1 ENTREPRENEURSHIP General Guidelines about the course Course Website:
2 Welcome to the course of Entrepreneurship Please know the basic class rules to ensure semester goes smoothly: Course outline is posted at the course website Visit the course website as frequently as possible as all our communication will be through this mode only Student evaluation is based on the criteria mentioned in the course outline. No Surprises to Anyone. Remember Grades are Earned not Given Assignments/Quizzes ARE JUST MISSED NO MAKE UPS. If sometime its not possible to attend the class, inform the instructor in advance by .
3 Student Evaluation Assignments: 05% Project / Term Paper: 05% Quizzes: 10% Mid Term Examination: 30% Final Examination: 50% Total: 100% PLEASE NOTE: ZERO PLAGIARISM POLICY. ALL SUBMISSIONS MUST BE IN ELECTRONIC FORMAT (TYPED) AND WILL BE ACCEPTED ONLY AFTER PLAGIARISM CHECK. MORE THAN 10% PLAGIARISM WILL RESULT IN ZERO MARKS
4 Recommended Book(s) During this course, we aim to cover a lot of diverse topics related to Entrepreneurship, thus we will be using multiple text books: 1. Entrepreneurship by Robert D. Hisrich, Michael P. Peters and Dean A. Shepherd. Seventh or latest edition available. 2. Essentials of Entrepreneurship and Small Business Management: by Norman Scarborough, Thomas Zimmerer and Doug Wilson. Sixth or latest available edition.
5 RULES OF THE GAME BE ON TIME! (After 10 Minutes No Attendance) SWITCH OFF YOUR CELL PHONES No Texting! NO WHISPERING / NO TALKING UNLESS YOU ARE TOLD TO DISCUSS SOMETHING KEEP YOUR PERSONAL DISCUSSIONS / ISSUES OUT OF THE CLASS. ANY ISSUE OR ANY QUERY.. JUST RAISE YOUR HAND. DO NOT MISS THE ASSESSMENTS.
6 ENTREPRENEURSHIP Lecture 01 Nature and Importance of Entrepreneurs
7 Introduction to Entrepreneurship What is Entrepreneurship? Entrepreneurship is the process of creating something new of value by devoting (giving) the necessary time and effort. By accepting and acknowledging the necessary financial, psychological, and social risks, and Finally receiving the resulting rewards be it monetary and personal satisfaction and freedom to do what you want. Robert D.Hisrich, M. Peters & D.A Shepherd
8 Introduction to Entrepreneurship What is an Entrepreneur? He or she is an individual who actively form or lead their own business and nurture them for growth and prosperity. UiTM Entrepreneurship Study Group
9 Who is an Entrepreneur? One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them. 1-9
10 Characteristics of Entrepreneurs Desire for responsibility Preference for moderate levels of risk risk eliminators Confidence in their ability to succeed Desire for immediate feedback High level of energy Future orientation serial entrepreneurs Skilled at organizing Value achievement over money 1-10
11 Entrepreneurship Ch. 1: The Foundations of Entrepreneurship One characteristic of entrepreneurs stands out: Diversity! Anyone regardless of age, race, gender, color, national origin, or any other characteristic can become an entrepreneur (although not everyone should). 1-11
12 The Entrepreneurial Process What is the Entrepreneurial Process? The process of pursuing (going after) a new venture or business, Whether it is a new product going into an existing market OR Existing product going into a new markets OR The creation of a totally new organization.
13 The Entrepreneurial Process The Entrepreneurial Process Four distinct process:- 1. Identification and evaluation of the opportunity. 2. Development of the Business Plan. 3. Determination of the required resources: Requires the commitment of the necessary time and effort. Appreciate and understand the importance of time and effort devoted to create something new and make it workable. 4. Management of the resulting enterprise: Involves the enjoyment of the rewards (Freedom, monetary) after the effort, followed by personal satisfaction.
14 Ch. 1: The Foundations of Entrepreneurship Benefits of Entrepreneurship The opportunity to: Create your own destiny: Owning a business provides an entrepreneurs the independence and the opportunity to achieve what is important to them. Entrepreneurs want to decide what they want in their lives, and they use their businesses to make their desire a reality (come true). Make a difference: More and more entrepreneurs are starting businesses because they see this as an opportunity to make a difference in a route or way that is personally important to them. Reach your full potential: Many people find their work not challenging and not exciting. Entrepreneurs see their business as a vehicle of self expression of personal desire and the pinnacle of their career success. 1-14
15 Ch. 1: The Foundations of Entrepreneurship Benefits of Entrepreneurship Reap impressive profits: The profit earned by an entrepreneur are an important motivation and indication factor for further increased performance. Thus these could spur them to greater achievement and success. Contribute to society and to be recognized for your efforts: Small business owners are among the most admired, respected and trusted individuals of society. Customers have shown their trust and faithfulness over their years for their business. Help to contribute employment, business opportunity in a particular locality or area. Do what you enjoy and to have fun at it: Small business owners tend to engage in business that gives them personal satisfaction. Though they may work long hours and engage in very industrious work that is beneficial to their organization and themselves. 1-15
16 Ch. 1: The Foundations of Entrepreneurship Drawbacks of Entrepreneurship Uncertainty of income Risk of losing your entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Complete responsibility Discouragement 1-16
17 Ten Deadly Mistakes of Entrepreneurship 1. Management mistakes 2. Lack of experience 3. Poor financial control 4. Weak marketing efforts 5. Failure to develop a strategic plan 1-17
18 Ten Deadly Mistakes of Entrepreneurship 6. Uncontrolled growth 7. Poor location 8. Improper inventory control 9. Incorrect pricing 10. Inability to make the entrepreneurial transition 1-18
19 Putting Failure Into Perspective Entrepreneurs are not paralyzed by the prospect of failure. Failure a natural part of the creative process. Successful entrepreneurs learn to fail intelligently. 1-19
20 Avoiding the Pitfalls of Small Business Failure Know your business in depth Develop a solid business plan Manage financial resources Understand financial statements Learn to manage people effectively Set your business apart from the competition Maintain a positive attitude 1-20
21 Important Aspects of Entrepreneurship Entrepreneurial Opportunities: Those situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater price than their cost of production. The bottom line is something new Entrepreneurs must be able to recognize, evaluate and exploit these opportunities. Entrepreneurial Action: Action through the creation of New Products/ Processes/ and or the entry into new markets, which may occur through a newly created organization or within an established organization. Entrepreneurs act on Opportunity, Use judgement to act (due to uncertainty)
22 Entrepreneurial Thinking Individuals mental processes of overcoming ignorance to decide whether a signal represents an opportunity for someone or reducing doubt as to whether an opportunity for someone is opportunity for them specifically, or processing feedback from action steps taken. Entrepreneurs think differently from non-entrepreneurs, moreover they handle situations in a different manner. Often take decisions in uncertain situations, when stakes are high, time pressures are immense, and there is considerable emotional investment.
23 Entrepreneurial Thinking Entrepreneurs are required to : 1. Think Structurally: Be able to establish connections between new products / services and the market conditions i.e. to truly understand the importance of an opportunity 2. Engage in Bricolage: often lack resources so entrepreneurs are required to test combination of resources at hand for new opportunities and situations e.g. experimenting, repackaging, recycling,
24 Entrepreneurial Thinking 3. Effectuate: a process that starts with what one has (Who they are, What they Know, and Whom they Know) and select among possible outcomes. Opposite of Causation: When you know the desired outcome. 4. Cognitive Adaptability: it describes the extent to which entrepreneurs are dynamic, flexible, self regulating, and engaged in the process of generating multiple decision frameworks focused on sensing and processing changes in their environments and then acting on them
25 Types of start - ups Three categories 1. Life style firm 2. Foundation firm 3. High potential venture
26 1. Lifestyle Firm: Privately held Modest growth Limited money devoted to R&D Grow after several years to 30 or 40 employees Exists primarily to support owners Little opportunity for significant growth and expansion These are firms that depend heavily on founder skills, personality, energy, and contacts. But without the founder s deep personal involvement, such businesses are likely to, well, flounder. Professional investors are therefore rarely involved with lifestyle businesses
27 2. Foundation Company: Created for R&D Grows in 5 to 10 years from 40 to 400 employees $10 million to $20 million in yearly revenues Rarely goes public Draws the interest of private investors only
28 3. High Potential Venture: Receives the greatest investment, interest and publicity Rapid growth After 5 to 10 years could employ about 500 employees Revenues are $20 million to $30 million
29 Entrepreneur Background and Characteristics Following things are considered important: Education Age Work History Role Model and Support Systems
30 The Role of Entrepreneurship in Economic Growth Generates Innovation which leads to the creation of new product and service. Improvement and modification on existing product to better suit market and customers needs. Creation of self employment and to cut back the dependency of potential employment of new workers in government sectors. Encourage the inclusion of new technology that is less labor dependent. Increase in the national output which in turn lead to greater and stronger economic growth. Increases the income of the people of the country
31 Ch. 1: The Foundations of Entrepreneurship The World of the Entrepreneur In United States, every year U.S. entrepreneurs launch 550,000 new businesses. Entrepreneurial spirit is considered to be the most significant economic development in recent history. Research studies have proven that entrepreneurial activity is directly linked with the economic development of a country. GEM study: 18.7% of adult population in the U.S. is actively involved in trying to start a new business. The Global Entrepreneurship Monitor (GEM) project is an annual assessment of the entrepreneurial activity, aspirations and attitudes of individuals across a wide range of countries. 1-31
32 Ch. 1: The Foundations of Entrepreneurship
33 Entrepreneurship in Pakistan The Total early stage Entrepreneurial Activity (TEA) rate for Pakistan (12%) is higher than the average for the Middle East and Africa region (8%) and that of Asia Pacific Region (10%). Most entrepreneurial activity is necessity-driven (those with no other option for work); the level of opportunitymotivated entrepreneurship is much lower. The female TEA rate is the lowest of the factor-driven nations. The attitude towards entrepreneurship in Pakistan is generally not that favorable; however, a higher percentage of males than females hold a positive attitude towards entrepreneurship.
34 Entrepreneurship in Pakistan Aspirations for entrepreneurial activity among the population are relatively high. In major metropolitan areas in particular, people perceive that they have the skills, knowledge and experience required to start a venture. The average Pakistani entrepreneur is a year old male with a higher secondary or 2-year college degree and comes from a middle to upper-class household.
35 Ch. 1: The Foundations of Entrepreneurship The World of the Entrepreneur Global Entrepreneurship Monitor (GEM) study reports: Men are twice as likely to start a business as women. Most entrepreneurs turn to family members and friends for capital. Entrepreneurs are most likely to launch businesses when they are between the ages of 25 and
36 The Cultural Diversity of Entrepreneurship Young entrepreneurs Women entrepreneurs Minority-owned enterprises Immigrant entrepreneurs Part-time entrepreneurs 1-36
38 FIGURE 1.4 Why Women Start Businesses Source: U.S. Small Business Administration, Ch. 1: The Foundations of Entrepreneurship
39 Small Businesses... Make up 99.7% of the million businesses in the U.S. Employ 51% of the nation s private sector workforce. Create more jobs than big businesses. 60% to 80% of net new jobs over the last decade Are leaders in offering training and advancement opportunities to workers. Is the situation same in Pakistan? We experience 3.5% growth in Small Businesses since 1990s, which is less than any developing country? Reason? 1-39
40 Ch. 1: The Foundations of Entrepreneurship FIGURE 1.5 Small Business by Industry Source: U.S. Small Business Administration, 2014.
41 Conclusion Entrepreneurs: Are an important part of the free enterprise system Are a diverse and talented group of people Represent a cross-section of society as a whole Are able to enhance the profitability of their businesses through acquiring additional knowledge and experience
Copyright 2016 Pearson Education, Inc. 1 1-1 Copyright 2016 Pearson Education Inc Section 1: The Challenge of Entrepreneurship 1 The Foundations of Entrepreneurship Copyright 2016 Pearson Education, Inc.
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