Introduction to Entrepreneurship ENT3001 PDF

ENTREPRENEURSHIP ENT3001 1 LECTURE #1 & 2 INTRODUCTION TO ENTREPRENEURSHIP INTRODUCTION TO ENTREPRENEURSHIP Focus questions students should consider  What is entrepreneurship?  Is it a good or bad thing?  Do you want what it offers?  Do you have what it takes to be an entrep...

ENTREPRENEURSHIP ENT3001 1 LECTURE #1 & 2 INTRODUCTION TO ENTREPRENEURSHIP INTRODUCTION TO ENTREPRENEURSHIP Focus questions students should consider  What is entrepreneurship?  Is it a good or bad thing?  Do you want what it offers?  Do you have what it takes to be an entrepreneur?  How can you benefit from doing this course?  Can you use this knowledge to help others? 2  INTRODUCTION TO ENTREPRENEURSHIP Objectives  Explain the concept of entrepreneurship  Outline the rewards and drawbacks of entrepreneurship  Identify the main personal , entrepreneurial characteristics (PEC’s) of successful entrepreneurs  Identify Supporting Enabling factors (SEF’s)  Identify the factors that are driving the growth of entrepreneurship  Explain how to avoid the mistakes of 3 entrepreneurship WHAT IS ENTREPRENEURSHIP? Many see entrepreneurship as the emergence of new businesses through the following ways  New Business / New idea  New Business / Existing idea  Buying Existing Business  Buying a franchise  Entering into a family business 4 WHAT IS ENTREPRENEURSHIP? Harvard Business School definition of entrepreneurship:  entrepreneurship is the pursuit of opportunity beyond resources controlled (Professor Howard Stevenson ) 5 WHAT IS ENTREPRENEURSHIP?  The way to make the economy more productive and compete more effectively in the global economy  The essence of free enterprise because the birth of new businesses gives a market economy its vitality ( new jobs, products) 6  WHAT IS ENTREPRENEURSHIP?  The most powerful economic force known to mankind (Donald Kuratko)  Builds something of value from practically nothing (Jeffery Timmonds)  Invigorates markets, creates new business and produces jobs (UNCTAD)  Socially entrepreneurship empowers citizens, generates innovation and changes mindsets (UNCTAD) 7 WHAT IS ENTREPRENEURSHIP?  A new style of doing business  An approach – way of seeing things and of doing things differently  Style of management ( Peter Drucker)  High risk activity  Ability to see change/ difficulties as a business opportunity 8 WHAT IS ENTREPRENEURSHIP? Almost all definitions of entrepreneurship include:  Initiative taking  The organizing and reorganizing of social/economic mechanisms to turn resources and situations to practical account.  The acceptance of risk or failure 9  Concept of Entrepreneurship / Types of Entrepreneurs Comes from the French meaning “between-taker” or “go-between” Earliest Period Marco Polo who attempted to establish trade routes to the far east The money person (forerunner of Capitalist) entered into contract with the go-between to sell his goods. Early Capitalist – privately owned the means of production with the objective of making a profit 10 Concept of Entrepreneurship / Types of Entrepreneurs Middle Ages The term entrepreneur was used to describe both an actor and a person who managed large production projects. A typical entrepreneur was the cleric who managed architectural projects. 11  Concept of Entrepreneurship / Types of Entrepreneurs 17th Century The entrepreneur was a person who entered into a contract with the government to perform a service 18th Century The entrepreneur was distinguished from the capital provider. Eli Whitney & Thomas Edison were unable to finance invention themselves. Both were capital users (entrepreneurs), not capital providers (venture capitalists). 12 Concept of Entrepreneurship / Types of Entrepreneurs 19th & early 20th Century Viewed mostly from an economic perspective Contributes his own initiative, skill and ingenuity in planning, organizing, and administering the enterprise … assuming the chance of loss and gain (risk taker) 13  Concept of Entrepreneurship / Types of Entrepreneurs Middle 20th Century and Beyond The notion of an entrepreneur as an innovator was established. Innovation, the act of introducing new, is one of the most difficult tasks for the entrepreneur. John Pierpont Morgan and Edward Harriman are examples of this type of entrepreneur. This ability to innovate is an instinct that distinguishes human beings from other creatures and can be observed throughout history. 14 DEFINITION OF ENTREPRENEURSHIP  The process of creating value by pulling together resources to exploit an opportunity  Entrepreneurship is the dynamic process of creating incremental wealth 15 ENTREPRENEURSHIP  A process with seven (7) key principles (O. Reid 2011) 1. Creativity – thinking new things 2. Innovation – doing new things 3. Calculated risk taking – taking your product to market 4. Self belief – willingness to stand behind your ideas 5. Persistence and determination - Practice becomes perfect and failure produces learning, taking me ever closer to achievement of my ultimate goal. ( The entrepreneur’s creed - O. Reid 2013) 6. Value creation – the purpose of entrepreneurship 7. Reaping / rewards – from the value created 16 ENTREPRENEURSHIP  Entrepreneurship is about possibilities and change, taking control of your life  It is about exploration, it is a journey 17 DEFINITION OF ENTREPRENEURSHIP  The process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence. 18  WHO IS AN ENTREPRENEUR? To the economist , an entrepreneur is one who brings resources, labour, materials, and other assets into combinations that make their value greater than before, and one who introduces changes, innovations, and a new order. 19  WHO IS AN ENTREPRENEUR? Definition Someone who perceives an opportunity and creates an organization to pursue it 20  REASONS FOR BECOMING AN ENTREPRENEUR  To increase earnings  To introduce a new and creative idea  To provide a needed service  To enjoy the satisfaction of developing your own successful venture  To become your own boss 21  REASONS FOR BECOMING AN ENTREPRENEUR  independence  enjoyment, challenge, more room for creativity  personal satisfaction  feeling of autonomy and freedom 22 REWARDS OF ENTREPRENEURSHIP  Opportunity to gain control over ones own destiny  Opportunity to reach one’s full potential  Opportunity to benefit financially  Opportunity to contribute to society and be recognized for one’s efforts  Freedom from supervision and rules of bureaucratic organizations  Freedom from routine, boring and unchallenging jobs  Freedom from the limits of standardized pay 23  DRAWBACKS OF ENTREPRENEURSHIP  Uncertainty of income  Complete responsibility  Risk of losing your entire invested capital  Long hours and hard work  Emotional loneliness  Disruptions to personal life  Strong possibility of failure  Lower quality of life until the business gets established 24  DRAWBACKS OF ENTREPRENEURSHIP  Which drawbacks are most disturbing to you and why?  Can anything be done to reduce them? 25  HOW TO REDUCE THE DRAWBACKS OF ENTREPRENEURSHIP  Mental preparation  Planning – Develop a thorough Business Plan  Research  Training  Start small  Start & operate business on the side  Start early 26  KEY ELEMENTS IN ENTREPRENEUR’S BACKGROUND √ Supportive childhood family environment √ Having a parent who is self-employed helps √ Education is important √ Aged 22 – 45 when starting venture √ Work history: dissatisfied with company job but has technical knowledge 27  ENTREPRENEUR VS INVENTOR  An inventor creates something for the first time. While the entrepreneur falls in love with the new venture, the inventor falls in love with the invention and often requires the expertise of an entrepreneur to launch a new venture  Historians classify Albert Einstein as an inventive genius and Henry Ford as an entrepreneurial genius. 28  THE ENTREPRENEUR  The classic entrepreneur is often seen as one who possess certain innate traits, often referred to as Personal Entrepreneurial Characteristics ( PECs)  Our actions on our external environment changes our results in the world – O. Reid 2014 29  PEC’S OF (SUCCESSFUL) ENTREPRENEURS  Committed to success  Have high work standards  Analyze situations easily and make and implement  Self-motivated & able to decisions quickly motivate others  Creative thinkers, able to  Enjoy working and sharing identify a positive trend ideas with people at all levels within a negative  Hardworking situation  Enthusiastic and Optimistic  Good planners and  Accept Responsibility organizers  Are good leaders 30  PEC’S OF (SUCCESSFUL) ENTREPRENEURS  Trustworthy people with integrity  Enjoy a challenge  Energetic, always on  Disciplined and determined the go  Information seeking  Committed to their  Persuasive and good projects  Self confidence networkers 31  PEC’S OF (SUCCESSFUL) ENTREPRENEURS  There is really no neat set of behavioral attributes that allow us to separate entrepreneurs from non-entrepreneurs  From studies done, it has been observed that entrepreneurs have a greater desire to be in control of their own fate, having a strong desire to be successful / high achiever 32 PEC’S OF (SUCCESSFUL) ENTREPRENEURS  Are PECs innate or can they be taught?  Two opposing schools of thought: 1. True entrepreneurs are born with special personality traits that create business. These traits cannot be taught or learned. 2. Entrepreneurial tendencies can be learned and developed through experience and business training. 33  SUPPORTING & ENABLING FACTORS (SEF’S)  Supporting and Enabling factors (SEF’s) are factors which are largely outside of the control of the entrepreneur but which nonetheless played a critical role in the success of the entrepreneur (Orville Reid 2011).  The concept of SEF’s concedes that for success to occur the entrepreneur must have PEC’s as well as SEF’s which contributes to success. 34  SUPPORTING & ENABLING FACTORS (SEF’S) May include:  Work experience  Prior business experience  Finance knowledge  International experience  Technical support  Recession / crisis  Outside support  Owning assets  Family support 35  Market growth ENTREPRENEURSHIP – THE FEAR OF FAILURE  What is failure ?  Is it OK to fail? Many cultures, including ours stigmatize failure  A business may fail and many do  An entrepreneur only fails when he never tries again  Entrepreneurs use business failures as opportunities to start over again and to learn from them 36 ENTREPRENEURSHIP – THE ENTREPRENEUR’S CREED  Practicebecomes perfect and failure produces learning, taking me ever closer to achievement of my ultimate goal. (O. Reid 2013). 37  FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP Capital Ideas Technology People FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Social Factors Natural entrepreneurial spirit Said to be part of the Jamaican psyche Probably connected with “Anancyism” – from stories of Bro. Anancy who tricked others to get what he wanted. Sometimes motivated by necessity – it is said that “necessity is the mother of invention” Some persons have no option but to hustle Jamaican are found in diverse places all over the world FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Social Factors The fulfillment of being your own boss The desire for self actualization Many Jamaicans want to be a “don” FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Social Factors Cont’d The role of the schools & other training institutions Entrepreneurship training is being introduced in schools especially at the tertiary level All local universities have offerings in entrepreneurship UTech’s School of Entrepreneurship offers a degree in entrepreneurship UTech conducts research in entrepreneurship – e.g. the Global Entrepreneurship Monitor HEART Trust/NTA ensures trainees are exposed to entrepreneurship FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Social Factors Cont’d The role of women in Yaneek Page entrepreneurship More women are engaging in business – to support their family and fulfill higher aspirations (donnesses).  FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Cultural factors  Ethnic groupings Some ethnic groups (Chinese, Jews, Indians) have a tradition of being involved in business in Jamaica. Cultural penetration Cable TV – showing foreign cultures; promoting wealth & affluence  FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Economic The state of the Jamaican economy is both a push and pull factor for persons to engage in entrepreneurship Stable economy Helps business planning, gives confidence for starting new business High inflation Wreaks havoc with business planning but encourages trading (buy-&-sell) operations  FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Economic High unemployment Increases the availability of unskilled & skilled labour at reasonable pay rates The effect of interest rates High rates reduce ability to repay loans, makes loan financing unattractive for funding business Stable exchange rates Helps keep prices constant, builds business confidence FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Technology Information & Communications age Technology replacing employees Technology increases business efficiency, but reduces need for certain human skills. Creativity, innovation & business start-up seen as solutions Opportunities are created for start-up of new high tech businesses FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Economic Globalization & Liberalization Removal of trade barriers between & within countries Increases trade with the rest of the world FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Globalization The ongoing process of integration of regional economies, societies & cultures through international exchange  Has economic, technological, socio-cultural, political and biological components Include the transnational dissemination of ideas, language and popular culture FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP Globalization The world becoming “smaller” Transportation & communication are easier and faster General state of change Paradigm shifts taking place in expectations & possibilities FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP Globalization Technology used to do things better, to do new things Mobile technology Empowering people. Bringing the world to you. Control your view of the world at the touch of a button Robotics, Management Information Systems, Expert Systems, Marketing possibilities via the Internet Showcase your products and services to the world at a small cost FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP Globalization The impact of liberalization on local & international markets Lowering/removal of barriers to trade of goods & services Exporting possibilities Lower import cost, increased specialization, increased export possibilities FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP Globalization Mobility of labour / jobs Live anywhere / work anywhere possibilities increasing via telecommuting, telemarketing FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP Regionalization - one component of Globalization Regional trading blocks CARICOM - Caribbean Common Market Allows free movement of capital & labour CSME – CARICOM Single Market & Economy Deepening the integration process, provides a unified market for goods within CARICOM FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP Regionalization - one component of Globalization Regional trading blocks FTAA – Free trade area of the Americas Opening up of markets (North America, Central America, South America & the Caribbean) NAFTA – North American Free trade Agreement (Canada, USA & Mexico) EU – The European Union China Caribbean relations – Extra Regional FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Political What specifically have governments done to promote entrepreneurship Adopted a capitalist free market economy for Jamaica Encourages the private sector to be the engine for economic growth FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Political Encourage & speak of the need for entrepreneurship Embarked on many initiatives to promote entrepreneurship in Jamaica HEART Trust/NTA created an entrepreneurial unit for training, development & promotion of entrepreneurship in Jamaica  FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Political Government policies Have been reducing Government ownership of businesses by privatizing state owned enterprises (JPS, the telecommunications sector, Air Jamaica, the sugar companies, etc.)  FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Political Government policies Government’s role has been changing to that of facilitator & referee, rather than owner & operator evidenced by the establishment of bodies such as the Office of Utilities Regulation -OUR, Fair Trading Commission - FTC, Anti-Dumping Commission, Financial Services Commission. FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Political (Cont’d) Business facilitation strategies E-government initiatives e.g. E-Gov & GovNet To allow the seamless transfer of information between Government ministries, departments and agencies and other stakeholders. To allow certain exporters to complete all the applications for permits and licences online, pay all the requisite fees online, and even receive his documents online. FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Political (Cont’d) Government entering into bi-lateral agreements with friendly governments to facilitate business. Access to loan and grant funds for business start- up JAMPRO Jamaica Trade & Invest FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Political (Cont’d) Business facilitation strategies Developed and tabled an MSME & Entrepreneurship in parliament Low interest rate schemes for business loans Lowering of import duties, removal of unnecessary red tape FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP Political (Cont’d) Business facilitation strategies Provision of technical assistance (JBDC) Tax holidays for businesses which create employment National Infrastructure Improvements e.g. Highway 2000; the potential benefits, jobs, other economic spin-offs, the multiplier effect CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA High Input costs Cost of economic inputs- due to depreciating exchange rate e.g. Imported materials, rent etc. Low productivity of workers Security Utility and other costs Transportation of workers Labour laws – sometimes unfriendly to business Inadequate business facilitation and support Unavailability of venture capital Low level of R&D transfer to business Inadequate adaptation and utilization of technology CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA Crime & violence Extortion Robbery & Murder Population size Small society, everybody knows everyone else; could restrict individual opportunities e.g. after business failure Small local market for sale of goods & services Lack of international orientation of many businesses CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA Geography Where people live – helps determine & limit the types of opportunities open to them (e.g. Kingston or Portmore vs. rural farming community) Access to internet, piped water, electricity Socialization Parents & family tends to encourage their children to select more traditional careers in less risky, established professions.  CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA Anti-entrepreneurial Education System The system tends to unfairly promote the Sciences as superior to the Arts and other creative endeavours Entrepreneurship is traditionally promoted as being for persons who are unable to progress in the traditional professional streams CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA Open economies such as Jamaica have little option if we are to survive in this global environment Jamaica has to find a way to take advantage of opportunities to create and grow businesses to compete against imports, create local employment and increase the standard of living for its peoples.  MISTAKES ENTREPRENEURS MAKE  Unclear goals -  Poor management  Lack of leadership ability, sound judgment and knowledge necessary to make the business work  Lack of experience  Poor Financial Control  Weak Marketing Efforts  Failure to plan strategically 69  MISTAKES ENTREPRENEURS MAKE  Overconfidence  Uncontrolled Growth  Poor Location  Improper Inventory Control  Incorrect Pricing  Inability to make the “Entrepreneurial Transition” - losing focus, getting bogged down and losing their way. 70  HOW TO AVOID THE PITFALLS  Know your business in depth  Set clear goals  Develop a business model and Business Plan  Learn to manage people effectively  Manage Financial Resources  Understand Financial Statements 71  SUMMARY  Concept of Entrepreneurship  Rewards and drawbacks of Entrepreneurship  PEC’s of Successful Entrepreneurs  Factors driving the growth of Entrepreneurship 72  How to avoid the mistakes of Entrepreneurship END OF LECTURE #1 & 2 73  TUTORIAL ACTIVITY  What are your strong PECs?  List five of them  What are your weak PECs?  List five of them  Youwill need to devise ways of improving each weak area  Identifyone specific strategy that you could use to improve each weak PEC 74  TUTORIAL ACTIVITY  Select one successful local entrepreneur  Explain why you think this person is successful  Identify four major PECs that this person exhibits  Substantiate your views with evidence of actual events/activities where these PECs were demonstrated 75  TUTORIAL ACTIVITY  Historians classify Albert Einstein as an inventive genius and Henry Ford as an entrepreneurial genius.  Do you agree?  Why? 76 TOPIC TO BE REVIEWED FOR DISCUSSION Importance of Entrepreneurship in Economic Development  Assessthe impact of entrepreneurship on national development.  Research the role of agencies which support the growth of entrepreneurship  What are the emerging business opportunities? 77