CHAPTER ONE--- FOR NEW VENTURE MGT.pptx

A Brief History of Entrepreneurship  In many an economy there has been the general realization that it is not only the big business that provides the foundation of the nation’s economies. The vital contribution made by the small business is recognized. Small businesses and entreprene...

A Brief History of Entrepreneurship  In many an economy there has been the general realization that it is not only the big business that provides the foundation of the nation’s economies. The vital contribution made by the small business is recognized. Small businesses and entrepreneurs have boosted many economies, for example, the United States of America, that the authorities have initiated strategic, financial, and counseling programme to support them.  Most successful small businesses are under the control of entrepreneurs. The entrepreneur may be regarded as the individual who, propelled by an idea, personal goals, and ambitions, brings together the financial, capital, people, equipment, and facilities to establish and manage a business enterprise. As the creators of small businesses, entrepreneurs are a formidable force in many developed and developing economies.  Entrepreneurship is derived from French word ‘entreprende’, literally meaning "to undertake", “between taker”, or, “go-between”. The earliest use of the term indicated this sense of the “middlemen” who directed resources provided by others. In the middle ages, an entrepreneur was someone who managed large projects on behalf of a landowner or the church, such as the building of a cathedral or castle. In Ghana today, such people are called contractors or agents. Definition of the Entrepreneur and Entrepreneurship The entrepreneur uses a deliberate planned approach that applies strategic management concepts and techniques. He/she is also highly innovative, creating new products and markets and applying creative strategies and ways of managing (Carland et al, 1984). The emphasis in this discussion is on the innovative, growth-oriented entrepreneur. In effect, an entrepreneur is an innovator or developer who recognizes and seizes opportunities; converts those opportunities into workable ideas; adds value through time, effort, money, or skills; assumes the risks of the competitive marketplace to implement these ideas, and realizes the rewards from these efforts (Ronstadt, 1985). Entrepreneurship is the process of creating goods and services from your ideas in order to achieve profitability. According to Shapero (1975), “In entrepreneurship, there is agreement that we are talking of a kind of behaviour that includes: Initiative taking The organizing or reorganizing of socio-economic mechanisms to turn resources and situations to practical account. The acceptance of risk of failure Factors that Shape and Influence the Entrepreneur 1. Risks 2. Motivation 3. Characteristics RISKS Financial risk Career risk Family and Social risks Psychological risk  Motivation Independence Personal and Professional Growth A Superior Alternative to a Dissatisfying Job Income Security Characteristics Entrepreneurs possess a significantly greater need for independence and autonomy, compared to managers. Entrepreneurs have a substantial need to achieve and a tolerance for ambiguity. Many entrepreneurs have high energy and endurance, substantial self-esteem, and strong dominance. The entrepreneur has a lower need for social support, compared to managers. He or she is not a team player or joiner.  Personal Entrepreneurial Competences A study on the difference between successful and unsuccessful entrepreneurs operating in the same environment revealed that successful entrepreneurs possessed certain personal entrepreneurial competences (PECs). Furthermore it was found that these PECs are exhibited by entrepreneurs across cultures, countries and continents. These PECs are categorized as follows: 1. Achievement Cluster Opportunity seeking and initiative Risk taking Demand for efficiency and quality Persistence Commitment to the work contract 2.Planning Cluster Information seeking Goal setting Systematic planning and monitoring 3.Power Cluster Persuasion and networking Independence and self-confidence  What Leads to Entrepreneurship Preference: Natural inclination or a deliberate choice to pursue business ownership rather than a career then actively seeking the “right” product/service.  Opportunity: In the course of work or other activities, coming across and recognizing the business potential of something and deciding to pursue it.  Necessity: Starting a business out of economic need.  Entrepreneur Fuel  Passion  Persistence  Fun  Creativity  Entrepreneurial Essentials 1. INTERNAL ESSENTIALS 2. EXTERNAL ESSENTIALS 3. INTERNAL ESSENTIALS Knowledge Skills Abilities Attitude Network Stamina 2. EXTERNAL ESSENTIALS Financing People Space Equipment Materials  The Entrepreneurial Task Planning Organizing Controlling Managing People / Leadership Coordinating Directing Benefits of entrepreneurship Independence: Owners of the business do not have to follow strict orders and working hours set by top management. Satisfaction: One becomes highly satisfied when ones skill, hobby and interest are turned into reality. Financial reward: Through hard work, the sky becomes their limit. Entrepreneurs built most of our great fortunes. Self-esteem: One develops a great sense of accomplishment and happiness when something valuable is being created. Development of new market: Entrepreneurs can create customers who would offer demand of their products and services. Mobilization of resources: Entrepreneurs are able to organise the factors of production. These factors of production include; land, labour and capital. Entrepreneurs put these resources together effectively and efficiently to produce goods and services. Introduction of new technology: As a result of their innovative skills, they are able to research and come out with something new. This helps to transform the economy. Creation of employment: The biggest sector of the economy which offers most employment is the private business. Examples of such businesses include; KAMA, MELCOM, TOBINCO, etc.  The Potential Drawbacks of Entrepreneurship  Uncertainty of Income: There is no guarantee that an entrepreneur’s idea would earn enough money to survive by opening and running a business. In most instances, in the early days of the business, the owner-manager, many a time, has difficulty in fulfilling his/her financial commitments and might have to live on their savings. Risk of Losing Your Entire Invested Capital: It is a well-known fact that the failure rate of small business founder within two researches suggests that twenty-four percent (24%) of new business fail within two years, and fifty-one percent (51%) shut down within four years (Ricklefs and Gupta, 1989). Many of these entrepreneurs who fail lose their personal savings. Also, they are hurt psychologically because business failure implies personal failure. Furthermore, the entrepreneur’s personal burden is increased by the fact that other investors in the business often lose their money. Long Hours and Hard Work: New businesses often require a great deal of investment in terms of time and energy so as to get the business moving. In many business start-ups, the entrepreneur often does everything alone and also works for long hours. Lower Quality of Life until the Business Gets Established: Obviously the long hours and hard work required for business start-ups could adversely affect the remainder of the entrepreneur’s life. In many instances, friendships and marriages often become the casualties of small business ownership. Complete Responsibility: Many small business owners realize that they must make decisions on issues about which they are not really knowledgeable. And the realization that the decisions they make could be the cause of success or failure of the business could have an adverse effect on some of them.  Factors Driving the Entrepreneurial Trend Entrepreneurs as heroes: an important factor is the attitude that people have toward entrepreneurs. In most nations, like Ghana, the people have raised entrepreneurs to hero status and have held out their skills as model to follow Entrepreneurial education: educational institutions like polytechnics and universities have realized that entrepreneurship is a popular course of study and an increasing number of students perceive owning a business as an attractive career option. Shift to a service economy: service businesses have been very popular with entrepreneurs and have created a lot of business opportunities, because of their relatively low start-up costs. Technological advancement: the pervasive impact of technological advancements with the availability of an array of main business machines have enabled individuals own and operate viable and powerful small businesses. Independent life-styles: entrepreneurship fits the way that most Ghanaians want to be independent and self-sustaining. People want the freedom to choose where they live, the hours they work, and what they do. International opportunities: the globalization of world economy has been a boost to those entrepreneurs wanting to go beyond the domestic market borders. International opportunities are growing rapidly for both small and large businesses.