CHAPTER: ENTREPRENEUR

Concept:
Economists has defined entrepreneur as a person who bring resources and generate
wealth. He is a person who introduces changes, innovations and new order.
Psychologist has viewed entrepreneur as a person who is typically driven by certain
forces, like the need to attain or obtain something, to experiment, to accomplish or
to escape the authority of others.
The person or group of person who creates new idea, innovate or invent new thing,
bear risk, manage resources and turn into successful business is called Entrepreneur.
Economists usually treat their service as separate factor of production called
Entrepreneurship. Entrepreneur is the only factor of production whose role is to
combine and organize other factors of production. The entrepreneur sees the value
of a new idea and is able to organize and carry out the job of turning it into cash.
They are the persons who shift economic resources out of an area of lower into an
area of higher productivity and greater yield. The term entrepreneur may be properly
applied to those who incubate (Develop) new ideas, start enterprises based on those
ideas and provide added value to society based on their independent initiative.
Entrepreneur as a Risk-Bearer, entrepreneur as an organizer, and entrepreneur as a
innovator. In conclusion we can say that Entrepreneur is the one who organizes and
manages a business undertaking, assuming the risk for the sake of profit. He is the
risk and uncertainty bearer, innovator, organizer of factors of production and effortful
for creating something new.

Characteristics of an Entrepreneur or Entrepreneurial Traits:

1. Desire for responsibility:

The entrepreneurs feel personal responsibility about

the result of the ventures in which they are associated.

2. Preference for moderate risk: the entrepreneurs are calculating risk taker
instead of being wild risk-takers. They rarely play gamble.
3. Confidence in their ability to succeed: the entrepreneurs have ample confidence
in their ability to succeed. They are optimistic regarding their chance to
succeed.
4. Desire for immediate feedback: the entrepreneurs want to know how they are
doing work. They are continuously interested for reinforcement.

5. High level of energy: the entrepreneurs have high level of energy than average
men. To be a successful entrepreneur, work long time and labor hard is a
rule rather than exception. Their morale is like this the harder you fall, the
harder you bounce.
6. Future orientation: the entrepreneurs have well-defined sense of searching
opportunities. They always look forward. They are less interested in what was
done yesterday.
7. Skill of organizing:

the entrepreneurs are well organizer. They group tasks

necessary to achieve goal and allocate task to various positions. He delegates

authority and responsibility of each position. He must also have established
harmony of efforts.
8. Desire for high achievement: the main force that motivates the entrepreneurs
is the desire for high achievement. They have strong desire to achieve their
goal.
9. High degree of commitment: the entrepreneurs need full commitment to initiate
any venture successfully. They fully surrender their body, mind and money to
the business.
10. Flexibility: the entrepreneurs must flexible to adapt to the changing demand of
their customers and their businesses.
11. Independence: the entrepreneurs do not like to be directed by others. They
like to work independent according to their routine.
12. Foresight: the entrepreneurs have good foresight regarding the future business
environment. They are able to forecast the likely future change in the market,
change in the attitude of the customers, technological progress.
13. Innovative: the entrepreneurs are continuously involved in innovation to make
necessary arrangement to meet the changing taste of the consumer. For this
they establish research and innovative centers.

Function of Entrepreneur:
1. Planning
a. Setting goals
b. Developing business plan
2. Organizing
a. Grouping of Tasks

b. Coordination
3. Mobilizing Resources
a. Financial resources
b. Human resources
c. Technology resources
4. Relationship Management
a. Exchange relationship
b. Professional relationship
c. Government relationship
d. Social relationship
5. Control
a. Financial control
b. Production control
c. Management control

Types of Entreprneurs
1. Innovative Entrepreneurs: innovative entrepreneurs can be the following types:
a)

Innovative: The entrepreneurs who make innovation are known as innovative

entrepreneurs. They introduce new products, initiate new production technique,
and discover new market, or new energy, or new source of raw materials.

b)

Imitative: The entrepreneurs who imitate the innovations made by the

innovative

entrepreneurs

are

known

as

imitative

entrepreneurs.

They

themselves do not make dynamic innovations. They simply adopt the

technique and method initiated by others.
c)

Fabian: the entrepreneurs who take extreme care while making any type of
experiment in their business and who are of skeptic (pessimistic) are known
as Fabian entrepreneurs.

d)

Drone: the entrepreneurs, who reject the opportunity to make improvement in

the technique of production even if the return has decreased in comparison
the product of similar firms, are known as drone entrepreneurs.

e)

Forced: they are the victim of circumstances. They forced to become

entrepreneurs to fashion their own economic livelihood.

f)

Empire builder: the entrepreneurs who go on creating new ventures one after
another are empire builder.

2. Behavioral
a) Solo operators: The entrepreneurs who work alone are called solo (alone)
operators.
b) Active partners: the entrepreneurs who operate the business as joint venture
are known as active partners.
c) Inventors: the entrepreneurs who discover new product from their capacity
are called inventors.
d) Challengers: the entrepreneurs who make business due to challenges are
called challengers. After meeting one challenge they search for other
challenges.
e) Buyers: the entrepreneurs who like to run the business by buying the business
in operation are called buyers.
f) Life timers: the entrepreneurs who take business as inseparable part of their
life is known as life timers.
3. Focus Group
a) Women: the women involved in independent business are known as women
entrepreneurship.
b) Minority: minority races are also involved in business which is called minority
entrepreneurship.
c) Immigrant: The people who go from one country to another country and run
business are known as immigrant entrepreneurs.
d) Part-time: the person who do not sacrifice fixed salary but also run their
independent business are called part-time entrepreneur.
e) Home-based: the entrepreneurs who run business from their home are called
home-based business.
f) Family business: the business in which the financial control of the company
lies with the two or more than two members of the family is called business
of family ownership and the persons involved are known family business
owners.
g) Corpreneur: the couples who work together as co-owner in their own business
are known as corpreneurs.
h) Intrapreneur: the corporate entrepreneur is known as intrapreneur.

Distinction between an Entrepreneur and a Manager:

Entrepreneur and manager are not the same terms. In reality these two terms denote
different meaning. An entrepreneur may initiate new business and may work also as
the manager of that business. But managers cannot be an entrepreneur. The
entrepreneur is the owner of the business firm whereas the manager is an employee.
The entrepreneur receives dividend or profit for making investment, which is uncertain.
On the other hand, the manager receives salary for the work done which is fixed
and certain. A firms managers are agents who work for the firms owners, who are
the principals. The main points of difference between an entrepreneur and a manager
have been shown in table below:
Points
1.

Motive

Entrepreneur

Manager

The main motive of entrepreneur

But,

is to start a venture by setting

manager

up

an

enterprise.

the

main
is

motive

to

render

of

a
his

He services in an enterprise already

understands the venture for his

set up by someone else.

personal gratification.
2.

Status

An entrepreneur is the owner of

A manager is the servant in the

the enterprise.

enterprise

owned

by

the

entrepreneur.
3.

Risk-bearing

An entrepreneur being the owner

A manager as a servant does

of the enterprise assumes all

not bear any risk involved in the

risks and uncertainty involved in

enterprise.

running the enterprise.

4.

5.

Rewards

Innovation

The reward is profit which is

The reward is salary which is

highly certain.

certain and fixed.

Entrepreneur

acts

as

an

Manager simply translates the

innovator also called a change

entrepreneurs

agent.

practice.

ideas

into

6.

Qualification

An

entrepreneur

possess

to

A manager needs to possess

qualities

and

distinct qualifications in terms of

like

high

sound

qualifications

needs

achievement motive, originality

management

in thinking, foresight, and risk

practice.

knowledge

in

theory

and

bearing ability and so on.

Concept of intrapreneur
The corporate entrepreneurship is known as intrapreneurship and who perform such
task is known as intrapreneur. The managers who make innovation by remaining
within any firm are known intrapreneurs. Intrapreneurs are the creative employee of
the organization who has ability to innovate some things. Intrapreneurs are not the
owner of the business. They do not have any risk, profit or loss.
Difference Between entrepreneur and intrapreneur:
Difference

Entrepreneur

Intrapreneur

1.Dependency

An entrepreneur is independent in

But,

his operation.

dependent

an

intrapreneur
on

entrepreneur.

i.e.,

is
the
the

owner.
2.

Raising

of

An

entrepreneur

himself

raises Funds are not raised by

funds

funds required for the enterprise.

3. Risk

Entrepreneur

bears

the

the intrapreneur.

risk An intrapreneur does not

involved in the business.

fully bear the risk involved

in the enterprise.

4. Operation

An

entrepreneur

outside

operates

from

On

the

contrary,

an

intrapreneur operates from

within
itself.

the

organization

Concept of Entrepreneurship
Entrepreneurship is related to coordination, innovation and performance of the
entrepreneur.

The

function

performed

by

the

entrepreneurs

is

known

as

entrepreneurship. Entrepreneurship is to be an entrepreneur. Entrepreneurship refers

to the various activities done for the establishment and operation of an enterprise.
Hence entrepreneurship is a system of creating new business. Entrepreneurship is
the process of creating new idea and turning it into successful business. It involves
creativity and innovation. It involves creating new idea, bring together factor of
production, Plans organize, operates and assumes the risk of new venture and
creating to incremental wealth. It can be said that entrepreneurship is a process
which consists in doing things that are not generally done in the ordinary course of
business routine.
The entrepreneurship is regarded as the engine of economic development. It has
resulted in millions of new ventures in the world. It has appeared as the driving force
for economic development. The interest in the concept of entrepreneurship is growing.
In conclusion, entrepreneurship means the process adopted by the entrepreneur for
the operation of the business. Since the function performed by an entrepreneur is
the

entrepreneurship.

Entrepreneurship

is

the

creative

process

of

exploiting

opportunities by starting new venture through resource pulling, risk taking, innovating
and managing for rewards. It is a change from present lifestyle.
The can be taken as the two faces of the same coin, which will be obvious from the
following table:
Entrepreneur

Entrepreneurship

1.

Person

Process

2.

Organizer

Organization

3.

Innovator

Innovation

4.

Risk-taker

Risk-taking

5.

Motivator

Motivation

6.

Creator

Creation

7.

Visualize

Vision

8.

Leader

Leadership

9.

Imitator

Imitation

10.

Decision maker

Decision-making

Features of Entrepreneurship/ Characteristics of Entrepreneurship

1.

Dynamic process:

2.

Innovation

3.

Risk bearing

4.

Decision making

5.

Accepting challenges

6.

Organization

7.

Skillful management

8.

Making the business success

Factor Affecting Entrepreneurship:

1.

Economic Factors
Economic factors (Free market economies/ capitalism, centrally planned
economies/ socialism, mixed economies.)

Capital

Human resources

Raw material

Market

Competition

Franchise

2.

Non-economic factors

Political factors

Social factors

Psychological factors

Technological factor

Entrepreneurship Decision Process:

1.

Conduct opportunity Analysis: opportunity is a favorable condition in the

external environment. It enables an entrepreneur to start a new business. Ideas

provide opportunities. Entrepreneurs must have the ability to generate a large number
of ideas. Business opportunity identification consists of there steps:

Identifying sources of new ideas

Determining methods of generating new ideas

Selection of best idea

The entrepreneur can generate new ideas from the following sources:

Situation survey

Present work environment factors

Outside sources

Research and development

2.

Develop business plan: A business plan is developed as road map of the

new venture. It sets goals to be achieved. It states the process and technology to
be used. It identifies target market. It determines product, price, and promotion and
distribution aspect. It describes finance and management aspects. Critical risks are
assessed. Milestones are set for implementation.
3.

Setup the venture (Start-up): in this stage the new venture is established and

legal aspect of venture is determined. The legal form of venture can be proprietorship,
partnership and company. The scope can be service, manufacturing, construction and
infrastructural activities.
4.

Acquire financial resources: Various options available for financing the new

venture are examined. Early stage funding can be from self, family, friends and
government sources. Growth stage finding can be debt from financial institutions or
public offer of shares.
5.

Implement business plan: after acquiring financial resources, the proposed

plan is implemented by organizing resources and building management team.

Role of Entrepreneurship in Economic Development

Economic development implies sustainable increase in quality of life. It encompasses
increase in per capita income, education, health, and environmental protection.
Entrepreneurship is the driving force for economic development. It plays a critical role
in economic development in the following ways:
1.

Capital formation: the entrepreneurship promotes capital formation by

mobilizing the idle savings of the people.

2.

Employment creation: the entrepreneurship creates employment opportunity

by initiating new business.

3.

Increased productivity: entrepreneurship help in the optimum utilization of

natural resources including land, labor and capital available in the country. This
increase production and productivity.
4.

Balanced development: the entrepreneurs operate business in the different

parts of the country on the basis of the availability of resources. This helps to achieve
the objective of balanced regional development or removing regional disparity of the
government.
5.

Equitable distribution: entrepreneurship help in reducing to concentration of

economic power. They help in equitable redistribution of income, wealth, and political
power in the country. It is because they provide employment to the deprived, exploited
and poor people. The entrepreneurs make these people conscious.
6.

Export promotion: entrepreneurs promote foreign trade by initiating new

products. This helps in earning foreign exchange and helps in reducing the
disequilibrium in balance of payment.
7.

Industrialization: entrepreneur and entrepreneurship leads the country to

industrialization. There is an increase in the economic activities in the country. It

helps to transfer the people overly dependent on agriculture to the non-agriculture
sector.
Thus it is clear that entrepreneurship serves as a catalyst of economic development.
On the whole, the role of entrepreneurship in economic development of a country
can best be put as an economy is the effect for which entrepreneurship is the
cause.

Challenges and Drawbacks of Entrepreneurship

1.

Uncertainty of income

2.

Risk of losing entire invested capital

3.

Long hours and hard work

4.

Lower quality of life

5.

Complete responsibility

6.

Centralized decision making system

7.

Traditional management

8.

Lack of professionalism and training

9.

Poor Human resource system

10.

Traditional technology

11.

Limited market

12.

Inadequate infrastructure

13.

Government policy and facilities

CHAPTER: FAMILY BUSINESS SUCCESSION STRATEGY

Concept of Family Business

A family business includes one or more members of a family with financial control.
A family business is a business in which one or more number of one or more families
has significant ownership interest and significant commitment toward the businesss
overall well being. It roots are fixed in family values. In USA, almost 90% of business
is family owned and managed. In India and Nepal as well their share is significant
in total business. In some countries, many of the largest publicly listed firms are
family owned. A firm is said to be family-owned, if a person is the controlling
shareholders.
Family participation as manager or owners of family business can strengthen the
company because family members are often loyal and dedicated to the family
enterprise. However, family participation as manager and/ or owners of a business
can present unique problem because the dynamics of the family system and the
dynamics of the business system are often not in balance.

Succession Planning
Business succession refers to the successfully passing the business down to family
members. It is big threat to family business. Only 50% of family business survives to
the second generation. Only 14% make it to the third generation. And 14% make it
to the third generation. And only 3% serving to the fourth generation and beyond.
Succession planning is a planning of transferring the business to the family member
of the next generation. It is concerned with setting up a smooth transition between
you and the future owners of your business. Business succession planning seeks to
manage the following issues:

Who is going to manage the business when you no longer work the

business?

How will ownership be transferred?

Will your business even carry on or will you sell it.

In family business, succession planning can specially have complicated because of

the relationship and emotion involved and because most people are not the
comfortable discussing topics such as aging, death, and their financial affairs. An
effective strategy needs to be formulated for family business succession. It should
consider the following aspects:

The role of the owner in the transition (Change) stage should be clear. It

can be working full time, part time or retirement. It can be staying as an advisor.

Family dynamics regarding the ability of family members to work together

should be considered. Specific responsibilities should be given to each member

succeeding the business.

Income for working family members and shareholders should be clearly

stated.

Business environment during the transition should be congenial (friendly).

Loyal employee should be retained

Tax implications of succession should be considered

Training of the succession should be considered.

TYPES OF START-UPS
Concept:
Start-ups refer to the establishment of new venture. In this stage legal form of new
venture, legal environment, financial sources and scope of new venture are
determined. Start-ups is concerned with three main entrepreneurial issues. They are:

Legal forms of entrepreneurial organization: The prospective entrepreneurial

organization legal structure that will best suit the demand of the new venture. The
necessity for this comes from changing tax laws, liability situation, the availability of
capital and complexity of business. Legal form of new venture can be sole trading,
partnership and Joint Stock Company. Each form of organization has specific
characteristics. It also has specific advantages and disadvantages. The entrepreneurs
specific situation, concerns, and desires will dictate the choice.

Legal environment and entrepreneurship: Entrepreneurs cannot be the legal

expertise or background of a lawyer but they should be sufficiently knowledgeable

about certain legal concepts that have implications for the business venture. There
are many legal concepts that can affect entrepreneurial ventures. These concepts can
be divided into 3 groups:

Legal concepts that relate to the inception of the venture.

Legal concepts that relate to the ongoing venture

Legal concepts that relate to the growth and continuity

Financial sources for entrepreneurial ventures: Finance is one of the

important prerequisites to start-ups an enterprise. It facilitates and entrepreneur to

bring together land, labor, machinery and raw material to combine them to produce
goods. It is a lubricant and life blood to the process of production. Therefore,
entrepreneurs must make plan to acquire required capital for start-ups. In financial
plan, the entrepreneur should clearly answer the following three questions:

How much money is needed?

Where will money come from? And

When does the money need to be available?

Types of Start-Ups
1.

Life-Style Firms (Home Firms): A life-style firm is a private firm which is also

called home firm. It usually achieves only modest growth due to the nature of the
business, the objectives of the entrepreneur and the limited money. In this style of
enterprise limited money is devoted to research and development. These types of
firm may grow after several years. The no. of employees may be limited to 30 to 40
and have annual revenue of about $2 million. A life-style firm exists primarily to
support the owners and usually has little opportunity for significant growth and
expansion.
2.

The foundation company (innovation enterprise): the second types of start-

ups are the foundation company which is also called innovation enterprise. It is
created by research and development and lays the foundation for a new industry.
This firm can grow in 5 to 10 years from 40 to 400 employees. Annual revenues

may be about $10 million to $20 million. Since these types of start-up rarely goes
public.
3.

The high-potential venture: the third type of start up is the high potential

venture. This types of start-up requires greatest investment interest and publicity.
Investors are striving to invest money in it. It growth is far more rapid than life style
and the foundation company. After 5 to 10 years the company could employ 500
employees with 20 to 30 million in annual revenue. The company usually shortly
becomes a public limited company.

Sources of Generating New Ideas:

Opportunity is a favorable condition in the external environment which enables an
entrepreneur to start a new business. The first phase of lunching a successful venture
is to search the ideas of good project because ideas provide opportunities to the
entrepreneurs. Generating good business ideas seem to be simple but it is difficult
to implement well. The imagination, sensitivity to environmental change and realistic
evaluation regarding what the firm can do is needed for identifying such ideas. In
order to select the most promising project, the entrepreneur needs to generate a few
ideas about the possible projects he/ she can undertake. The project ideas can be
discovered from various sources. They may include:
1.

Situation Survey: this involves survey of current situation in the general

environment. Changes and developments in general environment such as political,

legal, economic, socio-cultural and technological forces may provides ideas for the
establishment of new business. The following forces of general environment are
examined to generate new business ideas:

Technological changes

Political-legal changes

Socio-cultural changes

Economic changes

2.

Present work environment factors: Present work environment factors include

internal factors which also provide some business ideas. They can be:

Vision, mission, goals, strategies and priorities

Sudden identification of opportunities

Efforts to overcome problems

Job experience, hobby and interest of entrepreneurs

Creativity of entrepreneurs

Existing companies can be source of new idea

3.

Outside sources (external sources):

Potential entrepreneurs can develop

ideas from the external sources which includes:

Needs and requirement of consumers

Outside consultants and experts

Members of distribution channels

Foreign countries companies

Suggestions from friend, family etc.

TV, newspapers and media publication

Visiting to trade fairs and exhibitions

Attending education and training courses

Competitors activities

Government regulations

4.

Research and development: Research and development is the main sources

of generating mew ideas. It is concerned with generating creative ideas. It helps to

invent and innovate new things. Research can be conducted in the labs of current
employment. It can also conduct in an informal lab in the basement or garage of
home. A formal research and development department is a better place for the
entrepreneur to come up with new ideas.

Entrepreneurial Issues for Growth and Development

The entrepreneurial issues for growth and development of business organization in
the present business environment are grouped into 3 parts:
I.

Strategic planning and entrepreneurship:

Most entrepreneurs do some form of planning for their ventures, but it tends to be
informal and unsystematic. The actual needs for systematic planning will vary with
the nature, size and structure of the business. A small firm may successfully use
informal planning because little complexity is involved. But an emerging venture that
is rapidly expanding with constantly increasing personnel size and market operation
will need to formalize it planning because a great deal of complexity exists. In the
present business environment, an entrepreneurs planning will need to shift from an
informal to a formal systematic style. Formal planning is usually divided into two
major types:
a.

Strategic Planning:

Strategic planning is the formulation of long range plans for the effective management
of environmental opportunities and threats in light of a businesss strength and
weaknesses. It includes:

Defining the ventures mission

Specifying achievable objectives

Developing strategies

Setting policy guidelines.

Dynamic in nature, the strategic management process is the full set of commitments,
decisions and actions required for a firm to achieve strategic competitiveness and
earn above-average returns. The five basic steps must be followed in strategic
planning:

Examine the internal and external environment of the venture (strength,

weaknesses, opportunities, threats)

Formulate the ventures long rang and short-range strategies (mission,

objectives, strategies, policies)

Implement the strategic plan (programs, budgets, procedures)

Evaluate the performance of the strategy

Take follow-up action through continuous feedback

Value of Strategic Planning

Strategic planning is a key factor that influences a ventures survival. Lake of formal
and systematic strategic planning is a main cause of business failure in the current
business environment. Research showed that the firm that engaged in strategic
planning performed well those that did not use such planning. Proper strategic
planning leads to better decision that in turn lead to increased profitability, increased
time efficiency, company growth and knowledge of market. Survey of 500 US
incorporation showed that majority of the entrepreneurs did not have a business plan
when they started their firms but as the firm grew the planning process become more
prevalent and formalized. This survey helps to conclude that strategic planning is a
tool that helps to manage complexity in the business.
In conclusion, an entrepreneurs planning will need to shift from an informal to a
formal and systematic because it helps firms to establish and exploit competitive
advantages within particular environment context.
b.

Operational planning:

Operational planning also referred to as short-range planning or functional planning,

consists of the specific practices established to carry out the objectives set forth in
the strategic plan. The operational plan is thus an outgrowth or extension of the
strategic planning process. In the area of finance, marketing, production, and
management, functional policies need to be established in order to implement the
goal determined in the strategy.
The overall planning process incorporates all of the factors involved in strategic
planning and implementation tools of operational planning. Specifically, the tools
applied in functional areas of the business will be a key to implementation of the
planning process. Some of the tools must widely know and used are budgets, policies
and procedures

Budgets are planning devices used to establish future plans in financial

terms.

Policies are the fundamental guides for the venture as a whole.

Procedures are similar to policies; they are usually policies that have been

standardized as continuing method.

II.

The challenge of Entrepreneurial Growth

The life cycle stages of an enterprise can be divided into deferent stages. These
stages include:

New venture development

Start-up activities

Growth

Stabilization

Innovation or decline

Among these stages, managing growth can be a great challenge to the successful
development of any venture. In this stage, a venture usually reaches major crossroads
in the decision that affect its future. The growth stage often requires major changes
in entrepreneurial strategy. Competition and other market forces call for the
reformulation of strategies. The growth stage present newer and more substantial
problems than the entrepreneur faced during the start-up stage. These newer
challenges force the entrepreneur into developing a different set of skills while
maintaining an entrepreneurial perspective for the organization. Growth stage is a
transition from entrepreneurial one-person leadership to managerial team-oriented
leadership. This is not easy to do. A number of problems can occur during this
transition. They can be:

A highly centralized decision-making system

An overdependence on one or two key individuals

An inadequate managerial skills and training

A paternalistic atmosphere

These characteristics are effective in the new ventures startup and initial survival but
provide a threat to the firms development during the growth stage. In order to bring
about the necessary transition, the entrepreneur must carefully plan and then gradually
implement the following process:

The entrepreneur must want to make the change and must want it strongly

enough to undertake major modifications in his or her own task behavior.

The day to day decision making procedures of the organization must be

changed. Participation in this process must be expanded. Greater emphasis also

should be placed on the use of formal decision techniques.

The two or three key operating tasks are primarily responsible for the

organizations success must be institutionalized. This may involve the selection of

new people to supplement or replace indispensable individual who have performed
these task in the past.

Middle level management must be developed. Specialists must learn to

become functional managers, while functional manager must learn to become general
managers.

The firms strategy should be evaluated and modified, if necessary, to

achieve growth.

The organizational structure and its management system and procedures

must be slowly modified to fit the companys new strategy and senior manager

III.

The firm must develop a professional board of directors.

The management succession challenge:

Management succession challenge is another issue for entrepreneurs. Lack of

succession planning leads to ventures failure. Research shows that many privately
held firms go out of existence after ten years; only three out of ten survive into a
second generation. More significant, only 16% of all privately held enterprises make
it to a third generation. The survey of 200 successful manufacturing firm showed that
the average life expectancy for a privately held business is 24 years, which is also
the average tenure for the founders of a business. One of the major problems most
privately held businesses have is the lack of preparation for passing managerial
control to the next generation. Most privately held firms never formulate succession
plans.

CHAPTER: THE ENTREPRENEURIAL AND

INTRAPRENEURIAL MIND

The entrepreneurial Process:

1.

Identification and evaluation of opportunity:

Opportunity is a favorable condition in the external environment. It enables an

entrepreneur to start a new venture. Business opportunity identification and selection
consists the following steps:
a.

Generation of ideas:

First of all the entrepreneur should create idea about various alternative projects that
he can undertake in order to select the best project. The idea of project or business
opportunities can be found out from various internal and external sources. Some of
the sources of creating identifying good project idea may be explained as follows:
i.

Situation survey: situation survey refers to the survey of current situation

in the external environmental factors. Under situation survey, technological changes,

political-legal changes, socio-cultural changes, economic changes are surveyed.
ii.

Internal sources/ Present work environment factors: Internal environment

of the organization can be the sources of new idea. Internal sources of idea are:

Vision, mission, goals, strategies and priorities of entrepreneurs provide

ideas for new ventures.

Effort to overcome problem or identify opportunities by entrepreneur

suddenly provide new idea.

Job experience, hobby and interest f entrepreneur provides new ideas.

Entrepreneurial creativity also provides new ideas.

Existing companies can be sources of new ideas.

Suggestion made by research and development department, committees,

task forces, work teams, and quality circles can provide useful ideas for project

iii.

External sources/ Outside Sources: The following outside sources can

be helpful in generating new ideas:

Need and requirement of consumers

Outside consultants and experts

Members of distribution channel

Foreign country

Suggestion from family, friend etc.

Television, newspaper, and media publication

Visit to trade fairs and exhibitions and attending education and training

courses.

Competitors activities

Government policies, rules and regulation.

iv.

Research and development: It is the largest source of new ideas.

Research can be conducted in the labs of current employment. It can also conduct
in an informal lab in the basement or garage of home. A formal research and
development department is a better place for the entrepreneur to come up with new
ideas.
b.
i.

Evaluation of ideas: the new idea is evaluated in terms of :

Profit Test:

In this criterion, the profitability of the idea is assessed.

Marketing, production and financial aspect are analyzed.

ii.

Constraints Test: the idea should fit the financial, manpower, time, and

other constraints faced by the entrepreneur.

iii.

Risk Test: A risk is any event that could prevent the realization of

objective. The evaluation of idea also involves risk analysis. Risk can be:

Idea risk

Process risk

Risk analysis consists of assessment of risk and possible action.

c.

Selection of Best idea: After identifying business ideas, the entrepreneur

should select the appropriate project from among various alternative ideas. The
evaluated ideas are classified into three group:

Promising ideas: they are possible alternatives for new opportunities.

Marginal ideas: they are stored for future uses.

Reject ideas: they are dropped

A choice is made from among promising ideas.

2.

Develop Business Plan:

After identification of best idea, business plan is developed to convert the idea into
successful venture. The business plan is a roadmap of proposed new venture of the
entrepreneur. It is written document that details the proposed venture. It is required
to mobilize financial resources for the new venture. It also serves as a working
document once the venture is established. It covers business description of the
venture, marketing aspects, financial aspects, operations aspects and management
aspects. It analyses critical risks and presents a timetable for implementation of new
venture. A detailed business plan consists of ten sections:

Executive Summary

Business description element

Marketing element

Production element

Finance element

Management element

Critical risk element

Harvest strategy element

Milestone schedule

Appendix.

3.

Determine the resources required:

The resources needed for the new venture should be determined. No business can
thrive (succeed) without resource capabilities. The following factors should be
considered:

Determine resources needed

Determine existing resources

Identify resource gaps and available suppliers

Develop access to needed resources

4.

Manage the enterprise:

The management aspects of running the new venture are considered. They are:

Organization structure of the venture.

Development management style

Understand key variables for success

Identify problems and potential problems

Human resource management aspects of the venture.

Implement control system

Develop growth strategy

Managerial Versus Entrepreneurial Decision Making

The difference between the entrepreneurial and the managerial styles can be viewed
from five key business dimensionsstrategic orientation, commitment to opportunity,
commitment of resources, control of resources, and management structure. Managerial
styles are called the administrative domain.
1.

Strategic Orientation

The entrepreneurs strategic orientation depends on his or her perception of the

opportunity. This orientation is most important when other opportunity have diminishing
returns accompanied by rapid changes in technology, consumer economies, social
values or political rules.

The administrative (managerial) domain is operant in nature. Managerial strategic

orientation is driven by controlled resources. Managerial domain is concerned with
the use of planning system as well as measuring performance to control current
resources.
2.

Commitment to Opportunity

Entrepreneurs are revolutionary and have a short time span in terms of opportunity
commitment. The entrepreneurial domain is pressured by the need for action, narrow
decision windows, acceptance of reasonable risk and few decision constituencies.
In terms of commitments to opportunities, managers are evolutionary with long
duration. The managerial domain is not only slow to act on an opportunity but once
action is taken, the commitment is usually for a long time span. They are pressured
by acknowledgement of multiple constituencies, negotiation about strategic, course of
risk reduction and coordination with existing resources base.
3.

Commitment of Resources

An entrepreneur is used to having resources committed at periodic intervals that are

often based on certain tasks or objectives being reached. This multistage commitment
allows the resource providers (such as venture capitalists or private investors) to have
an exposure at each stage of business development. The following factors pressures
entrepreneurs for the periodic commitment of resources

Lack of predictable resource need

Lack of control over the environment

Social demand for appropriate use of resource

Foreign competition

Demands for more efficient use

In administrative domain, commitment of the resources is for the total amount needed.
He desires a single stag with complete commitment of resources. This resources
commitment come form need to reduce risk, incentive, compensation, turnover in
mangers, formal planning system.

4.

Control of Resources

Entrepreneur tries to use rented resources where possible. If the has difficulty in
obtaining resource, he tends to have multi uses for the same resources. He focusses
on rented and multi use of same resources due to the pressure of long resource life
compared with need, risk of obsolescence, risk involved in the identified opportunity,
inflexibility permanent commitment resources etc.
The administrator is rewarded by effective resource administration. He wants to own
or accumulate as many resources as possible. The pressures of power, status,
financial status, coordination of activity etc cause the administrator to avoid rental or
other periodic use of the resources. Thus, manager tends to accumulate resources
as it is a source of power for him.
5.

Management Structure

Entrepreneurs tend to have a flat organization as it allows him greater degree of

control. He focuses on multiple informal networks. He wants such flat with multiple
inform network due to pressure of coordination of key non controlled resources,
challenge to hierarchy, employees desire for independence etc.
Manager tends to follow a formal hierarchical structure as they know this consolidated
their power. Manager wants clearly defined lines of authority and responsibility.

Corporate Entrepreneurship or Intrapreneurship:

The corporate entrepreneurship is known as intrapreneurship and who perform such
task is known as intrapreneur. Intrapreneurship is a process of innovation that occurs
inside established companies through efforts of creative employees. Corporate
management

is

promoting

entrepreneurs

within

the

corporate

structure.

This

development of entrepreneurial within the corporate structure is called intrapreneurship.

In the globalized context, corporations are promoting individuals with entrepreneurial
skill within the organization and capitalizing on their skills and capabilities.
Intrapreneurship is developed within big business houses. This means, intraprenership
is the outcome of the creative activities of employees in big business. The
intrapreneurship emerges through long years of experience in big corporation.
Intrapreneurship

requires

multidisciplinary expertise.

large

amount

of

capital

and

team

of

people

with

Difference between entrepreneurship and intrapreneurship

Entrepreneurships the process of establishing an independent business

venture whereas intrapreneurship developed within big business houses.

Entrepreneurship is the outcome of the creative activities of entrepreneur

whereas intrapreneurship is the outcome of the creative activities of employees in big

business.

The entrepreneurship depends on the nature and attitude of the entrepreneur

whereas intrapreneurship depends on the climate of corporation.

The entrepreneurship generally begins with development of small business

with limited capital and other resources whereas intrapreneurship requires large
amount of capital and a team of people with multidisciplinary expertise.

Causes for interest in Intrapreneurship (The need for corporate

entrepreneuring)
Many companies today are realizing the need for corporate entrepreneuring. Both
business firms and consultants are recognizing the need for in-house entrepreneurship.
This need has arisen in response to a number of pressing problems. They can be:
1.

Interest in intrapreneurship has resulted from events occurring on social,

cultural, and business levels. There is an increasing interest in doing your own thing.
Individuals frequently desire to create something of their own. They want responsibility
and want more freedom in their work environment. Frustration can develop and result
in the employee becoming less productive or leaving the organization. This has
recently caused more discontent in structured organizations. When meaning is not
provided within the organization, individuals often search for an institution, such as
intrapreneurship, that will provide it.
Intrapreneurship is one method for stimulating and capitalizing on those who think
that something can be done differently and better.
2.

It is important to instill the entrepreneurial spirit in an organization in order

to innovate and grow. In a large organization problems occur that thwart creativity

and innovation. This growth and diversity that can result are critical, since large
corporations are more efficient in a competitive market than are smaller firms.
3.

The resistance against flexibility, growth, and diversification can be overcome

by developing a spirit of entrepreneurship, called intrapreneurship, within the existing

organization.
4.

There are social, cultural, and business pressures for intrapreneurship. Hyper

competition has forced companies to focus on new product development, increased

productivity, and decreasing costs.

Establishing Intrapreneurship in an organization:

Intrapreneurship is reflected in the entrepreneurial activities of the colorations and top
level managements shift in paradigm. The entrepreneurial efforts consist of four
elements. They are:
a.

New business venturing: New business venturing refers to the creation of

new business within an existing organization.

b.

Organizational innovativeness: Organizational innovativeness refers to product

and service innovation with an emphasis on development and innovation in technology.

c.

Self Renewal: Self-renewal reflects the transformation of organizations

through the renewal of the key ideas on which they are built.
d.

Proactiveness: Proactiveness includes initiative and risk taking, as well as

competitive aggressiveness and boldness.

Climate for Intrapreneurship:

a.

Management commitment: The first step is to secure a commitment to

intrapreneurship in the organization by top, upper, and middle management. Without

top management commitment, the organization will never be able to make the
necessary changes. Once top management has committed to intrapreneurship for a
sufficient length of time, the concept is introduced throughout the organization.
b.

Technology: The organization operates on the frontiers of technology.

Research and development are key sources for new product ideas. The firm must
operate on the cutting edge of technology and encourage and support new ideas
instead of discouraging them.

c.

Failure allowed: Experimentation, or trial and error, is encouraged. Successful

new products usually do not appear fully developed; instead they evolve. A company
has to establish an environment that allows mistakes and failures. Without the
opportunity to fail, few corporate intrapreneurial ventures will be developed.
d.

Resources available and accessible: The resources of the firm need to be

available and easily accessible. Often, insufficient funds are allocated to creating
something new. Available resources are committed instead to problems that have an
immediate effect on the bottom line. Some companies, such as Xerox, 3M, and AT&T
have established separate venture capital areas for funding new internal and external
ventures. When available, the reporting requirements can become obstacles to
obtaining resources.
e.

Multidiscipline teamwork approach: A multidisciplinary team approach needs

to be encouraged. One key to intrapreneurial success is the existence of skunkworks

involving key people. Another complication is the fact that a team members promotion
within the corporation is based on performance in the current position, not in the new
venture. The corporate environment must establish a long time horizon for evaluating
the success of the overall program.
f.

Voluntary involvement: The spirit of intrapreneurship cannot be forced on

individuals; it must be voluntary. Most managers in a corporation are not capable of

being successful intrapreneurs. Those that emerge must be allowed to carry a project
through to completion. An intrapreneur falls in love with the new venture and will do
almost anything to ensure its success.
g.

Reward system: The seventh characteristic is a reward system. The

intrapreneur needs to be appropriately rewarded for the energy and effort expended
on the new venture. An equity position in the new venture is one of the best
motivational rewards.
h.

Sponsors and champions available: A corporate environment favorable for

intrapreneurship has sponsors and champions throughout the organization who support
the creative activity and resulting failures.
i.

Strong support system: The intrapreneurial activity must be whole-heartedly

supported

j.

Training: The organization can use a group of managers to train and share

their experiences with other members. These sessions should be conducted one day
per month for a specified period of time. Information about intrapreneurship and about
the companys specific activities should be well publicized.
k.

Customer oriented: The organization needs to develop ways to get closer to

its customers by tapping the data base, hiring from smaller rivals, and helping the
retailer.

Intrapreneurial Leadership Characteristics:

There are certain individual characteristics needed for a person to be a successful
intrapreneur.

They

includes:

1. Understanding the environment:

An intrapreneur needs to understand all aspects of the environment. Creativity tends

to decrease with age and education. The individual must be creative and have a
broad understanding of the internal and external environments of the corporation.
2. Being visionary and flexible:
The intrapreneur must be a visionary leader. Leadership is the ability to dream
great things and communicate them in a way that people say yes to being part of
the dream. To establish a successful new venture, the intrapreneurial leader must
have a dream and overcome all obstacles to achieve it.
3. Flexible and creating management options:
The intrapreneur must be flexible and create management options. An intrapreneur
is open to and encourages change. By challenging the beliefs and assumptions of
the corporation, an intrapreneur can create something new in the organization
structure.
4. Encouraging teamwork:
He or she needs the ability to encourage teamwork and use a multidiscipline
approach. Every new company formation requires a broad range of business skills.
Recruiting those in the organization requires crossing established departmental
structure. The intrapreneur must be a good diplomat to minimize disruption
5. Encouraging open discussion:

Open discussion must be encouraged to develop a good team for creating something
new. Many corporate managers have forgotten that frank, open discussion is part of
the learning process. A successful venture can be formed only when the team feels
the freedom to disagree and to review an idea. The degree of openness among the
team

depends

on

the

degree

of

openness

of

the

intrapreneur.

6. Building a coalition of supporters:

Openness leads to a strong coalition of supporters and encouragers. The
intrapreneur must encourage each team member, particularly during hard times. A
good intrapreneur makes everyone a hero.
7. Persisting: an intrapreneur must be persistent to create a new venture and move
forward towards successful commercialization.

CHAPTER: THE ENVIRONMENT FOR ENTREPRENEURSHIP

Entrepreneurs Environment:
Environment for entrepreneurship consists of forces that directly or indirectly influence
the activities of creating and developing new business in the society. It is the
composite of all forces surrounding and influencing the entrepreneurs activities. They
consist of political-legal, economic, socio-cultural and technological forces in external
environment. They cannot be controlled. Environmental forces and factors influence
entrepreneurial activities by providing opportunities and threats. They are complex,
dynamic and uncertain. The entrepreneurs most monitor and respond to changes to
exploit the opportunities and face challenges resulting from changing business
environment. The effect of environmental factors differs from organization to
organization, industry to industry and markets to markets

Government Policies and Actions:

The policies and actions may directly and indirectly affect the entrepreneurial activities.
It may promote or limit entrepreneurial activities. Government policies and actions

influence entrepreneurial policies and practices. It defines what entrepreneurs can and
cannot do. Entrepreneurs must follow the legal provision of the country.
The entrepreneurship friendly industrial policy, industrial act, commercial policy etc.
can promote entrepreneurship. The government must create conductive environment
for entrepreneurship by making available basic facilities and services live transport,
communication, power etc. and incentive, subsidy, concession sound legal system
etc. such facilities reduce the risk and uncertainties of the entrepreneurs. Hence, the
supportive actions of the government are very conductive for entrepreneurial
development. Entrepreneurship has flourished and developed in the countries where
the government has provided such facilities. On the other hand, entrepreneurship and
economic growth is slow in the countries where the government has adopted
indifference policy regarding entrepreneurship. One of the main reasons rapid
economic growths in the countries is regarded to be the positive or market friendly
role played by the government towards the business.
In order to increase more positive business environment, the role of the government
should not be interfering and regulating in the daily activities of the enterprises. But,
should be supporting, faciliting and removing and constraints of initiative, innovation
and risk-taking.
The government in order to help and create positive business environment should
make following changes in its policy formulation and involvement (Kohli and Sood,
1987):

Simplification of labor policy

Reforms in the tax policy

Streamling legal frame work fro enterprise creation, operation and liquidation

Make effort to create competitive market (remove entry barriers)

Simplification of the regulation and controls (investment, production,

marketing, prices, foreign direct investment and technology transfer)

Address practical implementation of the policy.

Transparency of policy and their implementation.

Government polices that affect entrepreneurship

Industrial policy

Monetary policy

Fiscal policy

Privatization policy

Trade policy

Employment and trade policy

Tourism policy

Foreign investment policy

The

industrial

policy,

2010

spells

out

its

policies,

strategies,

promises

and

commitments:

Commits state-support for the development of infrastructure up to factory

sites for priority industries.

Provides special tax holidays for industries in rural and under-industrialized

parts of the country.

Recognizes and allow sub-contracting of production for the first time in the

countrys history.

Promises to help foster backward linkages, mainly facilitating small scale

industries, in incorporate in the large manufacturing process

Provision of differential tariff rates for raw material imports and the import

of finished goods. The aim of this provision is to promote domestic manufacturing

over direct trade.

Promises protection, duty and tax discount incentives for industries using

local raw material and higher value addition.

Entrusts the government to lay down industrial infrastructures such as roads,

electricity, and telecommunication in different districts that have been identified as

possessing manufacturing and processing potentials

Pledges additional promotional incentive packages for export industries,

particularly the small and medium enterprises.

Recognizes Research and development and market promotion as an integral

part of the industrial activities and allows 5% income tax deduction for each purpose.

Infrastructure:
Infrastructure is basic physical and organizational structures needed for the operation
of a society or enterprise. They are the services and facilities necessary for an
economy to function. It can be defined as the set of interconnected structural elements
that provide framework supporting an entire structure of development. It includes both
physical infrastructure such as transport, communication, water supply, energy etc
and non physical infrastructure such as financial system, education system, health
care system, the system of government, law enforcement as well as emergency
services. Infrastructure facilitates the production of goods and services and also the
distribution of finished products to markets. In least developed and developing
countries entrepreneurs are not motivated to establish enterprise due to the lake of
adequate infrastructure. Inadequacy of infrastructure limits the entrepreneurs activities.
Therefore, government is responsible to develop basic infrastructure in the country to
promote entrepreneurship.
Types of Infrastructure:

Hard Infrastructure: hard infrastructure refers to the large physical networks

necessary for the functioning of a modern industrial nation. It includes the capital
assets that serve the function of entrepreneurs. It includes:

Transportation infrastructure

Energy infrastructure

Water management infrastructure

Communications infrastructure

Solid waste management

Soft Infrastructure: soft infrastructure refers to all the institutions which are

required to maintain the economic, health, and cultural and social standards of a
country, such as the financial system, the education system, the health care system,
the system of government, and law enforcement, as well as emergency services. The

essence of soft infrastructure is the delivery of specialized services to entrepreneurs.

It includes
1.

Governance infrastructure

The system of government and law enforcement, including the political, legislative,
law enforcement, justice and penal systems, as well as specialized facilities
(government offices, courthouses, prisons, etc.), and specialized systems for collecting,
storing and disseminating data, laws and regulation
Emergency services, such as police, fire protection, and ambulances, including
specialized vehicles, buildings, communications and dispatching systems
Military

infrastructure,

including military bases, arms depots, training facilities,

command centers, communication facilities, major weapons systems, fortifications,

specialized arms manufacturing, strategic reserves
2.

Economic infrastructure
The financial system, including the banking system, financial institutions, the

payment system, exchanges, the money supply, financial regulations, as well as

accounting standards and regulations

Major business logistics facilities and systems, including warehouses as well

as warehousing and shipping management systems

Manufacturing infrastructure, including industrial parks and special economic

zones, mines and processing plants for basic materials used as inputs in industry,
specialized energy, transportation and water infrastructure used by industry, plus the
public safety, zoning and environmental laws and regulations that govern and limit
industrial activity, and standards organizations

Agricultural, forestry and fisheries infrastructure, including specialized food

and livestock transportation and storage facilities, major feedlots, agricultural price
support systems (including agricultural insurance), agricultural health standards, food
inspection, experimental farms and agricultural research centers and schools, the
system of licensing and quota management, enforcement systems against poaching,
forest wardens, and fire fighting
3.

Social infrastructure

The health care system, including hospitals, the financing of health care,

including health insurance, the systems for regulation and testing of medications and
medical procedures, the system for training, inspection and professional discipline of
doctors and other medical professionals, public health monitoring and regulations, as
well as coordination of measures taken during public health emergencies such as
epidemics

The educational and research system, including elementary and secondary

schools, universities, specialized colleges, research institutions, the systems for

financing and accrediting educational institutions

Social welfare systems, including both government support and private

charity for the poor, for people in distress or victims of abuse

4.

Cultural, sports and recreational infrastructure

Sports and recreational infrastructure, such as parks, sports facilities, the

system of sports leagues and associations

Cultural infrastructure, such as concert halls, museums, libraries, theatres,

studios, and specialized training facilities

Business travel and tourism infrastructure, including both man-made and

natural attractions, convention centers, hotels, restaurants and other services that
cater mainly to tourists and business travelers, as well as the systems for informing
and attracting tourists, and travel insurance

Assistance

for

Entrepreneurship

(institutional

support

to

entrepreneurship development)
Concept:
The support provided to the entrepreneurs by various institution like government, nongovernment, cooperatives and private organization in the form of facilities, incentives
and policies that aims to promote, support and facilitate entrepreneurship in a country
is known as institutional support or assistance. Entrepreneurship required promotional,
supportive and facilitative assistance from various institution to solve and diminish
various problem faced by entrepreneurs. Availability of support makes the business
environment conducive and enabling for entrepreneur. These may come up in various

forms such as loan, access to capital market, market facility and locations, research
and development,

information flow,

training

and skill entrancement

programs,

competency development oriented classes etc.

Need for institutional assistance or support:

Establishing a business is not a small task. In the contest of Nepal, it has to be
coordinated a lot of channel. Different types of resources and facilities are required
in order to establish any business or industry. For example, the adequate of finance,
availability of raw material, adequate supply of skillful manpower. Without it, it is only
a day dream of person to establish an industry. Small entrepreneurs are unable to
make available such facilities by themselves. The main problems that confront
entrepreneurs are:

Shortage of capital: Poor access to capital and credit

Scarcity of raw materials: Unreliable supply sources for inputs

Marketing problems: Poor access to market and tough competition. Lack of

market information.

Lack of opportunities for competency development

Lack of access to appropriate infrastructure

Poor access to information, research and extension

Lack of supportive policies and incentives

services

Institutional assistance to entrepreneurs is mainly needed in the following areas:

a.

Capital resources: entrepreneurs have lack of adequate capital resources.

New venture also does not easy assess to capital market instruments. Loans from
formal financial institutions such as commercial and development bank and other
financial institutions are needed to finance new venture. Besides this international
NGOs also provide loans to target entrepreneur.
b.

Limited market: the domestic market for Nepalese products is very limited

due to small size of the country and its population. Besides, this purchasing power
of the people is very low. Due to the low development of transportation and
communication the products can not be marketed easily through in low cost.

c.

Infrastructure availability: entrepreneurs need infrastructure facilities in terms

of industrial sheds, transport, communication, power, water, waste disposal etc.

institutions are needed to build infrastructure. Generally, government institution,
supported by foreign aid, undertakes the task of infrastructure development.
d.

Raw material supply: easy availability of raw material facilities supports

entrepreneurial growth. The scarcity of raw materials in the country is also a cause
of low industrial investment. New ventures, especially those based on new technology,
require raw material from foreign sources. Nepals major industries such as woolen
carpet, ready-made garments and handicrafts are dependent on imported raw material
and intermediated products. The problem of raw material is one of the main reasons
for low capacity utilization. Institutions are needed to take care of raw material supply
to meet the need of a variety of entrepreneur.
e.

Defective government policies and incentives: entrepreneur needs a sound

policy for creating sound industrial environment. But the government policy of Nepal
is neither sound nor consistent, nor are they effectively implemented. Government
institutions are the prime sources of formulation policies. The industrial policy of
Nepalese has reserved cottage and small industries for Nepalese citizens. The legal
frame work enacted by the government generally carries a number of incentives for
entrepreneurial activities.
f.

Long

procedures

of

bureaucratic:

Entrepreneurs

have

faces

long

bureaucratic process. They have complete different processes like, visit different
ministries and departments for registering industries for exports of the product. For
getting foreign exchange for getting financial support etc. the bureaucracy being
inefficient is corrupted as well. Entrepreneurs are needed a sound bureaucratic system.
g.

Access to information, research and development: this is the age of information

technology. Information is power. Research and development is the sources of

innovation and inventions. Institutions are needed to supply relevant information to
entrepreneurs. They are also needed to conduct research and provide extension
services relevant to entrepreneurs. Government institutions are important fulfill such
needs.

Institutional Assistance to Entrepreneurs in Nepal

Entrepreneurship has remained the backbone of Nepalese economy. But the pace of
its growth has remained slow. Majority of entrepreneurial ventures currently remain
sick or closed. Institutional support to industries in Nepal is through government
agencies,

specialized

agencies,

consultancy

services,

institutional

marketing services.
1.

Government Agencies

Ministry of industry

Department of industry

Department of cottage and small industries

Office of the registrar of companies

Nepal bureau of standards and metrology

Nepal tourism board

2.

Special agencies of government

Industrial promotion board

One-window committee

Nepal industrial development finance

Industrial district management limited

National productivity and economic development centre

Microenterprise, cottage and small industries promotion board

Industrial enterprise development institute

Private sector associations

3.

Institutional Finance

Commercial banks

Development banks

Micro finance banks

finance

and

Finance companies

Rural cooperatives (approved by NRB)

Unregulated cooperatives

Insurance companies

Employee provident fund

Citizens investment trust

Postal saving bank branches

NGO microfinance co.

Deposit insurance and credit guarantee corporation

4.

Consultancy services:

Institute of chartered accountants of Nepal (ICAN)

Centre for economic development and administration (CEDA)

Nepal engineering consultancy service (NEPECON)

5.

Marketing services

Trade and export promotion centre

Carpet and wool development board

Ready-made garment export promotion committee

6.
Balaju,

Industrial estates:
Hetauda,

Patan,

Nepalgunj,

Dharan,

Pokhara,

Butwal,

Bhaktapur,

Birendranagar, Dhankuta, Fajbiraj.

Franchising:
Franchising can simply be defined as a form of contractual arrangement in which a
retailer (franchisee) enters into an agreement with a producer (franchisor) to sell the
producers goods or services for a specified fee or commission. It is a form of
business ownership created by contract whereby a company grants a buyer the rights
to engage in selling or distributing its products or services under a prescribed business

format in exchange for royalties or share of profits. The buyer is called the franchisee
and the company that sells rights to its business concept is called the franchisor.
Thus, franchising is any arrangement in which the owner of a trademark, trade name
or copyright has licensed others to use it in selling goods or services. The franchisee
is generally legally independent but economically dependent on the integrated
business system of franchisor.

Advantage of Franchising:
1.

Training and guidance: The greatest advantage of buying a franchise is that

the franchisor will usually provide both training and guidance to the franchisee. As a
result, the like hood of success is much greater for franchisees who have received
this assistance than for small business owners in general.
2.

Brand-name appeal: the franchisers brand name appeals the customer. The

national advertising by the franchisor creates such brand name appeal. The layout,
facilities and decorations are standardized.
3.

Financial Assistance: another reason a franchise can be a good investment

is that the franchisor may be able to help the new owner to secure the financial
assistance needed to run the operation. In fact, some franchisors have personally
helped the franchisee get started by lending money and not requiring any repayment
until the operation is running smoothly. In short, buying a franchise is often an ideal
way to ensure assistance from the financial community.
4.

A proven track record: Franchising makes the task of getting started easier

because the franchisee gets a business format already market tested and found to
work. Hence, buying a franchise is so far safer than trying to start a business.
5.

Increase purchasing power: Franchising may increase the franchisees

purchasing power also. Because, being part of a large and that too recognized
organization means paying less for a variety of things such as supplies equipment,
inventory, services, insurance and so on. It also can mean getting better service from
suppliers because of the importance of the organization (franchisor) of you is part
(franchisee).

Disadvantage of Franchising:
1.

The controlled exercised by the franchisor: Unlike entrepreneurs who start

their own business, the franchisees find no room or scope for enjoying their creativity.
They have to work as per the given format. A number of restrictions are also imposed
upon the franchisees. Restriction may relate to remain confined to product line or a
particular geographical location only.
2.

Franchise Fees: the franchisee must pay different fees to the franchisor. Such

fees are franchisee fee, royalty payment, promotion costs, inventory and supplies
cost, and building and equipment cost. the larger and more successful the franchisor,
the greater the franchise fee.
3.

Unfulfilled promises: In some cases, especially among less-known franchisors,

the franchisees have not received all they were promised. Many franchisees have
found that the promised assistance from the franchisor has not been forthcoming. If
franchisees complain, they risk having their agreement with the franchisor terminated
or not renewed.
4.

No right to sell the business: Franchisees usually do not have the right to

sell their business to the highest bidder or to leave it to member of their family
without approval from the franchisor.
5.

No goodwill: Though the franchisee can build up goodwill for his or her

business by his or her efforts, goodwill still remains the property of the franchisor.
6.

Dependent: The franchisee may become subject to fail with the failure of the

franchisor.
7.

Buy back option: Franchisors generally reserve the option to buy back an

outlet upon termination of the contract. Many franchisees become vulnerable to this
option. As such, they operate under the constant fear of non-renewal of the franchise
arrangement.

Types of Franchising:
Franchising arrangements are broadly classified into three types;
1.

Product Franchising: this is the earliest type of franchising. Under this, dealers

were given the right to distribute goods for a manufacturer. For this right, the dealer

pays a fee for the right to sell the trademarked goods of the producer. Product
franchising was used, perhaps for the first time, by singer Corporation during the
1800s to distribute its sewing machines. This practice subsequently becomes popular
in the petroleum and automobile industries also.
2.

Manufacturing

Franchising:

Under

this

arrangement,

the

franchisor

(manufacturer) gives the dealer the exclusive right to produce and distribute the
product in a particular area. This type of franchising is commonly used in the softdrink industry.
3.

Business-Format Franchising: this is recent type of franchising and is the

most popular one at present. It is an arrangement under which the franchisor offers
a wide range of services to the franchisee, including marketing, advertising, strategic
planning, training, production of operations manuals and standards and quality-control
guidance.

Difference between Franchising and Distributorship or Agency

Distributorship and agency are the more traditional forms of distributing goods or
services. Under these, the principal is not allowed to exert the real control over the
distributor or agent. Here, the franchising differs from the distributorship and the
agency in the sense that it allows the franchisor to exercise a higher degree of
control over the franchisee. As a matter of fact, the franchisor has a right to say in
all important matters like branding, methodology and mergers.

Strategic Alliances:
A Strategic Alliance is a relationship between two or more parties to achieve a set
of agreed goal or to meet a critical business need while remaining independent
organizations. An arrangement between two companies that have decided to share
resources to undertake a specific, mutually beneficial project is called strategic
alliance. In a strategic alliance, each company maintains its autonomy while gaining
a new opportunity. A strategic alliance could help a company develop a more effective
process, expand into a new market or develop an advantage over a competitor,
among other possibilities. Well-structured strategic alliances can improve profitability
and allow a company to more easily enters new markets

Partners may provide the strategic alliance with resources such as products,
distribution channels, manufacturing capability, project funding, capital equipment,
knowledge, expertise, or intellectual property. The alliance is a co-operation or
collaboration which aims for a synergy where each partner hopes that the benefits
from the alliance will be greater than those from individual efforts. The alliance often
involves

technology

transfer

(access

to

knowledge

and

expertise),

economic

specialization, shared expenses and shared risk.

Stages of Alliance Formation

A typical strategic alliance formation process involves these steps:
Strategy Development: Strategy development involves studying the alliances feasibility,
objectives

and rationale,

focusing on the

major

issues

and challenges

and

development of resource strategies for production, technology, and people. It requires

aligning alliance objectives with the overall corporate strategy.
Partner Assessment: Partner assessment involves analyzing a potential partners
strengths and weaknesses, creating strategies for accommodating all partners
management styles, preparing appropriate partner selection criteria, understanding a
partners motives for joining the alliance and addressing resource capability gaps that
may exist for a partner.
Contract Negotiation: Contract negotiations involves determining whether all parties
have realistic objectives, forming high caliber negotiating teams, defining each
partners contributions and rewards as well as protect any proprietary information,
addressing termination clauses, penalties for poor performance, and highlighting the
degree to which arbitration procedures are clearly stated and understood.
Alliance Operation: Alliance operations involves addressing senior managements
commitment, finding the caliber of resources devoted to the alliance, linking of budgets
and resources with strategic priorities, measuring and rewarding alliance performance,
and assessing the performance and results of the alliance.
Alliance Termination: Alliance termination involves winding down the alliance, for
instance when its objectives have been met or cannot be met, or when a partner
adjusts priorities or re-allocates resources elsewhere.

Advantage of strategic alliance:

The advantages of strategic alliance include:
Allowing each partner to concentrate on activities that best match their capabilities.
Learning from partners & developing competences that may be more widely exploited
elsewhere.
Adequate suitability of the resources & competencies of an organization for it to
survive.
Disadvantages
Implementing and managing a strategic alliance may be difficult because each alliance
partner has a different way of operating. Mistrust could occur, particularly when
competitive or proprietary information is involved. The alliance partners could become
more dependent on each other, making it difficult to operate again as separate entities
if required.

Types of Strategic Alliance:

There are four types of strategic alliances: joint venture, equity strategic alliance, nonequity strategic alliance, and global strategic alliances.
Joint venture is a strategic alliance in which two or more firms create a legally
independent company to share some of their resources and capabilities to develop a
competitive advantage.
Equity strategic alliance is an alliance in which two or more firms own different
percentages of the company they have formed by combining some of their resources
and capabilities to create a competitive advantage.
Non-equity strategic alliance is an alliance in which two or more firms develop a
contractual-relationship to share some of their unique resources and capabilities to
create a competitive advantage.
Global Strategic Alliances working partnerships between companies (often more than
two) across national boundaries and increasingly across industries, sometimes formed
between company and a foreign government, or among companies and governments.

Technology Licensing: this is a contractual arrangement whereby trademarks,

intellectual property and trade secrets are licensed to an external firm. It is uses
mainly as a low cost way to enter foreign markets. The main downside of licensing
is the loss of control over the technology-as soon as it enters other hands the
possibility of exploitation arises.

Product Licensing: this is similar to technology licensing except that the

license provided is only to manufacture and sell a certain product. Usually each
licensee will be given an exclusive geographic area to which they can sell to. Its a
lower-risk way of expanding the reach of your product compared to building your
manufacturing base and distribution reach.

Franchising: franchising is any arrangement in which the owner of a

trademark, trade name or copyright has licensed others to use it in selling goods or
services. The franchisee is generally legally independent but economically dependent
on the integrated business system of franchisor.

Research and development: Strategic alliances based around Research and

development tends to fall into the joint venture category, where two or more
businesses decide to embark on a research venture through forming a new entity.

Distributors: if you have a product one of the best ways to market it is to

recruit distributors, where each one has its own geographical area are type of product.
This ensures that each distributors success can be easily measured against other
distributors.

Distribution Relationships

This is perhaps the most common form of alliance. Strategic alliances are usually
formed because the businesses involved want more customers. The result is that
cross-promotion agreements are established. Consider the case of a bank. They send
out bank statements every month. A home insurance company may approach the
bank and offer to make an exclusive available to their customers if they can include
it along with the next bank statement that is sent out. Its a win-win agreement the
bank gains through offering a great deal to their customers, the insurance company
benefits through increased customer numbers, and customers gain through receiving
an exclusive offer.

Outsourcing

The 1980s was the decade where outsourcing really rose to prominence, and this
trend continued throughout the 1990s to today, although to a slightly lesser extent.
The early forecasts, such as the one from American Journalist Larry Elder, have been
shown to not always be true: Outsourcing and globalization of manufacturing allows
companies to reduce costs, benefits consumers with lower cost goods and services,
causes economic expansion that reduces unemployment, and increases productivity
and job creation.

Affiliate Marketing

Affiliate marketing has exploded over recent years, with the most successful online
retailers using it to great effect. The nature of the internet means that referrals can
be accurately tracked right through the order process. Amazon was the pioneer of
affiliate marketing, and now has tens of thousands of websites promoting its products
on a performance-based basis.

E-Commerce
E-Commerce is establishing exchange relationships electronically through e-mail,
internet, and electronic platforms to satisfy individual needs of customers. It is direct
marketing based on electronic communication. E-commerce is conducted through online computers. E-commerce is the buying and selling of goods and services on the
Internet, especially the World Wide Web.

Internet serves as the communication

channel.
E-commerce encompasses the use of technologies, processes and management
practices that enhance organizational competitiveness through strategic use of
electronic information. E-commerce is, thus a modern methodology that addresses the
need of organizations merchants, and consumer. It cuts costs while improving the
quality of goods and services and increasing the speed of service delivery.
Ecommerce can be broken into four main categories: B2B, B2C, C2B, and C2C.
B2B (Business-to-Business)
Companies doing business with each other such as manufacturers selling to
distributors and wholesalers selling to retailers. Pricing is based on quantity of order
and is often negotiable.

B2C (Business-to-Consumer)
Businesses selling to the general public typically through catalogs utilizing shopping
cart software.
C2B (Consumer-to-Business)
A consumer posts his project with a set budget online and within hours companies
review the consumer's requirements and bid on the project. The consumer reviews
the bids and selects the company that will complete the project.
C2C

(Consumer-to-Consumer)

There are many sites offering free classifieds, auctions, and forums where
individuals can buy and sell things to online payment systems like PayPal where
people can send and receive money online with ease. eBay's auction service is a
great example of where person-to-person transactions take place everyday since
1995

Features of E-Commerce

Individualized communication:

Data depository

E-mail and Electronic platforms

On-line selling

Relationship marketing

Connectivity through e-commerce:

E-commerce takes a customer concept for individualized marketing. It is rapidly
growing.
1.

Connecting with customers:

E-commerce connects directly with customers on one to one basis. Voice

mail has facilitated interactions with customers. Connectivity can be: Business to
consumer (B2C), business to business (B2B), Consumer to consumer (C2C),
consumer to business (C2B). Databases are built to provide information about
individual customer.

Cost, time, distance and space are minimized.

Ecommerce connects with carefully selected customers. It targets profitable

customers.

E-commerce connects customers for a lifetime. It helps to build relationship

to make longer term profits.

2.

Connecting with stakeholders:

E-commerce connects with stakeholders, such as employees, suppliers,

competitors, middlemen, and marketing intermediaries. Paper work is eliminated

E-commerce connects with strategic alliance partners. They can be related

to marketing, logistics, technology, finance.

3.

Connecting globally:
E-commerce has facilitated connections with global customers. It has

expanded geographical coverage of purchasing manufacturing and marketing.

Benefits of e-commerce
E-commerce is win-win situation for the consumer and the product/ service provider.
The distinct advantages e-commerce can offer to the consumer are:

Consumer has much wider choice available on the cyber market.

They can compare products, features, prices and even look up reviews

before they select what they went.

They also have the convenience of having their orders delivered right to

the doorstep.

Finally, consumers are driven to e-shopping in hordes as even branded

goods cost less on the net.

The major advantages that e-commerce can bring to the companies

are:

It minimizes inventory cost: E-commerce venture need not maintain huge

inventories or expensive retail show rooms. Their marketing and sales force is a
fraction of those of traditional mortar-based businesses. E-commerce can minimize

inventory costs by adopting just-in-time system enhancing the firms ability to forecast
demand more accurately.

Improve customer services: It has been found that providing both customer

and after-sale services account for up to 10 per cent of the operating costs. By
putting these services on-line under e-commerce, these costs get reduced, on the
one hand, and simultaneously the quality of services also gets improved, on other.
High quality customer relationship called customization is crucial for retaining
customers in the e-commerce environment. It become necessary for the company to
enhance customer loyalty, otherwise the customer, who is full of choices, can jump
from one website to another. If company is to stay in business then it will have to
deliver the products or services to customer as they want, when they want and how
they want.

Reduce distribution cost: E-commerce also reduce distribution cost of goods

and service. The Electronic Data Interchange (EDI) based on EECD study has
revealed that the time needed to process an order declined by a minimum of 50%
to maximum of 96% per cent. It is really amazing.

Helps business globalize: E-commerce by minimizing costs enables

companies especially small ones to make information on its products and services
available to all the potential customers spread over worldwide.

Helps market products more quickly: By taking the entire product design

process on-line, drawing partners and customers into the process and removing the
traditional communication barriers, companies can bring products and services to
market far more quickly.

Challenges of e-commerce
E-commerce in spite of opportunities also bears the challenges as well at the same
time. The major challenges of e-commerce facing by small enterprises are mentioned
below:

Infrastructural problems: infrastructural problem is the main challenge of e-

commerce. Without development of modern communication and transportation, ecommerce is not possible.

Absence of cyber laws: Another big challenge associated with e-commerce

market is the near absence of cyber laws to regulate transactions on the net. WTO
is expected to enact cyber laws soon.

Privacy and security concern: another challenge related to e-commerce is

privacy and security. There is no protection offered either by Website or outside

watchdogs against hazard created by exploitation ones privacy.

Digital Illiteracy and consumer awareness: At present, digital illiteracy is one

of the formidable problems e-commerce is facing in Nepal. On the other hand, the
continuous exodus of skilled computer engineers to other countries has denuded
Nepal of software engineers. This has posed a real threat to the Nepal IT industry.
The consumer does not browse the net knowing the consequent hassles of
connectivity and other botherations. Added to this building trust on the electronic
media also takes long time more especially when the vendor is situated at a very
far off place.

Virus Problem: the computer virus is also a major problem in the execution

of e-transactions.

English specific: the software so far in the country is English specific. But,

in order to make e-commerce reach to the small enterprises, it needs to be available

in the languages (regional) of the owners of the small enterprises to enable them to
adapt e-commerce processes in their operations. Sooner it is done better will be it
for small enterprises to adapt e-commerce.

Payment issue: the electric payment is made through credit card which

could not become popular in Nepal due to the penetration of credit card in Nepal is
very low and the Nepali customers are quit skeptical of paying by credit card with
the increasing threat of fraud played by hackers. In Nepal credit card could not gain
growth mainly because of authentification and recognition problems of electronic
signatures.

Tax related issue: Tax administration is yet another complex problem in e-

commerce. It is difficult to administer tax related matter in e-transactions. It will provide

ample scope for tax evasion.

Impact of E-commerce on Entrepreneurship

Direct marketing

Electronic marketing

Cost effective

Marketing mix

Promotion

Strategic alliances

E-commerce strategy for entrepreneurs:

Presence: The e-name is registered. The entrepreneur builds excitement

about products of the venture in the market place to make its presence felt.

Penetration: the entrepreneur focused on gaining greater market share for

the products.

Profitability: The entrepreneur focuses on increasing revenue.

Ethic and Social Responsibility

In the broadest sense, ethics provide the basic rules or parameters for conducting
any activity in an acceptable manner. More specifically, ethics represent a set of
principles prescribing a behavioral code that explains what is good and right or bad
or wrong.

It is a set of moral principles or values that governs the conduct of an

individual or a group. What is lawful conduct being not always ethical conduct. The
law may permit something that would be ethically wrong. Business ethics comprises
the moral and standards that guide behavior in the world of business.
Business ethics is an important issue today. Business organizations are being
questioned and charged for their unethical behavior. Ethical issues arise in every
stages of business. Criticisms are being labeled against them for their unethical
actions by different sections of the society. Entrepreneurs cannot afford to overlook
such criticisms and charges. Their role has thus, increased. They have now to adopt
ethical behavior and be responsive. The call for better business ethics is clearly a
challenge for managers today.

Some business collapses over the last few years that have exposed the lack of moral
code & ethics. It appears that business needs a core of ethics & integrity to flourish
and enjoy long term success. Ethics are not optional because entrepreneurs work &
live with other human beings.

Sources of Business Ethics:

An organizations ethics is derived from three principal sources:

Societal ethics: Societal ethics are standards that govern how members of

a society deal with each other in matters involving issues such as fairness, justice,
and rights of the individual. The ethical standards originate from a societys laws,
customs and practices. These are basically unwritten values and norms of a society.
Societal ethics differ from society to society.

Professional ethics: Professional ethics are standards that govern how

members of a profession like entrepreneurs make decisions.

Individual ethics: individual ethics are personal standards and values that

govern how individuals interact with one another. Sources of individual values include
the influence of ones family, friends and relatives.

Role of Ethics in Entrepreneurship

Ethics have a huge role to play in business as they give a guideline as to

which business practices are socially and morally acceptable and which are not.

In cases where there are no laid down rules as to the right and wrong ways

of doing business, Ethics fill in the gap and give the much needed direction.

Awareness of ethics promotes entrepreneurs to stop from engaging in business

practices that lead to loss of human life and human rights compromise the
environment or bring about gain at the unfair expense of other businesses, employees,
consumers, etc.

Sound business ethics benefit the consumer as they strive to direct businesses

to be open and honest to their customers

Professor David Bat stone offers ten Principles for entrepreneurial ethics:

Company directors and management will consider their work force valuable

team members, not merely hired labor

A company will think of itself as a part of a community, not just a market

A company will take every possible care to ensure the quality and safety

of the products it brings to the public

A company will treat the environment as a silent stakeholder, a party to

which it is wholly accountable

A company will strive to diversify the kind of people who lead and manage

its affairs

A company will pursue international trade and production based on

reciprocal exchanges that respect the same rights accorded its own people

A company will care for an organizational culture that encourages its

employees to give critical feedback on unethical practices, and even blow the whistle
when their voices are ignored

A company will protect the privacy rights of its suppliers, customers, and

employees

A company will deliver what it promises, and promise what it can deliver

A company will not seek to generate any revenue from practices that

threaten life

Social Responsibility:
The obligation of an organization's management towards the welfare and interests of
the society in which it operates is called social responsibility. It is a principle
that companies should contribute to the welfare of society and not be solely devoted
to maximizing profits. It focuses on what an organization does to society and what it
does for society.
Socially responsible companies can act in a number of ways to benefit society. For
example, companies can give money to the arts, fund academic scholarships, support
community-building initiatives, and so on. They can also commit to not pollute or to
reduce the pollution they put out, to not build weapons, and so forth.

Areas of Social Responsibility:

Enterprises have clear and distinct responsibilities to various groups and entities that
have a stake in the firms. These include:
1.

Towards Consumers: Consumer plays an important role in the survival and

growth of business. Consumers provide sales revenues, the main source of income
for a business firm. Therefore, the purpose of a business is to create customer. For
that, business has the accountability towards its customers. This includes:

Charge reasonable prices for products.

Provide quality products, product guarantee, and after sale services

consistent with customers requests.

Truthful and socially responsible advertising

Protection against monopoly and restrictive trade practice.

Treat customers fairly in all respects of the business transactions

Make effort to ensure that the health and safety of consumer will be

enhanced by the product and services.

2.

Towards Shareholders: Shareholders are the investors. They together own

the business. They contribute capital to the business in the hope of earning dividends
and appreciation in share prices. The shareholders are also the members of society.
Thence, the accountabilities that a business owes to its shareholders are:

Regularity of dividend

Disclose relevant information to shareholders

Respect shareholders requests, suggestions, complaints, and formal

resolution

Report on social issues (the amount spent on social and development

programmes)
3.

Towards employees: Employees are the vital components of a business firm.

They are employed in a business as workers and managers. As workers, they are
directly involved in performing the basic and operating organizational functions. Thus,
business firm owes responsibilities to these employees on the following counts:

Provide legitimate decision-making and policy-making freedom to managers

and ensuring their full potential growth.

Provide fair wages, bonus and other economic benefits to all employees

that improve their living conditions

Grant right to form union, giving representation on decision-making bodies

Provide working conditions that respect each employees health and dignity

Institute grievance settling, social security and welfare schemes.

4.

Towards government: government is the agency that governs all the institution

and individuals in the country. It is done through promulgation and implementation of

appropriate laws and regulations. With this background, business must be responsible
to the government in the following ways:

Pay tax regularly

Follow the guidelines and policies

help the governments efforts to solve national problems

purchase treasury bills issued by government

Avoid unfair trade practices

Help government stop black marketing

5.

Towards Society: Business is operated in a society and has to consider the

necessity to improve the quality of life and contribute towards well being of the
society. In doing so, business has to fulfill following responsibilities:

Make efforts to reduce pollution of any kind

Make optimum utilization of natural and national resources

Provide maximum employment opportunities

Preserve social and cultural values

Promote national integration and development

Business must act as a good citizen.

Small Business Venturing Exporting:

Exporting is the practice of sending or carrying merchandise to a foreign country for
trade or sale. International business is a potentially lucrative area for many businesses,
but the small business owner should be aware that establishing oneself in a foreign
market is a complex, time-consuming task. Small business should not enter the world
of international trade until they have fully researched both their own exporting
capabilities and various business conditions in the target market(s) abroad. Indeed,
consultants point to a wide range of factors to consider when assessing your
company's readiness to expand its business beyond borders. These include company
export readiness, potential foreign markets, product distribution options, legal factors,
operating costs and profit margin, financing resources, and exporting alternatives (such
as joint ventures or off-shore manufacturing facilities).
Exporting is sometimes thought of as a practice that is largely the province of large
businesses and international corporations, but exporting can also be helpful to a small
business in a variety of ways. A small business that establishes its products in the
international marketplace can increase sales and profitability, enhance its domestic
reputation, reduce its dependence on domestic markets, reinvigorate the sales
potential of existing products, stabilize seasonal market fluctuations, sell excess
production capacity, and increase awareness of possible foreign competitors.
Of course, exporting is not a risk-free venture. Expanding a small business's
operations into foreign markets may require the development of new promotional
materials, assumption of increased short-term debt as a result of new operational and
administrative costs,

re-assignment

of

personnel,

and

adjustments

in product

functionality and appearance to meet the commercial and social standards of the
environment in which the business hopes to establish itself.

Preparing for the World of Exporting:

Small business consultants counsel their clients to undertake research and selfanalysis before committing time and resources to breaking into international markets.
Indeed, consultants stress that a small business should be able to answer positively
to the following questions before considering expanding its business to include
exporting:
i.

Is the business currently successful in its domestic operations?

ii.

Does the business owner understand the types and amounts of investments
(time, capital, and people) he or she will have to make to establish the
business's product in the targeted market?

iii.

Is the business sensitive to the cultural implications of doing business in the

targeted market?

iv.

Is the business willing to commit needed resources to make the exporting

effort work?
In order to arrive at an informed answer to the above questions, consultants
recommend that business owners with an eye to international markets take the
time to complete an international business plan. This document can highlight
potential trouble spots and business areas that need further research. Exporting
factors that should be considered in any international business plan include:

v.

Identification of potential market

vi.

Demographic and political environment of potential market

vii.

Economic status of potential market

viii.

Social and cultural environment of potential market

ix.

Access to potential market (includes research on tariffs and other trade barriers,
treaties, trade regulations, patent and trademark protection)

x.

Demand for product

xi.

Possible competition within potential market

xii.

Possible distribution channels

xiii.

Local distribution and production environment within potential market

xiv.

Exporting methodology

xv.

Any necessary adjustments to product or packaging

xvi.

Marketing strategy

xvii.

Cost of exporting operation

xviii.

Pricing strategy

xix.

Projected sales

xx.

Projected fortunes of domestic operation

Method of Exporting
There are two types of exporting: direct and indirect.
1. Direct exports

Direct exports represent the most basic mode of exporting, capitalizing on economies
of scale in production concentrated in the home country and affording better control
over distribution. Direct export works the best if the volumes are small. Large volumes
of export may trigger protectionism.

Direct exporting practices generally require

greater initial outlays of funds, personnel, and other resources, and they are generally
regarded as riskier in nature than indirect exporting options. But direct exporting can
also be a tremendously profitable practice. It basically requires businesses to find a
foreign buyer for its products and make all arrangements to deliver those goods to
the buyer.

Types of Direct Exporting:

a)

Sales representatives

Sales representatives represent foreign suppliers/manufacturers in their local markets

for an established commission on sales. Provide support services to a manufacturer
regarding local advertising, local sales presentations, customs clearance formalities,
legal requirements. Manufacturers of highly technical services or products such as
production machinery, benefit the most form sales representation.
b)

Importing distributors

Importing distributors purchase product in their own right and resell it in their local
markets to wholesalers, retailers, or both. Importing distributors are a good market
entry strategy for products that are carried in inventory, such as toys, appliances,
prepared food.
Advantages of direct exporting
Control over selection of foreign markets and choice of foreign representative
companies
Good information feedback from target market
Better protection of trademarks, patents, goodwill, and other intangible property
Potentially greater sales than with indirect exporting.
Disadvantages of direct exporting
Higher start-up costs and higher risks as opposed to indirect exporting

Greater information requirements

Longer time-to-market as opposed to indirect exporting.
2. Indirect exports
Indirect exports are the process of exporting through domestically based export
intermediaries. The exporter has no control over its products in the foreign market.
Types of Indirect Exporting
a)

Export trading companies (ETCs)

These provide support services of the entire export process for one or more suppliers.
Attractive to suppliers that are not familiar with exporting as ETCs usually perform all
the necessary work: locate overseas trading partners, present the product, quote on
specific enquiries, etc.
b)

Export management companies (EMCs)

These are similar to ETCs in the way that they usually export for producers. Unlike
ETCs, they rarely take on export credit risks and carry one type of product, not
representing competing ones. Usually, EMCs trade on behalf of their suppliers as
their export departments.
c)

Export merchants

Export merchants are wholesale companies that buy unpackaged products from
suppliers/manufacturers for resale overseas under their own brand names. The
advantage of export merchants is promotion. One of the disadvantages for using
export merchants result in presence of identical products under different brand names
and pricing on the market, meaning that export merchants activities may hinder
manufacturers exporting efforts.
d)

Confirming houses

These are intermediate sellers that work for foreign buyers. They receive the product
requirements from their clients, negotiate purchases, make delivery, and pay the
suppliers/manufacturers. An opportunity here arises in the fact that if the client likes
the product it may become a trade representative. A potential disadvantage includes
suppliers unawareness and lack of control over what a confirming house does with
their product.

e)

Nonconforming purchasing agents

These are similar to confirming houses with the exception that they do not pay the
suppliers directly payments take place between a supplier/manufacturer and a foreign
buyer.

Advantages of Indirect Exporting

i.

Fast market access

ii.

Concentration of resources for production

iii.

Little or no financial commitment. The export partner usually covers most

expenses associated with international sales

iv.

Low risk exists for those companies who consider their domestic market to be
more important and for those companies that are still developing their R&D,
marketing, and sales strategies.

v.

The management team is not distracted

vi.

No direct handle of export processes.

vii.

Disadvantages of Indirect Exporting

viii.

Higher risk than with direct exporting

ix.

Little or no control over distribution, sales, marketing, etc. as opposed to direct

exporting

x.

Inability to learn how to operate overseas

xi.

Wrong choice of market and distributor may lead to inadequate market

feedback affecting the international success of the company

xii.

Potentially lower sales as compared to direct exporting, due to wrong choice

of market and distributors by export partners.

Those companies that seriously consider international markets as a crucial part of

their success would likely consider direct exporting as the market entry tool. Indirect
exporting is preferred by companies who would want to avoid financial risk as a
threat to their other goals.

Major Constraints
The major constraints encountered by the small units in exporting their products are
as follows:

a)

Credit Policy: The small scale units have weak-base of their own funds, on

the one hand, and have no access to other sources of funds like capital market, on
the other. Hence, they have to depend upon the state financial corporations, the
commercial banks and private money lenders to meet their long-term and short-term
capital requirements. It requires high cost of capital. Therefore, there should be the
need for a comprehensive credit scheme targeted at small industry exports.
b)

Infrastructure: Lack of infrastructure facilities like power supply, transportation

and communication adversely affect the quantity and quality of production, its costs
and delivery.
c)

Technology: Technology is the heart of quality and competitiveness. However,

the adoption of technology in small industries hampered due to lack of infrastructural

facilities, on the one hand, and the present investment ceiling of the small scale
industry, on the other.

How to Export Commercial Goods into New International Markets

1. Export Planning
2. Screening Potential Markets

Obtain export statistics.

Identify potential markets.

Target the most promising ones.
3. Assessing Your Target Markets
Examine product trends
Research the competition
Analyze the market.
Identify barriers.
Choose a market.
4. Finding Qualified Buyers
- Search online.

- Attend trade shows.

- Contact industry associations.

Use the Department of Foreign Affairs and International Trade (DFAIT) Trade
Commissioners Service.
5. Taking Care of Logistics
6. Export Documentation
7. Pricing it Right

Cost based.

Market demand.
Competitor pricing.
8. Payment Terms
Cash in advance.
Documentary Letters of Credit (LCs).
Open account.
9. Export Financing

Entrepreneurial network
In business, entrepreneurial networks are social organizations offering different types
of resources to start or improve entrepreneurial projects. Having adequate human
resources is a key factor for entrepreneurial achievements. Combined with leadership,
the entrepreneurial network is an indispensable kind of social network not only
necessary to properly run the business or project, but also to differentiate the
business from similar projects.

Purpose
The goal of most entrepreneurial networks is to bring together a broad selection of
professionals and resources that complement each other's endeavors. Initially a key
priority is to aid successful business launches. Subsequently provide motivation,
direction and increase access to opportunities and other skill sets. Promotion of each

members talents and services both within the network and out in the broader market
increases opportunities for all participants.
One of the key needs of any startup is capital, and often entrepreneurial networks
focus on providing such financial resources, particularly tailored to their membership
demographic.
Entrepreneurial networks may also become community involved, endorsing reforms,
legislation or other municipal drives that accommodate their organization's goals.

Membership composition
lawyers, various specialties
scientists
engineers
architects
contractors/construction managers
real estate professionals
suppliers
government people or institutions
partners
high skilled employees
clients or any other kind of social contacts that can make the entrepreneurial business
(or project) successful
mentors
investors

E-entrepreneurship
E-entrepreneurship describes entrepreneurship in e-business. E-entrepreneurship
refers to establishing a new company with an innovative business idea within the Net
Economy. It uses an electronic platform in data networks. E-entrepreneurship offers
its products or services based upon a purely electronic creation of value. We use

the term e-entrepreneurship to refer primarily to the digital enablement of transactions

and processes within a firm, involving information systems under the control of the
firm. E-entrepreneurship does not include commercial transactions involving an
exchange of value across organizational boundaries. This value offer by eentrepreneurship is only made possible through the development of information
technology. Example of e-entrepreneurship is Google.com, eBay.com, yahoo.com,
amazon.com, etc.
The

e-dimension

of

entrepreneurship

incorporates

all

the

key

elements

of

entrepreneurship including risk-taking, proactive, and innovation in building, running

and managing e-business. The concept of e-entrepreneurship is not limited to small
e-businesses but includes corporate e-intrapreneurship which is embedded in
establishing e-infrastructure to do e-business in large organizations. E-entrepreneurship
operates in a fast-moving, highly uncertain, unknowable and unpredictable context. It
requires change in the traditional concept of entrepreneurship. For example, the
traditional notion of entrepreneurship of being or becoming an expert or finding and
protecting a unique knowledge in a niche market, clashes with the fact that e-business
knowledge is often short-lived and available to everyone, anytime, and anywhere.

Advantages:

The advantage of e-business is its ubiquity, or the ability to transcend

geographical constraints and remain accessible from everywhere.

The second biggest advantages of e-business are its cost-effective nature.

An e-business does away with many processes and costs associated with a traditional
business.

The e-business also requires fewer employees, with the entrepreneur herself

able to single-handedly manage the entire operations of a small or medium ebusiness.

access

E-businesses help in serving the customer better. In e-business, customers

comprehensive

information

of

the

desired

product

or

service,

make

comparisons, and effect the purchase, all with a few clicks of the mouse.

The customer of an e-business can access the entrepreneur directly through

email or online chat, compared to dealing with the many hierarchical levels, or lengthy

telephone holds up when trying to access the customer service department of a

traditional business.

Disadvantages:

The biggest disadvantage of e-business is its inherent separation from the

customer. The customer and the product come face to face in a traditional brick and
mortar business. The faceless nature of an e-business causes an issue of trust, which
remains hard to resolve.

Another big disadvantage of e-business is its unsuitability in many areas or

sectors. E-business, for instance, cannot treat a patient.

The success of an e-business depends on strong computer systems, updating

and maintaining the website, security of e-commerce transactions, reliability of shipping

and delivery, and search engine optimization.

A far bigger threat is the danger from viruses, Trojans, worms, and other

malware.

Finally, success of an e-business depends largely on the success of the

delivery channel partner. Only those e-businesses that can ensure delivery of the
product to the customer in a timely and safe manner can survive.

Success factors

Computer Science

It is important to have substantial knowledge about the technologies

Information Management

The technological basis provided by CS must be managed and it is important to have

knowledge about security, data warehousing, data mining.

Business Administration

It is essential to have solid business knowledge

Entrepreneurship vs. e-Entrepreneurship

entrepreneurship consist on the process of creating something new and assuming the
risks and rewards, e-Entrepreneurship will consist on creating owner business activity
on internet in some area to sell or provide service something only online, such as
email service DVDs, including rental and Books, Computers, T-shirts, Cell phones,
Magazine subscription, Software, etc.

CHAPTER: CREATIVITY AND BUSINESS IDEAS

Concept Creativity
Creativity is the generation of ideas that result in the improved efficiency or
effectiveness of a system. It is the ability to discover new ways of looking at problems
and opportunities. Creativity can be defined as the tendency to generate or recognize
ideas,

alternatives,

or

possibilities

that

may

be

useful

in

solving

problems,

communicating with others, and entertaining ourselves and others. It is any act, idea,
or product that changes an existing domain or that transforms an existing domain
into a new one.
It is the result of free, unbiased and unconventional thinking. It is based on mental
vision, imagination and observation. It is systematic and logical process to see,
recognize, and create opportunity. It concerned with solving business problem by
continually asking What if.? or Why n?
In conclusion, creativity is the entrepreneurs ability of analyzing problem from every
possible angle: what is the problem? Whom does it affect? How does it affect them?
What costs are involved? Can it be solved? Would the marketplace pay for a solution?

Aspect of Creativity:
Creativity has two aspects:
1.

Process: creativity process is goal-oriented. It is designed to find solution to

a problem. This process occurs in a creative climate.

2.

People: creativity lies in people. They are inherently creative. It is people who

determine the solution to a problem. They use following approaches to discover to

solve problems:

Adaptive approach:

existing solution are adapted to solve

problems.

Innovative approach: innovative solution is formulated to solve

problems.

Essentials of Creative Climate:

Creativity occurs in a creative climate. Characteristics creative climate are:

Trustful management that does not over control.

Open communication inside and outside the organization

People with variety of personality types.

Willingness to accept change.

Experimentation with new ideas.

Little fear of making mistakes.

Merit-based human resource management.

Encouragement to ideas through brainstorming, suggestion system etc.

Sufficient financial, physical and information resource.

Channeling of creativity in various arenas.

Creative Process:
The creative process has four commonly agreed steps:
1.

Background or knowledge accumulation: the first step in creative process is

knowledge accumulation. It involves investigation and information gathering to get

various perspectives on the problem. People practice the creative search for
background knowledge in a number of ways. Some of the most helpful follow:

Read in a variety of fields

Join professional groups and associations

Attend professional meetings and seminars

Travel to new places

Talk to anyone and everyone about your subject

Scan magazine, newspaper, and journals for articles related to subject

Develop a subject library for future reference

Carry a small notebook and record useful information

Devote time to pursue natural curiosities.

2.

Incubation: the second step involves sleeping on the problem. It involves

assimilation of knowledge to generate new idea to solve the problem. Creative

individuals allow their subconscious to mull over the tremendous amounts of
information they gather during the preparation phase. The incubation process often
occurs while they are engaged in activities totally unrelated to the subject or problem.
It happens even when they are sleeping. Some of the most helpful steps to induce
incubation follow:

Engage in routine mindless activities (cutting the grass, painting the hours)

Exercise regularly

Play (sports, board games, puzzles)

Think about the project or problem before falling asleep

Meditate or practice self-hypnosis


3.

Sit back and relax on a regular basis

The idea experience: this phase of the creative process is often the most

exciting. In this stage the idea or solution the individual is seeking is discovered.
Ideas emerge in a rough form. Idea experience can be speeded up by:

Daydream and fantasize about your project

Practice your hobbies

Work in a leisurely environment (for example, at home instead of the office)

Put the problem on the back burner

Keep a notebook at bedside to record late-night or early-morning ideas

Take breads while working.

4.

Evaluation and implementation: the fourth step is to modify, test or rework

on rough ideas to put them in final form. It takes courage, self-discipline and
preservance to evaluate and select the ideas. Some of the most useful suggestions
for carrying out this phase follow:

Increase your energy level with proper exercise, diet, and rest

Educate yourself in the business-planning process and all facets of business

Test your ideas with knowledgeable people

Take notice of your intuitive hunches and feelings

Educate yourself in the selling process

Learn about organizational policies and practices

Seek advice from others

The ideas that pass the test of evaluation are implemented.

The Role of Creativity:

Basically creativity can play important role in following aspect of entrepreneurial work:

A creative person can innovate ideas as per the demand of market chance.

They can materialize the imagination to mould the change

Able to change the domain of thought

They can synthesize the ideas from scientific invention to changing demand

of people.

The leader of the organization is creative they can allow to set the governing

rules themselves which can help them to bring new business ideas in the organization.

To bring the new ideas in the organization they have to allow trial and

error which may cause failure. Creative people may allow such failure in the
organizations.

Routine work may kill the creativity. People may have different ways to

perform particular task. So, they should be flexible in the activities to perform.

Sources of new business ideas:

The sources of new business ideas can be:
1.

Consumers: organization may get new business ideas through regular listening

to the customers. Customer complaints or suggestions can lead for the development
of new products, services or processes. If we regularly record complaints and try to
minimize such complaints it may give a birth of a new product.
2.

Competitors: Entrepreneur always constantly monitors the activities of the

competitors. What are competitors new products, services or processes? What

alteration in the existing system are they binging into the practice? Who are
competitorss dissatisfied customers? That do they want? What new readjustment can
help to bring hose to companys offering? Seeking answers of such questions may
help for development of new products, services or process.
3.

Channel members and sales force: these people are very close to the

customers. They frequently listen customer complaints and suggestions. They also
can notice the inconveniences of customers and competitors activities and offering.
They regularly monitor the customers evaluation of the offering with respect to
competitors offerings.
4.

Government: government can be the sources of new product idea. Government

agencies

may

suggest

ideas

through

training

or

registration

activities

while

entrepreneurs go for registration of the entrepreneurial work. They can pursue different

policies and publications for entrepreneurship development in the country. Government

can establish different standards and measures for business up gradation which can
provide the avenues for new product, service or process development to the
entrepreneurs.
5.

Research and developmental work: Entrepreneur can establish a separate

unit for regular research and development work, or hire such expert team for a
specific research and development work or can find out a new combination of offering
uniquely in their day to day activities.

Technique or Method of Idea Generation:

1.

Brainstorming: Brainstorming is a method of idea generation. Its purpose is

to solve problem that are new to the organization. In brainstorming, the group meets
to generate alternatives. The members present ideas and clarify them with brief
explanation. Each idea is recorded on a flip chart. Group members are encouraged
to offer any idea that occurs to them, even those that seem too risky and impossible
to implement. In this process, criticisms or evaluation of ideas in not allowed. Quantity
of ideas is very important. Each individual should not screen his or her ideas.
After a list of ideas has been generated, those most obviously impracticable are
eliminated from the list. The quantities of ideas that remain in the list are then kept
for serious discussion. This process ultimately leads to a broad agreement on the
vital ideas to be considered for implementation.
2.

Reverse Brainstorming: Reverse brainstorming is like brainstorming but in

reverse brainstorming criticism is allowed. It is conducted finding the fault of others.

Questions are asked how it cannot work or idea can fail.
3.

Brain writing: unlike in brainstorming, the individual in groups write down their

ideas on sheets of paper. The papers are then exchanged and other members of
the group make modifications and suggestions writhing. Each participant thinks and
records ideas individually, without any verbal interaction.
Here are the steps in a typical Brain writing session:

Participants sit around a table and each one gets a sheet of

paper with the same problem statement written at the top. Just like in traditional
brainstorming, also need a moderator for the session.

At the moderators signal, each participant has to write down ideas

on the sheet of paper. Just like in traditional brainstorming, the ideas should always
go unedited.

When time is up (or when everybodys done), each participant

passes the sheet of paper to the participant to the left.

Each participant now reads the ideas that were previously written

and a new round starts. Each participant must again come up with new ideas.
Participants are free to use the ideas already on the sheet as triggers or to ignore
them altogether.

The group can agree to stop after a fixed number of rounds (such

as when sheets come to a full turn around the table) or when participants feel that
contributions are exhausted.

After the idea-gathering phase is completed, the ideas are read,

discussed and consolidated with the help of the moderator, just like in traditional
brainstorming.
4.

Nominal Group Technique: nominal group technique involves a two-stage

process. In the first stage, individual work separately. Then, in the second stage, they
work as an interacting group to evaluate and choose the alternatives. Thus, the first
stages involve generating ideas, goals and alternatives. The second stage involves
the group collectively listing and then evaluating the ideas, goals and alternatives
generated in the first stage. This technique is very useful for identifying and evaluating
options, and solving a problem when no standard is available. It is especially useful
because it allows individuals to generate ideas independently and then bring them
together to evaluate those ideas.
5.

Free association: Free association is a technique used in psychoanalysis and

also in psychodynamic theory. In this method person work through their own material,
rather than parroting anothers suggestions considered free association as the first
instrument for the scientific examination of the human mind. It is a technique that
asks questions about objects or ideas in an effort to develop new ideas. It is five
step process:

Isolate the element of the problem

Find the relationship between these elements

Record the relationship in an orderly form

Analyze the resulting relationship

Develop new idea from these patterns

6.

Expert Opinion (Delphi Technique): in this method opinion of experts and

experienced person is taken as basis of generating new idea. This method is called
Delphi technique. Delphi technique is particularly used for decision making among
geographically scattered organization. The experienced and knowledgeable persons
are asked to give their opinion through a questionnaire about a particular event and
situation. The opinions are, thus, gathered and compiled to get on overall integrated
view of the experts on the subject. This integrated version is sent back to the experts
for moments and further opinion. This expert opinion, thus, becomes the useful input
for generating new idea.
2.

1.

Factual Information: in this method, information is collected to define the

problem, identify alternatives, and evaluating the outcomes of these alternatives. In

all these activities, information is vital. Decisions, which are based on objective facts
and information, are unbiased and more scientific. There is no scope for emotions
and social pressures when decisions are based on information. The problem with this
approach is that desired information is not available all at time. Access to information
requires cost, time and money.
3.

Intuition and Experience: information is not available all the time. Hence, the

decision makers use intuitions. They use their hunches, instincts, inner feeling, and
previous experience to reach a decision. In situation such as customer complaints,
an injury, or a natural disaster, time constraints make this action the only viable
choice. Intuition produces good results because they are derived from previous
experience.

Business Incubation Program:

A business incubation program is an economic and social development process
designed to advice potential start-up companies through a comprehensive business
assistance program. It is a business support system that accelerates the establishment
of successful business by providing resources and services to the entrepreneurs. The

primary goal of business incubation is to produce successful businesses that are able
to operate independently and financially viable. It offers services to support the
establishment and development of new, small and medium companies. It catalyzes
the process of starting and growing companies by providing entrepreneurs with the
expertise, networks and tools they need to make their venture successful. It is
concerned with:

Start up consulting and business planning

Consulting in all areas important for business development and growth

Consulting for access to financing

Training and networking

What does the business incubation program offer?

Mentoring on Business Basics
Online Resources for Entrepreneurs
Financial Management
Business Plan Development
Technology Assistance
Links to Strategic Partners
Advisory Boards and Mentors
Access to Networking Activities
Marketing Assistance
Legal Advice
Access to Local Funds

Business Incubator:
A business incubator is an economic and social development entity designed to
advise potential start-up companies, help them to establish, and accelerate their
growth and success through a comprehensive business assistance program. A
business incubator (Business and innovation center) is a physical facility aimed

promoting economic development of its community development. Business incubators

will provide a variety of resources or resourcefulness which may include the following:

Shared premises

Business advice

Business services

Networking

Mentoring

A full time manager

The importance of Business incubators:

Business incubators support the development of start-ups by providing them with
advisory and administrative support services. An incubator's primary objective is to
produce successful and financially viable firms that can survive on their own. Early
incubators focused on technology companies or on a combination of industrial and
service companies, but newer incubators work with companies from diverse industries.

Finance
Incubators help start-ups save on operating costs. The companies that are part of an
incubator can share the same facilities and share on overhead expenses, such as
utilities, office equipment rentals, and receptionist services. Start-ups can also take
advantage of lower lease rates if the incubator is located in low-rent industrial parks.
Incubators may also help start-ups with their financing needs by referring them to
angel investors and venture capitalists, and helping them with presentations. Startups may have better luck securing financing if they have the stamp of approval of
incubator programs.

Management
In addition to financial help, start-ups also need guidance on how to compete
successfully with established industry players. Incubators can tap into their networks
of experienced entrepreneurs and retired executives, who can provide management
guidance and operational assistance. For example, a biotechnology start-up would
benefit from the counsel of retired pharmaceutical executives who have first-hand

experience of the drug development and clinical approval process. Similarly, a

restaurant entrepreneur could learn about the difficulties of overseas expansion from
retired hospitality-industry executives. Start-ups usually benefit from having respected
individuals on their boards of directors and scientific advisory panels, because these
individuals bring invaluable connections and experience to the table.

Synergy
\The close working relationships between an incubator's start-ups create synergies.
Even after the start-ups leave an incubator, the connections and networks established
through these relationships can endure for a long time. Start-up entrepreneurs can
provide encouragement to one another, and employees may share ideas on new
approaches to old problems. Start-ups may plan joint marketing campaigns and
cooperate on product development initiatives.

Economy
By helping new businesses prosper, incubators assist in creating long-lasting jobs for
their host communities. They create long-lasting jobs for new graduates, experienced
mid-career personnel, and veteran executives. This benefits communities and drives
economic growth.

CHAPTER: BUSINESS DEVELOPMENT PLAN FOR A NEW

VENTURE

Business plan is a written statement regarding what the entrepreneur is going to do.
It is a guideline regarding what the entrepreneur has wanted to achieve and how has
he wanted to achieve. The business plan is a roadmap of proposed new venture of
the entrepreneur that describes current status, expected needs and projected results
of new venture. It develops the new venture for investment and allocates resources
in a coordinated manner. It provides a clear picture about:

Business description of new venture.

Goal of new venture.

Activities to be done in the new venture.

Timing of doing the activities and their sequence.

Methods of doing the activities.

Responsibilities for doing each activity.

Resources needed for doing each activity.

Projected profit.

A clear and complete business plan is the main document required to mobilize
financial resources for new venture. It also serves as a working document once the
venture is established. It analyses critical risks. It also presents a time table for
implementation of new venture.

Benefits of Business Plan (Value of Business Plan)

The benefits of business plan are as follows:
1.

Risk management: all aspects of the new venture are carefully analysed. This

helps the entrepreneur to deal with risks and uncertainties that may arise. It also
provides contingency plans for such situations.
2.

Objectivity: the time, effort, research and discipline needed to prepare a

business plan forces the entrepreneur to view the venture objectively and critically.
Close scrutiny of assumption made about the ventures success is done.
3.

Communication:

the

completed

business

plan

helps

entrepreneur

to

communicate with outside parties. Financial sources can use it for investment
purposes.
4.

Implementation: the business plan serves as an operational tool for guiding

the implementation of new venture toward success.

5.

Control: the business plan establishes standards for performance as bench

marks. Actual performance can be compared with standards to take corrective actions.

6.

Efficiency: the business plan improves efficiency of new venture by minimizing

waste. Results can be achieved on time within budgeted costs and of desired level
of quality

Scope of the business plan:

The business plan may be read by employees, investors, bankers, ventures capitalists,
suppliers, customers, advisors, and consultants. Whoever is expected to read and
focus? Since each of these groups reads the plan for different purpose, the
entrepreneur must be prepared to address all their issues and concerns. In some
ways, the business plan must try to satisfy the needs of everyone, whereas in the
actual marketplace the entrepreneurs product will be trying to meet the needs of
selected groups of customers.
However, there are probably three perspectives that should be considered when
preparing the plan.

Entrepreneurs perspective: the perspective of the entrepreneur, who

understands better than anyone else the creativity and technology involved in the
new venture. The entrepreneur must be able to clearly articulate what the venture is
all about.

Marketing perspective: entrepreneur will consider only the product or

technology someone would buy it. Entrepreneurs must try to view their business
through the eyes of their customer.

Investor perspective: the entrepreneur should try to view his or her business

through the eye of the investor. Sound financial projections are required. If the
entrepreneur does not have the skills to prepare this information, then outside sources
can be of assistance.
The depth and detail in the business plan depend on the size and scope of the
proposed new venture. Thus, differences in the scope of the business plan may
depend on whether the new venture in a service involved manufacturing or is a
consumer good or industrial product. The size of the market, competition, and potential
growth may also affect the scope of the business plan.

Reasons of some business fail:

Generally, a poorly prepared business plan can be blamed to fail due to one or more
of the following factors:

Goal set by the entrepreneur are unreasonable

Goals are not measurable

The entrepreneur has not made a total commitment to the business or to

the family.

The entrepreneur has no experience in the planned business.

The entrepreneur has no sense of potential threats or weakness to the

business.

No customer need was established for the proposed product or services.

Setting goals requires the entrepreneur to be well informed about the type of business
and the competitive environment. Goals should be specific and not so mundane as
to lack any basis of control.
In addition, the entrepreneur and his or her family must take a total commitment to
the business in order to be able to meet the demands of a new venture. For example,
it is difficult to operate a new venture on a part time basis while still holding on to
a full time position. And it is difficult to operate a business without an understanding
from family members as to the time and resources that will be needed. Lenders or
investors will not be favorably inclined toward a venture that does not have full time
commitment. Moreover, lenders or investors may expect the entrepreneur to make a
significant financial commitment to the business even if it means a second mortgage
or a depletion of saving.
Generally, a lack of experience will result in failure unless the entrepreneur can either
attain the necessary knowledge or team up with someone who already has it.
The entrepreneurs should also document customers needs before preparing the plan.
Customer needs can be identified from direct experience, letters form customers or
marketing research. A clear understanding of these needs and how the entrepreneurs
business will effectively meet them is vital to the success of the new venture.