Learning ObjectivesTo understand:1. Entrepreneurship as a Self-employmentDecision2. The Concept of Entrepreneurship3. The Entrepreneur: The Individual thatSteers4. The Myths, Fears and Excuses of Peoplewho are NOT Entrepreneurs5. The Advantage of becoming anEntrepreneurEntrepreneurship 2
Entrepreneurship as a Self-employment Decision Entrepreneurship the ability of an individual to determine andcome up with the proper combination of theresources available in his environment andtransform this into an output of either goodsor services, and obtain a fair profit at theprice the entrepreneur sets. It entails the activities of spotting opportunities,conceptualizing these ideas into businessopportunities, identifying and using resources inhis environment, and making use of theseresources to produce products and makes profitsout of them.Entrepreneurship 3
Entrepreneurship as a Self-employment Decision Idea - A clear blueprint in the entrepreneur’s mind. It isthe entrepreneur’s first investment in his businessenterprise. Raw materials - are the basic inputs the entrepreneuruses to come up with his products. Capital - refers to the buildings, machinery, equipmentand tools used in the course of production. Laborers -people directly responsible in the productionprocess. Plant - the place where physical factors used inproduction are found Market - the buyers and users of the entrepreneur’sproduct. Customers - people who buy the product. Consumers or end-users – people who use the product.Entrepreneurship 4
Entrepreneurship as a Self-employment Decision Entrepreneurship… Aimed to gear someone towards self-employment. It pertains to engaging in small andmedium-sized business. Things to Consider as an Entrepreneur The various government regulatory bodies; The suppliers who control material flow and itscredit and sales policies; The financial creditors and stakeholders; The demands and cycles of the market; and The demands on the entrepreneur’s personal.Entrepreneurship- 5
Entrepreneurship as a Self-employment Decision Table 1.1 Age ofBusiness FailuresEntrepreneurship 6Source: A.J. Williams, “Why Small business Fail”, Real Estate Journal,April 1995, p18Age of Business(Years)Failure Rate%Cumulative (%)Under 1 27.6 27.61-2 13.8 41.42.3 11.2 52.63-4 10.1 62.74-5 6.4 69.15-10 9.3 78.410-20 8.7 87.1Over 20 12.9 100 Table 1.2 Causes ofBusiness Failures%Neglect 3.0Fraud 1.1Lack of TechnicalExpertise8.5Lack of ManagementExpertise17.4Lack of Experience 21.2Incompetence 44.9Disaster and otherreasons3.9100.0Source: A.J. Williams, “Small Business Caught in Squeeze”’ The Sun-Herald, 8 May 1997, p122.
Entrepreneurship as a Self-employment Decision Why Small BusinessesFail Lack of experience Insufficient capital (money) Poor location Poor inventory management Over-investment in fixed assets Poor credit arrangements Personal use of business funds Unexpected growth Competition Low sales According to the U.S. Small BusinessAdministration, over 50% of smallbusinesses fail in the first year and 95%fail within the first five years.Entrepreneurship 7Source: http://www.statcan.gc.ca/daily-quotidien/000216/dq000216b-eng.htmSource: Michael Ames, “Small Business Management; Gustav Berlle“The Do It Yourself Business Book”,http://www.moyak.com/papers/small-business-failure.html
The Concept ofEntrepreneurship Historical Context Entrepreneurship started in France after theFrench Revolution The word entrepreneur originated from theFrench word entreprende, which means, “toundertake”. It was coined by Jean Baptiste Say,a renowned French economist. Evolution of the Term EntrepreneurshipEntrepreneurship 8CONTRIBUTOR ANDYEAR OFCONTRIBUTIONCONTRIBUTION TO ENTREPRENEURSHIP THOUGHTJean Baptiste Say(1800)Entrepreneurship refers to the shifting of economic resources out of an area oflower and into higher productivity and greater yield.Carl Menger(1871)Entrepreneurship involves obtaining information, calculation, an act of will andsupervision.
The Concept ofEntrepreneurshipCONTRIBUTOR AND YEAR OFCONTRIBUTION CONTRIBUTION TO ENTREPRENEURSHIP THOUGHTJoseph Schumpeter (1910) Entrepreneurship is, in its essence, the finding and promoting new combinations ofproductive factors.Harvey Liebenstein (1970) Entrepreneurship is the reduction of organizational inefficiency.Israel Kirzner (1975) Entrepreneurship is the identification of market arbitrage opportunitiesAlbert Shapiro (1975) Entrepreneurship involves a kind of behavior that includes initiative taking,organizing and recognizing social mechanism to turn resources and situations topractical account, and the acceptance of risks and failures.Karl Vesper (1980) Entrepreneurship is the dynamic process of creating incremental wealthW. Ed Mc Mullan andWayne A. Long (1990)Entrepreneurship is the building of new growth organization.Howard Stevenson (1992) Entrepreneurship is the pursuit of opportunity beyond the resources currently underone’s controlJeffrey Timmons (1994) Entrepreneurship is the ability to create and build a vision from practically nothing.Peter Drucker ( 1998) Entrepreneurship is the process of starting one’s own, new and small business. It isalso the process of innovation and new venture creation through four majordimensions-individual, organizational, environmental, process – aided bycollaborati8ve networks in government, education and institutions.Robert Hisrish (2001) Entrepreneurship involves the creation process, requires the devotionof the necessary time and effort, assumes the accompanying financialpsychic and social risks, and receives the resulting rewards ofmonetary and personal satisfaction and independence.Entrepreneurship 9
The Entrepreneur: TheIndividual that Steers Who is the Entrepreneur Entrepreneurs take and accept risks. Entrepreneurs own ventures Entrepreneurs are managers. Entrepreneurs establish new ventures and developexisting ones. Entrepreneurs identify opportunities in the market. Entrepreneurs apply their expertise. Entrepreneurs process market information. Entrepreneurs bring innovations. Entrepreneurs provide market efficiency. Entrepreneurs maximize investment returns. Entrepreneurs provide leadership.Entrepreneurship 10
The Entrepreneur: TheIndividual that SteersEntrepreneurship 11 Entrepreneurs are managers Guidelines that Differentiate the Managerialmindset from the Entrepreneurial mindset The entrepreneur is a creator; the manager is acustodian. The entrepreneur takes risks; the manager seeksstability. The entrepreneur is personally responsible; the manageris merely responsible. The entrepreneurs achieve; managers attain targets. The entrepreneurs are future oriented; managers are noworiented. The entrepreneurs thrive on chaos; managers thrive onstructure.
The Entrepreneur: TheIndividual that Steers What Makes the Successful Entrepreneur? People who worked hard to attain their dream asentrepreneurs. People who came from all walks of life and decided totake control of their lives. People who wanted to explore and test their limits. Characteristics of the Entrepreneur1. Entrepreneurs are in good physical health.2. Entrepreneurs have superior conceptual abilities.3. Entrepreneurs have the broad thinking of thegeneralist.4. Entrepreneurs have high self-confidence.5. Entrepreneurs have strong personal drive.Entrepreneurship 12
The Entrepreneur: TheIndividual that Steers Characteristics of the Entrepreneur (cont…)6. Entrepreneurs need to control and direct.7. Entrepreneurs have moderate interpersonalskills.8. Entrepreneurs are moderate risk takers.9. Entrepreneurs have a realistic outlook.10. Entrepreneurs have a high degree ofemotional stability11. Entrepreneurs have low need-level forstatus.Entrepreneurship 13
The Entrepreneur: TheIndividual that Steers Personal Prerequisites that Characterize anEntrepreneurial Personality1. Unencumbered personal life.2. Monomania.3. Plenty of staying power.4. High energy level, nurtured by periods of relaxation.5. Good judgement about people.o Other Essential Characteristics Needed toBecome a Successful entrepreneur:1) A positive can-do attitude.2) Psychological preparedness to lose the business.3) Sufficient start-up money.4) A determination to make your first product profitable.5) A pragmatic approach to business and life.Source: Warren Avis of Avis Rentr-A-CarEntrepreneurship 14
The Entrepreneur: TheIndividual that Steer Categories of an Entrepreneur The Intrapreneur He is an entrepreneur within an existing organization,referred to as the corporate entrepreneur. The Solo Self-Employed Individual Includes all agents, repairmen, brokers, accountantsand physicians who operate alone or with only fewemployees and perform work personally. The Dealers to Dealers Include highly knowledgeable businessmen engaged invarious forms of trades frequently, directly or indirectlyrelated to their line of work. The Team Builders Individuals who go on building larger companies using hiringand delegation.Entrepreneurship- 16
The Entrepreneur: TheIndividual that Steer Categories of an Entrepreneur (Cont….) The Independent Innovators Include persons who hit upon ideas for betterproducts or services and then create companies todevelop, produce, and sell these products. The Pattern Multipliers Entrepreneurs who spot an effective businesspattern, quite possibly originated by someone else,and multiply it to realize profits. The Economy of Scale Exploiters Entrepreneurs who locate their business in lowerrent and tax areas.Entrepreneurs hip 17
The Entrepreneur: TheIndividual that Steer Categories of an Entrepreneur (Cont….) The Capital Aggregators Smart entrepreneurs who use theirexperience and expertise n pooling a groupof financiers to engage in a business. The Acquirers Entrepreneurs who acquire businesses. The Independent Inventors They include pure inventors who reallydeveloped their own product or inventionand take care of marketing them.Entrepreneurship 18
The Entrepreneur: TheIndividual that Steer Categories of an Entrepreneur (Cont….) The Buy and Sell Artists They include wise guys referred to ascorporate raiders and brokers who turnaround, sell andliquidate Other Categories of Entrepreneur Immigrant Entrepreneurs, CorporateCastoffs, Copreneurs, CyberEntrepreneurs, Part time Entrepreneurs,Home-based Business Owners.Entrepreneurship 19
The Myths, Fears and Excuses ofPeople Who Are Not Entrepreneurs. Entrepreneurs are born. Entrepreneurs are super humans. Entrepreneurs are inventors. Entrepreneur inherit business traits Entrepreneurs possess a definite characteristic profile. The gender-difference myths (men are betterentrepreneurs) Entrepreneurs are academic and social misfits. Entrepreneurs are gamblers and risk takers. Luck and money are the only things needed to becomeentrepreneurs. Entrepreneurs experience a lot of failures.Entrepreneurship 20
The Myths, Fears and Excuses ofPeople Who Are Not Entrepreneurs. The Fears and ExcusesEntrepreneurship 21Risks ExcusesFinancial Risk “I do not have the money”“I do not know where to get the capital”“I am afraid to lose my house, car properties, etc.Career Risks “I can not risk my promotion”“I can not afford not to have salary”“What would happen to me if I don’t have a job.”Family Risks “My kids are still young”“My spouse and I are not doing well”“My spouse and I are just getting to know each other”Social Risks “What would my friends say?”“What if nobody buys it?”“ How am I supposed to beat the large companies?”Psychic Risks “I am too young”“I am too old for that”“I lack experience”“I can not handle the pressure”“I can not do it”
The Advantage andDisadvantages of BecomingEntrepreneursEntrepreneurship 22 Advantages Have the opportunity to create your own destiny. Have the opportunity to be financially well-off. Have the opportunity of knowing yourself better. Have the opportunity to excel, be recognized andcontribute to society. Disadvantages Uncertainty of income. Risk of losing your entire invested capital. Long hours of work. Lower quality of life until the business gets established. High levels of stress. Complete responsibility. Confrontation with various risks.
References Entrepreneurship for Modern BusinessCamposano, Jorge A., 2007 Entrepreneurship Principles and Practices (AModular Approach)Azarcon, Ernie Roy S., et al., 2008 Entrepreneurship and Small BusinessManagementSecond EditionMedina, Robert G., 2010 EntrepreneurshipEighth EditionHisrich, Robert D., et al., 2010