Entrepreneurship

DR (CS) SUDHA PANWAR

• Entrepreneurship is the ability and readiness
to develop, organize and run a business
enterprise, along with any of its uncertainties
in order to make a profit. The most prominent
example of entrepreneurship is the starting of
new businesses.
• An economic activity as it involves creating
and running a new business through optimum
utilization of all combined resources. It
ensures that all scarce resources are efficiently
used for deriving better returns in the form of
profit.
• The entrepreneurial vision is defined by
discovery and risk-taking and is an
indispensable part of a nation’s capacity to
succeed in an ever-changing and more
competitive global marketplace.
• The entrepreneur is defined as someone who has
the ability and desire to establish, administer and
succeed in a startup venture along with risk
entitled to it, to make profits. The best example of
entrepreneurship is the starting of a new business
venture. The entrepreneurs are often known as a
source of new ideas or innovators, and bring new
ideas in the market by replacing old with a new
invention.
• It can be classified into small or home business to
multinational companies. In economics, the profits
that an entrepreneur makes is with a combination
of land, natural resources, labour and capital.
The Nature of Entrepreneurship
• Innovation. Entrepreneurship generally means offering a new
product, applying a new technique or technology, opening a
new market, or developing a new form of organization for the
purpose of producing or enhancing a product.
• Running a business. combines resources to produce goods or
services. Entrepreneurship means setting up a business to
make a profit.
• Risk-taking. The term risk means that the outcome of the
entrepreneurial venture can’t be known. Entrepreneurs,
therefore, are always working under a certain degree of
uncertainty, and they can’t know the outcomes of many of
their decisions. Consequently, many of the steps they take are
motivated mainly by their confidence in the innovation and in
their understanding of the business environment in which
they’re operating.
Entrepreneurial Opportunities in
Contemporary Business Environment
Emerging Trends in Business

• A new ideas of entrepreneurs coupled with

advances in technology has lead to a changing
business environment.
• Various forms of business organization have
emerged –
– Network Marketing
– Franchising
– Business Process Outsourcing
– Greenentrepreneurship
– E-Commerce
– M-Commerce
Network Marketing

• A business model in which a distributor network is

needed to build business.
• Multilevel Marketing -payouts occur at more than one
level.
• Independent business persons act as a distributors of
company’s
• products.
• Each distributor can further engage sub- distributors
who can further add other distributors and so on.
• Thus, a network of distributors is formed who operate
at various levels.
Network Marketing
Profits for Individual Distributor
• Network Marketing distributor
purchase the product at
wholesale prices, may either
use discounted products
themselves or retail the
products to others for a profit.
• Distributors receives a
commission for their personal
volume, which is the value of
every product which the
customer buy or sell.
• Net Commission on overall
turnover from their group
personal volume.
Advantages of Network Marketing

– Network grows continuously- distributor manage

their own sales force.
– Network companies can maintain higher margins
on their products. No Advertisement expenditure
& retailer margin.
– Lower overheads costs as no infrastructure is
required
– Opportunity to earn unlimited income in form of
commission & sales revenue of recruits.
Disadvantages of Network Marketing

• As sales forecasting is difficult, under stocking

or overstocking of various products occur.
• Manufacturer do not have effective control
over his sales team as distributor take over the
control of the company.
• Networker needs extra efforts other than core
line of work, which creates risk of failing in
business, which happen in 95% such cases.
Green entrepreneurship
Green entrepreneurship is the activity of
consciously addressing environmental and
social problems and need, and coming up with
brilliant innovative entrepreneurial ideas that
will bring a solution to them. These ideas have
a high level of risk which has a positive effect
on the natural environment while at the same
time it helps maintain financial sustainability.
TOURISM
It is the amongst the fastest growing industries
in the world over, highest foreign exchange
earning sectors for India and offers
tremendous opportunity for entrepreneurship
and employment. It Includes:
1. Travel Arrangement(Rail,road,air or sea)
2. Accommodations(Hotels,guest house)
3. Food
4. entertainment
Franchising

• A ‘franchise’ means the special right given by a manufacturer

or a parent organization to another individual or a firm to sell
the product or service in a given specified area.
• In franchising a firm allows another firm or individual to use
technical know-how, trade mark, patents & trade secrets.
• The individual or a firm which grant the right is called as
• ‘franchiser’.
• The individual or a firm to whom the right is granted is called
as ‘franchisee’.
• The right granted by a franchiser to a franchisee is given
• under a special agreement known as Franchise Agreement
• Franchising helps to build the chain stores.
• Franchisors success is franchisee success.
Franchising Advantage

• To the Franchiser
– Expansion
– Feedback of local customer preference from franchisee
– Increased Reputation & Goodwill by expanding the network
– Rights are protected- only franchisee can use it
• To the Franchisee
– Ground work check out can be done before committing.
– Full assistance in staff training, product promotion & designing
store layout.
– Brand Advantage
– Can satisfy customers by supplying quality products.
– Exclusive rights
Franchising Disadvantage

• To the Franchiser-
– Franchisee may start a similar business
– Image can be tarnished if standards are not maintained
– Initial assistance has to be provided
– Trade secrets are leaked out
– There are ongoing costs of supporting the franchise & national
Advertising.
• To the Franchisee-
– Restrictions
– Payment of Royalty
– Conflicts may arise in maintenance of accounts, payment of
• Royalty, violation of quality norms
– Business cannot be sold without Franchiser permission.
Business Process Outsourcing (BPO)

• Outsourcing is popularly associated with ITES. Also known as BPO.

Knowledge Process Outsourcing (KPO) & Legal Process Outsourcing
(LPO) are some of the sub-segments of bpo.
• Contracting of operations and responsibilities of specific business
functions to a third party service provider.
• Ex- Coca-Cola outsourced large segments of its supply chain.
• BPO is typically categorized into back office outsourcing like-
• Human Resources, finances or accounting
• 24*7 Customer care service, telemarketing

• BPO that is contracted outside the company’s country- offshore

• BPO that is contracted to a company’s neighboring country- near
shore
Advantages of BPO

• Ensuring Smooth operations

• Expansion of Business
• Specialized Performance
• Getting Better Results
• Cost Effectiveness- Outsourcing IT
requirement save 30% of company’s
expenditure
• Skilled Manpower
Disadvantages of BPO

• Communication Challenges & Different

Standards
• Time Zone in off shore BPOs can create
problems for online meetings
• Loss of control in case of loss of transparency
• Service Provider looks for diversification
• Dependence- Reduces the flexibility
E-Commerce

• Comprehensive system of trading that uses

networks of computers for buying and selling
of goods, information & services.
• E-commerce includes buying & selling of-
– Goods- eg. Digital cameras, music systems,
clothes, accessories.
– Information- eg. Subscription to a site & get
access to information.
– Services- eg shaadi.com, naukri.com
Types of E-Commerce

• Ecommerce can take place-

between the companies
between the companies & the customers
between the companies & government departments

• Based on the type of entities involved in transaction, e-

commerce has been classified into the following category-
Business to Business (B2B)
Business to Consumer (B2C)
Consumer to Business (C2B)
Consumer to Consumer (C2C)
B2B
• B2B e-commerce, or e-biz, is a slightly more evolved
version of commerce. This type of e-commerce is the
electronic exchange of business documents among
businesses for the purpose of conducting commerce.
• B2B e-commerce is used for contract manufacturing,
customs declarations, global trade compliance, order
management and supply-chain logistics.
• By using B2B e-commerce, companies can improve
communications among partners and enhance the
purchasing experience from business to business.
B2B examples
• Ex- Company Websites- This software includes site-building tools and
templates, database features and methodologies for best practices,
plus transaction software.
• Ex- E-procurement websites- These B2B websites enable the
exchange of product supplies and procurement.
• Brokering sites act as an intermediary between service providers and
a potential business customer. For example, a construction company
may need to lease equipment. A broker site can help the construction
company find an equipment manufacturer that is willing to lease out
the needed equipment.
• Infomediaries- Trade & industry standards organization sites
• Dropbox- storage services
• ADP- Payroll & financial services
• Quill.com, Grainer.com are other examples
• Indiamart
Disadvantages of Ecommerce

– High-start up costs
– High Risk
– Organization require trained staff
– Trained staff is required to maintain the web page
– Fulfillment problems- website crashing during festive
seasons
– Lack of personal interaction
– Security
– Viruses can cause unnecessary delays, file backups,
storage problems
– Corporate Vulnerability- Access to the competitors
M-Commerce

– M-Commerce or mobile commerce refer to buying &

selling products through wireless handheld devices such as
mobile phones & personal digital assistants (PDAs)
– The phrase mobile commerce was originally coined in
1997 by Kevin Duffey at the launch of the Global Mobile
Commerce Forum
– Mobile Commerce is often called as "a retail outlet in your
customer’s pocket.“
– M-commerce opened the door for new application &
services
– Critical news which people need while traveling is made
available- traffic news, weather news, stock market reports
– Ex- Book my show, Paytm
M-Commerce

– Advantages-
• Ready convenient & secure way to do transactions
• New distribution network is open
• Large reach
– Disadvantages-
• Existing technology is not best suited for M-
Commerce- slow data transfer
• Acceptance of m-commerce is slow
• Poor display in cell phones
Enterprise Formation Process

The process of setting up a business enterprise involves

many steps, including:

 Researching your business idea: Explore the market

and your competitors to understand your idea
thoroughly.
 Writing a business plan: A business plan is a roadmap
that helps potential investors, financial institutions, and
company management understand your business.
 Choosing a business name: Decide on a name for your
business.
 Choosing an ownership structure: Decide on the
structure of your business ownership.
 Registering your business: Registering your business
with the state helps you legally start and run your
company.
 Reviewing and complying with legal
requirements: Make sure you comply with all legal
requirements.
 Applying for funding: Consider how you will raise
funds to start or expand your business.
 Creating a brand identity: Develop a brand identity for
your business.
 Opening a business bank account: A business bank
account is legally required for both the business and its
owners.
 Developing a marketing plan: A marketing plan helps
you map out your advertising and promotional
strategies

Section 3.1: Steps for setting up business enterprise

The procedure in setting up of a business unit is a time

consuming, complex and complicated activity. It involves
various steps, procedures and formalities.

The following steps are involved in process of setting up a

new business enterprise:

1. Identification of business opportunity.

2. Generation of business idea.

3. Feasibility Study.

4. Preparation of a business plan.

5. Launching the enterprise.

Step1. Identification of business opportunity:

This is the first step in setting up of a business unit

Entrepreneur is an opportunity seeker. As observed by Albert
Einstein “In the middle of every difficulty lies opportunity”.
He perceives an opportunity and strives to translate the
opportunity into an idea.
Opportunities do not come suddenly. The entrepreneur must
show alertness to grab opportunities when they come. The
opportunities must be carefully scrutinized and evaluated. The
process of identifying opportunity involves identifying the
needs and wants of the customers, scanning the environment,
understanding the competitor’s policy etc.

To identify the right business opportunity, an entrepreneur

needs to consider the following :

 Identify Market Inefficiencies

 Remove Key Hassles
 Customers Desire to Experience Something New
 Pick a Growing Sector/Industry
 Product Differentiation
 Cash Flow Considerations
 Listen to your potential clients and past leads. When
you're targeting potential customers listen to their needs,
wants, challenges and frustrations with your industry.
 Listen to your customers.
 Look at your competitors.
 Look at industry trends and insights.

Step 2. Generation of business idea:

This is the most important function of an entrepreneur.

The ideas that provide value for the customer, profit for the
entrepreneur and benefit for society and can be transformed
into products of services are called business ideas. Idea is
generated through vision. Idea generation is a critical skill in
entrepreneurship and involves insight, observation,
experience, education, training etc. It involves lot of creativity
on the part of entrepreneur and generally arises from an
opportunity in the market.

The various sources of information for business ideas can be

personal experience, observing markets, prospective
consumers, developments in other nations, government
organizations and trade fairs & exhibitions. This can be done
through environmental scanning and market survey.

An entrepreneur is not someone with clever ideas but

someone who has the ability to turn that idea into a real
business. An entrepreneur conceives the idea of launching the
project and program the structure of business. Converting a
business idea into a commercial venture is at the heart
entrepreneurship.

The entrepreneur than undergoes detailed investigation of an

idea. He analyse the idea to find out the feasibility whether the
project is profitable of not. An entrepreneur must show the
initiative to develop the idea and implement it in practical
sense.

Note: here we need to understand what is meant by

innovation and creativity and how important they are for
generation of business idea in entrepreneurship.

 Role of Innovation and Creativity:

Innovation may be defined as exploiting new ideas leading to

the creation of a new product, process or service. Innovation
deals with coming up with creative idea and turning that idea
into process. It may be defined as the process of doing new
things or doing old things in new ways. Entrepreneurship is a
source of innovation.
Creativity means to come up with new ideas, concepts,
process and products. In other words, it means the ability to
bring something new in existence.

Entrepreneurship process involves innovation and creativity.

Entrepreneurs are innovators. They constantly develop new
ideas, concepts and process to survive in a competitive
business world. Entrepreneurship is an art of finding creative
solutions to the problems. Innovation and creativity are
essential for sustainable growth and economic development.

 Stages In Creativity Process

In the nutshell we can say that, Ideas evolve through a

creative process whereby a person with imagination
germinates ideas, nurtures them and develops them
successfully.

Step 3. Feasibility Study:

After the selection of a worthy idea, an entrepreneur
undertakes various researches relating to market selection,
competition, location, machinery and equipment’s, capital,
customer preferences etc. to test the feasibility of the project.
A feasibility study is an evaluation of a proposed project. It is
the study of the project to find out whether the project is
profitable or not. In other words, feasibility study involves an
examination of the operations. Project has to be viable not
only in technical terms but also in economic and commercial
terms too. The objective of financial analysis is to ascertain
whether the proposed project will be financially viable.

Feasibility study is a detailed investigation of the proposed

project to determine whether the project is financially,
economically and technically viable or not. Feasibility Study
contains the comprehensive, detailed information about the
business structure, availability of resources and whether the
business will run efficiently or not.

Feasibility study is conducted in the following areas:

 Market/ commercial Feasibility:

It involves study of market situation, current market,

anticipated future market, competition, potential buyers, etc.

 Technical Feasibility:
This study involves study of technological aspects related to
the business, like location of the business, layout,
infrastructure, plant and equipment, effluent treatment and
discharge, foreign collaboration, transportation, resource
availability etc.
 Financial Feasibility:
Financial feasibility denotes the financial aspects of the
business. This study helps to understand requirement of start-
up capital, sources of capital, returns on investment, etc. It
helps to assess the financial health of the business.

 Socio- economic Feasibility:

This study is important to determine the extent to which the
project is meeting its social economic objectives of
development. It involves social cost-benefit analysis for testing
national profitability. It helps to know the contribution of the
project towards employment generation, income distribution,
foreign exchange savings, development of backward regions,
etc.

 Preparation of Feasibility Report:

Feasibility report is the final conclusion drawn about the

business after conducting the feasibility study. The feasibility
report includes the confirmation of the proposed project. It
gives the detail about technical, economic and financial,
environmental, socio-cultural and operational aspects of the
project.

It is a formal document prepared by the experts. It gives the

information on the authenticity of the feasibility study. The
feasibility report answer the question ‘the plan must be
implemented or not’.

The feasibility report contains information on:

a. It helps him to determine the viability of the venture.

b. It
provides guidance to the entrepreneur in planning realistic
goals.

c. It helps to identify possible roadblocks.

d. It is a pre-requisite to obtain finance.

Step 4: Preparation of a business plan:

It this step an entrepreneur prepares a good business plan, the

designs and creates the organisational structure for
implementation of his plan. This plan is further used to
achieve the realistic goals.

A business plan, as defined by Entrepreneur, is a “written

document describing the nature of the business, the sales and
marketing strategy, and the financial background, and
containing a projected profit and loss statement.” It serves as
the blueprint for how you will operate your business. It is an
effective means of defining your goals and the steps needed to
reach them.

 Need and purpose of a business plan:

A business plan spells out your purpose, vision and means of

operation. It also serves as your company's resume, explaining
your objectives to investors, partners, employees and vendors.
It serves the following purposes:

 Maintaining Business Focus.

 Securing Outside Financing.
 Understanding consumers and competitors.
 Fuelling Ambitions and Mapping Growth.
 Enlightening Executive Talent or to understand employee
needs.
 To assess feasibility of
your venture.

 Contents of a business
plan:

a. Executive Summary

Your executive summary should appear first in your business

plan. It should summarize what you expect your business to
accomplish. A good executive summary is compelling. It
reveals the company’s mission statement, along with a short
description of its products and services. It might also be a
good idea to briefly explain why you’re starting your
company and include details about your experience in the
industry you’re entering.

b. Company Description

The next section that should appear in your business plan is a

company description. It’s best to include key information
about your business, your goals and the customers you plan to
serve. Your company description should also discuss how
your business will stand out from others in the industry and
how the products and services you’re providing will be
helpful to your target audience.

c. Market Analysis
Ideally, your market analysis will show that you know the ins
and outs of the industry and the specific market you’re
planning to enter. In that section, you’ll need to use data and
statistics to talk about where the market has been, where it’s
expected to go and how your company will fit into it. In
addition, you’ll have to provide details about the consumers
you’ll be marketing to, such as their income levels. Further
information about markets, pricing systems, methods of
distribution, sales forecast, etc. to be enclosed.

d. Competitive Analysis
A good business plan will present a clear comparison of your
business to your direct and indirect competitors. You’ll need
to show that you know their strengths and weaknesses and
you know how your business will stack up. If there are any
issues that could prevent you from jumping into the market,
like high upfront costs, it’s best to say so. This information
will go in your market analysis section.

e. Description of Management and Organization

Following your market analysis, your business plan will
outline the way that your organization will be set up. You’ll
introduce your company managers and summarize their skills
and primary job responsibilities. If you want to, you can create
a diagram that maps out your chain of command.Don’t forget
to indicate whether your business will operate as a
partnership, a sole proprietorship or a business with a different
ownership structure. If you have a board of directors, you’ll
need to identify the members.

f. Breakdown of Your Products and Services

If you didn’t incorporate enough facts about your products

and services into your company description (since that section
is meant to be an overview), it might be a good idea to include
extra information about them in a separate section. Whoever’s
reading this portion of your business plan should know
exactly what you’re planning to create and sell, how long your
products are supposed to last and how they’ll meet an existing
need?

It’s a good idea to mention your suppliers, too. If you know

how much it’ll cost to make your products and how much
money you’re hoping to bring in, those are great details to add.
You’ll need to list anything related to patents and copyright
concerns as well.
g. Marketing Plan

In your business plan, it’s important to describe how you

intend to get your products and services in front of potential
clients. That’s what marketing is all about. As you pinpoint
the steps you’re going to take to promote your products, you’ll
need to mention the budget you’ll need to implement your
strategies.

h. Sales Strategy

In this section of business plan, one needs to decide, How will

you sell the products you’re building? That’s the most
important question you’ll answer when you discuss your sales
strategy. It’s best to be as specific as possible. It’s a good idea
to throw in the number of sales reps you’re planning to hire
and how you’ll go about finding them and bringing them on
board. You can also include sales targets.

i. Manufacturing and Operational Plan

In your business plan, the operations plan section describes
the physical necessities of your business' operation, such as
your physical location, facilities, and equipment. Depending
on what kind of business you'll be operating, it may also
include information about inventory requirements, suppliers,
and a description of the manufacturing process. An operations
plan is helpful for investors, but it's also helpful for you and
employees because it pushes you to think about tactics and
deadlines.

j. Financial Projections
In the final section of your business plan, you’ll reveal the
financial goals and expectations that you’ve set based on
market research. You’ll report your anticipated revenue for
the first 12 months and your annual projected earnings for the
second, third, fourth and fifth years of business. The following
schedules and statements to be included: Start up projections,
income statement, cash flow statement, balance sheet and
break even analysis.

k. Appendices and Exhibits

In addition to the sections outlined above, at the end of your
business plan, include any additional information that will
help establish the credibility of your business idea, such as
marketing studies, photographs of your product, permits,
intellectual property rights such as a patent, credit histories,
resumes, marketing materials, and/or contracts or other legal
agreements pertinent to your business.

Note: Add a Title Page and Table of Contents

After completing all the sections, don't forget to insert a title

page at the beginning of the plan followed by a table of
contents listing each section with page numbers.

Table of Contents

1. Executive Summary................................ Page #

2. Business/Industry Overview................. Page #
3. Market Page #
Analysis........................................
4. The Page #
Competition......................................
5. Sales & Marketing Page #
Plan...........................
6. Ownership and Management Plan....... Page #
7. Operating Page #
Plan..........................................
8. Financial Page #
Plan............................................
9. Appendices and Exhibits........................ Page #

Step 5: Launching the enterprise and managing the

business

At this step the entrepreneur fulfill some legal formalities. He

hunts for suitable location, design the premises and install
machinery. All the statutory formalities are to be met.

i. Acquiring license.
ii. Permission from local authorities.
iii. Approvals from banks and financial institution.
iv. Registration etc.

Once the project is set up, the entrepreneur must try to achieve
the target of a business plan. This involves setting up of an

appropriate business process. Only proper management can

ensure achievement of goals. The entrepreneur must be

capable of turning his ideas into reality. He should also have

the foresight to anticipate changes to avail of opportunities

and meeting threats likely to arise in the near future.
Section 3.2: Problems in setting up of a business
The factors that affect the growth of business are explained
below in detail:

1. Lack of legal knowledge:

The entrepreneur should have adequate legal knowledge to
handle legal affairs efficiently. Lack of legal knowledge on the
part of entrepreneurs may affect smooth conduct of business.
He should have knowledge regarding Factories Act, Wages &
Salaries Act, and Workers Compensation Act etc.

2. Lack of experience:
An entrepreneur should have enough experience to manage

the business efficiently. Lack of adequate experience may

create major problems and adversely affect the experience. The

major hurdles that the new entrepreneurs face are the

availability of resources to carry out such a business. The

most important is the allocation of funds that comes in the

form of money to research and development.

3. Lack of finance:
Finance is the life blood of every business. To start up a new
venture requires adequate capital. It is required to meet
business expenses like purchase of raw material, payment of
wages and salaries; payment of interest on loans etc. Lack of
finance can create hurdles in setting up of a business unit.

4. Lack of technology:
Technology is never constant, it keeps on changing.
Sophisticated technology helps in increasing the production

capacity and quality of the products. Lack of suitable

technology can hamper the reputation of the firm. Adoption of
suitable technology can prove beneficial to the business
success and vice versa.

5. Problem of human resource:

Organisation is made up of people and people make an
organisation. A firm requires skilled, qualified and talented
employees. Lack of competent staff is another major issue for
a business unit.
6. Problem of data:
Entrepreneurship is based on research work. The Entrepreneur
need to conduct a survey for gathering information regarding
market condition, competition, technology, consumer etc. the

data collected may not be accurate and precise. At times it is

incorrect and outdated. This hampers the survival of a
business.

7. Problem of marketing:

The Entrepreneur should have marketing knowledge. This

helps to face cut-throat competition in all sectors. Lack of
marketing efforts and knowledge with respect to product,

pricing, distribution and promotion hampers the

Entrepreneurial growth.
50
200