Enterpreneurship

TOPIC 1 INTRODUCTION TO ENTERPRENEURSHIP

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Entrepreneurship is

Agent of Change To the entrepreneur & community

Creative To the entrepreneur & community

Grow & Become Profitable Monetary & satisfaction

Most of what your hear about entrepreneurship is all wrong. Its not magic. Its not mysterious and it has nothing to do with genes. Its discipline, it can be learned.

Peter F Drucker

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The Evolution

The Earliest

Period

Middle Age The 17th Century The 18th

Century

The 19th 20th

Century

21th Century

Marco Polo An actor and Manager

of production projects

(using government

fund)

a person who

entered into a

contractual

arrangement with the

government to

perform a service or

to supply stipulated

products.

Entrepreneurs

hip vs Capital

Provider .

Entrepreneurs

hip vs

Manager .

Heroes of free

enterprise.

Contract

Trading Goods

Profits

In charged great

project Contract Profit/Loss

Risk Taker

Intervention

.

Innovators Innovation &

Creativity .

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The Concepts of Entrepreneurship Entrepreneurship

The dynamic process of creating incremental wealth

Creating something new with value, by devoting the necessary time & effort, assuming the accompanying financial psychological & social risk & receiving the resulting rewards of monetary

A process of innovation and new-venture creation through four major dimensions

Individual

Organizational

Environmental

Process

that is aided by collaborative networks in government, education, and institutions.

Entrepreneur

A catalyst for economic change who uses purposeful searching, careful planning, and sound judgment when carrying out the entrepreneurial process.

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The dynamic process of creating incremental wealth through innovation & new venture

Creating something new with value, by devoting the necessary time & effort, assuming the

accompanying financial psychological & social risk & receiving the resulting rewards of

monetary

Four major dimensions:

Kuratko and Hodgetts (2004)

Individual

Organizational

Environmental

Process

Entrepreneurship is

An innovator or developer who

recognizes and seizes opportunities

converts those opportunities into workable or marketable ideas

adds value through time, effort, money, or skills

assumes the risks of the competitive marketplace to implement these ideas; and

realizes the rewards from the efforts.

The meaning and definition of an entrepreneur varies with discipline. Although each of these definitions views entrepreneurs from a slightly different perspective, they all contain similar notions, such as:

Newness

Wealth

Organizing

Creating

Risk taking

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Entrepreneur is

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The Myth

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Kuratko and Hodgetts (2004) have discussed ten myths of entrepreneurship as

follows:

Myth 1 Entrepreneurs are doers, not Thinkers

Entrepreneurs are both thinkers & doers.

Myth 2 Entrepreneurs are born, not made

Entrepreneurship can be taught & studied.

Entrepreneurship has models, processes & case studies

Myth 3 Entrepreneurs are always inventors

Successful entrepreneurs use creative and innovative

ideas in their ventures

Myth 4 Entrepreneurs are academic & social misfits

Entrepreneur is professionals.

Myth 5 Entrepreneurs must fit the Profile

Many successful entrepreneurs today did not have all the profile of the successful entrepreneur when they started their venture.

Myth 6 All entrepreneurs need is money

To entrepreneurs, money is a resource but not an end in itself.

Myth 7 All entrepreneurs need is luck

Entrepreneur to seize an opportunity are planning, preparation, determination, desire, knowledge and innovativeness.

Myth 8 Ignorance is bliss for entrepreneurs

The key factors to be successful Detailed strategies and plans Leverage on strengths Set up clear timetables with

contingencies

Myth 9 Entrepreneurs seek success but experience high failure rates

Entrepreneurs always learn from their failures and also the failures of others,

Myth 10 Entrepreneurs are extreme risk takers (gamblers)

Entrepreneurs always search for information and do planning before taking any action.

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Entrepreneurship in Malaysia Entrepreneurship has existed in Malaysia (Malaya) since the

interaction of Malacca with foreign traders.

British colonised the Malay Peninsular, they changed the

structure of the society and practised the divide

and rule system in which the

Malays were engaged in administration and Agriculture Chinese in mining and business Indians in rubber plantations.

The New Economic Policy (19711990), the National Development Policy (19902000) and Vision 2020, all encourage and support entrepreneurship development in

Malaysia.

In 1995, the government incorporated the Ministry of

Entrepreneurship Development as a specific body to manage

and promote the growth of entrepreneurship in Malaysia.

Today, this ministry is named the Ministry of Entrepreneurship

Development and Co-operation.

Top 10 Richest Entrepreneurship in Malaysia

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Exercises : Winning Ideas of Business

Passion about

(You love doing)

Help People

(Would help other people life)

Interest

Knowledge Skills

Experience

Competency

Hobby Ambition

TOPIC 2 IDENTIFYING ENTERPRENEURSHIP

CHARACTERISTICS

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Entrepreneurial Mindset

Describes the most common characteristics associated with successful entrepreneurs as well as the elements associated with the dark side of entrepreneurship.

Who Are Entrepreneurs?

Independent individuals, intensely committed and determined to persevere, who work very hard.

They are confident optimists who strive for integrity.

They burn with the competitive desire to excel and use failure as a learning tool.

The Entrepreneurial Mindset

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Characteristic of Successful Enterpreneur

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Calculated risk taking

Commitment, determination & perseverance

Drive to achieve

Opportunity orientation

Initiative and responsibility

Persistent problem solving

Seeking feedback

Internal locus of control

Tolerance for ambiguity

Tolerance for failure

Self-confidence and optimism

High energy level

Creativity and Innovativeness

Vision Independence Team building

a brief summary of characteristics most commonly associated with successful entrepreneurs.

Self Assessment : Many instruments. To measure the potential inclination towards entrepreneurship in individuals

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Comparison

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Small Businessman Entrepreneur

Engages in business activities for the purpose of profit to support his living and his family.

Starts the venture, assumes leadership & expands the venture to fulfil personal goals and attain self accomplishment.

Low risk-taker. Moderate risk-taker.

Follows others and invests only in tested & proven markets.

Takes calculated risks.

b) Differences between a Conventional Manager & an Entrepreneur

Conventional Manager Entrepreneur

Very conscious of rules and taboos. Views rules only as guidelines.

Sensitive to the future and willing to postpone rewards.

Concept of the future based on personal goals. Low threshold for frustration.

Has a powerful need for acceptance. Ambivalent towards control, success & responsibility. Can be manipulative & exploitative of others.

Able to identify problems in any course of action.

Make detailed plans.

Impatient with discussions and theories. Prone to action and seems impulsive.

a) Differences between a Businessman & an Entrepreneur

TOPIC 3 DEVELOPING ENTERPRENEURIAL

CREATIVITY & INNOVATION

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Creativity & Innovation

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Creativity involves the development of unique and novel

responses to problems and opportunities.

Schermerhorn, Hunt and Osborn (2003),

Creativity and innovation are vital elements for all levels of

businesses in order for them to grow and expand. Besides, it is

also essential both

for survival and for building competitive advantage (Kirby, 2003).

Efficiency & effectiveness no longer guarantee the survival of

business nowadays

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The Process of Creativity

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An entrepreneur needs to think of ideas to implement new strategies.

Ideas evolve from the creative process in which an imaginative individual will imagine, inculcate and

develop an idea into a form that can be implemented and in return, benefit both the entrepreneur and

the organization.

According to Kuratko and Hodgetts (2004), there are four main phases or steps in the creative

process

Gather all relevant

information

Creative ideas from

different sources

Solution to your

problem

Transform ideas to reality

Barriers to Creativity

Personal Belief Fear of Criticism Over Management Stress

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How to generate creative ideas

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Different people have different ways of thinking. There are several techniques to

improve creativity. Five techniques that can be used to foster creativity are:

Brainstorming - During a brainstorming session, all members of the group suggest ideas that are then discussed

Forced Analogy - An idea is compared to a problem and something else that has little or nothing in common to get a new insight.

DO IT;

Mind Mapping - This technique allows one to use pictures and/or word phrases to organise and develop thoughts in a non-linear fashion. It helps people to see a

problem and its solution.

Nominal Group - The use of nominal groups is to generate ideas and evaluate solutions face to- face in non-threatening group circumstances; members do so

by writing down silently as many ideas as possible.

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Characteristic of Creative Individuals

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Remarkable humble & proud Passionate & objective about their work Like to try new things Open minded & willing to accept

criticism

Good combination of Playfulness & discipline Responsibility & irresponsibility

High self control Goal directed, deliberate & considerate

in making any decision

Willing to take calculated risks

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Types of Innovation

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Innovation finding ways to deliver new or better goods or services Innovation is also deemed as the creation of something new in the marketplace that

alters the supply-demand equation (Chell, 2001)

Invention Extension Duplication Synthesis

Innovation

Sources of Innovation Unexpected Events - Entrepreneurs frequently notice that they get ideas from something that is out

of their expectations. New-knowledge Based - Take longer time to develop. Ideas obtained through reading, attending

seminars or conferences or discussions among the professionals. Change of Demographic- The transformation of demographic characteristics has created huge

opportunities for entrepreneurs to explore Process Needs - Process needs exist within the process of business, an industry or a service

Barriers of Innovation Organizational not encourage for innovation

Insufficient resources

Traditional management behaviour

Personal & individual behaviour

Fear of trying

Fear of making mistakes

Improper motivation

Fear of change

Fear of failure

Self image block

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The importance of creativity & innovation to entrepreneurs

To Ensure an Organization's Survival : it can increase the organization's capability to compete with its rivals.

To Explore New Markets : The advantage of exploring untapped markets.

To Exploit Natural Resources : can get these benefits by exploiting the wealth of resources without causing harm to the environment.

Recognise your own ability

Change your perception

Change the organizational culture

Dare to fail

Strategies to encourage creativity & innovations

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Recognizing Relationships

Looking for different or unorthodox relationships among the elements and people around you.

Developing a Functional Perspective

Viewing things and people in terms of how they can satisfy his or her needs and help complete a project.

Using Your Brains

The right brain helps us understand analogies, imagine things, and synthesize information.

The left brain helps us analyze, verbalize, and use rational approaches to problem solving.

Developing Your Creativity

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TOPIC 4 VENTURES ENVIRONMENT

ASSESSMENT

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The components of ventures environment

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Entrepreneurs need to evaluate the environment not only prior to the start-up of

their business but also during the growth stage of ventures. An environment is

the situation where business ventures operate.

2 types of environment

Ventures Environment

External Environment Internal Environment

Macro Environment Micro Environment

Macro environment can influence

business decision-making in the long term

and comprises uncontrollable

elements.

the micro environment can directly

influence the entrepreneurs decisions and activities. It is also known as the

industrial environment or task

environment.

Internal Environment

Organizational

Structure

Culture

Resources

Government

Agencies

Competitors

Customer

Supplier

Financial Institutions

Non Government

Organization

Political &

Legislation

Technology Socio Cultural

Economy

Macro environment

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Internal

Micro

Macro

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Identification of Business Opportunity

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Opportunity

Social Changes Economic Changes

Ethical

Responsibility

Development of new

markets & distribution

channel

Ready availability of

established non

proprietary technology

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Acquiring a Business Venture

Demographics

New Knowledge

The process need

The Unexpected

Sources of Opportunity

The Incongruous

The industry & Market Structures

Change in Perception

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E-commerce as a New Opportunity

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Electronic commerce, commonly known as E-commerce or eCommerce, is trading in

products or services using computer networks, such as the Internet. Electronic

commerce draws on technologies such as mobile commerce, electronic funds

transfer, supply chain management, Internet marketing, online transaction

processing,electronic data interchange (EDI), inventory management systems, and

automated data collection systems. Modern electronic commerce typically uses

the World Wide Web for at least one part of the transaction's life cycle, although it may

also use other technologies such as e-mail.

E-commerce businesses may employ some or all of the following:

Online shopping web sites for retail sales direct to consumers Providing or participating in online marketplaces, which process third-party business-

to-consumer or consumer-to-consumer sales

Business-to-business buying and selling Gathering and using demographic data through web contacts and social media Business-to-business electronic data interchange Marketing to prospective and established customers by e-mail or fax (for example,

with newsletters)

Engaging in pretail for launching new products and services

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Evaluation of A Business Opportunity

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Identify &

Evaluate the

Opportunities

Develop the

Business Plan

Resources

Required

Manage the

Enterprise

Creation and length of the opportunities

Real & perceived value of the opportunities

Risk and return of opportunity

Opportunity versus personal skills and goals

Competitive Situation

Title page Table of contents Executive summary

1.Description of business

2. Description of industry

3. Marketing plan 4. Financial plan 5. Production plan 6. Organization plan 7. Operational plan 8. Summary

Appendices (Exhibits)

Existing resources of entrepreneur

Resource gaps and available supplies

Access to needed Resources

Management style Key variable for

success Identification of

problems and potential problems

Implementation of control Systems

Whether the opportunity is identified with input from consumers, business

associates, channel members, or technical people, each opportunity must be

carefully screened and evaluated.

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The Magnitude of the Opportunity The magnitude of an opportunity depends

on the following factors:

The value that the entrepreneurs want to create.

The size of the opportunities that will attract the investors.

Economic factors that require efficient use of assets.

Business necessary to attract key team members to make the business

successful.

Good opportunities come in three situations:

The original opportunities must lead to other opportunities. Good opportunities can force an organisation to develop a skill that can

be leveraged for the pursuit of many new ideas.

The implementation of opportunities should be worked out in teams or partnership.

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Sources of Opportunities; the origin of new ventures

New

Product/services

New way of

organising

New market

New method

of production

New raw material

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Opportunities & New Firms Advantages of Established Companies over New Companies

Learning Curve

Reputation

Cash Flow

Economies of Scale

Complimentary

Assets

as companies produce more of something, they get better at

doing it.

people are much more likely to buy products from

suppliers that they know and trust.

If a business is successful, they will have a

positive cash flow that is useful for developing

new products and services.

Economies of scale benefit established companies over

new companies because the established companies are

already

producing products and services.

Complimentary assets are used along with the

entrepreneurs new product to produce or distribute product.

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Relies heavily on reputation. Has a strong learning curve. Takes a lot of capital. Demands economies of scale. Requires complementary assets in marketing and distribution. Relies on an incremental product improvement.

Employs a competence destroying innovation. Does not satisfy the needs of existing firms mainstream customers. Is based on a discrete innovation. Lies in human capital.

Types of Opportunities for New & Established Ventures

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TOPIC 5 BUSINESS PLAN

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A BUSINESS PLAN is

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the blueprint of a company,

presented in a standard business

format that is logical and realistic.

A business plan must

communicate ideas and goals

clearly.

To accomplish this, a plan should include three things

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A BUSINESS PLAN is

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a business plan is a detailed programme or roadmap outlining every conceivable

aspect of an entrepreneurs proposed business venture. It is a comprehensive, self-explanatory plan of what the entrepreneur intends to do; how the entrepreneur

intends to do it, when the entrepreneur intends to do it; where the entrepreneur

intends to do it and why he believes his idea is viable and profitable. It is, in

essence, a structured guideline to achieve the entrepreneurs goals, in operating the business.

Patricia Utton (2001),

An ideal tool to check facts and to comprehensively examine the practicality of an

idea before putting it into action. It gives the entrepreneur opportunities for realistic

expectations and action when taking the business into operation. On the other hand,

it also helps the entrepreneur to identify areas of strength and weakness, and the

details for the entrepreneur to look over, the opportunity to be gained and the threat

to be faced. All these aspects will determine how they can best achieve their

business goals.

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1. It forces entrepreneurs to arrange their thoughts in a logical and structured

order.

2. It helps them to create business frameworks by defining the activities,

responsibilities and objectives to be achieved.

3. It encourages entrepreneurs to stimulate reality and anticipate pitfalls

4. before they actually occur.

5. It helps entrepreneurs to develop strategies to meet those objectives.

6. It serves as a working action plan or guideline in operating their business.

7. It enables them to identify constraints that they may face when running the

business.

Purpose

The Importance of Business Planning

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1. Increase opportunity for success

2. Develop Mission & Vision

3. Identify Barriers to Business

4. As a performance tools

5. Identify the main competitor

6. Identify the right way of managing the business

7. Increase the stake holder confidence

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1. The management team

2. The shareholders

3. Bankers or Creditors

4. Customers

5. Suppliers

6. The Employees

Who needs the business plan

The element of Business Plan

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1. Executive Summary

2. Market Analysis

3. Marketing & Sales Strategies

4. Services & Product Line

5. Organization & Management

6. Funding Request

7. Financials

8. Appendix

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1. Keep the business plan short

2. Be focused

3. Reveal People Involved & Their Roles

4. Avoid the use of jargon

5. Information should be based on study

6. Be realistic & objective

Guidelines in preparing business plans

Pitfalls to avoid in planning

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1. No realistic goals

2. Failure to anticipate obstacles

3. No commitment & dedication

4. Lack of business or technical experience

5. No market niche

CHAPTER 6 STARTING A NEW

ENTERPRENEURSHIP VENTURES

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Three (3) Form of Business

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A company recently formed. A process where the

entrepreneur creates a

completely new business

starting from scratch

Self start up Use funds from savings or by

borrowing

Needs to have lots of experience, knowledge, skills

and interest in the field involved.

Involves the invention of new products or services.

buying an existing

business

Buying or acquiring; either shares of an existing company;

or

all of the assets of an existing company

The safest and most effective way for entrepreneurs to go

into business.

need to put time and effort into finding the business that is right

for you.

It allows the company to expand and provide the

opportunity to enter new

markets.

The owner of a trademark, trade name, or copyright has licensed

others to use it and sell its goods

or services.

A franchisee - generally legally independent but economically

dependent on the integrated

business system of the franchisor

A franchisee can operate as an independent businessperson but

still realize the advantages of

regional or national organizations.

New business start-up Buying an existing business Franchising

Process Pre-Start Up Phase Start-Up Phase Post Start-Up Phase

Personal Priority Business Opportunities Reviewing Potential Target Arrangement for Financing Conduct Due Diligence The formal Agreement

The owner of a trademark,

trade name, or copyright has

licensed others to use it and

sell its goods or services

Advantage The freedom of making decisions

Own ideas, developing own image & make changes

Free to select location, plant, equipment, products or services, employees, suppliers and bankers

Can avoid abide to undesirable precedents, policies, procedures and legal commitments of existing firms.

Immediate operations Easier financing Existing Inventory & receivables Established market for the product

or services Existing customers A business plan & marketing method

should already be in place Experience employees Many of the problem have been

discovered & solved You can always resell the business Less Competitions

Training and Guidance Brand Name Appeal Proven Track Record Financial Assistance

Disadvantage time, money and additional effort

minimal profits or losses because of the large expenditure

Lack of experience & historical data

0 customers. Difficulty of obtaining loans

Costly Extra Expenditure Outstanding Contracts Problems Personal Conflicts Obsolete Goods Uncollectable Receivables

Franchise Fees Franchisor Control Unfulfilled Promises

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Three (3) Form of Business

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Buying an Existing Business

Steps in Buying An Existing

Business

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Buying an existing business is buying or acquiring either the shares of an

existing company or all of the assets of an existing company or business.

Personal Priority

Business

Opportunities

Reviewing

potential target

Arrangement for

financing

Conduct Due

Diligence

The formal

agreement

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A business is owned and operated by one person- Begin automatically

when a single business owner

decides to open a business. There

are no documents to file to begin a

sole proprietorship or a partnership.

Ease of Formation - Less formality and fewer restrictions are associated

with establishing a sole proprietorship

than with any other legal form. The

proprietorship needs little or no

governmental approval, and it usually

is less expensive than a partnership

or corporations.

Lack of Continuity - The enterprise may be crippled or terminated if the

owner becomes ill or dies.

This entrepreneur has the rights over all its profits and bears all of the liabilities for

the debts and obligations of the

business.

unlimited liability for all debts and liabilities that occur while operating the

business

Sole Ownership Profits- The proprietorship is not required to share

profits with anyone.

Less Available Capital Difficult to obtain long term financing

Formation Liability Formalities

A business is owned and operated by one person- Begin automatically when a

single business owner decides to open

a business. There are no documents to

file to begin a sole proprietorship or a

partnership.

Ease of Formation - Less formality and fewer restrictions are associated with

establishing a sole proprietorship than

with any other legal form. The

proprietorship needs little or no

governmental approval, and it usually is

less expensive than a partnership or

corporations.

Lack of Continuity - The enterprise may be crippled or terminated if the owner

becomes ill or dies.

Sole proprietorships and partnerships have a more informal structure that does not require the selection of officers and

directors

have full control over every aspect of their business Relatively Limited Viewpoint and Experience

Structure

Sole proprietorships Proprietorship is taxed as

entrepreneur

taxpayers and not as business.

Taxes

Sole Proprietor

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written articles/partnership agreement is recommended & clearly outlined;

financial and managerial contributions of the partners

the roles in the partnership relationship unless otherwise agreed to in writing, the

court assumes equal partnership; equal

sharing of profits, losses, assets

management

unlimited liability for all debts and liabilities Direct Rewards -Partners are motivated to

put forth their best effort by direct sharing of

profits

Relatively Difficult to Obtain Large Sums of Capital

Bound by the Acts of Just One Partner Difficulty of Disposing of Partnership Interest

Formation Liability

Partnership

Formalities

Partnerships and sole proprietorships have far less paperwork and fewer

ongoing formalities to adhere to in

comparison to a corporation.

do not have to hold company meeting are not required to file annual reports

with the state or create financial

statements.

Growth and Performance Facilitated - In a partnership, it often is possible to obtain

more capital and better range of skills

than in a sole proprietorship.

Flexibility - A partnership often is able to respond quickly to business needs in the

form of day-to-day decisions.

Relative Freedom from Governmental Control and Regulation- Very little

governmental interference occurs in the

operation of a partnership

.

If any partner dies, judged to be insane or simply withdraws from the business, the

partnership arrangement ceases.

However, operations of the business can continue based on the rights of

survivorship and the possible creation of

a new partnership by the remaining

members or by the addition of new

members.

Structure

Possible Tax Advantage- Most partnerships pay taxes as entrepreneurs,

thus escaping the higher rate assessed

against corporations..

Taxes

A partnership business automatically begins when two or more people decide

to go into business.

A partnership is an association of two or more persons acting as co-owners of a

business for profit.

Each partner contributes money, labour or skills and each share in the profits as

well as losses of the business.

Ease of Formation- Legal formalities and expenses are few compared with those of

complex enterprise or corporation.

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Corporation

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Liabilities - The liabilities of members of a corporation are only limited to the amount

of shares they subscribed. Therefore,

members are not liable even if the

corporation were to incur bankruptcy.

Corporations differfrom sole proprietorship

and partnership

Limited LiabilityThe stockholders liability is limited to the entrepreneurs investment.

This is the most amount of money the person can lose.

Life Span- The life span of a corporation is not dependent on its members.

The corporation will continue even if its members have died or withdrawn from the

corporation. However, the corporation can

be terminated if all its members are not

interested in continuing their business.

.

Formation Liability Formalities

Partnerships and sole proprietorships have far less paperwork and fewer

ongoing formalities to adhere to in

comparison to a corporation.

do not have to hold company meeting are not required to file annual reports

with the state or create financial

statements.

Growth and Performance Facilitated - In a partnership, it often is possible to obtain

more capital and better range of skills

than in a sole proprietorship.

Flexibility - A partnership often is able to respond quickly to business needs in the

form of day-to-day decisions.

Relative Freedom from Governmental Control and Regulation- Very little

governmental interference occurs in the

operation of a partnership

.

have a structure consisting of shareholders, directors, officers and

employees.

Every corporation must select at least one person to serve on its board of directors.

The board of directors is responsible for allocating the company's resources and

increasing the shareholders' profits.

Officers are required to manage the day-to-day activities of the company and

implement the decisions made by the

company's shareholders and directors.

Structure

businesses are required to file articles of incorporation

a business organisation is created based on the 1965 Company Act.

Members- A corporation must have at least two members that are permanent residents

of Malaysia.

The two members involved must act as directors and the cornerstone of the

corporation. In a corporation, its members

will elect the board of directors

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Source of Capital For Business

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Personal Funds

Family & Friends

Retirement

Accounts

Bank/Financial Institution

Government Loan

Stock Markets

TOPIC 7 ENTERPRENEURIAL NETWORKING

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Networking Networking is both an outcome of a past relationship strategy and a resource for

future strategy.

Relationship rights and obligations are the results of the resources, which the company initially brought to the network, the experience it gained and the

investment it has made in its relationships.

Advantages Accessibility

very important to gain either tangible or intangible resources directly or indirectly. Tangible resources : financial support, transfer of technology and accessibility in gaining information

to produce the right product at the right cost and the right time as demanded by the market

Intangible resources are the moral support, guidance and confidence provided by various groups to entrepreneurs in operating their business.

Reputations

The ability of entrepreneurs to exercise leadership or to influence the decision making of other network members, based on the expertise that they have. Expectations These can both facilitate and restrict the freedom of the companys actions.

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Expectations

These can both facilitate and restrict the freedom of the companys actions. For example, network members could have the expectation that a particular company will effectively set prices for a number of other companies. On the other hand, a company may be expected not to take advantage of product shortages by raising prices or to conform to conventional competition or to set higher ethical standards than others.

Advantages

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Gaining clarity on an entrepreneurs goals and objectives to be achieved in running the business by utilising their interaction with others and determining the best action that should be taken.

Strategic Networking

Type of Networking

Formal Informal

The importance of networking

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Gaining clarity on an entrepreneurs goals and objectives to be achieved in running the business by utilising their interaction with others and determining the best action that should be taken.

Strategic Networking

Entrepreneurship & Networking strategies for developing effective networking.

(a) Ready to listen;

(b) Ready to compromise;

(c) Skills in giving confidence; and

(d) Very much at peace.

Any failure to build good networking will:

(a) Increase cost;

(b) Waste time;

(c) Waste the resources of the company;

(d) Damage the entrepreneurs reputation;

(e) Damage the companys reputation; and

(f) Create dilemmas.

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Strategy for Networking Consolidation

Paying visits; Participating in formal functions Networking through third persons; Giving souvenirs; Sending cards e.g. Congratulatory cards,

condolence cards,

invitation cards; Writing letters and e-mails as well as

replying them;

Giving out business cards; Sending facsimiles; and Talking on the phone.

Strategy for Developing Self-confidence

Ability to do something which others cannot do. Ability to solve problems which others cannot solve. Ability to generate ideas constructively when needed. Ability to show that we can compete with others. Ability to make interpretations. Ability to show we are a place of reference for others. Always be right in decision-making. Make someone comfortable or happy when

communicating with us.

Expression, which does not suggest dominating leadership.

Ability to control tone of voice when talking. Not taking advantage of others. Always ready to talk frankly. Ready to accept opinions other than ones own. Ready to accept and appreciate other people and

their abilities.

Accept others advice and give advice to others. Be able to control ourselves. Flexible. Give and take when conflicts start.

Strategic Networking Consolidation

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Physical

Emotional

Negative

Psychological

Behavioral

Barrier in Building Strategic Networking

Technique for developing confidence Communicate Effectively

Prove your abilities to others

Show Concern for Other People

Always be Fair

Always be Ready to Admit Your Own Mistakes

Show Teamwork Spirit

Be Confident of Others

TOPIC 8 EVALUATION OF ENTERPRENEURIAL

OPPORTUNITIES

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the selection of new-venture ideas;

6 Common Pitfalls

No real inside into the market

Lack of Objective Evaluation

Inadequate Understanding of Technical

Requirements

Poor Financial Understanding

Lack of Venture Uniqueness

Ignorance of Legal Issues

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Critical Factors for New Venture Development

8 Critical Factors

Basic Feasibility of

the

Venture

Competitive

Advantages of

the Venture

Buyer Decision in

the

Venture

Marketing of the

Goods

and Services

Production of

the Goods

and Services

Staffing Decision in

the

Venture

Control of the

Venture

Financing the

Venture

Table 9.1 A New-Venture Idea Checklist

Basic Feasibility of the Venture

1. Can the product or service work?

2. Is it legal?

Competitive Advantages of the Venture

1. What specific competitive advantages will the product or service offer?

2. What are the competitive advantages of the companies already in business?

3. How are the competitors likely to respond?

4. How will the initial competitive advantage be maintained?

Buyer Decisions in the Venture

1. Who are the customers likely to be?

2. How much will each customer buy, and how many customers are there?

3. Where are these customers located, and how will they be serviced?

Marketing of the Goods and Services

1. How much will be spent on advertising and selling?

2. What share of market will the company capture? By when?

3. Who will perform the selling functions?

4. How will prices be set? How will they compare with the competitions prices?

5. How important is location, and how will it be determined?

6. What distribution channels will be usedwholesale, retail, agents, direct mail?

7. What are the sales targets? By when should they be met?

8. Can any orders be obtained before starting the business? How many? For what total amount?

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Table 9.1 A New-Venture Idea Checklist (contd)

Production of the Goods and Services

1. Will the company make or buy what it sells? Or will it use a combination of these two strategies?

2. Are sources of supplies available at reasonable prices?

3. How long will delivery take?

4. Have adequate lease arrangements for premises been made?

5. Will the needed equipment be available on time?

6. Do any special problems with plant setup, clearances, or insurance exist? How will they be resolved?

7. How will quality be controlled?

8. How will returns and servicing be handled?

9. How will pilferage, waste, spoilage, and scrap be controlled?

Staffing Decisions in the Venture

1. How will competence in each area of the business be ensured?

2. Who will have to be hired? By when? How will they be found and recruited?

3. Will a banker, lawyer, accountant, or other advisers be needed?

4. How will replacements be obtained if key people leave?

5. Will special benefit plans have to be arranged?

Control of the Venture

1. What records will be needed? When?

2. Will any special controls be required? What are they? Who will be responsible for them?

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Financing the Venture

1. How much will be needed for development of the product or service?

2. How much will be needed for setting up operations?

3. How much will be needed for working capital?

4. Where will the money come from? What if more is needed?

5. Which assumptions in the financial forecasts are most uncertain?

6. What will be the return on equity, or sales, and how does it compare with the rest of the industry?

7. When and how will investors get their money back?

8. What will be needed from the bank, and what is the banks response?

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Causes of New Ventures Fails Product/Market Problems

Poor timing

Product design problems

Inappropriate distribution strategy

Unclear business definition

Overreliance on one customer

Financial Difficulties

Initial undercapitalization

Assuming debt too early

Venture capital relationship problems

Managerial Problems

Concept of a team approach

Human resource problems

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Involves identifying and investigating the financial, marketing, organizational, and human resource variables that influence the businesss potential before the new idea is put into practice.

Involves the use of a criteria

selection list from which

entrepreneurs can gain

insights into the viability of

their venture.

Incorporates external

factors in addition to

those included in the

criteria questions

Is it proprietary? Are the initial production costs

realistic?

Are the initial marketing costs realistic?

Does the product have potential for very high margins?

Is the time required to get to market and to reach the break-

even point realistic?

Is the potential market large? Is the product the first of a

growing family?

Does an initial customer exist? Are the development costs and

calendar times realistic?

Is this a growing industry? Can the product and the need for

it be understood by the financial

community?

Profile Analysis

The Feasibility

Criteria

Approach

Comprehensive

Feasibility Approach

Assessing the

viability of a

venture

Causes of New Ventures Fails

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Table 9.5 Specific Activities of Feasibility Analyses

Technical Feasibility

Analysis

Market Feasibility

Analysis

Financial Feasibility

Analysis

Organizational

Capabilities Analysis

Competitive

Analysis

Crucial technical

specifications

Design

Durability

Reliability

Product safety

Standardization Engineering

requirements

Machines Tools Instruments Work flow Product development

Blueprints Models Prototypes Product testing

Lab testing Field testing Plant location

Desirable characteristics of plant

site (proximity to

suppliers, customers),

environmental

regulations

Market potential

Identification of potential customers and their

dominant characteristics

(e.g., age, income level,

buying habits)

Potential market share (as affected by

competitive situation)

Potential sales volume

Sales price projections

Market testing

Selection of test

Actual market test

Analysis of market

Marketing planning

issues

Preferred channels of distribution, impact of

promotional efforts,

required distribution

points (warehouses),

packaging

considerations, price

differentiation

Required financial

resources

Fixed assets

Current assets

Necessary working capital

Available financial

resources

Required borrowing

Potential sources for funds

Costs of borrowing

Repayment conditions

Operation cost analysis

Fixed costs

Variable costs

Projected profitability

Personnel requirements

Required skill levels and other personal

characteristics of

potential employees

Managerial requirements

Determination of individual

responsibilities

Determination of required organizational

relationships

Potential organizational development

Competitive analysis

Existing competitors

Size, financial resources, market

entrenchment

Potential reaction of competitors to

newcomer by means of

price cutting, aggressive

advertising, introduction

of new products, and

other actions

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TOPIC 9 ENTERPRENEURSHIP & PERSONAL FINANCIAL

PLANNING

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Financial Planning Financial planning is the long-term process of wisely managing your finances so

you can achieve your goals and dreams, while at the same time negotiating

financial barriers that inevitably arise in every stage of life (Financial Planning

Association)

In involves; budgeting, savings & spending money

Steps in Financial Planning

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Benefits of Financial Planning

Benefits of Financial Planning

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Short-Term

Goals

Intermediate

Goals

Long-Term

Goals

One year or

less

Two to five

years

More than five

years

Life Stage & Financial Goals At various phases in your life, you have different priorities,

responsibilities and financial goals.

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The Power of Money How to Set Your Goals

Based on your priorities

Can be measured

Short, medium & long term

An Important Goal Saving for Emergencies

The Power of Money Assets and Liabilities: What You Own and Owe

Balance Sheet Cash flow statement

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Knowing Your Net Worth

Deriving Your Net Worth

Total Assets Total Liabilities = Net Worth

Note :

Financial difficulties occurs when your assets are not liquid (not easily converted into cash)

You must have balance portfolio of your assets

When you owe than you owned = negative net worth

Step 1 : List the things of value that you own

Step 2 : Total up assets

Step 3 : List the things that you owe to others

Step 4 : Total up your liabilities

Step 5 : Asset Liabilities

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The basic of budgetting Budgeting & spending plan Tracking your cashflow

Live within your monthly income

Keep aside money & savings Reach your financial goals Prepare for financial

emergencies

Develop good financial management habits

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The Power of Money Assets and Liabilities: What You Own and Owe

THE BASICS OF BUDGETING

Balance Sheet Cash flow statement

TOPIC 10 ACHIEVING ENTERPRENEURSHIP PERSONAL

FINANCIAL DREAMS

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How to build your wealth by owning more than you owe

Saving Habit : save at least 10% of your salary every month. It is even better if you can save 20% to 30% because this will translate into more money for your future

Technique;

Write out a cheque every month and deposit it into your savings account;

Carry out the transfer on the ATM; or

Transfer money from your current account to your internet banking every month.

Saving & Investments (Investment Goals, Risk, Return & Diversify)

How much money do you need to save and how much to invest to achieve your goals?

How long do you have to save or invest your money to achieve your goals?

How much risk are you willing to take?

How much return do you expect from your savings or investments?

What sort of sacrifices are you prepared to make to achieve these goals, e.g. changing your lifestyle and spending habits?

Savings

75 75 75 75

Savings is the portion of disposable income not spent

Ways to Save

Cash and Fixed Interest Investments

Shares Unit Trust Funds

Example bank savings accounts and fixed deposits

Use as a transaction account;

short-term expenses and emergencies

represent ownership in a company

money from hundreds of individual investors are pooled together to buy a large number of different assets.

Professional fund managers decide what percentage of the fund should be invested

Advantange Immediate Cash potential to generate very high returns.

higher returns in the long term (in terms of dividend income and capital gain)

new to investing; outsource various investments

to professional managers; Have a small initial amount to

invest seeking investment

diversification to minimise risk.

Disadvantage very little income no capital growth inflation can erodes

the value of investment.

Have a longer investment time-frame; volatility in their investment value over the short term

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Types of Investment

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Planning for Uncertainties Life has many ups and downs where accidents and disasters can and do happen

unexpectedly. How do we cope with such uncertainty?

Insurance

financial instrument that you can purchase to protect you from such an eventuality giving you a financial buffer or protection in case something happens to you, your

family or your belongings.-

Purpose

Pay for damages or to replace your personal belonging Pay for medical bills Take care of your monthly living expenses, debts and financial commitments when you are not able to work Provide some financial support to your family in the event of your disability, serious illness or death

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Planning for Uncertainties 2 types of insurance;

A life insurance policy insures you and your life against risks such as

premature death, illness, disability and

hospitalization.

The coverage period is usually more than a year and you have a choice of

making premium payments monthly,

quarterly, semiannually or annually

throughout the coverage period.

Types of Insurance

Life Insurance General Insurance

General insurance protects you against losses due to theft or damages to

your personal belongings. It also covers you if you cause damage to a third

party, or if there is accidental death, injury or hospitalisation.

The period covered is usually one year and you have to pay a one-time premium payment on an

annual basis.

Motor

House

Travel

Personal

belonging General

Insurance

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Managing Debt

This is a loan offered for your personal

use, not for a large purchase such as

a house or car but more for the purchase

of a personal computer or money

to use towards your marriage. It is

tempting to apply for this type of loan

because the application process is

usually fast and easy. Moreover, most

banks do not require a guarantor or

collateral. Conversely, some of the

interest rates can be very high.

As stated earlier in this topic, ask

yourself some important questions before

you apply for such a loan. Be clear about

the purpose of the application and

whether you can afford to make the

repayments.

Most people want to have their own car

as soon as they start working. They

usually buy a car using a loan (also

known as hire purchase or HP). If you

do so, you become the hirer of the car

while the financial institution is the

owner. As the hirer, you pay instalments

to the financial institution based

on their terms and conditions. You

become the owner after completing all

your payments.

As with any loan you take, ask yourself

the important questions before

deciding to borrow. Also work out your

cash flow to see how much

monthly instalments you can afford to

pay. When you apply for a car loan,

you can do so directly with the financial

institution or through the car

dealer, who will then submit your

application to the financial institution.

The market for housing loans today is very

competitive and financial

institutions now offers all kinds of loans to

attract customers. Some loans

are even packaged with free gifts.

Do your research, get as much information as

you can and compare items

such as interest rates before deciding on the

loan suitable for you. As with

other loan products, you can choose between

a conventional or Islamic

housing loan.

Managing Debt

Credit cards allow you to buy

items and pay for services

electronically

without using cash. When

you use a credit card, the

credit card

acquirer will pay the

merchant on your behalf and

bill you later

through your issuing bank.

This makes purchasing

things a lot easier.

Charge card is similar to a

credit card. While credit

card allows you to

make a minimum payment

when you receive your

monthly

statement, charge card

does not. With a charge

card, you must pay the

total amount due in full

each month, failing which,

late payment

charges will be imposed.

Debit card is similar to an

Automatic Teller Machine

(ATM) card,

except that you do not have

to withdraw cash from an

ATM. You can

use the debit card at places

where you pay for products

or services.

The amount spent will be

immediately deducted from

your bank

account. Similar to credit

card, it is convenient to use

debit card

because you do not have to

carry cash with you.

Prepaid card can be used to make

purchases but there is a spending

limit equivalent to the amount of money

you place on the card. It is

like a prepaid phone card or a Touch &

Go card where you have a

fixed amount of money you can spend.

When the amount placed on

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Pay the amount due in full when you get your monthly statement to avoid paying interest;

Do not use a credit card if you cannot make the monthly payments; Limit the number of credit cards you have; Do not use your credit card to get cash advances from an ATM. Each time you use your credit card to withdraw money, you are increasing your loan commitments in addition to paying upfront withdrawal charges and daily interest Pay before the due date to avoid late payment charges and penalty rates;

Tips When Using Credit Card

Repayment & Default

Credit Bureau

Debt Repayment Problem

sued by the financial institution. property will be auctioned family members will be affected because they may have to

help in paying your debts

Guarantors - suffer because legal action can be taken against them

bankrupt if you fail to repay your loan. suffer emotionally due to stress. unproductive and your work or health may be affected.

Central Credit Reference

Information System (CCRIS), which is a computerised

system that automatically processes credit data

received from financial institutions and

synthesises these information into credit reports.

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Some signs to show that you are in financial difficulty are:

(i) You are not in control of your money i.e. your expenses are more than

your income;

(ii) You have more debts than you can manage to pay;

(iii) You are only able to pay the minimum 5% every month on your credit

card bills;

(iv) You do not have any savings to meet personal or family emergencies;

(v) You get calls from debt collectors regularly; and

(vi) You are being served with legal notice of demand.

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