Business Management

Entrepreneurship

UNIT 2
 Learning outcomes
• Define the term entrepreneurs
• Discuss the concept of entrepreneurship and
entrepreneurial process
• Describe the role of entrepreneurs and small
businesses in the economy
• Explain how to become an entrepreneur
 Cont…
• Comment on the skills and resources required
to become an entrepreneur
• Identify and describe the different ways of
entering the business world
• Present recommendations regarding the
choice of a business opportunity
• Elaborate on what a feasibility study is and its
value to the entrepreneur.
 INTRODUCTION
The second chapter deals with the concept of
entrepreneurship.

An introduction of why entrepreneurship is

important within business management is followed
by a discussion on the different views on what an
entrepreneur is and what qualifies as
entrepreneurship.
 Cont…
In order to understand how the business
organisation satisfies the needs and wants of the
nation in a market economy- understand the
driving force behind business : The entrepreneur

Decides what, how, by whom, for whom products

and services should be produced.
 Different concepts of what an
entrepreneur is
According to:

• Economists
• Behaviorists
• Marxists
• Corporate managers
• Proponents of a market economy
 Cont…
Entrepreneurs have been described as people
who:
– Are creative
– Have innovative ideas
– Identify opportunities
– Find resources to pursue opportunities for
financial gain
– Take financial risks
 Cont…
– Bring about change, growth and wealth in the
economy
– Re-energise economies and create jobs
– Start and manage small businesses
 Renaissance of entrepreneurship
Though out the world entrepreneurs:
•Revitalise the economies in establishing new
businesses and grow the existing ones
•Are changing people’s lives
•The generate jobs
In Europe 90% of business are SMEs and
contribute 53% to employment

In sub-Saharan African countries SMEs contribute

90% to the employment sector
Employment is linked with the state of economy
 Entrepreneurship in SA
Growth in the South African economy has decline
over the past few decades.
In order to sustain and improve economic
development of SA, a growth rate of over 7% per
year in needed.
The contribution of entrepreneurs will be relied on
for large part of growth needed.
The role of an entrepreneur and small
business owners in society
Entrepreneurs satisfy needs and wants by
mobilising natural, human and financial
resources.

Entrepreneurial activity is the source of economic

growth and social development

Wealth is created for society in form of jobs

Wealth is created for entrepreneurs in the form of

profits
 Cont…
Entrepreneurship is the spark that brings the
other factor of production into motion

People with entrepreneurial abilities are rare and

valuable

They constitute a resource that contribute to, if not

causes, the production products and services
They set in motion the creation of employment
opportunities
 Cont…
Small businesses often exist as a way of earning
income that is alternative to working as an
employee so not all small business are
entrepreneurial.

Responsible for survival and profitability of the

business

No intention of growing the business

 Why do entrepreneurs do what they do?

The decision to enter business is influenced mainly

three broad categories of reasons for individuals
initiating ventures are:

1.Traits and characteristics (innovation, creativity,

passion, commitment, adaptability etc)

2. Skills and industry experience

3. Opportunities arising owing to international trends

of outsourcing
 Cont…

1.Entrepreneur’s traits and characteristics

Achievement motivation

Internal locus control

Innovation and creativity

Risk-taking

Other traits
 Cont…

2.Entrepreneurs’ skills and industry

experience

Training and education, experience in a specific

field

Job termination leads people to become

entrepreneurs-(Necessity entrepreneurs)
 Cont…

 Opportunity entrepreneurs- driven purely by

opportunity.
 Cont…

3. Opportunities arising owing to outsourcing

This occurs when work is done by people than the

company’s full-time employees.

Example: SABMiller distribution

 Cont…

4. Other reasons for entrepreneurship

•Retrenchment

•Unbundling
 The entrepreneurial process

Is a process of identifying, creating or sensing

and opportunity where others don’t see it, and of
finding and combing resources to pursue the
opportunity until it becomes a successful business.
 Cont…

Entrepreneurial process involves the following

steps or phases to be resolved or work through:
•Personal characteristics, abilities and skills have
influence on the success of failure of a new
business

Do I possess the necessary abilities and skills

 Cont…
• Access to the required resources

• Do a realistic and objective assessment of the

opportunity

• Is the idea or opportunity feasible?

• Compile a business plan that will convince

investors, the bank, suppliers, and so on
 Cont…
• Then launch and manage the business

The stages of entrepreneurial process can be seen

as a framework for decision-making

Figure2.2 p. 58 indicates the entrepreneurial

process: A frame-work for decision-making
about new ventures.
 Cont…

The first four stages of entrepreneurial process

1. Skills required for entrepreneurship

Knowledge needed about the environment and

industries in which they want to operate,

considering management skills such as:

 Cont..
– Strategy skills
– Planning skills
– Marketing skills
– Financial skills
– Project management skills (organise, set
specific objectives, draw schedules etc)
– Human relations skills
 Cont…
2. Resources needed to start a business
– Financial resources
– Human resources
– Operating resources or physical resources
 Cont…

3. Business opportunities

Establishing a business involves an idea

Finding an idea is the first step and convert it into

a business opportunity.

A business ideas involves thorough search of

business environment, e.g. patterns that emerge
from various environmental trends
 Cont…

new venture idea

Due to trends in the environment such as:

Economic, political, social, new ways in which

products are distributed

New venture idea-Industry life-cycle stages

Figure 2.4 (life-cycle of industries)

 Cont…
Growing industries in Africa
•Education

•Healthcare

•Tourism

•Privatisation of government and government

services
 Cont…
New venture opportunities
Good idea is not the same thing as a good
opportunity

Good idea is not necessarily a good investment

opportunity
 Cont…
A good investment opportunities requires the
following:

•There must be a clearly defined market

•The opportunity must be able to achieve sustainable
competitive advantage
•The opportunity must have the potential to grow
•Reward the entrepreneur
etc
 Cont…

Other ways of owning a venture

•Buying an existing business

•Franchising

•Corporate entrepreneurship (Intrapreneurship)

 The feasibility of the idea or opportunity

A feasibility test to prove if an idea that is has value.

It is the collection of data that help forecast whether

an idea, opportunity or venture will survive

It gives an entrepreneur information profile that

should enable him or her to take a definite decision.
 The entrepreneurship and the 4th
Industrial revolution

Industrial revolution

Today, every industry is transforming at an

accelerated speed

Fourth industrial revolution is characterised by key

technologies such as genetics, artificial, Cloud
computing, nanotechnology, biotechnology and

3-D printing
Learning by creating value
for others