UNIT I.

NATURE OF
ENTREPRENEURSHIP and
PERSONAL FINANCE PLAN
At the end of the unit the students are expected to:
• Discuss the nature, origin, and concepts of
entrepreneurship.
• Determine the types of entrepreneurs and explain
their importance in economic development.
• Explain the importance of personal financial planning
to achieve a sound financial life.
TOPICS
A. Origin, Nature and Concepts of Entrepreneurship
B. Entrepreneur or Employee?
C. Characteristics of Entrepreneurship
D. Farm Business vs other business
A. Origin, Nature and
Concepts of
Entrepreneurship
Figure 1 – Historical and Evolutionary Entrepreneurship Thought (Illustration by Lee A. Swanson)
 Entrepreneurship: Economist and Management

According to Economist – an entrepreneur is the one who brings

resources, labour, material and other assets into combination to
produce a socially viable product, and also one who introduces
changes, innovation and new order.
According to Management – a person with a vision and action
plan to achieve it is an entrepreneur.
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ORIGIN OF ENTREPRENEURSHIP
• The word “entrepreneur” originates from a thirteenth-century French
verb, entreprendre, meaning “to do something” or “to undertake.”
• By the sixteenth century, the noun form, entrepreneur, was being used to
refer to someone who undertakes a business venture.
• The first academic use of the word by an economist was in 1730 by
Richard Cantillon, who identified entrepreneurship as “the willingness to
bear the personal financial risk of a business venture.”
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ORIGIN OF ENTREPRENEURSHIP
• In 1800s, Jean-Baptiste Say stressed the role of the entrepreneur in
creating value by moving resources out of less productive areas and
into more productive ones.
• John Stuart Mill used the term “entrepreneur” in his popular 1848
book, Principles of Political Economy, to refer to a person who
assumes both the risk and the management of a business.
• In this manner, he provided a clearer distinction between an
entrepreneur and other business owners (such as shareholders or
partners) who assume financial risk but do not actively participate
in the day-to-day activities.
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ORIGIN OF ENTREPRENEURSHIP
• Joseph Schumpeter, (20th century economist) stressed the role of the
entrepreneur as an innovator who implements change in an economy
by introducing new goods or new methods of production (innovation).
• Israel Kirzner, another 20th century economist, focused on the
entrepreneur as a person who discovers previously unnoticed profit
opportunities.
• The entrepreneur’s discovery initiates a process in which these newly discovered profit
opportunities are then acted on in the marketplace until market competition eliminates the
profit opportunity.
• Example, an increase in college enrolment in a place signifies an increase in opportunities to
add food houses, dormitories, etc.
 OriginOF
ORIGIN ofENTREPRENEURSHIP
Entrepreneurship
It is also believed that the Frenchman J.B. Say (1824) first used the
term ‘entrepreneur’ as an economic agent who brought together the
factors of production in such a way that new wealth can be created.
Oxford English dictionary adopted the word ‘entreprendre’ as
“entrepreneur” in 1897 and meant;
--“director or manager of a public musical institution; one who gets up
entertainments, especially musical performance”.
 Nature of Entrepreneurship
 Creation of an enterprise – it involves and operation of
an enterprise.
 Organizing function – it brings together various factors
of production for economic use.
 Innovation – it is an automatic, spontaneous and
creative response to changes in the environment.
 Risk bearing capacity – it assumes uncertainty of future.
 Nature of Entrepreneurship
 Managerial and leadership function – it is
responsible for controlling and coordinating the
human resource and giving direction to an enterprise.
 Gap Filling – it fills the gap between human needs
and available products and services.
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Why study entrepreneurship education?

• it teaches people to cultivate unique skills and think outside

the box
• it creates opportunity, instils confidence, ensures social justice
and stimulates the economy
• Helps students to learn about core business areas such as
finance, sales, marketing, management and accounting
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BENEFITS OF ENTREPRENEURSHIP STUDY

TO STUDENTS

A. PREPARE STUDENTS FOR AN UNCERTAIN

FUTURE
- According to the World Economic Forum's Future of Jobs survey, half of
today's work activities could be automated by 2055, creating completely new
roles, responsibilities, and challenges for the future workforce.
- Therefore, we cannot predict exactly what our students will need to know
or do after they graduate.
- Global transformations require skills transformation
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BENEFITS OF ENTREPRENEURSHIP STUDY

TO STUDENTS

B. LEAVE ROOM FOR CREATIVITY AND

COLLABORATION
- Entrepreneurship education encourages creativity, innovation, and
collaboration.
- These attributes are highly valued by the top colleges in the world and will
serve the student well beyond middle school and high school.
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BENEFITS OF ENTREPRENEURSHIP STUDY

TO STUDENTS

C. TEACH PROBLEM IDENTIFICATION

- Students need to learn how to identify problems before they learn how to
solve them.
In the real world, problems can only be solved when they have been properly
identified and described.
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BENEFITS OF ENTREPRENEURSHIP STUDY

TO STUDENTS

E. MAKE THE WORLD A BETTER PLACE

- Entrepreneurs seek to solve problems, meet needs, and ease pain points
with the help of their products and services.
- They are hard-wired to make a difference and make the world a better
place.
- By participating in entrepreneurship programs, students don’t just become
ready to create their own futures — they become ready to change the world.
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WHO IS AN ENTREPRENEUR?
• An individual who takes an initiative to bundle resources in innovative
ways and is willing to bear the risk in starting a business.
• Being an entrepreneur today:
- Involves creation process
- Requires devotion of time and effort
- Involves the rewards of being an entrepreneur (financial, social,
personal)
- Requires assumption of risk
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HOW DO ENTREPRENEURS
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THINK?
• Entrepreneurs think differently when faced with a different task and a different
environment.
• They need to have a high level of decision-making skills. Hence, they need to
be:
- Effectuate (knows how to execute)
- Highly adaptable (flexible and versatile)
- Learn from failure (learn to be accountable- uncertainty, changing
conditions, insufficient experience all contribute to business failure)
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The entrepreneurial process

1. Identify and evaluate opportunities present (the process by which the
entrepreneur produces the idea and opportunity for a new business venture)
2. Develop a business plan (to determine the direction of the future business)
3. Identify the resources required (to evaluate whether the business is doable
or not)
4. Manage the business (to experience the day-to-day operation and realize
the goals stated in the business plan)
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Concepts & Characteristics of entrepreneurship

1. Interest and Vision

- an entrepreneur must work in an area that interests him/ her. Otherwise, he/she
will not be able to maintain a high level of work ethic and will most likely fail. Then,
this interest should be turned into a vision of growth and expansion.
2. Many Skills
- An entrepreneur must be able to wear many hats and do so effectively. He should
be knowledgeable enough in the four areas of entrepreneurship (marketing, production,
organization & management, and financial).
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Concepts & Characteristics of entrepreneurship

3. Financial and Emotional Investment

- An entrepreneur’s investment may be something less tangible, such as the
time she spends or the skills or reputation she brings with it.
- It also tends to involve a significant investment of assets with a clear value,
whether they be cash, real estate or intellectual property. An entrepreneur who
will not or cannot invest in her company cannot expect others to do so and
cannot expect it to succeed.
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Concepts & Characteristics of entrepreneurship

4. Organization & Delegation

- successful entrepreneurship is characterized by quick and stable growth. This
means hiring other people to do specialized jobs. An entrepreneur needs to know how to
organize & multi-task.
5. Risk & Rewards
- The measurement of risk in business equates to the amount of time and money
invested into the business. However, this risk also tends to relate directly to the rewards
involved. The higher the risk, the bigger the reward.
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Issues and problems in

entrepreneurship
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1. RISK OF LOSING INVESTED CAPITAL

- When a business fails, it can be emotionally and financially devastating
- Before considering of entering into a business, one must first assess himself
“How much am I willing to risk?”
2. LONG HOURS AND HARD WORK
- An average small-business owner works 52 hours per week. In many new start-
ups, 10-12 hours per day, 6-7 days per week, with no paid vacations.
- Business owners have long, draining, working hours. One must be prepared to
accept that business is no easy task.
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3. LOWER QUALITY OF LIFE UNTIL THE BUSINESS GETS

ESTABLISHED
- Long hours and hard work affect the business owner’s outside and
social life.
- Before the business succeeds, an entrepreneur must make ends meet and
try to be as thrifty as possible, which affects their family and social life.
4. HIGH LEVELS OF STRESS
- The fear of business failure can mean a total psychological blow.
Constantly thinking about how the business will turn out, particularly when
things are not going so well, can affect the stress levels of the entrepreneur.
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4. COMPLETE RESPONSIBILITY
- Entrepreneurship is highly rewarding, but entrepreneurs usually
make decisions about things that they have very little or no knowledge
at all, and take all the burden in the conduct of business.
5. LACK OF FAVORABLE ENVIRONMENT
- Sometimes, it is impossible for entrepreneurs to find great support
from their environment because of the people mentality that
“entrepreneurs are always after money.”
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THE VALUE OF INNOVATION IN ENTREPRENEURSHIP

• Innovation in its modern meaning is "a new idea, creative thoughts,
new imaginations in form of device or method".
• Innovation is often also viewed as the application of better solutions
that meet new requirements, unarticulated needs, or existing market
needs.
• In business, innovation could be:
• implementing new ideas,
• improving services or
• creating unique and dynamic products
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THE VALUE OF INNOVATION IN ENTREPRENEURSHIP

• INNOVATION HELPS COMPANIES GROW

- People patronize companies who are always innovating, always
finding new and better ways to give products/ services needed by the
society.
• INNOVATION KEEPS ORGANIZATIONS RELEVANT
- Without innovation, people forget about organizations and
throughout time, they become obsolete
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THE VALUE OF INNOVATION IN ENTREPRENEURSHIP

• INNOVATION CAN ACT AS A CATALYST OF CHANGE

- it can make your business grow by changing products and services that
are of no relevance anymore and can help you adapt in the marketplace.
• INNOVATION HELPS AN ENTREPRENEUR SOLVE
PROBLEMS EASILY
- You need to come up with creative answers to solve certain problems in
your business. Many times you’ll face problems that don’t seem to go away. You
need to think outside the box to find an answer you’ve never come up with.
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THE VALUE OF INNOVATION IN ENTREPRENEURSHIP

• INNOVATION INCREASE YOUR PRODUCTIVITY

- In order to work smarter, think creatively. Focus on what things you should
streamline and what things you need to cut out. Also, focus on the programs and
workflows that you can use to increase productivity
• INNOVATION HELPS YOU BEAT YOUR COMPETITORS
- Come up with better ways to design products and connect with customers.
Along with this, creativity will help you figure out the right marketing techniques
that will help your business grow.
Sources:
• https://www.iedunote.com/entrepreneurship-definition
• chapter1conceptandnatureofentrepreneurship-150113062508-
conversion-gate01
• https://bbamantra.com/introduction-to-entrepreneurship/
#:~:text=Entrepreneurship%20is%20a%20dynamic%20activity,manner
%20to%20achieve%20certain%20goals.