An Overview of Entrepreneurship

(Block Course)

By
Mesfin A. (PhD Scholar)
Target Groups: For 2nd Year MBA Students
 1.1. Definitions
Entrepreneurship is a process of creating something
different with the value by devoting the necessary
time and effort, assuming the accompanying
financial, psychic, and social risks and receiving the
resulting rewards of monetary and personal
satisfaction and independence.
1.2. Benefits and Limitations of Entrepreneurship

Benefits
1. Opportunity of gain control over your own destiny
2. Opportunity to reach your full potential
3. Opportunity to reap impressive profits.
4. Opportunity to contribute to the society and recognized
for your effort.
5. Opportunity to do what you enjoy “Doing”
The potential drawbacks of Entrepreneurship
Although owning a business has many benefits
and provides many opportunities, any one
planning to enter the world of
entrepreneurship should aware of its potential
drawbacks.
1. Uncertainty of income: Opening and running a
business provides no guarantee that an
entrepreneur will earn enough money to
survive.
2. Risk
 Entrepreneur face a number of different types
of risk
These can be grouped into four basic area
a) Financial risk
b) Career risk
c) Family and social risk
d) Psychic risk
3. Long hours and hard work.
4. Lower quality of life until the business gets
established.
5. High level of stress.
6. Complete responsibility.
 1.3. The Entrepreneurial Decision Process
The Entrepreneurial decision process consists of
the following 3 interrelated steps!
1. The decision to leave a present career or
lifestyle.
2. The decision that an entrepreneurial venture
is desirable.
3. The decision that both external and internal
factors make the venture possible.
1. The decision to leave a present career or
lifestyle.
The two most important incentives to leave a
present lifestyle and start a business are:
2. Working Environment
 While individuals tend to start a business in
familiar areas two work environments tend to
particularly good in spawning new enterprises:
a) Research and development
b) Marketing
2. Disruption
It is something new comes from a negative forces.
Example:
 People who have retired.
 Who are relocated.
 Who have been fired.
2. The decision that an entrepreneurial
venture is desirable.
The perception that starting a new
company is desirable results from an
individual’s
Culture
Subculture
Family
Teachers
peers
3. The decision that both external and internal
factors make the venture possible.
 While the desire generated from the individual
culture, subculture, family, teachers and peers
must present before any action is taken, the
second part of the equation centers on the
questions: “What make it possible to form a
new company?”
Several factors: Government, Background,
Marketing, Role models and Finance contribute
to the creation of a new venture.
Entrepreneur: Definition & Classification
Definition
Entrepreneurs: is a person who has the ability to
see and evaluate business opportunities to
gather the necessary resources to take advantage
of them and to initiate appropriate action to
ensure success. ( Hill Meredith)
Classification
The entrepreneurs have been broadly classified
according to the type of business, use of personal skill,
motivation, growth and stage of development and
gender. ( Reading Assignment)
Personal Entrepreneurial Competencies (PEC’s)
 In the 1980’s the research and analysis made by
Management System International (MSI)
identified 3 major clusters or groups of
competencies that entrepreneurs own commonly
in all countries.
 These 3 clusters include:
1. Achievement Motivation Cluster
2. Planning cluster
3. Implementing power cluster
1. Goal setting
The 3 behavioral indicators of goal setting
are:
 Setting goals & objectives that are
personally meaningful & challenging.
 Articulating clear & specific long range
goals.
 Setting Measurable short-term life
objectives.
2. Risk Taking
The 3 behavioral indicators of risk taking are:
Deliberately calculating risk & evaluate
alternatives.
Taking action to reduce risks or control out
comes .
Placing self in situations involving a
challenge or moderate risk.
3. Opportunity seeking & initiative
Successful entrepreneurs have the following
characteristics:
 They do things before being asked or
forced by events.
 They act to extend the business into new
areas, products or services.
 They size unusual opportunities to start new
business, obtain financing, equipment, land,
workspace or assistance.
4. Persistence
The 3 behavioral indicators of persistence contains
Taking actions in the face of significant
obstacles
Taking repeated actions or switching to on
alternative strategy to meet a challenges or
overcome an obstacle.
Taking personal responsibility for the
performance necessary to achieve goals and
objectives
5. Commitment
The 3 behavioral indicators of commitment
are:-
 Making personal sacrifices or expending extra
ordinary efforts to a complete job.
 Striving to keep customers satisfied & working
with employees to make things for customers
ready.
 Placing long- term good will over short terms
gains.
6. Demand for Efficiency and Quality
The 3 quality indicators of demand for efficiency
and quality are:
 Finding ways to do things better, faster and
cheaper.
 Acting to do things that meet or exceed standards
of excellence.
 Developing and using procedures to ensure works
completed on time or that work meet agreed upon
standards of quality.
7. Information seeking
The 3 main behavioral indicators of information
seeking:
 Personally seeking information from clients,
suppliers and competitors.
 Doing personal research on how to provide a
product or services.
 Consulting experts for business technical advice.
8. Persuasion and Networking
The 3 behavioral indicators of persuasion power:
 Using a deliberate strategies to influence or
persuade others.
 Using key people as an agent to accomplish own
goals and objectives to approach the right people
in a right way to implement their goals.
 Acting to develop and maintain business contacts
9. Independence and Self Confidence
The 3 behavioral indicators of independence and
self-confidence:
 Sticking to autonomy from the rules and control of
others.
 Sticking with own judgment in the face of
oppositions or early lack of success.
 Expressing confidence in ones own ability to
complete a difficulty task or meet a challenge.
10. Systematic Planning and Control
The 3 behavioral indicators that
entrepreneurs commonly share include:
 Planning by breaking down large tasks into
time-framed subtasks.
 Revising plan in the light of feedback on
performance or challenging circumstances.
 Keeping financial records and using the to
make business decisions.
Chapter Two
Small Business
2.1 Definition
Generally, there is no universally accepted
definition of small business from the sake of
our discussion, we adept the following
definition.
Small Business: is a business which employs
less than 100 employees, owned by one or few
individuals, with the exception of the
marketing function has geographically
localized operations, and does not dominate the
industry.
Small business can be found in different
industries, which included
i. Retail industry: drug store, clothing store, book
stores, etc.
ii. Service industry, such as advertising agencies,
managerial consultants, etc.
iii.Manufacturing industry like shoe factory,
furniture manufacturing etc
2.2 Special contribution of small business
1. Providing job opportunities
 In fact, in most countries, the number of new job
created by small business is significantly higher
than created by large business
2. Introducing innovation
 Usually the research department of big business
tends to emphasize the improvement of existing
products
 Records show that many scientific breakthrough
originated with independent inventors and small
organizations
3. Stimulating economic competition
 SB by definition is one that does not dominate its industry and
competition will be closer to perfection when the market is
full of small business that cannot exert a significant impact on
the market price and supply when operating individually.
4. Aiding big business
 The fact that some functions more expertly performed by
small business that enable small businesses to contribute to
the success of larger ones
 Especially, there are two types of business activity which
performed by small business more economically and
effectively.
i. Distribution function_ Wholesale and retail out let
ii. Supply function_ most small business acts as suppliers and sub-contractors for
large firms
5. Producing goods and services efficiently
 We depend highly on small businesses for the
provision of most goods and services we need in
our lives.
2.3 Merits and Demerits of small business
The following are most common advantages of
owning a small business
1. Independency
2. Financial opportunity
 The possible financial opportunity obtained from
small business is the main reason that let the
owner to endure all possible challenges and pains.
3. Job security
4. Community service
5. To practice challenges
The following could be some of the demerits
1. Competition
 Comparative the level of risk, start up challenges
and requirements for small business give a room
for competitors to enter into small businesses
2. Sales fluctuation
 Sales fluctuation could be a possible challenge
associated with small business.
 This would occur due to change in the market or
increasing number of competitors.
 This in turn might lead to financial loss.
3. Risk of failure
2.4. Problems in Ethiopian Small Business
Small scale-industries have not been able to contribute substantially
as needed to the economic development particularly because of
financial, production and marketing problems.

According to World Bank report the case has been shown

improvement over the last three years, these problems are still major
handicaps to their development.
i. Lack of adequate finance and credit has always been a major
problem in Ethiopian small business
ii. Small scale enterprises find it difficult to get raw material of good
quality and cheaper rates in the field of production
iii.Many small business enterprises are suffering with the problem of
marketing their products.
•  
 Chapter 3
Establishing a small business and the avenues to
Business Opportunities
3.1. Sources of business ideas
Some of the more frequently used sources of ideas for
entrepreneurs include
1. Customers
 Potential entrepreneurs should continually pay close
attention to potential customers.
 Care need to be taken to ensure that the idea or need
represents a large enough market to support a new
venture.
2. Existing products and services
 Potential entrepreneurs should also establish a formal
method for monitoring and evaluating competitive
products and services on the market.
3. Distribution Channel
 Members of distribution channel are also excellent
sources for new ideas because of their familiarity
with the need of the market.
4. Research and development
 The largest sources of new ideas is the
entrepreneurs own research and development.
 3.2. The avenues to business opportunity
 Here we will discuss the difference avenues to change the
ideas into real business or indirectly to mean the different
options that may channel a business to be owner having
an idea
 The avenues are:
i. Some entrepreneur may launch an entirely new venture to
change their ideas into a business.-Starting business
from scratch/ creating new business.
ii. Others may prefer to purchase an existing firm to be an
entrepreneur to establish new venture -Business
acquisition
iii. Still others may join the entrepreneurs by
establishing a franchise firm- Franchising
iv. People become also a business man; not because of
their effort rather by fortune, which is the case of
inheriting family; it is difficult to categories these
peoples with entrepreneurs because they are not
creative as well as risk taker- Inheritance
 Chapter 4
Business Plan
Business Plan: Meaning
A business plan is a written document that sets out the
basic idea underlying a business and related start up
consideration.
Objectives of a Business Plan
For the entrepreneur starting a new venture, a business
plan has 4 basic objectives.
1. It identifies the nature and context of the business
opportunity-Why such an opportunity exits.
2. It presents the approach the entrepreneurs plan to
take to exploit the opportunity.
3. It identifies the factor that will most likely determine
whether the venture will be successful.
4. It serves as a tool for raising financial capital.
Contents/Outlines of Business Plan
1. Introductory Stage
A. Name and address of the business
B. Name and address of the principals
C. Nature of the business
D. Statement of financing needed
2. Executive summary
3. Industry Analysis
E. Future outlook and trend
F. Analysis of competitors
G. Market segmentation
H. Industry forecast
4. Description of Venture
A. Product
B. Service
C. Size of business
D. Office equipment and personnel
E. Background of entrepreneurs
5. Production Plan
F. Manufacturing process
G. Physical plant
H. Machinery and equipment
I. Name of suppliers of raw materials
6. Marketing Plan
A. Pricing
B. Distribution
C. Promotion

7. Organizational Plan
A. Form of ownership
B. Identification of partners or principal share holders
C. Authority of principals
D. Management team background
E. Roles of responsibilities of members of organization.
8. Assessment of Risk
A. Evaluation of weakness of the business
B. New technologies
C. Contingency plans
9. Financial Plan
D. Proforma income statement
E. Cash flow projections
F. Proforma balance sheet
G. Break-even analysis
H. Source and application of funds
10. Appendix
I. Letters
J. Market research data
K. Lease or contract
L. Price list from suppliers
 Assignment (35%)
Individual Assignment
Prepare any Business Plan that contains the
outlines that we have discussed in the class
room.

Deadline: Please bring your assignment when

you come to sit for your final examination.
When?? January 22, 2023 GC
Thank You!