Entrepreneurial Opportunity Recognition Process

Education

Prior knowledge of market & Consumer Problems

Entrepreneurial Alertness
OUTCOME Successful Opportunity Recognition

Experience

Personal Experience

Work Experience

Networks

Successful Opportunity Recognition

Feasibility Analysis Study

Product Planning & Development

Generate your idea

Product Innovation Process Innovation Innovation Life Cycle Detailed Discussion

+ v e

Net Cash flow

A B

C
D E F G E F G

_ v e

C1 Concept Stage C2 Procurement Stage C3 Pilot Product/ Service development Stage C4 Test Marketing Stage C5 Production Stage C6 Introduction to Market Stage

A : Opportunity Occurs B : Idea Generation C : Commencement of Project D : First group of customers is satisfied E : Huge Publicity F : Entry of Competitors G : Break Even Point H : Market Leader I : Starting of Maturity J : Retrenchment or Reviving
7

Role of Business Incubator

1. What is Business Incubator? 2. Why we need them?

Role of Business Incubator

1. What is Business Incubator? 2. Why we need them?

Just born Baby Entrepreneur

Incubator Business Incubator

Incubator

Incubatee

10

Objectives of these Incubators Nature of these Incubators

Developing Profitable Enterprises.

Create Jobs
Raise the awareness of Potential Entrepreneurs. Create ecosystem conducive for entrepreneurship. Success measures number of companies incubated and their being successful.

NGO Government financed Private Self financed

11

ICT (Information and Communication Technology) services Office space Shared workshops Financial management/accounting services Linkages to financiers, Loan and Loan guarantee Incubation and Business Development: Business information Business management and development advisory services Incubation program for non-resident clients (virtual incubation) Incubation program for resident clients Mentoring/coaching and mentoring Pre-incubation services International Business Services: Help entering particular markets Networks and Synergy: Networking events Referrals to business professionals Technology Transfer: Help with commercializing technology Help with intellectual property/patent advice Other: Facilities also includes shared resources. Strong support for access to business network, Angel/ VC/ Loan funding.

12

Some Business Incubators in India

Name Society for Innovation and Entrepreneurship (SINE) Technology Business Incubator (TBI)

Place IIT Bombay

Web site www.sineiitb.org

IIT Delhi

www.fitt-iitd.org

Rural Technology and Business Incubator (RTBI)

Science and Technology Entrepreneurship Park (STEP) IndiaCo Centre (for profit) JSSATE Noida Pune www.jssstepnoida.org

www.indiaco.com

13

CFC (Common facility Centre) GOI- --- Sfurti Scheme --- To Develop Cluster Through NIESBUD, Noida NIMSME, Hydrabad IIE, Guwahati EDI, Ahemdabad Various NGOs Example Firozabad Bangles Muradabad Brass Pilakhwa Textile Meerut Sport goods Saharanpur Wooden Khurja Ceramic Agra Petha Chamoli Bee Keeping

14

Case Study and Discussion

15

Feasibility Analysis Business Plan Feasibility of your business plan

16

 Idea Generation Feasibility Study

Business Plan

Final Project Report

17

What is a Feasibility Study? A feasibility study is an analysis of the viability of an IDEA through a disciplined and documented process of thinking through the idea from its logical beginning to its logical end. A feasibility study provides an INVESTIGATING function that helps answer Should we proceed with the proposed project idea? Is it a viable business venture? A feasibility study should be conducted to determine the viability of an idea BEFORE proceeding with the development of a business.

18

What is a Business Plan? A Business Plan summarizes the PLAN OF ACTION after a course of action has been determined through the Feasibility Study A Business Plan provides a Planning function A Business Plan outlines the actions needed to take the proposal from idea to reality A Business Plan tells How your business will be created and Why it will be successful?

A Business Plan provides a road map for strategic planning

19

Why do a Feasibility Study? Provide a thorough examination of all issues and assessment of probability of business success Give focus to the project and outline alternatives Narrow business alternatives Surface new opportunities through the investigative process Identify reasons NOT to proceed Enhance the probability of success by addressing and mitigating factors early on that affect the project Provide quality information for decision making Help to increase investment in the company Provide documentation that the business venture was thoroughly investigated Help in securing funding from lending institutions and other monetary sources could

20

Why to make a Business Plan?

Put the Pieces TogetherDo the pieces fit together in a logical manner? Create a Blueprint for Action Focus Founders and/or Management Team Obtain Financing Attract Equity Investment Attract Key Managers and Employees Obtain Contracts

Create Joint Ventures, Mergers, Acquisitions

21

What is included in a Feasibility Study Report? A feasibility study report should be completed in all respective manners, containing detailed analysis of all best possible factors on date. Operational Feasibility Will it work? how? Technical Feasibility Can it be built? how? Marketing Feasibility Can we market the product? how? Economic Feasibility Will it make economic sense if it works and is built? how? Will it generate profits? how? Financial Feasibility How to arrange required fund?

22

What is included in a Business Plan?

A Business Plan should be brief, concise & straight to the point. Main Requirements May Include Industry Description Market Size Customer Base Competitive Advantage Business Location Three years of Financial Projections Monthly Tracking of First Year Financials Management Experience and Profile Personal Statement of Affairs Other Sources of Cash, if any

23

Feasibility Study Vs. Business Plan Feasibility study (after idea generation) answers the bottom line question Is this venture going to make money?

Feasibility study outlines and analyzes several alternatives or methods of achieving business success.
Feasibility study is conducted before a business plan.

Business plan is prepared only after the venture has been deemed to be feasible.
Business plan deals with only one alternative or scenario that is determined to be the best alternative. Business plan considers the management sidegoals and objectives of the planned business venture.

24

25

Technical Feasibility Crucial technical specifications Design Durability Reliability and standardization Engineering requirements Machines Tools Instruments

Product safety
Product development Blueprints Models

Work flow
Product testing Lab testing Field testing

Plant location Desirable characteristics of plant site (proximity to suppliers, customers), environmental regulations
26

Marketing Feasibility Market potential Identification of potential customers and their dominant characteristics (e.g., age, income level, buying habits) Potential market share (as affected by competitive situation) Potential sales volume Sales price projections

Market testing Selection of test Actual market test Analysis of market

Marketing planning issues Preferred channels of distribution, impact of promotional efforts, required distribution points (warehouses), packaging considerations, price differentiation

27

Financial Feasibility

Required financial resources

Fixed assets Current assets Necessary working capital Available financial resources Required borrowing Potential sources for funds Costs of borrowing Repayment conditions Operation cost analysis Fixed costs Variable costs Projected profitability

28

Operational Feasibility Required skill levels and other personal characteristics of potential employees Managerial requirements Determination of individual responsibilities Determination of required organizational relationships Potential organizational development Competitive analysis

29

Summary of feasibility study Questions to be answered after study

30

Summary of Feasibility Study Basic Feasibility of the Venture

1. Can the product or service work? 2. Is it legal?

Competitive Advantages of the Venture 1. What specific competitive advantages will the product or service offer? 2. What are the competitive advantages of the companies already in business? 3. How are the competitors likely to respond? 4. How will the initial competitive advantage be maintained? Buyer Decisions in the Venture 1. Who are the customers likely to be? 2. How much will each customer buy, and how many customers are there? 3. Where are these customers located, and how will they be serviced?

31

Summary of Feasibility Study (Contd.) Marketing of the Goods and Services

1. How much will be spent on advertising and selling? 2. What share of market will the company capture? By when? 3. Who will perform the selling functions? 4. How will prices be set? How will they compare with the competitions prices? 5. How important is location, and how will it be determined? 6. What distribution channels will be usedwholesale, retail, agents, direct mail? 7. What are the sales targets? By when should they be met? 8. Can any orders be obtained before starting the business? How many? For what amount? total

32

Summary of Feasibility Study (Contd.) Production of the Goods and Services

1. Will the company make or buy what it sells? Or will it use a combination of these two strategies? 2. Are sources of supplies available at reasonable prices? 3. How long will delivery take? 4. Have adequate lease arrangements for premises been made? 5. Will the needed equipment be available on time? 6. Do any special problems with plant setup, clearances, or insurance exist?
How will they be resolved? 7. How will quality be controlled? 8. How will returns and servicing be handled? 9. How will pilferage, waste, spoilage, and scrap be controlled?

33

Summary of Feasibility Study (Contd.) Staffing Decisions in the Venture 1. How will competence in each area of the business be ensured? 2. Who will have to be hired? By when? How will they be found and recruited? 3. Will a banker, lawyer, accountant, or other advisers be needed? 4. How will replacements be obtained if key people leave? 5. Will special benefit plans have to be arranged?

Control of the Venture

1. What records will be needed? When? 2. Will any special controls be required? What are they? Who will be responsible for them?

34

Financing the Venture 1. How much will be needed for development of the product or service? 2. How much will be needed for setting up operations? 3. How much will be needed for working capital? 4. Where will the money come from? What if more is needed? 5. Which assumptions in the financial forecasts are most uncertain?

6. What will be the return on equity, or sales, and how does it compare with the rest of the industry?
7. When and how will investors get their money back? 8. What will be needed from the bank, and what is the banks response?

35

Data Sources for a Feasibility Assessment

Data required for a feasibility study can come from primary or secondary sources,

Primary data can include formal interviews and surveys. Collection of primary data can be expensive and time consuming,
Secondary data can include industry and trade publications, statistics of industry associations, and government agency reports

36

Feasibility Study

Business Plan

Starting the Venture

Success

Failure

good

Quality work of feasibility study and business plan

bad

37

success

good
Quality work of feasibility study and business plan

poor

38

Feasibility of your business plan

39

Legal Issues for a Entrepreneur

40

Intellectual property rights

Patents , Trademark, Copy rights, Trade secrets.

41

Lawyer
For legal advice. Check legal expertise for new venture. Fee to be paid.( one time or retainer ship) Option to be an employee

42

Patents
Utility patents. Design patents. Plants patents. International patents. Documentations. (Application, description, claims etc)

43

Licensing.
An arrangement between 2 parties where-in one party has proprietary & the other over information , process, technology rights. Product safety & liability. Insurance. Contracts (conditions)

44

Patent documentation.

45

Legal Environment & Entrepreneurship

Entrepreneurs are not supposed to be lawyers or have legal expertise but be sufficiently knowledgeable about legal concepts that impact businesses Review laws that relate to
Inception of the venture Growth & continuity of the venture

46

Legal Environment & Entrepreneurship

Patents
Processes, machines, plants, products, plants, chemical compounds, &
improvements in already existing items

Protection for 14 years Temporary monopoly to encourage creation of new ideas Can sell, license etc.

Copyright
Protection of literary & artistic productions (60 years, proposed for 70 years, might have already been done)

Books, periodicals, dramas, music, art, motion pictures, lectures, sound recording , computer programs

47

Legal Environment & Entrepreneurship

Trademarks
A distinctive name, mark, symbol, motto identified with a companys product (s)

48

Entrepreneurial Organizations & Legal Forms

Three primary legal forms
Sole Proprietorship Partnership Corporation (Pvt Ltd, Public Ltd)

49

Entrepreneurial Organizations & Legal Forms

Sole Proprietorships Advantages ???

50

Entrepreneurial Organizations & Legal Forms

Sole Proprietorships Advantages
Ease of formation Sole Ownership of profits Decision making & control Flexibility Relative Freedom from Govt. control Freedom from Corporate business taxes (taxed as individual tax payers)

51

Entrepreneurial Organizations & Legal Forms

Sole Proprietorships Disadvantages???

52

Entrepreneurial Organizations & Legal Forms

Sole Proprietorships Disadvantages
Unlimited Liability including personal assets Lack of continuity Less Available capital Obtaining long term debt relatively difficult Relatively limited viewpoint & experience

53

Entrepreneurial Organizations & Legal Forms

Partnerships Articles of partnership are usually executed and contain Name, purpose, Duration of agreement Character of partners (general or limited, active or silent) Contributions of partner Division of profits and losses Draws or salaries Death of a partner clauses Release of debts Business expenses handling Arbitration Etc.

54

Entrepreneurial Organizations & Legal Forms

Partnerships Advantages ???

55

Entrepreneurial Organizations & Legal Forms

Partnerships Advantages
Ease of Formation Direct Rewards Growth & Performance facilitated (more capital & skills) Flexibility Relative freedom from Governmental control

56

Entrepreneurial Organizations & Legal Forms

Partnerships Disadvantages??

57

Entrepreneurial Organizations & Legal Forms

Partnerships Disadvantages
Unlimited liability at least of one partner Lack of continuity Relative difficulty in getting large sums of capital Bound by the acts of just one partner (general, can sign any contracts and
obligations)

58

Entrepreneurial Organizations & Legal Forms

Partnership Success
Partnership Attributes
Commitment Coordination Trust & Interdependence

Communication Behavior
Quality Information Sharing & Participation

Conflict Resolution Techniques

Persuasion & Smoothing Arbitration & Joint Problem solving

59

Entrepreneurial Organizations & Legal Forms

Corporations A separate legal entity apart from the individuals who own it Advantages ????

60

Entrepreneurial Organizations & Legal Forms

Advantages
Limited Liability Easy Transfer of ownership Unlimited life Relative ease of securing capital Increased ability & Expertise

61

Entrepreneurial Organizations & Legal Forms

Corporations Disadvantages ???

62

Entrepreneurial Organizations & Legal Forms

Corporations Disadvantages
Activity Restrictions (Limited by Charter) Lack of participation for minority stockholders Regulation Organizing expenses Double taxation (on corporate profits as well as individual income)

63

Entrepreneurial Organizations & Legal Forms

Franchising (Franchisee & Franchisor, being shared for its uniqueness,
will be one of the earlier discussed forms)

Advantages
Training & Guidance Brand Name Appeal Proven Track Record Financial Assistance

64

Entrepreneurial Organizations & Legal Forms

Franchising Disadvantages
Franchisee Fees Control exercised by the franchisor Unfulfilled promises by some franchisors

65

Legal Environment & Entrepreneurship

Entrepreneurs are not supposed to be lawyers or have legal expertise but be sufficiently knowledgeable about legal concepts that impact businesses Review laws that relate to
Inception of the venture Growth & continuity of the venture

66

Legal Environment & Entrepreneurship

Patents
Processes, machines, plants, products, plants, chemical compounds, &
improvements in already existing items

Protection for 14 years Temporary monopoly to encourage creation of new ideas Can sell, license etc.

Copyright
Protection of literary & artistic productions (60 years, proposed for 70 years, might have already been done)

Books, periodicals, dramas, music, art, motion pictures, lectures, sound recording , computer programs
HANDOUT: Post Internet Copyright protection

67

Legal Environment & Entrepreneurship

Trademarks
A distinctive name, mark, symbol, motto identified with a companys product (s) HANDOUT:

68

Entrepreneurial Organizations & Legal Forms

Franchising Disadvantages
Franchisee Fees Control exercised by the franchisor Unfulfilled promises by some franchisors

Case 12.2

69

Entrepreneurial
Marketing Research

70

Entrepreneurial - Marketing Research

Marketing Research questions that you need answers for
Market
Do you know about the buying habits of your target market Do you know about the repeat purchase behavior Can you plot your sales month by month

Product
Have you tested the market acceptability of your offering Have you tested the price elasticity of your offering

Advertising
Is your advertising reaching the right target Is it more effective in comparison to your competitors
71

Entrepreneurial - Marketing Research

Inhibitors to marketing research
Cost Complexity Irrelevancy (in the mind of entrepreneur)

72

Entrepreneurial - Marketing Research

3 Marketing philosophies of entrepreneurs
Production driven Sales driven Consumer driven

Depends on
Competitive pressure Entrepreneurs background Short term focus
73

Entrepreneurial -Marketing Research

Entrepreneurs need to know distinctly their offering type
Convenience Goods
Staple goods (food etc.) & Impulse goods

Shopping goods (spend time on comparing prices & specs) Specialty Goods (customers make a special effort to find & purchase) Unsought Goods (encyclopedias etc.) New Products

74

Entrepreneurial Marketing Research

Marketing Stages for Growing Ventures
Entrepreneurial Marketing Opportunistic Marketing Responsive marketing Diversified marketing

75