Enterperneurship and Notes

EntrepreneurshipMGT602 VU Table of Contents Lesson No. Title / Topic 1 intro 2 The Nature and Importance of Entrepreneurship 3 go-aheadrial everywherelordcess/ function up 4 The enterpriserial and Intrapreneurial look 5 The Entrepreneurial and Intrapreneurial Mind (Contd ) 6 The Entrepreneurial and Intrapreneurial Mind (Contd ) 7 The Entrepreneurial and Intrapreneurial Mind (Contd ) 8 The somebody Entrepreneur 9 The Individual Entrepreneur (Contd ) 10 The Individual Entrepreneur (Contd 11 International Entrepreneurial Opportwholeies 12 International Entrepreneurial Opportunities 13 International Entrepreneurial Opportunities (Contd ) 14 International Entrepreneurial Opportunities (Contd ) 15 International Entrepreneurial Opportunities (Contd ) 16 Creativity and vexation Idea 17 Creativity and the Business Idea 18 Legal Issues for the Entrepreneur 19 Legal Issues for Entrepreneur (Contd ) 20 Legal Issues for the Entrepreneur (Contd ) 21 Creating and show age the gauge 22 Creating and jumping the Business Venture (Contd 23 Creating and Starting the Venture (Continued) 24 Creating and Starting the Business final ca utilization Continued) 25 The merchandising blueprint 26 The Marketing Mix 27 The Organizational Plan 28 The Organizational Plan (Continued) 29 The Organization Plan (Contd ) 30 The Financial Plan 31 The Financial Plan (Continued ) 32 Pro Forma Sources and Uses of Funds 33 Pro remainsa Sources and Uses of Funds 34 Bank loaning Decision 35 Sources of jacket 36 Sources of Capital (Contd ) 37 Capital Sources in Pakistan Preparing for the clean Venture Launch Early Management Decisions 38 (Contd ) Page No. 3 06 08 13 15 18 20 22 24 26 29 33 35 37 39 40 43 46 49 52 54 56 58 60 62 65 68 70 72 75 77 81 83 85 87 89 91 95 secure practical(prenominal) University of Pakistan 1 EntrepreneurshipMGT602 VU 39 Preparing for the clean Venture Launch Early Management Decisions (Contd ) 40 Preparing for the New Venture Launch Early Management Decis ions (Contd ) 41 Preparing for the New Venture Launch Early Management Decisions (Contd ) 96 97 99 42 Preparing for the New Venture Launch Early Management Decisions (Contd ) 43 New Venture Expansion Strategies and Issues 44 New Venture Expansion Strategies and Issues (Contd 45 Entrepreneurship and Pakistan 102 103 105 108 procure practical(prenominal) University of Pakistan 2 EntrepreneurshipMGT602 INTRODUCTION Lesson 01 LEARNING OBJECTIVES 1. 2. 3. 4. 5. VU 1. To instal the concept of enterprisership and its historical reading. 2. To explicate the enterpriserial ratiocination touch. 3. To account the basic types of start-up record chancess. 4. To exempt the intent of entrepreneurship in sparing acculturation. 5. To treat the morality and racial responsibility of entrepreneurs. reputation AND DEVELOPMENT OF enterpriserSHIP The term entrepreneur comes from the French and translates mingled with-taker or go-between. Earliest Period In this period the m unityy person (forerunner of the smashingist) entered into a contract with the go-between to sell his unspoilts. date the jacket cr takeist was a peaceful assay beargonr, the merchant bore severally the physical and emotional stakes. affectionateness Ages In this age the term entrepreneur was used to describe twain(prenominal) an actor and a person who managed large resultion computes. In much(prenominal) large convergenceion projects, this person did non take both(prenominal) risks, managing the project with the resources departd. A typical entrepreneur was the cleric who managed architectural projects. 7th century In the 17th century the entrepreneur was a person who entered into a contract with the strengthenment to per mastermind a service Richard Cantillon, a far-famed economist of the 1700s, go up theories of the entrepreneur and is regarded as the founder of the term. He viewed the entrepreneur as a risk taker who buys at original price and sells at an u ncertain price, thusly operating at a risk. 18th cytosine In the 18th century the person with capital was described from the one who driveed capital. In separate discourses, entrepreneur was distinguished from the capital provider. umpteen of the inventions essential during this time as was the case with the inventions of Eli Whitney and Thomas Edison were unable to pay invention themselves. Both were capital users (entrepreneurs), non capital providers ( casualty capitalists. ) Whitney used expropriated crget property. Edison brocaded capital from private sources. A run a risk capitalist is a lord coin manager who organises risk enthronements from a pool of legality capital to obtain a high rate of re contort on investments. nineteenth and 20th Centuries In the late 19th and early 20th centuries, entrepreneurs were viewed much than(prenominal) a great deal than not from an economic perspective.The entrepreneur contributes his own initiative, skill and ingenui ty in patternning, organizing and administering the enterprise, take for granted the chance of loss and chance upon. Andrew Carnegie is one of the best examples of this definition, expression the Ameri gutter actualise effort on of the wonders of industrial world, primarily with his competitiveness preferably than creativity. In the middle of the 20th century, the notion of an entrepreneur as an groundbreaker was launch. Copyright realistic University of Pakistan 3 EntrepreneurshipMGT602Innovation, the act of introducing something unseasoned, is one of the approximately serious tasks for the entrepreneur. VU Edward Harriman and John Pierpont Morgan argon examples of this type of entrepreneur. Edward reorganized the Ontario and southern railroad by dint of and with the northern pacific trust and john developed his large swaning manse by reorganizing and financing the nations industries. This ability to innovate is an reason that distinguishes human bes from oth er creatures and can be observed by dint ofout tale. commentary OF ENTREPRENEUR The concept of entrepreneurship from a personal perspective has been explored in this century.This geographic expedition is reflected in the following tierce definitions of an entrepreneur In almost all definitions of entrepreneurship, there is agreement that we ar talking about a multifariousness of behavior that implicates 1. Initiative victorious 2. The organizing and reorganizing or social/economic mechanisms to turn resources and seats to practical account. 3. The acceptance of risk or failure. To an economist, an entrepreneur is one who brings resources, labor, materials, and other assets into combinations that make their value greater than before, and one who introduces changes, groundings, and a naked enact.To a psychologist, much(prenominal) a person is typically driven by certain forces- the bespeak to obtain something, to experiment, to accomplish or perhaps to escape the cou ntenance of others. Entrepreneurship is the dynamic move of creating incremental wealth. Our definition of entrepreneurship contains four aspects 1. Entrepreneurship involves the creation deal. 2. It requires the awe of the necessary time and effort. 3. It involves assuming the necessary risks. 4. The rewards of being an entrepreneur be independence, personal satisfaction, and monetary reward.For the person who genuinely starts his or her own personal office of credit there is a high failure rate due to low sales, intense competition, overleap of capital or lack of managerial ability. THE ENTR EPRENEURIAL determination PROCESS (Deciding to make an entrepreneur by leaving bring in application ) Many man-to-mans chip in difficulty bringing their themes to the grocery and creating naked post entrepreneurship and the actual entrepreneurial decisions get resulted in several million fashionrnistic line of merchandisees being started throughout the world.Although n o one k instantlys the exact number in the United States. Indeed, millions of chances be bounded despite recession, in unconditionedion, high absorb rates, and lack of infrastructure, economic uncertainty and the high fortune of failure The entrepreneurial decision work at entails a movement from something to something a movement from a surrender tone style to embodimenting a late enterprise. To leave a extradite live-style to cause something untried-fangled comes from a negative force folie. Many companies argon formed by people who know retired, moved, or been fired.Another cause of disruption Copyright realistic University of Pakistan 4 EntrepreneurshipMGT602 is completing an educational degree. The decision to start a cutting company occurs when an man-to-man perceives that forming a new enterprise is both worthy and executable. VU reveal call Breakthrough entrys A new product with some technological change Business ethics The get word of behavior and m orals in a vexation situation sex appeal of new risk fundamental law Aspects of a situation that make it desirable to start a new company.Entrepreneur Individual who takes risks and starts something new Entrepreneur as an innovator An individual ontogenesis something unique Entrepreneurial decision fulfil Deciding to become an entrepreneur by leaving ease up bodily function Entrepreneurship Process of creating something new and assuming the risks and rewards Copyright virtual(prenominal) University of Pakistan 5 EntrepreneurshipMGT602 THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP Lesson 02 VU LEARNING OBJECTIVES 1. To introduce the concept of entrepreneurship and its historical development. . To justify the entrepreneurial decision process. Desirability of New Venture Formation (Aspects of a situation that make it desirable to start a new company) The perception that showtime a new company is desirable results from an individuals civilization, subculture, family, teache rs and peers. American culture places a high value on being your own boss, being a success and making cash wherefore, it is not impress to find a high rate of company fundamental law in the United States.On the other hand in some countries making money is not as wanted and failure may be a disgwash. The rate of ancestry formation in these countries is not as high. Many subcultures that shape value systems operate within a cultural framework. Studies doom that a high percentage of founders of companies had fathers and/or mothers who valued independence. Encouragement to form a company is excessively gained from teachers, who can significantly influence individuals. An sector having a wet educational base is as well a prerequisite for entrepreneurial activity.Peers argon primal, similarly, as is an theatre of operations with an entrepreneurial pool and peer-meeting place. happening of New Venture Formation (Factors making it possible to create a new impale) Although t he desire of new estimate formation derived from the individuals culture, subculture, family, teachers and peers choose to be present before any action is taken, the flash feature necessary centers around this question What makes it possible to form a new company? Formal education nd previous headache experience give a potential drop entrepreneur the skills needed to form and manage a new enterprise. Although educational systems ar historic in providing the needed line of descent knowledge, individual will be to be much in(predicate) in forming in fields in which they collapse worked. The government excessively contributes by providing the infrastructure to help a new venture. The market moldiness(prenominal) be large enough and the entrepreneur mustiness(prenominal) shoot the marketing know-how to put together the entire package. Finally, fiscal resources must be readily gettable.Although most start-up money comes from personal savings, credit, and friends, but there is practically a need for additional capital. happencapital availability plays an essential role in the development and harvest-feast of entrepreneurial activity. Copyright Virtual University of Pakistan 6 EntrepreneurshipMGT602 VU KEY TERMS Foundation companies A type of company formed from look into and development that popularly does not go public. Gazelles Very high beatth ventures. Government as an innovator A government active in commercializing technology High-potential ventures.A venture that has high increment potential and therefore mystifys great investor sideline Entrepreneurship Entrepreneurship within an live business structure iterative aspect synthesis The intersection of knowledge and social need that starts the product development process Lifestyle starchy A small venture that actualizes the owners and ordinarily does not grow Ordinary innovation Z new product with fine technological change Possibility of new venture formation Factors making it possible to create a new venture Copyright Virtual University of Pakistan 7 EntrepreneurshipMGT602 ENTREPRENEURIAL PROCESS/START UPS Lesson 03 LEARNING OBJECTIVES 1. To happen upon the basic types of start-up ventures. 2. To explain the role of entrepreneurship in economic development 3. To plow the ethics and racial responsibility of TYPES OF START-UPS Life-Style Firms A life-style pie-eyed exists primarily to get the owners and usually has little product probability.This type of coc identifyed may grow after several years to 30 or 40 employees. Foundation Companies VU A type of company formed from inquiry and development that usually does not go public. This unwaveringly can grow in flipper to ten years from 40 to 400 employees. high-tension Venture A venture has high growth potential and therefore squander gots great investor interest. The company may start out like a foundation company, but its growth is far much rapid. After five to ten years the company could employ around 500 employees.These firms argon also called gazelles and be most important for the economic development of an area ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT The role of entrepreneurship in economic development involves initiating change in the structure of business and society. One opening of economic growth depicts innovation as the gravestone, not completely in developing new products, but also in stimulating investment interest. The new capital created expands the capacity for growth (supply side), and new spending utilizes the new capacity and output (demand side. In spite of the importance of investment and innovation in the economic development of an area, there is still a lack of substantiateing of few factors which are as follows The product-evolution process is the process through which innovation develops and commercializes through entrepreneurial activity, which in turn stimulates economic growth. It begins with knowledge in the base technology and ends with products or services gettable in the marketplace. The critical point in the process is the intersection of knowledge and a recognized social need, called the iterative synthesis.This point often fails to evolve into a marketable innovation. Most innovations introduced in the market are ordinary innovations, with little uniqueness. scientific innovations refer to new products with significant technological forwardings. Breakthrough innovations cogitate the development of new products with some technological change. Regard little of the level of uniqueness or technology, each innovation evolves into and develops towards commercialization through one of three mechanisms the government, entrepreneurship, or entrepreneurship.Entrepreneurship has assisted in revitalizing areas of the Copyright Virtual University of Pakistan 8 EntrepreneurshipMGT602 VU inner city. Individuals in inner-city areas can relate to the concept and see it as a possibility for changing thei r present situation. GOVERNMENT AS AN innovator A government active in commercializing technology is known as an innovative government. Commercializing technology is frequently called technology transfer. However, few inventions resulting from government-sponsored interrogation discombobulate reached the commercial market.Most of the by-products from scientific investigate gull little application to any social need. The government lacks the business skills needed for successful commercialization. Government bureaucracy and red tape also often inhibit the timely formation of the business. Recently, federal labs maintain been inevitable to commercialize some of their technology each year and some are providing entrepreneurial training Intrapreneurship Intrapreneurship refers to entrepreneurship within an existing formation or business structure. Existing businesses build the financial resources, business skills, and arketing and distribution system to commercialize innovatio n successfully. Often the bureaucratic structure, strain on hapless-term profits, and incorporate scheme inhibit creativity. Some corporations acquire tried to establish an Entrepreneurial spirit in their establishment, some in the form of strategic business units (SBUs. ) Intrapreneurship can also bridge the spreading between science and the marketplace. It is the practice of using entrepreneurial skills without winning on the risks or accountability associated with entrepreneurial activities.It is practiced by employees within an established organization using a systemized business model. Employees, perhaps engaged in a special project within a larger firm are supposed to be digest as entrepreneurs, even though they gain the resources and capabilities of the larger firm to draw upon. Capturing the dynamic reputation of entrepreneurial counselling (trying things until successful, learning from failures, attempting to conserve resources, etc. ) adds to the potential of distinctly static organizations without exposing those employees or self mployed people to the risks or accountability normally associated with entrepreneurial failure. Employee Intrapreneur An employee Intrapreneur is the person who focuses on innovation and creativity and who transforms a dream or an idea into a profitable venture, by operating within the organisational purlieu. Thus, Intrapreneurs are inside entrepreneurs who follow the goal of the organization. Employees, perhaps engaged in a special project within a larger firm are supposed to be amaze as entrepreneurs, even though they have the resources, capabilities and nourishion of the larger firm to draw upon.Capturing a little of the dynamic nature of entrepreneurial direction (trying things until successful, learning from failures, attempting to conserve resources, etc. ) adds to the potential of an otherwise static organizations without exposing those employees to the risks or accountability normally associated wit h entrepreneurial failure Entrepreneurship The troika method for bridging the gap between the science and the marketplace is via Copyright Virtual University of Pakistan 9 EntrepreneurshipMGT602 VU entrepreneurship. Many entrepreneurs have difficult time bridging this gap and creating new ventures.They may often lack managerial skills, marketing capabilities, or financial resources. They frequently do not know how to interface with banks, suppliers, customers, and distributors. Yet, entrepreneurship is the most utile method for bridging the gap and creating new enterprises, these activities affect an areas economy by building the economic base and providing agate lines. ENTREPRENEURIAL CAREERS AND EDUCATION Since 1985 there has been an increased interest in entrepreneurial biographys fostered by factors such as increased media reporting of entrepreneurs and employment shifts.A conceptual model for concord entrepreneurial vocations views the line of movement power points as interacting with other stages and events in the individuals life, the life-cycle come. This set out conceptualizes entrepreneurial careers in nine categories. 1. Educational milieu 2. The individuals nature 3. puerility family environment 4. Employment history 5. braggy development history 6. Adult family/non-work history 7. Current work situation 8. The individuals on-line(prenominal) perspective 9.The current family situation Although there exist a coarse perception that entrepreneur are less educated than the general race however studies have found entrepreneurs boilers suit and fe antheral entrepreneurs in token, are far to a greater extent educated than the general population. However, this education sometimes does not develop the detail skills needed in the venture, especially for women entrepreneurs. Childhood influences have been explored, particularly in damage of values and the individuals personality . The traits most frequently researched are the need for achievement, locus of hold back, risk-taking, and gender identity.The research on the childhood family environment of the entrepreneur has had more definite results. Entrepreneurs melt to have self-employed fathers, and some also have entrepreneurial mothers. The family plays an important role in establishing the desirableness of entrepreneurship as a career. Employment history also has an opposition on entrepreneur careers in both validatory and a negative sense. Entrepreneurs tend to have a higher(prenominal) probability of success when the venture created is in their field of experience. Negative displacement (such as dissatisfaction with various aspects of ones job) also set aheads entrepreneurship.Although no definite research has been done on the expectant development history of entrepreneurs, it appears to also affect entrepreneurs careers. Ones development history has somewhat more of an impact on women, since they tend to start businesses at a later stage in life. a t that place is a lack of data on adult family/non-work history and the available data adds little understanding towards entrepreneurial career development. Entrepreneurs are known for their strong work values, their long workdays, and their dominant solicitude style. They tend to fall in love with the organization and will release almost Copyright Virtual University of Pakistan 10 EntrepreneurshipMGT602 VU anything in auberge for it to survive. firearm in college, few hereafter entrepreneurs realize that they will pursue entrepreneurship as their major life goal. Relatively few individuals will start a business immediately after graduation. Entrepreneurship education is a fast ontogenesis area in colleges and universities. While the courses vary by university, there is a great commonality, especially in the initial few courses. The skills required by entrepreneurs can be classified in to three main areas 1.Technical skills involve such things as writing, listening, oral prese ntations, coaching, and technical know-how. 2. Business commission skills include those areas involved in starting, developing and managing any enterprise. 3. Personal entrepreneurial skills incompatibleiate an entrepreneur from a manager and include inner run (discipline), risk taking, innovativeness, persistence, prophet leadership, and being change oriented. These skills and objectives form the basis of the modular approach to an entrepreneurship curriculum.Today entrepreneurs are recognizing the need to learn some of the science of guidance in an MBA program in order to grow their businesses effectively in the global environment. ETHICS AND SOCIAL RESPONSIBILITY OF ENTREPRENEURS The entrepreneur must establish a balance between ethical exigencies, economic expediency, and social responsibility. A managers attitudes concerning unified responsibility tend to be stand-inive of laws and professional codes of ethics. Entrepreneurs have few reference persons, role models, and developed internal ethics codes.Entrepreneurs are tender to peers pressure and social norms in the community as well as pressures from their companies. While ethics refers to the study of whatever is right and capable for humans, business ethics concerns itself with the investigation of business practices in light of human values. The word ethics stems from the Greek ethos, meaning custom and usage. get upment of Our Ethical Concepts Socrates, Plato, and Aristotle provide the earliest writings dealing with ethical conceptions earlier writings involving moral codes can be found in both Judaism and Hinduism.American attitudes on ethics result from three principle influences Judeo-Christian heritage, a belief in individualism and opportunities based on ability rather than social status. look on business ethics can be broken surmount into four broad classifications 1. Pedagogically-oriented inquiry 2. Theory-building without empirical testing 3. Empirical research, standard the attitudes and ethical beliefs of students and academic faculty 4.Empirical research within business environments THE prospective OF ENTREPRENE URSHIP In spite of the ends in definition of entrepreneurship, there are common aspects such as risk taking, creativity, independence, and rewards. Entrepreneurship is currently being embraced by educational institutions, governments, societies, and corporations. Schools are increasing their emphasis on entrepreneurship in terms of courses and academic research. In Europe many universities have started programs in entrepreneurship. thither has also been an increase in academic research, endowed chairs and centers of Copyright Virtual University of Pakistan 11 EntrepreneurshipMGT602 VU entrepreneurial activity. Governments have also promoted the growth of entrepreneurship. Individuals are back up to form new businesses and provided tax incentives, roads, and a communications system to facilitate this originative process. Some state govern ments are developing strategies for fostering entrepreneurial activity. The venture capital industry has benefited from lowering of capital gains tax rates and more relaxed rules regarding pension fund investment. Societys reliever of entrepreneurship is critical in providing motivation and public support.The media has played a powerful role in developing public support. Media coverage uplifts the image of the entrepreneur and growth companies. Articles have appeared in newspapers such as New York Times, The Wall Street Journal, and the capital of the United States Post. Business magazines such as Barrons, Business Week, Forbes, and Fortune have provided coverage. Magazines such as Black Enterprise, Entrepreneur, Inc. , and Venture focus on issues of the entrepreneurial process. telly on both a national and local level has highlighted entrepreneurship. rotund companies will continue to have a special interest in Entrepreneurship in the future.The largest 15 companies account for over 20 percent of the number U. S. research and development. Other companies will create more new businesses through Entrepreneurship. KEY TERMS Product-evolution process Process for developing and commercializing an innovation Risk taking Taking calculated chances in creating and running a venture. Technological innovation A new product with significant technological advancement Technology transfer Commercializing the technology in the laboratories into new products Copyright Virtual University of Pakistan 12 EntrepreneurshipMGT602THE ENTREPRENEURIAL AND INTRAPRENEURIAL judicial decision LEARNING OBJECTIV ES 1. To explain the aspects of the entrepreneurial process. 2. To explain the differences between entrepreneurial and managerial domains. 3. To explain the organizational environment conducive for entrepreneurship. 4. To identify the general device characteristics of an Entrepreneur. 5. To explain the process of establishing entrepreneurship in an organization. VU Lesson 04 ENTREPR E NEURIAL PROCESS The entrepreneurial process involves finding, evaluating, and developing an opportunity by overcoming the strong forces that resist the creation of something new. course 1 Identifying and Evaluating the Opportunity Most good business opportunities result from an entrepreneur being alert to possibilities. Some sources are often fruitful, including consumers and business associates. Channel segments of the distribution system-retailers, wholesalers or manufacturers reps-are also helpful. Technically-oriented individuals often identify business opportunities when operative on other projects. all(prenominal) opportunity must be carefully screened and evaluated-this is the most critical piece of the entrepreneurial process. . The evaluation process involves looking at b. The creation and length of the opportunity c. Its real and perceived value d. Its risks and return. e. Its fit with the skills and goals of the entrepreneur f. Its differential advantage in its competitive environment It is important to understand the cause of the opportunity, as the resulting opportunity may have a different market size and time dimension. The market size and the length of the windowpane of opportunity are the primarily bases for determining risks and rewards.The risks reflect the market, competition, technology, and amount of capital involved. The amount of capital forms the basis for the return and rewards. The return and reward of the present opportunity postulate to be viewed in light of any possible subsequent opportunities as well. The opportunity must fit the personal skills and goals of the entrepreneur. The entrepreneur must be able to put forth the necessary time and effort required for the venture to succeed. One must believe in the opportunity enough to make the necessary sacrifices.Opportunity compendium, or an opportunity judgment plan, should focus on the opportunity and provide the basis to make the decision, including a. A descrip tion of the product or service b. An assessment of the opportunity c. judging of the entrepreneur and the team up d. Specifications of all the activities and resources needed e. The source of capital to finance the initial venture The most difficult aspect of opportunity analysis is the assessment of the opportunity. Phase 2 Develop a Business Plan A good business plan must be developed in order to exploit the opportunity defined.A good business plan is important in developing the opportunity and in determining the resources required, obtaining those resources and successfully managing the venture. Copyright Virtual University of Pakistan 13 EntrepreneurshipMGT602 VU Phase 3 Determine the Resources Required. Assessing the resources needed starts with an appraisal of the entrepreneurs present resources. Any resources that are critical must be distinguished from those that are just helpful. Care must be taken not to underestimate the amount and variety of resources needed. getting needed resources, while giving up as little control as possible, is difficult.The entrepreneur should try to maintain as large an will power position as possible, particularly in the start-up stage. As the business develops, more funds will probably be needed, requiring more ownership be relinquished. Alternative resource suppliers should be identified, along with their needs and desires, in order to structure a deal with the lowest cost and loss of control. Phase 4 Manage the Enterprise. The entrepreneur must employ these resources through carrying into action of the business plan. This involves go acrossing a guidance structure, as well as identifying a control system.KEY TERMS administrative domain The slipway managers make decisions Business plan The description of the future direction of the business Corporate culture The environment of a particular organization Entrepreneurial domain The ways entrepreneurs make decisions Entrepreneurial process The process through which a new venture is created by an entrepreneur Entrepreneurial culture The environment of an entrepreneurial-oriented organization Entrepreneurship Entrepreneurship within an existing business organization Opportunity identification The process by which an entrepreneur comes up with the opportunity for a new venture Opportunity parameters Barriers to new product creation and development Top management commitment Managers in an organization strongly supporting entrepreneurship handed-down managers Managers in a non-entrepreneurial-oriented organization Window of opportunity The time period available for creating the new venture Copyright Virtual University of Pakistan 14 EntrepreneurshipMGT602 VUTHE ENTREPRENEURIAL AND INTRAPRENEURIAL nous (continued) Lesson 05 LEARNING OBJECTIVES 1. To explain the aspects of the entrepreneurial process. 2. To explain the differences between entrepreneurial and managerial domains. 3. To explain the organizational environment conducive for entrepreneu rship. 4. To identify the general characteristics of an entrepreneur. 5. To explain the process of establishing entrepreneurship in an organization. MANAGERIAL VERSUS ENTREPRENEURIAL DECISION MAKING The difference between the entrepreneurial and managerial styles involves five business dimensions. Strategic predilection The entrepreneurs strategic orientation depends on his or her perception of the opportunity.This orientation is most important when other opportunities have diminishing returns go with by rapid changes in technology, consumer economies, social values or policy-making rules. When the use of planning systems is the strategic orientation, there is more pressure for the administrative domain to be operant. Commitment to Opportunity The entrepreneurial domainis pressured by the need for action and has a short time span in terms of opportunity commitment. The administrative domain (the ways mangers make decisions) is not only slow to act on an opportunity, but the commit ment is usually for a longer time span. Commitment of Resources An entrepreneur is used to having resources committed at periodic intervals, often based on certain tasks or objectives being reached.In acquiring these resources the entrepreneur is forced to achieve significant milestones using really few resources. In the administrative domain, the commitment of resources is for the total amount needed. Administrative-oriented individuals receive personal rewards by effectively administering the resources under their control. Control of Resources The administrator is rewarded by effective resource administration and has a drive to own or accumulate as many resources as possible. The entrepreneur, under pressure of express resources, strives to rent resources on an as-needed basis. Managerial Structure In the administrative domain, the organizational structure is formalized and hierarchical in nature.The entrepreneur employs a flat organizational structure with informal profits. CA USES FOR RECENT INTEREST IN INTRAPRENEURSHIP Copyright Virtual University of Pakistan 15 EntrepreneurshipMGT602 VU Interest in intrapreneurship has resulted from events occurring on social, cultural, and business levels. There is an increasing interest in doing your own thing. Individuals frequently desire to create something of their own. They want responsibility and want more freedom in their organizations. defeat can develop and result in the employee becoming less productive or leaving the organization. This has recently caused more discontent in structured organizations.When meaning is not provided within the organization, individuals often search for an institution, such as entrepreneurship, that will provide it. Intrapreneurship is one method for stimulating and capitalizing on those who entail that something can be done differently and better, such as xerox Corporations commitment to Xerox Technology Ventures. It is important to initiate the intrapreneurial spirit in a n organization in order to innovate and grow. In a large organization businesss occur that thwart creativity and innovation. This growth and diversity that can result are critical, since large corporations are more efficient in a competitive market than are little firms.The resistance against flexibility, growth, and diversification can be overcome by developing a spirit of entrepreneurship, called Intrapreneurship, within the existing organization. There are social, cultural, and business pressures for Entrepreneurship. Hyper competition has forced U. S. companies to focus on new product development and increased productivity. Reductions in large corporations staff are being absorbed in the workforce, particularly in small businesses. Entrepreneurial endeavors consist of four key elements. 1. New business venturing refers to the creation of new business within an existing organization. 2. Organizational innovativeness refers to product and service innovation with an emphasis on d evelopment and innovation in technology. 3.Self-renewal reflects the transformation of organizations through the renewal of the key ideas on which they are built. 4. Proactiveness includes initiative and risk taking, as well as competitive aggressiveness KEY TERMS Administrative domain The ways managers make decisions Business plan The description of the future direction of the business Corporate culture The environment of a particular organization Entrepreneurial domain The ways entrepreneurs make decisions Entrepreneurial process The process through which a new venture is created by an entrepreneur Entrepreneurial culture The environment of an entrepreneurial-oriented organization Entrepreneurship Copyright Virtual University of Pakistan 16 EntrepreneurshipMGT602Entrepreneurship within an existing business organization Opportunity identification The process by which an entrepreneur comes up with the opportunity for a new venture Opportunity parameters Barriers to new product crea tion and development Top management commitment Managers in an organization strongly supporting Entrepreneurship Traditional managers Managers in a non-entrepreneurial-oriented organization Window of opportunity The time period available for creating the new venture VU Copyright Virtual University of Pakistan 17 EntrepreneurshipMGT602 VU THE ENTREPRENEURIAL AND INTRAPRENEURIAL spirit (continued) Lesson 06 LEARNING OBJECTIVES 1. 2. 3. 4. 5. To explain the aspects of the entrepreneurial process. To explain the differences between entrepreneurial and managerial domains. To explain the organizational environment conducive for entrepreneurship. To identify the general characteristics of an entrepreneur. To explain the process of establishing entrepreneurship in an organization.CORPORATE VERSUS INTRAPRENEURIAL CULTURE Smaller, aggressive, entrepreneurial firms are developing more new products and becoming dominant in certain markets. Many companies are attempting to create the same spiri t, culture, and rewards of entrepreneurship in their organizations. The typical corporate culture has a climate and reward system that favors conservative decision making. Emphasis is on gathering large amounts of data as the basis for a cerebral decision. Risky decisions are often postponed until hard facts are gathered or a consultant is hired. Often there are so many approvals required that no individual feels personally responsible for the project. The guiding principles in a conventional corporate culture are 1. 2. 3. 4. 5. 6.Follow instructions presumption Do not make mistakes Do not fail Do not take initiative Stay within your turf and protect your backside This restrictive environment is not conducive to creativity, flexibility, and risk taking The guiding principles of intrapreneurs Aspects of an Entrepreneurial culture are quite different 1. 2. 3. 4. 5. Develop visions, goals, and action plans Be rewarded for actions taken Suggest, try, and experiment Create and develop sate responsibility and ownership There are differences in the norms of the two cultures. The traditional culture is hierarchical in nature, with established procedures, lines of authority, and control mechanisms. These support the present corporate culture, and do not encourage new venture creation.The culture of an intrapreneurial firm has a flat organizational structure with networking, teamwork, sponsors, and mentors. Close working bloods help establish an atmosphere or trust that facilitates accomplishment of visions. Individuals make suggestions across functional areas, resulting in cross-fertilization of ideas. The two cultures produce different types of individuals and management styles. Copyright Virtual University of Pakistan 18 EntrepreneurshipMGT602 VU Motivation Traditional managers are motivated primarily by promotion and typical corporate rewards. Entrepreneurs and intrapreneurs succeed on independence and the ability to create.Intrapreneurs expect their doing t o be appropriately rewarded. There are also time orientation differences. Managers emphasize the short run, entrepreneurs the long run, and intrapreneurs somewhere in between. Intrapreneurs use a midpoint mode between delegation of managers and direct involvement of entrepreneurs. Entrepreneurs and intrapreneurs are moderate risk takers managers are much more cautious. Most entrepreneurs fail at least(prenominal) once, and Intrapreneurs learn to conceal risky projects from management until the last possible moment. Traditional managers tend to be most concerned about those at higher levels, entrepreneurs serve self and customers, and intrapreneurs add sponsors.CLIMATE FOR INTRAPRENEURSHIP In establishing an Intrapreneurial environment, certain factors and leadership characteristics need to be present. The offshoot of these is that the organization operates on the frontiers of technology. Since research and development are key sources for new product ideas, the firm must operate o n the cutting edge of technology and encourage and supporting new ideas instead of discouraging them. Second is experimentation, or trial and error, is encouraged. Successful new products usually do not appear fully developed instead they evolve. A company wanting to establish an intrapreneurial spirit has to establish an environment that allows mistakes and failures.Without the opportunity to fail, few corporate intrapreneurial ventures will be developed. Third an organization should make sure that there are no initial opportunity parameters, such as turf protection, inhibiting creativity in new product development. Fourth, the resources of the firm need to be available and easily rise to powerible. Often, insufficient funds are allocated not to creating something new but instead to solving a problem that have an immediate effect on the bottom line. Some companies, such as Xerox, 3M, and AT&T have established separate venture capital areas for funding new internal ventures. Fifth a multidisciplinary team approach needs to be encouraged.One key to Intrapreneurial success is the existence of skunkworks involving key people. Developing the needed team work for a new venture is further complicated by the fact that a team members promotion within the corporation is related to performance in the current position, not in the new venture. The corporate environment must establish a long time horizon for evaluating the success of the overall program. Sixth the spirit of intrapreneurship cannot be forced on individuals it must be voluntary. Most managers in a corporation are not open(a) of being successful intrapreneurs. Those who do emerge from this self selection process must be allowed the latitude to carry a project through to completion.An intrapreneur falls in love with the new venture and will do almost anything to ensure its success. The seventh characteristic is a reward system. The intrapreneur needs to be appropriately rewarded for the energy and effort ex pended on the new venture. An equity position in the new venture is one of the best motivational methods. Eight a corporate environment favorable for intrapreneurship has sponsors and champions throughout the organization that supports the creative activity and resulting failures. Finally the intrapreneurial activity must be whole-heartedly back up by top management. Copyright Virtual University of Pakistan 19 EntrepreneurshipMGT602 VUTHE ENTREPRENEURIAL AND INTRAPRENEURIAL MIND (continued) Lesson 07 LEARNING OBJECTIVES 1. 2. 3. 4. 5. To explain the aspects of the entrepreneurial process. To explain the differences between entrepreneurial and managerial domains. To explain the organizational environment conducive for entrepreneurship. To identify the general characteristics of an Entrepreneur. To explain the process of establishing entrepreneurship in an organization. INTRAPRENEURIAL LEADERSHIP CHARACTERISTICS There are certain individual characteristics needed for a person to be successful Entrepreneurs, including 1. Understanding the environment 2. Being visionary and flexible 3. Creating management options 4.Encourage teamwork while employing a multi-disciplined approach 5. Encouraging open discussion 6. Building a coalition of supporters, and prevail An Entrepreneur needs to understand all aspects of the environment. Part of this ability is reflected in individuals level of creativity. Creativity tends to decrease with age and education. The individual must be creative and have a broad understanding of the internal and external environments of the corporation. The intrapreneurial person must be a visionary leader-a person who dreams great dreams. Leadership is the ability to dream great things and relegate them in a way that people say yes to being a part of the dream.To establish a successful new venture, the intrapreneurial leader must have a dream and overcome all obstacles to achieve it. The 3rd necessary characteristic is that the intrapreneur mu st be flexible and create management options. An intrapreneur is open to and encourages change. By challenging the beliefs and assumptions of the corporation, an intrapreneur can create something new in the organization structure. He or she must accept the ability to encourage teamwork and use a multi-disciplined approach. Every new company formation requires a broad range of business skills. The intrapreneur must be a good diplomat to minimize disruption. Open discussion must be encouraged to develop a good team for creating something new.Many corporate managers have forget that frank, open discussion is part of the learning process. A successful venture can be formed only when the team feels the freedom to disagree and to critique an idea. The degree of receptivity among the team depends on the degree of openness of the intrapreneur. Openness leads to a strong coalition of supporters and encouragers. The intrapreneur must encourage each team member, particularly during hard ti mes. A good intrapreneur makes everyone a hero. unaccompanied through persistence will a new venture be created and successful commercialization result. ESTABLISHING INTRAPRENEURSHIP IN THE ORGANIZATION To establish an intrapreneurial environment, the organization must implement a procedure.This can be done internally, but it is easier to use an outsider to facilitate the process. This is particularly authentic when the environment is very traditional. There are some steps involved in it. Step 1 The first step is to secure a commitment to intrapreneurship in the organization by top, upper, and middle management. Without top management commitment, the organization will neer be able to make the necessary changes. Once top management has committed to intrapreneurship for a sufficient length of time, the concept is introduced throughout the organization. This is effectively accomplished through seminars. General guidelines need to be Copyright Virtual University of Pakistan 20 Entre preneurshipMGT602 VU stablished for intrapreneurial venture development. Next, intrapreneurial leaders need to be identified, selected, and trained. Step 2 Ideas and general interest areas should be identified, along with the amount of risk money that is available. The overall expectations and target results should be established, specifying time frame, profitability requirements, and impact of the organization. A mentor/sponsor system needs to be established. Step 3 A company needs to use technology to make itself meteoric and more flexible. Technology has allowed small companies to act like they are Brobdingnagian ones. Large companies can use technology to make them responsive and flexible.Step 4 The organization can use a group of managers to train and deal out their experiences with other members. These sessions should be conducted one day per month for a condition period of time. Information about intrapreneurship and about the companys specific activities should be well p ublicized. Step 5 The organization needs to develop ways to get closer to its customers by tapping the data base, hiring from smaller rivals, and luck the retailer. Step 6 An organization must learn to be more productive with fewer resources. With middle management cutbacks, more control has been precondition to lower levels of the organization. The span of control should be increased. Step 7 The organization needs to establish a strong support structure.Because they do not immediately affect the bottom line, intrapreneurial activities can be overlooked and receive little funding. These ventures require flexible, innovative behavior, with the intrapreneurs having total authority over expenditures and access to funds. Step 8 The support must involve trying the rewards to the performance of the intrapreneurial unit. This encourages team members to work harder and compete more effectively. The equity portion of the payment is particularly difficult to handle. Step 9 The organization needs to implement an evaluation system that allows successful units to expand and unsuccessful ones to be eliminated.PROBLEMS AND palmy EFFORTS Intrapreneurship, also called corporate venturing, is not without problems. One study found that new ventures started within a corporation performed worse than those started independently. Independent start-ups tend to beat corporate start-ups. There are many examples of companies that have successfully use intrapreneurship. 3M allows employees to devote 15 percent of their time to independent projects. After impuissance to recognize the potential of Wozniaks personal computer, Hewlett-Packard has taken steps to take advantage of future opportunities. Even IBM has developed the independent business unit concept. The problems of ntrapreneurship are not insurmountable, and the concept can lead to new products, growth and the development of an entirely new corporate environment and culture. Copyright Virtual University of Pakistan 21 Entr epreneurshipMGT602 THE INDIVIDUAL ENTREPRENEUR Lesson 08 LEARNING OBJECTIV ES 1. To identify some key entrepreneurial touch modalitys and motivations. 2. To identify key elements in an entrepreneurs background. 3. To discuss the importance of role models and support systems. 4. To identify the similarities and differences between manful and egg-producing(prenominal) entrepreneurs. 5. To explain the differences between inventors and entrepreneurs. VU ENTREPR E NEURIAL FEELINGS There is no true entrepreneurial profile- entrepreneurs come from many educational backgrounds, family situations, and work experiences.A potential entrepreneur may presently be a nurse, secretary, assembly line worker, sales person, mechanic, home maker, manager or engineer. A potential entrepreneur can be male or female and of any race or nationality. Locus of Control One concern people have when forming is whether they will be able to sustain the drive and energy required to form something new and to mana ge the new enterprise and make it grow. While research results are inconsistent, internal control seems to be a characteristic of entrepreneurs. Internal beliefs appear to differentiate entrepreneurs from the general public, but not from managers. Managers and entrepreneurs both have an internality tendency. Feelings about Independence and read for Achievement.The entrepreneur also has the need for independence, to do things in his or her own way and time. Another disputed characteristic is the entrepreneurs need for achievement. McClelland specified three attributes as characteristics of entrepreneurs 1. Individual responsibility for solving problems and setting and achieving goals. 2. Moderate risk taking as a function of skill. 3. Knowledge of results of decision/task accomplishment. McClelland cerebrate that a high need for achievement leads individuals to engage in entrepreneurial behavior, although other studies have been inconsistent. Risk Taking Risk taking seems a part o f the entrepreneurial process.However, it has not yet been empirically established whether risk-taking is a distinguishing characteristics of entrepreneurs. ENTREPR E NEURIAL BACKGRO UND AND CHARACT E RIST ICS Only a few background characteristics have differentiated the entrepreneur from the general populace or managers. Childhood Family surround The impact of birth order and social status has had conflicting research results. There is strong evidence that entrepreneurs, both male and female, tend to have self-employed or entrepreneurial fathers. Having a father who is self-employed provides a strong inspiration in the example of independence and flexibility of self-employment.This feeling of independence is often further enforced by an entrepreneurial mother. The overall parental Copyright Virtual University of Pakistan 22 EntrepreneurshipMGT602 VU relationship may be the most important aspect of the childhood environment in establishing the desirability of entrepreneurial activi ty. Parents of entrepreneurs need to be supportive and encourage independence, achievement, and responsibility. This supportive relationship appears to be most important for females. Female entrepreneurs tend to grow up in middle- to upper-class environments, where families are child-centered, and are similar to their fathers in personality.KEY TERMS Departure points The activities occurring when the venture is started Inventor An individual who creates something new Locus of control An attribute indicating the sense of control that a person has over life Moral-support network Individuals who give psychological support to an entrepreneur Entrepreneurship MGT602 VU Copyright Virtual University of Pakistan 23 EntrepreneurshipMGT602 VU THE INDIVIDUAL ENTREPRENEUR (continued) Lesson 09 LEARNING OBJECTIVES 1. To identify some key entrepreneurial feelings and motivations. 2. To identify key elements in an entrepreneurs background. 3. To discuss the importance of role models and support systems. 4. To identify the similarities and differences between male and female entrepreneurs. 5. To explain the differences between inventors and entrepreneurs.ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS Education Education appears important in the upbringing of the entrepreneur, in the level of education obtained and in playing a major role in coping with problems. Although formal education is not necessary for starting a new business, it does provide a good background. In education, female entrepreneurs previously experienced some disadvantage, with few having degrees in engineering, science, or math. The ability to deal with people and communicate clearly in written and spoken work is also important. Personal Values Studies have failed to indicate that entrepreneurs can be differentiated on personal valued from managers, unsuccessful entrepreneurs, or the general public. Leadership, support, aggression, benevolence, conformity, creativity, veracity, and resource seeking may also be important.A successful entrepreneur is frequently characterized as a victor winning may be a prerequisite for his or her actually becoming one. Age Entrepreneurial age is the age of the entrepreneur reflected in the experience. Entrepreneurial experience is one of the best predictors of success. In chronological age, most entrepreneurs start their careers between ages 22 and 55. Earlier starts in an entrepreneurial career seem to be better than later ones. Generally, male entrepreneurs start their first venture in their early 30s, while women tend to do so in their middle 30s. Work History Dissatisfaction with ones job often motivates the launching of a new venture. Previous technical and industry experience is also important once the decision to start a business is made.Experience in the following areas is particularly important financing product or service development manufacturing development of distribution channels and prep of a marketing plan. As the venture becomes established, managerial experience and skills become more important. Entrepreneurial experience becomes increasingly important as the complexity of the venture increases. MOTIVATION While motivations may vary, the reason cited most often for becoming an entrepreneur independence-not wants to work for anyone else. Other motivating factors differ between male and female entrepreneurs. Money is the second reason for mens starting a venture. Job satisfaction, achievement, opportunity, and money are the second order reasons for women. Copyright Virtual University of Pakistan 24 EntrepreneurshipMGT602 VUKEY TERMS Motivations That causes people to do something collect for achievement An individuals need to be recognized Need for independence. Being ones own boss-one of the strongest needs of an entrepreneur Professional-support network Individuals who help the entrepreneur in business activities Role models Individuals influencing an entrepreneurs career choice and style Social status T he level at which an individual in viewed by society Work history The historic work experiences of an individual Copyright Virtual University of Pakistan 25 EntrepreneurshipMGT602 VU THE INDIVIDUAL ENTREPRENEUR (continued) Lesson 10 LEARNING OBJECTIVES 1. To identify some key entrepreneurial feelings and motivations. 2.To identify key elements in an entrepreneurs background. 3. To discuss the importance of role models and support systems. 4. To identify the similarities and differences between male and female entrepreneurs. 5. To explain the differences between inventors and entrepreneurs. ROLE MODELS AND SUPPORT SYSTEMS One of the most important factors influencing entrepreneurs in their career choice is role models. Role models can be parents, relatives, or successful entrepreneurs in the community. Role models can also serve in a supportive capacity as mentors during and after the new venture is launched. This support system is most crucial during the start-up phase.It is impor tant that an entrepreneur establish connections to support resources early in the venture formation process. As contacts expand they form a network with density (extensiveness of ties between two individuals) and centrality (the total outperform of the entrepreneur to all other individuals. ) The strength of ties between the entrepreneur and any individual is dependent on the frequency, level, and reciprocity of the relationship. An informal network for moral and professional support benefits the entrepreneur. Moral-Support Network It is important for the entrepreneur to establish a moral support network of family and friends. Most entrepreneurs indicate that their spouses are their biggest supporters.Friends can provide advice that is more honest than that received from others, plus encouragement, understanding, and assistance. Relatives can also be sources of moral support, particularly if they are also entrepreneurs. Professional-Support Network The entrepreneur also needs advic e and counsel, which can be obtained from members of a professional support network. A mentor-protege relationship is an excellent way to secure the needed professional advice. The mentor is a coach, sounding board, and advocate. The individual selected needs to be an expert in the field. An entrepreneur can initiate the mentor-finding process by identifying and contacting a number of experts.The mentor should be periodically apprised of the progress of the business so that a relationship can gradually develop. Another source of advice is a network of business associates. Self-employed individuals who have experience in starting a business are good sources. Clients and buyers are also important as they provide word-of-mouth advertising. Suppliers are good components of the professional-support network-they help to establish credibility with creditors and customers, and provide good information on trends in the industry. flip associations are good network additions, as they keep up with new developments and can provide overall industry data. Affiliations ith individuals developed in hobbies, feature events, civic involvements and school alumni groups are excellent sources of referrals, advice, and information. Each entrepreneur needs to establish both a moral- and a professional-support network to share problems with and gain overall support. MALE VERSUS FEMALE ENTREPRENEURS Women are now starting new ventures at three times the rate of men. Women form over 70 Copyright Virtual University of Pakistan 26 EntrepreneurshipMGT602 VU percent of all new businesses. Women now own over 8. 5 million small businesses, an increase of over 45 percent since 1990. In some respects female entrepreneurs possess very different motivations, business skills, and occupational backgrounds.Factors in the start-up process for male and female entrepreneurs are different, especially in such areas as support systems, sources of funds, and problems. Men are motivated by the drive to c ontrol their own destinies. Women tend to be more motivated by the need for achievement arising from job frustration. Departure points and reasons for starting the business are similar for both men and women. Both generally have a strong interest and experience in the area of their venture. For men, the transition to a new venture is easier when the venture is an outgrowth of a present job. Women often leave a previous occupation with a high level of frustration and passion for the new venture rather than experience.Start-Up Financing Males often have investors, bank loans, or personal loans in addition to personal funds as sources of startup capital. Women usually rely solely on personal assets or savings. Obtaining financing and lines of credit are major problems for women. Occupations Both groups tend to have experience in the field of their ventures. Men more often have experience in manufacturing, finance, or technical areas. Most women usually have administrative experience, often in service-related fields. Personality Both men and women tend to be energetic, goal-oriented, and independent. Men are often more confident and less flexible and tolerant than women. Backgrounds The backgrounds of male and female entrepreneurs tend to be similar.Women are little older when they embark on their careers. Men often have studied in technical- or business-related areas, while women tend to have gratuitous arts education. Many women busi