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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