Syllabus:

JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY ANANTAPUR

III B. Tech I-Sem (ME)

(15A03505) ENTREPRENEURSHIP

UNIT 1: Introduction to Entrepreneurship Definition Types of Entrepreneur,

Entrepreneurial Traits, Entrepreneur vs. Manager, Entrepreneur vs Intrapreneur. The Entrepreneurial decision process. Ethics and Social responsibility of Entrepreneurs. Opportunities for Entrepreneurs in India and abroad.

Creating and Starting the Venture, Sources of new Ideas, Methods of generating ideas,

creative problem solving, product planning and development process.

UNIT II: The Business Plan Nature and scope of Business plan, Writing Business Plan, Evaluating Business plans, Using and implementing business plans. Marketing plan, financial plan and the organizational plan, Launching formalities.

UNIT-I

Concept of Entrepreneurship

An Entrepreneur is an individual with knowledge, skills, initiative, drive and spirit of innovation who aims at achieving goals. An entrepreneur identifies opportunities and seizes opportunities for economic benefits. Entrepreneurship is a dynamic activity which helps the entrepreneur to bring changes in the process of production, innovation in production, new usage of materials, and creator of market.

The word “entrepreneur” is derived from the French verb ‘Enterprendre’, which means ‘to undertake’. This refers to those who “undertake” the risk of new enterprises. An enterprise is created by an entrepreneur. The process of creation is called “entrepreneurship”. Entrepreneurship is a process of actions of an entrepreneur who is a person always in search of something new and exploits such ideas into gainful opportunities by accepting the risk and uncertainty with the enterprise. Entrepreneurship has traditionally been defined as the process of designing, launching and running a new business, which typically begins as a small business, such as a start-up company offering a product, process or service for sale or hire. The people who create these businesses are called entrepreneurs.

Definition

According to Cantillon, “An entrepreneur is the agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future”.

Characteristics of Entrepreneurship

Entrepreneurship is characterized by the following features:

1. Economic and dynamic activity:

Entrepreneurship is an economic activity because it involves the creation and operation of an enterprise with a view to creating value or wealth by ensuring optimum utilization of scarce resources. Since this value creation activity is performed continuously in the midst of uncertain business environment, therefore, entrepreneurship is regarded as a dynamic force.

2. Related to innovation:

Entrepreneurship involves a continuous search for new ideas. Entrepreneurship compels an individual to continuously evaluate the existing modes of business operations so that more efficient and effective systems can be evolved and adopted. In other words, entrepreneurship is a continuous effort for synergy (optimization of performance) in organizations.

3. Profit potential:

“Profit potential is the likely level of return or compensation to the entrepreneur for taking on the risk of developing an idea into an actual business venture.” Without profit potential, the efforts of entrepreneurs would remain only an abstract and a theoretical leisure activity.

4. Risk bearing:

The essence of entrepreneurship is the ‘willingness to assume risk’ arising out of the creation and implementation of new ideas. New ideas are always tentative and their results may not be instantaneous and positive.

An entrepreneur has to have patience to see his efforts bear fruit. In the intervening period (time gap between the conception and implementation of an idea and its results), an entrepreneur has to assume risk. If an entrepreneur does not have the willingness to assume risk, entrepreneurship would never succeed.

Importance of Entrepreneurship:

Entrepreneurship offers the following benefits to an Organisation:

1. Development of managerial capabilities:

The biggest significance of entrepreneurship lies in the fact that it helps in identifying and developing managerial capabilities of entrepreneurs. An entrepreneur studies a problem, identifies its alternatives, compares the alternatives in terms of cost and benefits implications, and finally chooses the best alternative.

This exercise helps in sharpening the decision making skills of an entrepreneur. Besides, these managerial capabilities are used by entrepreneurs in creating new technologies and products in place of older technologies and products resulting in higher performance.

2. Creation of organizations:

Entrepreneurship results into creation of organizations when entrepreneurs assemble and coordinate physical, human and financial resources and direct them towards achievement of objectives through managerial skills.

3. Improving standards of living:

By creating productive organisations, entrepreneurship helps in making a wide variety of goods and services available to the society which results into higher standards of living for the people.

Possession of luxury cars, computers, mobile phones, rapid growth of shopping malls, etc. are pointers to the rising living standards of people, and all this is due to the efforts of entrepreneurs.

4. Means of economic development:

Entrepreneurship involves creation and use of innovative ideas, maximisation of output from given resources, development of managerial skills, etc., and all these factors are so essential for the economic development of a country.

Types of Entrepreneurs

Depending upon the level of willingness to create innovative ideas, there can be the following types of entrepreneurs:

1. Innovative entrepreneurs

These entrepreneurs have the ability to think newer, better and more economical ideas of business organisation and management. They are the business leaders and contributors to the economic development of a country.

Inventions like the introduction of a small car ‘Nano’ by Ratan Tata, organised retailing by Kishore Biyani, making mobile phones available to the common may by Anil Ambani are the works of innovative entrepreneurs.

2. Imitating entrepreneurs

These entrepreneurs are people who follow the path shown by innovative entrepreneurs. They imitate innovative entrepreneurs because the environment in which they operate is such that it does not permit them to have creative and innovative ideas on their own. Such entrepreneurs are found in countries and situations marked with weak industrial and institutional base which creates difficulties in initiating innovative ideas. In our country also, a large number of such entrepreneurs are found in every field of business activity and they fulfill their need for achievement by imitating the ideas introduced by innovative entrepreneurs. Development of small shopping complexes is the work of imitating entrepreneurs. All the small car manufacturers now are the imitating entrepreneurs.

3. Fabian entrepreneurs

The dictionary meaning of the term ‘fabian’ is ‘a person seeking victory by delay rather than by a decisive battle’. Fabian entrepreneurs are those individuals who do not show initiative in visualising and implementing new ideas and innovations wait for some development which would motivate them to initiate unless there is an imminent threat to their very existence.

4. Drone entrepreneurs

The dictionary meaning of the term ‘drone’ is ‘a person who lives on the labour of others’. Drone entrepreneurs are those individuals who are satisfied with the existing mode and speed of business activity and show no inclination in gaining market leadership. In other words, drone entrepreneurs are die-hard conservatives and even ready to suffer the loss of business.

5. Social Entrepreneur

Social entrepreneurs drive social innovation and transformation in various fields including education, health, human rights, workers’ rights, environment and enterprise development.

They undertake poverty alleviation objectives with the zeal of an entrepreneur, business practices and dare to overcome traditional practices and to innovate. Dr Mohammed Yunus of Bangladesh who started Gramin Bank is a case of social entrepreneur.

Functions of an Entrepreneur

The important functions performed by an entrepreneur are listed below:

1. Innovation

An entrepreneur is basically an innovator who tries to develop new technology, products, markets, etc. Innovation may involve doing new things or doing existing things differently. An entrepreneur uses his creative faculties to do new things and exploit opportunities in the market. He does not believe in status quo and is always in search of change.

2. Assumption of Risk

An entrepreneur, by definition, is risk taker and not risk shirker. He is always prepared for assuming losses that may arise on account of new ideas and projects undertaken by him. This willingness to take risks allows an entrepreneur to take initiatives in doing new things and marching ahead in his efforts.

3. Research

An entrepreneur is a practical dreamer and does a lot of ground-work before taking a leap in his ventures. In other words, an entrepreneur finalizes an idea only after considering a variety of options, analyzing their strengths and weaknesses by applying analytical techniques, testing their applicability, supplementing them with empirical findings, and then choosing the best alternative. It is then that he applies his ideas in practice. The selection of an idea, thus, involves the application of research methodology by an entrepreneur.

4. Development of Management Skills

The work of an entrepreneur involves the use of managerial skills which he develops while planning, organizing, staffing, directing, controlling and coordinating the activities of business. His managerial skills get further strengthened when he engages himself in establishing equilibrium between his organization and its environment.

However, when the size of business grows considerably, an entrepreneur can employ professional managers for the effective management of business operations.

5. Overcoming Resistance to Change

New innovations are generally opposed by people because it makes them change their existing behaviour patterns. An entrepreneur always first tries new ideas at his level. It is only after the successful implementation of these ideas that an entrepreneur makes these ideas available to others for their benefit. In this manner, an entrepreneur paves the way for the acceptance of his ideas by others. This is a reflection of his will power, enthusiasm and energy which helps him in overcoming the society’s resistance to change.

6. Means of Economic Development

An entrepreneur plays an important role in accelerating the pace of economic development of a country by discovering new uses of available resources and maximizing their utilization.

Traits of an Entrepreneur

Successful entrepreneur from Henry Ford to Steve Ford, share similar qualities with one another. The following are the qualities to be a successful entrepreneur.

1. Strong leadership: Leaders are born not made. A leader is someone who values the goal

over any unpleasantness the work it takes to get there may bring. A strong leader has strong communication skills and the ability to team of people towards a common goal in a way that the entire team is motivated and works effectively to get there as a team.

2. Highly motivated: Successful go out into the world and invoke change through their actions. Typically, leaders enjoy challenges and will try tirelessly to solve problems .They adapt well to hanging situations and are typically expert of helping their teams change with them by motivating them towards new goals and opportunities.

3. Strong sense of basic ethics and integrity: Business is sustainable because there is a common code of ethics universally that is accepted. With importance in working with clients or leading a team, effective leaders admit to any error made and offer solutions to correct rather than lie or blame others.

4. Willingness to fail: Successful entrepreneur is risk takers and not afraid of failure.Entrepreneurs are often successful because they are calculating and able to make the best desisions in even the worst of cases.

5. Serial innovators: Entrepreneurs are almost defined by ther drive to constantly develop new ideas and imporve on existing processes. Successful people welcome change and often depend on it to improve their effeciveness as leaders and ultimately the success of their businesses as many business concepts rely on improving products, services and processes inorder to win business.

6. Know what you don’t know: While successful entrepreneurs are typically strong personalities overall, the best have learned that there’s always a lesson to be learned. Successful entrepreneurs are confident and they learn new ways of doing business.

7. Competitive spirit: Entrepreneurs enjoys a challenge and they like to win. In business, it’s a constant war with competition to win business and grow market share. It is a personal challenge to an entrepreneur to focus inward and grow a business to make profit.

8. Understand the value of a strong peer network: In almost every case, entrepreneurs never get to success alone. The best understand it takes a network of contacts, business partners, financial partners, peers and resources to succeed. Effective people nurture these relationships and surround themselves with people who can make them more effective.

Differences between an Entrepreneur and a Manager

Bases of Differences	Entrepreneur	Manager
1. Motive	The main motive of an entrepreneur is to start a venture by setting up an enterprise. He understands the venture for his personal gratification.	But, the main motive of a manager is to render his services in an enterprise already set up by someone else i.e., entrepreneur.
2. Status	An entrepreneur is the owner of the enterprise.	A manager is the servant in the enterprise owned by the entrepreneur.
3. Risk Bearing	An entrepreneur being the owner of the enterprise assumes all risks and uncertainty involved in running the enterprise.	A manager as a servant does not bear any risk involved in the enterprise.
4. Rewards	The reward an entrepreneur gets for bearing risks involved in the enterprise is profit which is highly uncertain.	A manager gets salary as reward for the services rendered by him in the enterprise. Salary of a manager is certain and fixed.
5. Innovation	Entrepreneur himself thinks over what and how to produce goods to meet the changing demands of the customers. Hence, he acts as an innovator also called a ‘change agent’	But, what a manager does is simply to execute the plans prepared by the entrepreneur. Thus, a manager simply translates the entrepreneur’s ideas into practice.
6. Qualification	An entrepreneur needs to possess qualities and qualifications like high achievement motive, originality in thinking, foresight, risk -bearing ability and so on.	On the contrary, a manager needs to possess distinct qualifications in terms of sound knowledge in management theory and practice.

Differences between an Entrepreneur and Intrapreneur

Bases of Differences	Entrepreneur	Intrapreneur
1. Nature	An entrepreneur is an independent person in his business operations	An intrapreneur is completely depending on the entrepreneur for everything. He cannot take decision by himself
2. Education	Entrepreneur need not to highly educate. He can learn everything by experience provided he has the basic qualities of a successful entrepreneur	An Intrapreneur enters into an organization with a high education and qualification. He is indeed a business specialist in the chosen field.
3. Funds	An entrepreneur himself raises funds necessary for starting and establishing his enterprise	An intrapreneur is completely free from the generation of funds
4. Risk factor	An entrepreneur has to bear all the risks involved in the business by himself	Intrapreneur need not to bear any risk involved in the business.
5. Work	Entrepreneur is more concerned with doing routine works and something he may not know the important details of his own business	An intrapreneur acts as a specialist in his chosen field and serves as an outside professional
6. Operations	He always operates from outside. The owner is different and the enterprise he owns is different.	Intrapreneur operates form within the organization itself. He is the part and parcel of the organization.
7. Authority	Generally, an entrepreneur operates with a strong authoritarian back-up	Intrapreneur is less authoritarian. He is more adaptable in the organization.

The Entrepreneurial Decision Process

An individual needs to pass through a process from present status to become an entrepreneur. In other words, the individual / entrepreneur have to take a number of decisions in sequential order, call it the entrepreneurial decision process, to leave the present status and become an entrepreneur. The following is an illustrative decision process individual’s follow to become entrepreneurs:

1. The Present Status

There is an apt saying: “Change is the law of nature and change is the only permanent thing in this world” Yet, change is often resisted because it involves uncertainty which causes fear. It is due to uncertainty, the present state of affair is considered better than the unknown one after the change. As such, leaving the present status and becoming an entrepreneur (i.e., a synonym of risk and uncertainty) is not easy as it takes a great deal of preparation and courage to do so. Nonetheless, individuals dare it and become entrepreneurs.

Broadly, there are two reasons for individuals to become entrepreneurs:

(i) By chance, and

(ii) By compulsion.

As regards choice, individuals working in marketing area become familiar with market and gain experience and, in turn, they decide to start their own business in that market. Sales representatives working in publishing companies generally start their own publishing business and present such example of becoming entrepreneurs by choice.

On the other hand, disruption in the present job/status due to retirement, lay-off, and other compulsions also compel people to become entrepreneurs. Thus, the idea and decision to become an entrepreneur, i.e. to start one’s own business enterprise occurs when an individual perceives and realizes that establishing a new enterprise is desirable for him / her.

2. Reasons for Changing the Present Status

Entrepreneurship being a difficult journey, the obvious question is: What are the reasons that people still become entrepreneurs? Researchers have tried to understand and answer these questions. The researchers report that people generally become entrepreneurs because of economic reasons. These include unemployment, completion of education, dislocation, no or less possibility for career and / or economic prosperity, etc. Nonetheless, the personal dislocation is reported as one of the most powerful reasons galvanizing an individual’s will to become an entrepreneur.

3. Desire for Change from the Present Status to Become Entrepreneur

Evidences are available to believe that the desire to start one’s own enterprise and, thus, become an entrepreneur by some factors like the culture and family one belongs to and the teachers and peers one comes into contact with. Like elsewhere in the world, there are cultures in India also which place a high value on being entrepreneur. For example, Punjabis and Gujaratis in India represent such cultures which value more on making money, becoming one’s own boss, having more individual opportunities for being successful in career and life. It is, therefore, not surprising to find the more number of enterprises formed by the people belonging to the Punjabis and Gujaratis cultures.

4. Possibilities to Become an Entrepreneur

The desire to form an enterprise needs to be present before forming an enterprise, but just desire to form an enterprise cannot make an individual an entrepreneur. Also needed is possibility, better call it supportive and facilitative structure, to form an enterprise. Available literature on entrepreneurship indicates that an individual’s business background, educational background, previous experience, government attitude, availability of finance and market and, of course, one’s role models in business world make it possible to form an enterprise.

Ethics and Social Responsibility of Entrepreneurs

An enterprise must earn profits for its own survival, for expansion, for bearing the risks and finally for the prestige of its management. But profit cannot be the sole objective of the entrepreneur. It is a means and not an end. No enterprise can last long unless along with earning profits, it continues to fulfill its obligations to the society. The ultimate objective of every enterprise has to be the good of the people. Business must be run by the people through the people and for the people. According to H.R. Brown, an entrepreneur, today, has an obligation ‘to pursue those policies, to make those decisions or to follow those lines of action which are desirable, in terms of the objectives and values of the society.

Business Ethics

Ethics is the branch of philosophy concerned with the meaning of all aspects of human behaviour. Theoretical ethics, sometimes called normative ethics, is about discovering and delineating right from wrong. Business ethics can be defined as written and unwritten codes of principles and values that govern decisions and actions within a company. In the business world, the organization’s culture sets standards for determining the difference between good and bad decision making and behaviour. There are three parts to the discipline of business ethics: personal, professional, and corporate.

Social Responsibility

Social responsibility is a duty every individual or organization has to perform so as to maintain a balance between the economy and the ecosystem. A trade-off always exists between economic development, in the material sense, and the welfare of society and the environment. Social responsibility is a way of conducting business through balancing the long-term objectives, decision-making, and behaviour of a company with the values, norms, and expectations of society.

Ethics and social responsibility are very important values in entrepreneurship ventures. Ethics and social responsibilities of an entrepreneur is certainly an important issue considering the role of social responsibility in society and ethics in business. Social responsibility is beneficial for business community and at the same time for global community. The link between business ethics and corporate social responsibility (CSR). The two concepts are closely linked:

· A socially responsible firm should be an ethical firm

· An ethical firm should be socially responsible

Responsibilities of the Entrepreneur to the different segments of the Society

The most important social responsibilities of an entrepreneur is to reconcile and balance the various conflicting interests in the best possible manner. The various stakeholders are:

1. Employees: Employees need security of job, higher wages, full employment, better conditions of work and opportunities for self-development and promotion. They also desire their work itself to be rewarding and to contribute something good to the society in general. Management, as a part of its social responsibilities, is expected to provide for their social security, welfare, grievances settlement machinery and sharing of excess profits.

2. Stockholders: An entrepreneur must provide safe, fair adequate and stable long-run rate of return and steady capital appreciation to the shareholders for their investments. It must also provide regular, accurate and adequate information about the working of the company.

3. Suppliers: Dealings with the suppliers should be based on integrity, impartiality and courtesy. Terms and conditions regarding delivery of goods and payment of prices must be reasonably fair. Producers may make available to the suppliers the benefits of their information and research so as to promote indigenous growth or for the improvement of the quality of their products.

4. Customers: In the words of Henry Ford, an entrepreneur must provide, “those goods and services which the society needs at a price which the society can afford to pay.” Entrepreneurial ventures must meet the requirements of the customers of different classes, tastes and with different purchasing power at the right time, place, and price and in right quality. An entrepreneur should act as a friend and guide to the customer. He must try to protect consumers’ interest at all costs. He must guard against adulteration, poor quality, lack of service and courtesy to the consumer, misleading and dishonest advertisement, underweighting, supply of stale goods, etc. He must handle the complaints of the customers carefully and efficiently and cooperate to the maximum extent with the consumers associations. A customer must also be protected against the ill effects of monopolistic and restrictive business practices.

5. Government: Entrepreneurs must abide by the laws of the country in their true spirit. The must conduct their affairs as may cause the minimum possible social damage such as air or water pollution. They must help in the proper implementation of all social improvement policies adopted by the Government. They must pay taxes honestly and promptly.

6. Trade Associations and Competitors: An entrepreneur should develop healthy inter-business relationships with fellow-entrepreneurs. He must adopt fair trade practices regarding prices, quality, terms and conditions of sale and after-sales service. The policy of under-cutting or restricted trade practices should be avoided. An entrepreneur must patronise business associations to ensure development of healthy business practices.

7. Community: The entrepreneurs should manage their business with such competence and skill that it inspires confidence and pride in the mind of the people. They must encourage democratic institutions and assist national integration. Enterprise, on the whole, should act on the ideas of social justice without discrimination of any kind. Business must set high standards of morality and put in all efforts to minimize social damage. It must help in bringing about a cultural, social and economic revolution in the society and lead to the economic growth of the backward regions of the world.

Role of an Entrepreneur in Economic Development

The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering economic growth and development. Entrepreneurship is one of the most important inputs in the economic development of the country. The major roles played by an entrepreneur in the economic development of an economy are discussed in a systematic manner as follows:

1. Promotes Capital Formation: Entrepreneur promotes capital formation by mobilizing the idle savings of public. They employ their own as well as borrowed resources for setting up their enterprises. Such type of entrepreneurial activities leads to value addition and creation of wealth, which is very essential for the industrial and economic development of the country.

2. Creates Large Scale Employment Opportunities: Entrepreneurs provides immediate large scale employment to the unemployed which is a severe problem of underdeveloped nations. With setting up of more and more units by entrepreneurs, both on small and large scale numerous job opportunities are created for others. In this way, entrepreneurs play an effective role in reducing the problem of unemployment in the country which in turns clears the path towards economic development of the nation.

3. Promotes Balanced Regional Development: Entrepreneurs help to remove regional disparities through setting up of industries in less developed and backward areas. The growth of industries and business in these areas lead to a large number of public benefits like transport, health, education, entertainment, etc., Setting up of more industries lead to more development of backward regions and thereby promotes balanced regional development.

4. Reduces Concentration of Economic Power: Economic power is the natural outcome of industrial and business activity. Industrial development normally leads to concentration of economic power in the hands of a few individuals which results in the growth of monopolies. In order to redress this problem a large number of entrepreneurs need to be developed, which will help reduce the concentration of economic power amongst the population.

5. Wealth Creation and Distribution: It stimulates equitable redistribution of wealth and income in the interest of the country to more people and geographic areas, thus giving benefit to larger sections of the society. Entrepreneurial activities also generate more activities and give a multiplier effect in the economy.

6. Improvement in the standard of living: Increase in the standard of living of the people is a characteristic feature of economic development of the country. Entrepreneurs play a key role in increasing the standard of living of the people by adoptable latest innovations in the production of wide variety of goods and services in large scale that too at a lower cost.

7. Promotes Country’s Export Trade: Entrepreneurs help in promoting a country’s export trade, which is an important ingredient of economic development. They produce goods and services in large scale for the purpose earning huge amount o foreign exchange from export in order to combat the import dues requirement. Hence import substitution and export promotion ensure economic independence and development.

Opportunities in India and Abroad for Entrepreneurs

It is high time out entrepreneurs realize the importance of being choosy in project identification. Just as companies and individuals carry out SWOT analysis for identifying business opportunities for our entrepreneurs.

1. Tourism

Tourism is a booming industry in India. With the number of domestic and international tourists rising every year, this is one hot sector entrepreneurs must focus on. India with its diverse culture and rich heritage has a lot to offer to foreign tourists. Beaches, hill stations, heritage sites, wildlife and rural life, India has everything tourists are looking for. But this sector is not well organised. India lacks trained professionals in the tourism and hospitality sectors. Any business in this sector will thrive in the long run as the demand continues to grow every year.

2. Automobile

India is now a hot spot for automobiles and auto-components. A cost-effective hub for auto components sourcing for global auto makers, the automotive sector is potential sector for entrepreneurs. The strong sales have made India the second fastest growing market after China. India being one of the world's largest manufacturers of small cars with a strong engineering base and expertise, there are many segments that entrepreneurs can focus on in India's automobile and auto components sector.

3. Textiles

India is famous for its textiles. Each state has its unique style in terms of apparels. India can grow as a preferred location for manufacturing textiles taking into account the huge demand for garments. Places like Tirupur and Ludhiana are now export hubs for textiles. A better understanding of the markets and customers' needs can boost growth in this sector.

4. Social ventures

Many entrepreneurs are taking up social entrepreneurship. Helping the less privileged get into employment and make a viable business is quite a challenge. There are many who have succeeded in setting up social ventures. With a growing young population in rural areas who have the drive and enthusiasm to work, entrepreneurs can focus on this segment.

5. Software With one of the largest pool of software engineers, Indian entrepreneurs can set higher targets in hardware and software development.

The information technology enabled services have contributed substantially to the economy. With more companies outsourcing contracts to India, business to business solutions and services would be required. Entrepreneurs can cash in on the rise in demand for these services with innovative and cost effective solutions.

6. Franchising

India is well connected with the world. Hence, franchising with leading brands who wants to spread across the country could also offer ample opportunities for young entrepreneurs. With many small towns developing at a fast pace in India, the franchising model is bound to succeed.

7. Education and Training

There is a good demand for education and online tutorial services. With good facilities at competitive rates, India can attract more students from abroad. Unique teaching methods, educational portals and tools can be used effectively to make the sector useful and interesting.

8. Food Processing

India's mainstay is agriculture. Entrepreneurs can explore many options in the food grain cultivation and marketing segments. Inefficient management, lack of infrastructure, proper storage facilities leads to huge losses of food grains and fresh produce in India. Entrepreneurs can add value with proper management and marketing initiatives. The processed food market opens a great potential for entrepreneurs be it fast food, packaged food or organic food. Fresh fruits and vegetables too have a good demand abroad. A good network of food processing units can help potential exporters build a good business.

9. Ayurveda and traditional medicine

India is well known for its herbal and ayurvedic products. With increasing awareness about the ill-effects allopathic medicines, there will be a huge demand for cosmetics, natural medicines and remedies.

10. Organic farming

Organic farming has been in India since a long time. The importance of organic farming will grow at a fast pace, especially with many foreigners preferring only organic products. Entrepreneurs can focus on business opportunities in this sector. There are many small-time farmers who have adopted organic farming but the demand is still unmet, offering many opportunities for those who can promote organic farming on a large scale.

11. Media

The media industry has huge opportunities to offer young entrepreneurs. With the huge growth of this segment, any business in this field will help entrepreneurs reap huge benefits. Television, advertising, print and digital media have seen a boom in business.

12. Toys

Another evergreen industry is toy manufacturing. India has potential to manufacture cost effective and safe toys for the world. With Chinese toys being pulled up for toxins, the market for safe and good quality toys beckons Indian entrepreneurs.

13. Recycling business

E-waste will rise to alarming proportions in the developing world within a decade, with computer waste in India alone to grow by 500 per cent from 2007 levels by 2020, according to a UN study. This sector opens a viable business opportunity for entrepreneurs in terms of e-waste management and disposal.

Creating & Starting New Venture

Creativity is the process of generating a novel or useful idea. The creative process can be broken into five stages:

1. Preparation: Preparation is the background, experience & knowledge that an entrepreneur brings to the opportunity recognition process. An entrepreneur needs expertise to spot opportunities. Studies that 50%-90% of start-up ideas emerge from a person work experience.

2. Incubation: Incubation is the stage during which a person considers an idea or thinks about a problem. Sometimes incubation is a conscious activity & sometimes it is unconscious & occurs while a person is engaged in another activity.

3. Insight: Insight is the flash of recognition when the solution to a problem is seen or an idea is born. It is sometimes called the “Eureka experience”. In business context, this is the moment an entrepreneur recognizes an opportunity.

4. Evaluation: Evaluation is the stage of the creative process during which an idea is subject to scrutiny & analyzed for its viability.

5. Elaboration: Elaboration is the stage during which the creative idea is put into a final form. The details are worked out & the idea in transformed into something of value such as a new product, service or a business concept.

Sources of New Ideas

A sound idea is essential to launch venture, some of the frequently used of sources of ideas for entrepreneur are as follows:

Consumers: Potential entrepreneurs should pay close attention to the final point of the idea for a new product / service the potential consumers. This can be an informal / formal survey of consumers expressing their opinions.
Existing companies: Entrepreneurs should establish a formal method for monitoring & evaluating the products & services in the market. Frequently this analysis uncovers ways to improve on these offering that may result in a new product that has more market appeal.
Distribution channels: Members of distribution channels are also excellent sources for new ideas because they are familiar with the needs of the market. They frequently have suggestions. For new product & also help in marketing the entrepreneurs’ newly developed products.
Federal Government: The federal government can be source of new product ideas in two easy. First, the files of patent office contain numerous new product possibilities. Several government agencies & publications are helpful in monitoring patent applications. Second, new p[product ideas can come in response to government regulations.
Research & development: The largest source of new ideas is the entrepreneurs’ own research & development. A formal research & development department is often better equipped & enables the entrepreneurs to conceptualize & develop successful new produ

Methods / Techniques for generating New Ideas

Even with the wide variety of sources available, coming up with an idea to serve as the basis for the new venture can still be a difficult problem. The entrepreneur can use several methods to help generate & test new ideas:

Brainstorming: A common way to generate new business idea is through brain

storming. Brain storming is the process of generating several ideas about a specific topic. In a formal brain storming session, the leader of the group asks the participants to share their ideas. One person shares an idea, another person reacts to it, another person reacts to the reaction & so on. An electronic whiteboard is used to record all the ideas. The ideas generated during a brain storming session need to be filtered and analyzed. While using brainstorming, these five rules should be followed:

a. No criticism is allowed by anyone in the group- no negative comments.

b. Freewheeling is encouraged- the wilder the idea, the better.

c. Quality of ideas is desired-the greater the number of ideas, the greater the like hood of the emergence of useful ideas.

d. Reap fogging is encouraged- this means using one idea as a means of jumping forward quickly of other ideas.

Focus Groups: A focus group is a gathering of five to ten people who are selected

because of their relationship to the issue being discussed. Focus groups typically involve a group of people who are familiar with a topic are brought together to respond to questions. Although focus groups are used for a variety of purposes, they can be used to help generate new business ideas.

Library & Internet Research: Libraries are often an underutilized source of

information for generating new business ideas. Libraries provide useful resources such as industry specific magazines, trade journals & industry reports. Internet research is also important, simply typing “new business ideas” into Google or Yahoo! Will provide links to newspaper & magazines articles about the latest new business ideas. This technique, which is available for free, will feed you daily stream of new articles about specific topics.

Problem inventory analysis: It uses individuals in a manner that is similar to

focus groups to generate new product ideas. However instead of generating new ideas themselves, consumers are provided with a list of problems in a general product category. They are then asked to identify and discuss products in this category that have the particular problem. This method can also be used to test a new product idea. An example of food industry, most difficult problems list like weight, taste, appearance & cost.

Psychological

Sensory

Activities

Buying Usage

a. Weight

Fattening
Calories

b. Health

Indigestion
Acidity

a. Taste

Bitter
Salty

b. Appearance

Colour
Shape

a. Preparation

· Too much trouble

· Too many pans

b. Cooking

· Burns

· Sticks

a. Portability

· Eat away from home

· Take lunch

b. Spoilage

· Gets moldy

· Goes sour

Other Techniques: Firms use a variety of other techniques to generate ideas.

Some companies set up Customer Advisory Board that meet regularly to discuss needs, wants & problems that may lead to new ideas. Other companies conduct survey by sending testers to homes to see how its products are working.

Creative Problem Solving and its methods

Creative problem solving is a technique for attaining new ideas focusing on the parameters. Creative ideas & innovations generated by using any of the following techniques:

1. Brain storming: The first technique, brainstorming, is probably the most well known and widely used for both creative problem solving and idea generation. It is an unstructured process for generating all possible ideas about a problem within a limited time frame through the spontaneous contribution of participants. All ideas, no matter how illogical, must be recorded, with participants prohibited from criticizing or evaluating during the brainstorming session.

2. Reverse Brain storming: Reverse brain storming is similar to brain storming except that criticism is allowed. This technique is based on finding faults, since the focus is on the negative aspects of the product, service or idea, care must be taken to maintain the group’s morale. This method stimulates innovative thinking. The process usually involves the identification of everything wrong with an idea, followed by a discussion of ways to overcome these problems.

3. Gordon method: This method, unlike other techniques, begins with group members not knowing the exact nature of the problem. The entrepreneur starts by mentioning a general concept associated with the problem, the group responds by expressing a number of ideas. Then a concept is developed followed by the group to more suggestions for implementation or refinement of the final solution.

4. Brain writing: Brain writing is a form of written brain storming. It was created by Bernd Rohrback in 1960s, where the ideas are in silent & written generation of ideas by the group of people. The participants write their ideas on special forms or cards that circulate within the group, which usually consist of six members. Each member generates & writes down three ideas during five minute period & it passed on to other members. If participants located at their own places & sheets are rotated by e-mails.

5. Check-list method: In this method, a new idea is developed through a list of related issues or suggestions. The entrepreneur can use the list of question / statements to guide. The checklist may take any form & a general checklist is as follows:

i. Uses-put to other uses, new ways to use.

ii. Modify-change meaning, colour, form, shape etc.,

iii. Magnify-what to add? More time, stronger, larger, thicker etc.,

iv. Minify-what to less? Smaller, lower, shorter, lighter etc.,

v. Substitute-other ingredients, other material, other process etc.,

6. Collective Note book method: Under this method, a small notebook that easily fits in a pocket, containing a statement of the problem, blank pages is distributed. Participants consider the problem & its possible solutions, recording ideas at least once, but preferably three times a day. AT the end of a week, list of best ideas is developed, along with any suggestions. This technique can also be used with the group of individuals who record their ideas, giving their notebook to a central coordinator who summarizes all the material & list the ideas in the order of frequency of mention. The summary becomes the topic of final creative focus group discussions by the group participants.

7. Cause-Effect Analysis: This is a technique developed by Toyota Motor Corporation & popularized by the Quality circle movement, often with the use of ‘Why-Why analysis’. It is a simple technique of asking a series of ‘Why’ in a sequence when confronted with the problem. That is, each answer to a ‘why’ will be confronted by another ‘why’. For example, a decline in sales may be normally treated as a ‘marketing’ problem, nut a ‘why-why’ analysis may lead to product quality issues, which in turn may lead to machine set up problems, improper employee training etc.,

Product Planning and Development Process

Once idea emerges from idea sources or creative problem solving, they need further development and refinement in to final product or service to be offered. This refining process- the product planning and development process is divided in to five major stages. Idea stage, concept stage, product development stage, test marketing stage and commercializing; it result in the product life cycle. Each of these stages will have to be evaluated for which the entrepreneur has to establish appropriate evaluation criteria.

Establishing evaluation criteria

At each stage of product planning and development process, criteria for evaluation need to be established. Criteria should be developed to evaluate the new product in terms of market opportunity, competition the marketing system, financial factors and production factors. A market opportunity and adequate market demand must exist. Current competing producers, prices, and policies should be evaluated in their impact on market share. The product should be able to be supported by and contribute to the company's financial structure. The compatibility of new product's production requirements with existing plant, machinery, and personnel should be determined.

Product Planning & Development Process

1. Idea Stage: Promising new product ideas should be identified and impractical ones eliminated in the idea stage allowing maximum use of company's resources. In the systematic market evaluation checklist method, each new product idea is expressed in terms of its chief values, merits, and benefits. The company should also determine the need for the new product and its value to the company. Need determination should focus on the type of need, its timing, the users involved, the importance of marketing variables, and the overall market structure and characteristics.

2.Concept Stage: In the concept stage the refined idea is tested to determine consumer acceptance without manufacturing it. One method of testing is the conversational interview in which respondents are exposed to statements that reflect attributes of the product. Features, price, and promotion should be evaluated in comparison to major competitors to indicate deficiencies or benefits. The relative advantages of the new product versus competitors should be determined.

3. Product Development Stage: In this stage, consumer reaction is determined, often through a consumer panel. The panel can be given samples of the product and competitors' products to determine consumer preference. Participants keep the record of their use of product and comment on its virtues and deficiencies. The panel of consumers is also given a sample of product and one or more competitive product simultaneously. One test product may already be on the market, whereas the other test product is new.

4. Test Marketing Stage: Although the results of product development stage provide the basis of the final marketing plan, the market test can be done to increase the certainty of successful commercialization. The last step in the evaluation process, the test marketing stage, provides actual sales results which indicate the acceptance level of consumers. Positive test results indicate the degree of probability of a successful product launch and company formation.

5. Commercialization: In the last stage of the process, actual launching of the product is done, where the new product is released to the defined market. Successful commercialization defines the successful release of the new product to the market.

Objective Questions and Answers

S.No.	Objective Questions
1.	______ are the roles of entrepreneurs in economic development a) Capital formation b) Raising standard of living c)Wealth creation d) All the above
2.	Which is not a trait of an entrepreneur? a) Leadership qualities b) Innovation c) Competitive spirit d) Avoiding failures
3.	Entrepreneurs are_____ & Intrapreneurs are_____ a) Shareholders & Owners b) Owners& employees c) Managers& owners d) Owners & shareholders
4.	Environment analysis includes______ a) External factors b) Internal factors c) Both A & B d) None
5.	Brain writing is a technique used for ________ a) Decision making b) Problem Solving c) Situation analysis d) None
6.	Entrepreneur derived from ‘Entrepredre’ means_____ a) To undertake b) To follow c) To force d) To give
7.	_______ is the technique used for creative problem solving. a) Brain storming b) Gordon approach c) Brain writing d) All of the above
8.	Which of the following refers to the course of action desired to achieve the objectives of entrepreneurs? a) Schedule b) Strategy c) Scanning d) Evaluation
9.	Social entrepreneurs drive _______________ a) Security b) Social innovation c) Commercial d) None
10.	Social Responsibility of business includes____ a) Gaining profits b) Attracting customers c) Defeating competitors d) Balancing values of the society
11.	Business Ethics refers to ___ a) Satisfaction b) Values c) Norms d) None
12.	Commercialization of Product is ____ a) Launching b) Modification c) Redesigning d) All of the above
13.	Sources for the generation of new ideas ____ a) Customers b) Government c) Competitors d) All of the above
14.	High risk taker is ____ a) Entrepreneur b) Manager c) Intrapreneur d) Employee
15.	Segments of Social responsibility of an entrepreneur ____ a)Customers b) Employees c) Government d) All of the above

Two Marks Questions and Answers

1. Define Entrepreneur.

2. State the various types of Entrepreneurs

Depending upon the level of willingness to create innovative ideas, there can be the following types of entrepreneurs:

1. Innovative entrepreneurs

These entrepreneurs have the ability to think newer, better and more economical ideas of business organisation and management.

2. Imitating entrepreneurs

They imitate innovative entrepreneurs because the environment in which they operate is such that it does not permit them to have creative and innovative ideas on their own.

3. Fabian entrepreneurs

Fabian entrepreneurs are those individuals who do not show initiative in visualising and implementing new ideas and innovations wait for some development which would motivate them to initiate unless there is an imminent threat to their very existence.

4. Drone entrepreneurs

Drone entrepreneurs are those individuals who are satisfied with the existing mode and speed of business activity and show no inclination in gaining market leadership.

5. Social Entrepreneur

Social entrepreneurs drive social innovation and transformation in various fields including education, health, human rights, workers’ rights, environment and enterprise development.

3. What are the traits of an Entrepreneur?

1. Strong leadership: A strong leader has strong communication skills and the ability to team of people towards a common goal in a way that the entire team is motivated and works effectively to get there as a team.

2. Highly motivated: Leaders adapt well to hanging situations and are typically expert of helping their teams change with them by motivating them towards new goals and opportunities.

3. Strong sense of basic ethics and integrity: With importance in working with clients or leading a team, effective leaders admit to any error made and offer solutions to correct rather than lie or blame others.

5. Serial innovators: Entrepreneurs are almost defined by ther drive to constantly develop new ideas and imporve on existing processes.

6. Know what you don’t know: Successful entrepreneurs are confident and they learn new ways of doing business.

7. Competitive spirit: Entrepreneurs enjoys a challenge and they like to win. In business, it’s a constant war with competition to win business and grow market share.

4. Define Social Responsibility of an entrepreneur.

5. Define Business Ethics.

Ethics is the branch of philosophy concerned with the meaning of all aspects of human behaviour. Theoretical ethics, sometimes called normative ethics, is about discovering right from wrong. Business ethics can be defined as written and unwritten codes of principles and values that govern decisions and actions within a company. In the business world, the organization’s culture sets standards for determining the difference between good and bad decision making and behaviour. There are three parts to the discipline of business ethics: personal, professional, and corporate.

6. What are the sources of New Ideas?

A sound idea is essential to launch venture, some of the frequently used of sources of ideas for entrepreneur are as follows:

Consumers: Potential entrepreneurs should pay close attention to the final point

of the idea for a new product / service the potential consumers. This can be an informal / formal survey of consumers expressing their opinions.

Existing companies: Entrepreneurs should establish a formal method for

monitoring & evaluating the products & services in the market. Frequently this analysis uncovers ways to improve on these offering that may result in a new product that has more market appeal.

Distribution channels: Members of distribution channels are also excellent

sources for new ideas because they are familiar with the needs of the market. They frequently have suggestions. For new product & also help in marketing the entrepreneurs’ newly developed products.

Federal Government: The federal government can be source of new product ideas

in two easy. First, the files of patent office contain numerous new product possibilities. Several government agencies & publications are helpful in monitoring patent applications. Second, new product ideas can come in response to government regulations.

Research & development: The largest source of new ideas is the entrepreneurs’

own research & development. A formal research & development department is often better equipped & enables the entrepreneurs to conceptualize & develop successful new product.

7. What is Brainstorming?

Brain storming is the process of generating several ideas about a specific topic. In a formal brain storming session, the leader of the group asks the participants to share their ideas. One person shares an idea, another person reacts to it, another person reacts to the reaction & so on. An electronic whiteboard is used to record all the ideas. The ideas generated during a brain storming session need to be filtered and analyzed. While using brainstorming, these five rules should be followed:

i. No criticism is allowed by anyone in the group - no negative comments.

ii. Freewheeling is encouraged- the wilder the idea, the better.

8. Define Problem inventory analysis

This is a method of generating new ideas, where consumers are provided with a list of problems in a general product category. They are then asked to identify and discuss products in this category that have the particular problem. This method can also be used to test a new product idea. An example of food industry, most difficult problems list like weight, taste, appearance & cost.

9. What is Brain writing?

Brain writing is a form of written brain storming. It was created by Bernd Rohrback in 1960s, where the ideas are in silent & written generation of ideas by the group of people. The participants write their ideas on special forms or cards that circulate within the group, which usually consist of six members. Each member generates & writes down three ideas during five minute period & it passed on to other members. If participants located at their own places & sheets are rotated by e-mails.

10. Define Cause-Effect Analysis.

This is a technique developed by Toyota Motor Corporation & popularized by the Quality circle movement, often with the use of ‘Why-Why analysis’. It is a simple technique of asking a series of ‘Why’ in a sequence when confronted with the problem. That is, each answer to a ‘why’ will be confronted by another ‘why’. For example, a decline in sales may be normally treated as a ‘marketing’ problem, nut a ‘why-why’ analysis may lead to product quality issues, which in turn may lead to machine set up problems, improper employee training etc.,

11. List out the stages in Product Planning & Development.

1. Idea Stage

2. Concept Stage

3. Product Development Stage

4. Test Marketing Stage

5. Commercialization

Descriptive Questions and Answers (University Question Papers)

Distinguish between an Entrepreneur and Intrapreneur

Bases of Differences	Entrepreneur	Intrapreneur
1. Nature	An entrepreneur is an independent person in his business operations	An intrapreneur is completely depending on the entrepreneur for everything. He cannot take decision by himself
2. Education	Entrepreneur need not to highly educate. He can learn everything by experience provided he has the basic qualities of a successful entrepreneur	An Intrapreneur enters into an organization with a high education and qualification. He is indeed a business specialist in the chosen field.
3. Funds	An entrepreneur himself raises funds necessary for starting and establishing his enterprise	An intrapreneur is completely free from the generation of funds
4. Risk factor	An entrepreneur has to bear all the risks involved in the business by himself	Intrapreneur need not to bear any risk involved in the business.
5. Work	Entrepreneur is more concerned with doing routine works and something he may not know the important details of his own business	An intrapreneur acts as a specialist in his chosen field and serves as an outside professional
6. Operations	He always operates from outside. The owner is different and the enterprise he owns is different.	Intrapreneur operates form within the organization itself. He is the part and parcel of the organization.
7. Authority	Generally, an entrepreneur operates with a strong authoritarian back-up	Intrapreneur is less authoritarian. He is more adaptable in the organization.

2. Explain the concept of Ethics and Social Responsibilities of an Entrepreneur.

Business Ethics

Social Responsibility

· A socially responsible firm should be an ethical firm

· An ethical firm should be socially responsible

Responsibilities of the Entrepreneur to the different segments of the Society

The most important social responsibilities of an entrepreneur is to reconcile and balance the various conflicting interests in the best possible manner. The various stakeholders are:

3. Describe in detail the various problem solving techniques in product development.

Creative problem solving is a technique for attaining new ideas focusing on the parameters. Creative ideas & innovations generated by using any of the following techniques:

1. Brain storming: The first technique, brainstorming, is probably the most well known and widely used for both creative problem solving and idea generation. It is an unstructured process for generating all possible ideas about a problem within a limited time frame through the spontaneous contribution of participants. All ideas, no matter how illogical, must be recorded, with participants prohibited from criticizing or evaluating during the brainstorming session.

2.Reverse Brain storming: Reverse brain storming is similar to brain storming except that criticism is allowed. This technique is based on finding faults, since the focus is on the negative aspects of the product, service or idea, care must be taken to maintain the group’s morale. This method stimulates innovative thinking. The process usually involves the identification of everything wrong with an idea, followed by a discussion of ways to overcome these problems.

3.Gordon method: This method, unlike other techniques, begins with group members not knowing the exact nature of the problem. The entrepreneur starts by mentioning a general concept associated with the problem, the group responds by expressing a number of ideas. Then a concept is developed followed by the group to more suggestions for implementation or refinement of the final solution.

4.Brain writing: Brain writing is a form of written brain storming. It was created by Bernd Rohrback in 1960s, where the ideas are in silent & written generation of ideas by the group of people. The participants write their ideas on special forms or cards that circulate within the group, which usually consist of six members. Each member generates & writes down three ideas during five minute period & it passed on to other members. If participants located at their own places & sheets are rotated by e-mails.

5. Check-list method: In this method, a new idea is developed through a list of related issues or suggestions. The entrepreneur can use the list of question / statements to guide. The checklist may take any form & a general checklist is as follows:

i. Uses-put to other uses, new ways to use.

ii. Modify-change meaning, colour, form, shape etc.,

iii. Magnify-what to add? More time, stronger, larger, thicker etc.,

iv. Minify-what to less? Smaller, lower, shorter, lighter etc.,

v. Substitute-other ingredients, other material, other process etc.,

6. Collective Note book method: Under this method, a small notebook that easily fits in a pocket, containing a statement of the problem, blank pages is distributed. Participants consider the problem & its possible solutions, recording ideas at least once, but preferably three times a day. AT the end of a week, list of best ideas is developed, along with any suggestions. This technique can also be used with the group of individuals who record their ideas, giving their notebook to a central coordinator who summarizes all the material & list the ideas in the order of frequency of mention. The summary becomes the topic of final creative focus group discussions by the group participants.

7.Cause-Effect Analysis: This is a technique developed by Toyota Motor Corporation & popularized by the Quality circle movement, often with the use of ‘Why-Why analysis’. It is a simple technique of asking a series of ‘Why’ in a sequence when confronted with the problem. That is, each answer to a ‘why’ will be confronted by another ‘why’. For example, a decline in sales may be normally treated as a ‘marketing’ problem, nut a ‘why-why’ analysis may lead to product quality issues, which in turn may lead to machine set up problems, improper employee training etc.,

4. Summarize the sources of new ideas in development process.

A sound idea is essential to launch venture, some of the frequently used of sources of ideas for entrepreneur are as follows:

Consumers: Potential entrepreneurs should pay close attention to the final point

of the idea for a new product / service the potential consumers. This can be an informal / formal survey of consumers expressing their opinions.

Existing companies: Entrepreneurs should establish a formal method for

monitoring & evaluating the products & services in the market. Frequently this analysis uncovers ways to improve on these offering that may result in a new product that has more market appeal.

Distribution channels: Members of distribution channels are also excellent

sources for new ideas because they are familiar with the needs of the market. They frequently have suggestions. For new product & also help in marketing the entrepreneurs’ newly developed products.

Federal Government: The federal government can be source of new product ideas

in two easy. First, the files of patent office contain numerous new product possibilities. Several government agencies & publications are helpful in monitoring patent applications. Second, new p[product ideas can come in response to government regulations.

Research & development: The largest source of new ideas is the entrepreneurs’

own research & development. A formal research & development department is often better equipped & enables the entrepreneurs to conceptualize & develop successful new product.

5. Explain the process of Entrepreneurial decision making

An individual needs to pass through a process from present status to become an entrepreneur. In other words, the individual / entrepreneur have to take a number of decisions in sequential order, call it the entrepreneurial decision process, to leave the present status and become an entrepreneur. The decision making process of an individual to become an entrepreneur involves various steps which can be explained as follows:

1. The Present Status

Change is often resisted because it involves uncertainty which causes fear. It is due to uncertainty, the present state of affair is considered better than the unknown one after the change. As such, leaving the present status and becoming an entrepreneur (i.e., a synonym of risk and uncertainty) is not easy as it takes a great deal of preparation and courage to do so. Nonetheless, individuals dare it and become entrepreneurs.

Broadly, there are two reasons for individuals to become entrepreneurs:

(ii) By chance, and

(ii) By compulsion.

2. Reasons for Changing the Present Status

3. Desire for Change from the Present Status to Become Entrepreneur

4. Possibilities to Become an Entrepreneur

Unit-II

Introduction

A business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. It addressed both short and long term decision making. It is an integration of functional plans such as marketing, finance, manufacturing, sales and human resources. The business plan is like a road map for the business’ development. The internet also provides outlines for business planning. A business plan is a set of management decisions that define what a business will do to try to be successful in the future. A business plan is a document that brings together the key elements of a business that include details about the products and services, the costs, sales and expected profits.

A business plan is a formal statement of a set of business goals, the reasons they are attainable, and the plans for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

Importance of a Business Plan

Business plans are documents used for planning out specific details about your business. They can range in size from a simple few sentences to more than 100 pages with formal sections, a table of contents and a title page. A Comprehensive business plans have three sections--business concept, marketplace and financial--and these are broken down into seven components that include the overview or summary of the plan, a description of the business, market strategies, competition analysis, design and development, operations and management, and financial information. The following are the uses of a business plan:

1. Clarify Direction: The primary purpose of a business plan is to define what the business is or what it intends to be over time. Clarifying the purpose and direction of your business allows you to understand what needs to be done for forward movement. Clarifying can consist of a simple description of your business and its products or services.

2. Future Vision: Businesses evolve and adapt over time, and factoring future growth and direction into the business plan can be an effective way to plan for changes in the market, growing or slowing trends, and new innovations or directions to take as the company grows.

3. Attract Financing: The development of a comprehensive business plan shows whether or not a business has the potential to make a profit." By putting statistics, facts, figures and detailed plans in writing, a new business has a better chance of attracting investors to provide the capital needed for getting started.

4. Attract Team Members: Business plans can be designed as a sale tool to attract partners, secure supplier accounts and attract executive level employees into the new venture. Business plans can be shared with the executive candidates or desired partners to help convince them of the potential for the business, and persuade them to join the team.

5. Manage Company: A business plan conveys the organizational structure of your business, including titles of directors or officers and their individual duties. It also acts as a management tool that can be referred to regularly to ensure the business is on course with meeting goals, sales targets or operational milestones.

Objectives and Uses of a Business Plan

In general, a business plan is necessary to provide a clear, precise, and meaningful sense of direction for a company for a specific period of time—usually 1 year. The preparation of an annual plan forces management to think through its intended actions and shows how they will affect various aspects of the business, both internal and external.

Internal Uses of a Business Plan

A business plan can provide several internal benefits for a company.

1. Improve Performance: It can improve performance by identifying the strengths and weaknesses of the company's operation and any potential or emerging problem areas.

2. Communication: A business plan can communicate to management and staff clear expectations regarding the company's performance and priorities.

3. Define Responsibility: For companies with multiple divisions, units, or points of management responsibility, a business plan can effectively coordinate and ensure consistency in the plans and operations of the various units or divisions.

4. Measuring Performance: A business plan provides a solid basis for measuring performance of the overall company and of individual units and managers. It establishes a standard for deciding if actual performance is good, bad, or indifferent.

5.Educating employees: A business plan and the process of developing it can be used to educate and motivate the key staff—such as managers and supervisors—of the company through participation in analyzing past performance, evaluating the impact of trends and developments, and developing action plans for the future.

External Uses of a Business Plan

A business plan has several uses in relationships with significant parties outside the company.

1. Educate: It can be used to educate outside parties regarding the objectives, structure, and performance of the company. This use becomes important if the support, either financial or nonfinancial, of outside parties is important to the company's success.

2. Funding: A business plan can be used to secure funding from outside investors, either individual or institutional. It is important to identify in advance the issues and types of information that are of primary concern and interest to the investors.

3. Communication: A business plan also can communicate planned actions, deflecting competitive or regulatory moves that may be under consideration by outside parties.

Elements or Components of a Business Plan

Every business plan of the company with the nature of its business, its size, or the intended uses of the plan should address a number of basic issues. These issues can be organized according to five major business strategies:

1. Market strategy

2. Production or service strategy

3. Research and development (R&D) strategy

4. Organization and management strategy

5. Financial strategy

Descriptions of each strategy compose the major portion of a complete business plan. The five strategies define the areas in which management must make future-oriented decisions as part of an effective business planning process. Each strategy is highly interrelated and must be consistent with the others. This basic relationship is exhibited as follows:

Elements or Components of a Business Plan

Market Strategy

By developing a market strategy, an organization is able to prepare estimates of revenues and selling costs—but not production costs—for its products and services. Several very important analyses underlie the development of a market strategy, including the following:

· Preference, consumption, and purchasing behaviour—that is, timing and volume—of customer segments

· Usefulness of products or services to customers

· Satisfaction of customers with products or services

· Degree of competition within the industry for the same customer segments

Production or Service Strategy

A production or service strategy addresses several critical issues: the process and technology that will be used to produce and deliver the company's products or services; the requirements for materials, equipment, and facilities; and the production schedule required to support sales goals. It enables the company to determine estimates of operating income profitability and to determine the level of sales and revenue that the organization must attain before it can become profitable—that is, the breakeven point.

Research and Development Strategy

If the company operates in a highly competitive environment, characterized by rapid and frequent technological change and requiring medium- to long-range planning horizons, a formal R&D strategy is an operating necessity. If the company operates in a more stable environment or in one where new product introduction is not a primary determinant of market success, a formal R&D strategy is less necessary.

Organization and Management Strategy

An organization and management strategy addresses several critical issues:

· Functions that must be performed and who will be responsible for performing them

· Organization of functions to promote overall effectiveness, efficiency, and productivity

· Management of the organization's processes and practices to ensure quality products or services

· Staffing requirements in terms of numbers, skills, qualifications, and promotional opportunities

· Procedures for guiding, motivating, and controlling the overall operation of the company

Financial Strategy

A financial strategy addresses the following:

· Historical information regarding the time relationship between the incurrence and payment of costs and the receipt of revenues—that is, the cash flow problem

· Policies of the company and its suppliers and customers regarding payments and collections

· Historical performance of the company on key financial indicators

· Composition of assets and liabilities, including future financial obligations

· Value and current usefulness of assets

· Cost and availability of funds from external sources

Scope and Value of the Business Plan

The business plan must be comprehensive to address the concerns of employees, investors, bankers, venture capitalist, suppliers, and customers. The process of developing a business plan provides a self-assessment of the entrepreneur

The three perspectives need to be considered:

1. Entrepreneur understands the new venture better than anyone.

2. The marketing perspective considers the venture through the eyes of customer.

3. The investor looks for financial projections.

The business plan is valuable to the entrepreneur because of the following:

i.It helps to determine the viability of the venture in a market

ii. It gives guidance in organizing planning activities.

iii. It serves as an important tool in obtaining finance.

Information Needs

Before preparing a business plan, the entrepreneur should clearly define the venture’s goals, which provide a framework for the business plan. The following are the needs of information which are useful for preparing a business plan:

1. Market Information: It is important to know the market potential for the product and service. A defined market makes it easier to project market size and market goals.

2. Operation Information: The entrepreneur may need information on Location, manufacturing operations, raw materials, equipment, labour skills, space etc.,

3. Financial Information: Before preparing the plan, the entrepreneur must evaluate the profitability of the venture through the determination of the expected sales and expenses, cash flows, Assets and investments for the first three years.

Writing the Business Plan

The business plan should be prepared by the entrepreneur, or consult many sources like Small Business Administration, retired business executives, Small Business Development centres etc., Designing a business plan is an important step in starting or expanding any business. It assists the business owner by organizing information that describes the business and its operation. The business plan should be comprehensive to give a potential investor a complete understanding of the venture:

1. Introductory Page: The title provides a brief summary of the business plan’s contents and should include:

· The name and address of the company

· The name of the entrepreneur and the contact details

· A paragraph describing the company and the nature of the business

· The amount of financing needed

· A statement of the confidentiality of the report

2. Executive Summary: This is prepared after the total plan is prepared. It should be three to four pages in length

and should highlight the key points in the business plan. The summary should highlight in a concise manner the key points in the business plan. Issues that should be addressed include:

· Brief description of the business concept

· Any data that support the opportunity for the venture.

· Highlight key financial results that can be achieved.

3. Environmental and Industry analysis: The entrepreneur should first conduct an environmental analysis to identify trends and changes occurring on a national and international level that may impact the new venture. Examples of environmental factors which are uncontrollable are Economy, Culture, Technology, Legal concerns. Next the entrepreneur should conduct on industry analysis that focuses on specific industry trends factors like industry demand, competition. After, an entrepreneur has to focus on specific market which includes information about the customers and the factors influencing their behaviour.

4. Description about the venture: The description about the venture should be detailed in this section. This should begin with the mission statement which describes the nature of the business ad what the entrepreneur hopes to achieve. The new venture should be described in detail, including the product, location, personnel, background of the entrepreneur and history of the venture.

Using and Implementing the Business plan

The business plan is designed to guide the entrepreneur through the first year of operations. It should contain control points to ascertain progress. Planning should be a part of any business operation. The entrepreneur can enhance efficient implementation of the plan by developing a schedule to measure programs and to institute operational plans.

· Measuring Plan Progress:Plan projections will typically be made on a 12

month schedule, but the entrepreneur should check the following key areas more frequently.

1.Inventory control:By controlling inventory, the firm can ensure maximum service to the customer.

2.Production control: Compare the cost figures against day-to-day operating costs.

3.Quality control: Quality control depends on the type of production system used.

4.Sales control: Information on units, dollars, and specific products sold should be collected.

5.Disbursements: The new venture should control the amount of money paid out

· Updating the Plan:Environmental factors and internal factors can change the

direction of the plan. It is important to be sensitive to changes in the company, industry, and market.

· Evaluating business plan: Making a critical evaluation of the new business concept at an early stage will allow an entrepreneur to discover and address any flaws in the business plan before it goes into the production stage. An entrepreneur can evaluate his business proposal with market research, looking for the potential target audience. He needs to evaluate plan and estimate where the product needs to be placed in the market place. Along with market research, an entrepreneur also needs to do early stage financial analysis by searching for the sources of attracting investors. Evaluating a Business plan is essential to find funding from angel investors and venture capitalists.

Marketing Plan

The marketing plan establishes how the entrepreneur will effectively compete and operate in the market place. Marketing planning should be an annual activity focusing on decisions related to the marketing mix variables. The marketing plan section should focus on strategies for the first three years of the venture. For the first year, goals and strategies should be projected monthly. For years two and three, market results should be projected based on longer term goals. Preparing an annual marketing plan becomes the basis for planning other aspects of the business.

The marketing plan should be a guide for implementing marketing decision-making and not a superficial document. The mere organization of the thinking process involved in preparing a marketing plan can be helpful in understanding and recognizing critical issues.

Marketing System

The marketing system identifies the major interacting components, both internal and external, that enable the firm to provide products to the market place. Environment factors, although largely uncontrollable, should be studied.

Internal environmental factors are more controllable by the entrepreneur:

Financial resources: The financial plan should outline the financial needs for the venture.

Management team: An effective management team responsibilities assigned is needed for implementing the marketing plan.

Suppliers: Suppliers used are generally based on a number of factors, such as price, delivery time, and quality.

Company mission: Every new venture should define the nature of its business and what it hopes to accomplish.

External Environment

· Economy

· Culture

· Technology

· Demand

· Legal Considerations

· Raw materials

· Competition

Feedback

Marketing strategies directed to consumers

Market Planning Decisions

Entrepreneur

Internal Environment

· Financial Resources

· Suppliers

· Goals & Objectives

· Management Team

Purchase decisions of customers

Marketing System

Steps in preparing a Marketing Plan

Step 1: Defining the Business Situation: The situation analysis is a review of where the company has been and considers many of the environmental factors. The entrepreneur should provide a review of past performance of the product and the company. Industry analysis should include information on market size, growth rate, suppliers, new entries, and economic conditions.

Step 2: Defining Target Market/Opportunities and Threats: The entrepreneur should have a good idea of who the customer or target market will be. The defined target market will usually represent one or more segments of the entire market. Market segmentation is the process of dividing the market into smaller homogeneous groups. The process of segmenting is:

a. Decide what general market or industry you wish to pursue.

b. Divide the market into smaller groups based on characteristics of the customer.

c. Select segment or segments to target.

d. Develop marketing plan integrating the parts of the marketing mix.

Step 3: Considering Strengths and Weaknesses: It is important for the entrepreneur to consider its strengths and weaknesses.

Step 4: Establishing Goals and Objectives:Before strategy decisions can be outlined, the entrepreneur must establish realistic marketing goals and objectives. These answer the question "Where do we want to go?" These goals should specify such things as market share, profit, sales, market penetration, pricing policy, and advertising support. Not all goals and objectives must be quantified. It is a good idea to limit the number of goals to between six and eight.

Step 5: Defining Marketing Strategy and Action Programs:Strategy and action decisions respond to the question "How do we get there?" It incorporates:

1. Product or Service: This includes a description of the product and may include more than the physical characteristics. It involves packaging, brand name, price, warranty, image, service, features, and style.

2. Customer Service: Meeting customer needs and creating loyalty involves a number of low-cost steps:

· In writing develop a statement of customer service principles.

· Train those employees who have direct contact with customers.

· Establish a process for evaluating customer service.

· Reward employees who are most effective in providing quality customer service.

· Make regular contact with customers.

· Invest in quality telephone equipment.

· Meet customer expectations.

· Customer service is especially important for e-businesses.

3. Pricing: One of the difficult decisions is determining the appropriate price for the product. Factors such as costs discounts, freight, and mark-ups must be considered. Marketing research can help determine a reasonable price that consumers are willing to pay.

4. Distribution:This factor provides utility or makes the product convenient to purchase when it is needed. This variable must be consistent with other marketing mix variables. Type of channel, number of intermediaries and location of members should be described. Regardless of the type of business, it is usually necessary for the new venture to have a website. The internet will become an increasingly important medium for information and distribution. Direct mail or telemarketing may be considered. Direct mail marketing is one of the simplest and lowest in entry costs. But the direct-marketing or Internet strategies are not a guarantee for success. The entrepreneur should evaluate all possible options for distribution.

5. Promotion: The entrepreneur needs to inform customers as to the product's availability using advertising media such as print, radio, or television. Usually television is too expensive unless cable television is a viable option. Larger markets can be reached using direct mail, trade magazines, or newspapers. A website may also create awareness and promote the product and services of the venture. It is possible to make use of publicity as a means of introduction. It is important that the marketing strategy and action programs be specific and detailed enough to guide the entrepreneur through the first year.

Step 6: Coordination of the Planning Process: The management team must coordinate the planning process. The entrepreneur may be the only person involved but may lack experience in preparing the plan. Assistance is available from many sources, such as the SBA.

Step 7: Designing Responsibility for Implementation: The plan must be implemented effectively to meet all of the desired goals and objectives. Someone must take the responsibility for implementing each decision made in the marketing plan.

Step 8: Budgeting the Marketing Strategy:Planning decisions must also consider the costs involved in the implementation of these decisions. This budgeting will be useful in preparing the financial plan.

Step 9: Implementation of the Marketing Plan: The marketing plan is meant to be a commitment to a specific strategy. A commitment to make adjustments as needed by market conditions is also valuable.

Step 10: Monitoring Progress of Marketing Actions: Monitoring of the plan involves tracking specific results of the marketing effort. What is monitored is dependent on the specific goals and objectives outlined.

Financial Plan

Every new business needs to prepare an effective financial plan. A financial plan of a business provides a complete picture of the amount of capital, sources of funds, the cash availability position and the projected financial position of the firm. The financial plan provides the short term basis for budgeting and helps prevent common problem lack of cash. The financial plan must explain how the entrepreneur will meet all financial obligations and maintain its liquidity. In general, the financial plan will need three years of projected financial data for outside investors.

Key Elements of the Financial Plan

There are a few key financial items which has to be included in the financial plan:

· Profit and Loss statement

· Balance Sheet

· Cash Flow Statement

Profit and loss statement: A profit and loss statement is essentially an explanation of how a business made a profit (or incurred a loss) over a certain period of time. It’s a table that lists all of the revenue streams and all of your expenses typically for a three-month period and lists at the very bottom the total amount of net profit or loss. This is a financial statement that goes by a few different names like profit and loss statement, income statement, pro forma income statement, P&L (short for “profit and loss”), it’s an essential report and very important to understand.

Balance sheet :A balance sheet is a overview of the business’s financial position at a particular moment in time, how are you doing? How much cash have in the bank, how much do the customers owe, and how much debt to the vendors? The balance sheet is standardized, and consists of three types of accounts:

· assets (accounts receivable, money in the bank, inventory, etc.)

· liabilities (accounts payable, credit card balances, loan repayments, etc.)

· equity (for most small businesses, this is just the owner’s equity, but it could include investors’ shares, retained earnings, stock proceeds, etc.)

Cash flow statement

A cash flow statement (also called a “statement of cash flows”) is an explanation of how much cash the business brought in, how much cash it paid out, and what its ending cash balance was, typically per-month. The cash flow statement helps you understand the difference between what the profit and loss statement reports as income—your profit—and what the actual cash position is.

Organizational Plan

An organizational plan is basically a “to do” list for an organization. It lists out the plan of work, program, and organizational growth over a period of time-six months, a year, a five years. Planning helps an organization chart a course for the achievement of its goals and the tasks involved, who is responsible for them, and when they’ll be done.

An organizational plan helps to:

· Set priorities for work

· Make sure tasks get done on time

· Focus on one thing at a time

· Share work among staff, boards members & volunteers

· Make goals clear to investors

· Get a handle on big projects by breaking the down

The organization plan must include location of your organization, the area in which it works, organizational structure of the organization, present professional experience and achievements of people who are to manage the project. The end result of the process of setting medium and long term objectives for an organization and then developing a strategy to accomplish those goals. Producing a logical organizational plan is one of the most important tasks of senior business management since it provides consistent guidance and an action plan for the rest of the company to follow.

Designing the Organization

The design of the organization will be the entrepreneur’s formal and clear indication to the members of the organization as to what is expected. The entrepreneur may have difficulty in making the transition from a start-up to a growing well managed business that maintains its success over a long period of time .As the workload increases the organizational structure will need to expand to include additional employees with defined roles. Interviewing and hiring procedures will need to be implemented.

The following are the areas which have be considered while designing organizational design:

· Organizational structure defines the jobs and the relationship these jobs have with each other.

· Planning, measurement and evaluation schemes reflect the goals of the organization.

· Rewards should be provided in the form of promotions, bonuses, praise and so on.

· Selection criteria will need to be set for selecting individuals for each position.

· Training can be in the form of formal education or learning skills.

Factors affecting Organizational design

There are many things which can affect the choice of an appropriate structure for an organization, the following five factors are the most common: size, life cycle, strategy, environment, and technology.

Organization Size &

Life Cycle

Strategy Environment

Technology

Organizational Design

1. Organizational size: If the organization is very small, it may not even have a formal structure. If the organization is very small, it may not even have a formal structure. As an organization grows, it becomes increasingly difficult to manage without more formal work assignments and some delegation of authority. Therefore, large organizations develop formal structures.

2. Organization life cycle: Organizations, like humans, tend to progress through stages known as a life cycle. Like humans, most organizations go through the following four stages: birth, youth, midlife, and maturity. Each stage has characteristics that have implications for the structure of the firm.

Birth: In the birth state, a firm is just beginning. An organization in the birth stage does not yet have a formal structure. In a young organization, there is not much delegation of authority. The founder usually “calls the shots.”

Youth: In this phase, the organization is trying to grow. The emphasis in this stage is on becoming larger
Midlife: This phase occurs when the organization has achieved a high level of success. An organization in midlife is larger, with a more complex and increasingly formal structure.
Maturity: Once a firm has reached the maturity phase, it tends to become less innovative, less interested in expanding, and more interested in maintaining itself in a stable, secure environment.

3. Strategy: An organization is going to position itself in the market in terms of its product is considered its strategy. A company may decide to be always the first on the market with the newest and best product (differentiation strategy), or it may decide that it will produce a product already on the market more efficiently and more cost effectively (cost‐leadership strategy). Each of these strategies requires a structure that helps the organization reach its objectives.

4. Environment: The environment is the world in which the organization operates, and includes conditions that influence the organization such as economic, social‐cultural, legal‐political, technological, and natural environment conditions. Environments are often described as either stable or dynamic.

In a stable environment, the customers' desires are well understood and probably will remain consistent for a relatively long time. Examples of organizations that face relatively stable environments include manufacturers of staple items such as detergent, cleaning supplies, and paper products.

In a dynamic environment, the customers' desires are continuously changing. In addition, the technology that a company uses while in this environment may need to be continuously improved and updated. An example of an industry functioning in a dynamic environment is electronics. Technology changes create competitive pressures for all electronics industries, because as technology changes, so do the desires of consumers.

Stages in designing an Organizational Chart

There are two stages of development in an organization design shown in the below diagrams:

Stage 1: The new venture is operated by one person, the entrepreneur with no need for sub managers

Stage 2: As business expands, the organization has to perform the following functions:

· Sub managers are hired to coordinate, organize and control aspects of the business.

· Measurement, evaluation, rewards, selection and training become necessary.

Building the Management Team and a Successful Organizational Culture

For building a successful organizational culture and to build a strong management team, the entrepreneur needs to assemble the right mix of people to assume the responsibilities. The team must be able to accomplish three functions;

1. Execute the business plan.

2. Identify fundamental changes in the business as they occur.

3. Make adjustments to the plan based on changes in the environment and market that will maintain profitability.

Objective Questions and Answers

S.No.	Objective Questions
1.	Marketing plan is a study of ____ a) 4P’s b) Suppliers c) Competitors d) Customers
2.	______ refers to system of maintaining business documents a) Business Control b) Record Keeping c) Auditing d) Tax structure
3.	A good strategy with effective implementation has ____ probability of success. a) Lower b) Higher c) Moderate d) Least
4.	Optimization implies____ a) Maximize costs, maximize revenues b) Minimize costs, minimize revenues c) Maximize costs, minimum revenues d) Minimum costs, maximum revenues
5.	Business plan is an integration of____ a) Marketing b) Finance c) Sales & HR d) All the above
6.	Which information is required for preparing a business plan? a) Marketing b) Financial c) Operational d) All the above
7.	_______ analysis is required while writing a good business plan. a) Environmental b) Government c) Technology d) All of the above
8.	Evaluating a Business plan is essential to find funding from _____ and ____ a) Angel investors b) Venture capitalists c)Both d) None
9.	Defining Target Market for marketing plan is essential to identify _____ a) Opportunities b) Threats c) Both d) None
10.	The entrepreneur needs to inform customers as to the product's availability is called as ____ a) Promotion b) Marketing c) Communication d) None
11.	The key elements of the Financial Plan are ____ a) Income statement b) Balance Sheet c) Cash flow statements d) All of the above
12.	A cash flow statement refers to the study of ____ a) Cash position b) Assets c) Liabilities d) None
13.	Market segmentation is the process of dividing the market into smaller ____ groups a) Homogeneous b) Heterogeneous c) Total d) All of the above
14.	Which of the following areas are to be considered while designing organizational design? a) Organizational structure b) Reward system c) Training d) All of the above
15.	____ is the complete representation of the organization. a)Organizational structure b) Authority c) Responsibility d) None

Two Marks Questions and Answers

1. Define Business Plan.

2. What is Marketing Plan?

The marketing plan establishes how the entrepreneur will effectively compete and operate in the market place. Marketing planning should be an annual activity focusing on decisions related to the marketing mix variables. The marketing plan section should focus on strategies for the first three years of the venture. For the first year, goals and strategies should be projected monthly. For years two and three, market results should be projected based on longer term goals. Preparing an annual marketing plan becomes the basis for planning other aspects of the business.

3. Define Financial Plan

4. What are the key elements of the financial plan?

While preparing a financial plan, it is essential to include few financial items:

Profit and loss statement: A profit and loss statement is essentially an explanation of how a business made a profit (or incurred a loss) over a certain period of time.

Balance sheet :A balance sheet is a overview of the business’s financial position at a particular moment in time, The balance sheet consists of three types of accounts: Assets, Liabilities, Equity share capital

Cash flow statement

5. Define Organizational Plan

An organizational plan is basically a “to do” list for an organization. It lists out the plan of work, program, and organizational growth over a period of time-six months, a year, a five years. The organization plan must include location of your organization, the area in which it works, organizational structure of the organization, present professional experience and achievements of people who are to manage the project.

6. What is Successful Organizational Culture?

1. Execute the business plan.

2. Identify fundamental changes in the business as they occur.

3. Make adjustments to the plan based on changes in the environment and market that will maintain profitability.

7. Using and Implementing the Business plan

8. What is Environmental and Industry analysis?

The entrepreneur should first conduct an environmental analysis to identify trends and changes occurring on a national and international level that may impact the new venture. Examples of environmental factors which are uncontrollable are Economy, Culture, Technology, Legal concerns. Next the entrepreneur should conduct on industry analysis that focuses on specific industry trends factors like industry demand, competition. After, an entrepreneur has to focus on specific market which includes information about the customers and the factors influencing their behaviour.

9. What is the information needed for business plan?

1. Market Information: It is important to know the market potential for the product

and service. A defined market makes it easier to project market size and market goals.

2. Operation Information: The entrepreneur may need information on Location,

manufacturing operations, raw materials, equipment, labour skills, space etc.,

3. Financial Information: Before preparing the plan, the entrepreneur must evaluate

the profitability of the venture through the determination of the expected sales and expenses, cash flows, Assets and investments for the first three years.

10. Define the scope of a Business plan

The three perspectives need to be considered:

1. Entrepreneur understands the new venture better than anyone.

2. The marketing perspective considers the venture through the eyes of customer.

3. The investor looks for financial projections.

Descriptive Questions and Answers (University Question Papers)

2. Explain the scope and value of the business plan

The three perspectives need to be considered:

1. Entrepreneur understands the new venture better than anyone.

2. The marketing perspective considers the venture through the eyes of customer.

3. The investor looks for financial projections.

1. Clarify Direction: The primary purpose of a business plan is to define what the business is or what it intends to be over time. Clarifying the purpose and direction of your business allows you to understand what needs to be done for forward movement. Clarifying can consist of a simple description of your business and its products or services.

2. Future Vision: Businesses evolve and adapt over time, and factoring future growth and direction into the business plan can be an effective way to plan for changes in the market, growing or slowing trends, and new innovations or directions to take as the company grows.

3. Attract Financing: The development of a comprehensive business plan shows whether or not a business has the potential to make a profit." By putting statistics, facts, figures and detailed plans in writing, a new business has a better chance of attracting investors to provide the capital needed for getting started.

4. Attract Team Members: Business plans can be designed as a sale tool to attract partners, secure supplier accounts and attract executive level employees into the new venture. Business plans can be shared with the executive candidates or desired partners to help convince them of the potential for the business, and persuade them to join the team.

5. Manage Company: A business plan conveys the organizational structure of your business, including titles of directors or officers and their individual duties. It also acts as a management tool that can be referred to regularly to ensure the business is on course with meeting goals, sales targets or operational milestones.

Value of the Business Plan

The business plan is valuable to the entrepreneur because of the following:

i. It helps to determine the viability of the venture in a market

ii. It gives guidance in organizing planning activities.

iii. It serves as an important tool in obtaining finance.

3. What are the various steps involved in writing business plan?

1.Introductory Page: The title provides a brief summary of the business plan’s contents and should include:

· The name and address of the company

· The name of the entrepreneur and the contact details

· A paragraph describing the company and the nature of the business

· The amount of financing needed

· A statement of the confidentiality of the report

2.Executive Summary: This is prepared after the total plan is prepared. It should be

three to four pages in length and should highlight the key points in the business plan. The summary should highlight in a concise manner the key points in the business plan. Issues that should be addressed include:

· Brief description of the business concept

· Any data that support the opportunity for the venture.

· Highlight key financial results that can be achieved.

3.Environmental and Industry analysis: The entrepreneur should first conduct an environmental analysis to identify trends and changes occurring on a national and international level that may impact the new venture. Examples of environmental factors which are uncontrollable are Economy, Culture, Technology, Legal concerns. Next the entrepreneur should conduct on industry analysis that focuses on specific industry trends factors like industry demand, competition. After, an entrepreneur has to focus on specific market which includes information about the customers and the factors influencing their behaviour.

4.Description about the venture: The description about the venture should be detailed in this section. This should begin with the mission statement which describes the nature of the business ad what the entrepreneur hopes to achieve. The new venture should be described in detail, including the product, location, personnel, background of the entrepreneur and history of the venture.

4. Describe the concept of using and implementing the business plan

· Measuring Plan Progress:Plan projections will typically be made on

a 12month schedule, but the entrepreneur should check the following key areas more frequently.

1. Inventory control:By controlling inventory, the firm can ensure maximum

service to the customer.

2. Production control: Compare the cost figures against day-to-day operating costs.

3. Quality control: Quality control depends on the type of production system used.

4. Sales control: Information on units, dollars, and specific products sold should be collected.

5. Disbursements: The new venture should control the amount of money paid out

· Updating the Plan:Environmental factors and internal factors can change the

direction of the plan. It is important to be sensitive to changes in the company, industry, and market.

5. Define Marketing Plan. Explain the various steps in preparing a marketing plan.

The marketing plan establishes how the entrepreneur will effectively compete and operate in the market place. Marketing planning should be an annual activity focusing on decisions related to the marketing mix variables. The marketing plan section should focus on strategies for the first three years of the venture. For the first year, goals and strategies should be projected monthly. For years two and three, market results should be projected based on longer term goals. Preparing an annual marketing plan becomes the basis for planning other aspects of the business.

Steps in preparing a Marketing Plan

Step 1: Defining the Business Situation: The situation analysis is a review of where the company has been and considers many of the environmental factors. The entrepreneur should provide a review of past performance of the product and the company. Industry analysis should include information on market size, growth rate, suppliers, new entries, and economic conditions.

a. Decide what general market or industry you wish to pursue.

b. Divide the market into smaller groups based on characteristics of the customer.

c. Select segment or segments to target.

d. Develop marketing plan integrating the parts of the marketing mix.

Step 3: Considering Strengths and Weaknesses: It is important for the entrepreneur to consider its strengths and weaknesses.

Step 5: Defining Marketing Strategy and Action Programs: Strategy and action

decisions respond to the question "How do we get there?" It incorporates:

2. Customer Service: Meeting customer needs and creating loyalty involves a number of low-cost steps:

· In writing develop a statement of customer service principles.

· Train those employees who have direct contact with customers.

· Establish a process for evaluating customer service.

· Reward employees who are most effective in providing quality customer service.

· Make regular contact with customers.

· Invest in quality telephone equipment.

· Meet customer expectations.

· Customer service is especially important for e-businesses.

6. Define Organizational Plan. Discuss the various factors in preparing the organizational design.

Factors affecting Organizational design

Organization Size &

Life Cycle

Strategy Environment

Technology

Organizational Design

Birth: In the birth state, a firm is just beginning. An organization in the birth stage does not yet have a formal structure. In a young organization, there is not much delegation of authority. The founder usually “calls the shots.”

Youth: In this phase, the organization is trying to grow. The emphasis in this stage is on becoming larger
Midlife: This phase occurs when the organization has achieved a high level of success. An organization in midlife is larger, with a more complex and increasingly formal structure.
Maturity: Once a firm has reached the maturity phase, it tends to become less innovative, less interested in expanding, and more interested in maintaining itself in a stable, secure environment.

In a stable environment, the customers' desires are well understood and probably will remain consistent for a relatively long time. Examples of organizations that face relatively stable environments include manufacturers of staple items such as detergent, cleaning supplies, and paper products.

In a dynamic environment, the customers' desires are continuously changing. In addition, the technology that a company uses while in this environment may need to be continuously improved and updated. An example of an industry functioning in a dynamic environment is electronics. Technology changes create competitive pressures for all electronics industries, because as technology changes, so do the desires of consumers.

ENTREPRENEURSHIP JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY ANANTAPUR

Importance of Entrepreneurship:

1. Development of managerial capabilities:

2. Creation of organizations:

3. Improving standards of living:

4. Means of economic development:

Types of Entrepreneurs

1. Innovative entrepreneurs

2. Imitating entrepreneurs

3. Fabian entrepreneurs

4. Drone entrepreneurs

5. Social Entrepreneur

Functions of an Entrepreneur

1. Innovation

2. Assumption of Risk

3. Research

4. Development of Management Skills

5. Overcoming Resistance to Change

6. Means of Economic Development

The Entrepreneurial Decision Process

Role of an Entrepreneur in Economic Development

Opportunities in India and Abroad for Entrepreneurs

2. State the various types of Entrepreneurs

1. Innovative entrepreneurs

2. Imitating entrepreneurs

3. Fabian entrepreneurs

4. Drone entrepreneurs

5. Social Entrepreneur

5. Explain the process of Entrepreneurial decision making

2. Future Vision: Businesses evolve and adapt over time, and factoring future growth and direction into the business plan can be an effective way to plan for changes in the market, growing or slowing trends, and new innovations or directions to take as the company grows.

Objectives and Uses of a Business Plan

Internal Uses of a Business Plan

External Uses of a Business Plan

Elements or Components of a Business Plan

Market Strategy

Production or Service Strategy

Research and Development Strategy

Organization and Management Strategy

Financial Strategy

Marketing Plan

Key Elements of the Financial Plan

Cash flow statement

The key elements of the Financial Plan are ____

2. What is Marketing Plan?

4. What are the key elements of the financial plan?

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