ENTERPRENEURSHIP.

ENTERPRENEURSHIP

Session objectives Define entrepreneurship and intrapreneurship
Explain the entrepreneurship process Validate business ideas to ensure that they are opportunities Identify different ways of financing business Identify the requirements for starting new business ideas for the cooperatives

DEFINING ENTREPRNEUSHIP
Entrepreneurship is creating and building something of value from practically nothing. It is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled. It involves the definition, creation, and distribution of value and benefits to individuals, groups, organization, and society.

A dynamic process of creating incremental wealth
Creation of wealth by individuals who assume major risks in terms of equity and/or career, commitment of providing value for some products

DEFINING ENTREPRNEUSHIP (cont..)
The process of taking or bearing uninsurable risks in buying and selling good and services Process of combining factors of production or resources such that wealth is created Creating and building something of value from practically nothing

Pursuing new opportunities without regard to resources currently controlled The process of creating new organisation

An innovative process that involves bringing new combinations into the production process such that: New products or services are offered New methods or technology is applied New markets are targeted or opened New sources of supply and raw materials are used New forms of organisations are formed

The process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychological and social risk, and receiving the necessary reward of monetary and personal satisfaction

Entrepreneurship It also requires a willingness to take calculated risks – both personal and financial – and then doing everything possible to influence the odds.

Basic aspects of being an entrepreneur
Entrepreneurship involves the creation process creating something new of value Entrepreneurship requires devotion of the necessary time and effort In order to create something new and make it operational

Basic aspects of being an entrepreneur (cont..)
Entrepreneurship means assuming the necessary risks: Financial psychological social etc

Basic aspects of being an entrepreneur (cont..)
Reward for being an entrepreneur: Independence Personal satisfaction Financial

Is it a Get-Rich Quick Plan?

Entrepreneurship Entrepreneurship is very rarely a get-rich-quick proposition. Rather, it is one of building long term value. This leads to long term cash flow streams. Entrepreneurship is a human creative act. It involves using personal energy to initiate and build an enterprise.

Entrepreneurship It also requires a willingness to take calculated risks – both personal and financial – and then doing everything possible to influence the odds.

Myths about Entrepreneurs
Myth1- Entrepreneurs are born, not made Myth2- Anyone can start a business Myth3- Entrepreneurs are gamblers Myth4- Entrepreneurs want the whole show to themselves Myth5- Entrepreneurs are their own bosses and completely independent Myth6- Entrepreneurs work longer and harder than managers in big companies

Myth7- Entrepreneurs experience a great deal of stress and pay a high price Myth8- Starting a business is risky and often ends in failure Myth9- Money is the most important start-up ingredient Myth10- Entrepreneurs should be young and energetic Myth11- Entrepreneurs are motivated solely by the quest for the almighty dollar

Myth12- Entrepreneurs seek power and control over others Myth13- If an entrepreneur is talented, success will happen in a year or two Myth14- Any entrepreneur with a good idea can raise venture capital Myth15- If an entrepreneur has enough startup capital, he or she can’t miss

INTRAPREPNEURSHIP

DEFINING INTRAPREPNEURSHIP
The practice of entrepreneurship within the confines of the organisation Creating something new and of value within the confines of the organisation Thrives in organisations with an entrepreneurial culture

Intrapreneurial culture
Employees with talents to act with freedom to take initiatives or try out new ideas as if they were running their own business

Differences between entrepreneurship and entrepreneurship
Intrapreneurship Acts within the confines of existing organization Challenges the status quo and fights to change the system from within Has “free” resources found in the organisation Entrepreneurship Acts outside the organisation Challenges the status quo outside the organisation Has to look for his resources

Factors retarding intraprenuership
The cost of failure too high, the reward of success too low No space is provided for failure No reward for innovative ideas Inertia caused by established systems that no one is willing to changed “we have always done it like this’ If it ain’t broken, don’t fix it” “changing now would be too much effort”

Factors retarding intraprenuership (cont…)
Hierarchy – the deeper the hierarchy, the more difficult it is to get permission for anything new. Support from top management Recognition that entrepreneurship culture needs to be compatible with the overall organizational culture Communication system within the organization is strong so that entrepreneurs within the company can be heard

Characteristics of successful entrepreneurs

Research has shown that certain traits seem to be associated with entrepreneurs

Who are entrepreneurs? Are opportunity driven, not resource driven
Managers ask: “given the resources under my control, what can I achieve?” Entrepreneurs ask: “Given what I want to achieve, what resources do I need to acquire?” Good as seeing pattern changes within the environment

Who are entrepreneurs? (cont…)
“The reasonable man adopts him/herself to the world: the unreasonable one persist in trying to adapt the world to him/herself” The entrepreneur is the unreasonable man/woman who is motivated by the dream of things that conventional wisdom says can’t, won’t or shouldn’t be Entrepreneurs have therefore stubborn perseverance

Stand up to ridicule Stand up to failure, good at failure but See failure as a temporary setback and an opportunity to learn and do better next time “success is the ability to go from failure to failure with no less of enthusiasm”

The two magic words of an entrepreneur “what if …?” What if telephone didn’t have to be connected to each other with wires” Constantly scanning the environment for opportunities

Entrepreneurs create their own future – get up , look up for circumstances they want, if they find them, make them”

Characteristics ( cont…)
A desire to achieve: The push to conquer problems, and give birth to a successful venture. A strong urge to build Hard work: It is often suggested that many entrepreneurs are workaholics. Desire to work for themselves/need for independence Entrepreneurs like to work for themselves rather than working for an organization or any other individual. They may work for someone to gain the knowledge of the product or service that they may want to produce. They seldom are willing to submit to authority

Nurturing quality: Willing to take charge of, and watch over a venture until it can stand alone.
Acceptance of responsibility: Are morally, legally, and mentally accountable for their ventures. Some entrepreneurs may be driven more by altruism than by self-interest. Reward orientation: Desire to achieve, work hard, and take responsibility, but also with a commensurate desire to be rewarded handsomely for their efforts; rewards can be in forms other than money, such as recognition and respect. Optimism: Live by the philosophy that this is the best of times, and that anything is possible.

Orientation to excellence: Often desire to achieve something outstanding that they can be proud of.
Organization: Are good at bringing together the components (including people) of a venture. Profit orientation: Want to make a profit; but the profit serves primarily as a meter to gauge their success and achievement.

Ingenious and resourceful, they are cunning, opportunistic, creative and non sentimental
Innovative, calculating inventor, over-optimistic promoter, organizational builder. These four terms are used to describe the characteristics which is not based on personality but on the type of opportunity the entrepreneur faces

Visionary – the entrepreneur ha an enthusiastic vision which is the driving force of the enterprise. This vision is supported by an interlocked collection of specific ideas not available to the market Persistence and determination - this helps the entrepreneur to develop strategies to make the vision into a reality

Risk taker – calculated risks which includes assessment of costs, market/customer needs and persuading others to join and help

Additional Characteristic of successful entrepreneurs
Competitive Hardworking Forceful Knowledgeable Networking Persuasive Good communicator Takes initiative Independent Problem solver Time conscious Leadership traits Adaptive to change Likes people

Skills and competencies required for entrepreneurship

What skills are required of in entrepreneurship
Technical skills Someone in the business must possess the professional skill and knowledge to generate the company’s product or service. The concept for what product or service the company will offer must become clear before the venture can succeed. Business management skills Personal entrepreneurial skills – disciplined, risk taker, innovative, change oriented, persistent, visionary etc

ENTERPRISE CULTURE

Enterprise culture Culture is a pattern of share beliefs and values that provide the members of an organization with rules of behaviour or accepted norms for conducting their operations It is the philosophies, ideologies, values, assumptions, beliefs, expectations, attitudes and norms that knit an organization or a community together and are shared by members

Enterprise culture (cont..)
Enterprise culture, therefore can be defined as a set of altitudes, values, and beliefs operating within a community or environment that lead both to the entering behaviour and aspiration towards self employment or venture creation

Research on enterprise culture
Research findings indicate that: Those who have parents or relative who own small businesses are likely to become entrepreneurs than those without similar acquaintances Those who have worked in small enterprises are more likely to establish such enterprises later

Research on enterprise culture
Those who work in organizations which allow hem greater deal of independence and freedom of operations under conditions of uncertainty are more likely to establish businesses than others Those coming from a culture which supports individual small business ownership whether for religious purposes, ethical or moral reasons are more likely to establish businesses than others outside the culture

Components of an enterprise culture
Abundant positive role models of successful independent businesses Ample opportunity for familiarization with small business tasks especially during youth Network of independent businesses family contacts and acquaintances reinforcing familiarity and providing market entry opportunities Provision of formal/informal knowledge and insight into the process of independent business management Opportunity to practice entrepreneurial attributes reinforced by society culture during formative years

ENTREPRENEURIAL BEHAVIOUR THEORIES

Entrepreneurial behaviour theories
Entrepreneurial behaviour looks at activities, interactions, competences and feeling of entrepreneurs There exist a number of schools of thought which view entrepreneurship from a fundamentally different perspective. Such perspectives are: Economic Psychological Social Managerial

Economic theories perspective
Economic theories of entrepreneurship focus on the effects that economic environment has on entrepreneurial activities and what impact entrepreneurs have upon the economy From the economic perspective, an entrepreneur is a person who brings together the resources or factors of production into combinations that make their value greater than before Economic theories help in providing missing links in the economic environment that are necessary for business startup and survival

Economic perspective (cont…)
Proponents of economic theory believe that entrepreneurship and small business development is influenced by factors such as: Market structures and opportunities Investment climate Government restrictions or encouragement An entrepreneur is seen as a person who specializes in taking judgmental decisions about the coordination of scarce resources (Casson, 1982)

Economic perspective (Cont..)
Classical economist like Keynes emphasis optimization of existing resources in order to reach equilibrium. Here the entrepreneur is defined as: The stabilizing force that brings market forces closer to an equilibrium He/she shifts economic resources out of an area of lower risk/productivity to areas of higher productivity/greater yield

Here the entrepreneur is defined as:…
An entrepreneur is the person involved in allocating scarce resources in order to produce goods/services with utility, hence a forth factor of production he/she distributes and organizes resources An entrepreneur is the stabilizing force which brings markets closer to equilibrium and which makes market forces work more smoothly The entrepreneur is the person driven by profit motive (profit maximization and cost minimization) and gains socially and financially from economic activities.

Here the entrepreneur is defined as:…
Entrepreneurs create a dynamic disequilibrium in the economy as opposed to static equilibrium This he does by creating innovations which introduce new combinations and production Entrepreneurial activity is a destabilizing force that starts the process of creative destruction, the essence of economic development Entrepreneurs are not manage who undertake routine activities on the basis of past experience without idea of change, rather they are risk takers in the area of uncertainty and engage in activities that have not been undertaken before

In summary, the economists see entrepreneurs as:
Risk takers or the bearer of uninsurable risks (Cantillon, 1755) A combiner of resources or factors of production such that wealth is created (Say, 1832) Innovators who bring new combinations into production process (Schumpeter, 1942) Schumpeter saw entrepreneurship as the engine of economic development which resulted in new combinations (called an enterprise)

The new combinations may include:
Introductions of new products or services Introduction of new method s of production Opening on new markets Finding new sources of supply of raw materials or components Providing induction reorganization Neoclassical economist view

Implications/comments on this theory
You can train entrepreneurs by enhancing their creativity and supporting innovating ideas People can be trained to sharpen their decision making abilities to see and analyse opportunities creatively

SOCIOLOGICAL THEORIST PERSPECTIVE
According the this perspective environmental factors such as belief systems, cultural values, social structure for the basis of entrepreneurial behaviour Studies by some sociologist indicate that the decision to become self employed is related to having association with another person who is a close relative Social interactions provide potential entrepreneurs with: Market/market information Credit Social support

SOCIOLOGICAL THEORISTS PERSPECTIVE (cont..)
The sociological theories have been based on the premise that members of a given society generally adhere to system of structured roles which can encourage or discourage entrepreneurships. Entrepreneurship activities will be high in those cultures where entrepreneurships is held in high esteem.

The social influence of entrepreneurship behaviour can be explained in terms of: Family background - the general hypothesis is that those whose parents are self employed or business owners are significantly more like to become business owners themselves Religion – research findings indicate that some particular religious persuasions tend to have entrepreneurial spirit. For example, Jews are commonly perceived as having an enterprising nature

Ethnicity – research indicates that some ethnic groups are more inclines to entrepreneurial activities than others Education and training – research studies indicate that entrepreneurial activities can be enhances through educational and training programmes .Relevant training provides prerequisites for business ownership and helps in reducing business failure rates Cultural values – some cultural values discourage/encourage entrepreneurship

Comments of this perspective:
It perpetrates the myth and stereotypes in society related to superiority and class system and are not healthiest for development

PYSCHOLOGICAL THEORISTS PERSPECTIVE
The psychological theories of entrepreneurship are based on traits and personality characteristics that are exhibited by successful entrepreneurs The central focus of this perspective is that the entrepreneurs have unique values, attitudes and needs which drive them to business creation People behave according to their values, and attitudes irrespective of the different situations they might be

PYSCHOLOGICAL THEORISTS PERSPECTIVE (cont..)
The psychological school focuses on personality factors Believe that entrepreneurs have unique values and attitudes towards work and life This propel the individual to behave in a certain way According to this theory, some people are more likely to become entrepreneurs because of their mental attitude for independence or with dissatisfaction with operating under the direction of others

Entrepreneurs, as other people acquire these values attitudes and needs as they grow up from: Families Schools Churches Communities These values are learned in the process of socialization into a culture.

Since values are leaned early in life ad are well established prior to adulthood, characteristics can only be reinforced in those who portray them or have them in latent (dormant, concealed) form It would not be cost effective to try to develop them in people who do not possess them but to reinforce them in those who already have them

The major distinguishing features, or quality of characters that have been widely explored within the psychological perspectives that make entrepreneurs different from others are: Need for achievement Locus of control Risk taking propensity Positive self image Initiative Independence Future orientation Goal setting Time bound planning Environmental searching

Extreme psychologist further suggests that: The entrepreneur has an ability, sixth sense and instinct which is inborn The entrepreneur portrays intuition, energy, persistence and self-esteem Entrepreneurs according to this version are born as they have natural abilities, training cannot influence in any way

Comments of this perspective:
It perpetrates the myth and stereotypes in society related to superiority and class system and are not healthiest for development It simply says people are not equal and it would be difficult to organize training programmes suitable for all It can give negative attitude towards young people who might not be lucky to possess the unique abilities and traits

MANAGEMENT PERSPECTIVE
This school emphasize organisation of resources in a systematic way to attain maximum profit Entrepreneurs are therefore organizers of an economic resource venture They organise, own, manage and assume risks Entrepreneurships is therefore a series of activists which focus on the central function of managing a business such as production, planning, marketing, coordinating, controlling, evaluating and financing

Management perspective (cont..)
The managerial school therefore emphasizes on improving a persons capacity through developing his/her Analytical Rational Cause-effect relationship Another stand of management view entrepreneurs as leaders on people They have the capacity to adapt their styles in order to get maximum out of people

Management perspective (cont..)
They view people as their greatest resource and realize that they cannot accomplish goals alone but must depend on other people and their skills Training is therefore possible by knowing how to motivate, lead and direct people Basic questions that people who follow this school of thought would be asking themselves are: What are my plans? What are my capabilities? What are my credentials? How do I get most from the people around me?

CONCLUSION All these theories provide a useful insight in understanding and explaining entrepreneurship It is possible that they can complement each other in developing a rich entrepreneurial programme Pre- starters can benefit a lot form psychological, social and economic schools of thought Start ups and on going entrepreneurs can benefit more from management school

Entrepreneurship Process

Is everybody who starts a business an entrepreneur?

Appreciating entrepreneurship
Right attitude: Positive – entrepreneurship can be a way of life Not a get rich quick business Be motivated to an entrepreneur

Entrepreneurship Process
Steps: Appreciating entrepreneurship Idea generation Opportunity assessment Business planning Registration Financing Start up

ENTREPRENEURIAL MOTIVATION

ENTREPRENERIAL MOTIVATION
.

ENTREPRENEURAIL MOTIVATION
Entrepreneurial motivation is affected by two main factors internal motivating factors External motivating factors

Internal motivation Internal motivation is the inner drive you get as a result of desire to achieve a certain goal or fulfill some needs The goals are the aspirations that define the base of inner drive of an entrepreneur

Internal factors affecting motivation
Self actualization One of the powerful motivators that form the base for inner drive on an entrepreneur is self actualization. Usually a successful venture offers various form of reward in terms of benefits identity and prestige. Having achieved the basic human needs, entrepreneurs become more confident in their abilities to realize their capability of achieving more Profit maximization The drive to maximize profits will make potential entrepreneurs work harder, be more innovative and even venture into other enterprises

Internal factors affecting motivation (cont…)
Desire to succeed This is an aspiration to achieve success toward ones welfare to maximize pleasure and happiness. This will give an entrepreneur public appreciation and recognition, especially if they have accomplished difficult tasks where others have failed Survival An entrepreneur has to face many challenges, completion, internal and external forces. To succeed, entrepreneurs have to strive to overcome these obstacles. This sprit of survive sustains them through a challenging environment

Internal factors affecting motivation (cont…)
Adventure This is a way of taking risks or challenges without knowing the end result. This gives a potential entrepreneur an opportunity to explore and this helps and enhances his knowledge and innovativeness Independence/self reliance An entrepreneur does not like being controlled by others. They have their own original thoughts and ideas and generally do not conform to routine jobs and practices. To satisfy their needs they seek opportunities that provide independent hence become masters of their own activist and taking full responsibilities for their outcome Power The desire to feel in total control of all situations

External motivation What external factors would motivate me to start a business? External motivation factors are those factors that expose you to the available public resources and facilities which would encourage you to start a business

External motivation factors
Credit facilities These are the facilities which would help you to acquire the necessary capital outlay to be able to set up an enterprise This capital outlay will assist you to purchase raw materials, machinery, equipment and other inputs Infrastructure Includes building, communication, information technology, transport and other auxiliary services and utilities Lack of adequate infrastructure creates physical constraint to you when implementing your ideas.

Access to business information
This includes investment information, small business development assistance and consultancy services, fairs and exhibitions Training In entrepreneurship, small business management, business planning, services, Access to technology Technology linkages through research institution Business incubation services – to guide growth

Access to markets Access to local markets though subcontracting, international or regional markets through trade agreements e.g. AGOA, COMESA Export and import incentive schemes: These are government schemes used to provide concessions to you, when you are involved in the export or import activities. Concessions on taxes, customs and excise duties, speedy licensing with regard to export and importation of machinery equipment and raw materials by the government will reduce your operating costs if your are involved in import and export activities. This will reduce your costs of imports and encourage you to set up an enterprise or expand the existing one

Pricing policy This is part of government policy which assists or encourages you to produce and sell goods and services It is important that a pricing system must take into account the total cost require to produce a good or services whereby you are able to recover production cost and be left with reasonable profit margins which could de used to improve your business

Export processing zones (EPZ)
This is a government scheme to assist investors manufacture internally competitive goods aimed entirely for export markets You as a local invest will benefit from not paying heavy freight costs, additional fees on insurance in transit, no delays form lengthy shipping durations when you purchase from EPZ If you invest in the EPZ you will benefit form exemption form export earning, raw materials, capital transactions, inputs relating to manufacturing activities

Idea generation – sources of business ideas
Vocational training and experience Hobbies Through networking, talking to bankers, sales people, peers Observing the environment – the unexpected, process needs, change in technology, demographic changes, law changes

Shows, exhibitions, fairs
Brainstorming in groups or community Newspapers and magazine – from special features ( e.g. on value addition), to tenders, adverts, etc Survey Talking to successful business people - they can advise you on certain businesses that are profitable Talking to potential customers - one can get to know their preferences for certain products or services

Business opportunity Not all ideas are opportunities
An opportnity is an attractive project idea which an entrepreneur accepts for investment on the basis of what he knows about the possible success of the project.

Characteristics of a good business opportunity
A business idea will be a business opportunity if it has the following characteristics: Demand There is a good market scope for the product – the available products are not enough to everybody or its not what the customers want – there is a gap in the market

Good return on investment – what is the expected return on investment, when are you likely to break even Availability of inputs – raw materials, technology, labour Skill required available – especially specialized skills Political and legal framework

Opportunity assessment/validating an idea
Purpose: To assess whether an idea is feasible (workable) and viable (give the owner good returns)

Validation process This requires some sort of feasibility studes which will look at four things: Market Your strengths Profitability Environment

The market Is there a market
Is there a need that needs to be fulfilled Do you understand the customers What is the industry trends

Your strengths Do you have:
The required skills and appropriate technology An entry strategy Organizational plan (Technical and management) Enough capital to finance the business

Profitability How profitable is the business
How long will it take to break even, can you wait that long What are the expected risks

The environment Evaluate the environment in terms of: Technology
Resource available Government policy and laws Infrastructure Market conditions Culture competition Economic assessment Business trends

“Failing to plan is planning to fail”
Business Planning “Failing to plan is planning to fail”

Business plan – what is it?
A written document with specific procedures for achieving results within a specified period of time It determines what a a business will is, will be and should be It is a document which summarizes a business opportunity ( why the opportunity exists and why the management team has what it takes to achieve it)

Business planning (cont…)
It defines and articulates how the management team will seize and execute the opportunity identified It specifies procedures for achieving objectives/results within a specified period of time

It states: What will be done, how it will be done, by who the work will be performed, under what time constraints It is a document which defines the most desirable, most timely, least hazardous route to a given destination

Why plan To raise capital – to convince investors that the new venture: Has an opportunity Has an entrepreneurial talent Has management talent to exploit the opportunity Has rational and coherent and believable programme for achieving revenue and expenses targets on time

Why plan As a means for guiding business growth to understand growth
to guide growth it is a flight stimulator gives confidence in decision making helps in redefining strategy and in making difficult decisions Claries the venture financial requirements

Why plan Save management time
Ensures management and market opportunities are not missed Provide for effective utilization of firms resources Encompasses strategies for carrying out decisions Provides systematic feedback as a means of measuring results

Why plan (cont… Analyse the impact of competition
Track changes in customers lifestyles, wants and needs Aid in decision making

Business plan outline Phase 1: the industry the company, products or services Phase 2: marketing research, analysis and marketing plan Marketing research and analysis – customers, market size, trends, competition, estimated market share Marketing plan – overall marketing strategy, pricing strategies, sales tactics, advertising and promotion programs, distribution plan

Business plan outline ( cont…)
Phase 3: operational analysis and organizational plan Designer and development plans Manufacturing and operational plans ( geographical location, facilities and capacity improvement, strategy and plans The management team ( organizational structure, key personnel, compensation, incentives, support advisors

Phase 4: financial analysis and plan The economics of the business – gross and operating margins, profit potential, fixed and variable costs Financial plan –pro forma income statements balance sheet and cash flow, breakeven analysis Proposed company financing – desired, sources and uses

Phase 5: Executive summary Summary description of the business The opportunity and entry strategy Target market and sales projection Competitive advantage Economics and profit potential The team Financial plan Overall schedule, critical risks and assumptions

Entrepreneurship financing
Purpose of financing Types of finance Sources of funds Accessing funds Utilization of funds

Purpose of financing To start a new business
To expand a existing business To meet an emergency situation To meet normal operating costs

Types of finances required
Long term finances usually for buying fixed assets Short time finances for buying stocks, meeting operational expenses, repairs etc

Sources of financing Sale of personal assets Savings
Profits that is put back into the business Donation from friends and relatives Trade credit Mortgage Hire purchase

Bank loans: Overdraft Loans – secured or unsecured Specialized loans ( for specific sector) Government and donor funding

What determines which source to go for?
Purpose Amount Repayment Terms and conditions Security Availability costs

Getting started Meeting all legal requirements Registration
Identification and recruitment of staff Creating commitment and buy ins Opening bank account

ENTERPRENEURSHIP.

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