Entrepreneurial Management PDF

ENTREPRENEURIAL MANAGEMENT RICHARD CANTILLON (1680s-1734) ENTREPRENEURSHIP - An Irish-French economist who FIRST coined the...

ENTREPRENEURIAL MANAGEMENT RICHARD CANTILLON (1680s-1734) ENTREPRENEURSHIP - An Irish-French economist who FIRST coined the concept of entrepreneurship back in the late 17th and Factors Affecting the Growth of Entrepreneurship early 18th centuries. Types of Entrepreneurs - He was foundational to classical economics. Requirements of Entrepreneurial Structure - Cantillon considered the entrepreneur to be a risk taker who deliberately allocates resources to exploit INTRODUCTION opportunities to maximize the financial return. - The word entrepreneur has an interesting definitional - Cantillon emphasized the willingness of the history and it stems from the French word entrepreneur to assume the risk and to deal with “entreprendre” which refers to undertake. uncertainty. Thus, he drew attention to the function of - Economists never had a consistent definition of the entrepreneur and distinguished between the “entrepreneur” or “entrepreneurship”. function of the entrepreneur and the owner who - An entrepreneur is “a person who starts a business provided the money and is willing to risk loss in order to make money”. - The common keywords ‘business’ and ‘risk’ are ESSAY ON THE NATURE OF COMMERCE IN GENERAL (1755) interrelated. If there is no real business or risk, a - Cantillon’s book where the term “entrepreneur” was person cannot be called as an entrepreneur. first used in business and economics and defined it The small businessman who has founded your as a person who pays a certain price for a product neighborhood grocery shop is an entrepreneur. and resells it at an uncertain price, "making The founder of the startup laundry service decisions about obtaining and using the resources across the street is an entrepreneur. while consequently admitting the risk of enterprise" The founder of the multi-billion Reliance Co. Ltd. with his hi-tech world-leading application, he is HISTORY an entrepreneur. Early 16th Century ➔ LTD = LIMITED The freelancing plumber who works for himself - The term ‘Entrepreneur’ was used by a Frenchman to and unclogs your drains is an entrepreneur. denote men leading in military expeditions. Around 1700 A.D. ENTREPRENEURSHIP - The term was used in France for contractors or - Entrepreneurship means the willingness of an architects. individual to start a new business venture by taking Early 18th Century risk and managing it in this technology-enabled - The term was applied to Business and Economic competitive global environment. activities by the French Economist Richard Cantillon. - The size of the business, the type of work involved, the age or the formal education of the entrepreneur etc. 1848 does not restrict the entry of the entrepreneur. - The famous economist JOHN STURT MILL described - Similarly, the label of success or failure also does “Entrepreneurship” as the founding of a private not matter. enterprise. Entrepreneurship is a process of willingly designing, launching, developing, organizing, and running a 1. EARLIEST PERIOD (3000 BCE - 476 AD) new business venture along with its risk to make a - ENTREPRENEURSHIP EXISTED DURING ANCIENT profit and hold in the growth of the economy. HISTORY. While the term “entrepreneur” was not yet Entrepreneurship is described under both established coined, many activities resembling entrepreneurship firms and new businesses that have the ability to occurred in ancient civilizations like Mesopotamia, translate inventions or technologies into products Egypt, Greece, and Rome. and services. ★ EXAMPLES OF ANCIENT ENTREPRENEURSHIP ENTREPRENEURS TRADE AND COMMERCE - particularly among Phoenicians and - Entrepreneurs are the people who have the courage to Mesopotamians offer and share an idea, a product, or a service with ★ EXAMPLE: the world ➔ spices, silk, grains, and other commodities. - The entrepreneurs are passionate about innovating, MARKETPLACES leading, inventing, or pioneering with a disruptive product - such as Agora in (Greece) and Forum (Rome) or technology. were hubs for buying and selling goods. is a person who creates a new business by identifying and collecting the required resources and INNOVATORS AND CRAFTMANSHIP by facing risk and uncertainty for the purpose of - skilled artisans from ancient Egypt and Greece achieving the desired profit and growth (pottery to jewelry) - Their innovations in crafting tools, art, and architecture often required entrepreneurial risk-taking and investment. BANKING AND FINANCE - banking system emerged in ancient Mesopotamia and Greece (loans and investments facilitating business ventures to both traders and merchants)  THOMAS EDISON (1847 – 1931) 2. MIDDLE AGES (10th CENTURY - 13th CENTURY) - An American inventor and businessman - In the Middle Ages, the term entrepreneur was used to widely known for his numerous describe both an actor and a person who managed groundbreaking inventions and large production projects. contributions to technology. - A typical entrepreneur in these times was a - Best known for developing the electric light CLERIC—the person in charge of great architectural bulb, phonograph, and motion picture works, such as castles and fortifications, public cameras, among many other innovations. buildings, abbeys, and cathedrals. - Both Edison and Whitney were capital users COMMERCIAL REVOLUTION (1450–1800) (entrepreneurs), NOT providers (venture - The period when Europe saw a rise in capitalists). commerce that boosted its economy. - Significant expansion of trade and banking. 5. 19th and 20th CENTURY - Trading began in the 11th century and - In the late 19th and early 20th centuries, entrepreneurs operated until the advent of the Industrial were frequently not distinguished from managers and Revolution. were viewed mostly from an economic perspective. - Marked a shift from a largely agrarian Andrew Carnegie is one of the best examples of this economy to a more diversified and definition. interconnected commercial economy ANDREW CARNEGIE (1835 – 1919) MARCO POLO (1254 – 1324) - was among the wealthiest and most famous - An Italian explorer in the 13th century who industrialists of his day. made significant contributions to the history - More recognized as an industrialist, and of entrepreneurship, particularly in trade and although exhibited some of the traits of an commerce during that time. entrepreneur, such as being innovative and - His travels to Asia, particularly in China, skilled in managing risks opened the door to broader connections and - In the MIDDLE OF THE 20TH CENTURY, the notion of exchanges of goods between the East and an entrepreneur as an innovator was established. West. - Expansion of trade routes, the introduction - The function of the entrepreneur is to reform or of Asian products to Europe, and cultural revolutionize the pattern of production by exploiting exchange were among Marco Polo's an invention or, more generally, an untried contributions to the field of entrepreneurship technological method of producing a new commodity or producing an old one in a new way, opening a new 3. 17th CENTURY source of supply of materials or a new outlet for products, by organizing a new industry. - Richard Cantillon, a noted economist and author in the 1700s, Cantillon developed one of the early INNOVATION theories of the entrepreneur and is regarded by some as the founder of the term. He viewed the - the act of introducing something new, is one of the entrepreneur as a risk taker, observing that most difficult tasks for the entrepreneur. merchants, farmers, craftsmen, and other sole - It takes not only the ability to create and proprietors “buy at a certain price and sell at an conceptualize but also the ability to understand all uncertain price, therefore operating at a risk.” the forces at work in the environment. JOHN LAW (1671-1729) - Scottish-French economist who contributed to DEFINITIONS OF ENTREPRENEUR the understanding of how credit, finance, and investment could drive economic 1. OXFORD DICTIONARY growth and entrepreneurship. - an entrepreneur is “A person who sets up a business or - Instrumental in the creation of the Mississippi businesses, taking on financial risks in the hope of profit” Company in France. - Convinced the French government to grant the company a monopoly over trade in the 2. INTERNATIONAL French colonies in North America. ENCYCLOPEDIA - His innovative ideas about money and banking had a lasting influence on economic theory, - an entrepreneur is “An individual who bears the risk of finance, and entrepreneurship. operating a business in the face of uncertainty about the future conditions” 4. 18th CENTURY 3. SCHUMPETER - In the 18th century, the person with capital was differentiated from the one who needed capital. - an entrepreneur is “The entrepreneur, in an advanced - In other words, the entrepreneur was distinguished economy is an individual who introduces something new from the capital provider (the present-day venture in the economy – a method of production not yet tested capitalist). by experience in the branch of manufacturing, a product ELI WHITNEY (1765 – 1825) with which consumers are not yet familiar, a new source - An American inventor widely known for of raw material or of new markets and the like” inventing the cotton gin dramatically reducing the time separating cotton seeds from cotton fiber.  4. ADAM SMITH 3. RAW MATERIALS - an entrepreneur is “The entrepreneur is an individual, - The necessity of raw materials hardly needs any who forms an organization for commercial purpose. emphasis for establishing any industrial activity and She/he is proprietary capitalist, a supplier of capital and its influence in the emergence of entrepreneurship. at the same time a manager who intervenes between the - It is ONE OF THE BASIC INGREDIENTS REQUIRED labour and the consumer”. “Entrepreneur is an employer, FOR PRODUCTION. master, merchant but explicitly considered as a capitalist” - Shortage of raw material can adversely affect entrepreneurial environment. - Without adequate supply of raw materials no industry 5. PETER F. DRUCKERS can function properly and emergence of entrepreneurship to is adversely affected. - an entrepreneur is “An entrepreneur is the one who - The more favourable these conditions are, the more always searches for change, responds to it and exploits it likely is the raw material to have its influence of as an opportunity. Innovation is the specific tool of entrepreneurial emergence entrepreneurs, the means by which they exploit changes - Necessity of the company having raw materials as an opportunity for a different business or different service” 4. MARKET ENTREPRENEURSHIP - MARKET/MARKETING - Involves an entrepreneur who takes action to make a - The role and importance of market and marketing is change in the world. very important for the growth of entrepreneurship. - The execution of ideas. - In modern competitive world no entrepreneur can think of - A complex term that’s often defined simply as running surviving in the absence of latest knowledge about your own business. market and various marketing techniques. - A full-time job which requires dedication and hard - CONNECT THE BUSINESS TO THE AUDIENCE. work. - The size and composition of the market both influence entrepreneurship in their own ways. ENTREPRENEURS 5. INFRASTRUCTURE - Innovators - Owners, producers, market creators, decision-takers, - Expansion of entrepreneurship presupposes properly and risktakers developed communication and transportation facilities. - The fourth “Factor of Production” along with other - It not only helps to enlarge the market, but expand factors such as land, labor, and capital. the horizons of business too. - Generate employment opportunities, so they are the - Apart from the above factors, institutions like trade/ backbone of the nation’s economic progress. business associations, business schools, libraries, etc. - Play a very important role in the development of any also make valuable contribution towards promoting and country sustaining entrepreneurship’ in the economy. - You can gather all the information you want from these FACTORS AFFECTING ECONOMIC GROWTH bodies. - They also act as a forum for communication and joint A. ECONOMIC FACTORS action. - Information and Communication Technology (ICT) IS ALSO INFRASTRUCTURE 1. CAPITAL A. GAG - Capital is one of the most important factors of B. NON-ECONOMIC FACTORS production for the establishment of an enterprise. Increase in capital investment in viable projects results in increase in profits which help in accelerating 1. EDUCATION the process of capital formation. - Education enables one to understand the outside - Capital is therefore, regarded as LUBRICANT TO THE world and equips him with the basic knowledge and PROCESS OF PRODUCTION. skills to deal with dayto-day problems. - In any society, the system of education has a significant 2. LABOUR role to play in inculcating entrepreneurial values. - Easy availability of right type of workers also effect - Our educational methods have not changed much entrepreneurship. The quality rather than quantity of even today. labour influences the emergence and growth of - The emphasis is till on preparing students for standard entrepreneurship. jobs, rather than marking them capable enough to - The problem of labour immobility can be solved by stand on their feet providing infrastructural facilities including efficient - IF YOU HAVE THEORIES OR PRIOR KNOWLEDGE, IT transportation. EASY AND MANAGEABLE JOB FOR YOU - The quality rather quantity of labour is another factor which influences the emergence of entrepreneurship. - Entrepreneurs, therefore, often find difficulty to secure sufficient labour. - PUTTING THE RIGHT PERSON TO THE RIGHT JOB.  TARIFF 2. ATTITUDE OF THE SOCIETY - Tariff is a tax or duty imposed by a - A related aspect to these is the attitude of the society government on imported or exported goods. towards entrepreneurship. It is one of the most common forms of trade - Certain societies encourage innovations and barriers used by countries to regulate novelties, and thus approve entrepreneurs’ actions international trade. Tariffs serve several and rewards like profits. purposes, such as generating revenue for the - Certain others do not tolerate changes and in such government, protecting domestic industries from circumstances, entrepreneurship cannot take root and foreign competition, and influencing the flow of grow. goods between nations. - Similarly, some societies have an inherent dislike for any money making activity. TYPES OF ENTREPRENEURS - ENCOURAGES NEW INNOVATIONS SUCH AS ONLINE SHOPPING LIKE LAZADA SHOPEE 1. INNOVATIVE ENTREPRENEURS 3. CULTURAL VALUE - Innovative entrepreneurs are those who introduce new products, new methods of production techniques or - Motives impel men to action. discovers a new market or new services etc. - Entrepreneurial growth requires proper motives like - They are commonly found in developed countries. profit-making, acquisition of prestige and attainment - They are aggressive in nature and they always try to of social status. make the idea successful one. - The strength of these motives depends upon the culture of the society. 2. IMITATIVE ENTREPRENEURS - They use their talents for a non-economic end - This type of entrepreneurs always tries to copy the - IT DEPENDS OF THE PEOPLE OR THE SOCIETY innovations made by innovative entrepreneurs. AND THEIR CULTURE. - They are organizers of factors of production rather 4. LEGAL ENVIRONMENT than creators. - They contribute to the under developed countries. - The legal environment affects the business very - They are adaptive and more flexible. substantially. - The copyrights, patents, trademark, plagiarism and etc. - If suitable legal arrangements do not exist for are belong to this category safeguarding the interests and powers of the COPYRIGHT entrepreneurs, businessmen and other parties related to - Are for movies, songs and videos. the business, no one will like to carry out any PATENTS significant business. - For inventions like machines TAX EVASION ★ Example: - illegal practice of deliberately ➔ Coca-Cola is patented yung SEXY misrepresenting or concealing information BOTTLE, it means bawal gayahin ng to reduce tax liability. This includes ibang soft drinks company yung underreporting income, inflating deductions, or ganong klaseng bottle hiding money in unreported accounts. Since it IPOPHL involves breaking the law, tax evasion can lead - The government agency responsible for to significant penalties, fines, and even managing patents and intellectual property imprisonment rights is the Intellectual Property Office of the TAX AVOIDANCE Philippines - refers to legal strategies used to minimize tax liabilities within the framework of the law. This 3. FABIAN ENTREPRENEURS includes taking advantage of deductions, credits, tax deferrals, or using tax-efficient - Fabian Entrepreneurs are very shy a lazy. investment vehicles. While it follows the letter of - They are very cautious. the law, tax avoidance can sometimes be - They do not venture or take risk. viewed as unethical, depending on the - They are rigid and fundamental in their approach. aggressiveness of the strategies used. - They follow the footsteps of their predecessors. - THEY ARE PLAYSAFE 5. INTERNATIONAL ENVIRONMENT 4. DRONE ENTREPRENEURS - The international environment also affects the system. - Presently, the waves of globalization and liberalization - This type of entrepreneur is conventional in their are flowing throughout the world. approach. - The international environment includes various factors, - They REFUSE to copy or use opportunities that come like mutual relations between various nations, their way. economic policies of the various national, availability - They are not ready to make changes in their existing of foreign capital, level of international competition, production methods even if they suffer losses. business activities of multinational companies, - They resist changes. conditions of international peace, rules of - Kabaligtaran ng FABIAN ENTREPRENEURS international trade, etc. - Impacts the importing and exporting in business  5. BUSINESS ENTREPRENEURS 13. SPONTANEOUS ENTREPRENEURS - - Business entrepreneurs are those who develop an idea - They are otherwise known as PURE for a new product or service and then establishes an ENTREPRENEURS, who are motivated by their desire enterprise to produce products according to their ideas. for self – fulfilment and to achieve or prove their - MOST OF THE ENTREPRENEURS BELONGS TO excellence in job performance. THIS CATEGORY. - They undertake entrepreneurial activities for their personal satisfaction in work, ego, or status. 6. TRADING ENTREPRENEURS - Their strength lies in their creative abilities. - They are the natural Entrepreneurs in any society. - They undertakes trading activities whether domestic or foreign trade. - They have to identify the potential market for his products 14. INDUCED ENTREPRENEURS in order to stimulate the demand of products. - They enter into entrepreneurship because of various - They use many techniques to promote trading. governmental support provided in terms of financial assistance, incentives, concessions, and other 7. INDUSTRIAL ENTREPRENEURS facilities to the peoples who want to set up their - They essentially manufacture products and offer Enterprises. services, which have an effective demand in the - Individuals who start a business or entrepreneurial market. venture primarily due to external factors or - They have the ability to convert economic resources necessity, rather than personal motivation or desire and technology into a profitable venture. for innovation. These entrepreneurs often enter entrepreneurship because of economic pressures, 8. CORPORATE ENTREPRENEURS lack of employment opportunities, or unfavorable conditions in the job market. - They are those who through their innovative ideas and skill able to organize, manage and control a corporate 15. MOTIVATED ENTREPRENEURS undertaking very effectively and efficiently. - They are motivated by their desire to make use of - Usually, they are promoters of the undertaking their technical and professional expertise and skill in corporations, engaged in business, trade or industry. performing the job or project they have taken up. - They have enough confidence in their abilities. 9. AGRICULTURAL ENTREPRENEURS - They are highly ambitious and are normally not - Those who undertakes agricultural as well as allied satisfied by the slow progress in their jobs. activities in the field of agriculture is known as agricultural Entrepreneurs. REQUIREMENTS OF ENTREPRENEURIAL STRUCTURE - They engage in raising and marketing of crops, fertilisers and other inputs of agriculture through employment of 1. ENCOURAGE EFFICIENCY modern techniques, machines and irrigation. - The main objective of an entrepreneurial structure is to 10. TECHNICAL ENTREPRENEURS infuse efficiency in various functions (among you people) - The Entrepreneurs who are technical by nature in the - The organizational members try to maximize the output sense of having the capability of developing new and of goods and services from the given inputs. improved quality of goods and services out of their - There is an effort to have systematic, rational and own knowledge, skill and specialization are called coordinated effort to control various waste and loss. technical Entrepreneurs. - These are the MANAGERIAL FUNCTIONS. Managers - They concentrate more on production than should encourage efficiency among people. A marketing. manager should encourage optimum use of a company's resources. They facilitate management and make it 11. NON-TECHNICAL ENTREPRENEURS - simple and flexible for everybody. - Non-Technical Entrepreneurs are those who mainly - If you don't have any of these skills as a manager, it will concerned with developing alternative marketing and be a loss for the company.. distribution strategies to promote their business. - They are not concerned with the technical aspect of 2. COMMUNICATION the product and services they are dealing with. - Communication is the number one problem of every organization. 12. PROFESSIONAL ENTREPRENEURS - A good structure provides proper communication channel among persons working in the organization. - They make their profession to establish business - We have internal and external communications. enterprise with a purpose, to sell them once they are INTERNAL (INSIDE) established. ➔ Employees, superiors, subordinates, peers (your - He or she is always looking forward to develop co-workers who are in your same level) alternative projects by selling the running business. - He is not interested in managing operations of the EXTERNAL (OUTSIDE) business established by him. ➔ Investors, customers, stockholders of the - He or she is very dynamic. corporation, co-partners, co-owners, suppliers, labor unions, government agencies (BIR, DTI, ETC), press, media (advertise product or services), general public (these are the people of your non-customer  3. OPTIMUM USE OF RESOURCES ENTREPRENEURIAL ORGANIZATIONAL CULTURE - The proper allocation of resources helps in their - Entrepreneurial Organizational Culture (EOC) is a optimum utilization also. system of shared values, beliefs, and norms of - The activities are placed according to their importance members of an organization, including valuing in the structure and proper guidelines are given for creativity and tolerance of creative people, believing resource allocation. that innovating and seizing market opportunities are - The optimum allocation of resources is IMPORTANT appropriate behaviors to deal with problems of FOR THE GROWTH OF A BUSINESS. survival and prosperity, environmental uncertainty - Maximizing the resources and making sure that and competitors' threats and expecting resources are properly allocated. organizational members to behave accordingly. - Maximum utilization of the resources of the - ALL ORGANIZATIONS ARE DIVERSE. company. - TEAMWORK 4. FACILITATES MANAGEMENT - All employees have different sets of beliefs or different families. Religious beliefs affect how we are as - There are a number of persons working in a employees but because of the common goal of EOC, business. - Their work will have to be specified and duties will be we set aside these differences. assigned as per the requirements of the organization. MISSION - A well thought organization structure is a great help for - It is the reason why organization exist. good administration. VISION - The long-term you want to do in the company. 5. SIMPLE AND FLEXIBLE - Organizational structure should be very simple. CULTURE - There should not be unnecessary levels of management. - The set of shared attitudes, values, goals, and - A good structure should avoid ambiguity and practices that characterize an institution or confusion. organization. (Merriam-Webster) - The system should also be flexible to adjust - They way of life especially the general customs and - The organization structure should be able to beliefs, of a particular group of people at a particular incorporate new changes without altering the basic time (Cambridge Dictionary) elements. - nCulture is learned consciously and unconsciously. - Organization chart is the graphical structure of the - It should, therefore, be distinguished from human organization or company. You will see the flow of the nature, on the one hand, and from the individual hierarchy of the company. personality, on the other. - Has various types of practices and beliefs that are LESSON 02: ENTREPRENEURIAL CULTURE acceptable for us, but for others is not. CULTURAL FEATURES ENTREPRENEURIAL CULTURE - Cultural features are passed on in socialization - An entrepreneurial culture consists of a group of processes. individuals who have suppressed individual interests - That is why CULTURE CANNOT BE CHANGED in the in an effort to achieve group success because group SHORT TERM: it HAS A LONG-TERM CHARACTER. success will advance their individual interests. - Cultural features influence attitudes towards start-ups - Can be described as a culture where someone is and vice versa. motivated. Management is ensuring that everyone is motivated for the common goal. ENTREPRENEURIAL CULTURE GOAL - Can be described as an environment where someone - Innovation and creation to attain succes. To is motivated to innovate, create, and take risks. penetrate the market and give a market ratio. To IN A BUSINESS stay in the competition. If in the product life - In a business, an entrepreneurial culture means cycle, you are in the last stage which is that employees are encouraged to declining na. brainstorm new ideas or products. - If you want to stay in the competition, you need - When work time is dedicated to these to innovate and innovate activities, it is called ENTREPRENEURSHIP. ➔ Nokia became complacent and tried to save it with Windows but it failed. ➔ Apple and Samsung are the big players in the smartphone industry because they always innovate. ➔ Mid players are Oppo, Vivo, etc. If they innovate they need to take a lot of research, market study and capital. They need big investment to innovate a technology like Apple and Samsung.  ELEMENTS OF ENTREPRENEURIAL CULTURE 5. DOING THE RIGHT THING - A good entrepreneur culture is achieved if there are 1. PEOPLE AND EMPOWERMENT FOCUSED PROPER ETHICAL PRACTICES. - Defined as doing what are morals and ethical. - Entrepreneur cultures are groups of individuals who PHILIP CROSBY have made and work for the development of the group. - A management guru or expert. - They are focused on the BUILDING OF POWER AND - Was an American businessman and EMPOWERMENT of the members of the group. author who contributed to management - Because an organization, society, or a country theory and quality management develops when the entrepreneurs develop. practices. - The management and their autonomy, and they - He quotes “DOING THINGS RIGHT centralized decision making. THE FIRST TIME” CENTRALIZED - An entrepreneurial culture should NOT ONLY aim ➔ It is controlled by one person only. towards the development of their entrepreneurs, but they DECENTRALIZED should always encourage the entrepreneurs to do the ➔ You can make a decision on your own. right thing. - They give you the chance to use your judgement and - The BUSINESS ETHICS AND SOCIAL consider feedback and opinions. They value the RESPONSIBILITY, a way of running your business in contribution. a profession way, ethically, and obersving what is right - It's not the management who only decides but they and wrong in a sustainable way. consider everybody's feedback. - It encourage autonomy, decision-making, emphasizing STEPS TO CHANGE ENTREPRENEURIAL CULTURE collaboration, and aligning personal organizatioal goal. 1. HIRE ASPIRING ENTREPRENEURS 2. VALUE CREATION THROUGH INNOVATION AND - It's no coincidence that aspiring entrepreneurs are CHANGE attracted to the startup environment. - These types are eager to gain experience and tend to - The new generation demands and wants new see opportunities in markets or the industry where requirements. others don't. - The entrepreneurial culture works towards VALUE - Bring them in and empower them to flex their CREATION through innovation and change. entrepreneurial muscles within your organization. - It refers to the process of generating new enhanced products and services. Work all with quality. 2. MAKE EMPLOYEES FEEL LIKE PARTNERS - Innovative changes and creations are important for the new generation. - Give everyone in your company equity and motivate them to view your company as their company. 3. ATTENTION TO THE BASICS - You really need to believe that everyone at your company is your partner and treat them that way. - Entrepreneurial culture works for the development of individuals, with the development of the group. 3. EMPOWER AND ENCOURAGE EMPLOYEES - It is necessary for them to keep their full concentration on the basics in the world of business. - Empower your employees with more responsibilities - Because it is said that AN ORGANIZATION DEVELOPS and encourage them to make decisions on their own. ONLY WHEN ITS BASICS ARE STRONG - Encourage creativity, reward your employees when they - It refers to the foundation. Define the market or target make good business decisions, and use their audience. mistakes as learning opportunities. MANAGER - Only manage and the goal is to 4. BE OPEN TO MICRO-FAILURES execute and implement everything. - I try to create an environment in which employees know LEADER that I am open to micro-failures in the macro-pursuit - Managing with the heart, and of success. character. They are motivators. - If people are afraid to take risks, then we aren't going 4. HAND-ON-MANAGEMENT to grow as quickly or smartly as possible. - But people DON'T always believe that making mistakes - A good entrepreneur should have GREAT is OK. MANAGERIAL SKILLS to run a successful organization. - I strive to give them proof that it is so they can let go of - An organization is going to develop only when all the any fears and try new ways of getting the job done. departments of the organization are managed properly. 5. GIVE INCENTIVES TO EMPLOYEES - These are the technical skills. A good communicator, decision-maker, risk-taker, goal oriented and his SKILLS - What's in it for them? If they're proactive, go the extra - It is important for the entrepreneurial culture to aim mile, and really impact your company positively -- toward having managers who are good at what do they get out of it? management and can make quick decisions. - Incentives can include raises, bonuses (time off, a paid holiday, etc.), stock options, promotions, and even public recognition of one's efforts.  6. LEAD BY EXAMPLE 12. MAKE HIRES DRAW AN OWL - You need to lead by example, take a few risks, and - There is a great Internet meme that we use as a hiring then let those ideas materialize. philosophy called "How to Draw an Owl." - In some cases, your risks will fail; you need to show Step one: your team that failure is OK. - Draw two circles. - They should embrace it, fail fast, and get back on it. Step two: - The only way your employees will feel like taking risks is - Draw the rest of the owl. if they know that failing will not be looked at in a bad - We need people who can self-direct and get things light. done, even if it isn't the way we'd ideally do it. - Just make sure each failure only happens once. - Drawing owls is a microcosm of the "intrapreneur" culture we want to foster. 7. GIVE EMPLOYEES A VOICE - By giving employees voices, listening to their ideas, and implementing them, you can encourage a culture of ENTREPRENEURIAL VS. ADMINISTRATOR "intrapreneurs." ENTREPRENEURIAL - Seeing that they are an integral part of the company -- - An entrepreneur launching a business whether it's saving money by using a different vendor or venture accepts the reality that the creating a new process to streamline production -- company may not succeed, and he may will give them pride in the company. lose the money he invested in it ★ ADMINISTRATOR 8. MAKE IT SAFE TO SHARE IDEAS - An administrator within a corporation is NOT - Create a culture where new ideas are welcomed and an owner of the company, so its potential not shut down. failure only affects him to the extent that - You want every employee to feel like she can make a he may lose his job. difference with her idea rather than depend on the ENTREPRENEURIAL founder or management team for the next big idea. - An entrepreneur is often motivated by the - Encourage your team to share often and openly to desire to be his own boss and not have to encourage intrapreneurship. answer to anyone but himself. 9. GIVE EMPLOYEES OWNERSHIP - He enjoys the freedom of being able to make all the key decisions about how to - To create a culture of intrapreneurs, you have to give operate the company. employees ownership of projects and follow their recommendations. ★ ADMINISTRATOR - We encourage an entrepreneurial mindset by having - An administrator has a narrower scope of employees take turns being "Sensei" and leading a authority, confined to his functional area. professional development training session. He works as part of a team and accepts - Additionally, every employee is expected to take a direction from those above him in the project from start to finish every quarter organization. 10. ASK THEM FOR THEIR ENTREPRENEURIAL RECOMMENDATION - An entrepreneur has a better chance of success if he has an understanding of and - Nearly all employees can present information; rock stars competency with all of the functional areas will prepare a recommendation. of his business -- including marketing, - When team members bring back information, ask them, finance, production, and personnel. "What do you think?" ★ ADMINISTRATOR - You'll create a culture of thinking beyond the current - An administrator can be more narrowly step toward the next steps and implications. focused. - It's the first step toward creating intrapreneurs. - For instance, a controller within a large company does not necessarily need 11. CREATE A STARTUP CULTURE extensive knowledge about advertising strategies. - If you want to have intrapreneurs in your organization, ENTREPRENEURIAL you need to foster an atmosphere of entrepreneurship. - An entrepreneur works in an environment - This can be done through articles you share with the with detailed policies and procedures in team, weekly meetings, and, most importantly, place mentorship. ★ ADMINISTRATOR - Creating a library of books about entrepreneurship - An administrator might view this as a helps as well. chaotic environment. - If you create and promote the culture, the entrepreneurial spirit within your employees will be ENTREPRENEURIAL empowered. - An entrepreneur must have a vision of how he wants to build the company. ★ ADMINISTRATOR THE CONCEPT OF INNOVATION AND - An administrator is not charged with ITS COROLLARY DEVELOPMENT creating the vision for the enterprise. EMBRACES FIVE FUNCTIONS ENTREPRENEURIAL 1. Introduction of a new good - An entrepreneur seeks the feeling of 2. Introduction of a new method of production accomplishment that comes from building 3. Opening of a new market something from the start-up stage. 4. Conquest of a new source of supply of raw materials and ★ ADMINISTRATOR 5. Carrying out a new organization in any industry - An administrator gets satisfaction from the Schumpeter represents a synthesis of success of the group -- the company as a different notions of entrepreneurship. His whole -- and his contributions to that concept of innovation included elements of success. risk-taking, superintendence, and coordination. ENTREPRENEURIAL - An entrepreneur's status comes from being IN PRACTICE, THE NEW COMBINATION part of the select class called business THEORY COVERS FIVE CASES owners. I. The introduction of a new good with which - As the company grows and gains consumers are not yet familiar—or of a new quality of recognition in its market, the a good. entrepreneur's status grows as well. II. The introduction of a new method of production that ★ ADMINISTRATOR has not yet been tested by experience in the branch - An administrator's sense of status comes of manufacture concerned, which need by no means from such things as an expanded job title, be founded upon a discovery scientifically new and being given increased responsibilities, or can also exist in a new way of handling a commodity receiving a bonus based on superior commercially. performance III. The opening of a new market, i.e., a market into which the particular branch of manufacture of the LESSON 03: THEORIES OF ENTREPRENEURSHIP country in question has not previously entered, whether or not this market has existed before. THEORIES OF ENTREPRENEURSHIP IV. The conquest of a new source of supply of raw materials or half-manufactured goods, irrespective of whether this source already exists or whether it has 1. SCHUMPETER'S DYNAMIC ENTREPRENEURSHIP first been created. INNOVATION THEORY V. The carrying out of the new organization of any industry, like the creation of a monopoly position (for - The innovative theory is one of the most famous example, through justification) or the breaking up of a theories of entrepreneurship used all around the monopoly position. world. The theory was advanced by one famous scholar, Schumpeter, in 1991. ACCORDING TO SCHUMPETER JOSEPH SCHUMPETER - Development is not an automatic process but must - An Austrian-American Economist born in 1883. be deliberately and actively promoted by some - Considered as one of the most influential economists agency within the system. Schumpeter called the of the 20th century. agent who initiated the above, an entrepreneur - Best known for his theory of innovation - He is the agent who provides economic leadership that changes the initial conditions of the economy Schumpeter believes that creativity or innovation is and causes discontinuous dynamic changes the key factor in any entrepreneur’s field of specialization. He argued that knowledge can only go - By nature, he is neither a technician nor a financier, a long way in helping an entrepreneur to become but he is considered an innovator successful. He believed development consisted of a - Entrepreneurship is NOT a profession or a process that involved the reformation of various permanent occupation, and therefore, it cannot equipment of production, outputs, marketing, and formulate a social class like a capitalist industrial organizations. - Psychological, entrepreneurs are NOT solely However, Schumpeter viewed innovation along with motivated by profit knowledge as the main catalysts of successful entrepreneurship. He believed that creativity was necessary if an entrepreneur was to accumulate a lot of profits in a heavily competitive market.  - This theory is also known as the ACQUIRED NEEDS as FEATURES OF SCHUMPETER THEORY McClelland put forth that the specific needs of an 1. High degree of risk and uncertainty in Schumpeterian individual are acquired and shaped over time through World the experiences he has had in life. 2. Highly motivated and talented individual - PSYCHOLOGIST DAVID MCCLELLAND advocated the 3. Profit is merely part of the objectives of entrepreneurs Need theory, also popular as the Three Needs 4. Progress under capitalism is much slower than it actually Theory. This motivational theory states that the is needs for achievement, power, and affiliation 5. It is leadership rather than ownership that matters. significantly influence the behavior of an individual, ➔ Many business people support this theory, and which is useful to understand from a managerial hence its popularity over other theories of context. entrepreneurship. - This theory can be considered an extension of Maslow’s hierarchy of needs. Per McClelland, every SCHUMPETER’S THEORY SUFFERS individual has these three types of motivational FROM THE FOLLOWING LIMITATIONS needs irrespective of their demography, culture, or I. It excludes individuals who merely operate an wealth. These motivation types are driven by real-life established business without performing innovative experiences and the views of their ethos. functions. - McClelland identified two characteristics of II. Innovating entrepreneur represents the most entrepreneurship. vigorous type of enterprise. However, this type of 1. Doing things in a new and better way. entrepreneur is rarely available in developing 2. Decision-making under uncertainty. countries like India. - This motive is called the tendency to strive for III. It laid too much emphasis on innovative functions. success in situations involving an evaluation of one’s However, it ignores the risk-taking and organizing performance in relation to some standard of aspects of entrepreneurship. excellence. People having a high need for IV. It assumes an entrepreneur is a large-scale achievement are more likely to succeed as businessman. He is a person who creates something entrepreneurs. new. But in practice, an entrepreneur cannot have - According to McClelland, individuals with high need large-scale operations from the very beginning achievement will NOT be motivated by monetary V. It fails to provide a suitable answer to questions incentives, but monetary rewards will constitute a like— why some countries had more entrepreneurial symbol of achievement for them. Similarly, they are talent than others. also NOT interested much in social recognition or According to Schumpeter, entrepreneurs are not a prestige, but their ultimate goal is personal class in themselves like capitalists and workers. An accomplishment. That is why McClelland suggests individual is an entrepreneur only when he actually that in order to raise the level of achievement carries out new combinations and ceases to be an motivation, parents should set high standards for entrepreneur the moment he settles down to running their children. the established business. According to Schumpeter, an entrepreneur exists only 1. NEED FOR ACHIEVEMENT if the factors of production are combined for the first - The need for achievement, as the name itself suggests, time. Maintenance of a combination is NOT an is the urge to achieve something in what you do. If entrepreneurial activity. In this way, combination you are a lawyer, it is the need to win cases and be theory differs from the theory of rent formulated by recognized; if you are a painter, it is the need to paint Ricardo. Ricardo included the term “entrepreneurial a famous painting. It is the need that drives a person ability” as an independent factor of production, and it to work and even struggle for the objective that he is concerned with profit. Thus, this theory fails to wants to achieve. People who possess high provide suitable solutions to the problems. achievement needs are people who always work to excel by particularly avoiding reward low-risk 2. THEORY OF HIGH ACHIEVEMENT BY situations and difficult-to-achieve high-risk McCLELLAND situations. - McClelland’s theory of needs is one such theory that 2. NEED FOR POWER explains this process of motivation by breaking down what and how needs are and how they have to be - The need for power is the desire within a person to approached. hold control and authority over another person and influence and change their decision in accordance DAVID McCLELLAND with his own needs or desires. The need to enhance - American Psychologist who developed his theory of their self-esteem and reputation drives these people, needs or Achievement Theory of Motivation which and they desire their views and ideas to be accepted revolves around three important aspects, namely, and implemented over the views and ideas of others. Achievement, Power, And Affiliation. These people are strong leaders and can be best - This theory was developed in the 1960s, and suited to leading positions. They either belong to McClelland points out that regardless of our age, sex, Personal or Institutional power motivator groups. If race, or culture, all of us possess one of these needs they are a personal power motivator, they would have and are driven by it. the need to control others, and an institutional power motivator seeks to lead and coordinate a team towards an end.  3. NEED FOR AFFILIATION THE PROCESS OF IDENTIFYING, EVALUATING AND SELECTING A BUSINESS OPPORTUNITY - The need for affiliation is the urge of a person to have INTERPERSONAL and SOCIAL RELATIONSHIPS with ➔ Identify the needs and wants of customers. others or a particular set of people. They seek to ➔ Scanning (examining) the environment and evaluating of work in groups by creating friendly and lasting self (entrepreneur) and the community. relationships and have the urge to be liked by others. ➔ Screening (Process of evaluating) or business They tend to like collaborating with others to opportunities. competing with them and usually avoid high-risk ➔ Selecting a business opportunity. situations and uncertainty. ➔ Preparing a Business Plan. 4. USING THE THEORY HUMAN NEEDS AND WANTS - McClelland’s theory can be applied to manage - Human needs and wants are unlimited and are of all corporate teams by identifying and categorizing types. every team member amongst the three needs. - Society affluence lead to increase to human wants Knowing their attributes may certainly help to and needs manage their expectations and run the team - More business opportunities arises. smoothly. - Thus entrepreneurs must take this opportunity to provide products and services - Entrepreneurs must be sensitive to changes in 3. THEORY OF PERSONAL RESOURCEFULNESS customers' needs and wants in order to be aware of new business opportunities - According to this theory, the root of the entrepreneurial process can be traced to the initiative taken by some SCANNING THE ENVIRONMENT AND EVALUATING OF individuals to go beyond the existing way of life. The SELF AND THE COMMUNITY emphasis is on initiative rather than reaction, although events in the environment may have ENVIRONMENTAL SCANNING (ES) provided the trigger for the person to express initiative. This aspect seems to have been subsumed ➔ ES can lead to an idea that can be converted into a within ‘innovation’, which has been studied more as business opportunity. the ‘change’ or ‘newness’ associated with the term ➔ Two approaches are used rather than ‘proactiveness’. 1. Scan the environment by micro perspective 2. Scan the environment by macro perspective LESSON 04: BUSINESS OPPORTUNITIES MACRO PERSPECTIVE BUSINESS OPPORTUNITIES - From the macro perspective for example the agricultural sector can offer business opportunity in WHAT IS A BUSINESS OPPORTUNITY? forestry, fishing, plantation, and livestock breeding. - A business opportunity is said to exist when: MICRO PERSPECTIVE ➔ There is a possibility of offering a new product or service in a particular market. - But from a micro perspective every industry can offer ➔ The product or service fulfills the demands specific business opportunities. and preferences of the customers. - For example in the case of forestry an entrepreneur ➔ Where the product can be used to solve their can be involved in problem. ➔ Logging ➔ Manufacturing of veneer plywood ➔ Processing of sawn timber WHEN AND WHY IS THERE A NEED TO OFFER A ➔ Manufacturing of furniture PRODUCT OR SERVICE IN A PARTICULAR MARKET ➔ Making wooden doors and frames WHEN? ANOTHER APPROACH OF SCANNING THE - Changes in Environmental Factors ENVIRONMENT IS BY LOOKING AT THE ➔ Political and Legal FOLLOWING FACTORS: ➔ Economic ➔ Structure of the population, income and tastes. ➔ Social ➔ Examine the import and export information of a country. ➔ Technological ➔ Study and examine types of local resources and technological breakthrough. WHY? ➔ Examine the Industrial linkages. - Because Environmental Factors effect customers' ➔ Examine the development projects by the public and demand for particular product or service. private sectors. ➔ Newspaper and magazines - local and foreign as a source of business opportunities ➔ Examine what the local issues and social problems ➔ Examine what new government policies and regulation have impact on small business.  ★ HERE ARE THE INDICATOR OF SWOT:\ SELF EVALUATION - Besides Environmental Scanning one is to do a self STRENGTHS OF A PRODUCT OR SERVICES evaluation to identify what skills, experience is Cheap and abundant raw materials available in an entrepreneur that can be used in Sufficient funds business development and engagement. Presence of skilled workers - Skill competency, experience, knowledge that match Management and technical expertise of the entrepreneur the business opportunities. Good quality/service Ease of production THE FACTORS THAT NEED TO BE Small capital CONSIDERED ARE AS FOLLOWS: WEAKNESSES OF A PRODUCT OR SERVICES ➔ Experience ➔ Knowledge and Competency Skills High price ➔ Financial Status and situation Poor quality/service ➔ Interest - likes and dislikes Weak management ➔ Networking - circle of friends and associates. Lack of skilled workers ➔ Cultural values and norms of the community. Irregular supply Unattractive design FACTORS ON RESOURCES HAVE TO BE EVALUATED High costs of production Market Individual Interest OPPORTUNITIES OF A PRODUCT OR SERVICES Capital Big demand for the product/service Skills Favorable government policy/support Supplier of inputs Scarcity of the product/service Poor quality of existing Manpower product Technology Absence of product/service Possibilities of good profits OTHER OPPORTUNITY-SEEKING PROCESSES THAT CAN GUIDE A PROSPECTIVE ENTREPRENEUR AS TO WHAT KIND OF BUSINESS TO ESTABLISH ARE AS FOLLOWS: WEAKNESSES OF A PRODUCT OR SERVICES - Look at other successful businesses/entrepreneurs. Shortage of raw materials at a given time - Respond to a problem area. Entry of many competitors - Home-Based Business Option. Increasing of costs of production - Linkage of Resources Expectation of unfavorable government laws, such as taxes MARKET RESEARCH Deteriorating peace and order Emergence of unfair demands of workers through labor - The best way to evaluate business opportunities. union activities ➔ Defining the problem ➔ Making a preliminary investigation LOCATION OF THE BUSINESS ➔ Planning the research ➔ Gathering the data - The location of the enterprise is a vital factor in the ➔ Analyzing the data success of a business. ➔ Reaching a conclusion ➔ Implementation and evaluating decision MORE BASIC FACTORS IN SELECTING A BUSINESS LOCATION - The entrepreneur can be directed in identifying profitable markets, new market opportunities, ➔ Population trends saleable products, available resources, business ➔ Income trends risks, trends in consumer tastes and preferences, ➔ Consumer characteristics better marketing strategies, proper business ➔ Retail sales trends location, the strengths and weaknesses of ➔ Competition competitors, and realistic objectives. ➔ Transportation Facilities ➔ Government policies SWOT ANALYSIS ➔ Environment (health and sanitation) - It studies the financial resources, physical facilities, RIGHT LOCATION management capabilities, the market, production process, information system, sources of supply and - Refers to that which will bring the highest possible social environment. benefits to the firm. - It is a toll evaluating the strengths, weaknesses, opportunities and threats associated with a particular POSSIBLE ADVANTAGES OF RIGHT product or service. LOCATION - SWOT is the acronym of strengths, weaknesses, opportunities and threats. 1. Increased revenues 2. Reduced costs 3. Reduced risks  PRODUCT LIFE CYCLE WHAT IS FRANCHISING? - Franchising refers to the method of practicing and using another's perfected business concept. In a franchise relationship, the franchisee is granted the right to market a product or a service under a marketing plan or a system that uses the trademark, name, logo and advertising owned by the franchisor. WHO IS A MANUFACTURER DEALER AND DISTRIBUTOR? MANUFACTURER 1. INTRODUCTION - Any person who is responsible for designing and - This is when you launch your product. manufacturing a product with a view to placing it on - It is in the initial phase and you are trying to get the community market under his own name customers. - It will take time to build a loyal customer base. DISTRIBUTOR 2. GROWTH STAGE - An entity that buys products warehouses them and resells to retailers or direct to the customers - Your product is starting to get noticed. - People organically buy/use your product and they like DEALER it. - Your products usage is growing everyday. - Individual or firm that buy goods from a manufacturer or distributor for selling them to the end users. 3. MATURITY WHOLESALERS - Your product has reached maturity and is considered amongst the best in its class. - Two specialized wholesalers are: - People use it frequently and it is an established brand Rack Jobbers name. Drop Shippers 4. DECLINE STAGE RACK JOBBERS - New and better products have been entertaining the - Manage inventory and merchandising for retailers by market. counting stock, filling it in when needed, and - They have a fresh look and offer better feature for a maintaining store displays. lesser price or for free. - They provide the display racks and bill the retailer - You need to refresh it. only for the goods sold. DROP SHIPPERS SERVICE BUSINESSES - Deal in bulk items such as coal, lumber, and - An enterprise composed of a professional or team of chemicals that require special handling. experts that deliver work or aid in completing a task - Drop shippers sell the goods to other businesses and for the benefit of its customers have the producer ship the merchandise directly to EXAMPLE OF SERVICE BUSINESS the buyers. - The products are owned, but never handled, by the ➔ Appliance repair drop shipper. ➔ Automotive repair ➔ Babysitting CONTRACTING OR SUBCONTRACTING ➔ Bookkeeping ➔ Consulting - Refers to an arrangement whereby the principal ➔ Dance instruction agrees to farm out a job, work or service to a ➔ Electrical services contractor/subcontractor within a definite period of ➔ Exterminators time regardless whether the job is completed within or outside the premises of the principal TRADING BUSINESSES CONTRACTOR OR SUBCONTRACTOR - Earn revenue and profits from the merchandise they sell. - Any person or entity engaged in a legitimate contracting or subcontracting arrangement. MANUFACTURING BUSINESSES - Any business that uses components, parts or raw VENDING MACHINE OPERATORS materials to make a finished good - Maintain vending machines at particular locations or on delivery routes  IDEATION - Ideation should be the first asset of anybody who seeks to be an entrepreneur. - Ideas that are valuable to a business should be the one that has a market today and in the future. - This could be a product, a service, and the like, which could be in any of the following types: ➔ Need/want drives ➔ Time-saving drives ➔ Money savings ➔ Unique or incorporating strong competitive advantages ➔ Link to personal interest, preferably passion THE MOST COMMON METHOD OF DEVELOPING IDEAS IS AS FOLLOWS: Recognizing the need Improving an existing product Recognizing trends Be aware of everything Questions and assumptions Naming it first, then develop it ENTREPRENEURIAL CREATIVITY - Innovation, creativity, and entrepreneurs are inseparable. Creativity is a vital part of innovativeness, the starting idea of a process, which is skillfully managed, and carries an idea into innovation. ENVIRONMENTAL STIMULANTS TO CREATIVITY ➔ Freedom ➔ Good Project Management ➔ Sufficient Resources ➔ Encouragement ➔ Various Organizational Characteristics ➔ Recognition ➔ Sufficient Time ➔ Challenge ➔ Pressure ➔ Outside Organization