Introduction to

Business

Module No. 006

By
Muhammad Shahid Iqbal
 Entrepreneurship
o. Entrepreneurs seek to create a business that will generate profits
for themselves. They search for opportunities where they may be
able to offer consumers a product or service that is either priced
lower or of better quality than what is offered by existing firms.
In this way, they may be able to satisfy customers and generate
revenue. They also hope to produce the product at a relatively
low cost so that their revenue exceeds their cost, resulting in
profits.
 Entrepreneurship is the process of identifying opportunities for
which marketable needs exist and assuming the risk of creating an
organization to satisfy them.
 Entrepreneur: An entrepreneur is an individual who creates a
new business, bearing most of the risks and enjoying most of the
rewards. The entrepreneur is commonly seen as an innovator, a
source of new ideas, goods, services, and business/or procedures.
 Entrepreneurship
 Characteristics of Entrepreneurship.
 Innovation: Entrepreneurship generally means offering a new
product, applying a new technique or technology, opening a new
market, or developing a new form of organization for the purpose of
producing or enhancing a product.
 Creation of business: Entrepreneurship means setting up business
to make a profit by combining resources to produce products.
 Risk taking: The term risk means that the outcome of the
entrepreneurial venture can’t be known. Entrepreneurs are always
working under certain degree of uncertainty, and they can’t know
the outcomes of many of the decisions that they have to make.
Consequently, many of the steps they take are motivated mainly by
their confidence in the innovation and in their understanding of the
business environment in which they’re operating.
 Pros & Cons of Being an Entrepreneur
 People are not born entrepreneurs. They choose to be
entrepreneurs, rather than working as employees for a business.
Some of the important advantages of being an entrepreneur are:
 Profits: As an entrepreneur, you may possibly earn large profits
on your business, and therefore earn a much higher income than if
you worked for another business.
 Control: You can be your own boss and run the business the way
that you want. Because you are in control, you do not need to
fear being mistreated by a boss or being fired.
 Freedom: an entrepreneur has complete freedom to do his own
thing. No more bosses to report to, or managers peering over your
shoulder – now you’ve gone from the bottom all the way to the
top. You are the boss.
 Flexibility: Many people are excited to work for themselves b/c it
means they can work when they want and where they want.
 Pros & Cons of Being an Entrepreneur
 Disadvantages of being an entrepreneur:
 Risk: You may possibly incur large losses and could even lose
your entire investment in the business. Though, as the owner of a
business, you will not be fired, you could still lose your source of
income if the business fails.
 Responsibility: Though you may be in control of the business, you
have to ensure that the business functions properly. Being in
control does not necessarily mean that you can skip work whenever
you desire; the income you earn is tied to how well the business is
managed on a daily basis.
 Workload: Entrepreneurs also face the challenge of feeling alone
and insecure about making the right decisions. They work long
hours, especially during start-up. They also face uncertain income
levels.
Characteristics of an Entrepreneur
 Characteristics of an Entrepreneur
 Creative: Entrepreneurship starts with an idea. To be successful,
you need to always be thinking of new ideas and better ways of
doing things.
 Passionate: passion is essential to any business owner or working
professional's success. Without passion, there is no reason for
your work and no drive to do it.
 Entrepreneurs love what they do and are extremely dedicated to
the businesses they create. To be successful, you must be
confident in yourself and your business, and you must be
proactive with what you do and how you do it.
 Motivated: Entrepreneurs are their own boss, which means
there's no one telling them to do things. You must be in charge of
your own time and how you spend it.
 Characteristics of an Entrepreneur
 High need for achievement: A strong need for achievement
helps entrepreneurs enjoy the challenge of reaching difficult
goals and promotes dedication to personal success.
 Strong belief that you can control your own destiny: You
control your schedule, You control your schedule, how hard you
work, your stress level, whom you work with, what happens
when you retire
 Hard Work: The entrepreneur will often be the first person to
arrive at the office and the last one to leave. Entrepreneurs have
the ability to work shoulder to shoulder with other people.
 Optimistic: Do you see the glass half empty or half full? For
entrepreneurs, it's always half full. Entrepreneurs always look
on the bright side and are constant dreamers. They look at how
they can do things better and make the world a better place.
 Characteristics of an Entrepreneur
 Determination: Entrepreneurs are not frustrated by their
defeats. They look at defeat as an opportunity for success. They
are determined to make all of their endeavors succeed, so will
try and try again until it does. Successful entrepreneurs do not
believe that something cannot be done.
 Self-Confident: The entrepreneur does not ask questions about
whether they can succeed or whether they are worthy of
success. They understand the challenges of starting and
operating a business and are decisive and confident in their
ability to solve problems.
 Flexible: Entrepreneurs are willing to change as needed and are
ready to adopt changes in processes and product. They are
Flexible in thinking and this makes them able to find unique
and effective solutions to issues.
 Characteristics of an Entrepreneur
 Future-oriented: Because entrepreneurs are focused on moving
forward, they are always looking toward the future.
Entrepreneurs are very goal-oriented and know exactly what
they want. They set their goals and everything they do is aimed
at achieving those goals.
 Persuasive: If you're a people person and know how to get
people to listen to you, you could be a successful entrepreneur.
Being a good entrepreneur means being able to effectively
convince an investor that you have a great idea, persuade
partners that your approach is right, and convince potential
customers that the solution is right for them.
 High Energy Level: It is important for an entrepreneur to have
a high energy level because Starting and operating a business
takes long hours.
 Characteristics of an Entrepreneur
 Resourceful: Entrepreneurs also know how to make the most of
what they have. Time, money and effort are never used
haphazardly. Everything has a plan and a purpose.
 Decisive: Entrepreneurs know what needs to be done and don't
hesitate to make the decisions that will lead them to success. They
don't let opportunities pass them by; instead, they seize the day
and get the job done
 Starting a New Business
Developing the Business Plan
 Assessing Market Conditions
 Before creating a new business for a particular market, the
following conditions in that market should be considered:
 Demand: Every product has its own market, where consumers
who purchase the product and businesses that sell the product.
The demand for products is influenced by general economic
conditions and also influenced by conditions within the specific
market of concern. The demand within a particular market
changes over time. When it increases, businesses within that
market get benefit and a decline in demand has adverse effects.
 Competition: Each business has a market share, which
represents its sales volume as a percentage of the total sales in a
specific market. When competition in a particular market
increases, it can reduce each firm’s market share, thereby
reducing the quantity of units sold by each firm in the market.
 Assessing Market Conditions
 Labor conditions: Some markets have specific labor
characteristics. The cost of labor is much higher in industries
such as health care that require specialized skills. Unions may
also affect the cost of labor. Understanding the labor
environment within an industry can help an entrepreneur
estimate labor expenses and decide whether a new business
could produce products at lower costs than existing firms.
 Regulatory conditions: The federal government may enforce
environmental rules or may prevent a firm from operating in
particular locations or from engaging in particular types of
business. Examples: environmental regulations, regulations
governing the Internet and e-commerce.
 Developing the Business Plan
 Business Plan, which is a detailed description of the proposed
business, including a description of the product or service, the
resources needed for production, the marketing needed to sell
the product or service, and
the financing required.
The business plan forces
the entrepreneurs to think
through the details of how
they would run the
business.
The plan should be clear
and Must convince others
that the business will
be profitable.
 Benefits of a Business Plan
 The bigger picture: When you plan your business right, you can
get a clearer picture of the business. You can connect the dots
between strategy and tactics & everything is easier to work out.
 Strategic focus: As a startup, you need to create an identity and
focus on building that identity. It is usually defined by your target
market, and the products you are tailoring to match their needs.
 Set priorities: It’s impossible to do everything at once in a
business. When you plan your business, you can order things in
terms of their importance and allocate your effort, resources and
time in an efficient and strategic manner.
 Manage change: When you plan your business effectively, you can
check your assumptions, track your progress and see new
developments right from the beginning, allowing you to adjust
accordingly.
 Developing the Business Plan
 A complete business plan normally includes an assessment of the
business environment, a management plan, a marketing plan, and a
financial plan,
 Assessment of the Business Environment: The business
environment surrounding the business includes the economic
environment, the industry environment, and the global
environment.
 Economic Environment: The economic environment is assessed
to determine how demand for the product may change in response
to future economic conditions. The demand for a product can be
highly sensitive to the strength of the economy.
 Industry Environment: It is assessed to determine the degree of
competition. If a market for a specific product is served by one or
a few firms, a new firm may be able to capture a significant portion
of the market.
 Developing the Business Plan
 Global Environment: The global environment is assessed to
determine how the demand for the product may change in
response to future global conditions.
 The global demand for a product can be highly sensitive to
changes in foreign economies, the number of foreign
competitors, exchange rates, and international trade regulations.
 Management Plan: A management plan, which includes an
operations plan, focuses on the firm’s proposed organizational
structure, production, and human resources.
 Organizational Structure: It identifies the roles and
responsibilities of the employees hired by the firm.
 Production: Various decisions must be made about the
production process, such as the site of the production facilities
and the design and layout of the facilities.
 Developing the Business Plan
 The business plan should also include the owners’ plans for the
business’s future growth.
 Those businesses that require a large investment in facilities to
produce their product can survive only if they attract substantial
demand for their product. In this type of business, there are
economies of scale, which means that the average cost per unit
produced declines as the firm produces more units.
 Human Resources: Many businesses begin with just a single
owner who works without any employees. As it grows, it tends to
hire more employees. Managers of a business are supposed to
ensure that employees are doing their job. A business must set up a
work environment that will motivate the employees. It must also
have a plan for monitoring and evaluating employees. By doing so
properly, the business can ensure that the employees are striving to
maximize its performance.
 Developing the Business Plan
 Marketing Plan: A marketing plan focuses on the target market,
product characteristics, pricing, distribution, and promotion.
 Target Market : A new business may be unknown to its target
market and will need to gain the trust of customers. New
businesses rely on various marketing strategies to attract
customers, such as advertising, offering a special discount, or
even providing free samples to the customers. Remember your
customers are your best sales brochure.
 Product Characteristics: The business plan should describe the
characteristics of the product, with an emphasis on what makes
the product more desirable than similar products offered by
competitors.
 Pricing: The proposed price of the product should be included.
The price will influence the demand for the product.
 Developing the Business Plan
 Distribution: The business plan should describe the means by
which the product will be distributed to the customers.
 Promotion: The business plan should also describe the means
by which the product will be promoted.
 Financial Plan: The financial plan determines the means by
which the business is financed. It also attempts to demonstrate
that the creation of the business is feasible.
 Financing: The creation of a business requires funds to
purchase machinery and materials, rent space, hire employees,
and conduct marketing. Most firms rely heavily on funding
from the entrepreneurs who established them. Creditors
typically prefer that a business demonstrate that it is capable of
covering its loan payments before they will provide a loan.