Setting business enterprise

Setting up a Business Enterprise

Enterprise(Child)

Promoter

MidwifeMother

Entrepreneur

Brings new enterprise into existence

Brings enterprise into successful venture

Entrepreneur Intrapreneur

Operates outside existing firm Operates within existing firm

Brings out a new venture Does not brings out a new venture

Arranges funds for venture No funds are arranged

Independent person and owner of the enterprise

Is a top level executive and not the owner of the firm

Assumes more risk Assumes less risk

ENTREPRENEUR V/S INTRAPRENEUR

InnovationAbility to generate new ideas and search new business opportunities

Desire to AchieveStrong desire to achieve something

Risk TakingAbility to take moderate risks

EnergyHigh level of energy and stamina for hardwork

VisionAbility to look beyond the present

Traits of Entrepreneurs

Organising SkillsAbility to mobilise and coordinate resources

ResponsibilitySense of personal responsibility

Functions of an Entrepreneur

Perceiving market opportunities

Carrying out Innovations

Taking Calculated Risks

Building the enterprise with all

the resources

I. Entrepreneurial Decisions in setting up

Business Enterprise

Line of Business

Size of Unit

Location of Business

Form of ownership

Financial Planning

Physical Facilities Plant Layout

Internal Orgn

Personnel

Type of goods &

services produced

Nature & Type

of business

Sel

ectio

n Profitability

Product Decision

1. Line of Business

• Expected rate of return

• Degree of risk• Technically feasible

Industrial, Trading or

Service

Raw materials, technology, source

of supply

Probable operating costs and proposed

revenue by market survey

Product design, pricing,

distribution & publicity

2. Size of the Units

• Determination of scale of operations• Optimum size where average cost per unit is minimum• Large scale – Offers economies of scale but involves huge

capital & expert managerial skills.• If risk involved is high, its preferable to start small and then

grow.• A careful analysis and reconciliation of technical, managerial,

financial, market and such factors should be considered.

3. Location of Business• It influences costs, profitability and growth• Absolute care should be taken since its very difficult to change

the selected site.• 3 stages are-

– Select region– Choice of locality– Selection of the site

• An unfavourable location may restrict the growth of the firm in addition to higher costs.

4.Form of Ownership• Determine the division of profits, authority, liability of owners,

continuity of business and transferability of interests.• Forms

– Sole Proprietorship– Partnership– Joint stock company

• A good form of ownership should be easy to form, simple to operate, durable, flexible, free from heavy taxation and legal requirements.

5. Financial Planning• Adequate funds must be provided at the right time for the

start & continuity• Advance decisions in financial planning are-

Total amount of capital required

Appropriate capital structure

Time, price and method of marketing securities

Administration of funds

6. Provision of Physical Facilities

• Selection of machines, equipments, plant and buildings.• Nature and quantum depends upon the

– Size of the Firm – Large, medium or small– Nature of the Business – Manufacturing, trading and service– Process of Production- Capital-intensive or Labour-intensive– Availability of funds– Relative cost and effect on Productivity– Availability of spares– Maintenance services– Skills of workers

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7. Plant Layout• Arrangement of physical facilities is called Plant Layout.• Good layout is essential for efficient and economical

operations• Helps reduce cost and efforts of material handling, inventory

& space.• Proper placement to ensure smooth flow of material.• Layout should be flexible and adapt itself to changing

conditions to avoid delays in production process.

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8. Internal Organization

• Creation and development of internal structures• Departmentation, viz, Production, finance , marketing &

personnel• Authority-Responsibility-Accountability relations• Facilitates efficient operations, avoids duplication, promotes

mutual co-operation and coordination• Departmentation, delegation, span of control decisions.

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9. Personnel

• Need of people or human capital• Human resource planning - Number & type of employees

• Procurement, development & motivation• Proper compensation and non-financial incentives for

maximum contribution towards organizational goal.

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10. Launching of the Enterprise

• Completion of physical, organizational and financial aspects.

• Final launch of the enterprise

II. Generation of Business Idea

Sources of Business Idea1. Observing Markets2. Prospective consumers3. Developments in other

nations4. Study of project profiles5. Governement Orgns6. Trade fairs and exhibitions

Generating Ideas-Approaches1. Brainstroming2. Improvement of an

existing product3. New ways of doing things4. Utilizing waste materials5. Converting hobbies into

business

Genration of Business Ideas

Compatible with

legalities & regulations

Selection of a Project Idea

Resources required could

be easily mobilized

Sufficient demand of the

product or service

Cost structure must ensure reasonable

return

Idea should match

resourcesFeasibility

InnovationProcess of doing new things or doing old things in a new way

Innovation Extension Duplication Synthesis

CreativityProcess of generating new and novel ideas, they are of no use unless converted into a product or service

Spontaneous Technical Inventive Innovative

III. Innovation,Creativity & Invention

InventionThe creation of something new, any idea or material. Results in creation of new

knowledge

Germination

Search for knowledge to

rationalize the idea

Search for knowledge to

rationalize the idea

Garnering of information

and fantasizing

Garnering of information

and fantasizing

Recognizing the feasibility

of the idea

Recognizing the feasibility

of the idea

Validation of the value of

ideas

Validation of the value of

ideas

Recoginition of idea in initial stage

Creativity Process

Preparation Incubation Illumination Verification

Commercial Aspect

Good to Go..

Financial Aspect

Socio-economic Aspect

Marketability Aspect

V. Feasibility Study

Technical Aspects• Location• Size of plant• Raw materials &

labour• Plant & equipment• Infrastructure• Foreign

Collaborations

VI. Project Appraisal

In-depth analysis made to decide selection or rejection of the project.

Select

Reject

VII. Project Report

Post feasibility study and project appraisal, the findings and recommendations are presented in a report

known as Project Report.

• Its helpful in getting clearances from Govt.• Also in applying loans from financial institution.

, suppliers, suppliers

VIII. Preparation of Business Plan• Written document• Describes all relevant internal and external elements effecting

the start-up.• Integration of functional plans, stating long term and short

term goals of the new venture.– Self assessment by entrepreneur– Determine the viability of venture in designated markets– Helps in raising necessary funds.– Judging the progress of the project at successive stages.– Investors, lenders, suppliers know about entrepreneur’s plans.

IX. Launch Enterprise

• Once convinced of the feasibility and profitability of the project, he assembles the necessary resources to launch the enterprise.

• Once commissioned, the operational phase stage starts.

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