Entrepreneurship

MGMT 1012
 Chapter 1: The Nature Of Entrepreneurship
What is Entrepreneurship
It originated from a French word, entreprender,
where an entrepreneur was an individual
commissioned to undertake a particular
commercial project.

Entrepreneurship is the process of identifying

opportunities in the market place, arranging the
resources required to pursue these opportunities
and investing the resources to exploit the
opportunities for long term gains.
 Cont….
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.
Entrepreneurship is the art of identifying viable
business opportunities and mobilizing resources to
convert those opportunities into a successful
enterprise through creativity, innovation, risk taking
and progressive imagination.
 Cont…
Entrepreneurship is a practice and a process that
results in creativity, innovation and enterprise
development and growth.
In general, the process of entrepreneurship includes
five critical elements.
The ability to perceive an opportunity.
The ability to commercialize the perceived
opportunity i.e. innovation
The ability to pursue it on a sustainable basis.
The ability to pursue it through systematic means.
The acceptance of risk or failure.
 Why become entrepreneur?
Factors that leads entrepreneurs into business
are divided into two as push and pull factors;
Pull factors are those that emphasize e’ship as
positive and desirable alternative.
 Need for achievement
 Desire to be independent

Push factors are those factors that push and force

people to become entrepreneurs
 Unemployment
 Dissatisfaction with current job
The r/p among an entrepreneur, entrepreneurship
and enterprise
 Entrepreneur: men and women who establish
and manage their own business; the catalyst
who brings about change; tangible people.
 An entrepreneur is a person who: create the job not
a job-seeker; has a dream, has a vision; willing to take
the risk and makes something out of nothing
 Entrepreneurship: is the process involved in
creating and starting an enterprise.
 Enterprise: is the business organization that is
formed and which provides goods and services,
creates jobs, contributes to national income,
exports and overall economic development.
 Types of Entrepreneurs
1. The individual entrepreneur: is someone who
started; acquired or franchised his/her own
independent organization.
2. Intrapreneur: is a person who does
entrepreneurial work within large organization.
There are two facts about intrapreneurship
– The Intrapreneur’s context is often large and
bureaucratic organization whereas the individual
entrepreneur operates in the broader, more flexible
economic market place.
– Intrapreneurs are individuals who often engage in the
entrepreneurial actions in large organizations without
the blessing of their organizations.
 Cont…
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 can create an environment in
which all of its members can contribute in some
function to the entrepreneurial function.
Entrepreneurial Organization are structures that
promote the emergence and development of
ideas from all members of the firm.
 Role of Entrepreneurs in Economic Development
1. Improvement in per capita Income/Wealth
Generation
2. Generation of Employment Opportunities
3. Inspire others Towards Entrepreneurship:-An
existing venture provides a number of
entrepreneurial opportunities through forward
and backward linkages, to these employees even
to become entrepreneurs themselves.
4. Balanced Regional Development: Entrepreneurs
help to remove regional disparities in economic
development.
 Cont….
5. 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.
6. Provide Diversity in Firms: Entrepreneurial
activity often results into creation of a variety of
firms in a region.
7. Economic Independence: Entrepreneurship is
essential for self-reliance for a country.
Entrepreneurs create industries that manufacture
indigenous substitutes, thereby reducing the
dependence on imports.
8. Combine Economic factors: All the products bought and sold
in an economy are a mix of three primary economic factors
(the raw materials, nature offers up, the physical and mental
labor people provide and capital (money).
 Now value is created by combing these three things together
in a way which satisfies human needs.
9. Provide Market efficiency: Efficient means resources are
distributed in an optimal way that is the satisfaction that
people can gain from them is maximized.
 An economic system can only reach this state if there is
competition between different suppliers.
10. Accepting Risk: The primary function of the entrepreneur is
to accept risk on behalf of other people.
11. Maximize Investor’s Return: Entrepreneurs create and run
organizations which maximize long-term profit on behalf of
the investors which in turn generates overall economic
efficiency.
 Entrepreneurial Competence and Environment
Entrepreneurial Mindset
A. Who Becomes an Entrepreneur?
B. Qualities of an Entrepreneur
C. Entrepreneurial Skills
D. The Entrepreneurial Tasks
E. Wealth of the Entrepreneur
A. Who Becomes an Entrepreneur?
 The Young Professional: Highly educated people often with
entrepreneurial qualifications .
 The Inventor: someone who has developed an innovation.
 The Excluded:- Displaced communities and ethnic and religious
minorities have not been invited to join the wider economic
community due to a variety of social, cultural and political and
historical reasons.
 As a result they may form their own internal networks, trading
among themselves and, perhaps, with their ancestral countries.
 B. Qualities of an Entrepreneur
 Opportunity-seeking: An opportunity is a favorable set of
circumstances that creates a need for a new product, service or
business.
 Persevering:- An entrepreneur always makes concerted efforts
towards the successful completion of a goal.
 An entrepreneur perseveres and is undeterred by uncertainties,
risks, obstacles, or difficulties which could challenge the
achievement of the ultimate goal.
 Risk Taking: The best entrepreneurs tend to set their own objectives
where there is moderate risk of failure and take calculated risks.
 Demanding for efficiency and quality
 Efficiency:- Being efficient means producing results with little
wasted effort.
 Quality:- A characteristic of the product or service that makes it fit
to use. It makes a product, process, or service desirable.
 Information-seeking: Successful entrepreneurs do not rely on
guesswork and do not rely on others for information.
 Goal Setting: is a general direction, or long-term aim that you want
to accomplish. It is not specific enough to be measured.
Planning: An effective entrepreneur usually plans
his/her activities and accounts as best as they can for
unexpected eventualities.
Persuasion and networking
Persuasion is a way of convincing someone to get something
or make a decision in your favor.
Networking is an extended group of people with similar
interests or concerns who interact and remain in informal
contact for mutual assistance or support.
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.
Listening to others: An entrepreneur does not simply
impose his/her idea on others.
Demonstrating leadership: An entrepreneur does not
only do things by him/herself, but also gets things done
through others.
 C. Entrepreneurial Skills
 A skill is simply knowledge which is demonstrated by action. It
is an ability to perform in a certain way.
Turning an idea into reality calls upon two sorts of skills
1. General Management Skills: These are skills required to
organize the physical and financial resources needed to run
the venture. It includes
 Strategy Skills:- An ability to consider the business as a
whole, to understand how it fits within its market place, how
it can organize itself to deliver value to its customers, and the
ways in which it does this better than its competitors.
 Planning Skills :- An ability to consider what the future might
offer, how it will impact on the business and what needs to be
done to prepare for it now.
 Marketing Skills: An ability to see the firm’s offerings and
their features, to be able to see how they satisfy the
customer’s needs and why the customer finds them
attractive.
Financial Skills: An ability to manage money; to be
able to keep track of expenditure and to monitor
cash-flow, but also an ability to assess investments
in terms of their potential and their risks.
Project Management Skills: An ability to organize
projects, to set specific objectives, to set schedules
and to ensure that the necessary resources are in
the right place of the right time.
Time Management Skills: An ability to use time
productively, to be able to priorities important jobs
and to get things done to schedule.
 2. People Management Skills
 To be effective, an entrepreneur needs to
demonstrate a wide variety of skills in the way
he/she deals with other people.
 Some of the more important skills we might
include under this heading are:
 Communication Skills – An ability to use spoken and
written language to express ideas and inform others.

 Leadership Skills – An ability to inspire people to work

in a specific way and to undertake the tasks that are
necessary for the success of the venture.
 Motivation Skills – An ability to enthuse people and get
them to give their full commitment to the tasks in hand.
Being able to motivate demands an understanding of what
drives people and what they expect from their jobs.
 Delegation Skills – An ability to allocate tasks to different
people. Effective delegation involves more than instructing.
It demands a full understanding of the skills that people
possess how they use them and how they might be
developed to fulfill future needs.
 Negotiation Skills – An ability to understand what is
wanted from a situations, what is motivating others in that
situation and recognize the possibilities of maximizing the
outcomes for all parties.
• All these people skills are interrelated.
 Here entrepreneurial performance results from a
combination of industry knowledge, general
management skills; people skills and personal
motivation
 D. The Entrepreneurial Tasks
 Owning Organizations: Ownership lies with those
who invest in the business and own its stock – the
principals, while the actual running is delegated to
professional agents or managers.
 Founding New Organizations: The entrepreneur
is recognized as the person who undertakes the
task of bringing together the different elements
of the organization.
 Bringing Innovations to Market: The idea of
innovation encompasses any new way of doing
something so that value is created.
Identification of Market Opportunity: An opportunity
is the gap in a market where the potential exists to do
something better and create value.
 Application of Expertise: A slight more technical
notion is that they have a special ability in deciding
how to allocate scarce resources in situations where
information is limited.
 The entrepreneur as manager: At the end of the day
the entrepreneur is a manager.
Provision of leadership: Entrepreneurs can rarely drive
their innovation to market on their own. They need
the support of other people both from their
organizations and from people outside such as investor
customer and supplier.
 E. Wealth of the Entrepreneur
 Wealth is money and anything that money can buy. It includes
money, knowledge and assets of the entrepreneur.
Who Benefits from the entrepreneur’s Wealth?
• Employees: They contribute physical and mental labor to the
business.
• Investors: peoples who provide the entrepreneur with the
necessary money to start the venture and keep it running.
• Supplier: individuals and organizations who provide the business
with the materials, productive assets and information it needs
to produce its output
• Customers: The entrepreneur may reward customers by offering
quality products, fair prices, regular and consistency of supply,
loan arrangement etc.
• The local community: Business has physical locations.
• Government: The responsibility of government is to ensure that
businesses can operate in an environment which has political
and economic stability.
 Entrepreneurship and Environment
 Business environment refers to the factors internal and
external to a business enterprise which influence its
operations and determine its effectiveness.
A study of business environment offers the following benefits:
 It provides information about environment which is
essential for successful operation of business firms.
 It opens up fresh avenues for the expansion of new
entrepreneurial operations.
 Knowledge about changing environment enables business
men to adopt a dynamic approach and maintain harmony
of business operations with the environment.
 By studying the environment entrepreneurs can make it
hospitable to the growth of business and thereby earn
popular support.
 i. Phases of Business Environment
A. External Environment
1. Economic Environment:- It consists of the structure of the economy,
the industrial, agricultural, trade and transport policies of the country,
the growth and pattern of national income and its distribution, the
conditions prevailing in industrial, agricultural and other sectors, the
position relating to balance of trade and balance of payments, and
other miscellaneous conditions of the economy.
2. Legal Environment:-Business must function within the framework of
legal structure.
3. Political Environment:- Managers and entrepreneurs should
understand the working of the political system.
4. Socio-Cultural Environment:-It consist the social and cultural norms
of a society in a given period of time.
 The variables that are appraised are values, beliefs, norms, fashions
and fads of a particular society.
5. Demographic Environment:- It assesses the overall population pattern
of a given geographical region.
 It includes variables like age profile, distribution, sex, education
profile, income distribution etc.
 B. Internal Environment
 It is the environment which is under the control of a
given organization.
 Following are the components of internal environment
of a business:
 Raw Material: It assesses the availability of raw
material now and in the near future.
 Production/Operation: It assesses the availability of
various machineries, equipment, tools and techniques that
would be required for production/operation.
 Finance: It assesses the total requirements of
finance in terms start-up expenses, fixed expenses
and running expenses
 Human Resource: It assesses the kind of human
resources required and its demand and supply in the
market.
 ii Environmental Factors Affecting Entrepreneurship
 Sudden changes in Government policy.
 Sudden political upsurge.
 Outbreak of war or regional conflicts.
 Political instability or hostile Government attitude towards
industry.
 Excessive red-tapism and corruption among Government
agencies.
 Ideological and social conflicts.
 Unreliable supply of power, materials, finance, labor and
other inputs.
 Rise in the cost of inputs.
 Unfavorable market fluctuations.
 Non-cooperative attitude of banks and financial institutions.
Entrepreneurship is environmentally determined.
 Creativity, Innovation and Entrepreneurship
 Creativity is thinking new things (ability to develop new ideas
and to discover new ways of looking at problems and
opportunities)
 Creativity is the development of ideas about products, practices,
services, or procedures that are novel and potentially useful to
the organization. It has its own process.
 Innovation is doing new things (the ability to apply creative
solutions to those problems and opportunities in order to
enhance people’s lives or to enrich society)
 It is the successful exploitation of new ideas –incorporating new
technology, design, and best practice-the key business process
that enables business to compete effectively.
 Entrepreneurship is creating value in the marketplace
(commercializing it).
N.B: Entrepreneurship = creativity + innovation.
 It is the result of a disciplined, systematic process of applying
creativity and innovation to needs and opportunities in the
marketplace.
The Innovation Sources
The main areas are: change in market, change demographic,
change attitudes, change perception, unexpected occurrences,
process needs, and gaps between expectations and reality.

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 Barriers to creativity
There are numerous barriers to creativity, including:
1. Searching for the one “right” answer.
2. Focusing on being logical.
3. Blindly following the rules.
4. Constantly being practical.
5. Viewing play as laughing
6. Becoming overly specialized.
7. Avoiding ambiguity.
8. Fearing to look foolish.
9. Fearing mistakes and failure.
10. Believing that “I am not creative”.

 By avoiding these ten mental locks, entrepreneurs can

set free their own creativity as well as the creativity of
those people around them. 30
Flow of Creativity, Innovation and Entrepreneurship
THANK YOU FOR
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ATTENTION!!!