Introduction to Entrepreneurship PDF

 1 Introduction to Entrepreneurship 1  Synopsis This chapter introduces students to entrepreneurship, its importance to national economy and discusses the definition of entrepreneurship, typical entrepreneurial characteristics and attri...

 1 Introduction to Entrepreneurship 1  Synopsis This chapter introduces students to entrepreneurship, its importance to national economy and discusses the definition of entrepreneurship, typical entrepreneurial characteristics and attributes, and types of entrepreneurship. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Objectives Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Learning Outcomes At the end of this chapter, students should be able to: Discuss entrepreneurship, entrepreneurial processes and activities. Discuss the importance of entrepreneurial activities. Discuss, adopt and adapt entrepreneurial characteristics and attributes in their life. Explain the types of entrepreneurship. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  List of Topics Introduction to Entrepreneurship Definitions of Entrepreneurship and Entrepreneur Entrepreneurial Process Characteristics and Attributes of Entrepreneurs Types of Entrepreneurship Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Introduction The study of entrepreneurship has emerged to be very important in countries that practise free market economy. In most of these countries, entrepreneurial development is an important agenda in nation building. There exists a need to understand entrepreneurship and its salient issues. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Introduction to Entrepreneurship In a free market economy, entrepreneurs are key players or providers that produce, transport or sell products and services to consumers. They seek business opportunities by identifying what is needed, wanted or desired by consumers. Entrepreneurs create new products, take risks in investing money and make the products available to customers. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Introduction to Entrepreneurship (cont.) Consequently, consumers get to choose the best products or services best suited to their needs and budget. New and improved products are continuously developed to replace older products, and these products have enhanced the standard and quality of life of the society. Thus, entrepreneurial activities are pillars of a nation’s economic progress, growth and prosperity. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Introduction to Entrepreneurship (cont.) A society that has a great entrepreneurial culture will be more productive, competitive and prosperous. By nature, entrepreneurs will always try to improve product quality, reduce cost of production, find better ways to serve their customers and thus serve customers’ needs more effectively. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Introduction to Entrepreneurship (cont.) Their ability to mobilize and allocate resources to where it is most needed based on business opportunities or market demand, make entrepreneurs the most efficient resource allocators in a free market economy. Many successful entrepreneurs have become very rich when their small businesses grow into big corporations. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Introduction to Entrepreneurship (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Definitions of Entrepreneurship and Entrepreneur Entrepreneurship can be defined as the activity of setting up a business or businesses, and taking on financial risks in the hope of making profit. The study of entrepreneurship includes the study of entrepreneurial behaviour, as well as the dynamics of business set-up, expansion and development. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Definitions of Entrepreneurship and Entrepreneur (cont.) The term ‘entrepreneur’ was first used by a Frenchman named Richard Cantillon (1775) to mean ‘a person who undertakes to do a job’. Adam Smith (1776) defines an entrepreneur as a person who acts as an agent in transforming demand into supply. Jean-Baptiste Say (1803) considers an entrepreneur as a person who shifts resources from an area of low productivity to high productivity. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Definitions of Entrepreneurship and Entrepreneur (cont.) John Stuart Mill (1848) states that an entrepreneur is a prime mover in private enterprise economic activities, where an entrepreneur is the fourth factor of production, after land, labour and capital. Carl Menger (1871) says that the entrepreneur acts as an economic agent who transforms resources into products and services and gives added value. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Definitions of Entrepreneurship and Entrepreneur (cont.) Ibnu Khaldun (Abdul Rahman Mohamed Khaldun) describes an entrepreneur as a knowledgeable and skilled individual craftsman who is instrumental in the development of a city state where enterprises will emerge. In the early 1900s, Joseph Schumpeter termed ‘entrepreneur’ as an innovator who introduced new innovation to replace old products or old ways of doing things. He described the process as creative destruction’ to signify creativity of new products or services to replace or destruct old ones. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Definitions of Entrepreneurship and Entrepreneur (cont.) In short, entrepreneurs are the prime movers of economic progress. They can be innovators, they mobilize resources to provide products and services needed, and in the process, they build businesses that provide jobs. Thereby improve the standard of living and quality of life of the people. They are the catalysts that contribute to the nation’s economic progress. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Entrepreneurial Process The Timmons Model of Entrepreneurial Process best describes the four major necessary components in venture creation: Founder Opportunity Team Resources Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Entrepreneurial Process (cont.) An entrepreneurial process is led by an entrepreneur who is able to seize and act on an opportunity. Together with his team, the entrepreneur will package a viable offering to customers using available resources. He may use his own money or canvass others to invest with him. He may need to convince others with required skills to be part of his team to execute the project and produce products and services for customers. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Entrepreneurial Process (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Characteristics and Attributes of Entrepreneurs Successful entrepreneurs always have a strong reason or mission for becoming an entrepreneur. For example, he likes promoting certain business values, solving specific problems, addressing some needs or exerting influence within an industry. Take Steve Jobs of Apple—he ‘disrupted’ and changed industries for which he created the personal computer to make computing personal, rather than limiting it only for large organizations. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Characteristics and Attributes of Entrepreneurs (cont.) His efforts continued with Apple iTunes— revolutionizing the way music and songs were sold and bought (Azman, 2014). This strong sense of mission is what shapes an entrepreneur’s character. In 1985, McClelland with McBer & Co, developed a measuring instrument to measure personal entrepreneurial competencies (PEC) or inclinations among successful entrepreneurs in Malawi, India and Ecuador. Figure 1.3 is a sample of such an instrument. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Characteristics and Attributes of Entrepreneurs (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Characteristics and Attributes of Entrepreneurs (cont.) The common characteristics of entrepreneurs: Creative, innovative, resourceful and possess high level of initiative. Willingness to work hard to achieve aspired objectives with a high degree of commitment, determination, perseverance, tenacity and discipline. Ability to take calculated risk, exhibit tolerance for ambiguity and ability to accept failure. Possess ability to think independently, exhibit high level of self-confidence, optimistic and believe in controlling one’s own destiny. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Characteristics and Attributes of Entrepreneurs (cont.) Opportunity orientation towards future goals, aspiration and vision. Skilful organizer, ability to manage and solve problems. Communicative and persuasive ability to influence others. Although these are common among entrepreneurs, it must be said that different types of entrepreneurship may require different entrepreneurial characteristics or different combinations of entrepreneurial characteristics. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Types of Entrepreneurship Broad categorization of the types of entrepreneurship can be seen in Figure 1.4 where the entrepreneurial activities are carried out in different forms of organizations. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0  Summary Entrepreneurships entail seeking, identifying, evaluating entrepreneurial opportunities, working out a business plan to mobilize resources and teams, and executing the business plan with commitment, determination and perseverance to achieve entrepreneurial objectives. Entrepreneurial activity is an important element in a nation’s economic progress. Through these activities, entrepreneurs provide products, services and employment opportunities and help to raise the standard of living of the people of a country. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 1– 0