Esbd Unit II

ENTREPRENEURSHIP
& SMALL BUSINESS

DEVELOPMENT
(MS 207)
UNIT II
1
SYLLABUS
Unit I
Entrepreneurship: Concept and Definitions; Entrepreneurship and Economic Development;
Classification and Types of Entrepreneurs; Entrepreneurial Competencies; Factor Affecting
Entrepreneurial Growth Economic, Non-Economic Factors; EDP Programmes; Entrepreneurial
Training; Traits/ Qualities of an Entrepreneurs; Entrepreneur; Manager Vs. Entrepreneur.
(14 Hours)
Unit II
Opportunity / Identification and Product Selection: Entrepreneurial Opportunity Search and
Identification; Criteria to Select a Product; Conducting Feasibility Studies; Project Finalization; Sources
of Information. (14 Hours)
Unit III
Small Enterprises and Enterprise Launching Formalities : Definition of Small Scale; Rationale;
Objective; Scope; Role of SME in Economic Development of India; SME; Registration; NOC from
Pollution Board; Machinery and Equipment Selection; Project Report Preparation; Specimen of Project
Report; Project Planning and Scheduling using Networking Techniques of PERT / CPM; Methods of
Project Appraisal.
(14 Hours)
Unit IV
Role of Support Institutions and Management of Small Business : Director of Industries; DIC;
SIDO; SIDBI; Small Industries Development Corporation (SIDC); SISI; NSIC; NISBUED; State
Financial Corporation SFC; Marketing Management; Production Management; Finance Management;
Human Resource Management; Export Marketing; Case Studies-At least 4 (four) in whole course.
(14 Hours)
2
UNIT II
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OPPORTUNITY IDENTIFICATION AND PRODUCT SELECTION
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ENTREPRENEURIAL OPPORTUNITY
SEARCH & IDENTIFICATION
Opportunity identification is central to
entrepreneurship and involves:
The creative pursuit of ideas
The innovation process
The first step for any entrepreneur is the

identification of a good idea.
The search for good ideas is never easy.
Opportunity recognition can lead to both personal and
societal wealth.
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How entrepreneurs do what they do:
Creative thinking + systematic analysis = success
Seek out unique opportunities to fill needs and wants
Turn problems into opportunities
Recognize that problems are to solutions what demand is to
supply
Ideas are not the same as opportunities
Ideas Opportunities
Last for ever are perishable
Are free require work
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What is an opportunity??
An idea that is timely, attractive, durable anchored
in a product or service that creates or adds value
for its buyer and user.
An opportunity is a favorable set of circumstances
that creates the need for a new product, service, or
business idea.
An idea, as we defined it, is Something imagined
or pictured in the mind. The difference is that an
idea may or may not represent an opportunity.
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An opportunity as four essential qualities
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Window of Opportunity
The term window of opportunity is a metaphor
describing the time period in which a firm can
realistically enter a new market.
Once the market for a new product is established,
its window of opportunity opens, and new entrants
flow in.
At some point, the market matures, and the
window of opportunity (for new entrants) closes.
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Three Ways to Identify An Opportunity:
1. Observing Trends
The first approach to identifying opportunities is to
observe trends and study how they create
opportunities for entrepreneurs to pursue.
There are two ways that entrepreneurs can get a
handle on changing environmental trends:
They can carefully study and observe them.
They can purchase customized forecasts and market
analyses from independent research firms.
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Environmental Trends Suggesting Business or
Product Opportunity Gaps:
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Economic Forces
Economic forces affect consumers level of disposable
income.
When studying how economic forces affect opportunities, it is
important to evaluate who has money to spend and who is
trying to cut costs.
An increase in the number of women in the workforce and
their related increase in disposable income is largely
responsible for the number of boutique clothing stores
targeting professional women that have opened in the past
several years.
Many large firms are trying to cut costs. Entrepreneurs have
taken advantage of this trend by starting firms that help other
firms control costs.
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Social Forces
Changes in social trends provide openings for new businesses
on an ongoing basis.
The continual proliferation of fast-food restaurants, for
example, isnt happening because people love fast food. It is
happening because people are busy, and have disposable
income.
Similarly, the Sony Walkman was developed not because
consumers wanted smaller radios but because people wanted
to listen to music while on the go.
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Technological Advances
Given the rapid pace of technological change, it is vital that
entrepreneurs keep on top of how new technologies affect
current and future business opportunities.
Entire industries have emerged as the result of technological
advances.
Examples include the computer industry, the Internet,
biotechnology, and digital photography.
Once a new technology is created, new businesses form to
take the technology to a higher level.
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Political and Regulatory Changes
Political and regulatory changes provide the basis for new
business opportunities.
For example, laws that protect the environment have created
opportunities for entrepreneurs to start firms that help other
firms comply with environmental laws and regulations.
Similarly, many entrepreneurial firms have been started to
help companies comply with the Sarbanes-Oxley Act of 2002.
The act requires certain companies to keep all their records,
including e-mail messages and electronic documents, for
at least five years.
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2. Solving a problem
These problems can be
Sometimes identifying
pinpointed through
opportunities simply
Observing trends and
involves noticing a problem
through more simple means,
and finding a way to
such as intuition,
solve it.
serendipity, or chance.
For example, Symantec

Some business ideas are
Corp. created Norton
Clearly initiated to solve a
Antivirus software to guard
problem.
Computers against viruses.
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3. Finding gaps in the market place
A third approach to identifying opportunities is to find a gap
in the marketplace.
A gap in the marketplace is often created when a product or
service is needed by a specific group of people but doesnt
represent a large enough market to be of interest to
mainstream retailers or manufacturers.
This is the reason that small clothing boutiques and specialty
shops exist.
The small boutiques, which often sell designer clothes or
clothing for hard-to-fit people, are willing to carry
merchandise that doesnt sell in large enough quantities for
Wal-Mart, GAP, or JC Penney to carry.
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CRITERIA TO SELECT A PRODUCT
Undertaking a business ventureis abig
investmentrequiring adequate planning. Just
asinvestment opportunitiesare many and diverse,
products or services options for an entrepreneur are
uncountable. However, the selection of required
product or serviceis the first step towards success.
product is anything that can be offered to a
marketer for acquisition, use or consumption.
products provide the business with the most
important and visible contact with buyers i.e.
consumers. Products to the consumers
representpsychological symbolsof personal
attributes, goal and social patterns
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In selecting product for a business venture, the following
factors must be taken into consideration:
Supply-gap:The size of the unsatisfied market demand
which constitute a source of business opportunitywill dictate,
to a great extent the need to select a particular product. The
product with the highest chances of success as reflected in its
demand will be selected. In essence, there must be existing
obvious demand for the selected product.
Fund:The size of the funds that can be mobilized is another
important factor. Adequate fund is needed to develop,
produce, promote, sell and distribute the product selected.
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Availability of and Access to Raw Materials:
Different products require different raw materials. The source
quality and quantity of the raw materials needed are factors
to be seriously considered, Are the raw materials available in
sufficient quantities? Where are the sources of raw materials
located? Are they accessible? Could they be sources locally or
imported? Satisfactory answers should be provided to these
and many other relevant questions.
Technical Implications:The production process for the
product needs to be considered. There is need to know the
technical implications of the selected product on the existing
production line, available technology and even the labour
force. The choice of a particular product may require either
acquisition of the machineries or refurbishing of the old ones.
The product itself must be technically satisfactory and
acceptable to the user. 19
Profitability/Marketability:Most often, the
product that has the highest profit potential is
often selected. However, a product may be selected
on the basis of its ability to utilize idle capacity or
complement the sale of the existing products. The
product must be marketable.
Availability of Qualified Personnel:Qualified
personnel to handle the production and marketing
of the product must he available. The cost of
producing the product must be kept to the
minimum by reducing wastages. This is achievable
through competent hands.
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Government Policies:This is quite often an
uncontrollable factor. The focuses of government
policies can significantly influence the selection of
product. For instance, a package of incentives from
government for a product with100% local input
contents can change the direction of the businesss
R & D and hence the product selected.
Government objectives:The contributions of
the product to the realization of the companys
short and long range objectives must be considered
before selection. For instance, the company goal
maybe the achievement of sale growth, sales
stability or enhancement of the companys social
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CONDUCTING FEASIBILITY STUDIES
Feasibility study is done to find whether the
proposed project (considering the above discussed
environment appraisal) would be feasible or not.
Feasibility study is dependent on environment
appraisal yet it is far more descriptive.
The variable/dimensions of feasibility analysis -
1. Market Analysis
2. Technical/Operational Analysis
3. Financial feasibility
4. Drawing functional plan
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1. Market Analysis
M A is conducted to estimate the demand and market share of
the proposed product/service in future.
Demand analysis and market share is based on number of
factors - consumption pattern, availability of substitute
goods/service, competition etc.
A preliminary discussions with consumers, retailers,
distributors, competitors, suppliers is carried to understand
consumer preferences, existing and potential demands,
strategy of competitors, and practices of distributors,
retailers etc., present and prospective consumers, geographic
and seasonality distribution of the demand, marketing mix of
competitors, accepted marketing mix of consumers.
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2. Technical/ Operational Analysis
Done to assess operational ability of the proposed business
enterprise.
Key questions to be answered are- what are the technological
and equipments needs, from where this technology and
equipments be obtained, from where the raw material be
obtained.
T/O analysis collects information about :
a) Material availability & requirement planning
b) Plant location
c) Plant capacity
d) Machinery and equipment
e) Plant layout
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3. Financial Analysis
Financial feasibility is done for financial assessment of the
proposed business venture. Following cost estimates have to
be carried out :
i) Cost of land and building depending upon the
requirement and availability of funds, the land and
building can be hired, taken on lease or purchased.
ii) Cost of plant & machinery-estimating cost of plants &
machineries and their running & maintenance.
iii) Preliminary cost estimation cost required for conducting
market survey, preparing feasibility report, registration
expenses, expenses involved in raising capital from public
& other misc expanses.
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iv) Provision of Contingencies : Needs to be made to cover
certain unexpected expenses which can emerge due to
change in external environment like increase in the price
of the raw material, petrol price, transportation costs.
v) Working capital estimates for running the business are also
made.
vi) Cost of Production It include raw material cost, labour
cost, overhead expenses, utilities like power, water, fuel
etc.
vii) Sales and Production estimates : Based on the plant
capacity the production and sales estimates are made
which help in estimating profitability.
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viii Profitability projections are made on the following
parameters
a. Cost of production
b. Sale expenses
c. Administrative expanses
d. Expected sales
e. Calculation of the above gives gross profit
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4. Drawing Functional Plan
After feasibility study, functional plans are drawn which
means developing plans and strategies for all operational
areas : marketing, finance, HR and production.
a) Marketing Plan : MP lays down the strategies of marketing
(Marketing mix) which can lead to success of business. From
the market feasibility study and marketing research,
potential/present demand of customers, which helps in
laying down the strategies for market segmentation,
identification of target market and laying down strategies
for the target market.
b) Production/operation Plan : Production plans are drawn for
manufacturing whereas operational plans are for service
sector. It includes strategies for following parameters :
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1. Location and reasons for selecting the locations
2. Physical layout
3. Cost & availability of machinery, equipments,
raw material
4. List of suppliers and if possible, distributors.
5. Cost of manufacturing / running operations
6. Quality management
7. Production scheduling, capacity mgt,inventory
mgt
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c) Organisational Plan : Defines the type of
ownership, organization structure and proposes
HRM practices that would govern the successful
running of proposed business enterprise.
d) Financial Plan : Financial Plan indicates the
financial requirement of the proposed business
1. Cost incurred in smooth running of all the plans
financial, marketing, operations and HRs.
. For eg. Cost incurred in the marketing plan would
include forecasting sales, for production plan it
includes cost of goods, for organizational plans it
includes cost of compensation to employees.
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2. Projected cash flows.
3. Projected income statement
4. Projected break-even point
5. Projected ratios.
6. Projected Balance sheet.
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PROJECT FINALIZATION
It will be important to ensure before finalization that the
execution plan:
Has a concrete timeline for each step in the process, and a
clear end point
Takes into account other team members input and feedback
Allows for a rigorous prioritization process as agreed in
principle by the stakeholders
Allows for the review and iteration of the output with
feedback from stakeholders
Is realistic and achievable
Allows for a smooth transition to the next stage of the
project: implementation and adoption of keywords.
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SOURCES OF INFORMATION
Self Information Search
Secondary Research through media (print/tele/social)
Market Survey Agencies
Hired Team
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ENTREPRENEURSHIP

& SMALL BUSINESS

OPPORTUNITY IDENTIFICATION AND PRODUCT SELECTION

The first step for any entrepreneur is the

For example, Symantec

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