Entrepreneurship: Chapter 1

• Dynamics of Entrepreneurship 3e, written by Winnie Sereeco and Ian Maseko.
• Entrepreneurship and small, medium, and micro enterprises fall within Chapter 1.
• The chapter helps define entrepreneurship and explain the relationship between entrepreneurship, a SME, and small business management.
• It aids in explaining the various types of entrepreneurial businesses as well as corporate entrepreneurship or intrapreneurship.
• It also aids in explaining the key success factors of entrepreneurs, and how they should deal with external factors that affect their businesses.

Introduction

• Employment opportunities abound in private and public sector organisations.
• Entrepreneurial activity has a crucial influence on the national economy.
• There is a direct correlation between job creation and the level of entrepreneurial activity in an economy.

Defining entrepreneur and entrepreneurship

• Entrepreneurs possess the ability to identify and seize an opportunity, plus create and develop a business by adding value to it.
• Entrepreneurship is the process of establishing a business, from the identification of a business opportunity and innovation through to planning, start-up, managing and growing it.

Relationship between entrepreneurship, SME and small business management

• Entrepreneurship starts as a small/micro enterprise managed by one person with the aim to grow the business.
• Once satisfied with business growth, the entrepreneur becomes a small business manager.
• An entrepreneur might have good ideas but without sufficient expertise to implement them.
• A successful business manager must be structured to plan, organise, lead and control business functions.
• Business managers must be able to organise tasks efficiently.
• They must ensure interpersonal and inter-group competence, and facilitate formal communication during scheduled meetings.
• They must compile and implement necessary policies and procedures.

Types of Entrepreneurial Businesses

• Can be classified: informal, micro, very small, small, medium or large.
• Formal small businesses fall into the small and micro business sector.
• A micro business has 5 or less employees and a turnover of less than R100000.
• A very small business has between 1 and 10 employees.
• A small business has between 11 and 50 employees.

Definition of a Small Business According to Industrial Sector, Employment and Turnover

• In agriculture, the total full-time equivalent of paid employees is 50, and the total turnover is R3m.
• In mining and quarrying, the total full-time equivalent of paid employees is 50, and the total turnover is R10m.
• In manufacturing, the total full-time equivalent of paid employees is 50, and the total turnover is R13m.
• In electricity, gas and water, the total full-time equivalent of paid employees is 50, and the total turnover is R13m.
• In construction, the total full-time equivalent of paid employees is 50, and the total turnover is R6m.
• In retail and motor trade, and repair services, the total full-time equivalent of paid employees is 50, and the total turnover is R19m.
• In wholesale trade, commercial agents and allied services, the total full-time equivalent of paid employees is 50, and the total turnover is R32m.
• In catering, accommodation and other trade, the total full-time equivalent of paid employees is 50, and the total turnover is R6m.
• In transport, storage and communications, the total full-time equivalent of paid employees is 50, and the total turnover is R13m.
• In finance and business services, the total full-time equivalent of paid employees is 50, and the total turnover is R13m.
• In community, social and personal services, the total full-time equivalent of paid employees is 50, and the total turnover is R6m.

Corporate entrepreneurship or intrapreneurship

• Occurs by creating a business or businesses within an existing large business, using new ideas and exploiting opportunities.
• It makes it possible for large businesses to adapt to changes in the market entrepreneurially and experiment in the market.
• It helps diversify from the core business and establish new distribution channels.
• It can make profits from new businesses.

Franchisors and Franchisees

• Franchising is an arrangement in which a franchisor, or a business grants an independent party, or franchisee, the right to sell the products or services of the business according to the franchisor's guidelines.
• A franchisor is an entrepreneur.
• A franchisee is a corporate entrepreneur.
• Franchisees do not have the freedom to experiment and operate their business according to their own vision.
• Franchisors usually fall into the medium to large business category.

Key success factors of entrepreneurs

• Entrepreneurs have distinctive characteristics.
• Each entrepreneur achieves success because of a unique combination of factors.
• There is no typical entrepreneur as they possess various characteristics or skills.
• It is important for an entrepreneur to know individual strengths and weaknesses.
• Strengths can be positively applied.
• Weaknesses can be addressed by personal development, attending courses, or appointing staff and/or experts to compensate where needed.

Key Success Factors

• Skills, expertise, and aptitude.
• Personal qualities.
• Management skills.
• External factors.

The skills, expertise and aptitudes of an entrepreneur

• Successful entrepreneurs have skills/expertise/aptitudes that can be applied profitably in any business.
• Skills are manual work that can be learned.
• Expertise is based on knowledge you acquire by studying or experience.
• A person is born with aptitude and talent.

The important personal characteristics of entrepreneurs

• Entrepreneurs must have perseverance and confidence in themselves and their business.
• Must have commitment to the business and dedicate all skills, expertise and resources to establishing and building the business.
• Involvement in the business is important, including performing tasks themselves and communicating well with staff and others.
• Willingness to take calculated risks.
• One must have sound human relations skills via collaborating closely with other people and realizing the importance of good business relationships.
• Creativity and innovative ability refers to a person's imagination, and the use of creative abilities.
• One must maintain a positive attitude and approach by being realistic and able to identify opportunities in adverse situations, and by learning from failures.

- The important functional management skills of entrepreneurs

• The management skills of an entrepreneur indicate how well he or she can perform important tasks in a business.
• Management functions include: general management, production/operational, financial, purchasing, human resources, marketing, administrative, and external relations.
• Important aspects of management skills: planning a business before it is established
• Important aspects of management skills include:
• General management skills and the use of advisors
• Customer service
• Knowledge of competitors
• Market orientation
• The importance of quality products or services
• Accounting for your own purposes
• Insight to expenditure, income, profit and loss
• Ability to use income wisely

Dealing with external factors that affects entrepreneurship

• External factors will influence the ability of the entrepreneur to exploit his or her potential
• External factors include:
  • Economic conditions such as interest rate.
  • Technological changes such as keeping up with technological development.
  • Social and cultural forces such as identifying opportunities for growth in market share among large sections of the population.
  • Political and legislative variables such as realising opportunities that arise after political adjustments.
  • Physical variables such as keeping abreast of the availability and price of resources.
  • International forces such as using technologically advanced communication channels, an entrepreneur can expand and establish a business in another country.

Summary

• The importance of entrepreneurial business at all levels is essential to a country's economic development, wealth and employment creation.
• The entrepreneur who applies certain talents, skills and expertise in the start-up, development and growth of a business was introduced as a person who continuously creates and innovates to build and develop a business of recognisable value.
• Many entrepreneurs start small businesses, but then prefer to remain small due to lifestyle preferences.
• Entrepreneurs are found in a variety of types of businesses.
• All the success factors includes: skills, expertise, aptitude, personal qualities, management skills and dealing with external factors.