Chapter 1 - Entrep - Perpectvie on Entreprenuership.docx

**Chapter 1: [A Perspective on Entrepreneurship]** 1. Define entrepreneurship, entrepreneurs. 2. Know what innovation means in terms of entrepreneurship. 3. Know the overview of concepts and tasks relating to entrepreneurship. [Entrepreneurship] is an important component of a capitalist e...

**Chapter 1: [A Perspective on Entrepreneurship]** 1. Define entrepreneurship, entrepreneurs. 2. Know what innovation means in terms of entrepreneurship. 3. Know the overview of concepts and tasks relating to entrepreneurship. [Entrepreneurship] is an important component of a capitalist economy, it thrives in economic systems that support innovation and handwork. When entrepreneurs become successful, the nation is immensely benefited. **[ECONOMIC DEVELOPMENT]** - It is scheme aimed at improving the living standards of nation's citizenry. - To achieve such, proper management of the following elements is necessary: 1. Human resources - Labor supply, education, discipline, motivation. 2. Natural resources - Land, minerals, fuel, climate. 3. Capital formation - Machines, factories, roads. 4. Technology - Science, engineering, management, entrepreneurship. - The effective and efficient utilization of various element contributes to the economic growth. - Such growth will occur when the elements of entrepreneurship is performed well by the players. - There is a need for entrepreneurs to perform the functions of: \-\-\-\-- to achieve economic development. 5. Harnessing the potential of any or all of the various elements. 6. Determining the right quantity of resources needed 7. Applying the elements at the right time. **ENTREPRENUERSHIP** - Refers to the economic activity of a person who stars, manages, and assume the risk of a business enterprise. Entrepreneur - Refers to the person who undertakes entrepreneurial activities. **[THE ENTREPRENEURS' TASK]** The entrepreneur can assume his role in the development of the economy when all the economic requirements are in place. - Basic task of entrepreneurs in relation to the development of economy: 1. Provides goods and services for customers and producers. 2. Provides employment. 3. Pay taxes 4. Demand for suppliers' product and services 5. Helps in training facilities for future entrepreneurs. - Basic task of entrepreneurs in relation to attempt to make profit: 6. To supply necessary capital. 7. To organize production by buying and combining inputs like materials and labor. 8. To decide on rate of output, in the light of his expectation abound demand. 9. To bear the risk inherent to the venture. The freedom of competition afforded by the capitalist economy serves to drive the entrepreneur to innovate and get ahead of his competitors lest he is driven out of the market. - Buyers tends to buy or patronize innovative offerings of any kind, hence the entrepreneur must take in to consideration this motivations if he wants to gain patronage. **[INNOVATION]** - Defined as the introduction of new method, procedures, custom, and device, among others. - Innovation can be any of the following: 1. New product; 2. New process of production; 3. Substitution of cheaper materials in unaltered product; 4. Reorganization of production, internal function, or arrangement. \-\-- leading to increased efficiency better product support and lower cost. - Improvement in instrument or methods of doing innovation. - It the last stage in the process of making new products and process. 5. *[Invention]* \-\-- refers to the discovery or devising of new products and processes; 6. *[Development]* \-\-- which refers to the process by which the ideas and principles generated from the stage of invention are embodied in concrete product and techniques; 7. *[Innovation]* \-\-- refers to the actual introduction of a new product or process - Examples of successful innovations - Cordless microphone - Cellular phone - Laser treatments - Use of computers in architectural in engineering fields. **[NEW VENTURES AND LONG TERM ENTERPRISES]** New venture cannot remain as such forever. The entrepreneur must develop it into a small business or make it grow into a mature and bigger company if he is to recoup the cost of opening a new venture and take advantage of the opportunities presented by a mature business. \*4 major stages of transition from new venture to a long-term enterprise: 1. Prestart-up stage 2. Start-up stage 3. Early growth stage 4. Late growth stage ***\*Prestart-up stage*** - Happens when the entrepreneur starts to question the feasibility of an idea, product, or service. - He seeks answers to question regarding potential markets, production, and financing. ***\*Start-up stage*** - Involves the following activities: 1. Formation of the business; 2. Generation of necessary capital; 3. Purchase of facilities and equipment; 4. Constructing prototype products; 5. Testing the market. - No full-scale activity must be undertaken at this stage for simple reason that feasibility must be establish and verified. ***\*Early growth stage*** - Activities will be on small scale, i.e., selling to limited markets within limited resources. - Of the enterprise is successful at this stage, the option to move to the next stage can be exercised. ***\*Late growth stage*** - The final stage before the new venture matures into a stable enterprise. - This is when the management is structured, long-term financing is established, and facilities planning are undertaken. - This is also the stage where the skills of the entrepreneur are less needed. Instead, the skilled manager begins to take over. **[REWARDS FOR SUCCESSFUL ENTREPRENEURSHIP]** The use of any of the factors of production deserves to receive some form of compensation. *[Factors of Production and Their Rewards ]* Factors Of Production Economic Reward Limiting Factor For Rewards Received ----------------------- ----------------- ------------------------------------------ Land Rent Supply and demand Capital Interest Industry rate/ government mandated rates Labor Wages/ salary Supply and demand legislation Entrepreneur Profits Skill of entrepreneur - Rent - refers to specifically to the price paid per unit of time for the services of a durable good, which, most often refers to land or building. - Interest - Refers the compensation paid to owners of invested capitals. - Wages - Determined on a piece-rate basis - Salaries - Based on time-rate - Profit - The residual amount after deducting all expenses to the gross income. **[THE ENTREPRENEUR'S PREDICAMENT]** In the creation of a new venture, the entrepreneur may be successful in offering innovative products or services. At this stage he will reap the profit for being ahead of the competitors. This situation may be temporary because the competitor may attempt to improve his position by making moves to outpace the entrepreneur in the race. The competitor may either imitate or offer better innovation, if so the profit of the entrepreneur might decline. **[BUSINESS SIZE]** To many, entrepreneurship means running a small business. New ventures, however, can also be undertaken on a large scale. To effectively compete, business of whatever size must adapt innovative approaches t its activities. Example: 1. Offering services on weekends or holidays. 2. Manufacture and sale of new product. 3. Selling on a deferred payment scheme. - Small business have the advantage of swathing to another business concept whenever necessary - Large business cannot do the same without spending must. However, large businesses have started to engage in "entrepreneurship" where a person with entrepreneurial skills and is employed by and is tasked to launch new product.