Arba Minch University

Institute of Technology
Faculty of Mechanical Engineering

Entrepreneurship for Engineers

 Chapter one

The Entrepreneur and the

Entrepreneurial Venture
 OUTLINES
 Entrepreneurs and Entrepreneurship
 The Concept of Entrepreneurship
 The Entrepreneur as an Individual
 Creativity and Innovation
 Entrepreneurs and Entrepreneurship
Economists may view entrepreneurs as those who bring resources
together in unusual combinations to generate profits.
Psychologists tend to view entrepreneurs in behavioral terms as
those achievement-oriented individuals driven to seek challenges and
new accomplishments.
Peter Drucker states, as “Entrepreneur is someone who always
searches for change responds to it, and exploits it as an opportunity.”
Example: It is the entrepreneur who only knows
Opening of new university near the society
Opening of Hotels near tourists’ attraction-center
 Entrepreneur
Entrepreneurs are action-oriented, highly motivated individuals who
take risks to achieve goals.
A vision-driven individual who assumes significant personal and
financial risk to start or expand a business.
Entrepreneurs are people who have 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.
 Characteristics of Entrepreneurs
Need for Achievement:- vision
Willingness to take risks:-financial, careers, family
Self-Confidence:- internal and external locus of control
 Innovation:-. The entrepreneurial manger is constantly looking for
innovations, not by waiting for a flash of inspirations, but through an
organized and continuous search for new ideas
Total Commitment
 All-rounders
A need to seek refuge:- escape from environmental factor
 The “Foreign Refugee”
 Corporate Refugee.
 Other Refugees
Other types of “ refugees” mentioned are the following:
1.The parental (paternal) refugee
Who leaves a family business to show the parent that “I can do it alone”.
2.The feminist refugee
Who experiences discrimination and elects to start a firm in which she can
operate independently male chauvinist.
3.The housewife refugee
Who starts her own business after her family is grown or at some other
point when she can free herself from household
responsibilities.
4.The educational refugee
Who tires of an academic program and decide to go into business.
 Success Factors for Entrepreneurs
Most new ventures succeed because their founders are capable

individuals.
1. The entrepreneurial team
2. Incremental growth of product or services
3. Marketing and timing: Market potential is critically influenced
by
timing of new products or services.
 Entrepreneurship
• Entrepreneurship is the dynamic process of creating incremental
wealth. This wealth is created by individuals who assume the major
risks in terms of equity, time and /or career commitments of
providing value for some product or service. The product or service
itself may or may not be new or unique but value must somehow be
infused by the entrepreneur by securing and allocating the necessary
skills and resources” Robert C. Ronstadt
• The pursuit of opportunity through innovation, creativity and hard
work without regard for the resources currently controlled.
• Entrepreneurship is very rarely a get rich-quick proposition; rather,
it is one of building long-term value and durable cash flow streams.
 Benefits of Entrepreneurship
Create your own destiny
Make a difference
Reach your full potential
Reap impressive profits
Contribute to society and to be recognized for your efforts
Do what you enjoy and to have fun at doing it
Economic growth
New industry formation
Job creation
 Weakness of Entrepreneurship
a. Limited resource:- entrepreneurship mostly starts from small
investment or contribution of owners are more than one individual
b. Lack of experience:- most of entrepreneurs have no experience and
this may lead to inefficiency
c. Disagreement between member: if the owner of entrepreneur is more
than one person, disagreement between them can be created. This
disagreement can limit the operation of the business.
d. Uncertainty of income:- opening and running a business provide no
guarantee that an entrepreneur will earn enough money to survive
e. Risk:- starting or buying a new business involves risk and the higher
rewards the greater the risk entrepreneurs usually face. This is why
entrepreneurs tend to have evaluate risk very carefully
f. Lower quality of life until the business gets established:- the long hour
and hard work needed to launch a business can take their tall in the rest
of the entrepreneurs life
g. Complete responsibility:- it is great to be the boss but many
entrepreneurs find they must make decision on issues about which they
are not knowledgeable. When there is no one to ask the pressure can
build quickly the realization that, the decisions they make are the cause
of success or failure.
 Kinds of Entrepreneurship
1. Women Entrepreneurs
2. Founders and other Entrepreneurs
a. Founding Entrepreneurs /Founders/
b. General mangers
c. Franchisees
3. High-Growth and low-Growth Firms
a. Marginal Firms
b. Attractive Small Companies
c. High potential ventures
The Entrepreneurship Process
 The Entrepreneurial Process
• It is opportunity/market driven
• It is driven by a lead entrepreneur and an entrepreneurial team
• It is resource parsimonious/saving/economical and creative
• It depends on the fit and balance among these
• It is integrated and holistic
 Steps in the Entrepreneurial Process
1. Discovery:
The stage in which the entrepreneur generates ideas, recognizes
opportunities, and studies the market.

Idea
Opportunity

Innovation
 What is an idea, opportunity and innovation?
• An Idea is a concept for a product or service that doesn't exist or is not
currently available in a market niche. It may be a brand-new concept or
an improvement of a current product or service.

• In contrast, an Opportunity is an idea for a new product or service with a

market that is willing to pay for that product or service so that it can form
the basis of a profitable business.

• Innovation is the process of making changes to something that adds value

to customers.
 Opportunity
An opportunity has four essential qualities
Three Ways to Identify an Opportunity

Jeans/Electric cars Energy problem Electric cars

Online Shopping
Apps
 Discovery
Consider your hobbies or skills
Consider consumer needs and wants
Conduct Surveys and questionnaires – test the market
Study demographics/ Market research
2. Concept Development:
 Develop a business plan: a detailed proposal describing the business
idea

Objective

Executive
summary
Mission Statement
E.g. The Coca Cola Company Mission.
Our mission is: To refresh the world in mind, body and spirit. To
inspire moments of optimism and happiness through our brands and
3. Resourcing:
The stage in which the entrepreneur identifies and acquires the
financial, human, and capital resources needed for the venture
startup, etc.

Start-up resources

Resourcing
• Apply for loans, grants and assistance
• Identify potential investors
• Hire employees
4. Actualization:
The stage in which the entrepreneur operates the business and
utilizes resources to achieve its goals/objectives.

5. Harvesting:
The stage in which the entrepreneur decides on business’s future
growth/ development.
• What is your 5-year or 10-year plan?
• Consider adding locations or providing different
products/services
• Will you go public?
 Elements Involved in Entrepreneurship
1. RISK:
Simply stated risk is “a condition in which there is a possibility of an
adverse deviation from a desired outcome that is expected or hoped from
applied to a business risk translates in to the possibility of losses associated
with the assets and the earning potential of the firm. ”
• Business risks can be classified in to two broad category market risk and
pure risk.
• Entrepreneurs face a number of different types of risk. These can be grouped
in to basic areas.
a. Political risk d. property risk
b. Business risk e. Personal risk
c. Economic risk
2. Information
Information gives the following importance to the businessmen’s
 To know the position of their competitors that is their strength and
weaknesses, business strategy they use and their long term plan.
 To know threats and opportunity in doing business
 Helps to design long term objectives and goals indicate capital
requirement (labor, capital and machinery)
 Helps to know market position locally and internationally.
 Sources of information
Information are obtained from two main methods of data collection. That
is primary data collection and secondary data collection
1. Collection of primary 2. Collection of secondary data:
data: • Various publication of the central state and
• Observation method local government
• Interview method • Various publications of foreign
• Through questioner government or international bodies and
their subsidiary organization
• Other methods which
includes warranty • Technical and trade journals
cards, consumer panels, • Books, magazines and newspapers
etc. • Reports
• Public records and statistics, historical
documents
• By way of caution, the entrepreneur before using secondary data must
see that the process following characteristics
1. Reliability of data
 Who collected the data?
 What were the sources of data?
 Were they collected by using proper methods?
 At what time they collected. Etc.
2. Suitability of data:- the data that are suitable for one enquiry may
not be suitable for another enquiry, then the researcher has to check
the suitability of the data properly.
3. Adequacy of data
 Who is an Entrepreneur?
Entrepreneurial Mindset
Manager’s Opportunities
Future Goals
Change Status Quo

Satisfied
Possible Entrepreneur
manager

Perceived
Capability
Frustrated Classic
Blocked manager bureaucrat
 Manager and Entrepreneur
Manager Entrepreneur
• Management is a profession, which, in • Entrepreneurship is not a profession; rather, it is
principle, can be learnt by formal education a style of life – a tradition. It is not easy to learn
and/or practice. it.
• They own and manage a small enterprise, in a • The entrepreneur is the owner of the business
way, which fits with their personal motivations. who enjoys the position of an employer.
Managers tend to be custodial; prefer to stick to • Entrepreneurs' activity seeks change by
proved ways of doing business. exploiting opportunities.
• Managers are more oriented to the achievement • They look at their business growth over a long
of short-term goals. period of time.
• They are rewarded by minimizing risk and • Entrepreneurs put their own personal finance at
avoiding failure. risk and they accept risk as part of the
• They tend to delegate tasks and supervise those entrepreneurial process.
workers performing the task. • They are directly involved in their
• They are more intent on survival than seeking organization's operational activities.
innovative change and growth. • Innovative, creative, imaginative soul
 Differences between Entrepreneurship and Wage
Employment Career Options
Wage Employment Entrepreneurship
• Work for Others • Own Boss
• Follow Instructions • Make own plans
• Routine Job • Creative activity
• Earning is fixed, never negative • Can be negative sometimes, generally surplus

• Does not create wealth • Creates Wealth, contributes to GDP

• Can choose from- Public Sector, • Can choose from- Industry Service Enterprise
Private Sector
 Invention VS Innovation
Invention: can be defined as the creation of a product or introduction
of a process for the first time.
Innovation: on the other hand, occurs if someone improves on or
makes a significant contribution to an existing products, process or
service.
 Types of Innovation
Type Description Examples

Invention Totally new product, service, Wright brothers—airplane

or process Thomas Edison—light bulb
Alexander Graham Bell—telephone

Extension New use or different development from the mainframe

application of an already computer to the desktop, then laptop
existing product, service, and more recently the notebook
or process computer.

Duplication Creative replication of an the adaptation of the franchise from fast

existing concept food industry to the education industry.

Synthesis Combination of existing The fax machine, the combination of

concepts and factors into a existing technologies has given rise to a
new formulation or use new product technique (Telephone +
Photocopier = Fax)
 Creativity and Innovation

• Creativity: the ability to develop new ideas and to discover new ways
of looking at problems and opportunities; thinking new things.
• Innovation: the ability to apply creative solutions to problems or
opportunities to enhance or to enrich people’s lives; doing new
things.
• Entrepreneurship: the result of a disciplined, systematic process of
applying creativity and innovation to the needs and opportunities in
the marketplace.
• Entrepreneurs connect creative ideas with purposeful action/structure
of a business.
• Creativity is an important source for building a competitive
advantage.
 To Enhance Individual Creativity

• Allow your self to be creative

• Give your mind fresh input everyday
• Observe the products/services of other companies, especially those
incompletely different markets
• Recognize the creative power of mistakes
• Keep a journal to record your thoughts and ideas
• Listen to customers
• Talk to a child(most children ask questions naturally)
• Read books on stimulating creativity
• Take some time off
The Creative Process