CHAPTER ONE

ENTREPRENEURSHIP

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“It’s fine to celebrate success
but it is more important to
heed the lessons of failure.”
Bill Gates
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 I CREATE
I TAKE RISKS
I LIVE MY PASSION
I AM ENTREPRENEUR

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“Anything that won’t sell, I
don’t want to invent.” Thomas
Edison

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“When you cease to dream
you cease to live.”
-Malcolm Forbes

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“If you put Bananas and Money in front of monkeys, they will
choose Bananas because monkeys do not know that money
can buy more Bananas. If you offer job and Business to
people, they would choose job because most people do not
know that Business can bring more money than salaries.
Salary can make you living but profits can bring you a
fortune ” (Jack Ma)

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E.g.

• Who is this girl?

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Sole rebels

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During the ancient period- entrepreneur refers to a person managing
large commercial projects.
 In the 17th Century- a person who has signed a contractual agreement
with the government to provide products or to perform service.
 18th Century – the first theory of entrepreneur has been developed by
Richard Cantillon.
Entrepreneur is a risk taker

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In the late 19th and early 20th Century- entrepreneur is the person who
organizes and operates an enterprise for personal gain.
 entrepreneur was viewed from economic perspectives.
In the middle of the 20th Century - the notion of an entrepreneur as an
inventor was established.
 The function of the entrepreneur is to reform or revolutionize the
pattern of production by exploiting an invention or untried technological
possibility for producing new commodities

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 Entrepreneurship:
 the process of creating something different and better with value
a creative human act that builds something of value in pursuit of
opportunities.
involves reforming or revolutionizing the pattern of production by
exploiting an invention or untried technological possibilities.

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a force of “creative destruction” where by established ways of doing
things are destroyed by the creation of new and better ways to get things
done.
 the art of identifying viable business opportunities and mobilizing
resources to convert those opportunities into a successful enterprise
through:
 creativity
Innovation

risk taking and progressive imagination.

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 an ability to discover, create or invent opportunities and exploit them to
the benefit of the society, which in turn brings prosperity.
 Entrepreneurship involves innovation and untried technologies
 It requires devoting the necessary time and effort, assuming:

- the accompanying financial

- Psychic and social risk and
- Receiving the resulting rewards (money, personal satisfaction
and independence).

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Critical elements of entrepreneurship process
The ability to perceive an opportunity.
The ability to commercialize the perceived opportunity i.e. innovation
The ability to pursue it on a sustainable basis.
The ability to pursue it through systematic means.
The acceptance of risk or failure.

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 any person who creates and develops a business idea and takes the risk of
setting up an enterprise to produce a goods or service which satisfies
customer needs.
 a professional who discovers a business opportunity to produce improved
or new goods and services.
Economist view
Entrepreneur is the one who brings resource, labor, materials, and other
assets into combination that makes their value greater than before.

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Psychologist View
Entrepreneur is a person who typically driven by certain forces of need to
obtain or attain something.
Capitalist View
Entrepreneur is the one who creates wealth for others as well, who finds
better way to utilize resources and reduce waste.

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1. The individual Entrepreneur: someone who started; acquired or franchised
his/her own independent organization.
2. Intrapreneur: a person who does entrepreneurial work within large
organization.
3. Entrepreneurial Organization: is an organization that creates an
environment in which all of its members can contribute to the
entrepreneurial function.

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 the most important input to the economic development.
 are at the core of industrial development
1. Improvement in per capita Income/wealth generation
2. Generation of Employment Opportunities: creates jobs for themselves and
for many others.
3. Inspire others towards Entrepreneurship: provides the opportunity for the
employees to have a first-hand experience of getting involved in an
entrepreneurial Venture.

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4. Balanced Regional Development: they set up the industries in the
backward areas to avail various subsidies and incentives offered by gov’t.
5. Enhance the Number of Enterprise: the number of enterprises based upon
new ideas/ concepts/ products in a region increases.
6. Provide diversity in firms: a variety of firms will be created
7. Economic Independence: create industries that manufacture indigenous
substitutes, thereby reducing the dependence on imports.

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8. Combine Economic factors: all the products produced in an economy are a
mix of three primary economic factors (raw materials, physical and mental
labor and capital (money).
9. Provide Market efficiency: resources are distributed in an optimal way that
is the satisfaction that people can gain from them is maximized.
 this will happen if there is competition among different suppliers.
10. Accepting Risk: accepting risk of failure on behalf of people.

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11. Maximizing investor’s return: create and run organizations which
maximize long-term profit on behalf of the investors.

Entrepreneurial Competence and Environment

1. Entrepreneurial Mindset
1.1. Who Becomes an Entrepreneur?
i. Young Professionals: highly educated people often with entrepreneurial
qualifications
ii. Inventor: someone who has developed an innovation

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ii. The Excluded: when nothing is open to some group of people (e.g.
displaced communities and ethnic and religious minorities).

Qualities of an Entrepreneur
1. Opportunity-seeking: always seeks out, identifies and converts
opportunities into a realistic and achievable goal.
 Opportunity - a favorable set of circumstances that creates a need for a
new product, service or business.

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2. Persevering: making a concerted efforts towards the successful completion
of a goal. e.g. Thomas Edison
3. Risk taking: financial, social, or psychological/only calculated risks.
 The best entrepreneur tends to:
 gain satisfaction from completing a job
 not be afraid of public opinion, skepticism
 take responsibility for their own actions

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4. Demanding for Efficiency and Quality
Efficiency: producing results with little wasted effort.
Quality: making the product or service fit to use
 the ability of a product or service to meet a customer’s expectations.
Importance of quality management
reduction of waste
 cost-effectiveness – reduced rework and changing the product after sales.

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 increase in market share - if customers are satisfied with the product
they will purchase it again and again and also recommend it to their
friends.
 Better profitability - increased customers leads to increased sales and
profits.
 Social responsibility - providing quality product enables the company
to fulfill its responsibility to the community and gov’t (meeting
standards).
 Reputation – building good will

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5. Information-seeking: do not rely on guesswork and do not rely on others
for information.
 they collect information about their customers, competitors, suppliers,
technology and markets.
6. Goal Setting: a general direction, or long-term aim that you want to
accomplish.
7. Planning: deciding about the future in terms of what to do, when to do,
where to do, how to do, by whom to do and using what resources.

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8. Persuasion and Networking
Persuasion: is a way of convincing someone to get something done or make
decisions in favor of you.
 Networking: is an extended group of people with similar interests or
concerns who interact and remain in informal contact.
9. Self-confidence: feel they can meet the challenges that confront them.
 is the state of being certain that a chosen course of action is the best or
most effective.

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Self-confident Person:
 risk-taker
 independent
 perseverance
 able to learn to live with failure
 ability to find happiness and contentment in work
 does what he/she believes to be right
 admits and learn from mistakes

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10. Listening to Others - listens to other people in their sphere of influence,
analyses their input in line with his/her own thinking and makes an informed
decision.
11. Demonstrating Leadership: inspire, encourage and lead others to
undertake the given duties in time.

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Skill: is an ability to perform something in a certain way.
 knowledge which is demonstrated by action.
 Turning an idea into reality calls upon two sorts of skills:
1. General management skills: skills required to organize the physical and
financial resources needed.

Strategy Skills Financial Skills

Planning Skills Project Management Skills
Time Management Skills Marketing Skills

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2. People management skills: the ability to deal with other peoples.
 It includes:
Communication Skills
Leadership Skills
Motivation Skills
Delegation Skills
Negotiation Skills

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Important task of Entrepreneurs
 Owning Organizations – investment & principal ownership.
 Founding New Organizations - bringing different resources together to
form a new firm.
 Bringing Innovations to Market – can be new product, service, methods of
informing the consumer or new way of delivering an existing product.
 Identification of Market Opportunity

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 Application of Expertise
 Provision of leadership
 The entrepreneur as manager

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Wealth: is money and anything that money can buy (i.e. money, knowledge
and assets).
Who Benefits from the entrepreneur’s Wealth?
Employees- wage or salary, share, personal development.
 Investors - stockholders and lenders
 Supplier – input suppliers
 Customers – obtain quality products, fair prices, regular and consistency
of supply, loan arrangement.

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The local community - sponsors local developmental activities &
improves political, economic and cultural things.
 Government: tax (income and business).
Business environment: are factors which affect the operations and
effectiveness of a business.
 can be healthy (favorable) or unhealthy (hostile or unfavorable).
 adjusting to the environment and modifying the environment is needed
as required.

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 the growth and pattern of national income
 balance of trade and balance of payments
 Business enterprise depends considera­bly upon the state and growth
of the economy.
ii. Legal Environment – new or existing laws, regulations, proclamations.
 knowing the business laws of the country is required
 have labor law consultants
 consulting government agencies

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iii. Political Environment - understanding the working of the political system.
 public opinion is very important.
 today's public opinion may becomes tomorrow's legislation.
 business persons should take public opinion into account in the decision-
making process.
iv. Socio-Cultural Environment - social and cultural norms of a society.
values, beliefs, norms, fashions and fads of a particular society.

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 understand the level of rigidity/flexibility of a given society
v. Demographic Environment - age, sex, education, income distribution
etc.
b. Internal Environment - the environment which is under our control.
 Raw Material
 Production/Operation - availability of machineries, equipment, tools
and techniques for production process.
 Finance

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 Human Resource
Environmental Factors Affecting Entrepreneurship
 changes in government policy
 Sudden political upsurge
Non-cooperative attitude of banks and financial institutions
Political instability
Excessive red-tape and corruption

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rise in the cost of inputs
unreliable supply of power, materials, finance, labor and other inputs
ideological and social conflicts
unfavorable market fluctuations
outbreak of war or regional conflicts

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1. Creativity: the thinking of novel and appropriate ideas.
 the tendency to generate ideas that may solve problems
the ability to come up with new idea and to identify new and different ways
of looking at a problem and opportunities.
 it is a process.
Creativity Process
Step1: Opportunity or problem recognition
Step2: Immersion - concentrating on the problem and becoming immersed
in it.
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Step 3: Incubation - the subconscious mind is still engaged.
 to keep the information assembled in mind
Step 4: Insight - the problem-conquering solution flashes into the person’s
mind at an unexpected time.
 the Aha! Experience.
Step 5: Verification and Application - to prove that the creative solution has
merit.
 gathering supporting evidence, using logical persuasion, and
experimenting with new ideas.

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Barriers to Creativity
searching for the one ‘right’ answer
focusing on being logical
blindly following the rules
constantly being practical
viewing play as frivolous
becoming overly specialized
avoiding ambiguity
fearing looking foolish
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fearing mistakes and failure
believing that ‘I’m not creative

2. Innovation
the practical application and commercialization of new ideas or inventions.
 includes conception of a new idea, the invention of a new device, and
practical application of ideas or inventions.
Innovation = theoretical conception + technical invention+ commercial
exploitation

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Types of innovation
1. Invention: creation of a new product, service, or process, often one that is
novel or untried.
2. Extension: the expansion of the product, service or process already in
existence.
3. Duplication: the replication of an already existing product, service, or
process.
4. Synthesis: the combination of existing concepts and factors into a new
formulation.

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The Innovation Process
1. Analytical planning: identify the product or service features, design and
resources required.
2. Resources organization: obtaining the required resources
3. Implementation: applying the resources in order to accomplish the plans.
4. Commercial application: the provision of values to customers, reward
employees and satisfy the stakeholders.

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Areas of Innovation
 New product
 New services
 New production techniques
 New way of delivering the product or service to the Customer
 New operating practices
 New ways of managing relationships between Organizations

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 New Means of Managing Relationship within the Organization
 New Means of Informing the Customer about the Product
From Creativity to Entrepreneurship
Entrepreneurship = creativity + innovation
 Creativity is the ability to develop new ideas and to discover new ways
 Innovation is the ability to apply creative solution to those problems and
opportunities.

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