Entrepreneurship for Engineers

(IEng5242)

Instructor: Biruk K.
Industrial Engineering Department
College of Engineering, IoT
Debre Berhan University
 Entrepreneurship for
Engineers (IEng5242)
Chapter One: Introduction to Entrepreneurship
Chapter Two: Starting Technology Based New
Ventures
Chapter Three: Business Structures and Legal
Ownership
Chapter Four: The Entrepreneurial Cycle
Chapter Five: Operations of Business Startups
Chapter Six: Risk and Insurance in Business
Enterprises
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Entrepreneurship for Engineers
(IEng5242)
Introduction to Entrepreneurship
Why We Study Entrepreneurship?
Meaning and Concept of entrepreneurship

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and an entrepreneur
The entrepreneur versus the manager
3 Motivation for straining one‘s own business
Personal competencies and Characteristics
of Entrepreneurs
Kinds of Entrepreneurship
Success factors for entrepreneurs
 Why We Study Entrepreneurship

Scientists and engineers who want to lead

companies need to know how to back up ideas
with numbers
You will learn the complex business processes
involved in commercialization
You learn how to make trade-offs among features,
benefits, price, markets, and operations
You learn how to adapt to uncertainty and change
You learn techniques for managing people

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 An Entrepreneur
Entrepreneurs are action-oriented, highly motivated
individuals who take risks to achieve goals.
Entrepreneurs have the ability
to see and evaluate business opportunities,
to gather the necessary resources to take advantage of
them
to initiate appropriate action to ensure success.
Economists may view entrepreneurs as those who
bring resources together in unusual combinations to
generate profits
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 An Entrepreneur

Psychologists tend to view entrepreneurs in

behavioral terms as those achievement- oriented
individuals driven to seek challenges and new
accomplishments.
Peter Drucker states, as “Entrepreneur is
someone who always searches for change, responds to
it, and exploits it as an opportunity”.
 Example: It is the entrepreneur who only knows
✓Opening of new university near the society
✓Opening of Hotels near tourists’ attraction-center
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 Entrepreneurship

Entrepreneurship (according to the classic

definition) is the process by which individuals pursue
opportunities without regard to resources they
currently control.
It is the dynamic process of creating incremental
wealth.
 This wealth is created by individuals who assume
the major risks in terms of equity, time and /or
career commitments of providing value for
some product or service.
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 Entrepreneurship

The product or service itself may or may not

be new or unique but value must somehow be
infused by the entrepreneur by securing and
allocating the necessary skills and resources
(Robert Ronstadt)
It is very rarely a get rich-quick proposition;
rather, it is one of building long-term value and
durable cash flow streams.

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 The Entrepreneur Vs The Manager

Entrepreneur
 Entrepreneurial function is the organization of
production:
 Entrepreneurship is an economic concept.
 Economics describes four factors of production namely;
land, labor, capital and entrepreneurial ability (organizational
skill).
 It is the entrepreneur who combines various factors of
production, processes the raw material, creates utility in the
product and converts the raw material into a finished
product, organizes the marketing function and sells the product in
9 the market in order to earn profit.
 Cont.…

 Decision-making and calculated risk bearing:

While organizing the production function, an
entrepreneur plays a significant role.
 He is decision-maker, risk taker and goal setter.
 It is responsibility to take the decisions about
product selection, size of investment, type of
organization, technology, price determination, etc.
 Every decision may result in success or failure. But
the risk is limited and calculated.

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 Cont.…
 An entrepreneur has an all-round personality:
 An entrepreneur possesses knowledge and insight into
 The quality and types  Labor laws,
of raw materials,  Taxation,
 Machinery,  Production process and
 Manpower and their  Marketing network.
behavioral pattern,
 Government machinery,
 High levels of achievement motivation
 Innovative, creative, imaginative soul
 The entrepreneur is the owner of the business who enjoys
11 the position of an employer.
 The Manager
 They may or may not be entrepreneurs.
 They own and manage a small enterprise, in a
way, which fits with their personal motivations.
 They are more intent on survival than seeking innovative
change and growth.
 Limited scope for innovativeness, creativity and imagination
 Managerial jobs are transferable
 As a manager in the business organization, his job is
transferable from office to office, from one unit and
location to another location
 Managers do not bear-risk
12  Risk bearing capacity is an entrepreneurial quality
 Cont.… Entrepreneur Vs Manager

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 Motivation for straining one’s own
business
What leads a person to strike out on his own and start
a business?
 Perhaps a person has been laid off once or more.
 Sometimes a person is frustrated with his or her current job
and doesn‘t see any better career prospects on the horizon.
 Sometimes a person realizes that his or her job is in jeopardy.
 A firm may be contemplating cutbacks that could end a
job or limit career or salary prospects.
 Perhaps a person already has been passed over for
promotion.
 Perhaps a person sees no opportunities in existing
businesses for someone with his or her interests and skills.

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 Cont.…
1. “Push” Influence
Many people are pushed into founding a new
enterprise by variety of factors including:
 Redundancy-Being without a job (idleness)
 Unemployment (or threat of)
 Disagreement with previous employer; Uncomfortable
relation at work has also pushed new entrants into small business
2. “Pull” Influence
Some individuals are attracted towards small business
ownership by positive motive such as a specific idea
which they are convinced will work.
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 Cont.…
Pull motives include:
 Desire for independence
 Desire to exploit an opportunity
 Turning a hobby or previous work experience in to a
business
 Financial Incentive
The promise of long-term financial independence
can clearly be a motive in starting new firm,
although it is usually not quoted as frequently as
other factors.
The dividing line between those ―pulled and those
―pushed is often blurred.
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 Personal competencies and
Characteristics of Entrepreneurs
 Generally, every career draws on the competencies of an
individual.
 Some of these competencies may be general and some
peculiar to the chosen career.
 You may understand competencies to mean abilities and
skills.
 However, we would desist from calling these as
personality traits as such a conceptualization only
reinforces the mistaken belief that entrepreneurs are
born rather than made.
 The three primary reasons that people became
entrepreneurs and start their own firms are: to be their own
17 boss, pursue their own ideas and realize financial rewards
 1.Passion (strong feeling) for business
2. Product/customer focus Ex. Steven Jobs,
cofounder of Apple computer
3.Tenacity Despite failure: because entrepreneurs are
typically trying some thing new, the failure rate associated with
their efforts is naturally high. It is like scientists, chemists…

Figure: Four Primary

Characteristics/Qualities of
Entrepreneurs

4.Execution Intelligence: the ability to fashion a solid idea in

to a viable business is a key characteristic of successful
18 entrepreneurs. 18
 Cont.…Characteristics of
Entrepreneurs

 Need for Achievement: set goals and targets, self-motivated and take
pleasure in achieving these goals.
 Willingness to take risks: financial, careers, families, psychic
 Individuals with a high need for achievement also have moderate risk-
taking propensities (reflects self-confidence)
 Self-Confidence: believe in their own ability to overcome the problems
 Innovation: based upon many factors from marketing to technology
 Doing things differently is part of entrepreneurs’ nature. It is how they
create a market opportunity and differentiate themselves from the
competition.
 Total Commitment: Hard work, energy and single mindedness
 All-roundness: make the product, market it and count money
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 Cont.…

 Creativity
 Determination
 Flexibility
 Leadership
 Passion
 Systematic Planning

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 Cont.…
 Other important Entrepreneurial  Real-time strategy and decision
skills making
 Oral and written communication  Comfort with change and
 Basics of finance and accounting chaos

 Teamwork  Risk-taking

 Creativity and opportunity  Selling, negotiation, and

evaluation  Motivation through influence
 Every entrepreneur has these qualities in different degrees.
and persuasion
But what if a person lacks one or more?
 Many skills can be learned. Or, someone can be hired who
has strengths that the entrepreneur lacks.
 The most important strategy is to be aware of strengths and to
build on them.
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 Kinds of Entrepreneurship

It is possible to identify entrepreneurship by

the varied types of people and firms that exist
Entrepreneurial leadership maybe classified into
three types
1. Founding Entrepreneurs /Founders/
2. General managers and
3. Franchisees

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 Cont.…
1. Founding Entrepreneurs:
Generally considered to be the “Pure” entrepreneurs,
Founders may be inventors who initials business as the basis
of new or improved products or services.
Founders refer to entrepreneurs who bring new firms into
existence.
 They may also be artisans who develop skills then start their
own firms.
 They may be enterprising individuals, often with marketing
backgrounds, who draw upon the ideas of others in starting new
firms whether acting as individuals or in groups, these
people bring firms not exist by surveying the market, raising
funds and arranging for the necessary facilities.
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 Cont.…
2. General Managers:
 As new firms become well established, founders
become less innovators and more administrators.
 General Managers preside over the operation of
successful ongoing business firms.
 They manage the week to week and month to month
production, marketing and financial functions of small
firms.
 The distinction between under and general managers
is often hazy.

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 3. Franchisees:
A system in which semi-independent business owners
(franchisees) pay fees and royalties to a parent company
(franchiser) in return for the right to become
identified with its trademark, to sell its products or
services, and often to use its business format and system
Franchising: A legal arrangement by which one
company allows its products, services, or business
format to be used by others for a fee
 Franchisee: A company or individual who pays for the legal
right to use the product, service, or format of another
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 Cont.…
Franchisor: A company that grants to another
company or individual the legal right to use its
product, service, or format
Franchisees differ from general managers in the
degree of independence. Because of the constraints and
guidance provided by contractual relationships with
franchising organizations, franchisees function as
limited entrepreneurs
Types of Franchising
 Trade name
 Product distribution
 Business format
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 Artisan Entrepreneurs and
Opportunistic Entrepreneur
A. The Artisan Entrepreneurs:
 Those who starts business with primarily technical skill
and little business knowledge. Artisan entrepreneur is limited to
technical training. Such entrepreneurs have technical job
experience, but they lack good communication skills.
 Their approach to business decision-making is characterized
by the following features:
They are paternalistic (They direct their business much as they
might direct their own families)
They are reluctant to delegate authority
They define marketing strategy in terms of the traditional price,
quality, and company reputation.
Their sales efforts are primarily personal.
Their time orientation is short, with little planning for future
28 growth or change. 28
 Cont.…
B. The opportunistic Entrepreneur:
 An entrepreneur who enters business with both
sophisticated managerial skills and technical knowledge.
 Their approach to business decision-making is
characterized by the following features:
 They avoid paternalism
 They delegate authority as necessary for growth
 They employ various marketing strategies and different
types of sales efforts
 They obtain capital from different source.
 They have a good plan for future growth
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 Success Factors For Entrepreneurs
 Most new ventures succeed because their founders are
capable individuals.
 The entrepreneurial team: The term “team” is used
because entrepreneurs do not start business by
themselves; they have teams, parents, close associates, or
extensive networks of advisors.
 Venture product or services: Nearly all-successful
ventures start small and grow incrementally;
Few “gear-up” with substantial organizations for a
big-bang start.
Incremental expansion of products and services
also tend to stay within the bounds of positive
cash flow.
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 Cont.…
 Marketing and timing: Successful entrepreneurs tend to have
a clear vision of both existing and potential customers.
There are no short cuts; innovation requires market
demand, not simply a good ideas.
Market potential is critically influenced by timing of
new products or services.
 Business Ideology: From an entrepreneur‘s perspective,
every venture has an ideology, a philosophy or rationale for
existing .
A business ideology is defined as a system of beliefs
about how one conducts an enterprise.
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  These beliefs include
 Commitment to providing customers with value
 The ability to take calculated risks
 The determination to grow and to control the fate of the
business
 The perspective of creating wealth realistically, and so on.
 Self-determination: They probably have great faith in their
ability to control their personal environment, rejecting too
high an influence of chance or fate.
 Desire for independence: They wish for autonomy believing
that independence of action is the only sure way to get what
they need.
 Whilst entrepreneurs may share some of these
characteristics, no one single trait can be said to be the
secret of entrepreneurial success
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 Information as one success factor for
entrepreneurship
Information is the result of processed data that
helps to give decision.
 Decision without information cannot be successful.
 Information helps business in all direction.
 Doing business with out information is like walking in the
dark
Sources of information
 Information are obtained from two main
methods of data collection.
1. Primary data collection and
33 2. Secondary data collection.
 Information gives the following importance to the
businessmen‘s
 To know the position of their competitors that is
their strength and weaknesses, business strategy
they use and their long term plan.
 To know threats and opportunity in doing business
 Helps to design long term objectives and goals
indicate capital requirement (labor, capital and
machinery)
 Helps to know market position locally and
internationally.
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 Drawbacks of Entrepreneurship

Uncertainty of income
Risk of losing your entire investment
Long hours and hard work
 Lower quality of life until the business gets
established
High levels of stress
Complete responsibility and Discouragement

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 Ten Deadly Mistakes of
Entrepreneurship
1. Management mistakes
2. Lack of experience
3. Poor financial control
4. Weak marketing efforts
5. Failure to develop a strategic plan
6. Uncontrolled growth
7. Poor location
8. Improper inventory control
9. Incorrect pricing
10. Inability to make the “entrepreneurial transition”
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