Chapter one
The nature of entrepreneurship
Definitions
of Entrepreneurship and Entrepreneur
v Entrepreneurship: is
the process of identifying market opportunities, arranging required resources,
and investing them to exploit opportunities for long-term gains. It involves
creating incremental wealth through innovative ways of organizing resources for
enterprise operation.
v Entrepreneur: An
individual who creates and develops a business idea, takes the risk of setting
up an enterprise, and produces goods or services to satisfy customer needs. An
entrepreneur is a risk-taker, innovator, and someone who identifies and pursues
business opportunities.
v Attributes of Entrepreneurship: Creativity,
innovation, risk-taking, and forward-thinking imagination are essential
elements of entrepreneurship. It is a pursuit that leads to the generation of
wealth by applying innovative ideas and implementation to fulfill consumer
needs.
Types of
Entrepreneurs
1. Individual Entrepreneur: Someone
who starts, acquires, or franchises their independent organization. The focus
is on basic features and activities of individual entrepreneurs.
2. Intrapreneur: is
an individual who engages in entrepreneurial work within a large organization,
often without official sanction. This process is termed Intrapreneurship.
3. Entrepreneurial Organization:-An organization that fosters an internal environment
allowing all members to contribute to the entrepreneurial function.
Entrepreneurship is not confined to physical individuals but can be embodied in
the organization itself.
The role of entrepreneurs in economic
development
1.
Per
Capita Income Growth: Entrepreneurs significantly boost per capita income
and wealth generation, fostering economic development.
2.
Employment
Opportunities: By establishing new businesses, entrepreneurs
address unemployment challenges, creating jobs for themselves and others.
3.
Inspiration
for Entrepreneurship: Entrepreneurs inspire others to venture into
business, creating a chain reaction of entrepreneurial activities and
contributing to the economy.
4.
Balanced
Regional Development: Entrepreneurs help mitigate regional disparities by
establishing industries in backward areas, balancing economic growth.
5.
Increased
Enterprise Numbers: Entrepreneurial ventures lead to the creation of new
firms, fostering competition, and facilitating the entry of innovative products
or services.
6.
Diversity
in Firms: Entrepreneurial activity results in diverse firms,
promoting economic development through the exchange of complementary knowledge.
7.
Economic
Independence: Entrepreneurs contribute to a country's
self-reliance by manufacturing indigenous substitutes, reducing dependence on
imports, and promoting exports for foreign exchange.
8.
Combining
Economic Factors: Entrepreneurs integrate raw materials, labor, and
capital to create value, satisfying human needs and contributing to economic
factors.
9.
Market
Efficiency: Entrepreneurs enhance market efficiency by fostering
competition, ensuring optimal resource distribution, and maximizing satisfaction
for consumers.
10. Risk Acceptance: Entrepreneurs
play a crucial role in accepting and managing risks on behalf of others,
acknowledging the uncertainty inherent in future outcomes.
11. Maximizing Investor's Return: Entrepreneurs
create and lead organizations to maximize long-term profits, contributing to
overall economic efficiency and benefiting investors.
Entrepreneurial
Competence and Environment
Who Becomes an Entrepreneur?
1.
The
Young Professional: Highly educated
individuals, often with entrepreneurial qualifications, choose to skip working
for established organizations and venture directly into establishing their own
ventures.
2.
The
Inventor: Someone who has developed an innovation and decides
to make a career out of introducing it to the market, whether it's a new
product, service, high-tech, or based on traditional technology.
3.
The
Excluded: Individuals who turn to entrepreneurship when
traditional paths are not open to them, often due to social, cultural,
political, or historical reasons. This includes displaced communities, ethnic
and religious minorities forming their own networks for trade.
Qualities of an Entrepreneur
1.
Opportunity seeking: Entrepreneurs
actively seek out and identify favorable circumstances that create a need for a
new product, service, or business. They convert opportunities into realistic
and achievable goals.
2.
Perseverance: Entrepreneurs
make concerted efforts to successfully complete their goals. They are
undeterred by uncertainties, risks, obstacles, or difficulties that may
challenge their ultimate objectives..
3. Risk
Taking Successful
entrepreneurs set objectives with moderate risk, finding satisfaction in
completing tasks. Unafraid of public opinion, they take responsibility for
actions, building self-confidence, fostering leadership, and creating strong
motivation for job completion.
4. Demanding
for Efficiency and Quality: Efficiency
involves producing results with minimal waste, while quality includes continuous
improvement to exceed customer expectations.
v
Quality
management in entrepreneurship reduces waste, enhances cost-effectiveness,
increases market share, ensures profitability, fulfills social responsibility,
and improves the business's reputation.
5. Information-seeking:
Entrepreneurs avoid guesswork by
actively collecting information about customers, competitors, technology, and
markets.
v
Informed
decisions in areas such as market dynamics, supply chains, operations, finance,
legislation, and infrastructure are essential for entrepreneurial success.
6.
Goal
Setting: A goal is
a broad, long-term aim that you want to accomplish without specific
measurement, while objectives are specific, measurable,
attainable, relevant, and time-bound (SMART). Entrepreneurs must set SMART goals:
·
Specific: Well-defined
and focused, serving as a magnetic force for resources.
·
Measurable: Goals
need concrete outcomes for tracking progress.
·
Attainable: Dream
big but remain rooted in reality to ensure achievability.
·
Relevant: Goals
align with current business conditions and realities.
·
Time-Based: Attach
a timeframe to ensure goal accomplishment.
7.
Planning: Entrepreneurs
make future decisions regarding what, when, where, how, by whom, and using what
resources. Effective planning anticipates and accounts for unexpected
eventualities.
8.
Persuasion
and Networking: Persuasion is a way of convincing others for making decisions
in your favor, is crucial in business interactions.
v Networking involves informal contact with people sharing
common interests for mutual assistance.
v Factors affecting persuasion and networking includes
socio-cultural background, communication skills, and negotiation skills.
9.
Building
Self-confidence: is the state of being certainty in chosen actions or
decision, is vital for entrepreneurs.
v Characteristics of a self-confident person include
risk-taking, independence, perseverance, learning from failure, finding
happiness in work, doing what is believed to be right, and admitting mistakes
for learning.
10. Listening to Others: Entrepreneurs
don't impose their ideas; instead, they actively listen to those in their
sphere of influence. They analyze input, align it with their own thinking, and
make informed decisions based on diverse perspectives.
11. Demonstrating Leadership: Entrepreneurs
don't work in isolation; they lead and inspire others. Through encouragement
and inspiration, entrepreneurs guide individuals to fulfill assigned duties
within specified timelines.
Entrepreneurial
Skills:
v A skill is defined as actionable knowledge,
representing an ability to perform in a specific way.
v An entrepreneur, tasked with transforming a business
idea into reality, necessitates a profound understanding and the capacity to
identify and address market gaps.
1.
General
Management Skills:
Ø Strategy Skills: The
entrepreneur must possess the ability to comprehend the business holistically,
understand its market position, and strategize on delivering superior value
compared to competitors.
Ø Planning Skills: Anticipation
of future impacts on the business and proactive preparation are crucial aspects
of effective entrepreneurship.
Ø Marketing Skills: Beyond
mere product features, the entrepreneur needs to discern customer needs and
recognize the factors that make offerings appealing.
Ø Financial Skills: Adapt
money management, meticulous tracking of expenditures, vigilant monitoring of cash
flow, and astute assessment of potential investments is essential.
Ø Project Management Skills: Organizing
projects, setting clear objectives, establishing schedules, and ensuring
optimal resource allocation are indispensable skills.
Ø Time Management Skills: The
entrepreneur must effectively utilize time, prioritize tasks judiciously, and
consistently meet deadlines.
B.
People
Management Skills:
Ø Communication Skills: Proficiency
in expressing ideas through spoken and written language is paramount for
effective entrepreneurial communication.
Ø Leadership Skills: Inspirational
leadership, guiding individuals to work in alignment with the venture's
objectives, is a fundamental requirement.
Ø Motivation Skills: The
entrepreneur's ability to enthuse individuals and secure their full commitment
hinges on understanding their motivations and job expectations.
Ø Delegation Skills: Efficient
allocation of tasks to individuals, considering their skills and potential
development, is a key managerial competency.
Ø Negotiation Skills: The
entrepreneur must possess the ability to discern desires and motivations in a
given situation, with an eye towards maximizing outcomes for all parties
involved.
Entrepreneurial
Tasks:
1. Owning Organizations: Entrepreneurs,
as owners, invest in businesses and may also manage them directly, combining
the roles of an investor and a manager.
2. Founding New Organizations: Entrepreneurs
bring together various organizational elements, such as people and resources,
giving them a separate legal entity and making significant changes to the
organizational structure.
3. Bringing Innovations to Market: Entrepreneurs
introduce innovations, which can be new products, services, delivery methods,
ways of informing consumers, or organizational approaches, creating value
through novel approaches.
4. Identification of Market Opportunity: Entrepreneurs
actively seek and identify market gaps, recognizing opportunities to create
value by addressing unmet needs, with opportunity taking precedence over
innovation.
5. Application of Expertise: Entrepreneurs
possess expertise in allocating scarce resources effectively, especially in
situations where information is limited, making them valuable to investors.
6. Provision of Leadership: Entrepreneurs
require leadership skills to garner support from individuals within and outside
their organizations, including investors, customers, and suppliers.
7. Entrepreneur as Manager: Ultimately,
an entrepreneur functions as a manager, distinguished not by specific tasks but
by what and how they manage, their effectiveness, and the impact they have on
the venture.
Wealth of
the Entrepreneur:
v Wealth comprises money, knowledge, and assets owned
by the entrepreneur.
Benefits
to Stakeholders:
1. Employees: Rewarded
with wages/salaries, share ownership possibilities, social relationships, and
opportunities for personal development.
2. Investors: Stockholders
benefit from business performance, while lenders receive fixed returns
independently of business performance, prioritized over stockholders.
3. Suppliers: Paid
for providing materials, productive assets, and information needed for
production.
4. Customers: Rewarded
through quality products, fair prices, consistent supply, and various
arrangements to minimize switching costs.
5. Local Community: Businesses
contribute to local development, stability, and environmental responsibility,
ensuring ethical practices.
6. Government: Government
ensures an environment of political and economic stability, providing essential
services, funded through taxation on individuals and businesses.
Entrepreneurship
and Environment:
Business
Environment: The business environment refers to external
factors that impact a business enterprise, influencing its operations and
determining its effectiveness. The business environment may be healthy or
unhealthy.
A.
External
Environment: It is the environment, which is external to the
business and hardly to influence independently.
1.
Economic
Environment: Influences business
success with factors like economic structure, policies, national income, and
sector conditions.
2.
Legal
Environment: Requires businesses to
function within legal frameworks, necessitating knowledge of laws and active
participation in legal processes.
3.
Political
Environment: In a democratic
setting, understanding and aligning with the political system is crucial,
considering public opinion for long-term success.
4.
Socio-Cultural
Environment: Encompasses social and
cultural norms, influencing product/service acceptance, and demands sensitivity
to societal values.
5.
Demographic
Environment: Analyzes population
patterns, aiding in identifying target customers based on age, distribution,
sex, education, and income.
B.
Internal
Environment: is the environment which is under the control of a
given organization.
1.
Raw
Material: Assesses raw material
availability, crucial for business continuity.
2.
Production/Operation:
Evaluates machinery, equipment, and
tools required for production/operation.
3.
Finance:
Examines funding requirements and
potential sources for start-up and ongoing expenses.
4.
Human
Resource: Considers the demand, supply, and cost of human
resources in the market.
Environmental
Factors Affecting Entrepreneurship:
v Various financial, institutional, cultural, and
personality factors influence entrepreneurial activity.
v Factors hindering entrepreneurship include sudden
policy changes, political instability, conflicts, red-tapism, and unfavorable
market conditions.
v Entrepreneurship is environmentally determined,
thriving in a favorable business environment that requires modification when
hindrances arise.
Creativity,
Innovation and Entrepreneurship
Creativity is
the inclination or tendency to generate or recognize ideas, alternatives, or
possibilities useful in problem solving, communication, and entertainment. It
involves coming up with new ideas and exploring different perspectives on
problems and opportunities.
v In entrepreneurship, creativity is the development
of novel and potentially useful ideas for products, practices, services, or
procedures.
v It involves viewing things differently, generating
new possibilities, and thinking flexibly.
Barriers
to Creativity: Barriers include a
focus on finding the single 'right' answer, rigid logic, blind adherence to
rules, excessive practicality, avoiding ambiguity, and fearing mistakes or
looking foolish.
Innovation is
the intentional process of implementing new ideas at the individual, group, or
organizational level. It involves making intentional changes to create value
and seize opportunities.
Four
Types of Innovation:
1. Invention: Creation
of a new product, service, or process.
2. Extension: Expansion
of an existing product, service, or process.
3. Duplication: Replication
of an already existing product, service, or process.
4. Synthesis: Combination
of existing concepts into a new formulation.
Areas of
Innovation:
v New product, new services, new production
techniques, new delivery methods, new operating practices, new means of
informing customers, and new ways of managing relationships within and between
organizations.
Creativity is the ability to develop novel ideas and perceive
problems and opportunities from fresh perspectives. Innovation is the capacity to
apply creative solutions, turning ideas into tangible, valuable outcomes. It
involves implementing and refining these ideas to create real world.