UNDERSTANDING ENTREPRENEURSHIP CHAPTER 1 ENTREPRENEURSHIP
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UNDERSTANDING ENTREPRENEURSHIP
CHAPTER 1 ENTREPRENEURSHIP
Chapter Objectives
• To understand the evolution of the term – ‘entrepreneur’
• To study the reasons for the current growth in entrepreneurship
• To list various reasons driving a person to starting a business
• To explore the characteristics and skills of successful entrepreneurs
• To classify different types of entrepreneurs• To look at the reasons for entrepreneurial failure
The Entrepreneurentreprende, which means – ‘to undertake’
Webster dictionary – one who organizes, manages and assumes the risks of a business or enterprise
Richard Cantillion – an entrepreneur is someone who takes the risk of running an enterprise by paying a certain price for securing and using resources to make a product and reselling the product for an uncertain price.
Joseph Schumpeter - an innovator playing the role of a dynamic businessman adding material growth to economic development
Timmons - Entrepreneurship is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled
Reasons for Growth of Entrepreneurship
• Industry Structure
• New technologies
• Deregulation and privatization
• Formation of new business communities
• Increasing demand for variety
• Government incentives and subsidies
• Increasing flow of information
• Easier access to resources• Entrepreneurial education• Return on innovation• Entrepreneur as a Hero• Self-employment is highly valued• Rising dissatisfaction at job• Acceptance of ex-entrepreneurs in the job
market
Gurubhai and Dhirubhai• Both start their career from the gulf• Both come to Mumbai to deal in synthetic yarn• Guru’s battle against an anglicized scion of an
established business family seems to mirror Ambani’s spat with Nusli Wadia.
• Guru’s success in getting people to invest in his IPO is similar to what happened in Ambani’s case.
• Mithun Chakraborty plays a newspaper owner in the film and his character resembles Ramnath Goenka. The virulent attacks of the newspaper on Guru are similar to what is alleged of Indian Express and Reliance in real life.
Impact of Entrepreneurial Firms
• Job Creation
• Economic growth
• New Technology
• Serving small markets
Why Start a Business?
• Control
• The idea
• Flexibility
• Money
Pros & Cons• You are the boss• All profits are yours• There will be great variety
in roles and tasks• Increases self confidence• Work can be very
satisfying• Success will give you
immense satisfaction
• You are alone• All decisions are yours• All losses are yours• Work may not be
satisfying• You will need to put in
long hours• Lack of success will effect
self esteem• Exiting the business is
difficult• Pressures will affect
social and family life
Entrepreneurial Characteristics
Timmons:
1. commitment and determination;
2. leadership;
3. opportunity obsession;
4. tolerance of risk, ambiguity and uncertainty;
5. creativity, self-reliance and ability to adapt; and
6. motivation to excel.
Bianchi
1. being an offspring of self-employed parents;
2. being fired from more than one job;
3. being an immigrant or a child of immigrants;
4. previous employment in a firm with more than 100 people;
5. being the oldest child in the family; and
6. being a college graduate.
Entrepreneurial Skills• Creativity and Opportunity Evaluation• Real-time Strategy and Decision Making• Comfort with Change and Chaos• Teamwork• Evangelism, Selling, Negotiation, and Motivation
through Influence and Persuasion• Oral and Written Communication• Basics of Start-Up Finance, Accounting and Law
Entrepreneurial Attitudes
• Comfortable with lifestyle changes
• Willingness to break / bend / stretch laws
• Patience to start small
• Prepared to make enemies
• Comfort with confrontations
• Dealing with failure
• Willingness to learn
Entrepreneurial Motivation
Entrepreneurial Motivation
Personal Characteristics
Personal Goals
IDEA
Environment
Entrepreneurial Activity
Expectations
OutcomesMatch
Types of Entrepreneurs
Based on Timing of Venture Creation:• Early starters• Experienced• Mature
Based on Socio-cultural Variables:• 1st generation entrepreneurs• From Business families• Minority entrepreneurs• Women Entrepreneurs
Based on Entrepreneurial Activity:• Novice• Serial• Portfolio
Reasons for Entrepreneurial Failure
• Lack of experienced management• Few trained or experienced human resource• Poor financial management• Rapid growth• Lack of business linkages• Weak marketing efforts• Lack of information• Incorrect pricing• Improper inventory control• Short term outlook
Thank you
Chapter Objectives
• To understand the importance of the business idea
• To explain the significance of a ‘new’ business idea
• To formulate a pre-selection process to precede the search for a business idea
• To list the possible source of business ideas• To describe the process of researching a
business idea• To develop a comprehensive framework for
evaluating business ideas
• Warren Buffer says, “Today’s successful companies live and die according to the quality of their ideas”.
• Peter Drucker, “Innovation is the specific instrument of entrepreneurs, the means by which they exploit change as an opportunity for a different business”
First MoverAdvantages• Technological leadership:
can also lead to– Cost advantages– Economies of scale
• Obtain and secure scarce resources before crowding
• Impose switching costs on buyers
Disadvantages• Reveal underlying
business concept• Others can try different
resource combinations• Investments in resolving
problems: others can benefit from learnings
• Inertia makes it difficult to abandon strategy no longer effective
Pre-selection
• Uncover your personal traits
• Knowledge and Experience
• Goals and aspirations– Technical knowledge– Domain knowledge– Contacts
Sources of Business Ideas
• Past work experience• Hobbies and interests• Strengths and abilities• Friends and family• Distribution channels• Travel• Books and magazines• Current trends• Research organizations• The web
Brainstorming
Some of the important ‘rules’ are as follows:
• Focus on quantity.
• Postpone criticism.
• Build on others’ ideas.
• Encourage crazy ideas.
• Work with a deadline.
Preliminary Research
• Cost structure
• Market structure
• Technology
• HR issues
• Government regulations
Mind Maps
Five Questions Framework
Q1. Which is the market segment being targeted?
Q2. What is the business model?
Q3. How big is your market?
Q4. How can you protect your business?
Q5. What are you getting out of it?
Porter’s Five Forces
SWOT Analysis
STRENGTH WEAKNESS
OPPORTUNITY THREAT
Thank You
INTELLECTUAL PROPERTYINTELLECTUAL PROPERTY
CHAPTER 3 CHAPTER 3 ENTREPRENEURSHIPENTREPRENEURSHIP
Chapter ObjectivesChapter Objectives
• To understand the importance of intellectual To understand the importance of intellectual property in modern businessproperty in modern business
• To explain the laws protecting trademarks, To explain the laws protecting trademarks, patents, designs, copyrights and other patents, designs, copyrights and other intellectual propertyintellectual property
• To describe the procedure for registration of To describe the procedure for registration of trademarks, patents, etc.trademarks, patents, etc.
• To develop a strategy for building and protecting To develop a strategy for building and protecting intellectual propertyintellectual property
• To comprehend the significance of trade secrets To comprehend the significance of trade secrets and other confidential informationand other confidential information
IP Laws in IndiaIP Laws in India
IP laws in India cover the following:IP laws in India cover the following:• TrademarksTrademarks• CopyrightCopyright• PatentsPatents• Geographical indication of goodsGeographical indication of goods• DesignsDesigns• Others including Semiconductor layout designs, Others including Semiconductor layout designs,
plants and farmer rights and biological diversity.plants and farmer rights and biological diversity.
Interesting TrademarksInteresting Trademarks
• numbers can be trademarks like in the case of 501 tea numbers can be trademarks like in the case of 501 tea and 555 cigarettesand 555 cigarettes
• symbols like those of Mercedes Benz or apple symbols like those of Mercedes Benz or apple computerscomputers
• letters like in 3M, IBM, NIITletters like in 3M, IBM, NIIT• Orange cellphone service has successfully managed Orange cellphone service has successfully managed
to include the colour orange as its trademark. to include the colour orange as its trademark. • sound like MGM’s ‘roar of the lion’ can also be a sound like MGM’s ‘roar of the lion’ can also be a
trademarktrademark• Sumitomo tyres has registered a rose like smell as its Sumitomo tyres has registered a rose like smell as its
trademarktrademark
Assignment of TrademarksAssignment of Trademarks
• Trademark searchTrademark search
• Application for registrationApplication for registration
• Receipt and examinationReceipt and examination
• Acceptance, advertisement and oppositionAcceptance, advertisement and opposition
• CancellationCancellation
Particulars of ApplicationParticulars of Application
• The class of goods for which the mark is sought. The class of goods for which the mark is sought. Classes can be textiles, food and confectionery, Classes can be textiles, food and confectionery, machine tools, etc. machine tools, etc.
• Definition of goods which is sought to be Definition of goods which is sought to be registeredregistered
• Details of the applicant including name, age, Details of the applicant including name, age, occupation, address and nationalityoccupation, address and nationality
• Whether the trademark is in use or is proposed Whether the trademark is in use or is proposed to be used. If in use, applicant must specify by to be used. If in use, applicant must specify by whom and for what period.whom and for what period.
Infringement of TrademarksInfringement of Trademarks
• The allegedly infringing mark must be either The allegedly infringing mark must be either identical or deceptively similar to the registered identical or deceptively similar to the registered trademark;trademark;
• The goods / services in relation to which the The goods / services in relation to which the allegedly infringing mark is used must be allegedly infringing mark is used must be specifically covered by the registration of the specifically covered by the registration of the registered trademark;registered trademark;
• The use of the allegedly infringing mark must be The use of the allegedly infringing mark must be in the course of trade; andin the course of trade; and
• The use must be in such a manner as to render The use must be in such a manner as to render the use likely to be taken as being used as a the use likely to be taken as being used as a trademark.trademark.
CopyrightCopyright
Copyright confers protection to:Copyright confers protection to:
• Literary worksLiterary works
• Dramatic worksDramatic works
• Musical workMusical work
• Artistic worksArtistic works
• Cinematographic films and sound Cinematographic films and sound recordingsrecordings
Dimensions of Copyrights Dimensions of Copyrights
• Idea ExpressionIdea Expression
• OriginalityOriginality
• FixationFixation
• Fair useFair use
Creators can prohibit others to:Creators can prohibit others to:
• reproduce the work in any form, such as reproduce the work in any form, such as print, sound .video, etcprint, sound .video, etc
• record the work in a compact discs, record the work in a compact discs, cassettes, etccassettes, etc
• broadcast it in any formbroadcast it in any form
• translate it to other languagestranslate it to other languages
• use the work for a public performance, like use the work for a public performance, like a stage drama or musical performancea stage drama or musical performance
PatentsPatents
The following are criteria for patentability:The following are criteria for patentability:
• NoveltyNovelty
• UtilityUtility
• Inventive stepInventive step
The following are not patentable:The following are not patentable:• Inventions which are frivolous or contrary to Inventions which are frivolous or contrary to
established natural lawsestablished natural laws• Inventions, the primary use of which, are Inventions, the primary use of which, are
contrary to morality or can cause harm to contrary to morality or can cause harm to humans or the environmenthumans or the environment
• The mere discovery of a scientific principle The mere discovery of a scientific principle without manifesting it in a productwithout manifesting it in a product
• Discovery of a new use of an existing substanceDiscovery of a new use of an existing substance• A new method of agricultureA new method of agriculture• A business methodA business method• A manufacturing process A manufacturing process
Patent Filing processPatent Filing process
• Filing applicationFiling application
• Publication of the applicationPublication of the application
• First examination reportFirst examination report
• GrantGrant
• Post-grant oppositionPost-grant opposition
Assigning Use of PatentAssigning Use of Patent
A patent holder may assign a patent to a 3A patent holder may assign a patent to a 3rdrd party. Their party. Their agreement will have the following elements:agreement will have the following elements:
• The term of the agreementThe term of the agreement• The territorial exclusivity of the rightsThe territorial exclusivity of the rights• Financial terms including payments of fixed and Financial terms including payments of fixed and
variable amounts to the patent holdervariable amounts to the patent holder• Specification of production capacities to be set up and Specification of production capacities to be set up and
marketing budget to be committedmarketing budget to be committed• Commitments from the patent holder regarding Commitments from the patent holder regarding
performance of the inventionperformance of the invention• Any other provisions which may be deemed necessaryAny other provisions which may be deemed necessary
Geographical Indication of GoodsGeographical Indication of Goods• The GI should pertain to a defined territoryThe GI should pertain to a defined territory• A given quality or reputation should be A given quality or reputation should be
attributable to goods originating from that regionattributable to goods originating from that region• Registration of a GI confers the right to use the Registration of a GI confers the right to use the
GI in relation to goods for which GI is registeredGI in relation to goods for which GI is registered• Also, right to obtain relief in case of infringementAlso, right to obtain relief in case of infringement• Rights under GI Act, cannot be assigned, Rights under GI Act, cannot be assigned,
transferred or transmitted. transferred or transmitted.
DesignsDesigns
Criteria for registration:Criteria for registration:• The design has to be originalThe design has to be original• Designs are registered only when they can be applied to Designs are registered only when they can be applied to
an articlean article• An article, in turn, is defined as any article of An article, in turn, is defined as any article of
manufacture and any substance, artificial or natural, and manufacture and any substance, artificial or natural, and includes any part of an article capable of being made includes any part of an article capable of being made and sold separately.and sold separately.
• The elements of design must be capable of existence The elements of design must be capable of existence separate from the article on which they have been separate from the article on which they have been applied.applied.
• The design must be of a distinctive nature and must The design must be of a distinctive nature and must appeal to people.appeal to people.
The following designs will not qualify for The following designs will not qualify for protection under the Design Act:protection under the Design Act:
• Methods or principles of constructionMethods or principles of construction
• Features dictated by functionFeatures dictated by function
• A mechanical deviceA mechanical device
• A trademarkA trademark
• Designs which can be construed as Designs which can be construed as immoralimmoral
Other IP LawsOther IP Laws
• The Protection of Plant and Varieties and The Protection of Plant and Varieties and Farmer Rights Act, 2001 Farmer Rights Act, 2001
• The Biological Diversity Act, 2002 The Biological Diversity Act, 2002
• Semiconductor Integrated Circuits Semiconductor Integrated Circuits Layout Act, 2000Layout Act, 2000
Non Disclosure AgreementNon Disclosure Agreement
NDA should have the following elements:NDA should have the following elements:• An NDA should define what information is confidential. An NDA should define what information is confidential. • Agreements should have clauses on restrictions on disclosure, copy Agreements should have clauses on restrictions on disclosure, copy
and use of informationand use of information• Restrictions on use of information when in employment and upon Restrictions on use of information when in employment and upon
termination of employment. termination of employment. • Requirements relating to return of confidential documents and Requirements relating to return of confidential documents and
paperwork upon termination of associationpaperwork upon termination of association• Specification of penal clauses like withholding salary, imposing Specification of penal clauses like withholding salary, imposing
fines, etcfines, etc• Addition of non-compete clause in an NDA prevents employees and Addition of non-compete clause in an NDA prevents employees and
vendors from setting up competing businesses or helping vendors from setting up competing businesses or helping competitors. competitors.
• Care should be also taken to ensure that employees do not violate Care should be also taken to ensure that employees do not violate the rights of third parties.the rights of third parties.
Protecting Trade SecretsProtecting Trade Secrets
• Employees should be made to realize their responsibility to protect Employees should be made to realize their responsibility to protect confidential material. confidential material.
• Employees should be educated to identify confidential materialEmployees should be educated to identify confidential material• Data and information which is confidential should be marked as Data and information which is confidential should be marked as
such. such. • Access to sensitive material or sensitive areas of the workplace Access to sensitive material or sensitive areas of the workplace
should be restricted on a need to know basisshould be restricted on a need to know basis• Interactions and disclosure to third parties should be channeled Interactions and disclosure to third parties should be channeled
through specified responsible employeesthrough specified responsible employees• When leaving an organization, an employee should be reminded of When leaving an organization, an employee should be reminded of
his obligations with respect to confidential information through an his obligations with respect to confidential information through an exit interview. exit interview.
FAMILY BUSINESS
CHAPTER 4
ENTREPRENEURSHIP
Entrepreneurship
Chapter Objectives• Define a family business• Discuss the history of family business in India• Discuss the roles and responsibilities of the founder• List the characteristics of able successors• Describe the roles, rights and responsibilities of family
members in a family business• Explain the role of non-family managers• Describe the issues in succession in a family business• List the best practices in managing family business, from
across the world.
What is a Family Business
• High percentage of share capital owned by a family either jointly or individually.
• Family members employed in the highest decision making posts
• Expression of intention to maintain family involvement in the future.
• A number of generations of the same family involved in management or ownership
• Direct descendants of the founders have management or ownership control
Advantages of a Family Biz
• There is a long term orientation as the continuity of the firm is of great concern to the older generations.
• The family culture is a source of great pride for family and non-family employees alike.
• The family firm functions in a less bureaucratic manner and it is not impersonal in dealing with employees and customers.
• Family firms have shown greater willingness to weather the bad times by ploughing back profits.
• It is structured to impart training to younger members of the family.
Disadvantages
• They may have a confusing structure where the role of many family members is not clearly defined.
• The style of functioning may be autocratic or patriarchal.
• Many of the younger generation may not be worthy of their position and role in the organization
• There can be very strenuous succession battles• Sometimes family members can selfishly drain
the finances from the company.
Roles of the Founder
• Starting the business
• Building the organization
• Providing guidance and direction to employees and family members
• Constructively involving family members in business
• Planning for succession
The Next Generation
• They know the business well. Ideally, they like or even love the nature of the business
• They know themselves and their strengths and weaknesses
• They have had the necessary outside experience and education
• They want to lead and serve• They are guided responsibly by the previous generation,
advisors and the board• They have good interpersonal relationships particularly
with other family members in business
The Next Generation
• They can count on competent non-family managers to complement their own skills
• They have controlling ownership either directly or through allies
• They have earned the respect of employees, suppliers, customers and other family members
• Their skills and abilities fit the strategic needs of the company
• They respect the past and focus their energies and resources on the future of the business and the family
Stepping Up• A new entrant should have a track record
that gives legitimacy to his ideas and his claims.
• It pays to consult the older generation while making the plan.
• Suggest a step by step approach. • If the plan is still not acceptable, accept
that there may be something wrong with the plan.
Retaining Non-family Managers
• Discuss career paths in the company and clearly state if top positions are not open for them.
• Offer compensation and benefits that are at par with the others in the industry.
• Involve non-family managers in top level decision making by getting them to be part of decision making teams with other owner-managers.
• Set targets and use performance measures to build motivation. Achievement of targets provides significant motivation.
Retaining Non-family Managers
• Emphasise the contribution of non-family managers in company meetings.
• Treat family members like employees at work. It helps build a healthy atmosphere.
• Involve non-family managers in succession planning. • Some senior non-family managers can be used as
‘bridge’ heads to smoothen the succession from one generation to another.
• Periodically assess the motivation level of non-family managers and the working relationship between family members and non-family managers.
Succession Planning
• Choose a successor
• Grooming the successor
• Planning
• Early entry
• Late entry
Advantages of Early Entry
• The successor becomes familiar with the nature of the business
• Gets a chance to develop relationships with other employees
• Gets to know other business associates• Skills specifically required for the business can
be acquired and developed• Good performance during employment will lead
to credibility with employees and other stakeholders
Advantages of Late Entry
• Success outside the firm establishes credibility
• Best practices from other firms are brought into the family business
• Business perspective of the successor is broad
• The successor’s competence is judged with greater objectivity.
Best Practices in Family Biz
• Communication
• Independence
• Shared Vision
• Documentation
• Conflict resolution
DOING BUSINESS IN INDIA
CHAPTER 5
ENTREPRENEURSHIP
Problems
• Bureaucracy
• Corruption
• Labour
• Local Sentiments
• Gray Market
• Social Capital
Chapter Objectives
• To understand the ground realities of doing business in India
• To identify the socio-cultural issues facing an Indian entrepreneur
• To list the various forms of business ownership available in India
• To understand some of the major laws and regulations governing conduct of business in India
Bureaucracy
• Characteristics of ideal bureaucracy:• Official business is conducted on a continuous
basis• Official business is conducted according to
written rules• Roles and responsibilities are defined within a
hierarchy, with rights of supervision and appeal• Official and private business and income is
strictly separate
Factors Working Against Corruption
• There is greater transparency in procedures to be seen across government departments.
• The right to information act (RTI) has significantly changed the situation
• Lately the media too has played an active and visible role
Measures Against Gray Markets
• Manufacturers may drastically reduced prices to narrow the gap in prices in local and overseas markets.
• Warranties may not be extended to products not purchased through the regular channels.
• Some high tech solutions have also been devised like the use of DVD regional codes to protect movies and other digital content.
Social Capital
• Negative consequences of ‘Pehchaan’:
• Exclusion of meritorious outsiders
• Excessive claims on group members
• Restrictions on individual freedom
• Norms aimed at downward leveling
Types of Ownership
• Sole Proprietorship
• Partnership
• Company
• Limited Liability Partnership
• Small Company
• One Person Company
Taxes, etc
• Income tax
• Sales tax
• Excise
• Service tax
• Profession tax
Features of VAT• Input tax credit even on capital goods• Credit is carried forward for 2 yrs and then it is
refunded in case it cannot be offset• Uniform rates throughout the country• Self assessment of possible tax liability is
allowed• Audit• In case of excess payment, refund is made
within 60/90 days• Interest can be claimed on delayed payments
Paying VAT
• Sell after stock transfer• Be careful of bogus stock transfer• Collect Forms C D F & H on time• Advise your dealer to be registered • Use ‘input tax credit’ on capital goods • Encourage dealers to get registered• Ensure that purchase and sales registers and
stock- books are maintained• Claim interest for delayed payment
Central Excise
• Find out if the product is excisable
• Find out its classification
• Find out its rate of duty
• Pay the tax
• File returns
Paying Excise
• Bill directly to the buyer• Advice all distributors and dealers of your products to be
registered• Avail of SSI concession if your unit is eligible• Know your product properly. There may be an
opportunity for reclassifying your product in a lower rate slab.
• Avail of all concessions under ‘CENVAT’• Let the customer pay separately for add-ons like
transport and warehousing expenses so it does not get included in calculating the total excise liability
Other Regulations
• Company law
• Labour law
• Import Export
• Pollution control
Entrepreneurship
ENTREPRENEURIAL SUPPORT
CHAPTER 6ENTREPRENEURSHIP
Entrepreneurship
Chapter Objectives
• Discuss various sources of support for the entrepreneur
• List policies from all over, that help entrepreneurs
• Discuss how to evaluate these policies• Describe the benefits of a business incubator• Explain the intricacies of incubator management• Define a business cluster• Discuss identification and development of
clusters
Entrepreneurial Support
• Support in the form of progressive policies which help entrepreneurial ventures.
• Incubators – which are set up to provide support to new firms in the early stages.
• Business clusters – which are made up of firms in the same industry in close proximity to one another.
Aims of Policies
• Entrepreneurship education:• Entrepreneurial skills:• Access to debt:• Stimulating Innovation:• Access to equity:• Simplifying administrative burden:• Access to markets:• Encourage weaker sections:
Evaluating Policies
• Take up of policy
• Opinion of beneficiaries
• Comparing performance
Incubators
Benefits from an incubator
• Access to shared flexible spaces
• Shared offices services
• Providing a business consulting network
• Networking
• Facilitating access to capital
Incubator Management
• There should be an incubator manager and a team of professionals
• The incubator should set clear guidelines for eligibility. • An incubator should have clear cut guidelines for an
admission process. • A contract should be signed by the incubator and the
entrepreneur laying down all the terms and conditions. • Clear guidelines for the entrepreneur’s exit should also
be laid out• The long term financial viability of the incubator will
depend on its business model.
Revenue Streams for Incubators
• A fixed rental to cover the cost of basic infrastructure
• A usage based charge for services like conference room, copier, etc.
• A success fee which can be in the form of an equity stake in the new venture.
Exiting an Incubator
The entrepreneur should exit:
• After a fixed period
• When the start up receives substantial funding
• When it achieves a certain level of profitability
• In case of irresolvable disputes
Some of the successfully incubated companies from SINE, the incubator at IIT, Bombay
• Herald Logic Pvt. Ltd.• Voyager2 Infotech• Myzus Technologies• eInfinitus• Powai Labs Pvt. Ltd.• Seclore Technology Pvt. Ltd• Eisodus Networks Pvt. Ltd. • Quantum Phynance Pvt. Ltd.
Business Clusters• A geographical concentration of industries that
gain performance advantages through co-location
• Well developed and intense links with suppliers• Formal and informal business networks• Shared supporting infrastructure like buildings
and road connections• A certain level of cooperation in spite of a high
degree of rivalry and competition
Entrepreneurship
International Clusters
• Auto industry in Detroit
• Paris for high fashion
• Antwerp for diamonds
• Hollywood for movie production
• 5th Avenue in New York for Advertising
• Hsinchu in Taiwan for high technology
Indian Clusters
• IT firms in Bangalore
• Diamond polishing in Surat
• Textiles in Tirupur
• Seafood processing in Kochi
• Call Centres in Gurgaon / NCR
• Jute mills in Kolkata
Benefits of Clusters
Michael Porter:
• productivity of the companies in the cluster increases
• there is increased scope for innovation in the sector
• new businesses are encouraged to come up
Entrepreneurship
Types of Clusters
• A vertically-integrated cluster is made up of businesses linked through intense buyer-seller relationships.
• A horizontally-integrated cluster is made up of businesses which share a common market for their end products, use a common technological base or common skilled workforce, or require similar raw materials.
Cluster Development
• Supplier buyer relationships can be forged by collecting and distributing information about potential industry linkages.
• Common infrastructure can be supported by external agencies.
• Especially in the case of industries heavily dependant on specialized skills, providing skills training and education is a good means of supporting a cluster.
• Industries in a cluster can be aided by providing marketing channels.
BUYING A BUSINESS
CHAPTER 7
ENTREPRENEURSHIP
Entrepreneurship
Chapter Objectives• To list the benefits of buying an existing business• To list the disadvantages of buying an existing business• To discuss the possible sources of information about a
business for sale• To describe a step by step process of buying a business• To tabulate the factors to be investigated before a purchase• To understand various methods of valuing a business• To discuss the major mistakes made in buying a business• To understand the concept of franchising• To list the benefits of being a franchisee• To discuss the factors important in evaluating a franchise
opportunity• To describe the elements of a franchise agreement
Entrepreneurship
Advantages of Buying a Business
• Buying an existing business will enable you to go around a lot of problems likely to crop up in opening a business.
• The existing business would have already got some licenses and government approvals which would be otherwise difficult to get.
• Land is scarce and it is difficult to find an appropriate location. An existing business is likely to come bundled with the land.
• The plant and machinery have already been bought and have been installed and tested.
• Employees are experienced. • A supplier base has already been established.
Entrepreneurship
Advantages of Buying a Business
• There is a readymade market. • A distribution network has been set up and money and
effort has already been invested in establishing a rapport with retailers and wholesalers.
• Goodwill and reputation would have been built up. • Cash flow is going to start immediately. • Banks may be more willing to lend to a business with
running operations, an established customer base and a steady cash flow.
• It might be cheaper than setting up new operations. • The former owner may be persuaded to guide you in
the early days. This free advice may prove to be invaluable.
Entrepreneurship
Disadvantages
• The industry as a whole is not doing well and the situation is not likely to improve in the near future.
• The owner may not have been truthful about the business.
• The equipment could be old and outdated. • The location is bad or is likely to become bad. • Employees may be unproductive or incapable
of meeting the standards required of them.
Entrepreneurship
Disadvantages
• Any bad reputation that the business had acquired amongst suppliers, distributors and other people in the industry is likely to pass on to you.
• The previous owner may have got into some unfavourable long term contractual obligations
• The inventory lying in stores could be obsolete or unfit for use.
• If the company’s products have not been received well by the market it will be harder to gain market share than it would have been for a new product.
Buying a Business
• Preliminary information collection
• Site visit
• Scrutiny
• Additional information collection
• Negotiation
• Transition
Getting Information
• The industry
• Accountants, lawyers
• Bankers
• Advertisements
• Others
Scrutiny
• Financial statements• Other statutory documentation• Valuation of capital equipment• Inventory• Licenses and permits• Contracts with customers and suppliers• Debt and accounts payable• Accounts receivable• Reputation of the firm
Valuation
• Value of assets– Book value– Replacement value– Market value
• Return on investment
• Payback period
• Discounted cash flow
Negotiations
Elements other than cash:
• Combination of stock and cash
• Accounts receivable
• Lease; with option to buy
• Non-compete clause
Common Mistakes While Buying
• Scrutunise claims
• Risk vs returns
• Valuation of receivables
• Antagonising the seller
McDonalds
• Arguably the most successful franchise chain
• Operates 30,000 outlets in over 100 countries
• Became a success after Ray Croc bought it from the McDonald Brothers
Franchising
Advantages of a Franchise
• By taking a franchise, you get a proven system of operation.
• The franchisor allows you the use of an established brand name.
• The franchisees can also use professionally designed point of sale advertising materials, packaging material, posters and print and TV ads.
• This brand recognition is driven by national and regional advertising programmes.
• The franchisor will often train the franchisee and the franchisee’s employees before letting a new franchisee start the business.
Advantages of a Franchise
• Ongoing product development and research is another advantage of being with a franchise chain.
• Large companies can gain from economies of scale but that would not be possible for individual entrepreneurs.
• The cost of starting up the franchise operations and the ongoing operating costs are very well documented by the franchisor and the details are shared with all prospective franchisees.
• A franchisor can add value by putting a quality program in place.
• The franchisor often does market research to find out if the market is big enough to support an outlet.
Choosing a Franchisor• It is good to get into an industry that is growing
and shows signs of sustaining a rate of high growth over the next few years.
• It is also important to take into account, the performance of the franchisor’s products in the market.
• It is better to choose a franchisor, which has been in this business for a long time.
• It is disadvantageous to become one of the initial franchisees in a chain.
• The reputation of the franchisor counts for a lot.
Choosing a Franchisor
• The franchisor’s relationship with other franchisees is also a very important factor to consider.
• Take a close look at the profitability indicated in the figures shared by the franchisor. Some of the assumptions made while arriving at those figures may need to be changed.
• It might need a good amount of investigation to come up with accurate estimates of the success rate of franchisees.
The Franchise Agreement
• The size and location of space needed
• The franchise fee including down payment and continuing royalties
• Refundable deposits
• A franchisee’s allotted territory
• The range of products and services which are offered by the franchisor
The Franchise Agreement
• Training and who pays for it
• Advertising and who pays for it
• Any other assistance
• No-compete clauses
• Dispute resolution and legal recourse
ENTREPRENEURIAL FINANCE
CHAPTER 8
ENTREPRENEURSHIP
Chapter Objectives• To list the various sources of debt finance• To understand the process of securing debt finance• To discuss the importance of collateral security• To tabulate the lending strategies of banks• To discuss the characteristics of venture capital• To understand the structure of venture funds• To list the various roles within a venture fund• To understand how venture capitalists get compensated for their
efforts• To describe a step by step screening process followed by venture
funds while making an investment• To list the elements of a termsheet• To understand the current scenario of VC funding in India
Disadvantages of Equity Finance
• Dilution of shareholding
• Increased 3rd party governance
• Increased external controls
• Increased commitment to stated strategy
Sources of Debt
• State Finance Corporations
• NBFC
• Banks
Entrepreneurship
Securing Debt
• Drawing up the business plan.
• Identifying sources of debt finance.
• Presenting the proposal to the bank.
• If the manager is considering your proposal favourably, you will have to go for further talks
• Once the two parties have broadly agreed, details have to be worked out.
Principles of Good Lending
• Purpose
• Safety
• Profitability
• Other considerations
Security
• Collateral– Inside – Outside
• Personal guarantee
• Maturity
• Covenants
• Menu pricing
Lending Strategies
• Financial statements
• Relationship lending– Length of relationship– Breadth of relationship– Degree of trust
• Credit scoring
Entrepreneurship
Venture Capital
Venture capital is characterized by:• Financing of new and potentially high growth companies• Investments primarily in the form of equity participation• Assistance in the early days of the enterprise • Adding value to the company through active
participation, even joining the management on occasions • Willingness to take on higher risk• Expectation of higher rewards• A long-term outlook regarding the investment
Roles in a Venture Fund
• General partner
• Investor
• Venture partner
• Entrepreneur-in-residence
• Others
Screening by VCs
• Get rid of scamsters
• Major broad concerns
• Growth and industry considerations
• Monetising value
Important Considerations
• The entrepreneurial team– Personal or individual characteristics – Experience of the individual
• Ease of exit– Via IPO– Sale to PE, etc
Entrepreneurship
The Termsheet
• Amount and terms of investment• Dividend policy• Composition of the board of directors• Reporting • Liquidity (exit) plans• Rights of sale • Warranties• Matters requiring venture capitalist approval
Entrepreneurship
Problems Facing VCs in India
• Large established firms with strong growth figures look like a very attractive proposition.
• Investments in public listed firms are giving returns in excess of 30%, at far lesser perceived risk
• Small firms in India are informationally opaque.• Indian entrepreneurs are perceived as lacking in
marketing and management skills. • Indian entrepreneurs are more reluctant to give up
controls than their western counterparts. • VCs face an exit challenge as the capital markets in
India are still shallow • Brand ‘India’ is strong only in some manpower driven
services sectors like IT and ITES.
Sectors Favored by VCs
• IT and IT-enabled services • Software Products • Wireless and telecom • Banking and financial services• Divestments in public sector units • Media and entertainment • Biotechnology • Pharma and diagnostics• High technology Manufacturing • Retail
MAKING A BUSINESS PLAN
CHAPTER 9
ENTREPRENEURSHIP
Chapter Objectives• To understand how a business plan is divided into
sections• To list the uses of a business plan• To lay out the steps involved in writing a business plan• To list out data required in drawing up a business plan• To discuss about the various types of business plan• To understand the significance of an executive summary• To understand the structure and composition of various
sections of a business plan• To list the various appendices and exhibits needed in a
business plan
Uses of a Business Plan
• Equity funding
• Bank finance
• Alliances
• Recruitment
• Clarify the business
• Others
Kinds of Business Plans
• Summary Plan
• Executive summary
• Full Business Plan
• Operational Business Plan
• The oral presentation
Steps in Writing a Business Plan
• Define purpose
• Collect Information
• Put it down
• The rough draft.
• Financial analysis
• Finishing
• Review
Data Required
• Company details– Documents relating to formation– Shareholding details– Permits and registrations
• Management – Organization chart– Details of key employees– Consultants and advisors– Compensation and other employee agreements
• Industry and Competitors– Market statistics from secondary sources– Reports on trends, etc– Competitor data– Customer surveys
Data Required• Operations
– Product specifications– Contracts and purchase orders for raw materials– Competitive advantages– Details of Intellectual Property (Patent, license, and trademarks)– Regulatory approvals – Industry standards as per regulations– Plant layout and operations plan– Research and development plans
• Marketing and Sales– Marketing plan– Advance orders, if any– Marketing materials
• Financial Information– Data on fixed and variable costs to be incurred– Financial forecasts
Key Sections of a Business Plan
• Executive summary• The company• The management team• The industry and the market• Operations• The marketing plan• Financial plan• Risks and contingencies• Appendices
Executive Summary
The executive summary is probably the most important section of the business plan.
It is basically the whole business plan condensed into a few pages
The main objective of the executive summary is to entice the reader to go through the entire plan.
The Company
• History
• Current Status
• Future
The Management Team
• Technical and professional qualifications• Quality of work experience• Experience in the relevant sector• Reputation in the business community• Evidence of moral integrity• Financial capacity• Networking with other vital people in the
industry
The Industry and the market
• An industry is a collection of sellers
• A market is a collection of buyers– Concentrate on the relevant segments
• Competition
Operations
• Gantt chart outline setup
• Technology
• Raw material strategy
• Production planning
• Quality
• HR policy
Marketing
• Target Segments
• Branding
• Product
• Packaging
• Pricing
• Distribution
• Promotion
Finance
• Funds sought
• Projected financial statements
• Costing details
• Break even and payback analysis
Risks and Contingencies
Identify major threats and risks
Outline strategies for countering them
Appendices
• Copy of documents pertaining to incorporation or formalisation of partnership.
• CV’s of the entrepreneur/s and of key employees• Copies of various permits or permissions granted.• Copies of papers pertaining to sale or lease of land for
the business• Copies of documentation of proprietary intellectual
property • Graphical representation of schedule including
milestones and dates• Photographs of location • Factory or plant layout• Graphical representation of production process
Appendices
• Findings of market survey conducted• Photograph of product or prototype• Storyboards or mock-ups of advertisements• Projected balance sheets• Projected profit and loss accounts• Projected cash flow statements• Sensitivity analysis of P&L a/c • Break even analysis• Financial ratios
MANAGING OPERATIONS
CHAPTER 10
ENTREPRENEURSHIP
Chapter Objectives• To understand the importance or correct purchasing in a venture• To list the activities involved in purchasing• To tabulate the elements of a purchase policy• To discuss the ways to evaluate suppliers• To discuss the best practices in purchasing• To list the kinds of inventory carrying costs• To classify different kinds of inventory• To understand the importance of cash management• To understand the role of the cash manager• To appreciate the challenges posed by cash flows• To understand the principles of receivables management• To discuss managing for disasters• To understand the strategies followed by seasonal businesses
Entrepreneurship
Purchase
Unplanned purchasing can lead to:
• spending more money than you need to
• buying goods that aren't of the proper quality
• choosing suppliers that don't offer the required level of customer service
Role of the Purchase Manager
• gather orders from various departments• make sure the orders are complete, • stay within specified spending parameters• select appropriate vendors • order for the goods • check condition upon receipt • check to make sure the invoice is correct• ensure timely payment of the invoice by forwarding it to
the accounting department• communicate effectively with the suppliers on various
issues
Entrepreneurship
Purchase Policy
The purchase policy should address the following issues:
• Who is authorized to purchase various goods?• How is the budget set for a purchase?• How does the venture hope to ensure
competition among vendors?• How to ensure quality of received goods?• What will be the payment system?• What will be the level of confidentiality between
the venture and vendors?
Suppliers
Evaluate a supplier on:• Timely delivery• Completeness of orders shipped • Quality of items • Price competitiveness• Strength of financial condition • Ability to service special orders • Quality of customer service • Expertise of sales representatives and technical staff• Consistency on above factors
Prioritising Purchases
Some items need more attention than others, on the basis of:
• Unit cost
• Total cost
• Time to delivery
• Quality
• Criticality
Inventory
Costs of carrying inventory• Interest on the financial investment in inventory. • Cost of insurance covering inventory. • Rental or ownership related costs of the store • Cost of handling inventory• Obsolescence• Pilferage, wastage or deterioration of stock
Types of Inventory
On the basis of stage in process:
• Raw Materials
• Work In Progress (WIP)
• Finished goods
• Goods for resale
Types of Inventory
On the basis of reason for stock to be held:
• Buffer stock
• Safety stock
• Overproduction
• Lot delay stock
• Demand fluctuation stock
• Line balance stock
Cash Management
• The efficient utilization of current assets and current liabilities throughout each phase of the business cycle.
• The systematic planning, management and monitoring of the company’s collections and disbursements.
• The collection, management and dissemination of information to enable effective use of available funds.
Good Vs Bad Cash Management
• Increasing the possibility that your business never runs out of cash.
• Eliminating the constant worry associated with not knowing your current and future cash position
• Improved relationships with your vendors as a result of good payment practices.
• The ability to foresee cash flow problems long before they actually happen.
• Suppliers are going to be dissatisfied with late paymentsand that will lead to higher prices, late deliveries or quality problems.
• If you are unable to meet salary obligations on payday, employees are going to be worried about the financial stability of the firm.
• If your cash problems are a result of tardy collections, customers will stand to gain a lot by not paying up and taking their business elsewhere.
Cash Manager
Role of the cash manager:• Efficiently collecting cash inflows• Concentrating collected funds• Controlling the timing of cash outflows• Forecasting the cash position• Securing adequate sources of short-term funds• Optimizing use of any temporary cash surpluses• Gathering timely information • Implementing the systems necessary to monitor,
manage and control the cash position• Ensuring the internal and external transfer of financial
data between departments or with the bank.
Cash Problems
As a result of business growth, cash can be:
• Mismatched
• Irregular
• Unpredictable
Collecting Accounts Receivable
• Investigate new customers.
• Supply against written orders.
• Sign on a legal contract.
• Maintain close contact with customers.
• Get and repeat positive feedback.
• Send invoice ASAP.
Collecting Accounts Receivable
• Contact before sending invoice.
• Keep a close watch on customer’s fortunes.
• Immediately contact on any delayed payment.
• Be firm
• Allow a customer to graduate in his credit ratings with you.
Managing During Disasters
• Identify risks
• Reduce risks
• Plan
• Train
• Getting back to business
Seasonal Businesses
• Seasonal businesses try to cut costs during the off season. The easiest way to do that is to cut down operations is seasons of low demand. By design some seasonal businesses have low installed capacities but create additional capacities for the season. E.g. restaurants putting in additional seats during a festive occasion are common sight in all major cities.
• Many businesses which close down during the off season depend on temporary labour and sometimes even the infrastructure is leased for a short time only. Clothes exhibitions that spring up in temporary shamianas (tent) are also another familiar sight in all cities.
• The off season is a very good time to carry out routine maintenance and repair work.
• In case the business is doing very well, the off season is a good time to plan and execute expansion plans.
• In case the goods can be stocked, the fallow time in the off season can be use to smoothen out the production schedule. So the entire year can be used to plan out production, which is ultimately sol within a short time.
HUMAN RESOURCE MANAGEMENT
CHAPTER 11
ENTREPRENEURSHIP
Chapter Objectives
• To discuss the process of hiring an employee• To describe the interview process• To discuss the induction process• To understand the ways of motivating
employees• To discuss the important aspects of salary and
perks• To list the ways of providing training to
employees• To understand the process of firing an employee
Job Description
Elements of a job description
• Details of the job responsibilities
• The qualifications desired
• The kind of experience the candidate should possess
• Salaries and other benefits to be given
• Career path
Hiring
• People you know personally can be good employees.
• A referral is the next best thing to knowing the candidate personally.
Other Sources
• Advertisements in local newspapers
• Posting on online job sites
• Accessing listed resumes
• Tapping a placement agency
Induction
• Signing of joining papers
• Narration about the company
• A tour of the facilities
• Early mentoring
Entrepreneurship
Motivation
Employees seek the following from their jobs:• Recognition for good work done by them• Meaningful participation in the venture’s endeavours• A feeling of belonging and of sharing in the success of
the organization• Opportunities for growth in accordance with their
competence and experience• Security in their job as long as they perform according to
expectations• Monetary reward for performance in their job• Benefits relating to medical expenses and insurance
Salary
How employees measure their salary:• The salary is comparable to salaries of others in similar
jobs in other companies within the industry• The salary being paid should be comparable to what the
employee is likely to get in some other job.• The salary should compare with salaries of others with
similar responsibilities within the company• The salary should be comparable to the salaries of his
friends and peers outside the industry
Components of a Salary
• The fixed component • Allowances• Provident fund • Medical insurance and a life insurance cover.
Additionally, a medical reimbursement can be provided for incidental medical expenses.
• Annual bonus based on salaries or on performance.
• Employee stock option plan (ESOP)
Some Perks
• Work related awards and competitions • Recreation room in the office • An annual picnic or excursion• Recognising achievements of employees
and their family members in other spheres
• Employees can be encouraged to attend seminars, workshops and short term courses.
More perks
• Free or subsidised lunch in the office • Discounts to employees on company products• Involving employees in a joint social cause • Employees can be allowed to work from home
on selected days • Bonus can be given to some or all employees. • Gifts like a watch or a household appliance on
some important occasions
ENTREPRENEURIAL MARKETING
CHAPTER 12
ENTREPRENEURSHIP
Chapter Objectives• To look at the marketing constraints of entrepreneurial
firms• To list the characteristics of entrepreneurial marketing• To tabulate market research practices in entrepreneurial
firms• To discuss the concepts of segmentation, targeting and
positioning and their relevance to entrepreneurial marketing
• To understand the process of brand building in entrepreneurial firms
• To explore pricing in entrepreneurial marketing• To look at the distribution function in small firms• To explore non-traditional advertising in entrepreneurial
firms• To tabulate different types of promotional campaigns
Characteristics of Entrepreneurial Firms
• Limited resources
• Small size
• Newness
Entrepreneurial Marketing
• Proactive orientation
• Innovativeness
• Customer focus
• Opportunity focus
• Risk management
• Value creation
Market Research
• Field survey
• Systematic Observation
• Focus groups
• Secondary sources
• Test marketing
Field Survey
Low cost field surveys:
• Convenience sampling
• Snowball sampling
• Omnibus sampling
• Low-cost surveyors
Good Market Research
• The researcher understands decision alternatives and the information required
• The relationship between results and the decision is understood by the entrepreneur and the researcher
• The results are communicated well. • Poor research design and poor planning can
delay the research or can result in erroneous conclusions.
• There is no fudging of data
Entrepreneurship
Forecasting Demand
• Define the total market• Divide total demand into distinct market
segments• Forecast drivers of demand in each segment• Match with own product to come up with
possible sales of own product in that segment• Total the forecasted sales in the segments that
can be profitably targeted• Conduct sensitivity analysis to understand
assumptions
Entrepreneurship
Attractiveness of a Segment
• Is your product able to deliver the value sought by a segment, better than the competition?
• Can the segment be easily identified?• Is the segment big enough in terms of
potential revenue?• How easy is it to reach the segment with
the positioning communication and with the product?
Branding
• Strategic brand building• Identity-building brand exposure• Involve the customer in the brand building
experience• Borrow practices from across industries• Pilot test novel ideas• Have a ‘brand manager’• Monitor results• Do not outsource
Entrepreneurship
According to Aaker, the following are the difficulties in branding:
• Pressure to compete on price• Proliferation of competitors• Fragmentation of media and markets• Brand relationships• Bias towards changing strategy• Bias against innovation• Pressure to invest elsewhere• Short term pressures
Costs and Pricing
• Producers costs indicate a floor price
• Customers cost indicates price sensitivity
• Competitor’s costs indicate their strength
Pricing• Assess what value customers place on the
product. • Look for variations in the way customers
value the product. • Identify a pricing structure. • Consider competitor’s reactions. • Monitor realised prices. • Assess customer’s emotional response to
prices.
Pricing Percepts
• Pricing of a product should work towards maximising present worth
• The unit for making decisions and for measuring return is the entire economic life of the product
• Pricing begins before production commences and re-pricing continues for the entire life cycle
• Different pricing strategies can be used in different segments
Price Sensitivity• Price sensitivity is less if a third party bears the cost. • Sensitivity is high when the cost of the item is a significant
portion of the individual’s total expenditure. • Price sensitivity is higher in the case of B2B buyers as the
buyer is not end user. • When there is no differentiation between the products
available, it becomes easy to compare products in the category and the price sensitivity of customers increase.
• Price sensitivity is more when there is easy access to competing products.
• Sensitivity decreases when there is a high cost of switching. • When a long term relationship with the seller is not important,
price sensitivity is low.
Response to a Price Cut
Is there a response that would cost less than the preventable sales loss?
If you respond, is competitor willing and
able to reestablish the price
difference?
Respond
Does the value of the markets at risk justify the cost of response?
Respond
While the multiple responses required to match a competitor cost less than the preventable sales lose?
Respond
Accommodate or ignore
Is your position in other
markets of risk?
Competitive price cut or” low cost”
product
NoNo
No
NoNo
YesYes
Yes
Yes
Yes
Distribution Alternatives
• Go directly to the consumer
• Go directly to the retailer: bypass distributor
• Use sales agents
• Participate in establisher channel structure
• Set up your own intermediaries
Distribution Tasks
Entrepreneurship
Buzz Marketing
• Most recent studies show that word-of-mouth is 10 times more effective than other media
• Media is getting fragmented and ad clutter is rising. Companies feel the need to stand apart
• Traditional forms of media are rising in cost. A 30 second slot during a cricket match on a TV channel can cost over seven lakhs.
• Too many marketers are making conflicting claims. The common man’s trust in ads is coming down.
• Many new technologies provide the impetus for the acceleration of buzz marketing.
Entrepreneurship
Strategies for Buzz
• Give away valuable products or services • Take advantage of others’ resources• The proper transfer mechanism should be
in place• Give people a story to tell • The entire self replicating communication
should be scalable• Utilize existing communication networks
rather than creating new ones
Promotion
Objectives in a promotional campaign:• SALES• Increase in distribution outlets• Increase in shelf space• Increased in-store presence• Expand the selling season• Increase purchase frequency• Increase usage occasions• Increase average transaction size• Induce trial
Steps in Planning a Promotion
• Planning a promotional campaign• Establish its objectives• Plan on strategies and tactics• Establish criteria for success• Create back-up plan• Review and test• Put controls in place• Roll out
Types of Promotions
• Contests• Coupons• Discounts• Continuity• Point Of Purchase• Sampling• Event• Free gift• Trade Promotions
Training
Training of employees can be carried out by the following:
• Training institutes
• Business schools
• In House training
• Online
Firing
Reasons for termination of employment:
• Indiscipline
• Impropriety
• Underperformance
• Lay off
• Resignation
Process of Termination
• An exit interview should be conducted and reasons for the termination should be honestly discussed.
• A letter of recommendation should be promptly given to the exiting employee.
• All terminal benefits and other payments due should be made promptly.
• All documentation citing the reasons for termination should be organized.
NEW PRODUCT DEVELOPMENT
CHAPTER 13
ENTREPRENEURSHIP
Entrepreneurship
Chapter Objectives
• To understand the importance of having a NPD process
• To list the types of new products• To study the various stages of the NPD process• To understand the adoption of new products• To tabulate the best practices in NPD• To look at various ways of involving customers
in the NPD process• To list various barriers to NPD• To discuss the common mistakes in NPD
Types of New Products
• New-to-the-world products
• New product lines
• Additions to a product line
• Improvements and revisions of existing products
• Repositioning
• Cost reduction
Failure Rate of New Products
“Debugging” Stage
Expected Product Life
“Wearout” Stage
Time
Num
ber
of
failu
re
The NPD Process
• Opportunity identification
• Concept generation
• Concept evaluation
• Technical Development
• Launch
• Life Cycle Management
Product Testing
• Alpha testing
• Beta testing
• Gamma testing
The Adoption Process
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption
Adopter Groups
According to Rogers, the adopter groups are:
1. Innovators
2. Early adopters
3. Early majority
4. Late majority
5. Laggards
Entrepreneurship
21/2%Innovators
131/2%Early adopters
34%Early majority
34%Late majority
16%Laggards
Time of Adoption of Innovation
Adopter Categories
Adoption
These five product characteristics influence product adoption:
• Relative advantage
• Compatibility
• Complexity
• Divisibility
• Communicability
• Communicate with the customer
• Tap employees for ideas
• New product team
• Budgeting
• Letting go
Involving the Customer
• Lead user method
• Mapping the consumption chain
Entrepreneurship
Barriers to NPD
• Shortage of funds
• Limited scope in some product categories
• Lack of time
• Restrictive laws and regulations
• Small markets
• Changing technology
• Changing consumer preferences
Common Mistakes in NPD
• No market research
• Hasty commercialization
• Focus on product
• Lack of communication
• Product availability
• Pricing it high
• Pricing it low
Success of Entrepreneur in Rural India
PANKAJ KUMARRai Business School
Content Rural Enterprise :- Some Facts Agriculture Entrepreneurial Development Under TRYSEM Risk taking Among Rural Entrepreneur Development Strategy For Small Entrepreneur Entrepreneurial Development In Backward Area
RURAL ENTERPRISES: SOME FACTS
• Fair industrial activity in rural India.– There are 42.12 million enterprises in
the country engaged in different economic activities other than crop production and plantation of which 25.81 million (61.30%) are in the rural areas.
– The annual rate of growth of enterprises and employment in rural areas was 5.53% and 3.33% respectively as compared to 3.71% and 1.68% respectively in urban centers.
– Average annual growth in employment is higher in rural areas (3.33%) than in urban India (1.68%).
Towards enabling Rural Areas….
Agriculture
Risk Coverage
• Crops insurance• KCC• Other Loan
Information Technology Development
• Use of Village Internet kiosk and mobile phones for– Obtaining market-prices in different
Markets – Transaction and deal-closing from villages– Scheduling delivery– Booking of transport– Direct payment through banks and loan
repayment
Training Programmed
• Skill Improvement Trainings
• Entrepreneurial Development Programmers ( EDPs )
• Agriculture and Animal Husbandry
Training on DTP
Fashion Designing
Entrepreneurial Development Under TRYSEM
Component of TRYSEM
• Identification of entrepreneurial Quality.
• Identification of entrepreneurial opportunity.
• Training in motivation and skills.
• Provision of credit facilities.
• Risk sharing by providing investment subsidy.
• Help in developing new materials and Market.
• Constant monitoring and follow-up.
Risk taking Among Rural Entrepreneur
Environmental Risk
Social RiskEconomic Risk
Technical Risk
Types of Risk
Types of Risk
Development Strategy For Small Entrepreneur
Condition Influencing The Entrepreneurial Trends
Economic Conditions(infrastructural & institutional)
Insufficient (-)
Entrepreneurial Trends
Insufficient (-)
Sufficient (+)
Sufficient (+)
Little ( - - )
Low (+ - )
High (+ +)
Low (+ -)
Social Conditions
Favorable(+)
Favorable(+)
Unfavorable(-)
Unfavorable(-)
+ =
Entrepreneurial Development In Backward Area
Training and Entrepreneurship Development Programme in India
Importance of training
Methods of training
EDP- Need and importance
Phases of EDP
Selection of entrepreneurs for EDP
Training programme - Course contents
Pre requisites of EDP
Organisations providing EDP
Importance of Training• Ensures availability of skilled manpower at all management levels
• Enhancing abilities, potential among entrepreneurs
• Increase efficiency
• Maintain and enhance product quality
• Minimise wastages in production process
• Minimise accidents on the job
• Reduce fatigue and increase speed of work
• Standardisation in industry and internal processes
Methods of Training
• Individual instruction
• Group instruction
• Lecture method
• Demonstration method
• Written instruction method
• Conference
• Meetings
EDP
• Designed with an aim of encouraging self employment
• Imparts training and motivates potential and existing entrepreneurs to start new business or diversify and expand the existing one
• Helps employment and wealth creation among educated unemployed youth
• Well equipped to face risks and challenges as an entrepreneur
• Government needs considerable human and material resource, importance to detailed planning & implementation
Phases of EDP
• Select area from existing government policy guidelines/socio-economic reports
• Techno-economic survey of the selected area; feasibility study
• Identify potential and existing entrepreneurs interested in starting new business/expansion/diversification
• Training
• Follow up and consultancy services
Selection of entrepreneurs for EDP
• The programme is well publicised and promoted to attract maximum applications for screening
• Selection of top 25 to 30 applicants only
• Applications screened for:
– Demographics and socio cultural data – age, education, work exp, financial resources, type of business etc
– Motivation factors – pull factors, source of encouragement, credibility, endurance, concreteness of plans
– Psychological test results- traits like risk taking, need for achievement
Training – Course contents
• Introduction to entrepreneurship
• Motivation training
• Essentials of management
• Fundamentals of project feasibility study
• Organising the business
• Plant visit
Pre requisites of EDP
• Selection of entrepreneurs
• Inputs for EDP
• Support system
• Follow up
Organisations providing EDP
National Institute for entrepreneurship and Small
Business Development (NIESBUD)• Established by Government of India in 1983
• An apex body for coordination and supervision on activities of various institutes engaged in entrepreneurial development
• Helps evolution of EDP, model syllabi, effective training strategies, methodology, manuals and tools
• Activities undertaken:
– Organise and conduct training programmes– Coordinate training activities of various agencies/institutes– Provide affiliation to such institutes– Hold examinations and confer certificates to trainers and trainees
Small Industries Service Institutes (SISI)
• Three months part time evening courses in management
• 4-6 weeks part time courses in intensive training in functional areas (marketing, finance)
• Special courses in quality control, HR, production planning, product development etc
• Mobile workshops imparting training on correct usage of tools and equipment
• Helps with preparation of plant layouts
• Helps individual firms on specific problems faced
Small Industries Development Organisation (SIDO)
• Runs EDP in collaboration with financial institutes, directorate of industries
• Gives on the job training on shop floor (carpentry, electrical devices)
• Sends its officials/trainers to organisations to update their knowledge
National Small Industries Corporation (NSIC)
• Provides apprenticeship for 2 years
• Training supervisory staff of SSI up to 2 years
• Training to engineers up to 2 years
• Training workmen for 12 months
• Training to set up own venture
• Advice on machinery and components
• Production of technologically advanced machines
Entrepreneurship Development Institute of India (EDII)
• Develops programmes for entrepreneurial training and development
• Develops innovative training techniques for trainers
• Focused attention on women entrepreneurs with first such EDP in 1988
• EDP for rural entrepreneurship development in U.P and Orissa
• Famous for organising camps on entrepreneurship
• Condusted EDP in Sri Lanka, Nepal, Ghana, Kenya etc
National Alliance of Young Entrepreneurs (NAYE)
• Contribution in encouraging women entrepreneurship
• Set up women’s wing in 1975• This wing assists women in:
– Getting better access to resources, infrastructure, markets
– Identify investment opportunities– Attending to problems of individual industries– Sponsor participation in trade fairs, exhibitions,
conferences– Organise seminars, training programmes,
workshops
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