Introduction to EntrepreneurshipIntroduction to Entrepreneurship

CHAPTER OUTLINE The Evolution of Entrepreneurship Concept of Entrepreneurship

Who are Entrepreneurs?Entrepreneurship IntrapreneurshipSocial-entrepreneurship

The Importance of Entrepreneurship The Myths of Entrepreneurship Entrepreneurship Development

ENTREPRENEURSHIPENTREPRENEURSHIP

The word ‘entrepreneurship’ comes from the French verb “entreprendre” and the German word “unternehmen”, both means ‘one who undertakes’ – that is, a ‘manager’.

EVOLUTION OF ‘BUSINESS’EVOLUTION OF ‘BUSINESS’3,000 B.C. – Origin of

Organized business activities

• Emergence of Aristocracy

• A.D. 500 – 1,500

• Growth of enterprise – A.D. 1,600

• Industrial Revolution – late A.D. 1,800

THE EVOLUTION OF ENTREPRENEURSHIP

THE EVOLUTION AND DEVELOPMENT OF THEORY OF ENTREPRENEURSHIP

WHO ARE ENTREPRENEURS?WHO ARE ENTREPRENEURS?

COMMON MAN’S APPROACH TO LIFECOMMON MAN’S APPROACH TO LIFE

Are very cautious – never want to make any risks

Assume that things are the way have to be

Like to be sure of the next month’s salary – and the one after…………. until retirement……….. perhaps the pension even after!!!!!!!

ENTREPRENEUR- “DEFINED”ENTREPRENEUR- “DEFINED”A self-employed person with uncertain returns Richard Cantillon,

1730

A leader of men, a manager of resources, an innovator of ideas, including new scientific ideas, and a risk taker

Abbe nicollas, 1767

A co-ordinator of production with managerial talent

Jean-Baptise Say, 1803

A manager responsible for direction & control, who bears uncertainty

Frank Knight, 1921/1961

A creative innovator Joseph Schumpeter, 1934

A moderate risk taker J.E. Stepanek, 1960

A person with high need for achievement McClelland, 1961

An arbitrageur Israel Kirzner, 1973

Internal locus of control J.B. Rotter, 1976

ENTREPRENEUR- “DEFINED”ENTREPRENEUR- “DEFINED”

A person always searches for change, responds to it, and exploits it as an opportunity Peter Drucker, 1986

Person who exercises strategic creativity through a business venture

McMullan and Long, 1990

Person who undertakes a wealth-creating activity and value-adding process, through incubating ideas, assembling resources and making things happen

Raymond W.Y. Kao, 1993

A person who creates a new business in the face of uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources

Scarborough & Zimmerer, 1998

One who undertakes to organize, manage and assume the risks of a business

Kuratko & Hodgetts, 2004

ENTREPRENEURENTREPRENEUR An entrepreneur is a person who is willing to put his/her career and financial security on the line and take risks in the name of an idea, spending time as well as capital on an uncertain venture.

THE NEW ENTREPRENEURTHE NEW ENTREPRENEUR

Then Now

Small business founder True entrepreneur who innovates, changes to infuse new value

Boss Leader

Lone-ranger Networker

Secretive Open

Self-reliant Inquisitive

Seat of the pants Business plans

Snap decisions Consensus

Male ownership Mixed ownership

Automate Innovate

ENTREPRENEURSHIP- “DEFINED”ENTREPRENEURSHIP- “DEFINED”

Bearing Uncertainty Richard Cantillon, 1730 & Frank Knight, 1921

Bringing together factors of production Jean-Baptise Say, 1803

Innovation through the process of ‘creative destruction’

Joseph Schumpeter, 1934

Responsible decision making Frank Knight, 1961

Exploration of opportunities- being an arbitrageur and an equilibrating agent Israel Kirzner, 1973

Creation of organizations Gartner, 1988

ENTREPRENEURSHIP- “DEFINED”ENTREPRENEURSHIP- “DEFINED”

The dynamic process of creating incremental wealth by individuals who assume major risks in terms of equity, time and career commitment or provide value for product or service

Histrich and Peter, 1998

Is a dynamic process of vision, change, and creation. It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions

Kuratko & Hodgetts, 2004

WHAT IS ENTREPRENEURSHIP??WHAT IS ENTREPRENEURSHIP??

NOT small business management

NOT just business startups

NOT just for-profit firms

WHAT IS ENTREPRENEURSHIP??WHAT IS ENTREPRENEURSHIP??

IS ……………….

ENTREPRENEURSHIPENTREPRENEURSHIP

Entrepreneurship is thus being taken as a value adding process of discovering, evaluating, organizing and exploiting opportunities.

ENTREPRENEURIAL MANAGEMENTENTREPRENEURIAL MANAGEMENT

Universality of principals, rules, application and contexts in which entrepreneurship is considered as a discipline.

BASIC ASPECTS OF ENTREPRENEURSHIPBASIC ASPECTS OF ENTREPRENEURSHIP

Basic Aspects

Creation of something

new of value

Devotion of necessary

time & effort

Assumption of various forms of

risks

Involvement of rewards

ENTREPRENEURSHIP PROCESSENTREPRENEURSHIP PROCESS

Exploring the entrepreneurial context – ‘rules’ of the game

Identifying opportunities & possible competitive advantages

Starting the

venture

Managing the

venture

LEVEL OF ENTREPRENEURIAL ACTIVITIESLEVEL OF ENTREPRENEURIAL ACTIVITIES

Top Middle Lowest

USA Argentina France

Canada Belgium Japan

Australia Brazil

Korea Finland

Norway Israel

Italy

India

Singapore

Spain

UK

Source: based on ‘Economic growth lined to level of business startups”, GEM 2000 report, adapted from Management-7th Ed. Stephen Robbins & Mary Coulter; Pearson Education, 2002.

IMPORTANCE OF ENTREPRENEURSHIPIMPORTANCE OF ENTREPRENEURSHIP New ideas and inventions are developed and this enables

continual improvement of societies and their organizations

Sky-scraping heights of apparent prospects; - the individual gets maximum scope for growth and opportunity

It is a challenging opportunity for the people

Entrepreneurship provides self sufficiency

Creates wealth for nation and for individuals as well

Provides employment to huge mass of people

Contributed towards research and development system

WHY BE AN ENTREPRENEUR? WHY BE AN ENTREPRENEUR?

WHAT MOTIVATES THEMWHAT MOTIVATES THEM

Could not find a job

To make money

More redundant

Building on experience as employer

Spotted an opportunity

Control over my working life

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

2%

6%

9%

15%

16%

17%

Source: Adapted from material published by NatWest bank, IFF research, May 2007.

ROLE OF AN ENTREPRENEURROLE OF AN ENTREPRENEUR An entrepreneur is a person who is

ready to supply enterprise necessary to;

take advantage of business opportunities

acquire productive resources

Combine them & use them effectively & efficiently

create value in goods & services that customers want to buy which creates profits

WHAT IT TAKES TO BE AN ENTREPRENEUR?WHAT IT TAKES TO BE AN ENTREPRENEUR?

‘Train your self to see vacuum or gaps in the market and fill them’

- William Heinecke

‘If something makes you angry, you have uncovered a gap in the market’

- Anita Roddick

SOME EXAMPLES ……..SOME EXAMPLES ……..

Isaac Singer Henry Ford George Eastman Ray Kroc Stephen Jobs And Dewitt and Lila Wallace

SOURCES WHERE ENTREPRENEURS GET THEIR IDEASSOURCES WHERE ENTREPRENEURS GET THEIR IDEAS

Your job

Hobbies or interests outside work

‘Pedestrian observation’ – spotting an opportunity through a casual encounter or an incident in your daily life

ONCE AGAIN SOME EXAMPLES ……..ONCE AGAIN SOME EXAMPLES ……..

The idea for a Diners Club struck Ralph Schneider when he went out for dinner & discovered he had no cash!!!!!!!!

Leo Gerstenzag invented Q-tips (cotton buds) when he saw his wife using cotton wool wrapped around a toothpick to clean their baby daughter’s ears.

King C. Gillette got the idea of a disposable razor when he became annoyed that his razor blade was dull in one morning!!!!!

ENTREPRENEURSHIP AS ‘CREATIVE DESTRUCTION’ENTREPRENEURSHIP AS ‘CREATIVE DESTRUCTION’

‘The process drives ineffective companies out of business as they are replaced by new, more efficient ones’

- Joseph Schumpeter

TYPES OF ENTREPRENEURSTYPES OF ENTREPRENEURSSmall businesses, lifestyle and family

entrepreneurs

Franchise entrepreneurs

Professional fast growth and serial entrepreneurs

Corporate entrepreneurship or intrapreneurs

Creative disruptors or innovators

Extreme entrepreneurs

Social and non-profit entrepreneur

INTRAPRENEURSHIPINTRAPRENEURSHIP Intrapreneurship or corporate entrepreneurship

involves the developing of new business ideas and the birthing of a new business activity within the context of large and established companies.

A learning organization encourages employees to act as intrapreneurs to help, form:

Product Champions: person that takes ownership of a product from concept to market.

New Venture Division: allows a division to act as its own smaller company.

Rewards for Innovation: link innovation by workers to valued rewards.

SOCIAL - ENTREPRENEURSHIPSOCIAL - ENTREPRENEURSHIP Social entrepreneurs combine the passion of;

A social mission (explicit and central)With business-like discipline, innovation,

and determination

10 MYTHS OF ENTREPRENEURSHIP10 MYTHS OF ENTREPRENEURSHIP

1. Entrepreneurs are does, not thinkers

2. Entrepreneurs are born, not made

3. Entrepreneurs are always inventors

4. Entrepreneurs are academic and social misfits

5. Entrepreneurs must fit the profile

10 MYTHS OF ENTREPRENEURSHIP10 MYTHS OF ENTREPRENEURSHIP

6. All entrepreneurs need is money

7. All entrepreneurs need luck

8. Ignorance is bliss for entrepreneurs

9. Entrepreneurs seek success but experience high failure rates

10. Entrepreneurs are extreme risk takers, i.e. gambles

WHAT MAKES AN ENTREPRENEUR???WHAT MAKES AN ENTREPRENEUR???

People who aren’t entrepreneurs

Bad entrepreneurs Good entrepreneurs

Are very cautious – never want to make any risks

Ignore risks – assume their own charisma/skill will guarantee success

Take calculated risks – weighing up to potential risks & resources

Assume that things are the way have to be

Rush to bring in something new or made huge changes

Launch new ideas in response to change in consumer’s tastes & attitudes

Like to be sure of the next month’s salary – and the one after…………. until retirement……….. perhaps the pension even after!!!!!!!

Trust that things will go as planned, spend freely at the start as they are sure of cash will start flowing tomorrow

Accept that the early days of a new business may be very tough, so try to spend as little as possible

SHORTCOMINGS OF ENTREPRENEURSSHORTCOMINGS OF ENTREPRENEURS

Overestimation of their ability to create new products that customers desire

Underestimate how difficult it is to actually reach prospective customers & get them to try their products

Do not realize how much ready cash is needed to see a business through its critical, initial ‘birth’ period.

ENTREPRENEURSHIP DEVELOPMENT IN MALDIVESENTREPRENEURSHIP DEVELOPMENT IN MALDIVES

Privatization Loan schemes for SME’s Entrepreneurship education

WHAT MAKES AN ENTREPRENEURIALECONOMY?

1. Competitive environment with a level playing field

2. Free and flexible markets that will enable the closing down of business that have run their course and be replaced by more efficient firms

3. Rule of Law: Protection of property rights & Contract enforcement

4. Availability of a financial system that provides the entrepreneurs with an easy access to capital

5. A quality educational system

FUNDAMENTAL PRACTICES FOR ENTREPRENEURSHIP DEVELOPMENT OF A COUNTRY

FUNDAMENTAL PRACTICES FOR ENTREPRENEURSHIP DEVELOPMENT OF A COUNTRY

Creating a national sense of mission

Creating customer / product competitiveness

Creating a nation of self-inspired people

Creating a national urgency to improve

- Larry C. Farrell, ‘The Entrepreneurial age’ (2001)

SOME CONCERNS ON ENTREPRENEURSHIPSOME CONCERNS ON ENTREPRENEURSHIP

Ethical issues Social responsibility