ENTREPRENEURSHIP

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Introduction to Entrepreneurship

Module 001 | Introduction to Entrepreneurship

The concept of Entrepreneurship has a wide range of meanings. On the one

extreme, an entrepreneur is a person of very high aptitude who pioneers
change, on the other extreme definitions, anyone who wants to work for
himself or herself is considered an entrepreneur.

The word entrepreneur originates from the French word, entreprendre, which
means "to undertake." In a business context, it means to start a business. The
Merriam-Webster Dictionary presents the definition of an entrepreneur as
one who organizes, manages, and assumes the risks of a business or
enterprise.

Objectives:

1. Understand key concepts, underlying principles and core

competencies in Entrepreneurship
2. Create or provide a quality and marketable product and/or
service in Entrepreneurship
3. Define the concept of Entrepreneurship

Schumpeter’s View of Entrepreneurship

Austrian economist Joseph Schumpeter’s definition of entrepreneurship

placed an emphasis on innovation, such as:

 New products
 New production methods
 New markets
 New forms of organization

Wealth is created when such innovation results in new demand. From this
viewpoint, one can define the function of the entrepreneur as one of combining
various input factors in an innovative manner to generate value to the
customer with the hope that this value will exceed the cost of the input factors,
thus generating superior returns that result in the creation of wealth.

Entrepreneurship vs. Small Business

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Many people use the terms "entrepreneur" and "small business owner"
synonymously. While they may have much in common, there are significant
differences between the entrepreneurial venture and the small business.
Entrepreneurial ventures differ from small businesses in these ways:

 Amount of wealth creation - rather than simply generating an

income stream that replaces traditional employment, a successful
entrepreneurial venture creates substantial wealth, typically in
excess of several million dollars of profit.
 Speed of wealth creation - while a successful small business can
generate several million dollars of profit over a lifetime,
entrepreneurial wealth creation often is rapid; for example, within
5 years.

Risk

The risk of an entrepreneurial venture must be high; otherwise, with the

incentive of sure profits, many entrepreneurs would be pursuing the idea and
the opportunity no longer would exist.

Innovation

Entrepreneurship often involves substantial innovation beyond what a small

business might exhibit. This innovation gives the venture the competitive
advantage that results in wealth creation. The innovation may be in the
product or service itself, or in the business processes used to deliver it.

Entrepreneur

A person who is able to identify business opportunities and implement actions

to maximize on the opportunities. An entrepreneur initiates enterprise
creation, undertakes risks, and manages resources to establish and operate a
business enterprise that is capable of to self-sustain.

Definition According to J.B. Say

According to a French economist, J. B. Say, an entrepreneur is a person who

shifts economic resources out of an area of lower productivity into an area of
higher productivity and greater yield.

Entrepreneur in Developing Economies

In the case of a developing economy, the concept of an entrepreneur is

understood differently. An entrepreneur in a developing economy is one who
starts an industry (old or new), undertakes risks, bares uncertainties and
performs the managerial functions of decision-making and coordinating. He
also puts new processes based on technological research into operation. He is
called an entrepreneur even if he imitates any techniques of production from
a developed economy. The term entrepreneur has now been attributed to all
small industrialists, traders and agriculturalists. Hence, all people who are
gainfully engaged in work of manufacturing, distribution or service in other
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Introduction to Entrepreneurship

sectors are called entrepreneurs. The entrepreneur can be considered as the

fourth factor of enterprise. The enterprise is the basic unit of an economic
organization. It produces goods and services worth more than the resources
used. Enterprise is an undertaking, especially one which involves four factors,
land, labor, capital and now the entrepreneur. It involves the willingness to
assume risks in undertaking an economic activity.

Image

It also involves innovation, risk taking, and decision-making. Entrepreneurs

are the people who start new enterprises. The entrepreneur and enterprise
are linked as the success of an enterprise depends on the entrepreneur.

Intrapreneur

This is an employed staff e.g. manager who innovates for the company and
takes risks only on behalf of the employer. He is therefore an intra company
entrepreneur for whom the term Intrapreneur is coined. Intrapraneurs are,
therefore, the main entrepreneurs in large companies who innovate and take
risks on behalf of their employer. These are creative people usually working
together as teams, who function as entrepreneurs within corporations. The
idea is to use a company’s existing resources such as human, financial and
physical resources to launch new products and gain more profit.

Intrapreneurship

This is the development within a large co-operation of internal markets and

relatively small autonomous business units producing products, services or
technologies that employ the firms‟ resources in a unique way. It gives the
managers of the co-operation the freedom to take initiatives and try new ideas.
It is entrepreneurship within an existing business.

Entrepreneurship and Innovation

Creativity is the ability to generate ideas while innovativeness is the ability to

implement the appropriate ideas. An entrepreneur is expected to be creative
and innovative to be able to solve problems, cope with business challenges,
plan and implement activities successfully. An entrepreneur’s innovativeness
is reflected in the following ways:

 Initiating new ideas. Initiative is the ability to start acting on an

idea. Entrepreneurs are crusaders of new ideas. They do not wait
for conditions to be perfect to act on a new idea. They act on them

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 and solve obstacles and difficulties as they arise. As a result, an
entrepreneur creates an advantage over their competitors.
 Searching for new information. An entrepreneur is always open
for information that facilitates the generation of new ideas for the
business.
 Translating ideas and information into a business venture.
Excellent ideas and information are not enough. An Dzaveragedz idea
acted upon and developed is far better than a Dzvery gooddz idea that
dies because it is not followed up. Entrepreneurs are action-
oriented and translate good ideas to actions.

Inquisitiveness

An entrepreneur is always curious to know what is happening in the business

environment. The ability of being inquisitive and sensitive to the environment
upgrades the entrepreneurs’ level of thinking and approach to business
problems.

 Perseverance. Entrepreneurs do not give in to failure. Rather, they

seek out the faults and weakness and then correct them. They
persevere in their effort to overcome problems and setbacks and
eventually win.
 Removing mental blocks and acceptance. Mental blocks and
acceptance are traits that inhibit creativity and innovativeness. Some
of these are traditional methods and beliefs. An entrepreneur has the
ability to remove these barriers and encourage clear thinking and
independence in his or her venture.

Entrepreneurial Contribution to Economic Development

Utilization of Local Resources

Local resources, some of which would be otherwise declared useless, are put
to more gainful use. The value of the resources is improved. For example, the
conversion of waste products such as nylon papers to make plastic posts,
bottle tops from used bottles to make door curtains, sisal fiber to make the
world famous Dzciondodz etc.

Promotion of Technology

Entrepreneurs are very creative hence, they contribute to the utilization and
development of technology. For example, the development of the energy
saving jiko, wheel chairs, washing machines, vegetable and fruit cutting
machines, charcoal refrigerators etc.

Capital Formation

Entrepreneurs help in the creation of wealth for the country through job
creation (as employees save their salaries and wages through the banking
system and other systems, they contribute to capital formation). As the
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entrepreneurs pay tax and save their earnings they too directly contribute to
capital formation.

Creation of Employment Opportunities

Entrepreneurs help in solving the unemployment problem. Majority of

indigenous. Kenyan entrepreneurs are in Small Scale and Jua Kali Sector that
is a major employer in the country. Promotion of an Entrepreneurial Culture
By portraying successful images, entrepreneurs become models to the
upcoming Kenyan generation. A country, which embraces entrepreneurial
culture, is bound to be economically stable.

Export Promotion

Many products manufactured by the Kenyan Jua Kali/Small Enterprise sector

find their way to foreign markets and in return, Kenyan entrepreneurs identify
foreign markets. Through these activities, entrepreneurs are able to earn the
country foreign exchange.

Favorable Balance of Payment

The improvement of the Jua Kali Sector has seen a reduction in the rate of loss
through import only. There is now a balance between the import and export
business.

The rate of improvement of industries in Kenya has gone up because of an

improvement in the Jua Kali and Small Scale Enterprises sector.

Improved Marketing of Locally Produced Products

The improvement in the Jua Kali sector has resulted in an improvement in the
internal and external markets. With the current competition, every business is
compelled to produce quality products/services and aggressively market the
same.

Improved Infrastructure

Creation of businesses leads to improved cities and towns, which in turn result
in improvement of roads, banking services, telephone network, electricity etc.

Promotion of Talent and Hobbies

The Jua Kali and Small Scale Enterprise Sector encourages young people to
exploit their talents.
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 Improved Growth in Gross Domestic Product

There is now favorable trade internally and this has seen an increase in
economic growth.

Self-reliance

Entrepreneurs enable citizens to survive comfortably without too much

borrowing.

Entrepreneurship and Self-Employment

A person puts his effort in a business or an activity that belongs to him/her in

this state. He or she works independently and earns a living from it. An
entrepreneur is one who recognizes an opportunity and takes the risks as a
business owner of providing a needed product or service for which an
adequate reward (profit) is realized. Thus, both risk and profit are involved.
These descriptions both fit entrepreneurship and self-employment so they are
one and the same, although entrepreneurship is a more serious and deliberate
level of self-employment.

Factors to Consider Before Going into Self-employment

 Business Idea
 Skills (Technical/Managerial)
 Market
 Capital (Opening, Working or Long-term)
 Machinery (Technology)
 Raw materials
 Location (Strategic)
 Legal Issues Competition

Reasons for Self-Employment

1. Need to improve personal income. Besides the inability to secure

any type of employment this is the most basic reason, which causes
many low-income earners to directly embark on business byway of
self-employment. Inflation often impairs the ability of low-income
earners to afford necessities of life to an extent they have to look for
alternative ways of ensuring survival, and this may lead them to set
up small business.
2. Inability to secure a desirable job. The number of Kenyans
eligible for employment is very high. There are not enough
employment opportunities in the formal sector. The small business
sector has the capacity to create many jobs.
3. Influence of others. Although many aspiring entrepreneurs make
a personal decision to go into business there are also strong
indications that just as many if not more get courage to take the
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Introduction to Entrepreneurship

plunge because of influence or inspiration gained from close

associates such as friends or relatives already in business.
4. To fulfill a life-long ambition. There are those people in society
whose ultimate goal is to go into business at some defined point life
no matter how attractive wage employment might seem. These
people are usually highly motivated internally and do not need
extrinsic motivators to go into business. They are often high
achievers who aim for self-fulfillment that comes from doing
something unique.
5. To seek more independence. These people prefer to be
introduced to a task without being led every step required for the
accomplishment of the task. They like to be left alone to think and
develop their own initiative. When guided closely they feel belittled,
frustrated and impatient. Occasionally these people rebel and will
often end up in self-employment if the present opportunity does not
give them the opportunity to seek challenge and contribute their
own ideas.
6. Love for adventure. Innovative people thrive on exploring new
ideas and opportunities even if the outcome might be uncertain and
risky. They derive satisfaction from the thrills that arise from a
mixture of success and uncertainty.
7. Dissatisfaction with wage employment. This may be because of
poor prospects of career advancement, delayed promotions, lack of
recognition or appreciation of special accomplishments, poor terms
of service, unsatisfactory working conditions pending redundancy
8. Favorable environment. These include appropriate incentives e.g.
access to credit facilities laws governing small enterprise creation,
access to raw materials and machinery, good infrastructure e.g.
roads telephone networks electricity, inexpensive cost of labor.

Characteristics of Entrepreneurs

M. M. P. AKhouri, formerly Executive Director, National Institute for

Entrepreneurship and Small Business Development (NIESBUD), New Delhi,
describes an entrepreneur in words that clearly bring out the characteristics
of an entrepreneur. He describes entrepreneur Dzas a character who combines
innovativeness, readiness to take risk, sensing opportunities, identifying and
mobilizing potential resources, concerns for excellence and who is persistent
in achieving the goal.dz

1. An eye for opportunity: Many entrepreneurs start by finding a

need and quickly satisfying it. They are always alert to
opportunities. They are very much quick to see and grab

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 opportunities. They plan intellectually and anticipate carefully how
to achieve their goals in realizing an opportunity.
2. Independence: Even though most entrepreneurs know how to
work within the framework for the sake of profits, they enjoy being
their own boss. They like doing things their own way. The
characteristics of independence and the sense of determination are
the drives that make an entrepreneur start their own business. In a
way, their own business fulfills their need for independence.
3. An appetite for hard work: Most entrepreneurs start out working
long, hard, hours with little play. Entrepreneurs are always at work
even when other people have stopped. They are persistent and
strongly believe that working hard will help them attain their goals.
They hence focus on the result.
4. Self-confidence: Entrepreneurs must demonstrate extreme self-
confidence in order to cope with all the risks of operating their own
business. Most successful entrepreneurs are confident of achieving
realistic and challenging goals. They get into business or industry
with a high level of self-confidence. This, couples with a sense of
effectiveness ultimately contribute to the success of the venture.
5. Discipline: Successful entrepreneurs resist the temptation to do
what is unimportant or the easiest but have the ability to think
through what is the most essential. Entrepreneurs are economically
efficient, do not like to waste time and they like to see work
completed. They use discipline as a guide to their destination.
6. Judgement: Successful entrepreneurs have the ability to think
quickly and make a wise decision. This is possible because they
have a plan, they have an economic goal, they know what they want
and they know what they can do. Entrepreneurs are unaffected by
personal likes and dislikes. They stand beyond these types of
prejudices, as they are realistic in their approach. At the time of
their need they select experts rather than friends and relatives to
assist them. They usually avoid emotional and sensitive attitude
towards their business or problem.
7. Ability to accept change: Change occurs frequently when you own
your own business, the entrepreneur thrives on changes and their
business grow. An entrepreneur may need to change his/her plans
in order to help the business grow. Entrepreneurs look at many
solutions to their problems. They realize that other people may
know how to do something better. Entrepreneurs can choose the
best way to do something, even if it is different from how they want
to do it.
8. Make stress work for them: On the roller coaster to business
success, the entrepreneur often copes by focusing on the result and
not the process of getting there. Entrepreneurs are capable of
working for long hours and solving different complexities at the
same time. As the captain of an industry or an enterprise, an
entrepreneur faces a number of problems and in right moment, he
takes right decisions that may involve physical as well as mental
stress.
9. Need to achieve: Although they keep an Dzeyedz on profit, this is often
secondary to the drive toward personal success. Entrepreneurs
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have strong desire to achieve higher goals. Their inner self

motivates their behavior towards high achievement. To an
entrepreneur, winning is achievement.
10. Focus on profits: Successful entrepreneurs always have the profit
margin in sight and know that their business success is measured
by profits.
11. Risk bearing: Entrepreneurs are the persons who take decisions
under uncertainty and thus they are willing to take risk, but they
never gamble with the results. They choose moderate risk rather
than play wild gamble. They, therefore, undertake calculated risk
which is high enough to be exciting, but with a reasonable chance to
win.
12. Locus of control: Closely consistent with McClellan’s theory of
need for achievement, is the belief in internal locus of control.
According to Rotte’s locus of control theory, an individual perceives
the outcome of an event as being either within or beyond his
personal control. Entrepreneurs believe in their own ability to
control the consequences of their endeavor by influencing their
socio-economic environment rather than leave everything to luck.
They strongly believe that they can govern and shape their own
destiny.
13. Creative and Innovators: Successful entrepreneurs are
innovators. They constantly put their efforts in introducing new
products, new method of production, opening new markets and
reorganizing the enterprise. They always try not to be satisfied with
conventional and routine way of doing things, but always think of
how they can do them in a better way.
14. Leadership: Entrepreneurs should possess the quality of
leadership. Leadership is the ability to exert interpersonal influence
by means of communication towards the achievement of goals.
Entrepreneurs as leaders should provide the necessary spark of
motivation by guiding, inspiring, assisting and directing the
members of the group for achievement of unity of action, efforts and
purpose. According to George R. Terry: DzLeadership is the activity
of influencing people of strive willingly for group objectivesdz. Thus,
entrepreneur, as the leader of the group, can ensure high
performance by creating a well-to-do environment among others.
They must have the capability to arrive at prompt and correct
direction and win the confidence of their subordinates. Being the
leader of the enterprise, they should possess the following
characteristics:
 Existence of followers
 Assumption of responsibility
 Empathy conduct
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  Exemplary conduct
 Developing teamwork
 Common objectivity
 Facilitating change
 Building morale
 Maintenance of discipline
 Active participation
15. Hence, entrepreneurs by their own leadership styles and behavior
reduce the problems with careful listening and proper handling of
situations. Good administrative work depends upon effective
leadership of the entrepreneur.
16. Ability to mobilize resources: Entrepreneurs must have the
ability to marshal all the inputs to obtain the product. They have to
mobilize 6Ms, i.e. Man, Money, Material, Machinery, Market and
Method effectively to realize the final product as entrepreneurship
is a function of gap filling and input completing.

Entrepreneurs have many qualities that help them their businesses successful.
However, an entrepreneur does not have to possess all the qualities. In that
case, he has either to learn or hire the services of those who possess the
qualities he does not have.

Glossary
Inquisitive: Eager for knowledge.
Leadership: The ability to exert interpersonal influence by means of
communication towards the achievement of goals.
Self-employed: A situation in which an individual works for himself instead
of working for an employer that pays a salary or a wage. A self-employed
individual earns his income through conducting profitable operations from a
trade or business that he operates directly.

References
1. Introduction to Entrepreneurship;
http://www.slideshare.net/Olwenda/introduction-to-
entrepreneurship-13327215 ; May 5, 2017
2. What Are the Basic Concepts & Characteristics of Entrepreneurship?
http://smallbusiness.chron.com/basic-concepts-characteristics-
entrepreneurship-18526.html ; May 5, 2017
3. Entrepreneurial Competencies;
https://eshipnotes.wordpress.com/topics/class-xi/entrepreneurial-
competencies/ ; May 5, 2017
4. Eduardo A. Morato, Jr.; 2016; Entrepreneurship 2016 Edition; Manila;
Rex Bookstore