Principles of Entrepreneurship

Foundations of

Entrepreneurship

Entrepreneur

• Someone who seeks to capitalize on new and profitable endeavors or business; usually with considerable initiative and risk.

• A person who operates a new enterprise or venture and assumes some accountability for the inherent risks

• Source : Wikipedia Available on Internet

<http://en.wikipedia.org/wiki/Entrepreneur>

Entrepreneur

• “One who organizes and manages any enterprise especially a business, usually with considerable initiative and risk”

Source : Random house

• “One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling necessary resources to capitalize them”

Source : Zimmerer & Scarborough

Entrepreneur

• According to John Thompson, entrepreneur is a person who habitually creates and innovates to build something of recognized value around perceived opportunities.

• Source: Bolton and Thompson .Available on Internet <http://www.1000ventures.com/business_guide/crosscuttings/entrepreneur_main.html>

Entrepreneur

Key words:

'Entrepreneur' – can be an individual entrepreneur, but also an entrepreneurial team or even entrepreneurial organization

• 'A person' – emphasizes a personality rather than a system

Entrepreneur

Key words:

• 'Habitually' – just cannot stop being an entrepreneur

• 'Creates' – starts from scratch and brings into being something that was not there before

Entrepreneur

Key words:

• 'Innovates' – able to overcome obstacles that would stop most people; turns problems and risks into opportunities; delivers - sees ideas through to final application

• 'Builds something' – describes the output of the creation and innovation process

EntrepreneurKey words:

• 'Of recognized value' – encompasses economic, commercial, social, or aesthetic value

• 'Perceived opportunities' – spotting the opportunity to exploit an idea that may or may not be original to the entrepreneur; seeing something other miss or only see in retrospect

Entrepreneurship

• Gartner (1985) states:

"Entrepreneurship is the creation of new organizations".

Entrepreneurship…

• First and foremost a mindset. It is the art of finding profitable solutions to problems .

Source: Colin Turner . Available on Internet<

http://www.1000ventures.com/business_guide/crosscuttings/entrepreneurship.html>

• The result of a disciplined, systematic process of applying creativity and innovation to the needs an opportunities in the market place.

Characteristics of entrepreneurship

• The entrepreneur has an enthusiastic vision, the driving force of an enterprise.

Characteristics of entrepreneurship

• The overall blueprint to realize the vision is clear, however details may be incomplete, flexible, and evolving.

Characteristics of entrepreneurship

• An entrepreneur is usually a positive thinker and a decision maker.

Characteristics of entrepreneurship

• The entrepreneur takes the initial responsibility to cause a vision to become a success

Characteristics of entrepreneurship

• Risks;

– Entrepreneurs take prudent risks.

– They assess costs, market/customer needs and persuade others to join and help.

Characteristics of entrepreneurship

• With persistence and determination, the entrepreneur develops strategies to change the vision into reality.

Characteristics of entrepreneurship

• The entrepreneur promotes the vision with enthusiastic passion.

Characteristics of entrepreneurship

• The entrepreneur's vision is usually supported by an interlocked collection of specific ideas not available to the marketplace.

Entrepreneurship

• Entrepreneurship is..

willingly working together, risking, creating, implementing, driving and following through an innovative idea that seeks to maximize value from opportunity without constraint to existing models, structure or resources.

Contributions of Entrepreneurs

• Develop new markets.

– Entrepreneurs are resourceful and creative

– They can create customers or buyers.

Contributions of Entrepreneurs

• Discover new sources of materials.

– Entrepreneurs are the organizers and coordinators of the major factors of production, such as land labor and capital.

– They properly mix these factors of production to create goods and service.

Contributions of Entrepreneurs

• Introduce new technologies, new industries and new products.

– Aside from being innovators and reasonable risk-takers, entrepreneurs take advantage of business opportunities, and transform these into profits.

Contributions of Entrepreneurs

• Create employment

Advantages of Entrepreneurship

• Enormous personal financial gain

• Self-employment, offering more job satisfaction and flexibility of the work force

• Development of more industries, especially in rural areas or regions disadvantaged by economic changes, for example due to globalisation effects

Development of new markets

Advantages of Entrepreneurship

• Encouragement of the processing of local materials into finished goods for domestic consumption as well as for export

• Income generation and increased economic growth

• Healthy competition thus encourages higher quality products

Advantages of Entrepreneurship

• Promotion of the use of modern technology in small-scale manufacturing to enhance higher productivity

• Employment for others, often in better jobs

More goods and services available

Advantages of Entrepreneurship

• Encouragement of more researches/ studies and development of modern machines and equipment for domestic consumption

• Development of entrepreneurial qualities and attitudes among potential entrepreneurs to bring about significant changes in the rural areas

Advantages of Entrepreneurship

• Freedom from the dependency on the jobs offered by others

• Reduction of the informal economy

• Emigration of talent may be stopped by a better domestic entrepreneurship climate

The ability to have great accomplishments

Successful entrepreneurship takes only a great idea.Successful entrepreneurship takes only a great idea.

Entrepreneurship is easy.Entrepreneurship is easy.

Entrepreneurship is a risky gamble.Entrepreneurship is a risky gamble.

Entrepreneurship is found only in small businesses.Entrepreneurship is found only in small businesses.

Entrepreneurial ventures and small businesses are identical.Entrepreneurial ventures and small businesses are identical.

Can you think of others; think about some successful Can you think of others; think about some successful

business and try to determine the barriers they overcame in business and try to determine the barriers they overcame in

being successful????being successful????

Myths About EntrepreneurshipMyths About Entrepreneurship

Entrepreneurship starts business solely to make moneyEntrepreneurship starts business solely to make money

It takes a lot of money to start a business.It takes a lot of money to start a business.

It takes great idea.It takes great idea.

Entrepreneurship is a zero-sum game.( everyone gains)Entrepreneurship is a zero-sum game.( everyone gains)

The bigger the risk, the bigger the reward.The bigger the risk, the bigger the reward.

A business plan is required for success.A business plan is required for success. Entrepreneurship cannot be taught.Entrepreneurship cannot be taught.

Entrepreneurship is for the young and the recklessEntrepreneurship is for the young and the reckless

Myths About EntrepreneurshipMyths About Entrepreneurship

Uncertainty of income

Must be comfortable with risk and uncertainty

Must make a bewildering number of decisions

Need many different skills and talents

May face tough times, stress and discouragement

Must be comfortable with hard work and working long hours

Must be comfortable with the potential for failure

Drawbacks of EntrepreneurshipDrawbacks of Entrepreneurship

Characteristics of The Entrepreneur

• Creative• Desire for responsibility• Preference for moderate risk• Confidence in their ability to succeed• Desire for immediate feedback• High level of energy• Future orientation• Skilled at organizing• Value achievement over money

Seeks independence and self-control

Aggressively pursues goals; pushes self and others

Focused and consistent

Independent thinking and quick thinking

Objective and impartial

Pursues simple, practical solutions

Comfortable (but not careless) with risk-taking

Exhibits clear opinions and values; has high expectations

Aggressive and often a pioneer

Positive, optimistic and confident

Characteristics of the Entrepreneur:Characteristics of the Entrepreneur:

The Agribusiness Entrepreneur

To be successful managers must be:

• Technically knowledgeable about the firm’s products and services

• A good communicator to everyone, especially those who work for the firm

• Able to motivate people effectively

The Agribusiness Entrepreneur

To be successful managers must be:• Able to motivate people effectively

• Proficient in the technical skills of business management such as inventory management, accounting, and forecasting

• Be able to mix each of these skills in just the right proportion in each market situation to gain the greatest benefit to the firm

Accepts responsibility and power as a challenge

Acts as a catalyst for change

Creative thinker

Proactive rather than reactive

An Entrepreneur Must Possess Excellent Management Skills:

These skills and principles of management should help to:

Make decision-making easier

Improve the quality of decisions

Reduce the time necessary to make decisions

Improve the frequency of good decisions

Improve efficiency and effectiveness

An Entrepreneur Must Possess Excellent Management Skills:

High degree of independence— Create your own destiny

Opportunity to make a difference

Opportunity for greater financial rewards

Get to use your specific skills and talents and reach your full potential

Autonomy to make decisions

Accountable to only yourself

Feeling of achievement and pride

Benefits of Being an EntrepreneurBenefits of Being an Entrepreneur

• “A venture is most prone to failure during its first three years of

operation - the so-called 'valley of death'.

A key to getting through these early years is to avoid the obvious

mistakes“

Source:'Devising Venture Strategies' by Invest-Tech Ltd.)

What does new venture creation means?

Venture…

• a risky start-up or enterprise company

• a major undertaking

Independently owned, operated, and financed

Less than 100 employees

Does not emphasize new or innovative practices

Innovative practices

Goals are profitability and growth

Seeks out new opportunities

Willingness to take risks

Differences Between Small Businesses Differences Between Small Businesses and Entrepreneurial Venturesand Entrepreneurial Ventures

Joseph A. Schumpter – “Creative Destruction”

Entrepreneurs are a force for change and make existing products obsolete.

A FRAMEWORK FOR NEW VENTURE CREATION

Entrepreneur

Innovative Idea

Market Opportunity

Venture Concept

Test of Potential•Prove potential•Create initial “prospectus” to seek resources

Test ofFeasibility•Prove feasibility•Prepare for implementation•Gather resources

New Venture

Resources I•“Potential” Info (general market, process, org., etc.)•“Sweat” Equity

Resources II•“Feasibility” Info (specific market, process, org., etc.)•Initial Equity

Resources III•Prop., Plant & Eqmt•Personnel•Management•Buyers•Suppliers•Advisors/Partners•Full Debt & Equity

Policy Environment

Industry and Market Environment

Nature of Entrepreneurial Start ups

• Entrepreneurial ventures have three primary characteristics;– Innovative– Value creating– Growth oriented

Common (Ten Deadly) Mistakes of Entrepreneurship

1. Management incompetence

2. Lack of experience

3. Poor financial control

4. Failure to develop a strategic plan

5. Uncontrolled growth

Common (Ten Deadly) Mistakes of Entrepreneurship

1. Poor location

2. Improper inventory control

3. Incorrect pricing

4. Poor marketing strategies

5. Inability to make the “entrepreneurial transition”

What mistakes are you likely to make?

Can you think of any mistakes other than those above?

The Twelve Key Reasons Why Companies Fail

• Inadequate planning of the business

• Insufficient initial capital for the start-up period and development stages due to inadequate planning

• Mistaken estimate of the market demand for product or services

• Lack of management ability

The Twelve Key Reasons Why Companies Fail

• Failure to select and use appropriate outside professional services

• Inability to market products or services effectively

• Over dependence on a single individual or a predicted event

The Twelve Key Reasons Why Companies Fail

• Failure to understand capital requirements of a growing business

• Poor timing of expenditures due to poor planning

• Expedient rather than reasoned decision-making

• Source:Terry Collison

How to Avoiding the Pitfalls of Small Business Failure

• Develop a solid business plan

• Know your business in depth

• Manage financial resources

• Understand financial statements

• Learn to manage people effectively

How to Avoiding the Pitfalls of Small Business Failure

• Keep in tune with yourself

• Be different

• Focus on customer service

• Ensure good employee relations

The Five Critical Success Factors for New Ventures

• A focus on the market

• Financial foresight, especially in planning for cashflow and capital needs ahead

Source: Peter Drucker

The Five Critical Success Factors for New Ventures (by Peter Drucker)

• Building an top management team long before the new venture actually needs one and long before it can actually afford one

• A decision by the founding entrepreneur in respect of his or her own  role, area of work, and relationship

Source: Peter Drucker

The Eureka MomentWhere did you get the original idea for your

business?

Research5%

Another Source12%

Experience as Consumer or

Client14%

Related Industry

17%Same Industry

52%

Sources of New Venture Ideas

1. Prior experience 2. Business associates3. Similar business4. Friends or relatives 5. Hobby/personal interest6. Market research7. Serendipity8. Other sources

Behaviour of EntrepreneursEntrepreneurs

• Entrepreneurs display many behaviours. Theses behaviours determines if the entrepreneurs is successful or not.

Let us look at the good, the bad and the ugly behaviours that Entrepreneurs

‘Good’ behaviours

• Creativity

• Business knowledge

• Critical thinking

• Integrity

• Self discipline and perseverance

• Thriving on uncertainty and chaos

‘Bad’ behaviours

• Greed

• Dishonesty and lack of ethics

• Poor judgment

• Not detailed-Oriented

‘Ugly’ behaviours

• People who will do anything to even if it means lying, cheating and stealing.succeed

Entrepreneurial Opportunities

• You don't get investment for just an idea –

Entrepreneurs are people that exploit ideas by matching them to market needs, designing a business model that makes the idea profitable.

Entrepreneurial Opportunities

• Joseph Schumpter stated that entrepreneurs create value by:

– “exploiting an invention or untried technology for producing a new product or an old product in a new way, or by

– opening a new source of supply of materials, or a new outlet for products, or by

– reorganizing an industry”.

– Example 3M US : Brands

Entrepreneurial Opportunities

• Joseph Schumpter stated that entrepreneurship placed an emphasis on innovations such as:

– New products

– New production methods

– New markets

– New forms of organizations

• The PhD –

– Government funded research leads to some new breakthrough. The PhD partners with a few people finds a little money to commercialize the technology.

How do Entrepreneurs find Opportunities to Start New

Businesses

• The corporate spinoff –

– A company develops a technology that it doesn't want or need. A few employees spinoff with the technology and cash from the corporation to commercialize it.

How do Entrepreneurs find Opportunities to Start New

Businesses

• The necessity –

– A guy runs a small business and has an unmet need. He figures out a new widget (or software maybe) to meet his need. Eventually, someone asks about the widget because they could use one too. Guy markets widget and does well.

How do Entrepreneurs find Opportunities to Start New

Businesses

• The consultant expansion –

– A small consultant shop tackles and solves a problem. Realizing that their solution has other applications, they seek funding and market it.

How do Entrepreneurs find Opportunities to Start New

Businesses

How do Entrepreneurs find Opportunities to Start New

Businesses• The part-timer –

– You start something small while keeping your day job. You have a few excited customers that you use to help figure out the future of your business. You grow to the point where you are stressed out from working two jobs. You work out a plan, and transition full-time to the new venture.

How do Entrepreneurs find Opportunities to Start New

Businesses• The hobby –

– A guy has a hobby and becomes very good at it, and people start asking him to make them things. He launches a business around it.

How do Entrepreneurs find Opportunities to Start New

Businesses• The small business –

– You start something simple and cheap. It never makes it to the "big leagues," but so what? Most entrepreneurs never do. Michael Dell is a rare breed.

Really Erroneous Predictions

Highways and Trains

• “ The actual building of roads devoted to motor cars is not for the near future, in spite of many rumors to that effect.” Source: Harpers Weekly, August 2, 1902. p.1046

• Irish Scientist, Dr. Dionysius Lardner did not believe that rail travel could contribute much in speedy transport. He wrote: “Rail travel at high speed is not possible, because passengers would die of asphyxia [suffocation].”

Television….

• “(Television) won’t be able to hold onto any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.”

–Darryl F. Zanuck.

Computers….

• “Despite the trend to compactness and lower costs, it is unlikely everyone will have his own computer any time soon.” Reporter Stanley Penn, The Wall Street Journal, 1966.

• “I think there is a world market for maybe five computers.” Thomas Watson is reported to make this ‘stupid’ statement in 1943. At the time he was the Chairman of IBM.

Telephone

• The telephone, a group of British experts clucked, “may be appropriate for our American cousins, but not here, because we have an adequate supply of messenger boys.”

• Western union wasn’t impressed either. It declined to buy the patent on Alexander Bell’s 1876 invention, saying the public could not be trusted to master such complicated equipment.

Perhaps the two guys that got it wrong most were….

• The Director of the US Patent Office: in 1899 he assured President McKinley that “everything that can be invented has already been invented.”

• Roman engineer Julius Sextus Frontinus, A.D.10. “Inventions have long since reached their limit, and I see no hope for further developments.”

Feeding the Entrepreneurial Fire

• Entrepreneurial education• Demographic and economic factors• Independent lifestyles• Shift to a service economy• Technological advancements• E-Commerce and the World Wide

Web• International opportunities

THE END

• Questions Any one ?

Exploring the Exploring the Entrepreneurial Entrepreneurial

ContextContext

IdentifyingOpportunities or

PossibleCompetitive Advantages

Starting the Venture:

Researching Feasibility

Planning the Venture

Organizing the Venture

Launching the Venture

Managing the Venture:

Managing Processes

Managing People

Managing Growth

Special Issues

The Entrepreneurial ProcessThe Entrepreneurial Process

The Four Entrepreneurial Strategies

• Being "the Fastest and the Mostest" – the "greatest gamble", aiming from the beginning at permanent  leadership.

• "Hitting Them Where They Ain't" – either by "creative imitation"; or by "entrepreneurial judo", a Japanese concept that enables newcomers to catapult themselves into a leadership position against entrenched, established companies

The Four Entrepreneurial Strategies

• Finding and occupying a specialized "ecological niche" - obtaining a practical monopoly in a small area

• Changing the economic characteristics of the product, a market, or an industry - by creating utility, or pricing, or adaptation to the customer's social and economic reality, or delivering what represents true value to the customer.

source: Peter Drucker

Protecting your Idea

New opportunities in Caribbean Agriculture.

• Opportunities in agriculture are many , and include agro-tourism

• Agro-energy,

• Herbal products, organic agriculture,

• Fiber crops such as animal feed ( using single cell protein and regionally grown grains and carbohydrate supplies),

New opportunities in Caribbean Agriculture.

• Science based technologies, • such as biotechnology products, greenhouse

technologies,• improved varieties of tropical flowers e.g.

Anthurium, • aquaculture, aquacponics• tropical fruit growing and processing• Gourmet foods,• Dairy and dairy products and small ruminant.

New opportunities in Caribbean Agriculture

• To the Caribbean, the relatively ‘newer’ areas include;

• herbal crops,

• Over –the- counter dietary supplements

( Nutraceuticals)

• Bio-fuels,

• Agro-tourism and recreational and decorative applications.

Agribusiness opportunities

• According to IICA (2006) agriculture is changing form the traditional agrarian primary crop production to value added production.

• This is driven by tremendous levels of investments in different sub sectors such as:

Agribusiness opportunities

• The Bakeries industry.

• Feed milling, edible oils and flour processing .

• The Food and Beverage industry

Other opportunities in the Caribbean

• Milk and dairy products- yogurts and health shakes in south and north East Asian market

• Meats and meat products- Halal goat meat for Muslims

• Fish and seafood. Tilapia niche market in Europe and America

• Fruit and vegetables

• Wine – Red wine reduces heart risk.

Other opportunities in the Caribbean

• Snacks/ comfort food- dehydrated fruits, health conscious consumers in the East Asian Markets.

• Soy based products health conscious consumers in East Asian and American Markets.

• Fresh and Frozen juices –Strong market in East Asian

Other opportunities in the Caribbean

• Processed and Package foods eg. calloo and chowmein pack segment in the Caribbean

• Home replacement meals, semi-ready meals, convenience foods . There is a strong market in the Americas and Europe.

• Breakfast cereals- health market in the Americas and Europe.

Other opportunities in the Caribbean

• Confectionery- unsatisfied market in Americas and Europe.

• Honey- opportunities exist in Middle East markets.

• Soups and salads – growing health market in America and Caribbean.

• Pet supplies

1. Find a need and fill it.

• When Ross Perot was working for IBM, he saw that his customers who were buying IBM computers needed help processing their data.

• He went to IBM with this idea, and they said they weren't interested, so he started his own business.

• He eventually sold it out for $2.8 billion dollars. He found a need and he filled it.

2. Find a problem and solve it.• A secretary working for a small company began

mixing flour with nail varnish in order to white out the mistakes she was making in her typing.

• Pretty soon, her friends in the same office asked if she could make some for them.

• So she began mixing it at her kitchen table. Then, people in other offices started asking for it, and she eventually quit her business and worked full time creating what is today called Liquid Paper.

• A few years ago, she sold her company to Gillette Corporation for $47 million.

3. Look for solutions.

• Find a way to supply a product or a service better, cheaper, faster or easier.

• Clemmons Wilson saw that there was a need for hotels that could accommodate families that were traveling, and he started Holiday Inns.

• And Holiday Inns has now become one of the most successful hotel chains in the world.

4. Focus on your customer.

• Become obsessed with your customer. Fixated on your customer.

• Think of what your customer wants, what your customer needs, what your customer will pay for, what your customer's problems are.

• Thomas J. Watson, the founder of IBM, built his company on this principle. See yourself as working for the customer.

5. Invest sweat equity in your business

• Most great fortunes in America were started with an idea and with personal effort and were started with the sale of personal services. This is called sweat equity.

•

5. Invest sweat equity in your business

• In other words, instead of cash equity, put in sweat equity.

• Put in the sweat of your brow to begin your business.

• Once you've come up with a product or and start to invest your time, talent and energy instead of your money, to get started

Action Exercises: Here are two things you can do immediately to

put these tactics into action:

• Find a need and fill it. Look around you and search for needs that people have for products or services that are not being met. One small idea is enough to start you on the way to business success.

• Find a problem and solve it. Look around you for problems that you or other people have that are not yet being solved. Look for solutions that nobody has thought of and give them a try. One good solution could change the direction of your life.

Assignment for Consideration(To be discussed in next class)

• Search through recent publications (newspaper, journals, magazines, Internet) and find an example of an entrepreneur, past or present. (Agribusiness)

• What the ‘story’ behind the business.

– What makes this business unique/innovative?

– What entrepreneurial qualities do these entrepreneurs exhibit?

– What obstacles did they face and how did they overcome failure.