LECTURE ONE ENTREPRENEURSHIP-AN INTRODUCTION Objectives On successful completion of this unit, you will be able to: • explain and distinguish between the different types of needs an individual needs to survive in life; • explain how creativity can help an entrepreneur develop new products or services; • distinguish between the terms entrepreneurship and entrepreneur in terms of their definitions; • list and explain the challenges and benefits of being an entrepreneur; • develop and explain solutions for overcoming entrepreneurial challenges; • explain the characteristics one should have to be able to overcome entrepreneurial challenges. Entrepreneurship can be defined as: • a field of business that seeks to understand how opportunities to create something new (e.g., new products or services, new markets, new production processes or raw materials, new ways of organizing existing technologies) arise and are discovered or created by specific persons, who then use various means to exploit or develop them, thus producing a wide range of effects. • the ability to identify business opportunities, which can be transformed into successful businesses through creative and innovative processes. • Entrepreneurship refers to a process that causes changes in an economy through innovation by individuals who respond to opportunities in the market. • The process of identifying a need, developing a product or service to satisfy that need together with all the other related activities. An entrepreneur can be described as• “one who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying significant opportunities and assembling the necessary resources to capitalize on them” • An entrepreneur is “one who organizes, manages, and assumes the risks of a business or enterprise” Entrepreneurship Environment • Entrepreneurship is not only about business. • It involves other role players that also have an influence on the way we do business. • Entrepreneurship focuses on management tasks and functions but adds the dimension of a person and the environment to make a complete picture. • Just as an individual cannot survive on his or her own, in the same way, a business cannot survive on its own. Who are these other parties (stakeholders) that will interact with a business or play a role in its activities? 1. The owner: For our purposes, we will call the owner the entrepreneur. The person who manages the business is of vital importance 2. The external environment: • The community, • customers, • other businesses and various other stakeholders from the external environment of the business. No business can survive without taking the environment into consideration. • A business needs the support of the community who will become customers and buy goods and/or services. • The business relies on financial institutions e.g. banks for credit and; • On suppliers for stock or materials. Because the environment plays a very important role in the success of the business, • it should be carefully scanned for opportunities continually, • always keeping an eye on competitors and new developments. Development of Ideas • A prospective entrepreneur needs to come up with a good idea, which will then serve as the foundation of a new venture. • An entrepreneur has the difficult task of turning a business idea into a business opportunity, either by starting a new business or by injecting new life into an existing one. • To help him along each step of the journey — from finding the idea in the first place through its planning and implementation — the entrepreneur must consider different aspects, such as the needs of the community and creativity. Needs of the Community • Businesses depend on the community to become consumers of their products. • The needs of the community are important when we form our ideas of a product or service. • We can distinguish between two types of needs: Basic needs 1. These are needs for things that we need to survive. For example, we need a house to live in to protect us against weather like rainfall, heat or cold, etc. 2. 3. Other needs (Wants) 2. These are called the nonessential needs. We can survive without them but want it to make our lives more comfortable, such as luxury cars, Plasma screen TV’s, etc. 2. 3. • Looking at the needs of people will help a potential entrepreneur to identify possible entrepreneurial opportunities. • What is important is that the entrepreneur needs to be original, innovative and creative to be able to develop a product or a service that people really need but is not available. Challenges and Benefits of Entrepreneurship • Entrepreneurship is fast becoming a major force in world economy. • Entrepreneurship, therefore, needs to change as the world continues to change. • Entrepreneurship proves to be very good for any economy, but it does not mean that it is always a smooth-sailing process. What are the Challenges for Entrepreneurship? • Setting up a business is not an easy or smooth process. • The process involves different decisions to be made with accompanying planning and implementation thereafter. Challenges can involve: 1) finding the right idea and opportunity to break into the market; 2) difficulties acquiring the resources (including land or raw materials, financial resources, labour and entrepreneurial ability) necessary for production and distribution of goods and services; 3) the high costs of creating internal roles, relationships and operating routines in new organisations; 4) the time and investment required to establish external relationships that are conditioned on experience, reputation, and trust; and 5) competition, often with very limited resources, with mature organisations that already have goods or services in the marketplace and that enjoy established customer relationships. Benefits of Entrepreneurship • But entrepreneurship does not only have challenges. It also has benefits. • Many entrepreneurs have been successful despite these challenges. Benefits that can be derived from entrepreneurial activities include the following: 1. Increase in employment opportunities • Entrepreneurship not only offers self-employment opportunities, it also creates employment for others, often better jobs. • Self-employment offers more job satisfaction and flexibility in the work force. • This kind of job creation utilises the human resources of the country and helps natural talent in the populace materialise. • Many people with disabilities, particularly those in rural areas where jobs are often scarce, have created opportunities for themselves through entrepreneurship. 2. Creation of more industries • Entrepreneurship leads to the development of more industries, especially in rural areas or regions where there are very few economic activities. • This does not only mean more goods and services, it also means higher quality products, because of healthy competition between different businesses. 3. Income generation and fewer social problems • Successful entrepreneurship activities increase the income level of the average person and also the standard of living in the community. • If more people are employed, more people pay taxes, which means more income for the government. • It also means that the crime rate goes down and the country becomes a safer location with more tourists willing to visit the country. • If tourism increases, more job opportunities become available and more people become employed. • Successful entrepreneurship can also attract more foreign investment into the country, which in return creates more job opportunities. 4. Higher productivity and economic growth • More industries mean higher production at lower prices. • Entrepreneurship encourages the use of local materials to produce finished goods for domestic consumption as well as for export. • Entrepreneurship enables a country to produce more and more goods locally and thereby build up its capacity and resources. • If we change our raw materials into consumable goods, we add value to our products, which means that we can now receive a much higher price and at the same time create more jobs. • With new inventions and developments in technology, a nation can use its resources more effectively. 5. Increase in exports and less dependence on imports • Entrepreneurship leads to the development of new markets. • If we produce more, we can export products that are not sold locally. • This means that products can also enter foreign markets. • From time to time, the president, cabinet ministers or high-ranking officials sign agreements with other countries to promote trade. • These are opportunities that should be taken into account by those who are involved in the production. • What is important is that exports must exceed imports in order for a country to be able to have an advantage. • If a country produces more and exports more, it can receive valuable foreign payments that will inevitably stimulate the economy. Entrepreneurial Characteristics and Skills Needed to Overcome Entrepreneurial Challenges 1. Education and Knowledge • Some people are very fortunate to have been born, as we say, as “natural business persons”. • As the demands on workers in the world ever increasing due to constant changes brought about by new technologies, having and education has become very vital. • In the old days, it was widely accepted that some occupations like farming did not require much education. • However today, farming has become so scientific that people go to college and university to study agriculture. • Farming is now in large part based on business principles. 2. Natural Ability and Skills • Some people are born with natural talents and skills. • If you are creative and use your talents and skills to develop solutions for challenges in your community, they can evolve into successful entrepreneurial activities, for example, carpenters, singers, designers, etc. • People who don’t have the required skills but do have an interest in a particular field, such as woodcarving, can employ people to do the work for them. • In such cases the entrepreneur should have the entrepreneurial skills to manage the business successfully. • People with creative and artistic skills create products that consumers want to buy, because these fulfil their needs. • Big companies and other businesses were founded by creative and resourceful persons. 3. Creativity • A nation with a creative mindset is a nation in which the economy can prosper. • We should be willing and open to change and entertain new ideas. • Get rid of old ideas and ways of doing things and stay at the cutting edge of development. • Not all people are born with creativity, but can develop it as a skill over a period of time. 4. Recognition of Opportunities • The ability to recognize opportunities is a skill that you can develop by looking at a situation in detail and with a positive mind-set. • We are often very negative and look for mistakes and challenges (problems) instead of being positive. • However, if we have studied the situation in detail and found that the challenges weigh more than the opportunities we can let the situation pass. • In this case, we will at least have the peace of mind that we were well informed that a particular opportunity was not a very good opportunity; or rather not an opportunity at all. • People with an entrepreneurial outlook, turn negatives into opportunities and do not shy away and let other people take advantage of opportunities. • They become job creators instead of job takers/seekers. • What is the difference? Job takers/seekers are people who work for someone else or for the government. • The person who owns a business is called a job creator. Here are some ways in which we can improve the skills: • Travelling • Learning a new language • Reading outside your main field of interest • Watching out for new developments and information about them • Asking people’s opinions regarding subjects that are of interest to you • Making new friends • Taking up new hobbies • Listening to others • Taking note that there are a wide variety of newspapers, magazines and newsletters • When you look for employment, take interest in businesses with an entrepreneurial culture and way of doing things 5. Experience • Practice makes perfect is a well-known saying. • We will never be able to do anything the correct way if we do not experience the activity ourselves. • To gain experience, you’ll need to attempt (try out) new undertakings and learn from those experiences. • Experience comes through trial and error and we should allow ourselves to make mistakes. • However, if we do careful and effective planning well in advance, we can minimize mistakes and save time and money in the process. 6. Strong Personal Characteristics • A strong personal character is important to take a stand in life and business but also to exercise positive ethical behaviour. • The following are examples of attitudes that we should possess to be successful in life, whether as employees or as entrepreneurs: Diligence Punctuality Willingness to make sacrifices Taking chances in life Going the extra mile for customers 7. Financial Resources • Finances are crucial and the amount of money needed to start and run a business will depend on the type of product or service, size of the business and many other factors. ASSIGNMENTS Case study Mr Juma after working in Dar es salaam for ten years, decided to go into business because he wanted to be his own boss and make more money than he made while still employed. He looked at the businesses most people were in, and found out that they were in mobile money (mpesa, tigopesa, etc.)businesses. He decided to open a mobile money business in Kigamboni. After being in business for several years, he did not make a lot of money. At times, he had no customers because there were so many mobile money businesses. At this moment, he is thinking of closing down the business. Questions: 1. Why did Mr Juma decide to start up his own business (enterprise)? 2. What type of business did he decide to start? 3. According to the case study, what were the disadvantages of opening a mobile money business? 4. Name two challenges that Mr Juma faced when running this business. 5. Do you think Mr Juma has good qualities as an entrepreneur? Provide reasons for your answer. 6. What advice will you give to Mr Juma on the idea of closing his business? Provide reasons for your answer. 7. Do you know a person in your community whom you believe is successful in his or her business or work? Write down five reasons why you think this person is successful. Practical activity 1: Creativity • Now organise your class and do the following activity to test your creativity. • Divide into different groups and give each group an egg. • Each group will have a time limit of say 30 minutes to come up with a solution to find a way to drop this egg from the first floor of a building or a high tree without the egg breaking. Discussion Do businesses exist alone or do they interact with people or institutions in a community? What is your opinion? Discuss this with your friend around you. Creative thinking-An Example: People from Manerumango Kisarawe have a problem to come to work in Dar es Salaam on a daily basis. What is the problem? Need: Some people don’t have their own cars/motorcycles and there is no public transport. Opportunity: This can be an opportunity for an entrepreneur to start a daladala business in that area. Practical activity 2 Think about and look around where you live. List five business opportunities in your neighbourhood and the need that each would satisfy: Business opportunity Need(s) satisfied 1. 1. 2. 2. 3. 3. 4. 4. 5. 5. Practical activity 3 Interview two unemployed persons in your community and ask the following questions: 1. Why did you become unemployed? 2. Why do you want to get employed? 3. What type of work do you want to do? 4. Do you have any skill or interest that will help you find the right job? 5. What is your educational background? 6. What suggestions do you have to address the problem of unemployment? What do you think these people can do to improve their situation? Study questions 1. Can you suggest solutions for the following problems? i. Next to your house is a vacant plot where people dump their waste and other refuse. ii. Your church, mosque or school wants to raise money to buy a public address system. iii. Your mother and father are both working from 8:00 till 17:00 daily from Monday to Friday. Your parents cannot afford to pay a domestic worker while they can also not assist your small brother who is in standard 4 with his schoolwork. 2. Explain how a creative mind can help you to develop a new product or service. 3. How does the term Entrepreneurship differ from Entrepreneur. 4. Look at the following words and classify them either as entrepreneurship or under entrepreneur. Give a reason for each of your choices. (i) hardworking (ii) customers (iii) do repairs to vehicles (iv) lazy (v) inventing a new machine (vi) good relationship with workers (vii) a person who takes chances in life (viii) banks (ix) designing a new range of dresses (x) working long hours 5. Entrepreneurship is not a smooth sailing process — it involves both challenges and benefits for the different stakeholders involved. 5.1 Name and explain the advantages entrepreneurship can have for a nation. 5.2 Explain the challenges entrepreneurship can have for an entrepreneur. 5.3 Name and explain the entrepreneurial characteristics you need to overcome challenges.
