Presentation on theme: "Entrepreneurship Introduction to Entrepreneurship and Small firms"— Presentation transcript:
1 Entrepreneurship Introduction to Entrepreneurship and Small firms
2 Topics Introduction of Entrepreneurship Definitions of EntrepreneurshipHistory of EntrepreneurshipImportance of EntrepreneurshipCharacteristics of EntrepreneurshipDefining small firms why these firms are different?
3 Learning objectives To give the introduction of Entrepreneurship. To understand the term Entrepreneurship through definitions.To understand the difference between an entrepreneur and traditional businessmanTo give an overview on entrepreneurial processTo explain the history of Entrepreneurship.To give brief importance of Entrepreneurship.To explain the different characteristics of successful Entrepreneurs.To give overview of small firms and why small firms Fails.
4 Your Thoughts Who are they? Are they born or made? What is their link to the process of innovation?Can entrepreneurs manage large firms or do they have to change as business growsAre entrepreneurs any different than managers?Are they any different from owner manager?Can entrepreneurship be engendered in large companies or other sorts of organizations
5 Definitions of Entrepreneurship Entrepreneurship is a process in which an individual organize, operates and takes on the risks of business.ORProcess of creating something new value by devoting the necessary time assuming the accompanying financial psychic and social risks and receiving the resulting rewards of monetary and personal satisfaction and independence.(Hisrich et al., 2009)
6 Definitions of Entrepreneurship Entrepreneurship as a type of behaviour that concentrates on opportunities rather than resources and essentially a behavioural characteristic of persons, although taking place in a organisational context(Wennekers and Thurik, 1999)Entrepreneurship as defined, essentially consists in doing things that are not generally done in the ordinary course of business routine.(Holt, 1991)
7 EntrepreneursThe Entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for profit.An Entrepreneur is being called so when he initiates, conceptualize and materialize a business process which is entirely unique.An Entrepreneur is someone who starts a business from a fresh idea and makes it work.Entrepreneurs use innovation to exploit or create change and opportunity for the purpose of making profit. They do this by shifting economic resources from an area of lower productivity into an area of higher productivity and greater yield, accepting a high degree of risk and uncertainty in doing so.The individual entrepreneur is a person who perceives opportunity, finds the pursuit of opportunity desirable in the context of his or her life situation, and believes that success is possible, and these three elements distinguish the individual entrepreneur from the vast majority of the population.”(Stevenson, 2000)
8 Difference between Entrepreneurs and Traditional Businessmen Entrepreneurs Bring uniqueness in their product/services and/or activities of businessBusinessmen operates without bringing uniqueness in their product/service and/or processes.The growth rate of entrepreneurs success is high/exponential/fastThe growth rate of businessmen’s success is low/steady/slowEntrepreneurs take moderate/calculated risk and accommodate 3 types of risk; Financial, physical and socialBusinessmen take low risk and accommodate only one risk i-e financial riskEntrepreneurs identify and explore an opportunity before taking a decision of business start upBusinessmen are generally not concerned with identifying opportunities.UniquenessGrowthRiskOpportunity
9 History of Entrepreneurship The word Entrepreneurship is derived from the French verb“ENTERPRENDRE”- to undertake .The French men who organized and led military expeditions in the early 16th Century were referred to as Entrepreneurs.17th CenturyDeveloped in 17th centuryBeing a person who entered into contractual arrangement with the Government to perform a service or to supply stipulated productsContract prices was fixed, any resulting profits or losses were entrepreneur’s18th CenturyPerson with capital was differentiated from who needed capitalIndustrialization occurring throughout the worldEg. Thomas Edison (Electronics) Whitney (Ginning)(http://goarticles.com/article/History-of-entrepreneurship/ /)
10 Entrepreneur organizes and operates an enterprise for personal gain 19th and 20th CenturyIn late 19th & early 20th centuries entrepreneurs were frequently not distinguished from managers and were reviewed mostly from an economic perspectiveEntrepreneur organizes and operates an enterprise for personal gainHe pays current price for the material consumed in the businessHe contributes his own initiative, skills and ingenuity in planning, organizing and administering the enterpriseHe also assumes the chances of loss and gain consequent to unforeseen and uncontrollable circumstances(http://goarticles.com/article/History-of-entrepreneurship/ /)
11 Importance of Entrepreneurship Economic ImportanceEconomic growth of a country is guaged by the number of entities in a country. Entrepreneurial ventures create employment, reduce the imports and reduce trade deficit, contribute in GDP etc.)Social ImportanceBusinesses generate employment which enable the society towards betterment in terms of literacy rate and population, Poverty reduction etc.
12 Importance of Entrepreneurship cont.. Community based importanceEntrepreneurial ventures are created to serve the society which builds the capacity of people through trainings, community based services, disaster management etc. (NGO’s)Individual Level importanceEntrepreneurial ventures provide independence to entrepreneurs, self respect, recognition, monetary rewards, and most importantly the freedom of decisions.
14 Entrepreneurship Theories Cont.. Economic Entrepreneurship TheoriesThese theories explore the economic factors that enhance the entrepreneurial behaviour. These theories include;Classical Theory:This theory described the directing role of the entrepreneur in context of production and distribution of goods in competitive market place (Say, 1803).Neo Classical Theory:This theory indicated that economic phenomena could be referred to instances of pure exchange, reflect an optimal ratio and transpire in an economic system that was basically closed (Murphy, Liao and Welsch, 2006).
15 Entrepreneurship Theories Cont.. Australian Market Process:Australian market process model concentrated on human actions in the context of an economy of knowledge. Schumpeter (1934) described entrepreneurship as a driver of market based systems. This model conceptualized the concept on three bases.Arbitraging market in which opportunities emerge for given market actors as others overlook certain opportunities or undertake sub-optimal activity.Alertness of profit making opportunitiesOwnership is distinct from entrepreneurship.
16 Entrepreneurship Theories Cont.. Psychological entrepreneurship theories:The level of analysis in psychological theories is the individual (Landstrom, 1998). These theories emphasize on personal attributes which defines entrepreneurship and includes;Personality traits theory:Coon (2004) defines personality traits as stable qualities that a person shows in most situations. Some of the characteristics associated with entrepreneurs are; opportunity driven, high level of creativity and innovation, high level of management skills, optimism, emotional resilience, mental energy, hard working, intense commitment, competitive desire to excel, dissatisfaction with status quo, transformational in nature, lifelong learner, can make a difference, take failure as tool of success, individual of integrity and above all visionary.
17 Entrepreneurship Theories Cont.. Locus of control:It can be internal locus of control or external locus of control. In internal locus of control entrepreneur’s success comes from his/her own abilities while in external locus of control emphasize on the factors from external environment. Internal locus of control is found to be positively associated with the desire to become an entrepreneur (Bonnett and Furnham, 1991).Need for Achievement theory:McClelland (1961) explained that human beings have a need to succeed, accomplish, excel or achieve. Entrepreneurs are driven by this need to achieve and excel.
18 Entrepreneurship Theories Cont.. Sociological Entrepreneurship theory:In sociological theories the level of analysis is traditionally the society (Landstrom, 1998). Social networks, life course stage, ethnic identification and population ecology are the social contexts that relates to entrepreneurial opportunity (Reynolds, 1991).Anthropological Entrepreneurship Theory:It is the study of origin, development, customs and beliefs of the community. This theory says that new venture is created by the influence of one’s culture.Opportunity based entrepreneurship theory:Entrepreneurs do not cause change but exploit the opportunities that create change (Drucker, 1985). He further described that entrepreneurs always search for change, respond to it and exploit it as an opportunity.
19 Entrepreneurship Theories Cont.. Resource based entrepreneurship theories:These theories stress the importance of financial, social and human resources (Aldrich, 1999). Thus access to resources enhances the individual’s ability to detect and act upon discovered opportunities and includes;Financial Capital/Liquidity Theory:People with financial capital are more able to acquire resources to effectively exploit entrepreneurial opportunities and set up a firm to do so (Clausen, 2006).
20 Entrepreneurship Theories Cont.. Social capital/network theory:Stronger social ties to resource providers facilitate the acquisition of resources and enhance the probability of opportunity exploitation (Aldrich and Zimmers, 1986).Human capital entrepreneurship theory:Human capital factors are positively related to becoming an entrepreneur, increase opportunity recognition and even entrepreneurial success (Anderson and Miller, 2003; Davidson and honing, 2003)
21 The Entrepreneurial Process Identify and evaluate the opportunitiesDevelop business planResources requiredManage the venture(Hisrich et al., 2009)
22 Types of Entrepreneurs Serial EntrepreneursThe person who is engaged in multiple businesses is called serial entrepreneur. Like Mian Amir (Punjab group, duniya TV), Mian Mansha (nishat textile, MCB, Adamjee insurance), Zoraiz Lashari (sozo water park, solo evento, solo world) etc.(www.businessdictionary.com)Opportunity EntrepreneursA person who after identifying a particular opportunity and availing it becomes a successful entrepreneur is called opportunity entrepreneur. Like Steve jobs (DNA testing device)(Block and Wagner, 2007)Necessity EntrepreneursA person who has no other option except to start his/her own venture because there is no job. These types of entrepreneurs are where there is a natural disaster; like flood, earth quack etc.
23 Types of Entrepreneurs Cont.. Social EntrepreneursA person who is engaged in business but with the primary objective of serving the society is called the social entrepreneur. They earn revenues to meet the expenses. Like Imran Khan(Shokat Khanam), Abdul sattar Edhi (Edhi foundation)(www.investopedia.com)IntrapreneurA person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk taking and innovation.IntrepreneurOne who sets up, maintains and assumes the financial risks of an Internet business venture not to be confused with intrapreneur or the more traditional entrepreneur.(Burns, 2007)(Burns, 2007)
24 Entrepreneur ,owner manager and manager Entrepreneur who starts the business from scratch. for example, initiating the plan , materializing and implementing and also creating brand for his products and services. in simple words entrepreneur who run the business in a unique formOwner-manager who follow up the market trying to capture the existing customers by doing some additional or value added services in the existing products and services category.Managers of firms do not own or control the firm they are employed by. The firm is controlled by its larger, parent company.(Burns, 2007)
25 Entrepreneur ,owner manager and manager Cont… Managers are different people from owner-managers, but both can be entrepreneurs.Figure below shows these relationships. Managers are different people from owner-managers, but both can be entrepreneursOwner-managersManagersEntrepreneurs(Burns, 2007)
26 Characteristics of successful Entrepreneurs Mental Ability – Entrepreneur must have creative thinking and must be able to analyze problems and situations. He should be able to anticipate changes.Business Secrecy – He should guard his business secrets from his competitors.Clear Objectives – He must have clear objectives as to the exact nature ofbusiness or the nature of goods to be produced.Human Relations – He must maintain good relation with his customers, employees, etc. To maintain good relationship he should have emotional stability, personal relations, tactfulness and consideration.Communication Ability – He should have good communication skills means both the sender and the receiver should understand each others message.Technical Knowledge – He should have sufficient technical knowledge.(Hisrich et al., 2009)(Burns, 2007)
27 Characteristics of successful Entrepreneurs Cont…. Long term involvement – An entrepreneur must be committed to the project.MotivatorModerate risk takerInitiativeHigh energy level – He should be able to work for long hours, for which his energy level should be high.Goal setterSelf confidence(Hisrich et al., 2009)(Burns, 2007)
28 How to become a Successful Entrepreneur? Find a simple solution to a big problemTake your hobby as a businessAlways find a cheaper way to do somethingHave a personal blog to bran yourself and your business.(Burns, 2007)
29 Motivation Factors for Business Startups Push factorsUnemploymentDisagreement with managementDoes not ‘fit in’ to companyNo other alternativePull factorsIndependenceAchievement/recognitionPersonal developmentPersonal wealth(Burns, 2007)
30 Barriers in Business Startups FundingManpowerStrong backingBranding/MarketingFear(Hisrich et al., 2009)(Burns, 2007)
32 Defining small firms in Pakistan Firm Type/ConditionManufacturingTrading/ Retailing/ ServicesNo of EmployeesUpto 250Upto 50Assets excluding land and buildingUpto Rs. 100 MillionUpto Rs. 50 MillionAnnual Turnover/SalesUpto Rs. 300 MillionSource: SME Bank
33 Soft DefinitionsA small firms is not just about size, its in simple statistical terms.These firms have some important characteristics:Market influenceLimited because of small market shareIndependenceSense of being on their ownPersonal influenceDepends on size and nature of business but this is still the predominant feature(Burns, 2007)
34 Important StatisticsIn Italy 79% of employment in generated by small firms(ec.europa.eu/enterprise/policies/sme/facts-figures.../italy_en.pdf)In France 63%(ec.europa.eu/enterprise/policies/sme/facts-figures.../france_en.pdf)In USA 80%(http://www.smeadvisor.com/2010/12/helping-hand/)In UK 62%(ec.europa.eu/enterprise/policies/sme/facts-figures.../uk_en.pdf)In Germany 60%(ec.europa.eu/enterprise/policies/sme/facts-figures.../germany_en.pdf)SMEs constitute nearly 90% of all the enterprises in Pakistan; employ 80% of the non-agricultural labor force; and their share in the annual GDP is 40%, approximately.(www.smeda.org.pk)
35 Potential Contributions of Small Business to Economic Development Employment ProvidersVehicles for individual independenceOriginators of innovationNiche market providersSupport infrastructure for large companiesSocial fabric of local communitiesSource of new industrySource of “Entrepreneurship”
36 Types of Small FirmsThe small firms are distinguish between two categories: Life style firms These are not set up to grow and therefore once a level of activity that provides the adequate income is reached, management becomes routine and tactical. Growth firms These businesses are established with the intension to growth.(Burns, 2007)
37 Eight reasons why many small businesses fail (Burns, 2007)