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CHAPTER ONE –ENTREPRENEURSHIP

AND FREE ENTERPRISE :
 Definitions of
Entrepreneurship
 Entrepreneurship refers to the ability of some
people to bring the necessary inputs together
and produce something valuable.
 Note that resources will not be gathered and get
combined by themselves, (when such things
happen we call the process a natural process –
not production) somebody else should take the
task of deciding, planning, mobilizing the
resources and make the actual production in to
reality. These people are called entrepreneurs.
Different definition of
entrepreneurship by different
scholars:
 Entrepreneurs allocate resources "to
opportunities rather than to problems.“
 Entrepreneurs are those who incubate new
ideas, start enterprises based on those ideas,
and provide added value to society based on
their independent initiative.
 Entrepreneurs are those who create and/or
expand business through innovative
combination of resources.
Role of entrepreneurship for economic
development

 Entrepreneurs are the innovators; they

identify business opportunities, plan to
address market needs, gather resources, and
manage the process of building business.
Entrepreneurs create jobs, transfer
technology to the market and create value,
adding immeasurably to our well being.
Entrepreneurs make unique contributions to
a country's economy.
Role of entrepreneurship for economic
develop…….

 Using innovations to grow their business,

they provide concrete benefits to the national
economy. In general they play role in
reducing unemployment, stabilizing inflation,
normalize balance of payment and business
cycle and so on.
Role of entrepreneurship for economic
develop………

 Developing economies need greater number

of people possessing entrepreneurial qualities
and capable of taking decisions under
conditions of uncertainties to transform their
underdeveloped economies into developed
one. For this, well-developed institutional
support is important.
Entrepreneurship, creativity and innovation

 Innovation is the process of entrepreneurship.

Innovation implies action, not just a new
idea.
 For an idea to have value, it must be proven
useful or be marketable. Innovation is the
transition of creative idea into a useful
application.
It requires four things to be fulfilled.
1.Analytical planning: - analytically working out the details
of product design or service, to develop marketing (i.e.,
marketing strategy), obtain finance and plan operation.
2.Organizing recourses: - obtaining materials, technology,
human resource and capital.
3.Implementation: - here the plan is changed to reality
where accomplishment in establishing organization,
product design, manufacturing and services are achieved.
4.Commercial application: - it is the stage where creative
idea transforms into application. This commercial
application provides value to customers (utility), reward
for employees (salary), revenue for investors (profit) and
satisfaction for founders.
 Now, it is necessary to see the distinction (difference)
between creativity, invention and innovation.
Creativity is the ability to bring something new into
existence. Here, there is no action to make the idea a
reality. It is the seed that inspires entrepreneurship and
it is the prerequisite to invention.
Invention is the creation of something new, which results in
new knowledge
Innovation is the process of doing new things. It is the
transformation of creative ideas into useful applications,
which results in new products, services or processes. E.g.
Thomas Edison's light bulb was only a curiosity until he
developed an electric system supplying power to
consumers.
Characteristics of entrepreneurs

 Mental ability: It consists of intelligence and

creative thinking.
 Clear objectives: An entrepreneur should have a
clear objective as to the exact nature of the
business,
 Business secrecy: An entrepreneur must be able
to guard business serious.
 Human relation ability: The most important
personality factors contributing to the success of
an entrepreneur are emotional stability, personal
relations, consideration and tactfulness.
Characteristics of entrepreneurs ……….
 Communication ability: Communication
ability is the ability to communicate
effectively.
 Technical knowledge: An entrepreneur must
have a reasonable level of technical
knowledge.
 Motivator: An entrepreneur must build a
team, keep it motivated, and provide an
environment for individual growth and career
development.
Characteristics of entrepreneurs ……….

 Self-confidence: Entrepreneurs must have

belief in themselves and the ability to
achieve their goals.
 Long-term involvement: An entrepreneur
must be committed to the project with a
time horizon of five to seven years.
 High energy level: Success of an
entrepreneur demands the ability to work
long hours for sustained periods of time.
Characteristics of entrepreneurs ……….
 Persistent problem-solver: An entrepreneur must
have an intense desire to complete a task or solve
a problem. Creativity is an essential ingredient.
 Initiative: An entrepreneur must have initiative,
accepting personal responsibility for actions, and
above all make well use of resources.
 Goal setter: An entrepreneur must be able to set
challenging but realistic goals.
 Moderate risk-taker: An entrepreneur must be a
moderate risk-taker and learn from any failures.
 To improve your capacity of generating
new ideas:
 copy somebody else's successful idea,
 combine two or more ideas to form a new one,
 solve problems to people,
 find what the competitors are doing,
 develop hobby, build on your skills,
 turn wastes into useful things,
 brainstorm the idea,
 talk and listen to people,
 make lists and play around with,
 look for gaps in the market, and
 find new ways to do things