ENTREPRENEURIAL SKILLS ENT3001/3003/4003 LECTURE #1 & 2 INTRODUCTION TO ENTREPRENEURSHIP 1.

ENTREPRENEURIAL SKILLSENT3001/3003/4003

LECTURE #1 & 2

INTRODUCTION TO ENTREPRENEURSHIP

1

INTRODUCTION TO ENTREPRENEURSHIP

Objectives Explain the concept of entrepreneurship Outline the rewards and drawbacks of

entrepreneurship Identify the main personal , entrepreneurial

characteristics (PEC’s) of successful entrepreneurs

Identify Supporting Enabling factors (SEF’s) Identify the factors that are driving the growth of

entrepreneurship Explain how to avoid the mistakes of

entrepreneurship

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WHAT IS ENTREPRENEURSHIP?

Many see entrepreneurship as the mere emergence of new businesses through the following ways

New Business / New idea New Business / Existing idea Buying Existing Business Buying a franchise Entering into a family business

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The way to make the economy more productive and compete more effectively in the global economy

The essence of free enterprise because the birth of new businesses gives a market economy its vitality ( new jobs, products)

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WHAT IS ENTREPRENEURSHIP? A new style of doing business An approach – way of seeing things and of

doing things differently Style of management ( Peter Drucker) High risk activity Ability to see change/ difficulties as a

business opportunity

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Almost all definitions of entrepreneurship include:

Initiative taking The organizing and reorganizing of

social/economic mechanisms to turn resources and situations to practical account.

The acceptance of risk or failure

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Concept of Entrepreneur Comes from the French meaning “between-taker” or “go-between”

Earliest Period Marco Polo who attempted to

establish trade routes to the far east The money person (forerunner of

Capitalist) entered into contract with the go-between to sell his goods.

Early Capitalist

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Middle Ages The term entrepreneur was used to

describe both an actor and a person who managed large production projects.

This person did not take any risks, managing the project with the resources provided.

A typical entrepreneur was the cleric who managed architectural projects.

Concept of Entrepreneur

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17th Century The entrepreneur was a person who entered

into a contract with the government to perform a service

18th Century The entrepreneur was distinguished from

the capital provider. Eli Whitney & Thomas Edison were unable to finance invention themselves.

Both were capital users (entrepreneurs), not capital providers (venture capitalists.


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19th & early 20th Century Viewed mostly from an economic

perspective Contributes his own initiative, skill and

ingenuity in planning, organizing, and administering the enterprise … assuming the chance of loss and gain (risk taker)

Andrew Carnegie is an example, building the American steel industry through competitiveness rather than creativity


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Middle 20th Century and Beyond The notion of an entrepreneur as an

innovator was established. Innovation, the act of introducing new, is

one of the most difficult tasks for the entrepreneur.

John Pierpont Morgan and Edward Harriman are examples of this type of entrepreneur.

This ability to innovate is an instinct that distinguishes human beings from other creatures and can be observed throughout history.


DEFINITION OF ENTREPRENEURSHIP

The process of creating value by pulling together resources to exploit an opportunity

Entrepreneurship is the dynamic process of creating incremental wealth

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DEFINITION OF ENTREPRENEURSHIP

The process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.

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WHO IS AN ENTREPRENEUR?

To the economist , an entrepreneur is one who brings resources, labour, materials, and other assets into combinations that make their value greater than before, and one who introduces changes, innovations, and a new order.

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WHO IS AN ENTREPRENEUR?

Definition

Someone who perceives an opportunity and creates an organization to pursue it

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REASONS FOR BECOMING AN ENTREPRENEUR

To increase earnings To introduce a new and creative idea To provide a needed service To enjoy the satisfaction of developing your

own successful venture To become your own boss

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REASONS FOR BECOMING AN ENTREPRENEUR

independence enjoyment, challenge, more room for

creativity personal satisfaction feeling of autonomy and freedom

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REWARDS OF ENTREPRENEURSHIP

Opportunity to gain control over ones own destiny

Opportunity to reach one’s full potential Opportunity to benefit financially Opportunity to contribute to society and

be recognized for one’s efforts Freedom from supervision and rules of

bureaucratic organizations Freedom from routine, boring and

unchallenging jobs Freedom from the limits of standardized

pay 18

DRAWBACKS OF ENTREPRENEURSHIP

Uncertainty of income Complete responsibility Risk of losing your entire invested capital Long hours and hard work Emotional loneliness Disruptions to personal life Strong possibility of failure Lower quality of life until the business gets

established19

DRAWBACKS OF ENTREPRENEURSHIP

Which drawbacks are most disturbing to you and why?

Can anything be done to reduce them?

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HOW TO REDUCE THE DRAWBACKS OF

ENTREPRENEURSHIP

Mental preparation Planning – Develop a thorough Business Plan Research Training Start small Start & operate business on the side Start early

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KEY ELEMENTS IN ENTREPRENEUR’S BACKGROUND

√ Supportive childhood family environment√ Having a parent who is self-employed helps√ Education is important√ Aged 22 – 45 when starting venture√ Work history: dissatisfied with company job

but has technical knowledge

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ENTREPRENEUR VS INVENTOR An inventor creates something for the first

time. While the entrepreneur falls in love with the new venture, the inventor falls in love with the invention and often requires the expertise of an entrepreneur to launch a new venture

Historians classify Albert Einstein as an inventive genius and Henry Ford as an entrepreneurial genius.

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THE ENTREPRENEUR

The classic entrepreneur is often seen as one who possess certain innate traits, often referred to as Personal Entrepreneurial Characteristics ( PECs)

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PEC’S OF (SUCCESSFUL) ENTREPRENEURS

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Committed to success Have high work standards Self-motivated & able to

motivate others Enjoy working and sharing

ideas with people at all levels Hardworking Enthusiastic and Optimistic Accept Responsibility Are good leaders

Analyze situations easily and make and implement decisions quickly

Creative thinkers, able to identify a positive trend within a negative situation

Good planners and organizers


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Trustworthy people with integrity

Disciplined and determined

Committed to their projects

Self confidence

Enjoy a challenge Energetic, always on

the go Information seeking Persuasive and good

networkers


There is really no neat set of behavioral attributes that allow us to separate entrepreneurs from non-entrepreneurs

From studies done, it has been observed that entrepreneurs have a greater desire to be in control of their own fate, having a strong desire to be successful / high achiever

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Are PECs innate or can they be taught? Two opposing schools of thought:

1. True entrepreneurs are born with special personality traits that create business. These traits cannot be taught or learned.

2. Entrepreneurial tendencies can be learned and developed through experience and business training.

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SUPPORTING & ENABLING FACTORS (SEF’S)

Supporting and Enabling factors (SEF’s) are factors which are largely outside of the control of the entrepreneur but which nonetheless played a critical role in the success of the entrepreneur (Orville Reid 2011).

The concept of SEF’s concedes that for success to occur the entrepreneur must have PEC’s as well as SEF’s which contributes to success.

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SUPPORTING & ENABLING FACTORS (SEF’S)

Work experience Prior business experience Finance knowledge International experience Technical support Recession / crisis Outside support Owning assets Family support Market growth 30

ENTREPRENEURSHIP – THE FEAR OF FAILURE

What is failure ? Is it OK to fail? Many cultures, including ours

stigmatize failure A business may fail and many do An entrepreneur only fails when he never

tries again Entrepreneurs use business failures as

opportunities to start over again and to learn from them

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FACTORS INFLUENCING THE GROWTH OF

ENTREPRENEURSHIP

Ideas

Technology

Capital

People

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Social Factors

Natural entrepreneurial spirit

Said to be part of the Jamaican psyche

Probably connected with “Anancyism” – from stories of

Bro. Anancy who tricked others to get what he wanted.

Sometimes motivated by necessity – it is said

that “necessity is the mother of invention”

Some persons have no option but to hustle


The fulfillment of being your own boss

The desire for self actualization

Social Factors


Social Factors Cont’dThe role of the schools & other training institutions

Entrepreneurship training is being introduced in schools especially at the tertiary level

HEART Trust/NTA ensures trainees are exposed to entrepreneurship


Social Factors Cont’d

The role of women in entrepreneurship

More women are engaging in business – to support their family and fulfill higher aspirations.


Cultural factors Ethnic groupings

Some ethnic groups (Chinese, Jews, Indians) have a tradition of being involved in business in Jamaica.

Cultural penetrationCable TV – showing foreign cultures; promoting wealth & affluence


EconomicThe state of the Jamaican economy is both a push and pull factor for persons to engage in entrepreneurship

Stable economyHelps business planning, gives confidence for starting new business

High inflationWreaks havoc with business planning but encourages trading (buy-&-sell) operations


Economic

High unemploymentIncreases the availability of unskilled & skilled labour at reasonable pay rates

The effect of interest ratesHigh rates reduce ability to repay loans, makes loan financing unattractive for funding business

Stable exchange ratesHelps keep prices constant, builds business confidence


Economic

Information & Communications ageTechnology replacing employeesTechnology increases business efficiency, but reduces need for certain human skills.

Creativity, innovation & business start-up seen as solutionsOpportunities are created for start-up of new high tech businesses


Economic

Globalization & LiberalizationRemoval of trade barriers between & within countries

Increases trade with the rest of the world


Globalization

The ongoing process of integration of regional

economies, societies & cultures through

international exchange

Has economic, technological, socio-cultural,

political and biological components

Include the transnational dissemination of ideas,

language and popular culture

FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP

Globalization

The world becoming “smaller”Transportation & communication are easier

and faster

General state of changeParadigm shifts taking place in expectations

& possibilities


Globalization

Technology used to do things better, to do new

things

Mobile technology

Empowering people. Bringing the world to you. Control

your view of the world at the touch of a button

Robotics, Management Information Systems, Expert

Systems,

Marketing possibilities via the Internet

Showcase your products and services to the world at

a small cost


Globalization

The impact of liberalization on local &

international marketsLowering/removal of barriers to trade of goods &

services

Exporting possibilities

Lower import cost, increased specialization, increased

export possibilities


Globalization

Mobility of labour / jobsLive anywhere / work anywhere

possibilities increasing via

telecommuting, telemarketing


Regionalization - one component of

Globalization

Regional trading blocks CARICOM - Caribbean Common Market

Allows free movement of capital & labour

CSME – CARICOM Single Market & EconomyDeepening the integration process, provides a unified market for goods within CARICOM


Regionalization - one component of

Globalization

Regional trading blocks FTAA – Free trade area of the Americas

Opening up of markets (North America, Central America, South America & the Caribbean)

NAFTA – North American Free trade Agreement (Canada, USA & Mexico)

EU – The European Union


PoliticalWhat specifically have governments done to promote entrepreneurshipAdopted a capitalist free market economy for Jamaica

Encourages the private sector to be the engine for economic growth


PoliticalEncourage & speak of the need for entrepreneurship

HEART Trust/NTA created an entrepreneurial unit for training, development & promotion of entrepreneurship in Jamaica


PoliticalGovernment policies

Have been reducing Government ownership of businesses by privatizing state owned enterprises (JPS, the telecommunications sector, Air Jamaica, the sugar companies, etc.)


PoliticalGovernment policies

Government’s role has been changing to that of facilitator & referee, rather than owner & operator evidenced by the establishment of bodies such as the Office of Utilities Regulation -OUR, Fair Trading Commission - FTC, Anti-Dumping Commission, Financial Services Commission.


Political (Cont’d)Business facilitation strategies

E-government initiatives e.g. Jamaicatradepoint.comTo reduce bureaucracy and lost man-hours; one stop shop for importers/exporters. Certain taxes can be paid on-line

Government entering into bi-lateral agreements with friendly governments to facilitate business.


Political (Cont’d)Access to loan and grant funds for business start-up

The Jamaica Business Development CompanyJAMPRO Jamaica Trade & Invest



Low interest rate schemes for business loans

Lowering of import duties, removal of unnecessary red tape



Provision of technical assistance (JBDC)Tax holidays for businesses which create employmentNational Infrastructure Improvements

e.g. Highway 2000; the potential benefits, jobs, other economic spin-offs, the multiplier effect

CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA


High Input costsCost of economic inputs- due to depreciating exchange rate e.g. Imported materials, rent etc.

Security

Utility and other costs

Transportation of workers

Labour laws – sometimes unfriendly to business


Crime & violence

Extortion

Robbery & Murder

Population size

Small society, everybody knows everyone else; could restrict individual opportunities e.g. after business failure

Small local market for sale of goods & services


GeographyWhere people live – helps determine & limit the types of opportunities open to them (e.g. Kingston or Portmore vs. rural farming community)

SocializationParents & family tends to encourage their children to select more traditional careers in less risky, established professions.


Anti-entrepreneurial Education SystemThe system tends to unfairly promote the Sciences as superior to the Arts and other creative endeavoursEntrepreneurship is traditionally promoted as being for persons who are unable to progress in the traditional professional streams


Open economies such as Jamaica have

little option if we are to survive in this

global environment

Jamaica has to find a way to take advantage of

opportunities to create and grow businesses to

compete against imports, create local

employment and increase the standard of living

for its peoples.

MISTAKES ENTREPRENEURS MAKE

Poor management Lack of leadership ability, sound judgment and

knowledge necessary to make the business work Lack of experience Poor Financial Control Weak Marketing Efforts Failure to develop a Strategic Plan

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MISTAKES ENTREPRENEURS MAKE

Overconfidence Uncontrolled Growth Poor Location Improper Inventory Control Incorrect Pricing Inability to make the “Entrepreneurial

Transition”

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HOW TO AVOID THE PITFALLS

Know your business in depth Set clear goals Develop a Solid Business Plan Learn to manage people effectively Manage Financial Resources Understand Financial Statements

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SUMMARY

Concept of Entrepreneurship

Rewards and drawbacks of Entrepreneurship

PEC’s of Successful Entrepreneurs

Factors driving the growth of Entrepreneurship

How to avoid the mistakes of Entrepreneurship66

END OF LECTURE #1 & 2

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TUTORIAL ACTIVITY What are your strong PECs?

List five of them

What are your weak PECs?List five of them

You will need to devise ways of improving each weak area Identify one specific strategy that you

could use to improve each weak PEC

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TUTORIAL ACTIVITY Select one successful local entrepreneur Explain why you think this person is

successful Identify four major PECs that this person

exhibits Substantiate your views with evidence of

actual events/activities where these PECs were demonstrated

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TUTORIAL ACTIVITY

Historians classify Albert Einstein as an inventive genius and Henry Ford as an entrepreneurial genius.

Do you agree?Why?

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TOPIC TO BE REVIEWED FOR DISCUSSION

Assess the impact of entrepreneurship on national development. Research the role of agencies which support the

growth of entrepreneurship What are the emerging business opportunities?

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Importance of Entrepreneurship in Economic Development

ENTREPRENEURIAL SKILLS ENT3001/3003/4003 LECTURE #1 & 2 INTRODUCTION TO ENTREPRENEURSHIP 1.

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