Entrepreneurial Management, M.COM Semester 3 (CBCS) PDF

M.COM SEMESTER - III (CBCS) BUSINESS STUDIES (MANAGEMENT) ENTREPRENEURIAL MANAGEMENT SUBJECT CODE: 72212  © UNIVERSITY OF MUMBAI Dr. Suhas Pednekar Vice Chancellor...

M.COM SEMESTER - III (CBCS) BUSINESS STUDIES (MANAGEMENT) ENTREPRENEURIAL MANAGEMENT SUBJECT CODE: 72212  © UNIVERSITY OF MUMBAI Dr. Suhas Pednekar Vice Chancellor University of Mumbai, Mumbai Prof. Ravindra D. Kulkarni Prof. Prakash Mahanwar Pro Vice-Chancellor, Director, University of Mumbai IDOL, University of Mumbai Programme Co-ordinator : Ms. Rajashri Pandit Assistant Professor (Economics) IDOL, University of Mumbai, Vidyanagari, Santacruz (E), Mumbai. Course Co-ordinator : Mr. Sambhaji Shivaji Shinde Assistant Professor, IDOL, University of Mumbai, Vidyanagari, Santacruz (E), Mumbai. Editor : Dr. Vinit Joshi Amity University Panvel, Mumbai 410206 Course Writers : Dr. Hemal Vora Gurukul College of Commerce - Tilak Road, Ghatkopar East. Mumbai 400077 : Dr. Sunil B. Lalchandani Smt. Chandibai Himathmal Mansukhani College, PB No. 17, Opp. Railway Station, Ulhasnagar - 3 : Dr. Vinod H. Kamble Bal Bharati’s MJP College of Commerce, Kandivali (W), Mumbai. : Dr. Kajal Dipen Chheda Gurukul College Of Commerce , Tilak Road, Derasar Lane, Ghatkopar (East), Mumbai 400070 Ms. Ritu Kashyap Bal Bharati’s MJP College of Commerce, Kandivali (W), Mumbai. May 2022, Print - 1 Published by: Director, Institute of Distance and Open Learning, University of Mumbai, Vidyanagari,Mumbai - 400 098. DTP composed and Printed by: Mumbai University Press  CONTENTS Chapter No. Title Page No. Module 1: Entrepreneurship Development Perspective 1. Entrepreneurship Development Perspective............................................................ 1 Module 2: Creating Entrepreneurial Venture 2. Creating Entrepreneurial Venture - I.................................................................... 22 3. Creating Entrepreneurial Venture - II.................................................................. 35 Module 3: Project Management 4. Project Management - I........................................................................................ 46 5. Project Management - II....................................................................................... 60 Module 4: Assistance and Incentives for Promotion and Development of. Entrepreneurship 6. Assistance and Incentives for Promotion and Development of Entrepreneurship - I.................................................................... 75 7. Assistance and Incentives for Promotion and Development of Entrepreneurship - I.................................................................... 92  M.COM SEMESTER - III (CBCS) ENTREPRENEURIAL MANAGEMENT SYLLABUS Revised Syllabus of Courses of Master of Commerce (M.Com) Programme at Semester III (To be implemented from Academic Year- 2017-2018) Group B: Business Studies (Management) 3. Entrepreneurial Management Modules at a Glance No. of SN Modules Lectures 1 Entrepreneurship Development Perspective 15 2 Creating Entrepreneurial Venture 15 3 Project Management 15 Assistance and Incentives for Promotion and Development of 4 15 Entrepreneurship Total 60 SN Modules/ Units 1 Entrepreneurship Development Perspective x Entrepreneurship – Concept, Factors affecting growth of Entrepreneurship, Types of Entrepreneurs, Requirements of Entrepreneurial structure. x Entrepreneurial Culture -Elements of culture, Steps to change Entrepreneurial culture, Entrepreneurial v/s Administrative culture. x Theories of Entrepreneurship- Schumpeter Dynamic Entrepreneurship Innovation Theory, Theory of High Achievement by McClelland, Theory of Personnel Resourcefulness 2 Creating Entrepreneurial Venture x Entrepreneurial Environment- Significance, SWOC Analysis, Problems of Entrepreneurship x Financial Analysis of Entrepreneurial Venture- Significance, Tools of Financial Analysis, Sources of development finance x Social Entrepreneurship- Features, Importance, Arguments (for and against) Social Entrepreneurship, Women Entrepreneurs – concept and special Government schemes for women entrepreneurs in India. 3 Project Management x Project - Concepts and Classification of Project, Search of Business Idea, Project Cycle. x Project formulation-----Steps for project formulation, Project Design and network analysis – concept and network analysis techniques: PERT/ CPM. x Project Management – Concept, Phases, Project Identification and Project Feasibility Analysis. 4 Assistance and Incentives for Promotion and Development of Entrepreneurship x Incentives – Need, Promotion and development Entrepreneurship-Types of Assistance and incentives -Fiscal, Financial, Promotional, Marketing, and Organisational. x NPSD - National Policy for Skill Development and Entrepreneurship 2015. x Institutions in aid of Entrepreneurship Development - The National institute for Entrepreneurship and small business development, District Industry Centre (DIC), National Alliance of young Entrepreneurs 


    
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 1 ENTREPRENEURSHIP DEVELOPMENT PERSPECTIVE Unit Structure 1.0 Objective 1.1 Introduction 1.2 Entrepreneurship 1.3 Entrepreneurial Culture 1.4 Theories of Entrepreneurship 1.5 Summary 1.6 Exercise 1.0 OBJECTIVE After studying this unit the student will be able to – Understanding the concept of Entrepreneurship and the factors affecting growth of entrepreneurs. Knowing the various types of entrepreneurs and the requirement of entrepreneurship structure. Knowing about the elements of culture and steps to change the entrepreneurial culture. Describe the difference between Entrepreneurial v/s Administrative culture Explain the various theories of Entrepreneurship 1.1 INTRODUCTION The concept of entrepreneur varies from industry to industry, country to country as well as from time to time. The word entrepreneur has an interesting definitional history and it stems from the French word “entrependre” which refers to undertake. Economists never had a consistent definition of “entrepreneur” or “entrepreneurship”. An entrepreneur is “a person who starts a business and is willing to risk loss in order to make money”. The common keyword ‘business’ and ‘risk’ are interrelated. If there is no real business or risk, a person cannot be called as an entrepreneur. The small businessman who has founded your neighbourhood grocery shop is an entrepreneur. The founder of the startup laundry service across the street is an entrepreneur. 1 Entrepreneurial The founder of the multi-billion Reliance Co.Ltd. with his hi-tech Management world-leading application is an entrepreneur. The freelancing plumber who works for himself and unclogs your drains is an entrepreneur. Entrepreneurship means the willingness of an individual to start a new business venture by taking risk and managing it in this technology enabled competitive global environment. The entrepreneurs are passionate to innovate, lead, invent or pioneer with a disruptive product or technology. The size of the business, the type of work involved, the age or the formal education of the entrepreneur etc. does not restrict the entry of the entrepreneur. Similarly, the label of success or failure also does not matter. Entrepreneurs are the people who have the courage to offer and to share an idea or a product or a service with the world. They try to make market a better place where the needs of consumers can be satisfied. Entrepreneurship is a process to willingly design, launch, develop, organise and run a new business venture along with its risk to make a profit and held in the growth of the economy. Entrepreneurship is described under both established firms and new businesses which have the ability to translate inventions or technologies into products and services.An entrepreneur is a person who creates a new business by identifying and collecting the required resources, by facing the risk and uncertainty for the purpose of achieving the desired profit and growth. The study of entrepreneurship reaches back to the work in the late 17th and early 18th centuries of Irish-French economist Richard Cantillon. He was foundational to classical economics. Cantillon defined the term first in his Essay on the Nature of Trade in General. Cantillon defined the term as a person who pays a certain price for a product and resells it at an uncertain price, "making decisions about obtaining and using the resources while consequently admitting the risk of enterprise". Cantillon considered the entrepreneur to be a risk taker who deliberately allocates resources to exploit opportunities to maximize the financial return. Cantillon emphasized the willingness of the entrepreneur to assume the risk and to deal with uncertainty, thus he drew attention to the function of the entrepreneur and distinguished between the function of the entrepreneur and the owner who provided the money. 1.1.2 HISTORY In the early 16thcentury the term ‘Entrepreneur’ was used by Frenchman to denote men leading in military expeditions. Around 1700 A.D. the term was used in France for contractors or architects. By the early 18thcentury the term was applied to Business and Economic activities by the French Economist Richard Cautillon, (Cantilon). In 1848, the famous economist John Sturt Mill described ‘Entrepreneurship’ as the founding of a Private enterprise.As far as India is concerned, several factors are responsible for the slow growth of entrepreneurship in pre independent India. At the time of independence, the industrial base of our economy was very poor. The industries were facing many difficulties, like shortage of raw materials, 22 shortage of capital, marketing problems etc. However, the Indian Entrepreneurship Development Perspective Government is considerably enhancing the ease of doing business. Entrepreneurship is defined as the process of starting a business. Today, entrepreneurs are romanticized as being the cornerstones of a successful capitalist economy.But where did entrepreneurship begin? Who were the first entrepreneurs? In a global economy dominated by big businesses, what does the future hold for entrepreneurship? Today, we’re going to tell you everything you need to know about the history of entrepreneurship. 1. Earliest period – An early example of the earliest definition of an entrepreneur as a go-between is Marco Polo, who attempted to establish trade routes to the Far East. As a go-between, Marco Polo would sign a contract with a money person (forerunner of today’s venture capitalist) to sell his goods. A common contract during this time provided a loan to the merchant–adventurer at a 22.5 percent rate, including insurance. While the capitalist was a passive risk bearer, the merchant–adventurer took the active role in trading, bearing all the physical and emotional risks 2. Middle Ages - In the Middle Ages, the term entrepreneur was used to describe both an actor and a person who managed large production projects. A typical entrepreneur in the Middle Ages was the cleric—the person in charge of great architectural works, such as castles and fortifications, public buildings, abbeys, and cathedrals. 3. 17th Century – Richard Cantillon, a noted economist and author in the 1700s, Cantillon developed one of the early theories of the entrepreneur and is regarded by some as the founder of the term. He viewed the entrepreneur as a risk taker, observing that merchants, farmers, craftsmen, and other sole proprietors “buy at a certain price and sell at an uncertain price, therefore operating at a risk.” One entrepreneur in this period was John Law, a Frenchman, who was allowed to establish a royal bank. The bank eventually evolved into an exclusive franchise to form a trading company in the New World – the Mississippi Company. Unfortunately, this monopoly on French trade led to Law’s downfall when he attempted to push the company’s stock price higher than the value of its assets, leading to the collapse of the company. 4. 18th Century – In the 18th century, the person with capital was differentiated from the one who needed capital. In other words, the entrepreneur was distinguished from the capital provider (the present-day venture capitalist). One reason for this differentiation was the industrialization occurring throughout the world. Many of the inventions developed during this time were reactions to the changing world, as was the case with the inventions of Eli Whitney and Thomas Edison. Both Whitney and Edison were developing new technologies and were unable to finance their inventions themselves. Whereas Whitney financed his cotton gin with expropriated British crown property, Edison raised capital from private sources to 3 Entrepreneurial develop and experiment in the fields of electricity and chemistry. Management Both Edison and Whitney were capital users (entrepreneurs), not providers (venture capitalists). A venture capitalist is a professional money manager who makes risk investments from a pool of equity capital to obtain a high rate of return on the investments. 5. 19th and 20th Century - In the late 19th and early 20th centuries, entrepreneurs were frequently not distinguished from managers and were viewed mostly from an economic perspective.Andrew Carnegie is one of the best examples of this definition. Carnegie invented nothing, but rather adapted and developed new technology in the creation of products to achieve economic vitality. Carnegie, who descended from a poor Scottish family, made the American steel industry one of the wonders of the industrial world, primarily through his unremitting competitiveness rather than his inventiveness or creativity.In the middle of the 20th century, the notion of an entrepreneur as an innovator was established. The function of the entrepreneur is to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological method of producing a new commodity or producing an old one in a new way, opening a new source of supply of materials or a new outlet for products, by organizing a new industry.The concept of innovation and newness is an integral part of entrepreneurship in this definition. Indeed, innovation, the act of introducing something new, is one of the most difficult tasks for the entrepreneur. It takes not only the ability to create and conceptualize but also the ability to understand all the forces at work in the environment. This ability to innovate can be observed throughout history, from the Egyptians who designed and built great pyramids out of stone blocks weighing many tons each, to the Apollo lunar module, to laser surgery, to wireless communication. 1.1.3 DEFINITIONS OF ENTREPRENEUR 1) According to Oxford Dictionary an entrepreneur is “A person who sets up a business or businesses, taking on financial risks in the hope of profit” 2) According to the International Encyclopedia, an entrepreneur is “An individual who bears the risk of operating a business in the face of uncertainty about the future conditions”. 3) According to Schumpeter’s an entrepreneur is “The entrepreneur, in an advanced economy 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 with which consumers are not yet familiar, a new source of raw material or of new markets and the like”. 4) According to Adam Smith’s an entrepreneur is “The entrepreneur is an individual, who forms an organization for commercial purpose. 44 She/he is proprietary capitalist, a supplier of capital and at the same  time a manager who intervenes between the labour and the Entrepreneurship Development Perspective consumer”. “Entrepreneur is an employer, master, merchant but explicitly considered as a capitalist” 5) According to Peter F. Drucker’s an entrepreneur is “An entrepreneur is the one who always searches for change, responds to it and exploits it as an opportunity. Innovation is the specific tool of entrepreneurs, the means by which they exploit changes as an opportunity for a different business or different service”. 1.2 ENTREPRENEURSHIP The meaning of entrepreneurship involves an entrepreneur who takes action to make a change in the world. Whether startup entrepreneurs solve a problem that many struggle with each day, bring people together in a way no one has before, or build something revolutionary that advances society, they all have one thing in common action. It’s not some idea that’s stuck in your head. Entrepreneurs take the idea and execute it. Entrepreneurship is about execution of ideas. Entrepreneurship is a complex term that’s often defined simply as running your own business. But there’s a difference between a “business owner” and an “entrepreneur,” and although one can be both, what distinguished entrepreneurship is a person’s attitude. Entrepreneurship is a full time job which requires dedication and hard work. Entrepreneurs are innovators. They are owners, producers, market creators, decision takers and risk takers. Entrepreneurs are referred to as fourth ‘Factor of Production’ along with the other factors such as land, labour and capital. They generate employment opportunities so they are the backbone of nation’s economic progress. They play a very important role in the development of any country. 1.2.1 FACTORS AFFECTING ENTREPRENEURIAL GROWTH A) Economic Factors B) Non-Economic Factors A) ECONOMIC FACTORS 1. Capital – Capital is one of the most important factors of production for the establishment of an enterprise. Increase in capital investment in viable projects results in increase in profits which help in accelerating the process of capital formation. Entrepreneurship activity too gets a boost with the easy availability of funds for investment. Availability of capital facilitates for the entrepreneur to bring together the land of one, machine of another and raw material of yet another to combine them to produce goods. Capital is therefore, regarded as lubricant to the process of production.France and Russia exemplify how the lack of capital for industrial pursuits 5 Entrepreneurial impeded the process of entrepreneurship and an adequate supply of Management capital promoted it. 2. Labour – Easy availability of right type of workers also effect entrepreneurship. The quality rather than quantity of labour influences the emergence and growth of entrepreneurship. The problem of labour immobility can be solved by providing infrastructural facilities including efficient transportation. The quality rather quantity of labour is another factor which influences the emergence of entrepreneurship. Most less developed countries are labour rich nations owing to a dense and even increasing population. But entrepreneurship is encouraged if there is a mobile and flexible labour force. And, the potential advantages of low-cost labour are regulated by the deleterious effects of labour immobility. The considerations of economic and emotional security inhibit labour mobility. Entrepreneurs, therefore, often find difficulty to secure sufficient labour. 3. Raw Materials - The necessity of raw materials hardly needs any emphasis for establishing any industrial activity and its influence in the emergence of entrepreneurship. In the absence of raw materials, neither any enterprise can be established nor can an entrepreneur be emerged. It is one of the basic ingredients required for production. Shortage of raw material can adversely affect entrepreneurial environment. Without adequate supply of raw materials no industry can function properly and emergence of entrepreneurship to is adversely affected. In fact, the supply of raw materials is not influenced by themselves but becomes influential depending upon other opportunity conditions. The more favourable these conditions are, the more likely is the raw material to have its influence of entrepreneurial emergence. 4. Market – The role and importance of market and marketing is very important for the growth of entrepreneurship. In modern competitive world no entrepreneur can think of surviving in the absence of latest knowledge about market and various marketing techniques.The fact remains that the potential of the market constitutes the major determinant of probable rewards from entrepreneurial function. Frankly speaking, if the proof of pudding lies in eating, the proof of all production lies in consumption, i.e., marketing. The size and composition of market both influence entrepreneurship in their own ways. Practically, monopoly in a particular product in a market becomes more influential for entrepreneurship than a competitive market. However, the disadvantage of a competitive market can be cancelled to some extent by improvement in transportation system facilitating the movement of raw material and finished goods, and increasing the demand for producer goods. 5. Infrastructure - Expansion of entrepreneurship presupposes properly developed communication and transportation facilities. It not only helps to enlarge the market, but expand the horizons of 66  business too. Take for instance, the establishment of post and Entrepreneurship Development Perspective telegraph system and construction of roads and highways in India. It helped considerable entrepreneurial activities which took place in the 1850s. Apart from the above factors, institutions like trade/ business associations, business schools, libraries, etc. also make valuable contribution towards promoting and sustaining entrepreneurship’ in the economy. You can gather all the information you want from these bodies. They also act as a forum for communication and joint action. B) NON-ECONOMIC FACTORS 1. Education – Education enables one to understand the outside world and equips him with the basic knowledge and skills to deal with day- to-day problems. In any society, the system of education has a significant role to play in inculcating entrepreneurial values.In India, the system of education prior to the 20th century was based on religion. In this rigid system, critical and questioning attitudes towards society were discouraged. The caste system and the resultant occupational structure were reinforced by such education. It promoted the idea that business is not a respectable occupation. Later, when the British came to our country, they introduced an education system, just to produce clerks and accountants for the East India Company, the base of such a system, as you can well see, is very anti-entrepreneurial. Our educational methods have not changed much even today. The emphasis is till on preparing students for standard jobs, rather than marking them capable enough to stand on their feet. 2. Attitude of the Society – A related aspect to these is the attitude of the society towards entrepreneurship. Certain societies encourage innovations and novelties, and thus approve entrepreneurs’ actions and rewards like profits. Certain others do not tolerate changes and in such circumstances, entrepreneurship cannot take root and grow. Similarly, some societies have an inherent dislike for any money- making activity. It is said, that in Russia, in the nineteenth century, the upper classes did not like entrepreneurs. For them, cultivating the land meant a good life. They believed that rand belongs to God and the produce of the land was nothing but god’s blessing. Russian folk-tales, proverbs and songs during this period carried the message that making wealth through business was not right. 3. Cultural Value - Motives impel men to action. Entrepreneurial growth requires proper motives like profit-making, acquisition of prestige and attainment of social status. Ambitious and talented men would take risks and innovate if these motives are strong. The strength of these motives depends upon the culture of the society. If the culture is economically or monetarily oriented, entrepreneurship would be applauded and praised; wealth accumulation as a way of life would be appreciated. In the less developed countries, people are not economically motivated. Monetary incentives have relatively 7 Entrepreneurial less attraction. People have ample opportunities of attaining social Management distinction by non-economic pursuits. Men with organizational abilities are, therefore, not dragged into business. They use their talents for non-economic end. 4. Legal Environment - The legal environment affects the business very substantially.If suitable legal arrangements do not exist for safeguarding the interests and powers of the entrepreneurs, businessman and other parties related to the business, no one will like to carry out any significant business. 5. International Environment - The international environment also affects the system. Presently, the waves of globalization and liberalization are flowing throughout the world.The international environment includes various factors, like mutual relations between various nations, economic policies of the various national, availability of foreign capital, level of international competition, business activities of multinational companies, conditions of international peace, rules of international trade, etc.The business institutions should manage and operate business activities, considering these factors. 1.2.2 TYPES OF ENTREPRENEURS 1. Innovative Entrepreneurs – Innovative entrepreneurs are those who introduce new products, new methods of production techniques or discovers a new market or new services etc. they are commonly found in developed countries. They are aggressive in nature and they always try to make the idea successful one. 2. Imitative Entrepreneurs – This type of entrepreneurs always tries to copy the innovations made by innovative entrepreneurs. They are organizers of factors of production rather than creators. They contribute to the under developed countries. They are adaptive and more flexible. 3. Fabian Entrepreneurs – Fabian Entrepreneurs are very shy a lazy. They are very cautious. They do not venture or take risk. They are rigid and fundamental in their approach. they follow the footsteps of their predecessors. 4. Drone Entrepreneurs – This type of entrepreneur is conventional in their approach. They refuse to copy or use opportunities that come their way. They are not ready to make changes in their existing production methods even if they suffer losses. They resist changes. 5. Business Entrepreneurs – Business entrepreneurs are those who develop an idea for a new product or service and then establishes an enterprise to produce products according to their ideas. Most of the entrepreneurs belongs to this category. 88 6. Trading Entrepreneurs – They undertakes trading activities Entrepreneurship Development Perspective whether domestic or foreign trade. They have to identify the potential market for his products in order to stimulate the demand of products. They use many techniques to promote trading. 7. Industrial Entrepreneurs – They essentially manufacture products and offer services, which have an effective demand in the market. They have the ability to convert economic resources and technology into a profitable venture. 8. Corporate Entrepreneurs – They are those who through their innovative ideas and skill able to organize, manage and control a corporate undertaking very effectively and efficiently. Usually, they are promoters of the undertaking / corporations, engaged in business, trade or industry. 9. Agricultural Entrepreneurs – Those who undertakes agricultural as well as allied activities in the field of agriculture is known as agricultural Entrepreneurs. They engage in raising and marketing of crops, fertilisers and other inputs of agriculture through employment of modern techniques, machines and irrigation. 10. Technical Entrepreneurs – TheEntrepreneurs who are technical by nature in the sense of having the capability of developing new and improved quality of goods and services out of their own knowledge, skill and specialization are called technical Entrepreneurs. They concentrate more on production than marketing. 11. Non-Technical Entrepreneurs – Non-Technical Entrepreneurs are those who mainly concerned with developing alternative marketing and distribution strategies to promote their business. They are not concerned with the technical aspect of the product and services they are dealing with. 12. Professional Entrepreneurs – They make their profession to establish business enterprise with a purpose, to sell them once they are established. He or she is always looking forward to develop alternative projects by selling the running business. He is not interested in managing operations of the business established by him. He or she is very dynamic. 13. Spontaneous Entrepreneurs – They are otherwise known as pure Entrepreneurs, who are motivated by their desire for self – fulfilment and to achieve or prove their excellence in job performance. They undertake entrepreneurial activities for their personal satisfaction in work, ego, or status. Their strength lies in their creative abilities. They are the natural Entrepreneurs in any society. 14. Induced Entrepreneurs – They enter into entrepreneurship because of various governmental supports provided in terms of financial assistance, incentives, concessions, and other facilities to the peoples who want to setup of their Enterprises. 9 Entrepreneurial 15. Motivated Entrepreneurs – They are motivated by their desire to Management make use of their technical and professional expertise and skill in performing the job or project they have taken up. They have enough confidence in their abilities. they are highly ambitious and are normally not satisfied by the slow progress in their jobs. 1.2.3 REQUIREMENTS OF ENTREPRENEURIAL STRUCTURE 1. Encourage Efficiency - The main objective of an entrepreneurial structure is to infuse efficiency in various functions. A systematic structure will not leave anything to chance and every activity is coordinated to perform to its maximum. The organizational members try to maximize the output of goods and services from the given inputs. There is an effort to have systematic, rational and coordinated effort to control various waste and loss. 2. Communication - Communication is the number one problem of every organization. A good structure provides proper communication channel among persons working in the organization. A reporting relationship is established and a hierarchy of who reports to whom is also specified in a good structure. There is a need for horizontal, vertical and lateral communication process and it is done by a well planned structure. 3. Optimum Use of Resources - The proper allocation of resources helps in their optimum utilization also. The organization structure gives higher place to activities which are more important to the achievement of organizational objectives. The activities are placed according to their importance in the structure and proper guidelines are given for resource allocation. The optimum allocation of resources is important for the growth of a business. 4. Facilitates Management - There are a number of persons working in a business. Their work will have to be specified and duties will be assigned as per the requirements of the organization. A good structure will help in establishing relationship among persons working at different positions. An organization structure is a mechanism through which management directs co-ordinates and controls the activities of various persons. A well designed structure will help both management and operation of a business. It is ensured that no activity remains unattended and work is assigned as per the capacity of the persons undertaking it. A well thought organization structure is a great help for good administration. 5. Simple and Flexible - Organizational structure should be very simple. There should not be unnecessary levels of management. A good structure should avoid ambiguity and confusion. The system should also be flexible to adjust according to the changing needs. There may be an expansion or diversification which required reclassification of duties and responsibilities. The organization structure should be able to incorporate new changes without altering 10 10 the basic elements. 1.3 ENTREPRENEURIAL CULTURE Entrepreneurship Development Perspective “An entrepreneurial culture consists of a group of individuals who have suppressed individual interests in an effort to achieve group success because group success will advance their individual interests."An Entrepreneurial Organizational Culture (EOC) is a system of shared values, beliefs and norms of members of an organization, including valuing creativity and tolerance of creative people, believing that innovating and seizing market opportunities are appropriate behaviours to deal with problems of survival and prosperity, environmental uncertainty and competitors' threats and expecting organizational members to behave accordingly. The different definitions clearly show culture to be always a collective phenomenon. Culture is learnt consciously and unconsciously. It should therefore be distinguished from human nature, on the one hand, and from the individual personality, on the other. Cultural features are passed on in socialization processes. That is why culture cannot be changed in the short term: it has a long-term character. Cultural features influence attitudes towards start-ups and vice versa.Entrepreneurial culture can be described as an environment where someone is motivated to innovate, create and take risks. In a business, an entrepreneurial culture means that employees are encouraged to brainstorm new ideas or products. When work time is dedicated to these activities, it is called entrepreneurship. 1.3.1 ELEMENTS OF ENTREPRENEURIAL CULTURE 1. People and empowerment focused – Entrepreneur culture are groups of individuals who have make and work for the development of the group. They are focused on the building of power and empowerment of the members of the group. Because an organisation, society or a country develops when the entrepreneurs develop. 2. Value creation through innovation and change – The new generation demands and wants new requirements. And the entrepreneurial culture works towards value creation through innovation and change. Innovative changes and creations are important for the new generation. 3. Attention at the basics – Entrepreneurial culture works for the development of individuals, with the development of the group. It is necessary for them to keep their full concentration on the basics in the world of business. Because it is said that an organisation develops only when their basics are strong. 4. Hand-on-management – A good entrepreneur should have great managerial skill to run a successful organisation. An organisation is going to develop only when all the departments of the organisation is managed properly. It is important for the entrepreneurial culture should aim towards having those managers who are good and management and can take quick decisions. 11 Entrepreneurial 5. Doing the right thing – A good entrepreneur culture is achieve if Management there is proper ethical practices. An entrepreneurial culture should not only aim towards the development of their entrepreneurs, but they should always promote the entrepreneurs to do the right thing. 1.3.2 STEPS TO CHANGE ENTREPRENEURIAL CULTURE 1. Hire Aspiring Entrepreneurs It's no coincidence that aspiring entrepreneurs are attracted to the startup environment. These types are eager to gain experience and tend to see opportunities in markets or the industry where others don't. Bring them in, and empower them to flex their entrepreneurial muscles within your organization. 2. Make Employees Feel Like Partners Give everyone in your company equity, and motivate them to view your company as their company. You really need to believe that everyone at your company is your partner and treat them that way. 3. Empower and Encourage Employees Empower your employees with more responsibilities, and encourage them to make decisions on their own. Encourage creativity, reward your employees when they make good business decisions and use their mistakes as learning opportunities. 4. Be Open to Micro-failures I try to create an environment in which employees know that I am open to micro-failures in the macro-pursuit of success. If people are afraid to take risks, then we aren't going to grow as quickly or smartly as possible. But people don't always believe that making mistakes is OK. I strive to give them proof that it is, so they can let go of any fears and try new ways of getting the job done. 5. Give Incentives to Employees What's in it for them? If they're proactive, go the extra mile and really impact your company positively -- what do they get out of it? Incentives can include raises, bonuses (time off, a paid holiday, etc.), stock options, promotions and even public recognition of one's efforts. 6. Lead by Example You need to lead by example, take a few risks, and then let those ideas materialize. In some cases, your risks will fail; you need to show your team that failure is OK. They should embrace it, fail fast and get back on it. The only way your employees will feel like taking risks is if they know that failing will not be looked at in a bad light. Just make sure each failure only happens once. 7. Give Employees a Voice By giving employees voices, listening to their ideas and implementing them, you can encourage a culture of "intrapreneurs." 12 12  Seeing that they are an integral part of the company -- whether it's Entrepreneurship Development Perspective saving money by using a different vendor or creating a new process to streamline production -- will give them pride in the company. 8. Make It Safe to Share Ideas Create a culture where new ideas are welcomed and not shut down. You want every employee to feel like she can make a difference with her idea rather than depend on the founder or management team for the next big idea. Encourage your team to share often and openly to encourage intrapreneurship. 9. Give Employees Ownership To create a culture of intrapreneurs, you have to give employees ownership of projects and follow their recommendations. We encourage an entrepreneurial mindset by having employees take turns being "Sensei" and leading a professional development training session. Additionally, every employee is expected to take a project from start to finish every quarter. 10. Ask Them for Their Recommendation Nearly all employees can present information; rock stars will prepare a recommendation. When team members bring back information, ask them, "What do you think?" You'll create a culture of thinking beyond the current step toward next steps and implications. It's the first step toward creating intrapreneurs. 11. Create a Startup Culture If you want to have intrapreneurs in your organization, you need to foster an atmosphere of entrepreneurship. This can be done through articles you share with the team, weekly meetings and, most importantly, mentorship. Creating a library of books about entrepreneurship helps as well. If you create and promote the culture, the entrepreneurial spirit within your employees will be empowered. 12. Make Hires Draw an Owl There is a great Internet meme that we use as a hiring philosophy called "How to Draw an Owl." Step one: Draw two circles. Step two: Draw the rest of the owl. We need people who can self-direct and get things done, even if it isn't the way we'd ideally do it. Drawing owls is a microcosm of the "intrapreneur" culture we want to foster. 1.3.3 ENTREPRENEURIAL V/S ADMINISTRATOR ENTREPRENEURIAL ADMINISTRATOR An entrepreneur launching a business venture accepts the reality that the company may not succeed and he may lose the money he invested in it.An administrator within a corporation is not an owner of the company, so its potential failure only affects him to the extent that he may lose his job. 13 Entrepreneurial An entrepreneur is often motivated by the desire to be his own boss and Management not have to answer to anyone but himself. He enjoys the freedom of being able to make all the key decisions about how to operate the company. An administrator has a narrower scope of authority, confined to his functional area. He works as part of a team and accepts direction from those above him in the organization. An entrepreneur has a better chance of success if he has an understanding of, and competency with, all of the functional areas of his business -- including marketing, finance, production, and personnel. An administrator can be more narrowly focused. For instance, a controller within a large company does not necessarily need extensive knowledge about advertising strategies. An administrator works in an environment with detailed policies and procedures in place An administrator might view this as a chaotic environment. An entrepreneur must have a vision of how he wants to build the company. An administrator is not charged with creating the vision for the enterprise. An entrepreneur seeks the feeling of accomplishment that comes from building something from the start-up stage. An administrator gets satisfaction from the success of the group -- the company as a whole -- and his contributions to that success. An entrepreneur's status comes from being part of the select class called business owners. As the company grows and gains recognition in its market, the entrepreneur's status grows as well.An administrator's sense of status comes from such things as an expanded job title, being given increased responsibilities, or receiving a bonus based on superior performance. 1.4 THEORIES OF ENTREPRENEURSHIP 1) Schumpeter Dynamic Entrepreneurship Innovation Theory The innovative theory is one of the most famous theories of entrepreneurship used all around the world. The theory was advanced by one famous scholar, Schumpeter, in 1991. Schumpeter believes that creativity or innovation is the key factor in any entrepreneur’s field of specialization. He argued that knowledge can only go a long way in helping an entrepreneur to become successful. He believed development as consisting of a process which involved reformation on various equipment’s of productions, outputs, marketing and industrial organizations. However, Schumpeter viewed innovation along with knowledge as the main catalysts of successful entrepreneurship. He believed that 14 14  creativity was necessary if an entrepreneur was to accumulate a lot Entrepreneurship Development Perspective of profits in a heavily competitive market. The concept of innovation and its corollary development embraces five functions: 1. Introduction of a new good 2. Introduction of a new method of production 3. Opening of a new market 4. Conquest of a new source of supply of raw materials and 5. Carrying out of a new organization of any industry Schumpeter represents a synthesis of different notions of entrepreneurship. His concept of innovation included elements of risk taking, superintendence and co-ordination. In practice, new combination theory covers five cases which are given below: (i) The introduction of a new good which consumers, are not yet familiar—or of a new quality of a good. (ii) The introduction of a new method of production, that one not yet tested by experience in the branch of manufacture concerned, which need by no means be founded upon a discovery scientifically new and can also exist in a new way of handling a commodity commercially. (iii) The opening of a new market i.e. a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before. (iv) The conquest of a new source of supply of raw materials or half manufactured goods, irrespective of whether this source already exists or whether it has first to be created. (v) The carrying out of the new organisation of any industry like the creation of a monopoly position (for example, through trustification) or the breaking up of a monopoly position. According to Schumpeter Development is not an automatic process, bur must be deliberately and actively promoted by some agency within the system. Schumpeter called the agent who initiates the above as entrepreneur He is the agent who provides economic leadership that changes the initial conditions of the economy and causes discontinuous dynamic changes By nature he is neither technician, nor a financier but he is considered an innovator Entrepreneurship is not a profession or a permanent occupation and therefore, it cannot formulate a social class like capitalist Psychological, entrepreneurs are not solely motivated by profit 15 Entrepreneurial Features of Schumpeter Theory Management 1) High degree of risk and uncertainty in Schumpeterian World 2) Highly motivated and talented individual 3) Profit is merely an part of objectives of entrepreneurs 4) Progress under capitalism is much slower than actually it is 5) It is leadership rather than ownership which matters. Many business people support this theory, and hence its popularity over other theories of entrepreneurship. However, Schumpeter’s theory suffers from following limitations: (i) It excludes individuals who merely operate an established business without performing innovative functions. (ii) Innovating entrepreneur represents the most vigorous type of enterprise. However, this type of entrepreneur is rarely available in developing countries like India. (iii) It laid too much emphasis on innovative functions. But it ignores the risk taking and organising aspects of entrepreneurship. (iv) It assumes an entrepreneur as a large scale business man. He is a person who creates something new. But in practice, an entrepreneur cannot have large scale operations from the very beginning, (v) It fails to provide a suitable answer to question like— why some countries had more entrepreneurial talent than others? According to Schumpeter, entrepreneurs are not a class in themselves like capitalists and workers. An individual is an entrepreneur only when he actually carries out new combinations and ceases to be an entrepreneur the moment he settles down to running the established business. According to Schumpeter, an entrepreneur exists only if the factors of production are combined for the first time. Maintenance of a combination is not an entrepreneurial activity. In this way, combination theory differs from the theory of rent formulated by Ricardo. Ricardo included the term “entrepreneurial ability” as an independent factor of production and it is concerned with profit. Thus, this theory fails to provide suitable solutions to the problems. 2) Theory of High Achievement by McClelland McClelland’s theory of needs is one such theory that explains this process of motivation by breaking down what and how needs are and how they have to be approached. David McClelland was an American Psychologist who developed his theory of needs or Achievement Theory of Motivation which revolves around three important aspects, namely, Achievement, Power, And Affiliation. This theory was developed in the 1960s and McClelland points out that regardless of our age, sex, race, or culture, all of us possess one of these needs and are driven by it. This theory is also known as the 16 16 Acquired Needs as McClelland put forth that the specific needs of an Entrepreneurship Development Perspective individual are acquired and shaped over time through the experiences he has had in life. Psychologist David McClelland advocated the Need theory, also popular as Three Needs Theory. This motivational theory states that the needs for achievement, power, and affiliation significantly influence the behavior of an individual, which is useful to understand from a managerial context. This theory can be considered an extension of Maslow’s hierarchy of needs. Per McClelland, every individual has these three types of motivational needs irrespective of their demography, culture, or wealth. These motivation types are driven by real-life experiences and the views of their ethos. McClelland identified two characteristics of entrepreneurship. First doing things in a new and better way. Secondly, decision making under uncertainty. This motive is called as the tendency to strive for success in situations involving an evaluation of one’s performance in relation to some standard of excellence. People having high need for achievement are more likely to succeed as entrepreneurs. According to McClelland, individuals with high need achievement will not be motivated by monetary incentives but that monetary rewards will constitute a symbol of achievement for them. Similarly, they are also not interested much for social recognition or prestige but their ultimate goal is personal accomplishment. That is why McClelland suggests that in order to raise the level of achievement motivation, parents should set high standards for their children. 1. Need For Achievement The need for achievement as the name itself suggests is the urge to achieve something in what you do. If you are a lawyer it is the need to win cases and be recognized, if you are a painter it is the need to paint a famous painting. It is the need that drives a person to work and even struggle for the objective that he wants to achieve. People who possess high achievement needs are people who always work to excel by particularly avoiding low reward low-risk situations and difficult to achieve high-risk situations. 2. Need For Power The need for power is the desire within a person to hold control and authority over another person and influence and change their decision in accordance with his own needs or desires. The need to enhance their self-esteem and reputation drives these people and they desire their views and ideas to be 17 Entrepreneurial accepted and implemented over the views and ideas over Management others. These people are strong leaders and can be best suited to leading positions. They either belong to Personal or Institutional power motivator groups. If they are a personal power motivator they would have the need to control others and an institutional power motivator seeks to lead and coordinate a team towards an end. 3. Need For Affiliation The need for affiliation is the urge of a person to have interpersonal and social relationships with others or a particular set of people. They seek to work in groups by creating friendly and lasting relationships and have the urge to be liked by others. They tend to like collaborating with others to competing with them and usually avoids high-risk situations and uncertainty The individuals motivated by the need for affiliation prefer being part of a group. They like spending their time socializing and maintaining relationships and possess a strong desire to be loved and accepted. These individuals stick to basics and play by the books without feeling a need to change things, primarily due to a fear of being rejected. 4. Using the Theory McClelland’s theory can be applied to manage the corporate teams by being identifying and categorizing every team member amongst the three needs. Knowing their attributes may certainly help to manage their expectations and running the team smoothly. 3) Theory of Personal Resourcefulness According to this theory, the root of entrepreneurial process can be traced to the initiative taken by some individuals to go beyond the existing way of life. The emphasis is on initiative rather than reaction, although events in the environment may have provided the trigger for the person to express initiative. This aspect seems to have been subsumed within ‘innovation’ which has been studied more as the ‘change’ or ‘newness’ associated with the term rather ‘pro- activeness’. 1.5 SUMMARY Entrepreneurship means the willingness of an individual to start a new business venture by taking risk and managing it in this technology enabled competitive global environment. 18 18 The word entrepreneur has an interesting definitional history and it stems Entrepreneurship Development Perspective from the French word “entrependre” which refers to undertake. The study of entrepreneurship reaches back to the work in the late 17th and early 18th centuries of Irish-French economist Richard Cantillon. He was foundational to classical economics. Cantillon defined the term first in his Essay on the Nature of Trade in General. Cantillon defined the term as a person who pays a certain price for a product and resells it at an uncertain price, "making decisions about obtaining and using the resources while consequently admitting the risk of enterprise". Cantillon considered the entrepreneur to be a risk taker who deliberately allocates resources to exploit opportunities to maximize the financial return. Cantillon emphasized the willingness of the entrepreneur to assume the risk and to deal with uncertainty, thus he drew attention to the function of the entrepreneur and distinguished between the function of the entrepreneur and the owner who provided the money. Entrepreneurship is a complex term that’s often defined simply as running your own business. But there’s a difference between a “business owner” and an “entrepreneur,” and although one can be both, what distinguished entrepreneurship is a person’s attitude. An entrepreneurial culture consists of a group of individuals who have suppressed individual interests in an effort to achieve group success because group success will advance their individual interests." Organizational structures, and the way those structures are visually represented in charts and diagrams, are important because they help sort out three key aspects of business operations: specific job duties, reporting relationships, and decision-making authority. Entrepreneurial Training Programme offer a comprehensive combination of courses to help young entrepreneurs develop their business ideas and self-confidence. These training courses are available to start-up ventures or those who want to expand their businesses. The Entrepreneurial Training Programme offers great resources to help you develop a solid business and learn what it takes to build a thriving business. As the term itself denotes, EDP is a programme meant to develop entrepreneurial abilities among the people. In other words, it refers to inculcation, development, and polishing of entrepreneurial skills into a person needed to establish and successfully run his / her enterprise. Thus, the concept of entrepreneurship development programme involves equipping a person with the required skills and knowledge needed for starting and running the enterprise. According to the American Heritage Dictionary, “Intrapreneur is a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.” 19 Entrepreneurial Innovation Theory – The innovation theory of profit was proposed by Management Joseph. A. Schumpeter, who believed that an entrepreneur could earn economic profits by introducing successful innovations. Need for Achievement Theory – McClelland emphasizes achievement orientation as most important factor for entrepreneurs. Individuals with high, achievement orientation are not influenced by considerations of money or any other external incentives. People with high achievement. The latter types are prepared to work harder for money or such other external incentives. On the contrary, profit is merely a measure of success and competency for people with high achievement need. 1.6 EXERCISE Fill in the blanks 1) According to Schumpter, innovative entrepreneurs would a) Thrive in the market b) Not survive and disappear from the market. c) Get absorbed within larger innovation businesses. d) Get absorbed within non-innovative businesses. 2) Who should be involved in preparing a firm’s business plan? a) Accountant b) Engineer c) Entrepreneur d) None of the above 3) Entrepreneurship Development Program is helpful for: a) First-generation entrepreneurs b) Future generation entrepreneurs c) Existing Entrepreneurs d) None of the above 4) Which of these is not a type of entrepreneurship? a) Small business entrepreneurship b) Scalable entrepreneurship c) Large scale entrepreneurship d) Intrapreneurship 5) ‘Entreprendre’ means to ______________. a) Undertake b) Enterprise c) Businessman d) None of the above 20 20 True or False Entrepreneurship Development Perspective 1) Entrepreneurship can be learned by anyone, its not something that can simply learn in a classroom. 2) Successful entrepreneurs often exhibit a strong need for status, money and power. 3) Entrepreneurs personally compete against others with self-imposed standards that are realistic and challenging. 4) An entrepreneur should not be ready to work hard. 5) Entrepreneurship is a full time job which requires dedication and hard work. Short Notes 1) Qualities of Entrepreneurship 2) Types of Entrepreneurs. 3) Elements of Entrepreneurial culture 4) History of Entrepreneurs 5) Requirements of Organisational structure for Entrepreneurs. Answer in Brief 1) What are different theories of entrepreneurship development? Examine critically. 2) Discuss the main theories of entrepreneurship. 3) “An entrepreneur is a person who creates an ongoing business enterprise from nothing.” Explain. Describe the main functions of an entrepreneur. 4) Define Entrepreneurship. Discuss its characteristics. 5) Explain the Importance and significance of Entrepreneurship.  21  2 Entrepreneurial Management CREATING ENTREPRENEURIAL VENTURE - I Unit Structure 2.0 Objective 2.1 Introduction 2.2 Entrepreneurial Environment 2.3 Financial Analysis of Entrepreneurship Venture 2.4 Summary 2.5 Exercise 2.0. OBJECTIVES After studying this unit the student will be able to - Understand the concept of entrepreneurship environment. Know about financial analysis of entrepreneurship venture 2.1. INTRODUCTION Entrepreneurship is an activity that helps in overall development of an economy, through balanced growth, infrstructure development, reduction in inequality and poverty, and additional opportunities of employment development. Hence an entrepreneural development activity sets a pathway for overall development of a country. The development of the terms “entrepreneur “ & “Entrepreneurship” have evolved over the years. It was initially connected with ‘Marco Polo’ the merchant adventurer. In the middle ages (476-1450AD) the term was used for a person who managed large production projects, but did not assume risk. Later by 17th century risk got associated with entrepreneurship. By the end of 18th century, the entrepreneurship and entrepreneur was regarded as capital provider. In the 19th century entrepreneurs were considered as leaders/managers and by the 20th century he has been called as innovator, by Joseph Schumpeter, which again was referred as “facilitator of economic and social development.” Entrepreneurial ventures provide independence, autonomy to entrepreneurs. Entrepreneurship enables them to be their own masters. They get an opportunity to achieve something on their own. They pursue their dreams and ambitions through their enterprises and get the pleasure of fulfillment, self-expression and self-actualization. Their vision, creativity, gets manifested through their enterprises. 22 22 They get an opportunity to stand out in the crowd and get recognition for Creating Entrepreneurial Venture - I their contribution. They get an opportunity to enjoy their work and thus are relieved of boring, unchallenging, uninteresting and unexciting work. They need not bother about stress of working under boss. It makes them free from depression and frustration arising out of dull working environment. Entrepreneurship enables them to work in lively environment where there is pleasure, enjoyment, an opportunity to exercise their ideas and explore their worth. It increases their self-esteem and builds up self-confidence. ENTREPRENEUR & ENTREPRENEURSHIP An entrepreneur is a person who develops a new idea and takes the risk of setting up an enterprise to produce a product/service which satisfy consumer needs. All entrepreneurs are business persons , but not all business persons are entrepreneurs. An entrepreneur acts as a ctalyst of growth and development in modern world. He introduces innovative changes in the business and society.He evaluates perceived opportunities and strives to make the decision that will enable the firm to realize sustained growth. According to Webster Dictionary –“ An entrepreneur is a person who organizes and manages a business undertaking, assuming the risk for the sake of profit.” An entrepreneurship is innovative and risk taking activity. It is a process of creating, new and innovative product / service by assuming the risks and rewards. Entrepreneurship is different from normal production and distribution activity, as it involves innovation, creativity, risk and uncertainty. According to “Robert Hisrich”- “ Entrepreneurship is the process of creating something new and assuming the risks and rewards” Entrepreneurship according to Joseph Schumpeter is concerned with:- Development of new technology Introduction of new product Creation of new form of organizational structure Development of new source of raw materials Entry in new market It results in reduction and optimum utilization of resources, capital formation, employment generation, infrastructure development and also generates revenue for the Government. 2.2 ENTREPRENEURIAL ENVIRONMENT Entrepreneurship environment refers to various facets within which enterprises- big, medium, small and others operate. Any enterprise is therefore influenced by the environment surroundings. 23 Entrepreneurial Entrepreneurial environment ecosystem might be viewed as a complex Management adaptive system that can be compared to a natural ecosystem, like a forest. This complexity theory perspective can be better understood as the nature of an entrepreneurial ecosystem. The entrepreneurial environment is the aggregation of all those external conditions and effects, which affect the life of living beings and development entrepreneurship. So There are many characteristics of entrepreneurial environment. These environment can broadly be classified as important components, which includes- 1) Political Environment : Political environment constitutes all the factors related to government affairs such as type of government in power, attitude of government towards different groups of societies, policy changes implemented by different governments etc. The political environment has immediate and great impact on the business transactions so businessman must scan this environment very carefully. 2) Economical Environment: The economic environment factors have immediate and direct impact on the businessman so businessmen must scan the economic environment and take timely actions to deal with these environments. Economic environment may put constraints and may offer opportunities to the businessman. After the new economic policy of 1991, lots of opportunities are offered to businessmen. 3) Social Environment : Social Environment consists of the customs and traditions of the society in which business is existing. It includes the standard of living, taste, preferences and education level of the people living in the society where business exists. 4) Legal Environment : Legal environment constitutes the laws and various legislations passed in the parliament. The businessman cannot overlook the legislations because he has to perform his business transactions within the framework of legal environment. 5) Technology Environment : Technological environment refers to changes taking place in the method of production, use of new equipment and machineries to improve, the quality of product. The businessman must closely monitor the technological changes taking place in his industry because he will have to implement these changes to remain in the competitive market 6) Cultural Environment: The cultural environment consists of the influence of religious, family, educational, and social systems in the marketing system. Marketers who intend to market their products overseas may be very sensitive to foreign cultures. While the differences between our cultural background in the United States and those of foreign nations may seem small, marketers who ignore these differences risk failure in implementing marketing programs. Failure to consider cultural differences is one of the primary reasons for marketing failures overseas. 24 24 2.2.1 SIGNIFICANCE OF ENTREPRENEURIAL ENVIRONMENT Creating Entrepreneurial Venture - I 1) Identify Opportunities: Entrepreneurial environment enables the firm to identify opportunities and getting the first mover advantage. Analysis of business environment helps to identify opportunities i.e., positive external changes to be exploited instead of losing them to competitors. 2) Identify Threats: It helps the firms to identify threats and early warns to take corrective measures against those treats that hinder business performance and take appropriate preventive measures on time. 3) Tapping useful resources: Any business enterprise depends on environment as a source of input like raw materials, labour etc. and as an outlet for outlet i.e., goods of services, taxes, etc. Analysis of business environment helps to get resources that it needs to convert into outputs which an environment desires. 4) Giving Direction for Growth: When a business interacts with its environment, it becomes easier to identify areas for growth and expansion of its activities. A firm can get answers to similar questions by tapping into its business environment. It gives a correct assessment of how to plan and strategise a business activity so as to achieve goals or objectives. 5) Continuous Learning: Since the environment is dynamic in nature, it constantly keeps changing. This keeps continuous learning & updating knowledge and skills. This helps an individual to prepare for predicted and unpredicted changes in the realm of business. 6) Increased Productivity : A better understanding of environment results in increased productivity, as all the resources can be arranged and used properly. Environmental factors help in proper utilization of resources as a result there is minimum wastage and increased productivity. 7) Coping with rapid changes: It helps management to become more sensitive to ever changing needs of the customers. As a result, of environmental awareness they are able to respond to such changes effectively. It helps in assisting in planning and policy formulation. Environmental scanning provides the basis for deciding future course of action (planning) and guidelines for decision making (policy). 8) Improved performance: The continuous monitoring of environment and adopting suitable business practices not only improve their present performance but also continue to succeed in the market for the period. 25 Entrepreneurial 2.2.2 SWOC ANALYSIS Management SWOC analysis is now defined as a strategic planning method used to research external and internal factors which affect company success and growth. Firms use SWOC analysis to determine the strengths, weaknesses, opportunities, and challenges of their firm, products, and competition. A) Strengths: It refers to something in which a firm is well-versed expertise in. Examples of organizational strengths are: Modern Technology Strong Financial condition Dedicated employees Broad product line B) Weaknesses: Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. Weaknesses are controllable. They must be minimized and eliminated. Examples of organizational weaknesses are: Outdated technology Lack of Financial Resources Apathetic employees Narrow product range Example - To overcome obsolete machinery, new machinery can be purchased. C) Opportunities: Organization should recognize the opportunities and grasp them whenever they arise. Organizations can gain competitive advantage by making use of opportunities. Opportunities may arise from: Government Incentives Less Competition Long credit period given by supplier Example: Increasing demand for motor bikes as it offers convenience to working people in travelling. It is a great opportunity for new firms to enter motor bike production business and compete with existing firms. D) Challenges: Challenges arise when conditions in external environment jeopardize (risk/endanger) the profitability of the organization’s business. 26 26  Threats are uncontrollable. When a threat comes, the stability and Creating Entrepreneurial Venture - I survival can be at stake / at risk. Examples of organizational threats are: Strikes by employees New strategy by competitor Changes in economic conditions Changes in customer preferences 2.2.3 PROBLEMS OF ENTREPRENEURSHIP Entrepreneurial activity is not a new concept, but still being started up as individual activity, has its own limitations. Entrepreneur faces lots of problems in undertaking any activity. 1) Financing: Getting funds for any activity is one of the main issues that all businesses face and have to tackle to survive. Inspite of initial money being used for starting any activity will not be sufficient for survival for long. Steady cash flow is crucial for businesses to endure, and extra funds to carry any activity ahead. A proper planning for arrangement and allocation of funds is a pre- requisite requirement for any entrepreneurial activity. 2) Lack of Planning : Much entrepreneurial activity fails to grow because of lack of initial planning. Key areas like sales, development, and funding aren’t after thoughts. They need to all belong to any business plan right from the start. 3) Hiring the right talent : Any business activity to be successful requires a right amount of numbers as well as right potential. As the entire success of any activity depends upon the manpower involved. But unfortunately getting a right talent is very difficult, as the skilled people’s supply is less than the demand. 4) Effective marketing within a limited budget : Being a new venture/start-up, it’s essential to create visibility among consumers. But targeting customers effectively huge cost. Hence marketing the concept /product/service becomes challenge with entrepreneurs. To do an effective marketing with limited budget is what an entrepreneur finds difficult. 5) Risk and uncertainty : For first-time entrepreneurs, dealing with the uncertainties of the venture can be a tough task. The entrepreneurs can often feel ultimately responsible for the success or failure of their venture. There are also many detours and deviations from the initial plan. All of this can take a toll on the entrepreneur. The VUCA environment that most new businesses operate in should be accepted as the reality and the changes accepted without much resistance. 6) Dealing with criticism : For an entrepreneur, criticism comes as a part and parcel of the job. Every decision of the entrepreneur can be 27 Entrepreneurial met with criticism by the team, partners, investors, customers, and Management even their family. Even established entrepreneurs such as Ratan Tata must deal with this. 7) Attractive Customers : Getting customers for your product or service can be the difference between success and failure for a business. Many businesses have started with powerful ideas however could not survive simply because they failed to reach the right customers. 8) Making Decisions: Decision-making in a business situation can be difficult, especially when there are so many things that need to be considered while taking on each decision. Entrepreneurs can face a dilemma while making a decision, especially when they have limited information. 9) Time Management: Even the best entrepreneurs struggle to manage their time properly. As they take up roles out of their expertise, they can find it challenging to get things done. The challenges often pop up when the entrepreneurs have to deal with conflicting priorities 10) Office Infrastructure: Workplace rent and associated costs are the first things that start with generation & implementation of idea. Any entrepreneurial idea that is there needs to have a set up and incur cost on such set up to start 2.3 FINANCIAL ANALYSIS OF ENTREPRENEUIAL VENTURE Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. A financial analyst will thoroughly examine a company's financial statements—the income statement, balance sheet, and cash flow statement. Any entrepreneurial activity before execution requires financial planning to be done. It is included in Business Plan that is presented for approval. The plan includes a projected profit-and-loss statement for the next three to five years and a cash flow statement. A balance sheet is sometimes included as well as a break-even analysis. The financial plan in entrepreneurship is important, because it establishes the financial goals of the company. 2.3.1 Following are the significance of financial planning:- 1) Determine Feasibility : Any business idea that is presented for approval needs to have feasibility evaluation done and once the feasibility report is attached then only the business idea gets approval. Financial analysis is an effective way of determining the feasibility of any business venture. 2) Variance Analysis : Financial analysis helps in finding out the variance in any venture, by comparing actual performance with 28 28  expected performance. There by enabling to take corrective Creating Entrepreneurial Venture - I measures in time. One of the biggest points of importance for entrepreneurial finance is monitoring the actual results against the line-item budget in the financial plan to give you the opportunity to take whatever steps are necessary to get back on track. For example, if you're not reaching the projected revenue, either the projections are wrong or the marketing program is not as effective as you thought. 3) Forecasting Financial Requirements: Financial Analysis enables the entrepreneur to have an estimated financial requirement that is required in future. As a result of which entrepreneurs can do a perfect planning with respect to future activity and maintained financial health. 4) Obtaining Fund: Investors and lenders request to see the entrepreneur's business plan, including the financial plan with projections and assumptions behind the forecast. If the financial plan is unrealistic, a common mistake with entrepreneurs, the loan or investment will not be forthcoming. Hence financial analysis will be taken into consideration before granting any amount of financial support. 5) Cash Flow Shortages: Financial analysis also helps an entrepreneur to overcome any kind of cash flow shortages. Any venture despite of accurate forecast suffers from thi