Section No.

2 The Practice of Entrepreneurship

Topics Covered The Process of Entrepreneurship, Entrepreneurial Management, The Entrepreneurial Business Entrepreneurship in Service Institutions The New Venture

The Process of Entrepreneurship:

It is the process through which an entrepreneur creates a new venture. An entrepreneur must fin , evaluate an evelop an opportunit! "! overcoming the forces. #orces mean those forces that resist the creation of something new. The process of entrepreneurship has four istinct phases as$ %. '. ). ,. I entification & Evaluation of the opportunit!. (evelopment of the "usiness plan. (etermination of the re*uire +esources. Management of the resulting enterprise.

1.

Identification & Evaluation of Opportunity:

The first phase of Entrepreneurship process "! which an entrepreneur comes up with the opportunit! for a new venture. This phase contains the following assessment an anal!sis as$ %. -pportunit! Assessment '. .reation & /ength of -pportunit! ). +eal an Perceive Values of opportunit! ,. +is0 an +eturn of the opportunit! 1. -pportunit! Vs Personal S0ills & 2oals 3. .ompetitions Environment

2.

evelop!ent of the "usiness Plan:

The secon phase of Entrepreneurship where the process of escription of the future irection of the "usiness. This is a ver! time consuming phase of the entrepreneurial process. It is important to un erstan the "asic issues involve in eveloping a "usiness plan. Ma4or issues involves in the Business Plan in this phase are as un er$ %5 Title Page '5 Ta"le of .ontents )5 E6ecutive Summar! ,5 Ma4or Sections. (escription of "usiness. (escription of In ustr!. Technolog! Plan Mar0eting Plan #inancial Plan Pro uction Plan -rgani7ation Plan -perational Plan Summar!

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eter!ine the $esources $e%uired:

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The thir phase of entrepreneurship process where resources re*uire for a ressing the opportunit! must also "e etermine . This process starts with an appraisal of the entrepreneur present resources. These inclu es$ %. (etermine +esources Nee e . '. (etermine E6isting +esources. ). I entif! +esources 2aps ,. (evelop access to nee e +esources

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)ana&e the resultin& Enterprise*Or&ani+ation:

The #ourth an last phase, after resources are re*uire , the entrepreneur must use them to implement the "usiness plan. The operational pro"lem of the growing enterprise must also "e e6amine . This phase involves the following wor0outs$ %. (evelop Management St!le '. 8n erstan ing 9e! Varia"les for Successes ). I entif! Pro"lem ,. Implement .entral S!stem 1. (evelop 2rowth Strategies

Entrepreneurial )ana&e!ent:
Entrepreneurship is an attractive career choice. But man! ecisions have to "e ma e "efore launching an managing a new "usiness, no matter its si7e. Among the *uestions that nee to "e answere are$

(oes the in ivi ual trul! want to "e responsi"le for a "usiness: ;hat pro uct or service shoul "e the "asis of the "usiness: ;hat is the mar0et, an where shoul it "e locate : Is the potential of the "usiness enough to provi e a living wage for its emplo!ees an the owner: <ow can a person raise the capital to get starte : Shoul an in ivi ual wor0 full or part time to start a new "usiness: Shoul the person start alone or with partners:

Answers to these *uestions are not empiricall! right or wrong. +ather, the answers will "e "ase on each entrepreneur=s 4u gment. An entrepreneur gathers as much information an a vice as possi"le "efore ma0ing these an other crucial ecisions. The entrepreneur=s challenge is to "alance ecisiveness with caution>to "e a person of action who oes not procrastinate "efore sei7ing an opportunit!>an at the same time, to "e rea ! for an opportunit! "! having one all the preparator! wor0 possi"le to re uce the ris0s of the new en eavor. Preparator! wor0 inclu es evaluating the mar0et opportunit!, eveloping the pro uct or service, preparing a goo "usiness plan, figuring out how much capital is nee e , an ma0ing arrangements to o"tain that capital. Through careful anal!sis of entrepreneurs= successes and failures, econo!ists have i entifie ,ey factors for up-and-co!in& .usiness owners to consi er closel!. Ta0ing them into account can re uce ris0. In contrast, pa!ing them no attention can precipitate the ownfall of a new enterprise.
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)otivation: ;hat is the incentive for starting a "usiness: Is it mone! alone: True, man! entrepreneurs achieve great wealth. <owever, mone! is almost alwa!s tight in the startup an earl! phases of a new "usiness. Man! entrepreneurs o not even ta0e a salar! until the! can o so an still leave the firm with a positive cash flow. Strate&y: ;hat is the strateg! for istinguishing the pro uct or service: Is the plan to compete solel! on the "asis of selling price: Price is important, "ut most economists agree that it is e6tremel! ris0! to compete on price alone. /arge firms that pro uce huge *uantities have the a vantage in lowering costs. $ealistic /ision: Is there a realistic vision of the enterprise=s potential: Insufficient operating fun s are the cause of man! faile "usinesses. Entrepreneurs often un erestimate start?up costs an overestimate sales revenues in their "usiness plans. Some anal!sts a vise a ing 1@ percent to final cost estimates an re ucing sales pro4ections. -nl! then can the entrepreneur e6amine cash flow pro4ections an eci e if he or she is rea ! to launch a new "usiness.
efine Entrepreneurship-)ana&e!ent S,ill0 <aving an entrepreneurial st!le of managing ma! "e thought of as having the structure an fle6i"ilit! to assist an organi7ation to succee . The manager implementing an entrepreneurial st!le must "e fle6i"le in a apting to the rapi changing of the mar0et con itions an i eas, which are important factors for eveloping strategies for a compan!As growth. Entrepreneurial managers ma! "e thought of as "eing aggressive, survivalist, creative, passionate, honest, an an innovator of i eas. The! often strive to ma0e the vision of the organi7ation a realit!. More organi7ations are "eginning to a opt an entrepreneurial structure, which often provi es an intimate an enthusiastic organi7ation. -ne in which the compan! is Bmallea"le an responsiveB to lea ershipAs plan. Parta0ing in such a st!le of operating ma! "e ris0! to the organi7ation rel!ing on the activities of one in ivi ual.

Entrepreneurial "usiness:
-ne important choice that new entrepreneurs have to ma0e is whether to start a "usiness alone or with other entrepreneurs. The! nee to consi er man! factors, inclu ing each entrepreneur=s personal *ualities an s0ills an the nature of the planne "usiness. In the 8.S, for instance, stu ies show that almost half of all new "usinesses are create "! teams of two or more people. -ften the people 0now each other wellC in fact, it is common for teams to "e spouses. There are man! a vantages to starting a firm with other entrepreneurs. Team mem"ers share ecision?ma0ing an management responsi"ilities. The! can also give each other emotional support, which can help re uce in ivi ual stress. .ompanies forme "! teams have somewhat lower ris0s. If one of the foun ers is unavaila"le to han le his or her uties, another can step in. Team interactions often generate creativit!. Mem"ers of a team can "ounce i eas off each other an D"rainstormE solutions to pro"lems. Stu ies show that investors an "an0s seem to prefer financing new "usinesses starte "! more than one entrepreneur. This alone ma! 4ustif! forming a team.

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-ther important "enefits of teaming come from com"ining monetar! resources an e6pertise. In the "est situations, team mem"ers have complementar! s0ills. -ne ma! "e e6perience in engineering, for e6ample, an the other ma! "e an e6pert in promotion. In general, strong teams have a "etter chance at success. In Entrepreneurs in High Technology, Professor E war +o"erts of the Massachusetts Institute of Technolog! FMIT5 reporte that technolog! companies forme "! entrepreneurial teams have a lower rate of failure than those starte "! in ivi uals. This is particularl! true when the team inclu es a mar0eting e6pert. Entrepreneurs of ifferent ages can create complementar! teams also. -ptimism an a Dcan? oE spirit characteri7e !outh, while age "rings e6perience an realism. In %GG,, for e6ample, Marc An reessen was a talente , !oung computer scientist with an innovative i ea. Hames .lar0, the foun er an chairman of Silicon 2raphics, saw his vision. Together the! create Netscape Navigator, the Internet?"rowsing computer software that transforme personal computing. But entrepreneurial teams have potential isa vantages as well. #irst, teams share ownership. In general, entrepreneurs shoul not offer to share ownership unless the potential partner can ma0e a significant contri"ution to the venture. Teams share control in ma0ing ecisions. This ma! create a pro"lem if a team mem"er has poor 4u gment or wor0 ha"its. Most teams eventuall! e6perience serious conflict. This ma! involve management plans, operational proce ures, or future goals. It ma! stem from an une*ual commitment of time or a personalit! clash. Sometimes such conflicts can "e resolve C in others, a conflict can even lea to selling the compan! or, worse, to its failure. It is important for a new entrepreneur to "e aware of potential pro"lems while consi ering the a vantages of wor0ing with other entrepreneurs. In general, the "enefits of teaming outweigh the ris0s.

The Ne1 /enture:

To a!, starting a new "usiness is passion of entrepreneur. -perating of a new "usiness involves consi era"le ris0 an efforts to overcome the inertia against creating new venture. Entrepreneur here will ta0e the responsi"ilit! of "usiness evelopment an so ta0e the ris0 of survival an en4o! the "enefits an rewar s from "usiness outcome. Entrepreneur is one who is willing to put all ris0s an efforts necessar! to create an start new venture. It is eas! to "e captivate "! the promise of entrepreneurship an the lure of "ecoming one=s own "oss. It can "e ifficult, however, for a prospective entrepreneur to etermine what pro uct or service to provi e. Man! factors nee to "e consi ere , inclu ing$ an i ea=s mar0et potential, the competition, financial resources, an one=s s0ills an interests. Then it is important to as0$ ;h! woul a consumer choose to "u! goo s or services from this new firm: -ne important factor is the uni*ueness of the i ea. B! ma0ing a venture stan out from its competitors, uni*ueness can help facilitate the entr! of a new pro uct or service into the mar0et. It is "est to avoi an entr! strateg! "ase on low cost alone. New ventures ten to "e small. /arge firms usuall! have the a vantage of lowering costs "! pro ucing large *uantities. Successful entrepreneurs often istinguish their ventures through ifferentiation, niche specifica? tion, an innovation.

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(ifferentiation is an attempt to separate the new compan!=s pro uct or service from that of its competitors. ;hen ifferentiation is successful, the new pro uct or service is relativel! less sensi? tive to price fluctuations "ecause customers value the *ualit! that ma0es the pro uct uni*ue. A pro uct can "e functionall! similar to its competitors= pro uct "ut have features that improve its operation, for e6ample. It ma! "e smaller, lighter, easier to use or install, etc. In %GI', .ompa* .omputer "egan competing with Apple an IBM. Its first pro uct was a single?unit personal computer with a han le. The concept of a porta"le computer was new an e6tremel! successful. Niche specification is an attempt to provi e a pro uct or service that fulfills the nee s of a specific su"set of consumers. B! focusing on a fairl! narrow mar0et sector, a new venture ma! satisf! customer nee s "etter than larger competitors can. .hanges in population characteristics ma! create opportunities to serve niche mar0ets. -ne growing mar0et segment in evelope countries comprises people over 31 !ears ol . -ther niches inclu e groups efine "! interests or lifest!le, such as fitness enthusiasts, a venture?travel "uffs, an wor0ing parents. In fact, some entrepreneurs speciali7e in ma0ing Dhomema eE inners for wor0ing parents to heat an serve. Innovation is perhaps the efining characteris tic of entrepreneurship. Visionar! "usiness e6pert Peter #. (ruc0er e6plaine innovation as Dchange that creates a new imension of performance.E There are two main t!pes of pro uct innovation. Pioneering or ra ical innovation em"o ies a technological "rea0through or new?to?the?worl pro uct. Incremental innovations are mo ifications of e6isting pro ucts. But innovation occurs in all aspects of "usinesses, from manufacturing processes to pricing polic!. Tom Monaghan=s ecision in the late %G3@s to create (omino=s Pi77a "ase on home eliver! an Heff Be7os= ecision in %GG1 to launch Ama7on.com as a totall! online "oo0store are e6amples of innovative istri"ution strategies that revolutioni7e the mar0etplace. Entrepreneurs in less? evelope countries often innovate "! imitating an a apting pro ucts cre? ate in evelope countries. (ruc0er calle this process Dcreative imitation.E .reative imitation ta0es place whenever the imitators un erstan how an innovation can "e applie , use , or sol in their particular mar0et "etter than the original creators o. Innovation, ifferentiation, an Jor mar0et specification are effective strategies to help a new venture to attract customers an start ma0ing sales. ;hat all !ou nee to create an start new venture is a uni*ue i ea an the concept, which fulfill the nee s of societ! as whole in some particular wa!. An Entrepreneur nee s to fin sources of new i ea. The sources can "e an!one form consumers to e6isting companies, istri"ution channels, the fe eral government, current mar0et tren s an eman s an research & evelopment. The entrepreneur nee s to anal!7e an stu ! in etail each of sources from where !ou can come up with the uni*ue i ea to "uil !our "usiness enterprise. There are several metho s which coul "e useful to entrepreneur in generating new i eas. Some of them are as un er$ #ocus 2roups Techni*ue, Brainstorming, Pro"lem Inventor! Anal!sis, .hec0list Metho s, etc

Entrepreneur has to appl! Big (ream Approach an Various anal!sis "efore stan ing up with his uni*ue i ea an get starte with !our "usiness venture. -nce entrepreneur prepare with the i ea an ma0e final ecision to put it in practice, he nee to involve in pro uct planning an
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evelopment process. <e has to un erstan Pro uct /ife .!cle ver! carefull! an stu ! how pro uct Evaluation .riteria. If chosen in a service in ustr! he nee to care of Service Evaluation .riteria. -n successful launch an implementation of pro uct or internal test an anal!sis "efore commerciali7ing of pro uct. Base on outcomes an report !ou are re*uire to mar0et the pro uct an pursue further mar0eting an promotional activities to capture target segments. Starting a new venture not 4ust en s up here onl!. It will ta0e long 4ourne! of growth an evelopment an organi7ation will pass through various stages of life c!cle. Eight researcher ma e a list of some action that an entrepreneur have to o to create new venture. This list is "ase on theoretical stu ies an on general o"servation. The! foun si6 common "ehaviours as$ /ocate a "usiness opportunit! Accumulate resources Mar0et pro uct or service Pro uce the pro uct Buil an organi7ation +espon to government an societ!

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