Download - Module 1- Foundations of Entrepreneurship
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EntrepreneurshipMysore University
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Nature of Entrepreneurship
Social & Cultural Factors affecting Entrepreneurship
Institutional support for Promoting Entrepreneurship
Universities, colleges, CSIR Labs
Case Study - Incubation
Module Contents
Module 1 Foundations of Entrepreneurship
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Entrepreneur
A person who perceives a need and bringstogether the manpower, material and capitalrequired to meet that need.
An individual or team that identifies theopportunity, gathers the necessary resources,creates a performing organization and isresponsible for the performance of theorganization
Introduction to Entrepreneurship
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Economics-
One who brings resources, labour, material and other assets in
such a way that the end result generates incremental value Introduces changes, innovations and a new order
Psychology
A person driven by certain forces the need for achievement,need to experiment, accomplish and the need to escape authority
Management
Creates wealth for others, finds a better way to utilize resources,reduce waste and creates jobs
More on Entrepreneur
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Entrepreneurs have certain common characteristics ortraits
Personal resourcefulness
Need for achievement Opportunity seeking
Innovativeness
Risk taking
When these elements converge at high intensities, in nonrestrictive environments, it is likely to give rise to anenterprise
So whats common?
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Entrepreneurship The process of creating value by bringing together a unique package of
resources to exploit an opportunity
The process of creating something new with value by devoting the
necessary time and effort, assuming the accompanying financial,psychic and social risks and uncertainties; and receiving the resultingrewards of monetary and personal satisfaction
Entrepreneurship involves Creation process
Devotion of time and effort by entrepreneurs and team Rewards for the entrepreneur are independence, personal satisfaction,
monetary reward
Assuming risks and uncertainties
Entrepreneurship
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Opportunity based Entrepreneurship
Entrepreneur perceives a business opportunity andexplores it sufficiently well to make it a profitableventure
Necessity based Entrepreneurship Entrepreneur chooses to run an own venture due to
economic compulsions, ancestral compulsions etc
Types of Entrepreneurship
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An Intrapreneur is a person who takes risk and initiative and createssomething new within an existing organizational framework
Driven by the needs of achievement and personal satisfaction, like an entrepreneur
But opt to operate within an organizational structure, on account of loyalty to the
parent organization or any other reason
Advantage of Intrapreneurship
Existing resources People, Technology, Systems, Markets, can be made use of toexplore the new opportunity
Challenges for Intrapreneurship Hierarchy
Rewards may be inadequate
Freedom to innovate also needs Bandwidth for independent decision making,which may be less in existing system
Module 1 Foundations of Entrepreneurship
Intrapreneur
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The Entrepreneur is essentially a Visualizer & an
Actualizer. He can Visualize something, and
when he visualizes it he sees exactly how to
make it happen.
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Module 1 Foundations of Entrepreneurship
Behavioural Traits of Entrepreneurs
Individual traits affect the behaviour and actions of entrepreneurs, that in turn
affect business outcomes
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Entrepreneurial Decision making can be characterised by the abilityto rapidly act, sense and mobilise, even under uncertain conditions.Some specific mental characteristics : Entrepreneurs perform Effectuation Cognitive Adaptability
Learn from failure
Cognitive Adaptability: Ability to generate multiple decision making frameworks based on
understanding the changes in the environment around them. Are theydynamic, flexible and self regulating?
To find out how cognitive adaptable an individual is, Prof Mike Hayniehas developed a survey by asking questions on the following - Comprehension Tasks Connection Tasks Strategic tasks Reflection tasks
Module 1 Foundations of Entrepreneurship
Entrepreneurial Mindset HowEntrepreneurs think
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Refers to the Rules of Thumb that entrepreneurs useto base their decisions.
The unrecognised and unarticulated policies that lie at the
back of their minds and guides their actions
Module 1 Foundations of Entrepreneurship
Entrepreneurial Heuristics
Successful Entrprnr Unsuccessful Entprnr
Accept a project if it enjoysteam consensus & is viable
Accept a project will enjoythe support of externalagencies
Minimize borrowed funds Borrow as much funds aspossible
Test the market beforeventuring out
Produce & Sell
Learn the ropes and
familiarize with technology
Manage technology
through paid workers
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Actively search for ideas from a wide range of sources
Choose partners for their ideological congruence &
complementary skills
Minimise initial investments
Module 1 Foundations of Entrepreneurship
Examples of common Heuristics(Rules of Thumb)
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Legitimacy of Entrepreneurship or Social Status for Entrepreneurs
Degree of Approval or disapproval in the society for entrepreneurship. Also called Cultural Themesand Sanctions
May require a shift or reorientation of traditional values to support entrepreneurship
Social Mobility
Ease of Geographical movement and social movement for the entrepreneur
How rigid the social hierarchies are. Need for openness in the system Need for flexibility in role relations
Mobility channels Movement of young and educated workforce reduces entrepreneurial behaviour
Marginality
Social marginality has been found to promote entrepreneurship
Individuals/groups in the perimeter of the social system or between two social systems
Religious/ Cultural/ Ethnic/Migrant groups
Reasons Positive attitude towards entrepreneurship & high Degree of group solidarity Cohesion
Security
Entrepreneurship is likely to emerge under medium turbulence or moderate secur
Insecurity does not hinder entrepreneurship, but different kinds of insecurity results in different kind ofentrepreneurship
Module 1 Foundations of Entrepreneurship
Socio-Cultural Determinants
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ENTREPRENEURS BACKGROUND & CHARACTERISTICS
Family Environment In most cases, people follow the footstep of father, or close relatives Traditional Entrepreneurial families
Education Education has no correlation with entrepreneurial spirit, if there is, it seems to be inverse.
Entrepreneurs need the Will to Succeed more than any thing else. Indian challenges - Problems of licence, quota, inspector raj, preferrence for a govt job trend slowly changing.
Age Normal to start as early as probably 10 Others after their retirement. Harland David Sanders, better known as Colonel started his famous Kentucky Fried Chicken
business quite late in his varied career.
Commonly, in the age group of 25 35 and women in the age group of 3045 Physical Attributes
Have absolutely no correlation with entrepreneurial spirit.
Marital Status No direct correlation but going by the age group, most entrepreneurs are married.
Module 1 Foundations of Entrepreneurship
Socio-Cultural Determinants
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Working History Entrepreneurs quite often have some working experience as a salaried employee in the
field of their venture helps to learn a little about business before putting the money in Sindhi community
Family Contacts
Family contacts in business world reduce the risks and help the entrepreneur
Professional Contacts Professional contacts again help. Industry contacts Alumni networks
Personal values Value hardwork, Result oriented, Self driven
Lifestyle Most entrepreneurs are fond of good things in life but are willing to wait till they strike
rich. In the interim they are willing to rough it out.
Module 1 Foundations of Entrepreneurship
Socio-Cultural Determinants
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McClellands Theory of Need Achievement Personality characteristics indicating high need achievement
Can be developed through intensive training programmes
Withdrawal of Status Respect Proposed by Hagen
Refers to loss of status by a group. Example, Japan
Developed sooner than any non western society. Samuraigroups.
Any of the four behaviours Retreatist, Ritualist, Reformist,Innovator
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Psychological Factors
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Phases of Entrepreneurship Process
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Phases of Entrepreneurship Process
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Based on type of Business Trading Entrepreneur
Retailer, Wholesaler or Middlemen
Manufacturing Entrepreneur Agricultural Entrepreneur
Based on Use of Technology Technical Entrepreneur
Non Technical Entrepreneur
Based on Ownership
Private Entrepreneur
State Entrepreneur
Joint Entrepreneur
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Types of Entrepreneurs
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Based on the Size of the Enterprise Small Scale Total Investment in P&M < 1Cr
Medium Scale - Total Inv in P&M between 1Cr and 5 Cr
Large Scale - Total Inv in P&M greater than 5 Cr
Based on Classification by Clarence DanhofClassifies based on economic success and enthusiasm
Innovating Entrepreneurs
Imitative Entrepreneurs
Fabian Entrepreneurs Great Caution and Skepticism Drone Entrepreneurs Refusal to adopt opportunities to make
changes in production even at the cost of reduced returns relative toother competitors
Module 1 Foundations of Entrepreneurship
Types of Entrepreneurs Contd.
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Other behavioural classifications
Solo Operators
Active Partners
Inventors Challengers
Buyers
Life Timers
Module 1 Foundations of Entrepreneurship
Types of Entrepreneurs Contd.
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Module 1 Foundations of Entrepreneurship
Case Study Saras Sarasvati
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A Process that starts with a desired outcome andfocuses on the means to generate the outcome.
It finds out the causes or factors responsible for theparticular outcome
Application
Research and Development of new products Medical researches and Studies
Investigation
Module 1 Foundations of Entrepreneurship
Causal Process
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A Process that starts with what one has (that is who
they are, what they know and whom they know) andselects among possible outcomes.
Providing a practical means to accomplish something.
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Effectuation
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Has 5 Principles under it
The patchwork quilt principleThis is a principle of means-driven (as opposed to goal-driven) action. The emphasis here ison creating something new with existing means than discovering new ways to achievegiven goals.
The affordable loss principle
This principle prescribes committing in advance to what one is willing to loserather than investing in calculations about expected returns to the project.
The bird-in-hand principleThis principle involves negotiating with any and all stakeholders who are willing to make
actual commitments to the project, without worrying about opportunity costs, or carryingout elaborate competitive analyses.Furthermore, who comes on board determines the goals of the enterprise. Not vice versa.
Module 1 Foundations of Entrepreneurship
Effectuation
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The lemonade principle
This principle suggests acknowledging andappropriating contingency by leveraging surprisesrather than trying to avoid them, overcome them, or
adapt to them.
The pilot-in-the-plane principle
This principle urges relying on and working with humanagency as the prime driver of opportunity rather than
limiting entrepreneurial efforts to exploiting exogenousfactors such as technological trajectories and socio-economic trends.
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Causal Effectuation
Begin with the effect or result Work with the inputs or
determinants.Working out various ways to reachthe result
Works out various combinations ofresults
Use Predictive strategies Use logic of action. Non predictive
Decision based Design based
Based on the premise:To the extent we can predict thefuture, we can control it
Effectual logic is based on thepremise:To the extent we can control thefuture, we do not need to predict it.
Module 1 Foundations of Entrepreneurship
Differences
Both have an inverse relationship
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Institutional Support to
Entrepreneurs
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Finance Life Blood of Business
Minimum Level of prior Infrastructure
Need for Development funds on soft and liberalconditions
Perks for developing industries in Backward Areas
Compensate for deficiencies in Transport and
Communication
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Need for Institutional Support
There are always plenty of resources for those who create practical plans forusing it - N Hill
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Central Level Institutions SSI Board NSIC SIDO KVIC (Khadi and Village Industries Commission) NPC
IIE State Level Institutions
DICs (District Industries centres) SISIs (Small Industries Service Institutes) SFC
Other Agencies NABARD HUDCO NGOs Industry Associations EPC SIDBI
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Institutions Profiled
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NSIC, an ISO 9000 certified company, founded in 1955
Promoting the growth of SSI
Functions
Provide machinery on hire purchase scheme to SSIs
Provide equipment leasing facility
Help in exporting the products
Participate in bulk purchase program
Distribute raw materials through raw material adopts
Impart training in industrial trades
Set up industrial estates
Module 1 Foundations of Entrepreneurship
National Small Industries Corporation(NSIC)
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Marketing Support Consortia and Tender marketing
Helps in procurement by forming consortia of units producingsame products
Single Point Registration under Government PurchaseProgramme Issue tenders free of cost
Exemption from payment of earnest money
Advance intimation of tenders issued by DGS&D
Issue competency certificate for high value orders above thespecified limit
Exhibitions and Technology Fairs
Buyer Seller Meets
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Area Specific Support of NSIC
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Credit Support Equipment Financing
Tie-ups with commercial banks
Financing for procurement of Raw Materials (Short Term) Financing of Marketing Activities
Performance and Credit Rating Scheme for Small Industries
Technology Support Setting up of Science Technology Parks/ Business
Incubators
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Area Specific Support of NSIC
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Constituted in 1954
Lead Institution to coordinate inter institutionallinkages
Apex Advisory body to render advice to thegovernment on all issues on SSI sect
Broad areas :-
Policies and Programmes
Devpt of industries in specific regions like North East Credit facilities, taxation, modernisation
Industrial sickness
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Small Scale Industries Board
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SME (Small and Medium sector) Fastest growingsectors across the world
Need for SME Devpt Agency to focus on this coresector
In India, Office of Devpt Commissioner (small scaleindustries) also called SIDO is the Nodal Devpt Agencyfor small industries
Functions under Ministry of SSI
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Small Industries Devpt Organization(SIDO)
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DC SSI heads SIDO, which has the following Institutionsunder it
Module 1 Foundations of Entrepreneurship
Institutional Network
DC SSI
SISI(30)
Br. SISI(28)
FTS(4)
RTC (4)
HTI (2) TR/TDI(10)
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Small Industries Service Institutes (SISIs) operationalthroughout the country. Main Functions
Interface between central and state govts
Technical Support and Consultancy Services
EDPs
Promotional Programmes
Regional Testing Centers 4 RTCs in the four metros. Theysupport 8 field Testing Stations
Hand Tool Institutes Equipped with Electronic, HEA, ComputerLabs
Tool Rooms and Tool Design Institutes (TR/TDI)
Product-cum-Process Devpt Centers
Module 1 Foundations of Entrepreneurship
Inst Network contd..
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Entrepreneurship Devpt and Management Training
Extension and Training Services
Skill Development
Entrepreneurship Development Institutes (EDI) Grantof upto 5 million per EDI
Preparation of Project Profiles
Plant Modernisation Studies
Prototype Development and Training Centre
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Services Provided by SIDO
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Credit Linked Capital Subsidy Scheme for TechnologyUpgradation @ 12% upto 4.8 lacs for individual SSIs
Credit Guarantee Scheme Collateral free loans upto25 lakhs
ISO 9001/ISO14001 Certification Reimursement Scheme
Full subsidy on space rent and shipment of exhibits forSSI units
Integrated Infrastructure Development (IID): Assitanceto state govt or industry assocs
One time grant for procurement of hardware
M d l F d i f E hi
SIDO Schemes