ENTREPRENEURSHIP MANAGEMENT

Prof Bharat Nadkarni

Reference BooksEntrepreneurship by Hisrich & PetersEntrepreneurship Management by P N Singh & J C SabooEntrepreneurial Management by R K MittalEntrepreneurship Development Programmes & Practices by J S SainiEntrepreneurship strategies and resources by Marc D DollingerIndian Entrepreneurship its past and present by V Chernovskaya

Entrepreneurship Management

Business Excellence Prof Bharat NadkarniWho are the Stakeholders of Business ?

Shareholders and Promoters

Customers

Employees

Suppliers and Partners (incl Contractors, Agents etc)

Government

Society

Business Excellence Prof Bharat NadkarniMost Admired BusinessBalancing and Exceeding the Expectations of all its Stakeholders.

Innovation is the sole cause of profit or Success

N D B

Business Excellence Prof Bharat NadkarniEmerging Waves

FactorYesterdayToday

MarketSellersBuyersPlayersFewSeveralKind of PlayersNationalGlobalPrice LevelHighDroppingConsumerNo choiceMultiple ChoiceTechnologyLowHighQualityAverageHighDeliveryWeeks/Months/YearsOff the shelfNeedsLimitedEnhancedResponseSluggishQuickRelationCurtRespectApproachMassPersonalised

Entrepreneurship Management Entrepreneurial TraitsNeed for achievementHigh level of motivationCreative / InnovativeModerate risk takerAgility / quickness in analysing and picking up opportunitiesSelf ConfidenceExcellent Leadership QualitiesGood business acumenIndependence of thought & action Flexible/ Ready to changeResilience

Entrepreneurship Management Who is an EntrepreneurEntrepreneur, 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 noteCreating something different with valueDevoting necessary time & effortAssuming accompanying financial, psychic and social risksReceiving resulting rewards Monetary, Personal satisfaction, independence

Entrepreneurship Management

Decision Process for a potential entrepreneurChange from present lifestyle- Work Environment- Disruption Form new enterpriseDesirablePossible- Cultural - Government- Family - Background- Teachers - Marketing- Peers - Financing- Role Models

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.

Entrepreneurship Management Origin & DevelopmentMarco Polo as a Trader

Thomas Edison as an Inventor

Narayan Murthy / Shahnaz Huassain as Innovators

J N Tata & Dhirubhai Ambani as Visionaries

Venture Capital conceptThe 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 re-organizing a new industry.

Entrepreneurship Management

Challenges InvolvedPerson 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 environmentalFactors. This could be represented asEB = f (P,E)whereP = Personality characteristicsE = Environmental factors, such asSocial/ psychological factors including family, peer group, formal and informal association etcFinancialMaterial availabilityTechnology availability/ applicabilityThese environmental factors could be either nurturant orimpediments to entrepreneurial development.

Entrepreneurship ManagementCase StudyWorking 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 ManagementThat 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. Fantasy stageTentative decision making stageStage of exploration and preparation for the decisionCommitment and Stability stage

Advantages of Entrepreneurship

To an IndividualSelf EmploymentEmployment for near & dearProlonged career for next generationsInnovation & CreativityUnlimited income/ higher retained incomeFreedom to use own ideasIndependenceSatisfaction

Advantages of Entrepreneurship

To the NationProvides larger employmentResults in wider distribution of wealthMobilises local resources, skills and savingsAccelerates the pace of economic developmentStimulates innovation & efficiency.Competition

Factors favouring EntrepreneurshipGrowth of education science, technology & managementDeveloped infrastructure facilitiesFinancial assistanceTraining facilitiesProtective and promotional policiesGlobalization

Entrepreneurship Theories1.1600 : French verb Go between or To undertake2.1700 : Person bearing Risks of Profit in a fixed price contract3.1725 : Richard Cantillon Person bearing risks is different from capital supplier (Risk) 4.1803 : J B Say Shifts economic resources out of an area oflower into an area of higher productivity & greater yields (Value Addition)5.1934 : Joseph Schumpeter Innovation is the sole cause of profit.6.1961 : David McClelland Need for Achievement N Ach factor - highly motivated, energetic, moderate risk taker.

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 Intrapreneur10.1985 : 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 developmentEmployment Generation

Distribution of economic power

Optimum utilisation of regional resources

Meeting the demand gap by seizing appropriate opportunityExport potential

Regional development

Karl Vespers TheoryEntrepreneurship Management

Entrepreneurship Management

Entrepreneur to an economistOne 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 psychologistOne 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 businessmanOne 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 MOTIVATIONThree basic types of motivating needs1]Need for achievementHave 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 powerPeople 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 MOTIVATION3]need for affiliationDerive 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 MOTIVATIONHow it applies to managersEntrepreneurs : showed very high need for achievement ; fairly high need for power ; low in their need for affiliationIn 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

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