MAWEGO TECHNICAL TRAINING INSTITUTE

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TOPIC 1 INTRODUCTION TO ENTREPRENEURSHIP

Definition of terms
Entrepreneurship: This is the process of scanning one’s ,environment identifying
business opportunity,
marshalling the resources and starting a profit making enterprise to provide for the
missing need in the community. The act of organizing, managing and assuming
responsibility for a business or other enterprise. It refers to an innovative behavior.
Entrepreneur
one, who scans the environment, identifies a business opportunity, marshals the
resources and start a profit making enterprise to provide for the missing need in the
community.
A person, who organizes, manages and assumes responsibility for a business or
other
enterprise.
Intrapreneurship
It is the practice of entrepreneurship by employees within an organization.
Intrapreneurship is a novel way of making organizations more profitable where
imaginative employees entertain entrepreneurial thoughts. It is a significant
method for companies to reinvent themselves and improve performance.
Intrapreneur
Is an employee who uses entrepreneurial skills to generate profits
for the venture they works for.
Enterprise
It is a business organization that provides goods and services to make profits and
has growth potential.
Business person
A person who undertakes any business activity for the purpose of making profit
Difference between self-employment and salaried employment Self-
employment
Self-employment is a situation in which a person starts and operates a business
enterprise. Since entrepreneurial skills drive people into self-employment,
entrepreneurship training is therefore expected to prepare trainees for starting and
operating their enterprises effectively.
Self-employment is a situation in which individuals create and run/operate their
own income generating activities.
Salaried employment
Salaried employment is a process in which an individual is hired for a period of
time, which may range from a few months to a few years, and is paid a given
amount of money as salary or wages for the work done.
The merits and demerits of salaried employment are varied and largely depend on a
person’s qualification, experience and specialization area. The merits and demerits
are also determined by the magnitude of growth, investment ability, profit and
government support of a given organization.
Defined working hours, guaranteed income, delegation of duties and specialization
are some of the main advantages of being in salaried employment. However,
salaried employment is affected largely by organizational elements such as change
of management, especially where new management introduces new policies, rules,
conditions of employment and other statutory requirements to the organization. Job
security is not guaranteed and personal satisfaction and motivation is not wholly
experienced.
Summary table of advantages and disadvantages of self-employment and
salaried employment
Self-employment
ADVANTAGE DISADVANTAGE
 leads rather than follows  Long, irregular hours of work
 can implement ideas  Broad responsibility
 can be creative  Must take risks
  potential income unlimited
 independence
 can take initiative
 controls work environment
 gives orders
 Income not stable or guaranteed
 No fringe benefits
 Always involved in finances
 Time constraint
 Uncertain future
 Learning never ends
 Hard to delegate work
 Too much paper work

Salaried employment
ADVANTAGES DISADVANTAGES
 Specific (or fixed
responsibilities)  Follows orders
 Steady income  Ability not easily recognized
 Fringe benefits  Set income
 Fixed hours of work  Limited responsibility
 More certain future  Difficult to implement ideas
 Set spam of control  Dependent on the employer
 Minimal risks

Contribution of Entrepreneurship to National Development

Entrepreneurship is the process that creates people (entrepreneurs) who contribute
to economic development in various ways. The contributions are made through:
1. Stimulating indigenous entrepreneurship and technological development.
2. Creating jobs for themselves and other people
3. Creating wealth and distributing income
4. Utilizing locally available resources
5. Dispersal and diversification of economic activities and mobilization of savings.
6. Promotion of entrepreneurial culture i.e., they become models to be imitated by
potential entrepreneurs because of successful images already portrayed by
existing entrepreneurs.
7. Increasing regional business activities through the export of manufactured
goods.
8. Promotion of indigenous/local technology e.g., use of jua kali technology.
9. Raising the economic productivity level.
10. Narrowing the “missing middle gap”

Suggested Teaching and Learning Activities

i) present various ways in which entrepreneurship contributes towards national
development

TOPIC TWO: EVOLUTION OF ENTREPRENEURSHIP

The Evolution of Entrepreneurship in Kenya
 Interest in the development of entrepreneurship and small enterprise in
Kenya gained momentum as a possible remedy to the stagnation of
economic development and the escalating unemployment problem
between the early 1960 and 1970s.
 Although there were attempts by the government to develop
entrepreneurship, the main impetus came from the international labor
organization (ILO) report. The report centered on the potential of the
informal sector and suggested that the bulk of Kenya’s urban workers were
self –employed in small enterprises.
 The report proposed that the development of this sector could:
I. Promote employment
II. Facilitate development
III. Facilitate equitable distribution of resources.
 Based on this report the government responded with a seasonal paper in
1973 – which recognized the role of entrepreneurship in employment
creation not just in the informal sector but also in the formal sector.
 Subsequent development plans have devoted time to the development of
strategies and to promote small-scale enterprises and entrepreneurs
which include
I. The industrial estate programme
II. Establishment of development agents e.g. ICDC and KIE
III. Policy and institutional framework to promote entrepreneurs.
IV. Promoting indigenous Kenyan enterprises.
Economic, Social and Political Factors Affecting Entrepreneurial Development
a) High taxation levels. For business and personal incomes
 Which in effect reduce profits earned making it un-attractive to engage in
business
 Taxation of raw materials and other inputs raise production costs.
b) Corruption and official harassment
 Occurs where entrepreneurs are forced to bribe officials in various
government departments to allow operation or start up.
 Raids under one pretext or another which tends to be very harassing.
c) Unregulated competition from the outside world due.
 Liberalization which opened importation competing locally produced
goods.
d) Declining personal incomes of people due to
 Over-increasing cost of living
 Arise in unemployment
e) The high cost of finance
 The cost of borrowing is high
 Business collapses because they lack ability to repay loans.
f) Lack of necessary skills and knowledge due to
 lack of training opportunities
 high education costs
g) Poor transport and communication network
 making business difficult
 Inconveniencing consumers
 High energy costs
 Lack of entrepreneurial culture
Myths Associated with Entrepreneurship
1) Entrepreneurs are doers not thinkers: Although it is true entrepreneurs tend
towards action, they are also thinkers.
2) Entrepreneurs are born not made: The idea that the characteristics of
entrepreneurs cannot be taught or learned, that they have innate trait, has long
been prevalent. Today, however, the recognition of entrepreneurship as a
discipline is helping to dispel the myth.
3) Entrepreneurs are always inventors: entrepreneurship covers more than just
invention. It requires a complete understanding of innovative behavior in all
forms.
4) Entrepreneurs are academic and social misfits. The belief that entrepreneurs
are academically and socially ineffective is as a result of some business owners
having started successful enterprise after dropping out of school or quitting a job.
Today the entrepreneur is considered a hero socially, economically and
academically and no longer misfit.
5) Most successful entrepreneurs have years of experience in their chosen line
of business. Bill Gates was still a student when he started Microsoft with Paul
Allen. This story of several inexperienced entrepreneurs starting out a new
business venture is replicated over and over again in the lives of millions of other
successful entrepreneurs.

6) All entrepreneurs need to run a business successful is money: Many

businesses fail because of managerial incompetence, lack of financial
understanding, poor planning etc. To many entrepreneurs, money is a source but
not an end in itself.
7) All entrepreneurs need is luck. Being at “the right place at the right time” is
always an advantage. But luck happens when preparation meets opportunity as
an equally appropriate advantage. Prepared entrepreneurs who seize the
opportunity when it arises often seem “Lucky” they are in fact simply better
prepared to deal with situations and turn them into success. What appears to be
luck really is preparation, determination, desire, knowledge and innovativeness?
8) Entrepreneurs must fail; in fact, failure can teach many lessons to those willing
to learn and often leads to future successes.
9) Entrepreneurs are extremely risk takers (Gamblers). Entrepreneur is usually
working on a moderate or calculated risk.
10) It takes a lot of money to start a business. This is false because it is all about
using the little resources to make the most out of it.
11) Those who make it are those with rich backups. You can start from scratch
with no special favors or advantages and succeed
12) Start-ups use equity, not debt money. Entrepreneurs who put up equity
coming from their own pocket only comprise less than 50% of the total start-ups.
The majority of the companies are financed by debt.

13) Those who start business, do so in very attractive industries

14) All entrepreneurs are rich and have financial success
15) Starting a business is easy. It is difficult and getting it running takes a lot.

Theories of entrepreneurship

 These refer to the various approaches, which have been advanced to give
an explanation as to why entrepreneurs behave the way they do. They are
also known as the perspectives of entrepreneurship.

 The theories try to explain whether entrepreneurs are born or made. The
born entrepreneurs inherit the entrepreneurial behavior from their parents
and grandparents while made entrepreneurs acquire entrepreneurial
behavior from the behavior in which they live in.

 The following are some of the entrepreneurial theories:

Economic theory
  The theory holds that entrepreneurial behavior is determined by economic
factors. Thus, entrepreneurs are greatly influenced by economic activities.
From an economic point of view an entrepreneur is a person who brings
together the factors of production into a combination to make their value
greater than before.

 According to Schumpeter, entrepreneurs are innovators who bring together

the various resources to produce a new product/service through new
ways/methods of production, finding new markets, finding new sources of
materials to create a new business.

 The economic theory provides basic data in the economic environment –

activities for business start-ups. Thus, entrepreneurial activities take place
where conditions are supportive/conducive to investment. This theory
revolves around an entrepreneur being an innovator, combining the various
resources/ factors of production to create new products/wealth.
Psychological theory
 The theory holds that entrepreneurs possess unique needs, values and
attributes, which drive them into entrepreneurial behavior. It holds that
people have personal traits and attributes, mental desires to be
independent.
 The main proponent of this theory is McClelland who attributed
entrepreneurial behavior to the high need for achievement. Entrepreneurs
are characterized by high need for achievement, which tends to give them
high desire to take personal responsibility in risks. They have little interest
in routine activities, which are not challenging. According to this theory,
entrepreneurial behavior is environmentally determined and is inherent
during childhood, where parents have certain high standards achievement.

Sociological theory
  The sociological theory maintains that environmental factors such as values
and beliefs influence entrepreneurial behavior. (Max Weber, 1904).
According to this theory, beliefs and societal aspects such as social status
and recognition influence entrepreneurial behavior.

VARIOUS ECONOMISTS’ S VIEWS ON ENTREPRENEURSHIP

SCHUMPETER’S VIEWS ON ENTERPRENEURSHIP
 According to him, entrepreneurship is an act of doing things that are not
done in an ordinary course of business. An entrepreneur is an in innovator,
they are motivated and talented class of people, they foresee the
opportunities and exploit it. Innovation may occur in the following forms:
 Introduction of new products
 Introduction of new markets
 Introduction of new market
 Introduction of methods of production
 Introduction of new sources of raw materials
 Schumpeter give the distinction between an innovator and inventor as
follows:
 An inventor produces ideas while the innovator implements
them
 An inventor is more concerned with technical work while
innovator converts technical work into economic performance
 Schumpeter’s theory emphasizes on innovation. It ignores the organizing
and risk-taking aspects which are important
 According to Schumpeter, an entrepreneur is a large-scale businessman
who creates something new but he cannot have large scale operation from
the beginning
Weakness / Limitations of Schumpeter’s views
 He fails to explain why some countries are endowed with
entrepreneurial talents
  He argues that entrepreneurs are large scale businessmen but in reality,
they cannot have large scale operations from the beginning
 He emphasizes on innovation as a function ignoring profitability function
PETER DRUCKER’S VIEWS ON ENTREPRENEURSHIP
 According to him, it is based on purposeful and systematic innovation for
example search for change and exploitation Such changes might offer
economic or social innovation
According to Drucker, for innovation to occur, three conditions must be fulfilled.
These include:
 It requires knowledge and ingenuity
 Must be built on their strength
 Must always be market focused and market driven
 Therefore, entrepreneurship is not confined to big business and economic
institutions but also small business and non-economic institution
McClelland’s views on Entrepreneurship
 He identifies two characteristics of entrepreneurship. These are:
 Doing things in a new better way
 Making decisions under uncertainties
 He stressed the need for achievement as the most relevant factors of
explaining economics behavior i.e. those people with high need of
achievement motive is stable characteristics an individual i.e. one does not
expect later events to change the achievement motive and behavior

Importance of Entrepreneurship theories

i) Entrepreneurship theories bring greater understanding of entrepreneurship
behavior exhibited by different entrepreneurs.
ii) They enable one to understand the need for entrepreneurship and why some
people are more entrepreneurial than others.
iii) The theories bring out various approaches and perceptions held by
entrepreneurs.
iv) Show that the desire for entrepreneurship is innate as well as environmentally
determined.
v) Helps us to understand the role played by role models through networks that
provide support.

TOPIC 3: THE ENTREPRENEUR

Introduction
Different types of entrepreneurs portray certain characteristics and patterns of
behavior which could be all learned and/or acquired depending on the
entrepreneur’s environmental background.

Entrepreneurs may play various roles in the enterprise. They scan the
environment, identify opportunities, plan, organize resources, oversee
production, marketing and liaise with their employees. They also innovate and
bear risk.
This sub-module unit focuses on the types, qualities and roles of an entrepreneur
in an enterprise. Specific objectives
By the end of this sub-module unit, the trainee should be able to: -
a. Describe the type of entrepreneurs
b. Describe the qualities of an entrepreneur
 c. Explain the role of an entrepreneur in an enterprise

Types of Entrepreneurs
 Entrepreneurs have their own typical qualities depending on their social,
economic, political and cultural environment. Each has an independent way
of thinking and a unique approach to decision making and handling
situations in the business.
 The following are various types of entrepreneurs:
3.3.2 Qualities / characteristics of an Entrepreneur
Entrepreneurs portray certain characteristics and patterns of behavior which can
be all learnt and/or acquired. Every entrepreneur may not possess all of the
qualities useful to make him/her successful. The following are the various
qualities an entrepreneur may have:
 a. Risk taking
An entrepreneur is open to risk in his business. They have to make decisions and
implement plans, the success of which cannot be fully guaranteed. He risks
financial, material and human resources at his disposal in the venture that he
undertakes.

b. Autonomy/independence
An entrepreneur by his/her own nature likes to be his own boss and does not
want to follow the instruction of another person without thinking further. This,
however, does not mean that they reject counseling from others. They want to try
his own ideas and while making decisions, they have to form his own opinion and
a set of course of action. They are ready to carry the burden of the
consequences of the decisions they make. Independence of thought is important.

c. Creativity and innovativeness

entrepreneurs must have an aptitude for searching out new ways and means of
doing things. They must be innovative in their approach to carrying out business
activities. To remain competitive, they must experiment to find out new
techniques of production, kinds of materials, types or variety of products. They
attempt to modify the method of manufacture to accommodate technological
developments, discover marketing opportunities, identify sources of supply and
develop sound organizations to meet requirements of the environment.

d. Internal locus of control

Entrepreneurs possess a high internal locus of control. They believe that
achievement of goals is dependent on their behavior or individual characteristics.
NB: A person with external locus of control believes that achievement of goals is a
result of luck or other people’s action. Such a person is not an entrepreneur.

e. Need for achievement

Entrepreneurs believe in achieving the set goals. The need to achieve may be
satisfied by acquiring higher status, succeeding in business, inventing and
popularizing a product, targeting new markets and attracting a greater number of
customers. It is the achievement motive which makes an entrepreneur diversify,
expand and innovate.

f. Keenness to learn
Entrepreneurs analyze the results and try to learn from them. They constantly
watch the path they take. They draw inferences from feedback, information and
have alternative plans.
 g. Ability to marshal resources
Entrepreneurs have to bring together all the required resources in the right
quantities at the right time. To achieve this, entrepreneurs must have patience,
ability to convince others and a strong conviction that their job is going to be
successful.

h. Time-consciousness
Entrepreneurs are interested in timely delivery of results. In order to
achieve this, they must complete their activities within a given time.

i. Organizational skills
Entrepreneurs have the ability to organize activities and utilize manpower in
order to put them to productive use.

For effective utilization of resources, the entrepreneur has to build a suitable

organization structure and with it, appropriate manpower.

Hardworking
Starting a business is hard work. An entrepreneur has to cope with the
demanding work of starting a business. Success comes very slowly for those
who are not willing to work hard?
Integrity
Integrity plays an important role in the advancement of any corporation and the
lack of it poses risks of loss of confidence, faith and commitment of employees,
clients and colleagues. Companies can promote integrity by establishing the moral
standards expected of its employees and implementing systems to reinforce
these standards. This will entail the provision of model roles, developing codes of
ethical conduct and providing information channels to report questionable
actions. Companies should also include integrity in their evaluations and consider
ethical aspects when formulating long-range plans.
Persistence
Successful entrepreneurs are persistent and hardworking. They master self-
discipline to such extent that if a work is important and related to their goals, they
will, eventually, complete it.

Getting things done is the vital link between motivations and their outcome. At
times, entrepreneurs force themselves to choose work over fun, a boring job
against a pleasant one, working on tax papers rather than reading a glamour
magazine. This requires a self-control that many people simply fail to develop in
them.

Successful entrepreneurs persist. They understand that it takes time to make it

really BIG!!! They are prepared to go the extra mile and do that little bit extra for
which they do not get paid.
Self Confidence
Self-confidence is a key entrepreneurial skill for success. It is easy to
become demoralized, frustrated and resentful if you lack self-confidence.

Self-confidence is concerned with how a person feels about his ability. A

successful entrepreneur believes in his abilities. He is not scared to explore,
take risk and take difficult decisions.
Suggested Assessment Questions
 An entrepreneur is a catalyst of change. Explain.
 Describe the different qualities of an ideal entrepreneurs.
 Write notes on;
i. Innovating entrepreneurs
ii. Problems of entrepreneurs in Kenya
iii. Types of entrepreneurial risks
iv. Importance of entrepreneurial growth