Course: Instructor: Alemayohu

Entrepreneurship
Workine (MBA)
 Introduction

Chapter One:
French word, entreprender,
The Nature of undertaking
Entrepreneurship

Entrepreneurship: a process of
creating value through
enterprising
Chapter Objective
Define the term entrepreneurship and entrepreneur

Identify types of entrepreneur

Recognize the role of entrepreneurship in the economy

Analyze the entrepreneurial competences

Understand creativity and innovation

1.2 Historical Origin

In the middle of the 20th

In 18th Cent. by Richard Cent., an entrepreneur
Cantillon-entrepreneur is started exploiting
a risk taker as buying at invention through
certain price to sell at revolutionizing
uncertain price production.

In 19th and 20th Cent.an Then creative and

entrepreneur was viewed innovative projects were
from the economic formulated through
perspectives-organizes entrepreneurs, leading to
and run enterprise for the concept of creativity
gain. and innovation in the
business.
 Entrepreneurship is related to the process:

The ability to perceive an opportunity.

The ability to commercialize the perceived opportunity

1.3 i.e. innovation
Entrepreneurship
and Entrepreneur The ability to pursue it on a sustainable basis.

The ability to pursue it through systematic means.

The acceptance of risk or failure.

Entrepreneur

any person who creates and develops a business idea and takes the risk of
setting up an enterprise

a professional who discovers a business opportunity to produce improved or

new goods and services

an individual who: has the ability to identify and pursue a business

opportunity; undertakes a business venture; raises the capital to finance it; ….

create the job not a job-seeker; has a dream, has a vision; willing to take the
risk and makes something out of nothing
 Perspectives

Psychologist- an
Economist -an entrepreneur Capitalist philosopher- an
entrepreneur is a person
is one who brings resource entrepreneur is one who
typically driven by certain
that makes their value creates wealth for others as
forces need to obtain or
greater than before well
attain something
entrepreneur
refers to the
person
entrepreneurship
defines the process
 The individual entrepreneur

Types of the Intrapreneur: person who does

entrepreneurial work within large
Entrepreneur organization.

The Entrepreneurial Organization: An

organization can create an environment in
which all of its members can contribute in
some function to the entrepreneurial function.
Role of Entrepreneurship in the Economic
Development

What do you think?

 Improvement in per capita Income/Wealth
Generation

Generation of Employment Opportunities

Role of
Entrepreneurs Inspire others Towards Entrepreneurship (most large
business in Ethiopia)
hip in the
Economic Balanced Regional Development

Development Enhance the Number of Enterprise (Due to

complementary inputs)

Provide Diversity in Firms (Different Kind of firms)

Entrepreneurial
Competence
and Entrepreneurial Mindset

Environment
 The Young Professional
Who
Becomes an
Entrepreneu The Inventor
r?
The Excluded (minorities and
excluded coz of who they are)
 • Opportunity-seeking
• Persevering/Your Story and Key Learning?
Qualities of
• Risk Taking
an • Demanding for efficiency and quality/Why?
Entrepreneu • Information-seeking
r • Goal Setting/SMART Objectives
• Planning
• Persuasion and networking
• Building self-confidence
• Listening to others/don’t impose ideas
Sec 5
• Demonstrating leadership/Entrepreneurs -do
things through others too
Quote
• Genius is“1% inspiration and 99% perspiration.” Edison
 General management skills and

Entrepreneuri
al Skills
People management skills
 Strategy Skills

Planning Skills

General Marketing Skills

Management
Skills Financial Skills

Project Management Skills

Time Management Skills

People Management Skills

• Communication Skills
• Leadership Skills
• Motivation Skills
• Delegation Skills
• Negotiation Skills
Entrepreneurial Skills
 Owning Organizations: Playing investor and manager role

The Founding New Organizations: by combining factors of

production
Entrepreneurial
Tasks-What Bringing Innovations to Market: new thing or bringing an
existing one in new ways
they actually
Identification of Market Opportunities by identifying
do? gaps

Application of expertise as allocating scarce resources

using their skills

Provision of leadership by coming up with new innovation by

mobilizing own people, customers and suppliers
 Employees as wage, part-ownership and
personal development

Investor who supply money to run the

entrepreneurial activity
1.6.1.5.The
Entrepreneurial Supplier who provides them input
Wealth-who
benefits from?
Customer (end user or business
customer)

The local community that could be

positively/negatively affected
1.6.2 Entrepreneurship and
Environment
 Business environment refers to the factors
external to a business enterprise which influence
its operations and determine its effectiveness

Environment? Healthy (Favorable for growth) and unhealthy

(unfavorable)

So you better study it as an entrepreneur to

influence it
 It provides information about environment which is
essential for successful operation of business firms.

Why to Study It opens-up fresh avenues for the expansion of new

the entrepreneurial operations.

ENvironment Knowledge about changing environment enables

businessmen to adopt a dynamic approach and maintain
? harmony of business operations with the envi­ronment.

By studying the environment, entrepreneurs can make it

hospitable to the growth of business and thereby earn
popular support.
 The Control

Consider The Influence

The Environment
Business Environment

EXTERNAL

INTERNAL
External Environment

ECONOMIC - LEGAL-LAWS
STRUCTURE AND CONCERNING WAYS OF
ECONOMIC RELATED DOING BUSINESS, SO
POLICIES CONSULT THE LAWS ON
LABOR AND OTHERS

POLITICAL-HOW IT SOCIO-CULTURAL
AFFECTS YOUR LIKE NORMS, AND
BUSINESS DEMOGRAPHICS
Internal Environment

Raw materials Operations issue Finance

availability issue if there is requirements to
enough start or expand
machines

Human
resources-skills
and kind
 • Sudden changes in Government policy.
• Sudden political upsurge.
• Outbreak of war or regional conflicts.
Environmental • Political instability or hostile Government attitude
towards industry.
Factors • Excessive bureaucracy and corruption among
Affecting Government agencies.
Entrepreneurshi • Ideological and social conflicts.
p • Unreliable supply of power, materials, finance, labor
and other inputs.
• Rise in the cost of inputs.
• Unfavorable market fluctuations.
• Non-cooperative attitude of banks and financial
institutions.
1.7 Creativity, Innovation
and Entrepreneurship
Sec 4
 1.7.1 Creativity

The tendency to generate or recognize ideas,

alternatives, or possibilities that may be
useful in solving problems, communicating
with others, and entertaining ourselves and
others.

It is a process of assembling ideas by

recombining elements already known but
wrongly assumed to be unrelated to each other
Key points to Consider

Process: creativity is a process (that it is

more like a skill than an attitude, and that
you can get better at it with practice)

Ideas: creativity results in ideas that have

potential value.

Recombining: the creative process is one

of putting things together in unexpected
ways.
Steps in the Creative Process

Step 4: Insight (the

problem-conquering Step 5: Verification and
solution flashes into the Application (supporting
Step1: Opportunity or Step2: Immersion Step 3: Incubation (the
person’s mind at an evidence, using logical
problem Recognition-for (concentrate and gather subconscious mind is still
unexpected time, such as persuasion, and
solution information) engaged, no activity)
on the verge of sleep, experimenting with new
during a shower… Aha… ideas)
experience!)
1.7. 2 Innovation
• is a process of intentional
change made to rate value
by meeting opportunity and
seeking advantage
 Invention - described as the creation
of a new product, service or process

There are four Extension - the expansion of a product,

service or process
distinct types
of innovation: Duplication - defined as replication of
an already existing product, service or
process

Synthesis - the combination of existing

concepts and factors into a new
formulation
 Analytical planning: Resources organization:
carefully identifying the obtaining the required
product or service
features, design as well as resources, materials,
the resources that will be technology, human or
The needed. capital resources

Innovation
Process
Commercial application: the
Implementation: provision of values to
applying the resources customers, reward
employees and satisfy the
in order to accomplish stakeholders.
the plans
Areas of Innovation

New product: A New Services: A New Production

new product can service is an act Techniques:
be developed which is offered to Innovation can be
through new or undertake a made in the way in
existing particular task or which a product is
technology. solve a particular to be
problem. manufactured.

New Operating
Practices: As with
innovations in the
New Way of production of physical
Delivering the products, innovation
Product or Service to in service delivery
the Customer: must address
Customer can only customers need and
use product/service offer them improved
they can access. benefits
Areas of Innovation…

New Means of Informing the Customer about

the Product: People will only use a product or
service if they know about it

New Means of Managing Relationship within

the Organization: Any organization has a wide
variety of communication channels running
through it.

New Ways of Managing Relationships between

Organizations: Organizations sit in a complex
web of relationships to each other
1.7.3 From Creativity
to Entrepreneurship
Creativity is the ability to develop new
ideas and to discover new ways of looking
at problems and opportunities.

Innovation is the ability to apply creative

solution to those problems and
opportunities in order to enhance
people’s lives or to enrich society.
Entrepreneurship is Creating value and
commercializing
Comparison of the C and I

Innovatio
Basis Creativity
n
Meaning Imagination Implementing new thing
Process Imaginative Productive
Quantifiable No Yes
Related to Thinking new things Introducing new things
Need Money No Yes
Have Risk No Yes
 Creativity- imagination

Difference? Innovation- Implementation

Entrepreneurship-
commercialization through value
creation
 Creativity: Thinking New Things

Innovation: Doing New Things

Entrepreneurship: Creating Value in the Marketplace

 Answer the
End of
questions on
Chapter One!
your Module!
Chapter Two: Business
Planning

2.1 Introduction
 This unit will help you to
understand the concept of OPPORTUNITY
opportunity identification IDENTIFICATION AND LACK OF PROPER OPPORTUNITY IDENTIFICATION AND
and evaluation, business EVALUATION, BUSINESS EVALUATION, IDEA DEVELOPMENT PROCESS AND
idea development and how IDEA DEVELOPMENT BUSINESS PLANNING ARE THE MOST OFTEN CITED
to prepare a business plan. REASONS FOR BUSINESS FAILURE.
AND THEN PREPARE
BUSINESS PLAN.
Objectives

• Identify opportunity in the

environment,
• Evaluate the opportunities in the
environment,
• Generate business idea,
• Explain the concept of business
planning,
• Identify components of business
plan,
• Develop business plan,
2.2 Opportunity Identification
and Evaluation

Scanning the Environment/ Getting the Idea (an opinion)

Opportunity Identification-ability to see, recognize, discover

and exploit opportunities that others miss-tech and other
factors for opportunity

Opportunity development-the process of combining

resources to pursue a market opportunity identified (refine
the best suits).

Opportunity Evaluation-Screen the best!

Business factor Questions for evaluation
Product or Description of the product or service, its differentiator, purpose and the need it fills
Service o What competitive advantage / benefits does the product have?
o What is the required customer care support for this product/service?
o Is the company able to produce product and supply required aftercare support?
 

Market o Where is the market demand? What is the target market? Is it generic or a niche?
Opportunity o Industry characteristics (growth rates, change, entry barriers).
o What market share can the product reasonably expect today? In 2, 5 or 10 years?
o Timing and length of the window of opportunity?
o What competition exists in this market? Substitutes? How big is their turnover?
o How accessible are the desired distribution channels?

Costing and o How much will it cost to develop the product and commercialize it?
Pricing o Where will the funds come from?
o How do the pricing, costs and economies of scale compare with competitors?
o How easy is it to acquire equipment, skills and other inputs required?
Profitability o Where is the money to be made in this activity? What are the gross margins?
o Would the return on investment be acceptable? What is the payback period?
o What are the cash flow patterns and the source of working capital?
Capital o How much capital (people, operating expense and assets) is required to start?
Requirements o What are the long-term capital needs?
o How much of the required capital is secured and where will the rest come from?
o What securities are available to guarantee the required funds?
o Is there a list of potential funders? In case the funders withdraw their capital?

Issues and risks o What risks (real and perceived) are inherent with the product/service?
o Industry based risks e.g. is the market on a decline?
o Are there plans for surviving the death of the lead entrepreneur?
 • Assessment of Entrepreneurial Team: Who would run the company?
Team factor Questions for evaluation
Focus: o Is the founder really an entrepreneur, bent on building a company?
o Does the entrepreneur (or his team) have some experience (work or industry)?
o Do they really like this product/sector? Do they really want this?
o Can the team create products to suit that market need?
o How stressful is the opportunity for the team?

Selling: o Does the team have the necessary selling and closing skills?

Management: o Who will work full time? Do your managers represent competitive advantage?
o Does the team have the necessary management and technical skills?
o If the required skills are not available, can they be acquired at competitive rates?
o How is their relationship with the entrepreneur, commitment and motivation?

Ownership: o Have the critical decisions about ownership and equity splits been resolved?
o Are the members committed to these?
o Does the owners have enough financial capital for required own contributions?
2.3 Business Idea
Development
• A basic description of business and the way
you operate
• There are three types of business ideas.
They are:
• Old Idea copy an existing business idea
from someone.
• Old Idea with Modification -accept an old
idea from someone and then modifies it in
some way to fit a potential customer’s
demand.
• A New Idea –invention of something new
for the first time
2.4 Business Idea
Identification

• What needs it fulfils?

• Good or service? People have willingness to pay
for?
• Do you have the skill to do that business? ( Janet
vs Lily case)
• Is there potential Customer? (How big is the
need! Large number of customers should exist!)
• How are you going to Sell? Direct or wholesale?
• Business and environmental Concerns- how it
affects the society?
 My business idea is:

Which need will my business fulfill?

 
Activity (From Your
Manual) What good/ service will I provide?

To whom will I sell?

How will I sell my good/ service?

How much will my business depend upon

and impact the environment?
2.5 Methods for
Generating
Business Ideas
See Hamisi 1. From Successful Businesspeople
Case/Experience
2. • Your Own Experience
• Other People’s Experience (“I cannot find a
Experience lunch box that keeps the food warm.”)
3. Scan and Survey your environment

4. Natural resources
• Waste products
• The way people live
• Research and publications
• Trade fairs
5. Brainstorming

• What can one do from a saw

dust?
2.6 Business Idea Screening

2. Micro Screening: is
aimed screening down
ideas into 3. The
Macro screening: is aimed common criteria used
screening down ideas to 10. for screening are:
(own competence, own Solvent demand,
finance…) Availability of raw
material, Availability of
personal skills…
 3. Scoring the Suitability of Business Idea
S. No Questions BI1 BI2 BI3
Are you familiar with the operations of this type of business?      
Does the business meet your investment goals?      
Does the business meet your income goals?      
Does the business generate sufficient profits?      
Do you feel comfortable with the business?      
Does your family feel comfortable with the business?      
Does the business satisfy your sense of status?      
Is the business compatible with your people skills?      
Is there good growth projected for the overall industry of the business?      
Is the risk factor acceptable?      
Does the business require long hours?      
Is the business location-sensitive?      
Does the business fit your personal goals and objectives?      
Does this business fit your professional skills?      
Totals      
Talk to these to answer the above questions:

Competitors, suppliers
Potential customers and entities with
financial resources

Key informants and

Financial institutions
opinion leaders
2.7 Concept of
Business Plan
• A business plan is a road map for
starting and running a business

• A business plan is the blueprint of

the step-by-step procedure that
would be followed to convert a
business idea into a successful
business venture
Objectives of BP

Give Evaluate Monitor Persuade Seek Visualize

Give Objectively Monitor the Persuade Seek loans Visualize the
directions to evaluate the progress after others to join from financial concept in
the vision prospects of implementing the business. institutions. terms of
formulated by business. the plan. market
entrepreneur. availability,
organizational,
operational
and financial
feasibility.
 Guide Identify Identify Clarify Identify Document
Guide the Identify the Identify Clarify ideas Identify the Document
entrepreneur in strengths and challenges in and identify resources that ownership
the actual weakness of terms of gaps in would be arrangements,
implementation the plan. opportunities management required to future
of the plan. and threats information implement the prospects and
about their plan. projected
business, growths of the
competitors business
and the market. venture.

Objectives of BP …cont’d
2.8 Developing a Business Plan
The Process
• Preliminary investigation-check the
available plan, assumptions…
• Opportunity Identification and Idea
Generation
• Environmental Scanning (The SWOT)
• Feasibility Study and Analysis (if
worth investing)
• Prepare report and decide to go for
or not
 • Cover Sheet
• Executive Summary
Essential
• The Business (Business Concept, history, form of
Components ownership…)
of Business • Funding requirement
Plan • Product or service
• Operational Plan (Marketing, Operation,
Financial like forecast…)
• Critical risks
• Exit Strategies (how to dissolve the business…)
• Summary
 Business plan outline  
For micro and small enterprises and start ups

Assignment
20%
Using this content described in your module,
prepare a business plan
END OF CHAPTER 2 THANK YOU!