1

Course Title: Entrepreneurship and Small

Business Management

Academic Year: 2020/2021 (2013 E.C)

Semester: II
Instructor : Sinishaw S. ( Msc. Highway Eng. Bsc. Structural Engineering)

Date May 8/2020

 2 Course outline
Chapter 1: An overview
Chapter 2: Small Business Ownership Opportunities
Chapter 3: Finding Sources of Financing
Chapter 4: Preparing a business Plan
Chapter 5: Legal issues of Small business management

04/30/21
 3 CHAPTER 1: Entrepreneurship: An
Overview
1.1. Introduction
 Has become a `popular subject universities because many young
graduates has found self employment a good opportunity
 Therefore, this course presents both the content and the process of
entrepreneurship and the skills required to become an entrepreneur.

04/30/21
 Class discussion
4

 What is entrepreneurship?
 What is an entrepreneur?
 Why study entrepreneurship?
 What are the benefits of entrepreneurship?
 What are the limitations of entrepreneurship?

04/30/21
 Why Study Entrepreneurship?

 Anyone who want to lead companies need to know how to back up

ideas with numbers
 You need to learn the complex business processes involved in
commercialization
 You need to learn how to make trade-offs among costs, benefits,
price, markets, and operations
 You learn how to adapt to uncertainty and change
 You learn techniques for managing people
6 1.2. Historical perspective of Entrepreneurship

 It is not a new phenomena , it has existed throughout history.

 The start of exchanging goods and services was the root of
entrepreneurship.
 However, the rule of the game has been changed now

04/30/21
7 i. In the Middle Ages

 the term entrepreneur was used to describe a person managing

large production projects
 the person would not take any risks, but would merely manage
the project using the resources provided

04/30/21
8 ii. In the 17th century

 A person who entered into a contractual arrangement with the

government to perform a service or supply stipulated products.
 Since the price is fixed, any resulting profits or losses reflected the
efforts of the entrepreneurs. He/she assumes risk (the notion of risk
was developed)

04/30/21
9 iii. Late 19th & early 20th centuries

 An entrepreneur is viewed from an economic perspective

 entrepreneurs were frequently not distinguished from managers
 The entrepreneur organizes and operates an enterprise for personal gain pays
for material, land, professional services etc, contribute his own initiative, skill
etc in planning, organizing, directing and controlling and assumes loss/gain.
The net residue goes to the owner.

04/30/21
10
iv. Middle of the 20th century

 The notion of an entrepreneur as an innovator was established

 Revolutionize the pattern of production exploiting an invention or more
generally, an untried technological possibility for producing a new commodity
or producing an old one in a new way, opening a new source of supply of
materials or a new outlet for products, by reorganizing a new industry.

04/30/21
11  
v. At Present
Entrepreneurship is….?

04/30/21
12
Entrepreneurs are seen differently

To an economist, an entrepreneur is one who brings resources, labor, materials,
 
and other assets in to combinations that make their value greater than before, and
also one who introduces changes, innovations and a new order.
 To a psychologist, such a person is typically driven by certain forces- need to
obtain or attain something, to experiment, to accomplish, or perhaps to escape
authority of others.
 To one businessman, an entrepreneur appears so a threat, an aggressive
competitor, where as to another businessman the same entrepreneur may be any
ally, a source of supply, a customer, or some one good to invest in.
 Capitalist philosophers see entrepreneurs as one who creates wealth for others
as well, who produces jobs others are glad to get.
 Engineers??

04/30/21
13 1.3. Definitions
1. Entrepreneurship is the process of creating something different with value by
devoting the necessary time and effort, assuming the accompanying financial,
psychological and social risks and receiving the resulting rewards of monetary
and personal satisfaction. (Hirsch, Robert)
2. Entrepreneurship is the dynamic process of creating incremental wealth.
3. Dr. C.B. Gupta defines entrepreneurship that it is the process of identifying
opportunities in the market place, marshalling the resources required to pursue
these opportunities and investing the resources to exploit the opportunities for
long term gains. It involves creating wealth by bringing together resources in
new ways to start and operate an enterprise.

04/30/21
14 Definitions …(3)

In all most all the definitions of entrepreneurship, there is agreement that

basic elements such as :
i) risk taking,
ii) initiative taking,
iii) organizing and reorganizing,
iv) vision,
v) wealth creation are involved.

04/30/21
15
What is an entrepreneur?
 The term entrepreneur comes form the French word “entereprenede” and literally
translated it means “between taker” or “go- between”- “to undertake.”
 Schumpeter viewed entrepreneurship as a force of "creative destruction." and the
entrepreneur as someone who carries out "new combinations," thereby helping
render old industries obsolete.
 Established ways of doing business/existing systems are destroyed by the creation
of new and better ways to do them.
 Business expert Peter Drucker (1909-2005) describe the entrepreneur as someone
who actually searches for change, responds to it, and exploits change as an
opportunity.

04/30/21
16 Definition of entrepreneur
The following are few of the definitions:
1. Entrepreneurs are action-oriented, highly motivated individuals who take risks to
achieve goals.
2. Entrepreneurs are people who have the ability to see and evaluate business
opportunities, the ability to gather the necessary resources to take advantage of
them; and the ability to initiate appropriate action to ensure success.
3. Entrepreneur is “someone who perceives an opportunity and creates an
organization to peruse it with the intention of being profitable.”
4. An entrepreneur is an “energetic, single minded” person having mission and a clear
vision he/she intends to create out this vision a product or service that improves the
lives of million. (David Silver)

04/30/21
 Key terms…
17

The definition entrepreneur includes:

a) Decision making;
b) Using available resources in novel ways;
c) Action orientedness;
d) The ability to see business opportunities, the ability to gather resources
to take advantage of them and the ability to take action; and
e) The ability to search for change, respond to it, and exploit it.

04/30/21
18
1.4. Entrepreneurial Process

The entrepreneurial process consists of the following phases:

1. Identifying and evaluating a business opportunity.
2. Developing the business plan.
3. Determining the resources required for the business and
4. Managing the resulting enterprise.

04/30/21
19
Class discussion

What do you think are the potential benefits and

limitations of Entrepreneurship?

----------------------------------------------------------------

04/30/21
20
1.5. Benefits of Entrepreneurship
1. Opportunity of gain control over your own destiny
2. Opportunity to reach your full potential
3. Opportunity to reap unlimited profits
4. Opportunity to contribute to society & be recognized for your effort
5. Opportunity to do what you enjoy

04/30/21
21
1.5. Benefits of Entrepreneurship

The opportunity to:

1. Create your own destiny
2. Make a difference
3. Reach your full potential
4. Reap impressive and unlimited profits
5. Contribute to society and to be recognized for your efforts
6. Do what you enjoy and to have fun at it
22 Limitations of Entrepreneurship

Anyone planning to enter the world of entrepreneurship should be

aware of its potential drawbacks.
1. Uncertainty of income
2. Risk: Entrepreneurs face a number of different types of risk.
These can be grouped into:
 Financial risk
 Career risk
 Family and social risk
 Psychic Risk
04/30/21
23 Limitations …

3. Long hours & hard work

4. Lower quality of life until the business gets established
5. High level of stress
6. Complete responsibility
7. Discouragement

04/30/21
24 1.6. Entrepreneurial Decision
 . Form new enterprise
These are factors necessary  Desirable
to start a business.  Culture
 Subculture
 Family
 Teachers
 Peers
Change from present life –style  Possible
 Work environment
 Disruption
 Government
 Background
 Marketing
 Finance
 Role models

04/30/21
25
Push vs Pull factors

 Discuss those factors that push or pull individuals

toward entrepreneurial career.
-----------------------------------------------------------------
----------------------------------------------------------

04/30/21
26
1.7. Competencies of Entrepreneurs

04/30/21
27
1. Knowledge
 Knowledge consists of a set or body of information stored, which may be
recalled at an appropriate time. It includes:
• a business opportunity
• the market
• customers
• competitors
• production processes
• technical matters
• business management
• sources of assistance
04/30/21
28 2. Skills
 Skill is the ability to apply knowledge.
Technical Managerial

• Engineering • Marketing (including selling)

• Computing • Financial management
• Carpentry • Organization
• Mechanics • Planning
• Catering • Leadership
04/30/21
29
3. Traits

 Trait is the total of peculiar qualities or characteristics

that constitutes personal individuality.
 Discussed below …

04/30/21
 1.8. Characteristics/traits of Entrepreneurs
30
1. Hard Working 13. Committed
2. Self-Confident
14. Builds on Strengths
3. Builds for the Future
4. Profit-Oriented
15. Reliable and Has Integrity
5. Goal-Oriented 16. Risk-Taker
7. Persistent Copes with Failure 17. locus of control
8. Responds to Feedback 18. Self- Esteem
9. Demonstrates Initiative
19. Information seeker
10. Willing to Listen
11. Sets own Standards 20. Need for achievement
12. Copes with Uncertainty
04/30/21
31
1.9. Entrepreneurs background
1. Childhood family Environment
 Specific topics in the family environment of the entrepreneurs researched include birth order,
parents’ occupation and social status, and relationship with parents.
2. Education
 Although a formal education is not necessary for starting a new business, it does provide a good
background, particularly when it is related to the field of the venture.
 3. Personal value
4. Age
most entrepreneurs initiate their entrepreneurial careers between the ages of 22 and 55.
5. Work experience
6. Sex structure (see table below)

04/30/21
32

Factors Men Women

1. Motivation  Derive to control their own  Job frustration and
destinies enthusiasm for new
. venture
2. Source of  Investors, banks, personal  Rely on personal
finance saving savings
3. Background  Similar, except men are Little  Arts education
older than females , have
technical education
4. Support  Use outside advisors, spouse  Spouse first, friend
second second
5. Experience  Mfg, finance, construction,  Administrative
technical areas (service sector)
6. Personality  Similar, but male are more 
confident, less flexible, more
tolerant 04/30/21
33 1.10. Role of Entrepreneurship in the Economy
 Creating jobs
 Promoting free enterprise culture
 Promoting healthy competition
 Generating wealth to himself and others
Question: (who benefits from the wealth and how? explain)
 Spreading prosperity

 Ensuring innovation and creativity

 Encouraging grassroots development

 Improving social and community conditions

04/30/21

 Promoting Growth
34
Cont’d …
 Better Production Methods and Products
 Identification of Business opportunities and Markets
 Conservation of Natural Resources.
 Abolition of monopoly and Enhancement of competition
 Development of Complementary Goods Producers. Complementary goods
are products that are used together. Example: Tea and sugar, car
manufacturing company and car repair shops.

04/30/21
35 Cont’d…

 Increase in per Capita output and income

 Generation of Foreign Currency
 Better Utilization of Resources
 Improvement of Business policies and Procedures
Example: Unity University vs education policy
 Positive Externalities
entrepreneur may develop infrastructure such as streets, electricity and
water – wells that will be shared by the community as well.
 Business Opportunity for Suppliers.

04/30/21
36 1.11. Challenges and opportunities of entrepreneurial
development in Ethiopia

 WHY WE ARE POOR? Is it because we do not have the resources?

Or is there anything else? What shall we do?

04/30/21
37

END of chapter 1

Thank you for listening

04/30/21
38 Creativity, innovation and Entrepreneurship

What is creativity?
 Creativity is a prerequisite for innovation
 Is a generation of ideas that result in improved efficiency or
effectiveness of a system.

04/30/21
 Creativity, innovation and Entrepreneurship

What is Innovation?
• Producing something new
• Commercializing or extracting value from ideas
• Innovation is a transformation of creative ideas in to useful application
• Innovation implies action, is a process of doing new things
• Schumpeter’s five types of innovation
– New product or substantial change in existing product
– New process
– New market
– New sources of supply
– Changes in industrial organization
• Incremental innovation = improvements on existing products
• Disruptive innovation = game changers
2- 39