Entrepreneurship Chapter One PDF

CHAPTER ONE INTRODUCTION  Quote “It’s fine to celebrate success but it is more important to heed the lessons of failure.” (Bill Gates) “When you cease to dream you cease to live.” (Malcolm Forbes)  Quote I CREATE I TAKE RISKS I LIVE MY PASSION I AM ENTREPRENEUR ...

CHAPTER ONE INTRODUCTION  Quote “It’s fine to celebrate success but it is more important to heed the lessons of failure.” (Bill Gates) “When you cease to dream you cease to live.” (Malcolm Forbes)  Quote I CREATE I TAKE RISKS I LIVE MY PASSION I AM ENTREPRENEUR  Social Entrepreneurship Who is this girl? Social Entrepreneurship Cont’d… Organizational Entrepreneurship Mixed Entrepreneurship  Mid Gymnastic  Why USA becomes most advanced country, but Ethiopia not? Entrepreneurship  Entrepreneur  Why to become an entrepreneur  The role of entrepreneurship in the economy  Introduction  No universally accepted definition of entrepreneurship. The word Entrepreneur derives from the French words entre, means to “undertake” (Richard Cantillon 18th C).  Historical Origin of Entrepreneurship Ancient Period Entrepreneur: 17th C Entrepreneur: A person who signed a A Person who contractual agreement manages large with the gov’t to commercial projets provide P/S. 19th and 20th C Entrepreneur: 18th C Entrepreneur: A person who is risk taker. Viewed from economic perspective. i.e. merchants, farmers.. buy products Organize and operates at a known price and sell it at an enterprise for personal unknown price Involve in innovation  Definitions Entrepreneurship: is the process of identifying opportunities in the market place.  the process of creating something different and better with value.  the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks,  Definition Cont’d… and receiving the resulting rewards of monetary and personal satisfaction and independence. The process of entrepreneurship includes five critical elements. These are: i. The ability to perceive an opportunity ii. The ability to commercialize the perceived opportunity i.e. innovation.  Definition Cont’d… iii. The ability to pursue it on a sustainable basis. iv. The ability to pursue it through systematic means. v. The acceptance of risk or failure. Entrepreneur: is any person who creates and develops a business idea and takes the risk of setting up an enterprise to produce a product or service which satisfies customer needs.  Definition Cont’d… Entrepreneur: any person that continuously seeks and acts upon opportunities for economic and or social gains through applying the principle of creative problem solving.  Types of Entrepreneurs 1.Individual Entrepreneur: who started; acquired/franchised own independent organization. 2. Intrapreneur: a person who does entrepreneurial work Intrapreneur within large organization. 3. Entrepreneurial organization: every social environment has its own way of filling the function.  Relationship of Entrepreneur and Entrepreneurship Entrepreneurship Entrepreneurship Process Person  Abstraction; Involves creating Tangible people; Individuals and starting enterprise who establish and manage their  Outcome of complex socioeconomic, own business psychological and other factors A key individual who play  Act central role to make things happen  Decision making Actor  Risk taking Decision maker  Creation Risk taker Creator  Role of Entrepreneurship in Economic Development A country might remain backward not because of lack of natural resources or dearth (insufficient) of capital but because of lack of entrepreneurial talents or its inability to tap the entrepreneurial talents existing in that society. “There are no under-developed countries any more. There are only mismanaged countries”. P.F. Drucker  Role of…. Entrepreneurial development is the most important input in the economic development of any country. It is foundation for: Industrial development, Balanced regional growth, and Generation of employment opportunities  Role of… Entrepreneurs are key to the creation of enterprises, and rejuvenate sustainable economic development through; Improvement in per capita Income/Wealth Generation Generation of Employment Opportunities Inspire others towards Entrepreneurship Balanced Regional Development  Role of… Enhance the Number of Enterprise Provide diversity in Firms Economic Independence Combine Economic factors Provide Market efficiency Accepting Risk  Maximize Investor’s Return  Entrepreneurial Mind-Set MIND = the ability to think or imagine SET = group of things Mind-Set = Mind + Set Mind-Set = the ability to think or imagine + group of things. is a set of assumptions, methods, or notations held by one or group of people that determine how people will interpret and respond to situations.  Types of Mindset There are two types of mindset: 1. Fixed mindset People believe that their basic qualities i.e. intelligence or talent are simply fixed traits (rigid). believe that that talent alone creates success. 2. Growth mindset  People believe that their most basic abilities can be developed through dedication and hard work.  Mindset Cont’d… brains and talents are just starting points. Fixed Growth Intelligence is static Intelligence is developed Challenges Avoid Embraces Obstacles Give up Fortitude No point Effort Work hard Deflect Criticisms Learns Feel threatened Criticisms Celebrates  Entrepreneurial Mindset Entrepreneurial mindset is the ability to quickly. Sense Take action and Get organized under certain conditions The ability to persevere / persistently Accept and learn from failure and  Get comfortable with a certain level of discomfort  Entrepreneurial Mindset Cont’d… Entrepreneurial mindset is a set of cognitive (thinking) process that triggers the individuals' to act or to behave entrepreneurially. also known as entrepreneurial talent or mentality it is the basis for individual behaviour. Having the right attitude: able to work without supervision  Entrepreneurial Mindset Cont’d…  able to self-motivate able to make quick decision  open-minded and flexible  Who becomes an entrepreneur? Anyone with the following characteristics can be an entrepreneur. 1. The young professionals - Educated people 2. The inventor - Innovators – high-tech or traditional technologies. 3. The excluded - Unemployment, immigration, layoff, displacement, school dropout. E.g. Jack Ma; co-founder of Alibaba group.  Cont’d…  27% of USA entrepreneurs are immigrants  T. Edison, B. Gates, M. Zuckerberg  Discuss other entrepreneurs in Ethiopia  Qualities of an Entrepreneurs 1. Opportunity-seeking - high demand, access to credit, training.. 2. Persevering – persistent determination/effort to achieve goal. Genius is 1% inspiration and 99% perspiration (Thomas Edison).  Accomplishment depends not on ingenuity rather on hard work.  Qualities Cont’d… 3. Risk Taking – calculated risk 4. Demanding for efficiency and quality – waste minimization, cost-effectiveness, increase market share, better profitability, social responsibility 5. Information-seeking – no room for guess work. Gather information about the environment.  Qualities Cont’d… 6. Goal Setting – goal is general direction not specific and measurable when we compare it with objectives which is SMART. 7. Planning – future oriented, answer “wh” questions 8. Persuasion and networking – ability to convince people, and build relationship 9. Building self-confidence – emotional state of mind, capability of doing activities.  Qualities Cont’d… 10. Listening to others – learn from others 11. Demonstrating leadership – inspire, encourage, lead others.  Entrepreneurial skills Skill - is the ability to perform in a certain way demonstrated by action. Entrepreneurs is the one who has a good business idea and can turn that idea into reality.  Turning an idea into reality calls upon two sots. a.General management skills and b. People management skills  Entrepreneurial skills Cont’d… a. General management skills - are skills required to organize the physical and financial resources needed to run the venture. The important general management skills are: 1. Strategy skills – ability to consider the business a as whole. 2. Planning skills - an ability to consider what the future might offer.  Entrepreneurial skills Cont’d… 3. Marketing skills – satisfying customers through the marketing mixes. 4. Financial skills 5. Project management skills 6. Time management skills b. People management skills Business are made by people  People are the most invaluable assets in an organization.  Entrepreneurial skills Cont’d… Important skills: Communication skills  Motivation skills  Delegation skills: ability to allocate tasks to d/t people.  Negotiation skills  The Entrepreneurial Tasks Owning organizations  Founding new organizations  Bringing innovations to the market  Identification of market opportunities  Application of expertise  Provision of leadership  The entrepreneurs as a manager  Wealth of the entrepreneur Wealth can be money, knowledge, assets that money can buy.  Who benefits from the entrepreneur’s wealth? Employees  Investors  Suppliers  Customers  Local community  Government  Entrepreneurship and Environment Business environment refers to the factors external to a business enterprise which influence its operations and determine its effectiveness.  Business environment can be healthy or favorable and unhealthy or unfavorable.  Environmental factors Cont’d… What factors can hinder entrepreneurial growth? Sudden changes in Government policy.  Sudden political upsurge.  Outbreak of war or regional conflicts.  Political instability or hostile Government attitude towards industry.  Excessive red-tapism and corruption among Government agencies.  Environmental factors Cont’d… Ideological and social conflicts.  Unreliable supply of power, materials, finance, labor and other inputs.  Rise in the cost of inputs.  Unfavorable market fluctuations.  Non-cooperative attitude of banks and financial institutions.  Creativity, Innovation and Entrepreneurship Creativity, innovation and entrepreneurship, have been recognized as important contributors to a nation’s economic growth. Creativity – the tendency to generate/recognize ideas, alternatives/possibilities that may be useful in solving problems, communicating with others, and entertaining ourselves and others.  Creativity, Innovation Cont’d… the ability to come up with new idea and to identify new and different ways of looking at a problem and opportunities.  creativity is the development of ideas about products, practices, services, or procedures that are novel and potentially useful to the organization.  Creativity, Innovation Cont’d… Steps in the creative process Step 1: Opportunity or problem Recognition – A person discovers that a new opportunity exists or a problem needs resolution Step 2: Immersion – the individual concentrates on the problem and becomes immersed in it. Step 3: Incubation – the person keeps the assembled information in mind for a while.  Creativity, Innovation Cont’d… Step 4: Insight – the problem-conquering solution flashes into the person’s mind at an unexpected time, such as on the verge of sleep, during a shower, or while running. Insight is also called the Aha! Experience. Step 5: Verification and Application – the individual sets out to prove that the creative solution has merit.  Creativity, Innovation Cont’d… Verification procedures include gathering supporting evidence, using logical persuasion, and experimenting with new ideas. Barriers of creativity  Searching for the one ‘right’ answer  Focusing on being logical  Blindly following the rules  Creativity, Innovation Cont’d… Constantly being practical  Viewing play as frivolous  Becoming overly specialized  Avoiding ambiguity  Fearing looking foolish  Fearing mistakes and failure  Believing that ‘I’m not creative  Creativity, Innovation Cont’d… Invention: discovering/creating something for the first time. the process of converting intellectual thoughts(concepts) into a tangible new artifact (a product or process). Innovation: an invention (act of creating something) plus commercialization (putting the new creativity into the market place).  Creativity, Innovation Cont’d… Innovation is the exploitation of opportunity.  It is the implementation of new idea at the individual, group or organizational level. Innovation = Theoretical Conception + Technical Invention + Commercial Exploitation  Types of Innovation 1. Invention - creation of a new product, service or process. 2.Extension - Expansion of a product or service. 3. Duplication - Replication of already existing product, service or process. 4. Synthesis - the combination of existing concepts and factors into a new formulation.  The innovation process 1. Analytical planning – carefully identifying the P/S, design, resources that will be needed. 2. Resources organization – obtaining the required resources, materials, technology, human or capital resources 3. Implementation– applying the resources in order to accomplish the plans.  Cont’d… 4. Commercial application– the provision of values to customers, reward employees and satisfy the stakeholders. Areas of innovation  New product  New service  New production techniques  Areas of innovation New way of delivering the Product or Service to the customer  New operating practices  New means of informing the customers about the product  New Means of Managing Relationship within the Organization  New Ways of Managing Relationships between Organizations  Their Relationship Creativity Thinking new things Innovation Doing new things creating value in Entrepreneurship the market place  Cont’d… Entrepreneurship = creativity + innovation.