Managerial Process Skills

MMS Sem II
Prof M.R.Koshti
Session 10
No. of slides 33
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Questions
1.
2.
3.
4.

From your understanding Define Entrepreneur. (61-66)

What are the roles of an Entrepreneur? (67-72)
What are the reasons for growth of entrepreneurship? (73-78)
What are the benefits of entrepreneurship to the economy? (7984)
5. Why do people start a business? (85-90)
6. What are the advantages of running your own business? (91-96)
7. What are the disadvantages of running your own business? (97102)
8. What are the Entrepreneurial characteristics and skills? (103-108)
9. How will you classify Entrepreneurs? (109-114)
10. Why do Entrepreneurs fail? (115-120)**

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1. Define Entrepreneur
Entrepreneur Derived from the French word
entreprende, which means to undertake
Webster dictionary One who organizes, manages,
and assumes risks of a business or enterprise
BBC English dictionary A person who sets up a
business
Irish economist Richard Cantillion Someone who
takes the risk of running an enterprise by paying a
certain price for securing and using resources to make
a product and reselling the product for an uncertain
price**
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 Austrian economist Joseph Schumpeter An

innovator playing the role of a dynamic
businessman adding material growth to
economic development
Harvard Business School Entrepreneurship
is the process of creating or seizing an
opportunity and pursuing it regardless of the
resources currently controlled.**
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2. Roles of an Entrepreneur
1. An individual who assumes uncertainty
associated risk
2. An individual who supplies financial capital
3. An individual who starts off a new venture
4. A person who owns an enterprise
5. An individual who allocates resources among
alternative uses
6. An individual who employs factors of production
(Man, material, machinery, money,
management)**
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7. An individual who is decision maker

8. A person who has got leadership qualities
9. A person who manages
10. An individual who is an organizer and
coordinator of economic resources
11. An innovative person
12. A person who is a contractor
13. A person who is an arbitrageur**
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3. Reasons for growth of

entrepreneurship
Industry structure Many large companies
would find it much more desirable to promote
ancillaries and vendors than to get in to the
activity directly.
New technologies Instability in the markets led
to decrease of mass production and move
towards flexible specialization. Small technology
based firms are now able to challenge larger
companies still dependent on economies of scale.
Small firms have advantage over large firms in
highly innovative industries.**
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 Deregulation and Privatization Small

entrepreneurship firms are dominant in
sectors that have been recently deregulated.
Many state owned enterprises have been
privatized leading to a greater role for private
sector in general and entrepreneurs in
particular.**

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 Formation of new Business communities

Recent advances in information technology
have made inter-firm coordination relatively
cheaper compared to intra-firm coordination.
Business exchanges such as alibaba.com help
smaller firms to be competitive. Promotes
setting up of new firms in the new-age
business communities.**
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 Increasing demand for variety Increased

wealth has led to increase in the demand for
variety. The increasing demand for new products
is of advantage to smaller firms. Large firms are
not comfortable entering into niche markets.
Services sector Services share in GDP is
growing. The average size of the firms in many
sections of services sector is relatively small.
(Software, business process outsourcing)**
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10

 Government incentives and subsidies

Central subsidy, state incentives (interst-free
loans), income tax holidays, sales tax breaks,
specific ministry incentives, MSFC, MSSIDC,
etc.
Increasing flow of information Euro Asia,
exports medical formulations developed using
information on the net. Easy
communication**
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11

 Easier access to resources Today it is easier

for the Entrepreneur to access debt and
equity finance than before. It is easy to
contact raw material suppliers and dealers of
capital goods. Many business services are
tailored to suit the needs of small business
owners. E.g. DHL, UPS
Entrepreneurial Education Institutes,
universities offer courses**
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12

 Return on innovation Strengthening of

Intellectual Property Rights (IPR) has acted as
a major boost to Entrepreneurs willing to take
risk on innovation. They do not need backing
of a large corporation.
Entrepreneur as hero People like Narayan
Moorthy have become heroes to the middle
class. They inspire lot of people to become
Entrepreneurs.**
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13

 High regards for self employment to achieve

variety of personal goals
Rising dissatisfaction at job
Acceptance of ex- Entrepreneurs in the job
market**

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14

4. Benefits of entrepreneurship to the

economy?
Job creation Large firms are downsizing.
New ventures need quality manpower.
Economic growth Gazelles (20% growth
every year) contribute for high growth rate for
economy, ensures utilization of resources
New Technology Entrepreneurial firm are
usually faster to come to market with radical
new technologies. This leads to a better
standard of living for the whole society.**
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15

 Serving small markets Large firms, with

their crippling overheads, do not find it
profitable to serve small populations
(Distribution). This is where small
Entrepreneurial firms serve an invaluable role
by providing specialized products to niche
customers.**

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16

5. Why do people start a business?

Control You do not like to have a boss. You
can make your own decisions. (However
realize that many of your decisions will be
dictated by government regulations,
customers, and even your own employees)
But having your own business gives you far
greater opportunity to exercise your own free
will**
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17

The Idea
You have this one great idea or a product that
will revolutionalize the world. No one else is
currently offering it and you think you should
not waste time in going ahead.**

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Flexibility
You want a schedule that allows you to work
when you want to and to spend time with
your kids when you want to. Running your
own business does give you the flexibility if
you want it but now probably you will spend
much more time on the job. Remember, now
the buck stops with you.**

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19

Money
It is the oldest and most common reason.
Most people start a business because they
feel that it is the only logical way to become
wealthy.
Most of the wealthy people have got their
money through business, either by starting
one or by inheriting one.
Leave a legacy**
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20

6. Advantages of running your own

business

You are the boss

All profits are yours
There will be a great variety in roles and tasks
Increase self confidence
Work can be very satisfying
Success will give you immense satisfaction**

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7. Disadvantages of running your own

business

You are alone

All decisions are yours
All losses are yours
Work may not be satisfying (quit?)
You will need to put in long hours
Lack of success will affect self esteem (Sheth,
Shree Raj Travels)
Exiting the business is difficult
Pressures will affect social and family life
Succession issues**
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8. Entrepreneurial characteristics and

skills
Timsons (1994)
1. Commitment and determination
2. Leadership
3. Opportunity Obsession
4. Tolerance of risk, ambiguity and uncertainty
5. Creativity, self-reliance, and ability to adapt
6. Motivation to excel**
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23

Characteristics
Bianchi(1993)
1. Being an offspring of self-employed parents
2. Being fired from more than one job
3. Being an immigrant or child of immigrant
4. Previous employment in a firm with more
than 100 people
5. Being the eldest child in the family
6. Being a college graduate**
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Skills

Creativity and opportunity evaluation

Real-time strategy and decision making
Comfort with change and chaos
Teamwork
Evangelicalism, selling, negotiation and
motivation through influence and persuasion
Oral and written communication
Basics of start up finance, accounting and law**
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Attitudinal adjustments

Comfortable with lifestyle changes

Willingness to break, bend, stretch laws
Patience to start from scratch
Comfortable with confrontation
Prepared to make enemies
Dealing with failure
Willingness to learn**
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9. Types of Entrepreneurs
Based on the timing of the venture creation
Early starters start the venture with little or no
full time work experience (from business families
generally, exception Suhas Gopinath, who started
Global Inc. in USA at the age of 14, as Indian laws
did not permit a minor to run a company)
Experienced Spent few years in family business
or in a large company. Business is related to his
experience. (Narayan Moorty 35 yrs age)
Mature Very senior people e.g. CEO quit a big
company to start on their own**
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Classification based on socio-cultural

variables
First generation Entrepreneurs Their parents /
families were never in a business (Dhirubhai
Ambani)
Entrepreneurs from business families Marwari,
Gujrati, Parsee, Sindhi etc. Tatas, Birlas, Wadias
Minority Entrepreneurs Small ethnic groups
that have traditionally not ventured in to
business. Set an example for rest in the
community
Women Entrepreneurs Kiran Majumdar Shaw
(Bicon)**
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Classification based on Entrepreneurial

activity
Novice Someone who has started his first
Entrepreneurial venture
Serial Entrepreneur Devoted to one venture at a
time but ultimately starts many. It is the process of
starting that excites the person. Once the business is
established, the serial Entrepreneur may loose interest
and think of selling and moving on.
Portfolio Entrepreneur Runs number of businesses.
Strategy of spreading risk, person excited by various
opportunities, synergies between ventures**

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10. Why do Entrepreneurs fail?

Lack of experienced management
Management team is usually new to this role of
being in charge of the fortune of a whole
company
Few trained or experienced manpower People
do not want to take risky job opportunity
Poor financial management Operational issues
keep the Entrepreneur too busy to pay attention
to financial management
Rapid growth Sudden unplanned growth puts
stress on production, marketing etc**
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 Lack of business linkages Relationship with

vendors, customers and others is key. New
venture has to develop them from scratch.
Weak marketing efforts Entrepreneurial firms
are reluctant to spend on marketing efforts
Lack of information Quality of information
available to large companies is far superior to
that available to new small Entrepreneurial
ventures (Market forecast)**
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 Incorrect pricing The price is most likely to be close

to that of competition. However there are many
sophisticated pricing policies a new venture can adopt.
Improper inventory control Understocking, or
overstocking of raw material
Short term outlook New ventures face numerical
problems on regular basis sometimes threatening their
existence. In such cases the management and the
employees focus on surviving the immediate crisis and
long term vision and strategy are soon forgotten**

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Assignment
The students who were absent for the first
class test / assignment can take
questionnaires (6) and submit on Saturday.
Will loose 1 mark for delay.**

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