1.

7 The relationship between entrepreneurship and intrapreneurship

Corporate entrepreneurship (commonly known as intrapreneurship) is a form

of entrepreneurship. It occurs when the intrapreneur identifies a business opportunity

and establishes a new business within the structure of an existing one.

1.7.1 Definition of the concept “intrapreneur”

An intrapreneur does not want to take the risk of starting his/her own enterprise, but
prefers to use his/her entrepreneurial ability in an existing enterprise. An intrapreneur is
an employee with entrepreneurial abilities, who identifies an opportunity in an existing
enterprise.

1.7.2 Differences and similarities between an entrepreneur and an intrapreneur

Table 1.2: Differences and similarities between an entrepreneur and an intrapreneur

Differences and similarities between an entrepreneur
and an intrapreneur
Entrepreneur Intrapreneur
Starts own enterprise and is the owner of Does not want to start an own enterprise and
the enterprise is an employee
Identifies business opportunities within an
Identifies opportunities and seizes them
existing enterprise
Is creative and innovative Is creative and innovative
Is willing to take calculated risks Does not want to take risks
Is responsible for growth Is responsible for growth

Table 1.2 outlines the key differences and similarities between an entrepreneur and
an intrapreneur, as regards ownership, opportunities, creativity, risks and the growth
of an enterprise.

Activity 1.4

Time for activity: 10 minutes

In your view, are small business managers and intrapreneurs the same things?
Identify the key differences and/or similarities.

Feedback
 No, they are not the same. See Table 1.3 for
details.

Differences and similarities between a small business manager and an intrapreneur

Differences and similarities between a small business manager and an

intrapreneur

Table 1.3: Differences and similarities between a small business manager and
an intrapreneur

Differences and similarities between a small business

manager and an intrapreneur
Small business manager Intrapreneur
Manages own enterprise (owner) or an existing Does not want to start an own
business or franchise enterprise/ in an employee
No creativity or innovation Is creative and innovative
Does not want to take new risks, but still carries the
Does not want to take risks
financial risk as the owner
Not interested in growth, only interested in profit and
Is responsible for growth
the survival of the enterprise

Table 1.3 outlines the key differences and similarities between a small business
manager and an intrapreneur.
The next section focuses on the types of entrepreneurial businesses, with a discussion of
formal and informal businesses.

1.8 Types of entrepreneurial businesses

1.8 Types of entrepreneurial businesses

Entrepreneurial businesses can be classified as

either informal, micro, very small, small, medium or large. Each type of business has very
specific characteristics, with specific needs and features.

1.8.1 The informal business sector

The informal business sector includes all businesses that are not registered for
income tax and value-added tax (VAT).

Businesses in the informal sector range from commercial activities, to production

and services, with most such businesses operating in the retail trade sector. These
businesses meet the specific needs of the poor and less affluent people in society,
because they provide products and services at more affordable rates.

The role of the informal sector remains controversial, as these businesses provide much
needed income opportunities, but their owners tend not to comply with tax, labour
and other regulations.
1.8.2 The formal business sector

The formal business sector includes micro, very small, small, medium and large
enterprises.

1.8.2.1 Micro, very small and small business sectors

Table 1.4: Micro, very small and small business sectors

Micro, very small and small business sectors

Type Employees Turnover per annum
Micro 5 or fewer R100 000
Very small 6-10 More than R100 000, but less than R3 million
Small 11-50 R3-32 million

Table 1.4 provides information on the number of employees as well as the turnover
for micro, very small and small businesses.

1.8.2.2 Medium-sized and large business sectors

Table 1.5: The medium-sized and large business sectors

The medium-sized and large business sectors

Type Employees
Medium Up to 200
Large 200 and more
Table 1.5 provides information on the number of employees in medium and
large businesses.
Activity 1.5

Time for activity: 10 minutes

List a few examples of prominent international (including from the African continent) and
South African entrepreneurs.

Feedback
Examples of prominent international and South African
entrepreneurs
International South African
Business Business
Entrepreneur Entrepreneur
Brennen Byrne Clef Julie Alexander iFix
Gabe Blanchet Grove Labs Bheki Kunene Mind Trix Media
Caroline Pugh VirtualU Ludwick Marishane HeadBoy Industries
Louis-Victor Jadavji Wiivv Adii Pienaar WooThemes
Daniel Fine Dosed Cyril Ramaphosa Shanduka Group
Adam Lipecz Codie Khanyi Dhlomo Ndalo Media

1.8.3 Advantages and disadvantages of formal and informal businesses

1.8.3 Advantages and disadvantages of formal and informal businesses

 Carefully study the following table, which shows
the differences between, and the advantages and disadvantages of, informal and formal
businesses.

Table 1.6: Differences between, and advantages and disadvantages of, formal
and informal businesses
Differences between, and advantages and disadvantages
of, formal and informal businesses
Formal
Advantages
Registered form of enterprise
Recognised business premises
Easier access to finance
Easier access to resources
Disadvantages
Has to keep financial records
Has to pay tax
Informal
Disadvantages
Not a registered form of enterprise
No recognised premises
Difficult to obtain finance
Difficult to obtain resources
Advantages
Does not have to keep financial records
Does not have to pay tax

Table 1.6 depicts the differences between, and the advantages and disadvantages
of, formal and informal businesses, with regards to business registration, premises,
finance, resources, financial records and tax implications.

In the next section, we look at a definition of franchising, as well as the differences

between franchisors and franchisees.

1.9 Franchisors and franchisees

1.9 Franchisors and franchisees

From your knowledge thus far, you will realise that a franchisor is an
entrepreneur, whereas a franchisee should rather be seen as a corporate entrepreneur or
intrapreneur (as discussed earlier), who innovates within the franchise system.

1.9.1 Definition of the concept of “franchising”

Franchising is an arrangement in which an individual or business (the franchisor)

grants an independent party (the franchisee) the right to sell the products or services of
the business, according to guidelines set down by the franchisor.

The franchisor retains control over the conduct of the business, and offers the
franchisee a comprehensive business package.
1.9.2 Definition of the concepts of “franchisor” and “franchisee” / Activity 1.6

1.9.2 Definition of the concepts of “franchisor” and “franchisee” / Activity

1.6

Time for activity: 10 minutes

Would you classify franchisors as micro, small, medium or large businesses? How
would you classify franchisees?

Feedback

Franchisors usually fall in the medium to large business category. The reason is that
successful franchisors usually manage large numbers of franchises as part of their
business. Franchisees can fall anywhere in the category of small to medium-sized
businesses.

In the next section, we discuss the key factors that make entrepreneurs successful.

1.10 Key success factors of entrepreneurs

1.9.2 Definition of the concepts of “franchisor” and “franchisee” / Activity

1.6

Time for activity: 10 minutes

Would you classify franchisors as micro, small, medium or large businesses? How
would you classify franchisees?

Feedback
Franchisors usually fall in the medium to large business category. The reason is that
successful franchisors usually manage large numbers of franchises as part of their
business. Franchisees can fall anywhere in the category of small to medium-sized
businesses.

In the next section, we discuss the key factors that make entrepreneurs successful.

1.10 Key success factors of entrepreneurs

1.10 Key success factors of entrepreneurs

Successful entrepreneurs take advantage of

certain key success factors, such as personal characteristics and functional management
skills. Make sure that you understand these concepts.
The profile of an entrepreneur is an indication of his/her personal abilities and
characteristics. Many researchers have tried to describe a typical entrepreneur, but
without success, as there is no such thing. Few (if any) entrepreneurs have all the key
success factors, but through introspection and self-evaluation they can identify what
their strengths and weaknesses are.

In the next subsections, the role of each of the following factors in entrepreneurial
success, will be considered:

 Skills, expertise and aptitudes

 Important personal characteristics
 Important functional management skills
 External factors

Activity 1.7

Activity 1.7

Time for activity: 10 minutes

Discuss how entrepreneurs can apply their strengths and overcome their weaknesses.

Feedback
Entrepreneurs can apply their strengths and overcome their weaknesses through one
or more of the following:

 Personal development
 Attending courses
 Appointing staff and/or experts to compensate for their own inadequacies.

1.10.1 Skills, expertise and aptitudes

1.10.1 Skills, expertise and aptitudes

We can distinguish between skills, expertise and aptitudes as follows:

 Skills: these refer to manual work and can be learned.

 Expertise: this is based on knowledge that is acquired through experience.
 Aptitudes: each person is born with certain aptitudes and talents.
It is best to start an enterprise in something which interests you, and with which you feel
comfortable (aptitudes), in which you have experience (expertise) and/or are
trained (skills). Usually, your skills, expertise and knowledge are a product of your natural
aptitudes, talents and interests.

For more on entrepreneurial skills, go to:

https://www.mindtools.com/pages/article/
newCDV_76.htm

1.10.2 Important personal characteristics

Skills, expertise and aptitudes in isolation do not guarantee a successful enterprise.

To ensure success in your enterprise, you must have certain personal characteristics.

The following personal characteristics are important:

 Perseverance

Entrepreneurs have confidence in themselves and their business. They continue

with determination, despite setbacks and obstacles.

 Commitment to the business

They dedicate their skills, expertise and resources, and prove their commitment by
usually investing their own money to establish their business.

 Involvement in the business

Entrepreneurs are personally involved in their business and are aware of everything
that happens in the business.

 Willingness to take risks

They carefully plan and consider business opportunities and usually take calculated risks.

 Sound human relations

They build sound relationships with employees, clients, suppliers and others involved
in their business, because they see value in building long-term relationships that will
benefit their business.

 Creativity and innovative ability

Creativity distinguishes an entrepreneur from his/her competitors. S/he takes

various initiatives to solve problems differently, and generates new ideas that will be
beneficial to the business.

 Positive attitude and approach

Entrepreneurs are not easily discouraged by setbacks, and learn from those setbacks
and failures, in addition to managing situations well.

Did you know that entrepreneurs should embrace their failures?

Go to: Can this movement get SA entrepreneurs to finally embrace

failure? http://www.smesouthafrica.co.za/16527/Can-this-movement-get-
SAentrepreneurs-to-finally-embrace-failure/

For more stories, go to:

Ten rules for entrepreneurs to live by: http://www.howwemadeitinafrica.com/ten-rules-

for-entrepreneurs-to-live-by/52994/

Success is all in the attitude: http://www.entrepreneur.com/article/204504

Being a successful entrepreneur in South Africa – the

reality: http://southafrica.smetoolkit.org/sa/en/content/en/8834/Being-a-
successfulentrepreneur-in-South-Africa-%E2%80%93-The-Reality
1.10.3 Important functional management skills

An entrepreneur’s management skills indicate how well s/he can perform important
tasks or activities in an enterprise.

Activity 1.8

Activity 1.8

Time for activity: 10 minutes

List the tasks or activities that an entrepreneur has to perform.

Feedback
These are the important functions which entrepreneurs have to perform:

 General management
 Financial
 Marketing
 Operations
 Purchasing
 Human resources
 Information management (administrative)
 Public (external) relations

1.10.3 Important functional management skills (continue)

1.10.3 Important functional management skills (continue)

The three main characteristics of the above functions of the enterprise, are:

 All these functions occur in every enterprise, regardless of its size.

 These functions must operate as a system.
 There must be constant interaction between the functions.

In this section, we discuss the ability of the entrepreneur to perform specific

management activities in the enterprise. Entrepreneurs must be aware of their strengths
and weaknesses in terms of management skills in the various functions of the enterprise,
so that they can build a successful enterprise.

As an entrepreneur, you should have a combination of the following nine management

skills:
  Planning (before the enterprise is established)
 General management and the use of advisers
 Customer service
 Knowledge of competitors
 Market orientation in identifying needs and desires, in order to define new
products to be developed
 Identifying quality products and/or services
 Accounting for all purposes
 Insight into expenditure, income, profit and loss
 The ability to use income carefully

Every entrepreneur must be aware of his/her strengths and weaknesses when it comes to
management skills in the various business functions, so that s/he can apply them to build
a successful business.

Click on these stories which deal with management skills:

To succeed as an entrepreneur:

Know your customer: http://www.forbes.com/sites/alanhall/2012/06/14/to-succeed-as-

an-entrepreneur-knowyour-customer/
Know your competition: http://www.entrepreneur.com/article/78596

1.10.4 External factors

External factors and circumstances influence the way in which an entrepreneur may
be able to exploit his/her own potential, and that of the business. How you
accommodate, deal with or even exploit external factors to your personal advantage, is a
measure of your entrepreneurial skills.

External factors are those influences, circumstances or situations that a business

cannot control, but which affect the business decisions that the business owner and
stakeholders make. A large number of external factors can have a direct impact on the
ability of a business to achieve its strategic objectives.

For an entrepreneur, the following external factors are important:

 Economic conditions – the entrepreneur must be knowledgeable enough to

adapt to fluctuating interest rates or declining levels of customer spending
power.
 Technological changes – the entrepreneur must keep up with
technological developments and know how to exploit them, to the benefit of the
business.
 Social and cultural forces – entrepreneurs must be able to identify opportunities
for growth in market share, given the fact that large sectors of the population are
now better educated.
 Political and legislative variables – an entrepreneur must realise the opportunities
that arise after political adjustments and events.
 Physical variables – the entrepreneur must keep abreast of the availability and
price of resources, by considering the use of alternatives, should there be a price
increase.
 International forces – an entrepreneur who uses technologically advanced
communication channels, can expand or establish a business in another country.

1.11 Summary


1.11 Summary

Successful entrepreneurs play an extremely important role in a country’s

economic development, wealth and job creation. In this learning unit, we discussed the
most important concepts related to this role.

Note: all the success factors which we have discussed, must be analysed in
personal terms. This may be discouraging to some potential entrepreneurs, but it is vital
for you, as an aspiring businessperson, to be aware of all these important aspects. You
must be critical of yourself, but, at the same time, positive about solving problems. You
can make adjustments in order to start an enterprise that has been your dream. As an
entrepreneur, you will realise how important it is to evaluate your personal strengths and
weaknesses realistically, in order to achieve your goals.

Learning outcomes

Having worked through this learning unit, you should be able to

 distinguish between the terms “entrepreneur”, “intrapreneur” and “small

business manager”
 critically compare the similarities and differences between
entrepreneurship, intrapreneurship and small business management
 distinguish between informal and formal businesses
 distinguish between micro, very small, small, medium and large enterprises
 explain the difference between the franchisor and the franchisee
 describe the key success factors that contribute to successful entrepreneurship
 analyse the functional management skills, personal characteristics and key
success factors of an entrepreneur
 explain how entrepreneurs should deal with external factors affecting
entrepreneurship
 You have come to the end of Lesson 1.

1.12 Self-assessment