Entrepreneurship
Chapter One: The Nature Of
Entrepreneurship
1
2
Outline
• After completing this chapter, students will be able to:
Define the term entrepreneurship and entrepreneur
Identify types of entrepreneur
Recognize the role of entrepreneurship in the economy
Analyze the entrepreneurial competences
Understand creativity and innovation
3
Introduction and Historical Origin of Entrepreneurship
• Its origin from a French word, entreprender, where an
entrepreneur was an individual commissioned to
undertake a particular commercial project.
• During the ancient period the word entrepreneur was
used to refer to a person managing large commercial
projects through the resources provided to him.
• In the 17th Century a person who has signed a contractual
agreement with the government to provide stipulated
products or to perform service was considered as4
entrepreneur.
• In the 18th Century the first theory of entrepreneur has been
developed by Richard Cantillon. He said that an entrepreneur
is a risk taker.
For example, the merchants buy products at a known price and sell it at
unknown price and this shows that they are operating at risk.
• In the late 19th and early 20th Century an entrepreneur was
viewed from economic perspectives.
The entrepreneur organizes and operates an enterprise for personal
gain. In the middle of the 20th Century the notion of an entrepreneur as
an inventor as established.
• From the historical development it is possible to understand
the fact that the perception of the word entrepreneur was
evolved from managing commercial project to the application
of innovation (creativity) in the business idea.
5
What is entrepreneurship?
Definitions of Entrepreneurship and Entrepreneur Who is an entrepreneur?
• Entrepreneurship is the processes through which
individuals become aware of business ownership then
develop ideas for, and initiate a business.
• Entrepreneurship can also be defined as the process of
creating something different and better with value by
devoting the necessary time and effort by assuming the
accompanying financial, psychic and social risks and
receiving the resulting monetary reward and personal
satisfaction.
6
• Entrepreneurship is a practice and a process that results
in creativity, innovation and enterprise development and
• Engaging in entrepreneurship shifts people from being
“job seekers” to “job creators”, which is critical in
countries that have high levels of unemployment.
• In general, the process of entrepreneurship includes
five critical elements. These are:
1. The ability to perceive an opportunity.
2. The ability to commercialize the perceived opportunity i.e.,
innovation
3. The ability to pursue it on a sustainable basis.
4. The ability to pursue it through systematic means.
5. The acceptance of risk or failure.
7
• Based on the above concepts of entrepreneurship, an
entrepreneur can be defined as follows:
• An entrepreneur is an individual who:
Has the ability to identify and pursue a business opportunity;
Undertakes a business venture;
Raises the capital to finance it;
Gathers the necessary physical, financial and human
resources needed to operate the business venture;
Sets goals for him/herself and others;
Initiates appropriate action to ensure success; and
Assume all or a major portion of the risk!
8
Other definition, views the term entrepreneur from three perspectives; i.e.
from the economist, psychologist and capitalist philosopher’s point of view.
I. To an economist an entrepreneur is one who brings resource, labor, materials, and other
assets into combination that makes their value greater than before.
II. To a psychologist an entrepreneur is a person typically driven by certain forces need to
obtain or attain something, to experiment, to accomplish or perhaps to escape the authority
of others.
III. For the capitalist philosopher an entrepreneur is one who creates wealth for others as well,
who finds better way to utilize resources and reduce waste and who produce job others are
glad to get.
In general, entrepreneur refers to the person and
entrepreneurship defines the process. 9
Types of Entrepreneurs
• Entrepreneurship can take three different forms. They are:
1. The individual entrepreneur: An individual entrepreneur is someone who
started; acquired or franchised his/her own independent organization.
2. Intrapreneur: An Intrapreneur is a person who does entrepreneurial
work within large organization.
3. The Entrepreneurial Organization: The entrepreneurial function need
not be embodied in a physical person. Every social environment has its
own way of filling the entrepreneurial function.
An organization that creates an internal environment in which all of its members
can contribute in some function to the entrepreneurial function is defined as
entrepreneurial organization.
10
Role of Entrepreneurs in Economic
Development
• Entrepreneurial development is the most important input in the
economic development of any country. Here below we would see how
entrepreneurs contribute for the economic development of once
country.
1) Improvement in per capita Income/Wealth Generation: Entrepreneurs play a
vital in the economic development of a region.
2) Generation of Employment Opportunities: By creating a new business
enterprise, entrepreneurs generate employment opportunities for others.
3) Inspire others Towards Entrepreneurship: this process helps in forming a
chain reaction of entrepreneurial activity which directly contributes to the
health of the economy.(backward and forward integration)
11
4) Balanced Regional Development: Entrepreneurs help to remove
regional disparities in economic development.
5) Provide Diversity in Firms: Entrepreneurial activity often results
into creation of a variety of firms in a region.
6) Enhance the Number of Enterprise: When new firms are created
by entrepreneurs, the number of enterprises based upon new
ideas/ concepts/ products in a region increases.
7) Economic Independence: Entrepreneurship is essential for self-
reliance for a country. (import substitution)
8) Combine Economic factors: Value is created by combing the
factors of production together in a way which satisfies human
needs.
9) Provide Market efficiency, Accepting Risk, and Maximize
Investor’s Return.
12
Entrepreneurial Competence and
Environment
Entrepreneurial Mindset
Who Becomes an Entrepreneur?
The Young Professional
The Inventor
The Excluded
13
Qualities of an Entrepreneur
1. Opportunity-seeking: An opportunity is a favorable set of
circumstances that creates a need for a new product,
service or business. An entrepreneur always seeks out
and identifies opportunities. He/she seizes an opportunity
and converts it into a realistic and achievable goal or
plan.
2. Persevering: An entrepreneur always makes concerted
efforts towards the successful completion of
Activity a goal.
1. Discuss on the story of An
Thomas Edison
entrepreneur perseveres and is undeterred by
14
uncertainties, risks, obstacles, or difficulties which could
challenge the achievement of the ultimate goal.
3) Risk Taking: The best entrepreneurs tend Importance
to:- of Risk-taking
Take a calculated risks & responsibility for theirown actions
Build self confidence
Create a feeling of leadership
Gain satisfaction from completing a job well
Create strong motivation to
Not be afraid of public opinion, skepticism complete a job well
4) Demanding for Efficiency and Quality: Being efficient
means producing results with little wasted effort.
Quality refers to: A characteristic of the product or
service that makes it fit to use. And or The ability of
a product or service to meet a customer’s
expectations for that product or service.
Quality plays an important role in this new era of globalization because it confers
certain benefits which include: Reduction of waste, Cost-effectiveness: An increase
in market share, Better profitability, Social responsibility, and Reputation.
15
5) Information-seeking: Gathering relevant information is
important to ensure that the entrepreneur makes well
informed decisions. Information on the area of market,
supply, operations, finance, legislation, and
infrastructure are important for entrepreneurs.
6) Goal Setting: A Goal - is a general direction, or long-term
aim that you want to accomplish. It is not specific enough
to be measured. Where as Objectives - are specific and
measurable.
Specific :- They
Great goals areare concise
well-defined and specific.
and focused.
An entrepreneur
Measurable : A goal withoutmust have outcome
a measurable a goal isand
like aan objective
sports which
competition withoutis
- SMART a scoreboard.
Attainable :- Far too often, entrepreneurs can set goals which are beyond their reach.
Relevant :- Business goals are based on the current conditions and realities of the
business climate.
Time- it is important to choose a time-frame to accomplish your goal. 16
Bound :-
7) Planning: is making a decision about the future in terms of
what to do, when to do, where to do, how to do, by whom to
do and using what resources.
8) Persuasion and Networking:
Persuasion: is a way of convincing someone to get
something or make a decision in your favor by a means of
argument, reasoning, or entreaty.
Networking: is an extended group of people with similar
interests or concerns who interact and remain in informal
contact for mutual assistance or support
Factors that Affect Persuasion and Networking are Socio-
cultural background and perceptions, Communication
skills (both verbal and non-verbal) and Negotiation skills
17
9) Building Self-confidence: Self-confidence is the state of being certain
that a chosen course of action is the best or most effective given the
circumstances.
Self-confidence is having confidence in oneself when considering a
capability. A feeling of trust on your ability.
A person with self-confidence may exhibit some of the following
characteristics: Risk-taking, Independent, Perseverance, Able to learn to
live with failure (Admitting mistakes and learning from them), Ability to
find happiness and contentment in work, Doing what you believe to be
right. Etc.
10)Demonstrating Leadership: Entrepreneurs inspire, encourage and
lead others to undertake the given duties in time.
And Entrepreneurs have the ability to Listening Others so, they does not
simply impose his/her idea on others. Rather, he/she listens to other
people in their sphere of influence, analyses their input in line with
his/her own thinking and makes an informed decision.
18
Wealth of the Entrepreneur
Wealth is money and anything that
money can buy. It includes money,
knowledge and assets of the
entrepreneur.
• No entrepreneur works in a vacuum. The venture they
create touches the lives of many other people.
•Who Benefits from the entrepreneur’s Wealth?
• Peoples who have a part to play in the entrepreneurial
venture generally are called stakeholder.
• The stakeholder groups are; employees, investor, supplier,
customer, the local community and government.
23
Let us look at the benefits of each stakeholder.
A. Employees B. Investors:
• They contribute physical and • These are the peoples who provide
mental labor to the business. the entrepreneur with the
Therefore, they are rewarded necessary money to start the
with: venture and keep it running.
Money – their wage or salary • There are two main sorts of
The possibility of owning a part of investors:
the firm through share schemes. Stockholders are those who buy the
stock of the company and are true
A stage of which they can develop owners of the firm.
social relationships.
Lenders, on the other hand, are people
The possibility of personal who offer money to the venture on the
development. basis of it being a loan.
24
C. Supplier and Customer D.Government and local
• Suppliers are the individuals and community
organizations who provide the • The responsibility of government is to
business with the materials, ensure that businesses can operate in an
productive assets and information it environment which has political and
needs to produce its output. economic stability.
They are paid for providing these Therefore, government should be rewarded
for its services. Hence, government taxes
inputs. individuals and businesses.
• Customers may need to make an • Business has physical locations. The way
investment in using a particular they operate may affect the people who
supplier. live and other businesses which operate
The entrepreneur may reward nearby.
customers by offering quality • A business has a number of responsibilities
products, fair prices, regular and to the society like Corporate Social
consistency of supply, loan Responsibility and Business Ethics.
arrangement etc.
25
30
Phases of Business Environment: Internal
Environment
A) Raw Material: It assesses the C) Finance: It assesses the total
availability of raw material now requirements of finance in terms
and in the near future. If the start-up expenses, fixed expenses
availability of raw material is less and running expenses. It also
now or would be less in future indicates the sources of finance that
then the entrepreneur should give can be approached for funding.
a serious thought. D) Human Resource: It assesses the
B) Production/Operation: It assesses kind of human resources required
the availability of various and its demand and supply in the
machineries, equipment, tools market. This further helps in
and techniques that would be estimating the cost and level of
required for competition in hiring and retaining
production/operation. the human resources.
31
Generally, The personal backgrounds of the
entrepreneurs are determined mainly by the environment
in which they are born and brought up and work. Some
of the environmental factors which hinder
entrepreneurial growth are given below:
Sudden changes in Government policy.
Sudden political upsurge.
Outbreak of war or regional conflicts.
Political instability or hostile Government attitude towards
industry.
Ideological and social conflicts.
Unreliable supply of power, materials, finance, labor and other
inputs.
Rise in the cost of inputs. 32
Unfavorable market fluctuations.
Creativity, Creativity is the ability to come up with
Innovation and new idea and to identify new and
Entrepreneurship different ways of looking at a problem
and opportunities.
It is a process of assembling ideas by
Creativity, innovation and recombining elements already known.
entrepreneurship, have been This definition has several key elements
recognized as important
contributors to a nation’s
that are worth considering:
economic growth. Process: creativity is a process
These three terminologies are Ideas: creativity results in ideas that have
chronologically interrelated and potential value.
it is very important to look in to Recombining: the creative process is one
them to get their full picture. of putting things together in unexpected
ways.
33
Steps in the Creative Process
• Creativity is the development of ideas about products,
practices, services, or procedures that are novel and
potentially useful to the organization.
• Step1: Opportunity or problem Recognition:
• Step2: Immersion: The individual concentrates on the problem and
becomes immersed in it.
• Step 3: Incubation: The person keeps the assembled information in
mind for a while.
• Step 4: Insight: The problem-conquering solution flashes into the
person’s mind at an unexpected time
• Step 5: Verification and Application: The individual sets out to prove
that the creative solution has merit.
34
Barriers to Creativity; Be aware that there are
numerous barriers to creativity, including:
Searching for the one ‘right’ Avoiding ambiguity
answer Fearing looking foolish
Focusing on being logical Fearing mistakes and failure
Blindly following the rules Believing that I'm not creative
Viewing play as frivolous
Becoming overly specialized
35
• It is the implementation of new idea at the
individual, group or organizational level.
Innovation is a process of intentional change
made to rate value by meeting opportunity
Innovation and seeking advantage.
• There are four distinct types of innovation,
these are as follows:
Invention - described as the creation of a
Innovation lies at the heart new product, service or process
of the entrepreneurial Extension - the expansion of a product,
service or process
process and is a means to Duplication - defined as replication of an
the exploitation of already existing product, service or
process
opportunity.
Synthesis - the combination of existing
concepts and factors into a new
formulation
37
Areas of Innovation
The Innovation Process
New product: A new product can be developed through new
or existing technology.
New Services: A service is an act which is offered to
undertake a particular task or solve a particular problem.
1. Analytical planning: carefully
New Production Techniques: Innovation can be made in the
identifying the product or way in which a product is to be manufactured.
service features, design as well New Way of Delivering the Product or Service to the
as the resources that will be Customer: Customer can only use product/service they can
needed. access.
2. Resources organization: New Operating Practices: Innovation in service delivery must
address customers need and offer them improved benefits.
obtaining the required
New Means of Informing the Customer about the Product:
resources, materials,
People will only use a product or service if they know about
technology, human or capital it.
resources New Means of Managing Relationship within the
3. Implementation: applying the Organization: Any organization has a wide variety of
communication channels running through it.
resources in order to
New Ways of Managing Relationships between
accomplish the plans Organizations: Organizations sit in a complex web of
4. Commercial application: the relationships to each other. 38
provision of values to
customers, reward employees
From Creativity to
Entrepreneurship
• Creativity is the ability to develop new ideas and to
discover new ways of looking at problems and
opportunities. Innovation is the ability to apply creative
solution to those problems and opportunities in order to
enhance people’s lives or to enrich society.
• Entrepreneurship = creativity + innovation
39
40
Thank You!
Build your master key to unlock
this world!!!
41
