Topic 1 INTRODUCTION TO ENTREPRENEURSHIP
Learning Objectives
To explain entrepreneurship and the entrepreneur To describe the entrepreneurial process To identify the entrepreneurial activities To identify the factors of entrepreneurship To discuss the advantages and disadvantages of entrepreneurship
The Entrepreneur
Peter Drucker noted that although the term entrepreneur has been used for 200 years, there has been total confusion over the definition. The earliest reference to the term has been traced to Richard Cantillon s work in 1734 focusing on the entrepreneur as an individual.
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The Entrepreneur
The Definition One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying significant opportunities and assembling the necessary resources to capitalize on them. Joseph A. Schumpter described an entrepreneur as a person who carries out new combinations, which may take the form of new products, processes, markets, organizational forms or sources of supply .
The Entrepreneur
Although many people come up the with great business ideas, most of them never act on their ideas. Entrepreneurs do. Recently there has been a focus on the process school of thought defining the entrepreneur by behavior and actions. Inventors and entrepreneurs differ from each other.
What s Feeding the Entrepreneurial Fire 1. 2. 3. 4. Entrepreneurs as heroes. Entrepreneurial education. Demographic and economic factors. Shift to a service economy.
Entrepreneurship
The Definition A process activity that generally involves the following inputs: 1. 2. 3. 4. 5. 6. An opportunity One or more proactive individuals An organizational context Risk Innovation Resources
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Entrepreneurship
The Definition A process activity that can produce the following outcomes: 1. 2. 3. 4. 5. A new venture or enterprise Value New products or processes Profit or personal benefit Growth
Entrepreneurship
INPUT
An opportunity One or more proactive individuals An organizational context Risk Innovation Resources
OUTPUT
A new venture or enterprise Value New products or processes Profit or personal benefit Growth
Entrepreneurship
The Entrepreneurial Process
Consists of 4 steps: 1. 2. 3. 4. Deciding to become an entrepreneur Developing successful business ideas Moving from an idea to an entrepreneurial firm Managing and growing the entrepreneurial firm
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Entrepreneurial Activities
1. New concept/new business The entrepreneur develops a new product or a new idea and builds business around the new concept. 2. Existing concept/new business The entrepreneur starts a new business based on old concepts. 3. Existing concept/existing business The entrepreneur buys an existing business without many plans to change the company operations.
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Factors of Entrepreneurship
A) The Individual Peter Drucker believes that anybody from any organization can learn to be an entrepreneur. Others disagree because they believe entrepreneurs have a special personality that cannot be taught. Cultural Influences Circumstances in Society A Combination of Factors
B) D) D)
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A) The Individual
1. Desire for responsibility Entrepreneurs feel a deep sense of personal responsibility for the outcome of ventures they start. They prefer to be in control of their resources, and they use those resources to achieve self-determined goals. 2. Preference for moderate risk Successful entrepreneurs are not much risk takers as they are risk eliminators, removing as many obstacles to the successful launch of their ventures as possible.
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A) The Individual
3. Confidence in their ability to succeed. Entrepreneurs typically have an abundance of confidence in their ability to succeed. They tend to be more optimistic about their chances for success. I don t believe in luck, says Kerri Evans, owner of a mobile pet grooming business. I believe in myself. 4. Desire for immediate feedback. Entrepreneurs enjoy the challenge of running a business, and they like to know how they are doing and are constantly looking for feedback.
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A) The Individual
5. High level of energy Entrepreneurs are more energetic than the average person. That energy may be a critical factor, given the incredible effort required to launch a start-up company. 6. Future orientation Entrepreneurs have a well-defined sense of searching for opportunities. They look ahead and are less concerned with what they did yesterday that with what they might do tomorrow. Not satisfied to sit back and revel in their success, real entrepruners stay focused on the future.
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A) The Individual
7. Skill of organizing Building a company from scratch is much like piecing together a giant jigsaw puzzle. Entrepreneurs know how to put the right people together to accomplish a task. Effectively combing people and jobs enables entrepreneurs to transform their visions into reality. 8. Value of achievement over money Achievement seems to be entrepreneurs primary motivating force; money is simply a way of keeping score of accomplishments a symbol of achievement.
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A) The Individual
9. Tolerance for ambiguity Entrepreneurs tend to have a high tolerance for ambiguous, ever-changing situations, the environment in which they most often operate. Amar Bhide, an entrepreneurial expert says that entrepreneurs exhibit a willingness to jump into things when it's hard to even imagine what the possible set of outcomes will be. 10. High degree of commitment Entrepreneurship is hard work, and launching a company successfully requires total commitment from an entrepreneur. Business founders often immerse themselves completely in their companies.
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A) The Individual
11. Flexibility One hallmark of true entrepreneurs is their ability to adapt to the changing demands of their customers and their business. 12. Tenacity Obstacles, obstructions, and defeat typically do not dissuade entrepreneurs from doggedly pursuing their visions. They simply keep trying.
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B) Cultural Influences
1. The effect of culture on entrepreneurial tendencies is not completely clear because individuals from different cultural groups do not become entrepreneurs for the same reason. Different cultures have varying values and beliefs that affect the tendency toward entrepreneurship. Culture also affects the image or status of the entrepreneur. While one Puerto Rican woman in Washington, D.C. was thinking of starting a business, her brother was reminding her that she should be married.
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C) Circumstances in Society
1. Workers who are laid off may be pushed toward self-employment. 2. Immigrants may become entrepreneurs if their skills do not meet the needs of employers. 3. These actions are considered adaptive-response behaviors.
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D) A Combination of Factors
1. The individual, the culture, and society s circumstances combine to affect the tendency toward self-employment. 2. Because outside factors appear to influence entrepreneurship, some people suggest that we should concentrate on nurturing the entrepreneurial spirit in children.
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Advantages of Entrepreneurship
Opportunity to create your own destiny. Opportunity to make a difference. Opportunity to reach your full potential. Opportunity to reap impressive profits. Opportunity to contribute to society and be recognized for your efforts. 6. Opportunity to do what you enjoy and have fun at it. 1. 2. 3. 4. 5.
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Disadvantages of Entrepreneurship
1. 2. 3. 4. 5. 6. 7. Uncertainty of income. Risk of losing your entire investment. Long hours and hard work. Lower quality of life the business gets established. High levels of stress. Complete responsibility. Discouragement.
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Wealthiest Entrepreneurs
Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Bill Gates Warren Buffett Carlos Slim Hel Lawrence Ellison Ingvar Kamprad Karl Albrecht Mahesh Ambani Lakshmi Mittal Theo Albrecht Amancio Ortega Net worth (USD) $40.0 billion $37.0 billion $35.0 billion $22.5 billion $22.0 billion $21.5 billion $19.5 billion $19.3 billion $18.8 billion $18.3 billion Sources of wealth Microsoft Berkshire Hathaway Telmex, Amrica Mvil Oracle Corporation IKEA Aldi Sd India Reliance Industries Arcelor Mittal Aldi Nord, Trader Joe's Inditex Group
Source: Adapted from Forbes magazine, March 11, 2009.
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Summary
What have you learned in Topic 1?
To explain entrepreneurship and the entrepreneur To describe the entrepreneurial process To identify the entrepreneurial activities To identify the factors of entrepreneurship To discuss the advantages and disadvantages of entrepreneurship
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