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Chapter I
Basics of Entrepreneurship
Aim
The aim of this chapter is to:
illustrate the history and evolution of entrepreneurship
introduce the concept of entrepreneurs, enterprise and entrepreneurship
explain the concept of intrapreneurship
distinguish intrapreneur and entrepreneur with traditional manager
Objectives
The objectives of this chapter are to:
clarify the characteristics of entrepreneurs
guide students on setting up an enterprise
enlist skills and resources needed by an entrepreneur
explain the Indian entrepreneurial economy
Learning outcome
At the end of this chapter, the students will be able to:
recognise the prominent characteristics of a entrepreneur and know how to venture a successful business
identify the role of entrepreneurs in building a good business
examine the entrepreneurial culture
realise the difference between intrapreneur and entrepreneur
understand the role of Indian government in entrepreneurship
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1.1 Introduction
In India, after completion of education, one has broadly two career options. One can employ oneself in government
agencies, public and private sectors, accepting the fxed salary. The other career option is self-employment under
which one perceives/innovates an idea, organises production by organising resources and fnally markets the products
and services. Such persons are called as entrepreneurs. However, it is observed that some of the entrepreneurs
achieve success while some of them face huge losses. Why is it so? Is establishing successful business so diffcult?
How can success be achieved by an enterprise? Why do many initiatives fail?
It is said that some humans have the ability to achieve success by hard work, while others may lack in using their
abilities. If this fact is correct, what sort of enterprise one should plan to venture into? What would one need to acquire
in terms of skills and resources to make the venture a success? What are the initiatives taken by the government and
other agencies to support these kinds of enterprises? This and subsequent chapters are an attempt to fnd answers
to all these questions. Let us try to understand what makes an entrepreneur, and what the entrepreneurship is all
about.
1.2 The Entrepreneur
Entrepreneurs are the people with the ability to create an enterprise where none existed before. They produce
combinations of ideas, skills, money, equipment, and markets that form a successful enterprise.
The Merriam-Webster Dictionary defnes the term entrepreneurs as, the one who organises, manages and assumes
the risks of a business or an enterprise. The term entrepreneur is derived from the French verb enterprendre,
which literally means to undertake something.
An entrepreneur can be described as someone who:
starts his/her own enterprise
manages his/her own enterprise
identifes new products or opportunities
organises and controls resources (like capital, labour, materials) to achieve proft
is creative and innovative
has fnancial means or who can obtain fnancing so as to realise the enterprise
has the ability and insight to produce and fnance and market a service or product
is willing to take calculated risks
Some of the famous entrepreneurs are:
Henry Ford (automobiles)
Thomas Edison (electricity/ light bulbs)
Milton S. Hershey (confections)
Jamshedji Tata (Iron and Steel, Textiles)
Sunil Mittal (Telecommunications)
Dhirubhai Ambani (Petrochemicals)
Ted Turner is another example of entrepreneurial spirit. He launched CNN because he perceived that people
wanted more television news than they were being offered. It took a lot of time for Turner to realise the vision,
but he had studied the market thoroughly. In realising the promise of CNN, Turner demonstrated a live scenario
of entrepreneurial spirit and persistence.
1.3 Evolution of Entrepreneurship
Entrepreneurship is the practice of starting new organisations, particularly new businesses generally in response
to identifed opportunities. Entrepreneurial activities differ according to the type of organisation that is being
started.
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The understanding of entrepreneurship owes a lot to the work of economist Joseph Schumpeter and Austrian
School of Economics. For Schumpeter (1950), an entrepreneur is a person who is willing and able to convert a
new idea or invention into a successful innovation.
1755 - Richard Cantillion: Essal Sur la Nature du Commere on General
1803 - Jean-Babsite Say: A treasure of Political Economy
1921 - Frank Knight: Risk, Uncertainty and Proft
1934 - Joseph Schumpeter: The Theory of Economic Development
1968 - Harvey Leibenstein : Entrepreneurship and Development
1973 - Competition and Entrepreneurship
1973 - Israel Kizner: Competition and Entrepreneurship
1982 - Mark Casson: The Entrepreneur: An Economic Theory
1986 - Peter Drucker and Entrepreneurship
Some notable thinkers and their works in entrepreneurship history
For Frank H. Knight (1967) and Peter Drucker (1970), entrepreneurship is about taking risks. Still, another
view of entrepreneurship is creating and building value from practically nothing. That is, entrepreneurship is
the process of creating or seizing an opportunity and pursuing it regardless of the resources currently.
On the other hand, Howard Stevenson at Harvard University believes that the entrepreneurship is the pursuit
of opportunity without regard to resources currently controlled. Thus, entrepreneurship is widely regarded as
an integral player in the business culture of life.
1.3.1 Entrepreneurial Traits
According to entrepreneurial personality studying literature, there are certain traits that seem to be associated with
entrepreneurs. They are as follows:
In 1961, David McClelland described the entrepreneur as primarily motivated by an overwhelming need for
achievement and strong urge to build.
Collins and Moore (1970) studied 150 entrepreneurs and concluded that they are tough, realistic people driven
by needs of independence and achievement. They rarely are willing to submit to authority.
Bird (1992) views entrepreneurs as mercurial, that is, prone to approaching, brainstorms, deceptions, ingeniousness
and imagination. They are cunning, opportunistic, creative, and tough.
Busenitz and Barney (1997) claim entrepreneurs are prone to overconfdence and over generalisations.
According to Cole (1959), there are four types of entrepreneur:
the innovator
the calculating inventor
the over-optimistic promoter
the organisation builder
These types are not related to the personality but to the type of opportunity the entrepreneur faces.
Burton W. Folsom, Jr. distinguishes between what he calls a political entrepreneur and a market entrepreneur.
The political entrepreneur uses political infuences to gain income through subsidies, protectionism, government-
granted monopoly, government contracts, or other such favourable arrangements with government. The market
entrepreneur operates without special favours from the government.
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1.4 Entrepreneurship and Intrapreneurship
Given below is the description of entrepreneurship and intrapreneurship
1.4.1 Entrepreneurship
An entrepreneurship is a process that involves various actions to be undertaken to establish an enterprise by an
entrepreneur. Entrepreneurship can also be said to be a tendency of mind to take calculated risks with confdence
to achieve a predetermined business objective.
Entrepreneurship = Entrepreneur + Enterprise
Fig. 1.1 Schematic representation of entrepreneurship
Entrepreneurship is the active process of creating incremental wealth. Individuals, who assume the major risks
in terms of equity, time, and commitments or provide value for some product or services, create the wealth.
Thus, we can defne entrepreneurship as the process of creating something innovative with value by devoting the
necessary time and effort, assuming the accompanying fnancial, psychological, and social risks and receiving
monetary and personal satisfaction and independence.
This defnition stresses on four aspects of entrepreneurship. They are as follows:
Entrepreneurship involves the creation processcreating something new.
Entrepreneurship requires the devotion of the necessary time and effort.
Assuming the risks is an essential aspect of entrepreneurship.
The last part of the defnition involves rewards of being an entrepreneur. These rewards are mostly in the
form of success in terms of personal satisfaction and money.
Management Thinkers Views
Schumpeter
Entrepreneurship is essentially a creative activity. The entrepreneur is the
innovator who introduces something new into the economy. Entrepreneurs
are business leaders and not simple owners of capital. They have vision,
drive and talent, and spot out opportunities and promptly seize them for
exploitation.
McClelland
Entrepreneurship means the function of creating something new, organising,
coordinating, undertaking risk and handling economic uncertainty.
A.H. Cole
Entrepreneurship is the purposeful activity of an individual or a group of
associated individuals, undertaken to initiate, maintain or organise a proft
oriented business unit for the production or distribution of economic goods
and services.
Peter Drucker
Entrepreneurship is neither a science nor an art. It is a practice and has a
knowledge base. Innovation is the specifc tool of entrepreneurs, the means
by which they exploit changes as an opportunity for different businesses or
services.
Table 1.1 Views of management thinkers on entrepreneurship
Entrepreneur Enterprise
(Process Driver) (Actionable Process) (Expected Outcome)
Enterpreneurship
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1.4.2 Intrapreneurship
Pinchot (1985) coined the term Intrapreneurship to describe entrepreneurial-like activities inside organisations
and government. The concept is commonly referred to as Corporate Entrepreneurship. Intrapreneurship is the
practice of entrepreneurial skills and approaches by or within a company.
Pinchot identifed four stages of spontaneous team development.
Stage 1
Sole Phase
Stage 2
Network Phase
Stage 3
Bootleg Phase
Stage 4
Formal Team Phase
Individual nurtures
idea to establish
feasible innovation
to develop.
Innovator seeks advice
and support from col-
leagues to develop the
idea.
Working informally
team proposes idea
to organisation for
development.
Corporate provides
budget and mandate
for team to pursue
formal development
of motivation.
Fig. 1.2 Four stages of intrapreneurial team development
Individuals, who strongly believe in their own talents, have a regular desire to create something independently,
want responsibility and have a strong need for individual expression and more freedom in their present
organisation, are ideal to be termed as intrapreneurs.
Thus, an intrapreneur is a persistent leader with a unique vision who is able to bring about change from within
an institution or organisation, through innovation. These innovative employees help the company in constructive
ways to initiate new products and services.
The intrapreneur uses resources in creative ways, by recruiting a core team of motivated people and encouraging
them to implement change and innovation, by building bridges and bringing people together from within various
parts of the institution.
It is very essential for the senior management of the company to carefully utilise the skills of these intrapreneurs
to achieve organisational goals.
For example: Wipro Technologies
Wipro Technologies which is one of the Indias top 3 IT service companies initiated a unique program.
Wipro had a sizeable chunk of IT professionals who were not being assigned to client projects.
Instead of resorting to layoffs, it invited employees to submit their business ideas in the technology domain,
which could be implemented within the broad areas of its operation.
A committee of technology, business and fnance professionals goes through all such proposals and
employees are asked to defend their ideas. All accepted proposals are started within the organisation by
mutual decision.
The employees are educated on the importance of Intellectual Property and encouraged to fle patents with
joint ownership. This helped Wipro to increase the entrepreneurial spirit of employees as well as effectively
utilise its vast pool of technical talent.
1.5 Entrepreneurial Culture
Culture is a set of social behavioural aspects, which include mainly beliefs, knowledge, ideas and preferences.
According to Webster, Culture is an integral pattern of human behaviour which includes thoughts, speech
and action.
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Entrepreneurial culture involves vision, values, norms and traits that are helpful for the development of
the economy. Culture of any enterprise depends on the culture of that country as well as the nature of that
business.
In order to create a culture which promotes growth, entrepreneurs should overcome their old established mindsets,
regulate themselves and build up their tolerance for the vague, the uncertain and the unpredictable.
An entrepreneur should be prepared to face any type of risk. Thus, entrepreneurial success is a result of strategic
thinking and corporate culture building.
1.5.1 Elements of Entrepreneurial Culture
The entrepreneur has to ensure that the following elements are a part of the entrepreneurial culture of his
enterprise:
people and empowerment focused
value creation through innovation and change
commitment and personal responsibility
attention to the basics
hands-on management
doing the right thing and freedom to grow and to fail
emphasis on the future and a sense of urgency
1.5.2 The Building Blocks of Entrepreneurial Culture
V.V. Ranganathan, the Country Leader and National Director, Entrepreneur of The Year Awards, Ernst & Young
India stated that, A robust entrepreneurial culture has strengthened Indias position in the world economy.
As Indian businesses cross borders, they foster both wealth creation and generation of employment opportunities.
Given the right impetus, there is very strong potential for more Indian businesses to become truly world class
players.
The following are fundamentals that help build an entrepreneurial culture:
Organisation culture
Organisational culture consists of the social structure, and integrated form of attitudes, values, experiences,
and beliefs.
Organisational culture is the specifc collection of values and norms that are shared by people and groups in an
organisation and these infuence the way they interact with each other and with stakeholders of the company.
Corporate culture
Corporate culture brings the following things for an entrepreneur:
Leader - set examples in terms of personal characteristics like honesty and justice.
Facilitator- demonstrates commitment, communicate and listen to people.
Deliberate - be result oriented, use frm agendas and strive for specifc objectives.
Decisive - take fast decisions, be quick and transparent.
Explicit - get people to take responsibility for small as well as big tasks.
Quality culture
Quality culture means total quality output and customer satisfaction. It also means improvement of quality of
work life and employee satisfaction. It is the sum total of norms, beliefs and values that regulate the behaviour of
individuals and groups within an organisation.
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Productivity culture
Product improvement does not only mean doing things better but doing the right things better at the frst time itself.
The attitude of the employees working in the organisation infuences the productivity culture.
Business ethics/code of conduct
Business ethics is a normative discipline, whereby particular ethical standards are advocated and then applied. It
makes specifc judgments about what is right or wrong. In other words, it makes claims about what ought to be done
or what ought not to be done in the course of business.
1.6 Comparison of Traditional Manager, Intrapreneurs and Entrepreneurs
Attribute Traditional Manager Intrapreneur Entrepreneur
Primary mo-
tives
Offce, power, promo-
tions and other corporate
rewards
Freedom, access to
corporate resources,
goal oriented, self-
motivated
Independence, op-
portunity to create,
money
Time orienta-
tion
Short- term meeting
quotas, budgets- weekly,
monthly, quarterly and an-
nually
Depending on urgen-
cy to meet self-im-
posed and corporate
timetable
Survival and achiev-
ing business growth
in 5-10 years
Status
Concerned about status
symbols
Desires independ-
ence, cares less about
status
No concern about
status symbols
Activity
Delegates and supervises
more than direct involve-
ment
More than delega-
tion, direct involve-
ment
Direct involvement
Risk failure
and mistakes
Cautious Avoids mistakes
and failures
Moderate risk taker
Attempt to hide risky
projects from view
until ready
Moderate risk taker
Deals with mistakes
and failures
Decisions
Aligned with senior man-
agement decisions
Ability to get others
agree to help achieve
dream
Follows own dreams
Relationship
with others
Hierarchy as the basis of
relationship
Transactions within
hierarchy
Transactions and
deal making as basic
relationships
Family history
Family members worked
for large organisation
Entrepreneurial,
small-business or
farming background
Entrepreneurial with
small-business, pro-
fessional or agricul-
tural background
Table 1.2 Comparison of traditional managers, intrapreneurs and entrepreneurs
1.7 Role of Entrepreneurship in India
The Indian economy has transformed consistently from a backward agrarian economy to its present status. Small
business has played a crucial role in this transformation of the Indian economy.
It has created millions of job opportunities to the unemployed people even to those having basic education. It
has fostered the inbuilt entrepreneurial spirit in all the corners of the nation which has developed all the regions.
It has been instrumental in raising the standard of living of the massive population.
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The small-scale sector has contributed specifcally in the following areas:
employment generation
low initial capital investment
balanced regional development
equitable distribution of income
promoting inter-sectoral linkages
exporting goods
development of entrepreneurship
Many of the big businesses today, for example, Siemens, Ford, Reliance, Eastman Kodak, Lever Brothers,
Nirma, Rasna and so on, were all started as a small business and then raised into big businesses. The success
stories of businesses built on a great idea executed by a talented team have great appeal in India, in spite of
scarcity of capital and resources.
Entrepreneurship has been embedded in the Indian genius and is a part of its tradition. The renowned economist
T.N. Srinivasan states that, India has been an entrepreneurial society and the entrepreneurial spirit is an ongoing
characteristic of Indias history. Traditionally, the Entrepreneurship of trading communities is facilitated principally
by the successful use of informal entrepreneurial ecosystems and interdependent business networks.
Government must commit to create the right environment to develop successful business builders. To do this,
the government must focus on four areas like:
creation of conducive environment to start a business
ensure that entrepreneurs have access to the right skills
ensure that entrepreneurs have access to smart capital
enable networking and exchange of ideas
Thus, India can beneft by creating a strong forum of entrepreneurs from whom new entrepreneurs can draw advice
and support.
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Summary
The Merriam- Webster Dictionary defnes the term entrepreneurs the one who organizes, manages and assumes
the risks of a business or an enterprise. The term entrepreneur is derived from the French verb enterprendre,
which literally means to undertake something.
An entrepreneurship is a process that involves various actions to be undertaken to establish an enterprise by an
entrepreneur. Entrepreneurship can also be said to be a tendency of mind to take calculated risks with confdence
to achieve a predetermined business objective.
Whereas, individuals who strongly believe in their own talents, have a regular desire to create something
independently, want responsibility and have a strong need for individual expression and more freedom in their
present organisation, are ideal to be termed as intrapreneurs.
Pinchot (1985) coined the term Intrapreneurship to describe entrepreneurial-like activities inside organisations
and government. The concept is commonly referred to as Corporate Entrepreneurship. Intrapreneurship is the
practice of entrepreneurial skills and approaches by or within a company.
The intrapreneurial team development passes through phases like sole phase, network phase, bootleg phase,
formal team phase.
The basics of entrepreneurial culture along with the elements of the entrepreneurial culture are included in this
chapter. The building blocks of culture are organisation culture, corporate culture, quality, productivity, and
business ethics.
The comparison between an entrepreneur, a manager and an intrapreneur is done considering the attributes like
primary motives, time orientation, status, activity, risk failure and mistakes, decisions, relationship with others,
family history.
The chapter concludes with the brief description of entrepreneurship in India and what needs to be done to
boost the new entrepreneurs of our country. It has emphasized on the role of Indian Government to create right
environment to develop successful entrepreneurs.
References
Goswami A., Dalmia, N., Pradhan, M., 2008. Entrepreneurship in India. National Knowledge Commission.
Nieuwenhuizen C., Machado R., 2004. Basics of Entrepreneurship. Juta and Company Ltd.
Chatrapathy, M. M., 2007. Basics of Business and Entrepreneurship. Asian Centre for Entrepreneurial
Initiatives.
Recommended Reading
Bhide, A., 2004. What Role for Entrepreneurship in India? Columbia University.
Lal, A. K., R. W., 2005. Economic Development in India : The Role of Individual Enterprise. Asia- Pacifc
Development Journal, Vol. 12, No. 2.
Singh, B., 2009. Entrepreneurship Development. Wisdom Publications.
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Chapter II
Entrepreneurial Development Process
Aim
The aim of this chapter is to:
illustrate various types of enterprises
state the problems in small scale enterprises
highlight entrepreneurial development process and its phases
enlist characteristics of successful entrepreneurs
Objectives
The objectives of this chapter are to:
understand the entrepreneurial process
identify the factors that affect entrepreneurs decisions
explore the characteristics of successful entrepreneurs
understand the corporate development process model
Learning outcome
At the end of this chapter, the students will be able to:
understand entrepreneurial development process and its phases
identify the types of environment affecting entrepreneurs decisions
recognise the key success factors of entrepreneurs
enlist problems of small scale enterprise
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2.1 Introduction
Entrepreneurs are those who like to set up a business on their own. The business ideas can evolve out of many sources
like experience, friends and relatives or personal interests. The process of creating or grabbing an opportunity is quit
diffcult for most of the entrepreneurs. However, to start up with any type of business it is necessary to understand
the opportunities available in that particular business. Once the entrepreneurs are aware of the opportunities which
will be advantageous to set up a business, they advance to carry out set of actions to set up the business. This process
is called as entrepreneurial process.
2.2 The Entrepreneurial Environment
The factors that affect entrepreneurs are referred to as the entrepreneurial environment. The entrepreneurial
environment is classifed into six parts as shown.
Fig. 2.1 Entrepreneurial environment
Entrepreneurial development is largely dependent on the types of environments and hence they are major considerations
in the decision-making process of entrepreneurship. Following table gives a view of type of environment and what
it consists of:
Type of Environment Composition
Political Environment Political conditions, leadership qualities, and so on
Economic Environment
Economic policies, trade practices, tariff regulations,
incentives, subsidies, labour issues, and so on
Social Environment Consumer attitudes, tastes, and motives
Technological Environment
New inventions, risk management, productivity, compe-
tition, and effciency
Legal Environment Rules and regulations, Government guidelines
Cultural Environment Social structure, values, beliefs, aspirations, and so on.
Table 2.1 Types of environments
Economic Technological
Legal
Social Political
Cultural
Entrepreneurial Environment
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2.3 Entrepreneurial Decisions
The entrepreneurial process involves the selection or formation of a combination of resources, stakeholders and an
environment that transforms the idea into a successful enterprise. This selection and formation occurs through a
set of interconnected entrepreneurial decisions. Entrepreneurial decisions arise out of four interconnected decision
domains. They are as follows:
Resources
This domain includes non-human resources. The decisions raised out of this domain typically lead to the selection/
creation of a production function with relevant inputs and technological constraints.
Financing issues, issues of information systems and fows including accounting can also occur in this
domain.
Stakeholders
This domain involves all stakeholders internal to the frm except the entrepreneur.
Decisions arising out of this domain typically lead to the selection/creation of a set of feasible contracts between
stakeholders within the frm.
Environment
This domain forms the interface between the frm and its external environment. The external environment
consists of competitive (market/strategic) environment and macroeconomic environment.
The decisions raised out of this domain lead to the development of the frms core competencies.
The other areas included in this domain are issues of market identification, positioning, and strategy
development.
Entrepreneur
This domain is particularly unique to the pre-frm and brings in issues of leadership, vision and the subjective
theories of the entrepreneur who makes the selection/creation decisions arising out of all the domains.
Decisions arising out of this domain lead to the overall identity of the frm in terms of its organisational structure,
form, and purpose. In other words, they lead to either the creation of the frm or the premature termination of
the pre-frm.
Fig. 2.2 Entrepreneurial decisions arising out of four interconnected decision domains
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The fgure illustrates a set of entrepreneurial decisions arising out of the four interconnected decision domains. The
topological objects are used to capture the interconnectedness of the four domains. However, there are many factors
that affect the entrepreneurs decision like:
culture and sub-culture
education and experience
peer groups
family background
2.4 Types of Enterprises
Sole proprietorship
This type of enterprise is easy to form as it usually involves just one individual who owns and operates the
enterprise. Example: Haldiram took 20 years to grow and venture abroad.
Advantages : All income belongs to the owner. From legal point of view, it is easy to start and close down
a sole proprietorship. The functioning of the enterprise is simple and can be easily adapted to changing
circumstances.
Disadvantages : Raising capital is diffcult as banks and other fnancing sources are often reluctant to make
business loans to sole proprietorships.
Partnership
In this case business will be owned and operated by several individuals. There are minimum of two partners
and maximum of twenty members. Partnerships come in two varieties: general partnerships and limited
partnerships.
Advantages : Opportunities for obtaining capital are usually favourable. The decision making process is faster.
The partners are taxed in their personal capacity and not collectively, so the proft is shared and each partners
share is taxed separately.
Disadvantages : Personal liability is a major concern. Like sole proprietors, general partners are personally
liable for the partnerships obligations and debts.
Corporation
A corporation is an independent legal entity, separate from its owners, and as such; it requires compliance with
more regulations and tax requirements.
Advantages : A corporations debt isnt considered that of its owners, so personal assets are not put at risk.
A corporation can also retain some of its profts without the owner paying taxes on them. Other advantage is
the ability of a corporation to raise money. A corporation can sell stock, either common or preferred to raise
funds.
Disadvantages : There are higher costs involved. Corporations are formed under the laws of each state, each of
which has its own set of regulations. Youll probably need the assistance of an attorney and accountant to guide
you. And not only are corporations subject to corporate income taxes at both the federal and state levels, any
earnings distributed to shareholders in the form of dividends are taxed at individual tax rates on the owners
personal income tax returns.
2.5 Problems in Small Scale Enterprise
During the process of setting up an enterprise, the entrepreneurs face many problems. The problems in small scale
enterprise are as follows:
Problem of raw material
A major problem that the small scale enterprises face is with the procurement of raw materials. The problems
related to raw materials include:
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an absolute scarcity
poor quality of raw materials
inadequate suppliers
The small units that use imported raw material face raw material problem with more severity, mainly due to
diffculty in obtaining this material either on account of the foreign exchanges crisis or some other reasons.
Problem of fnance
An important problem faced by the small-scale industries in the country is that of fnance. The problem of
fnance in small-scale sector is mainly due to two reasons
scarcity of capital in the country as a whole
weak credit worthiness in the country
High custom duties and high taxes, delayed payments from customers add up to the fnancial problems of the
entrepreneurs.
Marketing problems
The small entrepreneur cannot supply standardised goods of high quality and as a result cannot compete with
products of large companies or MNCs.
They usually do not have a brand name or loyalty, as there are hardly any funds for advertising or sales
promotion.
Under-utilisation of capacity
According to Arun Ghosh, on the basis of All India Census of Small Scale Industries 1972, the percentage
utilisation of capacity was only 47 in mechanical, 58 in automobile industries, 50 in electrical, 55 in leather
products and only 29 in plastic products manufacturing. On an average, it concludes that 50 to 40 percent of
capacity was not utilised in small-scale units.
The vital problem of under-utilisation of capacity is power problem faced by small-scale industries. The power
supply is not always available to the small scale units, and if it is available it is rationed by utilising only for
few hours.
Since small scale units are weak on economic front, they have to manage the best as they can within the available
meagre means.
Obsolete technology
Most small businesses use old technologies because they cannot afford better. As a result, the quality of their
goods is inferior and the cost of production is higher than in the case of other large-scale enterprise.
This has adverse effects especially after opening up of the economy when they have had to compete with
imported goods.
Poor project planning
With the lack of education and experience, small-scale businessmen often depend upon consultants.
They do not fully understand project details. Due to poor planning of project, cost and time overruns arise.
Inadequate infrastructure
Infrastructure quality and quantity of transportation, communications and other basic services particularly in
backward areas is another problem.
Inadequate infrastructure results in underutilisation of capacity and wastages. For example, instability of voltage,
unscheduled power cuts and long delays in getting power connections are common.
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Poor managerial and organisational skills
Usually the entrepreneur has to perform diverse functions invariably without having any exposure to professional
education or formal training.
On the other hand, the large -scale enterprise hire the best-qualifed and trained people. This may lead to hiring
more people than required and improper selection. This will add up to the costs.
Also the entrepreneur may not be able to see the company as a whole. This inability to see the bigger picture is
a typical managerial failure observed in entrepreneurs.
Other problems
In audition to the problems listed above, there are numerous other problems that the small units face.
According to the Seventh Five Year Plan, these include shortage of trained technicians, technological obsolescence,
insuffcient management expertise, unorganised nature of operations, and so on.
2.6 The Entrepreneurial Process
The process of starting a new enterprise is embodied in the entrepreneurial process, in which entrepreneurs
play a signifcant role.
It does not only involve problem solving in a typical management position, but an entrepreneur must fnd, evaluate,
and develop an opportunity by overcoming the factors or risks that affect the creation of a new enterprise.
The process has four distinct phases:
identifcation and evaluation of the opportunity
development of the business plan
identifcation of resources
management of the enterprise
Fig. 2.3 The entrepreneurial process
Identifcation and evaluation of the opportunity
Opportunity identifcation and evaluation is a very diffcult task. Most good business opportunities do not suddenly
appear, but rather result from an entrepreneurs alertness to possibilities, or in some cases, the establishment
of mechanisms that identify potential opportunities. The entry of the entrepreneurs into the business world is
with the intention to earn proft.
Entrepreneurship is a proft-oriented activity. Thus, entrepreneurial opportunity is evaluated by two distinct
attributes:
Identify Opportunity
Entrepreneur
Analyse outcomes
Develop Business Plan
Determine Resources
Manage the Enterprise
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Market issues: potential, proft margins, competitors, barriers to entry
Financial issues: taxation, capital required, returns on investment
These two attributes decide the possibility and proftability of converting the opportunity into a concrete business
project. Opportunity analysis or opportunity assessment plan includes:
description of the product or service
assessment of opportunities, entrepreneur and the team
specifcations of all the activities and resources needed to translate the opportunity into a feasible business
venture
source of capital to fnance the initial venture as well as its growth
The assessment of the opportunity requires answering the following questions:
What does market need?
What personal observations have been experienced or recorded with regard to that market need?
What social condition underlies this market need?
What market research data can be organised to describe this market need?
What competition exists in this market? How would one describe the behaviour of this competition?
What does the international market look like?
What does the international competition look like?
Where is the money to be made in this activity?
Development of the business plan
A good business plan must be developed in order to develop the defned opportunity. This is a very time-
consuming phase of the entrepreneurial process.
An entrepreneur usually has not prepared a business plan before and does not have the resources available to
do a good job. A good business plan involves:
development of the opportunity
identifying the resources
obtaining those resources
successfully managing the enterprise
Identifcation of resources
The resources needed by a typical enterprise are:
people
premises
customers
suppliers
funds
Any resources that are critical need to be differentiated from those that are just helpful. Care must be taken not
to underestimate the amount of variety of resources needed. Acquiring needed resources in a timely manner,
while giving up as little control as possible is the next step in the entrepreneurial process.
The risks involved in obtaining resources should also be determined. The amount of resources may vary as per
the stages of growth of the enterprise.
For example, as the business develops, more funds will probably be needed to fnance the growth of the enterprise,
requiring more ownership to be relinquished. That is why, alternative suppliers of all the resources, along with
their needs and desires need to be identifed.
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Management of the enterprise
After resources are acquired, the entrepreneur must use them effectively to execute the business plan. This involves
following steps:
Planning
decision making
operational and strategic planning
budgets and cash-fows
Organising
division of work and organisational structure
allocating available resources
Leading
delegation
motivation
Controlling
performance evaluation
review
The operational problems of the growing enterprise must also be examined. This involves implementing a management
style and structure, as well as determining the key variables for success. A control system must be established, so
that any problem areas can be quickly identifed and resolved.
Thus, we have studied the basics of entrepreneurial. However, various thinkers in this feld have proposed different
models for entrepreneurial process or new enterprise creation, which are discussed hereunder.
2.7 Entrepreneurial Process Models
Described below are the entrepreneurial process models.
2.7.1 The Four Stage Growth Model
The four-stage growth model consists of categories of distinct activities that are essential for the progress of new
enterprise from an idea to a substantial enterprise. The four stages are as follows:
Pre-start-up stage 1.
Start-up, early stage 2.
Early growth stage 3.
Later growth stage 4.
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Fig. 2.4 The four-stage growth model
Pre-start up stage
defning business concept
product-market study
fnancial planning
pre-start-up implementation
Start-up stage
This is the initial period of the business and does not have a defnite timeframe nor are there models to describe
what a business does during this stage; however there are two standard conditions.
First, entrepreneurs want to meet operating objectives, such as satisfying sales, revenue and cost targets.
Second, they want to position the venture for long term growth.
Early growth stage
This is a period of intense monitoring and growth can occur at different rates.
The growth rate ranges from slow growth through incrementally higher sales to explosive growth through
quantum changes in consumer demand.
Later growth stage
If the enterprise proves successful in the early growth stage, it can fnd itself in competition with larger
companies.
This is the later growth stage, when the rate of growth may be slower and the industry has attracted
competition.
Companies reaching this stage, often go public with stock offerings. Family fortunes turn into corporate equity
positions and professional management replaces the entrepreneurial cadre.
2.7.2 The Corporate Development Process Model
The process of development of the frm in interaction with its institutional environment is discussed below with
the help of the fgure.
Pre-start-up stage Start-up stage
Early growth
stage
Later growth
stage
The period during
which enterprise
is planned and
preliminary work
of obtaining
resources and
getting organised
prior to start up
The initial period
of business when
entrepreneur
must position
the enterprise
in market and
necessary
adjustments to
sure survival
This is the period
of rapid growth.
Enterprise may
undergo major
changes in
market, fnance
and resource
utilisation.
Enterprise evolves
into a large
company with
active competition
in established
industry.
Professional
Management
is more
important than
entrepreneurial
energy.
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Fig. 2.5 The corporate development process model
The fgure illustrates the interaction between the individual entrepreneur/entrepreneurship and informal/cultural
and structural/formal institutions, i.e., the corporate development process. This model is divided into three
stages:
the initiation phase
the establishment phase
the operational/growth phase
The model also illustrates how companies are affected in the development process by informal and formal
institutions, respectively, in three development phases. In general, the entrepreneurial perspective can be divided
into two:
focussing on the individual (the entrepreneur in focus)
focussing on the corporate development process, i.e., the entrepreneurial process
Entrepreneurship is viewed as a process where companies develop interaction with the institutional environment.
This involves the role that institutions play in the corporate development process.
2.8 Key Success Factors for Entrepreneurs
Entrepreneurs possess unique characteristics that set them apart from people who are intent on starting an
enterprise on their own. However, different entrepreneurs possess different characteristics.
Some of them become successful because they are prepared to take risks, and others achieve their goals as a
result of their innovative ideas, skills and fair for management.
Regulative
or
Formal Institutions
Regulative
or
Formal Institutions
Regulative
or
Formal Institutions
Cognitive-cultural
or
informal Institutions
Cognitive-cultural
or
informal Institutions
Cognitive-cultural
or
informal Institutions
Initiations phase
(Entrepreneur)
Establishment phase
(Enterprise)
Growth phase
(Enterprise)
Phase 1
The initiation
phase
Phase 1
The establishment
phase
Phase 1
The operational/
growth phase
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Fig. 2.6 Key success factors for entrepreneurs
Factors that usually contribute to successful entrepreneurship are known as key success factors, which are summarised
in the fgure given above. Other key successful factors are as follows:
Entrepreneurial team : The foremost key success factor is the entrepreneurial team. The team is important,
because, usually, entrepreneurs do not start businesses by themselves, and they have teams, partners, close
associates, or extensive networks of advisers.
Products or services : Nearly all successful enterprises start from small scale and grow incrementally. There are
very few which start on a large scale at the beginning. Products tend to have strong proft potential with high
initial margins rather than small margins with substantial volume requirement. Service businesses hold good
margins by effective cost controls and well-monitored overheads.
Markets and timing : Successful entrepreneurs usually have a clear idea of both existing and potential customers.
All great ideas need to be carried out simultaneously with valid market research. Timing pertains to when
products or services are introduced, how they are introduced, how they are priced, how they are distributed,
and how they are promoted.
Business ideology : A business ideology is defned as a system of beliefs about how one accomplishes an
enterprise. From an entrepreneurs perspective, every enterprise has an ideology, a philosophy or rationale for
existing.
2.9 Characteristics of Successful Entrepreneurs
If we go through the business history of India, we come across the names of persons who have emerged as
successful entrepreneurs. Some examples of successful entrepreneurs are JRD Tata, Dhirubhai Ambani, Aditya
Birla, Rahul Bajaj, Laxmi Niwas Mittal, Azim Premji and many more.
Thus, it is seen that the success of these entrepreneurs was because of their unique characteristics. The
characteristics that are seen in most of the successful entrepreneurs are:
self-confdence and optimism
able to take calculated risk
positive responce to challenges
creativity, high achievement motivation
dynamic leadership
fexibility
market knowledge
team spirit
resourcefulness
independent mindset
foresightedness
responsive to suggestions
KEY SUCCESS FACTORS
Skill
Expertise
Aptitude
Personal
qualities
Management
skills
External
factors
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initiative taker
open to criticism
2.10 Functions of Entrepreneurs
Kilby identifed many functions of an entrepreneur, in which managerial functions are also included. He has classifed
these functions into four groups as follows:
Exchange relationship
perceiving market opportunities
gaining command over scarce resources
purchasing inputs
marketing of the products and responding to competition
Political administration
dealing with public bureaucracy
managing human relation within the frm
managing customer and supplier relations
Management control
managing fnance
production management
Technology
acquiring and overseeing assembly of the factory
upgrading process and product quality
introducing new production techniques and products
Entrepreneurship
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Summary
The entrepreneurial process has two main models: the four stage growth model and the corporate development
process model.
The basic entrepreneurial process has four distinct phases including; identifcation and evaluation of the
opportunity; development of the business plan; determination of the required resources and; management of
the resulting enterprise.
Entrepreneurial development is largely dependent on the types of environments and hence they are major
considerations in the decision-making process of entrepreneurship. There are six types of environments like
political, economic, social, technological, legal, and cultural environment.
The types of enterprises have also been described in the chapter. There are mainly three types of enterprise;
sole proprietorship, partnership and corporation.
The in-born traits in an entrepreneur and the skill sets which can be developed to be successful in this feld
are an integral part of the successful entrepreneurial process. The focus should be on developing creative
entrepreneurs by stimulating innovation and the entrepreneurial spirit. This will help our country to become a
strong and growing economy in the 21st century.
Successful enterprises can be achieved by studying the key success factors, functions and the characteristics
present in the successful entrepreneurs. Characteristics like self-confdence, optimism, taking calculated risk,
responding positively to a challenge, creativity, high achievement motivation, dynamic leadership and fexibility
should be present in a person who wishes to become a successful entrepreneur.
References
Singh, B., 2009. Entrepreneurship Development. Wisdom Publications, Delhi.
Cecile, N., Machado R., 2004. Basics of Entrepreneurship. Juta and Company Ltd. P12 14, P38 40.
Chatrapathy, M. M., 2007 Basics of Business and Entrepreneurship. Asian Centre for Entrepreneurial
Initiatives.
Recommended Reading
Centre for Business Planning . Available at: <http://www.businessplans.org>. Accessed 30
th
November 2010.
Lal, A. K., Clement R. W., 2005. Economic Development in India: The Role of Individual Enterprise, Asia-
Pacifc Development Journal, Vol. 12, No. 2.
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Chapter III
The Business Planning Process
Aim
The aim of this chapter is to:
explain the concept of business plan
study how to generate business ideas
look into entrepreneurship development cycle
examine the problems and opportunities for entrepreneurs
Objectives
The objectives of this chapter are to:
determine the business planning process
understand elements of a business plan
analyse the environment and the process of environmental scanning
examine the different factors in entrepreneurial cycle
Learning outcome
At the end of this chapter, the students will be able to:
state the business planning process
understand the effects of environmental factors on business planning
recog nise the business incubators
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3.1 Introduction
A business plan describes a business opportunity. It is like a road map, because it tells what to expect and what
alternative routes are available to arrive at determined destination. A number of research studies have indicated that
successful small business managers set realistic goals and plan how they are going to achieve them.
Planning facilitates the entrepreneurs to work smarter rather than harder. It facilitates future-orientation and motivation
to achieve the results. Perhaps, most importantly, the process of completing a business plan helps in analysing the
goals of business and work with commitment to make a successful enterprise. Roger Thompson in Nations Business
says that, A realistic business plan might save you from yourself by persuading you to abandon a bad idea while
your mistakes are still on paper.
3.2 Principles for Business Planning
Before getting into the details of preparing a business plan, Jack Kaplan of the Columbia Business School, suggests
that it is necessary to answer the couple of questions such as:
What is the idea to set up a business?
What is the purpose of this plan?
Who is the target audience?
How can the plan help to advance the project?
What are the current market needs?
What is the target set to achieve the market goals?
A plan must be:
explicit: all steps must be completely spelled out
intelligible: should be capable of being understood by those who will carry it out
fexible: should be able of accepting change
written: committed to writing in a clear and concise manner
presented with the distribution plan: must be specifc about how the company will sell and distribute its products
or services
3.3 Common Elements in a Business Plan
Executive summary
This is the frst section of a business plan and is a synopsis of the proposed enterprise. Usually, it has no longer than
three pages and addresses fve subjects as mentioned below:
defnition of the enterprise
products or services
market characteristics
entrepreneurial team
fnancial summary
Business concept
A brief description of the business is done in this section. Points which could be included in this section are:
purpose of enterprise and major objectives
description of major competencies of the frm
nature of market demand
nature of business
technological profle of the frm
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Product or service
This section includes detailed description of the frms proposed product/service. The major points that are present
are as follows:
nature and function of product and service
proprietary interests
attributes and technical profle
Market research and analysis
This may be the most diffcult but the most essential part of the proposed plan. This may include:
proposed customer profle and consumer behaviour research
macro-environment, market scenario, trends
competitor profle
market niche and pricing systems
distribution channels
sales forecast
Market plan
This plan describes the entrepreneurs intended strategy. It is built on the research fndings. This section usually
describes the following marketing aspects such as:
product or service
prices
promotions
distribution channels
services and warranties
market leadership
Manufacturing or operations
This section depends on the nature of business. The key elements of a typical operations plan are as follows:
facilities - size, layout, capacity, location
inventory - raw material inventory, fnished goods inventory, warehouse requirements
human resource requirements
operational rationale
insurance and legal protection
Entrepreneurial team
profle of founders
key personnel
investors
key management roles
Financial documentation
income and expenses statements
cash fows
assets and liabilities
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3.4 Defning a Business Idea
Great ideas cultivate great business opportunities. The defnition of a successful business is one, which is
proftable, and proftable business is built upon ideas that have been thought, researched and evaluated.
Once an idea is thought to represent a real opportunity, one must be able to research the market, know what data
is important and how to gather it meaningfully, and know what actions this information indicates. This can then
be worked into a rather detailed plan, and then advanced into a blueprint for success.
Below are some steps an entrepreneur can carry out to transform the idea generated into a successful dream
enterprise.
Analyse likes
A list of personal interests and hobbies, something one is good at should be prepared. Others opinions can also
be sought. This list represents broad business models, which will give you the greatest joy over time.
Decide which items on your list you would most like to develop into a business.
Generation of ideas
Ideas can be generated from many sources. Some of the sources are as follows:
family
friends
successful entrepreneurs
from skills, attitudes and aptitude
from daily activities
Defne the business operations
To defne the business operations, following questions must be answered:
What are the skills and experience related to this business?
What are the estimated fxed costs and other variable expenses?
What is estimated the break-even period?
What is the statutory compliance needed?
What are the proposed sources of fnance?
Are there any insurance and legal coverage requirements?
What will be the corporate structure of the business?
3.5 Identifying Problems and Opportunities
To identify the potential opportunities and problems, the entrepreneur has to follow the following steps:
Opportunity creation or identifcation
An entrepreneur may identify a potential opportunity by various ways. One could be by observation of the
environment. Some of the other methods adopted by potential entrepreneurs are as follows:
identifcation of the needs of the people
market survey
trade, journal, business magazines and newspapers
technical and vocational skills
education
monopoly business
government schemes
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Strength weakness analysis of the particular opportunity
This is the most critical step after identifying the opportunity. It involves ascertaining business value of the idea by
assessing the questions such as:
How would the market accept the product/idea?
What resources would be required?
What are the entry and exit barriers?
What is the extent of present/future competition?
What is the expected revenue generation and market size?
Risk return analysis
The evaluation of risks and returns can be calculated by using various methods like SWOT analysis and ETOP.
These indicate the different factors which are available in the form of opportunities or threats, and thus lead to risks
or returns. Some of the questions to be considered to quantify the risk factor are:
How would the lack or shortage of the resources affect?
Is there the risk of obsolescence or what is the shelf life of the product?
What if the committed factors or resources are not consistent with time?
Mapping of entrepreneurs skills and competence against the opportunity
Here, a comparison between the entrepreneurs capability to manage the business and the risk of investing into
that particular business is made. One has to check the extent of risk involved in the business idea, how good are
the returns on investment and how capable is the entrepreneur to cope with the unexpected situation and do the
crisis management, if any. Conclusion can be contingency plan prepared by the entrepreneur and action plan for
risk mitigation.
Study of competitors and environment factors
A detailed study of competitor profle is a must, as this will assist an entrepreneur to identify where he/she stands
and where he/she has to be. The study of all the environmental factors as seen above can bridge the gap between
entrepreneur and the opportunity.
Develop the opportunity into a business plan
When the entrepreneur is clear with the business plan, he/she can now be well equipped to face the real situation
and proceed with the business idea.
3.6 Purpose of Business Plan
Purpose of planning
Following could be the purposes behind planning:
it acts as a long-term management tool
decisions can be made in the future that best ft with the aim of the business
to investigate and evaluate new business opportunities
to present a case for fnance
to get a clear picture of the business and its potential
many of the areas covered in a business plan are common to all of the above purposes, the amount and type of
information will, however, vary with the purpose of the plan
Need of Planning
Planning is essential to:
control future risks
prepare for future uncertainty
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control business environment
control business growth
avoid sales crises
avoid liquidity crises
avoid succession crises
ensure people development
ensure work space available
avoid stock buying crises
3.7 Environmental Analysis
Environmental analysis consists of following aspects
3.7.1 Environment Search
We have studied that market research is an important part of any business planning process. A detailed study of
the macro-environment is included in this research. The macro environment has two major parts: the internal
and the external environment, which play a major role in any business development activity.
Internal factors are those, which are controllable up to a certain extent. On the other hand, external factors are
those, which are uncontrollable but can affect the business tremendously.
External factors include the demographic environment, natural environment, technological environment, political
environment and socio-cultural environment. It is necessary o study the environmental factors before starting
any enterprise.
Fig. 3.1 Environmental circle
(Source: Johan Strydon, Alex Antonites, Andreas de Beer - Entrepreneurship & how to Establish Your Own
Business)
3.7.2 Types of Environment
Following are the types of environment:
Macro environment
Market environment
Micro environment
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Demographic environment
The most important factor that entrepreneurs monitor is Demographic environment i.e. size and growth rate of
population in cities, age distribution, ethnic mix, educational levels, household patterns, and so on.
Entrepreneurs have to fnd out the opportunities after analysing the purchasing power of the population in that
area.
Natural environment
Entrepreneurs need to be aware of the threats and opportunities associated with the natural environment like
the shortage of raw material especially water, increased cost of energy, increased pollution, non-renewable
resources, and so on.
Economic environment
A business depends upon the purchasing power of people and the purchasing power depends upon peoples
income, savings, and debt and credit availability. Major trends in income and consumer spending patterns are
to be studied.
Entrepreneurs, for their convenience, can distinguish market in to fve different income distribution patterns as
very low income, low income, medium income, high income and very high income.
Technological environment
An economys growth rate is affected by how many major new technologies are discovered. Thus, entrepreneurs
have to keep pace with what new technologies are emerging in the market, where is a scope for innovation,
etc.
One needs to keep on upgrading on the technological front to stay in business. Emerging technologies can also
give birth to new business ideas.
Socio-cultural environment
Entrepreneurs need to study peoples views, values, beliefs, attitudes and culture in that area before starting
any business.
The product/service should correspond to societys core values and address the needs of different cultures in
the society.
Political-legal environment
Entrepreneurs decisions are strongly infuenced by developments in the political and legal environment. This
environment is composed by government rules, laws, regulations, government agencies, etc.
Sometimes these rules create new business opportunities. For example, the Indian Government provides incentives
to entrepreneurs to promote industries in under-developed areas.
Thus, entrepreneurs should have a good working knowledge of the laws protecting competition, consumer and
society.
3.7.3 Environmental Scanning
The process of environmental scanning refers to information gathering about the external environment, the
knowledge of which would assist entrepreneurs in shaping up their business plans.
This study also helps an entrepreneur to know perceived environmental change and may lead to a strategic
change. It is the process by which organisations monitor their relevant environment to identify opportunities
and threats affecting their business.
The purpose of environmental scanning is to serve as an early warning system by alerting entrepreneurs to
potentially signifcant external developments in their early stages.
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Fig. 3.2 Environmental scanning process
3.8 Entrepreneurship Development Cycle
The entrepreneurial development cycle begins with the individual entrepreneur who can decide to take advantage
of new innovations and translate them into a successful economic enterprise.
The entrepreneur requires a lot of information and technological knowhow for translating a business idea into
a business plan and then into a setting up a business and in that context several simulatory, supporting and
sustaining factors which compile the development cycle.
Fig. 3.3 Entrepreneurial development cycle
Stimulatory Factors Support Factors Sustaining Factors
Entrepreneurial education Registration of unit Helps in modernisation
Planned publicity for entrepreneur-
ial opportunity
Arranging fnances
Helps in diversifcation/expansion/
substitute production
Identifcation of potential entrepre-
neurs through scientifc methods
Providing land, shed, power,
water and so on
Additional fnancing for full capacity
utilisation
Help and guidance in selecting
products and preparing project
reports
Supply for scarce raw material
and information
Diagnostic industrial extension/con-
sultancy source
Scanning Strategies
External
Environment
Scanning
Perceived
Change
Change in
Business Strategy
Internal Factors
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Evolving new products and pro-
cesses, which are locally suitable
Getting licenses
Product reservation/ creating new
avenues for marketing
Availability of Counselling
and promoting activity for
entrepreneurs by
trained personnel
Providing common facilities
Production units legislation/ policy
change
Availability of techno economic
information and product profts
Offering management consul-
tancy and help for marketing
the product
Deferring repayment/ interest
Creating an entrepreneurial forum
and recognition of entrepreneurial
skills
Tax relief and other govern-
ment subsidies
Quality testing and improving ser-
vices
Table 3.1 Factors in the development cycle
3.9 Business Incubators
Business incubators are organisations that support the entrepreneurial process, helping to increase survival rates
for innovative start up companies.
Only entrepreneurs with feasible business ideas are admitted into the incubators, where they are offered a
specialised menu of support resources and services.
The resources and services provided to an entrepreneur include:
provision of physical space
management coaching
help in making an effective
business plan, administrative services
technical support
business networking
advice on intellectual property
sources of fnancing
The incubation process is intended to last around 25 years. Since business incubators are powerful economic
development tools, they collaborate actively with regional and national government agencies, from which they
often receive fnancial grants.
In many countries, business incubators have national associations to represent their interests and organise
meetings where best practices are disseminated.
Evaluation of business incubators in Europe and the US suggest that 90% of incubated start-ups were active
and growing after three years of operation, which is a much higher success rate than that observed in start ups
launched without assistance.
Science-based business incubators are thought to be particularly useful from a policy perspective because they
can simultaneously promote knowledge diffusion, technology transfer and high-tech frm creation.
Thus, we have studied the business planning process in detail and how it helps the entrepreneurs to transform their
idea into a successful business
Entrepreneurship
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Summary
The frst step in setting up any enterprise is business idea generation. The effort required to implement the idea
into reality needs proper planning and its execution.
Roger Thompson, in Nations Business, says that, A realistic business plan might save you from yourself by
persuading you to abandon a bad idea while your mistakes are still on paper.
The eight elements of business plan include executive summary, business concept, product or service, market
research and analysts, market plan, operations, entrepreneurial team, and fnancial information.
The entrepreneurs need to creator identify the opportunity, analyse strength and weaknesses, analyse risk in the
opportunity, study the market and develop opportunity into a business plan.
The types of environment include micro and macro environment. The macro-environment further includes
internal and external factors. External factors include the demographic environment, natural environment,
technological environment, political environment and socio-cultural environment.
The entrepreneur requires a lot of information and technological knowhow for translating a business idea
into a business plan and then into a setting up a business and in that context several simulatory, supporting
and sustaining factors which compile the development cycle.
Business incubators are organisations that support the entrepreneurial process, helping to increase survival
rates for innovative start up companies. Only entrepreneurs with feasible business ideas are admitted into
the incubators, where they are offered a specialised menu of support resources and services.
References
Singh, B., 2009. Entrepreneurship Development. Wisdom Publications, Delhi. Chapter 7.
Biz Facts, Department of Trade and Economic Development, Adelaide, SA.
Strydon, J., Antonites, A., Andreas de Beer, 2009. Entrepreneurship & How to Establish Your Own Business.
Juta and Company Ltd., Chapter 2.
Recommended Reading
Centre of Business Planning . Available at: <http://www.businessplans.org> [Accessed 2 December 2010].
Dr. Ambilikumar, V., Entrepreneurship Development, Kerala Agriculture University Available at: <http://www.
slideworld.com/slideshow.aspx/entrepreneurship-development> [Accessed 2 December 2010].