Managing Human Capital Entrepreneurship Assignment.docx

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Managing Human Capital Entrepreneurship Assignment

MBA-S 2

Student Name: Biplob Saha

Student Id-L0279KHDKHD1114

Submission date- 23rd

, February, 2015


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Managing Human Capital Entrepreneurship

Assignment Task-1

Abstract:

“The role of uncertainty and imperfect information is crucial for the view of the role of theentrepreneur by Shackle” (Deakins, D and Freel, M, 2012,p.11)

The main objective of this paper is critical analysis of the above statement investigating the

concept of entrepreneur on the basis of standard literatures and examples. Various novel economic

theories, journals and case studies are thoroughly investigated to justify the statement.

Introduction:

Entrepreneur is a common term in economy from earlier times. It has a great impact in world

economy. Various economist defines it in different ways. Economist describes it as a main driving

force of any economy. Many factors play role to become a successful entrepreneur. Deakins and

Freel (2012:11) states the above statement to highlight uncertainty and imperfect information as

important factors on the basis of economist Shackle entrepreneur definition.

The goal of this paper is critical cross examination of (interpretation) what is uncertainty and

imperfect information and how those affect entrepreneur role. To justify the above statement at

first we will determine the entrepreneur definition on the basis of scholar literature. Later we will try

to find out the challenges of an entrepreneur. After that we will investigate the effect of uncertainty

and imperfect information on entrepreneurship concept.

The methodology of this research is qualitative and purely depends on secondary data.

Standard literatures, journals and scholar text books are used to do the literature study.

Who is an Entrepreneur?

Entrepreneur is a French word. (R S. Sobell). French dictionary defines it as an individual who

organizes or operates a business or businesses. According to Oxford Dictionary entrepreneur

meaning is-A person who sets up a business or businesses, taking on financial risks in hope of profit.

The term entrepreneur to define the quality of a businessman first enlisted in the French dictionary

“Dictionnaire Universel de Commerce” edited by Jacques des Bruslons in 1723(Naval et. Al, 2013). In

1725 Irish-French economist Richard Cantillon first determined the entrepreneur definition.

According to him entrepreneur is a person who takes risk to make profit by buying a product in

certain price with the intention of selling in uncertain price.(B. Anthony,1992). Later in 1830 another

French economist Jean-Baptiste Say defined entrepreneur definition elaborately by adding

requirement of managerial skills. (Drucker.Peter F,1985). In 1934 Austrian-American economist

Joseph Schumpeter developed a well-defined theory of entrepreneur. He explained entrepreneur as

an innovator (Schumpeter, 1976).

Role of entrepreneur -

Economist Du Toit (2009) explain entrepreneur as a factor who brings production into motion.

According to him entrepreneur is identified by confidence, creativity and individual skills. Economist

Jennings (1994) described entrepreneur role by six functional role. He derived these role from the

entrepreneur definition which is defined by many famous economist. According to Jennings Richard

Cantillon described entrepreneur as speculator. Jean-Baptiste say identified entrepreneur as a

coordinator and organizer. Famous Economist Frederick Hawler explained entrepreneur as product


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owner. Jennings found entrepreneur as an innovator in the definition of Joseph Schumpeter.

Economist Frank knight described entrepreneur role as a decision maker. Israel kirzner explained

entrepreneur as arbitrator. Jennings defined this six role as functional role of entrepreneur.

What is uncertainty?

Uncertainty is an unavoidable phenomena in business world. In every business uncertainty exist.

Uncertainty is a state where possible outcome is impossible to measure or predict due to insufficient

knowledge or past experience. It is totally different from risk. In case of risk there is possible

outcome which can be predictable with the help of past experience or knowledge. In 1921 Frank

knight in his famous work “Risk, Uncertainty and Profit” clearly distinguished between uncertainty

and risk. According to him uncertainty is cases of unknown probabilities. We are aware of a fact that

technology changes day by day but we don’t know how long the current technology will exist. In

earlier times cable telephone was a prime media which is now not too much in respect. Now a day’s

mobile technology is the main media of communication. We don’t know when new technology will

come. It is uncertainty. Knight described risk as a known probabilities. We know that if we drive rush

accident can happen any time but we don’t know the exact time. It is a risk.

Former USA defence secretary Donald Rumsfeld describes uncertainty as “unknown unknowns” and

risk as “known unknown”

Knight (1921) described the entrepreneur as a profit earner. He explained this profit as a reward for

taking risk. According to knight entrepreneur is person who takes risk to get the profit. He classified

probable outcomes in three types:

1. Risk-It is measurable by perfect calculation.

2. Ambiguity-it is very hard to measure or compute

3. True uncertainty- it is impossible to predict the probable outcomes.

According to Shackle uncertainty sometime creates scopes for entrepreneur opportunities.

According to Barreira et al.(2008) the development of an entrepreneur depends on market

uncertainty.

Uncertainty converts as risk after happening. Due to Tsunami in 2004 the atomic power plant of

Japan was highly affected. The Japanese Government never expected this type of situation. It was an

uncertain case. But, every organization will now count Tsunami before building Power plant near by

sea. It is now a part of risk optimization.

Uncertainty mainly arise due to macro and micro factors. Macro factors are mainly incontrollablefactors which actually comes from outer side of any organization or situation. Weather, government

policy, political policy are macro factors for any industry.

Micro factors are mainly the internal factors. As a business organization other market competitor’s

policy can create uncertainty to its business future. As an example- same type of product

manufactures to grow their market share sale the same quality product in cheaper price.

Continuous market study and environment study can minimize the risk of uncertainty though it is

not work all-time.


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What is imperfect information?

Imperfect information is mainly the difference of information between to information sharer. It is a

gap of information quality among two information collector. According to neo classical economists it

is one of the cause of uncertainty.

An insurance consumer sometimes hide the information of his past heart attack for keeping his

premium low. As a result the insurance company can be looser by paying his medical bill or death

assurance amount. Actually insurance company share this risk as an uncertainty with other

customers.

If a flower farmer after going market see the market price is low what should he do? He can go to

nearest market to sale his flower at a good price. But, it is not confirm that after paying transport fair

or oil price he will get the correct price. It may happen that the price is lower than previous market.

So, to minimize this risk he needs an information about the market.

Actually availability of information only makes a difference between uncertainty and risk. If we can

get some past experience of probable outcomes then it will be counted as a risk not uncertainty.

Here the key player is information. More information means more competitive advantage.

Economists consider imperfect information as a major cause for market failure.( Stiglitz ,2000).

According to Frank Knight (1921) perfect knowledge and certainty only gives scope of purely routine

function. There is no challenging or creativity presence.

Conclusion:

This study examined various important journal which related to entrepreneurship. The entrepreneur

definition and role are discussed. The main findings of this research is dependency of uncertainty on

imperfect information. Uncertainty and imperfect information directly affect the role of an

entrepreneur. According to the study Imperfect information causes uncertainty. By definition

entrepreneur is a person who will overcome the uncertainty through creating new opportunities. An

entrepreneur should prepare for multiple outcomes or worst outcomes. Constant review of every

situation and quick decision on change can save an organization from uncertainty related damage.

Market uncertainty creates scope for new opportunities. It is very easy to make a conclusion that

Uncertainty is a prime cause of necessity to start entrepreneurship. Perfect information is verynecessary to sustain any kind of business. For this reason new and established entrepreneur both

are equally careful to get the perfect information.


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Refrences:

Brewer, Anthony (1992). Richard Cantillon: Pioneer of Economic Theory . Routledge. ISBN-978-0-415-

07

Deakins, D.; Freel, M.S.(2009).”ENTERPRENEURAL ACTIVITY, THE ECONOMY AND THE IMPORTANCE

OF SMALL FDIRMS”. Entrepreneurship and small firms. McGraw-Hill Education. ISBN 978-0-07-

712162-5777-0.

Drucker,Peter F.(1985). Innovation and Entrepreneurship. Attributes the coining and defining of

“entrepreneur” to Jean-Baptiste Say in his A Treatise on political Economy;(1834)

Du Toit, G,S.,Erasmus, B.J and Strydom,J.W.2009. Introduction to Business Management . 7th

Edition.

Oxford, Southern Africa.

Jennings,D.F.1994. Multiple perspectives of entrepreneurship. Cincinnati, Ohio: South Western

Publishing Company.

Knight, F.H. 1964. Risk, Uncertainty and Profit . New York.

Navale,, Ashok Bhanudas(October 2013).”Developing Entrepreneur skills for Corporate Work” .

Research Directions 1 (4). ISSN 2321-5488.

Russell S. Sobel, Concise Encyclopaedia of Economics

Schumpeter, Joseph Alois (1976). Capitalism, Socialism and Democracy . Routledge. ISBN 978-0-415-

10762-4.

Stiglitz,J (2000). The contributions of the economics of information to twentieth century economics.

The Quarterly Journal of Economics, 115(4), 1441-1478


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Food24 business plan

Managing Human Capital Entrepreneurship- task 2

MBA-S 2

Student Name: Biplob Saha

Student Id-L0279KHDKHD1114

Submission date- 23rd

, February, 2015


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Table of contents

1.0. Executive summary

1.1 Objectives

1.2. Mission

1.3. Key to success

2.0. Company summary

2.1. Legal entity

2.2. Products and services

2.3. Location and facilities

2.4. Start-up summary

3.0. Market Analysis and summary:

3.1. Market size

3.2. Target market

3.3. Market trends

3.4. Market competitors

3.5. SWOT Analysis

4.0. Strategy and Implementation

4.1. Market philosophy

4.2. Market strategy

4.3. Sales strategy and forecast

4.4. Pricing strategy

4.5. Promotion and advertising

4, 6. Exit strategy

5.0. Organizational structure

5.1. Management Team

6.0. Financial Plan

6.1. Start-up cost

6.2. Key financial indicators

7. Important assumption

8. Conclusion


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1.0. Executive summary

Food24 will be formed as a fast food company specializing in healthy fast food. This fast food chain

will serve multicusine food and authentic Indian fast food with quick home delivery facility.

Primarily Food24 start-up plan is to introduce its business with three branches which will be located

in high populated area of Kolkata, India. It will take lease of three business property each of around

1000 square foot.

Food24 will be sole trading company. The total start-up cost is RS. 7,320,000. The owner Biplob Saha

will contribute 70% of total start-up cost as RS. 5,124,000 and remaining 30% as RS. 2,196,000 will

be organized by proposed bank loan.

The owner possessed MBA in marketing. He has an experience working as a fast-food employee.

Together of study and experience has developed Food24 plan.

Sale projection is 500 customers per day and as average of 50 per customer sale. The total sale

estimation in 1st

year is RS.9, 125,000 which will increase 20% in 2nd

year and 10% in 3rd

year

consecutively. The breakeven analysis will show that the invested money will incur within 2 years.

The total business plan is developed in Indian rupees as per business requirement as the prime

operation location of the business is India. According to the OANDA exchange the Indian Rupee to

GBP Conversion rate is 95.57 (on 18th

Feb, 15).

1.1 Objectives

The primary objectives of the this company are bellows-

to be the premier local fast- food chain in Kolkata

to provide quality and healthy meals at reasonable price

open first in this region as a 24 hour fast food chain

1.2. Mission

Our mission is to provide healthy fast food at reasonable price. People think fast food as an

unhealthy concept. But we want to change this concept serving freshly prepare healthy food. We

will achieve this goal by enlisting more healthy food in our menu and using organic product as our

raw materials.

1.3. Keys to success

making loyal customer by satisfying customer,

A variety of menu consist of many healthy food

24 hours open policy

convenient location

Customer service

a mix of global menu with the Indian traditional fast food

fast delivery process


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minimize customer waiting time and serving time

2.0. Company summary

Primarily Food24 will open three branches in premium location of Kolkata, India. Food24 will open

to the customer for 24 hours.

2.1 Legal entity and ownership

Food24 will be operated as a sole proprietorship wholly owned by Biplob Saha. The company will be

registered as per company law.

2.2 product and services

Food24 all branches will be open 24 hours for serving various global healthy food. Home delivery

service will be available.

Every branch will serve healthy food like fresh salad, fruit salad, soup, flavoured organic yogurt and

fresh juice. Fresh handmade sandwich and baguettes are most concern in our menu.

Global food like Russian salad, tom yum soup, Chinese rice noodles, Mexican wrap, smashed

potatoes, boil garden peas, Tibetan thukpa, momo will be serve.

Every branch will serve a diabetic meal. Low calorie food will be served for the diet conscious

people. A special child menu will be implement with o spice. Oil free food will be serve. All branch

will serve hot and cold drinks. On top of this Food24 is determined to introduce traditional Indian

fast food

2.3. Location and facilities

Primarily three convenient location will be chosen for opening first three branches. Minimum

required space for every branch 1000 square foot. Every branch consist of 40 seating capacity.

Modern toilet facilities will be available. The ad-hoc requirement is carpark.

Every branch will have online order facilities for delivery. Phone order facility will be available.

2.4 start- up summary

Total start-up costs will be RS 7,320,000 which including all start-up expenses and start-up assets.

The owner will contribute 70% of the start-up cost and the remainder will be managed through a

proposed bank loan. The details are included in financial plan.

3.0. Market Analysis summary

According to the CRISIL Research fast-food market will more than double to Rs.70 billion over the

next three years from Rs.34 billion in 2012-13. (Crisil Research, 13)Fast food business is now most

growing business in India at an average annual growing rate of 27 percent (Crisil Rsearch, 13).


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Data courtesy: CRISIL Research, 13 (in billion Rupees)

3.1. Target market

The main target is middle class and lower class customer as their main concern effective cost. So,

there is a huge chance of getting loyal customer providing quality food in cheaper price. By

introducing diabetic meal we can easily reach to the customers who are diabetic. According to the

International Diabetes Federation (IDF) 62 million of Indian people are diabetic. This is a big

percentage. Our low calorie meal and oil free meal easily can conquer the market as many people

are suffering for obesity problem. Our target is to implement gluten free and allergy conscious food.

3.2. Market size

The total market size of fast food industry of India will be Rs.70 billion by 2016. (CRISIL Research, 13)

3.3. Market trends

Pizza, burger and sandwiches together occupy about 83 percent of total fast food market. (Euro

monitor, 14). Maximum higher class people are regular consumer of global brand like Mc Donald’s,

KFC etc. for hygienic and quality reason .They are not only concern with taste. Healthy and diet food

are in high demand.

3.4. Market competitors

Main market competitors are global brand. Maximum share of the market is occupied by

McDonalds, KFC, dominos, subway and pizza hut. Currently 63 percent of total fast food market is

occupied by these four companies. Only 37 percent of share is occupied by Indian brand. Among

them jumbo king and Goli vada pav successfully running their business.

0

10

20

30

40

50

60

70

80

90

100

2009-10 2012-13 2015-16

Growth in indian Fast-food market


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Courtesy: CRISIL Research,13

Courtesy: Euromonitor,14

3.5. SWOT analysis

Strengths:

Local management so they know the taste of local demands. Normally foreign company do

some research work which is time consuming.

Market conditions are favourable as people already fond of fast food.

Can deliver good quality food in comparatively cheaper price as management running cost

and advertising cost low.

Wider menu so customer can return.

24 hour service so big operational time.

Serving local traditional fast food like samosa, Gulab jamun , chop-cutlet etc.


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Weakness

New venture so inexperience can be a big factor.

huge multinational branded competitors

minimum advertise due to minimum fund

Opportunities

First growing market for fast food.

Quick business growth chance by opening new branch.

Threats

Local customers are interested in global brand. Market entry of more global brand.

limitation of fund for business brunch opening

4.0 strategy and implementation summary

Our main target is become the largest local fast food chain. For this we will train our staff to satisfy

our customer. Regular review and customer feedback will be accepted. When brand image will build,

branch will be open in other cities. The management other strategy is to minimize the customer

waiting time and high quality customer service.

4.1. Marketing philosophy

The main philosophy of Food24 is serving customer better quality food at cheaper price. Menu will

be set with a range of price and variety to give customer flexibility.

4.2. Marketing strategy

Marketing strategy will be depends on product and price. Food24 will grab the market by his

cheaper price compare to the global company. A range of quality and fusion food will be one of its

strategy to get competitive advantage.

4.3 Sales strategy and forecast

Our main sales strategy is to make loyal customer and give 100% effort to retain customer.

Our sale forecast for first year is Rs.9, 125,000 as expected 500 customers per day on the average of

Rs.50 per customer sale. In 2nd

year the expected sale increase is 20%. In 3rd

year the sale will

increase 10% on top of 2nd

year.

Table- 1 Annual sales forecast (Indian Rupees)

Sales forecast Year 1 year 2 Year 3

Total sales 9,125,000 10,950,000 12,045,000


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4.4. Pricing strategy

As it is a new brand so we will price our product little bit below the market price. Our strategy is

maximum sale with minimum profit. It can return us maximum profit end of the year.

4.5. Promotion and advertising:

Our budget in advertising is very low so we cannot afford digital ad. We will distribute product

leaflet in adjacent locality. Some promotional price will be offer to introduce customer. Every

customer will be serve carefully which can grow our business. Word-of-mouth will work for us. Social

media network like Facebook, twitter etc. will be used to promote sale. A well-focused website will

be built to meet current industry trends.

4.6. Exit strategy

By selling the assets like furniture and kitchen equipment’s we could clear debt. As bank loan is only

30% of total start up investment.

5.0. Organizational structure

Food24 is a sole trader company. Owner is the head of this company. Branch manager is responsible

for day to day operations.

5.1. Management team

Our owner self will be top of our management to organize every aspect of this new venture. He

studied MBA in Marketing. He has finished his study in London where he worked for a fast food

company along his education. So, this experience will help to grow Food24.

Skilled chefs, managers and workers will be hired to run this business smoothly.

6.0. Financial plan

Major financial plans are stated below:

6.1. Start -up cost-

Total start -up cost will be Rs.7, 320,000. 70% of start-up cost will be paid by owner and remaining

30% will be arranged by bank loan. Details are included below:

Table2 - Start –up cost (Indian Rupees)

Start-up Expenses Amount

Logo, website, brand creation, IT 20,000

Licence, Lease security deposit 1,500,000

interior 3,000,000

Working capital 500,000

Other expenses 500,000


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Total start-up expenses 2,520,000

Start-up assets

Freezer 300,000

Ice maker 100,000Kitchen instruments 400,000

Table, chair 200,000

Computer, billing machine, printer 300,000

Tv, Ac machine 400,000

others 100,000

Total start -up assets 1,800,000

Total required start-up costs 7,320,000

6.2. Key financial indicators

Break even analysis-

Total fixed costs are Rs. 7,320,000. Expected Variable cost (overhead) is Rs. 20 per h customer when

per customer sale expected is Rs.50. So, break-even revenue is RS.15,275,000 which can be achieved

by serving 305,500 customers.

Table-3 Break-even Analysis (Indian Rupees)

Fixed costs-7,320,000

Variable costs-20 per customer

Number of customer-182500

Average price per customer-50

No of

customer

Net revenue Fixed cost Variable cost Total cost Total profit

0 0 7,320,000 0 7,320,000 -7,320,000182,500 9,125,000 7,320,000 3,650,000 10,970,000 -1,845,000

305,500 15,275,000 7,320,000 6,110,000 13,430,000 0

365,000 18,250,000 7,320,000 7,300,000 14,620,000 3,630,000

547,500 27,375,000 7,320,000 10,950,000 18,270,000 9,105,000


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Projected profit and loss

The profit and loss statement shows increases over the three expected years which demonstrates a

good financial health of the company.

Table -4 Profit and loss statement (Indian Rupees)

Year 1 Year 2 Year 3

income

sales 9,125,500 10,950,000 12,045,000

Cost of goods sold (3,650,200) (4,380,000) (4,818,000)

Gross profit 5,475,300 6,570,000 7,227,000

Expenses

rent 1,500,000 1,500,000 1,500,000

salaries 1,800,000 2,000,000 2,100,000

insurance 100,000 100,000 100,000

tax 300,000 400,000 600,000

Bank debt 500,000 500,000 500,000

Permit license 200,000 200,000 200,000

Other expenses 500,000 600,000 700,000

Total expenses 4,900,000 5,300,000 5,700,000

Net profit 575,300 1,270,000 1,527,000

Projected cash flow

The projected cash flow is stated below:

Table- 5 Cash Flow (Indian Rupees)

Cash flow Year 1 Year 2 Year 3

Owner investment 5,124,000

Bank loan 2,196,000

Cash sales 9,125,000 10,950,000 12,045,000

Cash from operations 574,800 1,744,800

Total cash received 16,445,000 11,524,800 13,789,800

Start-up expenses 7,320,000

salaries 1,800,000 2,000,000 2,100,000

rent 1,500,000 1,500,000 1,500,000

Bank instalments 500,000 500,000 500,000

Sale tax 300,000 400,000 600,000

insurance 100,000 100,000 100,000Permit 200,000 200,000 200,000


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Other expenses 500,000 600,000 700,000

Raw materials cost 3,650,200 4,380,000 4,818,000

Total expenses 15,870,200 9,680,000 10,518,000

Cash balance 574,800 1,744,800 3,271,800

7. Important assumption:

Meal price range from- Rupees 20 to 300

Average sale per customer-Rupees 50

Total customer per day-500 per day

Total Employee-15

Conclusion:

The business report is made for Food24 fast-food Company according to its market guidelines andinformation. The report is solely depends on the market assumption matrix. Responsible and quality

third party data are used to make this report.

Bibliography:

1. Organised fast food in the fast lane, CRISIL Opinion, September 2013,CRISIL Rsearch,

(online)Available online at

http://www.crisil.com/pdf/research/CRISIL%20Research_Article_QSR_17Sep2013.pdf (Last accessed

on 19.02.15)

2. Fast Food in India, October 2014,Euromonitor International, (online)

Available at

http://www.euromonitor.com/fast-food-in-india/report (last accessed on 19.02.15)

http://www.crisil.com/pdf/research/CRISIL%20Research_Article_QSR_17Sep2013.pdfhttp://www.crisil.com/pdf/research/CRISIL%20Research_Article_QSR_17Sep2013.pdfhttp://www.euromonitor.com/fast-food-in-india/reporthttp://www.euromonitor.com/fast-food-in-india/reporthttp://www.euromonitor.com/fast-food-in-india/reporthttp://www.crisil.com/pdf/research/CRISIL%20Research_Article_QSR_17Sep2013.pdf

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