UNIT ONE ‐ ENTREPRENEURSHIP

UNIT INTRODUCTION

Welcome to the first unit in this course. The idea of entrepreneurship may sound exciting,
but it may not necessarily be for everyone. There are number of questions you need to ask
yourself as an entrepreneur to determine whether or not you should go ahead with your
great business idea. In this unit, we will discuss the nature of entrepreneurship,
differentiate between entrepreneurship and entrepreneurs, look at the role that
entrepreneurship plays in society and also discuss the characteristics of an entrepreneur.
Upon completion of this unit you will have discovered how successful you could be as an
entrepreneur and begin the process of identifying a potential business opportunity.

UNIT OBJECTIVES
Upon completion of this unit you should be able to:
1. Define entrepreneurship.
2. Distinguish between entrepreneurship and an entrepreneur.
3. Describe the role of entrepreneurship in society.
4. Discuss the characteristics of entrepreneurs.
5. Explain the challenges and benefits of being an entrepreneur.
6. Explore different business opportunities.

ASSIGNMENTS AND ACTIVITIES

There are a number of learning activities and assignments throughout this unit. The major
assignment for this unit will require you to interview at least two entrepreneurs in your
area/district and to reflect upon their personal and professional characteristics and how
these characteristics have contributed to their success as an entrepreneur. You will also be
asked to complete a self‐assessment to help you identify your own strengths and
weaknesses. This will help you identify what you must improve upon.

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 TOPIC 1.1 – THE NATURE OF ENTREPRENEURSHIP
TOPIC INTRODUCTION
The word entrepreneur originates from the French word, entreprendre, which means "to
undertake" and was first defined by the Irish‐French economist Richard Cantillon. Jean‐
Baptiste Say, a French economist, is believed to have coined the word "entrepreneur" in
the 19th century. He defined an entrepreneur as "one who undertakes an enterprise,
especially a contractor, acting as intermediary between capital and labour" (Wikipedia).

There has been a great deal of attention paid to the subject of entrepreneurship over
the past few years, as many people realised that small firms contribute considerably to
the economic growth of a country. Developing countries have established policies and
tax incentives that encourage the planning and implementation of small businesses with
the belief that a small business can potentially grow into a large business.
TOPIC OBJECTIVES
Upon completion of this topic you should be able to:
1. Define the term “business”.
2. Define entrepreneurship.
3. Distinguish between entrepreneurship and an entrepreneur.
4. Explain the entrepreneurial process.
It is important that you familiarise yourself with some key concepts in the field
of entrepreneurship. Let’s start this topic with defining some of these concepts.
DEFINITIONS
Business Defined
Before a potential entrepreneur can start a business, he or she must understand what
the essence of a business is. The term business has a variety of definitions. Let’s examine
a few. A business is:
“An organization operated with the objective of making a profit from the sale of
goods or services.” (http://www.finet.com.hk/accounting/b.htm)
”An enterprise, commercial entity, or firm in either the private or public sector,
concerned with providing products (goods or services) to satisfy customer
requirements.” (www.georgetown.edu/uis/ia/dw/GLOSSARY0816.html)
‘The buying and selling of products or services in order to make a profit.” (Mariotti,
2006)
“An economic system in which goods and services are exchanged for one
another or money, on the basis of their perceived worth. Every business requires
some form of investment and a sufficient number of customers to whom its
output can be sold at profit on a consistent basis.”
(http://www.businessdictionary.com/definition/business.html)

Introduction to Entrepreneurship Page | 5

 The common elements in most of the definitions described above are:
A business sells or buys services and products.
The objective of a business is to make a profit.
All business entities have customers with specific needs and wants.
Business requires a solid financial footing.
In most cases a potential entrepreneur will be creating a “small business” that he or she
hopes to grow into a large and successful enterprise. Wikipedia defines a small business as
“a business that is privately owned and operated, with a small number of employees and
relatively low volume of sales. Small businesses are normally privately owned corporations,
partnerships, or sole proprietorships”. (http://en.wikipedia.org/wiki/Small_business)

Now that you have an idea how about the elements of a business, let’s explore
the concepts underlying entrepreneurship.

Entrepreneurship
What is Entrepreneurship? A normal response to this question is that
entrepreneurship is about creating or establishing a business. Entrepreneurship
however is more than simply starting or operating a small business. This is evident in the
responses from the people in the cartoon below.

It is true that entrepreneurship is both a science and an art. The science lies in the proven
process of planning and managing business. The art lies in the innovative thought,
implementation and growth of a business.

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 Self‐Reflection Question ‐ Entrepreneurship Defined

Take a couple of minutes and reflect on what you understand by the term
Entrepreneurship. How would you define it? Make some notes in your personal
journal.

Let’s examine some different interpretations and definitions of entrepreneurship. From an

economic perspective we might use the following descriptions.

Entrepreneurship is a dynamic, social process where individuals, alone or in

collaboration identify financial opportunities and act upon them by
establishing new enterprises.
Entrepreneurship however involves much more than just for a business to
be successful and sustainable.
Entrepreneurship is a dynamic, social process where individuals, alone or in
collaboration identify opportunities for innovation and act upon them by
transforming ideas into practical targeted activities whether in a social,
cultural or financial context.
(Norway Entrepreneurship Education and Training Action Plan,
http://planipolis.iiep.unesco.org/upload/Norway/Norway_Action_Plan_Entrepreneurship_2009_2
0 14.pdf)

The above descriptions indicate that entrepreneurship:

Has impact on individuals.

Provides financial opportunities.
Has an impact on the economic well‐being of a
society. Requires Innovation.
Is dynamic.

Activity ‐ Definitions

What would you say are the main differences between the first definition
and the second definition of entrepreneurship? Write your answers down in
your personal journal.

The definitions explored so far imply that entrepreneurship is more than just about
business success and sustainability. The first explanation is based on making business by
establishing new enterprise, while in the second definition new dimensions are added,
such as innovation and other areas of the environment e.g. the social, cultural and financial
context.

Introduction to Entrepreneurship Page | 7

 During this course we will define entrepreneurship as:
The process of identifying business opportunities, allocating resources,
and taking risks to produce goods and services of value, through creative
and innovative processes, to satisfy unmet consumer demands.

IMPORTANT ASPECTS OF ENTREPRENEURSHIP

Building upon the definition, Nieman et al, (2004:9) identified the following concepts as
integral to the understanding of entrepreneurship. Entrepreneurship means that an
individual must be able to:
Identify an opportunity ‐ This means that there must be a real
business opportunity.
Be innovation and creativity ‐ Something new and different is required that
is needed by a target audience.
Gather resources ‐ Capital, labour and operating equipment must be found.
Create and grow a business ‐ This means the start of a new business venture or
the conversion of an existing business.
Take risk ‐ There will be both personal and financial risks.
Create rewards ‐ Reward can be in the form of profit or increased value of
the business.
Manage a business ‐ This means that there must be planning,
organisation, leadership and control of all the functions.
So if entrepreneurship is a process of starting a new business, generally there also needs
to be someone who undertakes such a process? That is the entrepreneur.

The Entrepreneur
The person who plans, implements and manages a small business is usually called an
entrepreneur. This person must be able to embrace the concepts described by Nieman
above. Some additional definitions of an entrepreneur are:
An entrepreneur, can be defined as "one who
undertakes innovations, finance and business
acumen in an effort to transform innovations
into economic goods.
(Wikipedia)
An entrepreneur is someone (person) who in
pursuit of profits and at a risk makes the most of
the opportunities in the environment by combining
the expertise and resources of the community in
different ways to produce products and services
for the market.
(Cronje et al 2001:5)

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 So based on the above definitions an entrepreneur must:

Be a risk taker.
Be innovative.
Possess business acumen.
See potential opportunities in the community.
M. Gerber (1986) in his book “The E‐Myth” describes the entrepreneur in these terms:
The entrepreneur is the visionary in us. The dreamer. The energy behind every
human activity. The imagination that sparks the fire of the future. The catalyst
for change.
The entrepreneur lives in the future, never in the past, rarely in the present. He (or
she) is happiest when left free to construct images of ‘what if’ and ‘if‐when’.
For this course we will define an entrepreneur as:
A person who sees an opportunity in the market gathers his/her resources
and creates and grows a business venture to meet those needs. This person
will bear the risk and will be rewarded with profit if the venture is successful.
Generally, new organisations started by entrepreneurs are small businesses. However,
individuals that plan and implement large business ventures are also considered
entrepreneurs. We can conclude that entrepreneurship is the business process and the
entrepreneur is the person involved in implementing the entrepreneurial process.

Take a few minutes and complete the following activity. Make notes in your personal
journal.

Activity – Matching Terms

As you look at the following words, classify them either under the term entrepreneurship
or the term entrepreneur. Give a reason for your choice.
1. hardworking 1. good relationship with workers
2. customers 2. a person who takes chances in life
3. do repairs to vehicles 3. banks
4. lazy 4. designing a new range of dresses
5. inventing a new machine 5. working long hours

Introduction to Entrepreneurship Page | 9

The statements in the activity other. Entrepreneur represents the
list are very close to each person, while entrepreneurship
 represents the process to set up and 1. SELF DISCOVERY
run a business. You are therefore Learning what you are doing; examining your strengths
correct if you have grouped and weaknesses. Examining work experience and
relating it to potential opportunities.
numbers (ii) ‐ (iv) and (vii) with the
concept of entrepreneurship and
the rest of the numbers with the
2. IDENTIFYING OPPORTUNITIES
concept of entrepreneur. Looking for needs, wants, problems and challenges that are
not yet being met or dealt with effectively
Entrepreneurship is a difficult
task, as a majority of new
businesses fail. It is therefore 3. GENERATING AND EVALUATING IDEAS
important that the entrepreneur Using creativity and past experience to devise new and
follow the steps in the innovative ways to solve a problem, or meet a need and
entrepreneurial process which we then narrowing the field to one best idea.

will discuss next.

THE ENTREPRENEURIAL PROCESS 4. PLANNING

The Entrepreneurial Process Researching and identifying resources needed to turn the
idea into a viable venture. Preparing the research in the
includes the systematic steps
form of a written business plan. Preparing marketing
required to create and implement strategies.
a new business venture. This
includes all the functions,
activities, and actions associated
5. RAISING START‐UP CAPITAL
with perceiving opportunities and
Using the business plan to attract investors, venture
creating organizations to pursue capitalists partner. This stage can involve producing
them. Entrepreneurs often prototypes or test‐ marketing services
discover this process through trial
and error, but you can shorten
your learning curve by benefitting 6. START‐UP
from the experiences of others. Launching the venture, developing a customer base
and adjusting marketing and operational plans as
(Source:
required
http://www.mvp.cfee.org/en/aba
tt
entwhatiseentprocess.html )
7. GROWTH
(Source: Growing the business: developing and following
http://www.mvp.cfee.org/en/aba strategic plans, adapting to new circumstances
tt
entwhatiseentprocess.html )
8. HARVEST:
Selling the business and harvesting the rewards. For
many entrepreneurs, this also means moving on to new
Page | 10 ventures and new challenges.

Introduction to Entrepreneurship
Nieman, Hough, and Nieuwenhuizen (2003) break the entrepreneurial process into
four phases:

4
3
Start and
Determine manage the
2 the resources business.
required
Develop a
business plan
1
Identify and
evaluate the
opportunity

The Entrepreneurial Process

This brings us to the end of Topic 1. Let’s summarise what we have discussed.

TOPIC SUMMARY
In this topic we have learned that:
1. Entrepreneurship is a business process and the entrepreneur is a person involved in
the entrepreneurial process.
2. Important aspects of entrepreneurship include: identifying an opportunity, innovation
and creativity, gathering resources, creating and growing a business, taking risks, being
rewarded and managing the business.
3. The four steps in the entrepreneurial process are: identifying and evaluating an
opportunity; developing a business plan; determining the resources required and
then lastly starting and managing a business.
Now that we have defined key concepts in entrepreneurship, let’s move on to the
next topic where we will discuss the role of entrepreneurship in society.