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UNIT 1
ENTREPRENEURIAL MANAGEMENT
INTRODUCTION
The concept of entrepreneurship has been around for a very long time. In the last
decade it has resurged as if a new discovery has been made. Usually anyone who
runs a business is called an entrepreneur. The more precise meaning of
entrepreneur is one who creates his own business i.e. a person who organizes,
operates and assumes the risk of a business venture.
So we can say that entrepreneur a person who takes risk for establishing a new
venture or business in order to create utility for the welfare of human being as
well as for him of herself. She or he is always a person who seeks out
opportunities and takes on challenges.
Entrepreneurship:
CHARACTERISTICS OF AN ENTREPRENEUR:
1. Risk taking capability: every business has risk of time money etc .so an
entrepreneur must have the risk taking capability.
2. Creativity and innovation: an entrepreneur has an initiator possesses
creativity and innovative power.
3. Need for achievement: the entrepreneur has strong desire to achieve the goal
of business. he is always driven by the needs for achievement.
Nature of Entrepreneurship
Gap FIlling It lls the gap between human needs and available products and
services.
2. The Task: An entrepreneur has to perform several tasks. First he has to perceive
opportunity and then bring together necessary resources to give life to the idea.
He has to provide The Environment: entrepreneur and his organization are part
of the environment. The environment influences, facilitates or hinders the
growth of entrepreneurship and the viability of the enterprise. He draws
resources from the environment, and his output goes to the environment. The
environment consists of several elements such as economic, socio-cultural,
political, legal and others. The entrepreneurs will keep on acting and reacting to
various environmental changes. He tries to understand the environment well.
3. The Organization: The entrepreneur builds the organization and his creative
work takes place in it. It includes the organization structure, rule, policies,
Even though entrepreneurship is viewed here a dependent variable with all the
four sets of factors influencing and contributing to, it may be noted that the
individual, the environment and support systems are considered to influence
entrepreneurship directly,
(2) National Income : National Income consists of goods & services produced in
the country and those imported. An increasing number of entrepreneurs are
required to meet this increasing demand for goods and services. Thus
entrepreneurship increases the national income.
(4) Balance Regional Development : The growth of industry and business leads to
a large number of public benefits like road, transport, health, education,
entertainment etc. A rapid development of entrepreneurship ensures a balanced
regional development. When the new entrepreneurs grow at a faster pace, in
view of the increasing competition in and around the cities, they are forced to set
up their enterprise in the smaller towns away from big cities. This helps in the
development of the backward regions.
(6) Reducing Unrest and Social Tension Amongst Youth : In the changing
environment where we are faced with the problem of recession in wage
employment opportunities, alternative to wage career is the only viable option.
The country is required to divert the youth with latent entrepreneurial traits from
wage career to self employment career. Such alternate path through
entrepreneurship could help the country in defusing social tension and unrest
amongst youth.
ENTREPRENEUR PROCESS
Idea Generation: In a sense, opportunity identification and selection are akin to,
what is termed in marketing terminology, new product development. Thus,
product or opportunity identification and selection process starts with the
generation of ideas, or say, ideas about some opportunities or products are
generated in the first instance.
The ideas about opportunities or products that the entrepreneur can consider for
selecting the most promising one to be pursued by him/her as an enterprise, can
be generated or discovered from various sources- both internal and external.
Sources of Ideas:
Imagine that someone have generated the five ideas as opportunities as a result
of above analysis:
Monitor-evaluator: the person who assesses ideas. He/she explores all the
options and is capable of thoroughly analysing large amounts of data. His/her
judgements are good and rarely do they make the wrong decisions.
Resource investigator: the teams fixer. He/she has a wealth of contacts and is
always busy, often exploring new opportunities or/and picking other peoples
brains
Team worker: holds the team together. This is the teams counsellor, the person
who reconciles differences. They promote harmony especially at times of crisis.
Usually they are mild-mannered and sensitive, which makes them aware of
problems and difficulties within the team.
Completer-finisher: makes sure things get done. They have an eye for detail and a
concern for deadlines and timetables. Hence they pick up on omissions and errors
and have relentless follow-through.
1. The creation of a mission statement for the business : The Mission Statement
of a Business is a Statement of the purpose of the business which is intended to
unify the business to focus towards one common page. A well worded Mission
Statement will put all stakeholders (from management to employees to
PREPARED BY : PRUTHVIRAJSINH N RATHOD 11
ENTREPRENEUR DEVELOPMENT SYBBA 3
shareholders) on the same page and will get all stakeholders thinking along the
same lines.
2. Creating a vision for the business ; A Vision is a realistic dream for the
business for the future. With the Mission Statement in mind, a Vision needs to be
created and all stakeholders need to buy into the Vision. A Vision is normally
focussed on the long term and paints the picture of where a business should be
heading to or what should a business look like in the long term in a near perfect
environment.
3. Translating the vision for the business into short-term and long-tem
objectives ; The next step is to set short-term and long-term measurable and
obtainable targets that would ultimately lead the business to its Vision as set out
for the business. By linking the objectives to the Vision, the business will focus on
achieving the future realistic dream it set out for itself.
Once objectives have been set in this way, these will be evaluated and re-
evaluated on a continuous basis to establish if the business is realising the
objectives on its way to its Vision.
At this stage various possible practical actions plans will be analysed and decided
upon to achieve the strategic objectives. Core to the decision on which action
plans to be implemented are the following:
What are the different possible plans available to achieve the objectives?
Who will implement the plans?
With what will the plan be implemented (what resources are needed
and are the resources readily available)?
By when will the plan be implemented?
These plans will be business and industry specific and a detailed analysis of each
environment will have to be done before a decision on the course of action is
taken. Once the course of action is decided upon, a budget can be drawn up.
Theoretically a budget is an expression, in financial terms, of the strategic and
operation plans of an organisation, for a forthcoming period of time.
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ENTREPRENEUR DEVELOPMENT SYBBA 3
Planning the process : Various items should be taken into account during the
process as mentioned above, especially after the mission and vision have been
created, preferable on a yearly basis. An analysis of these items will help in setting
the measurable and obtainable objectives, as well as deciding on the correct
action plans to achieve the objectives.
The current economic cycle : The economic cycle refers to the fluctuations of
economic activity (business fluctuations) around its long-tem growth trend.
The stage in the life cycle of the businesss products ; All firms and products
have a life cycle. The length of the cycle can vary enormously from business to
business. The stages in the life cycle are: Introduction in the market, Growth,
Maturity, Saturation and decline.
Industry analysis: Understanding the industry will help in setting the correct
plans. The following factors should be analysed:
Franchising
Introduction : Some entrepreneurs are ready to take an idea, build a business,
find their own financing, and take the risk of starting with very little and hopefully
building a successful venture. Others want the opportunity to be their own boss,
but aren't excited about blazing their own trail. For these more risk-adverse
entrepreneurs, franchising may be just what they are looking for.
Definitions :
A franchise is a type of license that a party (franchisee) acquires to allow them to
have access to a business's (the franchiser) proprietary knowledge, processes
and trademarks in order to allow the party to sell a product or provide a service
under the business's name. In exchange for gaining the franchise, the franchisee
usually pays the franchisor initial start-up and annual licensing fees.
A franchise is the agreement or license between two legally independent parties
which gives:
a person or group of people (franchisee) the right to market a product or service
using the trademark or trade name of another business (franchisor)
the franchisee the right to market a product or service using the operating
methods of the franchisor
the franchisee the obligation to pay the franchisor fees for these rights
the franchisor the obligation to provide rights and support to franchisees
In India, franchising has been popular in fast food chains, beauty parlors,
fitness centres, computer education, clothing, shoes, hotels, pathology, health
care etc. NIIT, APTECH, LCC, McDonald, Nirulas, Wimpy, Haldiram etc. are some
popular examples of franchise.
Features :
(i) Franchise relationship is based on an agreement; which lays down terms and
conditions of this relationship.
(ii) The term of franchise may be for 5 years or more; and the franchise
agreement may be renewed with the mutual consent of both the parties.
(iii) The franchisee gives an undertaking not to carry on other competing business
during the term of the franchise; and the franchiser gives an undertaking not to
terminate the franchise agreement before its expiry except under situations
which may justify the termination of the franchise agreement.
(iv) The franchisee agrees to pay specified royalty to the franchiser, as per terms
of the franchise agreement.
(v) Franchise means selling the same product and maintaining a similar type of
shop decor (i.e. style of interior decoration); for which franchiser provides
assistance to franchisee in organising, merchandising and management. The
franchiser virtually sets up the business for the franchisee.
Merits of Franchise:
From the Viewpoint of the Franchiser:
(i) Expansion of Business: : The franchiser is able to expand his business, and gain
wider acceptance of his brand name or trademark, because of franchise
agreement. The franchiser can enter into foreign markets also and enhance his
goodwill and business.
(ii) Regular Income: The franchiser receives a regular income by way of royalty
from the franchisee at no extra cost; as cost of new premises and extra staff is
borne by the franchisee.
(iii) Economical Advertising: Advertising done by the franchiser benefits the
franchisee also. Thus, under franchise, advertising proves very economical, in the
long-run.
(iv) Advantage of Market Feedback: The franchiser gets market feedback about
product popularity, needs, preference of local customers from the franchisees.
Limitations of Franchise:
From the Viewpoint of the Franchiser:
(i) Danger of image tarnishing: If the franchisee does not maintain standards of
quality and service; there is a danger that the goodwill and image of the reputed
franchiser is tarnished.
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ENTREPRENEUR DEVELOPMENT SYBBA 3
Types
1. Product Franchising: This is the earliest type of franchising. Under this, dealers
were given the right to distribute goods for a manufacturer. For this right, the
dealer pays a fee for the right to sell the trademarked goods of the producer.
Product franchising was used, perhaps for the first time, by the Singer
Corporation during the 1800s to distribute its sewing machines. This practice
subsequently became popular in the petroleum and automobile industries also.
2. Manufacturing Franchising: Under this arrangement, the franchisor
(manufacturer) gives the dealer (bottler) the exclusive right to produce and
distribute the product in a particular area. This type of franchising is commonly
used in the soft-drink industry.
3. Business-format Franchising: This is recent type of franchising and is the most
popular one at present. This is the type that most people today mean when they
use the term franchising. In the United States, this form accounts for nearly three-
fourth of all franchised outlets.
Franchise Agreement
A franchise is an agreement between two business partners: the franchisee and
the franchisor. The franchisee is the entrepreneur that is going to buy the
franchise from the larger company, also known as the franchisor. When a
franchisee buys a franchise, they are essentially paying the franchisor for their
name, general business plan, and help in starting and operating the business.
Franchise is a continuing relationship between the parent company (called the
franchiser) and an individual business unit (called the franchisee); under which
the parent company provides a licensed privilege to the business unit to use its
trade mark, in return for a royalty payment made to the parent company.
The franchise agreement is the document which underpins your relationship with
your franchisor.
Grant : This is where the franchisor gives you the right to operate your business
using the franchisor's system which includes its manual and intellectual property
(i.e. brand name and trade marks
Term ; Most grants of franchises are only of a limited period of time. Usually this
period is between 5 to 7 years but can be both longer and shorter.
Fees : Generally speaking there are three types of fees payable by a franchisee
under a franchise agreement initial, ongoing and one off fees. The initial
franchise fee (for the grant of the franchise) (refer cooling off period below) is
payable on signing of the agreement or after the cooling off period has expired.
Ongoing fees such as the royalty (or sometime called franchise fee or franchise
service fee) are payable on a regular basis (usually monthly) to the franchisor for
the continued use of the franchisor's intellectual property and for the support
received from the franchisor.
Training : It is essential that you become familiar with the requirements of the
franchise system before you begin operating your franchise business. The
franchisor will usually have an obligation to provide you with some form of initial
training and you will be required to attend this and complete it to the franchisor's
satisfaction.
Approved Suppliers : You will usually be restricted to selling only those products
and services which have been approved by the franchisor and which have been
purchased from those suppliers which are approved and notified to you by the
franchisor.
under law and includes copyright, trade marks, brand names, patents, logos,
literary works, written texts, and artistic works.
Insurance : The franchisor will require you to take out various types of insurance
in respect of your business (including insurance in respect of the premises, public
liability insurance etc) and most often will require you to provide the franchisor
with evidence on a regular basis that you have this insurance in place. In addition
the franchisor may require the insurance policy to record the fact that the
franchisor is an interested party.
Renewal : More often than not your franchise agreement will provide that you
have a right to renew it at the end of the first term provided you meet certain
terms and conditions.
5. What types of businesses are succeeding these days, with every indication
that they will continue to succeed?
6. What is the kind of business you would like to be in?
7. Is someone offering a franchise in your area of interest, which you believe
will help you to succeed, and that you can afford?
8. Can you work within the limits of a franchise system? Franchisors are not
looking for real entrepreneurs, but more entrepreneurial sergeants who
can fit into the system.
The Franchise Operation
1. What is the franchiser's background and how long has it been offering
franchises?
2. Is the franchise financially stable?
3. How many franchises are operating now?
4. What innovations has the franchiser introduced since first starting?
5. Are you required to meet with existing franchise owners?
6. Does the franchiser provide local on-going training for franchisees for the
length of the contract?
The Product or Service
1. What makes the product or service unique?
2. Is there a reasonable demand for it?
3. Is it a product or service you would buy?
4. Are you allowed to carry other product lines?
5. Is it priced competitively with similar products or services?
6. Can the franchiser guarantee continual supply at a fair price?
7. Are there product warranties or guarantees? Who has responsibility?