EN6502

Introduction to Entrepreneurship
(Compulsory)

1- Entrepreneurship & Entrepreneurs

2- Explore the environment & Investigate business opportunities
3- Developing a business plan
4- Marketing
5- Finance
6- Risk

Susith Sanasuma
01. Entrepreneurship & Entrepreneurs
Myths
Definition
Characteristics
Competencies

Myths
01. Entrepreneurs are doers, not thinkers
02. Entrepreneurs are born, not made
03. Entrepreneurs are always inventors
04. Entrepreneurs are academic and social misfits
05. Entrepreneurs must fit the “profile.”
06. All you need is money to be an entrepreneur
07. All you need is luck to be an entrepreneur
08. Ignorance is bliss for an entrepreneur
09. Entrepreneurs seek success but experience high failure rates
10. Entrepreneurs are extreme risk takers(gamblers)

Definition
The capacity and willingness to develop, organize and manage a business venture [produces new goods and
services, new processes] along with any of its risks in order to make a profit.

Characteristics
01. Creativity
02. Innovations
03. Taking risks
04. Future vision
05. Sensitivity towards the environment and identifying opportunities
06. Being optimistic
07. Holds the confidence that success depends on his own ability
08. Tendency towards achieving difficult objectives
09. Independence
10. Flexibility
11. Dedication
12. Self confidence
13. Common sense
14. Seeking information
15. Self-motivation
16. Strong desire

01. Creativity –
Ability to develop new ideas & discover new ways to solve problems & issues using available opportunities.
Ways to improve the creativity
Absorbing diversity
Accepting failures
Encouraging curiosity
Perceiving issues as challenges
Creative training opportunities
 02. Innovations
The ability to produce or develop a new product or a service
Methods of Innovation
A new invention
Extension of a core product
Duplicating
Combination

03. Taking risks

Entrepreneurs evaluate the risk and take only the bearable risk.

Social Entrepreneurs: Give creative solutions for social problems

Business Entrepreneurs: Businessmen who involve in business activities with the motives of earning profits.

Schumpeterian Model of entrepreneurship : Continually Destroying the old one and creating a new one

Competencies
Achievement Competencies
Opportunity seeking
Persistence
Commitment to work
Demand for quality and efficiency
Risk taking
Planning Competencies
Goal setting
Systematic planning and monitoring
Information seeking
Conceptual skills
Forecasting / budgeting
Leadership Competencies
Laissez-Faire
Autocratic
Participative
Transactional
Transformational
Other
Strategic thinking and decision making competencies
Teamwork skills
Communication skills
Information technologies literacy or competency
Counselling skills
Technical skills
02 Explore the Environment & Investigate Business Opportunities

Types of Environment
Types of Analysis

Internal environment (MICRO)

Controlled by the business itself
–Business owners
–Managers
–Employees
–Resources

External environment (MACRO)

Outside the business organization

Types of the external environment and their impact.

1. Demographic environment
Population of a country
Growth rate
Population’s composition
Age-wise distribution
2. Economic environment
Economic conditions of a country
Fluctuation of interest rates
Changes in the price levels
Rate of employment
Salary level
Foreign exchange rates
3. Political and legal environment
Economic policies and the laws
International agreements
Foreign employment
Policies and laws [Tax rates]
4. Scientific & Technological environment
Scientific methods and new technology, Impact of research upon business activities
New scientific discoveries
Research and development
New goods and services
ICT
5. Natural environment
Natural phenomena upon business activities
Raw material and resources
Natural disasters
6. Social and culture environment
attitudes, values and life style of the people
Traditions
Values
Beliefs
Changes in the lifestyle
7. Global environment
Tendency for the countries of the world to forego their borders and be linked together.
Types of Analysis
01. SWOT [Strengths / Weaknesses / Opportunities / Threats]
02. PEST [Political / Economic / Social / Technological]
03. Porter' 5 Force Analysis
Threat of new entrants
Threat of substitutes
Bargaining power of customers
Bargaining power of suppliers
Rivalry among the existing players
04. Ansoff matrix
EXISTING PRODUCT NEW PRODUCT
EXISTING MARKET Market Penetration Product Development
NEW MARKET Market Development Diversification
05. Porter’s Generic Strategies
COST OF PRODUCT UNIQUENESS PRODUCT
BROAD MARKET Cost Leadership Differentiation
NARROW MRKET Focus [COST] Focus [DIFFERENTIATION]
06. Types of Business Organizations

Sole proprietorship
Partnership
Franchising
Limited liability
Corporation
Public limited company
7. Decisions that should be taken when starting a business

To which extent the person can dedicate for the business?

Which product or service the business is based?
Who is the target consumer?
What is the nature of the competition?
Are earnings adequate?
How to find the required capital?
How to start the business, individually or with partners?
What is the nature of the business location?

1.What kind of business do I want or interested in starting?

2.Whoare my ideal customers?
3.What services or products will I sell?
4.Is my business idea practical and will it fill a need?
5.What is my competition and who are my competitors?
6.How to select suppliers?
7.What is my business’s advantage over existing firms?
8.What is the difference between product based and service based businesses
9.How will I price my product compared to my competition?
10.How will I advertise my business?
11.How market data can be transformed to useful information to make decisions
12.Research and development of new ventures
13.Strategies for business development and Identifying entrepreneurial opportunities
Local entrepreneurial opportunities
Global entrepreneurial opportunities
14.Women’sroleasanentrepreneur
 SALES
Cash
Credit

COST OF SALES
Opening stock
Purchases
Loading expenses
Carriage inwards
(Closing stock)
Gross profit
Gross profit = Sales – Cost of sales

DISTRIBUTION EXPENSES
Promotional expenses, salaries to sales employees, bad debts,discount given, depreciation of
delivery vehicles, sales commission
ADMINISTRATION EXPENSES
Rental payment, insurance payments, stationery expenses, depreciation for building, repair
expenses, electricity expenses, depreciation for equipment
FINANCIAL EXPENSES
Interest for bank loans, Interest for overdraft facilities, Bank charges
OTHER EXPENSES
Losses from cash frauds, losses from fire
Net Profit
Net Profit = Gross profit – Total expenses
Profit after Tax
Profit after Tax = Net Profit – Tax
Retained Profit
Retained Profit = Profit after Tax – Dividends

Assets = Equity + Liabilities

Ratios

Profitability Ratios Liquidity Ratios Activity Ratios

Risks

Types
1 Strategic Risk
Consumer preferences/Emerging technologies or any market forces can put your company in danger
2 Compliance Risk
Follow rule and regulations under Safety and Health / Environmental Protection
3 Financial Risk
Credit limit and period /debt load / foreign exchange rates
4 Operational Risk
Internal business Process (people or system) fail/ transportation systems breaking down/ supplier failing
5 Reputational Risk
Product failures, lawsuits or negative publicity
6 Other Risks
– environmental risk (natural disasters)
– employee risk management (maintaining sufficient staff , employee safety and up-to-date skills)
– political and economic uncertainty in any foreign markets you export goods to
– health and safety risks
– commercial risks (failure of key suppliers or customers)
Attitudes
1 Averse [avoid risks unless the reward is high enough to outweigh the aversion of the risk]
2 Seeker [enjoy and find it challenging to deal with risks]
3 Neutral [Neutral means neutral]
Tolerant [ignoring risks don’t care and never pay attention to a risk until it becomes an issue]

Management
1 Identify
2 Analyze and prioritize
3 Plan and schedule
4 Track and report
5 Control
6 Learn

Treatment
1 Accepting
2 Avoiding
3 Reducing
4 Transferring
5 Retaining
Marketing
1. Market segmentation
1. Geographic Segmentation
dividing a market into different geographical units such as:
– Nations – States – Regions – Cities – Countries
2. Demographic Segmentation

3. Psychographic Segmentation
depends on lifestyle and personality characteristics.
4. Behavioristic Segmentation
Occasion – [Christmas, Valentine’s day]
User status – [non-user, ex-user, potential user, first time user, regular user]
Usage rate – [light, medium, heavy]
Loyalty status – Hard-core loyal (buy one brand all the time)
– Split loyal (buy two or three brands)
– Shifting loyal (shift from one brand to another)
– Switchers (show no loyalty to any brand)
Buyer readiness stage – awareness of the product
– knowledge of what it does
– interest in the product
– preference over competing products
– belief of the product’s suitability
– Purchase
Evaluation
Criteria Description
Homogeneous consumers allocated to each segment should be similar in some way
Heterogeneous consumers should be relatively unique,
Measurable able to measure the size of the market segment
Substantial segment should be large enough, in terms of sales and profitability
Accessible should be reachable, interms of distribution and communication
Actionable/practical able to implement a distinctive marketing mix for each market segment
Responsive should respond better to a diverse marketing mix,

2. Market targeting
Undifferentiated Differentiated Focused Marketing Customised Marketing

3. Product positioning
Clarity / Consistency / Credibility / Competitiveness

4. Marketing mix
Product / Price / Place / Promotion / People / Process / Physical Evidence
Product Concern on;
– Design
– Technology– Convenience of use
– Quality
– Packaging
– Brand
– Warranties
Pricing
1. Psychological pricing Set prices to certain limits (Rs.999.90 than Rs.1000)
2. Multiple Unit Pricing discount given when high number of items are purchased
3. Market penetration pricing to quickly attract new customers based on the low cost
4. Market skimming pricing setting higher price if they have little or no competition.
5. Bundle sell a package for a lower price than they would charge them separately.
6. Differential strategy Prices vary based on the demand
7. Loss leader strategy sells particular desirable products below their cost to attract customers
8. Competitor based pricing Determine price based on the competing pricing.

Place
characteristics of a good business place
strategic location
allowance for expansion
fit for the location or not.
availability of power

Intensive Strategy Try to sell their products in as many outlets as possible

Selective Strategy using a limited number of outlets in a geographical area to sell products
Exclusive Strategy limiting distribution to a single outlet