BUSINESS

ORGANIZATION AND
MANAGEMENT
UNIT II
ENTREPRENEURIAL OPPORTUNITIES IN
CONTEMPORARY BUSINESS
ENVIRONMENT
• Learning Outcomes
 Understand the international environment that influences business
 Examine the elements of macro environment of the entrepreneur
 Appreciate opportunities created by ever-evolving business
environment
ENTREPRENEURSHIP
• The capacity and willingness to develop, organize and manage a
business venture along with any of its risks in order to make a
profit. The most obvious example of entrepreneurship is the starting
of new businesses.
• Entrepreneurial spirit is characterized by innovation and risk-taking,
and is an essential part of a nation's ability to succeed in an ever
changing and increasingly competitive global marketplace
BUSINESS ENVIRONMENT

• Business environment is the sum total of all external and internal

factors that influence a business.
• “Environment contains the external factors that create opportunities
and threats to the business. This includes socio-economic
conditions, technology and political conditions.” –
• Business environment may be defined as the total surroundings,
which have a direct or indirect bearing on the functioning of
business.
WHY STUDY BUSINESS ENVIRONMENT??

The success of every business depends upon adapting itself to the

environment within which it functions.
• For Example:

1. When there is a change in government policies, the business has to

make the necessary changes to adapt itself to the new policies.

2. Change in technology may render the existing products obsolete,

introduction of colour T.V television replaced the black and white T.V
or introduction of computers replaced type writers.
IMPORTANCE OF BUSINESS
ENVIRONMENT
• Firm to identify Opportunities and getting the first mover advantage. E.g. Maruti for small cars.

• Firms to identify threats and early warning signals. E.g.. Multinational entering Indian market.

• Continuous learning: Environmental analysis makes the tasks of managers easier in dealing
with business challenges.

• Image Building: By showing their sensitivity towards the environment. E.g. Captive power plants
in factories.

• Meeting competition: It helps the firms to analyse the competitors strategies and formulate their
own strategies accordingly.

• Identifying firms strengths and weaknesses.

BUSINESS ENVIRONMENT
NETWORK
MARKETING
 NETWORK MARKETING
• Network Marketing or Multi-Level Marketing (MLM) started in
India in around 1960 and 1970. This marketing scheme used to offer
only small savings schemes with a large return such as Chit funds.
• Network marketing means very basic, which is the marketing of a
product, promotion, or selling with the help of a network. In this
case, the network is made up of people. This network has no limit.
• In this, your family members, friends, servants, neighbors,
colleagues and anyone else can join. The more people in a network,
the more will be the profit of you and the company.
ADVANTAGES OF NETWORK
MARKETING
• The distribution network grows continuously
• Lower overhead costs as no infrastructure is required
• The opportunity to earn unlimited income in form of
commission
• Reduces the additional overheads of firm like advertisement
expenditure and retailer margin.
DISADVANTAGES OF
NETWORK MARKETING
• Sales forecasting is difficult

• Distributors often become the largest customers and hence

take over the control of the company
• There is some risk concerned in becoming capitalist and
joining these businesses
FRANCHISING
 Introduction to Franchising

– Introduction
– Franchising is growing in popularity.
– Nearly 910,000 franchise outlets operate in the U.S.
– Franchises account for 1/3 of all retail sales in the U.S.
– History
– The word “franchise” comes from an old dialect of French and means
privilege or freedom.
– Many of the most popular franchises, including KFC (1952), McDonald’s
(1955), and H&R Block (1958) started as early as the 1950s.
What is Franchising?

Franchising
– Franchising is a form of business organization in which a
firm that already has a successful product or service
(franchisor) licenses its trademark and method of doing
business to another business or individual (franchisee) in
exchange for a franchise fee and an ongoing royalty payment.
– Some franchisors are established firms (like McDonald’s)
while others are first-time enterprises being launched by
entrepreneurs.
Two Types of Franchise Systems
Product and Trademark Franchise
– An arrangement under which the franchisor grants to the franchisee the right to
buy its products and use its trade name.
– This approach typically connects a single manufacturer with a network of dealers
or distributors.
– For example, General Motors has established a network of dealers that sell GM cars
and use the GM trademark in their advertising and promotions.
– Other examples of product and trademark franchisors include agricultural machinery
dealers, soft drink bottlers, and beer distributorships.
Two Types of Franchise Systems

Business Format Franchise

– An arrangement under which the franchisor provides a formula
for doing business to the franchisee along with training,
advertising, and other forms of assistance.

– Fast-food restaurants, convenience stores, and motels are well-

known examples of business format franchises.
– Business format franchises are by far the most popular form of
franchising, particularly for entrepreneurial firms.
 BUSINESS FORMAT FRANCHISING -

outlet in outlet in
Sale, Australia Marseille, France
 Types of Franchise Agreements
15-28

Individual Franchise Agreement

 Types of Franchise Agreements
15-29

Area Franchise Agreement

Types of Franchise Agreements
3 of 3

Master Franchise Agreement

Advantages and Disadvantages of Franchising
As
15-31
a Method of Business Expansion
Advantages Disadvantages

• Rapid, low-cost market expansion. • Profit sharing.

• Income from franchise fees and • Loss of control.
royalties.
• Friction with franchisees.
• Franchisee motivation.
• Managing growth.
• Access to ideas and suggestions.
• Differences in required business skills.
• Cost savings.
• Legal expenses.
• Increased buying power.
Advantages and Disadvantages of Buying a
Franchise
15-32

Advantages Disadvantages

• A proven product or service within • Cost of the franchise.

an established market.
• An established trademark or
business system.
• Franchisor’s training, technical
support, and managerial expertise.
• An established marketing
network.
• Restrictions on creativity.
• Duration and nature of commitment.
• Risk of fraud, misunderstandings, or
lack of franchisor commitment.
• Poor performance on the part of other
franchisees.

• Availability of financing (varies). • Potential for failure.

• Potential for business growth.

BUSINESS PROCESS OUTSOURCING
 Business process outsourcing

 Business process outsourcing (BPO) is a subset of

outsourcing that involves the contracting of the operations
and responsibilities of specific business functions (or
processes) to a third-party service provider. Originally, this
was associated with manufacturing firms, such as Coca
Cola that outsourced large segments of its supply chain.
BPO

 Outsourcing is popularly associated with IT Enabled

Services (ITES) and is also known as Business
Process Outsourcing (BPO). Knowledge process
outsourcing (KPO) and legal process outsourcing
(LPO) are some of the sub-segments of business
process outsourcing industry.
 The need for outsourcing arises because of the
following factors
 Specialized Performance: Through outsourcing, a firm can get various
tasks done by specialized agencies.
For example, it may entrust repair and maintenance of air conditioner and
other electronic gadgets to a specialist firm.
 Getting Better Results: A firm can’t have specialization in all activities and
so it can entrust some activities to outside agencies.
For example, it may outsource advertising activity to an advertising agency for
better result.
 Achieving Economy: It is economical to outsource some activities rather
than organizing a separate department for performing such activities. That is
why, delivery of mail outsourced to courier agency by most of the firms.
The need for outsourcing arises because of the
following factors….cont.

 Ensuring Smooth Operations: Outsourcing of routine activities

enables the firm to conduct its operation smoothly.

 Expansion of Business: A business firm can concentrate on its

growth strategies and outsource subsidiary or non-core services to
outside agencies which are specialists in their respective fields.
E- COMMERCE
WHAT IS E-COMMERCE?

Includes:

Online business to business transactions

Online business to consumer transactions

Digital delivery of products and services

Online merchandising

Automated telephone transactions eg phone banking

 E-COMMERCE?
‘Electronic commerce’ refers to all forms of business transactions which are carried out
through electronic processing and transmission of data including text, sound and visual
images.

The term electronic commerce or e-commerce as it is popularly known; refers to a

comprehensive system of trading that uses networks of computers for buying and selling of
goods, information and services. Using information and communication technology,
ecommerce can take place

i) between companies, ii) between companies and their customers, and iii) between
companies and government departments.
CLASSIFICATION OF E-
COMMERCE
Based upon the entities involved in transaction, electronic commerce
has been classified into following categories:

– Business-to-Business (B2B)

– Business-to-Consumer (B2C)

– Consumer-to-Business (C2B)

– Consumer-to-Consumer (C2C)
ADVANTAGES OF E-
COMMERCE
Global Market:. Wider Choice:
Lower Transaction Cost and
Customer Convenience
Higher Margin:
Direct Contact between
Quick Delivery:.
Business and Consumer
Saving of Time and Effort:
Launching of New Products:
24x7 Working:

Quick Supplies:
DISADVANTAGES OF E-
COMMERCE
High Start-Up Costs

High Risk

Training and Maintenance

Lack of Personal Touch

Security

Corporate Vulnerability
M-COMMERCE

M-Commerce or mobile commerce refers to the buying and selling of

goods and services through wireless handheld devices such as mobile
phone and personal digital assistants (PDAs).

M-Commerce enables the users to access the internet without

needing to find a place to plug in. The basic idea of M-Commerce is to
distribute information and thus to generate business in a mobile way.
M-COMMERCE
Advantages Limitations
A new distribution network being The existing technology is not best
available to conduct commerce suited for mobile data transfer.
A ready convenient and secure way Acceptance of m-commerce is slow.
to do transactions
Lack of infrastructure, competing
Large re standards
ach, effective target marketing, and
ability to offer location-based
services
FUTURE OF M-COMMERCE
Some application of M-commerce will become popular. These are time critical
services that people will need on their way, e.g. traffic news, stock market reports.
Booking tickets etc.

For instance, the travel industry in realizing the possible benefits of m-commerce,
is working on technologies that will take care of travel arrangement, update
customers on flight status, notify them when this information changes and will offer
to make new arrangements based on preset user preferences requiring no input
from the user
SETTING UP ENTERPRISE
 INTRODUCTION

Setting of an enterprise is a complex process. Various institutions and organizations are

providing training to young people to understand the process of setting up enterprise unit.

The entrepreneur should have complete knowledge of men, material, machinery, market, and
products. A number of formalities like approval and clearance from government departments
are to be completed before setting up an enterprise.

The setting of an enterprise involves the study of business opportunities, developments of a

feasible business plan and identification, determination and arrangement of men, materials,
machinery and market for products. This learning object explain the detail procedure to
setup a business enterprise.
I. Entrepreneurial Decisions
in setting up Business
Enterprise
 Line of Physical Plant
Business Facilities Layout

Size of Financial Internal

Unit Orgn
Planning

Location Form of
of Personnel
ownership
Business
 Industrial, Trad Raw materials,
ing or Service technology, source
of supply

1.
•Expected rate of Line of Probable
return
•Degree of risk Business operating costs
and proposed
•Technically revenue by
feasible market survey

Product
design, pricing, di
stribution &
publicity Product Decision
2. Size of the Units
• Determination of scale of operations
• Optimum size where average cost per unit is minimum
• Large scale – Offers economies of scale but involves huge
capital & expert managerial skills.
• If risk involved is high, its preferable to start small and then
grow.
• A careful analysis and reconciliation of
technical, managerial, financial, market and such factors
should be considered.
3. Location of Business
• It influences costs, profitability and growth
• Absolute care should be taken since its very difficult to change
the selected site.
• 3 stages are-
– Select region
– Choice of locality
– Selection of the site
• An unfavourable location may restrict the growth of the firm
in addition to higher costs.
4.Form of Ownership
• Determine the division of profits, authority, liability of
owners, continuity of business and transferability of interests.
• Forms
– Sole Proprietorship
– Partnership
– Joint stock company
• A good form of ownership should be easy to form, simple to
operate, durable, flexible, free from heavy taxation and legal
requirements.
5. Financial Planning
• Adequate funds must be provided at the right time for the
start & continuity
• Advance decisions in financial planning are-

Total amount Appropriate

of capital capital
required structure

Time, price
and method of Administration
marketing of funds
securities
6. Provision of Physical Facilities

• Selection of machines, equipments, plant and buildings.

• Nature and quantum depends upon the
– Size of the Firm – Large, medium or small
– Nature of the Business – Manufacturing, trading and service
– Process of Production- Capital-intensive or Labour-intensive
– Availability of funds
– Relative cost and effect on Productivity
– Availability of spares
– Maintenance services
– Skills of workers
7. Plant Layout
• Arrangement of physical facilities is called Plant Layout.
• Good layout is essential for efficient and economical
operations
• Helps reduce cost and efforts sof material handling, inventory
& space.
• Proper placement to ensure smooth flow of material.
• Layout should be flexible and adapt itself to changing
conditions to avoid delays in production process.
8. Internal Organization
• Creation and development of internal structures
• Departmentation, viz, Production, finance , marketing &
personnel
• Authority-Responsibility-Accountability relations
• Facilitates efficient operations, avoids duplication, promotes
mutual co-operation and coordination
• Departmentation, delegation, span of control decisions.
9. Personnel
• Need of people or human capital
• Human resource planning - Number & type of employees
• Procurement, development & motivation
s
• Proper compensation and non-financial incentives for maximum
contribution towards organizational goal.
10. Launching of the Enterprise
• Completion of physical, organizational and financial aspects.

• Final launch of the enterprise

s
II. Generation of Business Idea
Genration of Business Ideas

Sources of Business Idea

1. Observing Markets
2. Prospective consumers
3. Developments in other
nations
4. Study of project
profiles
5. Governement Orgns
6. Trade fairs and Generating Ideas-
exhibitions Approaches
1. Brainstroming
2. Improvement of an
existing product
3. New ways of doing
things
4. Utilizing waste
materials
5. Converting hobbies into
business
Selection of a Project Idea

Cost structure
must ensure
reasonable
return

Resources Compatible
Idea should required could with
match be easily Feasibility
legalities &
resources mobilized regulations

Sufficient
demand of the
product or
service
III. Innovation,Creativity & Invention
Creativity
Process of generating new and
novel ideas, they are of no use
Innovation unless converted into a product
Process of doing new things or or service
doing old things in a new way  Spontaneous
 Innovation  Technical
 Extension  Inventive
 Duplication  Innovative
 Synthesis

Invention
The creation of something
new, any idea or material.
Results in creation of new
knowledge
Creativity Process

Germination Preparation Incubation Illumination Verification

Recoginition Search for Garnering of

of idea in Recognizing Validation of
knowledge to information
initial stage the feasibility the value of
rationalize and
of the idea ideas
the idea fantasizing
V. Feasibility Study

Commercial
Technical Aspect

Aspects
•Location
• Size of plant Financial Aspect
•Raw materials &
labour
• Plant &
equipment Socio-economic
• Infrastructure Aspect
• Foreign
Collaborations

Marketability
Aspect Good to Go..
VI. Project Appraisal

In-depth analysis made to decide selection or

rejection of the project.

Select Reject
Three Ways to Identify an Opportunity
1. Observing Trends

2. Solving a Problem

3. Finding Gaps in the Marketplace

Ways to Identify an Opportunity
Observing Trends
–Trends create opportunities for entrepreneurs to pursue. –The most
important trends are: Economic forces. Social forces. Technological
advances. Political action and regulatory change. –It’s important to be
aware of changes in these areas. 
Solving a Problem
–Sometimes identifying opportunities simply involves noticing a problem
and finding a way to solve it. –These problems can be pinpointed through
observing trends and through more simple means, such as intuition,
destiny, or change. –Many companies have been started by people who
have experienced a problem in their own lives, and then realized that the
solution to the problem is an opportunity. 
Ways to Identify an Opportunity
Finding Gaps in the Marketplace

–A third approach to identifying opportunities is to find a gap in

the marketplace –A gap in the marketplace is often created
when a product or service is needed by a specific group of
people but doesn’t represent a large enough market to be of
interest to mainstream retailers or manufacturers. 
What is Idea Generation?
Idea generation is the creative process or procedure that a company uses
in order to figure out solutions to any number of difficult challenges. It
involves coming up with many ideas in a group discussion, selecting the
best idea or ideas, working to create a plan to implement the idea, and then
actually taking that idea and putting it into practice.

The idea can be tangible, something you can touch or see, or intangible,
something symbolic or cultural.
Creativity
Creativity is the process of generating a novel or useful idea.
Creativity is marked by the ability to create, bring into
existence, to invent into a new form, to produce through
imaginative skill, to make to bring into existence something
new.
Creativity is not ability to create out of nothing but the ability to
generate new ideas by combining, changing, or reapplying
existing ideas. Every being has a creative side but is not
realized.
 Process of Creativity
Preparation: It is the background, experience and knowledge.
Incubation: Is the stage during which person considers an idea or thinks about a
problem, it can be a conscious or sometimes unconscious activity.
Insight: In a business context this is a moment an entrepreneur recognizes an
opportunity it may pushes you to next stage or pushes you back to first stage.
Evaluation: It is the stage of creative process during which an idea is subjected to
scrutiny and analyzed for its viability. Many people skip and moves towards
implementation.
Elaboration: In which creative idea is put into final form: the detailed are work out and
the idea is transformed into something of value which is a new product, service,
process.
INNOVATION
Innovation is the process of bringing the best ideas into reality, which
triggers a creative idea, which generates a series of innovative events.
Innovation is the creation of new value. Innovation is the process that
transforms new ideas into new value.

No innovation is possible without creativity. Innovation is the process that

combines ideas and knowledge into new value. Without innovation an
enterprise and what it provides quickly become obsolete.
CREATIVITY AND INNOVATION IN AN
ENTREPRENEURIAL ORGANIZATION
Growth and development cannot be sustained without additional innovations. Additional
innovations make firms look glamorous in terms of new products, new marketing
techniques, and newer ways to reach out to customer in satisfying their needs.
These are usually seen as part of the process of innovation, which is itself seen as the
engine driving continued growth and development. The ‘winning performance’ of the
entrepreneur and the organization focuses on
– Competing on quality, not prices
– Domination of a market niche
– Competing in an area of strength
– Having tight financial and operating controls
– Frequent product or service innovation
FEASIBILITY STUDIES
  A feasibility study is an evaluation of a proposal designed to determine the difficulty in
carrying out a designated task. Generally, a feasibility study precedes technical development
and project implementation.
 A feasibility study looks at the viability of an idea with an emphasis on identifying potential
problems and attempts to answer one main question: Will the idea work and should you
proceed with it?

DEFINITION OF FEASIBILITY
STUDIES
80
1. Technology and system feasibility
2. Economic feasibility
3. Legal feasibility
4. Operational feasibility
5. Schedule feasibility

FIVE COMMON FACTORS (TELOS)

81
1. TECHNOLOGY AND SYSTEM
FEASIBILITY

 The assessment is based on an outline design of system

requirements in terms of Input, Processes, Output, Fields,
Programs, and Procedures. This can be quantified in terms of
volumes of data, trends, frequency of updating, etc. in order to
estimate whether the new system will perform adequately or not
this means that feasibility is the study of the based in outline.

83
 Economic analysis is the most frequently used method for evaluating
the effectiveness of a new system. More commonly known as
cost/benefit analysis, the procedure is to determine the benefits and
savings that are expected from a candidate system and compare them
with costs. If benefits outweigh costs, then the decision is made to
design and implement the system. An entrepreneur must accurately
weigh the cost versus benefits before taking an action. Time Based:
Contrast to the manual system management can generate any report
just by single click .

2. ECONOMIC FEASIBILITY
84
 Determines whether the proposed system conflicts with
legal requirements, e.g. a data processing system must
comply with the local Data Protection Acts.

3. LEGAL FEASIBILITY
85
 Is a measure of how well a proposed system solves the
problems, and takes advantages of the opportunities
identified during scope definition and how it satisfies
the requirements identified in the requirements analysis
phase of system development.

4. OPERATIONAL FEASIBILITY
86
 A project will fail if it takes too long to be completed before it is useful.
Typically this means estimating how long the system will take to develop,
and if it can be completed in a given time period using some methods like
payback period. Schedule feasibility is a measure of how reasonable the
project timetable is. Given our technical expertise, are the project
deadlines reasonable? Some projects are initiated with specific deadlines.
You need to determine whether the deadlines are mandatory or desirable.

5.SCHEDULE FEASIBILITY
87
 Market and real estate feasibility
 Resource feasibility
 Cultural feasibility

OTHER FEASIBILITY FACTORS

88