COURSE OUTLINE

ENTREPRENEURSHIP SKILLS

COURSE CODE: HRD: 2401

1.0 PURPOSE OF THE COURSE

The course aims at enabling the learner to nurture and disseminate entrepreneurial spirit and
develop the ability to convert and idea into a commercial venture in an organization.

2.0 COURSE OBJECTIVES

At the end of the course the learner should be able to:
2.1 Understand how business ideas are nurtured and developed and develop ability to convert
and idea into a commercial venture..
2.2 Understand the complex environment in which entrepreneurship grows.
2.3 Develop ability to nurture and disseminate entrepreneurial spirit in an organization..

3.0 COURSE DESCRIPTION

Week One and Two:  Definition of; entrepreneur, entrepreneurship, self-employment; benefits
of self-employment, comparison between self-employment and entrepreneurship and
contribution of entrepreneurship to the economy.
Week Three & Four: Characteristics of an entrepreneur, main theories of entrepreneurship,
identification of business/entrepreneurial opportunities
Week five:  Description entrepreneurial process; resources needed in venture creation AND
CAT 1
Week Six & Seven: Business planning; advantages and description; sources of entrepreneurial
finances; benefits of entrepreneurial planning
Week Eight: Description of entrepreneurial awareness; problems of starting and operating small
enterprises;
Week Nine: Description of entrepreneurial motivation that is internal factors a Techniques of
self assessment and influence of external motivators CAT
Week Ten: Entrepreneurial competencies, enterprise management and business planning
Week Eleven:  incubation and entrepreneurial success factors
Week Twelve:  Group presentation
Week Thirteen & Fourteen: End of Semester Examinations
4.0 TEACHING METHODOLOGY
The course will be taught using the following approaches:
4.1 Lecture to elaborate and reinforce theoretical concepts and literature available.
4.2 Groups / class discussions.
4.3 Assignments.
4.4 Case studies.
5.0 COURSE EVALUATION / ASSESSMENT
Assessment of the student’s progress shall assume the following dimension:
5.1 Continuous Assessment Tests
 Assignments / 10
 Case analysis 10
 Discussions and
presentations / seminar 10
5.2 End of Trimester Exam 70
100
6.0 COURSE TEXTS

1. Timmons and Spinnelli (2006). New Venture Creation: Entrepreneurship for the 21st century.
2. Deakins F (1999). Entrepreneurship and Small firms.5th Ed. ISBN

 
COURSE CODE: HRD: 2402: ENTREPRENEURSHIP SKILLS

Definition of an entrepreneur

An entrepreneur is a person who starts a new business and usually risks his own money to
start the venture.
An entrepreneur is a person who identifies a business opportunity, harnesses and obtains the 
resources necessary to initiate a successful business activity.  

✔ The entrepreneur implements the idea  

✔ Undertakes to operate the business  
✔ An entrepreneur is therefore a central key individual in the society who makes
things happens for economic development.  
According to Schumpeter; an entrepreneur is the one who takes up innovation and is an agent of
change. He came up with four issues;

 An entrepreneur is; Innovation that is introduces new combination of means of

production. You do new things or you do old things in a new way. Therefore, based on
the above, an entrepreneur is involved in creative destruction
 The second issue was that an entrepreneur is a risk taker and uncertainty bearer
 The third issue an entrepreneur make business decisions; in this context an entrepreneur
must be proactive
 The fourth issue is that an entrepreneur play managerial functions. It means you plan,
implement, leadership and control

In his theory of innovation theory, he summarizes that an entrepreneur is innovative, creative

and has foresight. According to Schumpeter, there are five dimensions of innovation, namely;

 Introduce new products/service

 Introduce new production method/ process innovation
 Open up a new market
 Look for a new source of raw materials
 Comes up with new organization in the industry

Functions of entrepreneurs
An entrepreneur has to perform one or more of the functions outlined below:
 a) Innovation- An entrepreneur is an innovator who introduces new combinations of factors
of production. Entrepreneurship is a creative activity, and the entrepreneur introduces
something new in any branch of economic activity.
b) Risk taking and uncertainty bearing- If an entrepreneur succeeds in doing this, he
makes profits and vice versa.
c) Taking business decisions: An entrepreneur makes decisions regarding the product and
the quality of product to be produced.
d) Managerial functions- The entrepreneur arranges finances, purchases raw materials and
provides the necessary infrastructure for production, including technology, supervises
sales and marketing and other employees.
e) Develops the market for products and devises new products to meet consumers’
demands.
f) Maintains good relations with public authorities and with the society at large.
g) Perceives/ identifies market opportunities.
h) Gap filling functions- It is the job of the entrepreneur to fill the gap or makeup the
deficiencies which exists in the society.
i) Entrepreneur handles budget of his business.
j) Entrepreneur initiates the business activity.
k) Entrepreneur organizes the factors of production.

Entrepreneurship meaning  
 In the broader sense entrepreneurship refers to the means of stimulating innovative
and creative undertakings for a better business community or world.  
 The act or process of identifying business opportunities and gathering the
necessary resources to initiate a successful business activity.  
 Entrepreneurship means having an idea of one’s own and trying to implement the
idea to create values on it.  
 Entrepreneurship there is the practice of starting a new business or revitalizing
existing businesses in response to identifying opportunities.
Differences between entrepreneur and manager

1. An entrepreneur is an owner of the business as he is the originator of the business idea

and a key person behind the formation of an enterprise. Whereas management is
employees of an organization as they have to perform their duties in the interest of an
organization and owners thereof.
2. Being the owner of the business an entrepreneur bears all the risk of success and failure
of the business and he is also responsible for not working its new business idea up to the
satisfaction of the consumers. Management is not concern about the risk of business
failure as they are just employees of an organization and mostly don’t hold any
beneficiary interest in that organization.
3. An entrepreneur gets remuneration in the form of profits out of the business, only after
netting all the direct and indirect expenses. They certainly have to keep money aside for
future expansion and future business opportunities and also for downturns in business
cycles and that may result in not gaining any money in the starting years. However, they
may earn abnormal profits when their company starts growing in the market. And if any
acquisition of the business is made then he will get huge returns on their entire
investment made in that innovative business idea since the beginning of the project.
Whereas management gets remuneration in the form of salary or any incentive or
commission based on their performances
4. Entrepreneurs are motivated to a start new venture with their unique business ideas
whereas management is motivated to manage an existing business of the entrepreneurs in
a more effective and timely manner.
5. Being the originator of the business entrepreneurs have all the decision making
authorities in respect of that business whereas management doesn’t have such decision
making authorities instead they have to follow the decisions made by the owners except
few key managerial personal’s who are involved in the decision-making body of the
organization.
6. Sustainable growth of the business is the primary motive of entrepreneur whereas
management is motivated towards the accomplishment of define organizational goals
with the optimum utilization of available resources.
 7. The overall process of entrepreneurship is centralized whereas the process of
management is decentralized due to many hierarchies available in an organization

NB/ Intrapreneurship is defined as entrepreneurship within an existing business set– up. That is
to say – Intrapreneurship is corporate entrepreneurship. When a corporation indulges in
entrepreneurial activities, like diversification into new businesses, it is called intrapreneurship.
Intrapreneur is a manager who focuses on innovation and creativity; who brainstorms, dreams
and puts ideas into profitable venture by operating within the organizational environment.
Entrepreneur Intrapreneur
Employer (Boss ) of the organization Employee of an organization
He/ She comes up with business decision and Depend on the organization to implement
implement his/her ideas
Bears all the risks involved in the enterprise Doesn’t bears all the risks
Exhibit high need for achievement May not have high need achievement
Profit is the reward Attractive salary, promotion and incentive are
the reward
May not have formal qualification Should have some professional or technical
qualification
Do not have any boundary for operation Have boundary based on their qualifications

CHARACTERISTICS OF AN ENTREPRENEUR

CREATIVITY- The ability to bring something new into existence. A person may conceive of
something new and envision how it will be useful but not necessary take the action required to
bring it a reality. An entrepreneur should be creative because ideas usually evolve through a
creative process whereby imaginative people bring them into existence nature then develop them
successfully.

MENTAL ABILITY-An entrepreneur must be reasonably intelligent and able to analyze

various problems and solution. He should be able to anticipate changes in the environment and
study various situations under which decisions have to be made.

INNOVATION- This is the specific instrument of entrepreneurship because it creates a

resource. An entrepreneur should be able to come up with new and different values and to
convert a material into a resource or to combine an existing resources to a new and more product
way.
DYNAMISM-It revises the target of the enterprise on an upward direction. A dynamic
entrepreneur set attainable goals that can be accomplished with a specific time frames. They
approach people on with a mindset of solution and are able to systematically solve them in the
interest of the enterprise.

LEADERSHIP-This is a basic quality of entrepreneur. They should be able to stand apart and
show direction within an organization. They should be able to generate resources and
demonstrate their utilization to the benefits of an organization.

TEAM BUILDING-An entrepreneur should be able to build a team. A team is a group of

people with a common purpose that is focused and aligned to achieve a specific task or a set of
outcomes. A good team will be able to share knowledge, core competencies and goals.

PROBLEM SOLVING- A good entrepreneur should be able to define the problem, gather
information, identify various solutions, evaluate alternative and select the best options, take
actions and evaluate the action taken.

RISK TAKING AND DECISION MAKING ABILITY-Entrepreneurs make decisions under

conditions of uncertainty and therefore a willing to bear risk. Risk bearing calls for absolute
clarity in thinking and coordinated actions. Every decision pertaining to an enterprise involves
risk. Decision making in an environment of uncertainty requires anticipation of risk and profit as
a reward for undertaking the risk.

HARDWORKING - Willingness to work hard. Most entrepreneurs have to put in a lot of hours
which can e tedious in order to see the ideas to the end. This is true especially in the beginning
where the entrepreneur has to do everything on his own.

TECHNICAL KNOWLEDGE- An entrepreneur should have sufficient knowledge required to

commercialize the ideas. An entrepreneur with a high levels of administrative ability, human
relation, communication skills and creativity will stand a much better chance of success

OTHERS-Commitment, goal orientation, communication ability, highly optimistic, desire for

high achievement, self-confident and independent..

Definition of Entrepreneurship
  Entrepreneurship is the process of identifying business opportunity, gather the necessary
resources such as finan
 ces , labour , assume risks and exploit economically
 According to Shane and venkataraman (2000) entrepreneurship is concerned with the
discovery and exploitation of profitable opportunities
 In the view of Hisrich & Peters (1989) Entrepreneurship is a dynamic process of
innovation and new-venture creation, and includes the assumption of the risks and
rewards of the new venture
 Entrepreneurship in Europe by the European Commission (2003) defines
entrepreneurship as the mind set and process to create and develop economic activities by
building risk-taking, creativity and/or innovation with sound management, within a new
or an existing organization.
 Difference between Entrepreneurship and Self Employment
 Self-employment: the state of working for oneself as a freelance or the owner of a
business rather than for an employer. Entrepreneurship: the activity of setting up a
business or businesses, taking on financial risks in the hope of profit
 The distinction between entrepreneurship and self-employment revolves around the
existence of an innovative business concept or idea. Entrepreneurs are attempting to
develop something new. People who are self-employed, by contrast, typically engage in
selling their labor to perform a specific set of tasks that are to some extent routine, but
might differ in quality depending on who does them.
 ? The following are the major differences between entrepreneurship and self-
employment with respect to Innovation Scope and Stage

Entrepreneurship Self-employment
Entrepreneurship necessarily involves the task Self-employment refers to full time
of sensing opportunities and innovating involvement in own occupation in which one
products and services. may or may not innovate a product or
services.
All entrepreneurs are self- employed. All self-employed persons may not
necessarily be entrepreneurs
Employment A lot of employment is Only self-employment, additional
generated employment may or may not exist
It is a matter of attitude It is a matter of habit
Roles of entrepreneurship to economic development / Entrepreneurship Contribution to
National Development and general society

1. Economic Roles (Contributions)

2. ROLE OF AN ENTREPRENEUR IN ECONOMIC DEVELOPMENT
3. It promotes capital formation – Entrepreneur promote capital formation by mobilizing the
idle saving of the public. They employ their own as well as borrowed resource to set up their
enterprises. Such types of entrepreneurial activities lead to value addition and creation of
wealth which is essential for industrial and economic development of the country
4. Creates large scale employment opportunities entrepreneurs provide immediate large scale
employment to the unemployed which is a chronic problem of undeveloped nation with the
setting up more and more units by enterprises both or small and large scale. Numerous job
opportunities are created for others. As time passes this enterprise grow providing direct and
indirect employment opportunities to many more. In this way entrepreneurs play an effective
role in reducing the problem of unemployment in the country which in turn clears the paths
towards economic development of the nation.
5. Promotes balanced regional development. Entrepreneurs help to remove regional
disparities through setting up of industries in less developed and backward areas. The growth
of industries and business in these areas lead to a large number of public benefit such as road,
transport, health, education and entertainment. Setting up of more industries leads to more
development of backward regions and therefore promote balanced regional development
6. Reduces concentration of economic power. Economic power is the natural outcome of
industrial and business activity; industrial development normally leads to concentration of
economic power in the hands of few individuals which results in the growth of monopolies.
In order to address this problem a large number of enterprises need to be developed thereby
reducing the concentration of economic power amongst the population
7. Wealth creation and distribution. It stimulates equitable redistribution of wealth and
income in the interest of the country to move people and geographic area. Therefore giving
 benefits to large section of the society. Entrepreneurial activities also generate more activities
and give a multiplier effect in the economy.
8. Contributes to even distribution of resources leading to reduction in crime.
9. Promote the country export trade. Entrepreneurs promote export trait which is a key
ingredient of economic development. They produce goods and services in large scale for the
purpose of earning huge amount of foreign exchange from export in order to compact the
import duce requirement therefore import substitution and export promotion ensure
economic independent and development
10. Induce backward and forward linkages. Entrepreneurs like to work in our environment of
change and they try to maximize profits by innovation. when an enterprise is established in
accordance to changing technology . its brings about backward and forward linkages which
stimulate no process of economic development in the country.
11. Basic for developing a pool of skilled and semi-skilled workers for future industrial
expansion.

12. They spark/development new ideas/innovation and develop quality products and services that
create new value for customers, leading to improved standards of living.
13. Provides opportunities for developing and adopting appropriate technologies and managerial
approaches.
14. Increases mobility for the improved development of natural resources and contribute to
increased participation in economic activities.

Reasons why an individual would prefer self-employment

 Satisfaction of creating your own job. Many self-employed people enjoy the sense of
independence and accomplishment that comes from using their skills and experience to create
their own work rather than depend on an employer for a job.
 Opportunity to follow your heart’s desire. Self-employment offers the chance to work at
something that not only provides income but also appeals to your passion. As your own boss you
have the freedom to determine where to invest your time and energy.
 Variety. No day is predictable. There are always new customers, clients and suppliers to meet
new problems to solve, and new projects to tackle.
 Feeling of control. Being self-employed gives you control over your schedule, your working
conditions and how you do your work.
 Opportunity to use your creativity. Many entrepreneurs say they felt confined and their
creativity thwarted in a corporate or government environment. Being your own boss lets you test
your bright ideas and fulfil your passion for creativity.
 Flexible work hours. If you want to spend time in your garden in summer or catch a child’s
performance at school, you may be able to juggle your schedule to do so. And if you make up for
it on evening and weekends, it will be by your own choice.
 No dress code. Every day can be a casual Friday when you’re calling the shots. You can enjoy
dressing for comfort on days without meeting with customers or clients.
 Opportunity for a healthier lifestyle. Working at a home-based business can pay health
dividends. You may be able to adjust your work schedule to accommodate personal needs, such
as scheduling an exercise program.

Weakness of self-employment
 Long hours. Anyone who goes into business thinking it will be easy street compared to being an
employee will not las long. Self-employed people often talk of 12 to 16 hours’ days as the norm.
client and customers can be demanding and customer services can make the difference between
success and failure.
 Loss of structure. Being your own boss can be unsettling if you’re used to having an employer
impose a certain structure on your work day. There’s no ‘’time clock’’ to punch, no set coffee
breaks. It’s up to you to create your own structure based on what’s needed to market yourself and
your product or services and get the work done.
 Isolation. As a self-employed person, you could miss the support of co-workers or the
opportunity to socialize on breaks, especially if you work from home.
 Paper work. When you run your own business, you’re not only the president and marketing
manager, but also the comptroller and bookkeeper. Of course, you can hire an accountant to help
you set up books and do your taxes. But you will have to spend many hours doing the paper
work and record-keeping required.
 Unpredictable income. Until you get a new business off the ground and running smoothly,
budgeting is vital. Even if you’ve done your homework and prepared a thoroughly researched
 business plan, your income won’t be as predictable as a regular paycheque. Some new business
owners take part-time or even fulltime jobs during the first year or two to keep a steady income
until the business takes off.
 Constant pressure to keep sales up or work coming in. Every day is a marketing day or a
work search day for the self-employed. If you have employees, the pressure is even grater to
bring in enough work to keep them busy and pay their salaries.
 Potential for loss. Starting any kind of business requires some financial investment. Even
equipping a modest home office to perform a professional service such as accounting requires a
minimum investment in such essentials as furniture, a computer, software, a business telephone
line, a copier and a fax machine. The capital required to start a restaurant or manufacturing
operation can be substantial. Should your business fail, this investment may never be recovered?

The myths of entrepreneurship

Throughout the years, many myths have arisen about entrepreneurship-primarily because of lack
of research on the subject. As many researchers in the field have noted, the study of
entrepreneurship is still emerging, and thus “folklore” tends to prevail until it is dispelled with
contemporary research findings. Ten of the most notable myths (and an explanation to dispel
each myth) are as follows

 Myth 1: Entrepreneurs are Doers, Not Thinkers

Although it I true that entrepreneurs tend toward action, they are also thinkers. Indeed, they are
often very methodical people who plan their moves carefully. The emphasis today on the
creation of clear and complete business plan- this is indication that “ thinking” entrepreneurs are
important as “doing” entrepreneurs.

 Myth 2: Entrepreneurs are Born, No Made

The idea that the characteristics of entrepreneurs cannot be taught or learned-that they are innate
traits one must be born with-has been prevalent. These traits include aggressiveness,
initiative,self drive, willingness to take risks, analytical ability, and skill in human relations.
 Today, however, the recogtion of entrepreneurship has models, processes, and case studies that
allow the topic to be studied and the knowledge to be acquired.

 Myth 3: Entrepreneurs Are Always Inventors

The idea that entrepreneurs are inventors is a result of misunderstanding and tunnel vision.
Although many inventors are also entrepreneurs, numerous entrepreneurs, encompass all sort of
innovative activity.

 Myth 4: Entrepreneurs Are Academic and Social Misfit

The belief that entrepreneurs are academically and socially infective is as a result of some
business after dropping out school quitting a job
 Myth 5: Entrepreneurs Must Fit the Profile
Many books and articles have presented checklists of characteristics of the successful
entrepreneurs. These list were neither validated nor complete; they were based on case studies
and on research findings among achievement-oriented people.. Today we realize that a standard
entrepreneurial profile is hard to compile. The environment, the venture, and the entrepreneur
have interactive effects, which result in many different types of profiles
 Myth 6: All Entrepreneurs Need Is Money
All entrepreneurs need is money - Most successful entrepreneurs need is luck. Being at the right
place at the right time is always an advantage. However luck happening when preparations meet
opportunity and advantage
 Myth 7: Enterprises Must Fail
Enterprises must fail. It is true that many entrepreneurs suffer a number of failures before they
are successful. They follow the saying ‘ if at first you don’t succeed try, try and you try again’ in
fact failure can teach many lessons to those who are willing to learn and often it leads to future
successes
 Myth 8: Entrepreneurs Are Extreme Takers Or Gambles
The entrepreneur doesn't need to rely on the luck of the game to make profit. To delve into that
idea a little bit, an entrepreneur takes calculated risks with well-planned business strategies that
account for bankroll and risk of ruin, meaning a loss won't be the end.
 Myth 9: All Entrepreneurs Need Is Luck
Being in “the right at the right time” is always an advantage-but “ luck happens when preparation
meets opportunity” is an equally appropriate adage. Prepared entrepreneurs who seize the
opportunity when it arises often seem “lucky.”. They are, in fact, simply better prepared to deal
with situations and turn them into successes. What appears to be luck is actually preparation,
determination, desire, knowledge, and innovativeness?
 Myth 10: Entrepreneurship is Unstructured and Chaotic
There is a tendency to think of entrepreneurs as gunslingers-people who shoot from the hip and
ask questions later. They are assumed by some to be disorganized and unstructured, leaving it to
others to eep things on track. The reality is that entrepreneurs are heavily involved in all facets of
their ventures and they usually have a number of balls in the air at the same time. As a result,
they are typically well-organized individuals. They tend to have a system-perhaps elaborate,
perhaps not-that is personally designed to keep things straight and maintain priories

CLASSIFICATION OF ENTREPRENEURS

ENTREPRENEURE The term ‘entrepreneur’ is derived from the French word ‘entrprendre’
which means ‘go between’ or ‘to undertake’. Thus an entrepreneur is any person who undertakes
the risk of establishing and running of a new enterprise. There are different types of
entrepreneurs on the modes or objectives or ventures. These classifications are not mutually
exclusive.

a) CLASSIFICATION ACCORDING TO INNOVATION

1. Innovative entrepreneurs:

These entrepreneurs have the ability to think newer, better and more economical ideas of
business organization and management. They are the business leaders and contributors to the
economic development of a country. Inventions like the introduction of a small car ‘Nano’ by
Ratan Tata, organised retailing by Kishore Biyani, making mobile phones available to the
common may by Anil Ambani are the works of innovative entrepreneurs.

2. Imitating entrepreneurs:

These entrepreneurs are people who follow the path shown by innovative entrepreneurs. They
imitate innovative entrepreneurs because the environment in which they operate is such that it
does not permit them to have creative and innovative ideas on their own. Such entrepreneurs are
found in countries and situations marked with weak industrial and institutional base which
creates difficulties in initiating innovative ideas. In our country also, a large number of such
entrepreneurs are found in every field of business activity and they fulfill their need for
achievement by imitating the ideas introduced by innovative entrepreneurs. Development of
small shopping complexes is the work of imitating entrepreneurs. All the small car
manufacturers now are the imitating entrepreneurs.

3. Fabian entrepreneurs:

The dictionary meaning of the term ‘fabian’ is ‘a person seeking victory by delay rather than by
a decisive battle’. Fabian entrepreneurs are those individuals who do not show initiative in
visualising and implementing new ideas and innovations wait for some development which
would motivate them to initiate unless there is an imminent threat to their very existence.

4. Drone entrepreneurs:

The dictionary meaning of the term ‘drone’ is ‘a person who lives on the labor of others’. Drone
entrepreneurs are those individuals who are satisfied with the existing mode and speed of
business activity and show no inclination in gaining market leadership. In other words, drone
entrepreneurs are die-hard conservatives and even ready to suffer the loss of business.

5. Social Entrepreneur:

Social entrepreneurs drive social innovation and transformation in various fields including
education, health, human rights, workers’ rights, environment and enterprise development. They
undertake poverty alleviation objectives with the zeal of an entrepreneur, business practices and
dare to overcome traditional practices and to innovate. Dr Mohammed Yunus of Bangladesh who
started Gramin Bank is a case of social entrepreneur

b) CLASSIFICATION ACCORDING TO THE TYPE OF BUSINESS

i) Business entrepreneurs:-who start business units after developing ideas for new
products/services.
ii)Trading entrepreneurs :-who undertake buying & selling of goods, but not engage in
manufacturing.
iii) corporate entrepreneurs:-who establish and manage corporate form of organization which
have separate legal existence.
iv) Agricultural entrepreneurs:- who undertake activities like raising and marketing of crops,
fertilizers and other allied activities.
c) CLASSIFICATION ACCORDING TO STAGES OF BUSINESS DEVELOPMENT
 First generation entrepreneurs:-who do not possess any entrepreneurial background. They
start industry by their own innovative skills.
 Second generation entrepreneurs:-who inherit the family business and pass to next
generation.
 Classical entrepreneurs:-who aims to maximize his economic returns at a level consistent
with the survival of the unit with or without an element of growth.
D) CLASSIFICATION ACCORDING TO THE BASIS OF MOTIVATION
i)Pure entrepreneurs:-who are basically motivated to become entrepreneurs for their personal
satisfaction, ego etc..
ii)Induced entrepreneurs:- who are induced to take up entrepreneurial role by the assistance and
policy of government including incentives, subsidies etc.

e) CLASSIFICATION BASED ON THE BASIS OF TECHNOLOGY

 Technical entrepreneurs:- who are task oriented and ‘craftsman type’. They prefer doing
than thinking
  .Non-technical entrepreneurs:- who are not concerned with technical side, but rather with
marketing and promotion.
 Professional entrepreneurs:- who start a business unit, but later sell the running business
and start a new unit later.
f) CLASSIFICATION BASED ON THE BASIS OF CAPITAL OWNERSHIP
 Private entrepreneurs:- individual or group set up enterprise, arrange finance, share risk
etc.
 State entrepreneurs:- means the trading or industrial venture undertaken by the state or
the government itself.
 Joint entrepreneurs:- the combination of private and government entrepreneurs.

g) CLASSIFICATION BASED ON SCALE

o Large scale entrepreneurs
o Medium scale entrepreneurs
o Small scale entrepreneurs

THEORIES OF ENTREPRENUERS

A theory is set of assumption, preposition or accepted facts attempts to provide a rational

explanation about relationship among a group. The explanation about entrepreneurship have
adapted different thematically assumptions however majority concern three central features that
is the nature of entrepreneurial security, nature of entrepreneurs as individual and nature of
decision making; Based on the above there are three main theories of entrepreneurship;

1. Economic theory
2. Sociological theory
3. Psychological theory

ECONOMIC THEORY
According to economist entrepreneurship and economic growth will take place in those
situations where particular economic conditions are mostly favorable. These economic incentives
include; taxation, policy, industrial policy, sources of finances and raw materials, infrastructure,
investment, marketing opportunities access to appropriate information technology e.t.c. This
theory emphasizes that entrepreneurship is the function of the entrepreneur to rationally combine
the forces of production into a new producing organization since an entrepreneur is a goal
oriented person he has to constantly direct the organization on the paths of its objectives. He
undertakes an activity of producing in present what the future will demand. The entrepreneur
must have four major characteristics

 He connects different market

 Capable of making market deficiencies that gap filling
 He is an input complete
 Creates or expands time

SOCIOLOGICAL THEORY

According to sociolologist entrepreneurship is most likely to emerge under a specific social

culture. Thus, one becomes an entrepreneur because of social environment they find in that is
social values, cultural beliefs, religion, customs, taboos, attitude and social roles and
expectation. Max Waber argued that religion has a very large contribution in making
entrepreneurs. religion that embrace hard work, returns on their hard work that encourages spirit
of value of money and profit, seem to have more entrepreneurs than religions that have different
view. He also said that the spirit of capitalism which is a result of economic freedom and private
freedom has to be merged with spirit of venture which is free force of impulse put under specific
religious values and social structures create entrepreneurship.

PSYCHOLOGICAL THEORY

The focus is that entrepreneurs have unique values, attitudes and need which drive them.  •
People’s behavior results from their attempts to satisfy their unique needs and values.  • The
psychological school focuses on personality factors believing that entrepreneurs have unique
values and attitudes towards work and life.   Among the most frequent traits of entrepreneurs
include the Need for achievement, Locus of Control and Risk taking propensity. This theory
emphasize that entrepreneurs are born. According to David McClelland, he said that
entrepreneurs have high achievement orientation a need to succeed. According to him, those
need to achieve is to get success with one’s own effort is very important as a result of the
external environment just provide incentives to succeed to make it. He taught of 3 needs of
entrepreneurs;

 Need for achievement -

 Need for power that is being dominant and influencing others
 Need for affiliation
However, for an entrepreneur the need for achievement is prime.

NB: an entrepreneur is a package of the 3 i.e economic, social and psychological.

IDENTIFICATION OF BUSINESS OPPORTUNITIES

A business opportunity is a business idea or chance that an entrepreneur might get which can be
exploited profitability. One may get many ideas yet not all of them may be viable. One of the
main causes of business failure is making the wrong choice of business to go into. To be able to
determine a good opportunity the entrepreneur must do the selection systematically and
carefully. He/she should go through the process of generating business ideas, assessing their
feasibility and viability before settling on which to start. The opportunity must be properly
screened and evaluated to see if it suits the entrepreneur and can profit him/her.

BUSINESS IDEA GENERATION

There is no established format of generating business ideas. The following are but a few of the
available methods.
Customers
Potential entrepreneurs should pay close attention to the final focal point of a new product ( the
customer).The view on the customers can be through a formal or an informal survey in which the
consumers express their opinions about existing products and services. Care should be taken to
ensure that the ideas from the consumers represent a large sample of the market
Existing companies
Entrepreneurs should establish a formal method for monitoring and evaluating the
products/services in the market. This may uncover ways to improve on present products resulting
in new products ideas.
Distribution channels
Channels members often have suggestions for new products because they are familiar with the
needs of the markets. These channel members can also help in marketing the new products or
service
Research and development
The largest source of new business ideas is the entrepreneur’s own research and development.
Research and development can be formal endeavor connected with one’s current employment or
an informal lab in the garage
Government
New products and services ideas can also come from government regulations
Building on your skills, hobbies or interest
Your interest, hobby or skill may be your business opportunity. To illustrate, if you enjoy
travelling, photography and/or hospitality, you may consider going into the tourist trade which is
one of the biggest industries in the world.
Personal skills and experience
Over half of the ideas for successful businesses come from work place experiences, e.g a
mechanic with experience of working in a large garage who eventually sets up his/her own car
repair or second hand business. Thus, the background of entrepreneurs play a crucial role in the
decision to go into business as well as the type of venture created. Your skills and experience-are
probably your most important resource not only in generating ideas but also in capitalizing on
them
Franchises
A franchise is an arrangement whereby the manufacturer or sole distributor of a trade mark,
product or service give exclusive rights of local distribution to independent retailers in return for
their payment of royalties and conformance to standardized operating procedures Franchising
may take several forms, but the one of interest is the type that offers a name, image, method of
doing business and operating procedures.
Using newspapers and magazines
There are many business opportunities that appear in the newspapers. The daily nation for
example, does publish export and import opportunities. Many special features and classified
sections of newspapers can give you a chance to exploit a new idea. Read fiction in a paper or
elsewhere and see if you cannot turn it into fact. Read the development plan. National and even
local development plans maybe a source for business idea generation. A rural industrialization
policy, family planning campaign etc. do suggest business ideas.
Show and Exhibitions
Good business ideas can be sourced from shows and exhibitions. This can be way of observing
the exhibits and discussing with the exhibitors. Watch out for events other than shows and
exhibitions- they may be your opportunities. Selling refreshments, souvenirs etc. at the events are
examples.
Brainstorming
It means letting the mind free to think of any of any business idea. In the process of
brainstorming even silly ideas may be generated but they may be quite likely to lead to ‘’high
ideas’’. During brainstorming you may be answering questions such as – what can one do with
this product or how else could we handle this?. Brainstorming is best done in a group or among
two peoples; with friends or in a family. One procedure is to identify a key word or product or
picture and let the mind lose in thinking about possible business ideas associated with the
word/product/picture.
Copying or improving somebody’s idea.
Many times, we complain about the shortcoming of certain existing business. Do you know of a
business that is badly managed? That has a bad customer care service? If you can identify the
mistakes an existing business does and be sure you can correct them then you are in business.
Combing two exising business ideas in a new way
Two or more existing business ideas can be combined to produce a new business concept. A’’
nyama choma’’ bar is an example. A children hair salon with play facilities is another example.
Trend observation
Identify trends and translate them into business ideas by identifying a possible need associated
with the trend. Local treads will help you identify home trade-based business while regional
trends should lead you to discover export opportunities. The trends may be economic social,
cultural, technological etc. Example: increased form four leavers, the need is further education
consequently business idea is private university/college
Listening to what people say
If you listened very well and very hard you may hear people complaining of things they would
like to have but do not have them. If enough people complain about the things then that could do
be a market niche to exploit.eg many people would like home delivery services. Listening to
what people say could be enhanced by actual interviewing of people to collect their complaints
and desires. A questionnaire could be circulated in an estate
Recognizing Needs
A need can be an opportunity. Indeed, a customer buys a product not for it technical attributes
but for its ability to satisfy his/her needs. Abraham Maslow, a celebrated humanistic
psychologist, identified a number of levels of human needs which range from very basic physical
needs such as the desire for food, water, clothing and shelter to very fine and personalized
physiological needs such as the need to be recognized. People have a mixture of needs and at any
time, some needs may be more dominant than others. For example, need for clothing, shelter,
water and business idea tailoring, low cost housing, water delivery.
Gaining from waste
If you looked closely at what appears to be waste it may not be waste at all. It could be recycled
or be made to produce some useful products. Methane gas to produce heat and electricity may be
produced from garbage dumps. Table vinegar can be produced from banana peels.
Talking to successful business people
Many successful people have a wealth of ideas that they may suggest to you. Also, when you
travel keep your eyes and ears open, you might notice a business to import to your locality.
Buying an idea
Some universities and research institutes have ideas that may be purchased. Some of these
institutions may offer joint venture opportunities. You may also become an agent for foreign
suppliers. Some embassies, the chambers of commerce and industry, the external trade
associations may have lists of foreign firms wanting to sell products in the home country. Some
large-scale producers would be happy subcontracting certain jobs to small businesses. The
building and construction industry could be an example.
Import substitution
Many items are imported into the country which could be locally produced. Analyze imported
items to see if you could produce some locally and cheaply e.g. Paper clips, vegetable oils.
Gaining from old products
Salvage old products. Buying old products and repairing them for sale or selling their good
components can be good business. Some supermarkets such as uchumi do sell old or soiled
products that could be salvaged.
Add value.
Local raw materials could be made into half-finished (half-processed) products and sold to final
processors. Hides and skins for the shoe industry, crude vegetable oil for the vegetable oil
refining industry and soap producers. Etc. are examples.
Business opportunity
A business opportunity may be defined as an attractive idea or proposition that provides the
possibility of a return for the investor or the person taking the risk. Such opportunity is presented
by customers’ requirements and lead to the provision of a product or service which creates or
adds value for its buyer or end user. A good idea, however, is not necessary a good opportunity.
For example one may invent a brilliant product from a technical point of view and yet the market
may not be ready for it. On the other hand the idea may be sound, but the level of competition
and the resources required may be such that it is not worth pursuing. To underscore the point
further, consider the fact that over 80 percentage of all new products fail. Surely to the inventors
or backers, the idea seemed good, yet clearly they did not stand the test of the market.
Characteristics of a good (Viable) Business idea)

A good viable business idea should ensure the following:

 It does not require excessive investment

 It is easy to manage
 It offers good return on investment
 It has scope for growth, expansion and diversification
 It requires operational skills which are available and/or can be achieved with minimal
training
 It involves minimum risks
 It is compatible with the owner’s goals and interests
 It has a short gestation ( break -even point) point
 It has a readily available market
 It has an adequate supply of inputs
 It is easy to exit (dissolve) if necessary
 It does not require frequent and extensive changes in technology