Introduction to Entrepreneurship

Introduction to Entrepreneurship

• Entrepreneurship is the process of becoming self-employed, typically through small to medium-sized businesses.
• It requires entrepreneurial skills to generate sales and revenue.
• Entrepreneurship is the capacity to create, organize, and run a business, accepting risks to make a profit.
• Entrepreneurship empowers people to find opportunities where others see insurmountable obstacles.
• It involves launching businesses with new products, processes, or services.
• It is the act of starting, growing, and scaling a business to generate profit.
• It enhances the world by addressing social changes, developing innovative products, and presenting new ideas.
• Competent entrepreneurs have a better chance of success in the competitive marketplace.

Causes of Business Failure

• Neglect
• Fraud
• Lack of Technical Expertise
• Lack of Management Expertise
• Lack of Experience
• Incompetence
• Disaster

Concepts of Entrepreneurship

• It originated in France after the French Revolution.
• Marks the beginning of Capitalism and the end of Feudalism.
• Jean Baptiste Say, a French economist, coined the term "entrepreneur".
• Say argued entrepreneurship is independent of classical economies despite ties to economics and society.
• 20th century economist Joseph Schumpeter, used Say's ideas in "The Theory of Economic Dynamics".
• Schumpeter stated innovative entrepreneurs cause dynamic disequilibria, which is essential for a healthy economy.
• Entrepreneurship includes initiatives, organizing, and reorganizing mechanisms to practically use resources and accept risks.
• In the Philippines, the 2015 Global Entrepreneurship Monitor (GEM) Report registered the highest societal perception of entrepreneurship in Southeast Asia.

Who are the Entrepreneurs?

• "Entrepreneur" originates from the French word meaning "to undertake."
• Entrepreneurs shift economic resources from lower to higher productivity areas.
• Entrepreneurs develop new ideas and business procedures to meet market demands and personal interests.
• An entrepreneur's mindset reflects their success.
• Motivation combines competency, willingness, experiences, talents, and education.

Entrepreneurs attributes:

• Take and accept risks
• Own ventures
• Are creators, managers not custodians
• Accept responsibilities
• Future-oriented
• Thrive on structure
• Establish new ventures, develop existing ones
• Identify market opportunities
• Apply their expertise
• Process market information
• Bring innovation
• Provide market efficiency
• Maximize investment returns
• Provide leadership

The Earliest Entrepreneurship

• Dates back approximately 20,000 years ago.
• Around 17,000 BCE, obsidian was traded in New Guinea for tools, skins, and food.
• Hunter-gatherer tribes traded commodities from various regions.

Development of Entrepreneurship as a Concept: Risk and Uncertainty

• Richard Cantillon (1680-1734), an Irish economist, coined the term "entrepreneur."
• According to Cantillon, entrepreneurs specialize in taking risks by insuring workers.
• Cantillon stated workers’ incomes are stable but entrepreneurs risk losing due to market fluctuations.
• Entrepreneurs were distinguished between financially independent landowners and hirelings (workers).
• Cantillon defined entrepreneurs as "individuals."
• Farmers were the most significant businesspeople during Cantillon's lifetime.
• Arbitrageurs suffered uncertain revenues intermediating between farmers and consumers.
• Adolph Reidel (1809-1872) expanded Cantillon's concept to suggest entrepreneurs take on uncertainty to allow others not to.
• Entrepreneurs offer a service to risk-averse income earners.
• Entrepreneurs sell products at higher prices than input costs, compensating for uncertainty.
• Frank Knight (1885-1972) differentiated insurable risk from uncertainty.
• Some hazards are insurable due to the frequency of the hazard while uncertainty isn't subject to probability calculations.
• Entrepreneurs can't share the risk of loss through insurance and profit motivates taking uninsurable risks..

The Distinction Between Entrepreneur and Manager

• Jean-Baptiste Say (1767-1832) stated entrepreneurship is a form of management central to production and distribution.
• Say's theory includes 3 functions: scientific knowledge, entrepreneurial industry, and productive industry.
• Frank Knight distinguished entrepreneurs and managers by focusing on decision-making under uncertainty.
• Managers become entrepreneurs when their judgment is prone to error, and they bear responsibility for its correctness.
• Entrepreneurs quantify risks in uncertain situations, make informed decisions, and hope to profit.
• Those who want to avoid risks choose employment.

Additional concepts

• Alfred Marshall differentiated between capitalists, entrepreneurs, and managers.
• Capitalists provide capital and bear financial risks
• Entrepreneurs use capital to make money by risking financial ruin.
• Entrepreneurs are risk-takers who leverage opportunities.
• Capitalists invest without directly managing the risk.
• Amasa and Francis Walker viewed entrepreneurs as wealth creators distinct from capitalists.
• Entrepreneurs use insight, leadership, and energy to manage resources and drive wealth-generating activities.

Why is Motivation Required?

• Motivation is vital for entrepreneurs to survive and thrive amid tough global competition.
• It is necessary to anticipate unfavorable conditions and protect the current economy.
• Motivation helps establish market demand and attract clients.
• It is important to boost creativity and innovate.
• Incentive is needed to increase production of cost-effective and great quality products.

Motivations for Entrepreneurship

• Earning profit
• Having the freedom to make own choices
• Attaining success and social prestige
• Grabbing an opportunity
• Giving back/paying it forward

Characteristics of a Successful Entrepreneur

• Good physical health
• Superior conceptual abilities
• Broad thinking of the generalist
• High self-confidence
• Strong personal drive
• Controlling and directing
• Moderate interpersonal skills
• Moderate risk-takers
• A realistic outlook
• High degree of emotional stability
• Low need level status

Other Traits

• Perseverance
• Energy, diligence
• Resourcefulness
• Ability to calculate risk
• Dynamism, leadership
• Optimism
• Need to achieve
• Versatility
• Initiative
• Flexibility
• Creativity
• Intelligence
• Profit-orientation
• Cooperativeness
• Commitment
• Aggressiveness

Advantages of Becoming an Entrepreneur

• Create your destiny
• Be financially well-off
• Know yourself better
• Excel, be recognized, and contribute to society

Importance of Entrepreneurs

• Create jobs
• Create change
• Give to society

Entrepreneurship in the Philippine Setting

• Valued to empower the poor, increase productivity, and stimulate innovation.
• Recognized as source of economic progress (Philippine Airlines Constitution of 1987).
• Emphasizes the importance of private firms for income and wealth distribution.

Government Agencies

• The Philippine government has many agencies managing establishing a business

Department of Trade and Industry (DTI)

• DTI realizes the country's competitive and innovative industry and services sector by inclusive growth and employment.

Department of Labor and Employment (DOLE)

• DOLE formulates policies and implements programs for labor and employment.
• DOLE protects workers by enforcing employment and labor laws.

Securities and Exchange Commission (SEC)

• SEC registers securities, analyzes security, and evaluates applicants' financial conditions and operations.

Philippine Social Security System (SSS)

• National, foreign employers, and employees earning over Php 1,000.00 must register and pay to SSS.
• Employers deduct and pay for employee SSS shares.

Home Development Mutual Fund (HDMF)

• HDMF membership is mandatory, employers and employees register and contribute to the fund, which is under Pag-IBIG fund.

Reasons For Doing Business in the Philippines

• Providing incentives to foreign investors, opening industrial and infrastructure opportunities
• Freely converted and repatriated earnings and capital.
• Privatization and deregulation has investment attractions
• Rising security markets with remarkable performance
• Accessible to Westerners due to historical links with Spain and the U.S.
• Intersection of international shipping and air routes.
• Offers a skilled, trainable, and inexpensive labor force where numerous people speak English
• Long-established significant exporter of agricultural products, minerals, and other raw materials/commodity goods.
• Reawakening industrial sector with competitive, higher value-added industrial products
• Substantial domestic market for modern consumer goods.

Business Ideas in the Philippines

• Palamig Business from Home
• Rental Shop for Costumes
• The Loading of Cellphones Business
• The Cake and Pastry Industry
• Business of Custom Invitations
• Video Blogging/ Vlogging
• Gift Basket Business
• Renting a Photo Booth
• Food cart
• T-Shirt Printing Company

The Entrepreneurs

• Is defined as establishing a new business or commercial enterprise, typically in high-growth industries
• Associates with resourcefulness, innovation, and calculated risks to launch a new product/service.
• The entrepreneurial spirit" encompasses all these elements.
• Establishes and manages the new business venture and is the driving force behind entrepreneurship.
• Typically self-employed, self-motivated, ambitious, taking risks to achieve objectives.
• Organizes and manages any enterprise, especially a business, usually with initiative and risk.
• Creates/develops a new product/service that will be the foundation of his or her new company.
• McClelland (1961), stated entrepreneurs are motivated by achievement to build
• Collins and Moore (1970) found that they are tough, pragmatic, driven by independence and achievement.
• Bird (1992) defines entrepreneurs are cunning, opportunistic, creative, and unsentimental.
• Cooper, Woo, and Dunkelberg (1989) stated entrepreneurs exhibit extreme optimism

Characteristics of Entrepreneurs

• Something new is born from creativity
• Having the correct attitudes and behaviour with clients to shape the company's culture.
• Taking risks
• Passion
• Planning, everything would be a loose string without it
• Knowledge
• Social skills
• Open-mindedness towards learning, people and even failure
• Empathy, the ability to grasp what is going on in someone's head
• Customer being everything

Entrepreneurial character is defined as:

• Planning skills
• Ability to communicate
• Marketing skills
• Interpersonal skills
• Basic management skills
• Leadership abilities

Types of Entrepreneurs

• Innovating: Introduces new products and services, new methods of production, experiments with novel processes, discovers the new market, and restructures the enterprise
• Imitative: Ready to adopt successful innovations
• Fabian: Unwilling to adopt new production methods.
• Drone: Refuse to adopt changing the methods of production.

An Entrepreneur's Contributions

• Aim to meet customer requirements and improve livelihoods by producing and distributing goods and services
• Providing job chances not only for themselves but also for others
• Infrastructure development in a community enabled through entrepreneurial ventures

Famous Filipino Entrepreneurs

• Henry Sy (Shoe Mart), Born into a poor household in Jinjang
• Tony Tan Caktiong (Jollibee Foods)
• Socorro Ramos (National Bookstore)
• John Gokongwei Jr. (J.G. Holdings)
• Joe Magsaysay (Potato Corner)

Determinants of Entrepreneurial Success or Failure

• Internal success factors
• Internal failure factors
• External success factors
• External failure factors

Entrepreneurial Mindset

• Vision and Mission in Entrepreneurship

Vision

• Vision is a fundamental element in becoming an entrepreneur
• Helps entrepreneur identify and define his goal or mission
• Guides in formulating action plans
• Serves as a communication tool
• Provides moral content to the endeavor

Key aspects of an entrepreneur

• New product
• New service
• New means of production
• New distribution route
• Improved service
• New relationships

Entrepreneural Options

• Start-up
• Buy-out
• Or franchising