PHARMA COLLEGE, HAWASSA CAMPUS

MASTER OF BUSINESS ADMINISTRATION

ENTRPRENEURSHIP & ENTERPRISE DEVELOPMENT

HABTAMU M. (B.A, MBA, PhD Candidate)

E-mail: sebsibe.segni@gmail.com

May, 2024
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 CHAPTER ONE
THE NATURE OF ENTREPRENEURSHIP

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 Objectives

After completing this chapter, students will be able to:

 Define the term entrepreneurship and entrepreneur
 Identify types of entrepreneur
 Recognize the role of entrepreneurship in the
economy
 Analyze the entrepreneurial competences
 Understand creativity and innovation

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 What does Entrepreneurship mean?

• Entrepreneurship
• is the process of creating something different
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. (Hisrich and Peters)

• This definition stresses four basic aspects of being

an entrepreneur:

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 Cond…

– First, it involves the creation process – creating

something new of value
– Second, it requires the devotion of the
necessary time and effort
– Third, it involves the rewards of being an
entrepreneur (independence, personal
satisfaction and monetary reward for profit
entrepreneurs)
– The final aspect of entrepreneurship is taking
risks in a very calculated fashion:
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 What is an entrepreneur?

Entrepreneurs – People
who risk their time,
money, and other
resources to start and
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 Cond…
• 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.

• Entrepreneurs do things that are not generally

done in the ordinary course of business

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 Cond…

• Some usually think an entrepreneur as:

– One who is highly responsive to change,
sees opportunities that others may not see
and mobilize resources to make new things
– Others feel that entrepreneurs are born,
not made but experience has shown that
entrepreneurship can be taught.

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 Cond…

–Is an innovator or developer who

• recognizes opportunities,
• converts those opportunities into
workable/marketable ideas
• add value through time, money or skills
• Assumes the risks of the competitive
market place to implement those ideas
• Realize the rewards from those efforts

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 Cond…

• To an economist, an entrepreneur is one who

brings resources- labor, material and other
assets into combinations that make their value
greater than before
• To a psychologist, such a person is typically
driven by certain forces – the need to obtain
or attain something, to experiment, to
accomplish perhaps to escape the authority of
others.

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 Cond…
• To one business man, an entrepreneur appears as
a threat, an aggressive competitor,
• where as to another business man the same
entrepreneur may be a supporter, a source of
supply, a customer or someone who creates
wealth for others as well as find better ways to
utilize resources, reduce waste and generate jobs.

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 Entrepreneurial Process

Identify and
Prepare a Resource Manage The
Evaluate
Opportunity Business Plan Acquisition Enterprise
• Identification • Written • Appraise • Implement
(Sources) Document Current Business
• Evaluation • Internal and • Acquire Plan
(Opportunity External Needed • Implement
Analysis Documents Variables for
Plan) Success

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 What are the reasons for someone to become an
entrepreneur?
Pull Influence
– Desire for independence
– Desire to exploit an opportunity
– Financial incentive
– Market opportunity-Community service
Push Influence
• Redundancy (Being without a job, idleness)
• Unemployment-Job Dissatisfaction
• Disagreement with previous employer
• Challenge Retirement –Many retired, but physically
and mentally fit people

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 Comon myths about Entrepreneurs
• MYTH 1: Entrepreneurs Are Born, Not Made
 Reality: Like all disciplines, entrepreneurship has
models, processes, and case studies that allow
the topic to be studied and the traits acquired.
(No one is born to be an entrepreneur rather it
is the function of the environment, life
experiences and personal choices)
• MYTH 2: Entrepreneurs Are Doers, Not Thinkers
 Reality: The emphasis today on the creation of
clear and complete business plans is an indication
that “thinking” entrepreneurs are as important as
“doing” entrepreneurs.
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• MYTH 3 : Entrepreneurs are gamblers
Reality: Entrepreneurs are not gamblers and
do not take high risks in the usual sense.
• MYTH 4 : Entrepreneurs Are Either Inventors
or Innovators
Reality: A contemporary understanding of
entrepreneurship covers more than just
invention or innovation.

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• MYTH 5: Entrepreneurs Are Academic and
Social Misfits
Reality: No longer a misfit, the entrepreneur is
now viewed as a professional.
• MYTH 6: Entrepreneurs are power and money
seekers
Reality: While many entrepreneurs might be
driven by this way, most successful and
growth-minded entrepreneurs are motivated
in just the opposite way

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• MYTH 7: Entrepreneurs Must Fit the “Profile”
Reality: Today we realize that a standard
entrepreneur profile is hard to compile.
• MYTH 8: All You Need Is Money to Be an
Entrepreneur
Reality: It is true but there are other problems
such as managerial incompetence, lack of
financial understanding, poor planning, and
the like.

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• MYTH 9: All You Need Is Luck to Be an
Entrepreneur
Reality: What appears to be lucky really is
preparation, determination, desire, knowledge,
and innovativeness.
• MYTH 10: Ignorance Is Bliss for an
Entrepreneur
Reality: Careful planning - not ignorance of it -
is the mark of an accomplished entrepreneur.

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• MYTH 11: Entrepreneurs Strike Success on
Their First Venture
Reality: In fact, failure can teach many lessons
to those willing to learn and often leads to
future successes.
• MYTH 12: Five Years Marks the Failure of
Most New Ventures
Reality: A venture can fail at any time and for a
variety of reasons. Five years does not mark
the critical point.
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 Entrepreneurial Incentives

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 Qualities of an Entrepreneur
 To be successful, an entrepreneur should have the following
qualities:
1) Opportunity-seeking
 Entrepreneurs identify and seize opportunities, such as access
to credit, working premises, education, and training, to create
a need for new products, services, or businesses.
2) Persevering:
 Entrepreneurs perseveres and is undeterred by uncertainties,
risks, or obstacles, which could challenge the achievement of
the ultimate goal.
3) Risk Taking: Best entrepreneurs set their own objectives where
there is moderate risk of failure and take calculated risks.

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 o Risk-taking is important to;
 Build self confidence
 Create a feeling of leadership
 Create strong motivation to complete a job well
4) Demanding for Efficiency and Quality
o Efficiency: means producing results with little wasted effort.
o Quality refers to;
i. Continuous improvement of goods/services to meet the
customer’s need.
ii. Characteristic of the product/service that makes it fit to use. It
makes a product, process, or service desirable.
iii. Ability of a product/service to meet a customer’s expectations.

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5) Information-seeking: Successful entrepreneurs gather crucial
data on their customers, competitors, suppliers, technology, and
markets to make informed decisions.
6) Goal Setting
o A Goal - is a general direction/long-term aim that you want to
accomplish.
o It is not specific enough to be measured, large in scope, not
necessarily time-bound, and is something that people strive for
by meeting certain objectives.
o Objectives - are specific, measurable, and concise.
o An entrepreneur must have a goal and an objective which is
specific, measurable, attainable relevant, and time bound
(SMART).

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7) Planning: is making a decision about the future in terms of what
to do, when to do, where to do, how to do, by whom to do and
using what resources.
8) Persuasion and Networking
o Persuasion is a way of convincing someone to get something or
make a decision in your favor.
o It is inducing or taking a course of action or embracing a point of
view by means of argument, reasoning, or entreaty.
o Persuasion is important when;
 We purchase goods from people
 We sell goods to people
 We need support from people
 We work with people.

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 o Networking: is an extended group of people with similar
interests or concerns who interact and remain in informal
contact for mutual assistance or support.
o In business environment, we network with customers, suppliers,
competitors, various firms/organizations, government offices
and family, etc.
o Factors that Affect Persuasion and Networking
 Socio-cultural background and perceptions
 Communication skills (both verbal and non-verbal).
 Negotiation skills
9) Building Self-confidence: is the state of being certain that a
chosen course of action is the best or most effective given the
circumstances.

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o Characteristics of a Self-confident Person
 Risk-taking: willing to take risks and go the extra mile to achieve
goals.
 Independent: entrepreneurs like to be their own masters and
want to be responsible for their own decisions.
 Perseverance: Ability to endure and survive setbacks and
continue to build confidence in whatever you do in your
business.
 Able to learn to live with failure: Entrepreneurs are going to
make mistakes. But they learn from these mistakes and then
move on.
 Ability to find happiness and contentment in work.
 Doing what you believe to be right, even if others mock or
criticize you for it.

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10) Listening to Others:
o Entrepreneurs does not impose ideas on others.
o Listens to other people in their sphere of influence, analyses their
input in line with his/her own thinking and makes an informed
decision.
11) Demonstrating Leadership:
o Entrepreneurs gets things done through others.
o Inspire, encourage and lead others to undertake given duties in
time.

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 Wealth of the Entrepreneur
 Wealth:- money, assets, knowledge etc.., that money can buy.
 Stakeholder groups:- those having a stake in the entrepreneurial
venture
Stakeholder Benefit
Employees • Wage/salary, buying ownership shares,
personal/social developments
Investors • Stockholders (owners of the venture)
• Lenders (receives interest on loan)
Supplier • Receives payment on sale of inputs
Customers • Quality products, fair prices, reliable services etc.,
Community • Local development activities
Government • Taxes
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 Creativity, Innovation and Entrepreneurship

• Creativity is defined as the tendency to generate or recognize

ideas, alternatives, or possibilities that may be useful in solving
problems.
 Process: Creativity is a skill that can be improved through
practice, resembling a process rather than an attitude.
 Ideas: creativity results in ideas that have potential value.
 Recombining: the creative process is one of putting things
together in unexpected ways.

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 Steps in the Creative Process
Step1: Opportunity or problem Recognition: A person discovers that
a new opportunity exists or a problem needs resolution.
Step2: Immersion: the individual concentrates on the problem and
becomes immersed in it. He or she will recall and collect information
that seems relevant, dreaming up alternatives without refining or
evaluating them.
Step 3: Incubation: While the information is simmering it is being
arranged into meaningful new patterns.
Step 4: Insight: the problem-conquering solution flashes into the
person’s mind at an unexpected time. Insight is also called the Aha!
Experience.
Step 5: Verification and Application: the individual sets out to prove
that the creative solution has merit. Verification procedures include
gathering supporting evidence, using logical persuasion, and
experimenting with new ideas.
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 Innovation
• Innovation is the implementation of new idea at the individual, group or
organizational level.
• The four distinct types of innovation are;
i) Invention - the creation of a new product, service or process
ii) Extension - the expansion of a product, service or process
iii) Duplication - replication of an already existing product, service or
process.
iv) Synthesis - the combination of existing concepts & factors into a new
formulation.
The Innovation Process
1.Analytical planning: carefully identifying the product or service features, design as
well as the resources that will be needed.
2.Resources organization: obtaining the required resources, materials, technology,
human or capital resources.
3.Implementation: applying the resources in order to accomplish the plans
4.Commercial application: the provision of values to customers, reward employees
and satisfy the stakeholders.

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 From Creativity to Entrepreneurship

• Creativity:- is the ability to develop new

ideas and to discover new ways of looking at
problems and opportunities.

• Innovation:- is the ability to apply creative

solution to those problems and opportunities
in order to enhance people’s lives or to enrich
society.

• Entrepreneurship = creativity + innovation.

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 END OF CHAPTER 1

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