ENTREPRENEURSHIPENTREPRENEURSHIP

UnderstandingUnderstandingEntrepreneurshipEntrepreneurship

Chapter # 1Chapter # 1

Market OpportunityMarket Opportunity

EntrepreneurshipEntrepreneurship

EntrepreneurshipEntrepreneurship is the practice of starting new is the practice of starting new organization or revitalizing mature organization, organization or revitalizing mature organization, using unique and new ideas and based on using unique and new ideas and based on identified market opportunities.identified market opportunities.

Entrepreneurship ranges in scale from solo Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only projects (even involving the entrepreneur only part-time) to major undertakings creating many part-time) to major undertakings creating many job opportunities.job opportunities.

Entrepreneurship is often a difficult undertaking, Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail.as a vast majority of new businesses fail.

Entrepreneurship is a ProcessEntrepreneurship is a Process

To reform and revolutionize the pattern of To reform and revolutionize the pattern of producing things by using new ways and producing things by using new ways and techniques for producing a new techniques for producing a new commodity or producing an old one in a commodity or producing an old one in a new way. In simple words:new way. In simple words:

Entrepreneurship means doing things that Entrepreneurship means doing things that are not generally done in the ordinary are not generally done in the ordinary course of business routine.course of business routine.

ENTREPRENEURENTREPRENEUR

The word Entrepreneur is taken from The word Entrepreneur is taken from French word “entreprendre” which means French word “entreprendre” which means “Undertaker” i.e. the person who “Undertaker” i.e. the person who undertakes to organize, manage and undertakes to organize, manage and assume the risks of new enterprise.assume the risks of new enterprise.

Defining EntrepreneurDefining Entrepreneur A person who bring resources together in A person who bring resources together in

unusual combination to generate profits.unusual combination to generate profits. An Entrepreneur is a person who organizes An Entrepreneur is a person who organizes

and manages a business undertaking, and manages a business undertaking, assuming the risk for the sake of profit. Any assuming the risk for the sake of profit. Any person (any age) who starts and operates a person (any age) who starts and operates a business is an entrepreneur.business is an entrepreneur.

In behavioral terms,” An achievement In behavioral terms,” An achievement oriented individual driven to seek challenges oriented individual driven to seek challenges and new accomplishments”and new accomplishments”

Defining Entrepreneur (cont’d)Defining Entrepreneur (cont’d)

The Entrepreneur is an inventor or a The Entrepreneur is an inventor or a developer who:developer who: Recognizes opportunitiesRecognizes opportunities Converts those opportunities into Converts those opportunities into

workable/marketable ideasworkable/marketable ideas Adds value through time, effort, money or skillAdds value through time, effort, money or skill Assumes the risks of the competitive Assumes the risks of the competitive

marketplace to implement those ideasmarketplace to implement those ideas Realizes the rewards from these efforts.Realizes the rewards from these efforts.

Contributions of EntrepreneurContributions of Entrepreneur

Develop new markets Develop new markets Discover new sources of materials Discover new sources of materials Mobilize capital resources Mobilize capital resources Introduce new technologies Introduce new technologies Create employment Create employment

BACKGROUND OF BACKGROUND OF ENTREPRENEURSHIPENTREPRENEURSHIP

The concept of Entrepreneurship is derived from the The concept of Entrepreneurship is derived from the Economic theory.Economic theory.

Adams Smith (1776) “ The Wealth of Nations:.Adams Smith (1776) “ The Wealth of Nations:.

According to Adam Smith, “Entrepreneur is an economic According to Adam Smith, “Entrepreneur is an economic agent with unusual foresight who could recognize agent with unusual foresight who could recognize potential demand of goods and services.”potential demand of goods and services.”

An economic risk taker.An economic risk taker.

Importance of Entrepreneurship Importance of Entrepreneurship EconomicEconomic

Majority of new jobs are created by Majority of new jobs are created by entrepreneurs and small businessesentrepreneurs and small businesses

Small high growth companies account Small high growth companies account for 70% of economic growth over last for 70% of economic growth over last decadedecade

Over 1/3 of difference in national Over 1/3 of difference in national economic growth may be due to economic growth may be due to difference in entrepreneurial activitydifference in entrepreneurial activity

Entrepreneurship accounts for at least Entrepreneurship accounts for at least 2/3 of all technological innovation2/3 of all technological innovation

Why Entrepreneurship EducationWhy Entrepreneurship Education

Objective is to become entrepreneurially Objective is to become entrepreneurially minded with the potential to act on this by minded with the potential to act on this by discovering or creating business discovering or creating business opportunities.opportunities.

Entrepreneurs are not “born”…they Entrepreneurs are not “born”…they “become” through the experiences of their “become” through the experiences of their liveslives

Entrepreneurs have a great diversity of Entrepreneurs have a great diversity of personal characteristics, the common one: personal characteristics, the common one: being willing to take a risk in return for a being willing to take a risk in return for a profitprofit

Anyone can be an entrepreneur at Anyone can be an entrepreneur at any time of one’s lifeany time of one’s life

Entrepreneurship is NOT learned Entrepreneurship is NOT learned by reading a textbook and then by reading a textbook and then taking a test to prove you are one.taking a test to prove you are one.

Entrepreneurship education Entrepreneurship education activities are a real-life vehicle for activities are a real-life vehicle for developing academic skillsdeveloping academic skills

Entrepreneurs are found in every Entrepreneurs are found in every occupation and careeroccupation and career

Entrepreneurship education Entrepreneurship education opportunities are important at all opportunities are important at all levels of educationlevels of education

Carl Menger (1871)Carl Menger (1871) View of Entrepreneur View of Entrepreneur

According to Menger, economic change does According to Menger, economic change does not arise from circumstances but from the not arise from circumstances but from the awareness and understanding of those awareness and understanding of those circumstances, it’s the individuals who sense circumstances, it’s the individuals who sense these circumstances and bring about these circumstances and bring about changes/improvements.changes/improvements.

Entrepreneur is a change agent who transform Entrepreneur is a change agent who transform resources into useful goods and services.resources into useful goods and services.

Profit / Loss

Menger’s Model of value added TransformationMenger’s Model of value added Transformation

Low value produce

VALUE OPPORTUNITIES

Value addedTransformation

Entrepreneurial

activity

High value produce

Menger’s Model of value added Menger’s Model of value added TransformationTransformation

Producing Grain

Harvesting Grain

Grinding Grain

Producing Bread

Delivering Bread

Low value produce

High value produce

Intermediate Points of Transformation

Menger’s Model of value added Menger’s Model of value added TransformationTransformation

Identifies intermediate points of Identifies intermediate points of transformation each with opportunities to transformation each with opportunities to add value to the original resource in such add value to the original resource in such a way to eventually satisfy human needs, a way to eventually satisfy human needs, e.g. producing/harvesting wheat, grinding e.g. producing/harvesting wheat, grinding grain, making bread and delivering it.grain, making bread and delivering it.

When value is added to a product/process, When value is added to a product/process, that value is rewarded by profit.that value is rewarded by profit.

Entrepreneurial ProcessEntrepreneurial Process

1.1. Identification and analysis of Opportunity.Identification and analysis of Opportunity.

2.2. Developing Business planDeveloping Business plan

3.3. Determination of required resourcesDetermination of required resources

4.4. Starting and Managing the Enterprise Starting and Managing the Enterprise

Identification and analysis of Identification and analysis of OpportunityOpportunity

Potential and length of opportunityPotential and length of opportunity Risks and returns of opportunityRisks and returns of opportunity Competitive situationCompetitive situation

Developing Business planDeveloping Business plan

Business plan is a formal document that Business plan is a formal document that describes all internal and external describes all internal and external elements and strategies for starting a new elements and strategies for starting a new business.business.

Determination of required Determination of required resourcesresources

Identification of source and resources.Identification of source and resources. Analyzing Gap between needed and Analyzing Gap between needed and

available resources.available resources. Organizing to generate resources.Organizing to generate resources.

Starting and Managing the Starting and Managing the EnterpriseEnterprise

Launch of the Venture Launch of the Venture Managing business operationsManaging business operations Developing sales/revenueDeveloping sales/revenue Improving cash flows.Improving cash flows.

Characteristics of EntrepreneursCharacteristics of Entrepreneurs

Self-confident & OptimisticSelf-confident & Optimistic Able to take calculated risksAble to take calculated risks Responsive to challengesResponsive to challenges AdaptiveAdaptive Versatile knowledgeVersatile knowledge Creative, energetic & intelligentCreative, energetic & intelligent Initiator & dynamic leader with a vision to excelInitiator & dynamic leader with a vision to excel Have strong ability to foresee and observeHave strong ability to foresee and observe Tolerance for failureTolerance for failure