esbd unit ii 1
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ENTREPRENEURSHIP & SMALL
BUSINESS DEVELOPMENT
(MS 207)UNIT II
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SYLLABUSUnit IEntrepreneurship: Concept and Definitions; Entrepreneurship and Economic Development;Classification and Types of Entrepreneurs; Entrepreneurial Competencies; Factor AffectingEntrepreneurial Growth – Economic, Non-Economic Factors; EDP Programmes; EntrepreneurialTraining; Traits/Qualities of an Entrepreneurs; Entrepreneur; Manager Vs. Entrepreneur.(14 Hours)Unit IIOpportunity / Identification and Product Selection: Entrepreneurial Opportunity Search andIdentification; Criteria to Select a Product; Conducting Feasibility Studies; Project Finalization; Sourcesof Information. (14 Hours)Unit IIISmall Enterprises and Enterprise Launching Formalities : Definition of Small Scale; Rationale;Objective; Scope; Role of SME in Economic Development of India; SME; Registration; NOC fromPollution Board; Machinery and Equipment Selection; Project Report Preparation; Specimen of ProjectReport; Project Planning and Scheduling using Networking Techniques of PERT / CPM; Methods ofProject Appraisal.(14 Hours)Unit IVRole of Support Institutions and Management of Small Business : Director of Industries; DIC;SIDO; SIDBI; Small Industries Development Corporation (SIDC); SISI; NSIC; NISBUED; StateFinancial Corporation SFC; Marketing Management; Production Management; Finance Management;Human Resource Management; Export Marketing; Case Studies-At least 4 (four) in whole course.(14 Hours)
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UNIT – IIHTTPS://WWW.YOUTUBE.COM/WATCH?V=F76WTYLYEFK
OPPORTUNITY IDENTIFICATION AND PRODUCT SELECTION
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION Opportunity identification is central to
entrepreneurship and involves: The creative pursuit of ideas The innovation process
The first step for any entrepreneur is the identification of a “good idea.” The search for good ideas is never easy. Opportunity recognition can lead to both personal
and societal wealth.
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION How entrepreneurs do what they do:
Creative thinking + systematic analysis = success
Seek out unique opportunities to fill needs and wants
Turn problems into opportunities
Recognize that problems are to solutions what demand is to supply
Ideas are not the same as opportunities
Ideas Opportunities
Last for ever are perishable
Are free require work
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION
What is an opportunity?? An idea that is timely, attractive, durable
anchored in a product or service that creates or adds value for its buyer and user.
An opportunity is a favorable set of circumstances that creates the need for a new product, service, or business idea.
An idea, as we defined it, is “Something imagined or pictured in the mind”. The difference is that an idea may or may not represent an opportunity.
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION An opportunity as four essential qualities
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION Window of Opportunity
The term “window of opportunity” is a metaphor describing the time period in which a firm can realistically enter a new market.
Once the market for a new product is established, its window of opportunity opens, and new entrants flow in.
At some point, the market matures, and the window of opportunity (for new entrants) closes.
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION Three Ways to Identify An Opportunity:
1. Observing Trends
The first approach to identifying opportunities is to observe trends and study how they create opportunities for entrepreneurs to pursue.
There are two ways that entrepreneurs can get a handle on changing environmental trends:
They can carefully study and observe them.
They can purchase customized forecasts and market analyses from independent research firms.
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION Environmental Trends Suggesting Business or
Product Opportunity Gaps:
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION Economic Forces Economic forces affect consumers’ level of disposable
income. When studying how economic forces affect
opportunities, it is important to evaluate who has money to spend and who is trying to cut costs.
An increase in the number of women in the workforce and their related increase in disposable income is largely responsible for the number of boutique clothing stores targeting professional women that have opened in the past several years.
Many large firms are trying to cut costs. Entrepreneurs have taken advantage of this trend by starting firms that help other firms control costs.
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION Social Forces Changes in social trends provide openings for new
businesses on an ongoing basis. The continual proliferation of fast-food restaurants, for
example, isn’t happening because people love fast food. It is happening because people are busy, and have disposable income.
Similarly, the Sony Walkman was developed not because consumers wanted smaller radios but because people wanted to listen to music while on the go.
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION Technological Advances Given the rapid pace of technological change, it is vital
that entrepreneurs keep on top of how new technologies affect current and future business opportunities.
Entire industries have emerged as the result of technological advances.
Examples include the computer industry, the Internet, biotechnology, and digital photography.
Once a new technology is created, new businesses form to take the technology to a higher level.
For example, RealNetworks was started to add audio capability to the Internet.
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION Political and Regulatory Changes Political and regulatory changes provide the basis for
new business opportunities. For example, laws that protect the environment have
created opportunities for entrepreneurs to start firms that help other firms comply with environmental laws and regulations.
Similarly, many entrepreneurial firms have been started to help companies comply with the Sarbanes-Oxley Act of 2002. The act requires certain companies to keep all their records, including e-mail messages and electronic documents, for at least five years.
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION
2. Solving a problem
Sometimes identifyingopportunities simply
involves noticing a problemand finding a way to
solve it.
These problems can bepinpointed through
Observing trends and through more simple means,
such as intuition,serendipity, or chance.
Some business ideas are Clearly initiated to solve a
problem.
For example, Symantec Corp. created Norton
Antivirus software to guard Computers against viruses.
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ENTREPRENEURIAL OPPORTUNITY SEARCH & IDENTIFICATION
3. Finding gaps in the market place A third approach to identifying opportunities is to find a
gap in the marketplace. A gap in the marketplace is often created when a
product or service is needed by a specific group of people but doesn’t represent a large enough market to be of interest to mainstream retailers or manufacturers.
This is the reason that small clothing boutiques and specialty shops exist.
The small boutiques, which often sell designer clothes or clothing for hard-to-fit people, are willing to carry merchandise that doesn’t sell in large enough quantities for Wal-Mart, GAP, or JC Penney to carry.
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CRITERIA TO SELECT A PRODUCT Undertaking a business venture is a big
investment requiring adequate planning. Just as investment opportunities are many and diverse, products or services options for an entrepreneur are uncountable. However, the selection of required product or service is the first step towards success.
product is anything that can be offered to a marketer for acquisition, use or consumption.
products provide the business with the most important and visible contact with buyers i.e. consumers. Products to the consumers represent psychological symbols of personal attributes, goal and social patterns
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CRITERIA TO SELECT A PRODUCT In selecting product for a business venture, the
following factors must be taken into consideration: Supply-gap: The size of the unsatisfied market
demand which constitute a source of business opportunity will dictate, to a great extent the need to select a particular product. The product with the highest chances of success as reflected in its demand will be selected. In essence, there must be existing obvious demand for the selected product.
Fund: The size of the funds that can be mobilized is another important factor. Adequate fund is needed to develop, produce, promote, sell and distribute the product selected.
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CRITERIA TO SELECT A PRODUCT Availability of and Access to Raw
Materials: Different products require different raw materials. The source quality and quantity of the raw materials needed are factors to be seriously considered, Are the raw materials available in sufficient quantities? Where are the sources of raw materials located? Are they accessible? Could they be sources locally or imported? Satisfactory answers should be provided to these and many other relevant questions.
Technical Implications: The production process for the product needs to be considered. There is need to know the technical implications of the selected product on the existing production line, available technology and even the labour force. The choice of a particular product may require either acquisition of the machineries or refurbishing of the old ones. The product itself must be technically satisfactory and acceptable to the user.
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CRITERIA TO SELECT A PRODUCT Profitability/Marketability: Most often,
the product that has the highest profit potential is often selected. However, a product may be selected on the basis of its ability to utilize idle capacity or complement the sale of the existing products. The product must be marketable.
Availability of Qualified Personnel: Qualified personnel to handle the production and marketing of the product must he available. The cost of producing the product must be kept to the minimum by reducing wastages. This is achievable through competent hands.
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CRITERIA TO SELECT A PRODUCT Government Policies: This is quite often
an uncontrollable factor. The focuses of government policies can significantly influence the selection of product. For instance, a package of incentives from government for a product with 100% local input contents can change the direction of the business’s R & D and hence the product selected.
Government objectives: The contributions of the product to the realization of the company’s short and long range objectives must be considered before selection. For instance, the company goal maybe the achievement of sale growth, sales stability or enhancement of the company’s social value.
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CONDUCTING FEASIBILITY STUDIES Feasibility study is done to find whether the
proposed project (considering the above discussed environment appraisal) would be feasible or not.
Feasibility study is dependent on environment appraisal yet it is far more descriptive.
The variable/dimensions of feasibility analysis - 1. Market Analysis2. Technical/Operational Analysis3. Financial feasibility4. Drawing functional plan
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CONDUCTING FEASIBILITY STUDIES1. Market Analysis M A is conducted to estimate the demand and market
share of the proposed product/service in future. Demand analysis and market share is based on number
of factors - consumption pattern, availability of substitute goods/service, competition etc.
A preliminary discussions with consumers, retailers, distributors, competitors, suppliers is carried to understand consumer preferences, existing and potential demands, strategy of competitors, and practices of distributors, retailers etc., present and prospective consumers, geographic and seasonality distribution of the demand, marketing mix of competitors, accepted marketing mix of consumers.
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CONDUCTING FEASIBILITY STUDIES2. Technical/ Operational Analysis Done to assess operational ability of the proposed
business enterprise. Key questions to be answered are- what are the
technological and equipments needs, from where this technology and equipments be obtained, from where the raw material be obtained.
T/O analysis collects information about :a) Material availability & requirement planningb) Plant locationc) Plant capacityd) Machinery and equipmente) Plant layout
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CONDUCTING FEASIBILITY STUDIES3. Financial Analysis Financial feasibility is done for financial assessment of
the proposed business venture. Following cost estimates have to be carried out :
i) Cost of land and building – depending upon the requirement and availability of funds, the land and building can be hired, taken on lease or purchased.
ii) Cost of plant & machinery-estimating cost of plants & machineries and their running & maintenance.
iii) Preliminary cost estimation – cost required for conducting market survey, preparing feasibility report, registration expenses, expenses involved in raising capital from public & other misc expanses.
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CONDUCTING FEASIBILITY STUDIES3. Financial Analysisiv) Provision of Contingencies : Needs to be made to
cover certain unexpected expanses which can emerge due to change in external environment like increase in the price of the raw material, petrol price, transportation costs.
v) Working capital estimates for running the business are also made.
vi) Cost of Production – It include raw material cost, labour cost, overhead expanses, utilities like power, water, fuel etc.
vii) Sales and Production estimates : Based on the plant capacity the production and sales estimates are made which help in estimating profitability.
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CONDUCTING FEASIBILITY STUDIES3. Financial Analysisviii Profitability projections are made on the following
parameters
a. Cost of production
b. Sale expenses
c. Administrative expanses
d. Expected sales
e. Calculation of the above gives gross profit
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CONDUCTING FEASIBILITY STUDIES4. Drawing Functional Plan After feasibility study, functional plans are drawn
which means developing plans and strategies for all operational areas : marketing, finance, HR and production.
a) Marketing Plan : MP lays down the strategies of marketing (Marketing mix) which can lead to success of business. From the market feasibility study and marketing research, potential/present demand of customers, which helps in laying down the strategies for market segmentation, identification of target market and laying down strategies for the target market.
b) Production/operation Plan : Production plans are drawn for manufacturing whereas operational plans are for service sector. It includes strategies for following parameters :
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CONDUCTING FEASIBILITY STUDIES1. Location and reasons for selecting the
locations2. Physical layout3. Cost & availability of machinery,
equipments, raw material4. List of suppliers and if possible, distributors.5. Cost of manufacturing / running operations6. Quality management7. Production scheduling, capacity
mgt,inventory mgt
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CONDUCTING FEASIBILITY STUDIESc) Organisational Plan : Defines the type of
ownership, organization structure and proposes HRM practices that would govern the successful running of proposed business enterprise.
d) Financial Plan : Financial Plan indicates the financial requirement of the proposed business
1. Cost incurred in smooth running of all the plans – financial, marketing, operations and HRs.
For eg. Cost incurred in the marketing plan would include forecasting sales, for production plan it includes cost of goods, for organizational plans it includes cost of compensation to employees.
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CONDUCTING FEASIBILITY STUDIES2. Projected cash flows.3. Projected income statement4. Projected break-even point5. Projected ratios.6. Projected Balance sheet.