ENTREPRENEURIAL PROCESS

STEPS IN ENTREPRENEURIAL PROCESS

According to Arthur.H.Cole, “Entrepreneurship is the purposeful activity of an individual or a

group of associated individuals undertaken to initiate maintain and maximize profit by
production or distribution of economic goods and services”.

The Entrepreneurship process can be expressed as a set of procedures and methodologies that are
followed by entrepreneurs for establishing a new business or venture. All the phases in the
entrepreneurship process have certain meaning and functionality, which one has to trail and
pursue for setting up a venture. All the successful entrepreneurs like Bill gates (Microsoft), Steve
Jobs (Apple), Gordon Moore (Intel) and others all has went through these process.

The various steps involved in the entrepreneurial process are:

1. Discovery: An entrepreneurial process begins with the idea generation, wherein the
entrepreneur identifies and evaluates the business opportunities. The identification and
the evaluation of opportunities is a difficult task; an entrepreneur seeks inputs from all the
persons including employees, consumers, channel partners, technical people, etc. to reach
to an optimum business opportunity. Once the opportunity has been decided upon, the
next step is to evaluate it.
An entrepreneur can evaluate the efficiency of an opportunity by continuously asking certain
questions to himself, such as:

 Whether the opportunity is worth investing in

 Is it sufficiently attractive,
 Are the proposed solutions feasible
 Is there any competitive advantage
 What is the risk associated with it
 Above all, an entrepreneur must analyze his personal skills and decide whether these
coincide with the entrepreneurial goals or not.

The entrepreneur has to do a market study in which he has to answer to the following
questions:

 What market need does it fill

 What social condition underlines this market need
 What market research has been done to describe the market need
 Where is the money to be made in the activity
 What competition exist in this market

2. Developing a Business Plan: Once the opportunity is identified an entrepreneur needs to

create a comprehensive business plan. A business plan is critical to the success of any
new venture since it acts as a benchmark and the evaluation criteria to see if the
organization is moving towards its set goals.
An entrepreneur must dedicate his sufficient time towards its creation; the major
components of a business plan are mission and vision statement, goals and objectives,
capital requirement, a description of products and services, etc. A good business plan is
essential for developing the opportunity and determining the resources required,
obtaining those resources and successfully managing the resulting venture.

3. Resourcing: The third step in the entrepreneurial process is resourcing, wherein the

entrepreneur identifies the sources from where the finance and the human resource can be
arranged. Here, the entrepreneur finds the investors for its new venture and the personnel
to carry out the business activities.  Any resources that are critical must be distinguished
from those that are just helpful.
Care must be taken not to underestimate the amount and variety of resources needed. The
entrepreneur should also assess the downside risks associated with insufficient or
inappropriate resources. The entrepreneur also needs to identify alternative sup-pliers of
these resources along with their needs and desires. By understanding resource supplier
needs, the entrepreneur can structure a deal that enables the resources to be acquired at
the lowest possible cost and with the least loss of control.

4. Managing the company: Once the funds are raised and the employees are hired the next
step is to initiate the business operations to achieve the set goals. First of all, an
entrepreneur must decide the management structure or the hierarchy that is required to
solve the operational problems when they arise.  A control system must be established, so
that any problem areas can be quickly identified and resolved. Some entrepreneurs have
 difficulty managing and growing the venture they created. During this stage the company
will see if it decreases, maintains or increases in sales.

5. Harvesting: The final step in the entrepreneurial process is harvesting wherein, an

entrepreneur decides on the future prospects of the business, i.e. its growth and
development. Here, the actual growth is compared against the planned growth and then
the decision regarding the stability or the expansion of business operations is undertaken
accordingly, by an entrepreneur.

The entrepreneurial process is to be followed, again and again, whenever any new
venture is taken up by an entrepreneur, therefore, it’s an ever ending process.

Within the entrepreneurial process, there are different events that are generated along the
process.

1. Innovation

It is the time when the entrepreneur generates the innovative idea, identifies the market
opportunity, and look for information. Also, it begins to see the feasibility of ideas, the
ability to get value from it and how to generate the development of the product or service.

2. Triggering event

This event is the gestation time of the project. The entrepreneur begins to motivate himself to
start a business and to decide to proceed with. The business plan is created, as well as the
identification of the resources required, the project risk, the source of the funds and how they
would use them.

3. Implementation

This event includes the incorporation of resources and arms the project to launch their new
business to the market. The strategy and business plan begin to develop day by day, and the
use of resources are invested in favor of building a successful company.

4. Growth

The ideal event for any entrepreneur is to see how their company is constantly growing.
Growth is the stage of the entrepreneurial process which reflects the time and effort spent by
the entrepreneur. At this time, to keep up the pace of the business growth, the entrepreneur
must keep up his personal development also to continue his internal growth.
IDENTIFICATION OF BUSINESS OPPORTUNITIES

The term opportunity implies a good chance or a favorable situation to do something offered by
circumstances. A business opportunity means a good or favorable change available to run a
specific business in a given environment at a given point of time.

Steps in Generating and screening business opportunities /Project idea

The process of generating and screening business or project idea comprises of the following
steps:
1. Generation of ideas
2. Monitoring the environment
3. Corporate appraisal
4. Scouting for project idea
5. Preliminary screening
6. Project rating index

1. GENERATION OF IDEAS: 

Identifying suitable project ideas is the most important step in the whole process of
project preparation. The search for promising project ideas is the first step towards
establishing a successful venture. The key to success lies in getting into the right business
in the right time. The objective is to identify investment opportunities which are feasible
and promising.

Generation of an idea of producing a new product, new business, requires imagination

sensitivity to environmental changes and the realistic assessment of what the firm can do.
A project is not a product or commodity to be purchased. It has a promise as well as a
risk.

Generally project ideas are generated:         

 By better understanding of Economy

 Changing needs of society
 Emerging trends in the society
 By analyzing the performance of existing industries
 Market demand
 Resource availability
  SWOT analysis
 Political considerations

The project idea selection is selection of project idea from available alternatives is to be best
suited to the entrepreneurs’ capacity, competence and willingness. The project Selection
includes

 Profitability
 Feasibility
 Resource-ability
 Acceptability

The basic criterion for selection of a project could be existence of a favorable cost-benefit
relationship.

People would like to select a project which requires a minimum investment, low degree of
competence, completed in the shortest time, and which has the highest return potential.

A project idea should be SMART:

S – Specific objective

M – Measurable

A – Achievable

R – Realistic

T – Time bounded

2. MONITORING THE ENVIRONMENT

Environment monitoring refers to the identification of the opportunities, threats, strengths

and weaknesses thrown open to an organization. The firm must systematically monitor the
environment and asses its competitive abilities. For purposes of monitoring the business
environment may be divided into six broad sectors. They are as follows:
1. Economic Sector
 The general economic condition
 Economic policies
 Growth rate of primary, secondary, and territory sectors
 Cyclical fluctuations
 Exchange rates

2. Government Sector
 Industrial policy
 Government programs and projects
 Tax frame work
 Subsidies, incentives, and concessions
 Import and export policies
 Financing norms
 Lending conditions of financial institutions and commercial banks
3. Technological Sector
 Emergence of new technologies
 Access to technical know-how, foreign as well as local
 Receptiveness on the part of industry
4.  Socio-demographic Sector
 Population trends
 Age shifts in population
 Income distribution
 Attitudes toward consumption and investment
5. Competition Sector
 Number of firms in the Industry
 Degree of homogeneity and differentiation among products
 Entry barriers
 Comparison with substitutes in terms of quality, price, appeal, and functional
performance
  Marketing policies and practices
6. Supplier Sector
 Availability and cost of raw materials
 Availability and cost of energy

There are a variety of techniques and methods in the area of environmental scanning. It is up
to the strategists or the managers to choose one of these techniques that suit the business
conditions in which a firm is working. The most significant ones are:

 PEST analysis: A PESTEL analysis or PESTLE analysis (formerly known as PEST

analysis) is a framework or tool used to analyze and monitor the macro-
environmental factors that may have a profound impact on an organization’s
performance. This tool is especially useful when starting a new business or entering a
foreign market. PESTEL is an acronym that stands for Political, Economic, Social,
Technological, Environmental and Legal factors.
 Political forces that speaks governmental intervention in managing the
economy. They are to do with tax, fiscal, labour, trade restrictions, tariffs and
political stability. It covers its influence on non-economic factors such as
health, education and infrastructure of the country.
 Economic forces covers economic growth, interest rates, the rate of
inflation.These has far reaching impact on business activities.
 Social forces comprises of cultural aspects and health dimensions, growth rate
of population, age group, career attitudes and societal safety. These factors
decide what is wanted by the society.
 Technological forces comprise of ecological and environmental incentives
and the pace of technological change. They have impact on cost, quality and
quantity of goods and services.
 Environmental forces encompass weather, climate and climate change,
global warming, pollution all that determine the product to be offered to the
society
 Legal forces cover various laws and acts which speak of safe, qualitative and
adequate products within reasonable time
 QUEST analysis: It represents quick environmental scanning technique. QUEST
analysis is a four step process that uses scenario writing for scanning the environment
and tracing the strategic options. These four steps involved are:
 Observing the major events and trends in the economy
 Speculating of future happenings
 Preparing summary report
 Reviewing report and scenarios by experts

Once the environmental scanning is done, the strategists are busy with configuring
the mass information and clearly identify what opportunities are viable for the
company.

 SWOT analysis: SWOT stands for strength and weaknesses which are purely
internal to the individual firm and Opportunities and Threats that are thrown open by
the external environment.
 ETOP analysis: It stands for environmental threats and opportunities profile. It is the
process by which organizations monitor their relevant environment to identify
opportunities and threats affecting their business for the purpose of taking strategic
decision. The preparation of ETOP involves dividing the environment into different
sectors and then analyzing the impact of each sector into subsectors and then the
impact of each sector is describes in the form of a statement.
 TOWS analysis: TOWS matrix is the conceptual framework designs for a systematic
analysis which facilitates matching external threats and opportunities with the internal
strength and weaknesses of a firm
 TOWS help you identify strategic alternatives that address the following additional
questions:

 Strengths and Opportunities (SO) – How can you use your strengths to take
advantage of the opportunities?

 Strengths and Threats (ST) – How can you take advantage of your strengths to avoid
real and potential threats?

 Weaknesses and Opportunities (WO) – How can you use your opportunities to
overcome the weaknesses you are experiencing?

 Weaknesses and Threats (WT) – How can you minimize your weaknesses and avoid
threats?

3. CORPORATE APPRAISAL
A ground reality appraisal of corporate strengths and weakness is a must for identifying
investment opportunities .The broad areas of corporate appraisal and the significant
aspects to be considered under these are given as under:
The broad areas of corporate appraisal and the significant aspects to be considered under
these are given as under:
a) Marketing and distribution Area
b) Production and Operation Area
c) Research and Development Area
d) Corporate Resources and personal Area
e) Finance and Accounting Area

4. SCOUTING FOR PROJECT IDEAS

Good project ideas are quite difficult to find. This fact makes the project planners to tap
a variety of sources to identify them. The experts have given certain suggestions in this
regard. These are:
a) Analysis of the performance of existing industries
b) Fish- eye view of inputs of various Industries
c) Government Guidelines
d) Take account of suggestions of financial Institutions and development agencies.
 e) Keen watch of technologies
f) Encourage creativity in generating new ideas

5. PRELIMINARY SCREENING
The earlier stages have made available large number of good project ideas. All good
ideas cannot be accepted for implementation. The very idea of screening the ideas is to
eliminate the ideas which are not promising or paying. And one is required to look into
the following aspects:

a. Compatibility with the promoter:

The idea must be compatible with the interest, personality, and resources of the
entrepreneur. It means:

 It should fit to the personality of the entrepreneur;

 It should be accessible to him
 It should offer him the prospect growth and high return on the invested capital.

b. Consistency with government priorities:

The project idea to be feasible should fit in the framework of government priorities. It is
consistent provided it gets ‘Yes’ answer to the following questions:

 Is the project consistent with national goals and priorities?

 Is it environmental friendly?
 Is it easier to get foreign exchange requirements of the project?
 Will there be any difficulty in obtaining the license for the project?

c. Availability of inputs:

The resources and inputs required for the project must be reasonably assured. To assess this, the
following questions need to be answered.

 Are capital requirements of the project within manageable limits?

 Can the technical know- how required for the project be obtained?
 Are the new materials required for the project available domestically at a              
reasonable cost?
 If the materials have to imported, will there be any problems?
d. Adequacy of the market:

To judge the adequacy of the market the following factors have to be examined:

 Total present domestic market

 Competitors and their market shares
 Exports markets
 Sales and distribution system
 Barriers to the entry of new units
e. Reasonableness of cost:

The cost structure of the proposed project must enable it to realize an acceptable profit with a
price. The following should be examined in this regard:

 Cost of material inputs

 Labor costs
 Factory overheads
 General administration expenses
 Selling and distribution cost
 Service cost
 Economies of scale

f. Acceptability of risk level:

The greater the risk more rewarding will be a line of activity. Therefore, the desirability
of a project is critically dependent on the risk featuring it. In the assessment of risk the
following factors should be considered:
 Business cycles
 Technological changes
 Competition from substitute
 Competition from imports
  Government control over price and distribution

Therefore, during the preliminary selection, the analyst should eliminate project proposals
that

 Technically unsound and risky

 Have no market for the output
 Have inadequate supply of inputs
 Are very costly in relation to benefits and
 Assume over ambitious sales and profitability.

6. PROJECT RATING INDEX

Preliminary screening can be done through Project Index Rating. That is, this process can
be reduced to an Index that rates the project based on the score. The steps involved in
determining rating index are:
 Identification of factors relevant for project rating
 Assigning of weights to these factors
 Rating the project proposal on various factors using a suitable rating scale. Generally, it is
a five-point scale or a seven – point scale.
 Multiply each factor with the weightage to get factor score
 Adding all the factor score to get the overall project rating index.

A project with a score 35 and above are acceptable

ENTRY STRATEGIES
When we enter into a new business venture and entering into a market which is totally new to us,
we should consider many important aspects. The main steps to enter into a new market with a
new venture are the following:
1. Set clear goals
2. Research your market
3. Study competition
4. Choose the mode of entry
5. Figure out financial needs
6. Develop strategy document

1. Set clear goals

When we enter into a new market with a new venture we should be specific about what
we want to achieve in our new market, including the level of sales you can expect to
reach. Do not lose sight of our goals as it helps us to stay on track and confirm that our
opportunity, products/services and overall business goals are aligned.
2. Research your market
In this step we should use every means at our disposal to get to know our new market
including
 Doing online research
 Going there in person
 Attending trade show as a participant
 Learning about the competition
 Making business contact in our area

When we know much about our market our next focus is to learn about social, cultural and
political climate. If we are entering a region with a different language or cultural norm that is
very different to our place, we should think about how we will communicate with key
contacts. Explore all of the rules that could affect our products and how we will produce and
how we will deliver it. We need understand our local regulations and we should learn about
the distribution channel too. At this stage it is advisable to seek information from all the
department of the government which is related to us.

3. Study the competition

A detailed competition analysis based on our research and visits to the target market will
help us to make key decision, it will help us to modify our product or services to
customize it for that market. Most of businesses underestimate the degree of competition
existing in new market. Getting expert advice can help clarify the challenges.

4. Choose our mode of entry

There are many ways to enter to a new market. We can use the service of a distributor or
agents located there. We might become a franchise or acquire an existing line of business.
Lots of companies are started by using the help of a distributor.
There are many ways to enter into a market
a) New Product
b) Franchising
c) Sponsorship
d) Acquisition
e) Partial momentum

(These points are explained with the help of slides. Please go through that)

5. Figure out financial needs

It is very important to find out if we will need to get any financing to support our venture.
We can also get insurance that protects our venture if we met some kind of uncertainty.
6. Develop strategy document
Once we worked out the details of our strategy we will be ready to ready to write it out.
Once created, this document will be our blueprint, going forward detailing our goals,
research findings, contacts, budget, major action items, and timeliness and how we will
manage and evaluate our success on an ongoing basis. It is important to follow our plan
so that are not overwhelmed in a new market.

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