Q1.

An entrepreneur refers to a person who visualises a business opportunity, takes steps

to promote a new enterprise, and assembles resources in the form of men, materials
and money to make the business venture successful. He is an innovator, organiser and
risk bearer.
The qualities essential for a successful entrepreneur are initiative, wide knowledge,
willingness to assume risk, open-mind and optimistic outlook, and adaptability. The
entrepreneur should also have self confidence, leadership qualities. Yu
QUALITIES OF SUCCESSFUL ENTREPRENEUR
The Indian business has seen great successful entrepreneurs like Tatas, Birlas, Modi, Dalmia
and many more who came up recently such as Ambaines, Mittals, Jindals, etc. The question
is what makes an entrepreneur successful? Did they all have certain common qualities?
The answer is, they all had certain prominent qualities which can be summarised as follows.
(a) Initiative: An entrepreneur must have an innovative aptitude, pick the right
opportunity, and initiate action. If he/she does not initiate action at the right time the
opportunity may be lost. Hence, the ability of an entrepreneur to take initiative is the
key to the success of the venture to a great extent.
(b) Wide Knowledge: An entrepreneur should have wide knowledge of the economic
and non-economic environment of business like the market, consumer attitudes,
technology, etc. In the absence of such adequate knowledge, the decisions taken by
him may be poor and will not contribute to the profitability of his business in the long
run.
(c) Willingness to assume risk: Entering any venture is full of risks and uncertainties.
In order to deal with various kinds of risks and uncertainties efficiently, the entrepreneur
should have willingness and necessary foresightedness to assume risks. The quantity
and quality of risk taking would determine the quality of business decisions.
(d) Open mind and optimistic outlook: An entrepreneur should have an open mind.
He/she must possess a dynamic and optimistic outlook so as to predict changes in
the business environment and respond effectively without delay.
(e) Adaptability: The entrepreneur must understand the ground realities of the business
environment. He/she should be prepared to adapt to the changes taking place in the system. Any resistance to change
and delay in responding thereto, shall lead to losing
the opportunity of taking advantage thereof.
(f) Self-confidence: For achieving success in life, one should have confidence in himself/
herself. A person who lacks confidence can neither do any work himself/herself nor
inspire others to work. Self-confidence is reflected in courage, enthusiasm and the
ability to lead.
(g) Leadership Qualities: An entrepreneur should possess the qualities of a good
leader. He/she should have the traits of self-discipline, presence of mind, sense of
justice, honour and dignity and above all, a high moral character.
(h) Orientation towards hard work: There is no substitute for hard work in life. While
running a business, one problem or the other may occur. The businessmen has to be
vigilant about these and find solutions thereof as early as possible. This requires hard
work on the part of the entrepreneur. He has to put in extra efforts to ensure success
of the enterprise started by him.

Q2.
Entrepreneurship refers to the functions performed by an entrepreneur. It involves
identification and use of opportunities prevailing in the market and undertaking
promotional activities to launch an enterprise. It involves risk-bearing, creative and
innovative action and constant striving for excellence in the field.
• Entrepreneurship is essential for economic development. It helps in capital formation
and provides large scale employment opportunities. It promotes balanced regional
development in the country and reduces concentration of economic power in a few
hands.
*TYPES
1. Small Business Entrepreneurship
Today, the overwhelming number of entrepreneurs and startups in the United States are still small businesses. There are
5.7 million small businesses in the U.S. They make up 99.7% of all companies and employ 50% of all non-governmental
workers.

Small businesses are grocery stores, hairdressers, consultants, travel agents, internet commerce storefronts, carpenters,
plumbers, electricians, etc. They are anyone who runs his/her own business. They hire local employees or family. Most
are barely profitable. Their definition of success is to feed the family and make a profit, not to take over an industry or
build a $100 million business. As they can’t provide the scale to attract venture capital, they fund their businesses via
friends/family or small business loans.

2. Scalable Startup Entrepreneurship

Unlike small businesses, scalable startups are what Silicon Valley entrepreneurs and their venture investors do. These
entrepreneurs start a company knowing from day one that their vision could change the world. They attract investment
from equally crazy financial investors – venture capitalists. They hire the best and the brightest. Their job is to search for
a repeatable and scalable business model. When they find it, their focus on scale requires even more venture capital to
fuel rapid expansion.

Scalable startups in innovation clusters (Silicon Valley, Shanghai, New York, Bangalore, Israel, etc.) make up a small
percentage of entrepreneurs and startups but because of the outsize returns, attract almost all the risk capital (and
press.)

3. Large Company Entrepreneurship

Large companies have finite life cycles. Most grow through sustaining innovation, offering new products that are
variants around their core products. Changes in customer tastes, new technologies, legislation, new competitors, etc.
can create pressure for more disruptive innovation – requiring large companies to create entirely new products sold into
new customers in new markets. Existing companies do this by either acquiring innovative companies or attempting to
build a disruptive product inside. Ironically, large company size and culture make disruptive innovation extremely
difficult to execute.

4. Social Entrepreneurship
Social entrepreneurs are innovators who focus on creating products and services that solve social needs and problems.
But unlike scalable startups their goal is to make the world a better place, not to take market share or to create to
wealth for the founders. They may be nonprofit, for-profit, or hybrid.

Q3
MEANING AND DEFINITIONS OF INNOVATION
The term “Innovation” seems to derive from the Latin novus (Hsu 2005), which
means new or young or novel. For most people “to be innovative” means to be
creative and/or to make something new.
Unfortunately there is no single accepted definition of the term “Innovation”. For
some people it means a new idea, for others it means an invention (a materialized
new idea), for some it means a new product (a developed invention), for some others
it means the act of creating a new product or process, while for others it means to
create a new business.
Innovation is defined simply as a "new idea, device, or method. However, innovation
is often also viewed as the application of better solutions that meet new
requirements, unarticulated needs, or existing market needs. This is accomplished
through more-effective products, processes, services, technologies, or business
models that are readily available to markets, governments and society. The term
"innovation" can be defined as something original and more effective and, as a
consequence, new, that "breaks into" the market or society. It is related to, but not
the same as, invention.
The process of translating an idea or invention into a good or service that creates
value or for which customers will pay.
To be called an innovation, an idea must be replicable at an economical cost and
must satisfy a specific need. Innovation involves deliberate application of
information, imagination and initiative in deriving greater or different values from
resources, and includes all processes by which new ideas are generated and
converted into useful products. In business, innovation often results when ideas are
applied by the company in order to further satisfy the needs and expectations of the
customers.
“Innovation is the introduction of new ideas, goods, services, and practices which are
intended to be useful (though a number of unsuccessful innovations can be found
throughout history). The main driver for innovation is often the courage and energy to better the world. An essential
element for innovation is its application in a
commercially successful way. Innovation has punctuated and changed human
history (consider the development of electricity, steam engines, motor vehicles,
etc.).”
Invention meaning
An object, process, or technique which displays an element of novelty
.
Innovation is
The act of introducing something new: something newly introduced
The successful exploitation of new ideas
A creative idea that is realized
Innovation is the entire process by which an organization generates creative new
technological ideas (invention) and converts them into novel, useful and viable
commercial products, services, and business practices for (potential) economic gain.
According to Rosabeth Kanter, “Innovation is the generation, acceptance and
implementation of new ideas, processes, products or services”.
Types of Innovation:
Three basic types of innovation are:
(i) Technical,
(ii) Product,
(iii) Process and
(iiv) Administrative.
Technical innovation involves creation of new goods and services. Many technical
innovations occur through research and development efforts intended to satisfy
demanding customers who are always seeking, new, better, faster and/or cheaper
products.
Technological innovation is daunting in its complexity and pace of change. It is vital
for a firm’s competitive advantage because today’s customers often demand
products that are yet to be designed. As technologies develop, product
obsolescence increases and innovative products will have to be introduced into the
markets.
Product innovation is the creation and subsequent introduction of a good or service
that is either new, or an improved version of previous goods or services.A product innovation is the introduction of a
good or service that is new or
significantly improved with respect to its characteristics or intended uses. These
include significant improvements in technical specifications, components and
materials, incorporated software, user friendliness or other functional characteristics.
Product innovations include both new products and new uses for existing products:
New products. These are goods and services that differ significantly in their
characteristics or intended uses from products previously produced by the firm. The
first microprocessors and digital cameras are examples of new products using new
technologies. The first portable MP3 player, which combined existing software
standards with miniaturised hard-drive technology, was a new product combining
existing technologies.
New uses for products. The development of a new use for a product with only
minor changes to its technical specifications is a product innovation. An example is
the introduction of a new detergent using an existing chemical composition that was
previously used as an intermediary for coating production only.
Provision of service. Product innovations in services can include significant
improvements in how they are provided (for example, in terms of their efficiency or
speed), the addition of new functions or characteristics to existing services, or the
introduction of entirely new services. Examples are significant improvements in
Internet banking services, such as greatly improved speed and ease of use, or the
addition of home pick-up and drop-off services that improve customer access for
rental cars. Providing on-site rather than remote management contact points for
outsourced services is an example of an improvement in service quality.
Design. Design is an integral part of the development and implementation of
product innovations. However, design changes that do not involve a significant
change in a product’s functional characteristics or intended uses are not product
innovations, although they can be marketing innovations. Routine upgrades or
regular seasonal changes are also not product innovations.

Process innovation involves creating a new way of producing, selling or distributing

an existing good or service.
Process innovation is the application or introduction of a new technology or method
for doing something that helps an organization remain competitive and meet
customer demands.
A process innovation is the implementation of a new or significantly improved
production or delivery method. This includes significant changes in techniques,
equipment and/or software. Process innovations can be intended to decrease unit
costs of production or delivery, to increase quality or to produce or deliver new or
significantly improved products.
Process innovations can be distinguished by production methods or delivery
methods.Production methods. These methods involve the techniques, equipment and
software used to produce goods or services. Examples of new production methods
are the implementation of new automation equipment on a production line or the
implementation of computer-assisted design for product development.
Delivery methods. These concern the logistics of the firm and encompass
equipment, software and techniques to source inputs, allocate supplies within the
firm or deliver final products. An example of a new delivery method is the
introduction of a bar-coded or active RFID (radio frequency identification) goods
tracking system.
Equipment and software changes. Process innovations can involve significant
changes in the equipment and software used in services-oriented firms or in the procedures or techniques that are
employed to deliver services. Examples are the
introduction of GPS tracking devices for transport services, the implementation of a
new reservation system in a travel agency and the development of new techniques
for managing projects in a consultancy firm.
Innovations in support services. Process innovations also cover new or
significantly improved techniques, equipment and software in ancillary support
activities, such as purchasing, accounting, computing and maintenance. The
implementation of new or significantly improved information and communication
technology (ICT) is a process innovation if it is intended to improve the efficiency or
quality of an ancillary support activity.

Administrative innovation occurs when creation of a new organisation design better

supports the creation, production and delivery of goods and services.
The various types of innovation often go hand in hand. For example, the rapid
development of business to business e-commerce represents process innovation.
But this new process requires many technical innovations in computer hardware and
software. Also as firms began to use business to business e-commerce,
administrative innovation soon followed. Further, implementation of process innovations necessitated organisational
change. “Doing something new means doing
something differently”. Thus, innovation and organisational change go hand in hand.
*Types of innovation
Innovation varies in scope, time for completion and organisational and societal impact.
Categorisation of any kind usually involves areas of duplication, where the lines between
one category and another overlap. We will overview the main types of innovation and
simplified classification.
We also need to note that categorising an innovation is not a science and any one
innovation can be positioned into different categories by firms.
1.2.1 Four main types of innovation (by innovation object)
As an object of the innovation, the Oslo Manual16 concentrates on four innovation types:
product innovation, process innovation, marketing innovation and organizational
innovation.
Figure 4: Four main types of innovation
A product innovation is the introduction of a good or service that is new or
significantly improved with respect to its characteristics or intended uses. This
includes significant improvements in technical specifications, components and
materials, incorporated software, user friendliness or other functional characteristics.17
Examples of product innovation: first portable MP3 player; introduction of ABS braking,
GPS (Global Positioning System) navigational systems or other subsystem improvements
in cars.
A process innovation is the implementation of a new or significantly improved
production or delivery method. This includes significant changes in techniques,
technology, equipment and/or software.
Examples of new production methods are the implementation of new automation
equipment on a production line or the implementation of computer-assisted design for
product development.
An example of a new delivery method is the introduction of a bar-coded or active RFID
(Radio Frequency Identification) goods-tracking system.
A marketing innovation is the implementation of a new marketing method
involving significant changes in product design or packaging, product placement,
product promotion or pricing.19
Marketing innovation is aimed at better addressing customer needs, opening up new
markets, or newly positioning a firm’s product on the market, with the objective of
increasing the firm’s sales. 20The distinguishing feature of a marketing innovation
compared to other changes in a firm’s marketing instruments is the implementation of a
marketing method not previously used by the firm. It must be part of a new marketing
concept or strategy that represents a significant departure from the firm’s existing
marketing methods. New marketing methods can be implemented for both new and
existing products.21
For example, the first use of a significantly different media or technique – such as product
placement in movies or television programmes – is a marketing innovation.
An organisational innovation is the implementation of a new organisational
method in the firm’s business practice, workplace, organisation or external
relations.22
Organisational innovation can be intended to increase a firm’s performance by reducing
administrative costs or transaction costs, improving workplace satisfaction (and thus
labour productivity), gaining access to non-tradable assets (such as non-codified external
knowledge) or reducing costs of supplies.23
The distinguishing features of an organisational innovation compared to other
organisational changes in a firm is the implementation of an organisational method that
has not been used before in the firm. 24
Examples: the first implementation of practices for employee development and improving
worker retention, such as education and training systems; the first introduction of
management systems for general production or supply operations, such as supply chain
management systems, business reengineering, lean production and quality-management
systems.
*Classification of innovation by novelty of results - Incremental, radical and breakthrough innovation .
*Innovation types by innovation source -R&D and non-R&D
*Innovation types by firms’ innovation strategy -open innovation
and closed innovation.

Q4
Successful innovation is strongly linked to financial performance. Innovation is a key driver
of economic growth. It also brings wider benefits for society. Ideas and discoveries
improve our standard of living. Innovation can also lead to better standards of safety,
better health care, better quality products, and products and services that are better for the
environment. Innovation has increased our productivity far beyond that of previous
generations and has fundamentally changed the way we live and all aspects of our lives.
Innovation and education are key ingredients to our global success in a knowledge
economy.
Our fast-changing world brings challenges and opportunities for businesses. Innovation
can help businesses make the most of these changes. Changing customer needs and
expectations, changing competitors, changing technology, changing external regulatory
environment, and an increasingly global and dynamic marketplace - all bring opportunities
for innovation. Innovation can lower the cost of production, build new markets and
increase competitiveness. Innovation can drive performance by building profitability,
generating employment and increasing market share and growth.
Successful innovation is strongly linked to financial performance. Innovation is a key driver
of economic growth. It also brings wider benefits for society. Ideas and discoveries
improve our standard of living. Innovation can also lead to better standards of safety,
better health care, better quality products, and products and services that are better for the
environment. Innovation has increased our productivity far beyond that of previous
generations and has fundamentally changed the way we live and all aspects of our lives.
Innovation and education are key ingredients to our global success in a knowledge
economy.
Our fast-changing world brings challenges and opportunities for businesses. Innovation
can help businesses make the most of these changes. Changing customer needs and
expectations, changing competitors, changing technology, changing external regulatory
environment, and an increasingly global and dynamic marketplace - all bring opportunities
for innovation. Innovation can lower the cost of production, build new markets and
increase competitiveness. Innovation can drive performance by building profitability,
generating employment and increasing market share and growth.
Q5
Copyrights, trademarks, and patents are commonly referred to as “intellectual property.” Each
one gives the owner exclusive rights to the work, meaning the owner has the right to prevent
anyone else from using their work. Each one deals in different spheres and the main difference
is as follows:
a. A copyright protects the expression of a person’s ideas. Copyright protection is given to
creative works like writing, computer programs, music, lyrics, graphic designs, sculpture,
photographs, movies, and sound recordings. The expression must be “original,” which,
in this context, means a work that is not an copy of another work.
b. In order to qualify for a patent, an invention must be novel, which means that it is
something new. The invention must also be useful and not necessarily very important,
but it must have some use and also must not be obvious. Non-obvious means a person
who is in the field (Phosita) and understands the subject views the invention as a
surprising and significant development in the field.
c. A trademark protects something that is used to identify origin of a product or a service.
A trademark describes something and is not the thing being described. An example of a
trademark would be a corporate identity, such as a logo, which is placed on products to
inform consumers that the product originated from that particular company.
For Example, Mr.X invents a plane that can travel in both the atmosphere as well as space.
Mr.X would get patent for the plane as the idea is novel and non-obvious and fulfil other
requirements like usefulness and technical solution. Then Mr.X puts “X” symbol in his plane
implying his creation or show causing the source. This would be eligible for Trademark. Then,
after some time he decides to write a book on the invention and provides a CD with it. The
expression of the book and CD is protected under the copyright.

The twenty-first century witnessed the emergence of “Intellectual Capital” as a key wealth driver of international trade
between countries, thanks to rapid globalization and liberalization of economies the world over. Intellectual property
rights have become an irreplaceable element of India’s business fraternity, whether in terms of new statues or judicial
pronouncements. India’s consent of the WTO (World Trade Organization) agreement has paved the way for its
compliance with TRIPS (Trade Related Aspects of Intellectual Property Rights).
Intellectual properties rights in India is governed under the following Acts:

Trade Marks Act, 1999

The Patents Act, 1970 (amended in 2005)
The Copyright Act, 1957
The Designs Act, 2000
The Geographical Indication of Goods (Registration and Protection) Act, 1999
The Protection of Plant Varieties and Farmers Rights Act, 2001
The Information Technology Act, 2000

Q7.
MEANING OF COMPANY
Section 3 (1) (i) of the Companies Act, 1956 defines a company as “a company
formed and registered under this Act or an existing company”. Section 3(1) (ii) Of the
act states that “an existing company means a company formed and registered under any
of the previous companies laws”. This definition does not reveal the distinctive
characteristics of a company . According to Chief Justice Marshall of USA, “A company
is a person, artificial, invisible, intangible, and existing only in the contemplation of
the law. Being a mere creature of law, it possesses only those properties which the
character of its creation of its creation confers upon it either expressly or as incidental
to its very existence”.
Another comprehensive and clear definition of a company is given by Lord
Justice Lindley, “A company is meant an association of many persons who contribute
money or money’s worth to a common stock and employ it in some trade or business,
and who share the profit and loss (as the case may be) arising there from. The common
stock contributed is denoted in money and is the capital of the company. The persons
who contribute it, or to whom it belongs, are members. The proportion of capital to
which each member is entitled is his share. Shares are always transferable although the
right to transfer them is often more or less restricted”.According to Haney, “Joint Stock Company is a voluntary
association of
individuals for profit, having a capital divided into transferable shares. The ownership
of which is the condition of membership”.
From the above definitions, it can be concluded that a company is registered
association which is an artificial legal person, having an independent legal, entity with
a perpetual succession, a common seal for its signatures, a common capital comprised
of transferable shares and carrying limited liability.

1. Classification of Companies by Mode of Incorporation

Depending on the mode of incorporation, there are three classes of joint stock
companies.
A. Chartered companies. These are incorporated under a special charter by a
monarch. The East India Company and The Bank of England are examples of
chartered incorporated in England. The powers and nature of business of a chartered
company are defined by the charter which incorporates it. A chartered company has
wide powers. It can deal with its property and bind itself to any contracts that any
ordinary person can. In case the company deviates from its business as prescribed by
the charted, the Sovereign can annul the latter and close the company. Such companies
do not exist in India.
B. Statutory Companies. These companies are incorporated by a Special Act passed
by the Central or State legislature. Reserve Bank of India, State Bank of India, Industrial
Finance Corporation, Unit Trust of India, State Trading corporation and Life Insurance
Corporation are some of the examples of statutory companies. Such companies do not
have any memorandum or articles of association. They derive their powers from the
Acts constituting them and enjoy certain powers that companies incorporated under
the Companies Act have. Alternations in the powers of such companies can be brought
about by legislative amendments.
The provisions of the Companies Act shall apply to these companies also except in
so far as provisions of the Act are inconsistent with those of such Special Acts [Sec
616 (d)]
These companies are generally formed to meet social needs and not for the purpose
of earning profits.
C. Registered or incorporated companies. These are formed under the Companies
Act, 1956 or under the Companies Act passed earlier to this. Such companies come
into existence only when they are registered under the Act and a certificate of
incorporation has been issued by the Registrar of Companies. This is
the most popular mode of incorporating a company. Registered companies may further
be divided into three categories of the following.
i) Companies limited by Shares : These types of companies have a share capital
and the liability of each member or the company is limited by the Memorandum to the
extent of face value of share subscribed by him. In other words, during the existence of
the company or in the event of winding up, a member can be called upon to pay the
amount remaining unpaid on the shares subscribed by him. Such a company is called
company limited by shares. A company limited by shares may be a public company or
a private company. These are the most popular types of companies.
ii) Companies Limited by Guarantee : These types of companies may or may not
have a share capital. Each member promises to pay a fixed sum of money specified in
the Memorandum in the event of liquidation of the company for payment of the debts
and liabilities of the company [Sec 13(3)] This amount promised by him is called Guarantee’. The Articles of Association
of the company state the number of member
with which the company is to be registered [Sec 27 (2)]. Such a company is called a
company limited by guarantee. Such companies depend for their existence on entrance
and subscription fees. They may or may not have a share capital. The liability of the
member is limited to the extent of the guarantee and the face value of the shares
subscribed by them, if the company has a share capital. If it has a share capital, it may
be a public company or a private company.
The amount of guarantee of each member is in the nature of reserve capital. This amount
cannot be called upon except in the event of winding up of a company. Nontrading or non-profit companies formed to
promote culture, art, science, religion,
commerce, charity, sports etc. are generally formed as companies limited by guarantee.
iii) Unlimited Companies : Section 12 gives choice to the promoters to form a
company with or without limited liability. A company not having any limit on the liability
of its members is called an ‘unlimited company’ [Sec 12(c)]. An unlimited company
may or may not have a share capital. If it has a share capital it may be a public company
or a private company. If the company has a share capital, the article shall state the
amount of share capital with which the company is to be registered [Sec 27 (1)]
The articles of an unlimited company shall state the number of member with
which the company is to be registered.

Q8
Factors AFFECTING ENTREPRENEURIAL GROWTH
These conditions may have both positive and negative influences on the emergence of entrepreneurship. Positive
influences constitute facilitative and conducive conditions for the emergence of entrepreneurship, whereas negative
influences create inhibiting milieu to the emergence of entrepreneurship.

Let us look at each one of them in details.

Economic Factors

Economic environment exercises the most direct and immediate influence on entrepreneurship. This is likely because
people become entrepreneurs due to necessity when there are no other jobs or because of opportunity.

The economic factors that affect the growth of entrepreneurship are the following:

1. Capital

Capital is one of the most important factors of production for the establishment of an enterprise. Increase in capital
investment in viable projects results in increase in profits which help in accelerating the process of capital formation.
Entrepreneurship activity too gets a boost with the easy availability of funds for investment.

Availability of capital facilitates for the entrepreneur to bring together the land of one, machine of another and raw
material of yet another to combine them to produce goods. Capital is therefore, regarded as lubricant to the process of
production.

France and Russia exemplify how the lack of capital for industrial pursuits impeded the process of entrepreneurship and
an adequate supply of capital promoted it.

2. Labor
Easy availability of right type of workers also effect entrepreneurship. The quality rather than quantity of labor
influences the emergence and growth of entrepreneurship. The problem of labor immobility can be solved by providing
infrastructural facilities including efficient transportation.

The quality rather quantity of labor is another factor which influences the emergence of entrepreneurship. Most less
developed countries are labor rich nations owing to a dense and even increasing population. But entrepreneurship is
encouraged if there is a mobile and flexible labor force. And, the potential advantages of low-cost labor are regulated by
the deleterious effects of labor immobility. The considerations of economic and emotional security inhibit labor mobility.
Entrepreneurs, therefore, often find difficulty to secure sufficient labor.

3. Raw Materials

The necessity of raw materials hardly needs any emphasis for establishing any industrial activity and its influence in the
emergence of entrepreneurship. In the absence of raw materials, neither any enterprise can be established nor can an
entrepreneur be emerged

It is one of the basic ingredients required for production. Shortage of raw material can adversely affect entrepreneurial
environment. Without adequate supply of raw materials no industry can function properly and emergence of
entrepreneurship to is adversely affected.

In fact, the supply of raw materials is not influenced by themselves but becomes influential depending upon other
opportunity conditions. The more favorable these conditions are, the more likely is the raw material to have its influence
of entrepreneurial emergence.

4. 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 fact remains that the potential of the market constitutes the major determinant of probable rewards from
entrepreneurial function. Frankly speaking, if the proof of pudding lies in eating, the proof of all production lies in
consumption, i.e., marketing.

The size and composition of market both influence entrepreneurship in their own ways. Practically, monopoly in a
particular product in a market becomes more influential for entrepreneurship than a competitive market. However, the
disadvantage of a competitive market can be cancelled to some extent by improvement in transportation system
facilitating the movement of raw material and finished goods, and increasing the demand for producer goods.

5. Infrastructure

Expansion of entrepreneurship presupposes properly developed communication and transportation facilities. It not only
helps to enlarge the market, but expand the horizons of business too. Take for instance, the establishment of post and
telegraph system and construction of roads and highways in India. It helped considerable entrepreneurial activities
which took place in the 1850s.

Apart from the above factors, institutions like trade/ business associations, business schools, libraries, etc. also make
valuable contribution towards promoting and sustaining entrepreneurship’ in the economy. You can gather all the
information you want from these bodies. They also act as a forum for communication and joint action.

political factors affecting business:

BureaucracyCorruption levelFreedom of the pressTariffsTrade controlEducation LawAnti-trust lawEmployment
lawDiscrimination lawData protection lawEnvironmental LawHealth and safety lawCompetition regulationRegulation
and deregulationTax policy (tax rates and incentives)Government stability and related changesGovernment involvement
in trade unions and agreementsImport restrictions on quality and quantity of productIntellectual property law
(Copyright, patents)Consumer protection and e-commerceLaws that regulate environment pollution

There are 4 main effects of these political factors on business organizations. They are:

Impact on economyChanges in regulationPolitical stabilityMitigation of risk

Impact on economy

The political situation of a country affects its economic setting. The economic environment affects the business
performance.

For example, there are major differences in Democratic and Republican policies in the US. This influences factors like
taxes and government spending, which ultimately affect the economy. A greater level of government spending often
stimulates the economy.

Changes in regulation

Governments could alter their rules and regulations. This could in turn have an effect on a business.

After the accounting scandals of the early 21st century, the US SEC became more attentive on corporate compliance.
The government introduced the Sarbanes-Oxley compliance regulations of 2002. This was a reaction to the social
environment. The social environment urged a change to make public companies more liable.

Political Stability

Lack of political stability in a country effects business operations. This is especially true for the companies which operate
internationally.

For example, an aggressive takeover could overthrow a government. This could lead to riots, looting and general
disorder in the environment. These disrupt business operations. Sri Lanka was in a similar state during a civil war. Egypt
and Syria faced disturbances too.

Mitigation of Risk

Buying political risk insurance is a way to manage political risk. Companies that have international operations use such
insurance to reduce their risk exposure.

Q9


What are the various sources of business ideas that can help you start a prosperous business? Well, business ideas are
crucial as they determine the potential energy of the company at start-up levels to the time when it begins to flourish
while achieving set objectives. Here are the top 7 sources of business ideas and opportunities for entrepreneurship that
can lead you to a successful business.

1. Interests and hobbies

A hobby is an activity that you enjoy doing during your leisure-time and is one of the primary sources of business ideas.
In fact, most people have founded great successful businesses while pursuing their interests or hobbies. For instance, if
you enjoy traveling, playing with computers, music, sports, performing or cooking, you can seamlessly develop it into a
business. You can join the tourism, entertainment or hospitality industry by venturing deeper into your favorite activity.
These are just a few suggestions since there are lots of leisure activities that can lead you to the world of successful
entrepreneurship. Just consider what you are good at, and you are ready to go.

2. Customer surveys

The starting point of any new business should be the clients because their needs and wants justify the service or product
that you can offer to them. The wants and needs of the customers are, therefore, the sources of business ideas
generation and you can ascertain them by carrying out a thorough survey. You can conduct such a survey, whether
formally or informally, through questionnaires, interviews or observation as you list the sources of business ideas that
work best for you.

While carrying out the surveys, you can talk with your friends and family to discover what the potential customers need,
yet it is not readily available to them. They may not be contented with the existing service or product and need
improvement. In this case, you can step in and talk with the people in the distribution chain including wholesalers,
retailers, manufacturers, agents, and distributors. It is essential to prepare the questions in advance that you can use in
interviews or put on the questionnaires.

The relationship you build with your potential customers during the survey leads you to new sources of business ideas as
they freely share their challenges with you. Thus, ensure that you talk to several existing and potential customers to
familiarize with them and understand their needs. Be a good listener and observer as you show them that you care by
sharing with them the possible solutions. The more information they are willing to give you, the higher your chances of
founding a successful business.

3. Brainstorming and dreams

Brainstorming is a method of problem-solving and qualifies as one of the seven sources of business ideas since every
company focuses on offering solutions to the problems facing the customers. The secret behind brainstorming is to
come up with as many ideas and options as possible. This process usually starts with a problem statement or question.
For instance, you may ask the question “what are the services or products necessary in the home that are hard to get?”
In this way, each design will result in one or more ideas and lead to several opportunities for becoming an entrepreneur.

Dreams are also part of the sources of developing business ideas though most people tend to ignore them. However, it
pays to consider and follow them up as they can lead to a booming business even if they may seem unintelligible and
strange. Do not hesitate to wake up in the middle of the night and jot down the ideas before they disappear at the crack
of dawn. While you can get ideas during the deep sleep in the form of dreams, you can also discover the germ of a
wonderful business idea as you meditate during the night when you lose sleep.

The rules of brainstorming

Here are the rules that will help you when brainstorming for different sources of business ideas:

Never judge or criticize the ideas and suggestions of othersEncourage freewheeling and invite crazy or wild
ideasQuantity is paramount where the more the number of ideas, the betterCombine and develop the ideas that friends
and colleagues give youNever procrastinate

4. Franchises

A franchise is a situation where a sole trademark distributor or manufacturer of a product gives exclusive rights to
independent retailers for local distribution. This is done in return for the consistency of the retailers to the set operating
procedures and payment of royalties. As one of the sources of business ideas for entrepreneurs, franchising can take
different forms but the most common and preferred one is where you are offered the image, operating procedures and
the name of an established business. Besides buying a franchise, you can also build on and sell its concept at a profit.

5. Mass media

The mass media; including television, newspapers, Internet, radio, and magazines are a great source of ideas,
information, and opportunities. One way to become a successful entrepreneur is taking a careful look at the
advertisements and commercials in these media. By reading a magazine or newspaper, you can easily come across a
business for sale that interests you. These media can also report on the trending fashion, and pressing customer needs
that you can jump on and start a business. If, for example, you find out that there is a high demand for physical fitness
and healthy eating practices, you can start a fitness and healthy eating centre.

While traditional media including television, radio, and newspapers have been great sources of ideas to run new
business, the Internet has emerged as the latest information technology with instant millions of ideas. With just a click
of a button on your computer or phone, you can get the best idea that will work perfectly according to your interests
and locality. Starting a successful business has never been this easy!

6. Personal experience and talents

Most of the ideas and opportunities for successful businesses are a result of the experiences in the place of work. For
example, an experienced manager working for a leading restaurant can eventually decide to start a business related to
hospitality even before he retires. As a potential entrepreneur, therefore, you can make the most use of your skills and
experiences as crucial sources of business ideas generation. They also determine the type of venture that you start as
you capitalize on them. If you are gifted or have experience in a specific field, then it is time to analyze just talent or
skills. You can start off with the following self-examination questions:

What am I passionate about?

What talents or skills do I possess?

Are people willing to pay me for my skills?

What do I need to build on my skills?

7. Trade fairs and exhibitions

Trade fairs and exhibitions are among the top sources of developing business ideas. They are usually advertised on the
Internet, radio, and newspapers, and by attending such events regularly, you will discover new services and products.
You will also meet with manufacturers, sales representatives, distributors, wholesalers, and franchisers who will answer
all your questions and inspire you to start a business that will thrive. In fact, some of them may be in need of someone
like you to partner with, and this will be an exceptional opportunity to partner with renowned entrepreneurs and
franchisers.

Sound business ideas from reliable sources of new ideas for business become good investments when implemented.
Hence, business visionaries and potential entrepreneurs must brainstorm on the ideas that can lead them to a well-
organized and successful business that meets the needs of the clients and promote the economy of the society. Business
idea generation, therefore, helps you identify the opportunities, the people or companies to partner with and your
competitors.
As you compare the different sources of business ideas and the available opportunities, you can easily go for an idea
that involves insignificant risks and no possible failure at the starting stage. You also get to know the latest technology
that will be appropriate for your communications with clients, suppliers, distributors, and partners. When all is said and
done, you get to know how to respond to the ever-changing needs and fashions.

the key methods to help generate end test new ideas:

1. Focus Groups ? these are the groups of individuals providing information in a structural format. A moderator leads a
group of people through an open, in-depth discussion rather than simply asking questions to solicit participant response.
Such groups form comments in open-end in-depth discussions for a new product area that can result in market success.
In addition to generating new ideas, the focus group is an excellent source for initially screening ideas and concept.

2. Brainstorming ? it is a group method for obtaining new ideas and solutions. It is based on the fact that people can be
stimulated to greater creativity by meeting with others and participating in organized group experiences. The
characteristics of this method are keeping criticism away; free wheeling of idea, high quantity of ideas, combinations
and improvements of ideas. Such type of session should be fun with no scope for domination and inhibition.
Brainstorming has a greater probability of success when the effort focuses on specific product or market area.

3. Problem inventory analysis? it is a method for obtaining new ideas and solutions by focusing on problems. This
analysis uses individuals in a manner that is analogous to focus groups to generate new product areas. However, instead
of generating new ideas, the consumers are provided with list of problems and then asked to have discussion over it and
it ultimately results in an entirely new product idea.

Q10.
a very great human being, a legend in the world of Technology and a very inspiring manager. Following are some of the
highlights of certain aspects of his personal and professional life-

Believe in yourself

From his parents garage when I was 20 started “Apple” along with two people and by the time he was 30 years of age it
transformed into a $2bn company with over 4,000 employees. This is a great achievement and one major factor behind
the journey is his “Self belief” in himself, his ideas, his vision. In his speech at Stanford University, he openly accepted
“Don’t lose faith, I’m convinced that the only thing that kept me going was that I loved what I did. You’ve got to find
what you love.”

Nothing is Impossible – Every record is meant to be broken

With the launch of iPhone and its astonishing success being replicated by every launch of new products by Steve Jobs, he
proved that nothing is impossible and every record is meant to be broken. Nokia was the best in the business till iPhone
was launched, and it changed the whole dynamics of mobile industry. Even when iPad was launched apple was the one
of its kind to introduce such a product, though product such as “NetBook” – a laptop specifically designed to perform
tasks such as net surfing and document management.

Be the change

Since its inception, with its innovative products “Apple” always tried to represent itself as a – ‘Unique executor of
ultimate idea’ whether it was Machintosh Workstation, Mac Book, iPhone, iPad or Mac Mini one thing is very clear and
that is it tried to represent the change people want over the conventional offerings. Today Every company in the world
would like to replicate product feature, design, functionality that Apple offers in its various products.

Face the Failure

Life of Steve Jobs holds much significance in more than one aspect of life in the sense that, he himself has gone through
a situation which was simply unacceptable. The board of the company which he himself started decided to fire him. This
is a very complex situation, difficult to accept. After he got fired, he really didn’t know what to do for a few months and
thought to run away from Silicon Valley but eventually he started a new company named NeXT, another company
named Pixar. NeXT was taken over by Apple and Pixar, being the most successful animation studio till date reminds us
the ups and downs and fighting spirit of Steve jobs. Face the failure and sometime these failure turns out to be the best
thing for something even success could not achieve.

Every Challenge is an Opportunity

When Apple were designing the first Macintosh computer, And we designed it all into the Mac. It was the first computer
with beautiful typography. If he had never dropped in on that single course in college, the Mac would have never had
multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, it’s likely that no personal
computer would have them. If he had never dropped out, he would have never dropped in on the calligraphy class, and
personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the
dots looking forward when he was in college. But it was very, very clear looking backwards ten years later.
Steve Jobs, a technocrat who transformed our lives by its unique offering of a variety of products and continue to be a
guiding force even after his death.

Q1 7/8
A sole proprietorship is the simplest business structure in which one person is the owner and operator of the business.
This sole proprietor is responsible for all aspects of the business and reaps all profits of the business.

Because there is no legal distinction between the business and the owner/operator, the owner/operator is in direct
control of the proprietorship’s activities and is accountable for all its debts.
* Advantages of Sole Proprietorships

Beginning a sole proprietorship is easy. Unlike other business structures, starting a sole proprietorship requires less
paperwork and time to create a legal sole proprietorship.It is cheap to start a sole proprietorship. Where other business
structures have increased fees and filings to open for business, sole proprietorships tend to be affordable models to
start and maintain.There are some tax benefits for a sole proprietorship. Instead of the business having to file its own
tax return, sole proprietors claim businesses gains and losses on their own individual tax return. Also, the sole
proprietorship is taxed using individual income tax rates rather than corporate making it simpler and cheaper to comply
with your tax obligations.Sole proprietors can employ others and grow their business. Sole proprietorships can hire
others and enjoy the tax benefits from doing so. Additionally, spouses of the owner can work for the sole proprietorship
without being declared as an employee.Owners have complete and direct controlover all decision making. Because the
owner is the business, the owner makes all decisions for the business rather than sharing power with a partner or
corporate board. This allows owners the freedom to drive the business in the direction they desire.
*Disadvantages of Sole Proprietorships?

Owners are fully liable. If business debts become overwhelming, the individual owner’s finances will be impacted. When
a sole proprietorship fails to pay its debts, the owner’s home, savings, and other individual assets can be taken to satisfy
those debts.Self-employment taxes apply to sole proprietorships. Owners must pay self-employment taxes on the
business income.Business continuity ends with the death or departure of the owner. Because the owner and the sole
proprietorship are one, if the owner dies or becomes incapacitated then the business dies with them and the money and
assets of the business become part of the individual's estate. The assets and money are subjected to inheritance taxes
and can have a great impact on employees of the sole proprietorship.Raising capital is difficult. Initial funds of the
business are generated by the owner and raising funds for the business can be hard since they cannot issue stocks or
other investment income. Loans may also be difficult if the owner does not have enough credit to secure additional
money.

Q2 7/8
1.A person who creates an enterprise, by taking a financial risk in order to get profit, is called an entrepreneur. An
individual who takes the responsibility of controlling and administering the organisation is known as a manager.
2.An entrepreneur focuses on business startup whereas the main focus of a manager is to manage ongoing operations.
3.Achievements work as a motivation for entrepreneurs. On the other hand, the primary motivation is the power.
4.The manager’s approach to the task is formal which is just opposite of an entrepreneur.
5.An entrepreneur is the owner of the enterprise while a manager is just an employee of the company.
6.A manager gets salary as remuneration for the work performed by him. Conversely, profit is the reward for the
entrepreneur.
7.An entrepreneur’s decisions are driven by inductive logic, courage, and determination; that is why the decision making
is intuitive. On the contrary, the decision making of a manager is calculative, as they are driven by deductive logic, the
collection of information and advice.
8.The major driving force of an entrepreneur is creativity and innovation. As against this, a manager maintains the
existing state of affairs.
9.While entrepreneur is a risk taker, the manager is risk averse.

Q3-7/8
Infringement
In dealing with copyright, we should bear in the mind that copyright does not protect novelty
but only originality. Copyright protects only the expression and not the idea. Therefore, if it is
the only method of expressing the work, it cannot be protected. Best example would be the
Telephone Directory wherein the Name, Address, Phone No. are given and also given in
alphabetical order. There can be no other way of expressing the same. Therefore, this would
not amount to copyright infringement. This is popularly referred to as Idea-Expression
Dicothomy.
7.1 The key factors required for initiating any infringement case are:
Prove ownership of Copyright
Infringer has copied (Substantially Similar)
Once the rights of the owner have been established, the next step is to prove that that there is
an actual infringement. If the defendant makes copies of a copyrighted work and commercially
exploits such copies or any blatant infringement, nothing further needs to be proved to
establish infringement apart from what has been discussed above. However, more complicated questions arise when
the defendant the alleged infringing work involved relates to something,
which is similar, but not identical with the plaintiff’s work. In such cases, in order to prove
infringement, the plaintiff must show the following:12
a. The defendant copied directly from the plaintiff’s work, and
b. The elements copied, when taken together, amounts to an improper appropriation.
Realizing that direct evidence of copying will be rarely available, courts have universally allowed
copyright owners to prove copying on the basis of circumstantial evidence, specifically through
inferences from the defendant’s access to the plaintiff’s work and from any similarities
between two works13
.
In the case of Super Cassette Industries Vs Nodules Co. Ltd ., the defendant played cassette in
Hotel amounts to copyright infringement. This was clearly held to be act of infringement of
author’s right over copyright.
Copying can, therefore, be proved by inference. It can be inferred that the defendant has in fact
copied the plaintiff’s work from the fact that the defendant had access to the plaintiff’s work
and from the similarities between his work and that of the plaintiff’s. The rationale behind this
is that given the sufficient opportunity that the defendant had to copy the plaintiff’s work in
addition to the striking similarity between the two works, the evidence in hand is indicative of
copyright infringement.
In the case of Roma Mitra Vs State of Bihar14, the Plaintiff, a student gave the work to the
guide. The guide published the work as her own. The published article was substantially similar
and therefore, amounted to copyright infringement.
In the case of Ty Ink Vs GMA Accessories15, it was held that Similarity between works is highly
unlikely to have been in accident of independent creation. This is an evidence of access.
Therefore, there is a reciprocal relationship between proof of access and similarity and this
relationship is subject to two important limitations.
In the case of S.K. Dutt vs Law Book Co. And Ors.
17, the court determined the amount of
substantiality should be more than half of the total work. It has also held that where the half of
the work is copied and the remaining being original work, it does not constitute infringement.
a. “If there are no similarities, no amount of evidence of access will suffice to prove
copying”.
b. “If evidence of access is absent, the similarities must be so striking as to preclude the
possibility that plaintiff and the defendant arrived at the same result.”
Therefore, to summarise the Condition to prove infringement can be summarized as follows:
a. Closely Similarity
b. Unlawful
c. Some connection
d. Access to original work

Q4.7/8
After you line up financing, find a suitable location, hire staff and organize a potentially successful business plan, you
must turn to external factors to effectively predict your future. There are a slew of factors to take into consideration that
usually are beyond your control. While you may have contingency plans in place to deal with outside influences that
affect your business, sometimes the best you can do is improvise when they occur.
Economy and Market Fluctuations

The global economy is one of the biggest external factors that will, at some time, affect your business. Market
fluctuations based on politics, terrorism attacks, wars and currency devaluation eventually trickle down to most
commercial enterprises.

Finance and Credit

Wall Street and the solvency of big banks and financial institutions may not seem to have much to do with your
business, but eventually they may affect your ability to continue doing business. Interest rates, the availability of credit
and consumer loans are external factors you rarely can control.

Impacts from Severe Weather

If man could control the weather, vacation resorts would know exactly when to charge the highest room rates. Storms,
tornadoes, hurricanes and wildfires are outside your purview of controllable business factors. In addition to the direct
impact a storm may have on your ability to open your doors at any given time, widespread weather events often carry a
substantial trickle-down effect to a wide range of businesses.

Changes in Local Infrastructure

Zoning laws, highway construction and housing development are particularly important to retail establishments,
restaurants, manufacturers and other businesses that rely on a location for success. Changes in the local infrastructure
may prove either disastrous or fortuitous to your company.

Changes to Laws

State, local or federal changes in the laws can have a direct impact on your business if the service or product becomes
highly regulated or outlawed. Cigarette manufacturers learned this lesson when public smoking was outlawed in many
areas and smoking indoors has become practically nonexistent. Government regulations such as those that affect the
environment or communication are beyond your control and could have a direct impact on your business.

Changing Trends and Technology

While you may spend a good part of your profits on marketing in the hopes of favorably influencing trends, some are
beyond your control. An increase in technology use by your customers may be built into your strategic planning, but you
may not have planned for the widespread use of social media that could affect your business. Celebrities who become
advocates for a cause or decide to boycott a certain business practice can start a trend that could seriously affect your
business if you're on the wrong side of the trend.

Changing Customer Base

Your target customer base may change suddenly or slowly over a period of time. The changing makeup of your
neighborhood that attracts more singles or young renters can affect your business for example if you cater to a more
upwardly mobile, family-oriented customer base. Cultural implications of a changing neighborhood may affect your
business negatively or positively depending on your ability to meet the needs of changing demographics.

Q5 7/8

Feasibility analysis is the process of confirming that a strategy, plan or design is possible and makes sense. This can be
used to validateassumptions, constraints, decisions, approaches and business cases. The following are common types of
feasibility analysis.

Financial

Validating that a goal is possible within your financial constraints. For example, a construction project that usesreference
class forecasting as a sanity check for project budget.

Schedule

Validating that a goal is possible with time constraints. For example, a fashion label discovers a trendy new fashion
accessory at a fashion week. They do a feasibility check to see if they can produce and distribute the item in time for the
Spring/Summer season.

Technical

Validating that a given technology can support requirements or that a goal is technically possible. For example, an
ecommerce project confirms that a partner's API can support a list of requirements for an integrationproject.
Market

Research to estimate the probability that a product, service or customer experience strategy will succeed in the market.
This may include factors such as customer needs, perceptions, demand, positioning and competition.

Regulations & Standards

Confirming that a strategy complieswith laws, regulations and standards.

Organizational

Looking at the people side of changesuch as a strategy that requires a significant change to organizational culture.

Operations
The feasibility of deploying and operating a project. For example, the costs and technical challenges associated with
operating and maintaining a deep water offshore wind farm

Q6 7/8
Q7 7/8
Procedure of Registration and Incorporation of a Company

Procedure of Registration

For the registration of a company, the following documents, together with necessary fees, must be submitted to the
Registrar of Companies of the State in which the registered office of the company will be situated.

1The Memorandum of Association, prepared in accordance with the provisions of the Companies Act, and signed by at
least 7 persons in the case of public companies and 2 persons in the case of private companies.
2The Articles of Association, in case of unlimited companies, companies limited by guarantee and private companies
limited by shares.
3 A declaration by any o the following persons, stating that all the requirements of the Act have been complied with an
advocate, an attorney, a pleader, a chartered accountant, or a person named in the articles as director, manager or
secretary of the company.
4A duly singed list of persons have consented to be directors of the company, their consent in writing and the singed
agreement with every such director to take the number of shares required to qualify as director. These are not required
in the case of private companies and companies not having a share capital.
5The Registration fees of a Company are fixed on a graduated scale on the amount of nominal capital or the number of
members. There is also a filing fee per document.

If the Registrar is satisfied that all the requirements of the Act have been complied with, he will register the company
and issue a certificate called the Certificate of Incorporation.(The certificate issued by the Registrar after a company is
registered is called the Certificate of Incorporation.)

Q10 7/8
PROS-
1.The risk of business failure is reduced by franchising. Your business is based on a proven idea. 2.You can check how
successful other franchises are before committing yourself.
3.Products and services will have already established a market share. Therefore there will be no need for market testing.
4.You can use a recognised brand name and trade mark. You benefit from any advertising or promotion by the owner of
the franchise - the 'franchisor'.
5.The franchisor gives you support - usually as a complete package including training, help setting up the business, a
manual telling you how to run the business and ongoing advice.
6.No prior experience is needed as the training received from the franchisor should ensure the franchisee establishes
the skills required to operate the franchise.
7.A franchise enables a small business to compete with big businesses, more so than an independent small business, due
to the pool of support from the franchisor and network of other franchisees.
8.You usually have exclusive rights in your territory. The franchisor won't sell any other franchises in the same territory.
9.Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good
reputation.
10.You can benefit from communicating and sharing ideas with, and receiving support from, other franchisees in the
network.
Relationships with suppliers have already been established.
CONS-
1.Costs may be higher than you expect. As well as the initial costs of buying the franchise, you pay continuing
management service fees and you may have to agree to buy products from the franchisor.
2.The franchise agreement usually includes restrictionson how you can run the business. You might not be able to make
changes to suit your local market.
3.You may find that after some time, ongoing franchisor monitoring becomes intrusive.The franchisor might go out of
business.
4.Other franchisees could give the brand a bad reputation, so the recruitment process needs to be thorough.
5.You may find it difficult to sell your franchise - you can only sell it to someone approved by the franchisor.
6.All profits (a percentage of sales) are usually sharedwith the franchisor.
7.The inflexible nature of a franchise may restrict your ability to introduce changes to the business to respond to the
market or make the business grow.

Q11. 7/8
This is the Age of the Entrepreneur. Never has entrepreneurship become more attractive that it is today that students
are encouraged to turn down corporate offers and establish their own businesses and ventures. But, before you set out
to do that, use these tried-and-tested tips to help build that perfect pitch, which investors won’t be able to turn down.

Get the story right: There are myriad reasons why one sets up a business or a venture. It is necessary to ask oneself the
Why—the reason for becoming an entrepreneur. It could be something very personal or maybe a great business
opportunity. Whatever be the case, get your story right because you will need that vision to channel the business as you
grow.
Be clear on the core problem and your solution: Make the pitch short and simple as you probably would have less than a
minute to make a compelling case. Investors listen to start-up proposals all the time and it would be prudent to ensure
that your proposal talks about the core problem that the start-up will be addressing and how.

Detail Evolution of Product / Service: Your proposal should include details of how you see the product or the service
offering evolving in the first three years. This would give investors a very clear idea about how the entrepreneur sees the
start-up flourishing and its financial feasibility.

Know your split: It is necessary to know your numbers in advance. This will help you in figuring out how much equity you
are willing to split with the investor. Depending on the funding they are willing to put up, some investors will want a lot
of equity and some other kinds of incentives. Whatever the case, have a good idea of what is a reasonable split.

Be open minded: One of the biggest problems that most investors face is the lack of willingness on the part of
entrepreneur to listen. You need to leave your ego at the door when you seek funds and be open to the suggestions that
are offered by the investors. Investors will ask numerous questions about the product/service and sometimes offer
suggestions to change the business model or technology platform. Take the time to consider the questions and
suggestions and view them as insights.

Know your investor: It is imperative that you do your homework on the investors before you approach them. Investors
have different preferences in terms of the type of business or industry, the level of risk, and what stage the start-up is at.
Entrepreneurs should make an effort to build a relationship with the investor rather than just viewing them as a fund
source.

Show your conviction: The investor wants to know that you’re doing everything possible to take advantage of every
opportunity that is being given to you and working 24*7 to make the company a success. This conviction should shine
through your presentation and pitch.

Keep a realistic valuation: An investment discussion should never begin with how much the start-up is worth.
Experienced investors will be able to give you an idea of the start-up’s valuation and even the entrepreneur must set a
realistic target of what he/she can expect in the market. Valuations may be adjusted based on the strength of the
management team, location of the business, industry or market.

Have clear knowledge about market: Do your research before you decide to take the entrepreneurship plunge. Know
your market. Is the project viable? Are there many companies in the area that you are looking to enter in? Is there a
demand for your product and service? If so, what can differentiate you from the rest of the crowd? Doing proper due
diligence will hold you in good stead as it could very well be the difference between success and failure.

Who’s your competition? Never say that you don’t have competitors. It is either a sign of arrogance or naiveté. Either
you are limiting yourself to direct competitors or you are not looking hard enough. Once you do identify them, then
ensure that you understand their business strategy, their strengths and weaknesses and it should be listed in your
business plan.

Q12 7/8 Q13 7/8

SN1

SN2
negotiation
An activity,
generally face to face,
with two or more players who,
facing interest divergence
and feeling that they are interdependent,
choose to actually look for an arrangement,
in order to put an end to this divergence
and thus create,
maintain or develop
a relationhip between them.
Negotiation is back and forth
communication designed to reach
agreement while leaving the other side
intact and positive.
Easier to negotiate when the two sides
have some shared interests and some
opposed.
Soft:
Participants are friends.
The goal is agreement.
Hard:
Participants are adversaries.
The goal is victory.
*Functions of a negotiation
• Trade and economic exchange (trading/dealing)
• Interactiv decision making (joint project)
• Conflict resolution (an alternative to « war »)
• Drafting joint rules (institutionalization)
Principled =Negotiating on the merits or
principles or interest based negotiation
Develop multiple options to choose from;
decide later.
Avoid premature judgment.
Avoid searching for the single answer.
Avoid assuming the pie is fixed.
Avoid thinking that “solving their problem
IS their problem”.
When and where do we negotiate?
At Work
 Salary and job responsibilities, space etc
With Patients
Compliance
At Home
Other ??
Includes:
Listening
Ability to identify the interests of
both sides
Persuasion
Diplomacy
Building and preserving relationships
The Six-Step
(Negotiation)Process
State the problem/issue.
Identify real needs (interests)on
both sides.
Restate the problem/issue(I think
the real issue is…).
Present possible solutions.
Decide on the best solution.
Reach consensus.
Barriers to Negotiation
1.Self-perception
It is more important to be liked than
anything else
Tend to feel more empowered to
negotiate for colleagues than for self
(extension of protecting children)
More likely to experience work opposition
as harmful to friendship
Too rule-oriented
When anxious, tend to talk too much!
2Power talk and Power actions
Disqualify assertive statements” This
needs to be done…is that OK?”
Automatically apologize when noting
another’s distress= admission of
responsibility
Invite disagreement<
“You may not like
this, but…."
Negotiation Outcomes
Both sides should come to consensus
and commit to the agreement
The agreement should help to maintain
ongoing communications and
interactions between the negotiating
parties so that future negotiations can
take place
Negotiations should lead to a better
situation.
SN3

What Is an Acquisition?

An acquisition is when one company purchases most or all of another company's shares to gain control of that company.
Purchasing more than 50% of a target firm'sstock and other assets allows the acquirer to make decisions about the
newly acquired assets without the approval of the company’s shareholders. Acquisitions, which are very common in
business, may occur with the target company's approval, or in spite of its disapproval.

We mostly hear about acquisitions of large well-known companies because these huge and significant deals tend to
dominate the news. In reality, mergers and acquisitions(M&A) occur more regularly between small- to medium-size
firms than between large companies.
Why Make an Acquisition?

Companies acquire other companies for various reasons. They may seek economies of scale, diversification, greater
market share, increased synergy, cost reductions, or new niche offerings. Other reasons for acquisitions include

As a way to enter a foreign market. If a company wants to expand its operations to another country, buying an existing
company in that country could be the easiest way to enter a foreign market. The purchased business will already have its
own personnel, a brand name, and other intangible assets, which could help to ensure that the acquiring company will
start off in a new market with a solid base.
As a growth strategy. Perhaps a company met with physical or logistical constraints or depleted its resources. If a
company is encumbered in this way, then it's often sounder to acquire another firm than to expand its own. Such a
company might look for promising young companies to acquire and incorporate into its revenuestream as a new way to
profit.
To reduce excess capacity and decrease competition. If there is too much competition or supply, then companies may
look to acquisitions to reduce excess capacity, eliminate the competition, and focus on the most productive providers.
To gain new technology. Sometimes it can be more cost-efficient for a company to purchase another company that
already has implemented a new technology successfully than to spend the time and money to develop the new
technology itself.

SN4
Innovation is a diverse activity. In laboratories and factory floors, universities and
coffee shops, or even over a beer after work, people are sussing out better ways to
do things. There is no monopoly on creative thought.
However, we do need to be careful, because there is a big difference between a
random brainstorm and a concerted effort. Innovation as an organized practice falls
into four categories:
Basic Research: This is the type of work done at universities and some R&D labs.
There isn’t a clearly defined outcome. The point is to discover more about how things
work.
It would be tough to argue that people like Einstein or Watson and Crick weren’t
innovative. They revolutionized their fields. Moreover, basic research pays huge
dividends in the long term and it’s difficult to imagine our modern world without
discoveries which seemed useless at the time.
Sustaining Innovation: This is the type of innovation that Apple excels at, where
there is a clearly defined problem and a reasonably good understanding of how to
solve it.
When Steve Jobs first envisioned the iPod, it was simply a device that allowed you to
put “1000 songs in your pocket.” That meant you needed to have a certain amount While basic research rarely leads
directly to new products or services, many
corporations invest serious money into it. Some companies, like IBM, have internal
labs doing primary research, while others invest by way of research grants to outside
scientists and academic affiliations.
Sustaining Innovation: Sustaining innovation is probably the most common in the
corporate world and is often referred to as engineering rather than science. Like
basic research, much of this is done by internal R&D labs, but many firms outsource
it as well.
For instance, when Steve Jobs wanted a mouse for the Macintosh computer,
he went to IDEO with clear technical specifications knowing that they had the right
skills to produce what he wanted.
Disruptive Innovation: Disruptive innovation is particularly tricky because you don’t
know it until you see it and sometimes its value isn’t immediately clear. That’s why
venture capital firms expect the vast majority of their investments to fail.
There is also a growing trend toward corporate innovation labs, which work closely
with start-ups to perform ongoing “test and learn” programs that help identify
promising new technologies before they are fully mature.
Breakthrough Innovation: Often, a particular field has trouble moving forward
because they need a new approach. That’s why breakthroughs often come from
newcomers. Einstein and Newton were both in their 20’s when they came up with
their major discoveries. The problem is, of course, waiting for a maverick genius to
come along isn’t an efficient solution.
One way companies have started to attack the problem is through open innovation,
either through internal programs like P&G’s connect and develop or through external
platforms such as Innocentive. As Jonah Lehrer points out in his book Imagine ,
answers to tough questions often come from professionals working outside their
chosen field.
Finally, some companies build multidisciplinary teams and set them up in a separate
unit to pursue a particular innovation, like IBM did when they created the PC. This is
rare, but can be the only viable option when breakthrough innovation is crucial to the
future of a business. +SS

SN5 same as Q5 7/8

SN 6 same Q6 7/8

SN 7
Business Plan

It is pertinent to note that when one is involved in making a business plan, one must always give greater thought to the
role that one’s audience will play. This is because it is only on account of their help and support, the business will
become a reality. Thus, in order to get a positive reaction from the desired audience, one must give considerable
importance to their audience. The fact that it will serve as a blueprint is genus, the species are:

Feasibility of the plan:

A business plan will in reality help one to understand whether pursuing the opportunity is worth it or not without
actually delving in it and ending up losing the two most essential resources of all, that is, money and time.

2. Business plan acts as a blueprint:

The business plan will provide a detailed outline of the business which will not only attract capital and help people be on
the same page but will also help equalize our emotions and prevent us from making mistakes, which at the initial stages
can be very harmful.

3. Helps identify potential weakness:

As the head already suggests, despite preventing us from making fatal mistakes, business plans can also locate inherent
and unrealized loopholes. Further, through a business plan, one can also receive potential opinions and feedbacks.

4. Raising capital:

Having a business plan will make it easier to raise funds as it will become very easy to communicate with the investors. A
business plan will give a detailed view of the business which, as mentioned above, will not only be advantageous for the
aspirer but also for the investors.

5. Chances of Success:

By being able to evaluate factors such as the feasibility and the potential weaknesses, one can avoid the pitfalls thereby
making a progressive step towards success. A business plan increases the chances of success considerably.

Conclusion

A business plan is not important as is evident from the generic idea that revolves around it, i.e., it being the first step. It
is important because it can help an organisation go through and fight the start-up phase which in most of the cases,
decides the fate of an organization. Further, a business plan is another step which affirms the commitment that one has
towards one’s aspirations.

SN 8 SAME AS Q9

SN 9 SAME AS Q11 7/8

SN 10.
CHARACTERISTICS OF A COMPANY
The main characteristics of a company are :
1. Incorporated association. A company is created when it is registered under
the Companies Act. It comes into being from the date mentioned in the certificate
of incorporation. It may be noted in this connection that Section 11 provides that an
association of more than ten persons carrying on business in banking or an association
or more than twenty persons carrying on any other type of business must be registered
under the Companies Act and is deemed to be an illegal association, if it is not so
registered.
For forming a public company at least seven persons and for a private company
at least two persons are persons are required. These persons will subscribe their names
to the Memorandum of association and also comply with other legal requirements of
the Act in respect of registration to form and incorporate a company, with or without
limited liability [Sec 12 (1)].
2. Artificial legal person. A company is an artificial person. Negatively speaking,
it is not a natural person. It exists in the eyes of the law and cannot act on its own. It has
to act through a board of directors elected by shareholders. It was rightly pointed out
in Bates V Standard Land Co. that : “The board of directors are the brains and the only
brains of the company, which is the body and the company can and does act only through
them”.
But for many purposes, a company is a legal person like a natural person. It has
the right to acquire and dispose of the property, to enter into contract with third parties
in its own name, and can sue and be sued in its own name.
However, it is not a citizen as it cannot enjoy the rights under the Constitution
of India or Citizenship Act. In State Trading Corporation of India v C.T.O (1963 SCJ
705), it was held that neither the provisions of the Constitution nor the Citizenship
Act apply to it. It should be noted that though a company does not possess fundamental
rights, yet it is person in the eyes of law. It can enter into contracts with its Directors,
its members, and outsiders.
Justice Hidayatullah once remarked that if all the members are citizens of India,
the company does not become a citizen of India.
3. Separate Legal Entity : A company has a legal distinct entity and is independent
of its members. The creditors of the company can recover their money only from the
company and the property of the company. They cannot sue individual members.
Similarly, the company is not in any way liable for the individual debts of its members.
The property of the company is to be used for the benefit of the company and nor for the personal benefit of the
shareholders. On the same grounds, a member cannot claim
any ownership rights in the assets of the company either individually or jointly during
the existence of the company or in its winding up. At the same time the members of
the company can enter into contracts with the company in the same manner as any
other individual can. Separate legal entity of the company is also recognized by the
Income Tax Act. Where a company is required to pay Income-tax on its profits and
when these profits are distributed to shareholders in the form of dividend, the
shareholders have to pay income-tax on their dividend of income. This proves that a
company that a company and its shareholders are two separate entities.
The principal of separate of legal entity was explained and emphasized in the
famous case of Salomon v Salomon & Co. Ltd.
The facts of the case are as follows :
Mr. Saloman, the owner of a very prosperous shoe business, sold his business
for the sum of $ 39,000 to Saloman and Co. Ltd. which consisted of Saloman himself,
his wife, his daughter and his four sons. The purchase consideration was paid by the
company by allotment of & 20,000 shares and $ 10,000 debentures and the balance in
cash to Mr. Saloman. The debentures carried a floating charge on the assets of the
company. One share of $ 1 each was subscribed by the remaining six members of his
family. Saloman and his two sons became the directors of this company. Saloman was
the managing Director.
After a short duration, the company went into liquidation. At that time the
statement of affairs’ was like this: Assets :$ 6000, liabilities; Saloman as debenture holder $ 10,000 and unsecured
creditors $ 7,000. Thus its assets were running short of
its liabilities b $11,000
The unsecured creditors claimed a priority over the debenture holder on the
ground that company and Saloman were one and the same person. But the House of
Lords held that the existence of a company is quite independent and distinct from its
members and that the assets of the company must be utilized in payment of the
debentures first in priority to unsecured creditors.
Saloman’s case established beyond doubt that in law a registered company is an
entity distinct from its members, even if the person hold all the shares in the company.
There is no difference in principle between a company consisting of only two
shareholders and a company consisting of two hundred members. In each case the
company is a separate legal entity.
The principle established in Saloman’s case also been applied in the following:
Lee V. Lee’s Airforming Ltd. (1961) A.C. 12 Of the 3000 shares in Lee’s Air
Forming Ltd., Lee held 2999 shares. He voted himself the managing Director and also
became Chief Pilot of the company on a salary. He died in an aircrash while working
for the company. His wife was granted compensation for the husband in the course of
employment. Court held that Lee was a separate person from the company he formed,
and compensation was due to the widow. Thus, the rule of corporate personality enabled
Lee to be the master and servant at the same time.
The principle of separate legal entity of a company has been, in fact recognized
much earlier than in Saloman’s case. In Re Kondoi Tea Co Ltd. (1886 ILR 13 Cal 43), it was held by Calcutta High Court
that a company was a separate person, a separate
body altogether from its Shareholders. In Re. Sheffield etc. Society - 22 OBD 470), it
has been held that a corporation is a legal person, just as much in individual but with no
physical existence.
The characteristic of separate corporate personality of a company was also
emphasized by Chief Justice Marshall of USA when he defined a company “as a person,
artificial, invisible, intangible and existing only in the eyes of the law. Being a mere
creation of law, it possesses only those properties which the charter of its creation
confers upon it either expressly or as accident to its very existence”. [Trustees of
Darmouth College v woodward (1819) 17 US 518)
4. Perpetual Existence. A company is a stable form of business organization. Its
life does not depend upon the death, insolvency or retirement of any or all shareholder
(s) or director (s). Law creates it and law alone can dissolve it. Members may come
and go but the company can go on for ever. “During the war all the member of one
private company , while in general meeting, were killed by a bomb. But the company
survived; not even a hydrogen bomb could have destroyed i”. The company may be
compared with a flowing river where the water keeps on changing continuously, still
the identity of the river remains the same. Thus, a company has a perpetual existence,
irrespective of changes in its membership.
5. Common Seal. As was pointed out earlier, a company being an artificial person
has no body similar to natural person and as such it cannot sign documents for itself. It
acts through natural person who are called its directors. But having a legal personality, it can be bound by only those
documents which bear its signature. Therefore, the law
has provided for the use of common seal, with the name of the company engraved on it,
as a substitute for its signature. Any document bearing the common seal of the company
will be legally binding on the company. A company may have its own regulations in its
Articles of Association for the manner of affixing the common seal to a document. If
the Articles are silent, the provisions of Table-A (the model set of articles appended to
the Companies Act) will apply. As per regulation 84 of Table-A the seal of the company
shall not be affixed to any instrument except by the authority of a resolution of the
Board or a Committee of the Board authorized by it in that behalf, and except in the
presence of at least two directors and of the secretary or such other person as the
Board may appoint for the purpose, and those two directors and the secretary or other
person aforesaid shall sign every instrument to which the seal of the company is so
affixed in their presence.
6. Limited Liability : A company may be company limited by shares or a
company limited by guarantee. In company limited by shares, the liability of members
is limited to the unpaid value of the shares. For example, if the face value of a share in
a company is Rs. 10 and a member has already paid Rs. 7 per share, he can be called
upon to pay not more than Rs. 3 per share during the lifetime of the company. In a
company limited by guarantee the liability of members is limited to such amount as the
member may undertake to contribute to the assets of the company in the event of its
being wound up.
7. Transferable Shares. In a public company, the shares are freely transferable.
The right to transfer shares is a statutory right and it cannot be taken away by a provision in the articles. However, the
articles shall prescribe the manner in which such transfer
of shares will be made and it may also contain bona fide and reasonable restrictions on
the right of members to transfer their shares. But absolute restrictions on the rights of
members to transfer their shares shall be ultra vires. However, in the case of a private
company, the articles shall restrict the right of member to transfer their shares in
companies with its statutory definition.
In order to make the right to transfer shares more effective, the shareholder can
apply to the Central Government in case of refusal by the company to register a transfer
of shares.
8. Separate Property : As a company is a legal person distinct from its members,
it is capable of owning, enjoying and disposing of property in its own name. Although
its capital and assets are contributed by its shareholders, they are not the private and
joint owners of its property. The company is the real person in which all its property is
vested and by which it is controlled, managed and disposed of.
9. Delegated Management : A joint stock company is an autonomous, selfgoverning and self-controlling organization.
Since it has a large number of members,
all of them cannot take part in the management of the affairs of the company. Actual
control and management is, therefore, delegated by the shareholders to their elected
representatives, know as directors. They look after the day-to-day working of the
company. Moreover, since shareholders, by majority of votes, decide the general policy
of the company, the management of the company is carried on democratic lines.
Majority decision and centralized management compulsorily bring about unity of action.

SN 11 SAME AS Q6

SN 13
The simplest way to describe a joint stock company is that it is a business organisation that is owned jointly by all its
shareholders. All the shareholders own a certain amount of stock in the company, which is represented by their shares.
Professor Haney defines it as “a voluntary association of persons for profit, having the capital divided into some
transferable shares, and the ownership of such shares is the condition of membership of the company.” Studying the
features of a joint stock company will clarify its structure.
Features of a Joint Stock Company

1] Artificial Legal Person

A company is a legal entity that has been created by the statues of law. Like a natural person, it can do certain things,
like own property in its name, enter into a contract, borrow and lend money, sue or be sued, etc. It has also been
granted certain rights by the law which it enjoys through its board of directors.

However, not all laws/rights/duties apply to a company. It exists only in the law and not in any physical form. So we call
it an artificial legal person.

2] Separate Legal Entity

Unlike a proprietorship or partnership, the legal identity of a company and its members are separate. As soon as the
joint stock company is incorporated it has its own distinct legal identity. So a member of the company is not liable for
the company. And similarly, the company will not depend on any of its members for any business activities.

3] Incorporation

For a company to be recognized as a separate legal entity and for it to come into existence, it has to be incorporated.
Not registering a joint stock company is not an option. Without incorporation, a company simply does not exist.

4] Perpetual Succession

The joint stock company is born out of the law, so the only way for the company to end is by the functioning of law. So
the life of a company is in no way related to the life of its members. Members or shareholders of a company keep
changing, but this does not affect the company’s life.
5] Limited Liability

This is one of the major points of difference between a company and a sole proprietorshipand partnership. The liability
of the shareholders of a company is limited. The personal assets of a member cannot be liquidated to repay the debts of
a company.

A shareholders liability is limited to the amount of unpaid share capital. If his shares are fully paid then he has no
liability. The amount of debt has no bearing on this. Only the companies assets can be sold off to repay its own debt. The
members cannot be made to pay up.

6] Common Seal

A company is an artificial person. So its day-to-day functions are conducted by the board of directors. So when a
company enters any contract or signs an agreement, the approval is indicated via a common seal. A common seal is
engraved seal with the company’s name on it.

So no document is legally binding on the company until and unless it has a common seal along with the signatures of
the directors.

7] Transferability of Shares

In a joint stock company, the ownership is divided into transferable units known as shares. In case of a public company
the shares can be transferred freely, there are almost no restrictions. And in a public company, there are some
restrictions, but the transfer cannot be prohibited.

SN15
top ten reasons for why we need
innovation.
10. For economic growth
This is the most often cited reason for needing innovation. Innovation is the route to
economic growth. Industries are maturing. Products are maturing. Innovation is the
creation and transformation of new knowledge into new products, processes, or services
that meet market needs. As such, innovation creates new businesses and is the
fundamental source of growth in business and industry.
9. For the progression of human well-being
This may be the least cited reason for needing innovation but perhaps the most important
result of achieving innovation. As given in number 10, innovation creates new
businesses. As such and at the same time, new businesses create new jobs. For reasons
obvious, new jobs create personal income and thereby provide the where-with-all for
achieving the personal well-being of humans.
Innovative new products are essential to the progress of any society. Imagine if we had
not progressed beyond stone-age tools and implements: we might go home tonight and do
a load of laundry by banging our socks with a big stone in the neighborhood stream. New
products respond to the wants and needs of the populace and stimulate higher standards
of living. The processes of developing new products provide employment and economic
well-being for those directly associated with them and for persons employed in
supporting industries. Thus, when innovation processes are properly managed (the proper
management of innovation processes is the subject of another discourse), an expanding
variety of new products stream forth. These products respond to the changing needs of a
society whose welfare is constantly increasing.
8. For competitive advantage
Companies that use and act on their insights get a jump on the competition. They are the
competition. They leave behind those that are lulled by the security of strong, enduring
economic performance and the conventional corporate wisdom that stays the course.
Often, the leader loses. The battle is swift; it's too late to respond. This is not a theory. It
is fact.
• Michelin captured the US tire market when it introduced radials.
• Citibank made its competitors look old-fashioned when it introduced ATMs.
2 of 2 of TOP 10 Reasons Why We Need INNOVATION by Lorraine Yapps Cohen
at www.amcreativityassoc.org
• Sony grabbed the recorded music market with the introduction of the compact
disc.
• The Japanese gained advantage over the Swiss with digital watches.
• Text processors, now computers, obsoleted Smith Corona's product, the
typewriter.
Examples abound.
7. Because cost-cutting is not enough anymore
Profit = revenue cost. The profit equation shows that for profits to grow, or even be
maintained, you've got to manage cost, even reduce it. It is the most obvious way to grow
profits. And companies have been doing this: with technology; by downsizing; through
re-engineering. While U.S. companies have been very good at squeezing the last ounces
of efficiency out of their organizations and work processes, and while companies have
pared their costs to the bone, many are looking anorexic. These practices simply allow
you to stay in the game, to stay in the business. They alone are not enough.
6. Desire for higher business revenues
On the same side of the profit equation as cost is the revenue term. It is the most often
neglected term, but it takes only a little insight to see that profits can be increased by
increasing revenue. With costs reaching bottom and few opportunities to reduce them
further, companies can turn to increasing sales. Marketing innovations come to mind here
and do well to sell more of what you have to sell. But new products and services bring in
new revenues too. Innovation sells.
5. To improve disappointing performance in the past 2 decades of U.S. firms
It has been suggested that the disappointing performance of U.S. firms during the 1980s
in technology-intensive, global markets was from failure to improve upon products and
processes. It has been cited that "the U.S. makes the breakthroughs, while other countries,
especially Japan, provide the follow-through." Revolutionary innovation has been
contrasted with less dramatic advancements. Incremental improvement can turn products
over and get more, newer models out. This may all sound dull, but the achievements can
be exhilarating. American firms may have failed to follow up on their breakthroughs with
such continuous improvements. Where there were successes, they were built upon a
combination of breakthroughs and incremental improvements. It is the subject of yet
another discourse as to what constitutes an innovation: a breakthrough or an incremental
improvement, or both, and/or everything in between.
4. To take advantage of opportunity
It is no surprise that surprises, often disappointing surprises, are the seeds of innovation.
Take the oil companies. It is no surprise that some oil companies are becoming oil-and-
gas companies. Why? Because gas is found more often and in greater abundance than oil 3 of 3 of TOP 10 Reasons Why
We Need INNOVATION by Lorraine Yapps Cohen
at www.amcreativityassoc.org
is. After the surprise and disappointment of continued gas finds, oil companies realized
that opportunity might be presenting itself. With large amounts of a raw material
considered to be the less desirable one, you can be sure that utilizing the abundant raw
material in hand became the focus of many innovations in the oil industry.
Take 3M's Post-It notes. You know this story. A researcher was disappointed in the
laboratory with the poor sticking performance of an adhesive he was working on. The
poor sticking performance became the basis of removable but staying-in-place pieces of
paper. The sticking performance was the disappointing surprise that was turned into an
innovation for those who would recognize it as such. It is the subject of yet another
discourse as to the role that serendipity and recognized opportunity play in innovation.
3. For a more constant flow of innovation
For some companies, it's feast or famine. They find themselves either scooping up the
wealth of new ideas turned into new products or waiting for one to arrive. Or pouring
money into existing operations with no visible new output. Or cutting back so hard that
output is a trickle. Innovation and the deliberate systematic management thereof can even
out the surges and slumps by providing a continuous stream of ideas for the innovation
pipeline.
2. For better returns
Innovations themselves not only break the mold (i.e., are truly novel, different, never
done before), but also yield far better returns than ordinary business ventures. One
American study found that the overall rate of return for some 17 successful innovations
made in the 1970s averaged 56%! Compare that with the 16% average return on
investment for all American business over the past 30 years.
I might say I think even 16% is high for the average hurdle rate for new projects. In your
company, what is the hurdle rate what is the expected return for projects to be
considered? A-hah! Then, is your company really looking for innovation?
And the number 1 reason why we need INNOVATION . . .

1. For business survival

As Alan M. Kantrow, editor of Harvard Business Review, once put it, "For companies to
survive a discontinuity (Kantrow is referring to S-curve discontinuities or major
innovations that change the nature of the game: the subject of yet another discourse), they
must face the rather unpalatable reality that there may have to be fundamental changes in
who they are, what they do, and how they do it, as wrenching and dislocating as it may
be." In a real sense, they will have to undergo a metamorphosis. Kantrow does not
discuss the alternative. It is not a subject for further discourse.