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1.

INTRODUCTION TO ENTREPRENEURSHIP AND ISLAMIC ENTREPRENEURSHIP


1.1

INTRODUCTION

A society that has entrepreneurs is considered to be a successful society.


This is because entrepreneurs are individuals who are creative, dynamic, and innovative
They are willing to take risks and face unpredictable and uncertain challenges by using their creativity and
will-power.
Entrepreneurs would develop and penetrate new business areas in order to stay competitive in the industry.
This world then lead to more choices of products or services being offered to the society, which would
enhance the society's economic development.
1.1.1 Entrepreneur

There are several definitions of entrepreneur and these definitions rarely agree with one another.
The word 'entrepreneur' is derived from the French word entreprendre which means 'to undertake or to try.
This term was used by Richard Cantillon in 1775
An entrepreneur is an individual who organizes, manages, and assumes the risks of a business (Kuratko and
Hodgetts)
The term entrepreneur in French refers to a person who undertakes and operates a new enterprise or venture,
and assumes accountability for the inherent risks
An entrepreneur is air individual who creates a new business in the face of uncertainty for the purpose of
achieving profit and growth by identifying and capitalizing opportunities and assembling the necessary
resources to capitalize on the identified opportunities (Zimmerer and Scarborough).
An entrepreneur is also defined as 'he who accept risks and opportunities of creating, operating, and growing a
new business'.
The dictionary defines an entrepreneur as an individual who manufactures industrial products or conducts
a business on a big scale.
The Encyclopaedia Americana defines an entrepreneur as a businessman who takes risks to combine the
factors of production such as capital, labour, and raw materials and accepts the rewards through the profits
made by the market value of his products.
Based on Webster's dictionary, an entrepreneur an individual who manages an economic activity, specifically
in sponsoring, owning, managing, and bearing the risks of a business.
An entrepreneur refers to an individual who establishes a business and manages it to obtain profit and to
be successful (Carland).
The word entrepreneur was widely used in Malaysia in 1970s after the implementation of the New Economic
Policies. (NEP).
A common definition of an entrepreneur is someone who establishes a new entity to offer a new or existing
product or service into a new or existing market, whether it is for a profitable or a non-profitable outcome.
An entrepreneur is an individual who is able to perceive an opportunity for a business and create an
organization to develop and manage that business successfully.
He is able to identify, and seize the opportunity and bring in the necessary resources such as finance,
workforce, and raw materials to develop and market the products and services
He takes proper action that is imaginative, creative and innovative
An entrepreneur is always alert about business opportunities that have not been seen by other
He driven by intense commitment, determination, perseverance and hard work
He is an optimist who sees the cup as half-full rather than half-empty
An entrepreneur strives for integrity and the competitive desire to excel
1.1.2

Type of Entrepreneurs

There are several types of entrepreneur in entrepreneurship. This does not mean that one type is better,
stronger, or more capable than the other.
However, it does mean that different types of entrepreneurs have different personalities and styles

a) Intrapreneur
An intrapreneur is an entrepreneur within a large organization with high entrepreneurial characteristics who
strongly believes in his talent and ability, and has a strong desire to create something using his own initiative
and creativity.
b) Technopreneur
A technopreneur is all entrepreneur who involves himself in technological changes in producing goods and
services for his organization
c) Corpreneurs
Copreneur is a process whereby an individual or a group of individuals in association an existing organization
create a new organization or instigates. The organization teaches managers to be entrepreneurs
d) Social Entrepreneurs
Social entrepreneur is someone who recognizes a social problem and uses entrepreneurial principles to
organize, create and manage a venture to make social change
A social entrepreneur often works through a non-profit organization, citizen group, or private or governmental
sector. Many successful entrepreneurs, such as Bill Gates of Microsoft, have become social entrepreneurs.
e) Cyberpreneurs
A cyberpreneur is someone who is starting or running a business in cyberspace and the Internet. An
entrepreneur who has an online based business on the internet targets international consumers. These
cyberpreneurs do not need or extensive support staff all over the world. They just need a great idea and a cable
to connect to the internet
1.1.3

Risks of being an entrepreneur

Owning a business can be lucrative. However one should be aware of the potential risks involved. The risks
that an entrepreneur has to take when setting up a business are as follows:

a) Uncertainly of income
Setting up a business does not provide any guarantee that an entrepreneur will be able to earn sufficient money
to survive
There are entrepreneur that hardly earn enough money to provide them with an adequate income.
The steady income obtained by working with someone is absent. The owner would be the last person to be
paid after paying the salaries of his staff.
b) Risk of losing entire investment
The failure rate among small business is rather high
About 3.5 percent of new businesses fail within two years and 54 percent shut down within four years
c) Long hours and hard work
Setting up a business would require a lot of time, money and effort to search for strategic location, obtain
licenses, purchase machines, find new suppliers, and hire and train new workers.
In many new start-up companies, the entrepreneur would have to work six or seven days a week with no paid
leave and does not have the opportunity to take a vacation
d) High stress level
Setting up a business can be very rewarding but it can also be very stressful.
It is often that an entrepreneur makes a huge investment in his company whereby he would have mortgaged
everything he owns to start a business.
Therefore, failure would mean a total financial ruin, which would create a high 1evel of stress and anxiety
There are entrepreneurs who burden themselves, as they are unable to delegate authority and responsibility to
others in the company even though their employees are capable of doing so

e)

Difficulty in obtaining customers


ln the early stages of setting up a business, there would not be existing customers.
The entrepreneur would need to make an effort to attract new customers and sales.
This would cause the business to expand very slowly and it will take longer time to bring in profits.

f) Complete Responsibility
Many entrepreneurs find that they need to make decisions on issues that they are not really knowledgeable
about.
They face difficulty in finding advisors who would be able to assist them in making critical business decisions
g) Difficulty in obtaining loans
Many entrepreneurs face difficulty in obtaining loans from financial institutions, as these institutions have less
confidence in new ventures compared to an established business.
h) Discouragement
Setting up a business requires a great deal of dedication and discipline
Along the way, many entrepreneurs face obstacles. In facing difficulties, many entrepreneurs would feel
discouraged in continuing their business.
A successful entrepreneur would realize that every business faces difficult times and they would need to cope
with a lot of hard work and by thinking optimistically
1.1.4 Entrepreneurship

Entrepreneurship is the process of seeking businesses opportunities under conditions of risks


Entrepreneurship also refers to the process of creating something new of value by devoting the necessary time
and effort, assuming the accompanying financial, physical and social risks and receiving the resulting rewards
of monetary, personal satisfaction and independence
The success of a business venture depends on several aspects which are required by an entrepreneur which are
attitude, skills and knowledge

Attitude
Motivation
Confidence
Initiative
Responsibility
Risk-taker
Diligence
Mental and physical fitness
Information seeker

Skills
Decision-making
Problem solving
Negotiation
Communication
Creativity
Team Work
Management
Technical

Knowledge
Law
Management
Economics
Accounting
Values
Business
Culture
Project Management

An entrepreneur should be motivated, confident, responsible, and diligent


Besides these attitudes, he should also be an information-seeker, risk-taker, takes personal initiative, and
possesses mental and physical fitness.
The entrepreneur should be knowledgeable in law, management, economics, accounting, values, business, and
culture as well as project management.
Among the major skills required by an entrepreneur are decision-making, problem solving, negotiation and
communication, creativity, team work, management, and technical skills
According to Yep Putih, entrepreneurship is the ability, capability, and tendency to perform the following
activities:
Identify business opportunities.
Manage a business effort which brings profit to tire entrepreneur and the public.
Obtain success and richness by fulfilling the society's needs.
Take calculated risks.
Manage and utilize the factors of production to bring economical development and enhance social
welfare.

Work hard and be prepared to make new changes that can increase production quantity and quality from
time to time.
Stevenson, Roberts and Grousbeck briefly defined entrepreneurship as an individual's preparedness to grab
opportunities without considering the resources at hand.
Dollinger defined entrepreneurship as the establishment of an economical firm that is innovative, profitoriented, willing to take risks, and face uncertainties in the environment
On the whole, every individual has an equal opportunity to become an entrepreneur.
Entrepreneurship benefits the entrepreneur, the economy and the society.
It is a process that creates and manages a business to achieve the entrepreneur's desired goals.
1.1.4

a)

Basic Aspect of Entrepreneurship

The creation process


Entrepreneurship involves the creation of something new of value
This creation has to be of value to the entrepreneur and to the consumers for which it is targeted
In generally, entrepreneurial competencies are not innate traits that one is born with. In fact, it can be learned
through the various stages in the entrepreneurial development process
The development process is influenced by individual or group and can be planned or spontaneous
The internal drive requires physical, emotional and spiritual strength to develop changes in attitude,
personality and the entrepreneurs willingness to seize entrepreneurship opportunities on a continuous basis

b) Devotion of time and effort


Entrepreneurship requires the devotion of-time and effort. Much of the entrepreneurs time is needed to ensure
the smooth running of a business.
It is not on the basis of punch in and punches out working culture but it is beyond that.
Continues effort in handling and tackling any seen or unforeseen obstacles has to be made when necessary
c) Acceptance of risks
Entrepreneurship involves accepting a risks, physical risks, and social risks depending on the field pursued by
entrepreneur
d) Monetary and non-monetary rewards
The last aspect involves the rewards of being an entrepreneur. The most important reward is non-monetary
rewards such as independence, followed by personal satisfaction. Monetary reward comes into play for an
entrepreneur aiming for a profitable business.
To several entrepreneurs, money is the symbol of success
1.1.5

Importance of Entrepreneurship

a) Fulfil the unlimited needs and wants of the community


Normally', entrepreneurs are manufacturers or businessmen who produce or supply various goods and services
to fulfil the needs and wants of society.
A successful entrepreneur is own who is able to identify the needs and wants of society and further supply,
products to the consumers.
In order to fulfil consumers' demands which are always increasing and changing, the entrepreneur produces
different types of products, makes improvements on the existing products, or develops new products.
b) Create choices through Innovative and creative production technique
Entrepreneurs utilize factors of production such as land, capital, technology, information, and human resources
through innovative and creative production techniques.
They also identify opportunities in the environment and increase activities that benefit the society.
c) Produce products of high quality
Another benefit is that entrepreneurship often generates new ways of doing things.
lt encourages the creation of a broader range of products and services. Entrepreneurs select the best approach
to utilize the factors of production in order to minimize wastage in entrepreneurial activities

d) Create more job opportunities


For the past two decades, the Malaysian government has been emphasizing on the start-up of small and
medium-sized enterprises that has increased the direction of smaller entrepreneurial firms.
The government are also encouraging entrepreneurs to venture into global markets that would enhance the
country's economic performance.
This would provide substantial employment to the Malaysian population
e)

Improve the lifestyle of the society


With the available job opportunities, the society is able to enjoy lucrative income.
This income can be used to buy various products or services that are needed.
An entrepreneur always produces innovative products to help increase the society's quality of life.

Islamic Entrepreneurship

Islam is a way of life that encourages entrepreneurship and agrees that ninety percent of an individual's
income comes from business activities
According to the history of lslam, entrepreneurship activities started since the existence of Prophet Adam'
Two of his sons, Habil and Qabil were responsible for developing the agricultural and livestock sectors
respectively
Trade and commerce have always been a part of Islam
During pre-Islamic days, the Holy City of Mecca has been focus of commercial activities
The early Muslims were not only engaged in trade but they went to distant lands in search of business.
Islamic history also proves that most of the prophets were involved in various entrepreneurial activities at the
domestic and international levels.
Through these activities, Islam successfully created and developed its own civilization
1.1.5

Goal of Islamic Entrepreneurship

Any kind of Islamic entrepreneurship is ultimately based on aqidah, syariah and akhlak.
Aqidah touches on faith or belief while syariah focuses on the guidelines of human activity, that is, muamalat,
al maliat, al-thoharat and al ibadat. Akhlak emphasize on Muslim conduct and behaviour
As a muslim entrepreneur, aqidah, syariah and akhlak cannot be treated separately, but rather done
simultaneously
Everything in this world belongs to Allah. As such, an individual's life and wealth belongs to Him, as God
created them.
Islam looks at an individual as a whole. One is required to submit himself completely to Allah, as stated in the
Quran
The result of this submission is that all of one's activities should conform to the instructions of Allah, to whom
the person is submitting to. Islam being a complete way of life requires that its followers follow every aspect
of their life according to its teaching
The goal of a entrepreneur is to achieve success, worldly and in the hereafter.
Muslim entrepreneur must be a person who is eager to seek excellence.
This may lead to an increase in the quality of job performed by him
Success means to achieve what is desired, happiness in both worlds, prosperity free from worries, difficulties
or mental anguish. Success in lslam emphasizes both profit and barakah.
Islam does not reject profits or trade and does not aim to remove differences in income and wealth that may
result in various social and economic classes
Profit, which is the economic manifestation of self-love, is generated from private investments
It is the engine of human economic accomplishment
Profit gives an individual the personal incentive to work hard overcome difficulties and challenges
However, when left without moral control, it will manifest itself in different forms of oppression
Individuals will be concerned only with securing their own interests to the point of abusing the interest of
others.

Islam only rejects materialistic gain as the ultimate ambition of man, which leads him to the oppression of the
others
This is the meaning of success in Islam whereby any success achieved in life on earth will contribute as a
success in the hereafter as long as the success had been achieved within the guidance of God
Hence, there is no dichotomy between efforts made for worldly developments and preparation for life in
hereafter

1.2 DIFFERENTIATE BETWEEN BUSINESSMAN, MANAGERS, ENTREPRENEURS AND ISLAMIC


ENTREPRENEURS

An entrepreneur is an individual who seeks profitable opportunities and takes the necessary risks to establish
and operate a business.
A small businessman main desire is to grow his business.
The entrepreneur is also considered to be different from a manager since a manager is responsible for using
the organization's resources to accomplish the organization's goals.
An entrepreneur is not synonymous with a businessman, specifically a small businessman.
A small businessman has the characteristics of an entrepreneur however, those characteristics are at lower
stage compared to those of an entrepreneur
Characteristics
Time
Nature of Job
Decision-making
Effort and commitment
Risk-taker
Goal

Entrepreneur
Unlimited
Flexible
Makes own decision
Continues
Moderate
Maximizes self-potential by utilizing
available opportunities

Small Businessman
Limited
Rigid in adapting to changes
Follows decisions made by others
Low
Low
Solely for profit maximization

a) Time
A businessman only spends time buying and selling products. However an entrepreneur spends unlimited time
in studying how to satisfy clients and always comes out with ideas on ways to improve his products
b) Nature of job
A small businessman faces competition as ordinary challenges makes him rigid in adapting to changes" For a1
entrepreneur, the competitive market is a challenge that needs to be thoroughly assessed in order to survive in
an industry. Therefore, an entrepreneur is always flexible in changing and refining his products.
c) Decision-making
A small businessman will normally follow the decisions made by others and invests only in tested and proven
markets. Therefore, he has a low level of commitment on the development of new products or services and
sells existing and available products in the market. An entrepreneur will make his own decisions and use his
creativity in producing and creating innovative products and services that can penetrate a market which has
not been tested before
d) Effort and commitment
A small businessman is not attracted to changes and technological breakthrough. On the other hand, an
entrepreneur will always keep himself updated with current and future technological developments to further
increase his creativity and productivity
e) Risk-taker
An entrepreneur is an individual who takes calculated or moderate risks to start and operate a business by
calculating the costs and benefits in any decisions that are made. A small businessman buys products available
in the existing market at a lower price and sells it at a higher price. Therefore, the small businessman is usually
a low risk-taker compared to an entrepreneur as his main motive is to earn profits.
f) Goal

1.3

A small businessman engages in business activities to gain profits so that he will be able to support and earn a
living. Meanwhile, an entrepreneur starts the venture and commits on the expansion of the venture in order to
fulfil personal goals and attain self-accomplishment. A small businessman always struggles to obtain profits
while an entrepreneur is more concerned with success and personal satisfaction rather than profits
THE CHARACTERISTIC OF SUCCESSFUL ENTREPRENEURS
1.3.1

Competencies of Successful Entrepreneurs

The term entrepreneurial competencies' refers to key characteristics possessed by successful entrepreneurs in
performing entrepreneurial functions effectively. Entrepreneurial competencies can be observed from the
entrepreneur's attitude, internal life values or his insistence to perform with excellence.
There are many competencies that are related to entrepreneurship. McClelland and McBer & Co. conducted a
research on successful entrepreneurs at Malawi, India, and Ecuador. They listed 13 entrepreneurial
competencies possessed by successful entrepreneur, which are:

a) Personal Initiative
A successful entrepreneur takes the initiative and will always do something without receiving instructions
from anyone.
He has a proactive and diligent attitude in making his business successful
This competency helps the entrepreneur in seeking opportunities and exploring his field of interest
An entrepreneur who is successful takes strong initiatives because he has the tendency to look and analyse any
situation or circumstances effectively
An entrepreneur who has strong personal initiative is able to act immediately on available opportunities and
chooses the best strategy when he faces a problem
Initiative allows an entrepreneur to be alert and proactive.
Most researchers agree that an effective entrepreneur actively seeks and takes personal initiative
He willingly puts himself in situations whereby he is personally responsible for the success or failure of the
business.
The entrepreneur feels personally responsible for the outcome of ventures in which he is associated with. He
likes to take initiative in solving problems in situations whereby no leadership exists.
b) Seize Opportunities
A successful entrepreneur grabs or seizes opportunities continuously to make sure that his business sustains
for a long time in the industry. He focuses identifies, and exploits business opportunities.
In an effort to seek and grab opportunities, the entrepreneur maximizes his thinking capacity by finding
solutions to problems faced by the community
An entrepreneur who is successful will be confident that there is a business opportunity behind every problem.
In identifying current human needs, he will take action to develop, modify, adapt, or adopt the existing
products to fulfil market demand.
The entrepreneur increases his knowledge by getting ideas from erlpiol.ees, customers, and competitors,
reading on related matters and identifying his skills, capabilities, and self-potential
c) Endurance
The life of an entrepreneur is a complex one. He has to face various barriers and problems before achieving
success. He needs to have great strength and courage within him
A successful entrepreneur is strong enough to face problems and barriers courageously. This makes him all the
more determined to be assertive to face challenges
An entrepreneur who is successful will be brave to express his opinions and ideas. He will also have the
courage to take action although his ideas might be objected by the party
Endurance and courage can be seen through the entrepreneurs action
He would never give up accomplishing his vision and tries to deal with barriers that block his path to
achieving success.
The entrepreneur faces various risks and problems, for example, the sudden increase in the cost of raw
materials and the decrease in demand for his products. However, he will always try to find solve problems he
faces.
A successful entrepreneur will also be very courageous even though he has been declared unsuccessful

d) Information seeker
A successful entrepreneur is able to seek information, that is he has done some research to obtain the
information and received feedback from customers in order to provide a good product or services that can gain
customers satisfaction and acceptance
It is important for an entrepreneur to make an analysis on his market and business progress.
A successful entrepreneur should have correct and up-to-date information.
He should possess the skills to find the right information from the correct source. Information obtained will
help him enhance his experience and improve his achievement and business performance.
e) High work quality
A successful entrepreneur places care on quality and can be seen as having the urge to sell or produce products
of high quality.
He always makes a comparison of his work quality with those of others to make sure his products are always
better
He makes sure that he is not only doing a job but also doing it in the best way possible to produce products of
the best quality.
High quality products ensures customer satisfaction and simultaneously increase market share
An entrepreneur who is successful can increase his reputation as well
As his business reputation, which are ways for him to become successful. The continuous production of
quality products and services will determine the customer's faithfulness, commitment, and satisfaction.
Products of high quality will bring profitable returns to an entrepreneur as it ensures the faith of customers
towards the products. Therefore, a successful entrepreneur should make an effort to develop high quality
products or services.
f) Commitment towards work agreements
A successful entrepreneur devotes total commitment to the venture. This commitment helps the entrepreneur
to rectify mistakes and overcome obstacles which threaten business operations.
His commitment to ideas and ventures determine how successful those ventures ultimately become.
A successful entrepreneur who has a high level of commitment towards work agreements can be seen in:
His willingness to sacrifice his personal interest in order to make the market successful.
Taking full responsibility in completing a task.
His willingness to help his own staff to perform the job and provide satisfaction to customers.
Showing an attitude of care to satisfy, customers, suppliers, and other parties as agreed. This good
attitude will gain the trust of others and help to improve the entrepreneur's image of his business which
is the key to his success.
The entrepreneur will continuously strive to overcome the hurdles that hinder the achievement of his
venture's goals.
g) Efficient
A successful entrepreneur is oriented towards efficiency and is always findings ways to produce products with
lower cost or within a shorter time period.
When a new idea emerges, the entrepreneur always takes into consideration the calculation of costs and
profits.
He uses business information and management methods to improve his efficiency in business, which would
help decrease wastage and costs.
This helps the entrepreneur to achieve success in his venture
h) Systematic Planning
Planning is the most important aspect for an entrepreneur in arranging business strategies to achieve business
goals.
A successful entrepreneur focuses on the future and is sensitive towards any change that occurs. He will not be
greedy or slow in reacting when an opportunity emerges.
If the entrepreneur does not have the expertise in n-raking decisions, he will consider sourcing skilled
expertise from outside the company. A successful entrepreneur practice time management in performing
systematic planning of his business
Systematic planning will then lead to an increase in performance and achieving business target

An entrepreneur who is successful will not make a long-term plans such as for five or ten years as the market
size keeps changing
Changing involving fixed capital based on a five year plan will bring damage to the company and its new
products as competition will grow in a long time span
Therefore, possessing a brilliant character and taking cautious steps will bring positive implications to
entrepreneurs.
He will have variations in thinking and acts directly towards the needs and thinking pattern of customers.
This type of entrepreneur would usually move towards:
making plans, taking forward steps and dividing big tasks into much simpler and smaller tasks
making plans to overcome anticipated obstacles
making evaluations and choosing the best alternative for a specific problem
taking systematic and logical approach to achieve business goals.
i) Creative Problem solving
A successful entrepreneur has the capability of solving problems in terms of searching for smart steps to solve
those problems as well as looking and thinking of innovative new ideas or creative problem solving methods
Every entrepreneur faces many uncertainties that might cause problems to the business.
Problems must be solved creatively. For example, a successful entrepreneur who faces the problem of high
employee turnover would solve this problem in the most efficient way such as increasing the salary of
employees or taking care of their welfare.
However, these actions can only be taken once the cause of the problem is identified. Actions taken must solve
the problem as well as to enhance employee loyalty towards the company
j) Self-confident
A successful entrepreneur will be confident of his abilities and capabilities, which would help him succeed in
his venture.
Others will also become confident of the entrepreneur and his business.
A successful entrepreneur who has confidence in himself would:
believe in his skills and capabilities to achieve what he desires. He tends to be optimistic about his
chances of success;
express the feeling of confidence towards his capability in solving certain tasks and challenges. He will
be able to stand firm and overcome the problem of low self-esteem when confronted with competition;
be able to make decisions without hesitation or respond to challenges;
read a lot and gather experience in subjects outside his specialization
not have the fear of failure.
k) Assertion
A successful entrepreneur will be assertive in his actions. He is brave to give ideas or opinions to people and
to take action even when he has to face defiance from others.
l) Persuasion
A successful entrepreneur is persuasive and will be able to persuade his customers to buy his products or
services. He will be obtrusive in his own skills
The entrepreneur must deal with a variety of individuals. In order to ensure that business deals are smooth, he
has to persuade many people who have an impact on his business such as staff, customers, suppliers, and
financial institutions.
m) Power and Authority
A successful entrepreneur will think of a strategy to influence customers to buy his products or services
without deceiving then-r in order to reach his vision
A successful entrepreneur is also a leader. As a leader, he will be able to influence his staff and the industry
that he is involved to make sure he achieves his vision.
The five aspects of influence that should be taken into consideration are as follows:
influences based on total control
influence based on the power to impose penalty
influence based on the power to give rewards
influence based on the power of expertise

influence based on the power to show good examples


A successful entrepreneurs will have these aspects or combination of these in order to have authority over
his customer, staff and the industry that he involved
1.1.4 Describe entrepreneurship from Islamic perspective
1.1.5 Classify the types of business in Islamic entrepreneurship
1.1.6 Case study: Successful Entrepreneurship