Entrepreneurship-Uz Wide Epecp301[1] Dr Masaire[1] PDF

Research, Innovation and Industrialisation Prepared By Dr. R.F Masaire  ENTREPRENEUR “one who brings resources, labour and other assets into combinations that make their value greater than before and also one who introduces changes, innovations and new o...

Research, Innovation and Industrialisation Prepared By Dr. R.F Masaire  ENTREPRENEUR “one who brings resources, labour and other assets into combinations that make their value greater than before and also one who introduces changes, innovations and new order---”Hisrich and Peters (2008) “someone who innovates a process or product for the first time,-- opens up new source of raw materials or factors of production and creates a new industrial structure” Schumpeter (1946)  “an entrepreneur is an individual who establishes and manages business for the principal purpose of profit and growth. The entrepreneur is principally characterised by innovative behaviour and will employ strategic management practices in the business” Carland (2014)  Meaning of Definitions Capital investment and growth/accumulation and inherent risk Managerial co-ordination in the pursuit of profit Creativity-exploring new ways of solving a problem  Innovation or invention Strategic management-opportunity identification and long term management Therefore entrepreneurship goes beyond owning a small business Entrepreneurship Elements  ELEMENTS OF ENTREPRENEURSHIP The entrepreneur- human capital and social capital The opportunity-a gap in the market that provides a source of profit Organisation/management ability- the ability to come up with a relevant structure that facilitates growth Resources- mobilising the necessary resources: labour, finances, etc.  Human Capital Knowledge- this can either be acquired or learned. Acquired is that which we learn in informal environments, while learned is that which we accumulate in formal environments Social capital- this is the social networks one creates  Human Capital Cont’d Social networks are a result of one’s socialisation processes- family, friends, etc.  Human Capital Cont’d Opportunity= the difference between the desired and the prevailing situation Should be sustainable Should be profitable Should have a relative advantage over existing ones  Human Capital Cont’d Should be compatible with society’s values and beliefs Should not inflict injuries to potential buyers Should be easy to communicate the benefits of the product/service Should be that which can be produced and marketed by the organisation better than competitors  Management abilities This refers to the process of achieving set objectives through planning, organising, leading and controlling organisational resources. Managing also includes the ability to manage the organisation strategically- to ensure long term survival Team building capabilities are also critical  Resource Mobilisation This is the ability to bring together all the required resources to ensure that the business takes off- Financial resources Manpower resources Equipment  The Environment This refers to the context in which entrepreneurial activities occur That context must be supportive It includes: The general environment-PESTLE The institutions- universities, financial institutions; research institutions Corporates, public institutions, etc.  Types of Entrepreneurs Start-up entrepreneurs-those who venture into setting up business ventures in any sector : Habitual= owners of a life time, sometimes in one or in several businesses, mainly for personal satisfaction. Income is secondary. Usually there is no succession planning.  Types of Entrepreneurs Cont’d Growth entrepreneurs= life time owners seeking major success- legacy Harvest entrepreneurs= business owners with an exit plan Spiral/helical= alternate growth and stability periods determined by personal and family needs  Types of Entrepreneurs Cont’d Occasional= those with another job and pursue entrepreneurship periodically  Types of Entrepreneurs Cont’d Corporate entrepreneurs- those who engage in entrepreneurial activities within their employment (employees) Social entrepreneurs-engage in entrepreneurship to improve societies for no profit  Types of Entrepreneurs Cont’d Technopreneurs-engage in entrepreneurial activities in the field of technology: High technology ventures in internet, life sciences and bio-tech; ICTs and electronics Service firms where technology is critical to their mission- FEDEX, e-bay, e-learning, etc.  Some popular technopreneurs Bill Gates- Microsoft Mark Zuckerberg-Facebook Jack Dorsey- Twitter Steve Jobs (late)- Apple Kevin Systrom- Instagram Larry Page- Google Ellon Musk- Tesla  Significance of entrepreneurship Opportunity to create own destiny Opportunity to make a difference Opportunity to reach full potential- self actualisation Opportunity to make a profit Opportunity to do what to one enjoys and have fun  Significance of entrepreneurship Cont’d Employment creation Seedbed for large businesses and technology advances Linkages with large enterprises Creates national competitiveness Contributes to GDP  Drawbacks of entrepreneurship Uncertain incomes Risk of failure and loss of entire investment Increased responsibility Lower quality of life until business is firmly established Need to be knowledgeable in all business areas  Approaches to Entrepreneurship The macro view- the approach argues that the success or otherwise of entrepreneurial ventures is based on external processes (External locus of control) The micro view- it argues that the potential entrepreneur has the ability to control the outcomes of major influences (internal locus of control)  The Macro View  The environmental school- focuses on the external forces that shape a potential entrepreneur Institutions Morals and values Government policies Work environment Social networks  The Macro View Cont’d The financial/capital school- focus is on availing capital resources Financial management is viewed as the pillar for entrepreneurial growth Setting up of financial institutions Concessionary interest rates Special fund for specific sectors Grants to specific targets The displacement school-focus is on an individual or group of individuals finding themselves “out of place” or literally displaced Political displacement- a political system that rejects free enterprises/restricts certain industries  The Macro View Cont’d Cultural displacement- focuses on social groups precluded from certain professional fields Economic displacement- focuses on economic variations (bad times) Recessions; Job loss Capital shrinkage  Micro View The Entrepreneurial Traits School- based on the common characteristics found in successful entrepreneurs need for achievement, technical knowledge, creativity and determination-being the common ones  family development and educational incubation  Entrepreneurial traits Commitment, self reliance and tenacity- do not easily give up but know when to stop High need for achievement- are ambitious, but not driven by envy. They have their own targets and work towards achieving them Opportunity driven- always seeking opportunities and exploiting them  Entrepreneurial traits Cont’d Responsible- they get a task done at the best of their abilities. They stretch themselves to give the best Problem solving abilities Team building abilities Initiative- go beyond what a task requires thus extend tasks into new frontiers  Entrepreneurial traits Cont’d Internal locus of control- believe destiny is in their own hands hence no external forces shape their destiny High ambiguity tolerance- able to work in situations where solutions are not obvious, are risk takers  Entrepreneurial traits Cont’d Integrity and consistency- honest, truthful and possess strong ethics Creativity and innovation-finding solutions to problems outside the conventional ways and being able to commercialise them Self-efficacy- strong belief in one’s ability to perform tasks or reach their goals  Entrepreneurial traits Cont’d Persuasive- a communicative behaviour intended to change, modify or shape the responses, attitudes or behaviour of the receiver  Entrepreneurial traits Cont’d Venture Opportunity School-argues that an individual’s ability to identify opportunities and ability to be creative and innovative determines entrepreneurship Strategic Formulation School- success in venture creation is based on ability to strategically plan and manage a business  What is industrialisation? It is a progressive transformation of an economic system from rudimentary productive methods to more complex manufacturing processes. It is systematic change that aims to reshape the productive forces of a given country This is achieved through innovating existing systems of production through addressing their weaknesses This can also be through producing goods and services that address customer needs What is industrialisation? Cont’d Industrialisation implies development of new technologies- equipment, production processes, new products, services, etc  The business environment It is made up of three environments namely: The general environment- this is an environment over which managers have no control It is characterized by the Political, Economic, Social, Technological, Legal, and Ecological factors (PESTLE)  The business environment Cont’d The task /the industry environment- this is an environment which managers have no control but can influence it It is characterized by customers, competitors and suppliers The business environment Cont’d  The business environment Cont’d The internal environment- this the environment that managers have control over It is characterized by what the organization owns- resources of the organization (employees/skills; organizational culture; structure; equipment; cash; etc)  SWOT Analysis Organisations need to make decisions regarding their continued existence/business continuity concept Such decisions are anchored on the developments in their environment Thus organisations need to assess factors that may allow it to grow (Opportunities) and those that may threaten their existence (Threats) Ability to assess the opportunities and threats requires understanding an organisations Strengths and Weaknesses  SWOT Analysis Cont’d Strengths are those that add Value, are Rare; are Inimitable and allow organisations to gain competitive advantage (VRIO)  Creativity vs. Innovation Creativity refers to process of identifying solutions to problems/opportunities/gaps “---a process of being sensitive to problems, deficiencies, gaps in knowledge, missing elements, disharmonies---identifying the difficulties; searching for solutions, making guesses or formulating hypotheses about deficiencies testing and retesting them; and finally communicating results.” Jalan and kleiner  Forms of Creativity Idea creativity- thinking of a new concept eg. Product, service or a way to solve a problem Material creativity- inventing and building a new tangible object eg. Product, advertisement, report , photograph, sculpture, etc. Organisation creativity- organising people, project, organisation , etc.  Forms of Creativity Cont’d Relationship creativity-innovative ways of creating win-win relationships with others eg collaborations, strategic partnerships, etc. Event creativity- ability to produce an event or occasion eg weddings, awards ceremonies, etc. Inner creativity-ability to change one’s self Spontaneous creativity- ability –ability to act on the spur-of – the-moment/spontaneously  Cultivating Creativity Need to recognise that anyone can be creative Need to shift the paradigm = a preconceived idea of what the world is, what it should be and how it operates Include creativity as a core value-important to evaluate the extent of its achievement in the organisation annually-a performance indicator Encourage diversity-hire people from different backgrounds  Allows for diverse contributions  Cultivating Creativity Cont’d Expect creativity-this should be communicated to employees eg. The brain storming board Expecting and tolerating failure-avoid punishing for failed ideas Changing scenarios-changing the environment that one works in- familiarity breeds contempt Accepting that problems are challenges-need to work on resolving them-employees should carry their own monkeys  Cultivating Creativity Cont’d Providing support for creativity- most importantly is to provide time for employees to be creative-work on pet projects (something they like doing)  Also provide financial support to promising ideas Develop a system of capturing the creative ideas Talk to customers Find alternative uses for organisation’s services or products in the market  Cultivating Creativity Cont’d Reward creativity-recognise creativity to reinforce the creative culture Talk to children/youths-they help you remove self imposed barriers (shift paradigms) Model creativity-start at the top  Cultivating Creativity Cont’d Convergent thinking- evaluating the ideas generated through divergent thinking Could involve looking at similar ideas; related ideas; those that could be linked; etc Incubation- divorcing oneself from the process to allow more time to reflect on the generated ideas Illumination- settling on an idea that seems feasible  Barriers to creativity Seeking the right answer Need to follow logic Need to be practical Need to follow rules Need to avoid ambiguity Need to avoid errors Need to demonstrate maturity  Cultivating Creativity Cont’d Need to stick to area of specialisation Need to appear intelligent Accepting defeat- “I am not creative”  What is Innovation? Many definitions have been proffered including: That it is creativity Coming up with new products/services Entrepreneurship Designs Inventions  What is Innovation? Cont’d However the weaknesses with these definitions is that they focus on the outcomes of innovation They take a narrow perspective- innovation is an event However innovation is a process-  What is Innovation? Cont’d “innovation is not a single action but a total process of interrelated sub processes. It is not just the conception of a new idea, nor the invention of a new device, nor the development of a new market. The process is all these things acting in an integrated fashion” Myers and Marquis (1969)  What is Innovation? Cont’d NB: the concept of new has to be understood in the following context That new is relative-being applied or used by the concerned party for the first time Thus it is measured by the lapse of time since its last use or discovery  What is Innovation? Cont’d Invention is translating intellectual thoughts into an artefact-tangible process or product Thus innovation goes beyond invention In summary: Innovation = theoretical conception + technical invention+ commercial exploitation  Theoretical Conception Developing an idea about a solution to a social problem- long distance communication; Is supported by creativity Level of creativity is also determined by knowledge possessed by the individual Recall discussion on Human capital earlier-acquired vs learned knowledge  Research and Development It is the purposeful and systematic use of scientific knowledge to improve men’s lot even though some of its manifestations do not meet with universal approval eg. Cloning R&D differs from organisation to organisation However it is always anchored on a firm’s heritage and resources  Research and Development Cont’d Components of R&D: Basic research-seeks to broaden knowledge about a particular area; thus it is general in nature Curiosity-driven basic research-this is research that does not seek to address a particular market problem but just to satisfy an area of interest  Research and Development Cont’d May result in the discovery of technologies or products Applied research-focuses on addressing particular needs through use of existing scientific knowledge resulting in new technologies  What is technology? Refers to the process of applying knowledge to achieve a practical result- eg. Vacuum cleaners, washing machines, laptops, etc. Technology is dependent on knowledge Need to invest in knowledge creation-Research  Invention Process of converting the idea into tangible product or process Need science and technology Science being the knowledge about the subject area- communication Technology being the process of converting the knowledge into a tangible solution  Commercialising Creating demand for the invention-need for marketing function  Benefits of Innovation Improved social standards Increase knowledge base  Importance of Innovation Allows for firm growth  New customers/markets  Firm competitiveness  Firm profitability  Shareholder value  National acceptance  Allows for employee growth Importance of Innovation Cont’d Allows for national economic growth Contribution to national GDP Improves nation’s competitiveness Grows national productivity and income levels  New Product Development Idea generation-this is the creative process driven by gaps in the market or within the organisation The process may also be driven by the desire to create convenience for the market or the organisation-3M experience (creating needs)  New Product Development Cont’d Idea screening- vetting ideas that were generated in the creative phase The organisation seeks to innovate the ideas/create value for the organisation Use of defined criteria-organisation’s objectives, resources, organisation’s capabilities, impact on existing offerings, etc  New Product Development Cont’d Concept testing-sampling potential customer’s view on the new product idea Oral or written presentation of the product idea Seeks reactions of the market to the idea-how will the market respond to the idea Normally there is a presentation followed by relevant questions  New Product Development Cont’d Business analysis- this involves analysis of the potential impact of the product idea on the overall business performance Costs Sales Environmental changes-reaction of competitors, suppliers, government, etc.  New Product Development Cont’d Product development-developing the idea prototype  Requires that the idea is produced at a price that will make it acceptable (that the target market is prepared to pay)  Product must be produced at the a level where its functionality will be tested (all dimensions must be met)  The stage also allows the organisation to asses its capabilities in production  New Product Development Cont’d Test marketing-introducing the product in selected markets This is mainly to assess the extent to which the product will be accepted Also assists in understanding the marketing challenges the product will face Important to select markets that are representative of target markets  New Product Development Cont’d At times organisations use simulated test marketing- giving out free samples and seeking customer opinions  New Product Development Cont’d Commercialisation- refining and finalising the budget in preparation of full scale manufacturing and marketing of product  Feasibility Studies “A logical tool used in considering a new operation or launch of a new product/service in order to make sure that the total investment needed will successfully bring the project to completion” Bridge S et al (2003)  Feasibility Studies Cont’d IPTV industry “a preliminary study undertaken before the real work of a project starts to ascertain the likelihood of the project’s success… it is an analysis of possible solutions to a problem and a recommendation on the best solution to use.”  Feasibility Studies Cont’d Product/service The product – performance, legality, purchase or produce, reliability, design, etc. The skills of entrepreneur/venture team- skills possession, market understanding, Suppliers  MARKET FEASIBILITY Customers- who are they, where are they, how often do they buy, their profile, etc. Competition- who are they, how many are they, how do they operate, their likely reaction, etc. Marketing strategies- how much to spend on advertising, selling strategies, sales promotions, discounts, credit facilities, etc.  Financial Feasibility Total initial capital outlay required Owner contribution Financing the balance Sales to be generated Costs of producing and operating Is it profitable Is it worth investing in  What is a Business Plan? A business plan is a written document prepared by the entrepreneur that describes all the relevant internal and external elements and strategies for starting a new venture. It is a integration of functional plans such as marketing, finance, manufacturing, sales and human resources.  Why Have a Business Plan? The business plan is valuable to the entrepreneur, potential investors, or even new personnel, who are trying to familiarize themselves with the venture, it goals, and objectives. – It helps determine the viability of the venture in a designated market – It provides guidance to the entrepreneur in organizing his or her planning activities – It serves as an important tool in helping to obtain financing.  Information Needs Before committing time and energy to preparing a business plan, the entrepreneur should do a quick feasibility study of the business concept to see whether there any possible barriers to success. Internet can be a valuable resource.  Outline of a Business Plan Introductory Page – Name and address of business – Name(s) and address(es) of principal(s) – Nature of business – Statement of financing needed – Statement of confidentially of report  Outline … Executive Summary – Three to four pages summarizing the complete business plan – What is the business concept or model? – How is this business concept or model unique? – Who are the individuals starting this business? – How will they make money and how much?  Outline … Environmental and Industry Analysis – Future outlook and trends – Analysis of competitors – Market segmentation – Industry and market forecasts Description of Venture – Product(s) – Service(s) – Size of business – Office equipment and personnel – Background of entrepreneurs  Outline … Production Plan – Manufacturing process (amount subcontracted) – Physical plant – Machinery and equipment – Names of suppliers of raw materials Operational Plan – Description of company’s operations – Flow of orders for goods and/or services – Technology utilization  Outline … Marketing Plan – Pricing – Distribution – Promotion – Product forecasts – Controls  Outline … Organizational Plan – Form of ownership – Identification of partners or principal shareholders – Authority of principals – Management-team background – Roles and responsibilities of members of organization  Outline … Assessment of Risk – Evaluate weakness of business – New technologies – Contingency Plans Financial Plan – Pro forma income statement – Cash flow projections – Pro forma balance sheet – Break-even analysis – Sources and applications of funds  Using and Implementing The Business Plan The business plan is designed to guide the entrepreneur through the first year of operations. Implementation of the strategy contain control point to ascertain progress and to initiate contingency plan if necessary. Business plan not end up in a drawer somewhere once the financing has been attained and the business launched.  Measuring Plan Progress Entrepreneur should check the profit and loss statement, cash flow projections, and information on inventory, production, quality, sales, collection of accounts receivable, and disbursements for the previous month. – Inventory control – Production control – Quality control – Sales control – Disbursements  Updating the Plan The most effective business plan can become out-of-date if condition change. If the change are likely to affect the business plan, the entrepreneur should determine what revisions are needed. In this manner, the entrepreneur can maintain reasonable targets and goals and keep the new venture on a course that will increase probability of success.  Why Some Business Plans Fail Goals set by the entrepreneur are unreasonable. Goals are not measurable The entrepreneur has not made a total commitment to the business or to the family. The entrepreneur has no experience in the planned business. The entrepreneur has no sense of potential threats or weaknesses to the business. No customer need was established for the proposed product or service.  Steps in registering a Pvt Ltd Company Business registration is done by the Registrar of companies in Harare. The registration process is administered through the Companies and Other Businesses Act Chapter 24  Steps in registering a Private Business Corporation 1) Online name search (CR2 form) 2) Confirmation of reserved name-CV4 3) Submit CR28 (Incorporation Statement) forms in duplicate together with accounting officer’s professional certificate, eg CIS, ACCA, CIMA, 4) The Registrar shall issue a certificate of incorporation  Steps in Private Limited Company registration 1) Online name search (CR2 form) 2) Confirmation of reserved name-CV4 3) Submit in duplicate: The Memorandum and Articles of Association together with two copies of Form CR5 (Registered company address) and Form CR6 (List of directors and secretaries) 4) The Registrar shall issue to a successful applicant a certificate of incorporation Steps in Public Limited Company registration 1) Online name search (CR2 form) 2) Confirmation of reserved name-CV4 3) Submit in duplicate the Memorandum and Articles of Association together with two copies of Form CR5 (Registered company address), Form CR6 (List of directors and secretaries), Form CR19 (Affidavit section 158 of the Act), Form CR20 (Consent to act as directors), CR 21(List of persons to act as directors) Steps in Private Limited Company registration 1) Online name search (CR2 form) 2) Confirmation of reserved name-CV4 3) Submit in duplicate: The Memorandum and Articles of Association together with two copies of Form CR5 (Registered company address) and Form CR6 (List of directors and secretaries) 4) The Registrar shall issue to a successful applicant a certificate of incorporation  Steps in Public Limited Company registration 1) Online name search (CR2 form) 2) Confirmation of reserved name-CV4 3) Submit in duplicate the Memorandum and Articles of Association together with two copies of Form CR5 (Registered company address), Form CR6 (List of directors and secretaries), Form CR19 (Affidavit section 158 of the Act), Form CR20 (Consent to act as directors), CR 21(List of persons to act as directors)  Steps in Public Limited Company registration 4. Submit in duplicate a copy of prospectus or a statement in lieu of prospectus. 5. The Registrar shall issue to a successful applicant a certificate of incorporation 6. The Registrar shall also issue a certificate to commence business FORM TITLE CR1 Applications for authority to use an electronic mail address, website, portal or other interactive electronic link. CR2 Application for search the availability of name CR3 Notice of Registration of Assumed Names CR4 Application for Replacement of lost, defaced and destroyed documents CR5 Notice of situation and postal address of a company’s registered once registered principal place of business and of any change thereto. CR6 List of Directors and Secretaries CR7 Notice of change of entity name CR8 Special resolution CR9 Notice of conversion, consolidation and split of Share Capital CR10 Notice of increase of share capital