ENTREPRENEURSHIP

Introduction to Entrepreneurship

Module 001 | Introduction to Entrepreneurship

The concept of Entrepreneurship has a wide range of meanings. On the

one extreme, an entrepreneur is a person of very high aptitude who
pioneers change, on the other extreme definitions, anyone who wants to
work for himself or herself is considered an entrepreneur.

The word entrepreneur originates from the French word, entreprendre,

which means "to undertake." In a business context, it means to start a
business. The Merriam-Webster Dictionary presents the definition of an
entrepreneur as one who organizes, manages, and assumes the risks of a
business or enterprise.

Objectives:

1. Understand key concepts, underlying principles and

core competencies in Entrepreneurship
2. Create or provide a quality and marketable product and/or
service in Entrepreneurship
3. Define the concept of Entrepreneurship

Schumpeter’s View of Entrepreneurship

Austrian economist Joseph Schumpeter’s definition of entrepreneurship

placed an emphasis on innovation, such as:

● New products
● New production methods
● New markets
● New forms of organization

Wealth is created when such innovation results in new demand. From this
viewpoint, one can define the function of the entrepreneur as one of
combining various input factors in an innovative manner to generate value
to the customer with the hope that this value will exceed the cost of the
input factors, thus generating superior returns that result in the creation of
wealth.

Entrepreneurship vs. Small Business

Many people use the terms "entrepreneur" and "small business owner"
synonymously. While they may have much in common, there are
significant
differences between the entrepreneurial venture and the small business.
Entrepreneurial ventures differ from small businesses in these ways:

● Amount of wealth creation - rather than simply generating an

income stream that replaces traditional employment, a
successful entrepreneurial venture creates substantial wealth,
typically in excess of several million dollars of profit.
● Speed of wealth creation - while a successful small business
can generate several million dollars of profit over a lifetime,
entrepreneurial wealth creation often is rapid; for example,
within 5 years.

Risk

The risk of an entrepreneurial venture must be high; otherwise, with the

incentive of sure profits, many entrepreneurs would be pursuing the idea
and the opportunity no longer would exist.

Innovation

Entrepreneurship often involves substantial innovation beyond what a

small business might exhibit. This innovation gives the venture the
competitive advantage that results in wealth creation. The innovation may
be in the product or service itself, or in the business processes used to
deliver it.

Entrepreneur

A person who is able to identify business opportunities and implement

actions to maximize on the opportunities. An entrepreneur initiates
enterprise creation, undertakes risks, and manages resources to establish
and operate a business enterprise that is capable of to self-sustain.

Definition According to J.B. Say

According to a French economist, J. B. Say, an entrepreneur is a person

who shifts economic resources out of an area of lower productivity into an
area of higher productivity and greater yield.

Entrepreneur in Developing Economies

In the case of a developing economy, the concept of an entrepreneur is

understood differently. An entrepreneur in a developing economy is one
who starts an industry (old or new), undertakes risks, bares uncertainties
and performs the managerial functions of decision-making and
coordinating. He also puts new processes based on technological
research into operation. He is called an entrepreneur even if he imitates
any techniques of production from a developed economy. The term
entrepreneur has now been attributed to all small industrialists, traders
and agriculturalists. Hence, all people who are gainfully engaged in work
of manufacturing, distribution or service in other sectors are called
entrepreneurs. The entrepreneur can be considered as the fourth factor of
enterprise. The enterprise is the basic unit of an
 ENTREPRENEURSHIP
Introduction to Entrepreneurship

economic organization. It produces goods and services worth more than

the resources used. Enterprise is an undertaking, especially one which
involves four factors, land, labor, capital and now the entrepreneur. It
involves the willingness to assume risks in undertaking an economic
activity.

Image

It also involves innovation, risk taking, and decision-making.

Entrepreneurs are the people who start new enterprises. The entrepreneur
and enterprise are linked as the success of an enterprise depends on the
entrepreneur.

Intrapreneur

This is an employed staff e.g. manager who innovates for the company
and takes risks only on behalf of the employer. He is therefore an intra
company entrepreneur for whom the term Intrapreneur is coined.
Intrapreneurs are, therefore, the main entrepreneurs in large companies
who innovate and take risks on behalf of their employer. These are
creative people usually working together as teams, who function as
entrepreneurs within corporations. The idea is to use a company’s existing
resources such as human, financial and physical resources to launch new
products and gain more profit.

Intrapreneurship

This is the development within a large co-operation of internal markets and

relatively small autonomous business units producing products, services
or technologies that employ the firms‟ resources in a unique way. It gives
the managers of the co-operation the freedom to take initiatives and try
new ideas. It is entrepreneurship within an existing business.

Entrepreneurship and Innovation

Creativity is the ability to generate ideas while innovativeness is the ability

to implement the appropriate ideas. An entrepreneur is expected to be
creative and innovative to be able to solve problems, cope with business
challenges, plan and implement activities successfully. An entrepreneur’s
innovativeness is reflected in the following ways:

● Initiating new ideas. Initiative is the ability to start acting on an

idea. Entrepreneurs are crusaders of new ideas. They do not
wait for conditions to be perfect to act on a new idea. They act
on them and solve obstacles and difficulties as they arise. As a
result, an entrepreneur creates an advantage over their
competitors.
 ● Searching for new information. An entrepreneur is always open
for information that facilitates the generation of new ideas for the
business.
● Translating ideas and information into a business venture.
Excellent ideas and information are not enough. An “average”
idea acted upon and developed is far better than a “very good”
idea that dies because it is not followed up. Entrepreneurs are
action- oriented and translate good ideas to actions.

Inquisitiveness

An entrepreneur is always curious to know what is happening in the

business environment. The ability of being inquisitive and sensitive to the
environment upgrades the entrepreneurs’ level of thinking and approach
to business problems.

● Perseverance. Entrepreneurs do not give in to failure. Rather, they

seek out the faults and weakness and then correct them. They
persevere in their effort to overcome problems and setbacks and
eventually win.
● Removing mental blocks and acceptance. Mental blocks and
acceptance are traits that inhibit creativity and innovativeness.
Some of these are traditional methods and beliefs. An entrepreneur
has the ability to remove these barriers and encourage clear
thinking and independence in his or her venture.

Entrepreneurial Contribution to Economic Development

Utilization of Local Resources

Local resources, some of which would be otherwise declared useless, are

put to more gainful use. The value of the resources is improved. For
example, the conversion of waste products such as nylon papers to make
plastic posts, bottle tops from used bottles to make door curtains, sisal
fiber to make the world famous “ciondo” etc.

Promotion of Technology

Entrepreneurs are very creative hence; they contribute to the utilization

and development of technology. For example, the development of the
energy saving jiko, wheel chairs, washing machines, vegetable and fruit
cutting machines, charcoal refrigerators etc.

Capital Formation

Entrepreneurs help in the creation of wealth for the country through job
creation (as employees save their salaries and wages through the banking
system and other systems, they contribute to capital formation). As the
entrepreneurs pay tax and save their earnings, they too directly contribute
to capital formation.
ENTREPRENEURSHIP
Introduction to Entrepreneurship

Creation of Employment Opportunities

Entrepreneurs help in solving the unemployment problem. Majority of

indigenous. Kenyan entrepreneurs are in Small Scale and Jua Kali Sector
that is a major employer in the country. Promotion of an Entrepreneurial
Culture By portraying successful images, entrepreneurs become models to
the upcoming Kenyan generation. A country, which embraces
entrepreneurial culture, is bound to be economically stable.

Export Promotion

Many products manufactured by the Kenyan Jua Kali/Small Enterprise

sector find their way to foreign markets and in return, Kenyan
entrepreneurs identify foreign markets. Through these activities,
entrepreneurs are able to earn the country foreign exchange.

Favorable Balance of Payment

The improvement of the Jua Kali Sector has seen a reduction in the rate of
loss through import only. There is now a balance between the import and
export business.

The rate of improvement of industries in Kenya has gone up because of

an improvement in the Jua Kali and Small- Scale Enterprises sector.

Improved Marketing of Locally Produced Products

The improvement in the Jua Kali sector has resulted in an improvement in

the internal and external markets. With the current competition, every
business is compelled to produce quality products/services and
aggressively market the same.

Improved Infrastructure

Creation of businesses leads to improved cities and towns, which in turn

result in improvement of roads, banking services, telephone network,
electricity etc.

Promotion of Talent and Hobbies

The Jua Kali and Small -Scale Enterprise Sector encourages young
people to exploit their talents.

Improved Growth in Gross Domestic Product

 There is now favorable trade internally and this has seen an increase in
economic growth.

Self-reliance

Entrepreneurs enable citizens to survive comfortably without too much

borrowing.

Entrepreneurship and Self-Employment

A person puts his effort in a business or an activity that belongs to him/her

in this state. He or she works independently and earns a living from it. An
entrepreneur is one who recognizes an opportunity and takes the risks as
a business owner of providing a needed product or service for which an
adequate reward (profit) is realized. Thus, both risk and profit are involved.
These descriptions both fit entrepreneurship and self-employment so they
are one and the same, although entrepreneurship is a more serious and
deliberate level of self-employment.

Factors to Consider Before Going into Self-employment

● Business Idea
● Skills (Technical/Managerial)
● Market
● Capital (Opening, Working or Long-term)
● Machinery (Technology)
● Raw materials
● Location (Strategic)
● Legal Issues Competition

Reasons for Self-Employment

1. Need to improve personal income. Besides the inability to

secure any type of employment this is the most basic reason,
which causes many low-income earners to directly embark on
business byway of self-employment. Inflation often impairs the
ability of low-income earners to afford necessities of life to an
extent they have to look for alternative ways of ensuring
survival, and this may lead them to set up small business.
2. Inability to secure a desirable job. The number of Kenyans
eligible for employment is very high. There are not enough
employment opportunities in the formal sector. The small
business sector has the capacity to create many jobs.
3. Influence of others. Although many aspiring entrepreneurs
make a personal decision to go into business there are also
strong indications that just as many if not more get courage to
take the plunge because of influence or inspiration gained from
close associates such as friends or relatives already in
business.
4. To fulfill a life-long ambition. There are those people in society
whose ultimate goal is to go into business at some defined point
 ENTREPRENEURSHIP
Introduction to Entrepreneurship

life no matter how attractive wage employment might seem.

These people are usually highly motivated internally and do not
need extrinsic motivators to go into business. They are often
high achievers who aim for self-fulfillment that comes from doing
something unique.
5. To seek more independence. These people prefer to be
introduced to a task without being led every step required for the
accomplishment of the task. They like to be left alone to think
and develop their own initiative. When guided closely they feel
belittled, frustrated and impatient. Occasionally these people
rebel and will often end up in self-employment if the present
opportunity does not give them the opportunity to seek
challenge and contribute their own ideas.
6. Love for adventure. Innovative people thrive on exploring new
ideas and opportunities even if the outcome might be uncertain
and risky. They derive satisfaction from the thrills that arise from
a mixture of success and uncertainty.
7. Dissatisfaction with wage employment. This may be because of
poor prospects of career advancement, delayed promotions,
lack of recognition or appreciation of special accomplishments,
poor terms of service, unsatisfactory working conditions pending
redundancy
8. Favorable environment. These include appropriate incentives
e.g. access to credit facilities laws governing small enterprise
creation, access to raw materials and machinery, good
infrastructure e.g. roads telephone networks electricity,
inexpensive cost of labor.

Characteristics of Entrepreneurs

M. M. P. AKhouri, formerly Executive Director, National Institute for

Entrepreneurship and Small Business Development (NIESBUD), New
Delhi, describes an entrepreneur in words that clearly bring out the
characteristics of an entrepreneur. He describes entrepreneur “as a
character who combines innovativeness, readiness to take risk, sensing
opportunities, identifying and mobilizing potential resources, concerns for
excellence and who is persistent in achieving the goal.”

1. An eye for opportunity: Many entrepreneurs start by finding a

need and quickly satisfying it. They are always alert to
opportunities. They are very much quick to see and grab
opportunities. They plan intellectually and anticipate carefully
how to achieve their goals in realizing an opportunity.
2. Independence: Even though most entrepreneurs know how to
work within the framework for the sake of profits, they enjoy
being their own boss. They like doing things their own way. The
 characteristics of independence and the sense of determination
are the drives that make an entrepreneur start their own
business. In a way, their own business fulfills their need for
independence.
3. An appetite for hard work: Most entrepreneurs start out working
long, hard, hours with little play. Entrepreneurs are always at
work even when other people have stopped. They are persistent
and strongly believe that working hard will help them attain their
goals. They hence focus on the result.
4. Self-confidence: Entrepreneurs must demonstrate extreme self-
confidence in order to cope with all the risks of operating their
own business. Most successful entrepreneurs are confident of
achieving realistic and challenging goals. They get into business
or industry with a high level of self-confidence. This, couples
with a sense of effectiveness ultimately contribute to the
success of the venture.
5. Discipline: Successful entrepreneurs resist the temptation to do
what is unimportant or the easiest but have the ability to think
through what is the most essential. Entrepreneurs are
economically efficient, do not like to waste time and they like to
see work completed. They use discipline as a guide to their
destination.
6. Judgement: Successful entrepreneurs have the ability to think
quickly and make a wise decision. This is possible because they
have a plan, they have an economic goal, they know what they
want and they know what they can do. Entrepreneurs are
unaffected by personal likes and dislikes. They stand beyond
these types of prejudices, as they are realistic in their approach.
At the time of their need they select experts rather than friends
and relatives to assist them. They usually avoid emotional and
sensitive attitude towards their business or problem.
7. Ability to accept change: Change occurs frequently when you
own your own business, the entrepreneur thrives on changes
and their business grow. An entrepreneur may need to change
his/her plans in order to help the business grow. Entrepreneurs
look at many solutions to their problems. They realize that other
people may know how to do something better. Entrepreneurs
can choose the best way to do something, even if it is different
from how they want to do it.
8. Make stress work for them: On the roller coaster to business
success, the entrepreneur often copes by focusing on the result
and not the process of getting there. Entrepreneurs are capable
of working for long hours and solving different complexities at
the same time. As the captain of an industry or an enterprise, an
entrepreneur faces a number of problems and in right moment,
he takes right decisions that may involve physical as well as
mental stress.
9. Need to achieve: Although they keep an “eye” on profit, this is
often secondary to the drive toward personal success.
Entrepreneurs have strong desire to achieve higher goals. Their
inner self motivates their behavior towards high achievement. To
an entrepreneur, winning is achievement.
ENTREPRENEURSHIP
Introduction to Entrepreneurship

10. Focus on profits: Successful

entrepreneurs always have the profit
margin in sight and know that their
business success is measured by profits.
11. Risk bearing: Entrepreneurs are the
persons who take decisions under
uncertainty and thus they are willing to
take risk, but they never gamble with the
results. They choose moderate risk rather
than play wild gamble. They, therefore,
undertake calculated risk which is high
enough to be exciting, but with a
reasonable chance to win.
12. Locus of control: Closely consistent with
McClellan’s theory of need for
achievement, is the belief in internal locus
of control. According to Rotte’s locus of
control theory, an individual perceives the
outcome of an event as being either within
or beyond his personal control.
Entrepreneurs believe in their own ability
to control the consequences of their
endeavor by influencing their
socio-economic environment rather than
leave everything to luck. They strongly
believe that they can govern and shape
their own destiny.
13. Creative and Innovators: Successful
entrepreneurs are innovators. They
constantly put their efforts in introducing
new products, new method of production,
opening new markets and reorganizing the
enterprise. They always try not to be
satisfied with conventional and routine
way of doing things, but always think of
how they can do them in a better way.
14. Leadership: Entrepreneurs should
possess the quality of leadership.
Leadership is the ability to exert
interpersonal influence by means of
communication towards the achievement
of goals. Entrepreneurs as leaders should
provide the necessary spark of motivation
by guiding, inspiring, assisting and
directing the members of the group for
achievement of unity of action, efforts and
purpose. According to George R. Terry:
“Leadership is the activity of influencing
people of strive willingly for group
objectives”. Thus, entrepreneur, as the
leader of the group, can ensure high
performance by creating a well-to-do
environment among others. They must
have the capability to arrive at prompt and
correct direction and win the confidence of
their subordinates. Being the leader of the
enterprise, they should possess the
following characteristics:
● Existence of followers
● Assumption of responsibility
● Empathy conduct
● Exemplary conduct
● Developing teamwork
● Common objectivity
● Facilitating change
● Building morale
 ● Maintenance of discipline
● Active participation
15. Hence, entrepreneurs by their own leadership styles and
behavior reduce the problems with careful listening and proper
handling of situations. Good administrative work depends upon
effective leadership of the entrepreneur.
16. Ability to mobilize resources: Entrepreneurs must have the
ability to marshal all the inputs to obtain the product. They have
to mobilize 6Ms, i.e. Man, Money, Material, Machinery, Market
and Method effectively to realize the final product as
entrepreneurship is a function of gap filling and input
completing.

Entrepreneurs have many qualities that help them their businesses

successful. However, an entrepreneur does not have to possess all the
qualities. In that case, he has either to learn or hire the services of those
who possess the qualities he does not have.

Exercise #1: REFLECT

Instruction: Answer the following questions.

1. Do you see your self becoming an entrepreneur in the future? Why and why not?
____________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
____________________________________________________

2. What are the characteristics you have that you think would make you a successful
entrepreneur?
____________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
____________________________________________________

3. What are three skills you have that you think would make you a successful
entrepreneur. If you can’t think of any, how can you develop the skills that a successful
entrepreneur need?
____________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
____________________________________________________

Glossary Inquisitive: Eager for knowledge.

Leadership: The ability to exert
interpersonal influence by means of working for an employer that pays a salary
communication towards the achievement or a wage. A self-employed individual
of goals. earns his income through conducting
Self-employed: A situation in which an profitable operations from a trade or
individual works for himself instead of business that he operates directly.

References 1. Introduction to
Entrepreneurship;
http://www.slideshare.n
et/Olwenda/introductio
n-to-
entrepreneurship-1332
7215 ; May 5, 2017
2. What Are the Basic Concepts &
Characteristics of Entrepreneurship?
http://smallbusiness.chron.com/basi
c-concepts-characteristics-
entrepreneurship-18526.html ; May
5, 2017
3. Entrepreneurial Competencies;
https://eshipnotes.wordpress.com/to
pics/class-xi/entrepreneurial-
competencies/ ; May 5, 2017
4. Eduardo A. Morato, Jr.; 2016;
Entrepreneurship 2016 Edition;
Manila; Rex Bookstore