Research material about the cost basic material

CHAPTER ONE
THE NATURE OF
ENTREPRENEURSHIP
04/12/2025
Compiled by: Mohammed Worku
(MPM) Ch 1 -1

04/12/2025 Entrepreneurship 2
1.1 INTRODUCTION
 The word ‘entrepreneur is originated from a French
word, entreprendre, was considered as an individual
commissioned to undertake a particular commercial
project.
 A number of concepts have been derived from the
idea of the entrepreneur such as entrepreneurial,
entrepreneurship and entrepreneurial process.
 Entrepreneur is someone who undertakes certain
projects.
 Entrepreneurship is then what the entrepreneur
does.
 Entrepreneurial is an adjective describing how the
entrepreneur undertakes what he or she does.

Con’t…
In ancient period, the word entrepreneur was
used to refer to a person managing large
commercial projects through the resources
provided to him.
In the 17th
Century, a person who has signed
a contractual agreement with the
government to provide products or 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.
In the 18th
Century, the first theory of
entrepreneur has been developed by Richard
Cantillon and He said that an entrepreneur is
a risk taker.

Con’t…
 The other development during the 18th
Century is
the differentiation of the entrepreneurial role
from capital providing role.
In the late 19th
and early 20th
century, the
entrepreneur was defined as one who organizes
and operates an enterprise for personal gain.
In the middle of the 20th
Century, the notion of
an entrepreneur as an inventor was established.
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.

1.3 Definitions of Entrepreneurship and Entrepreneur
 Entrepreneurship is a process of identifying opportunities
and investing the resources to exploit it for a profit.
 Entrepreneurship is the processes through which individuals
become aware of business ownership, then develop ideas for,
and initiate a business.
 Entrepreneurship is a 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.
 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.

Con’t…
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.
In General, the process of entrepreneurship
includes five critical elements. i.e:
 The ability to perceive an opportunity.
 The ability to commercialize the perceived
opportunity i.e. innovation
 The ability to pursue it on a sustainable basis.
 The ability to pursue it through systematic means.
 The acceptance of risk or failure.

Definition of Entrepreneur from different
perspectives i.e. from the economist, psychologist and capitalist
philosopher’s point of view.
• To an economist, one who brings resource, labor, materials,
and other assets into combination that makes their value
greater than before.
• To a psychologist, 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.
• For capitalist philosopher, one who creates wealth for
others, who finds better way to utilize resources and reduce
waste and who produce job others are glad to get.
• In general, entrepreneur refers to the person and
entrepreneurship defines the process.
• All entrepreneurs are business persons, but not all business
persons are entrepreneurs.

1.4 Types of Entrepreneurs
 The individual entrepreneur: is someone who
started; acquired or franchised his/her own
independent organization.
 Intrapreneur: is a person who does entrepreneurial
work within large organization.
 The Entrepreneurial Organization: An organization
that 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
 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

1.6 Entrepreneurial Competence and Environment
1.6.1 Entrepreneurial Mindset
1.6.1.1 Who Becomes an Entrepreneur?
– 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.
– 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.
– 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
To be successful, an entrepreneur should have the
following qualities:
 Opportunity-seeking
 Persevering
 Risk Taking
 Demanding for efficiency and quality
 Information-seeking
 Goal Setting
 Planning
 Persuasion and networking
 Building self-confidence
 Listening to others
 Demonstrating leadership

1.6.1.3 Entrepreneurial Skills
 General Management Skills: are skills
required to organize the physical & financial
resources needed to run the venture. i.e:
 Strategy Skills
 Planning Skills
 Marketing Skills
 Financial Skills
 Project Management Skills
 Time Management Skills

 People Management Skills
 Communication Skills
 Leadership Skills
 Motivation Skills
 Delegation Skills
 Negotiation Skills
• All these different people management skills are
interrelated.
• Here entrepreneurial performance results from a
combination of industry knowledge, general
management skills; people management skills and
personal motivation.

1.6.1.4 The Entrepreneurial Tasks
 Owning Organizations
 Founding New Organizations
 Bringing Innovations to Market
 Identification of Market Opportunity
 Application of Expertise
 Provision of leadership
 The entrepreneur as 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?
 Employees:
 Investors: stockholders/lenders.
 Suppliers
 Customers
 The local community
 Government

1.6.2 Entrepreneurship and
Environment
1.6.2.1 Phases of Business Environment
Business environment may be classified into two broad
categories; namely external and internal environment.
External Environment
 Economic Environment
 Legal Environment
 Political Environment
 Socio-Cultural Environment
 Demographic Environment
Internal Environment;
 Raw Material
 Production/Operation
 Finance
 Human Resource

1.6.2.2 Environmental Factors Affecting Entrepreneurship
Environmental factors which hinder
entrepreneurial growth are;
• Sudden changes in Government policy.
• Sudden political upsurge.
• Outbreak of war or regional conflicts.
• Political instability or hostile Government
attitude towards industry.
• Excessive corruption among Government
agencies.

con’t…
• Ideological and social conflicts.
• Unreliable supply of power, materials, finance,
labor and other inputs.
• Rise in the cost of inputs.
• Unfavorable market fluctuations.
• Non-cooperative attitude of banks and
financial institutions.
• Entrepreneurship is environmentally
determined.

1.7 Creativity, Innovation and Entrepreneurship
1.7.1 Creativity; is a process of assembling ideas
by recombining elements already known but wrongly
assumed to be unrelated to each other.
key elements of this definition;
• Process: implies that, it is more likely 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.

1.7.1.1 Steps in the Creative
Process
Step 1: Opportunity or problem Recognition; A person
discovers that a new opportunity exists or a problem needs
resolution.
Step 2: Immersion; the individual concentrates on the
problem and becomes immersed in it.
Step 3: Incubation; a person does not appear to be working
on the problem actively; however, the subconscious mind is still
engaged.
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.

1.7.1.2 Barriers to Creativity
There are a numerous barriers to creativity, i.e.
 Searching for the one ‘right’ answer
 Focusing on being logical
 Blindly following the rules
 Constantly being practical
 Viewing play as frivolous
 Becoming overly specialized
 Avoiding Ambiguity
 Fearing looking Foolish
 Fearing mistakes and failure
 Believing that ‘I’m not creative

1.7. 2 Innovation
 Innovation is the implementation of new idea at
the individual, group or organizational level.
 It is a process of intentional change made to rate
value by meeting opportunity and seeking advantage
 Types of Innovation; there are 4 types of
innovation.
1. Invention - the creation of a new product,
service or process
2. Extension - the expansion of a product, service
or process
3. Duplication - replication of already existing
product, service or process
4. Synthesis - the combination of existing concepts
and factors into a new formulation.

1.7.2.1 The Innovation Process
• Analytical planning: carefully identifying the
product or service features, design as well as the
resources that will be needed.
• Resources organization: obtaining the required
resources, materials, technology, human or capital
resources
• Implementation: applying the resources in order to
accomplish the plans
• Commercial application: the provision of values to
customers, reward employees and satisfy the
stakeholders.

1.7.2.2 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

1.7.3 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.
Entrepreneurship = creativity + innovation.

Con’t…

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