Beruflich Dokumente
Kultur Dokumente
• Books to consult
• For 4 credit course
– Entrepreneurship in the new millennium by
• Kurkato & Hodgetts , Cengage Learning
– Entrepreneurship by Rajeev Roy , Oxford
• For 1 credit course (PEV)
– Entrepreneurship & new venture creation by A Sahay
& V sharma
Entrepreneurship (PEV)
– Job Creation
– Economic growth
– New Technologies, processes & business models
– Serving small markets (Focus)
Entrepreneurship (PEV)
– Novice
– Serial Entrepreneur
– Portfolio Entrepreneur
Entrepreneurship (PEV) students
Entrepreneurship (PEV)
• Myths or Facts!
– Entrepreneurs are Doers and not Thinkers (clear
cut business plans)
HANDOUT 2
Entrepreneurship Evolution
• Another way to examine entrepreneurship is through a Process
Approach
• Strategic renewal
• Innovation
• Corporate venturing
Corporate Entrepreneurship
• Need for Intrapreneurship
Corporate Entrepreneurship
• Need for Intrapreneurship
– HANDOUT 7
Corporate Entrepreneurship
• Corporate venturing obstacles due to traditional
management practices
• Handout 6
Corporate Entrepreneurship
• Factors prevalent in organizations that are
successful innovators (James Quinn)
– Types of Innovation
• Invention (light bulb, Tube light)
• Extension (CFL)
• Duplication (walmart)
• Synthesis (Telemedicine)
Entrepreneurial Individual
• Innovation & Entrepreneur
– Sources of Innovation
• Unexpected occurrences (apple falling on Newton’s head)
• Incongruities (Fed express overnight delivery)
• Process need (time saving devices)
• Industry & market changes (New technologies & trends)
• Demographic changes (population getting older)
• Perceptual changes (health food)
• Knowledge based concepts
Entrepreneurial Individual
• Innovation & Entrepreneur
– Myths of Innovation
• Innovation is planned & predictable
• Creativity relies only on dreams & blue sky ideas
• Technology is the driving force of Innovation & success
Entrepreneurial Individual
• Innovation & Entrepreneur
– Principles of Innovation
• Be action oriented
• Make product/service simple
• Make product/ service customer based
• Start small
• Aim High
• Try/test/revise
• Learn from failures
– Handout : Five types of Innovators
– Case Study: Case 5.1
Entrepreneurial Individual
• Ethics & Entrepreneurs I (This topic is a self study
exercise)
– If I am operate within laws of land am I ethical?
– Are there any economic tradeoffs by being ethical
–
• SELF STUDY (Read page nos. 124 to 146 of
Kuratko & hodgetts
Opportunity Assessment
• Pitfalls in Selecting New Ventures
– Lack of objective evaluation
– No real insight into the market
– Inadequate understanding of Technical
requirements
– Poor financial understanding (usually less than half costs
estimated)
– Customer Availability
• Handout : A New Venture Idea Checklist
Opportunity Assessment
• Why new ventures fail (Bruno, Leidecker & Harder)
– Product/market problems
• Poor timing, product design problem, Wrong distribution
strategy, single customer reliance,
– Financial difficulties
• Initial undercapitalization, High initial debt, relationship
problem between entrepreneur & venture capitalist
– Managerial problems
• Team problems, Human resource problems
• Handout: Types & Classes of First Year
problems
Opportunity Assessment
• Evaluation Process
– Handout : Asking the Right questions
– Case 7.1
Environmental Assessment
• Environmental Scanning
• Economic & Industry Environment (Macro View)
– Assessing the Economic Environment (handout Table 8.1)
– Questions that need to be asked
• What is the current state of the economy
• What is the condition of labor market
• Are the interest rates rising or stable
• How many firms are in this industry
• Do firms vary in size or they similar
• What is the geographic concentration of these firms
• Do the firms serve only domestic or exports too
• What are the governmental regulations for this business
Environmental Assessment
• Environmental Scanning
• Economic & Industry Environment
– Examining the industry
• Handout Figure 8.5 (Guide to using the Five forces model)
• Competitive analysis
– Handout Figure 8.6 (Competitive Profile Analysis)
– Some important steps
» Define the industry for the new venture
» Analyze the competition
» Determine the strengths & characteristics of suppliers
» Establish the value added measure of your venture
» Project the market size
Environmental Assessment
• The Community Perspective (Micro view)
– Researching the Location
• Community Demographics
– Community size, residents purchasing power, educational
background, types of occupations, etc.
• Economic Base
• Population Trends
• Overall Business climate
– Handout: Evaluating Environmental Trends
– Case 8.2
Entrepreneurial Ventures &
Marketing Research
• Some specific objectives of marketing research
– Cost
– Complexity
– Irrelevancy (in the mind of entrepreneur)
Entrepreneurial Ventures &
Marketing Research
• 3 Marketing philosophies of entrepreneurs
– Production driven
– Sales driven
– Consumer driven
• Depends on
– Competitive pressure
– Entrepreneur’s background
– Short term focus
Entrepreneurial Ventures &
Marketing Research
• Entrepreneurs need to know distinctly their
offering type
– Convenience Goods
• Staple goods (food etc.) & Impulse goods
– Shopping goods (spend time on comparing prices & specs)
– Specialty Goods (customers make a special effort to find & purchase)
– Unsought Goods (encyclopedias etc.)
– New Products
– HANDOUT: COMPETITIVE INFORMATION
Entrepreneurial Ventures &
Marketing Research
• Marketing Stages for Growing Ventures
– Entrepreneurial Marketing
– Opportunistic Marketing
– Responsive marketing
– Diversified marketing
– Revenue
– Cost of goods sold
– Operating expenses : Selling expenses,
Administrative expenses, Financial Expense (Interest) &
Income Tax
–
Entrepreneurial Ventures &
Financial Analysis
• Cash Flow Statement
• It answers questions like
– Avoid exaggeration (show best case, worst case & probable case scenarios)
– Highlight Critical Risks
– Evidence of an Effective Entrepreneurial team (skills of
each key person)
– Sole Proprietorship
– Partnership
– Corporation (Pvt Ltd, Public Ltd)
Entrepreneurial Organizations &
Legal Forms
• Sole Proprietorships
• Advantages ???
Entrepreneurial Organizations &
Legal Forms
• Sole Proprietorships
• Advantages
– Ease of formation
– Sole Ownership of profits
– Decision making & control
– Flexibility
– Relative Freedom from Govt. control
– Freedom from Corporate business taxes (taxed as individual tax
payers)
Entrepreneurial Organizations &
Legal Forms
• Sole Proprietorships
• Disadvantages???
Entrepreneurial Organizations &
Legal Forms
• Sole Proprietorships
• Disadvantages
– Unlimited Liability including personal assets
– Lack of continuity
– Less Available capital
– Obtaining long term debt relatively difficult
– Relatively limited viewpoint & experience
Entrepreneurial Organizations &
Legal Forms
• Partnerships
• Articles of partnership are usually executed and contain
– Name, purpose,
– Duration of agreement
– Character of partners (general or limited, active or silent)
– Contributions of partner
– Division of profits and losses
– Draws or salaries
– Death of a partner clauses
– Release of debts
– Business expenses handling
– Arbitration
– Etc.
–
Entrepreneurial Organizations &
Legal Forms
• Partnerships
• Advantages ???
Entrepreneurial Organizations &
Legal Forms
• Partnerships
• Advantages
– Ease of Formation
– Direct Rewards
– Growth & Performance facilitated (more capital & skills)
– Flexibility
– Relative freedom from Governmental control
Entrepreneurial Organizations &
Legal Forms
• Partnerships
• Disadvantages??
Entrepreneurial Organizations &
Legal Forms
• Partnerships
• Disadvantages
– Unlimited liability at least of one partner
– Lack of continuity
– Relative difficulty in getting large sums of capital
– Bound by the acts of just one partner (general, can sign any contracts
and obligations)
Entrepreneurial Organizations &
Legal Forms
• Partnership Success
– Partnership Attributes
• Commitment
• Coordination
• Trust & Interdependence
– Communication Behavior
• Quality
• Information Sharing & Participation
– Conflict Resolution Techniques
• Persuasion & Smoothing
• Arbitration & Joint Problem solving
Entrepreneurial Organizations &
Legal Forms
• Corporations
• A separate legal entity apart from the individuals
who own it
• Advantages ????
Entrepreneurial Organizations &
Legal Forms
Advantages
• Limited Liability
• Easy Transfer of ownership
• Unlimited life
• Relative ease of securing capital
• Increased ability & Expertise
Entrepreneurial Organizations &
Legal Forms
• Corporations
• Disadvantages ???
Entrepreneurial Organizations &
Legal Forms
• Corporations
• Disadvantages
– Activity Restrictions (Limited by Charter)
– Lack of participation for minority stockholders
– Regulation
– Organizing expenses
– Double taxation (on corporate profits as well as individual income)
Entrepreneurial Organizations &
Legal Forms
• Franchising (Franchisee & Franchisor, being shared for its
uniqueness, will be one of the earlier discussed forms)
• Advantages
– Training & Guidance
– Brand Name Appeal
– Proven Track Record
– Financial Assistance
Entrepreneurial Organizations &
Legal Forms
• Franchising
• Disadvantages
– Franchisee Fees
– Control exercised by the franchisor
– Unfulfilled promises by some franchisors
• Case 12.2
Legal Environment &
Entrepreneurship
• Entrepreneurs are not supposed to be lawyers
or have legal expertise but be sufficiently
knowledgeable about legal concepts that impact
businesses
• Review laws that relate to
– Inception of the venture
– Growth & continuity of the venture
Legal Environment &
Entrepreneurship
• Patents
– Processes, machines, plants, products, plants, chemical
compounds, & improvements in already existing items
– Protection for 14 years
– Temporary monopoly to encourage creation of new ideas
– Can sell, license etc.
• Copyright
– Protection of literary & artistic productions (60 years, proposed
for 70 years, might have already been done)
– Books, periodicals, dramas, music, art, motion
pictures, lectures, sound recording , computer
programs
– HANDOUT: Post Internet Copyright protection
Legal Environment &
Entrepreneurship
• Trademarks
– A distinctive name, mark, symbol, motto identified
with a company’s product (s)
– HANDOUT: Nike vs. Mike
Financial Sources for
Entrepreneurial Venture
• Debt vs. Equity
– Debt
• Repayment plus interest
– Equity
• Relinquishing control
– A mix of both
– Debt financing is usually necessary
• Working capital
• Long term debt (for property & equipment)
Financial Sources for
Entrepreneurial Venture
• Sources of Debt
– Banks
• Queries of the bank are
– What do you want money for
– How much you need
– When do you need it
– How long will you need it
– How will you repay the loan
• Trade credit
• Accounts Receivables factoring
• Finance companies
Financial Sources for
Entrepreneurial Venture
• Debt Financing
– Advantages???
– Disadvantages??
Financial Sources for
Entrepreneurial Venture
• Debt Financing
– Advantages
• No relinquishing of ownership
• More borrowing allows greater return on equity
– Disadvantages
• Regular interest payments are required
• Affects cash flow
• Decreases P&L
Financial Sources for
Entrepreneurial Venture
• Equity Financing
– Advantages
– Disadvantages
Financial Sources for
Entrepreneurial Venture
• Equity Financing
– No legal obligation for repayment or interest
payment
– Sharing of ownership & profits are the costs of
equity financing
– Can be raised
• Public stock offerings
• Private Placements
Financial Sources for
Entrepreneurial Venture
• Public offerings
– Advantages
– Disadvantages
Financial Sources for
Entrepreneurial Venture
• Public offerings
– Advantages
• Size of capital amount
• Liquidity of Owner’s stock
• Valuation gets easier
• Image
– Disadvantages
• Costs (accounting fees, legal fees, underwriting stock etc.)
• Disclosure Norms
• Requirements of paperwork
• Shareholder Pressure
Financial Sources for
Entrepreneurial Venture
• Some equity instruments
– Convertible Debentures (unsecured loans that can be converted
into stock)
– Advantages??
– Disadvantages??
Financial Sources for
Entrepreneurial Venture
• Angel Investors
– Advantages
• Value adding
• Prefer start up & early stage
• Leveraging effect
– Disadvantages
• Little Follow on money
• Want a say in the firm
• No national reputation to leverage
Strategic Planning &
Entrepreneurship
• The need to shift from informal planning to a
formal systematic style is due to
– Degree of uncertainty
– Strength of competition
– Amount and type of experience
• Formal Planning
– Strategic
– Operational
Strategic Planning &
Entrepreneurship
• Basic steps of Strategic planning
– Examine the internal & external environments of the
venture (strengths, weaknesses, opportunities,
threats)
– Formulate the venture’s long range and short range
strategies (mission, objectives, strategies, policies)
– Implement the strategic plan (programs, budgets,
procedures)
– Evaluate the performance of the strategy
– Take follow up action through continuous feedback
– HANDOUT: The Strategic Management Process
Strategic Planning &
Entrepreneurship
• Five factors that influence strategic management
– Demand on Strategic Manager’s time
– Decision making speed (delegation demands)
– Environmental uncertainty
– Problems of Internal politics
– Entrepreneur’s vision
Strategic Planning &
Entrepreneurship
• Lack of strategic planning is due to??
Strategic Planning &
Entrepreneurship
• Lack of strategic planning is due to
– Time scarcity
– Lack of knowledge
– Lack of expertise/skills
– Lack of trust and openness
– Perception of high cost
Strategic Planning &
Entrepreneurship
• Porter identified five fatal mistakes
entrepreneurs make in strategy implementation
– Misunderstanding industry attractiveness
– No real competitive advantage
– Pursuing an unattainable competitive position
– Compromising strategy for growth
– Failure to communicate the venture’s strategy to
employees
– HANDOUT: Objections to Planning
Strategic Planning &
Entrepreneurship
• An entrepreneurial Strategy Matrix model (Sonfield
& Lussier)
– This model is based on Risk Vs. innovation
– HANDOUT: Figure 15.3
– HANDOUT: Figure 15.4
Challenge of Entrepreneurial
Growth