Why Entrepreneurship: Economic Development & Entrepreneurship 

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Road Map

Entrepreneurship and the economy What is Entrepreneurship The Entrepreneurial Process

The Main Idea

Entrepreneurship is the primary catalyst for economic growth.

Being a successful entrepreneur requires an understanding of how the economy works.

Entrepreneurship and the Economy content vocabulary Entrepreneur,

entrepreneurial &entrepreneurship

venture economics free enterprise system profit oligopoly goods services need want

factors of production scarcity market structure monopoly demand elastic demand inelastic demand diminishing marginal

utility supply equilibrium Gross Domestic Product business cycle

Small Business and Entrepreneurship As an entrepreneur, you accept the risks and

responsibilities of business ownership

entrepreneur

an individual who undertakes the creation, organization, and ownership of a business

Small Business and Entrepreneurship Creating and running a business venture

requires a variety of skills.

venture

a new business undertaking that involves risk

Small Business and Entrepreneurship Starting a home-based business calls for

entrepreneurship on the part of the owner. About one in three households is involved in

an entrepreneurial enterprise

entrepreneurial

the process of recognizing an opportunity, testing it in the market, and gathering the resources necessary to go into business

Differentiating Small Business and Entrepreneurship The difference between small businesses and

entrepreneurial ventures is that owners start small businesses to create jobs for themselves; while founders of entrepreneurial ventures have a desire to innovate, grow, and create new value.

Entrepreneurship Today Knowledge of economics contributes to an

understanding of how entrepreneurs and customers interact.

economics

the study of how people allocate scarce resources to fulfill their unlimited wants

Economic Systems

An economic system includes a set of laws, institutions, and activities that guide economic decision making.

Economic Systems

What goods and services should be

produced?

All economic systems attempt to answer four basic questions.

The Free Enterprise System

Most democratic nations have a free enterprise system

free enterprise system

an economic system in which people have important rights: to make economic choices of what products to buy, to own private property, and to choose to start a business and complete with other businesses

The Free Enterprise System Making a profit is a primary incentive of free

enterprise

profit

money that is left over after all expenses of running a business have been deducted from the income

The Free Enterprise System

Perfect competition is a market structure in which there are numerous buyers and sellers and no single buyer or seller can affect price.

market structure

the nature and degree of competition among businesses operating in the same industry; market structure affects market price

The Free Enterprise System The government may grant a temporary

monopoly to an inventor.

monopoly

a market structure in which a particular commodity has only one seller

The Free Enterprise System Under antitrust laws, some forms of oligopoly

are illegal.

oligopoly

a market structure in which there are just a few competing firms

Basic Concepts

Basic concepts of economics

Goods and Services

Goods and services are the products of our economic system

services

intangible (nonphysical) products that satisfy consumers’ wants and needs

Goods and Services Entrepreneurs respond to consumers’ wants

and needs with goods and services

need

a basic requirement for survival

Factors of Production There are four basic factors of production land labor entrepreneurship capital

factors of production

the resources businesses use to produce the goods and services that people want

Scarcity

The principle of scarcity means giving up one thing in order to have something else.

scarcity

the difference between demand and supply; limited resources

Supply and Demand Theory

In a free enterprise system, the price of a product is determined by demand.

demand

the quantity of goods or services that consumers are willing and able to buy at various prices

Supply and Demand Theory

The degree to which demand for a product is affected by its price is either governed by elastic demand or inelastic demand

inelastic demand

situations in which a change in price has little or no effect on the demand for products

Supply and Demand Theory

Due to the law of diminishing marginal utility, even when a product’s price is low, people will not keep buying it indefinitely.

diminishing marginal utility

the effect or law that establishes that price alone does not determine demand, and that other factors, such as income, taste, and the amount of product already owned, play a role as well

Supply and Demand Theory

Supply is continually shifting in the marketplace

supply

the amount of goods or services that producers are willing to provide

Supply and Demand Theory

If something is in heavy demand, but in short supply, prices will go up.

 If something is in heavy supply, but in short demand, prices will go down.

Supply and Demand Theory

Because supply and demand are continually shifting in the marketplace, the change creates surpluses, shortages, and equilibrium.

equilibrium

the point at which consumers buy all of a product that is supplied; at this point, there is neither a surplus nor a shortage

Economic Indicators and Business Cycles

There are four stages of the business cycle: growth, recession, depression, and recovery.

business cycle

the general pattern of expansion and contraction that the economy goes through

The Entrepreneur entreprende, which means – ‘to undertake’ Webster dictionary – one who organizes,

manages and assumes the risks of a business or enterprise

Richard Cantillion – an entrepreneur is someone who takes the risk of running an enterprise by paying a certain price for securing and using resources to make a product and reselling the product for an uncertain price.

Joseph Schumpeter - an innovator playing the

role of a dynamic businessman adding material growth to economic development

Timmons - Entrepreneurship is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled

What is Entrepreneurship? Common Themes in Definitions of

Entrepreneurship The role of the entrepreneur Innovation Organization creation Creating value Profit or Not-for-Profit Growth Uniqueness Process

So can Entrepreneurship be taught ? Most entrepreneurs and investors seem to think

the answer is "no" Most academicians and students think the

answer is "yes."

Business can be Taught Risk-Taking Cannot be Taught

Born entrepreneurs can be taught how to become better businesspeople.  But businesspeople cannot be taught how to become entrepreneurs.

Can Entrepreneurship be taught ? If you ask, most entrepreneurs will tell you

that the reason they started out was because the urge to start became so strong that they just had to give up what they were doing and dive into it. Hardly anybody will say that they started a company because they attended a course in entrepreneurship.

Entrepreneurial Attitudes Comfortable with lifestyle changes Willingness to break / bend / stretch laws Patience to start small Prepared to make enemies Comfort with confrontations Dealing with failure Willingness to learn

What Entrepreneurs Contribute

Why is it Important ? Entrepreneurship contributes to job creation

and growth Entrepreneurship is crucial to competitiveness Entrepreneurship unlocks personal potential Entrepreneurship promotes societal interests Entrepreneurship contributes in fostering

social and economic cohesion for regions whose development is lagging behind

And Why are you the Best suited for Entrepreneurship ? Young Independent Energetic Dynamic Adaptive Creative Technically Sound Passionate to Achieve

Start-Ups

Any new venture initiated by an Entrepreneur is called a Start-Up.

There are different kinds of Start-Ups

Lifestyle Firm – A small venture that supports the owner & usually doesn’t grow.Foundation Company – Formed from Research & Development that usually doesn’t go public.

High-Potential Venture – That has high growth potential & hence receives great investor interest.

Gazelles – Very high growth ventures

Entrepreneurship v/s Intrapreneurship

Independence, opportunity to create & money.

Survival & achieving 5-10 yr growth of business.

Direct Involvement

Moderate risk taker

Deals with mistakes & failures

Independence & ability to advance in the corporate rewards.

Depending on urgency to meet self-imposed & corporate timetable.

Direct involvement more than delegation.

Moderate risk taker Attempts to hide

risky projects from view until ready.

Intrapreneurship – Entrepreneurship within an existing organization.

Primary Motives

Time Orientation

Activity

Risk

Failures & Mistakes

Entrepreneurship v/s Intrapreneurship

Follows dream with decisions.

Self & Customers

Entrepreneurial small-business, professional, or farm background.

Transactions & deal making as basic relationship

Able to get others to agree to help achieve dream.

Self, Customers & Sponsors

Entrepreneurial small-business, professional or farm-background.

Transactions within hierarchy.

Decisions

Who Serves

Family History

Relationship with others

Intrapreneurial Environment• Organization operates on frontiers of

technology• New ideas encouraged• Trail and error encouraged• Failures allowed• No opportunity parameters• Resources available and accessible• Multidiscipline team work• Long time horizon• Volunteer Program• Appropriate reward system• Sponsors and champions available• Support of top management

An organization desiring to establish an intrapreneurial environment must implement the following steps :1)Secure a commitment to intrapreneurship

in the organization by top, upper & middle mgmt levels

2)Identify the areas in which top mgmt is interested in along with the amount of risk money available to develop them further

3)Deploy Technology to make it flexible4)Train the employees.5)Develop ways to get closer to its

customers

Establishing Intrapreneurship in the Organization

Establishing Intrapreneurship in the Organization6) Learn to be more productive with fewer

resources (e.g Downsizing etc.)7) Establish a strong support structure for

Intrapreneurship.8) Reward the employees for their performance9) Implement an evaluation system that allows

successful intrapreneurial units to expand and unsuccessful ones to be eliminiated.

Entrepreneurial Background

Childhood Family Environment

Education

Personal Values Age

Work History

Indian Attitude towards Entrepreneurship

A great Entrepreneurial Optimism is seen in India now than previously.

A largest chunk of the India’s population is in the 18-35 age group, and that’s a time when people are the least afraid to take risks.

On the other hand, India’s greatest liability is the corruption in its system, which is a big dampener to entrepreneurship.

Global- Indian Entrepreneurship

The social meaning of risk taking varies from country to country.

When you start an enterprise, does your culture allow you to borrow money from friends and relatives? Or even from banks? Some countries encourage entrepreneurship and others don’t .

One measure of a society’s entrepreneurship levels is its attitude towards failure. In China and Japan, there’s a big stigma attached to business failure, making it quite impossible for a failed entrepreneur to recoup and try again. In some societies, business failure marks you for life.

Global- Indian Entrepreneurship

On the other hand, in countries like the USA, UK or Israel, it doesn’t necessarily do you any damage, unless you failed because of some unethical conduct.

American business history offers up many instances of tycoons who went bankrupt several times before they built their fortunes. And the American corporate world usually sees entrepreneurial experience as an asset and those who have it are a valued commodity.

If successful entrepreneurs know what to do The failed ones know what not to do…….Which is equally important.

Global- Indian Entrepreneurship Financial institutions & their policies have a

big impact on a country’s entrepreneurship levels.

“The financial institutions of France and Germany generally don’t encourage risk taking”

Britain and Holland are the entrepreneurial champs on the other hand.

Indian Scenario: Entrepreneurship Access to information has been the biggest

factor contributing to the global mindset in Indian Entrepreneurs.

The other factor is the global flow of capital, which enables people to go wherever the money is.

Govt. policies and Organizations like NEN (National Entrepreneurial Network) who are actively promoting Entrepreneurship.

To be a Global Entrepreneur…..

First, a global entrepreneur needs to build and manage a global supply chain, from raw materials to the final customer.

Second, global entrepreneurs may have small bodies but they need to have long hands. They need a world-wide partnership network, to be managed adroitly despite the problem of time-zone differences.

Launching yourself as a global entrepreneur means competing with

the best in the world.

To be a Global Entrepreneur….. Third, they need to build and manage global

organizations, wherein key executives may be stationed far from headquarters.

Lastly, global players need to have an understanding of geopolitics. E.g: How does a news from Ethiopia affect

the business

The Myths About Entrepreneurship

Myth #1

• Get Rich Quick!

• Truth is – Life as an entrepreneur is not about money.– Success rarely happens overnight.– It's about what you want to do with your life.

Myth # 2 You must be born an entrepreneur

(trait theory)

Truth is: some of the most successful entrepreneurs are

the most unlikely. It is a lifestyle choice, not an accident. Entrepreneurship can be Learnt

Myth # 3 Entrepreneurs are high risk takers

Truth – Entrepreneurs are calculators Studies show entrepreneurs are only moderate

risk takers

Myth # 4

You have to have a great idea

Truth Your idea must be good Your idea must be doable Your idea must be wanted or needed Your idea must be priced right

So you have to have a Great Opportunity by being at a right place, at a right time having right product or service.

Myths and Misconceptions About Entrepreneurship

1. Entrepreneurs are Doers, Not Thinkers2. Entrepreneurs are Born, Not Made3. Entrepreneurs are always Inventors4. Entrepreneurs are Academic and Social Misfit5. Entrepreneurs Must Fit the Profile6. All Entrepreneurs Need Is Money7. All Entrepreneurs Need is a Luck8. Ignorance is a Bliss for Entrepreneurs9. Successful entrepreneurship needs only a great idea10. Entrepreneurship is easy11. Entrepreneurship is a risky gamble12. Entrepreneurship is found only in small businesses13. Entrepreneurial ventures and small businesses are the

same thing

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