ENTREPRENEURSHIP MANAGEMENT

Prof Bharat Nadkarni

Entrepreneurship Management

Reference Books
Entrepreneurship by Hisrich & Peters Entrepreneurship Management by P N Singh & J C Saboo Entrepreneurial Management by R K Mittal Entrepreneurship Development Programmes & Practices by J S Saini Entrepreneurship strategies and resources by Marc D Dollinger Indian Entrepreneurship its past and present by V Chernovskaya

Business Excellence

Prof Bharat Nadkarni

Who are the Stakeholders of Business ? Shareholders and Promoters Customers Employees Suppliers and Partners (incl Contractors, Agents etc) Government Society

Business Excellence

Prof Bharat Nadkarni

Most Admired Business Balancing and Exceeding the Expectations of all its Stakeholders.

Innovation is the sole cause of profit or Success NDB

Business Excellence Emerging Waves Factor Yesterday

Prof Bharat Nadkarni

Today Buyers Several Global Dropping Multiple Choice High High Off the shelf Enhanced Quick Respect Personalised

Market Sellers Players Few Kind of Players National Price Level High Consumer No choice Technology Low Quality Average Delivery Weeks/Months/Years Needs Limited Response Sluggish Relation Curt Approach Mass

Entrepreneurship Management

Entrepreneurial Traits
Need for achievement High level of motivation Creative / Innovative Moderate risk taker Agility / quickness in analysing and picking up opportunities Self Confidence Excellent Leadership Qualities Good business acumen Independence of thought & action Flexible/ Ready to change Resilience

Who is an Entrepreneur

Entrepreneurship Management

Entrepreneur, a french word literally translated means go between. Oxford Dictionary defines it as a person who organizes a commercial undertaking involving personal financial risk. An Entrepreneur is one who organizes and operates an enterprise for personal gain. He pays current prices for the materials consumed in the business, for the use of the land, for the personal services he employs and for the capital he requires. He contributes his own initiative, skill and ingenuity in planning, organizing and administering the enterprise. He also assumes the chance of loss and gain consequent to unforeseen and uncontrollable circumstances. The net residue of the annual receipts of the enterprise after all costs have been paid, he retains for himself.

Entrepreneurship : Definition
Entrepreneurship is the process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, social risks and receiving the resulting rewards of monetary and personal satisfaction and independence.
Points to note 1. Creating something different with value 2. Devoting necessary time & effort 3. Assuming accompanying financial, psychic and social risks 4. Receiving resulting rewards Monetary, Personal satisfaction, independence

Entrepreneurship Management

Decision Process for a potential entrepreneur

Form new enterprise
Desirable Possible - Government - Background - Marketing - Financing - Role Models

Change from present lifestyle

- Work Environment - Disruption

- Cultural - Family - Teachers - Peers

Entrepreneurship Management

The term entrepreneurship refers to the special, innate ability to sense and act on opportunity, combining out of the box thinking, with a unique brand of determination to create or bring about something new to the world. The persons involved in this process are called entrepreneurs. The term entrepreneur is a French word which basically means to undertake or go between and was first used in the French economies in the 17th and the 18th century. A French economist by the name of Jean Baptiste Say is credited to be the person who first defined this term. He defined an entrepreneur as the person who shifts economic resources out of an area of lower into an area of higher productivity and greater yield i.e. entrepreneurs create value.

Origin & Development

Marco Polo as a Trader Thomas Edison as an Inventor

Entrepreneurship Management

Narayan Murthy / Shahnaz Huassain as Innovators J N Tata & Dhirubhai Ambani as Visionaries Venture Capital concept
The function of an entrepreneur is to reform or revolutionize the pattern of production by exploiting an invention or more generally an untried technological possibility for producing a new commodity or producing an old one in a new way, opening a new source of supply or a new outlet for products by reorganizing a new industry.

Entrepreneurship Management

Challenges Involved
Person who actually starts his/ her own business, the experience is filled with enthusiasm, frustration, anxiety and hard work. There is a high failure rate due to: External Factors Inflation, recession, lack of infrastructure, corruption, economic & political uncertainty, Intense competition. Internal Factors Lack of capital, poor sales, lack of managerial ability.
WHAT THEN CAUSES A PERSON TO MAKE THIS DIFFICULT DECISION?

Entrepreneurship Management

Entrepreneurial Behaviour (EB) is a function of an individuals personality characteristics and environmental Factors. This could be represented as

EB = f (P,E)
where P = Personality characteristics E = Environmental factors, such as Social/ psychological factors including family, peer group, formal and informal association etc Financial Material availability Technology availability/ applicability These environmental factors could be either nurturant or impediments to entrepreneurial development.

Case Study

Entrepreneurship Management

Working for oneself is better than working for somebody else was clearly driven home by one of the American Professors at the seminar held at Taj in 1980s. We were discussing a case on entrepreneurship. He asked Ashish, my teammate, How much profit your company is making? It made about Rs 1,00,00,000 ( One Crore) last year, Ashish replied. How many managers are there in your company. The American Professor asked. Ten, Ashish replied. How much each of the managers are getting. The Professor asked. They are all getting different salaries but on an average they are getting around Rs 30,000 a year, Ashish replied. That incident happened 30 years back.

Entrepreneurship Management
That means that the managers together are getting ten times Rs 30,000 i.e. Rs 300,000 per year. And because of your managerial capability the company is making Rs One Crore. That makes managers take away is only 3 per cent. Are you not being exploited? Why dont you make Rs Ten lakhs as your share, yourself? That is 10 per cent. Why do you allow your managerial capabilities to be exploited by others? Why dont you exploit it yourself? the Professor went on. Ashish had no reply. Neither had we. But this case does give us a fodder to think. 1.Fantasy stage 2.Tentative decision making stage 3.Stage of exploration and preparation for the decision 4.Commitment and Stability stage

Advantages of Entrepreneurship
To an Individual 1. Self Employment 2. Employment for near & dear 3. Prolonged career for next generations 4. Innovation & Creativity 5. Unlimited income/ higher retained income 6. Freedom to use own ideas 7. Independence 8. Satisfaction

Advantages of Entrepreneurship
To the Nation 1. Provides larger employment 2. Results in wider distribution of wealth 3. Mobilises local resources, skills and savings 4. Accelerates the pace of economic development 5. Stimulates innovation & efficiency. 6. Competition

Factors favouring Entrepreneurship

1. 2. 3. 4. 5. 6. Growth of education science, technology & management Developed infrastructure facilities Financial assistance Training facilities Protective and promotional policies Globalization

Entrepreneurship Theories
1. 2. 3. 4. 1600 : French verb Go between or To undertake 1700 : Person bearing Risks of Profit in a fixed price contract 1725 : Richard Cantillon Person bearing risks is different from capital supplier (Risk) 1803 : J B Say Shifts economic resources out of an area of lower into an area of higher productivity & greater yields (Value Addition) 1934 : Joseph Schumpeter Innovation is the sole cause of profit. 1961 : David McClelland Need for Achievement N Ach factor - highly motivated, energetic, moderate risk taker.

5. 6.

Entrepreneurship Theories .... Contd.

7. 1964 : Peter Drucker Searches for change, responds to it and exploits as opportunity. (Opportunity focused) 8. 1980 : Karl Vesper Behaviour perceptions Economists, Psychologists, Businessmen, Politicians, (Environment) 9. 1983 : Gifford Pinchot Intrapreneur 10. 1985 : Robert Hisrich Creating something different with value, devoting time and effort, assuming risks financial, psychic and social, results rewards, satisfaction (Leadership & Vision)

Entrepreneurship Management

How entrepreneurship helps in economic development

s

Employment Generation Distribution of economic power Optimum utilisation of regional resources Meeting the demand gap by seizing appropriate opportunity Export potential Regional development

s s

Entrepreneurship Management

Karl Vespers Theory

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Entrepreneur to an economist
One who brings resources, labor, material and other assets into combinations that make their value greater than before and also one who introduces changes, innovations and a new order.

Entrepreneur to a psychologist
One who is typically driven by certain forces need to obtain or attain something, to experiment, to accomplish or perhaps to escape authority of others.

Entrepreneur to a businessman
One who appears as a threat and an aggressive competitor OR an ally, a source of supply, a customer or someone who creates wealth for others as well, who finds better ways to utilize resources, reduce waste and produces jobs for others.

Entrepreneurship & Leadership

MCCLELLANDS NEED THEORY OF MOTIVATION

MCCLELLANDS NEED THEORY OF MOTIVATION

Three basic types of motivating needs

1] Need for achievement

Have an intense desire for success and an equally intense fear of failure Want to be challenged Set moderately difficult goals for themselves Take realistic approach to life Would analyse and assess problems and take personal responsibility of completing a job Like specific and prompt feedback on how they are doing

MCCLELLANDS NEED THEORY OF MOTIVATION

2] need for power
People with high need for power have a great concern for exercising influence and control They seek positions of leadership Good conversationalists Can be argumentative Forceful, outspoken, hardheaded and demanding Enjoy teaching and public speaking

MCCLELLANDS NEED THEORY OF MOTIVATION

3] need for affiliation

Derive pleasure from being loved and tend to avoid the pain of being rejected by a social group Concerned with maintaining pleasant social relationships Enjoy sense of intimacy and understanding Ready to console and help others in trouble

MCCLELLANDS NEED THEORY OF MOTIVATION

How it applies to managers Entrepreneurs : showed very high need for achievement ; fairly high need for power ; low in their need for affiliation
In small companies/ Ventures : president/ entrepreneur has a very high achievement motivation In large companies : CEO/ Entrepreneur tend to be average in achievement but stronger in power and affiliation Entrepreneurs: rated higher in achievement motivation

Entrepreneurship Management

Innovation and Entrepreneurship

Prof Bharat Nadkarni

Entrepreneurship Management
Breaking of the Circular Flow
Schumpeters Model Profits caused by a particular innovation tends to be competed away as other imitate and adapt that. But if the entrepreneur comes out with another innovation at that time when the favourable effects of the former innovation are dying out, he will make profits again. Therefore, as long as innovation exist, profits continue to arise out of them. According to Schumpeter, Innovation is the sole cause of Profit.

Entrepreneurship Management

Thank You