Entrepreneurship - MGT602
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INTRODUCTION
LEARNING OBJECTIVES
- To introduce the concept of entrepreneurship and its historical development.
- To explain the entrepreneurial decision process.
- To identify the basic types of start-up ventures.
- To explain the role of entrepreneurship in economic development.
- To discuss the ethics and racial responsibility of entrepreneurs.
NATURE AND DEVELOPMENT OF ENTREPRENEURSHIP
The term entrepreneur comes from the French and translates "between-taker" or "go-between."
Earliest Period
In this period the money person (forerunner of the capitalist) entered into a contract with the go-between to sell his goods. While the capitalist was a passive risk bearer, the merchant bore all the physical and emotional risks.
Middle Ages
In this age the term entrepreneur was used to describe both an actor and a person who managed large production projects. In such large production projects, this person did not take any risks, managing the project with the resources provided. A typical entrepreneur was the cleric who managed architectural projects.
17th Century
In the 17th century the entrepreneur was a person who entered into a contract with the government to perform a service Richard Cantillon, a noted economist of the 1700s, developed theories of the entrepreneur and is regarded as the founder of the term. He viewed the entrepreneur as a risk taker who "buy[s] at certain price and sell[s] at an uncertain price, therefore operating at a risk."
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THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP
LEARNING OBJECTIVES
- To introduce the concept of entrepreneurship and its historical development.
- To explain the entrepreneurial decision process.
Desirability of New Venture Formation
(Aspects of a situation that make it desirable to start a new company)
The perception that starting a new company is desirable results from an individual’s culture,
subculture, family, teachers and peers.
American culture places a high value on being your own boss, being a success and making
money therefore, it is not surprising to find a high rate of company formation in the United
States. On the other hand in some countries making money is not as valued and failure may be
a disgrace. The rate of business formation in these countries is not as high. Many subcultures
that shape value systems operate within a cultural framework.
Studies indicate that a high percentage of founders of companies had fathers and/or mothers
who valued independence. Encouragement to form a company is also gained from teachers,
who can significantly influence individuals. An area having a strong educational base is also a
requirement for entrepreneurial activity. Peers are important, also, as is an area with an
entrepreneurial pool and peer-meeting place.
Possibility of New Venture Formation
(Factors making it possible to create a new venture)
- Although the desire of new venture formation derived from the individual’s culture,
subculture, family, teachers and peers needs to be present before any action is taken, the
second feature necessary centers around this question “What makes it possible to form a
new company?”
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ENTREPRENEURIAL PROCESS/START UPS
LEARNING OBJECTIVES
- To identify the basic types of start-up ventures.
- To explain the role of entrepreneurship in economic development
- To discuss the ethics and racial responsibility of
TYPES OF START-UPS
Life-Style Firms
A life-style firm exists primarily to support the owners and usually has little growth opportunity. This type of firm may grow after several years to 30 or 40 employees.
Foundation Companies
A type of company formed from research and development that usually does not go public. This firm can grow in five to ten years from 40 to 400 employees.
High-Potential Venture
A venture has high growth potential and therefore receives great investor interest. The company may start out like a foundation company, but its growth is far more rapid. After five to ten years the company could employ around 500 employees. These firms are also called gazelles and are most important for the economic development of an area
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THE ENTREPRENEURIAL AND INTRAPRENEURIAL MIND
LEARNING OBJECTIV ES
- To explain the aspects of the entrepreneurial process.
- To explain the differences between entrepreneurial and managerial domains.
- To explain the organizational environment conducive for entrepreneurship.
- To identify the general characteristics of an Entrepreneur.
- To explain the process of establishing entrepreneurship in an organization.
ENTREPR E NEURIAL PROCESS
The entrepreneurial process involves finding, evaluating, and developing an opportunity by overcoming the strong forces that resist the creation of something new.
Phase 1: Identifying and Evaluating the Opportunity
Most good business opportunities result from an entrepreneur being alert to possibilities. Some
sources are often fruitful, including consumers and business associates. Channel members of
the distribution system-retailers, wholesalers or manufacturer’s reps-are also helpful.
Technically-oriented individuals often identify business opportunities when working on other
projects. Each opportunity must be carefully screened and evaluated-this is the most critical
element of the entrepreneurial process.
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THE ENTREPRENEURIAL AND INTRAPRENEURIAL MIND (continued…)
LEARNING OBJECTIVES
- To explain the aspects of the entrepreneurial process.
- To explain the differences between entrepreneurial and managerial domains.
- To explain the organizational environment conducive for entrepreneurship.
- To identify the general characteristics of an entrepreneur.
- To explain the process of establishing entrepreneurship in an organization.
MANAGERIAL VERSUS ENTREPRENEURIAL DECISION MAKING
The difference between the entrepreneurial and managerial styles involves five business dimensions.
Strategic Orientation
The entrepreneur’s strategic orientation depends on his or her perception of the opportunity. This orientation is most important when other opportunities have diminishing returns accompanied by rapid changes in technology, consumer economies, social values or political rules. When the use of planning systems is the strategic orientation, there is more pressure for the administrative domain to be operant.
Commitment to Opportunity
The entrepreneurial domainis pressured by the need for action and has a short time span in terms of opportunity commitment. The administrative domain (the ways mangers make decisions) is not only slow to act on an opportunity, but the commitment is usually for a longer time span.
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THE ENTREPRENEURIAL AND INTRAPRENEURIAL MIND (continued…)
LEARNING OBJECTIVES
- To explain the aspects of the entrepreneurial process.
- To explain the differences between entrepreneurial and managerial domains.
- To explain the organizational environment conducive for entrepreneurship.
- To identify the general characteristics of an entrepreneur.
- To explain the process of establishing entrepreneurship in an organization.
CORPORATE VERSUS INTRAPRENEURIAL CULTURE
Smaller, aggressive, entrepreneurial firms are developing more new products and becoming
dominant in certain markets. Many companies are attempting to create the same spirit, culture,
and rewards of entrepreneurship in their organizations.
The typical corporate culture has a climate and reward system that favors conservative decision
making.
Emphasis is on gathering large amounts of data as the basis for a rational decision. Risky
decisions are often postponed until hard facts are gathered or a consultant is hired.
Often there are so many approvals required that no individual feels personally responsible for the
project.
The guiding principles in a traditional corporate culture are:
- Follow instructions given
- Do not make mistakes
- Do not fail
- Do not take initiative
- Stay within your turf and protect your backside
- This restrictive environment is not conducive to creativity, flexibility, and risk taking
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THE ENTREPRENEURIAL AND INTRAPRENEURIAL MIND (continued…)
LEARNING OBJECTIVES
- To explain the aspects of the entrepreneurial process.
- To explain the differences between entrepreneurial and managerial domains.
- To explain the organizational environment conducive for entrepreneurship.
- To identify the general characteristics of an Entrepreneur.
- To explain the process of establishing entrepreneurship in an organization.
INTRAPRENEURIAL LEADERSHIP CHARACTERISTICS
There are certain individual characteristics needed for a person to be successful Entrepreneurs, including:
- Understanding the environment
- Being visionary and flexible
- Creating management options
- Encourage teamwork while employing a multi-disciplined approach
- Encouraging open discussion
- Building a coalition of supporters, and persisting
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THE INDIVIDUAL ENTREPRENEUR
THE INDIVIDUAL ENTREPRENEUR
- To identify some key entrepreneurial feelings and motivations.
- To identify key elements in an entrepreneur’s background.
- To discuss the importance of role models and support systems.
- To identify the similarities and differences between male and female entrepreneurs.
- To explain the differences between inventors and entrepreneurs.
ENTREPR E NEURIAL FEELINGS
There is no "true entrepreneurial profile"- entrepreneurs come from many educational backgrounds, family situations, and work experiences. A potential entrepreneur may presently be a nurse, secretary, assembly line worker, sales person, mechanic, home maker, manager or engineer. A potential entrepreneur can be male or female and of any race or nationality.
Locus of Control
One concern people have when forming is whether they will be able to sustain the drive and
energy required to form something new and to manage the new enterprise and make it grow.
While research results are inconsistent, internal control seems to be a characteristic of
entrepreneurs.
Internal beliefs appear to differentiate entrepreneurs from the general public, but not from
managers. Managers and entrepreneurs both have an internality tendency.
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THE INDIVIDUAL ENTREPRENEUR (continued…)
LEARNING OBJECTIVES
- To identify some key entrepreneurial feelings and motivations.
- To identify key elements in an entrepreneur’s background.
- To discuss the importance of role models and support systems.
- To identify the similarities and differences between male and female entrepreneurs.
- To explain the differences between inventors and entrepreneurs.
ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS
Education
Education appears important in the upbringing of the entrepreneur, in the level of education obtained and in playing a major role in coping with problems. Although formal education is not necessary for starting a new business, it does provide a good background. In education, female entrepreneurs previously experienced some disadvantage, with few having degrees in engineering, science, or math. The ability to deal with people and communicate clearly in written and spoken work is also important.
Personal Values
Studies have failed to indicate that entrepreneurs can be differentiated on personal valued from managers, unsuccessful entrepreneurs, or the general public. Leadership, support, aggression, benevolence, conformity, creativity, veracity, and resource seeking may also be important. A successful entrepreneur is frequently characterized as a winner; winning may be a prerequisite for his or her actually becoming one.
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THE INDIVIDUAL ENTREPRENEUR (continued…)
LEARNING OBJECTIVES
- To identify some key entrepreneurial feelings and motivations.
- To identify key elements in an entrepreneur’s background.
- To discuss the importance of role models and support systems.
- To identify the similarities and differences between male and female entrepreneurs.
- To explain the differences between inventors and entrepreneurs.
ROLE MODELS AND SUPPORT SYSTEMS One of the most important factors influencing entrepreneurs in their career choice is role models. Role models can be parents, relatives, or successful entrepreneurs in the community. Role models can also serve in a supportive capacity as mentors during and after the new venture is launched. This support system is most crucial during the start-up phase.
It is important that an entrepreneur establish connections to support resources early in the venture formation process. As contacts expand they form a network with density (extensiveness of ties between two individuals) and centrality (the total distance of the entrepreneur to all other individuals.) The strength of ties between the entrepreneur and any individual is dependent on the frequency, level, and reciprocity of the relationship. An informal network for moral and professional support benefits the entrepreneur.
Moral-Support Network It is important for the entrepreneur to establish a moral support network of family and friends. Most entrepreneurs indicate that their spouses are their biggest supporters. Friends can provide advice that is more honest than that received from others, plus encouragement, understanding, and assistance. Relatives can also be sources of moral support, particularly if they are also entrepreneurs.
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INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES
LEARNING OBJECTIVES
- To identify the aspects and importance of international entrepreneurship.
- To identify the important strategic issues in international entrepreneurship.
- To identify the available options for entering international markets.
- To present the problems and barriers to international entrepreneurship.
THE NATURE OF INTERNATIONAL ENTREPRENEURSHIP
As more countries become market oriented and developed, the distinction between foreign and domestic markets is becoming less pronounced. International entrepreneurship is the process of an entrepreneur conducting business activities across national boundaries. It is exporting, licensing, or opening a sales office in another country. When an entrepreneur executes his or her business in more than one country, international entrepreneurship occurs.
THE IMPORTANCE OF INTERNATIONAL BUSINESS TO THE FIRM
International business has become increasingly important to firms of all sizes. The successful entrepreneur will be someone who understands how international business differs from domestic business and is able to act accordingly.
INTERNATIONAL VERSUS DOMESTIC ENTREPRENEURSHIP
Whether international or domestic, an entrepreneur is concerned about the same basic issues- sales, costs, and profits. What varies is the relative importance of the factors being considered. International entrepreneurial decisions are more complex due to uncontrollable factors such as the following.
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INTER NATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…)
LEARNING OBJECTIV ES
- To identify the aspects and importance of international entrepreneurship.
- To identify the important strategic issues in international entrepreneurship.
- To identify the available options for entering international markets.
- To present the problems and barriers to international entrepreneurship.
DIRECT FOREIGN INVESTME NT
The wholly owned foreign subsidiary has been the preferred mode of ownership for direct investment.
Minority interests The minority interest provides the firm with either a source of
raw materials or a captive market for products. Entrepreneurs have used minority
positions to gain a foothold in the market before making a major investment.
Joint ventures
Two firms get together and form a third company in which they share the equity.
Joint ventures have been used by entrepreneurs in two situations:
1. When the entrepreneur wants to purchase local knowledge
and an established facility.
2. When rapid entry into a market it needed. The keys to success
of joint ventures have not been well understood. Reasons for forming a joint
venture today are different than those in the past. Originally, joint ventures were
used for trading purposes and were one of the oldest ways of transacting
business. Joint ventures in the U.S. took the form of vertical joint ventures used
by mining concerns and railroads. Motives for the significant increase in the use
of joint ventures:
- To share the costs and risks of an uncertain project.
- To gain synergy between the two firms.
- To obtain a competitive advantage.
- To enter markets that pose entrance difficulties.
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INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued)
LEARNING OBJECTIV ES
- To identify the aspects and importance of international entrepreneurship.
- To identify the important strategic issues in international entrepreneurship.
- To identify the available options for entering international markets.
- To present the problems and barriers to international entrepreneurship.
DIRECT FOREIGN INVESTME NT
Majority interest Another equity method is to purchase a majority interest in a foreign business. The majority interest allows the entrepreneur to obtain managerial control while maintaining the company’s local identity. In technical sense anything over 50% of the equity of the firm is majority interest
100 percent ownership
One hundred percent ownership assures control. One form of 100 percent
ownership is mergers and acquisitions, but the entrepreneur needs to have a
general understanding of the benefits and problems of mergers as a strategic
option. A horizontal merger is the combination of two firms that produce
closely related projects in the same area. A vertical merger is the combination of
firms in successive stages of production. A product extension merger occurs
when acquiring and acquired companies have related production but do not have
directly competing products. A market extension merger is when two firms
produce the same products but sell them in different areas. A diversified activity
merger is a conglomerate merger involving the consolidation of two unrelated
firms. Mergers are a sound strategic option for an entrepreneur when synergy is
present. Economies of scale are the most common reason for mergers. A second
factor that causes synergy is taxation, or unused tax credits. The final factor is the
benefits received in combining complementary resources.
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INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…)
LEARNING OBJECTIVES
- To explain the aspects of the entrepreneurial process.
- To explain the differences between entrepreneurial and managerial domains.
- To explain the organizational environment conducive for entrepreneurship.
- To identify the general characteristics of an Entrepreneur.
- To explain the process of establishing entrepreneurship in an organization.
ENTREPRENEURIAL PARTNERING
One of the best methods to enter an international market is to partner with an entrepreneur in that
country. These foreign entrepreneurs know the country and culture and therefore facilitate
business transactions while keeping the entrepreneur current on business, economic and political
conditions. This partnering is facilitated by understanding the nature of entrepreneurship in the
country. Three areas of particular interest to U.S. entrepreneurs are Europe, the Far East and
transition economies.
Europe
- Europe has only recently become interested in entrepreneurship.
- Risk taking has been discouraged and business failure considered a social disgrace.
- Several changes in the social and political climate have changed this traditional, security- conscious culture.
- Exemplifying this new thinking are academics, especially scientists and engineers.
- Today more individuals are emerging in both academic circles and large companies who are look for a challenge.
- New government policies are making it easier to raise money for starting up businesses.
- The U.K. created the Business Expansion Scheme in 1983 to provide capital to new business ventures.
- In France several economic and social factors cause difficulties.
- Venture capital is managed by bankers, who are risk averse.
- Another hurdle is the French contempt for both failure and success.
- Research in Ireland and Sweden has explored the nature of European entrepreneurship.
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INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…)
LEARNING OBJECTIVES
- To explain the aspects of the entrepreneurial process.
- To explain the differences between entrepreneurial and managerial domains.
- To explain the organizational environment conducive for entrepreneurship.
- To identify the general characteristics of an Entrepreneur.
- To explain the process of establishing entrepreneurship in an organization.
SOURCES OF NEW IDEAS
A sound idea for a new product or service, properly evaluated, is essential to successfully launch a new venture. Some of the more frequently used ideas for new entrepreneur include consumers, existing companies, distribution channels, the federal government and research and development
Consumers
Potential entrepreneurs should pay close attention to the final focal point of the idea for a new product or service the potential consumer. This can be an informal or formal survey of consumers expressing their opinions. Care should be taken to ensure that the idea represents a large enough market.
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CREATIVITY AND THE BUSINESS IDEA
LEARNING OBJECTIVES
- To identify various sources of ideas for new ventures.
- To discuss methods available for generating new venture ideas.
- To discuss creativity and the techniques for creative problem solving.
METHODS OF GE NER A TI NG NE W IDEA S
Even with the wide variety of sources available, coming up with an idea to serve as the basis for the new venture can still be a difficult problem. The entrepreneur can use several methods to help generate and test new ideas, including focus groups, brain storming and problem inventory analysis.
Focus groups
Group of individuals providing information in a structured format is called a focus group. The group of 8 to 14 participants is simulated by comments form other group members in creatively conceptualizing and developing new product idea to fulfill a market need.
Brainstorming
A group method of obtaining new ideas and solutions is called brainstorming. The brainstorming method for generating new ideas is based on the fact that people can be stimulated to greater creativity by meeting with others an d participating with organized group experiences. Although most of the ideas generated from the group have no basis for further development, often a good idea emerges.
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CREATIVITY AND THE BUSINESS IDEA
LEARNING OBJECTIV ES
- To discuss the aspects of the product planning and development process
- To discuss aspects of e-commerce and starting an e-commerce business
PRODUC T PLA N NI N G AND DEV E LOPME N T PROCES S
Once idea emerges from idea sources or creative problem solving, they need further development and refinement in to final product or service to be offered. This refining process- the product planning and development process – is divided in to five major stages. Idea stage, concept stage, product development stage, test marketing stage and commercializing; it result in the product life cycle.
Establishing evaluation criteria
At each stage of product planning and development process, criteria for evaluation need to be established. These criteria should be broad, yet quantitative enough to screen the product carefully in the particular stage of development. Criteria should be developed to evaluate the new product in terms of market opportunity, competition the marketing system, financial factors and production factors. A market opportunity and adequate market demand must exist. Current competing producers, prices, and policies should be evaluated in their impact on market share. The new product should be compatible with existing management capabilities. The product should be able to be supported by and contribute to the company’s financial structure. The compatibility of new product’s production requirements with existing plant, machinery, and personnel should be determined. Entrepreneurs should formally evaluate an idea throughout its evolution.
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LEGAL ISSUES FOR THE ENTREPRENEUR
LEARNING OBJECTIVES
- To identify and distinguish intellectual property assets of a new venture including software websites.
- To understand the nature of patents, the rights they provide, and the process for filing one.
WHAT IS INTELLECTUAL PROPERTY?
Intellectual property which includes patents, trademarks, copyrights, and trade secrets represent important assets of entrepreneur and should be understood even before engaging the services of an attorney. Because entrepreneurs often don’t understand intellectual property, they can ignore steps that should be taken to protect these assets.
NEED FOR A LAWYER
All business is regulated by law. The entrepreneur needs to be aware of regulations that affect the new venture. At different stages the entrepreneur will need legal advice. The legal expertise required will vary based on factors such as type of product and organizational status. The entrepreneur should carefully evaluate his or her needs before hiring a lawyer.
HOW TO SELECT A LAWYER Why hire a lawyer?
The entrepreneur does not usually have the expertise to handle possible risks associated with difficult laws. An attorney is in a better position to understand all outcomes related to any legal action. The lawyer may work on a retainer basis (stated amount per month,), which provides office and consulting time. This does not include court time or other legal fees. The lawyer may be hired for a one-time fee, i.e. filing for a patent. Choosing a lawyer is like hiring an employee- The lawyer you work with should be someone to whom you can relate personally. When resources are limited, the entrepreneur may offer the lawyer stock in exchange for his or her services
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LEGAL ISSUES FOR THE ENTRE P RENEUR
LEARNING OBJECTIV ES
- To understand the purpose of a trademark and the procedure for filing.
- To learn the purpose of a copyright and how to file for one.
- To identify procedures that can protect a venture’s trade secrets.
- To understand the value of licensing to either expand a business or to start a new venture.
TRADEMARKS
A trademark may be a word, symbol, design, or some combination that identifies the source of certain goods. A trademark can last indefinitely, as long as it continues to perform its indicated function. The trademark is given a 20-year registration with 20-year renewable terms. In the fifth to sixth year, you must file an affidavit with the PTO indicating that the patent is in commercial use. Today the law allows filing a trademark solely on the intent to use the trademark in interstate commerce. There are benefits to registering a mark that has already been in use. Categories of trademarks: Coined marks denote no relationship between the mark and the goods and afford the possibility of expansion. An arbitrary mark is one that has another meaning in our language. A suggestive mark is used to suggest certain features or characteristics of a product or service. A descriptive mark must have become distinctive and gained recognition before it can be registered. Registering a trademark can offer significant advantages to the entrepreneur.
Registering the Trademark
The PTO is responsible for federal registration of trademarks. To file, the entrepreneur must complete the application form, which can be downloaded from the PTO website. Filing of the registration involves four requirements:
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LEGAL ISSUES FOR THE ENTREPRENEURS
LEARNING OBJECTIVES
- To illustrate some of the fundamental issues related to contracts.
- To understand important issues related to insurance and product safety and liability.
PRODUCT SAFETY AND LIABILITY
The Consumer Product Safety Act, passed in 1972, created a five-member commission that has the power to prescribe safety standards for products. The commission also has the power to identify what it considers to be substantial hazards and bar products it considers unsafe. The act was amended in 1990 to establish stricter guidelines for reporting product defects and resulting injuries and deaths. Manufacturers could be subject to fines of $1.25 million for not reporting product liability settlements or court awards. Any new product should be assessed as to whether it falls under the law. If it does, the entrepreneur has to follow appropriate procedures. Product liability problems are complex. Recent attempts to reform the legislation passed in Congress but were vetoed by the President. Claims regarding product safety and liability usually fall under one of these categories:
- Negligence extends to all parts of the production and marketing process.
- WarrantyConsumers may sue when advertising overstates the benefits of a product or when the product does not perform as stated.
- Strict Liability. A consumer can sue on the basis that the product was defective prior to its receipt.
- Misrepresentation occurs when advertising or other information misrepresents material facts concerning the quality of the product. The best protection against product liability is to produce safe products and to warn consumers of any potential hazards.
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CREATING AND STARTING THE VENTURE
LEARNING OBJECTIVES
- To define what the business plan is, who prepares it, who reads it, and how it is evaluated.
- To understand the scope and value of the business plan to investors, lenders, employees, suppliers, and customers.
PLANNING AS PART OF THE BUSINESS OPERATION
Planning is a process that never ends. In the early stages, the entrepreneur should prepare a preliminary plan. The plan will be finalized as the enterprise develops. Many different types of plans may be part of any business operation-financial, marketing, production, and sales plans. Plans may be short term or long term, or they may be strategic or operational. All of these plans have one purpose: to provide guidance and structure to management in a rapidly changing market environment.
WHAT IS THE BUSINESS PLAN
A business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. It addresses both short- and long-term decision making. The business plan is like a road map for the business’ development. The Internet also provides outlines for business planning. Entrepreneurs can also hire or offer equity to another person to provide expertise in preparing the business plan. In developing the business plan the entrepreneur can determine how much money will be needed from new and existing sources.
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CREATING AND STARTING THE VENTURE (Continued….)
LEARNING OBJECTIVES
- To identify information needs and sources for business planning.
- To enhance awareness of the ability of the Internet as an information resource and marketing tool
- To present helpful questions for the entrepreneur at each stage of the planning process.
- To understand how to monitor the business plan
INFORMATION NEEDS
Before preparing a business plan, the entrepreneur should do a quick feasibility study to see if there are possible barriers to success. The entrepreneur should clearly define the venture’s goals, which provide a framework for the business plan. The business plan must reflect reasonable goals.
Market Information
It is important to know the market potential for the product or service. The first step is to define the market. A well-defined target market makes it easier to project market size and market goals. To assess the total market potential, the entrepreneur can use trade associations, government reports, and published studies.
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CREATING AND STARTING THE VENTURE (Continued….)
LEARNING OBJECTIV ES
- To present examples and a step-by-step explanation of the business plan.
- To explain how to write a business plan
- To explain the procedure and list of document included in business plan
- To discuss the contents of each document and how to prepare them
WRITI NG THE BUSINESS PLAN
Description of the Venture
The description of the venture should be detailed in this section. This should begin with the mission statement or company mission, which describes the nature of the business and what the entrepreneur hopes to accomplish. The new venture should be described in detail, including the product, location, personnel, background of entrepreneur, and history of the venture. The emphasis placed on location is a function of the type of business. Maps that locate customers, competitors, and alternative locations can be helpful. If the building or site decision involves legal issues, the entrepreneur should hire a lawyer.
Production Plan or Operations Plan
If a new venture is a manufacturing operation, a production plan is necessary. This plan should describe the complete manufacturing process, including whether or not the process is to be subcontracted. If the manufacturing is carried out by the entrepreneur, the plan should describe the physical plant layout and machinery and equipment needed. If the venture is not manufacturing, this section would be titled operational plan. The entrepreneur would need to describe the chronological steps in completing a business transaction.
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CREATING AND STARTING THE VENTURE (Continued….)
LEARNING OBJECTIVES
- To present helpful questions for the entrepreneur at each stage of the planning process
- To understand how to monitor the business plan
- To understand the differences between business planning, strategy plans, and market planning
- To describe the role of marketing research in determining market strategy for the marketing plan
USING AND IMPLEMENTING THE BUSINESS PLAN
The business plan is designed to guide the entrepreneur through the first year of operations. It should contain control points to ascertain progress. Planning should be a part of any business operation. Without good planning the employees will not understand the company’s goals and how they are expected to perform their jobs. Bankers say that most businesses fail because of the entrepreneur’s inability to plan effectively. The entrepreneur can enhance efficient implementation of the plan by developing a schedule to measure programs and to institute contingency plans.
Measuring Plan Progress
Plan projections will typically be made on a 12-month schedule, but the entrepreneur should
check key areas more frequently. Inventory control by controlling inventory, the firm can ensure
maximum service to the customer. Production control Compare the cost figures against day-to-
day operating costs.
Quality control Quality control depends on the type of production system used.
Sales control Information on units, dollars, and specific products sold should be collected.
Disbursements. The new venture should control the amount of money paid out
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THE MARKETING PLAN
LEARNING OBJECTIVES
- To understand the differences between business planning, strategy plans, and market planning.
- To describe the role of marketing research in determining market strategy for the marketing plan.
- To illustrate an effective and feasible procedure for the entrepreneur to follow in engaging in a market research study.
- To define the steps in preparing the marketing plan.
- To explain the marketing system and its key components.
- To illustrate different creative strategies that may be used to differentiate or position the new venture’s products or services.
PURPOSE AND TIMING OF THE MARKETING PLAN
The marketing plan establishes how the entrepreneur will effectively compete and operate in the marketplace. Marketing planning should be an annual activity focusing on decisions related to the marketing mix variables. The marketing plan section should focus on strategies for the first three years of the venture. For the first year, goals and strategies should be projected monthly. For years two and three, market results should be projected based on longer-term goals. Preparing an annual marketing plan becomes the basis for planning other aspects of the business.
MARKET RESEARCH FOR THE NEW VENTURE
Information for developing the marketing plan may require some marketing research. Marketing research involves the gathering of data in order to determine such information as who will buy the product, what price should be charged, and what is the most effective promotion strategy. Marketing research may be conducted by the entrepreneur or by an external supplier or consultant. Market research begins with definition of objectives. Many entrepreneurs don’t know what they want to accomplish from a research study.
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THE MARKETING MIX
The actual short-term marketing decisions in the marketing plan will consist of four important marketing variables, called the marketing mix:
- Product or service.
- Pricing.
- Distribution.
- Promotion. Each variable should be described in detail in the strategy section of the marketing plan.
STEPS IN PREPARING THE MARKETING PLAN
Step 1: Defining the Business Situation
The situation analysis is a review of where the company has been and considers many of the environmental factors. The entrepreneur should provide a review of past performance of the product and the company. Industry analysis should include information on market size, growth rate, suppliers, new entries, and economic conditions.
Step 2: Defining Target Market/Opportunities and Threats
The entrepreneur should have a good idea of who the customer or target market will be. The defined target market will usually represent one or more segments of the entire market. Market segmentation is the process of dividing the market into smaller homogeneous groups.. The process of segmenting is:
- Decide what general market or industry you wish to pursue.
- Divide the market into smaller groups based on characteristics of the customer.
- Select segment or segments to target.
- Develop marketing plan integrating the parts of the marketing mix.
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THE ORGANIZATIONAL PLAN
LEARNING OBJECTIVES
- To understand the importance of the management team in launching a new venture.
- To understand the advantages and disadvantages of the alternative legal forms of incorporation.
- To explain the S Corporation and limited liability company as alternative forms of incorporation.
- To learn how to prepare a job analysis, job description, and job specification.
- To illustrate how the board of directors or board of advisors can be used to support the management of a new venture.
DEVELOPING THE MANAGEMENT TEAM
Potential investors are interested in the management team and its ability and commitment to the new venture. Investors usually demand that the management team not operate the business part- time while employed full time elsewhere. It is also unacceptable for the entrepreneurs to draw a large salary. The entrepreneur should consider the role of the board of directors and/or a board of advisors in supporting the management of the new venture.
LEGAL FORMS OF BUSINESS
There are three basic legal forms and one new form of businesses. The three basic forms are:
- Proprietorship.
- Partnership.
- Corporation
A new form is the limited liability company, which is now possible in most states. The entrepreneur should evaluate the pros and cons of each of the legal forms prior to submitting a business plan. He should determine the priority of several factors discussed below. It is also necessary to consider intangibles such as image to suppliers, existing clients, and prospective customers.
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THE ORGANIZATIONAL PLAN (Continued ….)
Transferability of Interest
- Each of the forms of business offers different advantages as to the transferability of interest.
- In a proprietorship, the entrepreneur has the right to sell any assets.
- In the limited partnership, the limited partners can sell their interests at any time without consent of the general partners. A general partner cannot sell any interest unless specified in the partnership agreement.
- In a corporation shareholders may transfer their shares at any time.
- In the S Corporation, the transfer of interest can occur only as long as the buyer is an individual.
Capital Requirements
The need for capital during the early months can become one of the most critical factors in keeping a new venture alive.
- For a proprietorship, any new capital can only come from loans or by additional personal contributions. Often an entrepreneur will take a second mortgage as a source of capital. Any borrowing from an outside investor may require giving up some equity. Failure to make payments can result in foreclosure and liquidation of the business.
- In the partnership, loans may be obtained from banks or additional funds may be contributed by each partner, but both methods require change in the partnership agreement.
- In the corporation, new capital can be raised by:
- Stock may be sold as either voting or nonvoting.
- Bonds may be sold.
- Money may also be borrowed in the name of the corporation.
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THE ORGANIZATIONAL PLAN (Continued ….)
TAX ATTRIBUTES OF FORMS OF BUSINESS
A. Tax Issues for Proprietorship
For the proprietorship the IRS treats the business as the individual owner. All income is personal income and the business is not taxed as a separate entity. The proprietorship has some tax advantages compared to the corporation.
- There is no double tax on profits.
- There is no capital stock tax or penalty for retained earnings.
B. Tax Issues for Partnership.
The partnership’s tax advantages and disadvantages are similar to the proprietorship. Limited partnerships can provide unique tax advantages. Both the partnership and proprietorship have a legal identity distinct from the partners, but this identity is only for accounting purposes. The income is distributed based on the partnership agreement, and the owners then report their share as personal income.
C. Tax Issues for Corporation
The corporation has the advantage of being able to take many deductions not otherwise available. The disadvantage is that dividends are taxed twice. This double taxation can be avoided if the income is distributed as salary. The corporation tax may also be lower than the individual rate.
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THE FINANCIAL PLAN
LEARNING OBJECTIV ES
- To understand why positive profits can still result in a negative cash flow.
- To understand the role of budgets in preparing pro forma statements.
- To learn how to prepare monthly pro forma cash flow, income, balance sheet, and sources and uses of funds statements for the first year of operation.
- To explain the application and calculation of the break-even point for the new venture.
- To illustrate the alternative software packages that can be used for preparing financial statements.
THE FINANCIAL PLAN
A. The financial plan provides a complete picture of:
- How much and when the funds are coming into the organization.
- Where the funds are going.
- How much cash is available?
- The projected financial position of the firm.
B. The financial plan provides the short-term basis for budgeting and helps prevent a common problem-lack of cash.
C. The financial plan must explain how the entrepreneur will meet all financial obligations and maintain its liquidity.
D. In general, the financial plan will need three years of projected financial data for outside investors.
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THE FINANCIAL PLAN (Continue d ….)
OPERATING AND CAPITAL BUDGETS
A. before developing the pro forma income statement, the entrepreneur should prepare operating and capital budgets.
- If the entrepreneur is a sole proprietor, he or she will be responsible for the budgeting decisions.
- In a partnership, or where employees exist, the initial budgeting process may begin with one of these individuals.
- Final determination of budgets will ultimately rest with the owners or entrepreneurs.
B. in the preparation of the pro forma income statement, the entrepreneur must first develop a sales budget, an estimate of the expected volume of sales by month.
- From sales forecasts, the entrepreneur will determine the cost of these sales.
- Estimated ending inventory will also be included.
C. Production or Manufacturing Budget.
- This budget provides a basis for projecting cash flows for the cost of goods produced.
- The important information in this budget is the actual production required each month and the needed inventory to allow for changes in demand.
- This budget reflects seasonal demand or marketing programs, which can increase demand and inventory.
- The operating budget is an important document, as the pro forma income statement will only reflect the actual costs of goods.
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PRO FORMA SOURCES AND USES OF FUNDS
- To identify the types of financing available.
- To understand the role of commercial banks in financing new ventures, the types of loans available, and bank lending decisions.
- To discuss Small Business Administrative (SBA) loans.
- To understand the aspects of research and development limited partnerships.
- To discuss government grants, particularly small business innovation research grants.
- To understand the role of private placement as a source of funds.
AN OVERVIEW
Different sources of capital are generally used at different times in the life of the venture.
Debt or Equity Financing
- Debt financing involves an interest-bearing instrument, usually a loan, the payment of
which is only indirectly related to sales and profits.
- Debt financing (also called asset-based financing) requires some asset be used as collateral.
- The entrepreneur has to pay back the amount of funds borrowed plus a fee, expressed in terms of interest.
- Short-term money is used to provide working capital.
- Long term debt (lasting more than a year) is frequently used to purchase some asset, with part of the value of the asset being used as collateral.
- Debt has the advantage of letting the entrepreneur retain a large ownership position and have greater return on equity.
- If the debt is too great payments become difficult to make and growth is inhibited.
- Equity financing offers the investor some form of ownership position in the venture.
- The investor shares in the profits of the venture.
- Key factors in choosing the type of financing are availability of funds, assets of the venture, and prevailing interest rates.
- Usually a combination of debt and equity financing is used.
- In a market economy all ventures will have some equity, as all are owned by someone.
- The equity may be entirely provided by the owner or may require multiple owners.
- This equity funding provides the basis for debt financing, which makes up the capital structure of the venture.
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PRO FORMA SOURCES AND USES OF FUNDS
COMMERCIAL BANKS
Commercial banks are the most frequently used source of short-term funds.
- This is debt financing and requires some collateral, some asset with value.
- This collateral can be business assets, personal assets, or the assets of the cosigner of the note.
Types of Bank Loans
1.Accounts receivable loans.
- Accounts receivable provide a good basis for a loan, especially if the customer base is creditworthy.
- A bank may finance up to 80% of the value of the accounts receivable.
- A factoring arrangement can be developed whereby the factor (bank) actually buys the accounts and collects the money.
- If any of the receivables are not collectible, the factor sustains the loss, not the business.
- The cost of factoring is higher than the cost of securing a loan against the accounts receivable.
2.Inventory loans.
- Inventory is often a basis for a loan, particularly when inventory is liquid and can be sold easily.
- Finished goods inventory can be financed up to 50% of value.
- Trust receipts are a type of inventory loan used to finance floor plans of retailers such as auto dealers.
- The bank advances a large percentage of the invoice price of the goods and is paid a pro rate basis as the inventory is sold.
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BANK LENDING DECISIONS
BANK LENDING DECISIONS
1. Banks are very cautious in lending money, particularly to new ventures.
- Commercial loan decisions are made only after the loan officer does a careful review of the borrower.
- Decisions are made based on quantifiable and subjective judgments.
2. Bank lending decisions can be summarized by the five C’s-Character, Capacity, Capital, Collateral, and Conditions.
- Past financial statements are reviewed in terms of key ratios and the entrepreneur’s capital invested.
- Future projections on market size, sales, and profitability are evaluated.
- Intuitive factors-Character and Capacity-are also taken into account and become more important when there is little or no track record.
3. The loan application format is generally a "mini" business plan.
- This provides the loan officer with information on the creditworthiness of the individual and the ability of the venture to repay the loan.
- Presenting a positive business image and following procedure are important in obtaining the funds.
4. The entrepreneur should borrow the maximum amount possible that can be repaid, as long as the prevailing interest rates and terms are satisfactory.
- Care must be taken to ensure that the venture will generate enough cash flow to repay the interest and principal on the loan.
- The entrepreneur should evaluate the track record and lending policies of several banks in the area.
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SOURCES OF CAPITAL
LEARNING OBJECTIV ES
- To identify the types of financing available.
- To understand the aspects of research and development limited partnerships.
- To discuss government grants, particularly small business innovation research grants
RESEARCH AND DEVELOPMENT LIMITED PARTNERSHIPS
This method of financing provides funds from inventors looking for tax shelters. A typical R&D partnership arrangement is established with a sponsoring company developing the technology with funds being provided by a limited partnership of individual investors. Research and development limited partnerships are particularly good when the project involves a high degree of risk or significant expense.
Major Elements
The three components are the contract, the sponsoring company, and the limited partnership. The contract specifies the agreement between the sponsoring company and the limited partnership. The sponsoring company does not guarantee results, but performs work on a best-effort basis. The typical contract specifies that the liability for any loss be borne by the limited partners. There are some tax advantages for both the partnership and the company. This tax deduction is based on two authorizations:
- Section 174 of the Internal Revenue Code.
- The Snow vs. Commissioner case of 1974. Limited partners may deduct their investments in the R& D contract under Section 174 in the year their investments are made, significantly increasing the rate of return of the investment. The second component is the limited partners. The limited partners have limited liability but are not a taxable entity. Any tax benefits of the losses are passed directly to the limited partners. When the technology is successfully developed, the partners share in the profits. The sponsoring company acts as the general partner developing the technology. The sponsoring company usually has the base technology but needs to secure partners for commercial success. The company usually retains the rights to use this technology to develop other products.
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SOURCES OF CAPITAL
PRIVATE PLACEMENT
A final source of funds is private placement with investors who may be family and friends or wealthy individuals.
Type of Investors
- An investor usually takes an equity position and can influence the nature of the business to an extent.
- The investors’ degree of involvement is important for the entrepreneur to consider.
- Some investors want to be actively involved in the business, and others are more passive.
Private Offerings
- Public offerings involve much time and expense.
- Registering the securities with the Securities and Exchange Commission (SEC) requires a number of reporting procedures once the firm has gone public.
- This public process was established to protect unsophisticated investors.
- A private offering is faster and less costly than other funding.
- These sophisticated investors still need access to material information about the company.
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CAPITAL SOURCES IN PAKISTAN
PROVINCIAL LEVEL INSTITUTIONS
1. Punjab Small Industries Corporation (PSIC)
In the province pf Punjab PSIC was established in 1972 as an autonomous body for the
promotion and development of the small-scale industries in the province. The PSIC covers the
critical areas of investment promotion and provision of credits for setting up new industries and
modernization of the existing ones. It also promotes the common facility center, technology
transfer, guidance, handicrafts development and design facilities.
(a) Financing and Loans
PSIC is providing two types of loans to its clients, working capital and capital investment loans. The maximum limit of loan is RS. 7.5 Lac. There are district officers appointed for monitoring the loan recovery and in the case of unrecoverable loans, they are transferred to the revenue authorities. PSIC has managed to recover 81.6% of all loans given out. Disbursing Rs. 1768.537 million to 6339 units through its 8 regional offices ( till 31-02-2001). The debt equity ration for loan up to Rs. 7.5 Lac is 70:30.
(b) Industrial Estates
PSIC has developed 14 industrial estates in various areas of the Punjab. The costs of land within these industrial states have been subsidized to allow the development of the small-scale sector.
(c) Services and Programs
PSIC has also launched “Rural Industrialization Program” to control unemployment and strengthen the marginal household income through stimulation of industrial growth in the urban and rural areas of the Punjab. PSIC has established various types of service centers e.g. metal industries development center, Sialkot, Engineering service centers. Gujranwala, institute of pottery development, Shahdara etc
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PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT
DECISIONS (Continued….)
RECORD KEEPING
It is necessary to have good records for effective control and for tax purposes. The entrepreneur should be comfortable and able to understand what is going on in the business. With software packages, much of the record keeping can be maintained on a personal computer. The goals of a good record keeping system are to identify key incoming and outgoing revenues that can be effectively controlled.
Sales (Incoming Revenue)
It is useful to have knowledge about sales by customer both in terms of units and dollars. The
entrepreneur of a retail store might try to identify the profile of the type of customer that
patronizes the store. Retailers also like to have information on specific customers. Credit card
purchases can be tracked for information on the type and amount of merchandise purchased. An
Internet venture can maintain purchase history data on the types of produces purchased.
Customers’ e-mail addresses can be requested so the customer can be notified of sales. Some
Internet firms have established a free membership as a means of following up. In a service
venture, records would need to be maintained on when a customer paid their monthly fee. As
cash flow problems are the most significant cause of new venture failure, good payment records
are necessary. Record keeping of payments can either be handled by a computer software
package or a simple card file system. If payments are late beyond a reasonable time, it may be
necessary to hire a collection agency, but only as a last resort.
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PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT
DECISIONS (Continued….)
RECRUITING AND HIRING NEW EMPLOYEES
The entrepreneur will generally need to establish procedures and criteria for hiring new employees.
Advertising in local newspapers and referrals from friends and associates is most effective for entry-level positions. For senior management the most effective strategy is networking with friends and business associates. Personnel agencies may also be considered if there are no other effective options.
Once resumes have been collected some basis of determining each candidate’s strengths should be made.
Some criteria must be used in the resume evaluation. Factors such as education, prior experience, entrepreneurial activities, and interests can be used to assess candidates. From the initial screening of resumes, a few candidates can be invited in for an interview. Most firms use an interview form with critical factors listed for evaluating the interview candidates. The goal should be to hire not only the best candidate but also someone who will perform well in the entrepreneurial environment and provide a long-term solution to the available position.
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PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT
DECISIONS (Continued….)
MOTIVATING AND LEADING THE TEAM
The entrepreneur will usually be a role model for any other employees.
Good work ethic will go a long way toward achieving financial and emotional success. During the early stages employees need incentives to remain committed and loyal to the long run success of the new venture.
It is important that the founder assume the role of leader to the management team and employees.
Leadership is also influencing and inspiring others in the organization to strive to meet the mission of the venture. Below are some behaviors that can exhibit the leadership qualities necessary for the new venture. Set an example with an ethical set of values for other managers and employees. Show respect and concern for the personal well being of employees. Don’t try to do everything yourself. Recognize the diversity of employees and how they should be treated. Encourage and praise others in the organization when deserved. Provide incentives and awards for quality work effort and new ideas. Recognize the importance of employees having fun at their jobs. Be aware of the need for future strategic planning.
Communication with managers and employees is one of the most important leadership qualities.
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PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT
DECISIONS (Continued….)
LONG-TERM VS SHORT-TERM DEBT
The entrepreneur may need to borrow funds to finance assets and meet cash needs. Fixed assets are usually financed by long-term debt borrowed from a bank. Alternatives include borrowing from family members, having partners contribute more funds or selling corporate stock. Many of these options require the entrepreneur to give up some equity.
MANAGING COSTS AND PROFITS
An interim income statement helps to compare the actual with the budgeted amount for that
period. The most effective use of the interim income statement is to establish cost standards and
compare the actual with the budgeted amount for that time period. Costs are budgeted based on
percentages of net sales. These percentages can be compared with actual percentages to see where
tighter cost controls may be necessary. This lets the entrepreneur manage and control costs before
it is too late. In later years, it is also helpful to look back on the first year of operation and make
comparisons month-to-month. When expenses or costs are much higher than budgeted, the
entrepreneur may need to determine the exact cause. Comparison of actual and budgeted
expenses can be misleading for ventures with multiple products or services. For financial
reporting purposes, the income statement summarizes expenses across all products and services.
This does not indicate the marketing cost for each product nor should the most profitable product.
Allocating expenses over product lines be done as effectively as possible to avoid arbitrary
allocation of costs.
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PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT
DECISIONS (Continued….)
CREATING AWARENESS OF THE NEW VENTURE
In the early stages, the entrepreneur should focus on developing awareness of the products offered.
Publicity is free advertising provided by a media outlet. Many local media encourage
entrepreneurs to participate in their programs. The entrepreneur can increase the opportunity for
getting exposure by preparing a news release and sending it to as many media sources as
possible. For radio or TV, the entrepreneur should identify programs that may encourage local
entrepreneurs to participate. Free publicity can only introduce the company. Advertising can be
focused on specific customers.
Internet Advertising
The Internet is an excellent medium to create awareness and to effectively support early launch strategies. Creating a website is the most important first stage. The website should indicate: Background of the company. Its products, officers, address, telephone and fax numbers. Contact names for potential sales. Direct sales from the website may also be available. Significant advertising is needed to create interest and awareness of the existence of the website. It is important to change the content of the website as necessary. The entrepreneur may also consider using a banner ad, small rectangular ads similar to billboard ads that appear on browser websites.
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NEW VENTURE EXPANSION STRATEGIES AND ISSUES
LEARNING OBJECTIVES
- To explain the methods for expanding the venture.
- To discuss the types of joint ventures and their uses.
- To discuss the concepts of acquisitions and mergers.
- To discuss the appropriateness and uses of leveraged buyouts.
- To discuss the different types of franchises.
- To identify the steps in evaluating a franchise opportunity.
JOINT VENTURES
with the increase in business risks, hyper-competition, and failures, joint ventures have increased. A joint venture is a separate entity involving two or more participants as partners. They involve a wide range of partners, including universities, businesses, and the public sector.
Historical Perspective
Joint ventures are not new. In the U.S. joint ventures were first used for large-scale projects in mining and railroads in the 1800s.The largest joint venture in the 1900s was the formation of ARAMCO by four oil companies to develop crude oil reserves in the Middle East. Domestic joint ventures are often vertical arrangements made between competitors allowing economies of scale. The increase in the number of joint ventures has been significantly throughout the 1990s.
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NEW VENTURE EXPANSION STRATEGIES AND ISSUES (Continued….)
LEARNING OBJECTIVES
- To explain the methods for expanding the venture.
- To discuss the types of joint ventures and their uses.
- To discuss the concepts of acquisitions and mergers.
- To discuss the appropriateness and uses of leveraged buyouts.
- To discuss the different types of franchises.
- To identify the steps in evaluating a franchise opportunity.
DISADVANTAGES OF AN ACQUISITION
- Marginal success record
Most ventures for sale have an erratic, or even unprofitable, record. It is important to review the records and meet important constituents to assess the future potential. - Overconfidence in ability
Even though the entrepreneur brings new ideas, the venture may never be successful for reasons not possible to resolve - Key employee loss
Often when a business changes hands key employees also leave. In a service business, it is difficult to separate the actual service from the person who performs it. Incentives can sometimes be used to assure that key employees will remain with the business. - Overvalued If the entrepreneur has to pay too much for a business, the return on investment will not be acceptable. The entrepreneur will need to establish a reasonable payback to justify the investment.
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ENTREPRENEURSHIP & PAKISTAN
LEARNING OBJECTIV ES
- To look at the history of entrepreneurship in Pakistan
- To understand the nature of policies in industrialization.
- To understand the profile of a typical entrepreneur in Pakistan.
- To learn the purpose of new policies induction.
- To identify different fields of entrepreneurship...
- To understand the value of Pakistani entrepreneur in the region.
- To illustrate some of the fundamental issues related to woman entrepreneurs...
- To understand development made in woman entrepreneurship.
- To look at the over all scenario of entrepreneurship in Pakistan.
- Future of entrepreneurship in Pakistan.
ENTREPRENEURS IN PAKISTAN
Salient Features of Entrepreneurs in Pakistan are:
Age Pattern
“The mean age of entrepreneur was found to be 42 years and of their enterprises 12 years. It is comparable to the Korean age pattern (46)”.
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