FOS 111
THE CONCEPT OF ENTREPRENUERSHIP
INTRODUCTION
The concept of Entrepreneurship was first established in the 1700s. There were many
concepts and theories about its genesis. However, based on it key features, there were
three basic ideas that explain the appearance of Entrepreneurial activity in the end.
FIRST, IT FOCUSES ON INDIVIDUAL: Entrepreneurial action is conceived as a
human attribute such as the willingness to face uncertainty, accepting risks, the need
for achievement, which differentiate entrepreneurs from the rest of society.
ECONOMIC AND ENVIRONMENTAL FACTORS: This motivates and enables
entrepreneurial activity such as the dimension of the market, the dynamic of
technological changes and the structure of the market.
THE FUNCTIONING OF INSTITUTIONS, CULTURE AND SOCIETAL VALUES:
This approach is not exclusive given that Entrepreneurial activity is a human activity
and does not spontaneously occur solely due to the economic environment or
technological normative.
The present development of Entrepreneurship started after the Second World War in
the 1950s when nations were looking to build up their economies from the ravages of
the war. People had ideas for business or jobs as individuals and started in small ways
with limited capital to form businesses which went on to challenge the well established
companies.
In the 2oth century, Economist Joseph Schumpeter 1883-1950 focused on how the
entrepreneur drives for innovation and improvement, create upheaval and change.
Schumpeter viewed entrepreneurship as a force of creative destruction.
The Entrepreneur carries out new combination thereby helping render old industry
obsolete. Established ways of doing business are destroy by the creation of new better
ways to do them. Business expert Peter Drunker 1909- 2005 took this ideas further,
describing the entrepreneur as someone who actually searches for change, respond to
it, and exploit change as an opportunity.
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EVOLUTION OF THE CONCEPT OF ENTREPRENEUR
EARLY PERIOD
The earliest definition of the entrepreneur as a go between was Marco Polo. He tried to
establish trade rout to the far East. He used to sign a contract with a venture capitalist
to sell his goods. The capitalist was the risk bearer. The merchant adventurer took the
role of trading. After his successful selling of goods and completing his trips, the profits
were shared by the capitalist and the merchant
MIDDLE AGES
The term entrepreneur was referred to a person who was managing large projects. He
was not taking any risk but was managing the projects using the resources provided.
An example is the cleric who is in charge of great architectural works such as castles,
public buildings, cathedrals
17TH CENTURY
An entrepreneur was a person who entered into a contractual arrangement with the
government to perform a service or to supply some goods. The profit was taken by the
entrepreneur.
18TH CENTURY
It was Richard Canutillo French Economist who applied the term entrepreneur to
business for the first time. He is regarded by some as the founder of the term. He
defined an entrepreneur as a person who buys factor services at certain prices with a
view to sell them at uncertain prices in the future
19TH CENTURY
The entrepreneurs were not distinguished from managers. They were viewed mostly
from the economic perspective. He takes risk, contributes his own initiative and skills.
He plans, organizes and leads his enterprise
20TH CENTURY
During the early 20th century, Dewing equated the entrepreneur with business promoter
and viewed the promoter as one who transformed ideas into a profitable business. It
was Joseph Schumpeter who described an entrepreneur as an innovator. According to
him an entrepreneur is an innovator who develops untried technology.
21th CENTURY
Research scientists live De Bone pointed out that it is not always important that an
individual comes up with an entirely new idea to be called an entrepreneur but if he is
adding incremental values to the current product or service he can be called an
entrepreneur
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MEANING OF ENTREPRENUER AND ENTREPRENUERSHIP
Academics differ widely in their definition of Entrepreneur and entrepreneurship. The
word Entrepreneur is derived from a French word Entrepreneur which means to
undertake. The entrepreneur creates a business to build the enterprise for growth and
profit. He or she is highly innovative, creating new products, and markets and applying
creative strategies and ways of managing- Carland etal 1984. In essence, the
entrepreneur is an innovator or developer who recognizes and seizes opportunities
convert those opportunities into workable ideas add value through time, effort, money
or skills and assumes the risks of the competitive market place to implement these
ideas, and realizes the rewards from these efforts- Ronstadt, 1984.
The entrepreneurship on the other hand is the practice of starting new organizations
or revitalizing mature organizations particularly new businesses in response to identified
opportunities- WIKIPEDIA.
Entrepreneurship is the process of creating something different with value by devoting
the necessary time and effort, and effort, assuming the accompanying financial, social
risks and receiving the resulting rewards of monetary and personal satisfaction and
independence- HISRICH AND peters, 1995:10
Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is
by individual who assumes major risks in terms of equity, time and career commitment
of providing value for some products or services. The products service itself may or may
not be new or unique but value must somehow be infused by the entrepreneur by
securing and locating the necessary skills and resources.-Ronstadt, 1964:28.
The entrepreneurial activity is governed by varying combination opf socio-economic,
psychological, cultural and ten other factors: religion, family background, level of
education, level of perception, occupational background, migratory character, entry into
entrepreneurship, nature of enterprise, investment capacity and ambition. An
entrepreneur is one who innovates, raises money, assembles inputs and sets the
organization going with the ability to identify opportunities which others are not able to
identified
CHARACTERISTICS OF AN ENTREPRENUERSHIP
Entrepreneur is a person with leadership which take to exploit certain opportunities
develop its strategy based almost entirely on personal interest. Entrepreneurs have the
ability to provide development opportunities, preventing them some changes that may
occur in the environment which seeks to exploit the personal interest. Research has
revealed several characteristics of entrepreneurs
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A DESIRE TO ACHIEVE
You must have the push to conquer problems and give birth to a successive
enterprise. Entrepreneur motivation is more complex, expressing the first urge to go
further and to do for others.
HARDWORK
Hard work and high energy allow him to make incredible effort needed to start a
business. Being an entrepreneur means you must start working fresh when others in
the team have given up. You should be the first and the last in any work where you
are involved. This normally serves as example to others.
WILLINGNESS TO ASSUME RESPONSIBILITIES
They prefer to control their own resources to achieve their objectives. Every
entrepreneur should be morally legally and mentally accountable for their enterprises.
Hence altruism rather than self interest drives them to accept responsibility.
OPTIMISM
Entrepreneurs gbbare engulf with the optimism or philosophy that this is the best of
time and they should make use of it as anything else is possible.
ORGANIZING SKILLS
All entrepreneurs are good at bringing both human and material resources together
which allows entrepreneurs to put together people who carry out certain tasks all are
combined to implement the vision.
PROFIT ORIENTATION
Their success and achievement is measured by the level of profit they make. This is the
more reason why entrepreneurs want to make profit
ORIENTATION TO EXCELLENCE
Entrepreneur should desire to achieve something outstanding that they and others
should be proud of.
REWARD ORIENTATION
The desire to achieve, work hard, take responsibility must be commensurately combine
with desire to be rewarded handsomely for the effort. Reward can be in the forms other
than money alone such as recognition and respect
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FUNCTIONS OF ENTREPRENEURSHIP
Below are some of the functions perform by the entrepreneurs that make them distinct
from others in the society
Decision Making:
Is the primary task or function perform by the Entrepreneur. The entrepreneur decides
what to produce, how to produce, how much to produce, where to produce, and how to
sell the products. He also decides the scale of production and the proportion in which
he combines the different factors he employs to produce products.
MANAGEMENT CONTROL
The management and control of the business are conducted by the entrepreneur. He
most have a high degree of management skill or ability to select the right type of
persons who will work for him. He must be able to plan, organize, control, and direct
the activity of other factors of production
RISK TAKING
Is probably the most important function of the entrepreneur. Modern production is
associated with risk and the entrepreneur is required to produce goods and services in
anticipation of their future demand. In general, entrepreneurs accept four types of
risks, namely, financial risk, job risk, social and family risk and health risk.
CREATIVITY AND INNOVATION
Creativity is the ability to imagine or invent something new. Creativity is not the ability
to create out of nothing but the ability to generate new ideas by combining, changing,
or reapplying existing ideas. Some creative ideas are astonishing and brilliant while
others are just simple, good, practical ideas that no one seems to have thought of yet.
Innovation is one the underlying dimensions of entrepreneurship and a key function
perform by the entrepreneurs.. Without innovation , the entrepreneurs can not
survive in modern competitive business world. Creativity also helps to generate or
recognize ideas, alternatives, or possibilities that may be useful in solving problems and
communicating with others.
RESEARCH
The entrepreneur is a practical dreamer and does a lot of ground work before taking a
step in his or her ventures. In other words, an entrepreneur finalizes an idea only after
considering a variety of options, analyzing their strengths and weaknesses by applying
analytical techniques, testing their applicability and supplementing them with empirical
findings.
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CATALYST OF ECONOMIC DEVELOPMENT
An entrepreneur plays an important roles in accelerating the pace of economic
development of a country by discovering new uses of available resources and
maximizing their utilization.
SOURCES OF FINANCE FOR ENTREPRENEURSHIP
1. Personal resources of an individual or individuals involved in the new venture.
2. The resources of family and friends are another source of finance
3. Other friends and relatives are also potential sources of startup funds.
4. Former business associates at superior could be approached to invest as either
shareholders or partners, depending upon the business organization form.
5. Another financing source sometimes used by new ventures is credit cards. Using
credit cards is a high cost short term option and is usually considered in the
absence of other options
6. Business angles are wealthy individuals who provide start up capital to new
businesses.
In addition,
angels usually want or require an active role in
company management.
CLASSIFICATION OF ENTREPRENUER
Entrepreneurs are generally classified based on expertise, business and motivational
levels.
ENTREPRENUERS BASED ON EXPERTISE
TECHNICAL ENTREPRENUERS
They develop improved quality of goods because of craftsmanship. The greatest
strength of technical entrepreneur is skill in production technique. Improve goods or
services by using innovative technology and concentrate more on marketing and
production.
NON-TECHNICAL ENTREPRENUERS
They are not concerned with the technical aspects of the product produced. Focus more
on marketing and distribution strategies less on production.
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PROFESSIONAL ENTREPRENUERS
They focus more on establishing a business but not managing or operating it. Sell out
the running business and start another venture with the sales proceeds. They also
conceive new ideas to develop alternative projects.
ENTREPRENUERS BASED ON MOTIVATIONAL LEVELS
PURE ENTREPRENUERS
They are motivated by psychological and economic rewards. They undertake
entrepreneurial activity for their personal satisfaction in work, ego or status
INDUCED ENTREPRENUERS
They are induced to take up an entrepreneurial task due to policy measures of the
Government like assistance, concessions and necessary overhead facilities to start a
venture.
MOTIVATED ENTREPRENUERS
They are influenced by the desire for self-fulfillment. They came into being because of
the possibility of making and marketing of some new product for the consumer
SPONTANEOUS ENTREPRENUERS
They start business with natural talents.
entrepreneurial activity.
Self-motivation
makes
them to undertake
ENTREPRENUERS BASED ON THE TYPES OF BUSINESS
BUSINESS ENTREPRENUERS
They conceive an idea for a new product or service and utilize both production and
marketing resources to develop a new business opportunity.
TRADING ENTREPRENUERS
They undertake trading activities but not concerned with manufacturing work. They
identify potential markets, stimulate demand for its product line and creates a desire
and interest among buyers.
INDUSTRIAL ENTREPRENUERS
They are manufacturers who identify the potential needs of the customers and tailor a
product or service to meet the marketing needs.
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CORPORATE ENTREPRENUERS
Demonstrate the skill in organizing and managing corporate undertakings. They also
follow the regulations and requirements of the corporate.
AGRICULTURAL ENTREPRENUERS
They undertake agricultural activities like raising and marketing of crops, farm animals,
fertilizers and the outputs of agriculture.
BENEFITS OF ENTREPRENUERSHIP
Entrepreneurs
are known to establish and manage businesses of their own and
consequently gain control over their lines. They are therefore expected to make a
difference in the world as they become self-fulfilled. This self-fulfillment and satisfaction
ends them to reap unlimited profits, contribute to societal development and give them
the pride of doing what they enjoy doing.
BENEFITS TO THE NATION
1. It fosters wealth for the nation.
2. It accelerates the pace of economic development: Entrepreneurship is the
government one of the most
When
the
entrepreneurs
trusted
vehicles
for economic development.
produce an output greater than the
input the
economy of the nation is directly busted
3.
It provides large employment
4.
It mobilizes local resources, skills and savings.
5.
Result In wider distribution of wealth. The higher the employment the greater
the distribution of wealth.
6.
It stimulates innovation and efficiency
7.
It provides an environment of competitiveness which further increases the
quality of the products in the national markets.
BENEFITS TO SOCIETY
1. The income level of the average person and the standard of living of a society
increase with every successful entrepreneurial project that is undertaken
2. There is an increase in the employment level on the regional scale. It is also
noticeable that entrepreneurship helps develop other entrepreneur businesses
because of the extra incentives that can provide to a new entrepreneur in the
shape of capital, knowledge and technology.
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3. Entrepreneurship helps the society to fulfill
its basic needs in the world.
Entrepreneurs lead by example in assisting the society and therefore boost the
morale of the public
BENEFITS TO INDIVIDUAL
 Entrepreneur can provide employment for near and dear one as well.
Entrepreneurship often provides an employment and livelihood for next
generations as well.
 Satisfaction : Each successful project carried out by the entrepreneur leads to
self – satisfaction
 Provide self-Employment: The greatest satisfaction is derived from the fact that,
the individual is his own boss and therefore can use its creativity without any
fear of repercussion
 Unlimited income or higher retained income
TRAITS OF ENTREPRENUERS
There are many traits of entrepreneurs and a few of them are mentioned below for
your understanding
1.
2.
3.
4.
5.
6.
7.
Self-motivation
Time orientation
Risk taking capability
Learning from failure and mistakes
Decision making skill
Empathetically thinking
Family history and Relationship management
BARRIERS TO ENTREPRENEURSHIP
Entrepreneurial development is very slow in under developed and developing countries.
This is due to the presence of several factors. Gunnar Myrdal pointed out that Asian
societies lack Entrepreneurship not because they lack money or raw materials but
because of their attitudes. These barriers to Entrepreneurship are classified into three
as follows:
ENVIRONMENTAL BARRIERS
The following are the important environmental barriers to Entrepreneurship
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1.
NON-AVAILABILITY OF RAW MATERIALS
The non-availability of raw materials especially during peak season is one of the
obstacles inhibiting Entrepreneurship. This leads to higher competition for raw
materials.
2.
LACK OF SKILLED LABOUR
This is the most important resource in any organization. Unfortunately, desired
manpower may not be available in an organization. This is either due to the lack of
skilled labor or due to lack of committed of loyal employees in the organization
3. LACK OF GOOD MACHINERY
Good machines are required for the production of goods because of rapid technological
development machines become obsolete very soon. Small Entrepreneurs find it difficult
to get large amount of cash for installing modern machinery.
4. LACK OF INFRASTUCTURE
The lack of infrastructure facilities is a major barrier to the growth of Entrepreneurship
particularly in under developed and developing countries. The infrastructural facilities
include, land, building, adequate and cheap power supply, proper transportation, water
and drainage facilities
LACK OF FUND
There are various methods by which an Entrepreneur arranges for funds. This done
through, own savings, borrowing from friends and relatives, banks and other financial
institutions. Many people do not enter into entrepreneurial activities because of lack of
funds.
OTHER ENVIRONMENTAL BARRIERS
Lack of business education, lack of motivation from Government, corruption in
Administration, high cost of production are the Environmental barriers that inhibit the
growth of entrepreneurship in underdeveloped countries
PERSONAL BARRIERS
Personal barriers are those barriers that are caused by emotional blocks of an
individual. Some of the personal barriers may be outlined as below
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1. UNWILLINGNESS TO INVEST MONEY
Even though people have money, they do not invest into entrepreneurship. They are
not willing to take the risks of investing money into entrepreneurial activities.
2. LACK OF CONFIDENCE
Many people think that, they lack what it takes to become an entrepreneur. They feel
that, they could not master all the skills. Thus, most people are reluctant to become
entrepreneurs.
3. LACK OF MOTIVATION
When an individual starts a new venture, he is filled with enthusiasm and drive to
achieve success. But when he faces the challenges of real business or bears loss or his
ideas do not work he loses interest or motivation
4. LACK OF PATIENCE
The desire to achieve success in the first attempt or become rich very soon is the prime
motivating factor of modern youth. When such dreams do not come true they lose
interest. This gradually drives to fail in business.
5. INABILITY TO DREAM
Entrepreneurs who are short on vision or become satisfied with what they achieve
sometimes lose interest in further expansion or growth of business
SOCIAL BARRIERS
The social attitudes inhibit many people from thinking of starting a business. The
important social barriers are as follow
1. LOW STATUS
The society thinks that, Entrepreneurs are the people who exploit the society. Thus
the attitude of the society towards entrepreneurs is not positive
2. CUSTOMS AND TRADITIONS OF THE PEOPLE
Many people want real job. Even parents who are entrepreneurs would not like their
children to be Entrepreneurs. Thus, lack of support from society and family hinder the
growth of Entrepreneurs.
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ENTREPRENEURSHIP SKILLS
A broad way of entrepreneurial skills are needed to succeed in todays competitive
market. An entrepreneur must possess basic skills necessary to enable him to start,
develop, finance, and market his own business enterprise. In entrepreneurship, skills
are categorized into three broad headings:
1. Technical skills
2. Business management skills
3. Personal Entrepreneurship skills
TECHNICAL SKILLS
Includes but not limited to technical know-how, writing and listening skills,
presentations, both oral and visual, monitoring environment, organizing ability, network
building, coaching and above all being a team player. There are advantages of
acquiring high technical skills. These are listed below:
1.
2.
3.
4.
5.
6.
7.
8.
Access and enjoy higher paying jobs
Save cash or money
Save time
Prevent problems
Reduce fraustration
Make intelligent technology purchases
Make you feel more confident and confortable with technology
Access information efficiently
BUSINESS MANAGEMENT SKILLS
These are skills normally involved in the starting and developing and managing a
business. They are needed in launching growth and managing a new enterprise.
Several of these skills do exist . Below are list of some
1. Decision making
2. Marketing
3. Financial or Accounting
4. Human Relations
5. Planning and goal setting
6. Negotiations
7. Managing Growth
8. Production
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PERSONAL Entrepreneurship skills
Interpersonal skills include the ability to read and manage the emotions, motivations
and behaviors of oneself and others during social interactions or in a social interactive
context. These skills may separate an Entrepreneur from a manager and from one
Entrepreneur from another. These skills include but not limited to :risk taking, being
innovative, being a change oriented person, a visionary leader, inner control or
discipline, being persistent. Interpersonal skills include.
MAINTAIN POSITIVE ATTITUDE
Cheerful attitude about work and about life. Few people want to be around someone
who is always down in their spirit or moody.
BE APPRECIATIVE
Find one positive thing about everyone you work with and let them hear it. Be
courageous with praises and kind words of encouragement. Says thanks when someone
helps you . Make colleagues feel welcome when they are with you.
ASK OTHERS FOR THEIR OPINIONS
Acknowledge their happy milestones and express concern and sympathy for difficult
situations such as illness or death.
PRACTICE ACTIVE LISTENING
Actively listening is a way of demonstrating that you intend to hear and understand
anothers point of view.Bring people together
Create an environment that encourages others to work together. Treat everyone
equally and don’t play favouritism. Avoid talking about others behind their backs.
RESOLVE CONFLICTS
Take a step beyond and simply bring people together and become someone who
resolve conflicts when they arise. Learn how to be an effective mediator
COMMUNICATE CLEARLY
Pay close attention to both what you say and how you say it. Being a clear and effective
communicator help you avoid misunderstanding with co-workers. Verbal eloquence
projects an image of intelligence and maturity no matter your age.
ENTREPRENEURIAL PROCESS
The decision about whether to start business can best be considered in the light of an
understanding of the distinct phases. The Entrepreneurial process has five phases
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IDENTIFYING THE OPPORTUNITY
This is the most difficult task in the entrepreneurial process. Most opportunities do not
suddenly appear but rather the Entrepreneur goes in search of them. Most
entrepreneurs identify business opportunities through success such as consumers and
business associates and technical people.
EVALUATE THE OPPORTUNITIES
After the opportunities have been identified, they must be carefully evaluated. The
evaluation of the opportunity allows the entrepreneur to assess whether the specific
product has their turn needed for the resources required.
DEVELOP BUSINESS PLAN
A good business plan must be developed in order to exploit the opportunity defined. A
good business plan is not only important in developing the opportunity but also
essential in determining the resources required and managing the resulting venture.
RESOURCE REQUIRED.
The resources needed for the opportunity must be assessed. This process starts with an
appraisal of the entrepreneurs present that are just helpful and those critical should be
acquired at the lowest possible cost.
MANAGE THE ENTERPRISE
After the resources have been acquired the entrepreneur must implement a
management style and structure as well as determining the key variable for success. A
control system must be identified so that problem areas can be identified.
ESSENTIAL ENTREPRENEURIAL QUALITIES AND CAPABILITIES
ENTREPRENEURS NEED CONFIDENCE
Entrepreneurs tend to have a higher level of confidence in their ability to make things
happen than most people. They also tend to rely less on what others do and to care
less about what other people think . Confidence plays a key role in entrepreneurship
because you have to believe you can make things happen that you and no one else
have ever done before. Confidence gives entrepreneurs the courage to take the
challenges they will face and deal with the barriers that stand their ways.
ENTREPRENEURS HAVE A TOLERANCE FOR TURBULANCE
Entrepreneurs need to be able to deal with turbulence that comes with times of change
and uncertainty. A lot of people deal with uncertainty by trying to cope with it.
Entrepreneurs do more than cope with it. They deal turbulence in a proactive manner.
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ENTREPRENEURS THRIVE IN TIME OF UNCERTAINTY
Times of great change are also times of uncertainty. Uncertainty implies risk because
you are not sure what is possible and what the probabilities of various possibilities may
be.
Some people frees when faced with uncertainty. Most people especially
professional s try to reduce or eliminate uncertainty by collecting information about the
situation they are facing. Entrepreneurs capitalize on change by acknowledging the
ambiguity, accepting the risks, and seizing the moment.
ENTREPRENEURS ARE OPPORTUNISTIC
Entrepreneurs make things happen because they are not satisfied with what they have
seen in the market place or there is something they need and
cannot get. The
willingness of entrepreneurs to challenge the merit of almost everything.
ENTREPRENEURS ARE OPEN MINDED AND QUICK TO LEARN
The best entrepreneurs make an effort to keep an open mind and learn.
ENTREPRENEUR MUST BE COMMITTED
Entrepreneurs must make numerous commitments each day. Each commitment creates
a responsibility to another person or organization to make something happen.
Commitment is particularly important when things get tough.
ENTREPRENEURS NEED TO BE PERSISTENT, TENACIOUS, AND RESILIENT
Entrepreneurs should be consistent in decision and follow up.. Not to be deterred by
difficulties and problems. Lazy people cannot be entrepreneurs.
Successful
entrepreneurs are always working and planning their next move and examining the
risks in their decisions and always acting.
RISK TAKING
Entrepreneurs should take moderate risk rather than a wild speculative gamble.
HOW TO START ENTREPRENEURSHIP
1.
2.
3.
4.
5.
By copying or taking over the family business
Innovation inspires in you by your teacher, model or peer group
Getting inspiration from your work environment
Entrepreneurship may arise out of negative experiences or disruption.
Completion of career course- normally time and money spent to acquire an
education and training gives better satisfaction when you are opportune to put
into practice what you have acquired. Entrepreneurship is sometimes born out
fof this desire15