Chapter One

Entrepreneurship and Free

Enterprise
 A Historical Perspective of
Entrepreneurship
 A French word ‘entreprendre’, which means “to
undertake.” The concept varies from period to
period .
 Through the ages, the concept of entrepreneurship
has shown significant development.
1. Earliest Period
 An ‘entrepreneur’ was a merchant adventurer who
signs a contract with a form of venture capitalist to
sell his goods.
 2. Middle Ages

 The term entrepreneur was given to both an actor

and a person who run large production projects.
3. 17th and 18th Century:
 The view of an entrepreneur as a risk taker was
developed.
4. 19th and 20th Century:
 Entrepreneurs were often viewed as managers and
from an economic point of view. The connection of
innovation with entrepreneur emerged.
 Definition of Entrepreneurship
 It is the process of identifying opportunities in the
market place, arranging resources to exploit
opportunities for long term gains.
 Is the process of designing, launching and running
a new business.
 It is the process of operating and assuming the risk of a
business venture.
 It is the ability to take risk independently to make more
earnings in the market oriented economy.
 Four Perspectives
1. To economist an entrepreneur is one who
brings resource, labor, materials into
combination that makes their value greater
than before.
2. To psychologist an entrepreneur is a person
typically driven by certain forces to attain
something.
 Cont’d…
3. For a business man entrepreneur is either a
threat (aggressive competitor) or supporter
(source of supply, consumer, etc).
4. For capitalist philosopher an entrepreneur is
one who creates wealth for others.
 Entrepreneurs
 Are action-oriented, highly motivated individuals who
take risks to achieve goals.
 Entrepreneurs are people who have the ability to:
– see and evaluate business opportunities
– gather the necessary resources to take advantage of
opportunities.
– initiate appropriate action to ensure success.
a person who tries to create something new
and undertake risks.
 The relationship among an entrepreneur,
entrepreneurship and enterprise

 A person who establish and manage their own

business. entrepreneurs
 The process involved in creating and starting
an enterprise. entrepreneurship
 The business organization that is formed &
provides goods & services, creates jobs,
contributes to national income, & overall
economic development. enterprise
 Entrepreneur vs. Intrapreneur
 Intrapreneur: It is the practice of beginning and
developing new business ventures within the
structure of an existing organization.
 Intrapreneur is an employee who commits time &
energy to create innovative new products/
services by using company resources, without
much personal investment, risks.
 Cont’d…
 Operations and decisions of entrepreneur is
independent as he is not answerable directly to
someone where as intrapreneur is bounded with his
line of authority and is dependent on the
organizational systems.
 Entrepreneur Vs. Manager
 Innovation, organizing, motivating, risk taking are
functions of entrepreneur where as managers planning,
organizing, staffing, directing & controlling.
 As manager is a salaried employee he does not assumes
much risk of business while entrepreneur taken financial
& social risk.
 Strategic view of entrepreneur is driven by perception of
opportunity where as manager is driven by
organizational resources currently available &
controlled.
Characteristics of Entrepreneurs
 Need for Achievement- a desire to succeed.
 Willingness to Take Risks- financial risk, they risk
their careers, place their families at risk.
 Self-Confidence- they can meet the challenges that
confront them. Believe in their own ability.
 Innovation- Constantly looking for innovations
through continuous search for new ideas.
 Types of Entrepreneurs
 Pure Entrepreneur: motivated by psychological and
economic rewards. He starts activities for his personal
satisfaction, status.
 Artisan Entrepreneur: is a person who starts a business
with primarily technical skills and little business
knowledge. They lack good communication skills.
 Induced Entrepreneur: is induced to take up an
entrepreneurial task due to the policy measures of the
government.
 Cont’d…
 Copreneurs: It is related to the married couples working together
in a business.
 Fabian: they are lazy and shy. They lack the will to adopt new
methods of production.
 Drone: is one who follows the traditional methods of production.
 Imitative Entrepreneurs: They Copy (imitate) techniques and
technology innovated by others.
 Forced Entrepreneurs: circumstances made many persons to
become entrepreneurs. They do not have any plan, forward
looking and business aptitude.
 Motivation for Starting a
Business
 Pull Influences
1. Desire for Independence
2. Desire to Exploit an Opportunity
3. Turning a Hobby or Previous Work
Experience into a Business
4. Financial Incentive
 2. Push Influences
1. Unemployment (or threat of unemployment)-
Job insecurity
2. Disagreement With Previous Employer-
Uncomfortable relations at work.
Success Factors for Entrepreneurs

 The Entrepreneurial Team – it refers to two or more

people who work together as entrepreneurs. They do not
start business by themselves; they have teams, partners.
 Venture Product or Services- Incremental expansion of
products and services, Products have strong profit potential,
high initial margins, substantial volume of sales.
 Markets and Timing - well-documented forecast of sales.
when products or services are introduced?
 Business Ideology- a system of beliefs about how one
conducts an enterprise.
The Role of Entrepreneurship in the
Economy
1. Promotes Capital Formation:
 By mobilizing the idle savings of public. They employ their own
as well as borrowed resources for setting up their enterprises. It
lead to value addition and creation of wealth.
2. Creates Large-Scale Employment Opportunities:
 Entrepreneurs play an effective role in reducing the problem of
unemployment in the country.
3. Promotes Balanced Regional Development:
 They help to remove regional disparities through setting up of
industries in less developed and backward areas.
 Cont’d…
4. Reduces Concentration of Economic Power:
 Concentration of economic power in the hands of a few
individuals which results in the growth of monopolies.
 In order to re address this problem a large number of
entrepreneurs need to be developed.
5. Wealth Creation and Distribution:
6. Improvement in the Standard of Living:
7. Promotes Country's Export Trade:
 Opportunities and Scope of
Entrepreneur
 The Scope of activities of entrepreneur is very wide in
Ethiopia as well as abroad.
1. Genetic Industries- breeding or reproduction of plants
and animals.
2. Extractive Industries- extract d/nt materials from
natural resources.
3. Manufacturing Industries- conversion or
transformation of raw materials and semi-finish
products into finished products or goods.
 Cont’d…
4. Construction Industries –construction of
buildings, bridges, roads, dams, canals, etc
Commerce or Trade
a. Internal Trade or Home Trade
Wholesale and retail Trade
b. International or Foreign Trade
Import and export trade
 Services
1. Professional Services-
 keeping and preparing accounts, providing medical
counseling, and economic consultancy, legal service.
2. Commercial Services - Warehousing or Storage ,
transportation, Advertising, banking, insurance Services.
3. Personal Service- beauty parlous, laundries,
restaurants, etc.
 Woman as Entrepreneur

Problems faced by Woman as Entrepreneur:

 Male dominance
 Family issues
 Lack of education
 Financial problems
 Stiff competition conditions
 Limited marketing and sales force
 Role conflicts
 Societal pressure
Entrepreneurship, creativity and
Innovation
 Creativity is the ability to develop new ideas
and to discover new ways of looking at
problems and opportunities.
 Innovation is the ability to apply creative
solutions to those problems and opportunities.
 In other words, creativity is thinking new things,
and innovation is doing new things.
 Cont’d…
 Creativity emphasizes the “ability” not the
“activity” of bringing something new in to
existence.
 Invention is the creation of something that has
never been made before.
 Entrepreneurship = creativity + innovation
The Process of Entrepreneurship
I. Identifying and evaluating business opportunity
 Business opportunities sources- customers,
business associates, channel member, and
technical people.
 It allows the entrepreneur to assess whether the
specific product or service has needed.
II. Develop a business plan
 BP is a document the entrepreneur prepares
before going to the implementation stage.
III. Determining the Resources required
 Assessing the resource needed for the
opportunity.
 More funds will be needed to finance the
growth of the venture.
IV. Managing the enterprise
 A control system must be identified.
 Implementing a management style & structure.
 Determining the key variable for success.
 .

End of
Chapter One