ENTREPRENEURSHIP

(ABM 213)

Unit 1: Entrepreneurship – introduction and History

By RM/AGM
A. COURSE MATERIAL/OBJECTIVES
Continuous assessments and exams

• Continuous assessments – 40%

• Exams – 60%

Pass mark – 50%

A. COURSE MATERIAL/OBJECTIVES
Looks at the following areas:
i. Nature and development of entrepreneurship;
ii. Entrepreneurial process;
iii. Creativity & business idea generation;
iv. Assessment of business opportunities;
v. Sources of funds; and
vi. Development of business plans for an enterprise to
survive and grow in a dynamic environment
Unit 1: Entrepreneurship – introduction and History
OUTLINES
A. Key terms
B. Entrepreneurship
C. Entrepreneur - Characteristics & Success factors
D. Business risks
E. Managerial success factors
F. Myths regarding entrepreneurs
G. Impact of Entrepreneurship
H. Entrepreneurial Venture and Small Businesses
A. Key terms
1) Entrepreneurship
2) Entrepreneur
3) Risks
4) Entrepreneurial venture
5) Small business
B. Entrepreneurship
• Defined:
oProcess of creating and pursuing opportunities regardless
of the resources currently controlled;
oInvolves assuming the accompanying risks; &
oReceiving rewards of monetary and personal satisfaction.
• Aspects of entrepreneurship (Niemen and Bennet, 2006)
i. identifying an opportunity-this means there must be a
real business opportunity
ii. Innovation and creativity-something new and different
is required
B. Entrepreneurship
• Aspects of entrepreneurship (Niemen and Bennet,
2006)…Continued
iii. Getting resources-Capital, labor and operating
equipment must be found
iv. Creating and growing a venture-starting a new
business venture or conversion of an existing one
v. Taking risks-this means there will be personal and
financial risks involved for the person who embarks on
the entrepreneurial process
B. Entrepreneurship
• Aspects of entrepreneurship (Niemen and Bennet,
2006)…Continued
vi. Being rewarded-free market (law of supply and
demand) allocates goods and services in an economy
to as entrepreneurs seek profit or increase in the
value of the business
vii.Managing the business-this means there must be
planning, organizing, leading, and controlling of all
the functions in the business venture.
Point to ponder: How opportunities arise
• Changes in the environment give rise to real business opportunities e.g.
Political – changes of governance systems, governments, new laws/legislations,
policies, international conventions/agreements/protocols e.t.c
Economic – market conditions (prices, demand & supply, tastes, market
structures), consumer incomes/GDP, interest rates, exchange rates, inflation
Social (demographic)– population size & growth rate, age structure, religion &
cultural beliefs, education, gender
Technological – methods of producing goods & services may either be
traditional or modern/advanced technologies (such as computer based
technologies)
Environmental or ecological – changes in ecosystems and atmosphere due to
human activities (agricultural activities and industrialisation) or natural activities
Legal – changes in national laws/legislations, new laws/legislations, policies,
international conventions/agreements/protocols
C. Entrepreneurship – Xstics & Success factors
• The entrepreneur is defined in several ways
E.g An entrepreneur is an individual who establishes
and manages a business for the main purpose of profit
and growth
Qustns:
Entrepreneurs are neither manager nor
inventors…do you disagree?
 Entrepreneurs are either born or made…do you
agree?
C. Entrepreneurship – Xstics & Success factors
• 5 Xstics:
1) Need for achievement
2) Locus of control -
3) Entrepreneurial self-efficacy
4) Need for autonomy
5) Calculated Risk taking
C. Entrepreneurship – Xstics & Success factors
• 5 Xstics:
1) Need for achievement - chasing goals
-confidence that success is clearly measurable &
achievable
-involves goal setting, planning, information
gathering, sustaining goal directed activity over a
long period of time.
C. Entrepreneurship – Xstics & Success factors
• 5 Xstics…Continued
2) Locus of control – internal v. external
-Relates to individual`s beliefs that the outcome of an event is
either within (internal) or beyond (external) their personal
control
- Entrepreneurs guided by belief that they are masters of their
destiny and control their environment
-internal locus of control perception that an outcome of an
event is dependent on ones own behaviour or own relatively
permanent characteristics
C. Entrepreneurship – Xstics & Success factors
• 5 Xstics…Continued
3) Entrepreneurial self-efficacy
-belief that one has in ability to start and complete a specific activity
-Entrepreneurs will pursue a matter irrespective of whether the
resources are at hand or not
4) Need for autonomy
-This is about being independent (thinking);
-Being one`s own boss;
-Make decisions without having to abide by someone`s else policies,
rules and regulations
C. Entrepreneurship – Xstics & Success factors
• Xstics…Continued :
5) Calculated Risk taking
-successful entrepreneur takes calculated (reasonable) risks
- There is no gambling, i.e. risking everything for the chance of success
• Additional xstics include
o Tenacity: Entrepreneurs do not give up easily
o Proactivity: Entrepreneurs plan ahead
o Passion for work: believe in what they do & be passionate about ventures
o Opportunism: Able to identify opportunities and act on them
o Dynamism: Entrepreneurs are go-getters and are energetic
o Creativity and innovation – able to generate new ideas
o Positive attitude: ensure that people feel positive towards them and will enjoy doing business with
them
o Determination and perseverance: not giving up in the face of set-backs and prepared to persevere in
the effort to ensure success
D. Business risks
• Risk is defined as any event whose occurrence or non-
occurrence may lead to business failure
• Due to risk, entrepreneurs cannot determine with
CERTAINTY how much profit they will make
• Therefore, probabilities are attached to profit figures
• When probabilities are not known, such risk is called
UNCERTANTY
D. Business risks
• Entrepreneurs face 3 kinds of risks:
i. Business risk: risks faced by changes in business,
supply, demand and customer behaviours
(preferences/tastes) which impact negatively on how
an entrepreneur runs the business
ii. Financial risk: When an entrepreneur starts a venture,
often does not know the outcome (i.e. profits)
For example, money is invested in the business but
this money may not yield any profits or be recovered
D. Business risks
• Entrepreneurs face 3 kinds of risks…Continued
i. Personal risk: risk faced by the entrepreneur as a
person such as reputation damage when he/she
fails to pay suppliers or become bankrupt.
D. Business risks – other risk types

Wheels of misfortune by Longennecker et al. (2000)

D. Business risks – How to manage risks
• Strategies to manage business risks:
i. Retention - strategy to bear the risk or accept it as part of the business
when:
o There is no practical means of risk avoidance
o The risk is unknown
o The consequences are not serious
o The consequences of avoiding the risk are unacceptable
o Risk is actively desired

ii. Reduction - strategy considered when loss cannot be eliminated

completely, but its impact can be reduced. These include:
o Revise the business plans regularly
o Implement management control systems
o Implement safety programmes
D. Business risks – How to manage risks
• Strategies to manage business risks:
iii. Avoidance - that nothing is done or explored especially
if probability for loss and severity are high, avoidance is
best
iv. Transfer - transfer risk or part of it to another party
• The basic principle to follow when considering insurance is
to:
oIdentify the business risk to be insured
olimit cover to major potential losses
orelate premium cost to the probability of the loss
D. Business risks – Process of managing risk
• An entrepreneur needs to actively manage risk by
i. Identifying risks
ii. Evaluating risks
iii. Select methods to manage risks
iv. Implement decision
v. Evaluate and review at regular intervals
E. Managerial success factors
• To manage business successfully, entrepreneurs also require
managerial success factors such as:
1) Planning
2) Knowledge of competitors
3) Market orientation
4) Knowledge and skill with regard to business
(1) Planning
• Planning is about identifying and choosing specifically: What tasks to
be done; Prioritizing activity in scale and preference; When to be
done; How will the tasks be done; Selecting people to undertake the
activity; Assign responsibilities to the selected people and penalty for
defaulters; Make a budget; Mobilize resources (physical or social)
E. Managerial success factors
(1) Planning
Qustn: Discuss how planning is important for a successful
entrepreneur

(2) Knowledge of competitors

• Who they are; What substitute products or services they offer; Which
customer/markets they supply; What their pricing, distribution or
promotion policy/strategies are; Who their suppliers are
• This knowledge helps to determine competitive advantage of ones
business in order to differentiate it from other businesses
E. Managerial success factors
(3) Market orientation
• Successful entrepreneurs acquire knowledge about their market
• They know what their target market is, what the target market`s
requirements and needs are and how to meet these needs profitably
(gross margins analysis)

(4) Knowledge and skill with regard to business

• Having sufficient knowledge and skills regarding their enterprise to
ensure reasonable success
• Making use of experts to provide them with advice
F. Myths regarding entrepreneurs
• Myth 1: Entrepreneurs are born not made
Reality: Natural intelligence is made perfect through accumulation
skills, knowledge, competences/abilities over years
• Myth 2: Entrepreneurs are doers and not thinkers
Reality: Entrepreneurs think big enough, start businesses that have a
better chance of succeeding
• Myths 3. Entrepreneurs are gamblers
Reality: Successful entrepreneurs take very careful, calculated risks.
Entrepreneurs like to be in control of their destiny and therefore
carefully plan to achieve their vision.
F. Myths regarding entrepreneurs
• Myth 4: Entrepreneurs depend on luck
Reality: Entrepreneurs are prepared (i.e. planning)
• Myth 5: Entrepreneurs are chaotic
Reality: Entrepreneurs are well-organized individuals-are in control
and may have a few areas of focus
• Myth 6: Starting a business is risky and often ends in failure
Reality: Talented and experienced entrepreneurs often succeed
because they pursue real business opportunities & attract the right
people, necessary financial and other resources to make their venture
successful
G. Impact of Entrepreneurship
• Impact of Entrepreneurship include:
• Economic growth and national development –private sector which is
the ENGINE of growth (small, medium and large companies) is driven
by these entrepreneurs
• Contribution to job creation, innovation, new products and services
and productivity
• Entrepreneurship provides people with the opportunity to create
one’s own destiny  being his or her own boss
• Entrepreneurship is provides the opportunity to achieve what one
wants or desires (e.g. obtain huge profits or reach full potential)
• Entrepreneurship provides the opportunity to make a difference in
our society by coming up with innovative solutions to societal
problems
H. Entrepreneurial Venture and Small Businesses
• Entrepreneurial venture and a small business create and pursue new
opportunities differently (Wickham, 2006)
• Entrepreneurial venture - main objectives are profitability and
growth
Three characteristics of an entrepreneurial venture are:
1. Thrive on innovation (e.g. new products & services, new ways
of producing, serving, distributing, organization etc.)
2. Potential for growth (e.g. potential for growth & creation of
own market)
3. Strategic objectives in relation to
i. Market targets
ii. Market development
iii. Market share
iv. Market position
H. Entrepreneurial Venture and Small Businesses
• Small business – main objective is furthering personal goals,
autonomy and ensuring security
• Small business is independently owned and operated; not
dominant in its field & does not engage in any new marketing or
innovative practices
key characteristics are:
1. Only delivers an established product or service; does not
engage in innovation or new marketing practices;
2. Operates in an established industry and given market,
unique only in terms of locality;
3. Rarely cares about growth as its objectives: rarely goes
beyond survival and sustaining the life style of the owner and
personal goals
•Gen 2:5 And every plant of the field
before it was in the earth, and every
herb of the field before it grew: for
the LORD God had not caused it to
rain upon the earth, and there was
not a man to till the ground.
THE END!