Entre ch.1

woLLO University
COLLEGE of Business and Economics

Department of management
Entrepreneurship – lecture slide
August,2021
Monday, January 2, 2023 1-1
CHAPTER ONE
THE NATUR OF ENTREPRENEURSHIP

Learning Objectives
Upon the completion of this unit you can:-

 Identify historical background of entrepreneurship
 Define a philosophy of entrepreneurial terminologies
 Identify the types of entrepreneurs
 Recognize the role of entrepreneurs in economy development
 Analyze entrepreneurial Competencies and environment
 Relate entrepreneurship, creativity and innovation

1.1 Introduction
• The root word “entreprendre”

• French verb, means “to undertake”.
• The informal meaning of it in French is
music or entertainment organizer.
• Why entrepreneurship?
• what is free enterprise?

1.2 Historical origin of entrepreneurship
The brief history of entrepreneurship follows

five distinct period.
1. Earliest Period:
• Marco polo , as a go-between was an Italian.
He wants to trade routes to the far East.
• Capitalist was the passive risk bearer and
merchant adventurer took the active role in
trading, bearing all physical and emotional
risks for 25 % commission business .
2. Middle Ages:
• Entrepreneur, an actor and a person who managed
large production projects.
• Individuals did not take any risks because all the
resources used to provided by the government of
the country
• all an entrepreneur should do is to manage it.
• A typical entrepreneur in the middle age was the
priest, the person in charge of great architectural
works used to build castles and fortifications, public
buildings, abbeys, and cathedrals.
3. 17th Century:
• The connection of the risk with entrepreneurship
• An entrepreneur was a person who entered into a contract
with the government to perform a service or to supply
stipulated products.
• John law (French), the founder of the royal bank of France
and the Mississippi Company, an exclusive franchise b/n
France and the new world.
• Richard Cantillion, a well-known English economist at the
beginning of the 17th century, understood Law’s mistake.
• He viewed the entrepreneur as a risk taker, observing
operating at a risk. ” i.e. “buy at a certain price and sell at
an uncertain price. E.g. merchants, farmers, craftsmen …

4. 18th Century:
• The capitalist was differentiated from the one who needed
capital.
• Because of the occurrence of industrialization throughout
the world.
• Eli Whitney -An American best inventor of the cotton gin.
• This was one of the key inventions of the industrial
Revolution.
• Thomas Edison, the inventor of many inventions. He was
developing new technologies and was unable to finance
his inventions himself.
• Edison was a capital user (an entrepreneur), not a provider
(a venture capitalist).
5. 19th & 20th Centuries:
• Entrepreneurs were managers and were viewed mostly from an economic
perspective.
• In the mid of 20th century the notion of an entrepreneur seen as inventor
• Andrew Carnegie define as organization and management of an
enterprise/combination of resources/ for personal gain
• poor scottish family, made the American Steel Industry one of the
wonders of the industrial world.
• Entrepreneurship is the recreation or revolution of the pattern of production by
introducing an invention like:-
• Edward Harriman, reorganized the railroad in the US.
• John Morgan, who developed his large banking house by reorganizing
and financing the nation’s industries.
• Then it become an application of creativity than management of
large projects

1.3 Definition of Entrepreneurial Terminologies
• There is no universally accepted definition

of entrepreneurship because it deals with
a complex phenomena
• But it has a many definition from a number
of qualified individuals according to their
profession as follows.

Entrepreneurship:-
• is the process of creating something new with value
by devoting the necessary resource and effort,
assuming the risk and receiving the resulting rewards of
monetary and personal satisfaction.
• Is the dynamic process of creating incremental wealth.
• The spirit of enterprise creation and development.
• process of brining creative, innovative ideas and
actions.
• Process of building and creating something's of value
from practically nothing.

… continued
• Involves the definition, creation and distribution of

values or benefits to users in general.
• Process of seizing business opportunities and
pursuing it regardless of the resources currently
controlled.
• Rarely is a get rich-quick proposition (not short
term, rather constructing value and durable cash
flow streams). (Timmons)
• An essential factory of economic recovery and
growth, employment generation, social progress
etc.
….continued
• Is an organizational and management approach that enables

persons to respond to change and solve problems in whatever
situation (either business or non-business) they may find
themselves.
• There are five critical elements of entrepreneurship process:
1)The ability to perceive an opportunity.

2)The ability to commercialize the perceived opportunity
i.e. innovation
3)The ability to pursue/follow it on a sustainable basis.
4)The ability to pursue it through systematic means.
5)The acceptance of risk or failure.
….continued
• It involves the use of economic resources

(money and equipment) as well as individual
human resources (energy, skills, knowledge,
time).
• It can also be explained as a process of
executing a work in a new and better way.
• “Entrepreneurship is an innovating, and
introducing something new in the economy”.
(Joseph A Schumpeter)

Entrepreneur:-
• “An entrepreneur is a person who pays a certain
price for a product to resell it at an uncertain price,
thereby making decisions about obtaining and
using the resources while consequently admitting
the risk of enterprise”(Richard Cantillon).
• It is used to describe men and women who
establish and manage their own business.
• People who have the ability to see and evaluate
business opportunities, gather necessary resources
to take advantage of them, initiate appropriate
actions to ensure success
….continued
• Action oriented, highly motivated individuals who

take risks to achieve goals.
• Who bring resources together in unusual
combination to generate profit (economists).
• Achievement oriented individuals who drive to seek
changes and new accomplishment (psychologists).
• Small business persons having the potential needed
for corporate management (managers)
• Who always searches for change, responds to it and
exploits it as an opportunity (Drucker).

1.4 TYPES OF ENTREPRENEURS/ Danhof’s/
• Based on their innovation and enthusiastic
1. Innovative entrepreneurs who launches new
pdts, mkt, methods
2. Imitative entrepreneurs Duplicate the technology
3. Fabian entrepreneurs experimentation any
change in the organization
4. Drone entrepreneurs
• Suffer losses , as they refuse to make any
modification in the existing production methods.
….continued
• Based on their entrepreneurial
personalities
• The personal achiever

• The Super Sales Person
• The Real Manager
• The Expert Idea Generator

….continued
• Based on the nature of entrepreneurs it can

take three different forms:
1. The individual entrepreneur: own independent
organization. corporate entrepreneur or corporate
venture man, developer of entrepreneurship in the
corporation.
2. Intrapreneur: a person who does entrepreneurial
work within large organization.
3. The Entrepreneurial Organization: An
organization which create an environment of
entrepreneurial function.
1.5 The Role of Entrepreneurs in
Economic Development
• The industrial health of a society

depends on the level of
entrepreneurship existing in it. True /
False? Why?

….continued
• A country might not be remain
backward because of lack of natural
resources or dearth( insufficient) of
capital [as it is many times believed]
but because of lack of entrepreneurial
talents or its inability to tap the
entrepreneurial talents existing in that
society
….continued
1. Capital formation: increases investment in

new and expanding businesses.
2. Improvement in per capita output and
income
3. Promotion of an entrepreneurial culture: By
projecting successful images, entrepreneurs
become role models for other people (Inspire
others)
4. Improvement in living standards
5. Economic independence
….continued
7. Backward and forward linkages
8. Generation of Employment
9. Increases value of locally Available
Resources
10. Balanced Regional Growth
11. Innovations in Enterprises
12. Initiating change in the structure of
business and society

….continued
12. Decentralization and diversification of

business: able to identify business opportunities,
and locate these businesses in suitable areas,
including rural areas.
13. Promotion of technology: By being creative,
entrepreneurs are able to contribute to the
utilization and development of appropriate
technology.
14. Improvisation and modification of products to
better suit customers’ needs in the market.
Monday, January 2, 2023 24

….continued
15. Streamline of the private sector and encourage the
inclusion of new technology that is less labor
dependent.
16. Increase in the national outputs which in turn lead to
greater and stronger economic growth.
17. Acting as a catalyst to nurture: Help develop
intrapreneurs in a business organization.
18. Combine Economic factors
19. Provide Market efficiency
20. Maximize Investor’s Return

1.6 Entrepreneurial Competence and Environment
1.6.1 Entrepreneurial Mindset
1.6.1.1 Who Becomes an Entrepreneur?
•The Young Professional: Increasingly young highly
educated people often with entrepreneurial qualifications
•The Inventor:
•The Excluded: because nothing is open to them. may
form their own internal networks, trading among
themselves. Eg. Displaced communities and ethnic and
religious
Monday, Januaryminorities
2, 2023 26
1.6.1.2 Qualities of an Entrepreneur
Goal Setting (SMART)
Opportunity-seeking
Systematic Planning and
Persevering:
monitoring
persistence Persuasion and
Risk Taking networking
Demanding for Building self-confidence
Listening to others:
efficiency and quality
Demonstrating
Information-seeking
Leadership:
….continued
Importance of Risk-taking
Build self confidence
Create a feeling of leadership
Create strong motivation to complete
a job well

….continued
Quality confers certain benefits like:
Reduction of waste:
Cost-effectiveness:
An increase in market share:
Better profitability:
Social responsibility:
Reputation:

….continued
• Importance of Persuasion in Business

We purchase goods from people
We sell goods to people
We need support from people
We work with people.
•Without people, be they are suppliers, workers, and
most importantly customers, there is no business.

….continued
• Factors that Affect Persuasion and

Networking
Socio-cultural background and perceptions
Communication skills (both verbal and
non-verbal).
Negotiation skills
Characteristics of a Self-confident Person
Risk-taking:
Independent:
Perseverance: Ability to endure and survive
setbacks and continue to build confidence
Able to learn to live with failure.
Ability to find happiness and contentment in
work.
Doing what you believe to be right, even if
others mock or criticize you for it.
Admitting mistakes and learning from them
1.6.1.3 Entrepreneurial Skills
•Turning an idea into reality calls upon two sorts of skills,

these are:
I. General Management Skills: skills required to organize

the physical and financial resources needed to run the
venture.
 Some of the most important general management business skills are:
Strategy Skills Financial Skills

Project Management Time Management Skills
Planning Skills
Monday, January 2, 2023 Marketing Skills 33
….continued
II) People Management Skills:
Communication Skills
Leadership Skills
Motivation Skills
Delegation Skills
Negotiation Skills

1.6.1.4 The Entrepreneurial Tasks
1) Owning Organizations: an investor and that of a manager.

2) Founding New Organizations: bringing together the different
elements of the organization (people, property, productive resource,
etc.) and giving them a separate legal entity.
3) Bringing Innovations to Market

4) Identification of Market Opportunity
5) Application of Expertise: have a special ability
6) Provision of leadership
7) The entrepreneur as manager
1.6.1.5 Wealth of the Entrepreneur
•It includes money, knowledge and assets of the entrepreneur.
•Who Benefits from the entrepreneur’s Wealth?
•No entrepreneur works in a vacuum.
•Let us look at the benefits of each stakeholder.
1. Employees:
 Wage or salary
 The possibility using share schemes.
 They can develop social relationships.
 The possibility of personal development.

….continued
2. Investors:
3. Supplier:
4. Customers:
5. The local community
Contributing and sponsoring local development
activities
Contribution for political and cultural stabilities and
economic improvements
6. Government:
1.6.2 Entrepreneurship and Environment
•No business concern can ignore the environment

around it except at its own peril.
•“The penalty of environmental disregard is heavy.
•It not only reduces profit margins and makes
opportunities for expansion slip, but it also arouses
social hostility and makes social environment
growingly inhospitable to business operations.”

….continued
•A study of business environment offers the following
benefits:
1)It provides information about environment
2)It opens up fresh avenues for the expansion of
ventures
3)To adopt a dynamic approach and maintain harmony
of business operations with the environment.
4)To make it hospitable to the growth of business.
….continued
1.6.2.1 Phases of Business Environment
A) External Environment
i) Economic Environment
ii) Legal Environment
iii) Political Environment
iv) Socio-Cultural Environment
v) Demographic Environment
….continued
B) Internal Environment
i. Material:
ii. Production/Operation:
iii. Finance:
iv. Human Resource:

….continued
1.6.2.2 Environmental Factors Affecting
Entrepreneurship
Sudden changes in Government policy.
Sudden political upsurge.
Outbreak of war or regional conflicts.
Political instability or hostile Government attitude
Excessive red-tapism and corruption among Government

agencies.
Ideological and social conflicts.
….continued
Unreliable supply of power, materials, finance,
labor and other inputs.
Rise in the cost of inputs.
Unfavorable market fluctuations.
Non-cooperative attitude of financial institutions.

•Generally entrepreneurship is environmentally
determined.
1.7 Creativity, Innovation and
Entrepreneurship
•Are important contributors to a nation’s economic
growth.
•are chronologically interrelated
• What is the entrepreneur’s secret for

creating value in the marketplace?
….continued
• In reality, the secret‟ is no secret at all”.
• It is applying creativity and innovation to
solve problems and to exploit opportunities
that people face every day.
• It is the ability to convert problems and

challenges to opportunity!

1.7.1 Creativity
•It is the ability to come up with new idea,
alternatives, or possibilities and to discover new
and different ways of looking at a problem and
opportunities.
•It is also a process of assembling ideas by
recombining elements already known but
wrongly assumed to be unrelated to each other.
….continued
•Key elements that are worth considering:
Process: creativity is a process (implying among other
things, that it is more like a skill than an attitude, and that
you can get better at it with practice)
Ideas: creativity results in ideas that have potential value.
Recombining: putting things together in unexpected ways.

•Thus, creativity is the development of ideas about products,
practices, services, or procedures that are novel and potentially
useful
Monday,to the
January organization.
2, 2023 47
1.7.1.1 Steps in the Creative Process
•Step1: Opportunity or problem Recognition

•Step2: Immersion: concentrates on the problem and becomes immersed
in it. Dreaming up alternatives, information without refining or evaluating
them.
•Step 3: Incubation: the person keeps the assembled information in mind
for a while.
•Step 4: Insight: Aha! Experience. the problem-conquering solution
flashes into the person’s mind at an unexpected time, such as on the verge
of sleep, during a shower, or while running.
•Step 5: Verification and Application: include gathering supporting
evidence, using logical persuasion, and experimenting theIr new ideas.
1.7.1.2 Barriers to Creativity
1.searching for the one ‘right’ answer
2.focusing on being logical
3.blindly following the rules
4.constantly being practical
5.viewing play as frivolous
6.becoming overly specialized
7.avoiding ambiguity
8.fearing looking foolish
9.fearing mistakes and failure
10.believing that ‘I’m not creative
1.7. 2 Innovation
•It is the ability to apply creative solution to those problems
and opportunities in order to enhance people’s lives or to
enrich society.
•It lies at the heart of the entrepreneurial process and is a
means to the exploitation of opportunity.
•It is also the implementation of new idea at the individual,
group or organizational level.
•Innovation is a process of intentional change made to rate
value by meeting opportunity and seeking advantage.
The four distinct types of innovations:
 Invention - described as the creation of a new product,
service or process
 Extension - the expansion of a product, service or
process
 Duplication - defined as replication of an already
existing product, service or process
 Synthesis - the combination of existing concepts and
factors into a new formulation
1.7.2.1 The Innovation Process
1. Analytical planning: carefully identifying the product or
service features, design as well as the resources that will be
needed.
2. Resources organization: obtaining the required resources,

materials, technology, human or capital resources
3. Implementation: applying the resources in order to

accomplish the plans
4. Commercial application: the provision of values to

customers, reward employees and satisfy the stakeholders.
1.7.2.2 Areas of Innovation
A.New product: A new product can be developed through

new or existing technology. The new product may be a
radically new or an improved.
B.New Services:
C.New Production Techniques: to obtain the product at a
lower cost, or a product of higher quality or better service.
D.New Way of Delivering the Product or Service to the
Customer:

….continued
E. New Operating Practices: customer servicing like,

easier access to the service, a higher quality service, a
more consistent service and a faster service etc.
F. New Means of Informing the Product to customers
G. New Means of Managing Relationship in the
Organization:
H. New Ways of Managing Relationships b/n
Organizations:

1.7.3 From Creativity to Entrepreneurship
• Their relationship: Entrepreneurship = creativity + innovation

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woLLO University

COLLEGE of Business and Economics

Entrepreneurship – lecture slide

THE NATUR OF ENTREPRENEURSHIP

Monday, January 2, 2023 1-2

Upon the completion of this unit you can:-

Monday, January 2, 2023 1-3

• The root word “entreprendre”

Monday, January 2, 2023 1-4

The brief history of entrepreneurship follows

Monday, January 2, 2023 1-7

Monday, January 2, 2023 1-9

• There is no universally accepted definition

Monday, January 2, 2023 1-10

Monday, January 2, 2023 1-11

• Involves the definition, creation and distribution of

• Is an organizational and management approach that enables

1)The ability to perceive an opportunity.

• It involves the use of economic resources

Monday, January 2, 2023 1-14

• Action oriented, highly motivated individuals who

Monday, January 2, 2023 1-16

• The personal achiever

Monday, January 2, 2023 1-18

• Based on the nature of entrepreneurs it can

• The industrial health of a society

Monday, January 2, 2023 1-20

1. Capital formation: increases investment in

Monday, January 2, 2023 1-23

12. Decentralization and diversification of

Monday, January 2, 2023 24

Monday, January 2, 2023 25

Monday, January 2, 2023 28

Monday, January 2, 2023 29

• Importance of Persuasion in Business

Monday, January 2, 2023 30

• Factors that Affect Persuasion and

•Turning an idea into reality calls upon two sorts of skills,

I. General Management Skills: skills required to organize

Strategy Skills Financial Skills

Monday, January 2, 2023 34

1) Owning Organizations: an investor and that of a manager.

3) Bringing Innovations to Market

Monday, January 2, 2023 36

•No business concern can ignore the environment

Monday, January 2, 2023 38

Monday, January 2, 2023 41

Sudden political upsurge.

Outbreak of war or regional conflicts.

Political instability or hostile Government attitude

Excessive red-tapism and corruption among Government

Unfavorable market fluctuations.

Non-cooperative attitude of financial institutions.

• What is the entrepreneur’s secret for

• It is the ability to convert problems and

Monday, January 2, 2023 1-45

Ideas: creativity results in ideas that have potential value.

Recombining: putting things together in unexpected ways.

•Step1: Opportunity or problem Recognition

2. Resources organization: obtaining the required resources,

3. Implementation: applying the resources in order to

4. Commercial application: the provision of values to

A.New product: A new product can be developed through