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.
