Entrepreneurship for Managers

By

Tesfahun Tegegn
 The concept & historical development
entrepreneur and entrepreneurship
O Entrepreneurship is economic factors mainstreams are:
land,
labor,
capital and
entrepreneurship.
O --- the activity of setting up business, taking on
financial risks in the hope of profit.
 ---- derived from French in 17th century
‘entreprendre’, refers “undertakers”, meaning those
who “undertook” the risk of new enterprise.

 The concept varies from country to country , period to

period and the level of economic development; a
concise and no universally accepted definition ----
 Example
o In the earliest period:
o An entrepreneur was viewed as the one who attempt to establish
trade routes and signed contracts

o In the Middle Ages:

o The term entrepreneur used to describe a person managing large
production projects.

o In the 18th century

o The Irishman named Richard Cantillon, risk taker:
merchants, farmers, crafts men, and other sole
proprietors buy products at certain price –
Karl Vesper: says it is a matter of individual perception
like:
O To an economist: an entrepreneur is one who brings
resources; labor, materials, and other assets in to
combination that makes their value greater than before.
O To a psychologist: such a person is typically driven by
behavioral forces like need to obtain, to experiment, to
accomplish something, or perhaps to escape authority of
others.
O To capitalist philosophers: an entrepreneur is the one who
creates wealth for others as well, who finds better ways to
utilize resources and reduce waste and who creates job that
others are glad to get.
 -----is decision maker whose entire role
arises out of his alertness to previously
unnoticed opportunities (kirzner-1973).

 ---- Who uses available resources in novel

ways (Schumpteter-1934).

 ----- someone who always searches for

change, responds to it, and exploits it as
an opportunity (Peter Drucker).
Robert Hisrich (1985), definition that:
 … a process of creating something different with
value by devoting the necessary time, and effort
assuming the accompanying financial,
psychological, and social risks, and receiving the
resulting rewards of monetary and personal
satisfaction.
 Differences b/n Entrepreneurship and Entrepreneur
Entrepreneurship Entrepreneur
O Entrepreneur is a person
O Entrepreneurship can be
who starts an enterprise.
described as a process of
setting up an enterprise.
O The entrepreneur is the
O Entrepreneurship is a
actor and
creative activity. The process
entrepreneurship is the
of creation is called
entrepreneurship. act.

O Entrepreneurship is the O The outcome of the actor

attitude of mind to seek and the act is called the
opportunities, take calculated
enterprise.
risks and derive benefits by
setting up a venture.
Entrepreneurship is about Opportunity Identification
Personality Traits of Successful Entrepreneurs
A). Need for Achievement
B). Willingness to take risk
C). Self-Confidence
D). Innovation and creativity
E). Total commitment
F). Effective time management:
G). An Ability of leadership
H). An ability of decision making
I). Desire for Independency
why people consider setting up their own businesses?
 “Pull' Influence
 Some individuals are attracted towards business
ownership by positive motives such as:
 Independence:
 Market opportunity:
 Financial incentives:
 Community service:
 "Push" influence
 Many people are pushed into founding a new
enterprise by variety of factors including;
 Unemployment:
 Disagreement with previous employer
 Challenge: Overcoming Challenge gives
psychological satisfaction
 Entrepreneurship vs Intra-preneurship
O Intra-preneurship: (Entrepreneurship within an
existing business structure).
O “. . . the process whereby an individual or a group of individuals, in
association with an existing organization, create a new organization,
or instigate renewal or innovation within that organization”
(Sharma and Chrisman; 1999:18).
O Intra-preneurship can bridge the gap between science and
the market place.
Eg. METEC
Entrepreneurship:
 They frequently lack managerial skills, Marketing
capability, and finances.

 Their innovations are frequently unrealistic and

thus need significant modification to be
marketable.
 In addition, entrepreneurs often do not know how
to interface with necessary entities such as banks,
suppliers, customers, venture capitalists,
distributors, and advertising agencies.
 Entrepreneur vs. Owner manager
Entrepreneur:
O Decision-making and calculated risk bearing:
 While organizing the production function, an entrepreneur plays
a significant role in decision making. Every decision may result
in success or failure. However, the risk is limited and calculated.
O An entrepreneur has an all-round personality:
 An entrepreneur possesses knowledge and insight about the
quality and type of raw materials, machinery, work force and
their behavioral pattern, government machinery, labor laws,
taxation, production process and marketing network.
 Owner Manager
O They may or may not be entrepreneurs.
O They usually own and manage a small enterprise; which
fits with their personal motivations.
O They are concerned more about survival than seeking
innovative changes and growth.
They are characterized by:
 Limited scope for innovativeness, creativity, and imagination

 Managerial jobs are transferable.

 Managers do not bear-risk.

 1.5. Classification of Entrepreneurs
O The entrepreneurs have been broadly classified
according to:
 the type of business,

 use of personal skills,

 motivation,

 growth, and stages of development and

 gender.
 Entrepreneur according to the type of
business
1). Business entrepreneur;
─ are individuals who conceive an idea for a new
product or services and then create a business to
materialize their idea in to reality.
2). Trading entrepreneur:
─ is one who undertakes trading activities and is
not concerned with the manufacturing.
3). Industrial entrepreneur:
─ is essentially a manufacturer who identifies
the potential needs of the customers and tailors
a product or service to meet the marketing
needs.
4). Corporate entrepreneur:
─ is a person who demonstrates his innovative
skill in organizing and managing corporate
undertaking.

5). Agricultural entrepreneur:

─ is the entrepreneur who undertakes agricultural
activities such as raising and marketing of crops,
fertilizers and other inputs of agriculture through
mechanization, irrigation and application of
technologies for dry land agricultural products.
 Entrepreneurs based on technology
1.Technical entrepreneur
 is a "Crafts man" with skill in production
techniques.
2. Non-technical entrepreneur
 is a person who is concerned with developing
alternative marketing and distribution strategies
to promote his business.
3. Professional entrepreneur
 is a person who is interested in establishing a
business but does not have interest in managerial
or operating it once it is established.
Entrepreneurs based on motivation
1. Pure entrepreneur
 is an individual who is motivated by psychological and
economic rewards/personal satisfaction.
2. Induced entrepreneur
 is one who is induced to take up an entrepreneurial task
due to the policy measures of the government that
provides assistance, incentives, concessions and
necessary overhead facilities to start a venture.
3. Spontaneous entrepreneurs
 are persons with initiative, boldness, natural talents
and confidences in their ability, which motivate them
to undertake entrepreneurial activity.
 Entrepreneurs based on stage of
development
1. First-generation entrepreneur
- starts an industrial unit by innovative skill and
combining different technologies to produce a marketable
product or service.
2. Modern entrepreneur
– is a person who undertakes ventures that go well along
with the changing demand in the market which suit the
current marketing need.
3. Classical entrepreneur
- is a person concerned with customers and
marketing needs through the development of a self-
supporting venture/without an element of growth.
Entrepreneurs based on Idea generation
1. Technological entrepreneur
- a one who innovates using a technology to
produce new products or new process for
producing old product.
2. A geographical entrepreneur
- is one who moves technology, products, and
process that go with it from one place to
another.
3. A sociological entrepreneur
- is one who finds a new situation in which to
sell an old product (existing products).
Based on source of capital
1. Private entrepreneurs
─ is when an individual on the basis
of his or her own property start up
a new venture.
2. Collective entrepreneurs
─ when a venture is created in a
grouped based on collective
property or contribution.
Entrepreneurs based on the reason
to start-up
1. Opportunity-driven entrepreneurs
─ they start a company because they see
clear market opportunities to exploit.
2. Necessity-driven entrepreneurs
─ go in to business to create self-
employment and to win a living.
 Entre---- Classification by Danhof
Innovating entrepreneur:
o aggressive and possess the art of cleverly putting the attractive possibilities
into practice.
Imitative entrepreneurs:
o adopt successful innovations inaugurated by successful innovating
entrepreneurs.
Fabian entrepreneur:
o Fabian entrepreneurs are cautions and skeptical in experimenting change
in their enterprises.
o neither they introduce new changes nor they desire to adopt new methods
Such entrepreneurs are shy, lazy and lethargic.
Drone entrepreneur:
o refuse to adopt and use opportunities to make changes in production
formulae even at the cost of severely reduced returns.
o are not ready to make changes
Success factors of entrepreneurs
1.The entrepreneurial team
2.Venture product and service
3.Marketing and timing
4.Market potential
5. Business Ideology
 Benefits and Limitations of Entrepreneurship
 People start their own business for a variety of reasons:
 Benefits Potential Limitations

1. Opportunity to gain control 1. Uncertainty of income

over your own destiny 2. Risk

2. Opportunity to reach your full A. Financial Risk

potential B. Career Risk
C. Family and Social Risk
3. Opportunity to reap unlimited
profits D. Psychic Risk
3. Long hours and hard work
4. Opportunity to contribute to
society and recognized for your 4. Lower quality of life until the business
effort gets established
5. Opportunity to do what you 5. High level of stress
enjoy
6. Complete Responsibility
Role of entrepreneurship in economic development

O Capital formation
O Improvement in per capita income
O Generation of employment
O Balanced regional development
O Improvement in living standards
O Economic independence
O Backward and forward linkages
Entrepreneurship, creativity, and innovation,
inventor