Entrepreneurship and Business Management

1. Entrepreneurship and Business Management Mega Bucks Workshop Indian Institute of Technology Kanpur Prof Parameshwar P Iyer Indian Institute of Science

2. What is Entrepreneurship? • Capacity to take risks • Ability to own and organize • Desire and capability to innovate and diversify (Stepanek, 1962) Prof Parameshwar P Iyer Indian Institute of Science

3. Who is an entrepreneur? • Person conducting own business (Webster) • Person who sets up business deals in order to make profits (Collins Cobuild) • Organizer of an economic venture, one who owns, organizes, manages, and assumes the risks of the business (Chandrashekhar) Prof Parameshwar P Iyer Indian Institute of Science

4. Why entrepreneurship? • Process of creating something different, with value, by devoting necessary time and effort, by assuming the accompanying financial, psychological, and social risks, and receiving the resulting rewards of monetary and personal satisfaction (Bowen and Hisrich, 1986). Prof Parameshwar P Iyer Indian Institute of Science

5. Role of the Entrepreneur • An innovator who combines technical innovations and financial finesses. • Important role in producing competitive products, processes, and services. • Generation of new employment • Local and regional economic development • Improved allocation of resources and transfer of technologies Prof Parameshwar P Iyer Indian Institute of Science

6. Entrepreneur as an Economic Pioneer • Introduction of new goods and products • Introduction of new processes and methods of production • Opening up of new markets • Opening up of new sources of supply • Industrial re-organization Prof Parameshwar P Iyer Indian Institute of Science

7. Strategic Importance of the Small-Scale Sector • Significant contributions to national income, employment, and export earnings • Value of output over Rs. 5,70,000 crores • Employment of over 17.5 million (> twice the private sector; almost as much as all public sector employment) • Exports of over Rs. 54,000 crores (> 35 per cent of all exports) (2000-01 figures) Prof Parameshwar P Iyer Indian Institute of Science

8. Entrepreneurship and Small Businesses • Entrepreneurship is especially critical in small businesses because: • Important sources of competition for large firms; challenge their economic power • Offer a wide range of choice to consumers • Sources of innovation and creativity • Good career opportunities to work in an unstructured environment of a small company Prof Parameshwar P Iyer Indian Institute of Science

9. Marketing Management • Demand variables: • Demographic, social, economic, political, and competitive factors in market environment • Psychological, social, and economic patterns in customer motivations • All autonomous factors Prof Parameshwar P Iyer Indian Institute of Science

10. Marketing Management • Semi-demand variables: • Market segmentation • Customer behavior • Only partially under the control of the entrepreneur Prof Parameshwar P Iyer Indian Institute of Science

11. Marketing Management • Decision Variables: • Product characteristics and pricing • Distribution and personal selling • Advertising policies • Mostly under the control of the entrepreneur Prof Parameshwar P Iyer Indian Institute of Science

12. Marketing Management • The essential entrepreneurial function in marketing management is to design an integrated marketing plan, where the demand and semi-demand variables of the market are related to the product and decision variables of the firm. Prof Parameshwar P Iyer Indian Institute of Science

13. Market Research • Marketing success depends on design of a distinctive marketing plan • A small entrepreneur should not try to compete on a product-to-product basis with large firms (same goods to same customers thru same channels at same prices !!) • Instead, try to do “something different”. Prof Parameshwar P Iyer Indian Institute of Science

14. Operations Management • Process of designing and utilizing the physical resources of the firm to maximize the operational capabilities of the company • Product/ service design • Process design • Job design • Job standards Prof Parameshwar P Iyer Indian Institute of Science

15. Operations Management • The entrepreneur’s smaller firm generally has to provide specialized, few-of-a-kind products and personalized services, without the benefits of mass production and mass distribution Prof Parameshwar P Iyer Indian Institute of Science

16. Financial Management • 1. Effective utilization of the assets- current(short-term) and capital (long-term) • 2. Provision of funds to support those assets • 3. Use of current liabilities, intermediate loans, and capital debt or equity • 4. Difficult for smaller companies to compete, in finance, with larger firms, simply because they lack money. Prof Parameshwar P Iyer Indian Institute of Science

17. Financial Management • Finances needed for: • 1. New investments in product development • 2. Expansion of markets • 3. Process improvements, etc. • Conserve available funds by preparing detailed financial plans, e.g. cash budgets, capital investment analysis, short-term plans Prof Parameshwar P Iyer Indian Institute of Science

18. Financial Management • Finding additional funds from sources as • 1. Current liabilities • 2. Bank loans • 3. Equity investments • 4. Retained earnings • 5. Venture capital proposals • 6. Angel funding proposals Prof Parameshwar P Iyer Indian Institute of Science

19. Product Development • Improvements in design of existing product • Inventions of new products • Lack resources for full R&D facility • Must use available capabilities efficiently • Outsourcing of R&D and innovation • Technical feasibility, market feasibility, development time and cost, manufacturing capability, and strategic fit Prof Parameshwar P Iyer Indian Institute of Science

20. Organizational Management and Control • Smaller companies go thru identifiable stages of growth • Increased specializations in tasks of staff • Increased delegation on part of founder • Increased systematization and formalization of information reporting and accounting procedures Prof Parameshwar P Iyer Indian Institute of Science

21. Formation and Growth • Formal and legal procedures of formation- memoranda and articles of association • Sole proprietorship • Partnership • Private limited • Public listing • Cooperative Prof Parameshwar P Iyer Indian Institute of Science

22. Formation and Growth • Purchase of a small company- identify, screen, evaluate, negotiate, and structure payments • Consolidation of a new company- intense conservation of cash, firm limitations on expenses, continual examination of company’s strategy. Prof Parameshwar P Iyer Indian Institute of Science

23. Conclusions • Entrepreneurship is a challenging and rewarding profession • Need to concentrate on market analysis, financial resources, and technology management • Cannot compete directly with the “big guys”, so need to be ingenious and innovative in all entrepreneurial functions Prof Parameshwar P Iyer Indian Institute of Science