School of Mechanical and

Industrial Engineering

Entrepreneurship for engineers

(IEng5242)

Lecture 1

: Introduction to Entrepreneurship for

engineers
1
February: 2020
 Course Content

Part 1: Introduction to Entrepreneurship

Part 2: Creation of New Venture

Part 3: Choosing The Legal Form Of an Ownership

Part 4: Marketing in Business enterprises

Part 5: Financing and accounting in business

Part 6: Risk and insurance of Business enterprises

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 Chapter One
Introduction to Entrepreneurship
1.1 Meaning of the terms entrepreneur,
entrepreneurship and owner manager;
1.2 Characteristics of Entrepreneurs
1.3 Motivation for starting a business

1.4 Success factors for entrepreneurs

1.5 The role of entrepreneurship in the economy

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 What is Entrepreneur?
 An entrepreneur, is an individual who creates a new business,

bearing most of the risks to achieve goals.

 Entrepreneur is a visionary leader- a person who dreams great

dreams. (Hisrich)

 The entrepreneur is commonly seen as an innovator, a source

of new ideas, goods, services, and business/or procedures.

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 What is Entrepreneur?...cont’d
 Entrepreneurs are people who have the ability

 to see and evaluate business opportunities,

 to gather the necessary resources to take advantage of them

 to initiate appropriate action to ensure success.

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 Cont…
Peter Drucker states, as “Entrepreneur is someone who

always searches for change responds to it, and exploits it as an

opportunity.”

 Example: It is the entrepreneur who only knows

Opening of new university near the society

Opening of Hotels near tourists’ attraction-center

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 What is Entrepreneurship?

 Entrepreneurship is the process of designing,

launching and running a new business, which is often
initially a small business.

Entrepreneurship capacity and willingness to

develop, organize and manage a business venture along
with any of its risks to make a profit.

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 Cont…
 Entrepreneurship is the dynamic process of creating
incremental wealth created by individuals who assume the major
risks in terms of equity, time and /or career commitments of
providing value for some product or service.

 The product/service itself may/may not be new or unique but

value must somehow be infused by the entrepreneur.

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 Generally Entrepreneur and Entrepreneurship

 Entrepreneur: a vision-driven individual who assumes

significant personal and financial risk to start or expand a
business.

 Entrepreneurship: The pursuit of opportunity through

innovation, creativity and hard work without regard for the
resources currently controlled.

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 Cont…

Entrepreneur Entrepreneurship Enterprise

The person The process The outcome

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 Factors Influencing Entrepreneurship

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 The term Entrepreneur can be distinguished from

other terms which are very close to each other:

Figure 1.2: The Entrepreneur and related terms
 Entrepreneurs should unify the leadership skills and the

managerial abilities – the doing and the motivation of others:

 • The Entrepreneur builds
Kind of companies new structures as well as in
newly founded business
units

in a new project,
Entrepreneurship
may be needed,
especially when the
Entrepreneurship is needed in SME company enters into
as they are not as specialized as new fields of business
compared to large corporations.
 The Process of Entrepreneurship
 Entrepreneurship can be understood as a process
 An opportunity is considered as a possibility to introduce a new market offering.

Opportunities however are not readily existing and visible for everybody, only for an
Entrepreneur. The right timing may be a critical factor!

 The Entrepreneur has to recognize existing economic imbalances as a prerequisite

for an opportunity. This depends very much on the experiences and know-how of
people to understand industry, markets and their customers, as well as competitive
forces and how they work together.

 The Entrepreneur has to evaluate the gathered information and to sort out

opportunities where the costs are too high. When this decision is made, the
Entrepreneur will become more formal and will continue with a feasibility study,
especially in case of innovative market offerings.

 Finally, the Entrepreneur has to use the opportunity and to start a new company, to

open a new branch office in the foreign market, to start a new business unit etc.
 Entrepreneurial Ecosystem
Societal Entrepreneurial Ecosystem
Personal Entrepreneurial Ecosystem

 What makes the Entrepreneur successful?

 Driving forces and restraining forces which affect the

Entrepreneur
Characteristics of an Entrepreneur
 Components of an Entrepreneurial Mindset
 “Habitual Entrepreneurs” have six characteristics in common
 Entrepreneurs Vs. Intrapreneurs
Entrepreneurs are people that notice opportunities
and take the initiative to mobilize resources to make
new goods and services.
Intrapreneurs also notice opportunities and take
initiative to mobilize resources, however they work
in large companies and contribute to the innovation
of the firm.
Intrapreneurs often become entrepreneurs.

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 Entrepreneurial Skills
 The following are foundational skills entrepreneurs need to
run and operate a successful business:
Human Relations, communication and negotiation Skills
Math or financial Skills
Problem Solving & Decision Making Skills
Planning and leadership skills
Technical Skills
Basic Business / marketing Skills
Project Management Skills

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 Owner manager
 The owner-managers are a person who both owns a business

and manages it.

 Owner-managers of an enterprises are workers who hold a

job in an incorporated enterprise, in which they:

hold controlling ownership of the enterprise; and

act on its behalf as regards contracts with other

organizations and the hiring and dismissal of persons.

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 Owner Managers and Entrepreneurs
 Both have to follow sound principles of management like
planning, staffing, delegation and control.
 Generally Similarities between Managers and Entrepreneurs
 To produce results
 To produce results through people
 To take decisions .
To cooperate under constraints
To follow sound principles of management
 A successful organization needs both entrepreneurship and
management.

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 The entrepreneur versus the owner manager
Entrepreneur
a. Decision-making and calculated risk bearing:

b. An entrepreneur has an all-round personality:

c. High levels of achievement motivation

d. Innovative, creative, imaginative soul

e.The entrepreneur is the owner of the business who enjoys the position of an
employer.

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 Owner manager
 They may or may not be entrepreneurs.
They are more intent on survival than seeking innovative
change and growth.
1. Limited scope for innovativeness, creativity and imagination
2. Managerial jobs are transferable
-As a manager in the business organization, his job is
transferable from office to office, from one unit and
location to another location
3. Managers do not bear-risk
-Risk bearing capacity is an entrepreneurial quality

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 Characteristics of Entrepreneurs
1. Need for Achievement

2. Willingness to take risks:-financial, careers, family ,

3. Self-Confidence:- internal and external locus of control
4. Innovation:-. The entrepreneurial manger is constantly looking for
innovations, not by waiting for a flash of inspirations, but through an
organized and continuous search for new ideas
5. Total Commitment
6. All-rounders
7. A need to seek refuge:- escape from environmental factor
a. The “Foreign Refugee”
b. Corporate Refugee.
30 c. Other types of Refugees
 Cont…
Other types of “ refugees” mentioned are the following:
1.The parental (paternal) refugee
 Who leaves a family business to show the parent that “I can do it
alone”.
2.The feminist refugee
 Who experiences discrimination and elects to start a firm in which
she can operate independently male chauvinist.
3.The housewife refugee
 Who starts her own business after her family is grown or at some
other point when she can free herself from household responsibilities.
4.The educational refugee
 Who tires of an academic program and decide to go into business.

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 Motivation for starting a business
The reason for small firm formation can be divided between “pull” and
“push” influences.
I.“Pull” Influence
 Some individuals are attracted towards small business ownership by
positive motive such as a specific idea which they are convinced will
work. ”Pull” motives include:
a. Desire for independence
b. Desire to exploit an opportunity
c. Turning a hobby or previous work experience in to a business
d. Financial Incentive
 The promise of long-term financial independence can clearly be a
motive in starting new firm, although it is usually not quoted as
frequently as other factors.
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 Cont…
II. “Push” Independence
 Many people are pushed into founding a new enterprise by
variety of factors including:
1.Redundancy==>Being without a job (idleness)
2.Unemployment (or threat of)
3.Disagreement with previous employer==>Uncomfortable
relation at work has also pushed new entrants into small
business.
 The dividing line between those “pulled” and those “pushed”
is often blurred.

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 Outcomes of Entrepreneurship
 Economic growth
 New industry formation
 Job creation
Success factors for entrepreneurs
Most new ventures succeed because their founders are

capable individuals.
1.The entrepreneurial team
2.Incremental growth of product or services
3.Marketing and timing: Market potential is critically influenced
by timing of new products or services.
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 Weakness of entrepreneurship
a. Limited resource:- entrepreneurship mostly starts from
small investment or contribution of owners are more than one
individual
b. Lack of experience:- most of entrepreneurs have no
experience and this may lead to in efficiency
c. Disagreement between member: if the owner of
entrepreneur is more than one person, disagreement between
them can be created. This disagreement can limit the
operation of the business.
d. Uncertainty of income:- opening and running a business
provide no guarantee that an entrepreneur will earn enough
money to survive
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 Cont…
e. Risk:- starting or buying a new business involves risk and the
higher rewards the greater the risk entrepreneurs usually
face. This is why entrepreneurs tend to have evaluate risk very
carefully

f. Lower quality of life until the business gets established:- the

long hour and hard work needed to launch a business can take
their tall in the rest of the entrepreneurs life

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 Elements involved in Entrepreneur
1.RISK:- Simply stated risk is “a condition in which there
is a possibility of an adverse deviation from a desired
outcome that is expected or hoped from applied to a business
risk translates in to the possibility of losses associated
with the assets and the earning potential of the firm. ”

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 Elements involved in Entrepreneur
RISK: Business risks can be classified into two broad category
market risk and pure risk.
Entrepreneurs face a number of different types of risk. These can
be grouped in to basic areas.
a. Political risk:-
b. Business risk:-
c. Economic risk:-
d. property risk
e. Personal risk

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 Elements involved in Entrepreneur
2. Information
Information gives the following importance to the
businessmen’s
 To know the position of their competitors that is their
strength and weaknesses, business strategy they use and
their long term plan.
 To know threats and opportunity in doing business
 Helps to design long term objectives and goals indicate
capital requirement (labor, capital and machinery)
 Helps to know market position locally and internationally.

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 Elements involved in Entrepreneur
Sources of information
 Information are obtained from two main methods of data
collection. That is primary data collection and secondary data
collection
1. Collection of primary data:
 Observation method
 Interview method
 Through questioner
 Other methods which includes warranty cards,
consumer panels, etc.

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 Elements involved in Entrepreneur
2. Collection of secondary data:-
 Various publication of the central state and local
government
 Various publications of foreign government or international
bodies and their subsidiary organization.
 Technical and trade journals
 Books, magazines and newspapers
 Reports
 Public records and statistics, historical documents.

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 Elements involved in Entrepreneur
 By way of caution, the entrepreneur before using secondary
data must see that the process following characteristics
1.Reliability of data
a. Who collected the data?
b. What were the sources of data?
c. Were they collected by using proper methods?
d. At what time they collected. Etc.
2.Suitability of data:- the data that are suitable for one
enquiry may not be suitable for another enquiry, then the
researcher has to check the suitability of the data properly.
3.Adequacy of data
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