ENTREPRENEURIAL SKILLS ENT3001/3003/4003

LECTURE #1 & 2 INTRODUCTION TO ENTREPRENEURSHIP

INTRODUCTION TO ENTREPRENEURSHIP

Objectives Explain the concept of entrepreneurship Outline the rewards and drawbacks of entrepreneurship Identify the main personal , entrepreneurial characteristics (PECs) of successful entrepreneurs Identify Supporting Enabling factors (SEFs) Identify the factors that are driving the growth of entrepreneurship 2 Explain how to avoid the mistakes of entrepreneurship

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

WHAT IS ENTREPRENEURSHIP?
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)

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

WHAT IS ENTREPRENEURSHIP?
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

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 7

Concept of Entrepreneur

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.
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Concept of Entrepreneur

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.

Concept of Entrepreneur

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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Concept of Entrepreneur

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. 11

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 ones full potential Opportunity to benefit financially Opportunity to contribute to society and be recognized for ones efforts Freedom from supervision and rules of bureaucratic organizations Freedom from routine, boring and unchallenging jobs Freedom from the limits of standardized pay

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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 19 established

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 ENTREPRENEURS 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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PECS OF (SUCCESSFUL) ENTREPRENEURS

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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PECS OF (SUCCESSFUL) ENTREPRENEURS

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

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PECS OF (SUCCESSFUL) ENTREPRENEURS

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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PECS OF (SUCCESSFUL) ENTREPRENEURS

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

2.

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SUPPORTING & ENABLING FACTORS (SEFS)

Supporting and Enabling factors (SEFs) 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 SEFs concedes that for success to occur the entrepreneur must have PECs as well as SEFs which contributes to success.
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SUPPORTING & ENABLING FACTORS (SEFS)

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

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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

Capital Ideas

Technology

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 t o hustle

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Social Factors
The

fulfillment of being your own

The desire for self actualization

boss

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Social Factors Contd

The

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

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Social Factors Contd

The

role of women in entrepreneurship

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

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Cultural factors
Ethnic groupings
Some

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

penetration

TV showing foreign cultures; promoting wealth & affluence

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

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

Stable economy
Helps business planning, gives confidence for starting new business

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

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Economic High unemployment

Increases the availability of unskilled & skilled labour at reasonable pay rates

The effect of interest rates

High rates reduce ability to repay loans, makes loan financing unattractive for funding business

Stable exchange rates

Helps keep prices constant, builds business confidence

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Economic

Information & Communications age

Technology replacing employees
Technology increases business efficiency, but reduces need for certain human skills.

Creativity, innovation & business start-up seen as solutions

Opportunities are created for start-up of new high tech businesses

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Economic

Globalization & Liberalization

Removal of trade barriers between & within countries
Increases trade with the rest of the world

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

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 change

Paradigm shifts taking place in expectations & possibilities

FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP

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

FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP

Globalization
The

impact of liberalization on local &

barriers to trade of goods & services

international markets
Lowering/removal of Exporting possibilities Lower

import cost, increased specialization, increased

export possibilities

FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP

Globalization
Mobility

of labour / jobs

Live anywhere / work anywhere

possibilities increasing via telecommuting, telemarketing

FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP

Regionalization - one component of

Globalization
Regional

trading blocks
Caribbean Common Market

CARICOM

Allows free movement of capital & labour

CSME

CARICOM Single Market & Economy

Deepening the integration process, provides a unified market for goods within CARICOM

FACTORS INFLUENCING THE GROWTH OF ENTREPRENEURSHIP

Regionalization - one component of

Globalization
Regional
FTAA

trading blocks

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

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Political
What specifically have governments done to promote entrepreneurship
Adopted

a capitalist free market economy for Jamaica

Encourages

the private sector to be the engine for economic growth

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Political
Encourage

& speak of the need for entrepreneurship

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

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Political
Government

policies

Have

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

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Political
Government

policies

Governments

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, AntiDumping Commission, Financial Services Commission.

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Political (Contd)
Business facilitation strategies
E-government

initiatives e.g. Jamaicatradepoint.com

To 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.

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Political (Contd)
Access

to loan and grant funds for business start-up

The Jamaica Business Development Company

JAMPRO Jamaica Trade & Invest

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Political (Contd)
Business Low

facilitation strategies
of import duties, removal of unnecessary red

interest rate schemes for business loans

Lowering

tape

FACTORS INFLUENCING THE GROWTH OF ENTREPERNEURSHIP

Political (Contd)
Business

facilitation strategies
of technical assistance

Provision

(JBDC)
Tax

holidays for businesses which create employment National 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

CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA

High
Cost

Input costs

of economic inputs- due to depreciating exchange rate e.g. Imported materials, rent etc.
Security Utility and

other costs of workers

Transportation Labour

laws sometimes unfriendly to business

CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA

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

CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA

Geography Where

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

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

CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA

Anti-entrepreneurial Education System

The system tends to unfairly promote the Sciences as superior to the Arts and other creative endeavours Entrepreneurship is traditionally promoted as being for persons who are unable to progress in the traditional professional streams

CHALLENGES TO THE GROWTH OF ENTREPERNEURSHIP IN JAMAICA

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 and drawbacks of Entrepreneurship

Rewards

PECs

of Successful Entrepreneurs driving the growth of Entrepreneurship

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Factors

How

to avoid the mistakes of Entrepreneurship

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

Importance of Entrepreneurship in Economic Development

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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