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UNDERSTANDING ENTREPRENEURSHIP
Chapter Objectives
To understand the evolution of the term entrepreneur To study the reasons for the current growth in entrepreneurship To list various reasons driving a person to starting a business To explore the characteristics and skills of successful entrepreneurs To classify different types of entrepreneurs To look at the reasons for entrepreneurial failure
The Entrepreneur
entreprende, which means to undertake Webster dictionary one who organizes, manages and assumes the risks of a business or enterprise Richard Cantillion an entrepreneur is someone who takes the risk of running an enterprise by paying a certain price for securing and using resources to make a product and reselling the product for an uncertain price.
Joseph Schumpeter - an innovator playing the role of a dynamic businessman adding material growth to economic development Timmons - Entrepreneurship is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled
Easier access to resources Entrepreneurial education Return on innovation Entrepreneur as a Hero Self-employment is highly valued Rising dissatisfaction at job Acceptance of ex-entrepreneurs in the job market
Pros
&
Cons
You are alone All decisions are yours All losses are yours Work may not be satisfying You will need to put in long hours Lack of success will effect self esteem Exiting the business is difficult Pressures will affect social and family life
You are the boss All profits are yours There will be great variety in roles and tasks Increases self confidence Work can be very satisfying Success will give you immense satisfaction
Entrepreneurial Characteristics
Timmons: 1. commitment and determination; 2. leadership; 3. opportunity obsession; 4. tolerance of risk, ambiguity and uncertainty; 5. creativity, self-reliance and ability to adapt; and 6. motivation to excel.
Bianchi 1. being an offspring of self-employed parents; 2. being fired from more than one job; 3. being an immigrant or a child of immigrants; 4. previous employment in a firm with more than 100 people; 5. being the oldest child in the family; and 6. being a college graduate.
Entrepreneurial Skills
Creativity and Opportunity Evaluation Real-time Strategy and Decision Making Comfort with Change and Chaos Teamwork Evangelism, Selling, Negotiation, and Motivation through Influence and Persuasion Oral and Written Communication Basics of Start-Up Finance, Accounting and Law
Entrepreneurial Attitudes
Comfortable with lifestyle changes Willingness to break / bend / stretch laws Patience to start small Prepared to make enemies Comfort with confrontations Dealing with failure Willingness to learn
Entrepreneurial Motivation
Environment
IDEA
Entrepreneurial Activity
Expectations
Match
Outcomes
Types of Entrepreneurs
Based on Timing of Venture Creation: Early starters Experienced Mature Based on Socio-cultural Variables: 1st generation entrepreneurs From Business families Minority entrepreneurs Women Entrepreneurs
Thank you
Chapter Objectives
To understand the importance of the business idea To explain the significance of a new business idea To formulate a pre-selection process to precede the search for a business idea To list the possible source of business ideas To describe the process of researching a business idea To develop a comprehensive framework for evaluating business ideas
Warren Buffer says, Todays successful companies live and die according to the quality of their ideas.
Peter Drucker, Innovation is the specific instrument of entrepreneurs, the means by which they exploit change as an opportunity for a different business
First Mover
Advantages Technological leadership: can also lead to
Cost advantages Economies of scale
Obtain and secure scarce resources before crowding Impose switching costs on buyers
Disadvantages Reveal underlying business concept Others can try different resource combinations Investments in resolving problems: others can benefit from learnings Inertia makes it difficult to abandon strategy no longer effective
Pre-selection
Uncover your personal traits Knowledge and Experience Goals and aspirations
Technical knowledge Domain knowledge Contacts
Brainstorming
Some of the important rules are as follows: Focus on quantity. Postpone criticism. Build on others ideas. Encourage crazy ideas. Work with a deadline.
Preliminary Research
Cost structure Market structure Technology HR issues Government regulations
Mind Maps
SWOT Analysis
STRENGTH WEAKNESS
OPPORTUNITY
THREAT
Thank You
INTELLECTUAL PROPERTY
CHAPTER 3 ENTREPRENEURSHIP
Chapter Objectives
To understand the importance of intellectual property in modern business To explain the laws protecting trademarks, patents, designs, copyrights and other intellectual property To describe the procedure for registration of trademarks, patents, etc. To develop a strategy for building and protecting intellectual property To comprehend the significance of trade secrets and other confidential information
IP Laws in India
IP laws in India cover the following: Trademarks Copyright Patents Geographical indication of goods Designs Others including Semiconductor layout designs, plants and farmer rights and biological diversity.
Interesting Trademarks
numbers can be trademarks like in the case of 501 tea and 555 cigarettes symbols like those of Mercedes Benz or apple computers letters like in 3M, IBM, NIIT Orange cellphone service has successfully managed to include the colour orange as its trademark. sound like MGMs roar of the lion can also be a trademark Sumitomo tyres has registered a rose like smell as its trademark
Assignment of Trademarks
Trademark search Application for registration Receipt and examination Acceptance, advertisement and opposition Cancellation
Particulars of Application
The class of goods for which the mark is sought. Classes can be textiles, food and confectionery, machine tools, etc. Definition of goods which is sought to be registered Details of the applicant including name, age, occupation, address and nationality Whether the trademark is in use or is proposed to be used. If in use, applicant must specify by whom and for what period.
Infringement of Trademarks
The allegedly infringing mark must be either identical or deceptively similar to the registered trademark; The goods / services in relation to which the allegedly infringing mark is used must be specifically covered by the registration of the registered trademark; The use of the allegedly infringing mark must be in the course of trade; and The use must be in such a manner as to render the use likely to be taken as being used as a trademark.
Copyright
Copyright confers protection to: Literary works Dramatic works Musical work Artistic works Cinematographic films and sound recordings
Dimensions of Copyrights
Idea Expression Originality Fixation Fair use
Creators can prohibit others to: reproduce the work in any form, such as print, sound .video, etc record the work in a compact discs, cassettes, etc broadcast it in any form translate it to other languages use the work for a public performance, like a stage drama or musical performance
Patents
The following are criteria for patentability: Novelty Utility Inventive step
The following are not patentable: Inventions which are frivolous or contrary to established natural laws Inventions, the primary use of which, are contrary to morality or can cause harm to humans or the environment The mere discovery of a scientific principle without manifesting it in a product Discovery of a new use of an existing substance A new method of agriculture A business method A manufacturing process
Designs
Criteria for registration: The design has to be original Designs are registered only when they can be applied to an article An article, in turn, is defined as any article of manufacture and any substance, artificial or natural, and includes any part of an article capable of being made and sold separately. The elements of design must be capable of existence separate from the article on which they have been applied. The design must be of a distinctive nature and must appeal to people.
The following designs will not qualify for protection under the Design Act: Methods or principles of construction Features dictated by function A mechanical device A trademark Designs which can be construed as immoral
Other IP Laws
The Protection of Plant and Varieties and Farmer Rights Act, 2001 The Biological Diversity Act, 2002 Semiconductor Integrated Circuits Layout Act, 2000
FAMILY BUSINESS
CHAPTER 4 ENTREPRENEURSHIP
Chapter Objectives
Define a family business Discuss the history of family business in India Discuss the roles and responsibilities of the founder List the characteristics of able successors Describe the roles, rights and responsibilities of family members in a family business Explain the role of non-family managers Describe the issues in succession in a family business List the best practices in managing family business, from across the world.
Entrepreneurship
Disadvantages
They may have a confusing structure where the role of many family members is not clearly defined. The style of functioning may be autocratic or patriarchal. Many of the younger generation may not be worthy of their position and role in the organization There can be very strenuous succession battles Sometimes family members can selfishly drain the finances from the company.
Stepping Up
A new entrant should have a track record that gives legitimacy to his ideas and his claims. It pays to consult the older generation while making the plan. Suggest a step by step approach. If the plan is still not acceptable, accept that there may be something wrong with the plan.
Succession Planning
Choose a successor Grooming the successor Planning Early entry Late entry
Problems
Bureaucracy Corruption Labour Local Sentiments Gray Market Social Capital
Chapter Objectives
To understand the ground realities of doing business in India To identify the socio-cultural issues facing an Indian entrepreneur To list the various forms of business ownership available in India To understand some of the major laws and regulations governing conduct of business in India
Bureaucracy
Characteristics of ideal bureaucracy: Official business is conducted on a continuous basis Official business is conducted according to written rules Roles and responsibilities are defined within a hierarchy, with rights of supervision and appeal Official and private business and income is strictly separate
Social Capital
Negative consequences of Pehchaan: Exclusion of meritorious outsiders Excessive claims on group members Restrictions on individual freedom Norms aimed at downward leveling
Types of Ownership
Sole Proprietorship Partnership Company Limited Liability Partnership Small Company One Person Company
Taxes, etc
Income tax Sales tax Excise Service tax Profession tax
Features of VAT
Input tax credit even on capital goods Credit is carried forward for 2 yrs and then it is refunded in case it cannot be offset Uniform rates throughout the country Self assessment of possible tax liability is allowed Audit In case of excess payment, refund is made within 60/90 days Interest can be claimed on delayed payments
Paying VAT
Sell after stock transfer Be careful of bogus stock transfer Collect Forms C D F & H on time Advise your dealer to be registered Use input tax credit on capital goods Encourage dealers to get registered Ensure that purchase and sales registers and stock- books are maintained Claim interest for delayed payment
Central Excise
Find out if the product is excisable Find out its classification Find out its rate of duty Pay the tax File returns
Paying Excise
Bill directly to the buyer Advice all distributors and dealers of your products to be registered Avail of SSI concession if your unit is eligible Know your product properly. There may be an opportunity for reclassifying your product in a lower rate slab. Avail of all concessions under CENVAT Let the customer pay separately for add-ons like transport and warehousing expenses so it does not get included in calculating the total excise liability
Other Regulations
Company law Labour law Import Export Pollution control
ENTREPRENEURIAL SUPPORT
CHAPTER 6 ENTREPRENEURSHIP
Entrepreneurship
Chapter Objectives
Discuss various sources of support for the entrepreneur List policies from all over, that help entrepreneurs Discuss how to evaluate these policies Describe the benefits of a business incubator Explain the intricacies of incubator management Define a business cluster Discuss identification and development of clusters
Entrepreneurship
Entrepreneurial Support
Support in the form of progressive policies which help entrepreneurial ventures. Incubators which are set up to provide support to new firms in the early stages. Business clusters which are made up of firms in the same industry in close proximity to one another.
Aims of Policies
Entrepreneurship education: Entrepreneurial skills: Access to debt: Stimulating Innovation: Access to equity: Simplifying administrative burden: Access to markets: Encourage weaker sections:
Evaluating Policies
Take up of policy Opinion of beneficiaries Comparing performance
Incubators
Benefits from an incubator Access to shared flexible spaces Shared offices services Providing a business consulting network Networking Facilitating access to capital
Incubator Management
There should be an incubator manager and a team of professionals The incubator should set clear guidelines for eligibility. An incubator should have clear cut guidelines for an admission process. A contract should be signed by the incubator and the entrepreneur laying down all the terms and conditions. Clear guidelines for the entrepreneurs exit should also be laid out The long term financial viability of the incubator will depend on its business model.
Exiting an Incubator
The entrepreneur should exit: After a fixed period When the start up receives substantial funding When it achieves a certain level of profitability In case of irresolvable disputes
Some of the successfully incubated companies from SINE, the incubator at IIT, Bombay Herald Logic Pvt. Ltd. Voyager2 Infotech Myzus Technologies eInfinitus Powai Labs Pvt. Ltd. Seclore Technology Pvt. Ltd Eisodus Networks Pvt. Ltd. Quantum Phynance Pvt. Ltd.
Business Clusters
A geographical concentration of industries that gain performance advantages through colocation Well developed and intense links with suppliers Formal and informal business networks Shared supporting infrastructure like buildings and road connections A certain level of cooperation in spite of a high degree of rivalry and competition
International Clusters
Auto industry in Detroit Paris for high fashion Antwerp for diamonds Hollywood for movie production 5th Avenue in New York for Advertising Hsinchu in Taiwan for high technology
Entrepreneurship
Indian Clusters
IT firms in Bangalore Diamond polishing in Surat Textiles in Tirupur Seafood processing in Kochi Call Centres in Gurgaon / NCR Jute mills in Kolkata
Benefits of Clusters
Michael Porter: productivity of the companies in the cluster increases there is increased scope for innovation in the sector new businesses are encouraged to come up
Types of Clusters
A vertically-integrated cluster is made up of businesses linked through intense buyer-seller relationships. A horizontally-integrated cluster is made up of businesses which share a common market for their end products, use a common technological base or common skilled workforce, or require similar raw materials.
Entrepreneurship
Cluster Development
Supplier buyer relationships can be forged by collecting and distributing information about potential industry linkages. Common infrastructure can be supported by external agencies. Especially in the case of industries heavily dependant on specialized skills, providing skills training and education is a good means of supporting a cluster. Industries in a cluster can be aided by providing marketing channels.
BUYING A BUSINESS
CHAPTER 7 ENTREPRENEURSHIP
Chapter Objectives
To list the benefits of buying an existing business To list the disadvantages of buying an existing business To discuss the possible sources of information about a business for sale To describe a step by step process of buying a business To tabulate the factors to be investigated before a purchase To understand various methods of valuing a business To discuss the major mistakes made in buying a business To understand the concept of franchising To list the benefits of being a franchisee To discuss the factors important in evaluating a franchise opportunity To describe the elements of a franchise agreement
Entrepreneurship
Entrepreneurship
Entrepreneurship
Disadvantages
The industry as a whole is not doing well and the situation is not likely to improve in the near future. The owner may not have been truthful about the business. The equipment could be old and outdated. The location is bad or is likely to become bad. Employees may be unproductive or incapable of meeting the standards required of them.
Entrepreneurship
Disadvantages
Any bad reputation that the business had acquired amongst suppliers, distributors and other people in the industry is likely to pass on to you. The previous owner may have got into some unfavourable long term contractual obligations The inventory lying in stores could be obsolete or unfit for use. If the companys products have not been received well by the market it will be harder to gain market share than it would have been for a new product.
Entrepreneurship
Buying a Business
Preliminary information collection Site visit Scrutiny Additional information collection Negotiation Transition
Getting Information
The industry Accountants, lawyers Bankers Advertisements Others
Scrutiny
Financial statements Other statutory documentation Valuation of capital equipment Inventory Licenses and permits Contracts with customers and suppliers Debt and accounts payable Accounts receivable Reputation of the firm
Valuation
Value of assets
Book value Replacement value Market value
Negotiations
Elements other than cash: Combination of stock and cash Accounts receivable Lease; with option to buy Non-compete clause
McDonalds
Arguably the most successful franchise chain Operates 30,000 outlets in over 100 countries Became a success after Ray Croc bought it from the McDonald Brothers
Franchising
Advantages of a Franchise
By taking a franchise, you get a proven system of operation. The franchisor allows you the use of an established brand name. The franchisees can also use professionally designed point of sale advertising materials, packaging material, posters and print and TV ads. This brand recognition is driven by national and regional advertising programmes. The franchisor will often train the franchisee and the franchisees employees before letting a new franchisee start the business.
Advantages of a Franchise
Ongoing product development and research is another advantage of being with a franchise chain. Large companies can gain from economies of scale but that would not be possible for individual entrepreneurs. The cost of starting up the franchise operations and the ongoing operating costs are very well documented by the franchisor and the details are shared with all prospective franchisees. A franchisor can add value by putting a quality program in place. The franchisor often does market research to find out if the market is big enough to support an outlet.
Choosing a Franchisor
It is good to get into an industry that is growing and shows signs of sustaining a rate of high growth over the next few years. It is also important to take into account, the performance of the franchisors products in the market. It is better to choose a franchisor, which has been in this business for a long time. It is disadvantageous to become one of the initial franchisees in a chain. The reputation of the franchisor counts for a lot.
Choosing a Franchisor
The franchisors relationship with other franchisees is also a very important factor to consider. Take a close look at the profitability indicated in the figures shared by the franchisor. Some of the assumptions made while arriving at those figures may need to be changed. It might need a good amount of investigation to come up with accurate estimates of the success rate of franchisees.
ENTREPRENEURIAL FINANCE
CHAPTER 8 ENTREPRENEURSHIP
Chapter Objectives
To list the various sources of debt finance To understand the process of securing debt finance To discuss the importance of collateral security To tabulate the lending strategies of banks To discuss the characteristics of venture capital To understand the structure of venture funds To list the various roles within a venture fund To understand how venture capitalists get compensated for their efforts To describe a step by step screening process followed by venture funds while making an investment To list the elements of a termsheet To understand the current scenario of VC funding in India
Sources of Debt
State Finance Corporations NBFC Banks
Securing Debt
Drawing up the business plan. Identifying sources of debt finance. Presenting the proposal to the bank. If the manager is considering your proposal favourably, you will have to go for further talks Once the two parties have broadly agreed, details have to be worked out.
Entrepreneurship
Security
Collateral
Inside Outside
Lending Strategies
Financial statements Relationship lending
Length of relationship Breadth of relationship Degree of trust
Credit scoring
Venture Capital
Venture capital is characterized by: Financing of new and potentially high growth companies Investments primarily in the form of equity participation Assistance in the early days of the enterprise Adding value to the company through active participation, even joining the management on occasions Willingness to take on higher risk Expectation of higher rewards A long-term outlook regarding the investment
Entrepreneurship
Screening by VCs
Get rid of scamsters Major broad concerns Growth and industry considerations Monetising value
Important Considerations
The entrepreneurial team
Personal or individual characteristics Experience of the individual
Ease of exit
Via IPO Sale to PE, etc
The Termsheet
Amount and terms of investment Dividend policy Composition of the board of directors Reporting Liquidity (exit) plans Rights of sale Warranties Matters requiring venture capitalist approval
Entrepreneurship
Chapter Objectives
To understand how a business plan is divided into sections To list the uses of a business plan To lay out the steps involved in writing a business plan To list out data required in drawing up a business plan To discuss about the various types of business plan To understand the significance of an executive summary To understand the structure and composition of various sections of a business plan To list the various appendices and exhibits needed in a business plan
Data Required
Company details
Documents relating to formation Shareholding details Permits and registrations
Management
Organization chart Details of key employees Consultants and advisors Compensation and other employee agreements Market statistics from secondary sources Reports on trends, etc Competitor data Customer surveys
Data Required
Operations
Product specifications Contracts and purchase orders for raw materials Competitive advantages Details of Intellectual Property (Patent, license, and trademarks) Regulatory approvals Industry standards as per regulations Plant layout and operations plan Research and development plans
Financial Information
Data on fixed and variable costs to be incurred Financial forecasts
Executive Summary
The executive summary is probably the most important section of the business plan. It is basically the whole business plan condensed into a few pages The main objective of the executive summary is to entice the reader to go through the entire plan.
The Company
History Current Status Future
Competition
Operations
Gantt chart outline setup Technology Raw material strategy Production planning Quality HR policy
Marketing
Target Segments Branding Product Packaging Pricing Distribution Promotion
Finance
Funds sought Projected financial statements Costing details Break even and payback analysis
Appendices
Copy of documents pertaining to incorporation or formalisation of partnership. CVs of the entrepreneur/s and of key employees Copies of various permits or permissions granted. Copies of papers pertaining to sale or lease of land for the business Copies of documentation of proprietary intellectual property Graphical representation of schedule including milestones and dates Photographs of location Factory or plant layout Graphical representation of production process
Appendices
Findings of market survey conducted Photograph of product or prototype Storyboards or mock-ups of advertisements Projected balance sheets Projected profit and loss accounts Projected cash flow statements Sensitivity analysis of P&L a/c Break even analysis Financial ratios
MANAGING OPERATIONS
CHAPTER 10 ENTREPRENEURSHIP
Chapter Objectives
To understand the importance or correct purchasing in a venture To list the activities involved in purchasing To tabulate the elements of a purchase policy To discuss the ways to evaluate suppliers To discuss the best practices in purchasing To list the kinds of inventory carrying costs To classify different kinds of inventory To understand the importance of cash management To understand the role of the cash manager To appreciate the challenges posed by cash flows To understand the principles of receivables management To discuss managing for disasters To understand the strategies followed by seasonal businesses
Purchase
Unplanned purchasing can lead to: spending more money than you need to buying goods that aren't of the proper quality choosing suppliers that don't offer the required level of customer service
Entrepreneurship
Purchase Policy
The purchase policy should address the following issues: Who is authorized to purchase various goods? How is the budget set for a purchase? How does the venture hope to ensure competition among vendors? How to ensure quality of received goods? What will be the payment system? What will be the level of confidentiality between the venture and vendors?
Entrepreneurship
Suppliers
Evaluate a supplier on: Timely delivery Completeness of orders shipped Quality of items Price competitiveness Strength of financial condition Ability to service special orders Quality of customer service Expertise of sales representatives and technical staff Consistency on above factors
Prioritising Purchases
Some items need more attention than others, on the basis of: Unit cost Total cost Time to delivery Quality Criticality
Inventory
Costs of carrying inventory Interest on the financial investment in inventory. Cost of insurance covering inventory. Rental or ownership related costs of the store Cost of handling inventory Obsolescence Pilferage, wastage or deterioration of stock
Types of Inventory
On the basis of stage in process: Raw Materials Work In Progress (WIP) Finished goods Goods for resale
Types of Inventory
On the basis of reason for stock to be held: Buffer stock Safety stock Overproduction Lot delay stock Demand fluctuation stock Line balance stock
Cash Management
The efficient utilization of current assets and current liabilities throughout each phase of the business cycle. The systematic planning, management and monitoring of the companys collections and disbursements. The collection, management and dissemination of information to enable effective use of available funds.
Cash Manager
Role of the cash manager: Efficiently collecting cash inflows Concentrating collected funds Controlling the timing of cash outflows Forecasting the cash position Securing adequate sources of short-term funds Optimizing use of any temporary cash surpluses Gathering timely information Implementing the systems necessary to monitor, manage and control the cash position Ensuring the internal and external transfer of financial data between departments or with the bank.
Cash Problems
As a result of business growth, cash can be: Mismatched Irregular Unpredictable
Seasonal Businesses
Seasonal businesses try to cut costs during the off season. The easiest way to do that is to cut down operations is seasons of low demand. By design some seasonal businesses have low installed capacities but create additional capacities for the season. E.g. restaurants putting in additional seats during a festive occasion are common sight in all major cities.
Many businesses which close down during the off season depend on temporary labour and sometimes even the infrastructure is leased for a short time only. Clothes exhibitions that spring up in temporary shamianas (tent) are also another familiar sight in all cities.
The off season is a very good time to carry out routine maintenance and repair work. In case the business is doing very well, the off season is a good time to plan and execute expansion plans. In case the goods can be stocked, the fallow time in the off season can be use to smoothen out the production schedule. So the entire year can be used to plan out production, which is ultimately sol within a short time.
Chapter Objectives
To discuss the process of hiring an employee To describe the interview process To discuss the induction process To understand the ways of motivating employees To discuss the important aspects of salary and perks To list the ways of providing training to employees To understand the process of firing an employee
Job Description
Elements of a job description Details of the job responsibilities The qualifications desired The kind of experience the candidate should possess Salaries and other benefits to be given Career path
Hiring
People you know personally can be good employees. A referral is the next best thing to knowing the candidate personally.
Other Sources
Advertisements in local newspapers Posting on online job sites Accessing listed resumes Tapping a placement agency
Induction
Signing of joining papers Narration about the company A tour of the facilities Early mentoring
Motivation
Employees seek the following from their jobs: Recognition for good work done by them Meaningful participation in the ventures endeavours A feeling of belonging and of sharing in the success of the organization Opportunities for growth in accordance with their competence and experience Security in their job as long as they perform according to expectations Monetary reward for performance in their job Benefits relating to medical expenses and insurance
Entrepreneurship
Salary
How employees measure their salary: The salary is comparable to salaries of others in similar jobs in other companies within the industry The salary being paid should be comparable to what the employee is likely to get in some other job. The salary should compare with salaries of others with similar responsibilities within the company The salary should be comparable to the salaries of his friends and peers outside the industry
Components of a Salary
The fixed component Allowances Provident fund Medical insurance and a life insurance cover. Additionally, a medical reimbursement can be provided for incidental medical expenses. Annual bonus based on salaries or on performance. Employee stock option plan (ESOP)
Some Perks
Work related awards and competitions Recreation room in the office An annual picnic or excursion Recognising achievements of employees and their family members in other spheres Employees can be encouraged to attend seminars, workshops and short term courses.
More perks
Free or subsidised lunch in the office Discounts to employees on company products Involving employees in a joint social cause Employees can be allowed to work from home on selected days Bonus can be given to some or all employees. Gifts like a watch or a household appliance on some important occasions
ENTREPRENEURIAL MARKETING
CHAPTER 12 ENTREPRENEURSHIP
Chapter Objectives
To look at the marketing constraints of entrepreneurial firms To list the characteristics of entrepreneurial marketing To tabulate market research practices in entrepreneurial firms To discuss the concepts of segmentation, targeting and positioning and their relevance to entrepreneurial marketing To understand the process of brand building in entrepreneurial firms To explore pricing in entrepreneurial marketing To look at the distribution function in small firms To explore non-traditional advertising in entrepreneurial firms To tabulate different types of promotional campaigns
Entrepreneurial Marketing
Proactive orientation Innovativeness Customer focus Opportunity focus Risk management Value creation
Market Research
Field survey Systematic Observation Focus groups Secondary sources Test marketing
Field Survey
Low cost field surveys: Convenience sampling Snowball sampling Omnibus sampling Low-cost surveyors
Forecasting Demand
Define the total market Divide total demand into distinct market segments Forecast drivers of demand in each segment Match with own product to come up with possible sales of own product in that segment Total the forecasted sales in the segments that can be profitably targeted Conduct sensitivity analysis to understand assumptions
Entrepreneurship
Attractiveness of a Segment
Is your product able to deliver the value sought by a segment, better than the competition? Can the segment be easily identified? Is the segment big enough in terms of potential revenue? How easy is it to reach the segment with the positioning communication and with the product?
Entrepreneurship
Branding
Strategic brand building Identity-building brand exposure Involve the customer in the brand building experience Borrow practices from across industries Pilot test novel ideas Have a brand manager Monitor results Do not outsource
According to Aaker, the following are the difficulties in branding: Pressure to compete on price Proliferation of competitors Fragmentation of media and markets Brand relationships Bias towards changing strategy Bias against innovation Pressure to invest elsewhere Short term pressures
Entrepreneurship
Pricing
Assess what value customers place on the product. Look for variations in the way customers value the product. Identify a pricing structure. Consider competitors reactions. Monitor realised prices. Assess customers emotional response to prices.
Pricing Percepts
Pricing of a product should work towards maximising present worth The unit for making decisions and for measuring return is the entire economic life of the product Pricing begins before production commences and re-pricing continues for the entire life cycle Different pricing strategies can be used in different segments
Price Sensitivity
Price sensitivity is less if a third party bears the cost. Sensitivity is high when the cost of the item is a significant portion of the individuals total expenditure. Price sensitivity is higher in the case of B2B buyers as the buyer is not end user. When there is no differentiation between the products available, it becomes easy to compare products in the category and the price sensitivity of customers increase. Price sensitivity is more when there is easy access to competing products. Sensitivity decreases when there is a high cost of switching. When a long term relationship with the seller is not important, price sensitivity is low.
Accommoda te or ignore
No
No
Is there a response that would cost less than the preventable sales loss?
Yes
If you respond, is competitor willing and able to reestablish the price difference?
No Respond
Yes Yes Does the value of the markets at risk justify the cost of response? While the multiple responses required to match a competitor cost less than the preventable sales lose?
No
No
Yes
Yes Respond
Respond
Distribution Alternatives
Go directly to the consumer Go directly to the retailer: bypass distributor Use sales agents Participate in establisher channel structure Set up your own intermediaries
Distribution Tasks
Buzz Marketing
Most recent studies show that word-of-mouth is 10 times more effective than other media Media is getting fragmented and ad clutter is rising. Companies feel the need to stand apart Traditional forms of media are rising in cost. A 30 second slot during a cricket match on a TV channel can cost over seven lakhs. Too many marketers are making conflicting claims. The common mans trust in ads is coming down. Many new technologies provide the impetus for the acceleration of buzz marketing.
Entrepreneurship
Promotion
Objectives in a promotional campaign: SALES Increase in distribution outlets Increase in shelf space Increased in-store presence Expand the selling season Increase purchase frequency Increase usage occasions Increase average transaction size Induce trial
Types of Promotions
Contests Coupons Discounts Continuity Point Of Purchase Sampling Event Free gift Trade Promotions
Training
Training of employees can be carried out by the following: Training institutes Business schools In House training Online
Firing
Reasons for termination of employment: Indiscipline Impropriety Underperformance Lay off Resignation
Process of Termination
An exit interview should be conducted and reasons for the termination should be honestly discussed. A letter of recommendation should be promptly given to the exiting employee. All terminal benefits and other payments due should be made promptly. All documentation citing the reasons for termination should be organized.
Chapter Objectives
To understand the importance of having a NPD process To list the types of new products To study the various stages of the NPD process To understand the adoption of new products To tabulate the best practices in NPD To look at various ways of involving customers in the NPD process To list various barriers to NPD To discuss the common mistakes in NPD
Entrepreneurship
Debugging Stage
Wearout Stage
Time
Product Testing
Alpha testing Beta testing Gamma testing
Adopter Groups
According to Rogers, the adopter groups are: 1. Innovators 2. Early adopters 3. Early majority 4. Late majority 5. Laggards
Adopter Categories
21/2% Innovators
131/2% Early
adopters
16% Laggards
Entrepreneurship
Adoption
These five product characteristics influence product adoption: Relative advantage Compatibility Complexity Divisibility Communicability
Communicate with the customer Tap employees for ideas New product team Budgeting Letting go
Barriers to NPD
Shortage of funds Limited scope in some product categories Lack of time Restrictive laws and regulations Small markets Changing technology Changing consumer preferences
Entrepreneurship
Content
Rural Enterprise :- Some Facts Agriculture Entrepreneurial Development Under TRYSEM Risk taking Among Rural Entrepreneur Development Strategy For Small Entrepreneur Entrepreneurial Development In Backward Area
Agriculture
Risk Coverage
Crops insurance KCC Other Loan
Training Programmed
Skill Improvement Trainings Entrepreneurial Development Programmers ( EDPs ) Agriculture and Animal Husbandry
Component of TRYSEM
Identification of entrepreneurial Quality. Identification of entrepreneurial opportunity. Training in motivation and skills. Provision of credit facilities. Risk sharing by providing investment subsidy. Help in developing new materials and Market. Constant monitoring and follow-up.
Types of Risk
Technical Risk
Economic Risk
Types of Risk
Social Risk
Environmental Risk
Entrepreneurial Trends
Favorable (+)
High (+ +)
Favorable (+)
Unfavorable (-) Unfavorable (-)
Insufficient (-)
Sufficient (+)
Low (+ -)
Low (+ - )
Insufficient (-)
Little ( - - )
Importance of Training
Ensures availability of skilled manpower at all management levels Enhancing abilities, potential among entrepreneurs Increase efficiency Maintain and enhance product quality
Methods of Training
Individual instruction Group instruction Lecture method
Demonstration method
Written instruction method
EDP
Designed with an aim of encouraging self employment Imparts training and motivates potential and existing entrepreneurs to start new business or diversify and expand the existing one Helps employment and wealth creation among educated unemployed youth
Phases of EDP
Select area from existing government policy guidelines/socio-economic reports Techno-economic survey of the selected area; feasibility study
Established by Government of India in 1983 An apex body for coordination and supervision on activities of various institutes engaged in entrepreneurial development
Helps evolution of EDP, model syllabi, effective training strategies, methodology, manuals and tools