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Entrepreneurship Development
UNIT - I
Definition of Entrepreneur Functions of an Entrepreneur Entrepreneurial motivation and Barriers Internal and External Factors Classification of Entrepreneurship Theory of Entrepreneurship Concept of Entrepreneurship Development of entrepreneurship Culture, stages in 2 entrepreneurial process.
LECTURE PLAN
Unit- I
Sub: Entrepreneurship Development Academic Consultant: Riju Agarwal Slide no 5-14 16-19 21-24 26-30 32-43 45-46 48-53 55-59 61-62 64-70 72-83
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Lecture no 1 2 3 4 5 6 7 8 9 10
Contents (sub topics) Definition of Entrepreneur Functions of an Entrepreneur Entrepreneurial motivation and Barriers Internal and External Factors Concept of Entrepreneurship Classification of Entrepreneurship Theory of Entrepreneurship Theory of Entrepreneurship Development of entrepreneurship culture Stages in entrepreneurial process FAQS, CASE STUDY & ASSIGNMENTS
Lecture 1
Entrepreneur
Origin from French word-
Entreprendre
Meaning
Definitions of Entrepreneur
1725
Richard Cantillon
Risk taker
1800 1934
JB Say JA Schumpeter
1876 1975
1983 1985
Organizer Innovator (developing country) Manager (developing countries) Opportunity exploiter Pioneer/ Captain of industry Takes initiative, organizes & accepts risks Intrapreneur Creates something different & of value, devotes time & effort, assumes risks & receives result
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Richard Cantillon
JB Say
Organiser
The economic agent who unites all means of Production, the labor force of one, the capital and land of the other and by selling the product, he pay Interest on the Capital, Rent on the land and Wages to the labor and what remains is his profits.
Francis A Walker
Pioneer
One who is endowed with more than average capacities in the task of organizing & coordinating, and receives surplus reward over and above the managerial wages for them.
Joseph A Schumpeter
Innovator in an advanced economy
One who introduces something new in an economy Risktaker & Manager in developing economy One who starts an industry, undertakes risks, bears uncertainties and also perform the managerial functions of decision-making & coordination
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Peter Drucker
Opportunity Exploiter
One who searches for change, responds to it and exploits an opportunity.
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An Entrepreneur within an already established organisation. An intrapreneur perceives and exploits business opportunities within an existing enterprise He / she generally serves as the chief executive of a semi-autonomous product division or subsidiary of a big organisation
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Manager Is concerned only with day-to-day affairs of a going concern Runs an established enterprise and undertakes no big risk Involves combining and coordinating resources
Establishes new enterprise and undertakes risks Mobilizes resources to initiate change in production
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Lecture 2
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Functions of an Entrepreneur
Innovates
Bears Risk
Organization Building
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Functions of an Entrepreneur
Innovation - Introduction of a new product / new quality of an existing product methods of production / distribution new market source of raw materials form of organization
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Functions of an Entrepreneur
Risk taking
Assuming the responsibility for loss that may arise due to unforeseen contingencies Guaranteeing interest to creditors, wages to labour and rent to the landlord In the end, whatever left is profit, reward of taking risk or might have nothing left for him / her
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Functions of an Entrepreneur
Organization Building
Bring together factors of production:
Capital Interest Land Rent Labor - Wages
Organize them, performing planning, decision making , coordinating and controlling functions of manager Determining the line of business, expansion and growth of the enterprise
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Lecture 3
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Key Motivators
Ambition- to make money & live a decent lifestyle Need for Achievement Past work experience Entrepreneurial education Economic condition Unemployment/ Dissatisfaction with present job Independent lifestyles Internal locus of control- control one has over his life
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Key Motivators
Family background- successful entrepreneurs Compulsion- family business Social status- level at which an individual is viewed by society Demographic and economic factors Shift to a service economy Technological advancements E-Commerce and the World Wide Web International opportunities
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Key Motivators
Support & assistance available from family, friends, government, financial institutions etc. Governmental influence by
Industrial Policy
creating basic facilities, utilities, services providing incentives and concessions Providing conducive Economic environment availability of Capital, Labor, Raw materials, Market
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Key Barriers
Lack of Viable concept Lack of Market knowledge Lack of Seed-capital Lack of Business know-how Legal constraints & regulations- protectionism,
patents
Social Stigma- being unsucessful Insecurity fear of losing their economic assets Lack of technical skills Time presences and distractions
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Lecture 4
25
Economic conditions Economic environment exercises the most direct and immediate influence on entrepreneurship
The main economic factors are:
Capital Labour Raw materials Market
2.
Social mobility
Social mobility is crucial for entrepreneurial emergence
Security
If individuals are fearful of losing their economic assets or of being subjected to various negative sanctions, they will not be inclined to increase their insecurity by behaving entrepreneurially
3. Governmental influence
Government can promote entrepreneurship in one way or the other through its clearly expressed Industrial Policy By creating basic facilities, utilities, services and by providing incentives and concessions, government can provide prospective entrepreneurs a facilitative socio-economic setting
Technological innovations are caused more by the culturally marginal persons than others Internal locus of control- control one has over his life
Independent lifestyles
2. Personal factors Entrepreneurial education & Past work experience Economic condition Unemployment/ Dissatisfaction with present job
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Lecture 5
31
Concept
Entrepreneur
Person who Identify opportunities & exploit them To create Value
Entrepreneurship
Process Dynamic & Continuous
Enterprise
Object
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Who is an Entrepreneur?
A person who 1. Identifies opportunities in the marketplace. 2. Marshalls the resources required to pursue these
opportunities.
Employ the resources to Exploit the opportunities for long-term gains. 4. Creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth 5. Creates Value for all stakeholders 33
3.
Who is an Entrepreneur ?
An individual:
With certain qualities. Who tries to create something new/Innovate. Who builds an Organization- organizes factors of production. Who undertakes risk (involved in the establishment and operation of a business enterprise).
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Characteristics of an Entrepreneur
Ambitious Goal-oriented Imaginative / Creative / Innovative Visionary- can foresee future Initiation / Risk taker / accepts challenges Commitment/ Persistence / Tenacity / Determination / Perseverance / Endurance / Doggedness / Persuasion Dedication / Hard worker/ Industrious Energetic / Drive Self confident / Assertive Flexibile / Adaptable 35 Skilled at organizing
Contd.
Watchdog for opportunities / Information seeker Marshalling resources / Efficient monitoring Intelligent- ability to acquire & apply knowledge & skill Knowledgeable- information acquired through experience & education Skillful- ability to do something well Quality conscious / Efficiency lover Leader High Integrity Emotional maturity & stability Good judge of human nature
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Entrepreneurial Process
1)
2) 3) 4) 5)
Identify/Evaluate Opportunity Develop Business Plan Determine & marshal resources required Manage The Enterprise effectively Means value creation for all stakeholders esp wealth for himself
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Nature of Entrepreneurship
Economic activity
Involves creation and operation of an enterprise Is concerned with production and distribution of goods
Dynamic process
Thrives on changes in environment Flexibility is the hallmark
Creative activity
A creative response to changes in the environment Involves innovation / introduction of something new & better- is a change agent
Purposeful activity
Seeks to earn profits through satisfaction of needs A goal-oriented activity
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A function of risk-bearing
Assumes uncertainty of future In the pursuit of profits there is every possibility of loss
An organizing function
Coordination/control of efforts of all engaged in enterprise Is an attempt at organization building
Management incompetence Lack of experience Poor financial control Failure to develop a strategic plan Uncontrolled growth
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6.
7. 8. 9.
Poor location Improper inventory control Incorrect pricing Inability to make the entrepreneurial transition
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Entrepreneurs serve as the catalysts in the process of industrialization and economic growth
The rate of economic progress depends upon its rate of innovation which in turn depends upon the entrepreneurial talent in the population Technical progress alone cannot lead to economic development, unless technological breakthroughs are put to economic use by entrepreneurs
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Lecture 6
44
Classification of Entrepreneurship
According to Stage of economic development Type of business business, trading,
agricultural
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Classification
according to stages of economic development, by Clarence Danhof
Fabian Entrepreneurs
Are risk-averse, cautious & skeptical, adopts if inevitable, as a last resort
Drone Entrepreneurs
Refuses to adopt, One who would take the beaten path, no matter what
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Lecture 7
47
Entrepreneur bears risks and plans, supervises, organizes, and owns factors of production
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19th Century
Jean Baptiste Say: Proposed that profits from entrepreneurship were separate from profits of capital ownership
Distinction made between those who supplied funds and earned interest and those who profited from managerial abilities
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20th Century
Joseph Schumpeter: Described the entrepreneur as someone who is an innovator and someone who creatively destructs
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To understand why there is a focus on personality rather than skills look at history of entrepreneurship theory nobody can hope to understand the economic phenomenon of anyepoch who has not adequate command of the historical facts (Schumpeter, 1934: 36) French tradition - the Physiocrats Cantillon (1755) Foresight to assume uncertainty Reacts to profit opportunities Bears uncertainty Brings about a balance between supplies &
The Modern Austrian Tradition: Main representative Kirzner (1973) The entrepreneur as a coordinating agent who is capable of exploiting unnoticed opportunities due to his/her special alertness. Has knowledge not available to everybody which leads to creative discoveries Facilitates exchange between suppliers and customers Profit as reward for recognising a market opportunity & acting as middleman
Schumpeter (1934) Entrepreneur as innovator, creator and catalyst for change Only certain extraordinary people have the ability to be entrepreneurs and they bring about extraordinary events Brings about change through introduction of new technological process/product About dream/vision and impulse to fight Creative destruction of existing combinations of resources
Lecture 8
54
PSYCHOANALYTIC APPROACHES Conflicts, difficulties or losses in childhood, motivates entrepreneurs to succeed In particular absent father, poverty, illness etc To think about developing entrepreneurship in this way brings ethical questions to the fore Criticised for only describing extremes and not accounting for the majority of entrepreneurs Variety of reasons behind set-up e.g. life-style choice, fulfilling dream, loss of long-term employment etc.
Propose to focus on the behaviours of entrepreneurs rather than their personalities Entrepreneurs have certain heuristics, schemas that allow him/her to examine the environment and find existing opportunities (Mitchell, 2002) However, now focus on special thinking Still focuses on entrepreneur as having special abilities rather than focusing on the process of entrepreneurship
ENTREPRENEURSHIP AS ACTION
A DIFFERENT APPROACH Psych studies treat entrepreneur as disconnected from context Individuals not distinct from their activities - they are part of and create the systems within which they are situated Focus on what the entrepreneur does, not who the entrepreneur is (Gartner, 1988) This view leaves open the possibility of developing entrepreneurship in individuals Entrepreneurs made not born (Chell, 2001)
ENTREPRENEURSHIP AS ACTION
An individual is not always entrepreneurial, may be team-effort Necessity vs. opportunity entrepreneurship Innovations as a response to the need for making un-programmed decisions Transcends the limits imposed by the owner manager Possible at any stage of the life cycle of a business enterprise (Handy, 2004)
Lecture 9
60
Young entrepreneurs Women Minority-owned enterprises Immigrant entrepreneurs Part-time entrepreneurs Home-based businesses Family businesses Copreneurs Corporate castoffs Corporate dropouts
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Cultural Norms/Values
Corporate
Fragmented Instruction Controlled Outer-Directed Alienation Chores Defined Limits Interference Distrust Expendable Limiting People
Intrapreneurial
Whole Vision In Control Inner-Directed Responsibility Enthusiasm/Motivation Space/Freedom Trust Belief In People Expandable Growing People
Lecture 10
63
In many cases, the decision start a business precedes the idea Many ideas fall by the way side, since they are either technically not feasible or financially not viable or both So you need to do enough research to converge on the idea
Documentary Experience
3.Business Formation
Type of company: legal form, registration Financing new product development:
4.Growth/exit
Difference between life style and growth companies Growth will require
infusion of capital through internally generated funds Sometimes employment of venture capitalists Passive investors
Growth will also require organization, as taught in business schools (Michael Dell story)
Exit
Various reasons Story of Lands End
5. Going Public
Probably the point in time the entrepreneur extracts the value of his/her efforts
Questions
71
FAQs
1. Who is an Entrepreneur? 2. Enumerate & discuss the different theories of Entrepreneurship. 3. Enumerate types of Entrepreneurship according to type of business. 4. Enumerate types of Entrepreneurs according to type of motivation. 5. Enumerate types of Entrepreneurship according to stages of Economic development. 6. Enumerate types of Entrepreneurship according to scale of Operation. 7. Enumerate the qualities/ characteristics of a successful Entrepreneur.
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8. Discuss different barriers to entrepreneurship. 9. What do you understand by Intrapreneurship? How does it differ from Entrepreneurship? 10. Differentiate entrepreneurs from managers. 11. Discuss different functions/role of an entrepreneur. 12. Who is an Adoptive entrepreneur? 13. Distinguish between Drone entrepreneur and Fabian entrepreneur. 14. Describe the motivational forces that cause entrepreneurial growth in a developing country.
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15. 16.
17.
18. 19.
Innovation is the hallmark of Entrepreneurship. Discuss. Discuss the qualities or traits of a successful entrepreneur? Developing countries need imitative rather than innovative entrepreneurs. Justify. Discuss the development of concept of Entrepreneurship? Whose theory of Entrepreneurship is suitable in todays market Schumpeter or Drucker. Discuss
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A Six Sigma Performance Every day, battling the traffic and crowds of Mumbai city, the Dabbawalas, also known as Tiffinwallahs, unfailingly delivered thousands of dabbas to hungry people and later returned the empty dabbas to where they came from. They delivered either homecooked meals from clients' homes or lunches ordered for a monthly fee, from women who cook at their homes according to the clients' specifications. The service was used by both working people and school children.
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In 1998, Forbes Global magazine, conducted a quality assurance study on the Dabbawalas' operations and gave it a Six Sigma efficiency rating of 99.999999; the Dabbawalas made one error in six million transactions. That put them on the list of Six Sigma rated companies, along with multinationals like Motorola and GE. Achieving this rating was no mean feat, considering that the Dabbawalas did not use any technology or paperwork, and that most of them were illiterate or semiliterate. Apart from Forbes, the Dabbawalas have aroused the interest of many other international organizations, media and academia. 77
Background Note The origin of the Dabbawalas' lunch delivery service dates back to the 1890s during the British raj. At that time, people from various communities migrated to Mumbai for work. As there were no canteens or fast food centers then, if working people did not bring their lunch from home, they had to go hungry and invariably, lunch would not be ready when they left home for work. Besides, different communities had different tastes and preferences which could only be satisfied by a homecooked meal. Recognizing the need, Mahadeo Havaji Bacche (Mahadeo), a migrant from North Maharashtra, started the lunch delivery service.
For his enterprise, Mahadeo recruited youth from the villages neighboring Mumbai, who were involved in agricultural work. They were willing to come as the income they got from agriculture was not enough to support their large families, and they had no education or skills to get work in the city. The service started with about 100 Dabbawalas and cost the client Rs.2 a month. Gradually, the number of Dabbawalas increased and the service continued even though the 79 founder was no more...
Delivery System The Dabbawala service was available wherever the local trains ran in Mumbai as it was their primary mode of transportation. During the delivery process, the dabbas changed hands at least four times before they reached their destination...
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Assignment
Interview 5 entrepreneurs around your neighborhood or city; At least one of the entrepreneurs should have a physical shop. For example, they could be: a. Providing shoe shine service b. Selling knick-knacks to tourists c. Selling books to cars waiting at intersections Ask them the following questions: a. How did they start this occupation? b. Why are they doing what they are doing now (How they identified the opportunity)? 82 c. Why do their customers buy from them (and not
d. Do they have any plans to expand? Make a report on a. The different types of businesses you came across. b. Their experience where did you go, were there any surprises, what were the stories you heard from these entrepreneurs. c. Key learnings from the project. d. The issues that the entrepreneurs faced - do the you agree that they are issues and whether you were able to solve these issues or help the entrepreneurs to solve them. 83
ENTREPRENEURSHIP DEVELOPMENT
UNIT - II
Creative Performance.
Feasibility Analysis: Economic, Marketing, financial & Technical. Project Planning. Project Evaluation, Control. Project Segmentation. Monitoring &
LECTURE PLAN
Unit- II
Sub: Entrepreneurship Development Academic Consultant: Gaurav Agrawal Slide no 87-98 100-123 124-142 144-158
Lecture no 1 2 3 4
Contents (sub topics) Idea Generation Screening and Project Identification Creative Performance Feasibility Analysis
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6 7 8 9 10
160-173
175-182 184-193 195-200 202-216 218-233 235
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Lecture 1
IDEA GENERATION
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IDEA GENERATION
Entrepreneurs develop business ideas by: Developing new products and services Tapping new markets Formulating new methods of production Identifying new raw materials Developing new ways of organizing processes
SOURCES OF IDEAS
A business idea may be discovered from the following sources: Observing markets Prospective consumers Developments in other nations. Study of project profiles Government organizations Trade Fairs and Exhibitions
Economic Forces Consumers level of disposable income Interest rate changes More women in workforce Social Forces Both parents working: fast food People too busy: Sony Walkman Life stress: spas, wellness clinics
5.
6. 7. 8.
Family & work patterns - dabbawallas Aging of the population yoga n anti aging Increasing diversity in the workplace - tabs Globalization of industries Carre four, walmart Increased focus in health care & fitness sona belts Proliferation of computers & Internet online shopping, airtel money Increase in numbers of cell phone users -uninor New forms of music & entertainment- ipods
Technological Advances Cell phones: people very mobile E-commerce: people very busy
Political Action New laws: help companies comply Terrorism: Products & services to protect
Lecture 2
SCREENING AND PROJECT IDENTIFICATION
99
PRE-IDENTIFICATION
Pre-Identification: Where do projects originate? The pre-identification phase refers essentially to the less specific research studies and surveys that should form part of any system of planning. It involves synthesizing, from national and sectoral strategies and policies, project ideas which seem worthy of more in-depth investigation.
PRE-IDENTIFICATION
Pre-identification is thus an on-going process involving reviewing, inventorying, integrating and analysis of strategies, policies natural resource data and socioeconomic information.
Project Identification
Assuming that there is a reasonable database and development strategies and policies have been formulated in sufficient detail to be operationally useful - how do we go about identifying projects? Two complementary approaches are suggested:
Project Identification
(i) Find out what people want and see how these ideas can be fitted into the schema of available resources, strategies and policies, taking account of physical, human, institutional and financial constraints; and (ii) Examine existing situations in respect of demand and supply of goods and services and look at past trends and likely future trends.
Reasons for Rejection of a Project: 1) Inappropriate technology in relation to the projects objectives or to local capabilities 2) Excessive risk 3) Inadequate demand for the proposed output or lack of comparative advantage 4) Inadequate raw materials or skills 5) Overambitious design in relation to available financial resources
Project Screening
6)Excessive economic, social, or environmental costs relative to the expected benefits 7)Lack of commitment of the intended beneficiaries or lack of political support from key authorities
Before time and resources are spent there is need to develop some feel for whether a project is likely to be feasible. A pre-feasibility analysis is necessary to serve as a screening process This pre-feasibility analysis should result in a Project Profile
The Project Profile defines: the objectives of the project, identifies project output, inputs and constraints and makes a rough assessment of project costs and benefits. The profile facilitates approval in principle by the relevant authority and serves as a basis for detailed feasibility and project preparation.
Pre-feasibility study
Should be carried out in just enough detail to determine the broad justification of the: Project idea The possible design alternatives to be considered further Reasons for the choices made or proposed
Pre-feasibility study
To permit a decision on the merits of the project idea, the study should briefly examine: 1) The size and nature of the demand for the product or service, and the intended or expected beneficiary groups or target areas
Pre-feasibility study
2) The alternative technical solutions or package available, with corresponding estimates of outputs, including identification of technologies already located in local use and their potential for improvement 3) The availability of the principal physical and human resources and skills that will be required
Pre-feasibility study
4) The magnitude of the costs both for the initial investment and for continued operation 5) The magnitude of the financial and economic rates of return (where applicable) 6) Any institutional constraints or policy issues likely to have an important impact on the proposed project
A project may be deemed to be ready for detailed preparation when: 1) Major options and alternatives have been identified and some initial choices have been made. 2) The principal institutional and policy issues affecting project outcome have been identified and appear amenable to solution.
Project Preparation
Purpose and Scope: The purpose of the feasibility study is to: 1) provide decision-makers with the basis for deciding whether to proceed with the project, and, 2) for choosing the most desirable option or alternative among the few remaining.
Project Preparation
Purpose and Scope: The purpose of the feasibility study is to: 1) provide decision-makers with the basis for deciding whether to proceed with the project, and, 2) for choosing the most desirable option or alternative among the few remaining.
1) Conform with the organizations objectives and priorities? 2) Is the project technically sound, and is it the best of the available technical alternatives? 4) Is the project administratively workable? 5) Is there adequate demand for the projects output? 6) Is the project economically justified and financially viable? 7) Is the project compatible with the customs and traditions of the beneficiaries? 8) Is the project environmentally sound?
Project Preparation
Of primary importance in project preparation is a clear definition of project objectives. These objectives must be specific (as opposed to broad statements of intention) if their achievements are to be measured at the end of the project and if project preparation is to proceed in a logical fashion.
Objectives
Defining Objectives: 1) An objective is the aim or goal of a project, and describes the desired state which the project is expected to achieve/contribute to. 2) it provides the reason for undertaking the project
Project Preparation
Once these objectives are defined, the constraints to achieving them must be identified. Some of these constraints are removable by the project itself while others are exogenous and can only be tackled on a global or national basis and not through individual projects.
If a project shows merit, additional data would be required during project preparation: a) Detailed market studies b) Geological or environmental studies c) Investigation of local sources of raw material d) Details of government regulations and policies
Data Requirements
f) Economic, social, or cultural characteristics of the people in the project area g) Availability of technical and managerial skills h) Existing or potential sources of local capacity for project preparation and implementation
Project Preparation
Project feasibility involves five important aspects: Technical Institutional Financial, Economic Social. The project preparation process consists of analyzing these five components and designing a feasible project.
Lecture 3
CREATIVE PERFORMANCE
124
Definition of Creativity
"Creativity is the ability to respond to all that goes on around us, to choose from the hundreds of possibilities of thought, feeling, action, and reaction that arise within us, and to put these together in a unique response, expression, or message that carries moment, passion, and meaning.-Clarissa Pinkola Estes, Woman Who Run With the Wolves
Soft Thinking: metaphor, dream, play, intuition, ambiguous, fantasy, approximate humor Hard Thinking: logic reason, work adult, analysis, consistency, reality exact precision
Writing Activities:
Webbing, mapping, wet inking, reflection writing, story starters
Process-Product Activities:
Problem finding, problem defining, problem-based learning
The Right Answer Thats Not Logical Follow The Rules Be Practical Play Is Frivolous Dont Be Foolish Avoid Ambiguity To Err Is Wrong Im Not Creative Thats Not My Area
Supervisors that have higher creativity expectations are observed rewarding creativity, recognizing creative efforts, allocating more resources, encouraging collaboration and sharing, applying creative goal setting and modeling creative behavior in their own work
Employees interpret meaning through environmental cues and supervisors must communicate through behavior. Self-efficacy levels influence the extent to which employees entertain creative activities, initiate creative acts, and sustain creative levels in their work. Supervisors must be aware of the impact and clearly state expectations to shape creative effort and manage the supervisor/employee relationship.
often generalize their relationships with direct reports to the entire organization, this perceived support of creativity has even greater impact on the individuals relationship to the organization as a whole
Measuring Creativity
Divergent Thinking Tests open ended questions Torrance Tests of Creative Thinking Guilford Tests Personality & Biographical Inventories perceptions, attitudes, values, interests, motivations
Form strong friendship ties with relatively few people; are capable of greater love. Are democratic, unprejudiced in the deepest possible sense. Are strongly ethical and moral individual (not necessarily conventional) ways; enjoy work in achieving a goal as much as the goal itself; are patient, for the most part.
Have a more thoughtful, philosophical sense of humor that is constructive, not destructive. Are creative, original inventive with a fresh, nave, simple and direct way of looking at life; tend to do most things creatively but do not necessarily possess great talent. Are capable of detachment from their culture; can objectively compare cultures; can take or leave conventions.
Lecture 4
FEASIBILITY ANALYSIS
143
Objectives of a feasibility study: To find out if an information system project can be done: ...is it possible? ...is it justified? To suggest possible alternative solutions.
After a feasibility study, management makes a go/no-go decision. A feasibility study is a management-oriented activity
Things to be studied in the feasibility study: The present organizational system users, policies, functions, objectives,... Problems with the present system inconsistencies, inadequacies in functionality, performance,
Types of feasibility
Operational feasibility Explores the urgency of the problem and the acceptability of any solution: If the system is developed, will it be used? Includes people-oriented and social issues
Types of feasibility
internal issues: manpower problems labour objections manager resistance organizational conflicts and
policies external issues: social acceptability legal aspects and government regulations.
Types of feasibility
Technical feasibility Is the project feasibility within the limits of current technology? Does the technology exist at all? Is it available within given resource constraints? i.e. budget, schedule,
Types of feasibility
Schedule feasibility Is it possible to build a solution in time to be useful: What constraints are there on the project schedule? Can these constraints be reasonably met?
Types of feasibility
Economic feasibility (Cost/Benefits Analysis) Is the project possible, given resource constraints? What benefits will result from the system?
Types of feasibility
Look for both tangible and
intangible benefits Quantify the benefits (e.g. cost savings) What are the development and operational costs? Are the benefits that will accrue worth the costs?
Lecture 5
ECONOMIC AND MARKETING ANALYSIS
159
Economic Feasibility
To
Economic Feasibility
Economic Feasibility
Economic Feasibility
Economic Feasibility
Economic Feasibility
Net present value: A measure over time of the costs and benefits of the project. Their future values are discounted to account for the time value of money. Break-even point: The time at which all the costs of the system will have been recovered. Return on investment: The ratio of the net present value of the system to the net present value of the costs.
PV is the present value of a cost or benefit for time period n. FV is the future value of a cost or benefit in time period n. i is the interest rate for discounting future costs or benefits. 1 / (1 + i ) n is the discount factor, dependent only on i and n.
FIGURE 2.18
( 2.18 )
MARKET ANALYSIS
Industry Description
Industry Size Industry status (growing, mature, in decline) Growth potential Geographic locations Trends and entry barriers Profit potential Sales patterns and gross margins
MARKET ANALYSIS
Target Market
Primary target markets Secondary markets Demographics Customer needs analysis
Product/Service Differentiation
Unique features Potential for innovation
MARKET ANALYSIS
Competitors
Direct and indirect
Market share Description Strengths and weaknesses
MARKET ANALYSIS
Competitive Advantage
Proprietary protection Other competitive advantages
MARKET ANALYSIS
MARKETING PLAN
Pricing
Venture versus competitors Value chain
Marketing Tools
Advertising & promotion
Media Plan
Uses and costs of specific marketing tools
Marketing Budget
Individual costs and total costs as a percentage of sales
Lecture 6
FINANCIAL AND TECHNICAL ANALYSIS
174
FINANCIAL PLAN
Simple Profit and Loss Statement Drive all financial assumptions from expected costs, not sales projections. Try and avoid as many fixed costs as possible. Outsource
CONTINGENCY PLAN
DEAL STRUCTURE
Debt and/or Equity Funding Amounts Projected Return on Investment
Technical Feasibility
The goal
- to assess the extent to which the system can be successfully designed, developed and installed
Technical Feasibility
Technical Feasibility
Project size
- the number of people, length of time to complete, the number of distinct features - there is a greater chance of risk if
> the project is large > the project is highly integrated with other system
Compatibility
- new technology and applications must integrate with the existing technology
Lecture 7
PROJECT PLANNING: EVALUATION, MONITORING & CONTROL
183
Project Planning
Guidelines for Project Plans. Use project plans to coordinate rather than to control. Make use of different personalities within the project environment. Preschedule frequent revisions to project plans. Empower workers to estimate their own work. Describe value-creating tasks rather than activities. Define specific and tangible milestones. Use check lists, matrices, and other supplements to project plans.
Internal Factors
Infrastructure Project scope Labor relations Project location Project leadership Organizational goal Management approach Technical manpower supply Resource and capital availability
External Factors
Public needs Market needs National goals Industry stability State of technology Industrial competitors Government regulations
Summary of Project Plan Objectives Approach Policies and Procedures Contractural Requirements (document problematic areas) Project Schedule Resource Requirements Performance Measures Contingency Plans Tracking, Reporting, and
Planning Phase
Define problem
Confirm project feasibility Produce project schedule Staff the project Launch the project
Analysis Phase
Gather information
Problem Domain Application
Define system requirements Build prototypes requirements Prioritize requirements Generate and evaluate alternatives Review recommendations with management for discovery of
Design Phase
Design and integrate the network Design the application architecture Design the user interfaces Design the system interfaces Design and integrate the database Prototype for design details Design and integrate the system controls
Implementation Phase
Support Phase
Lecture 8
PROJECT SEGMENTATION
194
The process of talking to total heterogeneous market for product and dividing it into several submarkets or segments, each of which tends to be homogeneous in all significant aspects. W.J. Stanton
to achieve a rapid growth rate. To do better marketing job and make more efficient use of marketing resources. to fulfill the needs of a particular segment in a better way. To design promotional devices that are effective and also helps to evaluate their results. To take appropriate decisions relating to introduction of new products, promotion, distribution, pricing etc
Lecture 9
CREATIVE PROBLEM SOLVING
201
Objective finding - define the problem area Fact finding - gather information Problem finding - define the problem correctly Idea finding - generate solutions to the problem Solution finding - evaluate and choose between possible solutions Acceptance finding - implement the chosen ideas correctly
OBJECTIVE FINDING
The objective finding stage essentially involves divergent thinking to generate a list of problems Convergence is then used to identify the most relevant problem areas for further exploration 'Hits' and 'hotspots' are identified by questioning
Ownership - is one motivated to solve it? Priority - how important is the problem? Critical nature - how urgent is it to solve this problem?
FACT FINDING
Next is the fact-finding stage, where overall comprehension of the problem is increased by collection of relevant information This also helps new ideas to be generated 'Hits' and 'hotspots' can assist convergence The previously identified problem(s) may now be seen from a new perspective
PROBLEM FINDING
Problem-finding essentially uses the previous stage 'hits' to identify the most productive problem definition possible.
IDEA FINDING
Idea-finding helps to structure the search for potential solutions Mainly divergent activity is used to generate many ideas using a variety of idea-generation aids
SOLUTION FINDING
Solution-finding is basically the choice of ideas that can be transformed into workable solutions.
ACCEPTANCE FINDING
Acceptance-finding is primarily a divergent activity that helps to implement solutions successfully, such as
Listing potential implementation obstacles and ways to overcome them Developing both preventive actions and contingency plans Generating an action plan to implement a solution
Which will provide the optimum solution? What are the risks? Are costs in keeping with the benefits? Will the solution create new problems?
Who must be involved? To what extent? How, when and where? Who will the decision impact? What might go wrong? How will the results be reported and verified?
Test the solution against the desired results. Make revisions if necessary.
Lecture 10
TECHNIQUES OF CREATIVE PROBLEM SOLVING
217
BRAINSTORMING
Purpose:
BRAINSTORMING
Rules for Brainstorming:
The more ideas the better! No discussion No idea is a bad idea Build on one anothers ideas Display all ideas
BRAINSTORMING EXERCISE
How Do We Motivate Our Local Optimist Club Members?
Ideas: Freely record your ideas as they come to your mind.
BRAINSTORMING GUIDELINES
Remember Creative Thinking
2. Clarify understanding. Once all the ideas have been generated (it may take approximately 5 to 6 minutes), review ideas offered.
BRAINSTORMING GUIDELINES
Lets combine ideas!!!
4. Completion.
Input data are inexact or limited. High computation time for an optimal solution. Problems are solved frequently and repeatedly. Symbolic processing is involved. A reliable, exact method is not available. Optimization is not economically feasible.
Heuristic Bias
Sometimes the use of heuristics can hamper finding a solution. The four major categories of bias are: 1. Availability people tend to estimate probability based on past experience, which may not be representative. 2. Adjustment and anchoring people often pick a starting value and then adjust up and down from it. They tend to underestimate the need for adjustments.
Synectics
The process of generating novel alternatives through role playing and fantasizing. Synectics (Gordon, 1961) is an approach to creative thinking that depends on understanding together that which is apparently different. Its main tool is analogy or metaphor. The approach, which is often used by groups, can help students develop creative responses to problem solving, to retain new information, to assist in generating writing, and to explore social and disciplinary problems. It helps users break existing minds sets and internalize abstract concepts. Synectics can be used with all ages and works well with those who withdraw from traditional methods (Couch, 1993).
Value Analysis
A team problem-solving system, developed at the General Electric Company in the late 1940s. Its special power is a technique called Function Analysis which dramatically shifts the viewpoint of the problem-solvers.
FUNCTION ANALYSIS FUNCTION-COST FUNCTION-WORTH CREATE BY FUNCTION IMPLEMENTATION THE JOB PLAN THE TEAM OWNERSHIP
Questions
234
Questions
1. What do you understand by project? Discuss the elements of a project.
2.
3.
ENTREPRENEURSHIP DEVELOPMENT
UNIT - III
of
international
Supporting organizations.
Incentives and facilities. Financial institutions Industries. and Small Scale
236
LECTURE PLAN
Unit- III
Sub: ENTREPRENEURSHIP DEVELOPMENT Academic Consultant: Gaurav Agrawal Slide no 239-244 246-256 258-261 263-275
Lecture no 1 2 3 4
Contents (sub topics) The nature of international entrepreneurship. Importance of international business to the firm. International versus domestics entrepreneurship Stages of economic development
5
6 7 8 9 10
Supporting organizations
Incentive and facilities. Financial institutions and Small Scale Industries. Financial institutions and Small Scale Industries Government policies for SSIs. Government policies for SSIs. FAQS, MCQs, CASE STUDY & ASSIGNMENTS
277-282
284-292 294-295 297-301 303-306 308-314 316-320
237
Lecture 1
The nature of international entrepreneurship
238
Definition:
International entrepreneurship is the process of an entrepreneur conducting business activities across national boundaries.
Multi displinary Global challenges Commercial risks Political risks Legal risks Cargo risks Credit risks
To expand sales Acquire resources Diversify sources of sales and supply Minimize risk Expansion of technology Liberalization of Cross-Border Movements
Direct exporting Licensing Joint ventures Manufacturing Assembly operations Management contract Turn-key operations Acquisitions & mergers Wholly owned subsidies
Lecture 2
Importance of international business to the firm
245
International Entrepreneurship can Fuel economic growth Create employment Generate prosperity for citizens
International business has become increasingly important to firms of all sizes particularly today when every firm is competing in a hypercompetitive global economy.
The successful entrepreneur will be someone who fully understands how international business differs from purely domestic business.
International investment inflow. Outsourcing & subcontracting. Competitive & learning effects. International economic cooperation. Price stabilisation. Technological gains. Greater specialization. Larger markets.
Lecture 3
International versus domestic entrepreneurship
257
Uncontrollable Factors
Economics
Stage of Development Balance of payment Type of system
Bartering Third-party arrangements
Uncontrollable Factors
Political-Legal environment Cultural environment Technological environment
Although international and domestic entrepreneurs alike are concerned with sales, costs, and profits.
The difference between domestic and international entrepreneurship is the variation in the relative importance of the factors affecting each decisions.
Lecture 4
Stages of economic development
262
Process that influences growth and restructuring of an economy to enhance the economic well being of a community. The desired result is creation of wealth for a region.
Elected officials Governmental staff (city, county and state) Economic development organizations Utilities Chambers of Commerce Neighborhood Associations Commercial real estate professionals Developers Educational Institutions Financial community Citizens
understand the economic development process and how it works in the Greater Des Moines area.
provide an overview of the basic concepts and principles of the economic development process. understand your role in the process
To
To
Human Infrastructure
Professional staff Partners
Local Product
Land Available buildings Zoning Physical infrastructure (i.e. water, sewer, gas, electric, roads, telecommunications, etc.) Business Climate Workforce
Program of Work
Marketing
Iowa Department of Economic Development (IDED) Greater Des Moines Partnership (GDMP) Counties Communities
Stage 1: The traditional society Stage 2: The preconditions for takeoff Stage 3: The takeoff Stage 4: The drive to maturity Stage 5: The age of high mass consumption The United Nations groups countries into three categories:
MDCs (more-developed countries) LDCs (less-developed countries) LLDCs (least-developed countries)
Newly Industrialized Countries (NICs) - Countries that are experiencing rapid economic expansion and industrialization and do not exactly fit as LDCs or MDCs
Industrialization is the fundamental objective of most developing countries. Most countries see in economic growth the achievement of social as well as economic goals.
Better education Better and more effective government Elimination of many social inequities Improvements in moral and ethical responsibilities
The trend toward privatization is currently a major economic phenomenon in industrialized as well as in developing countries.
Infrastructure represents those types of capital goods that serve the activities of many industries. The quality of an infrastructure directly affects a countrys economic growth potential and the ability of an enterprise to engage effectively in business. The less developed a country is the less adequate the infrastructure is for conducting business. Countries begin to lose economic development ground when their infrastructure cannot support an expanding population and economy.
Over time, the importance of the sectors changes. Primary is the first sector to be important, followed, in sequence, by the others. As the tertiary and later sectors increase in importance, the earlier ones (primary and secondary) decline in relative importance. This is shown in the sector model, in which MEDCs have experienced the changes described above, whereas LEDCs have not yet experienced the full range of the changes.
Based on the experiences of the rich industrialised nations. Concerned with the stages countries go through to achieved economic growth. Investment = key to economic growth. With increasing investment, a country will move from a subsistence-based economy (stage 1) to an economy dominated by the production of consumer goods and tertiary and quaternary industries (stage 4-5). Rostows model implies that developing countries need to follow the stages of development experienced by the western industrialised nations.
1 Traditional Society
UK Singapore India
More commercial agriculture, transport improves, one industry dominates Manufacturing develops rapidly, further transport infrastructure, more investment (up to 15% GDP) from abroad or internal Growth is self sustaining and spreads to all parts of country & economy, linked to urbanisation, more range of industry Rapid growth of tertiary sector, a decline in manufacturing
3. Take off
4. Drive to maturity
UK Singapore India
UK Singapore India
Argued that the model is too simplistic. Dispute the assumption that the experiences of developed countries are appropriate for all developing countries. Despite relatively large injections in aid, many LEDCs (e.g. countries in Africa) are still at stage one. Those which have moved towards the take-off stage may have done so by incurring huge national debts (Brazil, Mexico). The time taken for a country to develop diminishes as countries learn from already developed nations, the development of the NICs (Singapore, Hong Kong, South Korea and Taiwan). Eurocentric model.
Core-periphery model
Economic growth and development are never even. Takes into account regional variations within countries (local or current conditions). Core most prosperous and developed part of a country, or region. Periphery Levels of wealth, development and standards of living decrease with distance from the core.
Lecture 5
Institutional support for new ventures Supporting organizations
276
Supporting organizations
MONEY MARKET INSTITUTIONS: Money market institutions are the institutions that promote short term loans.
Investing institutions Development institutions Investment banks Merchant banks Mutual funds
Lecture 6
Incentives and facilities
283
Meaning:
Membership industrial extension services institutional support in respect of credit facilities and scarce raw materials, factory recommendation in industrial estates, provision of developed sites for construction of sheds, provision of training facilities, subsidised power tariffs, supply of machinery on hire-purchase terms, assistance for domestic marketing as well as exports, special incentive for setting up enterprises in backward areas etc..
General Initiatives
Investment limit for SSI units raised to Rs. 100 lakhs. To protect the interest of micro and tiny SSI units, 40% of the credit going to SSI sector has been reserved for units having investment in plant and machinery upto Rs. 5 lakhs and 20% for units with investment between Rs. 5 lakhs and Rs. 25 lakhs. To coverage under the Technology Development & Modernisation Scheme of SIDBI has been enlarged to extend assistance to nonexporting units also for technology upgradation and modernisation. The interest rate of loans provided under the Scheme will be based on prime lending rate (PLR) of SIDBI from IDBI and IDBI shareholding in State Financial Corporations will be transferred to SIDBI. factory recommendation in industrial estates, Restricted list in small scale sector has been disbanded Procedure for registration of electronic items delicenced to,
General Initiatives
Locational restrictions for defining tiny sector removed. Definition of industry related service and business enterprises streamlined and made uniform. Registration procedure simplified. New Registration Forms introduced from January, 1994. Clarified that units employing less than 50/100 workers with/without power and the items exclusively reserved for manufacture in the small scale sector do not require to obtain industrial licence even if the item of production is included in Schedule-II to the Licensing Exemption Notification of July, 1991. Clarification regarding Registration as Hindu Undivided Family "The mode of ownership does not impose any bar on small scale unit registration as long as it falls within the existing notified investment limit and the unit is not subsidiary of, or owned or controlled by any other industrial undertaking in terms GOI Notification No. S.O. 857(E) dated 10th December, 1997, as amended vide S.O. 1288 (E) dated 2nd December, 1999. Thus, a unit owned by an HUF is registrable as an SSI, provided it is otherwise eligible."
Act as motivational force. Encourage the entrepreneur. By providing incentives & facilities Government can:
Bring industrial development. Develop more new entrepreneurs. Reduce overall problems of entrepreneurs. Help entrepreneurs to face competition.
Types of incentives
Financial incentives Fiscal incentives General incentives Special incentives Reservation of items for exclusive manufacture in SSI
Export import subsidies & bounties. Interest free loans Subsidy for R&D works. Capital investment subsidy. Interest subsidy. Subsidy for power generation. Exemption from property tax. Special incentive to women entrepreneurs. Exemption from income tax.
Other facilities
Subsidised consultancy services. Subsidy for market studies. Adoption of indigenous technology. Machinery on hire-purchase. Special facilities for import of raw materials. Transport subsidy. Seed capital assistance.
Lecture 7
Financial Institutions and Small Scale Industries
293
Financial institutions play an important role in providing finance to the business for long term purposes. In India, there are following financial institutions:
Industrial Finance Corporation of India (IFCI) Industrial Development Bank of India (IDBI) State Finance Corporation (SFC) Industrial Credit and Investment Corporation of India (ICICI) Unit Trust of India (UTI)
Lecture 8
Financial Institutions and Small Scale Industries
296
Agriculture Credit
-Cooperative
Banks -NABARD Non-Govt. Organisations (NGOs) & Micro Finance Institutions (MFIs)
State Industrial Development Corporation (SIDC) Industrial Reconstruction Corporation of India (IRCI) Life Insurance Corporation of India (LIC) Small Industries Development Bank of India (SIDBI) Industrial Reconstruction Bank of India (IRBI)
National Small Industries Corporation (NSIC) National Bank for Agriculture & Rural Development (NABARD) Export Import Bank of India
SIDBI
Rural Industrialisation Information Dissemination & Credit Rating
Technology Upgrading
Capacity Building
Entrepreneurship Promotion
Lecture 9
GOVERNMENT POLICY FOR SSIs
302
The small scale industry sector output contributes approximately 30% of the GDP, 45% of the total exports from India (direct as well as indirect exports ) and is the second largest employer of human resources. The development of Small Scale Sector has therefore been assigned an important role in India's national plans. In order to protect, support and promote small enterprises as also to help them become self-supporting, a number of protective and promotional measures have been undertaken by the Government.
Comprehensive policy package for small scale industries and tiny sector (announced on 30th and 31st August, 2000)
By the end of March 2000, the SSI sector accounted for nearly 40% of gross value of output in the manufacturing sector and 35% of total exports from the country. Through over 32 lakh units, the sector provided employment to about 18 million people.
Industrial extension services. Institutional support in respect of credit facilities. Provision of developed sites for construction of sheds, Provision of training facilities, Supply of machinery on hire purchase terms, Assistance for domestic marketing as well as exports, Special incentive for setting up enterprises in backward areas etc. Technical consultancy & financial assistance for technological up gradation.
Lecture 10
Government policies for SSIs
307
Policy support:
The investment limit for the tiny sector will continue to be Rs.25 lakhs. The investment limit for the SSI sector will continue to be at Rs.1 crore. The Ministry of SSI & ARI will bring out a specific list of hi-tech and export oriented industries which would require the investment limit to be raised upto Rs.5 crore to admit suitable technology up gradation and to enable them to maintain their competitive edge. The Limited Partnership Act will be drafted quickly and got enacted. Attempt will be made to bring the Bill before the next session of the Parliament.
Fiscal support: To improve the competitiveness of Small Scale Sector, the exemption from excise duty limit raised from Rs.50 lakhs to Rs.1 crore.
Credit support: The composite loans limit raised from Rs.10 lakhs of Rs.25 lakhs. The Small Scale Service and Business (industry related) Enterprises (SSSBEs) with a maximum investment of Rs.10 lakhs will qualify for priority lending. In the National Equity Fund Scheme, the project cost limit will be raised from Rs.25 lakhs to Rs.50 lakhs. The soft loan limit will be retained at 25% of the project cost subject to a maximum of Rs.10 lakhs per project. Assistance under the Nef will be provided at a service charge of 5% per annum. The eligibility limit for coverage under the recently launched (August 2000) Credit Guarantee Scheme has been raised to Rs.25 lakhs from the present limit of Rs.10 lakhs. The Department of Economic Affairs will appoint a Task Force to suggest revitalization/restructuring of the State Finance Corporations. The Nayak Committees recommendations regarding provision of 20% of the projected turnover as working capital is being recommended to the financial institutions and banks.
Infrastructural support: The Integrated Infrastructure Development (IID) Scheme will progressively cover all areas in the country with 550% reservation for rural areas. Regarding upgrading the Industrial Estates, which are languishing, the Ministry of SSI & ARI will draw up a detailed scheme for the consideration of the Planning Commission. A plan scheme for Cluster Development will be drawn up. The funds available under the non lapsable pool for the North-East will be used for industrial infrastructure development, setting up of incubation centers, for Cluster Development and for setting up of IIDs in the North-East including Sikkim.
Technological support and quality improvement: Capital subsidy of 12% for investment in technology in select sectors. An inter ministerial committee of experts will be set up to define the scope of technology up gradation and sectorial priorities. To encourage Total Quality Management, the scheme of granting Rs. 75000 to each unit for opting ISO-9000 certification will continue for the next 6 years i.e. till the end of the 10th plan. Commercial banks are being requested to develop schemes to encourage investment in technology up gradation and harmonize the same with SIDBI. One time capital grant of 50% will be given to small scale associations which wish to develop and operate testing laboratories, provided they are of international standard.
Marketing support: SIDO will have a market development assistance programme, similar to one existing in the Ministry of Commerce & Industry. It will be a plan scheme. The vendor development programme, buyer-seller meets and exhibitions will take be held more often and at dispersed locations.
Questions
315
Questions
1. Define the nature of international entrepreneurship in detail. 2. What is the importance of international business to the firm. 3. Explain international versus domestic entrepreneurship. 4. What are the stages of economic development? 5. Discuss in detail the various supporting organizations for institutional support for small scale industries. 6. Explain the government policies for promoting and developing SSIs in India. 7. Explain the meaning of incentives and describe why these incentives and facilities are required towards economic development. 8. What are the major financial institutions in India? Explain in brief.
316
Questions
9.
10. 11.
12.
Critically examine the role played by SIDBI in providing the necessary support to the small-scale industries in India. What steps are taken by the entrepreneur for Project Management? Describe them in brief. What do you understand by segmentation, targeting and positioning of a product and how are they done? Discuss the different problems encountered by an entrepreneur at both incubation and implementation stage. Discuss the Institutional support available for new 317 and existing ventures in India.
CASE STUDY
The sickness among the small scale units began from 1991. the sickness has assumed serious proportions, which is reflected in the increasing number of sick industrial units, alarming increase in the number of funds, increasing unemployment, and continuous increase in the huge funds of financial institutions locked up in the sick units. In spite of corrective measures announced by the government in the past, the root of this economic situation goes much deeper into the economy. Industrial sickness not only tends to aggravate the problem of unemployment, but also renders the invested capital useless. Moreover, it creates an adverse industrial climate for the development of entrepreneurship in then SSI units. As Sangli district is growing industrially, in establishing and stabilizing the industries specially SSI. Availability of labour and credit is the main factor in pushing the progress and promotion of such industries. The upliftment of the economy of the sangli district could be possible through the successful incorporation of small scale units and the entire district can be develop through the effective organization of such industries.
In spite of many facilities to small scale units, handicaps still exists and there is growing sickness in Sangali district. In 2000-2001, 367 had fallen sick, of which 60 units have been reported to be dead (closed down). Remaining units have shown satisfactory performance by their own efforts.
QUESTIONS: Discuss the rehabilitation of SSI sick units. What are the causes of sickness and closed down of SSIs.
ASSIGNMENTS
Choose any new venture and study how much support it received from various support organisations & Financial Institutions
Entrepreneurship Development
UNIT - IV
Role of professionals Professionalism vs family entrepreneurs Role of woman entrepreneur Venture Capital- nature & overview Venture Capital process Locating venture 321 capitalists
LECTURE PLAN
Unit- IV
Sub: Entrepreneurship Development Academic Consultant: Riju Agarwal Slide no 324-329 331-336
Lecture no 1 2
3
4 5 6 7 8 9 10
338-346
348-354 356-364 366-372 374-383 385-393 395-400 402-409 411-421
322
423-443
Lecture 1
323
PROFESSIONALISM
Professionalism is actually the process by which given occupation become profession in the sense of attaining professional status. OR The expertness characteristic of a professional person.
324
Elements of Professionalism
ALTRUISTIC ACCOUNTABILITY EXELLENCE HONESTY/INTEGRITY DUTIFUL RESPECT TO OTHER
325
1.ALTRUISTIC: Showing unselfish concern for the welfare of others 2. ACCOUNTABILITY Responsibility and Reliability
326
3.EXELLENCE Knowledgeable Skilful Competency to retrieve and handle information Appropriate decision making skills Competency in skills of communication
327
4. Honesty/ Integrity The quality of being honest Moral soundness Undivided or Unbroken 5. Dutiful Appreciation of the role Aptitude for personal development 6. Respect to others
328
Role of Professionalism
Health and Hygiene Personal Image-First Impressions REALLY Count! Appearance and Dress Etiquette and Manners
Use of magic words: PLEASE and THANK YOU Be on time Keep your promises Respect people and be courteous Return all phone calls Call ahead to confirm appointments
329
Lecture 2
330
Family Entrepreneurs
A family entrepreneurship is defined in terms of:
Ownership control by members of a family Strategic influence of a family in the management of the firm Concern for family relationship The dream of continuity across generation
331
2. NEW PRACTICES:
Include Quality certification, Participative Mgmt., Change in working style, financing pattern.
Professional are always leaders in adopting them, experimenting with them. While there is lack of this attitude in family entrepreneurs
333
3. IMPARTIAL HRM:
Professionals do not show partiality towards any particular gender. But family business houses employ their relative or friends or people belonging to same social caste in responsible position.
334
Lecture 3
337
Women Entrepreneur
Definition A woman or a group of women who initiate, organize & run a business enterprise. An enterprise owned & controlled by a woman having a minimum financial interest of 51% of capital & giving atleast 51% of the employment generated in the enterprise to women- GOI
Then came 3 Ps
Powder Pappad Pickles
339
Reasons
Permanent inadequacy in income of the family Desire to evaluate their talent To utilize their free time or education Need and perception of Womens Liberation, Equity etc. To gain recognition, importance and social status. To get economic independence
340
Value creation for all stakeholders Customers Shareholders Employees Society Identify market opportunities Gain command of scarce resources Manage resources Managerial function
Supportive Measures
Direct
& indirect financial support Yojna schemes and programmes Technological training and awards Federations and associations
342
Nationalized banks State finance corporation State industrial development corporation District industries centers Differential rate schemes Mahila Udyug Needhi scheme Small Industries Development Bank of India (SIDBI) State Small Industrial Development Corporations (SSIDCs)
343
344
Stree Shakti Package by SBI Entrepreneurship Development Institute of India Trade Related Entrepreneurship Assistance and Development (TREAD) National Institute of Small Business Extension Training (NSIBET) Womens University of Mumbai
345
National Alliance of Young Entrepreneurs (NAYE) India Council of Women Entrepreneurs, New Delhi Self Employed Womens Association (SEWA) Association of Women Entrepreneurs of Karnataka (AWEK) World Association of Women Entrepreneurs (WAWE) Associated Country Women of the World (ACWW)
346
Lecture 4
347
Some WE of India
Lakme
Simon Tata
Shipping coorporation
Mrs. Sumati Morarji
Exports
Ms. Nina Mehrotra
Herbal Heritage
Ms. Shahnaz Hussain
Balaji films
Ekta Kapoor
348
Fortune magazine listed her as one of the worlds most powerful businesswomen in 2003. India Inc recognises her as one of its most powerful investment bankers.
349
Shahnaz Husain
Herbal Beauty Queen Shes the "Estee Lauder of India", with even famous department stores like Galleries Lafayette in Paris, Harrods and Selfridges in London and Bloomingdales in New York stocking her cosmetics, creams and lotions.
350
Vineeta Bali
Director, Academic Success Program Practiced law as a business litigator for three years, as a transactional attorney for the Silicon Valley Law Group for several years ( main responsibilities: mergers and acquisitions, investor financing and corporate funding, business formation and corporate governance, securities compliance for privately held and public companies.
351
Lalita Gupte
Banker Shes created a formidable global presence of what was once a native development finance institution. Accountholders can now bank at ICICI branches in UK, the Far East, West Asia and Canada. With ICICI since 1971, Gupte was the first woman to be inducted on the board in 1984.
352
Problems faced by WE
Dual role to play at workplace & at home place Subordinate to men Just that her being women Non-awareness of facilities provided by government Competition with large scale units Problems related to marketing
353
Suggestions
Procedure of getting finance should be simple Effective propagation of programmes and yojna Linkages between product, services and market centers. Encouragement to technical and professional education.
354
Lecture 5
355
Venture capital is a means of equity financing for rapidly-growing private companies. Finance may be required for the start-up, development/expansion or purchase of a company. Venture Capital firms invest funds on a professional basis, often focusing on a limited sector of specialization (eg. IT, infrastructure, health/life sciences, clean technology, etc.). The goal of venture capital is to build companies so that the shares become liquid (through IPO or acquisition) and provide a rate of return to the investors (in the form of cash or shares) that is consistent with the level of risk taken. VC firms typically source the majority of their funding from large investment institutions such as fund of 356 funds, financial institutions, endowments, pension funds and banks.
When venture capitalists invest in a business they typically require a seat on the company's board of directors. They tend to take a minority share in the company and usually do not take day-to-day control. Rather, professional venture capitalists act as mentors and aim to provide support and advice on a range of management, sales and technical issues to assist the company to develop its full potential.
357
General Partners
358
Source Deals
The GPs have to source deals- I.e. find investment opportunities. This is done in a variety of ways- referrals from trusted sources (other funds, entrepreneurs they have invested in before, lawyers, accountants etc.)
360
Capital Commitments
The Limited Partners do not actually invest money in the Fund at the closing. They legally commit to provide a certain amount of capital when they are called upon. This is called a Limited Partners Capital Commitment.
Capital Calls
When the General Partners find what they think is a good investment opportunity they make a Capital Call on the Limited Partners. Example: a Fund has $500M of capital and the GP/VCs what to make an investment of $10M. A Limited Partner with a Capital Commitment of $50M will be required to send $1M to the General Partners: 50M/500M = 10% times 10M = $1M
361
Management Fees
The General Partners receive an annual Management Fee, which is usually a percentage of the Capital Commitments to the Fund. A typical fee is 2.5%. On a $400M fund this $10M per year. The Management Fee is used by the General Partners to run the Fund business e.g. it pays the salaries of the General Partners, the Associates, the Support Staff and the office rent.
362
Board involvement Management recruitment Future capital raising Access to business network Strategy development Patience!
363
VC Snapshot
Stage/Industry focused 5-10 year investment horizon 3 to 4 investment professionals Review 1000+ business plans a year Manage $50 to $200 million in capital Buy equity (preferred stock) - rarely make loans Participation of the venture capitalist in Management of the entrepreneurs business. Sources of capital: - Pension funds - Corporations 364 - College endowments - Wealthy individuals
Lecture 6
365
Collect management fees from L.P.s - 2 1/2% annually Share profits with L.P.s - 20/80 split on investment gains
5% 95%
Mgmt. Fee
Investment Gains
366
VC Compensation
Venture Capitalists with a great track record will receive a higher Carried Interest- e.g. 30%
367
Advantages of VC
It injects long term equity finance which provides a solid capital base for future growth. The VC is a business partner, sharing both the risks and rewards. The VC is able to provide practical advice and assistance to the company based on past experience with other companies which were in similar situations. The VC also has a network of contacts in many areas that can add value to the company, such as in recruiting key personnel, providing contacts in international markets, introductions to strategic partners, and if needed coinvestments with other vc firms when additional rounds of financing are required. The VC may be capable of providing additional rounds of funding should it be required to finance growth. 368
Investment Stages
Most VCs have a preference for a particular investment stage.
Five Stages:
Seed Start-up Early Expansion Mezzanine/Bridge
369
Stage/Characteristic
Stage
Seed
Investment
$50-500K
Characteristics
- Founder(s) only - No product
- No customers
- Primary risk: R&D
Start-Up
$500K to $1MM
- Mgmt. team incomplete - Prototype or beta product - No revenues - Limited customer interest - Some capital invested - Primary risk: market accept. 370
Stage/Characteristic
Stage
Early
Investment
$1MM - $3MM
Characteristics
- Most of team in place - Limited revenues - Not profitable - Primary risk:execution - Meaningful revenues - Achieving profitability - Growing customer base - Primary risk: competition
371
Stage/Characteristic
Stage Investment Characteristics
Mezzanine/ $10MM - $20MM - Significant revenues Bridge - Profitable
- Industry player - IPO in 6-12 months - Risk much lower
372
Lecture 7
373
Economics Risks
374
Management
The most important question: Has the team had experience and success in the same industry?
VC Focus:
DIRECT sales experience? Prior P/L responsibility? Personal financial stake? Willingness to share equity Fire in the belly? Functional areas covered?
375
Market
Can management demonstrate a thorough understanding of the marketplace dynamics?
VC Focus:
Market size and growth rate? Market drivers? Customer involvement in the R&D process? Number of competitors?
376
Competition
Does management have a clear understanding of the competitive landscape?
VC Focus:
Why are competitors successful? What is the prevailing business model? Barriers to entry?
377
Business Economics
Does management have a deep understanding of the financial dynamics of the business and industry?
VC Focus:
Margins comparable to industry norm? Break-even < 2 years ? Appropriate sales model? Moderate capital intensity?
378
Risk
Does management recognize, accept, and have strategies to deal with key risks?
VC Focus:
Reasonable financial projections? New technology adoption rate? Length of sales cycle? Best and worst case scenarios explored? Regulatory hurdles?
379
Exit Strategies
Sale or Merger
Most likely exit
Redemption
Least attractive
Management buy-out
Generally not possible
380
Secrets of Success?
The Eight Commandments
CEO carried a bag Called on same customer base Gross margin > 50% Some degree of technology Cash flow break-even < $5M Sourced the deal 25% ownership or greater First institutional investor
381
Chances
1 in 15 6 in 10
7 in 10
382
Chances
7 in 10
Lecture 8
384
Business Plan First Meeting Second Meeting Term Sheet Due Diligence Negotiations
385
Business Plan
#1 objective of the the business plan: Get the VC interested in hearing more about the opportunity. Business Plan Basics:
Executive Summary
What should the executive summary address?
Mission statement Brief company history Description of investment opportunity Market overview
Management team Product & technology Customers Strategy Competition Capital 388 requirements
Main Body
Management
Key Questions to Address:
Who are the key people in the company? Where did they come from, and why are they the right people to run the company?
Main Body
Product/Technology/Service
Key Questions to Address:
Main Body
Marketplace
Key Questions to Address:
What is happening in the marketplace? Is it growing, if so, why and at what rate? What is lacking from the market leaders that this product/tech/service will provide? Which customers have been involved in the development of the product and are likely to purchase it?
391
Main Body
Strategy
Key Questions to Address:
Why will the customer be compelled to purchase the product? How will the company maintain its competitive differentiation? What barriers exist/will be created to curtail new entrants?
392
Appendix
Not all business plans require an Appendix section, but it can be useful. What to include?
Relevant industry articles to bolster management claims Major customer testimonials Other information likely to impress those not familiar with the market
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Lecture 9
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First Meeting
Skepticism might best describe the venture firms attitude in the first meeting. Dont be alarmed by this. The Details:
Location: VCs office Duration: 2-3 hours Attendees: 1 to 2 VCs Format: Formal presentation with Q/A
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Second Meeting
Getting to the second meeting is an important milestone. he team will now make its case to the entire partnership.
Focus On :
Business opportunity - not the technology Addressing concerns of the skeptics - THIS IS CRITICAL! Next steps
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Term Sheet
After the second meeting, the VC typically provides a term sheet to the entrepreneur.
Term Sheet - Common questions:
Is it a legally binding document? Whats covered? What is it designed to do? Why participating preferred stock?
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$ amount of the
financing Investors identified Size of employee option pool Vesting periods Key-person insurance
Board representation Additions to management team, if any Monitoring covenants, Restrictive covenants Other deal specific issues
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Due Diligence
The heavy lifting for the venture capitalist starts with the due diligence process. Due Diligence Overview:
Length: 6-12 weeks Will perform up to 100 reference calls Interview customers, former employees, competitors, industry experts Intense legal, financial work 399
Negotiations
Negotiations take place throughout the due diligence process. What is negotiable?
Some flexibility in:
Valuation
Total investment Vesting periods
Restrictive covenants
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Lecture 10
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Development in India
This concept was introduced in India in 1987. It was operated by Industrial Development bank of India. In the same year Industrial Credit and Investment Corporation of India also started venture capital activity. Government started leving 5% cess on all payment related to venture fund. Fiscal incentive - reduction of capital gain tax rate gave an unprecedented boost to the development of venture capital Total estimated investment in 2003 was to be US $800 million. Its increase in 2004 was near about US $1 billion.
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promoted by the state government controlled development finance institutions. -GVFCL -APVCL
promoted by public sector banks such as Canfina (canara finance) by canara bank, SBI-cap by SBI.
VCFs
promoted by foreign bank and private sector companies and financial institutions.
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Indian Venture Capital Association- a national organization , comprising Venture capital firms Institutional investors Banks Incubators Angel groups Government bodies Corporate advisors, accountants, lawyers, Academic institutions and other service providers to the venture capital and private equity industry.
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The IVCA Directory provides basic information about each member's investment preferences. It promotes the industry within India & throughout the world and encourages investment in high growth companies. They provide capital for seed ventures, early stage companies, later stage expansion, and growth finance for management buyouts/buyins of established companies.
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CanBank Venture Capital Fund Ltd. HSBC Private Equity Management Mauritius Ltd ICICI Venture Funds Management IDFC Infrastructure Fund/IDFC Asset Management Co. IFCI Venture Capital Funds Ltd. Indian Angel Network International Finance Corporation Kochhar & Co. Kotak Investment Advisors Limited
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PriceWaterHouse Coopers Punjab Venture Capital Ltd SIDBI Venture Capital Ltd. Standard Chartered Private Equity SUN Group UTI Venture Funds Management Company Pvt. Ltd. Yes Bank Ltd.
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Questions
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FAQs
1. Discuss the role of professionals ? 2. Differentiate between family entrepreneurs vs professionals. 3. Discuss the role of woman entrepreneurs. 4. What is Venture Capital. What do they do? 5. Discuss the advantages of VCs. 6. What do VCs look for in a proposal. 7. Discuss the Venture Capital Process. 8. Discuss how to locate VCs in India. 9. Discuss points to be considered by an antrepreneur in selecting a VC.
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In 2002, with a turnover of Rs 3 billion, exports worth Rs 100 million, 62 branches and 40 divisions all over the country, and 42000 members, the Sri Mahila Griha Udyog Lijjat Papad (SMGULP)1 was a women's entrepreneurial success story in India.
From humble beginnings in a thickly populated locality of Mumbai in 1959, SMGULP has come a long way. The organization gained recognition through its most famous product- Lijjat papad. In addition to papads, SMGULP manufactured other household products like spices, bakery products and detergents. 412
A look at any of the branches of SMGULP gives the feel of an efficient entrepreneurial set up. The key to SMGULP's success lies in the feeling of oneness that it creates. Women above 18 years of age can become members of SMGULP by signing a pledge of devotion to the organization. At SMGULP, workers are referred to as coowners and the women who work there are referred to as sisters. Over the years, SMGULP has won several awards. The organization was awarded for its outstanding contribution to the uplift and welfare of socially, economically and physically handicapped women. In 2002, The Economic Times Award for Women Entrepreneur of the year was awarded to Jyoti Naik, President, SMGULP.
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Background Note In March 1959, seven semi-literate women from Gujarat came together to supplement their family incomes and create a sustainable source of employment with the skill they knew - cooking. The seven women were Jaswantiben Jamnadas Popat, Parvatiben Ramdas Thodani, Ujamben Narandas Kundalia, Banuben. N. Tanna, Laguben Amritlar Gokani, Jayaben V. Vithalani, and one more lady whose name is not known. They started out on the terrace of a large, old, residential building called Lohana Niwas in Girgaum, a thickly populated area in south Mumbai. This is where the seven housewives, bored and confined to their homes, saw an opportunity to set up an organization 44 years ago.
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Entrepreneurship was something these women had never heard of. The venture was immensely successful and marked the genesis of a cooperative "for the women, by the women and of the women." In 1959, these women borrowed Rs 80 from Chaganlal Karamsi Parekh, a member of the Servants of India Society and a social worker. This debt had to be returned within a stipulated period of time. The women commenced business by selling papads to a merchant known to them. Gradually, they bought a cupboard to store raw materials and utensils on the terrace. In the first year, they had to stop production during the rainy season as the rains would prevent the drying of papads.
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To solve this problem, by the next rainy season, they bought a cot and a stove. The papads would be kept on the cot and the stove below so that the process of drying could take place in spite of the rains. Within three months, there were about 25 women making papads, and within six months, they were able to reward themselves with half a gram of gold each with the profit they had made. The group used considerable publicity through word-ofmouth publicity and articles in vernacular newspapers. By the second year of its formation, 100 to 150 women joined the group, and by the end of the third year more than 300 women were rolling papads.
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The Success Formula The vision and principles of SMGULP are based on the ideals of trusteeship. The basic principles underlying the philosophy of the organization are; SMGULP is a voluntary organization. SMGULP never accepts charity or grants. SMGULP believes in running the business wisely. SMGULP is like a family and the sisters run it as if they all belonged to the same family. SMGULP is like a revered place of worship. SMGULP is a combination of three concepts, the business concept, the family concept and the devotion concept...
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The Business Concept SMGULP is run on sound, commercial principles. The main aim of the organization is to provide selfemployment opportunities to women. As most of the women working in SMGULP come from disadvantaged sections of society, the organization seeks to inculcate feelings of self confidence and self reliance in them. The member sisters share the profits among themselves in a judicious manner. The organization believes that business has to be done with prudence... The Family Concept SMGULP works like a big family. It tries to create a sense of family among employees. All the affairs of the institution are handled like a family carrying out 418 its own daily household chores...
The Concept of Devotion For women working in SMGULP, it is a source of strength; a place of worship where they work for the benefit of all. The organization is for people who have faith and trust in its policies and basic concepts and who regard work as worship. Each branch usually operates from 5.00 am to 10.30 am. Buses are provided by SMGULP to take the member sisters from their homes to their respective branches. The member sisters receive payment for the papads prepared the previous day...
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2.
Discuss the entrepreneurial traits of some of the successful women entrepreneurs of India. Discuss the reasons for success at SMGULP.
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Assignment
MCQs
MCQs
1: The entrepreneur was distinguished from capital provider in: A. Middle ages B. 18th century C. 17th century D. 19th and 20th century 2: ___________ Process of creating incremental wealth is called Entrepreneurship. A. Dynamic B. Static C. Continues D. Systematic 423
3: Most important factor in forming a new business is: A. Finance B. Marketing C. Govt Support D. Family Support 4: Which one of the following is the process of entrepreneurs developing new products that over time make current products obsolete? A. Creative destruction B. New business model C. Anatomization D. None of the given options
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5: The intersection of knowledge and a recognized social need to start a product development process is called: A. Iterative synthesis
B. Product-evolution process C. Ordinary innovation D. Situation analysis
6: Which one of the following is the primary cause of failure in small businesses? A. Poor financial control
B. Poor location C. Management mistakes D. Improper inventory control
7: Which one of the following is the first step in the entrepreneurial process? A. Developing successful business ideas
B. Deciding to become an entrepreneur C. Growing the entrepreneurial firm D. Moving from an idea to an entrepreneurial firm
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8: Which of the following is NOT included in the opportunity evaluation process? A. Length of the opportunity B. Real and perceived value of opportunity C. Goals and objectives of customers D. Risks and rewards of opportunity 9: The resistance of employees in an organization against flexibility, growth, and diversification can be overcome by developing: A. Entrepreneurship B. Intrapreneurship C. Managerial domain D. Administrative domain
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10: The entrepreneurs_______________ depends on his perception of the opportunity. A. Commitment to opportunity
B. Commitment of resources C. Control of resources D. Strategic orientation
11: Which of the following statements about the entrepreneurial climate is (are) true? A. Trial and error are discouraged
B. Resources of the firm need to be available and easily accessible C. A multidisciplinary approach is discouraged D. Failures are not allowed
12: Which of the following makes the formation of new venture difficult within a corporate culture? A. Lack of intrapreneurial talent
B. Lack of freedom to make autonomous decisions C. Lack of market opportunity D. All of the given options
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13: Which of the following factors has allowed small companies to act like they are big ones? A. Competition B. Economic development C. Technology D. Customers 14: Which of the following is alternatively called corporate venturing? A. Entrepreneurship B. Intrapreneurship C. Act of stating a new venture D. Offering new products by an existing company 15: Being ones own boss is a need of: A. Independence B. Achievement C. Affiliation D. Authority
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16: An individuals need to be recognized is called: A. Need for independence B. Need for affiliation C. Need of fame D. Need for achievement 17: Which one of the following factors does not affect a person for being an entrepreneur? A. Family background B. Education C. Personal Values D. Gender 18: Female entrepreneurs differ from male entrepreneurs in terms of all of the following EXCEPT: A. Motivation B. Business skills C. Departure point D. Goal orientation 429
19: Which of the following areas are preferred by women entrepreneurs? A. Administration B. Utilities C. Manufacturing D. None of the above 20: Which one of the following is NOT TRUE about male entrepreneurs? A. Males often have investors, bank loans, or personal loans in addition to personal funds B. Males often have more experience in manufacturing, finance, or technical areas C. Men are often more confident and less flexible and tolerant D. Men usually list as the least important supporters 21. The depth and detail of a business plan depend on A. the target audience. B. the experience of the entrepreneur. C. the size and scope of the new venture. 430 D. the amount of capital needed.
22. To assess the potential profitability of a venture, the entrepreneur needs to ascertain expected sales and expenses figures for the first A. one year. B. three years. C. five years. D. ten years. 23. The usefulness of the introductory page is A. that it provides information about the company. B. such that it requires several pages. C. questionable, especially to investors. D. both a and b. 24. The executive summary section should A. be prepared after the total plan is written. B. highlight key financial results that can be expected. C. be about two or three pages in length. D. all the above.
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25. If the new venture is not a manufacturing operation but a retail store or service, planning of its operations activities will be put in a section called A. organizational plan. B. production plan. C. operations plan. D. executive summary. 26. The business plan is designed to guide the entrepreneur A. through the first year of operations. B. through the planning process. C. and the investor in the financing process. D. in case of a change in ownership. 27. Bankers often say that many businesses fail due to A. lack of cash. B. lack of planning. C. lack of initiative. 432 D. lack of customers.
28. Which of the following is a factor that will result in failure of a business plan? A. Goals set by the entrepreneur are measurable. B. The entrepreneur has no experience in the planned business. C. Goals set by the entrepreneur are reasonable. D. Customer need was established for the product. 29. _______________ pricing is based on the total cost of the product plus a standard profit margin or mark-up. A. Cost-based B. Value-based C. Competition-based D. Product-based 30. Which of these statements does not describe marketing? A. An exchange activity that takes place between a business and its customers. B. It is focused on satisfying the customers needs and wants. 433 C. It is a group of customers with needs and wants.
31. It is important to identify the target market because A. it is not practical and almost impossible to satisfy the needs and wants of the entire population. B. good business practices must be based on religious boundaries and ethical practices. C. most businesses have limited resources in terms of time, money and manpower. D. it is better to focus on activities that would attract a core group of customers that has the highest potential to purchase the goods or services offered. 32. Steps to identify a target market include the followings except for A. identifying the product or service to be offered. B. identifying the market area and business location, collecting data and segmenting the market. C. determining the target market from the market segments identified. 434 D. developing the sales forecast.
33. Which of these is not included in preparing a sales forecast? A. Determine market size. B. Conduct external environment and industry analysis. C. Identify the competitors. D. Estimate market share. 34. A __________ is a name, term, sign, symbol or design that identifies a product & differentiates it from any other product. A. quality B. packaging C. brand D. patent 35. This distribution channel has two intermediary levels. Select the correct distribution channel which depicts the statement. A. Manufacturer ----- Consumer B. Manufacturer ----- Wholesaler ----- Retailer ----- Consumer 435 C. Supplier ----- Manufacturer ----- Wholesaler ----- Retailer
36. In a Marketing Budget, the amount to be spent on Signboard should be placed in which category? A. Fixed assets. B. Monthly expenses. C. Other expenses. D. Renovation expenses. 37. Which of these describes the components of the operations process? A. Business input, transformation system and output. B. Administrative, inventory control & accounting system. C. Supplier, intermediary and customer. D. Cash flow, income statement and balance sheet. 38. The entrepreneur must constantly monitor the _____________ of all the processes and output. A. feedback B. quality C. machines
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39. These factors should be taken into consideration when choosing a supplier except for A. price and discount offered. B. quality of materials. C. sale terms and conditions. D. the location of the target market. 40. ______ refers to the arrangement of machinery, equipment, workers and other facilities used in the operation. A. Capacity B. Layout C. Raw materials D. Supplier 41. Determining the total operational cost would enable the entrepreneur to calculate the _____ of the goods produced. A. number of workers B. quantity of raw materials 437 C. cost per unit
42. ____ involves identifying the step-by-step processes from beginning to end in making the product or in providing the service. A. Product schedule B. Material requirement planning C. Capacity planning D. Process planning 43. This activity will ensure that the quantity of production is enough to fulfill expected market demand. This statement relates to A. product schedule B. material requirement planning C. capacity planning D. process planning 44. Total number of buses to be washed is 300 units. Monthly operations cost is RM20,835. Direct Labour Costs is RM11,520. Overhead Costs is RM3,000. What is the cost to wash a bus? A. RM48.40 per bus. B. RM69.45 per bus. 438 C. RM107.85 per bus.
45. Which do not describe the importance of a financial plan? A. To determine the size of investment i.e. project implementation cost. B. To identify and propose the relevant sources of finance. C. To ensure that the initial capital is sufficient. D. To scan the environment for a business opportunity. 46. In the project implementation cost schedule, _____expenditure refers to such expenditure as the procurement of plant, machinery, equipment, vehicles & other FA needed by the new business. A. short-term B. long-term C. financial D. both a and b 47. These are components of the project implementation cost schedule except for A. capital expenditure. B. cash flow statement. 439 C. working capital requirements.
48. Sources of finance for new projects include A. equity contributions. B. term loan. C. hire purchase. D. all the above. 49. Cash outflow is generally made up of A. equity contributions. B. term loan. C. cash sales D. none of the above. 50. The final component in the pro forma cash flow statement is the ________________. A. cash inflow B. cash surplus or deficit C. cash position D. cash outflow
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51. The pro forma income statement shows the expected profit or loss for the planned period, usually for _________ year(s). A. one B. two C. three D. four 52. The pro forma balance sheet shows the _______ position of the company at a specific point in time in terms of assets owned and how those assets are financed. A. short-term B. long-term C. financial D. both a and b 53. To be a reputable halal food producer in the region and serve the needs of the global Muslim community. This statement is an example of a A. vision. B. mission. 441 C. objective.
54. One of these statements is not relevant to the understanding of Organizational Structure. A. It is used to show the assignment of specific task and responsibility to every individual in the organization. B. It can be visualized through an organizational chart. C. Most small businesses do not have an organizational structure because it is too costly to establish. D. The most commonly used organizational structure in a small business is the line structure. 55. Job analysis, job description and job specification are three basic things that need to be prepared by a manager in ___________________. A. selection process B. retaining employees C. personnel planning D. recruitment process
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Answers
1. B 5. B 9. A 13. C 17. D 2. A 6. C 10. A 14. A 18. A 3. A 7. A 11. B 15. A 19. A 4. D 8. C 12. D 16. D 20. B
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