Entrepreneurship

1. BEN2014 Introduction To CyberpreneurshipMid -Trimester Test HighlightsTrimester 3 2001/2002 Session

2. Entrepreneurship • Peter Drucker defined the entrepreneur as one who shifts economic resources out of an area of lower and into an area of higher productivity and greater yield. • Jeffrey Timmons’ definition includes building something from nothing, the pursuit of opportunity regardless of the resources, a vision and commitment to lead others in pursuit of that vision, and a willingness to take calculated risks.

3. Cyberpreneurship • It is about how to manage the technology in order to achieve superior value for the customer. • A cyberpreneur is defined as “an entrepreneur with the skills and mindset to deal with the knowledge economy”. • Knowledge economy is defined as the “generation and exploitation of knowledge to create value in the economy”.

4. Characteristics of Cyberpreneur • You have a vision of what technology can offer that is new to customers. • Practices continuous learning - must always be up-to-date. • Practices foresight - able to solve problems before they start. • One man R&D company - the initiative to learn and develop oneself.

5. Characteristics of Cyberpreneur • Conceptually strong - must be good at understand concepts. • Can manage knowledge workers. • Avoids stereotypes and easy solutions. • Adds value to the customer.

6. Motivation of Cyberpreneurs • Money is not usually the primary motivating factor. • The need for achievement and the desire for independence are more important than money. • Other motivating factors include the opportunity to use skills and abilities, to gain control over one’s life, to build something for the family, and to live how and where one chooses. • Other studies have identified motivating factors such as the need for recognition, a need for tangible rewards, and a need to satisfy expectations.

7. Traits of Cyberpreneurs 1. Need for achievement 2. Calculated risks 3. Self-confidence 4. Independent 5. Compassion 6. Creative 7. Personal growth 8. Innovative 9. Hard work 10. Responsible

8. The Value Chain And Innovation • Systematic innovation - “consists in the purposeful and organised search for change, and in the systematic analysis of the opportunities such changes might offer for economic and social innovation”… Peter Drucker • Cyberpreneurs are people who do things differently by shifting the economic resources UP the value chain.

9. Economistsvs.Entrepreneurs • Economists - looking for equilibrium between demand and supply. • Entrepreneurs - change is natural than force.

10. Sources of Innovation 1. The unexpected 2. The incongruity 3. Innovation based on process need 4. Change in industry or market structure 5. Demographics 6. Changes in perceptions, mood and meaning 7. New knowledge • The first 4 happen inside the firm or industry, the last 3 outside the firm or industry.

11. Qualifiers • Western countries prefer individualism - winner from among the group of employees. • Asian countries prefer collectivism - the whole organisation wins if total knowledge is applied to the whole group of employees.

12. Content of A Business Plan 1) Cover Sheet 8) Competition 2) A Statement of Purpose 9) Management / Personnel Plan 3) A Table of Contents 10) Operating Procedures Plan 4) Executive Summary 11) Business Insurance 5) General Company 12) Financial Plan Description 6) Product and / or Services Plan 7) Marketing Plan

13. The Marketing Plan - Pricing & Sales Some of the pricing strategies are: retail cost and pricing • competitive position • pricing below competition • pricing above competition • price lining • multiple pricing

14. The Marketing Plan - Pricing & Sales Service costs and pricing (for service businesses only) • service components • material costs • labour costs • overhead costs

15. Types of Companies 1. A company limited by shares 2. A company limited by guarantee 3. A company limited both by shares and guarantee 4. An unlimited company

16. Companies Limited by Shares • The liability of a member’s contribution to the company’s assets limited to the amount. • If the company becomes insolvent the members are not required to make any further contributions to discharge its debts.

17. Companies Limited by Guarantee • The liability of members is limited to such amount as they have undertaken to contribute to the assets in the event of its being wound up

18. Company • Register with ROC • Share is generally transferable • No maximum number of members (except private company) • Constitution - MAA • Required to supply certain information to the public • Formal dissolution

19. Partnership • Register under the Registration of Business Act, 1956 • A partner cannot transfer his status to someone else without the consent of all partners • The maximum number of members is twenty • Constitution of partnership may be formed orally or in writing • No need to supply information to the public • Partnership may be dissolved informally

20. Sole-proprietorship Sole-proprietorship • Register under the Registration of Business Act, 1956 • May transfer his business to someone else • Only one person in a sole-proprietorship • No agreement/constitution is necessary • No need to publish any information to the public • May be dissolved informally • Even though registration is limited, but all your personal properties are at risk if your company face problems.

21. Private and Public Companies A company having a share capital may be incorporated as a private company if its Memorandum of Articles: 1. Restricts the right to transfer its shares 2. Limits the number of members to not more than 50 3. Prohibits any invitation to the public to subscribe for any shares 4. Prohibits any invitation to the public to deposit money with the company

22. Memorandum & Articles of Association (MAA) • MAA defines the essential components of the structure of the company • MAA provides information to those who do business with the company • It is a set of regulations for management of the company • MAA is a contract under seal binding both the members and the company

23. Franchises Advantages of Franchises • Management And Marketing Assistance • Personal Ownership • Nationally Recognised Name • Financial Advice And Assistance. • Lower Failure Rate. Disadvantages of Franchises 1. Large Start-up Costs. • Shared Profit • Management Regulation. 4. Coattail Effects. 5. Restriction On Selling. 6. Fraudulent Franchisors.

24. Marketing Mix

25. Dream Business Burke Hedges (1999) defined a dream business as having 5 criterion: • Residual Income • Global Market • Sellable and willable • Duplicable System • Low investment and low maintenance

26. Hofstede Model in Understanding National Culture • Power distance (PD) - the extend to which members of a society accept that power in an institution or organisation is distributed unequally. • Uncertainty avoidance (UIA) - the degree, to which members of a society feel uncomfortable with uncertainty and ambiguity, which leads them to support beliefs promising certainty and maintain institutions protecting conformity.

27. Risk Taking and Failing • Tom Peters in his “Liberation Management” says the same thing that “failure is the engine of Capitalism. More failures produce more information, more experiments than anything else. Very often success is only the accidental by-product of failure. People always find this difficult to accept”. • Initial disaster have made Ted Tate and Heinecke successful businessmen.

28. Capital • Capital is essentially money that you need to start the business with OR the pool of money available to finance and run your business. • Equity capital =The money contributed by you and other investors. Equity represents ownership. • Debt Capital = The money lent to you by financial institutions or other lenders • Short-term liabilities enable you to run your business now while conserving cash. E.g.: Account payables and accruals (spontaneous financing)

29. Breakeven Analysis • Breakeven point = point at which the business really turns profitable • Breakeven analysis, or cost-volume-profit analysis, is concerned with relationship between cost, volume and profit. • At Breakeven = the volume of sales is sufficient to cover all fixed and variable costs; it is a point at which revenues equal costs. No profit or loss.

30. Contribution margin Sales = CM Ratio Break-even point Fixed costs Unit contribution margin = Fixed expenses + Target profit Unit contribution margin Units sold to earn the target profit = Breakeven Analysis

31. Contribution Margin Contribution margin = unit selling price (SP) less variable cost per unit (VC) Example: Fixed cost RM 20,000 Variable cost RM 1.00 per unit Selling price RM 3.00 per unit Current sales volume 40,000 units The breakeven point can be calculated such that: Contribution margin = SP-VC = RM3.00 – RM1.00 = RM 2.00 Breakeven point in units = RM 20,000/ RM 2.00 = 10,000 units

32. Major Sources of Short Term Capital Short term loans – These are basically • loans from banks for a fixed amount and for a fixed period of time. • the interest rates charged on the amount borrowed are fixed and • the loans can be extended for only a few months to a few years. • repayments are on instalment basis but a lump sum payment is allowed depending upon the banks’ agreement. • For this kind of loan, security is often required.

33. Major Sources of Short Term Capital Bank overdraft – • an arrangement with a bank to borrow up to a predetermined maximum limit but not necessarily within a specified period. • The borrower can draw from his current account as and when the needs arise • an interest rates of about 2-5% above the bank’s base lending rate will be charged

34. Major Sources of Short Term Capital Bridging loans – • extended for a specified time period at the end of which the fund with which the repayment will be made is available. • extended for the purpose of selling old premises or buying new properties.

35. Major Sources of Short Term Capital Revolving credits – • agreement by the bank to lend a certain amount of money over a specified period of time. Normally it is for a short period of three months and may be renewed once expires. • more like a hybrid of short and medium term loan facilities since the company is able to borrow and repay the loan for a few years.

36. Major Sources of Short Term Capital Invoice discounting – • similar to factoring • the bank will advance a certain percentage of the company’s trade debt and • the company will in turn repay the amount advanced together with the interest charged.

37. Major Sources of Short Term Capital Debt factoring – • the bank advances an amount of money to a company and then takes over the management or rather the collection of trade debts for a commission. • This enables the company to free up its cash flow, which would otherwise tied down in its receivables.

38. Major Sources of Short Term Capital Trade credits – • extended by the supplier of goods to the business. • an important and cheap source of financing. • The period of credit may vary from one to three months but may also be extended for a longer period depending on the kind of goods, suppliers’ financial position and the cash discount given. • The cash discount is given to encourage early settlement of credits but is also a cost to the purchaser should they decide against settling the debts within a shorter credit period.

39. The Basic Accounting Equation Assets = Liabilities + Owner’s Equity

40. Assets • Assets are resources owned by a business. • They are things of value used in carrying out such activities as production and exchange.

41. Liabilities • Liabilities are claims against assets. • They are existing debts and obligations.

42. Owner’s Equity • Owner’s Equity is equal to total assets minus total liabilities. • Owner’s Equity represents the ownership claim on total assets. • Subdivisions of Owner’s Equity: 1 Capital 2 Drawing 3 Revenues 4 Expenses

43. End Good Luck!