Assignment -1Q.1 what is entrepreneurship? Explain causes of

slow growth rate for entrepreneurs in India.

Q.2 what is entrepreneurship theory and briefly explain about any two theories.

Date of submission-

unit-2 Business opportunityThere is a maximum opportunity available in the

business. but every one can not observe it. It visible for those person who constantly remain search of them. Opportunity not come to easy but the entrepreneur has to struggle for it.

Business opportunity can be described-It is an economic idea which can be implemented to

create a business enterprise and earn profits.Before selecting an opportunity, the entrepreneur has

to ensure two things-a) Good market for the product, which is going to

produce.

b) The rate of return on the investment is high.An entrepreneur is basically an opportunity finder.

An entrepreneur generally evaluate different possibilities and select one who is the highest paying possibility.

All idea are not opportunity but all opportunity are idea.

Elements of a business opportunity-a. Market scopeb. High rate of return on investmentc. Implementation of the idea.d. Potential of future growth

Exploring opportunities in the environment-An opportunity may be derived from the needs and

problems of the society. An entrepreneur to produce/ serve the needs of the society and solve/ remove the problems.

Entrepreneurial opportunities exist in the environment and entrepreneurs making process of receiving/ getting ideas from different sources.

1. Finding opportunity.2. Evaluating ideas from environmental sources.3. Identifying product.4. Setting up a project.

problems needs

Opportunity(Scouting)

Creativity(Ideas)

Innovation(Product)

Project(Business enterprise)

environment

environment

ENVIRONMENT

ENVIRONMENT

Needs and Problems of

society Creative solutions

Entrepreneurial opportunities

Exp- Tata nano- for lower income group Nirma for lower income group as compare to surf

and tide.North Indian foods in south India.

Factors involved in opportunities

1-ability to perceive and preserve basic ideas.a. Problemsb.Changesc. Inventionsd. competition

2. Ability to support different sources of information

3.Vision and creativity

1.Ability to perceive and preserve basic ideas-a. Problems-idea comes when problem faced by the

people. The solution is called business opportunity. Exp- multimedia phone, multi use of products.

b. Change- changes in an environment also causes of business opportunity. Exp-cyber cafes, computer institute.

c. Inventions-creative new things as well as new and creative process that add value of existing products. Exp- audio and video cassette players to CD players to DVD players.

d. competition-an entrepreneur is open to receive ideas from different sources. This expects the entrepreneur to be a good network besides having the ability to recognise and nature the potential idea in to venture.

Exp-Shiv Nadar (HCL Computers)2.Ability to harness/support different source of

information-supporting information from different sources is an important aspect of opportunities. The information collected from different sources has to be analysed and utilised for the identification of the right opportunity.

Exp- Tarver Baylis an English inventor, developed-

A portable radio that was powered by clock-work instead/ in-respect of batteries.

3.Vision and creativity- it is one of the most behavioral nature of an entrepreneur. He should able to develop creative ideas.

Exp- Henry Ford developed a motor car for the common man, in low price so any person can by it.

Exp- Tata NanoIdea generation- it is the most important task of an

entrepreneur. It is involves creativity. the business idea comes from market opportunity.

Environmental analysis-Importance of environment- environment playing a

very vital role in the success of an existing enterprise. If a company is able to adopt the environmental changes/ conditions, then will be success in the market, for the log-run otherwise company will be out from the environment/ market.

Exp- Bajaj and Texla television out from the market.1. Formulation of strategies and policies- it would

be helpful for indentifying the environmental opportunities in the market. So it create a vital role in formulating strategies/ policies.

In India different reputed business houses take help from expert to find out trends in the external environment and implementing it making strategies.

2.Tapping useful resources- an entrepreneur gets various resources/ inputs from the environment and implement it in goods/ products/ services for transfer to the ultimate users.

If a business houses capable to understand the external environment then they arrange all things from the market at very nominal price and at the right time.

3.Better performance- if an entrepreneur understand the external environment then he can take corrective decision in time and get opportunity.

4.Sensitisation of entrepreneurs to cope up with rapid changes- when an entrepreneur doing keen observation of the trends in environment. It would be helpful to the entrepreneur in changing technology, competition, govt. policies, and also changing need of the customers.

Exp-in India reliance industries always keep the keen observation of the external environment and implement strategies to avail opportunities in emerging areas.

5.Image building-if an organisation keeping keen observation about the external environment then it would create/ produce, product and services according to requirement of the customers and it create good image/ reputation in the consumer mind.

Exp- Reliance mobile going to launch 4G services in Indian market.

Analysis of environment-It is the process of monitoring/ observing the

economic/ non-economic environment to determine the opportunities/ threats for a enterprise.

It includes data collection, information processing and forecasting for developing goals/ strategies of a business. It would be also helpful to the an entrepreneur to predicting future development and take timely actions.

Information comes from- customers, wholesalers, retailers, distributors, consultants, company records, govt./ financial institution, and international org. etc.

It would be helpful in making forecasting about economic, social, political, legal, and market forces in future.

Environmental factors- entrepreneurship, environment define the various forces with in which various small, medium, and large enterprises operate.

Environment consist of the actors and factors external to the enterprise. It is the total of external factors with in which the enterprise operates. It includes controllable and uncontrollable factors.

Types of external environment

micromacro

Business environment

Micro environmenta. Suppliersb. Customersc. Intermediariesd. Competitors

Macro environmenta.Economicb.Socio-culturalc.Politicald.Technologicale.natural

Competitive analysis of market-It is define the status of the product and services in

the market. It gives the real picture of the products/ services in the market.

Needs of competitive analysis-a. Various dimension of the marketb. Potential entrants in to marketc. Direction of change in the trendd. The threat of substitute or new products

Micheal E. Porter defined competitive analysis-

Industry competitors

Rivalry among existing firms

Potential entrants

buyers

substitutes

suppliers

Bargaining power of buyersBargaining power of suppliers

Threat of substitute productsOr services

1.Threat of entry of new firms- an entrepreneur create good image in local market. He might be dominate market by one or two product. The threat of new entry either in terms of new idea, a new package, a new services or low cost.

Threat could be define-a. Large scale of capital interventionsb. Product volume interventionsc. Large-scale distribution interventiond. Establishing a distinct competency Capital intervention- an entrepreneur might be

operate with a moderate capital investment for the product. And might have still a monopoly-

The product might have a market life for a substantial period of time. If any other entrepreneur who intervenes in the production and distribution of the similar product with a very large capital investment. Then the moderate and small-scale entrepreneur might extremely difficult, to compete due to lack of investment matching the new entrant

Product-volume intervention-the products in the market, are either consumable or non-consumable, no any single entrepreneur could meet the entire requirements of the market. In this situation it depend up on the capability -

Of the entrepreneur to capture the market. In this condition the small entrepreneurs would not be able to provide the needed supply to the market.

Intervention in distribution system- an entrepreneur might be producing good product to the society but he may not have proper distribution of the product. In this situation he could not properly access the potential market. So advantages goes to these entrepreneur who has good distribution network either his product may not have the same quality as compare to another entrepreneur.

Intervention through distinct competence-when we observing the market we also find that which brands have distinct place in the market. it is related to the reputation of an entrepreneur. A new entrepreneur might find it difficult to compete with such brands.

Incase of an entrepreneur having established a market arrival of a new entrepreneur with products based on a distinct competence is a matter of great threat.

2.Bargaining power of suppliers- it is depend up on the economic bargaining power relative to companies competing in the industry.

Suppliers becomes powerful when company reduced its profitability by suppliers actions. When the suppliers raising prices or restricting the quantity.

Suppliers are more powerful in given situation-a. When qualitative substitute products are not in

market to buyers.b. Buyers are not a significant customers group for the

suppliers group.c. Effectiveness of suppliers products has created high

switching cost for buyers.d. The suppliers segment of the industry is dominated

by a few large companies-

And it more concentrated than the industry to which it sales.

3.Bargaining power of buyers-when a company running in an industry so it maximise return on investment. So buyers are interested purchasing products at the lowest possible price. To reduce cost value, customer bargain for higher quality at the lowest price.

Buyers groups are more powerful when-a. Buyers are important because they purchase a

large quantity of the seller’s products.b. Buyers are able to switch the products from one

suppliers to others.

4.Threat of substitute products- an entrepreneur better understand that they have to compete substitute products. those are capable to satisfying similar customers needs but have different feature-

The threat of substitute products is greater when-a. Buyers/customers face few, switching cost.b. Price of the substitute product are lowerc. Quality, performance, standard of substitute

products are equal to or greater than those of the existing products.

International environmentIt is play a very vital role in case of those firms who

running in export/import and also a firm manufacturing operation in different countries. It is includes trade policies of foreign govt. international org.such as- WTO, IMF, World Bank, MNC’S, etc.

After the globalisation a large no. of foreign MNC’S come in India and opened its subsidiaries in India with Indian company. Its increased competition in Indian market. In result Indian small and medium enterprises faced difficulty in competing with foreign company.

Setting up new business enterprise-Setting up a new business enterprise is not as easy

job. It is complex and difficult . Because it face various difficulty when forming new business enterprise-

Basic consideration in setting up a new business unit-

1.Selection of line business-Identify marketMake surveyFind out market demandPrepare project report

2. Choice of form of ownership-Sole proprietorship, partnership, joint stock

company.Depend up on authority of entrepreneur insurance and banking business done only joint

stock companies.Size of business define the form of org.Sole proprietorship or partnership are suitable

for small & medium scale.Other factors like- capital requirement,

managerial skills requirement, market coverage, limit of liab., tax liab, etc.

3.Size of business- it depend up on- technical, managerial, financial, and marketing.

Some factors favor the large size but some factors favor the small size.

If the entrepreneur full confident then start large scale.

For new idea , it would be suitable for small scale operation.

4. Financing the proposition- Entrepreneur should have sufficient amount of capital

for continuity of the business.Capital required in fixed assets like-land, building,

machine, equipment,

5. Location of business- location of business should be easy accessable to raw materials, labour, power, markets, other service like- banking, transportation, communication, insurance, warehousing, etc.if the location of plant is not appropriate then it will causes many problems. In this case increase cost per units and also restrict the growth of the firm.

6.Machine equipment- it depend up on various factors like- availability of funds, size of production, nature of production process, etc.

If the quality worker are available for the production process then no need of installation the machine.

Repair/ maintenance and service parts should be easily available for the machine.

It would be suitable for the large scale of operation.7.Plant layout-it should be economical and efficient,

and reduced transport, materials handling, clerical and other cost.

8.Human resources- entrepreneur can not run the business without human resources, because both skilled and unskilled and managerial staff include in an org.,right person for the right job minimising the wastage of time, money and effort.

9.Procedural formalities-in case of sole proprietership or partnership no procedural formalities. Only permission from the municipality to start the business.

Less legal formalities joint stock company/public company have greater procedural formalities. Send periodical report to the registrar of the company and SEBI.

10.Tax-planning-it is a compulsory task now days-Huge profit- promote companyLess profit- promote sole proprietor and partnership11.Launching the business enterprise- do all the

formalities and arrange all the necessary things.

Steps in setting up a new business

Scanning the environment of entrepreneurial opportunity

Development of product/ service idea

Assessment of feasibility of the idea

Preparation of business plan

Appraisal by the funding agencies

Resources mobilisation

Project commissioning and launch

Practical steps in setting up a small enterprise- Project report

No objection certificate

Formal sanction of loan

Construction of building and installation of machinery

Establishing market network

Application for permanent registration

Detailing manpower

Choice of form of organisation-When selecting a particular form of organisation then

some most of important factors should be considered by an entrepreneur.

1.Easy formulation- business should be easily formed.Minimum cost and minimum legal formalities.In this condition sole proprietorship and partnership

are preferable.2.Liability- in an org. should be limited liabilities.It is helpful in case of winding up the business.Owner can easily pay his liabilities.

3.Nature of business- It is the most important factors for selecting the

business.Business activity might be in trading,

manufacturing, services.In case of trading business need small capital and

less managerial ability.It is suitable for sole proprietorship Service activities needs partnershipFor manufacturing partnership and joint stock

company is better choice.

4.Easy to raising finance-Without capital business can not surviveLarge capital needed for the businessIt Is depend upon the facility with which finance

can be raised. 5.Control-For direct control sole proprietorship would be

right form.In private company the promoter should be able to

control business activities.In case of public company the promoters have no

direct control over the management of the company.

6.Business secrecy- It is not a easy task for any business to keep

secrets in business activities.It is implemented in soleproprietoship In case of partnership the partner selection

should be very carefully. 7.flexibility of operation-Business form should be allow flexibility in

operation.Possibility of modification/ changes

8.Stability or continuity- in any form of business continuity should be most important factors. But in case of soleproprietorship/ partnership get affected immediately if the partner/ owner exist.

9.Freedom from government regulation- business form should be free from day to day govt. regulation , but in case of company form needs dome more govt. regulation. but in case of partnership/ soleproprietorship no govt. regulation.

10.Taxation – minimum burden of income tax, and should be flexibility in taxation and not same for all owner’s. Tax rate should be considerable.

Legal requirement of incorporation of a company-The following documents are required-A)MOA B)AOA C) List of directorsd) Written consent of directors e) Declaration regarding qualification sharesf) Notice regarding registered officeg) Statutory declarationc) List of directors- it is define name, address and

occupation of the person who agreed to act as first directors of the company. 3 directors in case of public company and 2 directors in case of private company.

d)Written consent- it is filled by that person who agreed to work as a first directors in the company.

e) Declaration regarding qualification shares- in this condition directors should give/ undertaking that they have agreed to purchase and pay for the qualification shares.

g) Statutory declaration- it is declare by an advocate or secretary or directors or CA or any other person who have taken part in the formation of company.

Raising of capital-1)SEBI approval for raising capital- SEBI is the

regulatory authority of the financial market in India. It provide guidelines for shares/ debenture and protection of investors. When a company inviting to the public by make all relevant information. Company take approval from SEBI before going raising funds from public.

2)Filling of prospectus- a copy of statements which filled by company registrar, it is the invitation to the public to apply for share/ debenture of the company. Investors decided about the investment according to information and in this documents here no misrepresentation and should all logical information disclosed.

3)Appointment of bankers, brokers, underwriters- raising funds from the public is a most crucial task for the company. The application money received by bankers of the company. Brokers try to sell the shares by distributing the for and motivating public to apply for the shares. If the company has doubt/ not sure about the hood public response then it may appoint underwriters. Underwriters undertake to by the shares if there are not subscribed by the public but it is not necessary.

4) Minimum subscription- it is compulsory for all the companies who inviting public to buy shares/ debenture. The company should must received application for a certain minimum no. -

Of shares before going allotment of shares. Minimum subscription is 90% of inviting shares. If the subscription goes less than 90% then allotment can not made and application money must be returned to the applicants.

5) Application of stock exchange-application should be made at least 1 stock exchange for taking permission to deal in share/ debenture. If such permission not granted before the expiry of 10 weeks from the date of closure of subscription list then the allotment become void and all money received from the applicants will have to returned to them with in 8 days.

6)Allotment of shares- in case the no. of shares allotted is less than the no. of applied or no share are allotted to the applicants the application money is to be returned or adjustment in allotment money.

Returned of allotment signed by a director or secretary is to be filled with the registrar of the companies with in 30 days of allotment.

Core values of entrepreneurs-1)Innovation and creativity- it is the most important

values in between most of the entrepreneur, they are guided by these values when they come out with creative ideas, new products, services, to solve the specific problems of the society. Creativity is the ability to fond out new way of doing things. Innovation may be in the area of new products, new method of production.

2)Self-reliance- it is implemented whether the entrepreneurs likes to be the master of his own density. I can not work under any one , I will be my own boss. Self-reliance is the important assets because it provides courage and confidence to -

Undertake risk of trying with innovative things.3)Respect for work- the entrepreneur have great

respect for work. A successful entrepreneur believe that they can achieve any things by hard work. This values provides goal direction which encourages entrepreneurs. They understand “work is worship” they concentrate on their work to achieve their goals.

4)Achievement orientation- a good quality entrepreneurs are guided by the values of out-standing performance. Dhirubhai Ambani had this values when he created Reliance Industries LTD. And made it respected enterprise.

And other out standing performance on the part of Narayan Murthy that saw the emergence and growth of Infosys.

They do not fears from the opposite situation they concentrate their focus on goals. Do hard work and achieve the target/goals.

Essential attitudes of successful entrepreneurs-1.Attitude towards imagination- an entrepreneur

predict the future opportunity from the environment. They observe how can solve the problems. They are quick to analyse the reason, for a particular situations and identify the strengths and weakness of the situation. And find opportunities for innovation ,growth and development. They integrate intitution with imagination to make a new product or new services.

2.Attitude towards initiative- the entrepreneurs take initiative because it is the tendency of entrepreneurs.

Entrepreneurs are the leader not followers. They convert dreams in to reality.

3.Attitudes towards new opportunities- entrepreneurs always searching new opportunities and start new business for availing this opportunities.

4.Attitudes towards change- entrepreneurs have positive attitudes towards changes. They are always ready to adopt changes and make policy/ strategy according this changes.

5.Attitudes towards freedom of expression and action- it is the tendency of an entrepreneur make freedom of expression and action.

They do not happy if instruction given by others. This tendency are not suitable for doing job, but promote new ventures.

6.Attitudes towards performance- entrepreneur create value information, when an entrepreneur successful complete their task. Its indicate their performance, whether they are performing well or not. This gives full satisfaction after successful competition of performance of the task.

7.Attitudes towards personal capacity-entrepreneur tendency to believe in their capacity. Who influence the environment , they have capacity to change it, rather than leave everything to luck. -

They understand that anything can be achieved by their own efforts. They think that they can change and influence the environment.

8.Attitudes towards building relations or networking- entrepreneurs always do not get various resources required to complete project. If they have networking with the suppliers of various resources. Such as capital, machinery, materials, etc.

Entrepreneur should have positive attitudes towards networking and building relations with the suppliers of various resources.

9.Attitudes towards customers-entrepreneurs attitude towards customer should be positive and respectable and they understand customers comes first. They maintain customers satisfaction by expert sales force building customers trust. The success of business and ability of entrepreneur to listen to the customers problems and find out quickly what the customers wants and produce quality products.

Venture capital-Venture capital used to define financing feature by

high risk and potential for substantial returns. It is require capital to launch new commercial ventures and improve/ finance early stage –growth.

It is just like fund manager who finance the money for the equity investors in pool. They focus on high risk entrepreneurial ventures.

Role of venture capital- the first generation entrepreneurs face the shortage of equity capital, banks and others financial institution before providing the loan the observe/ analysis the all

documents and find out credit capabilities of the entrepreneurs. It will take so much time but bank/institution do not provide as much require fund. In this case need of venture capital.

“high risk high reward”When the business will run successfully then banks

and others investors are willing to invest. In this stage firm can sell the venture capital shareholding funds in the enterprise.

Venture capital is a risk capital which is required to launch and operate a business venture in the initial stages.

Sebi define the venture capital-a. Pool capital.b. Raised in a manner specified in the regulations.c. Invest capital in ventures in accordance with

these regulations. Feature of venture capital-1. Investment made are those enterprise which are

new and use new technology to produce new products, having an expectation of higher profits.

2. Generally the investments are in equity instruments.

3.The investors return is taxed as capital gain rather than ordinary income.

“venture capital is an important source of equity for start up companies”

These are the some companies- (federal express, Compaq, sun micro system, Intel, Microsoft,) received venture capital during the initial stages.

Venture capital funds in India-Venture capital funds are governed by the SEBI

guidelines- a.Subsidaries of large financial corporation and

banks.

b.Private independent specilised firms.c.founded small business investment corporations.Venture capital in India /provide venture capital for

the young entrepreneurs.

Consideration in extending venture finance-

The following points to be consider before extending venture capital to an entrepreneur-

1.Dule diligence- in this case its define the process of investigating and advantages of project or prospective investment. It is define qualification of entrepreneurs, size and growth capacity of -

Venture market, identifying competition, potential market, returns etc. in initial stage entrepreneurs observe 30-50% return.

2.Cost of venture capital- it is represented by the ownership % by the entrepreneurs. It is depend upon investors perception of risk. Investors will demand in larger stakes in the company for early stage, and identify 30-50% return. but few business venture achieved these projected plans.

3.Exit options- venture capital investment is the crucial process for capital suppliers. Because gain of capital realised b/w 3-10 yrs. But in case venture investors want to know the progress of investments. Business plans covers all these aspect. but exit option includes selling of the company.