ENTREPRENEURSHIP

DEVELOPMENT

PRASANJEET BHATTACHARJEE
UNIT - I
 Definition of Entrepreneur

“The entrepreneur, by definition, shifts

resources from areas of low productivity and
yield to areas of higher productivity and yield.
Of course, there is a risk the entrepreneur may
not succeed”.
(Drucker, ’85)
DEFINITION OF ENTREPRENEURSHIP

 It is more than mere creation of business

 Entrepreneurship is a process of innovation

and new venture creation through four major
dimensions – individual, organizational,
environmental and process.

 The entrepreneurship process is aided by

collaborative networks in government,
education and institutions.
 DEFINITION OF ENTREPRENEURS

Functional definition of entrepreneurs

offers the following definition:

“Entrepreneurs are individuals who

actively form or lead their own business
and nurture them for growth and
prosperity.”
 What is an Entrepreneur?
• An Entrepreneur (ahn’tra pra nur) is
a person who organizes and manages
a business undertaking, assuming
the risk for the sake of profit. Any
person (any age) who starts and
operates a business is an
entrepreneur.
 Definition: Entrepreneurship
“The Spirit of Creative Risk Taking”

Entrepreneurship is the act of:

Creating new ventures that generate
and capture value by realizing
opportunities through creativity,
innovation, knowledge, skill and passion
while managing resources and risks!
 What is entrepreneurship?
• A person who destroys the existing economic order by
introducing new products and services, by creating new forms
of organization, or by exploiting new raw materials -
Schumpeter
• Someone who perceives an opportunity and creates an
organization to pursue it - Bygrave

• Most current:

A way of thinking and acting that is opportunity obsessed,

holistic in approach and leadership balanced for the purpose
of wealth creation - Babson College
 Entrepreneurship
Some advantages
– You are your own boss
– Enjoy the profits from you efforts
– Sense of pride in your business
– Flexibility in your work schedule
 Entrepreneurship
Some disadvantages
– Will need to put in long hours
– Need money to start
– Have to keep up with government rules and
regulations
– May have to mark hard decisions (hiring, firing,
etc.)
– May lose money
Intrapreneurship defined

Intrapreneurship is entrepreneurship by employees

in existing organisations

Source: Antoncic and Hirsh, 2003

 Entrepreneurship (cont’d)
Intrapreneurs
– Individuals (managers, scientists, or researchers)
who work inside an existing organization and
notice an opportunity for product improvements
and are responsible for managing the product
development process.
• Intrapreneurs frustrated with the lack of support or
opportunity at their firm often leave and form their
own new ventures.
Entrepreneurship Vs Management
• Entrepreneurship
– Creating something new
– New product, new method of production, new
markets, new source of raw material
– Challenges the ‘norm’
• Management
– Protects
– Stewardship of existing resources
 Why become an Entrepreneur?
• Personal situation
• Resources
• Entrepreneurial skills
• Success stories
• Desire for independence
• Opportunity to exploit a gap
• Frustration
Characteristics of an Entrepreneur
• Drive • Vision
• Perseverance • Motivation
• Ambition • Self-confidence
• Leader • Self Satisfaction
• Survivor status • Extrovert
• Competitive • Results
• Interpersonal orientated
skills • Committed
• Innovative skills • Risk taker
• Ability to • Sociable
 Psychological Characteristics of
Entrepreneurs
• Need for achievement
• Locus of Control
– Internal
– External
• Risk-taking Prosperity
• Tolerance for ambiguity
• Type A Behaviour
– Impatient, time urgency, driving ambition,
competitiveness
• Need for Independence
What is the Role of the Entrepreneur?

• Opportunity recognition
• Market uncertainties
– Dealing with the future
• Risk taking
– Businesses, financial and personal
• Resource gathering
• Profits/Reward
 Skills & Competencies
(Birdthistle)

• I can.…Communicate
• I can.... Present
• I can…. Represent my opinion
• I can…. Co-ordinate tasks
• I can…. Develop alternative plans
• I can…. Hand tasks over to a 3rd party
• I can…. Co-operate with others
• I can…. Negotiate
• I can …. Sell
• I can…. Organise and plan
• I can…. Handle numbers
• I can…. Handle technical devices
• My literacy is ….
• My interaction with people is ….
 Reasons for Entrepreneurial Success
• Hard work and long hours
• Dedication, drive, enthusiasm and belief in the
idea
• Unsatisfied market demand
• Managerial competence
• Luck
• Strong control systems
• Sufficient capital
Hurdles in starting up a a business
• Lack of the right business idea
• Complicated regulatory efforts
• Own financial risk
• Lack of courage
• Lack of right founding partner
• Lack of equity
• Lack of debt capital
• Know-how-deficit
Hurdles in starting up a a business
• Lack of contact clients/customers
• Economic cycle
• Business environment
• Fear of failure
• Support by family and friends
• Lack of time
• Lack of entrepreneurial skills
• Have you the ‘fire in your belly’? – Not
indigestion but – a vision; a concept; a
belief; in your future?

• Have you the guts to take the rough

with the smooth? – Sure rough times –
but accept it and move on.

• If you are entrepreneur – work is fun!!

• Have some fun……………….

CATEGORIES OF ENTREPRENEURS
 Entrepreneurship in India
comes in three forms

Types of Entrepreneurship

Individual Micro & Small Enterprises Large Markets

Entrepreneurship driven by Small to medium businesses Large businesses with large
instincts to survive with scope and employment scope and employment
• Vegetable vendor • 5-100 employees • Typically run by highly educated
• Cattle rearing • Relies on internal business sense managers
• Tea Stall to succeed • Exit markets well understood

• Currently with limited financial

• The area of microfinance support • Significant conventional venture
• Supported by small loans • Need USD $20K to $250K capital support
between USD $50 - $200 • Generally rely on personal funds, • Need USD millions in equity
• Debt structure; short payback family, friends, and money lenders •Primarily service export or urban
period focused
• Proven area for finance • Proven area for finance
Factors that Shape Future Entrepreneurs
 Functions of an Entrepreneur
• Job Creator

• Risk Taker

• Coordinator

• Promoter

• Value Creator

• Profit Maximiser
 What is EM?
Entrepreneurial motivation refers to the way
in which urges, drives, desires, striving,
aspirations or needs direct, control or explain
the entrepreneurial behavior of human
beings.
 Elements of EM

• Motive
Motive
• Behavior
• Goal

Goal Behavior
 Relationship between Motive, Behavior &
Goal

Help Goal
(Assistance)
Effort

Barriers
(Internal)
Activity

Barriers
(External) Feelings
Intention Expectation
(+ve/-ve)
(Motive) (+ve/-ve)
Sources of Entrepreneurial Motivation

• Internal/Intrinsic
– Personal goals
– Need for achievement
– Ambition

• External/Extrinsic
– Compulsion
– Support
– Successful entrepreneurs
– Access to capital
– Status
 Models of EM
• Needs-based entrepreneurial motivation
• A general model of entrepreneurial motivation
• Entrepreneurial intentions model
• Enterprise formation model
• Model of entrepreneurial motivation and the
entrepreneurial process
David McClelland, Psychologist
(1917-98)

Needs-based
Entrepreneurial
Motivation
 David McClelland's Needs-Based
Motivational Model
• Need for achievement (n-ach)
– attainment of realistic but challenging goals, and advancement in
the job. Feedback as to achievement and progress, and a sense of
accomplishment.

• Need for authority and power (n-pow)

– influential, effective and to make an impact ,personal status and
prestige.

• Need for affiliation (n-aff)

– friendly relationships and interaction with other people

• Need for security/safety (n-sec)

– Comfortable with secure employment and unwillingness to take
higher risk
Behavior of Achievement-Motivated People

• Achievement is more important than material or

financial reward.
• Achieving the aim or task gives greater personal
satisfaction than receiving praise or recognition
• Financial reward is regarded as a measurement of
success, not an end in itself.
• Security is not prime motivator, nor is status.
Behavior of Achievement-Motivated People

• Feedback is essential, because it enables

measurement of success, not for reasons of praise
or recognition.
• Achievement-motivated people constantly seek
improvements and ways of doing things better.
• Achievement-motivated people will logically
favor jobs and responsibilities that naturally satisfy
their needs, i.e. offer flexibility and opportunity to
set and achieve goals, e.g., sales and business
management, and entrepreneurial roles.
Behavior of Achievement-Motivated People

• Capacity to set high personal but

obtainable goals
• Concern for personal achievement
rather than the rewards of success
• The desire for job-relevant
feedback (How well am I doing?)
rather than for attitudinal feedback
(How well do you like me?)
A Model of Entrepreneurial Motivation
PC PE PG Internal

Expectation/
Expectation/ Intrinsic/Extrinsic
Intrinsic/Extrinsic
Outcome
Outcome Rewards
Rewards
Comparison
Comparison

Decision
Decision Entrepreneurial
Entrepreneurial Entrepreneurial
Entrepreneurial Firm
Firm
to
to behave
behave Strategy
Strategy Management
Management Outcomes
Outcomes
Entrepreneurially
Entrepreneurially

Implementation/
Implementation/
Outcome
Outcome
Perception
Perception
PC = Personal Characteristics
PE = Personal Environment
PG = Personal Goals
BE IDEA Internal/External BE = Business Environment
Entrepreneurial Intentions Model

Perceived net
desirability of
self-employment
(NDSE)

Tolerance for Self-employment

risk (TR) intentions

Perceived feasibility
(self-efficacy) of self-
employment (SE)
Factors Critical to Start-Up & Reasons for Not
Starting-Up
 A Model of Enterprise Formation

PERSONAL BACKGROUND:
Age
Gender
Previous employment DECISION:
Family and ethnic group START (Triggers > Barriers)
Education

INTENTIONALITY
ENVIRONMENT:
Industry
Social DECISION:
Economic ABANDON (Triggers < Barriers)
Political
Infrastructure development
 Triggers to start up
• Invest (need a job; way to personal savings, super,
redundancy; earn a better salary)
• Creativity (take advantage of own talents; have an
interesting job; create something new; realise a
dream)
• Autonomy (work own hours, own location; be one’s
own boss)
• Status (follow example of a person I admire;
increase status/prestige; maintain family tradition)
• Market Opportunity (saw one)
• Money (make more, keep more RM)

41
 Barriers to start up
• Lack of resources - lack of marketing skills,
lack of management/financial expertise, lack
of information, difficulty in obtaining finance
• Compliance costs - high taxes and fees,
compliance with government regulation,
problems finding suitable labour
• Hard reality - assessment that risks are
greater than expected, uncertainty and fear
of failure
Entrepreneurial Motivation &
Entrepreneurship Process

Source: Shane, et.al. (2003)

Entrepreneurial Behavior & Favorable Business
Outcome
 Pull Factors
 Religious Values
– A lot of bounties in business
– Follow the teachings of the religion
– Duty to lead a prosperous life
 Psychological
– Doesn’t like to be controlled
– Want freedom
 Pull Factors
 Riches and Power
– Rich and famous
– Sophisticated life-style
 Service to the Society
– Corporate social responsibility
– Philanthropic activities
 Entrepreneurial Culture
– Entrepreneurial mindset
– Business succession
 Push Factors
 Frustration
– Limited job mobility
– VSS and “retrenchment”
– Dissatisfaction
 Necessity
– No jobs
– Need to support family
– Lack educational qualifications
 Barriers to Entrepreneurship
• “Too much to lose”
• “Personal inadequacy”
• “Fear of Competition”
• “Lack of Capital”
• “Lack of Opportunity”
 Factors in Entrepreneurial Success
• Achievement Oriented Personality
• Entrepreneurial Attitudes
• Belief in Self and Ability
• Social Context
• Precipitation Event
• Intention to Start a Venture
• Opportunity Recognition
• Controlling Resources
• Timing
 Classification of Entrepreneurship
• Contextual Basis

• Novelty Basis

• Intention Basis
 Contextual Basis
• Entrepreneurship (stand alone start up)
• Corporate entrepreneurship (new ventures within large
established organizations)
• Co-preneurship (a working professional starts a business and
runs it alongside his / her job)
• Technology Entrepreneurship (start-ups witjh product and
process which are technology based)
• Service Entrepreneurship (start-ups in the services domain of
activity)
• E-entrepreneurship (start-ups wherein business is on internet
platform)
 Novelty Basis

• Innovating Entrepreneurship
Innovating Entrepreneurship involves introduction of new
goods, new methods of production, discovers new market and
reorganizes the enterprise. This is usually the case with
technology companies but it is not ruled out for other
ventures also. It is also called Schumpeterian
Entrepreneurship.
• Imitative Entrepreneurship
This is the type of entrepreneurship wherein the
entrepreneur is poised to adopt successful innovations which
are already in the market
 Intention Basis
• Build to sell
 THE EVOLUTION OF
ENTREPRENEURSHIP THEORY
Definition of an Entrepreneur :

• “ An entrepreneur is a person who

undertakes to do a job ” Richard
Cantillon (1755). The term entrepreneur
is a French word first coined by Richard
Cantillon.

• In Malaysia the term “usahawan” is

used for entrepreneur.
 THE EVOLUTION OF
ENTREPRENEURSHIP THEORY
Definition of Entrepreneurship:

• Entrepreneurship involves not only the

process that leads to the setting up of a
business entity but also the expansion
and development of an on going
concern. The study of entrepreneurship
is concerned with the entrepreneurial
behavior, the dynamics of business set
up and expansion and development.
 THE EVOLUTION OF
ENTREPRENEURSHIP THEORY

• Adam Smith (1776) - An entrepreneur is

a person who acts as agent in
transforming demand into supply.

• Jean Babtiste Say (1803) - An

entrepreneur is a person who shifts
resources from an area of low
productivity to high productivity.
 THE EVOLUTION OF
ENTREPRENEURSHIP THEORY

• John Stuart Mill (1848) - An entrepreneur is a

prime mover in the private enterprise. The
entrepreneur is the fourth factor of production
after land ,labor and capital.

• Carl Menger (1871) - The entrepreneur acts

as an economic agent who transforms
resources into products and services. The
entrepreneur transforms and gives added
value.
 THE EVOLUTION OF
ENTREPRENEURSHIP THEORY

• Joseph Aloysius Schumpeter (1934) - An

entrepreneur is an innovator. The economy
moves through leaps and bounds and the
prime mover is the entrepreneur through the
process of creative destruction.

• Alfred Marshall (1936) - The process of

entrepreneurship or business development is
incremental or evolutionary . It evolves from
sole proprietorship to a public company.
 THE EVOLUTION OF
ENTREPRENEURSHIP THEORY

• Ibnu Khaldun (Abdul Rahman Mohamed

Khaldun) - The entrepreneur is seen as a
knowledgeable individual and is instrumental
in the development of a city-state where
enterprise will emerge.

• David McClelland - The entrepreneur is a

person with a high need for achievement.
This need for achievement is directly related
to the process of entrepreneurship.
 Concept of Entrepreneurship
• Development of Entrepreneurship

• Entrepreneurial Culture and Stages in the

entrepreneurial Process
o Stage-I: Entrepreneurial Interest
o Stage-II: Generate Ideas for screening
o Stage-III: Venture Screening
o Stage-IV: Develop and refine the concept
o Stage-V: Determine resources required
o Stage-VI: Acquiring necessary financials
o Stage-VII: Developing business plan
o Stage-VIII: Implement and manage
o Stage-IX: Growth or Exit
 Concept of Entrepreneurship
• What makes a culture Entrepreneurial
o Treat what people respect
o Help employees stay healthy
o Open doors to communication
o Build camaraderie

• Maintaining this entrepreneurial culture

o Let the team build itself
o Participate without controlling
o Don’t forget the little things
Development of Entrepreneurship

Key Dimensions of Entrepreneurship

Entrepreneur

Economy Venture
Entrepreneurship in Career Development
Subject Area
 Entrepreneurial Culture & Stages in the
Entrepreneurial Process
• (A) Stage – I : Entrepreneurial Interest
• (B) Stage – II : Generate Ideas for Screening
• (‘C) Stage – III : Venture Screening
• (D) Stage – IV : Develop and refine the concept
• (E) Stage – V : Determine resources required
• (F) Stage – VI : Acquiring necessary Financials
• (G) Stage – VII : Developing the business plan
• (H) Stage – VIII : Implement and Manage
• (I) Stage – IX : Growth or Exit
 What Makes a culture Entrepreneurial

• (a) Treat people with respect

• (b) Help employees healthy

• (‘c) Open doors to communication

• (d) Build camaraderie

 Maintaining the entrepreneurial Culture

• (a) Let team build itself

• (b) Participate without controlling

• (‘c) Don’t forget the little things

UNIT - II
 Idea generation & Creativity
• Idea Generation Techniques:
(a) Brainstorming
(b) Fishbone diagram
(‘c) Free Association
(d) Mind mapping
(e) Visual Brainstorming
- Idea Generation Phase
- Evaluation Phase
(f) Alternative scenarios
(g) Attribute listing
 Idea generation & Creativity
(h) Card board story
(i) Chunking
(j) False faces
(k) Problem reversal
(l) SCAMPER

SCAMPER is the acronym of : -

S – Substitute
C – Combine
A – Adapt
M – Modify
P - Put to another use
E – Eliminate
R - Reverse
 Idea Screening and selection
• Product / Service
• Sources of advantage
• Value creation and realization of benefits
• Customer / Market
• Competitor’s competitive advantage
• Management team
• Creates significant value for customers
• Significant profit potential
• Fit with capabilities of the founder
• Durable
• Amenable to financing
 Feasibility Analysis
• Economic Feasibility

• Market Feasibility

• Financial Feasibility

• Technical Feasibility
The various details that emerge from the feasibility analysis and
contribute to larger portion of the business plan are as follows:

Executive summary
The industry and the firm
Market research and analysis
The economics of the business
Marketing plan
Design and development plan
Manufacturing and operational plan
Management team
Overall schedule
Critical Risks, Problems and Assumptions
Financial Plan
Appendices
 Economic Feasibility

• Value – cost – price

• Hidden Costs
• Trade – offs
– Cost Functions
• People / Knowledge and machines
• Scale Vs. Scope
• Market and demand
• Risks
 Marketing Feasibility

• Description of the industry

• Current Market Analysis
• Competition
• Anticipated Future Market potential
• Potential Buyers and sources of Revenues
• Sales Projections
 Financial Feasibility
• Start-Up-Capital Requirements
• Calculating Business Start-up costs
• Project Start-up costs conservatively
• Segregate one-time start-up costs from recurring costs
– Never run out of cash
– Cash is king
– Know the cash balance now
– Do today’s work today
– Do the work or get someone else
– Do not manage from the bank balance
– Know your six months cash balance
– Cash flow problems do not just happen
– Have cash flow projections
– Take care of customers
 Technical Feasibility
• Preparing an outline for writing your technical
feasibility study
• Calculating material requirements
• Calculating labor requirements
• Transportation and shipping requirements
• Physical location of your business
• Technology requirements to run your business
 Project Planning

“A project is an organized unit dedicated to the

attainment of a goal – the successful completion of
a development project on time, within budget, in
conformance with predetermined programme
specification”.
 Project Classification
• Quantifiable and non-quantifiable projects
• Sectoral projects
– Agricultural and allied
– Irrigation and Power
– Industry and Mining
– Transport and communication
– Social service
– Miscellaneous
• Techno- Economic Projects
• Project Identification
• Project Selection
 Project Classification
• Project Formulation
• Contents of a project report
– Executive summary
– The industry and the firm
– Market research and analysis
– Economics of the business
– Marketing plan
– Design and development plan
– Manufacturing and operational plan
– Management team
– Overall schedule
– Critical risks
– Financial plan
– Appendices

• Project Implementation
 Project evaluation
There are various methods used for evaluating
projects.
Some of these are as:

• Simple rate of return (SRR)

• Payback Period (PBP)
• Benefit Cost Ratio (BCR)
• Net present value (NVP)
• Internal Rate of Return (IRR)
 Project Monitoring and Control
• Monitoring the project
– Identify risks, potential project problems, as early as
possible
– Identify when constraints may be violated
– Ensure that contingency plans occur before
unrecoverable problems occur
– Provide and receive project status for the phases and
total project
• Monitoring changes to workflows
• Monitoring system performance
• Controlling Changes
 Creative Problem Solving (CPS)

CPS is a simple process that involves

breaking down a problem to understand
it, generating ideas to solve the problem
and evaluating those ideas to find the
most effective solutions
 Steps in Creative Problem Solving
• Clarify and Identify the problem
• Research the problem
• Formulate creative challenges
• Identify insights
• Generate ideas
• Combine and evaluate the ideas
• Draw up an action plan
• Do it! (i.e. implement the ideas)
 Heuristics of Problem Solving
• Heuristic problem solving are common sense rules
drawn from experience, used to solve problems.

• General heuristics are “cognitive rules of thumb that

are useful in solving a great variety of problems.”

• Heuristic problem solving involves finding a set of

rules, or a procedure, that finds satisfactory solutions
to a specific problem. (Why?)
 Ill-structure
Problems for which there are no known algorithmic solutions
are called ill-structured. A well structured problem has the
following characteristics:

• All information relevant to the problem can be

represented in an appropriate model.
• The model should include all feasible solutions
• There exists an algorithm for finding the optimal solution
to the model.
• All data required should be economically practical to
gather.
 Heuristic Problem Solving
• Random solutions
• Greedy solutions
• Exchanging heuristics
• Break-combine heuristics
• Improving our solutions
• Local optimization
• Iterated local search
• Simulated annealing
 Brainstorming
Brainstorming can be effective way to generate lots
of ideas on a specific issue and then determine which
idea – or ideas – is the best solution.

Brainstorming requires a facilitator in order to guide

the session.

It should be energetic and openly collaborative.

 Brainstorming
Step by step process of brainstorming:

• Define your problem / issue

•Give yourself a time limit
•It must be written down, without any criticism
•Select your five best ideas
•best solve your problem, Criteria should start with the word “should”
•Give each idea a score (0-5 points)
•The idea with the highest score will best solve your problem. (Keep a
record of all of your best ideas)
 Brainstorming
Factors to be considered for successful
brainstorming
– Mixed participants
– Enthusiastic facilitator
– Well stated challenge
 Brainstorming
Factors to be considered for
successful brainstorming:

– Mixed participants
– Enthusiastic facilitator
– Well stated challenge
 Synectics and Value Analysis
Synectics was formally created by William Gordon &
George Prince
Synectics
Synectics is a problem solving methodology that stimulates thought processes of which the subject may be
unaware. This method was developed by George M. Prince (April 5, 1918 - June 9, 2009)[1]and William J.J.
Gordon, originating in the Arthur D. Little Invention Design Unit in the 1950s. They set up Synectics Inc.
(now Synecticsworld) in and the methodology has evolved substantially in the ensuing 50 years.

Process
The process was derived from tape-recording (initially audio, later video) of thousands of meetings, analysis of
the results and experiments with alternative ways of dealing with the obstacles to success in the meeting.
"Success" was defined as getting a creative solution that the group was committed to implement. This history
of sustained Research and Development provides a scientific foundation for the Synectics body of knowledge.

Prince emphasized the importance of Creative Behaviour in reducing inhibitions and releasing the inherent
creativity of everyone. He and his colleagues developed specific practices and meeting structures which help
people to ensure that their constructive intentions are experienced positively by one another. The use of the
Creative Behaviour tools extends the application of Synectics to many situations beyond invention sessions
(particularly constructive resolution of conflict).

Gordon emphasized the importance of "'metaphorical process' to make the familiar strange and the strange
familiar". He expressed his central principle as: "Trust things that are alien, and alienate things that are
trusted." This encourages, on the one hand, fundamental problem-analysis and, on the other hand, the
alienation of the original problem through the creation of analogies. It is thus possible for new and surprising
solutions to emerge.

As an invention tool, Synectics invented a technique called "springboarding" for getting creative beginning
ideas. For the development of beginning ideas, the method incorporates brainstorming and deepens and
widens it with metaphor; it also adds an important evaluation process for Idea Development, which takes
embryonic new ideas that are attractive but not yet feasible and builds them into new courses of action which
have the commitment of the people who will implement them.

Synectics is more demanding of the subject than brainstorming, as the steps involved mean that the process is
more complicated and requires more time and effort. It is also much more rewarding because the end product
is action not just ideas.
 Step by Step Process of Synectics

• Start with original problem statement

• Analyze the problem. Restate the problem. Formulate the problem as a
single concrete target
• Generate, collect and record the first ideas that come to mind
• Fins a relevant analogy in one of the listed categories of analogies
• Ask yourself questions in order to explore the analogy
• Force fit various solutions to the reformulated problem statement
• Generate, collect and record the ideas
• Test and evaluate the ideas
• Develop the selected ideas into concepts
• Present your concepts to the point
 Innovation
Innovation is defined as the ability to apply
creative solutions to problems or
opportunities to enhance or to enrich people’s
lives.
Innovation could take the form of
• a new good
• a new method of production
• a new market
• a new source of supply of raw materials
• carrying out of a new organization
UNIT - III
 International Entrepreneurship
Opportunities

With the globalization of the World economy,

interest in international markets has increased
manifolds and thereby observed enhanced
entrepreneurial activity in this domain also.

Some new ventures are born global (such as IT

firms in India)
Nature of International Entrepreneurship

International Entrepreneurship is the

development of international new ventures or
start ups that from inception engage in
international business thus viewing their
operating domain as international from initial
stages of the firm’s operation.
Nature of International Entrepreneurship

• It is the study of the nature ?& consequences

of a firm’s risk taking behavior as it ventures
into international markets.

• A business organization that from inception

seeks to derive significant competitive
advantage from the use of resources and sale
of outputs in multiple countries.
Nature of International Entrepreneurship

• International Entrepreneurship is a firm level

activity that crosses national borders and
focuses on the relationship between businesses
and the international environments in which
they operate.
• Combination of innovative, proactive and risjk
seeking behavior that crosses national borders.
 Examples
The liberalization and globalization of Indian
business has seen a lot of increased activity in
this field, venture based con specialized
resources are able to capitalize on markets
elsewhere

• Dr. Reddy’s Lab

• Biocon
• And many more………..
Importance of International Business to the
firm
• International Business is all business
transactions – private and governmental –
that involve two or more countries.

• Companies that engage in some form of

international business are involved in
exporting than in any other type of business
transaction.
Importance of International Business to the
firm
• Another core Issue is the company’s growth
and the importance of networking and
interaction i.e. collaborations, sub-contracting,
etc.

• Diverse Markets with vibrant and varied

cultural heritage.
Importance of International Business to the
firm
• Helps as growth strategy
• Helps in managing product life cycle
• Technology advantages
• New business opportunities
• Proper use of resources
• Availability of quality products
• Earning foreign exchange
 Complexities
• Controlling the market
• Exhausting natural resources
• Importance to Luxuries
• Trade practices
• Economic Development
• Shifting of Investment
International Vs Domestic Entrepreneurship

The dimensions on which the international and

domestic entrepreneurship differ are basically to
do with the reasons to go international as
compared to just focus attention on domestic
markets. The main reason for organizations to
tread across borders has noticeably been to
acquire access to larger markets. This requires
making alterations to your offerings at times.
International Vs Domestic Entrepreneurship

Uncontrollable Factors:
Economies
Balance of payments
Type of system
Political-legal Environment
Cultural Environment
Technological environment
Stages of Economic Development
Rostow's Stages of Development

Walt Whitman Rostow (1916- 2003)

In 1960, the American Economic Historian, W. W. Rostow, suggested that countries passed
through five stages of economic development.

Stage 1 -- Traditional Society

The economy is dominated by subsistence activity where output is consumed by producers rather
than traded. Any trade is carried out by barter where goods are exchanged directly for other
goods. Agriculture is the most important industry and production is labor intensive using only
limited quantities of capital. Resource allocation is determined very much by traditional methods
of production.

Stage 2 -- Transitional Stage (the preconditions for takeoff)

Increased specialization generates surpluses for trading. There is an emergence of a transport
infrastructure to support trade. As incomes, savings and investment grow entrepreneurs emerge.
External trade also occurs concentrating on primary products.

Stage 3 -- Take Off

Industrialization increases, with workers switching from the agricultural sector to the
manufacturing sector. Growth is concentrated in a few regions of the country and in one or two
manufacturing industries. The level of investment reaches over 10% of GNP.

The economic transitions are accompanied by the evolution of new political and social institutions
that support the industrialization. The growth is self-sustaining as investment leads to increasing
incomes in turn generating more savings to finance further investment.

Stage 4 -- Drive to Maturity

The economy is diversifying into new areas. Technological innovation is providing a diverse range
of investment opportunities. The economy is producing a wide range of goods and services and
there is less reliance on imports.

Stage 5 -- High Mass Consumption

The economy is geared towards mass consumption. The consumer durable industries flourish. The
service sector becomes increasingly dominant.

According to Rostow, development requires substantial investment in capital. For the economies of
LDCs to grow, the right conditions for such investment would have to be created. If aid is given or
foreign direct investment occurs at stage 3 the economy needs to have reached stage 2. If the
stage 2 has been reached then injections of investment may lead to rapid growth.

Limitations
Many development economists argue that Rostows's model was developed with Western cultures
in mind and not applicable to LDCs. It addition its generalized nature makes it somewhat limited.
It does not set down the detailed nature of the pre-conditions for growth. In reality, policy makers
are unable to clearly identify stages as they merge together. Thus as a predictive model it is not
very helpful. Perhaps its main use is to highlight the need for investment. Like many of the other
models of economic developments it is essentially a growth model and does not address the issue
of development in the wider context.
Stages of Economic Development
Stages of Economic Development
The Stages of Economic Development and
Entrepreneurship
In his classic text W.W. Rostow suggested that countries go through five stages of economic
growth: (1) the traditional society (2) the preconditions for take-off (3) the take-off (4) the
drive to maturity and (5) the age of high mass-consumption. While these stages are a
simplified way of looking at the development of modern economies, they identify critical
events. While Rostow focused on the age of high mass-consumption, Porter following recent
developments in the Rostow (1960).

economics of innovation. Michael Porter8 has provided a modern rendition of this approach
by identifying three stages of development: (1) a factor-driven stage, (2) an efficiency-
driven stage and (3) an innovation-driven stage.

The factor-driven stage is marked by high rates of agricultural self-employment. Countries

in this stage compete through low-cost efficiencies in the production of commodities or low
value-added products. Sole proprietorships—i.e. the self-employed—probably account for
most small manufacturing firms and service firms. Almost all economies experience this
stage of economic development. These countries neither create knowledge for innovation
nor use knowledge for exporting. To move into the second stage, the efficiency-driven
stage, countries must increase their production efficiency and educate the workforce to be
able to adapt in the subsequent technological development phase: the preconditions for
take-off plays a crucial role. The drive to efficiency describes the first transition that is
predominantly institutional in nature.

To compete in the efficiency-driven stage, countries must have efficient productive practices
in large markets, which allow companies to exploit economies of scale. Industries in this
stage are manufacturers that provide basic goods and services. The efficiency-driven stage
is marked by decreasing rates of self-employment. In the efficiency-driven economy capital
and labor play a crucial role in productivity and the focus is on technology, in the decision
making process. For over a century there has been a trend in economic activity—exhibited
in virtually every developing country—toward larger firms.

In 1957 Robert Solow at MIT modified Douglas’s earlier findings on the contributin of capital
and labor by a kind of exponential growth factor suggested by Schumpeter early on in the
Century. As the Nobel Laureate Paul Samuelson (2009, 76) recently pointed out, “This
‘residual’ Solow proclaimed, demonstrated that much of post-Newtonian enhanced real
income had to be attributed to innovational change (rather than, as Douglas believed, being
due to ‘deepening’ of the capital/labor K/L ratio).”
The transition to the innovation driven stage is characterized by increased activity by
individual agents. In the innovation-driven stage knowledge provides the key input. In this
stage the focus shifts from firms to agents in possession of new knowledge.9 The agent
decides to start a new firm based on expected net returns from a new product. The
innovation-driven stage is biased towards high value added industries in which
entrepreneurial activity is important.

Institutions dominate the first two stages of development. In fact, innovation accounts for
only about 5 percent of economic activity in factor-driven economies and rises to 10 percent
in the efficiency driven stage. However, in the innovation-driven stage when opportunities
have been exhausted in factors and efficiency, innovation accounts for 30 percent of
economic activity. We see an S-shaped relationship between entrepreneurship and
economic development because in the first transition stage entrepreneurship plays a
Institutional Support For New Ventures

Supporting Organizations

The Government of any nation has a critical

role to play in ensuring the development of a
vibrant business eco-system.
 Vibrant Business Eco-system
• Government Support
• Infrastructure Support
– Industrial Areas / Economic Zones
• Financial Support
– Debt & Equity Funding, Tax Holidays, etc.
• Skills Support
– Supply of educated, qualified, trained workforce
• Incubation Support
– Mentoring-technical & business guidance for success & growth of
ventures
• Procedural Support
– Simplifying the process of starting & doing business
Incentive Schemes by Central Government
(A) Credit Guarantee Fund Schemes for SSI

Small scale industrial units particularly the first

generation of entrepreneurs faced difficulties in
accessing bank credit because of their inability
to provide adequate collateral security for loans
• Govt. launched the credit Guarantee Fund Scheme for small
Industries on 30th August, 2000
• Alleviating the problem of collateral security & impediment to
flow of credit to Small Scale Industries (SSI) sector
• The govt. approved Credit Guarantee Fund Scheme for small
industries on 19th May, 2000
• Loans up to Rs. 10Lacs w/o collateral / third party guarantees
• The scheme is being operated by the credit Guarantee Trust
Fund for small for small industries (CGTSI) set up by Govt. of
India & SIDBI
• The trust was incorporated on 27th July, 2000
• The scheme has been operationalised w.e.f. 1st January, 2001
The Govt. decided to increase the eligibility limit
of loans to be guaranteed from Rs. 10 Lacs to Rs.
25 Lacs. Necessary modifications have been
carried out in the indenture of the trust to
enable CGTSI to guarantee loans up to Rs. 25
Lacs & to provide for counter guarantees to other
institutions
Incentive Schemes by Central Government

(B) Salient Features of the scheme

– Eligibility & Coverage
– Guarantee & Annual Service Fee
– Commencement of guarantee cover
– Invocation of Guarantee
Incentive Schemes by Central Government

(‘C) Eligible Institutions

– All scheduled commercial banks & Regional Rural
Banks (Categorized under sustainable viability) or
such of those institutions as may be directed by
GOI
– Contribution to the Corpus Fund of CGTSI
– Progress of Credit Guarantee Scheme
Incentive Schemes by Central Government
(D) Initiatives for women entrepreneurs
- Women entrepreneurs have achieved remarkable success

- The small Industries Development Organization (SIDO), the various State

Small Industries Development Corporations (SSIDCs), the nationalized
banks and even NGOs are conducting various programs including EDPs

_ The office of DC (SSI) has also opened a women cell to provide coordination
& assistance to women entrepreneurs

_ SIDBI has been implementing two special schemes for women : (i) Mahila
Udyam Nidhi & (ii) Mahila Vikas Nidhi

_ SIDBI also provides training

Incentive Schemes by Central Government
(E) Incentives for North Eastern Region
- Development of Industrial Infrastructure
- Transport Subsidy Scheme
- Fiscal Incentives to new Industrial Units & their
substantial Expansion
- Relaxation of PMRY Norms
- Other Incentives Proposed
- Procedure for release of assistance under the new
Initiatives
- Development of village & small Industries (VSI) Sector
 Financial Institutions & Small Scale Industries
Industrial Development Bank of India (IDBI)
- MSME Finance
IDBI Bank SME Products:
Sulabh Vyapar / Business Solutions
Dealer Finance / Dealer Solutions
Vendor Financing / Vendor Solutions
Funding under CGFMSE
Loans to small road & water transport operations
Finance to professionals & self employed
Finance to medical practitioners
Working capital financing to IT & ITES entities
Lending against the security of future credit card receivables
Entrepreneurial Development Fund
Laghu Udyami Credit Cards (LUCC)
SME Hoisery Current Account
 Financial Institutions & Small Scale Industries

Small Industries Development Bank of India (SIDBI)

– Objectives
• Financing
• Promotion
• Development
• Co-ordination for orderly growth of industry in the
small scale sector
Small Industries Development Bank of India (SIDBI)

(A) Development Outlook

The major issues confronting SSIs are identified to be as
follows:

- Technology obsolescence
- Managerial inadequacies
- Delayed payments
- Poor quality
- Incidence of sickness
- Lack of appropriate infrastructure
- Lack of marketing network
Small Industries Development Bank of India (SIDBI)

(B) Co-ordination and Understanding

As an apex institution SIDBI makes use of the network of
the banks & state level financial institutions which have
retail outlets

SIDBI has signed memorandum of understanding with 18

banks & the agencies
 Financial Institutions & Small Scale
Industries
• State Bank of India
• Punjab National Bank
• ICICI Bank
• National Small Industries Corporation Ltd.
(NSIC)
 Financial Institutions & Small Scale Industries

Micro, Small & Medium Enterprises – Development

Institute (MSME-DI)
They are field Institution office of the Development Commissioner (MSME)
under the ministry of Micro, Small & Medium Enterprises, Government of India
has been playing a key role for development of Micro, small & medium
enterprises through counseling, consultancy & training. These were established
in 1960 as Small Industries Service Institute Extension Centre, thereafter
upgraded as small Industries since June, 2007 as a follow-up of the merger of
the two Ministries of Small Scale Industries & Agro and Rural Industries into a
newly formed Ministry of Micro, Small & Medium Enterprises. The Institute
strives to achieve its avowed objective through a gamut of operations ranging
from training, consultancy, buyer-seller, meet, vendor development programme
as well as various awareness & modernization programmes.
Government Policies for Small Scale Industries

The Micro, Small and Medium Enterprises (MSME) sector has

been recognized as the engine of growth all over the world.

SMEs in India met the expectations of the Government in this

respect.

SMEs developed in a manner which made it possible for them

to achieve the following objectives:
• High Contribution to domestic production
• Significant export earnings
• Low investment requirements
• Operational Flexibility
• Location wise mobility
• Low intensive imports
• Contribution towards defense production
• Technology-oriented industries
• Competitiveness in domestic and export
markets
 At the same time, one has to understand the
limitations of SMEs, which are as follows:

• Low capital Base

• Concentration of functions in one / two
persons
• Inadequate exposure to international
environment
• Inability to face impact of WTO regime
• Inadequate contribution towards R&D
• Lack of professionalism
In site of these limitations, the SMEs have made significant contribution
towards technological development and exports. EMEs have been
established in almost all major sectors in the Indian industry as follows:

Food Processing
Agricultural Inputs
Chemicals and Pharmaceuticals
Engineering, Electricals, Electronics
Electro-medical equipment
Textiles and Garments
Leather and leather goods
Meat products
Bio-engineering
Sports goods
Plastics products
Computer Software, etc.
MSME-New Policy and Definition
The small scale industry sector output contributes almost 40%
of the gross industrial value-added 45% of the total exports
from India (direct as well as indirect exports) and is the
second largest employer of human resources after agriculture.
The development of small scale sector has therefore been
assigned an important role in India’s national plans.

In order to protect , support and promote small enterprises as

also to help them become self-supporting, number of
protective and promotional measures have been undertaken
by the Government.
The promotional measures cover

• Industrial extension services

• Institutional support in respect of credit facilities
• Provision of developed sites for construction of sheds
• Provision of training facilities
• Supply of machinery on hire – purchase terms
• Assistance for domestic marketing as well as exports
• Special incentive for setting up enterprises in
backward areas, etc.
• Technical consultancy and financial assistance for
technological up gradation
 Government Policies and Support –
A brief History
• 1948-91: Office of Development Commissioner was
established in 1954

• 1991-1999: Small Industries Industrial Development

Bank was created

• 1999 onwards: A new ministry was formed and a

new policy package was announced in August 2000
to address the problems of credit, infrastructure,
marketing and technology up gradation effectively
Present Policy Frame work and Focus Areas

By enacting the micro, small and Medium enterprises

Development act 2006, the Government has recently fulfilled
one of the needs felt and articulated by this segment for long.

Focus Areas:
Credit / Finance
Priority Sector Lending
Institutional Arrangement
Credit Guarantee Scheme
Performance and Credit Rating Scheme
 Technological Up gradation
• Department of Science and Technology
• Department of Bio-technology
• National Research and Development Corporation
• Commercial Activities
• Promotional Activities
• Development and Promotion of Rural Technology
• Export of Technology
• Dissemination of Information on Technology and its
and its transfer to Industry
UNIT - IV
 FAMILY & NON FAMILY ENTREPRENEURS

Role of Professionals
The real professional is able to see trends and value them in the emerging
patterns of relationship and is able to value it. The professional has an
understanding of the way things work in the sphere of activity that he/ she is
and has adequate knowledge. He / she brings more professionals into
organization from other field to understand and get things done. A professional
ids continuously on work towards his / her development and growth
professional should be able to guide social establishment by way of training and
competence development on his / her part.

In addition to ability, confidence, responsibility, belief sand respect other key

personal qualities that define a professional are honor, reputation and
trustworthiness.
 Elements of Professionalism
• Altruistic: Showing unselfish concern for welfare of others
• Accountability responsibility and reliability
• Excellence
Knowledgeable
Competency to retrieve and handle information
Appropriate decision making skills
Competency in communication
• Integrity the quality of being honest moral soundness
• undivided or unbroken
• Dutiful appreciation of the role aptitude for personal
• development
• Respect to others
 Professionalism v/s Family Entrepreneurs
Family entrepreneurship is defined as ownership control
by members of a family strategic influence of a family in
the management of the firm concern for family
relationship the dream of continuity across generation

• Degree of open mindedness

• New Practices
• Impartial HRM
• Organization
• Decision making style
 Role of Woman Entrepreneur
Reasons why women have started looking towards
entrepreneurial careers in today’s time:

• Limited job opportunities

• Pressing need to earn income to supplement the family income due to the
high cost of living
• Social pressure of increasing standard of living
• Utilization of spare time
• Self esteemed need
• Increasing socio-economic awareness
• Impact of role models in industry and business
• Constant motivation by government institutions
• Impact of media
• Attractive incentive, subsidies and schemes
 Opportunities for Women Entrepreneurs
• Beauty Parlors
• Communication Centers
• Community Kitchens
• Computer maintenance
• Computer services and information dissemination
• Computer training at various levels
• Crèches
• Culture centers
• Distribution and trading of household provisions as well as saris, dress materials, etc.
• Health clubs
• Job contract for packaging goods
• Mini Laundry, community eating centre

And many more…………………

 Role of Women Entrepreneurs
• Desire to serve others
• Needs in community
• Self-Actualization
• Desire to achieve change
• Other
Venture Capital: Nature & Overview
Venture Capital (VC) is one of the many ways in which
a growth-oriented venture can obtain funds in
exchange for certain equity in the venture.

VC is a fund which is managed by class of people /

organizations that support stimulate and sustain
entrepreneurship by way of providing for equity
capital at different stages of a venture depending
upon their fund requirements and growth aspirations.
 Venture Capital: Nature & Overview
Venture capitalists provide funds and at the same time
support to the extent of
Being like a business partner-sharing the risks & rewards
Being like mentor

VC is different from other type of financing as in

following:
• Development Finance
• Seed capital
• Term Loan
• Passive equity investment support
• R&D funding sources
 Venture Capital Process
The venture capital model typically works by way of an investment made by
investors in an fund (Trust). This fund has a fixed time period of 5+2 years. The
asset management company (AMC) manages the investments for the trust and
charges the fund an annual operating cost of approx. 2.5 % PA To obtain returns
from this fund, the AMC invests in several companies. The upside of this whole
equation is shared between the AMC and investors approx. 25:75 subject to
minimum invested return. Typically, a venture fund may invest in up to 20
companies out of which 10 would fail, 4 will succeed and 6 may do okay. The
venture capital funds do not shy away from risk but manage them by way of a
balanced portfolio of investments, focusing on the people and the ideas and
mentoring, coaching, adding value to the companies they fund. All new
ventures are high risked- there is a significant chance of loss. That is why the
expectations of a VC fund are of gaining the typical 300-400 % ROI in each
venture. When 4 out of 20 succeed in expected manner, the fund is able to
obtain more than type of returns that they had in mind while investing.
 Locating Venture Capitalists

The spread of VC firms in India is not

confirmed to one specific location but are
located mostly in large metropolitans type of
locations. At the same time, there are global
firms in this league that operate in India also.
Thank you