ENTREPRENEURSHIP

Understanding Entrepreneurship Chapter # 1

Market Opportunity DISCOVERY EVALUATION EXPLOITATION

Entrepreneurship Entrepreneurship is the practice of starting new organization or revitalizing mature organization, using unique and new ideas and based on identified market opportunities. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities. Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail.

Entrepreneurship is a Process To reform and revolutionize the pattern of producing things by using new ways and techniques for producing a new commodity or producing an old one in a new way. In simple words: Entrepreneurship means doing things that are not generally done in the ordinary course of business routine.

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

Defining Entrepreneur A person who bring resources together in unusual combination to generate profits. An Entrepreneur is a person who organizes and manages a business undertaking, assuming the risk for the sake of profit. Any person (any age) who starts and operates a business is an entrepreneur. In behavioral terms,” An achievement oriented individual driven to seek challenges and new accomplishments”

Defining Entrepreneur (cont’d) The Entrepreneur is an inventor or a developer who: Recognizes opportunities Converts those opportunities into workable/marketable ideas Adds value through time, effort, money or skill Assumes the risks of the competitive marketplace to implement those ideas Realizes the rewards from these efforts.

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

BACKGROUND OF ENTREPRENEURSHIP The concept of Entrepreneurship is derived from the Economic theory. Adams Smith (1776) “ The Wealth of Nations:. According to Adam Smith, “Entrepreneur is an economic agent with unusual foresight who could recognize potential demand of goods and services.” An economic risk taker.

Importance of Entrepreneurship Economic Majority of new jobs are created by entrepreneurs and small businesses Small high growth companies account for 70% of economic growth over last decade Over 1/3 of difference in national economic growth may be due to difference in entrepreneurial activity Entrepreneurship accounts for at least 2/3 of all technological innovation

Why Entrepreneurship Education Objective is to become entrepreneurially minded with the potential to act on this by discovering or creating business opportunities. Entrepreneurs are not “born”…they “become” through the experiences of their lives Entrepreneurs have a great diversity of personal characteristics, the common one: being willing to take a risk in return for a profit

Anyone can be an entrepreneur at any time of one’s life Entrepreneurship is NOT learned by reading a textbook and then taking a test to prove you are one. Entrepreneurship education activities are a real-life vehicle for developing academic skills Entrepreneurs are found in every occupation and career Entrepreneurship education opportunities are important at all levels of education

Carl Menger (1871) View of Entrepreneur According to Menger, economic change does not arise from circumstances but from the awareness and understanding of those circumstances, it’s the individuals who sense these circumstances and bring about changes/improvements. Entrepreneur is a change agent who transform resources into useful goods and services.

Menger’s Model of value added Transformation OPPORTUNITIES Profit / Loss Low value produce Entrepreneurial activity High value produce

Menger’s Model of value added Transformation Low value produce Producing Grain Harvesting Grain Intermediate Points of Transformation Grinding Grain Producing Bread High value produce Delivering Bread

Menger’s Model of value added Transformation Identifies intermediate points of transformation each with opportunities to add value to the original resource in such a way to eventually satisfy human needs, e.g. producing/harvesting wheat, grinding grain, making bread and delivering it. When value is added to a product/process, that value is rewarded by profit.

Entrepreneurial Process Identification and analysis of Opportunity. Developing Business plan Determination of required resources Starting and Managing the Enterprise

Identification and analysis of Opportunity Potential and length of opportunity Risks and returns of opportunity Competitive situation

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

Determination of required resources Identification of source and resources. Analyzing Gap between needed and available resources. Organizing to generate resources.

Starting and Managing the Enterprise Launch of the Venture Managing business operations Developing sales/revenue Improving cash flows.

Characteristics of Entrepreneurs Self-confident & Optimistic Able to take calculated risks Responsive to challenges Adaptive Versatile knowledge Creative, energetic & intelligent Initiator & dynamic leader with a vision to excel Have strong ability to foresee and observe Tolerance for failure