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METTU UNIVERSITY
FACULTY OF ENGINEERING AND TECHNOLOGY
DEPARTMENT OF MECHANICAL ENGINEERING

ENTREPRENEURSHIP FOR ENGINEERS

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Chapter One
Introduction to Entrepreneurship

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Contents of the chapter
1.Meaning of entrepreneurship
2. Characteristics of entrepreneurship
3. Kinds of entrepreneurship
4. Success factors for entrepreneurship
5.Innovation and source of new ideas to
start new ventures

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 1.1. Meaning and Concept of entrepreneurship and an
entrepreneur
i. Meaning of entrepreneurship
• “Entrepreneurship is the dynamic process of creating
incremental wealth.
• Entrepreneurship is the process of creating and
building something of value from practically nothing.
• Entrepreneurship is a human creative act. It involves
finding personal energy by initiating and building an
enterprise or organization, rather than by just
watching, analyzing, or describing one.

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 …continued
• Entrepreneurship usually requires a vision and the
passion, commitment, and motivation to transmit
this vision to other stockholders.
• It also requires a willingness to take calculated risk-
both personal and financial.
• Entrepreneurship is a multidimensional concept and
it is necessary to consider many factors and
perspectives.

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 …continued
Entrepreneur
• Entrepreneurs are action-oriented, highly motivated
individuals who take risks to achieve goals.
• Entrepreneurs are people who have:
 the ability to see and evaluate business opportunities
the ability to gather the necessary resources to take
advantage of them; and
the ability to initiate appropriate action to ensure
success.
• The entrepreneur is a combination of the thinker and the
doer.
• Entrepreneurs take the risks necessary in producing goods
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& services.
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 Entrepreneur versus Manager
Entrepreneur Manager
• is the owner of • may or may not be the
business owner of the business
• Decision-making and • Do not bear-risk
calculated risk bearing • Limited scope for
• Innovative and creative innovativeness,
• all-round personality creativity and
• High levels of imagination
achievement motivation • Managerial jobs are
transferable
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 …continued

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 1.2. Characteristics of entrepreneurs
• Need for achievement
• Willingness to take risks
• Self-confidence
• Innovation
• Total commitment
• All-rounders

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 …continued
Other important entrepreneurial skills:
• Oral and written communication
• Basics of finance and accounting
• Teamwork
• Creativity and opportunity evaluation
• Real-time strategy and decision making
• Comfort with change
• Risk-taking, and
• Motivation through influence

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 1.3. Kinds of entrepreneurship
Entrepreneurial leadership maybe classified into three types:
A. Founding Entrepreneurs /Founders/
 Generally considered to be the “Pure” entrepreneurs

 Funders may be an inventor who initials business as the

basis of new or improved products or services.

 Founders refer to entrepreneurs who bring new firms into

existence.

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B. General managers
 As new firms become well established, founders
become less innovators and more administrators.

 Thus, we recognize another class of entrepreneurs

called general managers.

 General Managers preside over the operation of

successful ongoing business firms.

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 C. Franchisees
• A system in which semi-independent business owners
(franchisees) pay fees and royalties to a parent company
(franchiser) in return for the right to become identified with
its trademark, to sell its products or services, and often to
use its business format and system.
 Franchising: A legal arrangement by which one company allows
its products, services, or business format to be used by others for a
fee
 Franchisee: A company or individual who pays for the legal right
to use the product, service, or format of another
 Franchisor: A company that grants to another company or
individual the legal right to use its product, service, or format

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 …continued
Note:
 Franchisees differ from general managers in the degree of
independence.

 Because of the constraints and guidance provided by

contractual relationships with franchising organizations,
franchisees function as limited entrepreneurs.

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 …continued

Benefits of franchising
• Management training and support during Start-up and
Ongoing
• Brand name appeal
• Standardized quality of goods and services
• National advertising program
• Financial assistance
• Proven products and business formats
• Greater chance for success

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 …continued
Drawbacks of Franchising
• Franchise fees and ongoing royalties
• Strict adherence to standardized operations
• Restrictions on purchasing
• Limited product line
• Contract terms and renewal
• Unsatisfactory training programs
• Market saturation
• Less freedom
• Happy prisoners

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Artisan Entrepreneurs and Opportunistic Entrepreneur
A. Artisan Entrepreneurs
 They are those who starts business with primarily technical
skill and little business knowledge.
 Artisan entrepreneur is limited to technical training.
 Such entrepreneurs have technical job experience, but they
lack good communication skills.
 Their approach to business decision-making is characterized
by the following features:
– They are paternalistic
– They are reluctant to delegate authority
– They define marketing strategy in terms of the traditional
price, quality, and company reputation.
– Their sales efforts are primarily personal.
05/18/24 – Their time orientation is short, with little planning for future
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growth or change.
B. Opportunistic Entrepreneur
An entrepreneur who enters business with both
sophisticated managerial skills and technical knowledge.
Their approach to business decision-making is
characterized by the following features:
• They avoid paternalism
• They delegate authority as necessary for growth
• They employ various marketing strategies and different types
of sales efforts
• They obtain capital from different source.
• They have a good plan for future growth
For example: the small building contractor and developer who
use a relatively sophisticated approach to management
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1.4. Success factors for entrepreneurs
• Most new ventures succeed because their founders are
capable individuals with:
– The entrepreneurial team
– Venture product or services
– Marketing and timing
– Business ideology
– Self-determination
– Desire for independence

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Information as one success factor for entrepreneurship
 Information is the result of processed data that helps to give
decision.
 Decision without information cannot be successful. Information
helps business in all direction.
 Doing business without information is like walking in the dark
 Information gives the following importance to the
businessmen’s
• To know the position of their competitors
• To know threats and opportunity in doing business
• Helps to design long term objectives and goals that indicate
capital requirement
• Helps to know market position locally and internationally.
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Sources of information
• Information is obtained from two main methods of data
collection.
• i. Collection of primary data
• ii. Collection of secondary data
i. Collection of primary data: there are several methods of
collecting primary data. These are:
– Observation method
– Interview method
– Through questioner
– Other methods which includes warranty cards, consumer panels,
through projective techniques etc

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ii. Collection of secondary data
• Secondary data means data that are already available which
have already been collected and analyzed by someone else.
• Secondary data are available in:
– Various publication of the central state and local government
– Various publications of foreign government or international
bodies.
– Technical and trade journals
– Books, magazines and newspapers
– Reports
– Public records and statistics
– Historical documents.

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 …continued
 Resources must be very careful in using secondary data.
 Before using secondary data, researcher must process the
following characteristics:
– Reliability of data
– Suitability of data
– Adequacy of data
Drawbacks of entrepreneurship (Caution!!)
Uncertainty of income
Risk of losing your entire investment
Long hours and hard work
Lower quality of life until the business gets established
High levels of stress
Complete responsibility and Discouragement
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 1.5. Innovation and source of new ideas to start new
ventures
 Innovations are new ways to achieve tasks.
 It is useful to distinguish between process innovations and
product/service innovations
i. Product innovation: results in new or improved products.
ii. Process innovation: occurs when the manufacturing processes
are improved to make the production of existing products
cheaper, or when new processes are developed specifically for
making a new or improved product.
iii. Service innovation: occurs when new ways of delivering services
are developed

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 …continued
Classification of Innovation
i. Incremental innovation: occurs when small improvements are made
to a product, or the processes used in manufacturing a product.

ii. Radical innovation: occurs when major improvements are made to a

product.

iii. Transformational innovation: occurs when the innovation is of

such a fundamental nature that it enables the development of many
other innovations
– destroys whole industries and changes the nature of society.

iv. Induced Innovations: Innovations respond to need and economic

conditions.
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 …continued
 Investors, and researchers put effort into solving burning
problems that leads to innovations. For example:
– Labor shortages led to mechanized equipment.
– Drought conditions led to improved irrigation.
– Energy crises led to higher efficiency cars.
– Environmental regulations trigger cleaner technologies
– -A tax on carbon will lead to improved stoves and power plants.
 Generally, many people are pushed into founding a new
enterprises by variety of factors including:
• redundancy (Being without a job (idleness)
• Unemployment
• disagreement with previous employer (uncomfortable
relation at work)
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 …continued
 Pull motives (positive motive) which attract some
individual towards small business ownership are:
desire for independence
desire to exploit an opportunity
turning a hobby or previous work experience into a
business
Financial incentives

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 .

END OF CHAPTER ONE

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