CHAPTER ONE

ENTREPRENEURSHIP AND FREE ENTERPRISE

1.1. Definitions of Entrepreneurship and Entrepreneur
What is entrepreneurship? And who is an entrepreneur? These two questions are asked more
frequently reflecting the increasing demand in the field of entrepreneurship. Offering a specific
and unambiguous definition of the term entrepreneurship /entrepreneur presents a challenge. This
is not because definitions are not available, but because there are so many definitions. The main
difference between entrepreneur and entrepreneurship is their attachment. Entrepreneur is a
person while entrepreneurship is a process. When it is put in other way, entrepreneurship is a
process undertaken by entrepreneur to augment his/her business interest. Broadly defined
1 Entrepreneurship is a dynamic process undertaken by an entrepreneur to create
incremental value and wealth by discovering investment opportunities, organizing an
enterprise, undertaking risk and economic uncertainty and there by contributing to
economic growth. or
2 Entrepreneurship is the process of creating something different with value by devoting
the necessary time and effort, assuming the accompanying financial, psychic and social
risks, and receiving the resulting rewards of monetary and personal satisfaction and
independence.
When the first definition is explained in other words, entrepreneurship is a function of seeing
investment and production opportunity, organizing an enterprise to undertake a new production
process, raising capital, hiring labor, arranging for the supply of raw materials and selecting
managers for the day to day operation of an enterprise (Higgins). I.e. through the process of
entrepreneurship, entrepreneur organizes an enterprise that is committed to undertake the basic
activities essential in making and selling entrepreneur’s product.
So, entrepreneurship:
1 Is both a science and an art
2 Involves vision and passion of innovation and creation
3 Requires willingness to undertake calculated risk
4 Involves building a committed and dedicated team
5 more over involves accepting challenges, managing skills and organization of resources
Entrepreneurship can also be defined as the ability of some people to bring the necessary inputs
together and produce something valuable. Note that resources will not be gathered and get
combined by themselves, (when such things happen we call the process a natural process – not

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production) somebody else should take the task of deciding, planning, mobilizing the resources
and make the actual production a reality. These people are called entrepreneurs.
In general the four key elements in entrepreneurship are:
1 Vision (Identifying emerging opportunities)
2 Innovation (Doing some thing new)
3 Risk taking (Assuming different types of risks: financial, psychological, social)
4 Organizing (Coordinating resources and creating enterprise)
Different Definitions of Entrepreneur by Different People:
Adam smith
Describe entrepreneur as an individual who undertook the formation of an organization for
commercial purposes. He viewed the entrepreneur as a person with unusual foresight who could
recognize potential demand for goods and services.
Carl
The entrepreneur becomes the change agent who transforms resource into useful goods and
services, often creating the circumstances that lead to industrial growth.
J. Schumpeter
The entrepreneur seek "to reform or revolutionize the pattern of production by exploiting an
invention or, more generally, an untried technological possibility for producing a new
commodity or producing an old one in a new way, by opening up a new source of supply of
materials or a new outlet for products. Entrepreneurship essentially consists in doing things that
are not generally done in the ordinary course of business routine"
Peter Drucker
Entrepreneurs allocate resources "to opportunities rather than to problems."
Robert Rostald
Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created
by individuals who assume the major risks in terms of equity, time, and/or career commitment of
providing value for some product or service. The product or service itself may or may not be
new or unique but value must some how be infused by the entrepreneur by securing and
allocating the necessary skills and recourses.
David Silver
An entrepreneur is "energetic, single-minded" person having a mission and clear vision, he or
she intends to create out of this vision a product or service in a field many have determined is
important to improve the lives of millions."

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David Holt
Entrepreneurs are those who incubate new ideas, start enterprises based on those ideas, and
provide added value to society based on their independent initiative.
On the whole the process of entrepreneurship includes five critical elements.
1 The ability to perceive an opportunity.
2 The ability to commercialize the perceived opportunity i.e. innovation
3 The ability to pursue it on a sustainable basis.
4 The ability to pursue it through systematic means.
5 The acceptance of risk or failure
Based on the above concepts of entrepreneurship, an entrepreneur can be defined as follows: An
entrepreneur is someone who perceives an opportunity and creates an organization to pursue it
with the intention of being profitable.
1.2. History
Before having the present definition the term of entrepreneur was related to a lot of assertions.
The following are among the significant developments that gave the present form to
entrepreneur.
1 The word entrepreneur first appeared in the French language as ‘’entreprendre”, which
means, “to undertake”
2 From the 14th up to the end of the 17th century, the term entrepreneur was applied to persons
like leaders of military expedition, tax collectors, adventurers and architects who were
responsible for construction of roads, bridges, and buildings
3 Writers of 17th and 18th century stressed on the two essential characteristics of entrepreneur
was taking of risks and creating innovation
4 Richard Calliton became the first person to relate entrepreneur to economic activities,
because he defined entrepreneur as a person who buys service factors at certain prices and
sell products at uncertain price in the future. By this definition, we can observe that
entrepreneur surely face risk as there is possibility of bankruptcy and inconsistent demand.
5 J. B. Say defined entrepreneur as “Economic agent who unites all means of production, the
labor, the capital or the land of the other and who finds in the value of products which results
from their employment, reconstitution of the entire capital that he utilizes and the value of the
wages the interest and the rent which he pays as well as profit belonging to himself.”
6 FH Knight (1921), in his book referred entrepreneurs as specialized group of people who
bear risks and deal with uncertainty

7 Leon Walras (1945) considered entrepreneur as a coordinator of the factors of production. He

treated entrepreneur as the fourth factor of production, as one who hires factors of land, labor
and capital
8 Schumpeter(1960s) defined entrepreneur for developed and developing nation
For developed countries
9 Entrepreneur is the one who innovates; raises money assembles inputs chose manager and
sets the organization with his ability to identify them.
For developing countries

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10 Entrepreneur is the one who start an industry (old or new) undertake risk, bears uncertainty
and also perform managerial function of decision-making and coordination.
11 In general Schumpeter regarded entrepreneur basically as an innovator who carries out new
combination to initiate and accelerate economic development. This is the intersection point
of his two definitions.

As we can see from the selected evolutions, the aspects given to the entrepreneur has expanded
as the evolution continues to get modernized. Anciently, entrepreneur was referred to people that
are not considered as entrepreneurs today. Also, the importance given to entrepreneur in terms of
economic enhancement and development has significantly upgraded by the trend of the
evolution.

1.3. The Process of Entrepreneurship

The decision about whether to start a new business is best considered in light of an understanding
of the entrepreneurial process. It involves finding, evaluating, and developing an opportunity by
overcoming the strong forces that resist the creation of something new.
The entrepreneurial process has four steps.

1 Identifying and evaluating business opportunity

2 Developing business plan
3 Determining the resources required for business and
4 Managing the enterprise
PHASE 1: Identifying and Evaluating Business Opportunity
Most good business opportunities result from an entrepreneur being alert to possibilities. Some
sources are often fruitful, including consumers and business associates. Channel members of the
distribution system-retailers, wholesalers or manufacturer’s reps-are also helpful. Technically-
oriented individuals often identify business opportunities when working on other projects. Each
opportunity must be carefully screened and evaluated-this is the most critical element of the
entrepreneurial process.
The evaluation process involves looking at:
➢ The creation and length of the opportunity
➢ Its real and perceived value
➢ Its risks and return.
➢ It’s fit with the skills and goals of the entrepreneur
➢ Its differential advantage in its competitive environment
It is important to understand the cause of the opportunity, as the resulting opportunity may have
a different market size and time dimension. The market size and the length of the window of

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opportunity are the primarily bases for determining risks and rewards. The risks reflect the
market, competition, technology, and amount of capital involved. The amount of capital forms
the basis for the return and rewards. The return and reward of the present opportunity needs to be
viewed in light of any possible subsequent opportunities as well. The opportunity must fit the
personal skills and goals of the entrepreneur. The entrepreneur must be able to put forth the
necessary time and effort required for the venture to succeed. One must believe in the
opportunity enough to make the necessary sacrifices. Opportunity analysis, or an opportunity
assessment plan, should focus on the opportunity and provide the basis to make the decision,
including:
➢ A description of the product or service
➢ An assessment of the opportunity
➢ Assessment of the entrepreneur and the team
➢ Specifications of all the activities and resources needed
➢ The source of capital to finance the initial venture
The most difficult aspect of opportunity analysis is the assessment of the opportunity.
PHASE 2: Develop a Business Plan
A business plan is a document the entrepreneur prepares before going to the implementation
stage. It details every aspect of the business the entrepreneur aspires to establish: description of
the business and the marketing, financial, organizational and operational plans necessary for the
foundation of the venture. A good business plan is important in developing opportunity and also
important in determining the resource required, obtaining those resources and successfully
managing the resulting venture.
PHASE 3: Determining the Resources Required
Assessing the resources needed starts with an appraisal of the entrepreneur’s present resources.
Any resources that are critical must be distinguished from those that are just helpful. Care must
be taken not to underestimate the amount and variety of resources needed. Acquiring needed
resources, while giving up as little control as possible, is difficult. The entrepreneur should try to
maintain as large an ownership position as possible, particularly in the start-up stage. As the
business develops, more funds will probably be needed, requiring more ownership be
relinquished. Alternative resource suppliers should be identified, along with their needs and
desires, in order to structure a deal with the lowest cost and loss of control.
NB. There are three sorts of resources that entrepreneurs can call up on to build their
ventures

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 1 Financial resources: Resources which take the form of or can be readily converted to
cash
2 Human resource: The facilities which allow people to do their jobs such as buildings,
vehicles, office equipment, machinery and raw materials, etc.
3 Operating Resources: The facilities which allow people to do their jobs such as
buildings, vehicles, office equipment, machinery, raw materials, etc.
PHASE 4: Managing the Enterprise
After resources are acquired the entrepreneur must employ them trough implementation of
business plan. The operational problem of the growing enterprise must also be dealt with. These
involve implementing a management style and structure, as well as determining the key variable
for success. A control system must be identified so that any problem areas can be carefully
monitored.
1.4. Classifications of Entrepreneurs
There are so many ways of classifying entrepreneurs. The most important bases are discussed
below.
➢ According to types of business
Entrepreneurs are found in various types of business occupations of various sizes. We may
broadly classify them as follow;
1. Business entrepreneur: are individuals who conceive an idea for a new product or service
and then create a business on materialize their idea in to reality. They tap both productions
and marketing resource in their search to develop a new business opportunity. They may set
up a big establishment or a small business unit such as printing press, textile processing
house, advertizing agency, readymade armaments, etc.
2. Trading entrepreneur: is one who undertakes trading activities and is not concerned with the
manufacturing desire and interest among buyer to go to in for his product. He is engaged in
both domestic and overseas trade.
3. Industrial entrepreneur: is essentially a manufacturer who identifies the potential needs of
customers and tailors product or service to meet the marketing needs. He is product oriented
man who starts in an industrial unit because of the possibility of marketing some new
product. The entrepreneur has the ability to convert economic resources and technology into
a considerable profitable venture.
4. Corporate entrepreneur: is a person who demonstrate his innovative skill in organizing and
managing a corporate undertaking

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5. Agricultural entrepreneur: are those entrepreneurs who undertake such agricultural activities
as raising and marketing of crops, fertilizers, and other inputs of agriculture.
➢ Classification by Danhof
1. Innovative Entrepreneurs: an innovating entrepreneur is the one who introduces new
goods, inaugurate new method of production discovers new market and recognizes
the enterprise. It is important to note that such entrepreneur can work only certain
level of development is already achieved, and people look forward to change and
improvement.
2. Imitative Entrepreneurs: imitative entrepreneurs do not innovate the change
themselves, they only imitate techniques and technology innovated by others. Such
type of entrepreneurs are particularly important for under developed region for
bringing mushroom drive of imitation of new combination of factors of production
already available in developed regions.
3. Fabian Entrepreneurs: Fabian entrepreneurs are characterized by very great caution
and skepticism in experimenting any change in their enterprises. They imitate only
when it becomes perfectly clear that failure to do so would result in a loss of the
relative position in the enterprise.
4. Drone Entrepreneurs: these are characterized by a refusal to adopt opportunity to
make change in production formulae even at the cost of severely reduced returns
relative to other producers.
➢ Classification According to Motivation
Motivation is the force that influences the effect of the entrepreneur to achieve his or her
objective.
1. Pure Entrepreneur: - is an individual who is motivated psychological and economic
reward. The entrepreneur undertakes the enterprise for his personal satisfaction.
2. Induced Entrepreneur: -is the one who is induced to take up entrepreneurial task
due to the policy measures of the government that provides assistance, incentive and
necessary overhead facilities to start a venture.
3. Motivated Entrepreneur: - motivation is the desire for self-fulfillment. They come
into being because of the possibility of making and marketing some new product.
4. Spontaneous Entrepreneur- is one who is motivated by his/her natural talent to
begin a business. This kind of entrepreneurs is very confident in their natural
blessings from God and wants to undertake business because they believe their

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 natural gifts will enable them to do so.
➢ Classification According to Use of Technology
The application of new technology in various sectors of national economy is essential for the
future growth of business.
1. Technical Entrepreneurs:
➢ Have technical knowledge regarding innovation of new products
➢ Concentrate on manufacturing (technical aspect) rather than marketing
2. Non technical Entrepreneurs
➢ Are not concerned with technical aspect of a product
➢ Concentrate on developing alternative marketing, distribution and promotion aspects of
their product rather than manufacturing aspect
3. Professional Entrepreneurs
➢ Are interested in neither the technical aspect nor in the non technical aspects of a
product
➢ Are interested in establishing a business but doesn’t have the interest to manage or
operate once a business is established. Professional entrepreneurs sell their business ideas
and look on to creating another business.
1.5. Entrepreneurial traits
A successful entrepreneur must be a person with the following traits:
1. Mental ability: It consists of intelligence and creative thinking. An entrepreneur must be
reasonably intelligent, and should have creative thinking and must be able to engage in
the analysis of various problems and situations in order to deal with them. The
entrepreneur should anticipate changes and must be able to study the various situations
under which decisions have to be made.

2. Clear objectives: An entrepreneur should have a clear objective as to the exact nature of
the business, the nature of the goods to be produced and subsidiary activities to be
undertaken. A successful entrepreneur may have the objective to establish the product, to
make profit or render social service.

3. Business secrecy: An entrepreneur must be able to guard business secrets. Leakage of

business secrets to trade competitions is a serious matter, which should be carefully
guarded against by an entrepreneur. An entrepreneur should be able to make a proper
selection of his assistants.

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 4. Human relation ability: The most important personality factors contributing to the
success of an entrepreneur are emotional stability, personal relations, consideration and
tactfulness. An entrepreneur must maintain good relation with his/her customers if he/she
is to establish relations that will encourage them to continue to patronize his/her business.
He/she must also maintain good relations with his employees if he is to motivate them to
perform their jobs at a high level of efficiency. An entrepreneur who maintains good
human relation with customers, employees, suppliers, creditors and the community is
much more likely to succeed in his/her business than the individual who does not practice
good human relations.
5. Communication ability: Communication ability is the ability to communicate
effectively. Good communication also mesa that both the sender and the receiver
understand each other and are being understood. An entrepreneur who can effectively
communicate with customers, employees, suppliers and creditors will be more likely to
succeed than the entrepreneur who does not.
6. Technical knowledge: An entrepreneur must have a reasonable level of technical
knowledge. Technical knowledge is the one ability that most people are able to acquire if
they try hard enough.
An entrepreneur who has a high level of administrative ability, mental ability, human relations
ability, communication ability, and technical knowledge stands a much better chance of success
than his counterpart who possesses low levels of these basic qualities. Brilliant men/women with
first class degrees from university shy away from becoming entrepreneurs because the one thing
they cannot be taught is coping with human emotions.
Robert D. Hisrich has identified a few more capabilities or personal characteristics that an
entrepreneur should possess. According to him, the entrepreneur must have an adequate
commitment, motivation, and skills to start and build a business. The entrepreneur must
determine if the management team has the necessary complementary skills necessary to succeed.
Some key characteristics of successful entrepreneur are:
1. Motivator: An entrepreneur must build a team, keep it motivated, and provide an
environment for individual growth and career development.
2. Self-confidence: Entrepreneurs must have belief in themselves and the ability to achieve
their goals.
3. Long-term involvement: An entrepreneur must be committed to the project with a time
horizon of five to seven years. No ninety-day wonders are allowed.

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 4. High energy level: Success of an entrepreneur demands the ability to work long hours
for sustained periods of time.
5. Persistent problem-solver: An entrepreneur must have an intense desire to complete a
task or solve a problem. Creativity is an essential ingredient.
6. Initiative: An entrepreneur must have initiative, accepting personal responsibility for
actions and above all make well use of resources.
7. Goal setter: An entrepreneur must be able to set challenging but realistic goals.
8. Future Oriented: He plans and thinks in the future. He anticipates possibilities that lie
beyond the present
9. Moderate risk-taker: An entrepreneur must be a moderate risk-taker and learn from any
failures.
NB: the following are Types of Risks Assumed by Entrepreneurs
1. Financial Risk: Refers to the risk of loosing one’s own saving and entire capital that
would result from failures to repay loans and other financial requirements
2. Career Risk: If entrepreneurs fail to be successful, it would be difficult for them to
easily acquire another employment opportunity
3. Psychic Risk: The mind of entrepreneurs is subject to constant frustration and
psychological tensions as to the fate of their business
4. Family Risk: The spouses and offspring’s of entrepreneurs are also subject to certain
psychological frustrations in state being worried whether their business will fail or not.
5. Social Risk
1.6 Manager and Entrepreneur
Entrepreneurs take existing resources and redeploy them, often in a creative way, to give them
greater economic value. They are agent of change, innovators of new products, methods, or
markets. They are more involved in looking for and exploiting new opportunities. They are less
concerned with managing what exists in the most efficient manner. Managers may or may not
be entrepreneurs. There are a number of similarities and ambiguities between manager and
entrepreneur; and of course, in most small-scale businesses both refer to the same person.
However, each of the two concepts is distinct from the other.
Similarity:
1. Both managers and entrepreneur are answerable for producing results
2. Both have to produce results through people working with them though they deal with

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 different set of people.
3. Both are decision makers but the decisions are different as their tasks vary.
4. Both have to operate under constraints.
Entrepreneurs Vs Managers
An entrepreneur is different form a manger. But it doesn’t mean that they are entirely different
from each other. That means they also have their own intersection points.

Similarities
• Both make decisions
• Both are visionary
• Both are accountable for their actions
• Both work under constraints
• Both are organizers
• Both perform management functions

Differences
The main points of difference between the two may be described as follows:

• Primary Motive: The entrepreneur is primarily driven by innovation, profit and need for
independence. On the other hand, the manager is driven by power and compensation
• Focus: Entrepreneurs focus more on exploiting new opportunities. But managers focus
is more on optimizing the existing resources
• Risk taking: An entrepreneur takes calculated risks of a business venture. He may
jeopardize his own financial security for losses that may occur. By contrast, the manger
does not face the uncertainty of a new venture with its potential for failure and financial
loss. He does not share any business risks.

• Reward: An entrepreneur is motivated by profits while the manger is motivated by

externally imposed goals and rewards. The gains of an entrepreneur are uncertain and
irregular and can at times be negative. The salary of a manger is on the contrary, fixed
and regular and can never be negative.

• Skills: An entrepreneur needs intuition, creative thinking and innovative ability among
other skills. On the other hand, a manger depends more on human relations and
conceptual abilities.

• Status: An entrepreneur is self employed and he is his own boss. On the contrary, a
manger is a salaried person and he is not independent of his employer, the entrepreneur.

1.7 Role of Entrepreneurship in Economic Development

More the entrepreneur activity betters the development. Entrepreneurship is the life blood of any
economy and it applies more to a developing economy like Ethiopia. Developing economies
need greater number of people possessing entrepreneurial qualities and capable of taking
decisions under conditions of uncertainties to transform their underdeveloped economies into

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developed one. For this, well-developed institutional support is important.
The world is rapidly changing; and unless we are also able to change our attitudes and
approaches there is a real danger. The process of development includes creation of infrastructure
and setting up and management of public utilities. Non-conventional energy sources have to be
developed on a commercial scale.

Similarly, application of modern scientific techniques in agriculture and horticulture is essential

for providing a sound base for a more rapid growth of employment and incomes. There is also a
need for rapid growth of industries well distributed and in a multi-directional way. Apart from
land, labor and capital, there is greater need for entrepreneurs to strive for growth on an ongoing
basis. In this context an attempt has been made in this unit to analyze the nature and importance
of entrepreneurs.
Entrepreneurs are the innovators; they identify business opportunities, plan to address market
needs, gather resources, and manage the process of building business. Entrepreneurs create jobs,
transfer technology to the market and create value, adding immeasurably to our well being.
Entrepreneurs make unique contributions to a country's economy. Using innovations to grow
their business, they provide concrete benefits to the national economy. In general they play role
in reducing unemployment, stabilizing inflation, normalize balance of payment and business
cycle and so on.
Generally the following are among the importance of entrepreneurship:
1. Taking to higher rate of economic growth by creation of value.
2. Speed up the process of industrial use of the factors production.
3. Creation of employment opportunity
4. Dispersal of economic activities to different sectors of the economy and identifying a new
venue s of growth.
5. Development of back word and tribal areas.
6. Better social changes
7. Improvement of the standard of living of different weaker section in the society
8. Bringing social and political change in the society
9. Develop technological know how
10. Improve culture of business and expand commercial activities
11. Entrepreneurship acts as a change agent to meet the requirement of the change markets and
customer preferences.

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 1.8. Entrepreneurship, Creativity and Innovation
Innovation is the process of entrepreneurship. Innovation implies action, not just a new idea.
When people have passed through the process of creativity, they may have become inventors;
but they are not yet innovators. For an idea to have value, it must be proven useful or be
marketable. Innovation is the transition of creative idea into a useful application.
1.8.1 Developing Creativity
Creativity is the ability to bring something new into existence. Here, there is no action to make
the idea a reality. It is the seed that inspires entrepreneurship and it is the prerequisite to
innovation
Developing creativity involves the following process
In the creative process, most social scientists agree on five stages. These stages are idea
germination, preparation, incubation, illumination and verification.
1. Idea Germination: It is a seeding process. For most entrepreneurs ideas begin with interest
in a subject or curiosity about finding a solution to a particular problem.
2. Preparation: Once a seed of curiosity has taken form as a focused idea, creative people
embark on a conscious search for answers. If it is a problem they are trying to solve, then
they begin an intellectual journey, seeking information about the problem and how others
have tried to solve it (e.g. Bell's determinations to help those with impaired hearing). If it is
an idea of for new product or service, the business equivalent is market research (i.e., for
design, market.)
3. Incubation: It is the assimilation of information by the subconscious mind. In this stage, the
subconscious intellect assumes control of creative process. Conscious focus behaves
rationally to attempt to find systematic resolutions. Subconscious process minds are not
hampered by the limitations of human logic; and therefore open to unusual information and
knowledge that we cannot assimilate in a conscious state.
4. Illumination (enlightenment): It occurs when the idea resurfaces as a realistic creation. This
stage is critical for entrepreneurs because ideas, by themselves, have little meaning.
5. Verification: An idea once illuminated in the mind of an individual still has little meaning
until verified as a realistic and useful. Entrepreneurial effort is essential to translate an
illuminated idea into a verified, realistic and useful application. It is the development stage
of refining knowledge into Innovation
1.8.2. Innovation
Innovation is the process of doing new things. It is the transformation of creative ideas into

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useful applications, which results in new products, services or processes. E.g. Thomas Edison's
light bulb was only a curiosity until he developed an electric system supplying power to
consumers.
It requires four things to be fulfilled.
• Analytical planning: - analytically working out the details of product design or service, to
develop marketing (i.e., marketing strategy) obtain finance and plan operation.
• Organizing recourses: -obtaining materials, technology human resource and capital.
• Implementation: - here the plan is changed to reality where accomplishment in
establishing organization, product design, manufacturing and services are achieved.
• Commercial application: - it is the stage where creative idea transforms into application.
This commercial application provides value to customers (utility), reward for employees
(salary), revenue for investors (profit) and satisfaction for founders’ one quality of
entrepreneurs is innovation. Schumpeter has emphasized in his writings that innovation as
a step forward to shatter the status quo through new combination of resources and new
methods of commerce
1 Innovation lies at the heart of the entrepreneurial process and is a means to the exploitation of
opportunity. It may be viewed economically or entrepreneurial.
Economically: - Innovation is the combining of resources in a new and original way.
Entrepreneurially: - it is the discovery of a new and better way of doing things.
1 Innovation goes beyond invention. The new way does not stand on its own merits. It will
only create new value if it offers customers an improved way to approach tasks and to solve
problems.
2 Innovation is a knowledge-based process. Successful innovation is founded on knowledge in
three areas.
➢ Market Knowledge: - Is concerned with customers, their needs, demands, likely demand
growth and what competitions are supplying.
➢ Technological Knowledge: - Relates to the effective development and production of the
product or service aimed at the customers.
➢ Capability Knowledge: - The venture’s understanding of what it does and why it does it
well. This includes knowledge of the informational, cost, flexibility and human
advantages the venture can call upon to compete effectively.

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1.9 Why do People Want to Become Entrepreneurs?

Today, people are becoming entrepreneurs at an alarming rate. The fact that the number of
today’s entrepreneurs when compared to the figure before ten years is almost quadruple tells too
much about the increasing number of entrepreneurs. These days, many people share a dream of
becoming entrepreneurs. This shows, there are a lot of factors that push ordinary people to
become entrepreneurs. This ranges from the tangible and psychological benefit of putting
themselves in the world of entrepreneurship. In brief these factors are:
Pull factor
➢ Opportunity to gain control over your own destiny: owning a business gives the
entrepreneur the independence and the opportunity to achieve what is personally
important.
➢ Opportunity to reach your full potential: small business is an instrument for self-
expression and self-actualization. Many entrepreneurs don’t enjoy working for some one
else. No body limits you because you are independent and there is likely that you have
challenging job.
➢ Opportunity to reap unlimited profit: although money is not the primary force driving
most entrepreneurs, their ability to keep the money their business earns certainly is a
critical factor in their decision to create companies.
➢ Opportunity to contribute to the society: small business owner enjoy the recognition they
received from customers whom they have served faithfully over the years.
➢ Opportunity to turn previous work experience into business for self and family.
➢ Financial incentive: the research of starting a business can be high, and are well-
publicized by those selling how to information to entrepreneurs. The promise of long
term financial independence can be a motive in starting a new firm.

Push factor
These factors include:
➢ Community attitude: this has proved a considerable push into entrepreneurship
particularly when accompanied by acceptance in a locality where other employment
possibilities are low.
➢ Unemployment: job insecurity and employment varies in significance by region, and by
prevailing economic climate. A study reported that 25% of business founders in the late
1970s were pushed in this way.
➢ Disagreement with the previous employer: Uncomfortable relations at work have also
pushed new entrants in to small business. Many people considering an opportunity or
having a desire for independence still need some form of push to help them make their
decision.

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