1

INTRODUCTION

Entrepreneurship is the propensity of the mind to take calculated risk with confidence to achieve a
predetermined business or industrial objective. In other words risk taking ability of the individual, broadly
coupled with correct decision making.

The following are certain prerequisites for successful entrepreneur:

Brain

Along with appropriate educational credentials are important, entrepreneurial "brains" means more than
scholastic achievements. To become a successful entrepreneur, you should have a working knowledge about
the business you plan to start before you start it. Common sense, combined with appropriate experience, is
the necessary brainpower. Prudence, follow through and attention to detail are very important.

Capital
Every Business needs money of your own plus sufficient cash to maintain a positive cash flow for at least a
year. In a future session operating entrepreneurs will learn how to forecast future cash requirements through
cash flow control. Most businesses can be started on a very small scale with a small investment. Then, as the
business grows and you gain experience, cash flow from your business can be used for growth.

Step-by-Step Approach for setting up an Enterprise

1. Decide if you really want to be in business:

You are putting some (not all, hopefully) of your net worth at risk. You may run the risk of becoming
eccentric, meaning creating a life that is out of balance, with working hours taking away from other family
or pleasurable activities. There may be levels of stress you have not experienced as an employee.

2. Decide what business and where:

Once you are satisfied you have the characteristics of a successful entrepreneur and that you definitely want
to be in business, then you must decide which business is best for you and where to locate that business.
Selection strategy is covered later on in this session. Also see Session 16 Home Based Business for those
considering operating a business from their home.
 2

3. Selection Strategies

Operating the wrong business is the most frequent mistake that start-up entrepreneurs make. The above
given are certain points which may help you to evaluate if you are in a potentially successful one or to
reassess the business you are in:
• It is very essential to select the right business. The selection process takes a lot of planning and
your experience and complete knowledge is vital for your success.
• One should not be discouraged by not having enough capital to start a business. Business can
started with a small investment initially.
• Initiate a business that has a market today and tomorrow.

Things to Avoid:

• Impatience
• Do not let overconfidence short circuit you from analyzing your business carefully. You must
not fear hearing the negative aspects; it is much better to be aware of them and face them early on.
• The lure of high rewards. They will come if you have selected the right business and if you
understand every aspect of the business before you open its doors.
 3

TEN ENTREPRENEURIAL STRATEGIES FOR SUCCESS

1. Trust Your Gut

Successful; independent-minded entrepreneurs know when to trust their gut. An expanding body of research
from a number of fields -- including economics, neurology, and cognitive psychology -- confirms that
intuition is a real form of knowledge. It's a skill you can develop and strengthen -- one that's particularly
valuable in the most chaotic, fluid business environments, when you must make critical, high- pressure
decisions at a moment's notice. At such times, intuition usually beats rational analysis.

Trusting ones instincts also emboldens you to carry out new, untested ideas and ventures, even when nobody
else believes in them. It's about seeing the need for a product or new service and just knowing you can make
it happen.

2. Buck the Conventional Wisdom

Ignore those who say, "It won't work" or "It's never been done that way." Profiled entrepreneurs succeeded
in large part because they veered away from established formulas and ways of thinking. Don't just blindly
accept the so-called best practices of the industry. Look at them with a hypercritical eye. Dissect them, slice
and dice them, contemplate different what-if scenarios. Challenging convention can open the door to
competitive advantage.

3. Never Let Adversity or Failure Defeat You

Don't accept the limits that others or circumstances place upon you. The ranks of successful entrepreneurs
are filled with men and women who refused to stop believing in themselves, despite the derision of others or
heartbreaking failures in their past. As an entrepreneur you'll undoubtedly experience stressful moments that
will test your faith, especially in the beginning when you're still trying to establish your brand and separate
from the pack.

4. Go on a Treasure Hunt and Find an Undeserved Niche

In the business world, there's nothing more exciting than finding an underserved niche representing a
lucrative market that everyone else has failed to spot and target. That's like finding gold bullion at a crowded
beach -- it was there for everyone else to see, but you were the one who took notice of the golden glint in the
sand. Even a huge multi-billion-dollar company can't offer something for everyone. Look for ways to fill a
niche -- road even small start-ups can take. Many niches are too small for giant corporations to consider.
 4

5. Spot a new Trend and Pounce

Often, a shift in cultural or economic trends will create new entrepreneurial opportunities. Sometimes that
shift arises from advances in technology. Many of our profiled entrepreneurs recognized emerging consumer
needs and desires that signalled new market opportunities.

6. Hit 'Em Where They Ain't

Casey Stengel, legendary manager of the New York Yankees, loved to tell the story of baseball great "Wee
Willie" Keeler, who stood at just 5' 4'', weighed 140 pounds, and began a streak of eight seasons with two
hundred or more hits. The Hall of Famer's bat was only thirty inches. Once a sports reporter asked him how
such a small guy could get so many big hits. Willie replied, "Keep your eye clear, and hit 'em where they
ain't -- that's all." The same holds true in the business world. Whenever possible, set your sights on areas that
your competitors have neglected or ignored.

7. Just Start

If you have an idea for a business, truly believe it will succeed, and are willing to push telling you this
business idea is a winner, take action now. The "perfect" time for a business launch will never present itself.
More often than not, waiting just gives would-be competitors the opportunity to beat you to the punch. None
of the entrepreneurs we interviewed waited for a sign from heaven or until a long-forgotten aunt died and left
them $300,000 in seed money. Many faced tremendous financial hurdles. Nonetheless, they saw a market
opportunity and grabbed it.

8. Save Your Bucks and Get Noticed Without Expensive Advertising

If your start-up business is on a tight budget, there are plenty of ways to get customers' attention without
spending money on advertising. Get your creative juices percolating and try something different. And when
an opportunity arises to expose your brand to the masses, don't think twice -- jump right in. Use your own
creativity to make your company stand out a crowd.

9. Exploit Your Competitor's Weakness and Make It Your Strength

The sharpest entrepreneurs have a knack for viewing the world from the perspective of their customers. That
quality can help identify your competitors' vulnerabilities and shortcomings. If your number one competitor
has a reputation for slow deliveries, for example, make certain your deliveries arrive in less time. Engage
and listen to customers to identify such weaknesses.
 5

10. Never Stop Reinventing Your Company

You know the old adage "If it ain't broke, don't fix it"? The problem with that piece of advice is that it invites
complacency -- and complacency in business is like a slow leak in a tire. You may not notice the damage it's
causing until the thing is completely flat and you can't move forward. Top-performing entrepreneurs aren't
afraid to take chances and keep expanding their product line. They're not afraid to give their business a major
overhaul now and then to keep pace with changes in the marketplace. And sometimes a complete face-lift is
in order.
 6

THEORIES AND STRATEGIES BY JOSEPH SCHUMPETER AND MC

CLELLAND

Joseph Schumpeter view on Entrepreneurship

Joseph Schumpeter has done some pioneering work on Entrepreneurship. According to him
Entrepreneurship is a creative activity of doing things that are generally not done in the ordinary course of
business. An entrepreneur is the one who innovates. Innovation may occur as:-

• Introduction of a new product or new quality of an existing product.

• Introduction of new method of production that is not yet tested.

• The conquest of a new source of supply of raw materials or manufactured goods.

• Opening of a new market where it has not entered previously.

• Creating a monopoly position or breaking up of a monopoly position.

Schumpeter makes a distinction between an innovator and an inventor. An inventor is the one who discovers
new methods, new techniques, new materials etc. on the other hand an innovator is the one who utilizes or
applies inventions and discovers in order to make new combinations and thus manufactures new and better
goods which brings him satisfaction as well as profit.

• An inventor produces ideas whereas an innovator implements them.

• An inventor is more concerned with his technical work of invention whereas an innovator converts the
technical work into economic performance.

An innovator is more than an inventor as he does not only originate as an inventor does but goes further in
exploiting the invention commercially. Every social organization has its own way of carrying out innovation.
In a developing country like India, the Green Revolution brought in by the Government is an innovation.
According to Schumpeter, Entrepreneur is a change agent and he therefore stressed the role of
Entrepreneurial function in the economic development. He represents the most vigorous type of
entrepreneur.
 7

Schumpeter’s theory is more relevant to developing countries and emphasises more on the innovation
function. It completely ignores the organizing and risk taking aspects. Schumpeter has not explained as to
why some countries are endowed with entrepreneurial talents. He has only pointed out that an individual is
an entrepreneur only when he actually carries out new innovative combination.

Mc Clelland’s views on Entrepreneurship

MC Clelland identified two characteristics of entrepreneurship:-

• Doing things in a new and better way

• Decision making under uncertainty

He stressed the need for achievement as the most directly relevant factor for explaining economic behavior.
This motive is defined as the tendency to strive for success in situations involving an evaluation of one’s
own performance in relation to some standard to excellence. Those people who have high need for
achievement are more likely to succeed as entrepreneurs.

By assumption the achievement motive is a relatively stable characteristic of an individual. Such individuals
believe that they can control their own lives and not believe in luck. They are willing to take the calculated
risks and have a high tolerance for making decisions with incomplete information. They struggle to achieve
more and more.
 8

ENTREPRENEURIAL STRATEGIES BY PETER DRUCKER

Peter Drucker presents four different entrepreneurial strategies. He starts pointing out that entrepreneurial
strategies are as important for any business as entrepreneurial management is.

.The author proposes four specific entrepreneurial strategies:

1. "Being fustiest with the mostest"

2. "Hitting them where they ain't"

3. Finding and occupying a specialized "ecological niche"

4. Changing the economic characteristics of a product, a market or an industry

The way Drucker calls these four strategies is evidently very metaphorical, almost a bit poetical, and it
already gives an implicit, summed up explanation what these strategies are about.

We will now have a closer look at each of the four strategies.

1. Being Fustest with the Mostest

As the naming suggests, this strategy is mainly defined by trying to become the unchallenged

leader in an economic field. Drucker observes that this is sometimes seen as the only entrepreneurial strategy,
and he states that this view is false. Indeed, he sees it not even as the dominant entrepreneurial

strategy. He considers this strategy to carry the biggest risks and demanding massive resources, even though
it is highly rewarding when successful.

Drucker points out that "Being Fustest with the Mostest" must aim at creating something truly new,
something truly different. But if one has established such a new product in the market, the strategy is far from
being over. Drucker explains that the real effort behind this idea is just starting to begin.

The entrepreneur now has to make sure he stays the unchallenged leader in this economic field. This requires
that he has to make his product or his process obsolete before a competitor can do it. Work on the successor
of the successful product has to start immediately, which means that the research budget must be higher after
the original innovation has been established than before.

Furthermore, the entrepreneur who has attained leadership has to be the one who systematically cuts the price
of his own product or process. Otherwise, he may provide the possibility for competitors to follow up with
imitated products, who could benefit from high prices.

Drucker ends by concluding that "Being Fustest with the Mostest" is much too risky and much too difficult to
be used for anything than major innovations, even though it is highly rewarding when successful.
 9

2. Creative Imitation / "Hit them where they ain't"

This strategy is somehow a consequence of the risks the "Being Fustest with the Mostest" strategy we've just
considered carries. In essential, it means that one does not innovate a new product from scratch, but instead
trying to exploit the potential opportunities of an innovation someone else has made, but was not able to
profit from it so far. Being successful in "Creative Imitation" means that one understands better what the
innovation represents than the people who actually made it.

This strategy aims at market leadership, too, but it is much less risky than the first strategy. If the new
product is already known, it is much easier to find out what customers buy and how to fit their specific needs.

The main risk with this strategy - besides misreading the trend in the market - is to offer too many products
for too specific needs, resulting in a hard to manage, segmented market.

This strategy requires that the true, origin innovator of a new product fails at placing his product successfully
at the market, tailored to customers' specific needs. But economic practice shows that this is often the case, so
the strategy of "Creative Imitation" is a promising one.

3. Finding and occupying a specialized "ecological niche"

In contrast to the strategies presented earlier, this one does not aim so much at leadership or dominance of a
market, but rather at control. It tries to obtain a practical monopoly in a small area. Companies referring to
this strategy will therefore remain relatively small and unknown to a broader public. The main idea behind
this strategy is to offer a product that is essential, but nevertheless offers no incentive for others to compete.

There are three possible ways of applying this strategy:

The Toll-Gate Strategy: This means an entrepreneur tries to find a product that is essential to some bigger,
complex process, but does not represent a big part of the whole thing. The market for this product must be so
small that whoever enters it first pre-empts it. Such toll-gate positions are not easily to find. Furthermore,
there is almost no chance for a company to grow or increase its business.

The Specialty Skill Strategy: Somehow similar to the first strategy, one would aim at occupying a certain
field of the market, but not so much because it is too small for more than one enterprise, but because it
requires very specialized, very unique knowledge no others are likely to have or to achieve.

This means, a business occupying a specialty skills niche must constantly work on improving its own skill,
making sure no runners-up will enter the stage. Another problem might result from the fact that the occupant
of a specialty skills niche is dependent on somebody else bringing his product to the market, as this product
is only a component of some bigger product. Another danger is that the specialty skill ceases being special
and becoming universal knowledge.

The Specialty Market Strategy: This strategy is very similar to the previous one. The difference is that it is
not built around a product or service, but a specialzed knowledge of a market. The entrepreneur thus tries to
 10

place a more or less common product on a very special market, meeting specific customers' needs that are not
as common as the product itself might be in the overall market.

This strategy has the same limitations as the specialty skills strategy. The greatest threat is its success,
because when the market one occupies becomes a mass market, it is – however complex and difficult to
understand it might be - not special any longer.

4. Changing the economic characteristics of a product

The former strategies always aimed in some way at introducing an innovation to the market.

This last big strategy simply takes an old, well known product and tries to position it on the market as
something different and knew, when there is actually no physical change to the product. There are several
ways of applying this strategy; each of them tries to create new customers for an existing product. By the
way, creating customers is the core concern of any business.

Creating Customer Utility: The main element of this strategy is some additional service that is offered with
the product should meet specific customers' needs.

Pricing: This strategy tries to price different components of a product in a way that is accepted by customers.
It is not so much about cutting the overall price of a product, but about thinking how the price should be
divided among its components. Thus, the price of a component needn't always resemble the actual
manufacturing or other costs associated with it, but the value it presents to the customer.

The Customer's Reality: This strategy focuses on selling a product in a way it fits into the customer's world,
and not in a way that resembles the manufacturer's point of view. This might concern pricing (as mentioned
above), but sometimes it might just be enough to think of services or product packages appealing to potential
customers.

Delivering Value to the Customer: According to this strategy one should focus on what delivers value to the
customer and not to the manufacturer
 11

EXAMPLES

A growing number of economic experts now believe that clusters provide a unique way for small rural
factories to compete effectively in the global economy. If true, then rural developers might consider
abandoning the traditional strategy of trying to land one big fish, and instead assemble a cluster of small but
similar firms that can form synergies.
Examples:

1. RECYCLING CAPITAL

When the out-of-state owners of the Richwood Sawmill decided to sell off their holdings, as part of a
corporate restructuring program, they could not find a buyer and simply shut down the mill. Bill and
Glasscock had been working at that mill and as long-time employees; they realized that they had the
necessary experience and loyal workforce to make the mill thrive. What they lacked was the capital to make
it happen. Working with the existing Corp., they were able to raise sufficient capital to purchase the mill. But
in order to close the deal, they needed to find a source of working capital for the day-to-day operations of
their new business. So the Natural Capital Investment Fund provided a solution to the Glasscock’s financial
dilemma and offered $50,000 in subordinated debt for permanent working capital, thus allowing them to
purchase logs and cover miscellaneous start-up costs. The group also raised grant funds to hire a financial
management specialist to assist the company in developing an internal accounting system. Thus the help
from the National Capital Investment Fund went beyond merely putting up capital as it helped in thorough
research planning. This helped them in achieving progress and with more increase in production.

2. PROFITABLE NICHE MARKETS

Bill Davidson, a Rogersville, Tennessee, farmer after careful business and agricultural planning, raises cattle
and grows fruits and vegetables and to make salsa, chow-chow, jellies and popular vegetable soup starters
that are sold in the Davidson Country Store, a retail outlet that was revitalized with some of its value added
products which though may not save agriculture but can be profitable niche market.

Thus he took a risk but was awarded an Honorable Mention in a national sustainable agriculture contest for
his best practice farming methods and community service.

3. GROWING DAILEY’S TREASURES

 12

Jenny Dailey offered samples of her venison jerky at a convenience store where she worked in Reedsville,
Ohio, and after receiving enthusiastic reviews from the customers who tasted the jerky, she decided to look
into the possibility of producing the jerky commercially. And just three years later, Dailey’s Treasures
produces four marinades and two varieties of jerky. She found out about the Appalachian Center for
Economic Networks, which offers a commercial kitchen as well as training in marketing, product
development and design, and advice on how to deal with retailers. By providing her access to a bottling line
and an industrial oven, the ACE networks commercial kitchen allows her to accomplish in two hours what
previously took two weeks at home.

“Everything about the business, ACE networks has helped.” Seed money encouragement came from a
“Trickle UP” grant facilitated by ACE net. Jenny Dailey’s needs also pushed ACE net to acquire its Ohio
Department of Agriculture meat license this fall so that Dailey and other meat producers could fully utilize
ACE net’s commercial kitchen. Dailey is part of a regional brand called Food We Love that has helped her
products gain entry into 28 stores throughout southern Ohio. So Dailey’s road to success also had many
hurdles. Thus Despite the hurdles and uncertainties that burden many small entrepreneurs, Dailey is moving
ahead happily and hopes to make a profit in future.

4. NETWORKS ADD VALUE

Jeff Sties is an architect; Jennifer and Bob Wagner have a small farm that includes 10 acres, Charlie Lawson
runs Clinch Valley Millworks, a custom cabinet and millwork shop and Charles Fugate bought a portable
mill for personal use but found he had a lot of down time due to bad weather, wet ground and the time it
took to move the mill from place to place.
In 2001, a value-added, ecologically sustainable wood products industry began to emerge in Appalachian
Virginia, linking the Wagners, Fugate, Lawson and Sties in a dynamic wood manufacturing network. With
Appalachian Sustainable Development (ASD) acting first as a catalyst for the project, and then as manager,
the Sustainable Woods initiative began.
Under ASD’s management, Wagner’s woodlands were harvested by a local logger following rigorous,
restorative forestry practices. When the logs arrived at ASD’s Sustainable Woods Processing Center, they
were sawn into boards by Fugate, whose sawmill is now in an enclosed and ventilated shed constructed by
ASD. Once sawn, the boards are dried in ASD’s solar & wood waste kiln and then milled. The dried boards
are milled into flooring, wainscoting, trim and other products at Lawson’s shop. The Sustainable Woods
 13

products are sold and delivered to both residential and commercial builders, spurred on by retailers,
contractors and architects like Jeff Sties. Thus the synergies of this network benefited multiple entrepreneurs.

5. REGIONAL CATALYST OPENS MARKETS

In 2000, the Center for Economic Options (CEO), was providing on-going technical assistance to 20 micro-
entrepreneurs to participate in a major State Chamber of Commerce-sponsored business export which
included purchasing booth space and designing a Micro business Pavilion for clients but at d end moment
was cancelled which disappointed many businessmen.
So CEO came up with an innovative solution to open its own retail space for artisans and small scale
manufacturers.
“Sell Local” was a great call for the customers and CEO launched a public awareness campaign that drew
attention to the need to support local markets for local products. CEO has since become a champion for
policy changes that an entrepreneur working alone would be unlikely to tackle. With its combination of
technical assistance skills, strategic communications capacity, statewide networks, and a focused access to
the Charleston market, CEO is a perfect example of how a regional catalyst can help to build regional
entrepreneurship.
Thus CEO is able to partner with opportunity-seeking entrepreneurs as well as with a broad spectrum of
public and private organizations to enhance the performance of West Virginia entrepreneurs and identify
specific policy issues to move their enterprises to a state-wide and regional scale.

6. POWER OF A MAYOR’S NETWORK

Sewer and water infrastructure is one of the least glamorous issues in rural communities but one of the most
critical to economic and entrepreneurial development. Mayors’ Partnership for Progress (MPP), serves as a
powerful learning network for local officials as well as a way to work together to identify regional and local
policy issues that impact their communities. So the mayors are also working on developing a buying group
for supplies and equipment and organizing a consortium to purchase health care benefits for the partnership
counties. Thus the Mayor’s Partnership for Progress serves as powerful learning network for local officials
as well as a way to work together to identify regional and local policy issues that impact their communities.

Bibliography
 14

Websites

• www.bussinessknowhow.com

• www.GruberHuskic.com