KIMEP (Kazakhstan Instıtute Management and Economic Research) June 10, 2011

Almaty, Kazakhtstan

Entrepreneurship in a Free Society Moderator: Bahattin Karademir

Contents Contents

• What is entrepreneurship?

• Who are the entrepreneurs?

• What is the significance of entrepreneurship?

• How to nurture entrepreneurship?

• What should be the appropriate strategies?

Dr. Khanna ‘s current research focuses on understanding the drivers of entrepreneurship worldwide.

As part of the Emerging Giants project, he seeks to understand how to build world-class companies from emerging markets worldwide.

In 2008 he published a book on entrepreneurship, “Billions of Entrepreneurs: How China and India are Reshaping their Futures and Yours”, in which he compares entrepreneurship in China and India

(see, http://hbswk.hbs.edu/item/5766.html)

Prof. Tarun Khanna Harvard Business School

What makes him so hopeful What makes him so hopeful about the future of India?about the future of India?

What is Entrepreneurship?What is Entrepreneurship?

• Process of creating something new;

• Devoting the necessary time and effort;

• Assuming the financial, psychic and social risks;

• Receiving the resulting rewards of monetary and personal satisfaction and independence.

Who are Entrepreneurs?Who are Entrepreneurs?

An entrepreneur may be:

• Man or woman

• Someone with high income or low income

• A technologist or someone lacking technological sophistication

• A college graduate or a primary school dropout

Who are Entrepreneurs?Who are Entrepreneurs?

An entrepreneur may have been:

• An inventor

• A manager

• A nurse

• A salesperson

• An engineer

• A student

• A teacher

• A retiree

© Prentice Hall, 2005 Excellence in Business, Revised Edition Chapter 5 - 10

Traits of EntrepreneursTraits of Entrepreneurs

• Willing to exploit new opportunities

• Prefer risk taking over security

• Eager to acquire new skills

• Driven by ambition

• Listen to their intuition

• Learn from their mistakes

• Henry Ford set out to build a car which everyone could afford to buy.

• It was slow, ugly and difficult to drive, and was nick named the ‘Tin Lizzie’ by the American people.

Henry FordHenry Ford

• The attraction of the Model T Ford was that its price never increased.

• Costing $1200 in 1909, the price in 1928 was only $295.

• By 1929 Ford was producing more than one car per minute

Model TModel T

1913 – Mother of Karl Albrecht & Theo Albrecht brothers opened a small store

1946 – Brothers took over their mother’s shop and opened one another soon after

1960 - Brothers split the business when they had 300 stores

1970s - Initial internationalization

1993 – Brothers retired

2010 – 8210 stores in 19 countries

Karl & Theo AlbrechtKarl & Theo Albrecht

• Michael Dell is the chairman of the Board of Directors of Dell, the company he founded in ’84 for $1,000.

• With an unprecedented idea---build relationships directly with consumers (born in February ‘65).

Michael DellMichael Dell

“Selling tech products by telephone and then the Internet… Michael broke the paradigm about how to run a computer business; they haven’t been so great at finding the next paradigm.”

BusinessWeek 3/6/06

Dell ComputersDell Computers

• Murthy founded Infosys in 1981 in Pune with an initial capital of US $250, most of which was borrowed from his wife Sudha Murthy.

• At its inception, he invited six other engineers to join the company.

Narayana MurthyNarayana Murthy

• Infosys is one of the

largest IT companies in India with 122,468 employees as of 2010.

• It has offices in 33 countries and development centres in India, China, Australia, UK, Canada and Japan.

InfosysInfosys

The Small BusinessThe Small Business

Not DominantNot DominantIn Its FieldIn Its Field

Not DominantNot DominantIn Its FieldIn Its Field

Fewer ThanFewer Than50 Employees 50 Employees Fewer ThanFewer Than

50 Employees 50 Employees

IndependentlyIndependentlyOwned and OperatedOwned and Operated

IndependentlyIndependentlyOwned and OperatedOwned and Operated

Relatively SmallRelatively SmallAnnual SalesAnnual Sales

Relatively SmallRelatively SmallAnnual SalesAnnual Sales

Ad Van Vugt

The Story of an Entrepreneur

A Vase of Marbles

Economic Roles of Small BusinessesShare in Total Output

Bovee, C., Thill, J., Mescon, M. (2005), Excellence in Business, 5th edition, pg: 116, Pearson Prentice Hall, United States.

Economic Roles of Small BusinessesThey Provide New Jobs

Bovee, C., Thill, J., Mescon, M. (2005), Excellence in Business, 5th edition, pg: 116, Pearson Prentice Hall, United States.

Economic Roles of Small BusinessesShare in Non Farm Employment

Bovee, C., Thill, J., Mescon, M. (2005), Excellence in Business, 5th edition, pg: 116, Pearson Prentice Hall, United States.

Economic Roles of Small BusinessesThey Introduce New Products

Bovee, C., Thill, J., Mescon, M. (2005), Excellence in Business, 5th edition, pg: 116, Pearson Prentice Hall, United States.

Economic Roles of Small BusinessesAnnual Spending

Bovee, C., Thill, J., Mescon, M. (2005), Excellence in Business, 5th edition, pg: 116, Pearson Prentice Hall, United States.

Small Businesses Big Businesses

Why New Businesses FailWhy New Businesses Fail

• Management IncompetenceManagement Incompetence

• Lack of Industry ExperienceLack of Industry Experience

• Inadequate FinancingInadequate Financing

• Poor Business PlanningPoor Business Planning

• Unworkable GoalsUnworkable Goals

• Diminished Customer BaseDiminished Customer Base

• Uncontrolled GrowthUncontrolled Growth

• Inappropriate LocationInappropriate Location

• Poor System of ControlsPoor System of Controls

• Lack of Entrepreneurial SkillsLack of Entrepreneurial Skills

© Prentice Hall, 2005 Excellence in Business, Revised Edition Chapter 5 - 30

How to Nurture Entrepreneurship?How to Nurture Entrepreneurship?What are the appropriate strategies?What are the appropriate strategies?

• Should the government provide cheaper inputs such as raw materials, energy etc?

• Should the government provide favorable credits through state owned banks etc?

• Should the government protect local market through quotas, import taxes etc?

The Institutional Setting & The Institutional Setting & EntrepreneurshipEntrepreneurship

• Institutional environment defines and limits entrepreneurial opportunities:– Regulations and policies allocating resources

– Inadequate institutional environment can complicate new venture development

– More developed institutional environment with only restrictive regulation hampers firm founding

Core Capabilities for Business GrowthWhich is more important in a free society?

How to Nurture Entrepreneurship?How to Nurture Entrepreneurship?What are the appropriate strategies?What are the appropriate strategies?

Economic Freedoms

Political Freedoms

Cultural & Social Freedoms

Thanks for listening!

Q & A