BB0028 – Entrepreneurship Development

Feb drive 2011

Bachelor of Business Administration-BBA Semester 6

BB0028 – Entrepreneurship Development- 4 Credits

Note: Each question carries 10 Marks. Answer all the questions.

Q.1 What are the essential characteristics of Entrepreneurship?

Ans :  Entrepreneurship is the act of setting out on your own and starting a business instead of working for someone else in his business. While entrepreneurs must deal with a larger number of obstacles and fears than hourly or salaried employees, the payoff may be far greater as well.

1. Interest and Vision:

The first factor for entrepreneurial success is interest. Since entrepreneurship pays off according to performance rather than time spent on a particular effort, an entrepreneur must work in an area that interests her. Otherwise, she will not be able to maintain a high level of work ethic, and she will most likely fail. This interest must also translate into a vision for the company's growth. Even if the day-to-day activities of a business are interesting to an entrepreneur, this is not enough for success unless she can turn this interest into a vision of growth and expansion. This vision must be strong enough that she can communicate it to investors and employees.

2.Skill:

All of the interest and vision cannot make up for a total lack of applicable skill. As the head of a company, whether he has employees or not, an entrepreneur must be able to wear many hats and do so effectively. For instance, if he wants to start a business that creates mobile games, he should have specialized knowledge in mobile technology, the gaming industry, game design, mobile app marketing or programming.

3. Investment:

An entrepreneur must invest in her company. This investment may be something less tangible, such as the time she spends or the skills or reputation she brings with her, but it also tends to involve a significant investment of assets with a clear value, whether they be cash, real estate or intellectual property. An entrepreneur who will not or cannot invest in her company cannot expect others to do so and cannot expect it to succeed.

4. Organization and Delegation:

While many new businesses start as a one-man show, successful entrepreneurship is characterized by quick and stable growth. This means hiring other people to do specialized jobs. For this reason, entrepreneurship requires extensive organization and delegation of tasks. It is important for entrepreneurs to pay close attention to everything that goes on in their companies, but if they want their companies to succeed, they must learn to hire the right people for the right jobs and let them do their jobs with minimal interference from management.

5. Risk and Rewards:

Entrepreneurship requires risk. The measurement of this risk equates to the amount of time and money you invest into your business. However, this risk also tends to relate directly to the rewards involved. An entrepreneur who invests in a franchise pays for someone else's business plan and receives a respectable income, while an entrepreneur who undertakes groundbreaking innovations risks everything on an assumption that something revolutionary will work in the market.

Q.2 Explain the different phases in entrepreneurial development programme.

Ans :  EDP is primarily designed to induce motivation and competence among young prospective entrepreneurs. So the cause and curriculum of Entrepreneurship Development programme will be so designed that it will induce motivation and competency. The course curriculum of EDP should be designed to cover the following aspects:

• It will give general introduction to entrepreneurship.
• It will afford motivational training.
• It will increase managerial skill of the entrepreneur,
• It makes entrepreneur to have expert knowledge on various support systems and procedure.
• It will give fundamental idea on project feasibility study.
• It will encourage plant visit to afford practical knowledge to entrepreneurs.

After deciding on course contents and curriculum on EDP, the next important task is to decide various phases of EDP. There are three different phases of EDP like:

1. Pre-training phase
2. Training phase
3. Follow-up phase

1. Pre-training phase:

Pre-training phase consists of all activities and preparation to launch training programme. Pre-training phase of EDP consists of the following activities :

• Selection of entrepreneurs for the training programme.
• Arrangements of infrastructure are for the programme like selection of place of training.
• Deciding guest faculty for the programme from education industry and banks.
• Taking necessary steps for inauguration of programme.
• Formation of selection committee to select trainees from the programme.
• Making provision with regard to publicity and campaigning for the programme.

2. Training Phase:

The primary objective of training programme is to develop motivation and skill or competency amongst the potential entrepreneurs. Care should be taken to impart both theoretical and practical knowledge to various trainees. The training phase of EDP will be so designed that it will answer the following questions:

(a) Whether the attitude of the entrepreneur has been tuned towards the proposed project or no.

(b) Whether the trainee has been motivated to accept entrepreneurship as a career.

(c) How the trainee behaves like an entrepreneur.

(d) Whether the trainee has sufficient knowledge on resources and technology or not.

(e) What kind of entrepreneurial traits he lacks and what steps should be taken to set it.

3. Follow-up Phase:

Follow up phase of EDP has been termed as post-training phase. The ultimate objective is to develop competent entrepreneurs. So that they can start their project. Post-training phase is a review phase of training programme. It consists of reviewing of work in the following manner:

• Review of pre-training work
• Review of actual training programme
• Review of post training programme so that cost effectiveness of the present programme can be evaluated

Q.3 What are the basic problems faced by the women entrepreneurs?

Ans : Women entrepreneurs face a series of problems right from the beginning till the enterprise functions. Being a woman itself poses various problems to a woman entrepreneur, The problems of Indian women pertains to her responsibility towards family, society and lion work. Besides the above basic problems the other problems faced by women entrepreneurs are as follows:

1. Family ties:

Women in India are very emotionally attached to their families. They are supposed to attend to all the domestic work, to look after the children and other members of the family. They are over burden with family responsibilities like extra attention to husband, children and in laws which take away a lots of their time and energy. In such situation, it will be very difficult to concentrate and run the enterprise successfully.

2. Male dominated society:

Even though our constitution speaks of equality between sexes, male chauvinism is still the order of the day. Women are not treated equal to men. Their entry to business requires the approval of the head of the family. Entrepreneurship has traditionally been seen as a male preserve. All these puts a break in the growth of women entrepreneurs.

3. Lack of education:

Women in India are lagging far behind in the field of education. Most of the women (around sixty per cent of total women) are illiterate. Those who are educated are provided either less or inadequate education than their male counterpart partly due to early marriage, partly due to son's higher education and partly due to poverty.

4. Social barriers:

The traditions and customs prevailed in Indian societies towards women sometimes stand as an obstacle before them to grow and prosper. Castes and religions dominate with one another and hinders women entrepreneurs too. In rural areas, they face more social barriers. They are always seen with suspicious eyes.

5. Shortage of raw materials:

The scarcity of raw materials, sometimes nor, availability of proper and adequate raw materials sounds the death-knell of the enterprises run by women entrepreneurs. Women entrepreneurs really face a tough task in getting the required raw material and other necessary inputs for the enterprises when the prices are very high.

6. Problem of finance:

Women entrepreneurs stiffer a lot in raising and meeting the financial needs of the business. Bankers, creditors and financial institutes are not coming forward to provide financial assistance to women borrowers on the ground of their less credit worthiness and more chances of business failure. They also face financial problem due to blockage of funds in raw materials, work-in-progress finished goods and non-receipt of payment from customers in time.

7. Tough competition:

Usually women entrepreneurs employ low technology in the process of production. In a market where the competition is too high, they have to fight hard to survive in the market against the organised sector and their male counterpart who have vast experience and capacity to adopt advanced technology in managing enterprises

Q.4 What are the sources from which an entrepreneur can obtain business ideas.

Ans :  In practice there are many ways in which the business opportunity and idea is first spotted.  As we shall see, sometimes luck plays a big part; at other times there is a role for approaches which encourage deliberate creativity. Here are some of the main sources of business ideas for start-ups:

1. Business experience:

Many ideas for successful businesses come from people who have experience of working in a particular market or industry.  For the start-up, there are several advantages of applying this experience to a new business:

• Better and more detailed understanding of what customers want
• Knowledge of competitors, pricing, suppliers etc
• Less need for start-up market research

Entrepreneur is able to make more realistic assumptions in the business plan about sales, costs etc

Industry contacts, who might then become the first customers of the start-up!

All of the above help the business planning process and you could argue that they reduce the risks of a start-up.

On the other hand, you might argue that “familiarity breeds contempt”.  In other words, detailed experience of an industry means that the budding entrepreneur doesn’t have a fresh perspective.  Someone who is new to a market may be able to exploit approaches that have worked in other industries to make an impact with the start-up.

2. Personal experience:

Many ideas come to entrepreneurs from their day-to-day dealings in life, or from their hobbies and interests. For some of us, frustrating or bad experiences are a source of irritation.  For the entrepreneur they might suggest a business opportunity. 

It is often said that one of the best ways to spot a business opportunity is to look for examples of poor customer service (complaints, product returns, persistent queues etc).  Such examples suggest that there is an opportunity to do something better, quicker or cheaper than the existing products.

Hobbies and interests are also a rich source of business ideas, although you have to be careful to avoid assuming that, just because you have a passion for collecting rare tin openers, there is a ready market from people with similar interests!  Many people have tried to turn their hobby into a business and found that generates only a small contribution to household income.

3. Observation:

Simply observing what goes on around you can be a good way of spotting an idea.  Often an idea will be launched in another country and has not yet been tried in other, similar economies.  When Stephen Warring was in the USA attending a wedding, by luck he sat next to someone who ran a household service business (treating lawns).  After some brief market research, Stephen found out that there was no similar business in the UK, so he launched one.

Q.5 Mr. Latha G. wants to set up her own garment manufacturing unit. She needs to submit report about the project ,in order to get the loan. What all essential details she should mention in the project report.

Ans : The details that Mr. Latha G needs to mention are:-

1. Aim of Project:-

What do we want to produce? The aim of the project is a mixture of the reasons for doing the project and the benefits that are expected from it. This section of the plan can be either fulfilled by linking to the main business case, or by restating it in language for the expected audience.

2. Outputs:-

Given the aim of the project, what do we actually need to produce to get there? What will your completed project be made up of? These need to be clearly defined. For example, your project's aim may be to upgrade the IT infrastructure in an organisation. Your final output would be a completed computer network, a new computer on every desk, and all appropriate software installed and ready to go.

3. Quality Criteria:-

Now we have the outputs, we need to understand what quality they need to be of. In the example above, we have an output of a completed computer network. However, we need to know that the network can actually cope with the amount of traffic going over it!

4. Resources:

We have now set down what outputs we need to produce, and what quality they need to be at. This means we are now in a position to look at the resources we will need to achieve this. Resources include staff time, particular knowledge or skill sets, money (e.g. buying equipment), and time (some tasks can't be increased by throwing more people at the problem, e.g. delivery times, setting time for concrete, etc.).

5. Management Structure:-

How are we going to manage the work? You need to describe the general approach to the project here. Who will be the decision makers for the various different streams of work? For example, you may be doing a significant procurement - who makes the decision about what company to buy from?

6. Milestones:-

Here you need to think about how you will break up the project. Unless it is very small, you don't want to have the entire project as one lump of work, with the only check on progress at the very end. Instead, it makes sense to break the project up into discrete chunks, where related tasks can be lumped together, with a sensible milestone at the end of them.

7. Tolerances:-

You will have already looked at the resources you need. Now we need to set how far you, or the project executive, can let the project stray from these targets before needing to sound the alarm. For example, you could set a tolerance in terms of finance of +/- 5%, and a tolerance in terms of time of +/- 10%. Equally, you may want to look at tolerances of quality.

8. Dependencies:-

This is where you look at what needs to happen before something else. For example, in our example above, you need to complete the requirements gathering before you can finish the tender documentation.

Q.6 Mr. Raghvan is the owner of Furniture manufacturing company. He needs some more finance to get some new machines and also expand his business. Suggest the different sources of finance he could use to get the required funds.

Ans : An entrepreneur might face the major hurdle of acquiring financing to jumpstart a business and increase the likelihood for success. Depending on the services or products provided, your company might require thousands of dollars to open for business. Fortunately, an array of finance sources is available. However, you must select the source based on your personal financial standing and that best meets your needs.

1. Small Business Administration Loan:

The SBA is a federal government agency that provides financial assistance to new and existing businesses. Offices exist throughout the United States to assist small businesses. Business cash flow is the primary consideration for a loan. Owners with 20 percent or more ownership must personally guarantee the loan. Because there are three SBA loan programs, contact a local office or lender before completing an application to determine the plan best for your company.

2. Private Loan:

You might need complete funding of your new business or a loan amount that augments your existing funds. Consider a loan from family or friends. Execute a loan note that defines the loan amount and terms, including the interest rate. This document becomes a business record that might affect business profit and taxes.

3. Personal Credit Card:

Although it is best to separate personal and business transactions, you might consider using your personal credit card to start up a company. Keep records of business-related charges to your credit card. This funding might build equity in the company. However, you might elect instead to reimburse yourself from future revenue.

4. Personal Bank Loan:

You might initiate a personal bank loan that you personally guarantee, perhaps with a lean on your home. If your company has other owners, they are not liable for this debt, regardless of the company’s use of funds that you provide. However, you might consider documenting a personal loan to the company in the amount provided by you.

5. Venture Capital Investors:

Generally, venture capital investors provide funds to early-stage start up companies. These investors are interested in industries with high-growth potential, such as information technology. Normally, venture capital investors provide funds to a company in exchange for company shares. These investors require a business plan that demonstrates the probability of success.

6. Retirement Funds:

If you have an Individual Retirement Account or 401k retirement plan, you might withdraw funds to invest in a new business or provide capital for an existing company. For example, you might use funds from your IRA to purchase inventory or expand your office space. Check with a financial institution to initiate access to your retirement plan