The Foundations of Entrepreneurship

Chapter 01
 Chapter Objectives
Describe entrepreneurs, entrepreneurship, and the differences among them.
Characteristics of Entrepreneurs & Discuss main reasons people decide to become
entrepreneurs.
Identify main characteristics of successful entrepreneurs.
Discuss the positive effects of entrepreneurship and entrepreneurial firms on
economies and societies.
The potential drawbacks of entrepreneurship
Types of Entrepreneurs based on different categories
Ten Deadly Mistakes of Entrepreneurship.
Difference between Entrepreneur, Intrapreneur and Manager
Explain common myths regarding entrepreneurship.
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 Old Name Vs. New Image

…was a food Amazon: was a

river in South
America

Aarong Yahoo… was

Village market something cowboys
yelled
 Entrepreneur
An Entrepreneur is one who
 creates a new business in the face of risk and uncertainty
 for the purpose of achieving profit and growth
 by identifying opportunities &
 assembling the necessary resources to capitalize on them.

An entrepreneur is a
 Risk bearer
 Organizer
 Innovator

An Entrepreneur
 Entrepreneurship
 Entrepreneurship is the attempt
Person Process

Entrepreneur and Entrepreneurship

 To create value through recognition of business
opportunity, Organizer Organization
 the management of risk-taking appropriate to the

Difference between
opportunity, and Innovator Innovation
 through the communicative and management skills
to mobilize human, financial and material Risk-bearer Risk-bearing
resources necessary to bring a project to
completion Motivator Motivation

Creator Creation

Visualiser Vision
Leader Leadership
 Our Common Understanding !!!
 The boss
 The business Owner
 The risk taker
 One who takes initiative
 One who thinks differently
 Innovate & renovate
 One who is sole controller of the business
 One Who start a small business
 The resourceful guy?
 Definition
Entrepreneur comes from French word “Endependre” which means an undertaker.

Entrepreneur is the word On the other hand,

who undertakes and Entrepreneurship is the
operates a new practice of starting new
enterprise and assume organization ,particularly new
some accountability for business in respond to the
inherent risk. identified opportunities.
 Continued..
In a word, Entrepreneurship is:
The coordination done by entrepreneur
The process of innovating something new
The way through which entrepreneur starts and operates business
The risk bearing practice done by entrepreneur
The way by which entrepreneur motivates employee toward the goals

“Entrepreneur is an undertaker who unities all means of production.”

( J.B. Say)
“A Person who organizes, operates and assume risk for business venture.”
(American Heritage Dictionary)
 Continued..
According to Koontz and Fulmer, “The ability of a person to see a business
opportunity to get together the capital needed to take advantage of the
opportunity and to start a business taking risk of failure in the hope of reaping
the rewards of success.”

Organization Creation Growth

Entrepreneurship
Innovation Profit/ Non-profit

Uniqueness Creating Value

 Characteristics of Entrepreneurs
Desire for Responsibility-
 prefer to be in control of their resources and use the resources to achieve self determined goal.

Preference for Moderate Risk

 They are calculated risk taker, rarely gamble

Confidence in their ability to succeed

 They are optimistic. This high level of optimism may explain why some of the most successful
entrepreneur have failed in business before finally succeeding.

Desire for Immediate Feedback

High Level of Energy
 Characteristics of Entrepreneurs
Future Orientation
 Have a well-defined sense of searching opportunities. Entrepreneurs are less concerned
about yesterday they are more focused on future.

Skilled at Organizing
 Effectively combining people and jobs.

Value Achievement Over Money

 Achievement seems to be the primary motivating source; money is symbol of
achievement.

High Degree of Commitment

 Launching a company successfully needs total commitment from an entrepreneur .
 Characteristics of Entrepreneurs
Tolerance for uncertainty
 The ability to handle uncertainty is critical because these business builders constantly
make decision using new, sometimes conflicting information gained from variety of
unfamiliar sources.
Flexibility
 The ability to adopt to the changing demand of their customer and their business.
Persistence
 Obstacle cannot stop pursuing their vision they simply keep trying.

Anyone – regardless of age, race, gender, color, national origin, or any other characteristic – can
become an entrepreneur (although not everyone should).
 The Benefits of Entrepreneurship
 Opportunity to Create Your Own Destiny
 Provides independence and opportunity to achieve what is important to them.
 Opportunity to Make A Difference
 Entrepreneurs are finding ways to combine their concerns for social issues and their desire to earn a good
living.
 Opportunity to Reach Your Full Potential
 Most people find their work is boring, unchallenging and unexciting, but not for the entrepreneurs. It
gives them a sense of empowerment.
 Opportunity to Reap Impressive Profits
 Opportunity to Contribute to society and To Be Recognized for the Efforts
 Opportunity to Do What You Enjoy and to Have Fun At It
 “Find a job doing what you love, and you will never have to work a day in your life” – Harvey McKays.
Entrepreneurs make their vocation (work) their hobbies and are glad they did.
 The Potential Drawbacks of
Entrepreneurship
Individual who prefer the security of a steady income, a benefit package, a two
week paid vacation, should not go into business for themselves.
Uncertainty of Income
Risk of Losing Your Entire Investment
 Failure rate is relatively high
Long Hours and Hard Work
Lower Quality of Life Until the Business Gets Established
 Half of all entrepreneurs launch their business between age 25 and 39 just when they start their
family. So family life suffers.
 The Potential Drawbacks of
Entrepreneurship
High Level of Stress
 Sometimes they unnecessarily bear the burden of managing alone, because they can not bring
themselves to delegate authority and responsibility to other in the company, even though their
employees are capable

Complete Responsibility
 It is great to be boss. But many entrepreneur find that they must make decisions on issues about
which they are not really knowledgeable. The realization that the decision they make are the cause
of success or failure has a devastating effect on some people.

Discouragement
 Feeding the Entrepreneurial Fire
Entrepreneurs as Heroes

Mark Elliot Zuckerberg Bill Gates Michael Dell

founder of Facebook founder of Microsoft founder of DELL

Jeff Bezos Walter Disney

founder of amazon.com founder of Walt Disney
 Types of Entrepreneurs
According to the Type of Business
Business Entrepreneurs
Conceive the idea of a new product or services and then translate their ideas into reality.
Entrepreneurs examine the various possibilities of sources of finance, supply of labor, raw materials or
finished products.
Trading Entrepreneurs
Buying the finished products from the producer and selling off to the customer directly or through a
retailer.
Has to be creative enough as he has to identify the market, create demand through extensive advertising.
So he has to find out the desires tests and choices of his customers in domestic and international market
 Types of Entrepreneurs
 Industrial Entrepreneurs
 Perceive the opportunity to set up his unit complies with necessary formalities
 Has ability to convert economic resources and technology into considerably profitable venture.
 Corporate Entrepreneurs
 The one who plans, develops and manage a corporate body. He is a promoter, an part of board of
directors an owner as well as an entrepreneur
 He gets his corporate body registered under the requisite Act which gives his company the status of
separate legal entity.
 Agricultural Entrepreneurs
 The one who is engaged in the agricultural activities.
 He uses latest technology to increase the productivity of agriculture and also adopts mechanization.
 Types of Entrepreneurs
According to Motivation
 Pure Entrepreneurs
 One who may or may not possess an ability for entrepreneur.
 But is tempted by the monetary reward or profit
 They are status- conscious and wants recognition.

 Induced Entrepreneurs
 Is attracted by the various incentives, subsidies and facilities offered
by the government.
 Every person can be trained to become a good entrepreneur.
 Types of Entrepreneurs
According to Capital Ownership
 Private Entrepreneurs
 When an individual or a group of individual set up an enterprise.
 State Entrepreneurs
 The trading or industrial venture undertaken by the state or the
government itself.
 Joint Entrepreneurs
 Combination of private entrepreneur and state entrepreneur who join
hands.
 Intrapreneurship
Intrapreneurship is the change initiative within the going concern by the people who working in
that organization.

“Intrapreneurship is the entrepreneurship within an existing organization”

(Hisrich & Peters)
“Intrapreneur is an entrepreneurial person employed by a corporation and
encouraged to be innovative and creative.”
(Skinner & Ivancevich)
Intrapreneurship = Intra + Entrepreneurship

MGT 3135
 Intrapreneurship
The term refers to entrepreneurial actions by individuals within an existing organization.
Intrapreneurs create new ideas, products, and services for their employer
Intrapreneurs have more access to resources than a start-up entrepreneur
Most CEOs of large Companies are Intrapreneurs
Entrepreneurship Vs. Intrapreneurship
An entrepreneur is an
individual who establishes
and manages a business for
the purpose of profit and
Difference
growth.
To innovate something new of
socio economic value.
Innovation , Financial gain &
Independence
An Intrapreneur is an individual
employed in a large
organization known as
corporation in where he/she
makes new product and
s services and develop newer
methods of production.
To increase competitive strengths
and market sustainability of the
organization.
Enhance rewarding capacity of the
organizations and autonomy
MGT 3135
 INTRAPRENEURSHIP ENTREPRENEURSHIP
Direct participation which is more Direct and total participation in the
Activity
than delegation of authority. process of innovation.
Bear moderate risk Risk Bear all types of risk.
Collaborative decisions to execute Decision Independent decisions to execute
dreams. dreams.
Organization and Intrapreneur Whom Customer and entrepreneur himself.
Serves
himself
Operates from inside the
Operates from outside the Operation organization.
organization
Attitude Strong commitment to self initiated
Strong self confidence and hope for towards efforts and goals
achieving goals. destiny
 Difference between Entrepreneur, Intrapreneur and Manager

Primary Motive
 Manager: Promotion and other traditional corporate rewards, such as
office, staff and power.
 Entrepreneur: Independence, opportunity to create, and money.
 Intrapreneur: Independence and ability to advance in the corporate
rewards.
Time Orientation
 Manager: Short term – meeting quotas and budgets, weekly, monthly,
quarterly, and the annual planning horizon.
 Entrepreneur: Survival and achieving 5 to 10 year growth of business.
 Intrapreneur: Depending on urgency to meet self imposed and corporate
timetable.
 Difference between Entrepreneur, Intrapreneur and Manager

Activity
 Managers: Delegates and supervises more than direct involvement.
 Entrepreneurs: Direct involvement.
 Intrapreneurs: Direct involvement more than delegation.
Risk
 Managers: Careful
 Entrepreneur: Moderate risk taker
 Intrapreneur: Moderate risk taker
Status
 Managers: Concerned about status symbol.
 Entrepreneurs: Not Concerned about status symbol.
 Intrapreneurs: Not Concerned about traditional status symbols --- desires independence.
 Difference between Entrepreneur, Intrapreneur and Manager

Failure and Mistake

 Managers: Tries to avoid mistakes and surprises.
 Entrepreneurs: Deals with mistakes and failures.
 Intrapreneurs: Attempts to hide risky projects from view until ready.
Decisions
 Managers: Usually agrees with those in upper management positions.
 Entrepreneurs: Follows dream with decisions.
 Intrapreneurs: Able to get others to agree to help achieve dream.
Who Serves
 Managers: Others
 Entrepreneurs: Self & customers.
 Intrapreneurs: Self, customers & sponsors.
 Ten Deadly Mistakes of Entrepreneurship

1. Management Mistakes
Poor management is the primary cause of failure. Lacks leadership
ability, sound judgment
2. Lack of Experience
Need to have experience in the field they want to enter
3. Poor Financial Control
Tend to have overly optimistic and often misjudged the financial
requirements. They start undercapitalized.
Cash not the profit what matters most in a new venture
4. Weak Marketing Efforts
Believe that if they build it, customer automatically come
 Ten Deadly Mistakes of Entrepreneurship

5. Failure to Develop a Strategic Plan

Without a clearly defined strategy business has no sustainable basis for creating and maintaining a
competitive edge in the market

6. Uncontrolled Growth
Expansion can be done when sales increases 40 to 50 percent
Expansion should be financed by the profit they generate (retained earning)
or by capital contribution of owner.
Most business wind up borrowing a portion of the capital investment
Expansion increase problems and entrepreneurs must learn to deal with the
problems.
 Ten Deadly Mistakes of Entrepreneurship

7. Poor Location
Location are selected without proper study, investigation and planning.
8. Improper Inventory Control
Insufficient inventory levels results in shortages and stock outs causing
customers to become disappointed and leave.
9. Incorrect Pricing
Charge at competitors price or selling the best product at a lowest price –
both are dangerous
10. Inability to Make the “Entrepreneurial Transition”
Growth requires entrepreneurs to delegate authority.
 Myths about Entrepreneurship
Entrepreneurs are risk takers
Entrepreneurs are born
Entrepreneurs are mainly motivated to get rich
Entrepreneurs are loners and introverts
Entrepreneurs are often ruthless or deceptive
Entrepreneurs have limited dedication
Entrepreneurs don’t have personal life
Entrepreneurs are only motivated by money
Entrepreneurs have great ideas
Entrepreneurs are young
Entrepreneurs don’t have quit until they succeed.
 Common Myths About Entrepreneurs
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Myth 1: Entrepreneurs Are Born, Not Made

◦ This myth is based on the mistaken belief that some people are genetically
predisposed to be entrepreneurs.
◦ The consensus of many studies is that no one is “born” to be an entrepreneur;
everyone has the potential to become one.
◦ Whether someone does or doesn’t become an entrepreneur is a function of
their environment, life experiences, and personal choices.

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Common Myths About Entrepreneurs
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Although no one is “born” to be an entrepreneur, there are common traits and
characteristics of successful entrepreneurs
• A moderate risk taker • Optimistic disposition
• Persuasive • A networker
• Promoter • Achievement motivated
• Resource assembler/leverager • Alert to opportunities
• Creative • Self-confident
• Self-starter • Decisive
• Tenacious • Energetic
• Tolerant of ambiguity • A strong work ethic
• Visionary • Lengthy attention span

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 Common Myths About Entrepreneurs
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Myth 2: Entrepreneurs Are Gamblers

◦ Most entrepreneurs are moderate risk takers.
◦ The idea that entrepreneurs are gamblers originates from two sources:
◦ Entrepreneurs typically have jobs that are less structured, and so they face a more uncertain
set of possibilities than people in traditional jobs.
◦ Many entrepreneurs have a strong need to achieve and set challenging goals, a behavior that
is often equated with risk taking.

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 Common Myths About Entrepreneurs
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Myth 3: Entrepreneurs Are Motivated Primarily by Money

◦ While it is naïve to think that entrepreneurs don’t seek financial rewards,
money is rarely the reason entrepreneurs start new firms.
◦ In fact, some entrepreneurs warn that the pursuit of money can be distracting.

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 Common Myths About Entrepreneurs
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Myth 4: Entrepreneurs Should Be Young and Energetic

◦ Entrepreneurial activity is fairly easily spread out over age ranges.
◦ While it is important to be energetic, investors often cite the strength of the
entrepreneur as their most important criteria in making investment decisions.
◦ What makes an entrepreneur “strong” in the eyes of an investor is experience, maturity, a
solid reputation, and a track record of success.
◦ These criteria favor older rather than younger entrepreneurs.

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Common Myths About Entrepreneurs
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 Common Myths About Entrepreneurs
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Myth 5: Entrepreneurs Love the Spotlight

◦ While some entrepreneurs are flamboyant, the vast majority of them do not
attract public attention.
◦ As evidence of this, consider the following question: “How many
entrepreneurs could you name?”
◦ Most of us could come up with Jeff Bezos of Amazon.com, Mark Zuckerberg of Facebook,
Steve Jobs of Apple, and maybe Larry Page and Sergey Brin of Google.
◦ But few could name the founders of Twitter, YouTube, Netflix, or DIRECTV, even though
we frequently use those firms’ services.

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