ESBM
salluvarghese
10641FA_9867FA_EntrepreneurshipandSmallBusinessManagement011.pptxEntrepreneurship and Small Business Management
-by Tausif Mulla
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Learning Outcome 01:
Explore and illustrate the range of venture types that might be considered entrepreneurial
Learning Outcome 02:
Assess the impact of small business on the economy
Learning Outcome 03:
Determine and assess the key aspects of an entrepreneurial mindset.
Learning Outcome 04:
Examine the different environments that foster or hinder entrepreneurship
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Concept of Entrepreneur
Who is an 'Entrepreneur‘?
An entrepreneur is an individual who, rather than working as an employee, runs his/her own business and assumes all the risks and rewards of a given business venture.
Entrepreneurship is the propensity of the mind to take calculated risks with confidence to achieve a pre determined business or industrial objective.
It is the risk taking ability of an individual coupled with correct decision making.
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Who is your favorite entrepreneur?
Concept of Entrepreneurship
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https://www.youtube.com/watch?v=VkQw4NQk2YE
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Motivation
Passion
Creativity and Persuasiveness
Versatility
Superb Business Skills
Risk Tolerance
Drive
Vision
Flexibility and Open-Mindedness
Authoritativeness
Characteristics of an Entrepreneur
Source: https://www.monster.com/career-advice/article/entrepreneur-traits
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https://www.youtube.com/watch?v=s7N-9E_e-wk
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Activity
Search for famous entrepreneurs and briefly talk about their ventures
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Hardworking
Energetic
Resourceful
Visualizes change (ex: Chromebooks by Sundar Pichai)
Planner and believes in systematic work
Motivation towards achievement
Creative
Clarity
Confidence
Dreamer
Instinct
Qualities of Entrepreneurs
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Joseph A Schumpeter view’s
The Entrepreneur is an individual who introduces something new in the economy-
A method of production not yet tested by experience in the branch of manufacturing.
A product which the consumers are not yet familiar (Ex: Tesla solar roof tiles)
A new source of raw material (Ex: New processor for mobiles)
New market (Ex: Tata Nano in European market)
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Peter Drucker’s views
Entrepreneurs are innovators.
Entrepreneur is one who always searches for changes, responds to it as an opportunity. Ex: Mark Zuckerberg
Innovation is a specific tool of an entrepreneur hence an effective entrepreneur converts a source into a resource
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Scope of Entrepreneurship
Perception of market opportunities (original or imitative).
Gaining command over scarce resources.
Marketing of the product and responding to competition.
Dealing with the public bureaucracy (concessions, licenses, taxes).
Management of human relations within the firm.
Management of customer and supplier relations.
Financial management.
Production management records, supervision, coordinating input flows with orders, maintenance.
Acquiring and overseeing assembly of the factory.
Industrial engineering (minimizing inputs with a given production process).
Upgrading processes and product quality.
Introduction of new products.
Scope of Entrepreneurship by Kilby
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Qualities and Attributes needed to become a successful Entrepreneur
High level of motivation
Risk-taker
Self-confident
Excellent Leadership qualities
Good Business acumen
Managerial competence
Problem solving attitude
Flexibility and adaptability
Realistic approach to planning
Ability to perceive opportunities and threats
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10 core principles of Entrepreneurship
https://s-media-cache-ak0.pinimg.com/564x/19/f5/6b/19f56b44d3b0f575a0f615a72707cae3.jpg
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Activity
Entrepreneur’s name:
Business name:
Type of Business:
What kind of business do you run?
How long you have been in this business?
What was your inspiration for starting the business?
What is one thing you wish you would have known prior to starting your own business?
What advice do you have for entrepreneurs who are just starting out?
Interviewing an Entrepreneur
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Trends affecting the economic growth are:
Technology as a reservoir
Competition in domestic and international markets
Role of inventions
Government as stimulator
Entrepreneurial and Intrapreneurial development.
Innovative capital formation
Active financial sector
Progressive management
Quality as a goal
Supremacy of the customer
Collaborative relationships
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Why entrepreneurs are important to the economy?
https://www.youtube.com/watch?v=KEuTpRkZqiY
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Theory of High Achievement by Mc Cleland
3 Basic Needs
Need for Achievement
Need for Affiliation
Need for Recognition
McClelland identified 2 characteristics of Entrepreneurship.
Doing things in a new and better way
Decision making under uncertainty
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Advantages of developing and encouraging Entrepreneurship
Employment Generation: The entrepreneurial ventures are generally started in small-scale, utilizing the labor intensive techniques. Therefore, these venture generate a lot of employment for the regional manpower.
Distribution of Economic power: Small-scale Business are the seed-bed for entrepreneurship therefore they help in equitable distribution of economic power instead of it getting concentrated in the hands of certain big industrialists.
Optimum utilization of regional resources: The small-scale entrepreneurs generally rely on the regional resources for their production needs.
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Advantages of developing and encouraging Entrepreneurship (cont..)
Meeting the demand gap by seizing appropriate opportunity: Entrepreneurs have the knack of seizing the opportunities existing in the environment as pointed out earlier. Therefore they always study the demand gap keenly and utilize their entrepreneurial ventures too meet such demand gaps.
Export potential: Whenever entrepreneurial ventures are the results of innovations, they create an opportunity for export. As we are aware a number of entrepreneurial ventures are the results of innovation. Hence, they always add to the export potential.
Regional Development: Regional development is one of the key advantage of entrepreneurial ventures.
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The individual. Individuals who initiate, establish, maintain and expand new enterprises generate entrepreneurship in a society.
Environment. This factor is constituted by the socio-political and economic policies of the government and financial institutions and the opportunities available in a society as a result of such policies.
Socio-cultural factors. Entrepreneurs grow in the traditions of families and societies and internalize certain values and norms from these sources. The contribution from these socio-cultural factors, in the process of transmission, gets filtered through the individual whom it seeks to influence.
Support system. Support systems that work for the development of entrepreneurs include financial and commercial institutions, research, training, extension and consultancy services, as also large industrial units interested in developing ancillary industries.
Factors Influencing Entrepreneurship
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https://www.youtube.com/watch?v=D3yNfU-svAU
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Activity
Name your favorite entrepreneur : ______________
Name of the venture: ________________
Life story: _______________
His/her trait as an entrepreneur: __________________
Where has the business reached now: _________________
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SharkTank
https://www.youtube.com/watch?v=9oj8WWLqy9o
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Types of Ventures
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Sole Proprietorship
One of the most popular business types, namely because it's one of the simplest and only requires an individual.
In a nutshell, a sole proprietorship is a business that's owned by just one person.
There isn't a legal or financial distinction between the business and the business owner, which means that you as the business owner are fully accountable for all of the profits, liabilities and legal issues that your business may encounter.
Instead, just by owning a business on your own, a sole proprietorship is automatically associated with your new business.
Keep in mind, however, that depending on your product or service (and your location), you may need to access a specific license or other documents.
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Advantages of Sole Proprietorship:
Many sole proprietorships are one-owner businesses.
An individual owns and operates the business and is responsible for all business transactions.
He may or may not have any employees.
He can close it, sell it or pass it down to his heirs at any time.
A sole proprietor pays taxes as a part of his individual income tax filing.
Some businesses may require licensing.
However, the costs of obtaining a license for sole proprietors are substantially less than those for corporations.
Start-up costs for sole proprietorship are very low.
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Disadvantages of Sole Proprietorship:
The main disadvantage of sole proprietorships is the owner's personal liability for all debts incurred by the business.
Creditors may come after an owner's personal assets if a small business is unable to cover debts.
Sole proprietors may have difficulty obtaining business loans.
Financial institutions are reluctant to lend to them as many small business loans go into default when companies struggle to stay afloat.
While a sole proprietorship does not pay taxes, the owner may have to pay higher taxes as his profits increase.
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Two heads are better than one, right?
A partnership might be appropriate if your business is owned by two or more people.
Keep in mind that with this type of business, business responsibilities, including financial and legal, fall upon each business owner.
Depending on how the ownership is divided (either equally or not), there are different types of partnerships for you to explore from a legal standpoint.
A partnership does require that you register your business with your state and establish an official business name.
After that, you'll then be required to obtain a business license, along with any other documentation that your state office can help you with.
Partnership
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Advantages of Partnership:
Capital – Due to the nature of the business, the partners will fund the business with start up capital. This means that the more partners there are, the more money they can put into the business, which will allow better flexibility and more potential for growth. It also means more potential profit, which will be equally shared between the partners.
Flexibility – A partnership is generally easier to form, manage and run. They are less strictly regulated than companies, in terms of the laws governing the formation and because the partners have the only say in the way the business is run (without interference by shareholders) they are far more flexible in terms of management, as long as all the partners can agree.
Shared Responsibility – Partners can share the responsibility of the running of the business. This will allow them to make the most of their abilities. Rather than splitting the management and taking an equal share of each business task, they might well split the work according to their skills. So if one partner is good with figures, they might deal with the book keeping and accounts, while the other partner might have a flare for sales and therefore be the main sales person for the business.
Decision Making – Partners share the decision making and can help each other out when they need to. More partners means more brains that can be picked for business ideas and for the solving of problems that the business encounters.
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Disadvantages of Partnership:
Disagreements – One of the most obvious disadvantages of partnership is the danger of disagreements between the partners. Obviously people are likely to have different ideas on how the business should be run, who should be doing what and what the best interests of the business are.
Liability – Ordinary Partnerships are subject to unlimited liability, which means that each of the partners shares the liability and financial risks of the business. Which can be off putting for some people. This can be countered by the formation of a limited liability partnership, which benefits from the advantages of limited liability granted to limited companies, while still taking advantage of the flexibility of the partnership model.
Taxation – One of the major disadvantages of partnership, taxation laws mean that partners must pay tax in the same way as sole traders, each submitting a Self Assessment tax return each year.
Profit Sharing – Partners share the profits equally. This can lead to inconsistency where one or more partners aren’t putting a fair share of effort into the running or management of the business, but still reaping the rewards.
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Limited Partnership
A limited partnership, or LP, is an offshoot version of a general partnership, and while it may not be as common, it's a great bet for businesses who are looking to raise capital from investors who aren't interested in working the day to day aspects of your operations.
With an LP, there are two sets of partners, one of which is known as a general partner.
The general partner is usually involved in the everyday business decisions, and has personal liability.
On the other hand, there's also a limited partner (typically an investor), who are not liable for debts and don't partake in regular business management of said company.
Just like a general partnership, if you enter an LP agreement, you'll need to register your business with the state, establish a business name.
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Corporation
A corporation, is a fully independent business (when public) that's made up of multiple shareholders who are provided with stock in a new business.
The only problem with this is that your profits will be taxed twice, both at the corporate level and at the personal level.
Don't let this fact deter you however - this is extremely common, and if you currently work for a company with multiple employees, that's likely the business structure they're using.
Most likely, if you're starting off as a smaller business, particularly one that only operates online, declaring yourself as a corporation wouldn't be appropriate.
But if you truly are a corporation, you'll need to file very specific documents with the state, followed by obtaining the appropriate business licenses and permits.
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Limited Liability Company (LLC)
An LLC is a newer type of business that is a blend between a sole proprietorship and a corporation.
Instead of shareholders, with LLCs, owners are referred to as members.
No matter how many members a particular LLC has, there must be a managing member who takes care of the daily business operations.
The main difference between an LLC and a corporation is that LLC’s aren't taxed as its own business entity.
Instead, all profits and losses are moved from the business to the LLC members, who then, instead of having to report business finances on a corporate return, can report profits and losses on a personal federal tax return.
The nice thing about pursuing an LLC is that members aren't personally liable for business decisions or actions of the company in question, and there's far less paperwork involved in creating an LLC as compared to a corporation.
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Nonprofit Organization
It’s a business organization that's intended to promote educational or charitable purposes.
The "non-profit" aspect comes into play in that any money earned by the company must be kept by the organization to pay for its expense, programs, etc.
Keep in mind that there are several types of nonprofits available, many of which can receive "tax exempt" status.
This process requires filing paperwork, including an application, with the government for them to recognize you as a nonprofit organization.
Depending on the parameters of your new business, they'll be able to tell you which category you best fall under.
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Cooperative
A business that's fully owned and operated for the benefit of the members of the organization that use its services.
In other words, whatever is earned by the cooperative is then shelled out among the members themselves, and aren't required to be paid out to any external stakeholders, etc.
Unlike other types of businesses, which have shareholders, cooperatives sell shares to cooperative "members," who then have a say in the operations and direction of the cooperative itself.
The main difference in the process of becoming a cooperative, as opposed to the other types of businesses listed, is that your organization must create bylaws, have a membership application and have a board of directors with a charter member meeting.
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Type of Business Ownership
https://www.youtube.com/watch?v=gG9JRCTpklA
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Advice for entrepreneurs by Richard Branson
https://www.youtube.com/watch?v=VH35Iz9veM0
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Franchisee
FRANCHISOR OR FRANCHISEE?
A franchise is merely a legal document that defines a commercial relationship between the owner of a trademark or trade name and an individual or group that wants to use that identification in business.
If you own a trademark you can choose to distribute your product all by yourself, or you can create a contract with others who wish to distribute the product you created.
In the simplest form, a franchisor owns the right to the name or trademark, and sells that right to a franchisee.
This is known as a product/trade name franchising.
The franchise often provides a full range of services including site selection, training, product supply, marketing plans, and even assistance in obtaining financing.
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| ADVANTAGES | DISADVANTAGES |
| Established product or service | High costs of agreement |
| Technical and managerial assistance | Too high expectations of success |
| Quality control standards | Over dependence |
| Less operating capital | Fixed performance standards |
| Higher probability of survival | Competition with performance of other franchisees |
| Opportunities for growth, sub franchisees | Restrictions on freedom of decision |
| Potential lower cost supplies because of quantity purchasing | No choice of suppliers |
| Use of franchisor’s secret methods | Fear of termination of agreement |
Franchisee Pro’s & Con’s
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Franchisor needs to provide…..
Promotional assistance in the form of a marketing plan, promotional materials, advertising, publicity etc.
Assistance in selection of area site.
Adequate insurance coverage (fire, inventory, burglary, accident and health insurance, liability etc.).
A trademark that will distinguish the business from competition.
Guidelines on the purchase of inventory and equipment.
Written requirement on restrictions on goods sold.
Restrictions as they apply to competition with other company franchisees.
Terms of agreement and renewal
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Activity
Plan a franchisee for a kindergarten school in UAE?
Points to cover:
Name of the kindergarten
Capital needed to take up the franchisee
What type of licenses are required?
Space requirements
Staff requirements
Age groups
Price points for Day care, Playgroup, LKG, UKG
Marketing support provided by the Franchisor
What royalty will you charge?
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SharkTank
10 most successful SharkTank businesses
https://www.youtube.com/watch?v=pjKbagr2Bvg
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If you wish to be an entrepreneur, ask yourself a few basic questions:
Is your business a charity or is it for-profit?
Is your business a partnership?
How much personal liability are you comfortable with accepting?
How much equity can you give to raise the capital?
How many employees will you need in first 3-6 months?
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Types of Entrepreneurs
1) Trading Entrepreneur:
As the name itself suggests, the trading entrepreneur undertake the trading activities.
They procure the finished products from the manufacturers and sell these to the customers directly or through a retailer.
These serve as the middlemen as wholesalers, dealers, and retailers between the manufacturers and customers.
A) Based on the Type of Business:
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2) Manufacturing Entrepreneur:
The manufacturing entrepreneurs manufacture products.
They identify the needs of the customers and, then, explore the resources and technology to be used to manufacture the products to satisfy the customers’ needs.
In other words, the manufacturing entrepreneurs convert raw materials into finished products.
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3) Agricultural Entrepreneur:
The entrepreneurs who undertake agricultural pursuits are called agricultural entrepreneurs.
They cover a wide spectrum of agricultural activities like cultivation, marketing of agricultural produce, irrigation, mechanization, and technology.
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B) Based on the Use of Technology:
1) Technical Entrepreneur:
The entrepreneurs who establish and run science and technology-based industries are called ‘technical entrepreneurs.’
They use new and innovative methods of production in their enterprises.
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Smart Flower Solar Panels
https://www.youtube.com/watch?v=WuZFG1R0hyY
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2) Non-Technical Entrepreneur:
Based on the use of technology, the entrepreneurs who are not technical entrepreneurs are non-technical entrepreneurs.
The forte of their enterprises is not science and technology.
They are concerned with the use of alternative and imitative methods of marketing and distribution strategies to make their business survive and thrive in the competitive market.
Ex: Dealer of a generator
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C) Based on Ownership:
1) Private Entrepreneur:
A private entrepreneur is one who as an individual sets up a business enterprise. He / she is the sole owner of the enterprise and bears the entire risk involved in it.
2) State Entrepreneur:
When the trading or industrial venture is undertaken by the State or the Government, it is called ‘state entrepreneur.’
3) Joint Entrepreneurs:
When a private entrepreneur and the Government jointly run a business enterprise, it is called ‘joint entrepreneurs.’ For example, DEWA & EMAAR Properties
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D) Based on Gender:
1) Men Entrepreneurs:
When business enterprises are owned, managed, and controlled by men, these are called ‘men entrepreneurs.’
2) Women Entrepreneurs:
Women entrepreneurs are defined as the enterprises owned and controlled by a woman or women having a minimum financial interest of 51 per cent of the capital and giving at least 51 per cent of employment generated in the enterprises to women.
Arianna Huffington
Sara Al Madani
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E) Based on the Size of Enterprise:
1) Small-Scale Entrepreneur:
An entrepreneur who has made investment in plant and machinery up to AED 500,000 is called ‘small-scale entrepreneur.’
2) Medium-Scale Entrepreneur:
The entrepreneur who has made investment in plant and machinery above AED 500,000 but below AED 2.5 Million is called ‘medium-scale entrepreneur.’
3) Large-Scale entrepreneur:
The entrepreneur who has made investment in plant and machinery more than AED 2.5 Million is called ‘large-scale entrepreneur.’
http://www.yourarticlelibrary.com/entrepreneur/top-10-types-of-entrepreneurs-explained/40648/
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Development of Start-up
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Growth of Start Up
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Who is a Serial Entrepreneur?
An entrepreneur who continuously comes up with new ideas and starts new businesses.
As opposed to a typical entrepreneur, who will often come up with an idea, start the company, and then see it through and play an important role in the day to day functioning of the new company.
A serial entrepreneur will often come up with the idea and get things started, but then give responsibility to someone else and move on to a new idea and a new venture.
This can be a good thing if the individual has lots of unique ideas and is the best one suited to get each one started, but can be a bad thing if the individual stops putting time into a company that needs his or her help, in order to try to move forward with a new idea that may or may not succeed.
Mark Cuban – Owner of NBA Dallas Mavericks | Shark Investor on Shark Tank
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Activity
Name each type of entrepreneur
Trading Entrepreneur
Manufacturing Entrepreneur
Agriculture Entrepreneur
Technical Entrepreneur
Non technical entrepreneur
Private entrepreneur
State entrepreneur
Joint entrepreneur
Based on gender
Small scale entrepreneur
Medium scale entrepreneur
Large scale entrepreneur
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Corporate Entrepreneurship – defining the concept
Corporate entrepreneurship is the process by which teams within an established company conceive, foster, launch and manage a new business that is distinct from the parent company but leverages the parent’s assets, market position, capabilities or other resources.
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Who is an Intrapreneur?
Intrapreneur is a person who focuses on innovation and creativity, transforms dream or idea into profitable venture by operating within organizational environment.
Entrepreneurship within an existing business.
Example – 3M
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How to create Intrapreneurial environment in the corporates?
Research and Development
Funding
Creating a climate / ecosystem
Training & Development
Reward System
Multi-disciplinary Team
Commitment
Examples: 3M, GE, Apple, Google,
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Corporate Entrepreneurship Process
Strategic Renewal
Innovation
Corporate Venturing
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Creating an Innovation Culture for Corporate Entrepreneurship
The story of innovation has not changed. It has always been a small team of people who have a new idea, typically not understood by people around them and their executives.
Eric Schimdt – Former CEO Google
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Entrepreneurship in Public Sector
Public entrepreneurship is defined as the generation of a novel or innovative idea and the design and implementation of the idea into public sector practice.
[Public entrepreneur is] an individual who undertakes purposeful activity to initiate, maintain or elevate one or more public sector organizations.
Individuals who generate, design, and implement innovative ideas in the public domain are called public entrepreneurs.
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Comparing Independent, Corporate, and Public Entrepreneurs
| Category | Independent Entrepreneur | Corporate Entrepreneur | Public Entrepreneur |
| Organizational type | New enterprise | Existing business | Public sector organization |
| Person | Independent founder | Corporate executive | Public officer |
| Main activity | Create and grow business | Create value within an innovate project | Create value for citizens by bringing together unique combinations of resources |
| Skills | Know business intimately, more business acumen than managerial or political skill | Strong technical skills or product knowledge; good managerial skills; weak political skills | Strong political skills |
| Risks and failure | Assumes considerable financial and personal risk | Likes moderate risks | Calculated risk-taker |
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Comparison between Entrepreneurs and Intrapreneurs
| Parameters | Intrapreneurial Characteristics | Entrepreneurial Characteristics |
| Primary motives | Freedom and access to corporate resources. Proactive but does respond to corporate rewards and recognition. | Wants freedom. Goal oriented, self-reliant and self motivated |
| Time orientation | Depending on venture, 5-10years. Looks for incremental achievements. | Depending on venture 5-10 years. Looks for incremental achievements |
| Skills and experience | Much like the entrepreneur, but doesn’t get discouraged by hierarchy. | Knows business very well and can put together resources. |
| Environments | Same as entrepreneur plus must deal with corporate environment. | Macro-environment and microenvironment relevance. |
| Resources | Derived primarily from slack within the Organization | Assembled and acquired from the factor markets for resources. |
| Failure and mistakes | Sensitive to corporate attitudes. May attempt to hide errors. Will learn from mistakes | Learns from mistakes. Pays for own errors. All errors public and visible. |
| Decisions | Needs to get others to share vision. More willing to accept compromise. | Follows own vision and makes own decisions. May not compromise. |
| Attitude to bureaucracy | Dislikes the system but has learned to live with and manipulate it. | May have one done well in the system, but grew impatient and left to start own venture. |
| Risk preference | Accepts moderate risk. Puts career and job on the line. | Accepts moderate risk. Has money, reputation in jeopardy. |
| Attitude to status | Considers corporate symbols demeaning and worthless. | Willing to accept long period of low status until venture is a success. |
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Social Entrepreneurs
A person who pursues an innovative idea with the potential to solve a community problem.
These individuals are willing to take on the risk and effort to create positive changes in society through their initiatives.
Examples of social entrepreneurship include microfinance institutions, educational programs, providing banking services in underserved areas and helping children orphaned by epidemic disease.
The main goal of a social entrepreneur is not to earn a profit, but to implement widespread improvements in society.
However, a social entrepreneur must still be financially savvy to succeed in his or her cause.
Muhammad Yunus – Founder of Grameen Bank
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Activity
Look for a social entrepreneur.
Study the life of the entrepreneur
What change he/she brought to the society?
Can you replicate the same venture in UAE?
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Characteristics of Social Entrepreneurs
Achieves large scale, systemic and sustainable social change through a new invention, a different approach, a more rigorous application of known technologies or strategies, or a combination of these.
Focuses first and foremost on the social and/or ecological value creation and tries to optimize the financial value creation.
Innovates by finding a new product, a new service, or a new approach to a social problem.
Continuously refines and adapts approach in response to feedback.
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Growth of Social Economy
Increasing the capacity and sustainability of organizations to develop, enhance and deliver support programmes and create more employment opportunities.
Encouraging and supporting social innovation approaches to tackle poverty, creating stronger links between social economy organizations, communities, academia and research institutes.
Providing opportunities for individual social entrepreneurs to participate in a training and leadership activities. This will improve their motivational skills, knowledge, personal resilience, and capacity to grow their businesses.
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Majority of countries set up funds dedicated growth of social economy.
Developing Social Entrepreneurs
Objectives:
To support micro, small and medium-sized enterprises
To support social innovation projects.
To support projects which increase R & D capacity and investment in the social economy
Growth of Social Economy (cont..)
https://rs.boell.org/en/2014/05/06/social-economy-alternative
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