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ENTREPRENEURIAL SKILLS ENT3001/3003/4003
LECTURE #1 & 2 INTRODUCTION TO ENTREPRENEURSHIP
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INTRODUCTION TO ENTREPRENEURSHIP
Objectives Explain the concept of entrepreneurship Outline the rewards and drawbacks of entrepreneurship Identify the main personal , entrepreneurial characteristics (PEC’s) of successful entrepreneurs Identify Supporting Enabling factors (SEF’s) Identify the factors that are driving the growth of entrepreneurship Explain how to avoid the mistakes of entrepreneurship
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What is entrepreneurship?
Many see entrepreneurship as the mere emergence of new businesses through the following ways New Business / New idea New Business / Existing idea Buying Existing Business Buying a franchise Entering into a family business
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What is entrepreneurship?
The way to make the economy more productive and compete more effectively in the global economy The essence of free enterprise because the birth of new businesses gives a market economy its vitality ( new jobs, products)
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What is entrepreneurship?
A new style of doing business An approach – way of seeing things and of doing things differently Style of management ( Peter Drucker) High risk activity Ability to see change/ difficulties as a business opportunity
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What is entrepreneurship?
Almost all definitions of entrepreneurship include: Initiative taking The organizing and reorganizing of social/economic mechanisms to turn resources and situations to practical account. The acceptance of risk or failure
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Concept of Entrepreneur
Comes from the French meaning “between-taker” or “go-between” Earliest Period Marco Polo who attempted to establish trade routes to the far east The money person (forerunner of Capitalist) entered into contract with the go-between to sell his goods. Early Capitalist
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Concept of Entrepreneur
Middle Ages The term entrepreneur was used to describe both an actor and a person who managed large production projects. This person did not take any risks, managing the project with the resources provided. A typical entrepreneur was the cleric who managed architectural projects.
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Concept of Entrepreneur
17th Century The entrepreneur was a person who entered into a contract with the government to perform a service 18th Century The entrepreneur was distinguished from the capital provider. Eli Whitney & Thomas Edison were unable to finance invention themselves. Both were capital users (entrepreneurs), not capital providers (venture capitalists.
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Concept of Entrepreneur
19th & early 20th Century Viewed mostly from an economic perspective Contributes his own initiative, skill and ingenuity in planning, organizing, and administering the enterprise … assuming the chance of loss and gain (risk taker) Andrew Carnegie is an example, building the American steel industry through competitiveness rather than creativity
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Concept of Entrepreneur
Middle 20th Century and Beyond The notion of an entrepreneur as an innovator was established. Innovation, the act of introducing new, is one of the most difficult tasks for the entrepreneur. John Pierpont Morgan and Edward Harriman are examples of this type of entrepreneur. This ability to innovate is an instinct that distinguishes human beings from other creatures and can be observed throughout history.
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DEFINITION OF ENTREPRENEURSHIP
The process of creating value by pulling together resources to exploit an opportunity Entrepreneurship is the dynamic process of creating incremental wealth
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DEFINITION OF ENTREPRENEURSHIP
The process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.
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Who is an Entrepreneur? To the economist , an entrepreneur is one who brings resources, labour, materials, and other assets into combinations that make their value greater than before, and one who introduces changes, innovations, and a new order.
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Who is an Entrepreneur? Definition Someone who perceives an opportunity and creates an organization to pursue it
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Reasons for becoming an Entrepreneur
To increase earnings To introduce a new and creative idea To provide a needed service To enjoy the satisfaction of developing your own successful venture To become your own boss
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Reasons for becoming an Entrepreneur
independence enjoyment, challenge, more room for creativity personal satisfaction feeling of autonomy and freedom
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Rewards of Entrepreneurship
Opportunity to gain control over ones own destiny Opportunity to reach one’s full potential Opportunity to benefit financially Opportunity to contribute to society and be recognized for one’s efforts Freedom from supervision and rules of bureaucratic organizations Freedom from routine, boring and unchallenging jobs Freedom from the limits of standardized pay
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Drawbacks of Entrepreneurship
Uncertainty of income Complete responsibility Risk of losing your entire invested capital Long hours and hard work Emotional loneliness Disruptions to personal life Strong possibility of failure Lower quality of life until the business gets established
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Drawbacks of Entrepreneurship
Which drawbacks are most disturbing to you and why? Can anything be done to reduce them?
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How to Reduce the Drawbacks of Entrepreneurship
Mental preparation Planning – Develop a thorough Business Plan Research Training Start small Start & operate business on the side Start early
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KEY ELEMENTS IN ENTREPRENEUR’S BACKGROUND
√ Supportive childhood family environment √ Having a parent who is self-employed helps √ Education is important √ Aged 22 – 45 when starting venture √ Work history: dissatisfied with company job but has technical knowledge
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ENTREPRENEUR VS INVENTOR
An inventor creates something for the first time. While the entrepreneur falls in love with the new venture, the inventor falls in love with the invention and often requires the expertise of an entrepreneur to launch a new venture Historians classify Albert Einstein as an inventive genius and Henry Ford as an entrepreneurial genius.
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The Entrepreneur The classic entrepreneur is often seen as one who possess certain innate traits, often referred to as Personal Entrepreneurial Characteristics ( PECs)
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PEC’s of (Successful) Entrepreneurs
Committed to success Have high work standards Self-motivated & able to motivate others Enjoy working and sharing ideas with people at all levels Hardworking Enthusiastic and Optimistic Accept Responsibility Are good leaders Analyze situations easily and make and implement decisions quickly Creative thinkers, able to identify a positive trend within a negative situation Good planners and organizers
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PEC’s of (Successful) Entrepreneurs
Trustworthy people with integrity Disciplined and determined Committed to their projects Self confidence Enjoy a challenge Energetic, always on the go Information seeking Persuasive and good networkers
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PEC’s of (Successful) Entrepreneurs
There is really no neat set of behavioral attributes that allow us to separate entrepreneurs from non-entrepreneurs From studies done, it has been observed that entrepreneurs have a greater desire to be in control of their own fate, having a strong desire to be successful / high achiever
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PEC’s of (Successful) Entrepreneurs
Are PECs innate or can they be taught? Two opposing schools of thought: True entrepreneurs are born with special personality traits that create business. These traits cannot be taught or learned. Entrepreneurial tendencies can be learned and developed through experience and business training.
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Supporting & Enabling factors (SEF’s)
Supporting and Enabling factors (SEF’s) are factors which are largely outside of the control of the entrepreneur but which nonetheless played a critical role in the success of the entrepreneur (Orville Reid 2011). The concept of SEF’s concedes that for success to occur the entrepreneur must have PEC’s as well as SEF’s which contributes to success.
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Supporting & Enabling factors (SEF’s)
Work experience Prior business experience Finance knowledge International experience Technical support Recession / crisis Outside support Owning assets Family support Market growth
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Entrepreneurship – The fear of failure
What is failure ? Is it OK to fail? Many cultures, including ours stigmatize failure A business may fail and many do An entrepreneur only fails when he never tries again Entrepreneurs use business failures as opportunities to start over again and to learn from them
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Factors influencing the growth of Entrepreneurship
Ideas Capital People Technology
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Social Factors Natural entrepreneurial spirit Said to be part of the Jamaican psyche Probably connected with “Anancyism” – from stories of Bro. Anancy who tricked others to get what he wanted. Sometimes motivated by necessity – it is said that “necessity is the mother of invention” Some persons have no option but to hustle
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Social Factors The fulfillment of being your own boss The desire for self actualization
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Social Factors Cont’d The role of the schools & other training institutions Entrepreneurship training is being introduced in schools especially at the tertiary level HEART Trust/NTA ensures trainees are exposed to entrepreneurship
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Social Factors Cont’d The role of women in entrepreneurship More women are engaging in business – to support their family and fulfill higher aspirations.
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Cultural factors Ethnic groupings Some ethnic groups (Chinese, Jews, Indians) have a tradition of being involved in business in Jamaica. Cultural penetration Cable TV – showing foreign cultures; promoting wealth & affluence
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Economic The state of the Jamaican economy is both a push and pull factor for persons to engage in entrepreneurship Stable economy Helps business planning, gives confidence for starting new business High inflation Wreaks havoc with business planning but encourages trading (buy-&-sell) operations
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Economic High unemployment Increases the availability of unskilled & skilled labour at reasonable pay rates The effect of interest rates High rates reduce ability to repay loans, makes loan financing unattractive for funding business Stable exchange rates Helps keep prices constant, builds business confidence
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Economic Information & Communications age Technology replacing employees Technology increases business efficiency, but reduces need for certain human skills. Creativity, innovation & business start-up seen as solutions Opportunities are created for start-up of new high tech businesses
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Economic Globalization & Liberalization Removal of trade barriers between & within countries Increases trade with the rest of the world
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Globalization The ongoing process of integration of regional economies, societies & cultures through international exchange Has economic, technological, socio-cultural, political and biological components Include the transnational dissemination of ideas, language and popular culture
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FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP
Globalization The world becoming “smaller” Transportation & communication are easier and faster General state of change Paradigm shifts taking place in expectations & possibilities
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FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP
Globalization Technology used to do things better, to do new things Mobile technology Empowering people. Bringing the world to you. Control your view of the world at the touch of a button Robotics, Management Information Systems, Expert Systems, Marketing possibilities via the Internet Showcase your products and services to the world at a small cost
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FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP
Globalization The impact of liberalization on local & international markets Lowering/removal of barriers to trade of goods & services Exporting possibilities Lower import cost, increased specialization, increased export possibilities
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FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP
Globalization Mobility of labour / jobs Live anywhere / work anywhere possibilities increasing via telecommuting, telemarketing
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FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP
Regionalization - one component of Globalization Regional trading blocks CARICOM - Caribbean Common Market Allows free movement of capital & labour CSME – CARICOM Single Market & Economy Deepening the integration process, provides a unified market for goods within CARICOM
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FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP
Regionalization - one component of Globalization Regional trading blocks FTAA – Free trade area of the Americas Opening up of markets (North America, Central America, South America & the Caribbean) NAFTA – North American Free trade Agreement (Canada, USA & Mexico) EU – The European Union
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Political What specifically have governments done to promote entrepreneurship Adopted a capitalist free market economy for Jamaica Encourages the private sector to be the engine for economic growth
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Political Encourage & speak of the need for entrepreneurship HEART Trust/NTA created an entrepreneurial unit for training, development & promotion of entrepreneurship in Jamaica
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Political Government policies Have been reducing Government ownership of businesses by privatizing state owned enterprises (JPS, the telecommunications sector, Air Jamaica, the sugar companies, etc.)
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Political Government policies Government’s role has been changing to that of facilitator & referee, rather than owner & operator evidenced by the establishment of bodies such as the Office of Utilities Regulation -OUR, Fair Trading Commission - FTC, Anti-Dumping Commission, Financial Services Commission.
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Political (Cont’d) Business facilitation strategies E-government initiatives e.g. Jamaicatradepoint.com To reduce bureaucracy and lost man-hours; one stop shop for importers/exporters. Certain taxes can be paid on-line Government entering into bi-lateral agreements with friendly governments to facilitate business.
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Political (Cont’d) Access to loan and grant funds for business start-up The Jamaica Business Development Company JAMPRO Jamaica Trade & Invest
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Political (Cont’d) Business facilitation strategies Low interest rate schemes for business loans Lowering of import duties, removal of unnecessary red tape
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FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP
Political (Cont’d) Business facilitation strategies Provision of technical assistance (JBDC) Tax holidays for businesses which create employment National Infrastructure Improvements e.g. Highway 2000; the potential benefits, jobs, other economic spin-offs, the multiplier effect
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CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA
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CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA
High Input costs Cost of economic inputs- due to depreciating exchange rate e.g. Imported materials, rent etc. Security Utility and other costs Transportation of workers Labour laws – sometimes unfriendly to business
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CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA
Crime & violence Extortion Robbery & Murder Population size Small society, everybody knows everyone else; could restrict individual opportunities e.g. after business failure Small local market for sale of goods & services
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CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA
Geography Where people live – helps determine & limit the types of opportunities open to them (e.g. Kingston or Portmore vs. rural farming community) Socialization Parents & family tends to encourage their children to select more traditional careers in less risky, established professions.
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CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA
Anti-entrepreneurial Education System The system tends to unfairly promote the Sciences as superior to the Arts and other creative endeavours Entrepreneurship is traditionally promoted as being for persons who are unable to progress in the traditional professional streams
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CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA
Open economies such as Jamaica have little option if we are to survive in this global environment Jamaica has to find a way to take advantage of opportunities to create and grow businesses to compete against imports, create local employment and increase the standard of living for its peoples.
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Mistakes Entrepreneurs Make
Poor management Lack of leadership ability, sound judgment and knowledge necessary to make the business work Lack of experience Poor Financial Control Weak Marketing Efforts Failure to develop a Strategic Plan
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Mistakes Entrepreneurs Make
Overconfidence Uncontrolled Growth Poor Location Improper Inventory Control Incorrect Pricing Inability to make the “Entrepreneurial Transition”
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How to Avoid the Pitfalls
Know your business in depth Set clear goals Develop a Solid Business Plan Learn to manage people effectively Manage Financial Resources Understand Financial Statements
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Summary Concept of Entrepreneurship
Rewards and drawbacks of Entrepreneurship PEC’s of Successful Entrepreneurs Factors driving the growth of Entrepreneurship How to avoid the mistakes of Entrepreneurship
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END OF LECTURE #1 & 2
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TUTORIAL ACTIVITY What are your strong PECs? What are your weak PECs?
List five of them What are your weak PECs? You will need to devise ways of improving each weak area Identify one specific strategy that you could use to improve each weak PEC
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TUTORIAL ACTIVITY Select one successful local entrepreneur
Explain why you think this person is successful Identify four major PECs that this person exhibits Substantiate your views with evidence of actual events/activities where these PECs were demonstrated
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TUTORIAL ACTIVITY Historians classify Albert Einstein as an inventive genius and Henry Ford as an entrepreneurial genius. Do you agree? Why?
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TOPIC TO BE REVIEWED FOR DISCUSSION
Importance of Entrepreneurship in Economic Development Assess the impact of entrepreneurship on national development. Research the role of agencies which support the growth of entrepreneurship What are the emerging business opportunities?
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