Chapter 3The Environment for Entrepreneurship

Entrepreneur’s Environment: Environment for entrepreneurship consists of forces that directly or indirectly influence the activities of creating and developing new business in the society. It is the composite of all forces surrounding and influencing the entrepreneur’s activities. They consist of political-legal, economic, socio-cultural and technological forces in external environment. They cannot be controlled. Environmental forces and factors influence entrepreneurial activities by providing opportunities and threats. They are complex, dynamic and uncertain. The entrepreneurs most monitor and respond to changes to exploit the opportunities and face challenges resulting from changing business environment. The effect of environmental factors differs from organization to organization, industry to industry and markets to marketsGovernment Policies and Actions:The policies and actions may directly and indirectly affect the entrepreneurial activities. It may promote or limit entrepreneurial activities. Government policies and actions influence entrepreneurial policies and practices. It defines what entrepreneurs can and cannot do. Entrepreneurs must follow the legal provision of the country.The entrepreneurship friendly industrial policy, industrial act, commercial policy etc. can promote entrepreneurship. The government must create conductive environment for entrepreneurship by making available basic facilities and services live transport, communication, power etc. and incentive, subsidy, concession sound legal system etc. such facilities reduce the risk and uncertainties of the entrepreneurs. Hence, the supportive actions of the government are very conductive for entrepreneurial development. Entrepreneurship has flourished and developed in the countries where the government has provided such facilities. On the other hand entrepreneurship and economic growth is slow in the countries where the government has adopted indifference policy regarding entrepreneurship. One of the main reasons rapid economic growths in the countries is regarded to be the positive or market friendly role played by the government towards the business.In order to increase more positive business environment, the role of the government should not be interfering and regulating in the daily activities of the enterprises. But, should be supporting, faciliting and removing and constraints of initiative, innovation and risk-taking.The government in order to help and create positive business environment should make following changes in its policy formulation and involvement (Kohli and Sood, 1987):

Simplification of labor policy Reforms in the tax policy

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Streamling legal frame work fro enterprise creation, operation and liquidation Make effort to create competitive market (remove entry barriers) Simplification of the regulation and controls (investment, production, marketing, prices,

foreign direct investment and technology transfer) Address practical implementation of the policy. Transparency of policy and their implementation.

Government polices that affect entrepreneurship Industrial policy Monetary policy Fiscal policy Privatization policy Trade policy Employment and trade policy Tourism policy Foreign investment policy

The industrial policy, 2010 spells out its policies, strategies, promises and commitments: Commits state-support for the development of infrastructure up to factory sites for

priority industries. Provides special tax holidays for industries in rural and under-industrialized parts of the

country. Recognizes and allow sub-contracting of production for the first time in the country’s

history. Promises to help foster backward linkages, mainly facilitating small scale industries, in

incorporate in the large manufacturing process Provision of differential tariff rates for raw material imports and the import of finished

goods. The aim of this provision is to promote domestic manufacturing over direct trade. Promises protection, duty and tax discount incentives for industries using local raw

material and higher value addition. Entrusts the government to lay down industrial infrastructures such as roads, electricity,

and telecommunication in different districts that have been identified as possessing manufacturing and processing potentials

Pledges additional promotional incentive packages for export industries, particularly the small and medium enterprises.

Recognizes Research and development and market promotion as an integral part of the industrial activities and allows 5% income tax deduction for each purpose.

Infrastructure:

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Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise. They are the services and facilities necessary for an economy to function. It can be defined as the set of interconnected structural elements that provide framework supporting an entire structure of development. It includes both physical infrastructure such as transport, communication, water supply, energy etc and non physical infrastructure such as financial system, education system, health care system, the system of government, law enforcement as well as emergency services. Infrastructure facilitates the production of goods and services and also the distribution of finished products to markets. In least developed and developing countries entrepreneurs are not motivated to establish enterprise due to the lake of adequate infrastructure. Inadequacy of infrastructure limits the entrepreneur’s activities. Therefore, government is responsible to develop basic infrastructure in the country to promote entrepreneurship.

Types of Infrastructure:

Hard Infrastructure: hard infrastructure refers to the large physical networks necessary for the functioning of a modern industrial nation. It includes the capital assets that serve the function of entrepreneurs. It include:

Transportation infrastructure

Energy infrastructure

Water management infrastructure

Communications infrastructure

Solid waste management

Soft Infrastructure: soft infrastructure refers to all the institutions which are required to maintain the economic, health, and cultural and social standards of a country, such as the financial system, the education system, the health care system, the system of government, and law enforcement, as well as emergency services. The essence of soft infrastructure is the delivery of specialized services to entrepreneurs. It includes

1. Governance infrastructure

The system of government and law enforcement, including the political, legislative, law enforcement, justice and penal systems, as well as specialized facilities (government offices, courthouses, prisons, etc.), and specialized systems for collecting, storing and disseminating data, laws and regulation

Emergency services , such as police, fire protection, and ambulances, including specialized vehicles, buildings, communications and dispatching systems

Military infrastructure, including military bases, arms depots, training facilities, command centers, communication facilities, major weapons systems, fortifications, specialized arms manufacturing, strategic reserves

2. Economic infrastructure

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The financial system, including the banking system, financial institutions, the payment system, exchanges, the money supply, financial regulations, as well as accounting standards and regulations

Major business logistics facilities and systems, including warehouses as well as warehousing and shipping management systems

Manufacturing infrastructure, including industrial parks and special economic zones, mines and processing plants for basic materials used as inputs in industry, specialized energy, transportation and water infrastructure used by industry, plus the public safety, zoning and environmental laws and regulations that govern and limit industrial activity, and standards organizations

Agricultural , forestry and fisheries infrastructure, including specialized food and livestock transportation and storage facilities, major feedlots, agricultural price support systems (including agricultural insurance), agricultural health standards, food inspection, experimental farms and agricultural research centers and schools, the system of licensing and quota management, enforcement systems against poaching, forest wardens, and fire fighting

3. Social infrastructure

The health care system, including hospitals, the financing of health care, including health insurance, the systems for regulation and testing of medications and medical procedures, the system for training, inspection and professional discipline of doctors and other medical professionals, public health monitoring and regulations, as well as coordination of measures taken during public health emergencies such as epidemics

The educational and research system, including elementary and secondary schools, universities, specialized colleges, research institutions, the systems for financing and accrediting educational institutions

Social welfare systems, including both government support and private charity for the poor, for people in distress or victims of abuse

4. Cultural, sports and recreational infrastructure

Sports and recreational infrastructure, such as parks, sports facilities, the system of sports leagues and associations

Cultural infrastructure, such as concert halls, museums, libraries, theatres, studios, and specialized training facilities

Business travel and tourism infrastructure, including both man-made and natural attractions, convention centers, hotels, restaurants and other services that cater mainly to tourists and business travelers, as well as the systems for informing and attracting tourists, and travel insurance

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Assistance for Entrepreneurship (institutional support to entrepreneurship development)Concept:The support provided to the entrepreneurs by various institution like government, non-government, cooperatives and private organization in the form of facilities, incentives and policies that aims to promote, support and facilitate entrepreneurship in a country is known as institutional support or assistance. Entrepreneurship required promotional, supportive and facilitative assistance from various institution to solve and diminish various problem faced by entrepreneurs. Availability of support makes the business environment conducive and enabling for entrepreneur. These may come up in various forms such as loan, access to capital market, market facility and locations, research and development, information flow, training and skill entrancement programs, competency development oriented classes etc.Need for institutional assistance or support:Establishing a business is not a small task. In the contest of Nepal it has to be coordinated a lot of channel. Different types of resources and facilities are required in order to establish any business or industry. For example, the adequate of finance, availability of raw material, adequate supply of skillful manpower. Without it, it is only a day dream of person to establish an industry. Small entrepreneurs are unable to make available such facilities by themselves. The main problems that confront entrepreneurs are:

Shortage of capital: Poor access to capital and credit Scarcity of raw materials: Unreliable supply sources for inputs Marketing problems: Poor access to market and tough competition. Lack of market

information. Lack of opportunities for competency development Lack of access to appropriate infrastructure Poor access to information, research and extension services Lack of supportive policies and incentives

Institutional assistance to entrepreneurs is mainly needed in the following areas:a. Capital resources: entrepreneurs have lack of adequate capital resources. New venture

also do not easy assess to capital market instruments. Loans from formal financial institutions such as commercial and development bank and other financial institutions are needed to finance new venture. Besides this international NGO’s also provide loans to target entrepreneur.

b. Limited market: the domestic market for Nepalese products is very limited due to small size of the country and its population. Besides, this purchasing power of the people is very low. Due to the low development of transportation and communication the products can not be marketed easily through in low cost.

c. Infrastructure availability: entrepreneurs need infrastructure facilities in terms of industrial sheds, transport, communication, power, water, waste disposal etc. institutions are needed to build infrastructure. Generally government institution, supported by foreign aid, undertakes the task of infrastructure development.

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d. Raw material supply: easy availability of raw material facilities supports entrepreneurial growth. The scarcity of raw materials in the country is also a cause of low industrial investment. New ventures, especially those based on new technology, require raw material from foreign sources. Nepal’s major industries such as woolen carpet, ready-made garments and handicrafts are dependent on imported raw material and intermediated products. The problem of raw material is one of the main reasons for low capacity utilization. Institutions are needed to take care of raw material supply to meet the need of a variety of entrepreneur.

e. Defective government policies and incentives: entrepreneur needs a sound policy for creating sound industrial environment. But the government policy of Nepal is neither sound nor consistent, nor are they effectively implemented. Government institutions are the prime sources of formulation policies. The industrial policy of Nepalese has reserved cottage and small industries for Nepalese citizens. The legal frame work enacted by the government generally carries a number of incentives for entrepreneurial activities.

f. Long procedures of bureaucratic: Entrepreneurs have faces a long bureaucratic process. They have complete different processes like, visit different ministries and departments for registering industries for exports of the product. For getting foreign exchange for getting financial support etc. the bureaucracy being inefficient is corrupted as well. Entrepreneurs are needed a sound bureaucratic system.

g. Access to information, research and development: this is the age of information technology. Information is power. Research and development is the sources of innovation and inventions. Institutions are needed to supply relevant information to entrepreneurs. They are also needed to conduct research and provide extension services relevant to entrepreneurs. Government institutions are important fulfill such needs.

Institutional Assistance to Entrepreneurs in NepalEntrepreneurship has remained the backbone of Nepalese economy. But the pace of its growth has remained slow. Majority of entrepreneurial ventures currently remain sick or closed. Institutional support to industries in Nepal is through government agencies, specialized agencies, consultancy services, institutional finance and marketing services.

1. Government Agencies Ministry of industry Department of industry Department of cottage and small industries Office of the registrar of companies Nepal bureau of standards and metrology Nepal tourism board

2. Special agencies of government Industrial promotion board One-window committee Nepal industrial development finance

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Industrial district management limited National productivity and economic development centre Microenterprise, cottage and small industries promotion board Industrial enterprise development institute Private sector associations

3. Institutional Finance Commercial banks Development banks Micro finance banks Finance companies Rural cooperatives (approved by NRB) Unregulated cooperatives Insurance companies Employee provident fund Citizen’s investment trust Postal saving bank branches NGO microfinance co. Deposit insurance and credit guarantee corporation

4. Consultancy services: Institute of chartered accountants of Nepal (ICAN) Centre for economic development and administration (CEDA) Nepal engineering consultancy service (NEPECON)

5. Marketing services Trade and export promotion centre Carpet and wool development board Ready-made garment export promotion committee

6. Industrial estates:Balaju, Hetauda, Patan, Nepalgunj, Dharan, Pokhara, Butwal, Bhaktapur, Birendranagar, Dhankuta, Fajbiraj.

Franchising: Franchising can simply be defined as a form of contractual arrangement in which a retailer (franchisee) enters into an agreement with a producer (franchisor) to sell the producer’s goods or services for a specified fee or commission. It is a form of business ownership created by contract whereby a company grants a buyer the rights to engage in selling or distributing its products or services under a prescribed business format in exchange for royalties or share of profits. The buyer is called the franchisee and the company that sells rights to its business concept is called the franchisor.

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Thus, franchising is any arrangement in which the owner of a trademark, trade name or copyright has licensed others to use it in selling goods or services. The franchisee is generally legally independent but economically dependent on the integrated business system of franchisor.Advantage of Franchising:

1. Training and guidance: The greatest advantage of buying a franchise is that the franchisor will usually provide both training and guidance to the franchisee. As a result, the like hood of success is much greater for franchisees who have received this assistance than for small business owners in general.

2. Brand-name appeal: the franchiser’s brand name appeals the customer. The national advertising by the franchisor creates such brand name appeal. The layout, facilities and decorations are standardized.

3. Financial Assistance: another reason a franchise can be a good investment is that the franchisor may be able to help the new owner to secure the financial assistance needed to run the operation. In fact some franchisors have personally helped the franchisee get started by lending money and not requiring any repayment until the operation is running smoothly. In short, buying a franchise is often an ideal way to ensure assistance from the financial community.

4. A proven track record: Franchising makes the task of getting started easier because the franchisee gets a business format already market tested and found to work. Hence, buying a franchise is so far safer than trying to start a business.

5. Increase purchasing power: Franchising may increase the franchisee’s purchasing power also. Because, being part of a large and that too recognized organization means paying less for a variety of things such as supplies equipment, inventory, services, insurance and so on. It also can mean getting better service from suppliers because of the importance of the organization (franchisor) of you is part (franchisee).

Disadvantage of Franchising:1. The controlled exercised by the franchisor: Unlike entrepreneurs who start their won

business, the franchisees find no room or scope for enjoying their creativity. They have to work as per the given format. A number of restrictions are also imposed upon the franchisees. Restriction may relate to remain confined to product line or a particular geographical location only.

2. Franchise Fees: the franchisee must may different fees to the franchisor. Such fees are franchisee fee, royalty payment, promotion costs, inventory and supplies cost, and building and equipment cost. the larger and more successful the franchisor, the greater the franchise fee.

3. Unfulfilled promises: In some cases, especially among less-known franchisors, the franchisees have not received all they were promised. Many franchisees have found that the promised assistance from the franchisor has not been forthcoming. If franchisees complain, they risk having their agreement with the franchisor terminated or not renewed.

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4. No right to sell the business: Franchisees usually do not have the right to sell their business to the highest bidder or to leave it to member of their family without approval from the franchisor.

5. No goodwill: Though the franchisee can build up goodwill for his or her business by his or her efforts, goodwill still remains the property of the franchisor.

6. Dependent: The franchisee may become subject to fail with the failure of the franchisor.7. Buy back option: Franchisors generally reserve the option to buy back an outlet upon

termination of the contract. Many franchisees become vulnerable to this option. As such, they operate under the constant fear of non-renewal of the franchise arrangement.

Types of Franchising:Franchising arrangements are broadly classified into three 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 singer Corporation during the 1800s to distribute its sewing machines. This practice subsequently becomes popular in the petroleum and automobile industries also.

2. Manufacturing Franchising: Under this arrangement, the franchisor (manufacturer) gives the dealer 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. It is an arrangement under which the franchisor offers a wide range of services to the franchisee, including marketing, advertising, strategic planning, training, production of operations manuals and standards and quality-control guidance.

Difference between Franchising and Distributorship or AgencyDistributorship and agency are the more traditional forms of distributing goods or services. Under these, the principal is not allowed to exert the real control over the distributor or agent. Here, the franchising differs from the distributorship and the agency in the sense that it allows the franchisor to exercise a higher degree of control over the franchisee. As a matter of fact, the franchisor has a right to say in all important matters like branding, methodology and mergers.Strategic Alliances:A Strategic Alliance is a relationship between two or more parties to achieve a set of agreed goal or to meet a critical business need while remaining independent organizations. An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project is called strategic alliance. In a strategic alliance, each company maintains its autonomy while gaining a new opportunity. A strategic alliance could help a company develop a more effective process, expand into a new market or develop an advantage over a competitor, among other possibilities. Well-structured strategic alliances can improve profitability and allow a company to more easily enters new marketsPartners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or

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intellectual property. The alliance is a co-operation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance often involves technology transfer (access to knowledge and expertise), economic specialization, shared expenses and shared risk.

Stages of Alliance FormationA typical strategic alliance formation process involves these steps:

Strategy Development: Strategy development involves studying the alliance’s feasibility, objectives and rationale, focusing on the major issues and challenges and development of resource strategies for production, technology, and people. It requires aligning alliance objectives with the overall corporate strategy.

Partner Assessment: Partner assessment involves analyzing a potential partner’s strengths and weaknesses, creating strategies for accommodating all partners’ management styles, preparing appropriate partner selection criteria, understanding a partner’s motives for joining the alliance and addressing resource capability gaps that may exist for a partner.

Contract Negotiation: Contract negotiations involves determining whether all parties have realistic objectives, forming high caliber negotiating teams, defining each partner’s contributions and rewards as well as protect any proprietary information, addressing termination clauses, penalties for poor performance, and highlighting the degree to which arbitration procedures are clearly stated and understood.

Alliance Operation: Alliance operations involves addressing senior management’s commitment, finding the caliber of resources devoted to the alliance, linking of budgets and resources with strategic priorities, measuring and rewarding alliance performance, and assessing the performance and results of the alliance.

Alliance Termination: Alliance termination involves winding down the alliance, for instance when its objectives have been met or cannot be met, or when a partner adjusts priorities or re-allocates resources elsewhere.

Advantage of strategic alliance:The advantages of strategic alliance include:1. Allowing each partner to concentrate on activities that best match their capabilities.2. Learning from partners & developing competences that may be more widely exploited

elsewhere.3. Adequate suitability of the resources & competencies of an organization for it to survive.

DisadvantagesImplementing and managing a strategic alliance may be difficult because each alliance partner has a different way of operating. Mistrust could occur, particularly when competitive or proprietary information is involved. The alliance partners could become more dependent on each other, making it difficult to operate again as separate entities if required.

Types of Strategic Alliance:There are four types of strategic alliances: joint venture, equity strategic alliance, non-equity strategic alliance, and global strategic alliances.

Joint venture is a strategic alliance in which two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage.

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Equity strategic alliance is an alliance in which two or more firms own different percentages of the company they have formed by combining some of their resources and capabilities to create a competitive advantage.

Non-equity strategic alliance is an alliance in which two or more firms develop a contractual-relationship to share some of their unique resources and capabilities to create a competitive advantage.

Global Strategic Alliances working partnerships between companies (often more than two) across national boundaries and increasingly across industries, sometimes formed between company and a foreign government, or among companies and governments.

Technology Licensing: this is a contractual arrangement whereby trade marks, intellectual property and trade secrets are licensed to an external firm. It is uses mainly as a low cost way to enter foreign markets. The main downside of licensing is the loss of control over the technology-as soon as it enters other hands the possibility of exploitation arises.

Product Licensing: this is similar to technology licensing except that the license provided is only to manufacture and sell a certain product. Usually each licensee will be given an exclusive geographic area to which they can sell to. It’s a lower-risk way of expanding the reach of your product compared to building your manufacturing base and distribution reach.

Franchising: franchising is any arrangement in which the owner of a trademark, trade name or copyright has licensed others to use it in selling goods or services. The franchisee is generally legally independent but economically dependent on the integrated business system of franchisor.

Research and development: Strategic alliances based around Research and development tends to fall into the joint venture category, where tow or more businesses decide to embark on a research venture through forming a new entity.

Distributors: if you have a product one of the best ways to market it is to recruit distributors, where each one has its own geographical area are type of product. This ensures that each distributor’s success can be easily measured against other distributors.

Distribution RelationshipsThis is perhaps the most common form of alliance. Strategic alliances are usually formed because the businesses involved want more customers. The result is that cross-promotion agreements are established. Consider the case of a bank. They send out bank statements every month. A home insurance company may approach the bank and offer to make an exclusive available to their customers if they can include it along with the next bank statement that is sent out. It’s a win-win agreement – the bank gains through offering a great deal to their customers, the insurance company benefits through increased customer numbers, and customers gain through receiving an exclusive offer.

OutsourcingThe 1980s was the decade where outsourcing really rose to prominence, and this trend continued throughout the 1990s to today, although to a slightly lesser extent. The early forecasts, such as the one from American Journalist Larry Elder, have been shown to not always be true: “Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation.”

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Affiliate MarketingAffiliate marketing has exploded over recent years, with the most successful online retailers using it to great effect. The nature of the internet means that referrals can be accurately tracked right through the order process. Amazon was the pioneer of affiliate marketing, and now has tens of thousands of websites promoting its products on a performance-based basis.

E-CommerceE-Commerce is establishing exchange relationships electronically through e-mail, internet, and electronic platforms to satisfy individual needs of customers. It is direct marketing based on electronic communication. E-commerce is conducted through on-line computers. E-commerce is the buying and selling of goods and services on the Internet, especially the World Wide Web . Internet serves as the communication channel.E-commerce encompasses the use of technologies, processes and management practices that enhance organizational competitiveness through strategic use of electronic information. E-commerce is, thus a modern methodology that addresses the need of organizations merchants, and consumer. It cuts costs while improving the quality of goods and services and increasing the speed of service delivery.Ecommerce can be broken into four main categories: B2B, B2C, C2B, and C2C.

B2B (Business-to-Business)Companies doing business with each other such as manufacturers selling to distributors and wholesalers selling to retailers. Pricing is based on quantity of order and is often negotiable.

B2C (Business-to-Consumer)Businesses selling to the general public typically through catalogs utilizing shopping cart software.

C2B (Consumer-to-Business)A consumer posts his project with a set budget online and within hours companies review the consumer's requirements and bid on the project. The consumer reviews the bids and selects the company that will complete the project.

C2C (Consumer-to-Consumer)There are many sites offering free classifieds, auctions, and forums where individuals can buy and sell things to online payment systems like PayPal where people can send and receive money online with ease. eBay's auction service is a great example of where person-to-person transactions take place everyday since 1995

Features of E-Commerce Individualized communication: Data depository E-mail and Electronic platforms On-line selling Relationship marketing

Connectivity through e-commerce:E-commerce takes a customer concept for individualized marketing. It is rapidly growing.

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1. Connecting with customers: E-commerce connects directly with customers on one to one basis. Voice mail has

facilitated interactions with customers. Connectivity can be: Business to consumer (B2C), business to business (B2B), Consumer to consumer (C2C), consumer to business (C2B). Databases are built to provide information about individual customer. Cost, time, distance and space are minimized.

Ecommerce connects with carefully selected customers. It targets profitable customers.

E-commerce connects customers for a lifetime. It helps to build relationship to make longer term profits.

2. Connecting with stakeholders: E-commerce connects with stakeholders, such as employees, suppliers, competitors,

middlemen, and marketing intermediaries. Paper work is eliminated E-commerce connects with strategic alliance partners. They can be related to

marketing, logistics, technology, finance.3. Connecting globally:

E-commerce has facilitated connections with global customers. It has expanded geographical coverage of purchasing manufacturing and marketing.

Benefits of e-commerceE-commerce is win-win situation for the consumer and the product/ service provider. The distinct advantages e-commerce can offer to the consumer are:

Consumer has much wider choice available on the cyber market. They can compare products, features, prices and even look up reviews before they

select what they went. They also have the convenience of having their orders delivered right to the doorstep. Finally, consumers are driven to e-shopping in hordes as even branded goods cost less

on the net.The major advantages that e-commerce can bring to the companies are:

It minimizes inventory cost: E-commerce venture need not maintain huge inventories or expensive retail show rooms. Their marketing and sales force is a fraction of those of traditional mortar-based businesses. E-commerce can minimize inventory costs by adopting just-in-time system enhancing the firm’s ability to forecast demand more accurately.

Improve customer services: It has been found that providing both customer and after-sale services account for up to 10 per cent of the operating costs. By putting these services on-line under e-commerce, these costs get reduced, on the one hand, and simultaneously the quality of services also gets improved, on other. High quality customer relationship called customization is crucial for retaining customers in the e-commerce environment. It become necessary for the company to enhance customer

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loyalty, otherwise the customer, who is full of choices, can jump from one website to another. If company is to stay in business then it will have to deliver the products or services to customer as they want, when they want and how they want.

Reduce distribution cost: E-commerce also reduce distribution cost of goods and service. The Electronic Data Interchange (EDI) based on EECD study has revealed that the time needed to process an order declined by a minimum of 50% to maximum of 96% per cent. It is really amazing.

Helps business globalize: E-commerce by minimizing costs enables companies’ especially small ones to make information on its products and services available to all the potential customers spread over worldwide.

Helps market products more quickly: By taking the entire product design process on-line, drawing partners and customers into the process and removing the traditional communication barriers, companies can bring products and services to market far more quickly.

Challenges of e-commerceE-commerce in spite of opportunities also bears the challenges as well at the same time. The major challenges of e-commerce facing by small enterprises are mentioned below:

Infrastructural problems: infrastructural problem is the main challenge of e-commerce. With out development of modern communication and transportation, e-commerce is not possible.

Absence of cyber laws: Another big challenge associated with e-commerce market is the near absence of cyber laws to regulate transactions on the net. WTO is expected to enact cyber laws soon.

Privacy and security concern: another challenge related to e-commerce is privacy and security. There is no protection offered either by Website or outside watchdogs against hazard created by exploitation one’s privacy.

Digital Illiteracy and consumer awareness: At present, digital illiteracy is one of the formidable problems e-commerce is facing in Nepal. On the other hand, the continuous exodus of skilled computer engineers to other countries has denuded Nepal of software engineers. This has posed a real thereat to the Nepal IT industry.The consumer does not browse the net knowing the consequent hassles of connectivity and other botherations. Added to this building trust on the electronic media also takes long time more especially when the vendor is situated at a very far off place.

Virus Problem: the computer virus is also a major problem in the execution of e-transactions.

English specific: the software so far in the country is English specific. But, in order to make e-commerce reach to the small enterprises, it needs to be available in the languages (regional) of the owners of the small enterprises to enable them to adapt e-commerce processes in their operations. Sooner it is done better will be it for small enterprises to adapt e-commerce.

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Payment issue: the electric payment is made through credit card which could not become popular in Nepal due to the penetration of credit card in Nepal is very low and the Nepali customers are quit skeptical of paying by credit card with the increasing threat of fraud played by hackers. In Nepal credit card could not gain growth mainly because of authentification and recognition problems of electronic signatures.

Tax related issue: Tax administration is yet another complex problem in e-commerce. It is difficult to administer tax related matter in e-transactions. It will provide ample scope for tax evasion.

Impact of E-commerce on Entrepreneurship Direct marketing Electronic marketing Cost effective Marketing mix Promotion Strategic alliances

E-commerce strategy for entrepreneurs: Presence: The e-name is registered. The entrepreneur builds excitement about products of

the venture in the market place to make its presence felt. Penetration: the entrepreneur focused on gaining greater market share for the products. Profitability: The entrepreneur focuses on increasing revenue.

Ethic and Social ResponsibilityIn the broadest sense, ethics provide the basic rules or parameters for conducting any activity in an acceptable manner. More specifically, ethics represent a set of principles prescribing a behavioral code that explains what is good and right or bad or wrong. It is a set of moral principles or values that governs the conduct of an individual or a group. What is lawful conduct is not always ethical conduct. The law may permit something that would be ethically wrong. Business ethics comprises the moral and standards that guide behavior in the world of business.Business ethics is an important issue today. Business organizations are being questioned and charged for their unethical behavior. Ethical issues arise in every stages of business. Criticisms are being labeled against them for their unethical actions by different sections of the society. Entrepreneurs cannot afford to overlook such criticisms and charges. Their role has thus, increased. They have now to adopt ethical behavior and be responsive. The call for better business ethics is clearly a challenge for managers today.Some business collapses over the last few years that have exposed the lack of moral code & ethics.  It appears that business needs a core of ethics & integrity to flourish and enjoy long term success.  Ethics are not optional because entrepreneurs work & live with other human beans.Sources of Business Ethics:An organization’s ethics is derived from three principal sources:

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Societal ethics: Societal ethics are standards that govern how members of a society deal with each other in matters involving issues such as fairness, justice, and rights of the individual. The ethical standards originate from a society’s laws, customs and practices. These are basically unwritten valuesand norms of a society. Societal ethics differ from society to society.

Professional ethics: Professional ethics are standards that govern how members of a profession like entrepreneurs make decisions.

Individual ethics: individual ethics are personal standards and values that govern how individuals interact with on another. Sources of individual values include the influence of one’s family, friends and relatives.

Role of Ethics in Entrepreneurship Ethics have a huge role to play in business as they give a guideline as to which business practices

are socially and morally acceptable and which are not.

In cases where there are no laid down rules as to the right and wrong ways of doing business, Ethics fill in the gap and give the much needed direction.

Awareness of ethics promotes entrepreneurs to stop from engaging in business practices that lead to loss of human life and human rights compromise the environment or bring about gain at the unfair expense of other businesses, employees, consumers, etc.

Sound business ethics benefit the consumer as they strive to direct businesses to be open and honest to their customers

Professor David Batstone offers ten Principles for entrepreneurial ethics:

Company directors and management will consider their work force valuable team members, not merely hired labor

A company will think of itself as a part of a community, not just a “market”

A company will take every possible care to ensure the quality and safety of the products it brings to the public

A company will treat the environment as a silent “stakeholder,” a party to which it is wholly accountable

A company will strive to diversify the kind of people who lead and manage its affairs

A company will pursue international trade and production based on reciprocal exchanges that respect the same rights accorded its own people

A company will care for an organizational culture that encourages its employees to give critical feedback on unethical practices, and even “blow the whistle” when their voices are ignored

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A company will protect the privacy rights of its suppliers, customers, and employees

A company will deliver what it promises, and promise what it can deliver

A company will not seek to generate any revenue from practices that threaten life

Social Responsibility:The obligation of an organization's management towards the welfare and interests of the society in which it operates is called social responsibility. It is a principle that companies should contribute to the welfare of society and not be solely devoted to maximizing profits. It focuses on what an organization does to society and what it does for society.

Socially responsible companies can act in a number of ways to benefit society. For example, companies can give money to the arts, fund academic scholarships, support community-building initiatives, and so on. They can also commit to not pollute or to reduce the pollution they put out, to not build weapons, and so forth.Areas of Social Responsibility:Enterprises have clear and distinct responsibilities to various groups and entities that have a stake in the firms. These include:

1. Towards Consumers: Consumer plays a important role in the survival and growth of business. Consumers provide sales revenues, the main source of income for a business firm. Therefore, the purpose of a business is to create customer. For that, business has the accountability towards its customers. This includes:

Charge reasonable prices for products. Provide quality products, product guarantee, and after sale services consistent

with customers’ requests. Truthful and socially responsible advertising Protection against monopoly and restrictive trade practice. Treat customers fairly in all respects of the business transactions Make effort to ensure that the health and safety of consumer will be enhanced by

the product and services.2. Towards Shareholders: Shareholders are the investors. They together own the business.

They contribute capital to the business in the hope of earning dividends and appreciation in share prices. The shareholders are also the members of society. Thence, the accountabilities that a business owes to its shareholders are:

Regularity of dividend Disclose relevant information to shareholders Respect shareholders’ requests, suggestions, complaints, and formal resolution Report on social issues ( the amount spent on social and development

programmes)

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3. Towards employees: Employees are the vital components of a business firm. They are employed in a business as workers and managers. As workers, they are directly involved in performing the basic and operating organizational functions. Thus, business firm owes responsibilities to these employees on the following counts:

Provide legitimate decision-making and policy-making freedom to managers and ensuring their full potential growth.

Provide fair wages, bonus and other economic benefits to all employees that improve their living conditions

Grant right to form union, giving representation on decision-making bodies Provide working conditions that respect each employee’s health and dignity Institute grievance settling, social security and welfare schemes.

4. Towards government: government is the agency that governs all the institution and individuals in the country. It is done through promulgation and implementation of appropriate laws and regulations. With this background, business must be responsible to the government in the following ways:

Pay tax regularly Follow the guidelines and policies help the government’s efforts to solve national problems purchase treasury bills issued by government Avoid unfair trade practices Help government stop black marketing

5. Towards Society: Business is operated in a society and has to consider the necessity to improve the quality of life and contribute towards well being of the society. In doing so, business has to fulfill following responsibilities: Make efforts to reduce pollution of any kind Make optimum utilization of natural and national resources Provide maximum employment opportunities Preserve social and cultural values Promote national integration and development Business must act as a good citizen.

Small Business Venturing Exporting:Exporting is the practice of sending or carrying merchandise to a foreign country for trade or sale. International business is a potentially lucrative area for many businesses, but the small business owner should be aware that establishing oneself in a foreign market is a complex, time-consuming task. Small business should not enter the world of international trade until they have fully researched both their own exporting capabilities and various business conditions in the target market(s) abroad. Indeed, consultants point to a wide range of factors to consider when assessing your company's readiness to expand its business beyond borders. These include company export readiness, potential foreign markets, product distribution options, legal factors,

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operating costs and profit margin, financing resources, and exporting alternatives (such as joint ventures or off-shore manufacturing facilities). Exporting is sometimes thought of as a practice that is largely the province of large businesses and international corporations, but exporting can also be helpful to a small business in a variety of ways. A small business that establishes its products in the international marketplace can increase sales and profitability, enhance its domestic reputation, reduce its dependence on domestic markets, reinvigorate the sales potential of existing products, stabilize seasonal market fluctuations, sell excess production capacity, and increase awareness of possible foreign competitors. Of course, exporting is not a risk-free venture. Expanding a small business's operations into foreign markets may require the development of new promotional materials, assumption of increased short-term debt as a result of new operational and administrative costs, re-assignment of personnel, and adjustments in product functionality and appearance to meet the commercial and social standards of the environment in which the business hopes to establish itself. Preparing for the World of Exporting:Small business consultants counsel their clients to undertake research and self-analysis before committing time and resources to breaking into international markets. Indeed, consultants stress that a small business should be able to answer positively to the following questions before considering expanding its business to include exporting:

Is the business currently successful in its domestic operations? Does the business owner understand the types and amounts of investments (time, capital,

and people) he or she will have to make to establish the business's product in the targeted market?

Is the business sensitive to the cultural implications of doing business in the targeted market?

Is the business willing to commit needed resources to make the exporting effort work? In order to arrive at an informed answer to the above questions, consultants recommend that business owners with an eye to international markets take the time to complete an international business plan. This document can highlight potential trouble spots and business areas that need further research. Exporting factors that should be considered in any international business plan include:

Identification of potential market Demographic and political environment of potential market Economic status of potential market Social and cultural environment of potential market Access to potential market (includes research on tariffs and other trade barriers, treaties,

trade regulations, patent and trademark protection) Demand for product Possible competition within potential market Possible distribution channels Local distribution and production environment within potential market Exporting methodology Any necessary adjustments to product or packaging Marketing strategy Cost of exporting operation Pricing strategy

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Projected sales Projected fortunes of domestic operation

Method of ExportingThere are two types of exporting: direct and indirect.1. Direct exportsDirect exports represent the most basic mode of exporting, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. Direct exporting practices generally require greater initial outlays of funds, personnel, and other resources, and they are generally regarded as riskier in nature than indirect exporting options. But direct exporting can also be a tremendously profitable practice. It basically requires businesses to find a foreign buyer for its products and make all arrangements to deliver those goods to the buyer.

Types of Direct Exporting:a) Sales representatives

Sales representatives represent foreign suppliers/manufacturers in their local markets for an established commission on sales. Provide support services to a manufacturer regarding local advertising, local sales presentations, customs clearance formalities, legal requirements. Manufacturers of highly technical services or products such as production machinery, benefit the most form sales representation.

b) Importing distributorsImporting distributors purchase product in their own right and resell it in their local markets to wholesalers, retailers, or both. Importing distributors are a good market entry strategy for products that are carried in inventory, such as toys, appliances, prepared food.

Advantages of direct exporting Control over selection of foreign markets and choice of foreign representative companies Good information feedback from target market Better protection of trademarks, patents, goodwill, and other intangible property Potentially greater sales than with indirect exporting.Disadvantages of direct exporting Higher start-up costs and higher risks as opposed to indirect exporting Greater information requirements Longer time-to-market as opposed to indirect exporting.

2. Indirect exportsIndirect exports are the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign market.

Types of Indirect Exportinga) Export trading companies (ETCs)

These provide support services of the entire export process for one or more suppliers. Attractive to suppliers that are not familiar with exporting as ETCs usually perform all

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the necessary work: locate overseas trading partners, present the product, quote on specific enquiries, etc.

b) Export management companies (EMCs)These are similar to ETCs in the way that they usually export for producers. Unlike ETCs, they rarely take on export credit risks and carry one type of product, not representing competing ones. Usually, EMCs trade on behalf of their suppliers as their export departments.

c) Export merchantsExport merchants are wholesale companies that buy unpackaged products from suppliers/manufacturers for resale overseas under their own brand names. The advantage of export merchants is promotion. One of the disadvantages for using export merchants result in presence of identical products under different brand names and pricing on the market, meaning that export merchant’s activities may hinder manufacturer’s exporting efforts.

d) Confirming housesThese are intermediate sellers that work for foreign buyers. They receive the product requirements from their clients, negotiate purchases, make delivery, and pay the suppliers/manufacturers. An opportunity here arises in the fact that if the client likes the product it may become a trade representative. A potential disadvantage includes supplier’s unawareness and lack of control over what a confirming house does with their product.

e) Nonconforming purchasing agentsThese are similar to confirming houses with the exception that they do not pay the suppliers directly – payments take place between a supplier/manufacturer and a foreign buyer.

Advantages of Indirect Exporting Fast market access Concentration of resources for production Little or no financial commitment. The export partner usually covers most expenses

associated with international sales Low risk exists for those companies who consider their domestic market to be more

important and for those companies that are still developing their R&D, marketing, and sales strategies.

The management team is not distracted No direct handle of export processes.Disadvantages of Indirect Exporting Higher risk than with direct exporting Little or no control over distribution, sales, marketing, etc. as opposed to direct exporting Inability to learn how to operate overseas Wrong choice of market and distributor may lead to inadequate market feedback

affecting the international success of the company

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Potentially lower sales as compared to direct exporting, due to wrong choice of market and distributors by export partners.

Those companies that seriously consider international markets as a crucial part of their success would likely consider direct exporting as the market entry tool. Indirect exporting is preferred by companies who would want to avoid financial risk as a threat to their other goals. Major ConstraintsThe major constraints encountered by the small units in exporting their products are as follows:a) Credit Policy: The small scale units have weak-base of their own funds, on the one hand,

and have no access to other sources of funds like capital market, on the other. Hence, they have to depend upon the state financial corporations, the commercial banks and private money lenders to meet their long-term and short-term capital requirements. It requires high cost of capital. Therefore, there should be the need for a comprehensive credit scheme targeted at small industry exports.

b) Infrastructure: Lack of infrastructure facilities like power supply, transportation and communication adversely affect the quantity and quality of production, its costs and delivery.

c) Technology: Technology is the heart of quality and competitiveness. However, the adoption of technology in small industries hampered due to lack of infrastructural facilities, on the one hand, and the present investment ceiling of the small scale industry, on the other.

How to Export Commercial Goods into New International Markets1. Export Planning2. Screening Potential Markets

Obtain export statistics.  Identify potential markets.  Target the most promising ones. 

3. Assessing Your Target Markets  Examine product trends Research the competition Analyze the market.  Identify barriers.  Choose a market. 

4. Finding Qualified Buyers Search online. . Attend trade shows. .  Contact industry associations.  Use the Department of Foreign Affairs and International Trade (DFAIT) Trade

Commissioners Service. 5. Taking Care of Logistics6. Export Documentation7. Pricing it Right

Cost based. 

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Market demand.  Competitor pricing. 

8. Payment Terms Cash in advance.  Documentary Letters of Credit (LCs).  Open account. 

9. Export Financing

Entrepreneurial networkIn business, entrepreneurial networks are social organizations offering different types of resources to start or improve entrepreneurial projects. Having adequate human resources is a key factor for entrepreneurial achievements. Combined with leadership, the entrepreneurial network is an indispensable kind of social network not only necessary to properly run the business or project, but also to differentiate the business from similar projects.PurposeThe goal of most entrepreneurial networks is to bring together a broad selection of professionals and resources that complement each other's endeavors. Initially a key priority is to aid successful business launches. Subsequently provide motivation, direction and increase access to opportunities and other skill sets. Promotion of each member’s talents and services both within the network and out in the broader market increases opportunities for all participants.One of the key needs of any startup is capital, and often entrepreneurial networks focus on providing such financial resources, particularly tailored to their membership demographic.Entrepreneurial networks may also become community involved, endorsing reforms, legislation or other municipal drives that accommodate their organization's goals.Membership composition

lawyers, various specialties scientists engineers architects contractors/construction managers real estate professionals suppliers government people or institutions partners high skilled employees clients or any other kind of social contacts that can make the entrepreneurial business (or

project) successful mentors investors

E-entrepreneurship

E-entrepreneurship describes entrepreneurship in e-business. E-entrepreneurship refers to establishing a new company with an innovative business idea within the Net Economy. It uses an electronic platform in data networks. E-entrepreneurship offers its products or services based upon a purely electronic creation of value. We use the term e-entrepreneurship to refer

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primarily to the digital enablement of transactions and processes within a firm, involving information systems under the control of the firm. E-entrepreneurship does not include commercial transactions involving an exchange of value across organizational boundaries. This value offer by e-entrepreneurship is only made possible through the development of information technology. Example of e-entrepreneurship is Google.com, eBay.com, yahoo.com, amazon.com, etc.

The e-dimension of entrepreneurship incorporates all the key elements of entrepreneurship including risk-taking, proactive, and innovation in building, running and managing e-business. The concept of e-entrepreneurship is not limited to small e-businesses but includes corporate e-intrapreneurship which is embedded in establishing e-infrastructure to do e-business in large organizations. E-entrepreneurship operates in a fast-moving, highly uncertain, unknowable and unpredictable context. It requires change in the traditional concept of entrepreneurship. For example, the traditional notion of entrepreneurship of being or becoming an expert or finding and protecting a unique knowledge in a niche market, clashes with the fact that e-business knowledge is often short-lived and available to everyone, anytime, and anywhere.Advantages:

The advantage of e-business is its ubiquity, or the ability to transcend geographical constraints and remain accessible from everywhere.

The second biggest advantages of e-business are its cost-effective nature. An e-business does away with many processes and costs associated with a traditional business.

The e-business also requires fewer employees, with the entrepreneur herself able to single-handedly manage the entire operations of a small or medium e-business.

E-businesses help in serving the customer better. In e-business, customer’s access comprehensive information of the desired product or service, make comparisons, and effect the purchase, all with a few clicks of the mouse.

The customer of an e-business can access the entrepreneur directly through email or online chat, compared to dealing with the many hierarchical levels, or lengthy telephone holds up when trying to access the customer service department of a traditional business.

Disadvantages: The biggest disadvantage of e-business is its inherent separation from the customer. The

customer and the product come face to face in a traditional brick and mortar business. The faceless nature of an e-business causes an issue of trust, which remains hard to resolve.

Another big disadvantage of e-business is its unsuitability in many areas or sectors. E-business, for instance, cannot treat a patient.

The success of an e-business depends on strong computer systems, updating and maintaining the website, security of e-commerce transactions, reliability of shipping and delivery, and search engine optimization.

A far bigger threat is the danger from viruses, Trojans, worms, and other malware. Finally, success of an e-business depends largely on the success of the delivery channel

partner. Only those e-businesses that can ensure delivery of the product to the customer in a timely and safe manner can survive.

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Success factors Computer Science

It is important to have substantial knowledge about the technologies Information Management

The technological basis provided by CS must be managed and it is important to have knowledge about security, data warehousing, data mining.

Business AdministrationIt is essential to have solid business knowledge

2.1. Entrepreneurship vs. e-Entrepreneurshipentrepreneurship consist on the process of creating something new and assuming the risks and rewards, e-Entrepreneurship will consist on creating owner business activity on internet in some area to sell or provide service something only online, such as email service DVDs, including rental and Books, Computers, T-shirts, Cell phones, Magazine subscription, Software, etc.

Chapter 4Creativity and Business Ideas

Concept of Creativity:Creativity is the generation of ideas that result in the improved efficiency or effectiveness of a system. It is the ability to discover new ways of looking at problems and opportunities. Creativity can be defined as the tendency to generate or recognize ideas, alternatives, or possibilities that may be useful in solving problems, communicating with others, and entertaining ourselves and others. It is any act, idea, or product that changes an existing domain or that transforms an existing domain into a new one.It is the result of free, unbiased and unconventional thinking. It is based on mental vision, imagination and observation. It is systematic and logical process to see, recognize, and create opportunity. It concerned with solving business problem by continually asking “What if….?” or “Why n…?”In conclusion, creativity is the entrepreneurs’ ability of analyzing problem from every possible angle: what is the problem? Whom does it affect? How does it affect them? What costs are involved? Can it be solved? Would the marketplace pay for a solution?Aspect of Creativity:Creativity has two aspects:

1. Process: creativity process is goal-oriented. It is designed to find solution to a problem. This process occurs in a creative climate.

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2. People: creativity lies in people. They are inherently creative. It is people who determine the solution to a problem. They use following approaches to discover to solve problems: Adaptive approach: existing solution are adapted to solve problems. Innovative approach: innovative solution is formulated to solve problems.

Essentials of Creative Climate:Creativity occurs in a creative climate. Characteristics creative climate are:

Trustful management that does not over control. Open communication inside and outside the organization People with variety of personality types. Willingness to accept change. Experimentation with new ideas. Little fear of making mistakes. Merit-based human resource management. Encouragement to ideas through brainstorming, suggestion system etc. Sufficient financial, physical and information resource. Channeling of creativity in various arenas.

Creative Process:The creative process has four commonly agreed steps:

1. Background or knowledge accumulation: the first step in creative process is knowledge accumulation. It involves investigation and information gathering to get various perspectives on the problem. People practice the creative search for background knowledge in a number of ways. Some of the most helpful follow:

Read in a variety of fields Join professional groups and associations Attend professional meetings and seminars Travel to new places Talk to anyone and everyone about your subject Scan magazine, newspaper, and journals for articles related to subject Develop a subject library for future reference Carry a small notebook and record useful information Devote time to pursue natural curiosities.

2. Incubation: the second step involves sleeping on the problem. It involves assimilation of knowledge to generate new idea to solve the problem. Creative individuals allow their subconscious to mull over the tremendous amounts of information they gather during the preparation phase. The incubation process often occurs while they are engaged in activities totally unrelated to the subject or problem. It happens even when they are sleeping. Some of the most helpful steps to induce incubation follow:

Engage in routine mindless activities (cutting the grass, painting the hours) Exercise regularly Play (sports, board games, puzzles) Think about the project or problem before falling asleep Meditate or practice self-hypnosis Sit back and relax on a regular basis

3. The idea experience: this phase of the creative process is often the most exciting. In this stage the idea or solution the individual is seeking is discovered. Ideas emerge in a rough form. Idea experience can be speeded up by:

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Daydream and fantasize about your project Practice your hobbies Work in a leisurely environment (for example, at home instead of the office) Put the problem on the back burner Keep a notebook at bedside to record late-night or early-morning ideas Take breads while working.

4. Evaluation and implementation: the fourth step is to modify, test or rework on rough ideas to put them in final form. It takes courage, self-discipline and preservance to evaluate and select the ideas. Some of the most useful suggestions for carrying out this phase follow:

Increase your energy level with proper exercise, diet, and rest Educate yourself in the business-planning process and all facets of business Test your ideas with knowledgeable people Take notice of your intuitive hunches and feelings Educate yourself in the selling process Learn about organizational policies and practices Seek advice from others

The ideas that pass the test of evaluation are implemented.The Role of Creativity:Basically creativity can play important role in following aspect of entrepreneurial work:

A creative person can innovate ideas as per the demand of market chance. They can materializing the imagination to mould the change Able to change the domain of thought They can synthesize the ideas from scientific invention to changing demand of people. The leader of the organization is creative they can allow to set the governing rules

themselves which can help them to bring new business ideas in the organization. To bring the new ideas in the organization they have to allow trial and error which may

cause failure. Creative people may allow such failure in the organizations. Routine work may kill the creativity. People may have different ways to perform

particular task. So, they should be flexible in the activities to perform.Sources of new business ideas:The sources of new business ideas can be:

1. Consumers: organization may get new business ideas through regular listening to the customers. Customer complaints or suggestions can lead for the development of new products, services or processes. If we regularly records complaints and try to minimize such complaints it may give a birth of a new product.

2. Competitors: Entrepreneur always constantly monitors the activities of the competitors. What are competitor’s new products, services or processes? What alteration in the existing system are they binging into the practice? Who are competitors’s dissatisfied customers? That do they want? What new readjustment can help to bring hose to company’s offering? Seeking answers of such questions may help for development of new products, services or process.

3. Channel members and sales force: these people are very close to the customers. They frequently listen customer complaints and suggestions. They also can notice the inconveniences of customers and competitors activities and offering. They regularly monitor the customer’s evaluation of the offering with respect to competitor’s offerings.

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4. Government: government can be the sources of new product idea. Government agencies may suggest ideas through training or registration activities while entrepreneurs go for registration of the entrepreneurial work. They can pursue different policies and publications for entrepreneurship development in the country. Government can establish different standards and measures for business up gradation which can provide the avenues for new product, service or process development to the entrepreneurs.

5. Research and developmental work: Entrepreneur can establish a separate unit for regular research and development work, or hire such expert team for a specific research and development work or can find out a new combination of offering uniquely in their day to day activities.

Technique or Method of Idea Generation:1. Brainstorming: Brainstorming is a method of idea generation. Its purpose is to solve

problem that are new to the organization. In brainstorming, the group meets to generate alternatives. The members present ideas and clarify them with brief explanation. Each idea is recorded on a flip chart. Group members are encouraged to offer any idea that occurs to them, even those that seem too risky and impossible to implement. In this process, criticisms or evaluation of ideas in not allowed. Quantity of ideas is very important. Each individual should not screen his or her ideas.After a list of ideas has been generated, those most obviously impracticable are eliminated from the list. The quantities of ideas that remain in the list are then kept for serious discussion. This process ultimately lead to a broad agreement on the vital ideas to be considered for implementation.

2. Reverse Brainstorming: Reverse brainstorming is like brainstorming but in reverse brainstorming criticism is allowed. It is conducted finding the fault of others. Questions are asked how it cannot work or idea can fail.

3. Brain writing: unlike in brainstorming, the individual in groups write down their ideas on sheets of paper. The papers are then exchanged and other members of the group make modifications and suggestions writhing. Each participant thinks and records ideas individually, without any verbal interaction.

Here are the steps in a typical Brain writing session:

Participants sit around a table and each one gets a sheet of paper with the same

problem statement written at the top. Just like in traditional brainstorming, also

need a moderator for the session.

At the moderator’s signal, each participant has to write down ideas on the sheet

of paper. Just like in traditional brainstorming, the ideas should always go

unedited.

When time is up (or when everybody’s done), each participant passes the sheet

of paper to the participant to the left.

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Each participant now reads the ideas that were previously written and a new round

starts. Each participant must again come up with new ideas. Participants are free to

use the ideas already on the sheet as triggers — or to ignore them altogether.

The group can agree to stop after a fixed number of rounds (such as when sheets

come to a full turn around the table) or when participants feel that contributions are

exhausted.

After the idea-gathering phase is completed, the ideas are read, discussed and

consolidated with the help of the moderator, just like in traditional brainstorming.4. Nominal Group Technique: nominal group technique involves a two-stage process. In

the first stage, individual work separately. Then, in the second stage, they work as an interacting group to evaluate and choose the alternatives. Thus, the first stages involve generating ideas, goals and alternatives. The second stage involves the group collectively listing and then evaluating the ideas, goals and alternatives generated in the first stage. This technique is very useful for identifying and evaluating options, and solving a problem when no standard is available. It is especially useful because it allows individuals to generate ideas independently and then bring them together to evaluate those ideas.

5. Free association: Free association is a technique used in psychoanalysis and also in psychodynamic theory. In this method person work through their own material, rather than parroting another’s suggestions considered free association as the first instrument for the scientific examination of the human mind. It is a technique that asks questions about objects or ideas in an effort to develop new ideas. It is five step process: Isolate the element of the problem Find the relationship between these element Record the relationship in an orderly form Analyze the resulting relationship Develop new idea from these patterns

6. Expert Opinion (Delphi Technique): in this method opinion of experts and experienced person is taken as basis of generating new idea. This method is called Delphi technique. Delphi technique is particularly used for decision making among geographically scattered organization. The experienced and knowledgeable persons are asked to give their opinion through a questionnaire about a particular event and situation. The opinions are, thus, gathered and compiled to get on overall integrated view of the experts on the subject. This integrated version is sent back to the experts for moments and further opinion. This expert opinion, thus, becomes the useful input for generating new idea.

7. Factual Information: in this method, information is collected to define the problem, identify alternatives, and evaluating the outcomes of these alternatives. In all these activities, information is vital. Decisions, which are based on objective facts and information, are unbiased and more scientific. There is no scope for emotions and social pressures when decisions are based on information. The problem with this approach is that desired information is not available all at time. Access to information requires cost, time and money.

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8. Intuition and Experience: information is not available all the time. Hence, the decision makers use intuitions. They use their hunches, instincts, inner feeling, and previous experience to reach a decision. In situation such as customer complaints, an injury, or a natural disaster, time constraints make this action the only viable choice. Intuition produces good results because they are derived from previous experience.

Business Incubation Program: A business incubation program is an economic and social development process designed to advice potential start-up companies through a comprehensive business assistance program. It is a business support system that accelerates the establishment of successful business by providing resources and services to the entrepreneurs. The primary goal of business incubation is to produce successful businesses that are able to operate independently and financially viable. It offers services to support the establishment and development of new, small and medium companies. It catalyze the process of starting and growing companies by providing entrepreneurs with the expertise, networks and tools thy need to make their venture successful. It is concerned with:

Start up consulting and business planning Consulting in all areas important for business development

and growth Consulting for access to financing Training and networking

What does the business incubation program offer? Mentoring on Business Basics Online Resources for Entrepreneurs Financial Management Business Plan Development Technology Assistance Links to Strategic Partners Advisory Boards and Mentors Access to Networking Activities Marketing Assistance Legal Advice Access to Local Funds

Business Incubator:A business incubator is an economic and social development entity designed to advise potential start-up companies, help them to establish, and accelerate their growth and success through a comprehensive business assistance program. A business incubator (Business and innovation center) is a physical facility aimed promoting economic development of its community development. Business incubators will provide a variety of resources or resourcefulness which may include the following:

Shared premises Business advice Business services Networking Mentoring A full time manager

The importance of Business incubators:

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Business incubators support the development of start-ups by providing them with advisory and administrative support services. An incubator's primary objective is to produce successful and financially viable firms that can survive on their own. Early incubators focused on technology companies or on a combination of industrial and service companies, but newer incubators work with companies from diverse industries.FinanceIncubators help start-ups save on operating costs. The companies that are part of an incubator can share the same facilities and share on overhead expenses, such as utilities, office equipment rentals, and receptionist services. Start-ups can also take advantage of lower lease rates if the incubator is located in low-rent industrial parks. Incubators may also help start-ups with their financing needs by referring them to angel investors and venture capitalists, and helping them with presentations. Start-ups may have better luck securing financing if they have the stamp of approval of incubator programs.ManagementIn addition to financial help, start-ups also need guidance on how to compete successfully with established industry players. Incubators can tap into their networks of experienced entrepreneurs and retired executives, who can provide management guidance and operational assistance. For example, a biotechnology start-up would benefit from the counsel of retired pharmaceutical executives who have first-hand experience of the drug development and clinical approval process. Similarly, a restaurant entrepreneur could learn about the difficulties of overseas expansion from retired hospitality-industry executives. Start-ups usually benefit from having respected individuals on their boards of directors and scientific advisory panels, because these individuals bring invaluable connections and experience to the table.SynergyThe close working relationships between an incubator's start-ups create synergies. Even after the start-ups leave an incubator, the connections and networks established through these relationships can endure for a long time. Start-up entrepreneurs can provide encouragement to one another, and employees may share ideas on new approaches to old problems. Start-ups may plan joint marketing campaigns and cooperate on product development initiatives. EconomyBy helping new businesses prosper, incubators assist in creating long-lasting jobs for their host communities. They create long-lasting jobs for new graduates, experienced mid-career personnel, and veteran executives. This benefits communities and drives economic growth.

Chapter 5:Business Development Plan for a New Venture.

Business plan is a written statement regarding what the entrepreneur is going to do. It is a guideline regarding what the entrepreneur has wanted to achieve and how has he wanted to achieve. The business plan is a roadmap of proposed new venture of the entrepreneur that describes current status, expected needs and projected results of new venture. It develops the new

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venture for investment and allocates resources in a coordinated manner. It provides a clear picture about:

Business description of new venture. Goal of new venture. Activities to be done in the new venture. Timing of doing the activities and their sequence. Methods of doing the activities. Responsibilities for doing each activity. Resources needed for doing each activity. Projected profit.

A clear and complete business plan is the main document required to mobilize financial resources for new venture. It also serves as a working document once the venture is established. It analyses critical risks. It also presents a time table for implementation of new venture.Benefits of Business Plan (Value of Business Plan)The benefits of business plan are as follows:

1. Risk management: all aspects of the new venture are carefully analysed. This helps the entrepreneur to deal with risks and uncertainties that may arise. It also provides contingency plans for such situations.

2. Objectivity: the time, effort, research and discipline needed to prepare a business plan forces the entrepreneur to view the venture objectively and critically. Close scrutiny of assumption made about the venture’s success is done.

3. Communication: the completed business plan helps entrepreneur to communicate with outside parties. Financial sources can use it for investment purposes.

4. Implementation: the business plan serves as an operational tool for guiding the implementation of new venture toward success.

5. Control: the business plan establishes standards for performance as bench marks. Actual performance can be compared with standards to take corrective actions.

6. Efficiency: the business plan improves efficiency of new venture by minimizing waste. Results can be achieved on time within budgeted costs and of desired level of quality

Scope of the business plan:The business plan may be read by employees, investors, bankers, ventures capitalists, suppliers, customers, advisors, and consultants. Whoever is expected to read and focus? Since each of these groups reads the plan for different purpose, the entrepreneur must be prepared to address all their issues and concerns. In some ways, the business plan must try to satisfy the needs of everyone, whereas in the actual marketplace the entrepreneur’s product will be trying to meet the needs of selected groups of customers.However, there are probably there perspectives that should be considered when preparing the plan.

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Entrepreneur’s perspective: the perspective of the entrepreneur, who understands better than anyone else the creativity and technology involved in the new venture. The entrepreneur must be able to clearly articulate what the venture is all about.

Marketing perspective: entrepreneur will consider only the product or technology someone would buy it. Entrepreneurs must try to view their business through the eyes of their customer.

Investor perspective: the entrepreneur should try to view his or her business through the eye of the investor. Sound financial projections are required. If the entrepreneur does not have the skills to prepare this information, then outside sources can be of assistance.

The depth and detail in the business plan depend on the size and scope of the proposed new venture. Thus, differences in the scope of the business plan may depend on whether the new venture in a service involved manufacturing or is a consumer good or industrial product. The size of the market, competition, and potential growth may also affect the scope of the business plan.

Reasons of some business fail:Generally a poorly prepared business plan can be blamed to fail due to one or more of the following factors:

Goal set by the entrepreneur are unreasonable Goals are not measurable The entrepreneur has not made a total commitment to the business or to the family. The entrepreneur has no experience in the planned business. The entrepreneur has no sense of potential threats or weakness to the business. No customer need was established for the proposed product or services.

Setting goals requires the entrepreneur to be well informed about the type of business and the competitive environment. Goals should be specific and not so mundane as to lack any basis of control. In addition, the entrepreneur and his or her family must take a total commitment to the business in order to be able to meet the demands of a new venture. For example, it is difficult to operate a new venture on a part time basis while still holding on to a full time position. And it is difficult to operate a business without an understanding from family members as to the time and resources that will be needed. Lenders or investors will not be favorably inclined toward a venture that does not have full time commitment. Moreover, lenders or investors may expect the entrepreneur to make a significant financial commitment to the business even if it means a second mortgage or a depletion of saving.Generally, a lack of experience will result in failure unless the entrepreneur can either attain the necessary knowledge or team up with someone who already has it.The entrepreneur should also documents customers’ needs before preparing the plan. Customer needs can be identified from direct experience, letters form customers or marketing research. A clear understanding of these needs and how the entrepreneur’s business will effectively meet them is vital to the success of the new venture.

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