FUNDAMENTALS OF ENTREPRENEURSHIP DEVELOPMENT PROGRAMMES: CBM SEMESTER TWO 2010/2011 Course objectives: 1.

To enable students appreciate the importance of entrepreneurship in the development of businesses especially in Uganda. 2. To enable students start up manage and run business in their local envir onment 1.0 . INTRODUCTION Who is an entrepreneur? There is no universal definition of an entrepreneur or entrepreneurship because of the differences in the approaches and time factor. The following are vario us definitions of entrepreneurship from several scholars. Researchers have been inconsistent in their definitions of entrepreneurship (Bro ckhaus & Horwitz, 1986, Sexton & Smilor, Wortman, 1987; Gartner, 1988). Definitions have emphasized a broad range of activities including The creation of organizations (Gartner, 1988), The carrying out of new combinations (Schumpeter, 1934), The exploration of opportunities (Kirzner, 1973), The bearing of uncertainty (Knight 1921) The bearing of uncertainty risks (Richard Cantillon 1730); The outline below presents some authors definitions of entrepreneurship and atte mpts to summarize these viewpoints into a more meaningful whole. (a ) Richard Cantillon (circa 1730); The word originated from the French word entrependre which means to undertake. He was the first person to approach the word entrepreneurship. According to him, En trepreneurship is defined as self-employment of any sort and that Entrepreneurs buy at certain prices in the present and sell at uncertain prices in the future. The entrepreneur is a bearer of uncertainty. (b ) Jean Baptiste Say (1816); The entrepreneur is the agent "who unites all means of production and who finds in the value of the products...the reestablishment of the entire capital he empl oys, and the value of the wages, the interest, and rent which he pays, as well a s profits belonging to himself." (c ) Frank Knight (1921); Entrepreneurs attempt to predict and act upon change within markets. Knight emp hasizes the entrepreneur s role in bearing the uncertainty of market dynamics. E ntrepreneurs are required to perform such fundamental managerial functions as di rection and control. (d ) Joseph Schumpeter (1934); The entrepreneur is the innovator who implements change within markets through t he carrying out of new combinations. The carrying out of new combinations can take several forms; (i). The introduction of a new good or quality thereof, (ii). The introduction of a new method of production, (iii). The opening of a new market, (iv). The conquest of a new source of supply of new materials or parts, (v). The carrying out of the new organization of any industry. Schumpeter equated entrepreneurship with the concept of innovation applied to a business context. As such, the entrepreneur moves the market away from equilibri um.

Schumpeters definition also emphasized the combination of resources. Yet, the man agers of already established business are not entrepreneurs to Schumpeter. (e ) Penrose (1963); Entrepreneurial activity involves identifying opportunities within the economic system. Managerial capacities are different from entrepreneurial capacities (f ) Harvey Leibenstein (1968, 1979); The entrepreneur fills market deficiencies through input-completing activities. Entrepreneurship involves "activities necessary to create or carry on an enterp rise where not all markets are well established or clearly defined and/or in whi ch relevant parts of the production function are not completely known. (g ) Israel Kirzner (1979); The entrepreneur recognizes and acts upon market opportunities. The entrepreneur is essentially an arbitrageur. In contrast to Schumpeter s viewpoint, the entre preneur moves the market toward equilibrium (h ) Gartner (1988); the creation of new organizations

"Entrepreneurship is the process of identifying, developing, and bringing a visi on to life. The vision may be an innovative idea, an opportunity, or simply a be tter way to do something. The end result of this process is the creation of a ne w venture, formed under conditions of risk and considerable uncertainty." In summary, entrepreneurship is often viewed as a function which involves the ex ploitation of opportunities which exist within a market. Such exploitation is mo st commonly associated with the direction and/or combination of productive input s. Entrepreneurs usually are considered to bear risk while pursuing opportunities, and often are associated with creative and innovative actions. In addition, entrepreneurs undertake a managerial role in their activities, but routine management of an ongoing operation is not considered to be entrepreneur ship. In this sense entrepreneurial activity is fleeting. An individual may perform an entrepreneurial function in creating an organizatio n, but later is relegated to the role of managing it without performing an entre preneurial role. In this sense, many small-business owners would not be consider ed to be entrepreneurs. Finally, individuals within organizations (i.e. non-founders) can be classified as entrepreneurs since they pursue the exploitation of opportunities. Thus intra preneurship is appropriately considered to be a form of entrepreneurship. CHARACTERISTICS OF ENTREPRENEURS/ ENTREPRENEURS BEHAVIOR Different people who become entrepreneurs are seen to have various entereprenual behaviors or traits/ features 1. Entrepreneurs are careful about money. They always know how much money t hey have. They know the value and cost of things so they can recognize a real ba rgain. Most entrepreneurs earned money when they were teenagers babysitting, mow ing lawns, delivering newspapers, sacking groceries, etc. 2. Entrepreneurs dont retire. They may sell or change their business, think ing they will retire, but they always jump back in with a new project or get a n ew idea that they just can t ignore. 3. Entrepreneurs are professionals. Whether working from their bedroom, the kitchen table or a modern, well-appointed home office, they operate just as the y would if they were in an expensive office building in a major city. When they are working, they don t let outside influences distract them. 4. Strong need for achievement: When they succeed in something their self-e

steem is enhanced i.e. they are encouraged to seek for more and never give up. 5. Risk taking: They deal with new ideas whose results are uncertain. Howev er a common misperception about entrepreneurs is that entrepreneurs are wild ris k-takers. Entrepreneurs compete with themselves and believe that success or fail ure lies within their personal control or influence. They do not see non-success es as failures but as learning experiences. They do take risks, but only calcula ted ones. One of the abilities successful entrepreneurs share is the ability to evaluate risks. 6. Internal locus of control: They believe they are the ones in control of what surrounds them. Internal locus of control is that what happens to a person is as result of his own doing. However the person with an external locus of con trol feels powerless and looks at others to make decisions for him or her. 7. Need for autonomy: They so much struggle to go alone in most of the busi nesses. This is because they want to be free from rules and regulations that wil l disrupt them. 8. Determination/ persistence: He will have to overcome difficulties, must be willing be determined and above all ready to try and fail until success is ac hieved. 9. Initiative: He need to be proactive not reactive to most of the events t hat come along. These events may include opportunities and threats. The entrepre neur should be ready to act before rather than react to the opportunities and th reats. 10. Creativity: A good entrepreneur is one who is seen to develop new and de velopmental ideas. Its these ideas that will put into action to bring a tangible or physical product in place. Thus should be ready to be more adaptive and prepa red to bring new changes in place. 11. Innovative: The entrepreneur should struggle to make the ideas real in r elation ability to develop new products. 12. Self confident: : Findings have showed that as long as entrepreneurs are in control, they are relentless in pursuit of their goals. If they lost control , they quickly lost interest in the undertaking. 13. Good health & Emotional Stability. Successful entrepreneurs must work lo ng hours for extended periods of time. When they get sick, they recover quickly. They have the stability to handle stress from business and from personal areas in their lives. Setbacks are seen as challenges and do not discourage them. 14. Sense of Urgency: They have a never-ending sense of urgency to do someth ing. This corresponds with a high energy level. Many enjoy individual sports rat her than team sports. Inactivity makes them impatient. Comprehensive Awareness: They have a comprehensive awareness of a total situatio n and are aware of all the ramifications involved in a decision. 15. Realistic Outlook: There is a constant need to know the status of things . They may or may not be idealistic, but they are honest and straightforward and expect others to be the same. 16. Conceptual Ability: They have superior conceptual abilities. This helps entrepreneurs identify relationships in complex situations. Chaos does not bothe r them because they can conceptualize order. Problems are quickly identified and solutions offered. The drawback is that this may not translate well to interper sonal problems. 17. Attraction to Challenges: They are attracted to challenges but not to ri sks. It may look like they are taking high risks, but in actuality they have ass essed the risks thoroughly. 18. Describing with Numbers: They can describe situations with numbers. They understand their financial position and can tell at any time how much they have in receivables and how much they owe. 19. Receptive to new ideas and changes: Very inquisitive to know and accept

new ideas as opportunities. WHY ENTREPRENEUALSHIP SHOULD BE STUDIED? Its a core paper in business studies due to a number of reasons 1. Knowing the theory of enterprising: To any person to make use of any dev elopmental activity needs to first acquire the theory and knowledge of Entrepren eualship before operationalising the business. 2. To know the areas of specialty: Entrepreneualship theory has a diversity of understanding such that several areas of concern are studied and yet when it comes to execution of activities one cannot do everything. There is need for on e to specialise for better results. 3. Self employment: Any person that has studied Entrepreneualship and has a cquired knowledge in any specific area for human resource management is able to create a job for himself if the skills acquired are put into practice. 4. Job creation: Through the process of organizing resources, many jobs are created for others both direct and indirect. 5. Designing feasibility studies: Any prospective business person would lik e to finance his business by considering a number of environmental factors that can make the business either viable or feasible or not. Factors to consider here could be economic, social, financial, and technical. To answer the initial stag es of starting a business in a clear form is by preparing a feasibility study. 6. To prepare business plan: After judging the business to be viable and fe asible one is in position to arrange the productive resources by first doing pap er work i.e. where to buy from, the type e of people to employ, where to locate the business etc 7. Economic improvements: Its studied to make people get self employed and t his is a macro economic motive since entrepreneurs can be located any where. 8. Its a source of innovation: It teaches people to become creative and late r developing new things that are competitive and marketable. 9. It helps students acquire skills in academic business disciplines e.g. h uman resource management, accounting etc.

FUNCTIONS OF THE ENTREPRENEUR Entrepreneurs are owners of business related ventures and in the process of owni ng and running or management, they offer the following functions; 1. Economic growth: Entrepreneurs can be locate any where and their enterep renual economic benefits can be generalized on a country basis and consequently results into expansion of the volume good and services hence economic growth. 2. Backward and forward linkages: They can offer productive resources to hi gher level e.g. raw materials hence backward linkage and also serve as buyers of final product e.g. whole sellers retailers, commission agents etc hence forward linkage. 3. Market efficiency: Their big number enables them to provide a variety of goods and services to the market on a timely perspective. This in turn leads to customers choice and their ability to bargain. 4. Competition: Since entrepreneurs almost provide similar related products they is stiff rivalry amongst themselves and this in turn leads to improved pro

duct offers, customer care, reasonable competitive prices. 5. Innovation: They bring about an innovative culture in business related i ssues and this brings about people becoming idea generators and going away with being imitative/ adaptive. 6. Employment: They start businesses themselves and normally run them with others and so they provide employment opportunities. 7. Leadership: Since they employ others, they work with them and as per ori ginal business structure, business activities are normally run by the owners and employees follow. 8. Risk taking: They take moderate or calculated risky ventures. This in tu rn makes them to survive with their businesses. 9. Organizing and allocating the factors of production: To start a business , economic resources are assembled in their productive forms e.g. equipment, sta ff, money etc. 10. They deal with public bureaucracy. : They are entangled with a number of environmental difficulties e.g. taxation, licensing, registration, and its a dut y for the entrepreneurs to over come them.

(a ) The person In entrepreneurship there is a person called entrepreneur. This individual has v arying contributions and statuses towards entrepreneual activity, the following are factors of consideration under the person. Personality, skills, Experience, motives, psychological aspects Personality here refers to ones background Skills: some people are naturally gifted and others get skills from learning Experience; a way of doing things in an improved form as a result of doing somet hing over and over again Motives: this comes about when some one has an environmental factor that he or s he is confronted with making him or her to be driven towards exploiting it e.g. need for self employment. Psychological aspects; Ones behaviour towards business can make him or her succe ed e.g. being inquisitive, risk taking etc (b ) The organisation An entereprenual venture may be structured in a given internal lay out and this way affects the internal operations of an entereprenual setting. Factors to cons ider here may include staff, machinery rules and regulations, internal relations , mode of management etc. (c ) The task An entrepreneur in business must be doing several tasks to make the business boo ming e.g. perceiving opportunities in the environment. This is done in relation to assessment of the forthcoming threats in the environment. Organizing productive resources e.g. labour capital, machinery, materials etc to gether. Providing leadership i.e. working and showing Employing others (d ) The environment It is seen that an entereprenual setting does not operate in a vacuum but in a w ell structural surrounding called the environment. This can internal and externa l to the business venture. Factors to consider under this may include; Availability of skilled labour Adequate financial pool Infrastructure Competitive pressure

Social values Regulations and rules of state State of technology All the above elements manipulated properly are likely to support Entrepreneursh ip development in a favourable way and the reverse is true. THEORIES OF ENTREPRENEURSHIP Different scholars have come up with various distinctive theories towards entrep reneurship These theories are only three namely; (a ) Economic theory (b ) Psychological theory (c ) Sociological theory (a ) Economic Theory This states that the economic factors within an environment will make people to run businesses if such particular economic conditions are being made favourable. The theory further states that individuals choose entrepreneurship because of ec onomic rewards got as a result of speculations hence a profit. Here profit is the main reason for engaging in business. People therefore choose to become entrepreneurs if the total utility they derive is in form of profits through risk bearing, hardworking, independence etc. However there are other economic motives to consider as they may include Economic incentives; these are normally extended by government towards individua ls in form of tax exemptions tax reductions, credit facilities on soft pay-backs etc Stable economic environment eg stable currency, reduced inflation etc (b ) The Psychological Theory Under this theory one becomes an entrepreneur due to the fact that personal trai ts of him or her make him to become an entrepreneur. The theory therefore descri bes entrepreneurship tendencies towards ones personality, mental and physical ma ke up. This theory is further divided into; The traits approach It suggests that individuals with certain characteristics always become entrepre neurs. This is therefore a behavioral approach. Cognitive approach The entereprenual successes here are closely related to the way people think and process information. Therefore it depends on ones brains. (c ) Sociological Theory This explains entrepreneurship as a result of the environmental conditions where individuals live. Such factors include Family background Education level Previous work experience