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2- Entrep (1)

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The Nature and importance of entrepreneurship
Development of Entrepreneurship (1 of 2)
- Earliest Period
Entrepreneurs would sign contracts with a money person.
Example: Marco Polo
- Middle Ages
Entrepreneurs were actors and people who managed large production projects.
- 17th Century
Entrepreneurs entered into contractual arrangements with the government.
Example: Mississippi Company
- 18th Century
With global industrialization taking place, entrepreneurs were distinguished from capital
providers.
● Inventions developed during this time were reactions to the changing world.
Example: Edison & Whitney
- 19th and 20th Centuries
Entrepreneurs were not distinguished from managers.
They were viewed mostly from an economic perspective.
Concept of innovation and newness was an integral part.
Example: Andrew Carnegie
- Definition of Entrepreneurs Today
Entrepreneurship is the process of creating something new and assuming the risks and
rewards.
- Four aspects of being an entrepreneur today:
Involves creation process.
Requires devotion of time and effort.
Involves rewards of being an entrepreneur.
Requires assumption of necessary risks.
- Entrepreneurs Versus Inventors
Inventor: Creates something for the first time; highly driven and motivated by his or her own
work and personal ideas.
Differentiating characteristics of an inventor:
Education.
Level of experience.
Problem-solving skills.
Level of self-confidence.
Willingness to take risks.
Ability to tolerate ambiguity and uncertainty.
View of monetary benefits in measuring success.
The Entrepreneurial Process
Four distinct phases:
- Identify and evaluate the opportunity.
●
Window of opportunity.
-
Develop a business plan.
Determine the resource requirement.
Manage the resulting enterprise.
Aspects of the Entrepreneurial Process
Types of Start-Ups
- Lifestyle firm
Privately held; usually achieves only modest growth.
- Foundation company
Created from research and development.
Lays the foundation for a new business area.
- High-potential venture
Receives the greatest investment interest and publicity.
Starts out like a foundation company, but attains rapid growth.
Also called gazelles, is integral to the economic development of an area.
- Role of Entrepreneurship in Economic Development
Innovation is depicted as a key to economic development.
● Product-evolution process: Process through which innovation is developed and
commercialized.
● Iterative synthesis: Critical point in the product-evolution process.
Three types of innovation:
- Ordinary
- Technological
- Breakthrough
Product Evolution
Government as an Innovator
One channel for commercializing the results of the synthesis of social need and technology.
Frequently called technology transfer.
Relatively few innovations reach commercial markets.
- Lacks business skills necessary for successful commercialization.
- Government bureaucracy and red tape act as inhibitors.
Corporate Entrepreneurship
-
Strengths of an existing business:
Financial resources.
Business skills.
Marketing and distribution systems.
Factors that inhibit successful commercialization:
Bureaucratic structure.
Emphasis on short-term profits.
A highly structured organization.
In the current era of hypercompetition, strategic business units (SBUs) are emerging.
Independent Entrepreneurship
Factors that inhibit commercialization:
Managerial skills.
Marketing capabilities.
Financial resources.
Unrealistic inventions.
Lack of awareness on interfacing with necessary entities (banks, suppliers, customers, venture
capitalists, distributors, and advertising agencies).
Ethics and Social Responsibility
- Entrepreneurs usually develop an internal ethical code.
-
Personal value systems tend to be influenced by:
Peer pressure.
General social norms in the community.
Pressures from their competitors.
Future
Entrepreneurship has gained mileage through a number of ways:
- Entrepreneurial education.
- Increase in academic research.
- Societal support (media coverage).
- Corporate entrepreneurship.
Entrepreneurial Universities
Activities
Seminars
Consulting
Research
Case Development
Technology Development & Transfer
Joint Ventures & Strategic Alliances
- Structures
Business Assistance Centers
Incubators
Innovation Centers
Industrial Parks
Enterprise Development Centers
Venture Capital Exchanges
- Inputs
Guest Lectures
Board of Advisors/Trustees
Internships
Student Projects
Source of Funds
The Entrepreneur’s Task
- If all requirements in a capitalist
economy are in place, the
entrepreneur can assume his
assigned role in the development of
the economy.
-
A review of the contributions of
entrepreneurs will reveal that no
business, big or small, started
without the hand of the entrepreneur.
-
Even if many of these businesses
failed to survive, still a sizable
number developed and proceeded to
make the capitalist economy a viable
concern.
-
This is made possible because the
surviving enterprises are responsible
for providing the following:
2Entrepreneurship and Economic
Development
Ex. of an entrepreneurship activity
Entrepreneur's
concern
Problem at
hand
Entrepreneur's
Action
Identifying an
economic need
High income
families are
not satisfied
with the
services
provided by
high
school's in
their area.
Establish a high
school
education with
higher
standards than
the current
high schools are
providing.
Assembling
resources
required
Assuming risk
Resources
must be made
available
Acquire funds,
hire people,
construct
buildings, and the
like.
Venture must
be made.
Prepare project
study,
advertise,
maintain good
relationship with
employees
and customers,
among others.
The Entrepreneur’s Task
1.
Products and services for customers
and producers;
2.
Employment;
3.
Taxes;
4.
Demand for suppliers’ products and
services; and
5.
Training facilities for future
entrepreneurs.
-
An inspection of the array of the
products offered for sale in a typical
supermarket reveals a wide choice
provided to the consumer.
-
When a consumer is making a
decision on which brand of soap he
is going to buy, for instance, he will
be choosing from as many as 10
different brands.
-
Many years ago, his choice was
limited to one or two brands. Much
earlier, soap was not even available
for sale. The consumer had to
produce his own requirement.
entrepreneurs employs millions of
people.
-
The taxes paid to the government in
the form of licenses, fees, and
permits applicable to the enterprises,
as well as income taxes applicable
to the employees and entrepreneurs,
easily amount to billions of pesos.
The taxes collected are, in turn,
poured into development projects of
the government.
-
The entrepreneurs also make sure
that the suppliers will have a ready
market for their products and
services.
-
The retailers, for instance, assure
the viability of big companies like
San Miguel Corporation and
Purefoods Company. Hollow block
manufacturers utilize the output of
big cement factories. VCD and DVD
shops provide the necessary linkage
between consumers and producers
of movies and recorded music.
-
Lastly, business enterprises provide
a training ground for future
entrepreneurs.
-
A number of entrepreneurs were
former employees of enterprising
persons. Many of them used their
acquired skills in starting new
businesses. Some even improved
on the entrepreneurial skills passed
on to them.
What brought the consumer to the situation where he
has the luxury of choosing from many options?
And this does not refer to soaps alone but other
products as well.
The Entrepreneur’s Task
Services which were not previously
available are now at the beck and call of the
consumer.
The fast-food canteen at the corner, parcel
delivery, communication through
cellphones, cable television, short term
credit through credit card, money
remittance, and the like, are among the
many services made possible by
entrepreneurs.
-
A review of the statistical reports
prepared by the government shows
that business organized
output the firm must produce. This
will have to be tied up with demand.
-
In attempt to make profits, the
entrepreneur performs the following
specific functions:
1.
To supply the necessary capital;
2.
To organize a production by buying and
combining inputs like materials and labor;
3.
To decide on the rate of output, in the
light of his expectation about demand; and
4.
To bear the risk inherent to the venture.
-
Any business enterprise must offer
products or service to the buyers
whether these buyers are
consumers or producers. The
products or services that will be sold
to the services of employees,
laborers, and managers.
-
Equipment, furniture, and
machi-produce, in addition to
whatever fund reserves are required.
-
The next specific function of the
entrepreneur is to assemble a
production unit complete with
manpower and equipment, the
quality and quantity of which have
been predetermined by him.
-
The entrepreneur will also determine
and make decisions on the rate of
Finally, whatever risk is involved in
the entrepreneurial activity, he must
suffer the consequence of losses if
he fails, but he will enjoy the profits
as a reward if he succeeds.
Entrepreneurship and Innovation
- Innovation may be defined as the
introduction of a new method,
procedure, custom, device among
others. It could be any of the
following:
1. New product
2. New process of production
3. Substitution of a cheaper material in an
unaltered product.
4. Reorganization of production, intermal
function, or distribution arrangement leading
to increased efficiency, better support for a
given product, or lower costs;
5. Improvement in instruments or methods
of doing innovation. Innovation may also be
viewed as the last stage in an important
process consisting of the following:
a. Invention- refers to the discovery or
devising of new products
b. Development refers to the process
by which the ideas and principles
generated from the stage of
invention are embodied in concrete
products and techniques
c. Innovation - refers to the actual
introduction of a new product or
process.
Ex. of successful innovations are the
following:
1. Cordless microphone
2. Microwave oven
3. Cellular phone
4. Kung Fu fight scenes
5. Karaoke music appliances
6. Eyelaser treatment
7. Autocad and the like
NEW VENTURES AND LONG TERM
ENTERPRISES
- The transition from a new venture to
a successful long term enterprise
consists of at least four major stages
as follows:
1. Prestart-upstage
2. Start-up stage
3. Early growth stage
4. Late growth stage
Prestart-up
- This happens when the entrepreneur
starts to question the feasibility of an
idea, product, or service. He seeks
answers to questions regarding
potential markets, production, and
financing.
Start-up stage
The following activities are undertaken:
1. Formation of the business;
2. Generation of necessary capital;
3. Purchase of facilities and equipment;
4. Constructing prototype products;
and
5. Testing the market
Early Growth Stage
This stage follows after establishing
feasibility. Activities will be on a small scale.
If losses occur, it will naturally be limited
also. If the enterprise is successful at this
stage, the option to move to the next stage
can be exercised.
Late Growth stage
• This is the final stage before the new
venture matures into a stable enterprise.
This is when management is structured,
long term financing is established and
facilities planning are undertaken. This is
also the stage where the skills of the
entrepreneur are less needed. Instead, the
skilled manager begins to take over.
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