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Entrepreneurship Development

According to D.C.McClelland entrepreneur and entrepreneurship are defined as follows: 'Entre-preneur' is a person who creates an enterprise and the process of creation is called as 'entrepreneur-ship'.

ENTREPRENEURSHIP DEVELOPMENT

 

INTRODUCTION

 

Starting and operating a new business involve considerable risk and effort to overcome the inertia against creating something new. In creating and growing a new venture, the entrepreneur assumes the responsibilities and risks for its development, survival and enjoys the corresponding rewards. The fact is that consumers, business people, and government officials are interested in entrepreneurship.

 

DEFINITION

 

According to D.C.McClelland entrepreneur and entrepreneurship are defined as follows: 'Entre-preneur' is a person who creates an enterprise and the process of creation is called as 'entrepreneur-ship'.

 

Entrepreneurship is doing things in a new and better way and decision-making under the condition of uncertainty.

 

The assumption of risk and responsibility in designing and implementing a business strategy or starting a business. -Encyclopedia Britannica

 

Entrepreneurship is the function of foreseeing investment and production opportunity, organizing an enterprise to undertake a new production process, raising capital, hiring labour, arranging for the supply of raw materials, and selecting managers for day-to-day operation of the enterprise.


WHO IS AN ENTREPRENEUR?

 

            A person who develops and owns his own enterprise

 

            A moderate risk taker and works under uncertainty for achieving the goal

 

            Reflects strong urge to be independent and innovative

 

            Persistently tries to do something better

 

            Dissatisfied with routine activities

 

            Prepared to withstand the hard life.

 

FUNCTIONS OF AN ENTREPRENEUR

 

            Perceiving market opportunities

 

            Gaining command over scarce resources

 

            Managing human relations within firms

 

            Marketing of the products

 

            Responding to the competition

 

            Dealing with bureaucracy

 

            Managing finance

 

            Upgrading process and product quality

 

            Managing customer and supplier relations

 

            Introducing new production techniques and products

 

            Risk Taking

 

THE CHARACTERISTICS OF A UNIQUE ENTREPRENEUR

 

            Need for achievement

 

            High need for power

 

            Independence

 

            Propensity to take risk

 

            Personal modernity

 

            Support

 

            Business enterprise

 

            Leadership

 

            Determined but patient

 

            Exhibits sense of leadership

 

            Also exhibits sense of competitiveness

 

            Takes personal responsibility

 

            Oriented towards the future

 

            Tends to persist in the face to adversity

 

            Convert a situation into opportunity

 

ENTREPRENEURIAL MOTIVATION FACTORS

 

            Educational background

 

            Occupational Experience

 

            Desire to work independently

 

            Desire to branch out to manufacturing

 

            Family background

 

            Assistance from Government

 

            Assistance from financial institution

 

            Availability of technology/raw material

 

            Profit margin

            Desire for taking personal responsibility

             

            Anticipation of future possibilities

             

QUALITIES OF A GOOD ENTREPRENEUR

             

            According to McClelland:

             

            An unusual creativeness

             

            A propensity of risk taking

             

            A strong need for achievement According to Prof. Tandon:

             

            Capacity to assume risks

             

            Technical Knowledge and willingness to change

             

            Ability to marshal resources

             

            Ability of organization and administration

             

            TYPES OF AN ENTREPRENEUR

             

            There are five types of entrepreneurs

             

            Innovating Entrepreneurs:

             

            They are aggressive in experimentation and clever in putting attractive possibilities into practice.

             

            Adoptive or Imitative Entrepreneurs:

             

            They adopt best practices. Imitative entrepreneurs are revolutionary and important.

             

            Fabian Entrepreneurs:

             

            They display great caution and skepticism in experimenting with any change in their enterprise.

             

            Drone Entrepreneurs:

             

            They are against any change in production method even at the cost of losses.

             

            Forced Entrepreneurs:

             

            They become entrepreneurs on account of circumstances.

             

            NEED OF ENTREPRENEURSHIP

             

            The Network of Entrepreneurship and Economic Development (NEED) brings together under-privileged communities with the teams of Social Entrepreneurs in order to maximize human resource potential and create positive change in their socio-economic and political environment.

             

            This is achieved through:

             

            Mainstreaming Gender Issues

             

            Micro-Enterprise and Entrepreneurial Skills Development

            Career driven focused Vocational Skill Training and upgradation.

 

            Pro-poor driven advocacy for Intellectual Property Right (IPR) towards registering the indig-enous products through Geographical Indicators (GI) and economics governance.

 

            Women's and Children's Health, including Water and Sanitation

 

            Rural Asset Management, including Natural Resources

 

            Capacity Building Development in Locally Specific Resource Groups

 

            Networking Towards Grassroots Activism and Global Change

 

            Service driven Micro-Finance supports to groups

 

THREE ASPECTS OF ENTREPRENEURSHIP

 

1.   The identification/recognition of market opportunity and the generation of a business idea (prod-uct or service) to address the opportunity.

 

2.   The marshalling and commitment of resources in the face of risk to pursue the opportunity.

 

3.   The creation of an operating business organization to implement the opportunity-motivated busi-ness idea.

 

PROJECT IDENTIFICATION

 

Project Identification is a collection, compilation and analysis of data to locate potential opportu-nities for starting business and development of such opportunities. Opportunity is a business concept, which if turned into a tangible product or service, by the enterprise, will result into profit. It is all about creating values. The search of a good idea, generate your own idea and develop someone else's idea. Opportunities are identified through innovation/search of business ideas.

 

Types of innovation:

 

There are three types of innovation

 

            Additive Innovation - Fully exploiting already existing resources, such as product lines extensions complementary.

 

            Innovation - Offers something new and introduces a few changes in the structure of the business.

 

            Breakthrough Innovation (Radical Innovation) - Changes the fundamentals of the business, creat-ing a new industry and new avenues for extensive wealth creation

 

IMPORTANCE OF PROJECT IDENTIFICATION ENTREPRENEURSHIP MANAGEMENT

 

            It has long term consequences (make or break)

 

            Involves commitment which can not be easily reversed

 

            Ideas are put into action

 

            Projects are catalytic agents for economic development

 

Involves creative use of resources- manpower, capital, raw materials etc.

            Generates value addition and build-up national capital

 

            Brings socio-cultural development

 

            Leads to development of infra-structure and environment

 

CRITERIA FOR  SELECTING A PROJECT ENTREPRENEURSHIP MANAGEMENT

 

            Investment size

 

            Location of project

 

            Technology to be used

 

            Equipment

 

            Marketing

 

CONSTRAINTS IN PROJECT FORMULATION ENTREPRENEURSHIP MANAGEMENT

 

            Lack of a viable / feasible project idea

 

            Lack of realistic/ achievable objectives

 

            Lack of necessary resources / infrastructure to convert idea into reality

 

            Policies of government / Legal restrictions

 

            Lengthy and cumbersome procedures to get finance and start business

 

STAGES OF PROJECT FORMULATION ENTREPRENEURSHIP MANAGEMENT

 

            Feasibility Analysis (First stage in project formulation)

 

            Techno-Economic Analysis (Screens the idea to- Estimate of potential of the demand for goods/ services)

 

            Project Design and Network Analysis (The sequence of events of the project and it identifies project inputs, finance needed and cost-benefit profile of the project)

 

            Input Analysis (Assesses the input requirements during the construction and operation of the project)

 

            Financial Analysis (Involves estimating the project costs, operating cost and fund requirements)

 

            Cost-Benefit Analysis (It considers costs that all entities have to bear and the benefit connected to it)

 

            Pre-Investment Analysis (Helps the project-sponsoring body, the project-implementing body and the external consulting agencies to accept/reject the proposal)

 

A PROJECT REPORT GIVES INFORMATION ON THE FOLLOWING

 

            Economic aspects - present market, scope for the growth, justification for investment

 

Technical aspects - technology, machinery, and equipment needed

            Financial aspects - Total investment needed, entrepreneur's contribution, cost of capital and re-turn on capital

 

            Production aspects - Product details, justification for the choice of product, export worthiness

 

            Managerial aspects - Qualifications, experience of people needed for managerial posts

 

The project report is submitted to financial institutions for grant of land and other financial conces-sions. Organizations like Small Industries Service Institute (SISI) and Small Industries Development Organization (SIDO) help entrepreneurs to prepare project report. The financial institutions ascertain from the report, whether the project can generate enough funds to repay the borrowings in stipulated time frame.

 

WHAT IS FINANCIAL MANAGEMENT?

 

Financial Management can be defined as the management of the finances of a business / organiza-tion in order to achieve financial objectives.

 

The key objectives of financial management would be to:

 

            Create wealth for the business

 

            Generate cash, and

 

            Provide an adequate return on investment bearing in mind the risks that the business is taking and the resources invested.

 

THERE ARE THREE KEY ELEMENTS FOR THE PROCESS OF FINANCIAL MANAGEMENT

 

1 Financial planning

 

Management needs to ensure that enough funding is available at the right time to meet the needs of the business. In the short term, funding may be needed to invest in equipment and stocks, pay employ-ees and fund sales made on credit. In the medium and long term, funding may be required for significant additions to the productive capacity of the business or to make acquisitions.

 

2 Financial control

 

Financial control is a critically important activity to help the business ensure that the business is meeting its objectives.

 

3 Financial decision-making

 

The financial decision is whether profits earned by the business should be retained rather than distributed to shareholders via dividends. If dividends are too high, the business may be starved of funding to reinvest in growing revenues and profits further.

 

4 The role of the budget

 

            The budget is a part of the foundation upon which an organization justifies its mission.

 

It establishes financial parameters through which the organization can determine its objectives and attain its goals.


            An estimation of revenue and expenses for a given period of time, usually 1-2 years.

 

            Anticipate or predict cash flow as well as control cash flow.

 

5 Financial ratios

 

Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy.

 

BOOKKEEPING

 

Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, in-come, and payments by an individual or organization. Bookkeeping is usually performed by a book-keeper.

 

1 Steps to start a small scale industry

 

The following are steps to start a small scale industry

 

            Description of the Business

 

            Product/Service

 

            The Location

 

            The Marketing Plan

 

            Competition

 

            Pricing and Sales

 

            Advertising and Public Relations

 

            The Management Plan

 

            Self-Paced Activity

 

            The Financial Management Plan.

 

2. Description of the business

 

The business description section is divided into three primary sections. Section 1 actually de-scribes about business, Section 2 describes about the product or service and Section 3 the location of business, and why this location is desirable.

 

3 Product / service

 

Try to describe the benefits of goods and services from your customers' perspective. Successful business owners know or at least have an idea of what their customers want or expect from them.

 

            How will the product or service benefit the customer?

 

            Which products/services are in demand? Will there be a steady flow of cash?

 

            What makes the product/service different and desirable?


4 THE LOCATION

 

The location of the business can play a decisive role in its success or failure. The location should be built around the customers, it should be accessible and it should provide a sense of security.

 

5 THE MARKETING PLAN

 

Marketing plays a vital role in successful business ventures. How well they market the business, along with a few other considerations, will ultimately determine degree of the success or failure. The key element of a successful marketing plan is to know about customers-their likes, dislikes, and expec-tations.

 

COMPETITION

 

Competition is a way of life. Nations compete for the consumer in the global marketplace, as do individual business owners. Advances in technology can send the profit margins of a successful business into a tailspin causing them to plummet overnight or within a few hours. When considering these and other factors, it can conclude that business is a highly competitive, volatile arena. Because of this volatility and competitiveness, it is important to know about competitors.

 

PRICING AND SALES

 

Pricing strategy is another marketing technique that can be used to improve overall competitive-ness. Get a feel for the pricing strategy the competitors are using. Determine prices in line with competi-tors in the market area and verify if they are in line with industry averages.

 

Some of the pricing strategies are:

 

            Retail cost and pricing

 

            Competitive position

 

            Pricing below competition

 

            Pricing above competition

 

            Price lining

 

            Multiple pricing

 

            Service costs, components and pricing (for service businesses only)

 

            Material costs

 

            Labor costs

 

            Overhead costs

 

ADVERTISING AND PUBLIC RELATIONS

 

Advertising and promotion, however, is the lifeline of a business and should be treated as such. Devise a plan that uses advertising and networking as a means to promote business.

 

THE MANAGEMENT PLAN

 

Managing a business requires more than just the desire to be one's own boss. It demands dedication, persistence, the ability to make decisions and the ability to manage both employees and finances.


Operating Budget

 

            Personnel

 

            Insurance

 

            Rent

 

            Depreciation

 

            Loan payments

 

            Advertising/promotions

 

            Legal/accounting

 

            Miscellaneous expenses

 

            Supplies

 

            Payroll expenses

 

            Salaries/wages

 

            Utilities

 

            Dues/subscriptions/fees

 

            Taxes

 

            Repairs/maintenance

 

THE FINANCIAL MANAGEMENT PLAN

 

            Funding of capital projects

 

            Developing new products and services

 

            Retiring products and services

 

            Selling assets, purchasing assets, protecting assets

 

            Moving an organization to a new location

 

            Tax liabilities

 

1 QUALITY CONTROL

 

Quality control is a process by which entities review the quality of all factors involved in production. This approach places an emphasis on three aspects:

 

            Elements such as controls, job management, defined and well managed processes, performance and integrity criteria, and identification of records

 

            Competence, such as knowledge, skills, experience, and qualifications

 

Soft elements, such as personnel integrity, confidence, organizational culture, motivation, team spirit, and quality relationships.


2 Quality control in project management

 

In project management, quality control requires the project manager and the project team to inspect the accomplished work to ensure that it is aligned with the project scope. In practice, projects typically have a dedicated quality control team which focuses on this area. Quality control is a process employed to ensure a certain level of quality in a product or service. It may include whatever actions a business deems necessary to provide for the control and verification of certain characteristics of a product or service.

 

CONCLUSION

 

Entrepreneurs must understand all aspects of their business. They should have the knowledge and skills to buy the right supplies, keep complete financial records, and manage people in a way that they can be highly productive. Entrepreneurs need to project a professional image with well designed busi-ness cards and letterhead stationary. Many entrepreneurial opportunities exist that can be operated from a home, store, factory or warehouse. Small boutiques or specialized stores can be formed any-where there are consumers. Technology enables small business owners to keep in touch with both suppliers and customers.

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