Introduction Question

1. What expectations do you have about what you are going to get
out of this course?

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 INTRODUCTION
.

• Do you know that there are millions of

unemployed youth in the world and by the time
you graduate, this number would have increased
substantially?
• The world’s population is growing at a time
when traditional, stable labour markets are
shrinking.
• The ILO estimates that 47 per cent of all
unemployed persons globally are young women
and men and 660 million young people will
either be working or looking for work in 2015.
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 CHAPTER ONE:
Entrepreneurship

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 1.1 INTRODUCTION
• The word ‘entrepreneur’ is originated from a
French word ‘entreprender’ where an
entrepreneur was an individual commissioned to
undertake a particular commercial project.
• Entrepreneurship :-is what the entrepreneur does.
• Entrepreneurial is an adjective describing how
the entrepreneur undertakes what he or she does.
• Entrepreneurial process is the means through
which new value is created as a result of the
project: the entrepreneurial venture.
1.2. Historical Origin of Entrepreneurship

• From the historical development it is possible to

understand the fact that the perception of the
word entrepreneur was evolved from managing
commercial projects to the application of
innovation (creativity ) in the business area.
 …Cont’d
• In the 17th Century a person who has signed a
contractual agreement with the government to provide
stipulated products or to perform service was considered
as entrepreneur. In this case the contract price is fixed
so any resulting profit or loss reflects the effort of the
entrepreneur.
• 18th Century the first theory of entrepreneur has
been developed by Richard Cantillon.
• Entrepreneur is a risk taker.
• The other development during the 18th Century is
the differentiation of the entrepreneurial role from
capital providing role.
 …Cont’d
• In the late 19th and early 20th Century an
entrepreneur was viewed from economic
perspectives. The entrepreneur organizes and
operates an enterprise for personal gain.
• In the middle of the 20th Century the notion of an entrepreneur
as an inventor as established.
• “The function of the entrepreneur is to reform or revolutionize
the pattern of production by exploiting an invention or more
generally untried technological possibility for producing new
commodities or producing an old one in a new way or opening
a new outlet for products by reorganizing a new industry.” (the
concept of innovation and newness is the heart of definition)
 1.3 Definitions of Entrepreneurship and
Entrepreneur

• It is known that entrepreneurship is a process

and entrepreneur is a person undertaking
entrepreneurial activities such as undertaking
own business.
 What is Entrepreneurship?

Entrepreneurship is a process of :

Identifying opportunities in the market place,

arranging the resources required to pursue this
opportunity , investing the resources to exploit
the opportunity for long term gains.

It involves creating incremental wealth by

bringing together resources in a new ways to start
and operate an enterprise.
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 … Cont’d
• Entrepreneurship is the process through which
individuals become aware of business ownership
then develop ideas for and initiate a business

• Entrepreneurship is the process of creating

something new with 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.
 … Cont’d
 Entrepreneurship is the art of identifying viable business
opportunities and mobilizing resources to convert those
opportunities into a successful enterprise through creativity,
innovation, risk taking and progressive imagination.

Entrepreneurship is a practice and a process that

results in creativity, innovation and enterprise development
and growth. It refers to an individual’s ability to turn ideas
into action involving and engaging in socially-useful wealth
creation through application of innovative thinking and
execution to meet consumer needs, using one’s own labor,
time and ideas.
 …Cont’d
In general, the process of entrepreneurship
includes five critical elements. These are:
1) The ability to perceive an opportunity.
2) The ability to commercialize the perceived
opportunity i.e. innovation
3) The ability to pursue it on a sustainable basis.
4) The ability to pursue it through systematic means.
5) The acceptance of risk or failure.
 ENTREPRENEURSHIP IS A MIX OF:
• Risk Taking
• Mindset
• Opportunity
Seeking
• Innovation

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 What is Entrepreneur?
• Entrepreneur is any person that continuously seeks and
acts upon opportunities for economic and or social gains
through applying the principl.
• An entrepreneur is an individual who: has the ability to
identify and pursue a business opportunity; undertakes a
business venture; raises the capital to finance it; gathers the
necessary physical, financial and human resources needed
to operate the business venture; sets goals for him/herself
and others; initiates appropriate action to ensure success;
and assumes all or a major portion of the risk.

• An entrepreneur is a person who: create the job not a job-

seeker; has a dream, has a vision; willing to take the risk
and makes something out of nothing
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14
 …Cont’d
Views of entrepreneur from three perspectives;
 To an economist an entrepreneur is one who brings resource, labor,
materials, and other assets into combination that makes their value
greater than before and also one who introduces changes innovations.

 To a psychologist an entrepreneur is a person typically driven by

certain forces need to obtain or attain something, to experiment, to
accomplish or perhaps to escape the authority of others.

 For the capitalist philosopher an entrepreneur is one who creates

wealth for others as well, who finds better way to utilize resources and
reduce waste and who produce job others are glad to get.

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All entrepreneurs are business persons, but not all business persons are entrepreneurs. 15
 1.4 Types of Entrepreneurs
1) Individual entrepreneur:
– Someone who started; acquired or franchised his/her own independent
organization.
2) Intrapreneur:
– A person who does entrepreneurial work within large organization.
– The process by which an intrapreneur affects change is called
Intrapreneurship.
3) Entrepreneurial Organization:
– An organization can create an environment in which all of its members

can contribute in some function to the entrepreneurial function.

 Difference between entrepreneur and
Intrapreneur.
Entrepreneur Intrapreneur
• Dependency: He is independent • He is dependent on the
in his operation entrepreneurs i.e. owner.
• Raising of funds: He himself • He does not raise funds for the
raises funds required for the organization.
organization. • He does not fully bear the risk
• Risk: Entrepreneurs bears the risk involved in the organization.
involved in the business. • An intrapreneur operates from
• Operation: An entrepreneur inside.
operates from outside. • Intrapreneur takes the responsibility
• Entrepreneurs convert the ideas of creating innovation.
into viable opportunities. • He is provided with a variety of
• Entrepreneurs take the profit of perquisite for his innovation.
the business.
 1.5 Role of Entrepreneurs in Economic
Development
• Improvement in per capita Income/Wealth Generation:
• Generation of Employment Opportunities:
• Inspire others Towards Entrepreneurship
• Balanced Regional Development
• Enhance the Number of Enterprise
• Provide Diversity in Firms
• Economic Independence
• Combine Economic factors
• Provide Market efficiency
• Accepting Risk
• Maximize Investor’s Return
 1.6.1 Entrepreneurial Mindset:
A. Who Becomes an Entrepreneur?

• The Young Professional

• The Inventor

• The Excluded
 B. Qualities of an Entrepreneur
1. Opportunity seeking and initiative

2. Persistence and Commitment

3. Goal setting

4. Systematic planning and monitoring

5. Information seeking

6. Risk taking

7. Efficiency and Quality

8. Persuasion and networking

9. Independence and self-confidence

10. Listening to others

 1. Opportunity seeking and
initiative

• Opportunity : a favorable set of cir-

cumstances that creates a need for
a new product, service or
business.
• It includes access to credit, working premises, education,
trainings etc.
21
 Opportunity seeking and
-
initiative
Does things before asked or forced by
events- proactive
- Seizes opportunities to start a new
business, obtain finance, equipment,
land, work space or assistance etc.
- Takes action to extend the business into
new areas, products or services (Con-
tinuously moves into new frontiers)

22
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 Exercises- Opportunity Seeking
. . .
. . .
. . .
Connect the nine dots without uplifting your pencil
“Creativity emerges from the elimination of all unnecessary
assumptions.”
23
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NINE DOTS

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 2) Persistence
- Takes action in the face of a signifi-
cant obstacle collation
- Acts repeatedly or switches to alter-
native strategies to meet a challenge
or overcome an obstacle.
- Takes insistent actions or switches
between alternatives to attain goal.
- Takes personal responsibility and
demonstrate proactive stance.
- Story of persistent people like
Tomas Edison

25
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 - Deliberately calculates risks
and evaluates alternatives
- Takes action to reduce risks
and control outcomes
- Faces challenges and moder-
ate risks
- “You can’t steal second base
and keep your foot on first.”
Importance of Risk-taking
 Build self confidence
 Create a feeling of leadership
 Create strong motivation to
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26
 4. Demand for efficiency
and quality
- Finds ways to do things better ,faster and
cheaper.
- Acts to do things that meet or exceed standards
of excellence
- Develops ways / procedures that ensure the
required quality.
- Quality plays an important role in this new era of
globalization because it confers certain
benefits which include:
o Reduction of waste
o Cost-effectiveness
o An increase in market share
o Better profitability
o Social responsibility
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 5. Information
seeking
- Seeks information from clients, suppliers, competitors
and other sources

- Does research on how to provide a product or service

- Seeks the advice of experts

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 6. Goal Setting

- Sets personally meaningful and

challenging goals and objectives

- Articulates clear and specific

long range goals

- Sets SMART short term objec-

tives
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 7. Systematic planning and
monitoring
- Planning is making a decision about the
future in terms of what to do, when to
do ,where to do, how to do , by whom to
do, and using what resource .
- Plans by breaking large tasks into small
steps with deadline.

- Evaluates performance, receive feed-

backs and change accordingly

- Keeps neat financial records and

utilizes them for business decisions
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8. Persuasion and networking

- Uses deliberate strategies to influ-

ence or persuade others.

- Uses key people to accomplish ob-

jectives.

- Acts to develop and maintain busi-

ness contacts.
31
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 9. Independence and self-
confidence
- Looks for freedom and autonomy from control
of others/ curtailing rules

- Sticks with own judgment

- Expresses confidence to accomplish ‘difficult

tasks’
- Characteristics of self confidence
- 1. Risk taker
- 2. Independent
- 3. perseverance
- 4. Able to learn to live with failure
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 10. Listening to others

 An entrepreneur does not simply impose his/her idea on

others. Rather, he/she listens to other people in their
sphere of influence, analyses their input in line with
his/her own thinking and makes an informed decision.

11. Demonstrating leadership

An entrepreneur does not only do things by him/herself, but also
gets things done through others. Entrepreneurs inspire, encourage
and lead others to undertake the given duties in time.
 C. Entrepreneurial Skills
• A skill is an ability to perform in a certain way.
• An entrepreneur is someone who has a good
business idea and can turn that idea into
reality.
• Turning an idea into reality calls upon two sorts of
skills, these are:
1. General management skills and
2. People management skills
 …Cont’d
1. General Management Skills:
• skills required to organize the physical and financial
resources needed to run the venture.
• Some of the most important general business
management skills are :
– Strategy Skills:
• Ability to consider the business as a whole. How it
fits within its market place.
– Planning Skills:
• Ability to consider what the future might offer,
how it will impact on the business and what needs
to be done to prepare for it now.
 … Cont’d

• Marketing Skills:
– Ability to see firm’s past offerings, see how they satisfy the
customer’s needs and why the customer finds them attractive.
• Financial Skills:
– Ability to manage money, keep track of expenditure, monitor
cash-flow, & assess investments in terms of their potential
and their risks.
• Project Management Skills:
• Time Management Skills:
– An ability to use time productively.
 2. People management skills
• Businesses are made by people. To be effective,
an entrepreneur needs to demonstrative a wide
variety of skills in the way he/she deals with other
peoples.
 People Management Skills
• Communication Skills:
– Ability to use spoken and written language to express ideas and
inform others.
• Leadership Skills:
– An ability to inspire people to work in a specific way and to
undertake the tasks that are necessary for the success of the venture.
• Motivation Skills:
– Ability to enthuse people and get them to give their full
commitment to the tasks in hand
• Delegation Skills:
– Ability to allocate tasks to different people.
• Negotiation Skills:
– Ability to understand what is wanted from a situations, what is
motivating others in that situation and recognize the possibilities of
maximizing the outcomes for all parties.
 D. The Entrepreneurial Tasks
• A number of tasks have been associated with the
entrepreneur. Some of the more important are:
1) Owning Organizations:
2) Founding New Organizations
3) Bringing Innovations to Market
4) Identification of Market Opportunity.
5) Application of Expertise
6) Provision of leadership
7) The entrepreneur as manager
 E. Wealth of the Entrepreneur
• Wealth is money and anything that money can buy. It
includes money, knowledge and assets of the entrepreneur.

Who Benefits from the entrepreneur’s Wealth?

1) Employees: They contribute physical and mental labor to the

business. they are rewarded with: Money , owning a part of the firm
through share schemes, social relationships and the possibility of
personal development.

2. Investors: These are the peoples who provide the

entrepreneur with the necessary money to start the venture
and keep it running.
 …Cont’d
There are two main sorts of investors:
A. Stockholders :- are those who buy the stock of the company
and are true owners of the firm. The actual return of the
stockholders varies depending on how the business performs.
B. Lenders:- are people who offer money to the venture on the
basis of it being a loan.

3) Supplier: They are the individuals and organizations who provide

the business with the materials, productive assets and information it
needs to produce its output.
4) Customers: The entrepreneur may reward customers by offering
quality products, fair prices, regular and consistency of supply, loan
arrangement.
 …Cont’d
5) The local community: Business has physical
locations. Expected responsibilities are
Not polluting their shared environment
Contributing and sponsoring local development
activities.
Contribution for political and cultural stabilities and
economic improvements
Acting in an ethical way.
6) Government: The responsibility of government is to
ensure that businesses can operate in an environment
which has political and economic stability.
 1.6.2 Entrepreneurship and Environment
• Refers to the factors which influence enterprise’s
operations and determine its effectiveness.

• The firm and its management have to adjust to the

conditions prevalent around it.
• A study of business environment offers:
– Information about environment which is essential for
successful operation of business firms.
– Fresh avenues for the expansion of new entrepreneurial
operations.
– Knowledge to adopt a dynamic approach and maintain
harmony of business operations with the environment.
 Elements of Business Environment
• Business environment is classified into two broad categories;
internal and/or external.
1) External:
– Environment which is external to the business and hardly to
influence independently.

• Components include:
– Economic Environment

– Legal Environment

– Political Environment

– Socio-Cultural Environment

– Demographic Environment
2) Internal Environment:
– The environment which is under the control of a given
organization.

• Components include:
– Raw Material
– Production/Operation
– Finance
– Human Resource
 1.7 Creativity, Innovation and Entrepreneurship
1.7.1 Creativity; is a process of assembling ideas by
recombining elements already known but wrongly assumed
to be unrelated to each other.
 Is an ability to come up with new ideas and to identify new
and different ways of looking at a problem and
opportunity.
key elements of this definition;
• Process: implies that, it is more likely a skill than an
attitude, and that you can get better at it with practice.
• Ideas: creativity results in ideas that have potential value.
• Recombining: the creative process is one of putting things
together in unexpected ways.
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 1.7.1.1 Steps in the Creative Process
Step 1: Opportunity or problem Recognition; A person
discovers that a new opportunity exists or a problem needs resolution.
Step 2: Immersion; the individual concentrates on the problem and
becomes immersed in it.
Step 3: Incubation; a person does not appear to be working on the
problem actively; however, the subconscious mind is still engaged.
Step 4: Insight; the problem-conquering solution flashes into the
person’s mind at an unexpected time, such as on the verge of sleep,
during a shower, or while running. Insight is also called the Aha!
Experience.
Step 5: Verification and Application; the individual sets out to
prove that the creative solution has merit.

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 1.7.1.2 Barriers to Creativity

There are a numerous barriers to creativity, i.e.

 Searching for the one ‘right’ answer
 Focusing on being logical
 Blindly following the rules
 Constantly being practical
 Viewing play as frivolous
 Becoming overly specialized
 Avoiding Ambiguity
 Fearing looking Foolish
 Fearing mistakes and failure
 Believing that ‘I’m not creative
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 1.7. 2 Innovation

 Innovation is the implementation of new idea at the

individual, group or organizational level.
 It is a process of intentional change made to rate value by
meeting opportunity and seeking advantage
 Types of Innovation; there are 4 types of innovation.
1. Invention - the creation of a new product, service or
process
2. Extension - the expansion of a product, service or
process
3. Duplication - replication of already existing product,
service or process
4. Synthesis - the combination of existing concepts and
factors into a new formulation.

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 1.7.2.1 The Innovation Process
• Analytical planning: carefully identifying the product or
service features, design as well as the resources that will be
needed.
• Resources organization: obtaining the required
resources, materials, technology, human or capital
resources.
• Implementation: applying the resources in order to
accomplish the plans

• Commercial application: the provision of values to

customers, reward employees and satisfy the stakeholders.
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 1.7.2.2 Areas of Innovation
 New product
 New Services
 New Production Techniques
 New Way of Delivering the Product or Service to the
Customer
 New Operating Practices
 New Means of Informing the Customer about the Product
 New Means of Managing Relationship within the
Organization
 New Ways of Managing Relationships between
Organizations
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 1.7.3 From Creativity to Entrepreneurship

 Creativity, is the ability to develop new ideas and

to discover new ways of looking at problems and
opportunities.

 Innovation, is the ability to apply creative solution

to those problems and opportunities in order to
enhance people’s lives or to enrich society.

Entrepreneurship = creativity + innovation.

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 Con’t…

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 Why be an entrepreneur?
• Why should you be interested?
– Many young people have succeeded:
• Michael Dell - Dell Computers
• Frank Carney - Pizza Hut
• Mark Zuckerberg - Facebook
• Betelhem Tilahun- soleRebeles.

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The Potential Limitations of Entrepreneurship

• Uncertainty of income
• Risk
– Financial
– Career
– Family and social
– Psychic
• Long hours and hard work
• Lower quality of life until the business gets
established
• High level of stress
56
 How Do People Become an Entrepreneur
Do what you love
Develop the mindset
Write a Business plan
Register the business
Make best use of virtual resources
(Internet)
Manage your time

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 How Do People Become an Entrepreneur
Network
Find a mentor
Think big
Do your research
Value existing and potential
customers

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 TO BE SUCCESSFUL

• Improve your knowledge of the industry

• Be creative
• Expand business through reinvesting profits and
diversifying
• Study likely changes in business environment

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