LEARNING MODULE

ENTR 1013 – The Entrepreneurial Mind

AY 2020-2021

Lesson 1: Introduction to Entrepreneurship

Topic: Entrepreneurship Defined

Learning Outcomes: At the end of this module, you are expected to:

1. Define 'entrepreneur' and 'entrepreneurship'

2. Describe characteristics required of successful entrepreneurs
3. Explain the importance of factors of production and enterprise in becoming an entrepreneur
4. List several types of entrepreneurs and provide examples of each
5. Summarize the role that entrepreneurs play in the economy

LEARNING CONTENT

Introduction:

Entrepreneurship is an important engine of growth in the economy. In this lesson, you'll learn about what an
entrepreneur is and the key characteristics and skills that a successful entrepreneur possesses. Some examples
of entrepreneurs will also be given. Entrepreneurs also fill a vitally important role in market economies. In this
lesson, you'll also learn about the importance of entrepreneurship, different types of entrepreneurs and how they
add value to an economy.

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Lesson Proper:

Entrepreneurs - Risk Takers

Meet Eddie. He's an entrepreneur, which is a person who starts a business. Eddie recently graduated from
college with a degree in computer programming and has developed an app that he believes will make him a
small fortune. So, instead of working nine to five for a software company in Silicon Valley, he decides to start his
own. He wants to challenge himself and work the way he wants to without answering to a boss. He's using a
small inheritance to fund the start-up. As an entrepreneur, Eddie is not only starting a business, but is risking his
personal wealth to establish it.

Eddie is also trying to convince some friends from school to form an entrepreneurial team with him.

•It is a group of people that help spread out the risk of the new venture
Entrepreneurial Team
and also bring in different talents and skill sets to it.

Eddie has a friend who majored in accounting and another who majored in marketing. He's hoping they may
come along with him and bring their skills and some cash. If he can build the right team, he can create a synergy,
where the group can achieve more together than they can apart.

Examples of Entrepreneurs
Eddie hopes that his entrepreneurial gamble will pay off as well as the gambles of other well-known
entrepreneurs, such as:

Bill Gates Steve Jobs Mark Zuckerberg

• Bill Gates, founder of Microsoft. There are probably not many people that have not been touched by one
of his products, such as Microsoft Windows, Microsoft Office and Internet Explorer.
• Steve Jobs, co-founder of Apple computers, which produces Macs, iPods and iPhones, as well as Apple
TV.
• Mark Zuckerberg, the founder of Facebook.
• Pierre Omidyar, founder of eBay.

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 • Caterina Fake, co-founder of Flikr, which hosts images and videos on the Internet.

Characteristics & Skills

Entrepreneurs are like gamblers, and like any gambler, their chances of winning increase if they have the right
cards. Let's look at some characteristics and skills that help an entrepreneur succeed.

a. A tolerance for risk-taking is a necessary attribute for entrepreneurs. You can think of risk-taking as
pursuing an activity even if there is a chance of a negative consequence. Starting a business is risky, and
even more so when you're using your own money. Sometimes you can spread the risk by convincing
investors to come along on your new venture or by forming an entrepreneurial team, like Eddie is trying
to do. But, at the end of the day, you can't avoid risk if you are going to start a new business and innovate.

b. Entrepreneurs also need creativity. Think about Steve Jobs and Mark Zuckerberg; these two
entrepreneurs brought innovative products to the market that changed the way we live. Successful
entrepreneurs innovate in one of two ways. They can bring an entirely new product or service to the
market, like the first cellular phone. On the other hand, they can radically improve upon something in a
dramatic way, just like the iPhone changed the world of smart phones.

c. Initiative is also required. Entrepreneurs lead. If you are not willing to start without being pushed, your
new business will never get off the ground. For example, Eddie had an idea fresh out of college and took
the initiative to start his business venture. No one had to convince him to act; he just acted.

d. Independence is also a paramount attribute for entrepreneurs. Nobody holds an entrepreneur's hand,
and they don't want any hand-holding. Successful entrepreneurs must be willing to go it alone and
succeed or fail on their own effort without relying much on the other people.

e. Entrepreneurs also need excellent problem-solving skills. Successful entrepreneurs often provide a
service or good that solves a problem for potential customers. But problem solving doesn't stop with
product design. Running a business is all about problem solving. You have to figure out how to start your
business, how to obtain financing, how to market your product and how to manage employees, just to
name a few problems that the average entrepreneur will encounter.

f. Organizational skills are necessary. Running a business is complex and time consuming. Without
organization skills, a business may unintentionally break laws, productivity could fall short or it could be
unprepared for unexpected situations and problems. Entrepreneurs need to constantly juggle and
multitask because they often wear the hats of owner, manager, accountant, and salesperson.

g. Communication is essential. Entrepreneurs must be able to effectively communicate with potential

lenders, investors, business partners and customers. Sooner or later, most businesses will need capital
to grow. Entrepreneurs must make their pitch to lenders or investors to get the funds needed to take their
business to the next step. And of course, if you can't convince your prospective customers of the value
of your product or service, your business is doomed to fail.

Entrepreneurship Defined

Now let’s define the term entrepreneurship.

Meet Ernie. Once upon a time he, like most people, punched
a clock for a wage. When he wasn't working, he was pursuing
his hobby of gourmet cooking. After a particularly trying day at
work, Ernie decided to take the leap and become an
entrepreneur.

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An entrepreneur is a person who takes a risk to start and operate a business. Not everyone is cut out to be an
entrepreneur. You need to have entrepreneurship:
- which is the ability and willingness to take the risk to develop and operate a
business for profit or a non-profit organization to serve the needs of a particular
group.

Factors of Production

A successful business typically needs to utilize all factors of production, which is just a fancy way of referring to
resources necessary to provide a good or service. Take Ernie's new restaurant for example. He'll need all the
classical factors of production, which includes land, labor and capital. He needs to either purchase or lease
property on which his new restaurant will sit. He'll need to hire people to help him prepare and serve meals. He'll
also need capital to finance the new restaurant.

In addition to the 'classic' factors of production, he needs one final factor of production, which he will supply
himself - enterprise.
Enterprise is the ability to take all other factors of production and use them to
create goods or services.
Entrepreneurs, like Ernie, provide the enterprise to an economic activity.

Types of Entrepreneurs

Entrepreneurs don't always fit into one neat little category. Let's take a look at different types of entrepreneurs.
In her book, Launching New Ventures, Ernie identifies different types of entrepreneurs:

• Home-based entrepreneurs are people that establish businesses in the comfort of their home. An
example of a home-based entrepreneur is a freelance writer or novelist who works from home.

• Cyber entrepreneurs are people that conduct business completely online. People that sell crafts,
antiques or used books on auction sites, such as eBay, are a prime example.

• Serial entrepreneurs enjoy the thrill of starting a new business, but they don't want to stay around and
operate it. Once the new venture gets off the ground, they move on to another start-up.

• Traditional entrepreneurs are people like Ernie who take the risk to start a business with the intention
of owning, operating and obtaining profits from it.

• Non-profit entrepreneurs start non-profit organizations to serve a specific group. Contrary to popular
belief, non-profit organizations can generate a tremendous amount of profits. The distinction between a
for-profit and a non-profit is that a non-profit organization is not permitted to distribute its profits to its
members. Instead, profits are retained and invested to further the goal of the non-profit. A classic example
of a non-profit is a non-profit hospital.

• Corporate venturers are people who work in large companies but are charged with finding new
opportunities for the companies. They often operate in skunk works, which operate fairly autonomously.
One of the most famous skunk works is at Lockheed-Martin, where advanced aircraft for the military are
developed.

Engine for Growth & Innovation

Entrepreneurs, like Ernie, are vital for economic growth and innovation. Entrepreneurs are willing to take the risk
to bring their ideas into reality. They often create new products and entire new industries. Examples of
entrepreneurship creating new products and services include Internet search engines, smart phones, computer
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tablets and social media sites. These new products and services help grow the economy and create new jobs.
They can even change the face of society. Just remember the iPhone, and you'll see a good example of this.

Creating a new product and being brave enough to

try and sell it can lead to exciting things for an
entrepreneur. Lastly, in this lesson, we'll learn the
four common forms of entrepreneurship and their
characteristics.

MEET SKIP!
Skip has recently invented a new product for schools that he thinks will be a huge
hit. While he has not mentioned his product to anyone else, Skip feels it might be
time to start his own business selling his product. Now, anyone can start a business
selling products that are already on the market that are loved and needed by
consumers everywhere. But, starting a business selling a product that is new and
never been sold before, is a whole other story.

You see, if Skip decides to start and run a new business selling a new innovation
and takes on all of the risks and rewards, he would be considered an entrepreneur.
Before Skip decides to take a leap and start his business, he first wants to do some
research on the different forms of entrepreneurship. Come along as Skip learns
which form is best for him and his new school product.

Basics of Entrepreneurship

Let's learn the basics of entrepreneurship first. Keep in mind that entrepreneurial ventures are generally started
by an individual who usually has very limited resources to operate the business. Many times, they revolve around
new, innovative products but not always. The owner takes on all of the planning and the risks of the business at
the beginning. And, should the business succeed, they reap all of the rewards. Sometimes investors are brought
on board to share risks and rewards. Skip knows he is ready for the rewards, but is a bit concerned about all of
the risks he would be taking on himself

In order to continue with his new business, he knows he has to be willing to stake everything on his product -
including both his finances and his time. He will need to find the materials needed to make the product, the
money to finance his business, and the possible employees. Entrepreneurial ventures also need to do their own
marketing and have to generate their own sales and distribution. But, if the product takes off and is a huge
success, Skip could see sky-high returns.

Forms of Entrepreneurship

Now, Skip has decided to compare the following four forms of entrepreneurship to better understand where his
new product and business best fits.

A. Small Business Entrepreneurship

There are many small businesses today. If Skip were to become a small business entrepreneur, he would
typically hire local employees and family members to run his own business, and would likely only produce
very small profits. Small business entrepreneurs often just operate to make ends meet and not to make
huge profits and become a multi-million-dollar business. It's common for small business entrepreneurs
to fund their company with the help of family and friends. This is because getting an investor or financial
backer is hard to do when the company is small and may seem unattractive to the large investor. Some
examples of small business entrepreneurship include small local grocery stores or hair salons.

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B. Scalable Startup Entrepreneurship
Skip learns that this type of entrepreneurship allows for growth. Those that fall into this form start a
company with the idea that their new product or service will make an impact on a large scale. Scalable
startup entrepreneurial companies are able to gain investments from venture capitalists and often look to
hire top notch employees with great skills. Once the entrepreneur finds a business model that can grow,
they attract more financial backing to expand. Examples of popular scalable startup entrepreneurship
can be found in Silicon Valley.

C. Large Company Entrepreneurship

Skip finds that unlike other forms of entrepreneurship, large company entrepreneurship is bigger in size
and offers new products to meet the needs of their customers. In order to maintain the business, large
company entrepreneurship needs to understand how the needs of customers change. They need to be
able to incorporate any new technology that has evolved. And, they need to be aware of their competition
so that they can make products that are equally attractive to win over customers from other companies.
The idea is to constantly offer products that are innovative and exciting so that customers continue to
come back. Some examples of large company entrepreneurship are Domino's and Red Bull, who both
started with one idea and made changes to reach more customers.

D. Social Entrepreneurship
The last form for Skip to consider is a social entrepreneurship. Social entrepreneurship seeks to bring
about positive change for the world. They want to make products that can solve problems and crises and
make their community and world a better place. Social entrepreneurship has a mission to fulfill and are
often innovative in finding funding and resources for their product. They want to make a difference and
are not motivated by profits. Some examples of social entrepreneurship would be things like teaching
homeless children or finding ways to feed the hungry.

*** END of LESSON 1***

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