Entrepreneurship:

Entrepreneur is a loanword from French. First used in 1723, today the

term entrepreneur implies qualities of leadership, initiative, and innovation in new venture
design. Economist Robert Reich has called team-building, leadership, and management
ability essential qualities for the entrepreneur. 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, and the people who do so are called 'entrepreneurs'. It has been defined as the
"...capacity and willingness to develop, organize, and manage a business venture along with
any of its risks in order to make a profit." While definitions of entrepreneurship typically
focus on the launching and running of businesses, due to the high risks involved in launching
a start-up, a significant proportion of businesses have to close, due to a "...lack of funding,
bad business decisions, an economic crisis -- or a combination of all of these" or due to lack
of market demand. The entrepreneur is commonly seen as a business leader and innovator of
new ideas and business processes." Entrepreneurs tend to be good at perceiving new business
opportunities and they often exhibit positive biases in their perception (i.e., a bias towards
finding new possibilities and seeing unmet market needs) and a pro-risk-taking attitude that
makes them more likely to exploit the opportunity.

An entrepreneur is typically in control of a commercial undertaking, directing the factors of

productionthe human, financial and material resourcesthat are required to exploit a
business opportunity. They act as the manager and oversee the launch and growth of an
enterprise. Entrepreneurship is the process by which an individual (or team) identifies a
business opportunity and acquires and deploys the necessary resources required for its
exploitation. The exploitation of entrepreneurial opportunities may include actions such as
developing a business plan, hiring the human resources ( workforce of an organization),
acquiring financial and material resources, providing leadership, and being responsible for
the venture's success or failure. Economist Joseph Schumpeter (18831950) stated that the
role of the entrepreneur in the economy is "creative destruction" (industrial revolution which
destroy the old one and create a new one) launching innovations that simultaneously destroy
old industries while ushering in new industries and approaches. For Schumpeter, the changes
and "dynamic disequilibrium brought on by the innovating entrepreneur ... [are] the norm of
a healthy economy."
"Entrepreneurial spirit is characterized by innovation and risk-taking." While
entrepreneurship is often associated with new, small, for-profit start-ups, entrepreneurial
behaviour can be seen in small-, medium- and large-sized firms, new and established firms
and in for-profit and not-for-profit organizations, including voluntary sector
groups, charitable organizations and government. For example, in the 2000s, the field
of social entrepreneurship has been identified, in which entrepreneurs combine business
activities with humanitarian, environmental or community goals.

Relationship between small business and entrepreneurship:

The term "entrepreneur" is often conflated with the term "small business" or used
interchangeably with this term. While most entrepreneurial ventures start out as a small
business, not all small businesses are entrepreneurial in the strict sense of the term. Many
small businesses are sole proprietor operations consisting solely of the owner, or they have a
small number of employees, and many of these small businesses offer an existing product,
process or service, and they do not aim at growth. In contrast, entrepreneurial ventures offer
an innovative product, process or service, and the entrepreneur typically aims to scale up the
company by adding employees, seeking international sales, and so on, a process which is
financed by venture capital and angel investments. Successful entrepreneurs have the ability
to lead a business in a positive direction by proper planning, to adapt to changing
environments and understand their own strengths and weakness.

Ethnic entrepreneurship:

The term ethnic entrepreneurship refers to self-employed, business owners who belong to
racial or ethnic minority groups in the United States and Europe.

Institutional entrepreneur:

Feminist entrepreneur:

A feminist entrepreneur is an individual who applies feminist values and approaches through
entrepreneurship, with the goal of improving the quality of life and wellbeing of girls and
women. Many are doing so by creating for women, by women enterprises.

. Feminism is a range of political movements, ideologies, and social movements that share a
common goal: to define, establish, and achieve political, economic, personal, and
social rights for women. This includes seeking to establish equal opportunities for women in
education and employment.
Entrepreneurial behaviour:

The entrepreneur is commonly seen as an innovator a designer of new ideas and business
processes. Management skill and strong team building abilities are often perceived as
essential leadership attributes for successful entrepreneurs.

Uncertainty Perception and Risk-taking

Theorists Frank Knight and Peter Drucker defined entrepreneurship in terms of risk-taking.
The entrepreneur is willing to put his or her career and financial security on the line and take
risks in the name of an idea, spending time as well as capital on an uncertain venture.
However, entrepreneurs often do not believe that they have taken an enormous amount of
risks, because they do not perceive the level of uncertainty to be as high as other people do.
Knight classified three types of uncertainty:

Risk, which is measurable statistically (such as the probability of drawing a red colour
ball from a jar containing 5 red balls and 5 white balls)
Ambiguity, which is hard to measure statistically (such as the probability of drawing a
red ball from a jar containing 5 red balls but an unknown number of white balls)
True uncertainty or Knightian uncertainty, which is impossible to estimate or predict
statistically (such as the probability of drawing a red ball from a jar whose contents are
entirely unknown)

Entrepreneurship is often associated with true uncertainty, particularly when it involves the
creation of a novel good or service, for a market that did not previously exist, rather than
when a venture creates an incremental improvement to an existing product or service.

Strategies that entrepreneurs may use include:

Innovation of new products, services or processes

Continuous process improvement (CPI)
Exploration
Use of technology
Use of business intelligence
Development of future products and services
Optimized talent management
Behavioural charcteristics of entrepreneurs

drive and energy

self-confidence
high initiative and personal responsibility
internal locus of control
tolerance of ambiguity
low fear of failure
moderate risk taking
long-term involvement
money as a measure not merely an end
use of feedback
continuous pragmatic problem solving
use of resources
self-imposed standards
Clear goal setting.
Entrepreneurship and management:
 The Practice of Entrepreneurship:

Entrepreneurial Process:

1. Discovery: An entrepreneurial process begins with the idea generation, wherein the
entrepreneur identifies and evaluates the business opportunities. The identification and the
evaluation of opportunities is a difficult task; an entrepreneur seeks inputs from all the
persons including employees, consumers, channel partners, technical people, etc. to reach to
an optimum business opportunity. Once the opportunity has been decided upon, the next step
is to evaluate it.

An entrepreneur can evaluate the efficiency of an opportunity by continuously asking certain

questions to himself, such as, whether the opportunity is worth investing in, is it sufficiently
attractive, are the proposed solutions feasible, is there any competitive advantage, what are
the risk associated with it. Above all, an entrepreneur must analyse his personal skills and
hobbies, whether these coincides with the entrepreneurial goals or not.

2. Developing a Business Plan: Once the opportunity is identified, an entrepreneur needs to

create a comprehensive business plan. A business plan is critical to the success of any new
 venture since it acts as a benchmark and the evaluation criteria to see if the organization is
moving towards its set goals.

An entrepreneur must dedicate his sufficient time towards its creation, the major components
of a business plan are mission and vision statement, goals and objectives, capital requirement,
a description of products and services, etc.

3. Resourcing: The third step in the entrepreneurial process is resourcing, wherein the
entrepreneur identifies the sources from where the finance and the human resource can be
arranged. Here, the entrepreneur finds the investors for its new venture and the personnel to
carry out the business activities.
4. Managing the company: Once the funds are raised and the employees are hired, the next
step is to initiate the business operations to achieve the set goals. First of all, an entrepreneur
must decide the management structure or the hierarchy that is required to solve the
operational problems when they arise.
5. Harvesting: The final step in the entrepreneurial process is harvesting wherein, an
entrepreneur decides on the future prospects of the business, i.e. its growth and development.
Here, the actual growth is compared against the planned growth and then the decision
regarding the stability or the expansion of business operations is undertaken accordingly, by
an entrepreneur. The entrepreneurial process is to be followed, again and again, whenever
any new venture is taken up by an entrepreneur, therefore, its an ever ending process.
 Entrepreneurship and innovation
The innovation concepts:
Types of Innovation
The different forms of innovation can be classified in several ways.
Product innovation:
It consists of changes in product attributes with a change in how the product is noticed by
consumers.
Example: car with automatic transmission compared to conventional one.
Process innovation:
It consists of changes regarding the product or the service production process. It does not
necessarily have an impact on the final product but produces benefits in the production
process, generally increasing the productivity and reducing costs.
Example: automobile produced by robots compared to that produced by human workers.
Innovation of business model:
It consists of changes in the business model which means the way the product or the service
is offered to the market. It does not necessarily imply changes in the product or even in the
production process but in the way as it is brought to the market.
Example: the consumer rents a car paying a monthly fee to use the vehicle, including
insurance, maintenance and replacement by newer model every year, compared to the
traditional business model where the vehicle is sold.
Innovation Impact:
Incremental Innovation:
It reflects small continuous improvements in products or product lines. It generally represents
small improvements in benefits noticed by the consumer and it does not change significantly
the business model or the way the product is consumed.
Example: the evolution of common CD to double CD, capable of storing twice as many
tracks.
The Importance of Innovation in Entrepreneurship:
Innovation is important in entrepreneurship. In the highly competitive world that we live in,
innovative ideas are what will separate you from the rest. Your goal is not to build just an
average startup, right? In order to create an outstanding product, strong brand and to build
your customer network, you need to innovate. Innovation doesnt always mean to create
something new: innovators often take something that already exists, improve it, change it,
make it better and make it the best for their customers. Innovative ides are what will make a
startup competitive.
Being innovative doesnt happen overnight: it requires time and effort to create something
truly innovative that will make difference. Innovation and creativity walk hand in hand when
we talk about entrepreneurship. Here you can find seven great ways to look at innovation in
order to understand its importance in entrepreneurship, education, ideas execution,
knowledge and more.
Sources of innovative opportunities:
The Unexpected:
The market place is the number one area to look for opportunities. A good manager should be
constantly studying the market. Is a particular product or service in greater or lesser demand
than anticipated? Why? Is there a way we can exploit this unexpected success? What has to
happen if we want to convert this success into an opportunity? The whole market could
change dramatically by peoples unexpected decisions.
The Incongruity:
There is a discrepancy between what is and what should be. This is a key to developing
wildly successful businesses but its tricky. Facebook is a company that nailed it. Prior to the
social networks prolific rise Myspace was the dominant player, but it had its downfalls.
Facebook wisely noted what Myspace was vs. what should be and built that platform. The
end result? A company that just had an IPO versus. one that has fallen off considerably.
One of the best places to look for incongruity is in your own customers. Their complaints and
unmet wants are all the hints you need.
Steve Jobs comes to mind and all of his inventions. A good example of this would be how
Steve Jobs and apple created the Iphone it was one of a kind at the time, no one else
combined both music and a cell phone in one.
Process Need:
Process need involves identifying your companys process weak spots and correcting or
redesigning them. This is a task oriented solution meaning that the source of innovation
comes from within your existing capabilities and ways of doing business not the market.
An example might be a restaurant that identifies that people wait too long for their entrees
and so decides to hire another chef to speed up creation times.
Essentially your company will want to look for all weak links and eliminate them.
Industry and Market Structure Change:
Your industry and the market are in continual flux. Regulations change and some product
lines expand while others shrink. Firms should continually be on the watch for this.
Demographics:
We constantly see changes occur in populations, income levels, human capital (education)
and age ranges. Smart firms are constantly paying attention to this.
When it comes to the baby boomers (Baby boomers are the demographic group born during
the postWorld War II baby boom, approximately between the years 1946 and 1964. This
includes people who are between 53 and 71 years old in 2017, according to the U.S. Census
Bureau.) businesses have been following them constantly as they got older. At present they
are one of the largest as well as the most affluent demographic groups with high levels of
disposable income.
Combining demographic data with segmentation and targeting is a powerful method of
accurately meeting a target markets desires.
Changes in Perception, Meaning, and Mood:
Over time populations and people change. The way they view life changes, where they take
their meaning from, and how they feel about things also is modified over time and smart
companies must pay attention to this in order to capitalize (and avoid becoming forgotten, a
relic of ages past).
Here are two really good examples. First is a principle called downaging which refers to
people who look at 50 as being 40. Industries have responded to this, most notably in the
cosmetic and personal care industry which provides plenty of solutions to help these people
look younger. Full industries are creeping up that make people feel younger. Have you
spotted any lately?
New Knowledge:
As the speed of technological revolution increases there will be an ever increasing number of
opportunities that open up. The internet has been the most notable one in the last couple
decades but there have been a plethora of other industries and opportunities pop up as a result
of this technological revolution.
New knowledge is about more than just technology though, its about finding better ways of
doing things and improving processes. Your company should look to this new knowledge for
ways it can improve incrementally.
Intel does this constantly and its a major part of why theyre the leading processor
manufacturer today. Constantly paying attention to the latest in both academic research as
well as investing heavily in their own R&D, the company has managed to find continual
sources of innovation, driving its success.
The innovation process:
1. Idea Generation and Mobilization
New ideas are created during idea generation. Mobilization occurs when the idea is moved to
a different physical or logical location, such as an outside firm or another department.
Inspiration for a new idea can originate from an improvement of an existing idea, or
something from scratch. The Atlantic explains how Apple waited three years after MP3
players were introduced to create the iPod, which was attractive, intuitive and offered
capacity for up to 1,000 songs.
2. Advocacy and Screening
Not all ideas are worth implementing. Advocacy and screening help evaluate an idea and
measure its potential benefits and problems. From there, a decision can be made about an
ideas future.
One of the biggest advantages for the joint processes of advocacy and screening is
refinement. If the idea has potential, discussions and arguments help enhance it. The study
in Innovation: Management, Policy & Practice mentions how this stage prepares an idea for
upper management, which can call for a different approach. Because idea generators dont
always have the skills to advocate for their ideas, managers working with the idea generator
can facilitate, encourage and support the person.
Companies looking to build a robust culture can establish a few best practices for this step.
First, employees should have plenty of avenues to receive advocacy and feedback. Second,
organizations must understand the difficulties involved with evaluating truly innovative
ideas. Third, organizations need to build transparent evaluation and screening protocols.
3. Experimentation
The experimentation stage tests an idea, such as with a prototype or pilot test. Researchers
in Innovation: Management, Policy & Practice carefully note that Experimentation does not
test an ideas objective merits, but the suitability for a particular organization at a particular
time. Some ideas might be ahead of their time or beyond the present capacity of the
company [they] may be set aside into an idea bank or idea library for development at a
later time.
Experimentation can remain continuous or exist in spurts, as advocates and screeners
reevaluate an idea. Sometimes, experimentation leads to new ideas due to information that is
gathered on the results and the overall feasibility of the original idea. Time is crucial in this
process; individuals must be given adequate time to run the experiments. As refinements and
evaluations occur, they must be given enough time to reflect on the experiments.
Many businesses experiment with new products and services, such as grocery stores. One
innovation came in 2007, when Amazon tested its grocery delivery service in certain Seattle
suburbs. After this successful experiment, Amazon Fresh expanded to Los Angeles, San
Diego and New York City; New Jersey and the United Kingdom are the latest locations
Amazon has targeted.
4. Commercialization
Commercialization aims to create market value for an idea by focusing on its potential
impact. This step makes the idea appealing to the audience, such as by packaging an idea
with other ideas, clarifying how and when the idea can be used, and using data or prototypes
from experiments to demonstrate benefits.
An important part of commercialization is establishing the specifications of any given idea.
The promises and potentials of the earlier stages of innovation must be discarded so that the
actual benefits of the new innovation can be perceived and communicated, researchers wrote
in Innovation: Management, Policy & Practice. Once an idea is refined, it can appropriately
target and meet the needs of the audience.
5. Diffusion and Implementation
Diffusion is one of the processes that allows this to happen. Diffusion and implementation
are two sides of the same coin, researchers wrote in Innovation: Management, Policy &
Practice. Diffusion is the companywide acceptance of an innovative idea, and
implementation sets up everything needed to develop and utilize or produce the innovation.
The use or application of the innovation should be demonstrated by the end of this stage,
along with acceptance of the innovation. For the innovation to succeed, it will need the
proper resources, a marketing plan for customers and an open culture with strong advocacy.
Also important to diffusion and implementation is the opportunity for future ideas; this final
stage allows the organization to determine the next set of needs for customers. Receiving
feedback, in addition to indicators for success metrics and other benchmarks, enables the
organization to stimulate the innovation process once again.
Risks involved in innovation:
1. Returns. 2. Financial resources. 3. Commercial - eg failing to attract enough customers
4. financial - eg investing in unsuccessful innovation projects
Developing Entrepreneur:
Entrepreneurial Profile: (Outline of yourself)
The decision to become an entrepreneur is a significant choice that people make and it is a
decision that determines innovation, competition and job creation at the social and industrial
level. An entrepreneur must have following characteristics:
Confident, Delegator (A person authorized to act as representative for another).,
Knowledgeable, Risk taker.
Trait approach to understanding entrepreneurship:
Individuals called entrepreneur possess certain specific traits or characteristics which
made them capable of generating new ideas and creating new ventures.
Creative and innovative skills
Propensity (V natural tendency to behave in a particular way) to take risk
Efficient and effective worker
Achiever (with strong desire to achieve)
Like to influence and control the outcome of events
Have strong desire to turnout best product and render superior services
Persistence in problem solving
Dealing positively with failure
Factors influencing Entrepreneurship:
Entrepreneurs encounter challenges as they establish themselves in the business world. There
are factors that can positively or negatively affect their work.
Opportunity:
There will be time when opportunities seem to magically appear for you.
Funding:
If you don't have sufficient capital saved yourself, you must depend on loans, grants or
investors. Funding is a key factor determining whether you are able to dedicate yourself full
time to your personal venture or if you will need to work for someone else for the present.
Knowledge:
Knowing what you are doing and how to get it done greatly influences whether or not you
can succeed as an entrepreneur. You cannot jump into full entrepreneurship without doing
your homework. Next, study the feasibility of starting a business in your particular field.
Look at information regarding competition, start-up costs, availability of locations and, most
importantly, whether your business is needed or desired in your area. Once you have
determined the feasibility of your project, learn as much as possible about the field itself.
Persistence:
Persistence is the only way to maintain entrepreneurship. Determine not to quit despite the
obstacles you encounter and your stumbles during your self-employed journey. Persistence
separates visionaries who fail from those who stay in business.
Risk Tolerance:
Rewards rarely come without risk. Your ability to take advantage of an opportunity will
depend, in part, on your tolerance for risk. As the founder of a start-up, investors will expect
you to have a vested interest in your business.
Responsiveness:
Opportunity can leave quickly. With the Internet, the spread of information and ideas has led
to deeper, faster competition to be the first mover. The ability to respond to the market and
new business opportunities can be the difference between a successful entrepreneur and a
failed business model.
Rights:
If you do not protect your ideas, they may be copied -- cheaply. Once an idea is in the public
domain, it may no longer be possible to use that idea as a competitive advantage. Society
values ideas being shared.
Market:
The role and importance of market and marketing is very important for the growth of
entrepreneurship. In modern competitive world no entrepreneur can think of surviving in the
absence of latest knowledge about market and various marketing techniques.
The Environment:
The surroundings or conditions in which a person lives or operates must be favourable.
(PU Fight, Students cant study properly).
Socio cultural factors:
Sociocultural factors are customs, lifestyles and values that characterize a society. Some
examples are religion, attitudes, economic status, class, language, politics and law, gender,
age, ethnicity, culture. These factors can affect quality of life, business and health.
Support System:
Entrepreneurs need strong support and advisory system in order to turn their startup ideas into
valuable businesses. Supporting entrepreneurship is essential for the development and
improvement of our lives.
Entrepreneurship Organization:
Group of business owners who meet on regular basis to share information, experiences and
tools for improving business. Entrepreneurs' Organization (EO) is a global non-profit
organization, whose stated mission is to "Engage leading entrepreneurs to learn and grow."
EO was formerly known as Young Entrepreneurs' Organization (YEO). The organization was
founded in 1987.
History: In 1987, 22 young entrepreneurs created an organization whose goal was stated to
be "to provide learning and networking opportunities for its members". The Young
Entrepreneurs' Organization (YEO) expanded throughout the United States and Canada.
Within a few years, membership grew to include chapters in Latin America, Europe, the
Middle East, Africa, and Asia. In 1996, YEO helped create the World Entrepreneurs
Organization (WEO), which served as an alumni organization for YEO members who, after
the age of 40, wanted to continue their involvement in an entrepreneurial membership
organization. In 2005, YEO and WEO merged to form the Entrepreneurs Organization (EO)
as it is known today.
Founding members: Verne Harnish is the founder of the Young Entrepreneurs
Organization and recruited 22 entrepreneurs as founding board members to initially fund the
start-up of the organization. Kevin Harrigton, of Shark Tank fame, was one of the founding
board members, in addition to Alfred F. Gerriets, II. recognized 30 years ago as an aspiring
entrepreneur in the book "The Dynamos" who still thinks outside the box. The Global
Student Entrepreneur Awards (GSEA) is an awards program for high school, undergraduate,
and graduate students who own and operate a business.
Team Work:
The process of working collaboratively with a group of people in order to achieve a goal. The
combined action of a group, especially when effective and efficient.
Networking Organization:
These organizations offer different types of resources to start or improve entrepreneurial
projects. The goal of most entrepreneurial networks is to bring together a broad selection of
professionals and resources that complement each other's actions. Initially, a priority is to aid
successful business launches. Subsequently, to provide motivation, direction and increase
access to opportunities and other skill sets. Promotion of each member's talents and services
both within the network and out in the broader market increases opportunities for all
participants.
Compensation and Employee Motivation:
Some employees are motivated by money. In fact, most are motivated by money; at least for
their basic needs. Employee motivation through compensation can come in the form of raises,
performance bonuses, commissions, profit sharing, or any number of "extra benefits" like,
automobiles, vacations, or other tangible items purchased and used as rewards.
Value System:
The value system of a group of people is the set of beliefs and attitudes that they all share.
The set of values according to which people in a society or organization regulate their
behaviour.
Entrepreneurship and SMES:
Defining SMEs: Small and medium-sized enterprises (SMEs, also small and medium
enterprises) or small and medium-sized businesses (SMBs) are defined by State Bank
of Pakistan. A small Enterprise (SE) is a business entity which does not employ (including
contract employees) more than 50 persons and annual sales turnover is up to Rs.150 million.
In SME the employment size is up to 250 and paid up capital is up to 25 million and annual
sale is up to 250 million. The abbreviation "SME" is used in the European Union and by
international organizations such as the World Bank, the United Nations and the World Trade
Organization (WTO).
Small and Medium Enterprises Development Authority SMEDA: Premier institution of
the Government of Pakistan under Ministry of Industries & Production. SMEDA was
established in October 1998 to take on the challenge of developing Small & Medium
Enterprises (SMEs) in Pakistan. With a futuristic approach and professional management
structure it has focus on providing an enabling environment and business development
services to small and medium enterprises. SMEDA is not only an SME policy-advisory body
for the government of Pakistan but also facilitates other stakeholders in addressing their SME
development agendas
Assignment: a) SMEDA objectives, vision and mission statement, services provided by
SMEDA, Projects, regional profiles. b) How SME is defined around the world (Africa, Asia,
European Union, North America and Oceania).
Small and medium-sized enterprises (SMEs) are the backbone of an economy. They represent
99% of all businesses in the EU. In the past five years, they have created around 85% of new
jobs and provided two-thirds of the total private sector employment in the EU. The European
Commission considers SMEs and entrepreneurship as key to ensuring economic growth,
innovation, job creation, and social integration in the EU.
What SMEDA do for SMEs:
Creates a business friendly environment: It provide a comprehensive SME policy in
Pakistan. It promotes the 'Think Small First' principle and promotes entrepreneurial spirit
among citizens.
Promotes entrepreneurship: The Commission promotes entrepreneurship through
the Entrepreneurship Action Plan, supports entrepreneurship education, and provides support
tools for aspiring entrepreneurs.
Improves access to new markets and internationalisation: The Commissions priority is to
ensure that enterprises can rely on a business friendly environment and make the most out of
cross border activities, both within the country and outside the country.
Facilitates access to finance: Access to finance is the most pressing issue for many small
enterprises. The Commission works on improving the financing environment for SMEs and
provides information on funding.
Supports SME Competitiveness and Innovation:
Promoting competitiveness and innovation are key aspects of SMEDA policy in relation to
industry and enterprise, in particular for SMEs.
Provides key support networks and information for SMEs: 1.It provides entrepreneurs
with information and interactive services that help them expand their business abroad 2. It
helps SMEs and entrepreneurs access market information, overcome legal obstacles, and find
potential business partners. 3. It provides information on foreign markets and helps to
internationalise their activities.
Scope of SMEs:
SME Sector in Pakistan: 1. 3.2 million business units in Pakistan 2. Over 99% business
units employ less than 99 persons i.e. 3.16 million SMEs 3. Generate 78% of non-agri sector
employment 4. Direct Contribution to GDP over 30% 5.Generate 25% of Manufacturing
Export Earnings
The assessment of the role of SMEs in Pakistan is of vital importance. Sometimes we have
shinny figures and data regarding economy like GDP growth or per capita income but these
can be misleading because the earners of these massive growth are not masses but the
capitalists in the country. SME produces the income stream for masses located in the
countryside and the capitalists associated with this activity that is generally medium or small
as the name suggests. The vital question is not what SMEs have produced? But, what they
are capable to produce? The simple answer is if they produce on their full potential and
capacity Pakistan would be way ahead on economic racetrack of the world. They can produce
billion of dollars worth items that is why SMEDA is quite right in stating its mission as
Turning potential into profits. Turning potential into profits gives us a truer and fair picture
of the role of SMEs in Pakistan. Now we will see what potential we have and the threats
associated with it and how we can turn potential into profits by overcoming existing threats.
SMEs will be the main source of poverty reduction in Pakistan that will create the value and
innovation for the country in the days to come. The thing that really needs serious attention is
to remove the unnecessary bureaucratic procedures. It is essential to make it possible that the
opportunities for small entrepreneurs should not be wasted through excess processing of
finance applications or other official terms. Assistance to SMEs is not enough; the
government and specialized financial and technical institutions should stand as partners of
small and medium entrepreneurs, this is the only way that the financial institution can recover
their funds with yield. Government could achieve its goal for poverty reduction, economic
progress and above all the value creation process by promoting the culture of SMEs. This is
the only way that can make sure the poor masses of Pakistan shall not live poor anymore.
Managers of SME:
Financial and marketing problems of SMEs:

Entrepreneurial marketing:
Entrepreneurial marketing is the unique set of marketing practices and methods used
by entrepreneurs, start-ups, and small businesses to market and build sustainable businesses.
It is only recently that entrepreneurship has been studied as its own distinct category of
business. The amazing success of once small companies like Microsoft, Virgin, and Dell has
revealed that entrepreneurship is its own class of business with many unique challenges and
opportunities. As the field has received more and more focus, specific strategies for
successful entrepreneurship have begun to emerge.
The primary challenge facing the entrepreneur is competing against larger, better known, and
more resourceful companies. How can a start up with a small staff, limited budget, and
miniscule customer base hope to compete against the giants in their industry? They do this by
turning their weaknesses into their strengths. By their very nature, start-up companies can be
more flexible and unorthodox than their major competitors.
Many entrepreneurial marketing strategies are born out of necessity. New businesses might
have 10, five, or just one person working on their marketing efforts. They work within
limited budgets and have access to a fraction of the resources that their major competitors
have. Luxuries like graphic design teams and advertising consultants are often outside the
means of start-ups, requiring them to find ways to make the maximum impact with limited
resources.
The most common features of entrepreneurial marketing include innovation, risk taking, and
being proactive. Entrepreneurial marketing campaigns try to highlight the company's greatest
strengths while emphasizing their value to the customer. Focusing on innovative products or
exemplary customer service is a way to stand out from competitors. They make this pitch
using cheap and accessible tools including viral videos, Tweets, Facebook pages, and email
marketing. Any and all marketing strategies can be considered as long as they produce
results.
Dell computer Case Study:
In 1984, a college student named Michael Dell decided to found a computer company. Today
it is one of the largest and best known computer companies in the world. Below are some of
the steps that Dell took in its earliest stages to get noticed in the computer market.
Define your customers Dell realized early that there was a hole in the market for
customized business computers. Their first products were marketed to large and midsized
companies looking to purchase many computers at once. It was only in the late 90s that they
began to focus on personal computers for students and families.
Offer something new In the early 80s, computers were bought and sold primarily through
retail stores. Dell took the then radical step of selling directly to consumers, cutting out the
retail middle man. This made it easy for business customers to place large orders and to
customize each computer they purchased.
Go to where the customers are Dell marketed at electronics trade shows, in trade
magazines, and in other avenues that corporate technology officers would follow. Advertising
messages highlighted the ways that Dell computers were optimized for business customers.
Offer exceptional services Dell offered 24 hour technical support to all of its customers.
This was a valuable service to customers who were only beginning to integrate computers
into their businesses.
How an entrepreneurial marketing plan is is developed:
Marketing plans can only develop after a company determines several aspects about their
business model. They must understand the core mission of the company, which customers
they will target, and who their competitors are. Making a careful self-analysis can help
emerging businesses define their place in the market and set realistic goals. The type of
business a start-up strives to be will also affect its marketing decisions. If a company decides
that it will market to professional business customers, it probably wont use funny viral
videos on Youtube.
The details of the plan will depend largely on the particular marketing strategy that a
company chooses. The strategies of relationship marketing are significantly different than
viral marketing (See also Relationship Marketing). It is important to define which type of
marketing to focus on, and then concentrate all efforts in that area. A comprehensive
marketing plan helps companies to maintain this focus as they revise their strategies. Most
marketing plans do not cover more than a year's worth of time because start-ups face such
uncertain circumstance, requiring businesses to be flexible and open to quick changes.
Entrepreneurial marketing plans are based on input from every aspect of the company -- from
production, to finance, to personnel. In order to succeed, start-ups should work in a
coordinated way to use their resources as efficiently as possible. Marketing decisions must
reflect the real world circumstances facing the company.
Metrics used to evaluate the marketing plan should reflect the goals of the company. These
goals can range from maximizing profits, to reaching the broadest customer base, to
redefining a particular market. Each goal will require a different marketing strategy and be
evaluated on different terms. Emerging companies have to set quantitative targets for
themselves and then revise their strategies if those targets are not met. Otherwise, growth is
impossible.
Entrepreneurial marketing framework:

Marketing plan:
Same like business plan, also include 4 Ps

Entrepreneurial marketing strategies:

In competitive markets, it can be easy to get lost in the crowd. One of the biggest challenges
for entrepreneurs is standing out from their competitors. Marketing in new, unusual, or
aggressive ways is the best way to illustrate what makes a business unique. Below are some
marketing strategies that entrepreneurs have used successfully in the past. A company can
direct all of its marketing efforts towards one strategy, or use several of them at once.
It is important to distinguish these businesses from small businesses. While they do start
small, their goal is to grow rapidly and to become major players in their industry as quickly
as possible. This is drastically different from a restaurant or machine shop that may be
content to stay small forever. Growth is the primary goal of entrepreneurship, and marketing
is the primary means for growth.
Guerilla Marketing:
Also called Low Budget Marketing
Word-of-mouth advertising ( An unpaid form of promotion in which satisfied
customers tell other people how much they like a business, product or service).
Relationship marketing:
Identifying, establishing, maintaining and enhancing relationships with customers and
other stakeholders, for profit
Focuses on creating a strong link between the brand and the customer.
Expeditionary marketing:
Creating markets before competitors
Involves creating markets and developing innovative products.
Continuous search for innovative product concepts
Leading rather than following consumers
Tolerance of failure
One-to-one marketing:
Individualized marketing mix
Customers are marketed to as individuals.
Marketing based on knowing the customer through collaborative interactions
Viral marketing:
Self-replicating promotion
Places marketing messages on the Internet so they can be shared and expanded on by
customers.
Multiplies as like-minded people market to each other
One has to be careful of transformation (change)
Digital marketing:
New forms of interaction lead to deeper relationships
Greater personalization
Radical marketing with limited financial resources
 Maximum exploitation of limited budget
Redefine competitive rules
Focus on growth and expansion rather than short term gains
Customer-centric marketing:
Marketing seeks to fulfill needs of individual consumer
Needs of consumer is the starting point of planning process

Product Design and Quality:

When a company designs a product for sale in the open marketplace, the engineers should use
the engineering design sciences to design each component of the product. During the initial
design phase, a prototype is made. The prototype should then be tested in the lab and in the
field. These tests should determine functionality, safety, product durability and life span. If
design problems become apparent during testing, a product redesign should be performed to
eliminate the issue. Then product testing should resume. If the product is improperly
designed and not thoroughly tested, design flaws could be the result, and the product could be
unsafe and could fail. Failure may be catastrophic or may fail from use over time. The failure
may or may not injure a customer depending on the type of product. The bottom line is that if
a product has one or more design flaws and has not been properly tested before it is released
for mass production, it will fail in some way at some point. The failure could be either from
lack of performance, safety or durability.
In the world of engineering, good engineers use the engineering sciences to design products.
In this endeavor, design problems must be worked out and solved if the engineering science
is available. A product must be designed to operate safely and must be designed and
manufactured with a reliability that will ensure a long and trouble free life. But whether the
science is available or not, performance, durability and safety issues must be solved, and
whatever form the design solution takes under these conditions is called "Engineering".
Some companies design a product, manufacture and inspect it all in-house. QA and QC.
Entrepreneurship and economic development:

Entrepreneurship and economic development are intimately related. Schumpeter opines

that entrepreneurial process is a major factor in economic development and
the entrepreneur is the key to economic growth. Entrepreneurs can change the way we live
and work. If successful, their innovations may improve our standard of living. In short, in
addition to creating wealth from their entrepreneurial ventures, they also create jobs and the
conditions for a prosperous society.

The following are reasons why entrepreneurs are important to the economy:

Entrepreneurs Create New Businesses:

Entrepreneurs Add to National Income:

Entrepreneurial ventures literally generate new wealth. Existing businesses may remain
confined to the scope of existing markets and may hit the glass ceiling in terms of income.
New and improved offerings, products or technologies from entrepreneurs enable new
markets to be developed and new wealth created.

Entrepreneurs Also Create Social Change:

Through their unique offerings of new goods and services, entrepreneurs break away from
tradition and indirectly support freedom by reducing dependence on obsolete systems and
technologies. Overall, this results in an improved quality of life, greater morale and economic
freedom.

For example, the water supply in a water-scarce region will, at times, force people to stop
working to collect water. This will impact their business, productivity and income. Imagine
an innovative, automatic, low-cost, flow-based pump that can fill in people's home water
containers automatically. Such an installation will ensure people are able to focus on their
core jobs without worrying about a basic necessity like carrying water. More time to devote
to work means economic growth.

Community Development:
Entrepreneurs regularly nurture entrepreneurial ventures by other like-minded individuals.
They also invest in community projects and provide financial support to local charities. This
enables further development beyond their own ventures. Some famous entrepreneurs,
like Bill Gates, have used their money to finance good causes, from education to public
health. The qualities that make one an entrepreneur are the same qualities that motivate
entrepreneurs to pay it forward.

Role of Entrepreneurship in Economic Development:

The word development is used in so many ways that its precise connotation is often baffling.
Nevertheless, economic development essentially means a process of upward change whereby
the real per capita income of a country increases over a long period of time. Then, a simple
but meaningful question arises: what causes economic development?

This question has absorbed the attention of scholars of socio-economic change for decades. In
this section, we shall attempt to shed light on an important aspect of that larger question, i.e.
the phenomenon of entrepreneurship.

The one major issue we shall address here is: what is the significance of entrepreneurship for
economic development? Does it add an important independent influence to that of other
factors widely agreed to promote economic development of a country like India?

Adam Smith, the foremost classical economist, assigned no significance to entrepreneurial

role in economic development in his monumental work An Enquiry into the Nature and
Causes of the Wealth of Nations, published in 1776. Smith extolled the rate of capital
formation as an important determinant of economic development.

The problem of economic development was ergo largely the ability of the people to save
more and invest more in any country. According to him, ability to save is governed by
improvement in productivity to the increase in the dexterity of every worker due to division
of labour. Smith regarded every person as the best judge of his own interest who should be
left to pursue his own advantage. According to him, each individual is led by an invisible
hand in pursuing his/her interest. He always advocated the policy of laissez-faire in
economic affairs.
In his theory of economic development, David Ricardo identified only three factors of
production, namely, machinery, capital and labour, among whom the entire produce is
distributed as rent, profit and wages respectively. Ricardo appreciated the virtues of profit in
capital accumulation. According to him, profit leads to saving of wealth which ultimately
goes to capital formation

Thus, in both the classical theories of economic development, there is no room for
entrepreneurship. And, economic development seems to be automatic and self-regulated.
Thus, the attitude of classical economists was very cold towards the role of entrepreneurship
in economic development. They took the attitude: the firm is shadowy entity and
entrepreneur even shadower or at least is shady when he is not shadowy. The economic
history of the presently developed countries, for example, America, Russia and Japan tends to
support the fact that the economy is an effect for which entrepreneurship is the cause.

The crucial role played by the entrepreneurs in the development of the Western countries has
made the people of underdeveloped countries too much conscious of the significance of
entrepreneurship for economic development. Now, people have begun to realize that for
achieving the goal of economic development, it is necessary to increase entrepreneurship
both qualitatively and quantitatively in the country. It is only active and enthusiastic
entrepreneurs who fully explore the potentialities of the countrys available resources
labour, technology and capital.

Schumpeter (1934) visualised the entrepreneur as the key figure in economic development
because of his role in introducing innovations. Parson and Smelser (1956) described
entrepreneurship as one of the two necessary conditions for economic development, the other
being the increased output of capital.

Harbison (1965) includes entrepreneurs among the prime movers of innovations, and Sayigh
(1962) simply describes entrepreneurship as a necessary dynamic force. It is also opined that
development does not occur spontaneously as a natural consequence when economic
conditions are in some sense right: a catalyst or agent is always needed, and this requires an
entrepreneurial ability.
It is this ability that he perceives opportunities which either others do no see or care about.
Essentially, the entrepreneur searches for change, sees need and then brings together the
manpower, material and capital required to respond the opportunity what he sees.

Akio Morita, the President of Sony who adopted the companys products to create Walkman
Personal Stereo and Indias Gulshan Kumar of T-Series who skimmed the audio-cassette
starved vast Indian market are the clearest examples of such able entrepreneurs.

The role of entrepreneurship in economic development varies from economy to economy

depending upon its material resources, industrial climate and the responsiveness of the
political system to the entrepreneurial function. The entrepreneurs contribute more in
favourable opportunity conditions than in the economies with relatively less favourable
opportunity conditions.

Viewed from the opportunity conditions point of view, the underdeveloped regions, due to
the paucity of funds, lack of skilled labour and non-existence of minimum social and
economic overheads, are less conducive to the emergence particularly of innovative
entrepreneurs.

In such regions, entrepreneurship does not emerge out of industrial background with well
developed institutions to support and encourage it. Therefore, entrepreneurs in such regions
may not be an innovator but an imitator who would copy the innovations introduced by
the innovative entrepreneurs of the developed regions (Brozen 1954-55).

In these areas, according to McClellands (1961) concept of personality aspect of

entrepreneurship, some people with high achievement motivation come forward to behave in
an entrepreneurial way to change the stationary inertia, as they would not be satisfied with the
present status that they have in the society.

Under the conditions of paucity of funds and the problem of imperfect market in
underdeveloped regions, the entrepreneurs are bound to launch their enterprises on a small-
scale. As imitation requires lesser funds than innovation, it is realized that such regions
should have more imitative entrepreneurs.

And, it is also felt that imitation of innovations introduced in developed regions on a massive
scale can bring about rapid economic development in underdeveloped regions also. But, it
does not mean that such imitation requires in any way lesser ability on the part of
entrepreneurs.

In this regard, Berna opines:

It involves often what has aptly been called subjective innovation, that is, the ability to do
things which have not been done before by the particular industrialists, even though unknown
to him, the problem may have been solved in the same way by the others. These imitative
entrepreneurs constitute the main spring of development of underdeveloped regions.

Further, India which itself is an underdeveloped country aims at decentralized industrial

structure to militate the regional imbalances in levels of economic development, small-scale
entrepreneurship in such industrial structure plays an important role to achieve balanced
regional development.

It is unequivocally believed that small-scale industries provide immediate large- scale

employment, ensure a more equitable distribution of national income and also facilitate an
effective resource mobilization of capital and skill which might otherwise remain unutilized.

Lastly, the establishment of Entrepreneurship Development Institutes and alike by the Indian
Government during the last decades is a good testimony to her strong realisation about the
premium mobile role of entrepreneurship plays in economic development of the country.

The important role that entrepreneurship plays in the economic development of an

economy can now be put in a more systematic and orderly manner as follows:
1. Entrepreneurship promotes capital formation by mobilising the idle saving of the public.

2. It provides immediate large-scale employment. Thus, it helps reduce the unemployment

problem in the country, i.e., the root of all socio-economic problems.

3. It promotes balanced regional development.

4. It helps reduce the concentration of economic power.

5. It stimulates the equitable redistribution of wealth, income and even political power in the
interest of the country.
6. It encourages effective resource mobilisation of capital and skill which might otherwise
remain unutilized and idle.

7. It also induces backward and forward linkages which stimulate the process of economic
development in the country.

8. Last but no means the least, it also promotes countrys export trade i.e., an important
ingredient to economic development.

Thus, it is clear that entrepreneurship serves as a catalyst of economic development. On the

whole, the role of entrepreneurship in economic development of a country can best be put as
an economy is the effect for which entrepreneurship is the cause

The Japanese experience:

After living in Japan for seven of the past 40 years, I recently returned for an institutional
development project at Tokyo University of Science. Tokyo University of Science is a private
university founded in 1881 with over 20,000 students, and is the largest source of engineers
and scientists for Japanese industry. The university is also the Japan host for an educational
and research initiative called MIT REAP (MIT Regional Entrepreneurship Development
Program).a

We have been dealing with the following puzzle: Japan was once renowned for creating
powerful, global companies, especially in manufacturing industries like automobiles,
consumer electronics, semiconductors, and computer hardware. Japanese government and
industry partnerships also once promised to revolutionize information technology, with bold
initiatives such as the VLSI (Very Large-Scale Integration) Project of the 1970s for
semiconductors and the Fifth Generation Computing Project of the 1980s for artificial
intelligence. Japanese companies have since developed admirable hardware skills and
competence in many aspects of software. But we no longer see bold innovation initiatives in
Japan, nor do we see much entrepreneurial activity. What happened?

Against all odds Japanese entrepreneur Ryo Kubota, M.D., Ph.D. left his native Japan for the
US to change the world. From the basement of his home in Seattle and with his own money
he launched Acucela Inc., a biotech startup which develops drugs to treat sight-impairing eye
diseases. This February Acucela raised $142 million on the small companies section of the
Tokyo Stock Exchange (TSE Mothers). Today, Kubotas thoughts on entrepreneurship and
innovation are being sought by government officials, politicians and business leaders seeking
ways to rejuvenate Japans economy.

The entrepreneurial doctor credits his success to outside the box thinking that he believes
Japanese culture does not tolerate. With a bit more respect for people who think crazy
thoughts, Japans economy, which has been in the doldrums for the past 20 years, can get
back on track. Kubota wants everyone to know that entrepreneurial success can be achieved
in Japan, not just in the US.

Kubota was born in Kyoto and raised in Kobe. After graduating from Japanese high school,
he earned an M.D. and Ph.D. in molecular biology at Keio University where he specialized in
ocular research. Later he became a practicing ophthalmologist. To the untrained eye, Kubota
seemed typically Japanese. But an experience in elementary school taught him to think and
act differently.

When Kubota was in third grade, his Japanese elementary school teacher called on a fellow
student and childhood friend to answer the simple question: What color is the opposite of
white? The teacher expected to hear black as the answer. But Kubotas friend argued that
red could be considered correct given its prevalence as a contrasting color in Japanese
culture.

His friend referred to the Japanese flag which has a red circle on a white background. Also,
many festive occasions in Japan are celebrated with red and white colors thought to bring
good luck. Steamed sweet bean rice cakes bearing those colors are often served at Japanese
weddings and other special occasions. Japanese ceremonial gifts wrapped with stringed
ornaments are also colored red and white.

Kubota was impressed by the sophistication of his friends logic. He expected the teacher to
recognize its ingenuity and give some credit for it. Instead, the teacher shot back, No! No!
No! Black is the opposite. Kubota was shocked by the retort, inferring from this experience
that one must come to the same answer as everyone else in Japan. Later his friend dropped
out of school. There was truth in the old Japanese proverb which warns, The nail that sticks
out gets hammered down.
The following year Kubotas family moved to the US when his dad was temporarily assigned
there. Kubotas fourth grade US science teacher asked the students, Does the moon rotate?
(The correct answer is: Yes, it does.) Students this time were directed to consider the
evidence and draw their own conclusions.

They formed into two groups, each taking an opposite view. Without any prior knowledge
students went through a rigorous debate why they thought one way or the other. The teacher
encouraged kids to defend their positions based on logical thinking. Each group was equally
valued for their contributions. Kubota inferred from this experience that, in the US, more
important than reaching the correct answer (always important) was learning how to think
logically. That resulted in a better chance to reach the right conclusion.

Kubotas educational experiences more than 30 years ago in the two countries could not have
been more contrastingly different. In America, he was free to think any which way he
wanted. But in Japan, everything was controlled. There could only be one correct answer.
Everyone had to do everything the same way. Students even had to wear the same style
clothing to school.

In hindsight, Kubota believes his third grade teacher was indoctrinating students to the
Japanese custom of living in harmony. To preserve harmony, he thought, there could only
be one answer. Students learn to memorize those answers and not to think any further out of
fear of being heavily criticized.

Harmony is not always bad, Kubota argues. Much of society works well when people rely
on others to think and act in coordinated ways, he says. Basic services like the post office
run smoothly. That attribute helped Japan achieve its economic miracle in the 60s, 70s and
80s. Then, manufacturers learned to make great products to the highest standards, precisely
because there could be no deviation from the norm.

Japans high precision, detailed oriented and super clean culture also makes it one of the most
comfortable countries of the world to live. The trains run on time. Plumbers and other
tradesmen appear when scheduled. Japan has the highest level of social cohesiveness of any
nation.
But notes Kubota, these attributes become an inherent weakness in a rapidly changing world
where new and disruptive technologies can make established products obsolete overnight.
Take Sony, Panasonic and Matsushita for example. These once global leaders lost market
share to more innovative firms like Apple and to firms in developing nations which caught up
with them.

To adjust to a world that is speedier, global and more innovative, Kubota thinks Japan needs
people more willing to experiment with ideas that are outside of the box. Most of those ideas
will be crazy, he says, adding, But, rarely perhaps 1 in a 1,000 someone comes up with
a brilliant idea that outweighs all previous efforts. That single idea will be so innovative, new
and disruptive that all previously endured failures pale into insignificance. The invention of
e-mail is one example. Compared to snail-mail, its more energy efficient and instantaneous.
Someone has to work on those kinds of ideas if they are to be developed, he says.

Most pioneering work results in failure. Therefore, people need to be unafraid of making
mistakes or they wont learn from them. Making mistakes is part of the cost of
innovation, reckons Kubota who says, It is similar to learning to walk. The process
involves making many mini-failures. That kind of learning is best achieved in a more
flexible teaching environment where logical errors are not admonished.

Kubota believes education is the process whereby children, who naturally think crazy and
dissociative thoughts, are taught to fit into other peoples ways of thinking. This allows
society to run smoothly and in a predictable manner. But if education requires too much
fitting into the box, as he experienced growing up in Japan, the results may be self-defeating.
Then there is little room for a sufficient portion of society to think creatively or be
innovative.

Not everyone can or should become an independent or creative thinker, believes Kubota. The
majority who apply common sense thinking can support a minority who innovate to prepare
for the future. Perhaps 20% of Japanese people should ideally innovate, he argues, reasoning
that society would become chaotic if everyone were to think out of the box.

Nor are those who innovate better people than those who dont. On the contrary, What is
needed is an allowance for diversity, he suggests. As long as the two groups have mutual
respect for one another, Japan can rise to the challenges of the 21st century.
Kubota is optimistic Japan can make that leap without endangering its underlying culture. He
cites Japans successful transition during the Meiji era when people switched from wearing
kimonos and swords to wearing westernized clothing. The change was huge, but the
countrys cultural underpinnings remained intact. A similar shift to a freer thinking and more
flexible society should also be possible, he assures.

Today there is urgency not present a decade ago to address Japans economic stagnation.
Realizing Japan must change if the nation is to retain its status as a leading economic power,
government officials, politicians and business leaders are seeking input from thought leaders
like Kubota. In the past, they would have castigated him for having left Japan, even for short
periods. Now theyre embracing his thoughts.

Today when visiting Japan, Kubota feels very much part of the fabric of the country. Wow!
he marvels, Japan has changed a lot.