Samara University

College of Business and Economics

Department of Management

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 The Course

Entrepreneurship

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Course contents
• CHAPTER 1: THE NATURE OF ENTREPRENEURSHIP
• CHAPTER 2: BUSINESS PLANNING
• CHAPTER 3: BUSINESS FORMATION
• CHAPTER 4: PRODUCT/SERVICE DEVELOPMENT
• CHAPTER 5: MARKETING
• CHAPTER 6: BUSINESS FINANCING
• CHAPTER 7: MANAGING GROWTH AND TRANSITION

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Assessment and Evaluation
• Tests and Quizzes………………………………….…..20%
• Individual and Group Assignment……………………..40%
• Attendance and Participation………………………..…10%
• Final Exam………………………….....................……30%
Total 100%

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CHAPTER 1: THE NATURE OF ENTREPRENEURSHIP

•1.1 INTRODUCTION
 The word ‘entrepreneur’ is originated from a French word,
entreprender, where an entrepreneur was an individual
commissioned to undertake a particular commercial project.
 Entrepreneurship is then what the entrepreneur does.
 The entrepreneurial process in which the entrepreneur
engages is the means through which new value is created as
a result of the project: the entrepreneurial venture.
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 1.2 Historical Origin of Entrepreneurship

 From the historical development it is possible to understand the

fact that the perception of the word entrepreneur was evolved
from managing commercial project to the application of
innovation (creativity) in the business idea.
 In the 17th Century a person who has signed a contractual
agreement with the government to provide stipulated products or
to perform service was considered as entrepreneur.
 In this case the contract price is fixed so any resulting profit or
loss reflects the effort of the entrepreneur.
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 The later role is the base for today’s venture capitalist.
 In the late 19th and early 20th Century an entrepreneur
was viewed from economic perspectives.
 The entrepreneur organizes and operates an enterprise
for personal gain.
 In the middle of the 20th Century the notion of an
entrepreneur as an inventor as established.

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 1.3 Definitions of Entrepreneurship and Entrepreneur
Entrepreneurship
• Entrepreneurship is the process of identifying opportunities in the
market place… arranging the resources required to pursue these
opportunities… investing the resources to exploit the opportunities
for long term gains.
• Entrepreneurship is the processes through which individuals become
aware of business ownership then develop ideas for, and initiate a
business.
• Entrepreneurship is the art of identifying viable business
opportunities and mobilizing resources to convert those opportunities
into a successful enterprise through creativity, innovation, risk taking
and progressive imagination.
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• Entrepreneurship can also be defined as the process of creating
something different and better with value by devoting the
necessary time and effort by assuming the accompanying
financial, psychic and social risks and receiving the resulting
monetary reward and personal satisfaction.
• In this case an individual should come up with something
different and better in order to the named as entrepreneur.
• Entrepreneurship is a practice and a process that results in
creativity, innovation and enterprise development and growth.
• It refers to an individual’s ability to turn ideas into action
involving and engaging in socially-useful wealth creation
through application of innovative thinking and execution to meet
consumer needs, using one’s own labor, time and ideas.
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 In general, the process of entrepreneurship includes five critical elements. These are:

1)The ability to perceive an opportunity.

2)The ability to commercialize the perceived opportunity
i.e. innovation
3)The ability to pursue it on a sustainable basis.
4)The ability to pursue it through systematic means.
5)The acceptance of risk or failure.
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Entrepreneur
Based on the above concepts of entrepreneurship, an entrepreneur can be defined as follows:

An entrepreneur is any person who creates and develops a

business idea and takes the risk of setting up an enterprise to
produce a product or service which satisfies customer needs.
An entrepreneur can also be defined as a professional who
discovers a business opportunity to produce improved or
new goods and services and identifies a way in which
resources required can be mobilized.
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•An entrepreneur is an individual who: has the
ability to identify and pursue a business
opportunity; undertakes a business venture;
raises the capital to finance it; gathers the
necessary physical, financial and human
resources needed to operate the business
venture; sets goals for him/herself and others;
initiates appropriate action to ensure success;
and assumes all or a major portion of the risk!
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 An entrepreneur is a person who: create the job not a job-seeker; has a dream, has a
vision; willing to take the risk and makes something out of nothing
 Other definition, views the term entrepreneur from three perspectives; i.e. from the
economist, psychologist and capitalist philosopher’s point of view.
i) To an economist an entrepreneur is one who brings resource, labor, materials, and
other assets into combination that makes their value greater than before and also one
who introduces changes innovations.
ii)To a psychologist an entrepreneur is a person typically driven by certain forces need
to obtain or attain something, to experiment, to accomplish or perhaps to escape the
authority of others.
iii)For the capitalist philosopher an entrepreneur is one who creates wealth for others
as well, who finds better way to utilize resources and reduce waste and who produce
job others are glad to get.
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 1.4 Types of Entrepreneurs

•Entrepreneurship can take three different forms. They are:

1. The individual entrepreneur: An individual entrepreneur is someone who started;
acquired or franchised his/her own independent organization. The major portion of this
module is also devoted to describe the basic features and activities of the individual
entrepreneur.
2. Intrapreneur: An Intrapreneur is a person who does entrepreneurial work within large
organization. The process by which an intrapreneur affects change is called
Intrapreneurship.
• There are two facts about intrapreneurship.
3. The Entrepreneurial Organization: The entrepreneurial function need not be embodied
in a physical person. Every social environment has its own way of filling the
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1.5 Role of Entrepreneurs in Economic Development
• Improvement in per capita Income/Wealth Generation
 Generation of Employment Opportunities
 Inspire others Towards Entrepreneurship
 Balanced Regional Development
 Enhance the Number of Enterprise
 Provide Diversity in Firms
 Economic Independence
 Combine Economic factors
 Provide Market efficiency
 Accepting Risk
 Maximize Investor’s Return
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 1.6 Entrepreneurial Competence and Environment

•Under this topic entrepreneurial mindset (that will address subtopics

such as;
who become an entrepreneur;
qualities of successful entrepreneurs;
entrepreneurial skills;
the entrepreneur’s task and wealth of the entrepreneur, and
Entrepreneurship and Environment.

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 Entrepreneurial Mindset

•1.6.1.1 Who Becomes an Entrepreneur?

•Anyone with the following characteristics can be an entrepreneur.
1) The Young Professional
1. The Inventor: The inventor is someone who has developed an innovation and
who has decided to make a career out of presenting that innovation to the
market.
2. The Excluded: Some people turn to an entrepreneurial career because nothing
is open to them. Displaced communities and ethnic and religious minorities
have not been invited to join the wider economic community due to a variety
of social, cultural and political and historical reasons.
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•Qualities of an Entrepreneur

•In order to be successful, an entrepreneur should have the following qualities:

Opportunity-seeking:- An opportunity is a favorable set of circumstances that
creates a need for a new product, service or business.
 It includes access to credit, working premises, education, trainings etc.
 An entrepreneur always seeks out and identifies opportunities.
 He/she seizes an opportunity and converts it into a realistic and achievable goal or
plan.
Persevering:- An entrepreneur always makes concerted efforts towards the
successful completion of a goal.
 An entrepreneur perseveres and is undeterred by uncertainties, risks, obstacles, or
difficulties which could challenge the achievement of the ultimate goal.
Risk Taking
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•Entrepreneurs

Set their own objectives where there is moderate risk of failure

and take calculated risks
Gain satisfaction from completing a job well
Not be afraid of public opinion, skepticism
Take responsibility for their own actions

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•Importance of Risk-taking
Build self confidence
Create a feeling of leadership
Create strong motivation to complete a job well
Demanding for efficiency and quality
•Efficiency: Being efficient means producing results with little wasted
effort.
•Quality: The ability of a product or service to meet a customer’s
expectations for that product or service.

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•Quality plays an important role in this new era of
globalization because it confers certain benefits which
include:
 Reduction of waste
 Cost-effectiveness
 An increase in market share
 Better profitability
 Social responsibility
 Reputation
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Information-seeking:
 Successful entrepreneurs spend time collecting information about
their customers, competitors, suppliers, relevant technology and
markets.
 Information on the area of market, supply, operations, finance,
legislation, and infrastructure are important for entrepreneurs.
 Ensure that the entrepreneur makes well informed decisions.

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Goal Setting
 A Goal - is a general direction, or long-term aim that you want to
accomplish.
 It is not specific enough to be measured.
 It is large in scope, not necessarily time-bound, and is something
that people strive for by meeting certain objectives which will
hopefully add up to eventually achieving the goal.
 Objectives - are specific and measurable.
 An entrepreneur must have a goal and an objective which is
specific, measurable, attainable relevant, and time bound (SMART).
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Planning
 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.
 An effective entrepreneur therefore usually plans his/her
activities and accounts as best as they can for unexpected
eventualities.

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Persuasion and networking
 Persuasion is a way of convincing someone to get something or
make a decision in your favor.
•Importance of Persuasion in Business
 Without people, be they are suppliers, workers, and most
importantly customers, there is no business.
 Networking is an extended group of people with similar
interests or concerns who interact and remain in informal
contact for mutual assistance or support.

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•Factors that Affect Persuasion and Networking
 Socio-cultural background and perceptions
 Communication skills (both verbal and non-verbal).
 Negotiation skills

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Building self-confidence
 Self-confidence is the state of being certain that a chosen
course of action is the best or most effective given the
circumstances.
 Overconfidence is having unmerited confidence-believing
something or someone is capable when they are not.

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Characteristics of a Self-confident Person

Risk-taking
Independent
Perseverance
Able to learn to live with failure
Ability to find happiness and contentment in work
Doing what you believe to be right
Admitting mistakes and learning from them

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Listening to others
 An entrepreneur does not simply impose his/her idea on others.
Rather, he/she listens to other people in their sphere of influence,
analyses their input in line with his/her own thinking and makes
an informed decision.
Demonstrating leadership
 An entrepreneur does not only do things by him/herself, but also
gets things done through others. Entrepreneurs inspire,
encourage and lead others to undertake the given duties in time.

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 Entrepreneurial Skills

 A skill is simply knowledge which is demonstrated by action.

 It is an ability to perform in a certain way.
•Turning an idea into reality calls upon two sorts of skills, these are:

I.General management skills and

II.People management skills

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I. General Management Skills: These are skills required to organize the physical and financial resources needed to run
the venture.
I) Some of the most important general management business skills are:
 Strategy Skills – An ability to consider the business as a whole, to understand how it fits within its market
place, how it can organize itself to deliver value to its customers, and the ways in which it does this better
than its competitors.
 Planning Skills – An ability to consider what the future might offer.
 Marketing Skills – An ability to see past the firm’s offerings and their features, to be able to see how they
satisfy the customer’s needs and why the customer finds them attractive.
 Financial Skills – An ability to manage money.
 Project Management Skills – An ability to organize projects, to set specific objectives, to set schedules and
to ensure that the necessary resources are in the right plat of the right time.
 Time Management Skills – An ability to use time productively, to be able to priorities important jobs and to
get things done to schedule.

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I. People Management Skills: Businesses are made by people.
 To be effective, an entrepreneur needs to demonstrative a wide variety of skills in the way he/she deals with other
peoples.
Some of the more important skills we might include under this heading are:
 Communication Skills – An ability to use spoken and written language to express ideas and inform others.
 Leadership Skills – An ability to inspire people to work in a specific way and to undertake the tasks that are
necessary for the success of the venture.
 Motivation Skills – An ability to enthuse people and get them to give their full commitment to the tasks in hand.
Being able to motivate demands an understanding of what drives people and what they expect from their jobs.
 Delegation Skills – An ability to allocate tasks to different people. Effective delegation involves more than
instructing. It demands a full understanding of the skills that people possess how they use them and how they
might be developed to fulfill future needs.
 Negotiation Skills – An ability to understand what is wanted from a saturations, what is motivating others in that
situation and recognize the possibilities of maximizing the outcomes for all parties.

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 The Entrepreneurial Tasks
•A number of tasks have been associated with the entrepreneur. Some of the more
important are:
 Owning Organizations
 Founding New Organizations
 Bringing Innovations to Market
 Identification of Market Opportunity
 Application of Expertise
 Provision of leadership
 The entrepreneur as manager

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•Wealth of the Entrepreneur
•Wealth is money and anything that money can buy. It
includes money, knowledge and assets of the entrepreneur.

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•Who Benefits from the entrepreneur’s Wealth?
•Peoples who have a part to play in the entrepreneurial venture generally are called
stakeholder.

1) Employees: They contribute physical and mental labor to the business.

Therefore, they are rewarded with Money, owning a part of the firm through
share, social relationships, and the possibility of personal development.
2) Investors: These are the peoples who provide the entrepreneur with the
necessary money to start the venture and keep it running. There are two
main sorts of investors: stockholders and lenders.

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 Stockholders are those who buy the stock of the company and are true owners of the firm.
 Lenders are people who offer money to the venture on the basis of it being a loan.
1) Supplier: They are the individuals and organizations who provide the business with the
materials, productive assets and information it needs to produce its output. They are paid
for providing these inputs.
2) Customers: The entrepreneur may reward customers by offering quality products, fair
prices, regular and consistency of supply, loan arrangement etc.
3) The local community: Business has physical locations. So expected responsibilities are …
 Not polluting their shared environment
 Contributing and sponsoring local development activities
 Contribution for political and cultural stabilities and economic improvements
 Acting in an ethical way.

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 1) Government: The responsibility of it is political and economic stability.
•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, communicating with
others, and entertaining ourselves and others.
 Creativity is the ability to come up with new idea and to identify new and
different ways of looking at a problem and opportunities.
 It is a process of assembling ideas by recombining elements already known but
wrongly assumed to be unrelated to each other.

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•This definition has several key elements that are worth considering:
Process: creativity is a process (implying among other things, that it
is more like a skill than an attitude, and that you can get better at it
with practice)
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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•In order to be creative, you need to be;
1.Able to view things in new ways of from a different perspective.
Among other things,
2.Able to generate new possibilities or new alternatives.
 Creativity measure not only the number of alternatives that people
can generate but the uniqueness of those alternatives.
 Thus, creativity is the development of ideas about products,
practices, services, or procedures that are novel and potentially
useful to the organization.
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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: the person keeps the assembled information in mind for a while. He
or she does not appear to be working on the problem actively; however, the subconscious
mind is still engaged. While the information is simmering it is being arranged into
meaningful new patterns.
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•Step 4: Insight: the problem-conquering solution flashes into the
person’s mind at an unexpected time, such as on the verge of sleep,
during a shower, or while running. 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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 Barriers to Creativity

1. searching for the one ‘right’ answer

2. focusing on being logical
3. blindly following the rules
4. constantly being practical
5. viewing play as frivolous
6. becoming overly specialized
7. avoiding ambiguity
8. fearing looking foolish
9. fearing mistakes and failure
10.believing that ‘I’m not creative
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•Innovation
 Innovation lies at the heart of the entrepreneurial
process and is a means to the exploitation of
opportunity.
 It is the implementation of new idea at the individual,
group or organizational level.
 Innovation is a process of intentional change made to
rate value by meeting opportunity and seeking
advantage.
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 There are four distinct types of innovation, these are as follows:
 Invention - described as the creation of a new product, service
or process
 Extension - the expansion of a product, service or process
 Duplication - defined as replication of an already existing
product, service or process
 Synthesis - the combination of existing concepts and factors
into a new formulation

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•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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 Areas of Innovation
 New product
 New Services
 New Production Techniques
 New Way of Delivering the Product or Service to the
Customer
 New Operating Practices
 New Means of Informing the Customer about the Product
 New Means of Managing Relationship within the Organization
 New Ways of Managing Relationships between Organizations

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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.

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 Entrepreneurship = creativity + innovation

Fig 1.2: Flow of Creativity, Innovation and Entrepreneurship

• 

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The end of the First Chapter

Thank You!
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