COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

COURSE TITLE: ENTREPRENEURSHIP AND

BUSINESS DEVELOPMENT

COURSE CODE: MGMT (102)

ACADAMIC YEAR: 2021

COMPILED BY : CHERNET T. (MBA)

Course Objectives: Upon the completion of this
course, students will be able to:
Define entrepreneurship within the context of society
Identify business opportunities
Prepare business plan
Distinguish forms of business ownership
Comprehend intellectual property rights in business
practices
Define basic marketing concepts
Formulate context-based marketing strategies
Identify and evaluate sources of financing new
ventures
Manage business growth and transition
Practice ethical business with all stakeholders
 Chapter One:
The Nature of Entrepreneurship
After completing this chapter, you 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
Definitions of Entrepreneurship and
Entrepreneur
1. Entrepreneurship is the process of identifying
opportunities in the market place, arranging the
resources required to pursue these opportunities and
investing the resources to exploit the opportunities for
long term gains.
 It involves creating incremental wealth by
bringing together resources in new ways to start and
operate an enterprise.
2. Entrepreneurship is the processes through which
individuals become aware of business ownership then
develop ideas for, and initiate a business.
3. Entrepreneurship can also be defined as the
process of creating something different and better
with value by devoting the necessary time and effort
and to obtain financial rewards and personal
satisfaction.
In this case an individual should come up with
something different and better in order to the
named as entrepreneur.
4. 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.
 Entrepreneurship is a practice and a process that
results in creativity, innovation and enterprise
development
 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.
 Engaging in entrepreneurship shifts people from
being “job seekers” to “job creators”
 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.
 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
Entrepreneurship Vs. entrepreneur
In general, entrepreneur refers to the person and
entrepreneurship defines the process.
Both men and women can be successful
entrepreneurs; it has nothing to do with gender.
All entrepreneurs are business persons, but not
all business persons are entrepreneurs.
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.
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.
2. Intrapreneur: An Intrapreneur is a person who does
entrepreneurial activity within large organization.
 The Intrapreneur’s context is often large and bureaucratic
organization, whereas the individual entrepreneur operates
in the broader, more flexible economic market place.
3. The Entrepreneurial Organization: The
entrepreneurial function need not be embodied in a
physical person.
 An organization can create an environment in which all of
its members can contribute in some function to the
entrepreneurial function.
1.5 Role of Entrepreneurs in Economic
Development
 Entrepreneurial development is the most important input
in the economic development of any country.
 Entrepreneurs are at the core of industrial development
which results in greater employment opportunities to the
unemployed youth, increase in per capita income, higher
standard of living and increased revenue to the
government in the form of income, sales tax, export
duties, import duties etc.
 The entrepreneurs serve as a key to the creation of new
enterprises, thereby rejuvenating economy and
sustaining the process of economic development in the
following ways:
1) Improvement in per capita Income/Wealth
Generation:
 Entrepreneurs play a vital in the economic
development of a region and a nation.
From the fall of Rome (AD 476) to the
eighteenth century, there was virtually no
increase in per capita wealth generation in the
West.
With the advent of entrepreneurship, per capita
wealth generation and income in the west
grew exponentially by 20 Percent in the 1700s,
200 percent in the 1800s, 740 percent in the
1900 (Drayton, 2004).
2) Generation of Employment Opportunities:
By creating a new business enterprise,
entrepreneurs generate employment
opportunities for others.
3) Inspire others Towards Entrepreneurship:
The team created by an entrepreneur for his new
undertaking often provides the opportunity for
the employees to have a first-hand experience of
getting involved in an entrepreneurial Venture.
4. Enhance the Number of Enterprise: When
new firms are created by entrepreneurs, the
number of enterprises based upon new ideas/
concepts/ products in a region increases.
5. Provide Diversity in Firms:
Entrepreneurial activity often results into
creation of a variety of firms in a nation.
These firms operate into diverse activities
and it has been found that it is this diversity
in firms which fosters economic development
and growth rather than homogeneity.
6. Economic Independence:
Entrepreneurship is essential for self-reliance
for a country.
Entrepreneurs create industries that
manufacture indigenous substitutes, thereby
reducing the dependence on imports.
Also, the goods are exported to other
countries to earn foreign exchange.
This import substitution and export
promotion results in more economic
independence to the country
7. Combine Economic factors: All the
products bought and sold in an economy are a
mix of three primary economic factors (the raw
materials, human resource (physically and
mentally) and capital (money).
Now value is created by combing these three
things together in a way which satisfies
human needs.
8. Accepting Risk: No matter how we plan
there is always a possibility of adverse
deviation from what we expect or hoped for.
Here the primary function of the entrepreneur
is to accept risk on behalf of other people.
9. Maximize Investor’s Return:
Entrepreneurs create and run organizations
which maximize long-term profit on behalf of
the investors which in turn generates overall
economic efficiency.
1.6 Entrepreneurial Competence and Environment
1.6.1 Entrepreneurial Mindset
Who Becomes an Entrepreneur?
1) The Young Professional: Increasingly young highly
educated people often with entrepreneurial qualifications are
skipping the experience of working for an established
organization and moving directly to work on establishing
their own ventures.
2) 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.
It may be a new product or it may be an idea for a new service.
3) 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.
1.6.1.2 Qualities of an Entrepreneur
1. Opportunity-seeking
2. Persevering
3. Risk Taking
4. Demanding for efficiency and quality
5. Information-seeking
6. Demonstrating leadership
7. Goal Setting
8. Planning
9. Persuasion and networking
10.Building self-confidence
11.Listening to others
1) 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 takes an opportunity and
converts it into a realistic and achievable goal or plan.
2) Persevering: An entrepreneur perseveres and is not
discouraged by uncertainties, risks, obstacles, or
difficulties which could challenge the achievement of the
ultimate goal.
3) Risk Taking: The best entrepreneurs tend to:-
 Take calculated risks
 Gain satisfaction from completing a job well
 Not be afraid of public opinion, skepticism
Importance of Risk-taking
 Build self confidence
 Create a feeling of leadership
 Create strong motivation to complete a job well
4) Demanding for Efficiency and Quality
 Efficiency: Being efficient means producing results with little
wasted effort.
Quality refers to:
 The ability of a product or service to meet a customer’s
expectations for that product or service.
 There is always a demand for quality products and efficient
services. Quality plays an important role in this new era of
globalization because it confers certain benefits which
include:
a) Cost-effectiveness: Striving to ensure quality helps
businesses to minimize the chances that they will make
mistakes.
 As a result, the costs of re-doing work or changing the
b) An increase in market share: Customers prefer
to buy the same product again and again if they are
satisfied with the quality.
C) Better profitability: Better quality of product
satisfies customers. Increased customers means
increase sales, increased shares in market and
consequently increased profits.
d) Social responsibility: By providing quality
products and services, a company is more likely to be
able to fulfill its responsibility to the community and
meet standards set by government.
e) Reputation: Quality of goods and services
improves the reputation of the business for
competition in the market and growth.
5) Information-seeking: Successful entrepreneurs do not
rely on guesswork and do not rely on others for information.
Instead, they spend time collecting information about
their customers, competitors, suppliers, relevant
technology and markets.
Gathering relevant information is important to ensure that
the entrepreneur makes well informed decisions.
Information on the area of market, supply, operations,
finance, legislation, and infrastructure are important for
entrepreneurs.
6) Goal Setting
A Goal - is a general direction, or long-term aim that you
want to accomplish.
An entrepreneur always sets goals that he/she wants to
achieve in the future. A goal should not be easy to reach
and unrealistic
7) 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.
8) Persuasion and Networking
a)Persuasion is a way of convincing someone to get
something or make a decision in your favor.
Importance of Persuasion in Business
We purchase goods from people
We sell goods to people
We need support from people
We work with people.
b) Networking is an extended group of people
with similar interests or concerns who interact
and remain in informal contact for mutual
assistance or support.
Factors that Affect Persuasion and
Networking
 Socio-cultural background and perceptions
Communication skills (both verbal and non-
verbal).
 Negotiation skills
9) 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.
 Self-confidence is having confidence in oneself when
considering a capability.
 Overconfidence is having unmerited confidence-
believing something or someone is capable when
they are not.
 Characteristics of a Self-confident Person
Risk-taking:
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
10) 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.
11) 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.
1.6.1.3 Entrepreneurial Skills
A skill is simply knowledge which is
demonstrated by action. It is an ability to
perform in a certain way.
An entrepreneur is someone who has a good
business idea and can turn that idea into reality.
To be successful, an entrepreneur must not only
identify an opportunity but also understand it in
great depth.
Turning an idea into reality calls upon two sorts
of skills, these are:
1) General Management Skills: These are skills
required to organize the physical and financial
resources needed to run the venture. 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, how it will impact on the
business and what needs to be done to prepare for
Marketing Skills – An ability to see how they satisfy
the customer’s needs and why the customer finds
them attractive.
Financial Skills – An ability to manage money;
to be able to keep track of expenditure and to
monitor cash-flow, but also an ability to assess
investments in terms of their potential and their risks.
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.
2) People Management Skills: Businesses are
made by people.
A business can only be successful if the
peoples who make it up are properly directed and
are committed to make an effort on its behalf.
An entrepreneurial venture also needs the
support of people from outside the organization
such as customers, suppliers and investors.
To be effective, an entrepreneur needs to
demonstrative a wide variety of skills in the way
he/she deals with other peoples.
i. Communication Skills – An ability to use spoken
and written language to express ideas and inform
others.
ii. 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.
iii. Motivation Skills – An ability to enthuse people
and get them to give their full commitment to the
tasks in hand.
iv. Delegation Skills – An ability to allocate
tasks to different people.
v. Negotiation Skills – An ability to understand
1.6.1.4 The Entrepreneurial Tasks
We recognize entrepreneurs, first and foremost, by
what they actually do – by the tasks they undertake.
1) Owning Organizations: the entrepreneurs own
the organization they have created.
Therefore, if an entrepreneur actually owns the
business then he/she is in fact undertaking two roles
at the same time that of an investor and that of a
manager.
2) Founding New Organizations: The
entrepreneur bring together the different elements of
the organization (people, property, productive
resource, etc.)
3) Bringing Innovations to Market: The idea of
innovation encompasses any new way of doing
something so that value is created.
4) Identification of Market Opportunity: An
opportunity is the gap in a market where the potential
exists to do something better and create value.
New opportunities exist all the time but they do not
necessarily present themselves.
5) Application of Expertise: they have a special
ability in deciding how to allocate scarce resources in
situations where information is limited.
It is their expertise in doing this that makes
entrepreneurs valuable to investors.
5) Provision of leadership: Entrepreneurs need the
support of other people both from their organizations
and from people outside such as investor customer and
supplier.
6) The entrepreneur as manager: At the end of the
day the entrepreneur is a manager.
1.6.1.5 Wealth of the Entrepreneur
 Wealth is money and anything that money can buy.
Who Benefits from the entrepreneur’s Wealth?
 No entrepreneur works in a vacuum. The venture they
create touches the lives of many other people.
 To drive his/her venture forward, the entrepreneur calls up
on the support of a number of different groups. In return for
their support these groups expect to be rewarded from the
success of the venture.
 Peoples who have a part to play in the entrepreneurial
venture generally are called stakeholder.
 The stakeholder groups are; employees, investor,
supplier, customer, the local community and
government..
1) Employees: They contribute physical and
mental labor to the business. Success of the
entrepreneurial venture depends on their effort and
motivation. Therefore, they are rewarded with their
wage or salary and the possibility of owning a part of
the firm through share schemes.
2) Investors: These are the peoples who provide the
entrepreneur with the necessary money to start
the venture and keep it running.
3) Supplier: They are the individuals and
organizations who provide the business with the
materials it needs to produce its output. They are
paid for providing these inputs.
4) Customers: The entrepreneur may reward
customers by offering quality products, fair prices,
5) The local community: Business has physical
locations. The way they operate may affect the
people who live and other businesses which operate
nearby.
 A business has a number of responsibilities. Such as:
Not polluting their shared environment
Contributing and sponsoring local development
activities
Contribution for political, & economic
improvements
 Acting in an ethical way.
6) Government: The responsibility of government is
to ensure that businesses can operate in an
environment which has political and economic stability.
 In addition, it provides central services such as
1.6.2 Entrepreneurship and Environment
 Business environment refers to the factors which
influence its operations and determine its
effectiveness.
 Business environment may be healthy or unhealthy.
Healthy business environment means the conditions
are favorable to the growth of business whereas
unhealthy environment implies conditions hostile or
unfavorable to business operations.
Business environment determine the success of
business enterprises.
The firm and its management have to adjust to
the conditions prevalent around it.
A study of business environment offers benefits:
1) It provides information about environment which is
essential for successful operation of business firms.
2) It opens up fresh avenues for the expansion of
new entrepreneurial operations.
 The entrepreneurs may come forward with new
ideas and with new ventures when they find
environment suitable to their enterprises.
3) Knowledge about changing environment enables
businessmen to adopt a dynamic approach and
maintain harmony of business operations with the
environment.
1.6.2.1 Phases of Business Environment
 Business environment may be classified into two
broad categories; namely external; and internal
environment
A) External Environment
 It is the environment which is external to the
business and hardly to influence independently.
i) Economic Environment
 It consists of the structure of the economy (the
industrial, agricultural, trade and transport policies
of the country),
 The growth & pattern of national income & its
distribution, interest rate, & other economic
conditions of the country.
ii) Legal Environment
 Business must function within the framework of legal
structure.
 There are several business laws in our country. A
working knowledge of these laws is very helpful for
the entrepreneur. Such knowledge will keep them
away from innocent breaches and resultant
penalties. Some laws differ from region to region and
amendments are made from time to time.
 Therefore, the entrepreneur must always keep in
touch with those who know the latest position in law.
 In addition, an entrepreneur should:
a) Read the books that enlighten on the legal side of
business
b) Consult government agencies concerned with the
iii) Political Environment
A businessmen do not overlook the country's politics
while doing their business activities. Managers and
entrepreneurs should understand the working of the
political system and condition of the country.
iv) Socio-Cultural Environment
It consist the social & cultural norms, values, beliefs,
fashions of a particular society in a given period of
time.
 It can help in understanding the level of
rigidity/flexibility of a given society towards a new
product/service/concept.
v) Demographic Environment
 It assesses the overall population pattern of a given
geographical region. It includes variables like age
B) Internal Environment
 Internal environment is the environment which is under
the control of a given organization. Following are the
components of internal environment of a business:
i) Raw Material: It assesses the availability of raw
material now and in the near future.
ii)Production/Operation: It assesses the availability of
various machineries, equipment, tools and techniques
that would be required for production/operation.
iii) Finance: It assesses the total requirements of
finance in terms start-up expenses, fixed expenses and
running expenses.
 It also indicates the sources of finance that can be
approached for funding.
iv) Human Resource: It assesses the kind of human
resources required.
Environmental Factors Affecting Entrepreneurship
 Some of the environmental factors which hinder
entrepreneurial growth are given below:
1) Sudden changes in Government policy.
2) Sudden political change.
3) Outbreak of war or regional conflicts.
4) Political instability or hostile Government attitude towards
industry.
5) Excessive bureaucratic and corruption among Government
agencies.
6) Ideological and social conflicts.
7) Unreliable supply of power, materials, finance, labor and
other inputs.
8) Rise in the cost of inputs.
9) Unfavorable market fluctuations.
10) Non-cooperative attitude of banks and financial institutions.
1.7 Creativity, Innovation and Entrepreneurship
The three terminologies are chronologically
interrelated and it is very important to look in to
them to get their full picture.
1.7.1 Creativity
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.
In order to be creative, you need to be able to view
things in new ways of from a different perspective.
1.7.1.1 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 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. While the information
is simmering it is being arranged into meaningful new
patterns.
Step 4: Insight: obtaining or finding a solution
Step 5: Verification and Application: Verification
procedures include gathering supporting evidence,
using logical persuasion, and experimenting with new
1.7.1.2 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
1.7. 2 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.
 There are four distinct types of innovation, these are
as follows:
1. Invention - described as the creation of a new
product, service or process
2. Extension - the expansion of a product, service or
process
3. Duplication - defined as replication of an already
existing product, service or process
4. Synthesis - the combination of existing concepts and
 1.7.2.1 The Innovation Process
1. Analytical planning: carefully identifying the
product or service features, design as well as the
required resources
2. Organize Resources: 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.
1.7.2.2 Areas of Innovation
A. New product: A new product can be developed
through new or existing technology.
B. New Services: A service is an act which is offered to
D. New Way of Delivering Product/Service to the
Customer: Customer can only use product/service
they can access.
E. New Operating Practices: As with innovations in
the production of physical products, innovation in
service delivery must address customers need
and offer them improved benefits, for example
easier access to the service, a higher quality
service, a more consistent service, a faster or less
time consuming service etc.
F. New Means of Informing the Customer about
the Product: People will only use a product or
service if they know about it. Demand will not exist
if the offering is not properly promoted to them.
G. New Means of Managing Relationship within
the Organization:
Entrepreneurship = creativity +
innovation.