Chapter 2

Entrepreneurship
 Learning Outcomes
• Define the term entrepreneur
• Discuss the concept of entrepreneurship and the entrepreneurial process
• Describe the typical entrepreneurial mindset and characteristics
• Describe the roles of entrepreneurs and small businesses in the economy
• Identify and describe the different ways of entering the business world
• Present recommendations regarding the choice of a business opportunity
 Introduction
• Entrepreneurship is the process of creating and building
something that is of value to consumers.
• An entrepreneur is someone who decides what, how, by whom
and for whom products and services should be produced.
• Someone who starts a business with intention of making profit and
assumes the risk of losing resources if the business fails
• Mobilises land, labour and capital.
 Introduction
• Entrepreneurship is the process of creating and building
something that is of value to consumers.
• An entrepreneur is someone who decides what, how, by whom
and for whom products and services should be produced.
• Someone who starts a business with intention of making profit and
assumes the risk of losing resources if the business fails
• Mobilises land, labour and capital.
Different concepts of what an
entrepreneur is
• Entrepreneurs have been described as people who:
• Are creative
• Have innovative ideas
• Identify opportunities
• Find resources to pursue opportunities for financial gain
• Take financial risks
• Bring about change, growth and wealth in the economy
• Re-energise economies and create jobs
• Start and manage small businesses
 Why do entrepreneurs do what
they do?
• Entrepreneurial traits and characteristics:
• Achievement motivation
• Internal locus of control
• Innovation and creativity
• Risk-taking
• Other traits (including high levels of energy, confidence and
optimism, desire for feedback, high tolerance for ambiguity,
flexibility/adaptability, passion, commitment and
determination, opportunity orientation and motivation to excel)
 Why do entrepreneurs do what
they do? (continued)
• Entrepreneurs’ skills and industry experience
• Most significant reasons to become an entrepreneur:
• Skills and knowledge
• Identified opportunities
• Quest for independence
• Two types of entrepreneurs
• Necessity entrepreneur – an individual who was retrenched from his
job and starts a business to support his family.
• Opportunity entrepreneurs – someone who identifies an opportunity
in the market
 Why do entrepreneurs do what
they do? (continued)
• Opportunities arising owning to outsourcing
• Outsourcing occurs when work is done for a company by people
outside of the company’s full time employees who have the
necessary skills to complete specific tasks.
• Outsourcing forms part of a business’s strategic plan.
• For example many Namibian companies make use of professional
service institutions, such as Deloitte or KPMG, to handle their
auditing, tax and advisory requirements.
 Why do entrepreneurs do what
they do? (continued)
• Opportunities arising owning to outsourcing
• Outsourcing occurs when work is done for a company by people
outside of the company’s full time employees who have the
necessary skills to complete specific tasks.
• Outsourcing forms part of a business’s strategic plan.
• For example many Namibian companies make use of professional
service institutions, such as Deloitte or KPMG, to handle their
auditing, tax and advisory requirements.
 Why do entrepreneurs do what
they do? (continued)
• Entrepreneurs’ skills and industry experience
– Most significant reasons to become an entrepreneur:
• Skills and knowledge
• Identified opportunities
• Quest for independence
– Two types of entrepreneurs
• Necessity entrepreneur – an individual who was retrenched from his job
and starts a business to support his family.
• Opportunity entrepreneurs – someone who identifies an opportunity in
the market
 DIFFERENT TYPES OF
ENTREPRENEURS
• Intrapreneurs: This are entrepreneurs who work in an existing business.
They have characteristics that set them apart from other employees.
They apply their entrepreneurial skills to turn the business into a
competitive business.
He/she does not own a business, but rather manages a business and is
paid a salary.

• Technopreneurs: This are entrepreneurs who combine their

technological and entrepreneurial skills. Mostly found in information
technology, and engineering technology
 DIFFERENT TYPES OF
ENTREPRENEURS
• Copreneurs: This is when couples, such as husband and wife, work
together as co-workers of their entrepreneurial business.
Couples who share ownership, commitment and responsibility for a
business.
They combine their expertise and rely on each other’s strengths in
running the business.

• Corporate cast-offs and dropouts: People who are retrenched or who

voluntarily resign from the corporate sector and decide to start their own
businesses. They have the advantage of management and working
experience.
 DIFFERENT TYPES OF
ENTREPRENEURS
• Women entrepreneurs: This refer to modern-day women who are
stepping beyond their traditional roles into the so-called men’s world by
starting and running successful entrepreneurial enterprises.
• Social entrepreneurs: People or organisations that start entrepreneurial
business to develop and benefit the community are called social
entrepreneurs.
They may make a profit, but their motivation is to give a service that will
uplift and improve the lives of a specific society.
What is a small business?
• It is difficult to formulate a universal definition for a
small business.
• However, the most appropriate way to define a small
business is to make use of
– qualitative and
– quantitative criteria or guidelines.
What is a small business?
• Qualitative criteria/guidelines • Quantitative
This refer to variables which cannot criteria/guidelines
be measured easily. This include a
simple organisational structure that Quantitative criteria refer to
is independent and privately owned those matters that can be
and managed, i.e measured such as:
• the owner must be part of the -Number of full-time employees
management of the business
• Capital is provided by the -Sales volume
entrepreneur or a few people who -Value of assets
start the business together
• The activities of the enterprise is
-Number of business units or
mainly local branches
Comparison of entrepreneurial
VENTURE with small business
 BENEFITS OF OWNING YOUR
OWN BUSINESS
• Being your own boss: You are able to set your own goals and work
towards realising these goals.
• Maximising your full potential: When you work for someone else,
it is possible that you do not realise your full potential. You often
just follow someone else’s instructions, and your creative and
innovative approach may be frustrated because some organisation
do not encourage intrapreneurship.
 BENEFITS OF OWNING YOUR
OWN BUSINESS
• Generating unlimited profits: Entrepreneurship open doors
for greater opportunities, they can earn more money by
owning their own business than by earning a salary.
• Contributing to society: They uplift the standard of living of
the community by creating job opportunities.
• Doing what you enjoy:
 CHALLENGES OF OWNING YOUR
OWN BUSINESS
• The demand of full responsibility: As the owner you have to take
full responsibility for everything. Your may experience pressure
when your are not knowledgeable in some area and there is nobody
to consult
• No guaranteed income: It may take a few years before you start
earning an income from your business. Sometimes you may have to
use your own savings or do without a salary in order to make up foe
the shortfall of the business.
 CHALLENGES OF OWNING YOUR
OWN BUSINESS
• Hard work: Owning your own business demands many long hours of
hard work, especially in the beginning.
• Sacrificing quality of family life: Family life may suffer because of the
long hours you have to spend away from home. Finances that may be
needed in the business may affect the family budget.
• Risk of loosing invested capital: Businesses that don’t monitor what
is happening in the micro, market and macro environment can have
their businesses fail. As a result they loose the capital invested in
them.
 Business opportunities
• New venture ideas
• Take into consideration:
• Trends
• Life cycle of the industry
• Growth industries
• New venture opportunities
• The fundamental requirements for a good investment opportunity:
• A clearly defined market need for the product
• A sustainable competitive advantage must be attainable
• Growth potential
• Should be rewarding to the investor and/or entrepreneur
• The timing of the opportunity must be right.
 Business opportunities
(continued)
• Buying an existing business
 Business opportunities
(continued)
• Franchising
• Acquisition of franchise
• Opportunity to start business that has been proven in market
• Entrepreneur becomes franchisee
• Franchisor gives franchisee the right to operate a business, using the
franchise name, products and systems
• Franchisor as entrepreneur
• View franchisee as intrapreneur who initiates ideas in the franchise
system
• For example: Cash Crusaders, King Pie, Mica hardware, Mugg & Bean
and Maxi’s
 Business opportunities
(continued)
• Corporate entrepreneurship
• Entrepreneurship in existing business
• Person develops a new corporate business within a business though
identifying a new opportunity
• Method by which a corporation introduces new and diversified
products or services
• Done through internal processes and corporation’s resources
• Enables investment and profits through establishment of business
within business
 Business opportunities
(continued)
• The feasibility of the idea or opportunity
• Not all ideas can be converted into successful ventures
• Entrepreneurs should conduct a feasibility study to determine if a
venture/opportunity will survive
• After feasibility has been established, a business plan can be drawn up
THE ROLE OF SMALL
BUSINESSES IN THE ECONOMY
• Strategic role of small business:
o Production of products and services
o Less inhibited by large bureaucratic decision-making structures, more flexible

and more productive than large firms.

o In advanced economies produce most of the products and services

o Innovation
o Responsible for most of the innovation worldwide
o Photocopiers, jet engines, insulin, etc
o Cell phones, the internet, google, touch screen products
o Aiding of big businesses
o Job creation.
 The role of entrepreneurs and
small business owners in society

Entrepreneurs Small Business Owners

Entrepreneurs satisfy needs and Small business owners satisfy needs
wants by mobilising natural, human as a way of earning a personal
and financial resources. income.
Responsible for the growth and Responsible for the survival and
survival of the business. profitability of the business.
Likely to take risks in order to grow No intention of taking a risk to grow
their business. or develop their business.
Summary

• Entrepreneurship as the driving force behind economy

• Role of the entrepreneur in the economy
• Assessment of the entrepreneur's unique abilities and skills, access to resources,
search for opportunities
• Small businesses create new jobs, fuel innovation, and vitalize inner cities