University of Gondar (UOG)

Institute of Technology
School of Mechanical and Industrial Engineering
Target group: Electrical and Computer
Engineering (Control Stream)
lecture note on Entrepreneurship for Engineers

By: Mequanent E.
Date 05/04/2013 E.C.

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Part 1 Introduction to Entrepreneurship
Part 2 Starting Technology based new venture
Part 3 Choosing The Legal Form of Ownership
Part 4 Entrepreneurial cycle (business plan dev.t)
Part 5 Operations of Business startup
Part 6 Risk and insurance of Business enterprises

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 Meaning of the term: entrepreneur,
entrepreneurship, Intrapreneur and owner manager
 The entrepreneurship process
 Characteristics of Entrepreneurs
 Motivation for starting a business
 Success factors for entrepreneur
 Kinds of Entrepreneurship
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 What is “entrepreneurship”?
 Why be an entrepreneur? Why not?
 Are you interested to learn entrepreneurship? Why?

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 Introduction

 What are the profiles of Entrepreneurs?

 Are Entrepreneurs Born or Made?
 What is the distinction between Entrepreneurship and
Entrepreneurs?

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 Entrepreneur is a person who owns, organizes,
manages and runs an enterprise assuming the risk of a
business or enterprise to be happen (Meredith, 1982).
 Entrepreneurs are action-oriented, highly motivated
individuals who take risks to achieve goals.
 Entrepreneurs are people who have the ability
• to see and evaluate business opportunities,
• to gather the necessary resources to take advantages
• to initiate appropriate action to ensure success. 7
 Economists may view entrepreneurs as those who bring
resources together in unusual combinations to generate
profits.
 Psychologists tend to view entrepreneurs in behavioral
terms as those achievement- oriented individuals driven
to seek challenges and new accomplishments.
• (New Encyclopaedia Britannica) – An individual who
bears the risk of operating business in the face of
uncertainty about the future conditions. 8
 Entrepreneurs are Lucky
 Entrepreneurs make or break on the first venture
 Entrepreneurs are born not made
 Entrepreneurs are High-Tech wizards
 Entrepreneurs extreme risk takers (Gamblers)
 All Entrepreneur need to be successful is Money

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What is Entrepreneurship?
 “ Entrepreneurship is the dynamic process of
creating incremental wealth. This wealth is created
by individuals who assume the major risks in terms
of equity, time and /or career commitments of
providing value for some product or service.
• The product or service itself may or may not be new
or unique but value must somehow be infused by
the entrepreneur by securing and allocating the
necessary skills and resources” (Robert Ronstad)
• Entrepreneurship is very rarely to get rich-quick;
rather, it is a long-term value and durable cash flow
streams.
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Standard definition
 Entrepreneurship is the process of creating
something different with value by devoting the
necessary time and effort, assuming the
accompanying financial, social risks and receiving
the resulting rewards of monetary and personal
satisfaction and independence.

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 What is an Entrepreneur
& Entrepreneurship ?

ENTREPRENEUR
A vision-driven individual who assumes significant personal
and financial risk to start or expand a business.
ENTREPRENEURSHIP
The pursuit of opportunity through innovation, creativity and
hard work without regard for the resources currently
controlled.
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Cont…

Entrepreneur Entrepreneurship Enterprise

The person The process The outcome

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 Forms of Entrepreneurship

 Entrepreneurship can take three different forms

1.The individual entrepreneur

2.Intrapreneur:
a person who does entrepreneurial work within
large organization
3. Social Entrepreneur: People who drive social
innovation and transformation in various fields
including education, health, environment and
enterprise development
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 Entrepreneurs are people that notice opportunities
and take the initiative to mobilize resources to make
new goods and services.

 Intrapreneur also notice opportunities and take

initiative to mobilize resources, however they work
in large companies and contribute to the innovation
of the firm.

 Intrapreneur often become an entrepreneur.

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 The following are foundational skills
entrepreneurs need to run and operate a successful
business:
 Communication Skills
 Writing, Speaking & Listening

 Human Relations Skills

 Problem Solving & Decision Making Skills
 Technical Skills
 Basic Business Skills
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• It is opportunity/market driven
• It is driven by a lead entrepreneur and an
entrepreneurial team
• It is resource
parsimonious/saving/economical and
creative
• It depends on the fit and balance among
these
• It is integrated and holistic
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Entrepreneur
a) Entrepreneurial function is the organization of
production:
b) Decision-making and calculated risk bearing:

c) An entrepreneur has an all-round personality:

d) High levels of achievement motivation

e) Innovative, creative, imaginative soul

f) The entrepreneur is the owner of the business

who enjoys the position of an employer.
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Owner Manager

 They may or may not be entrepreneurs.

 They own and manage a small enterprise, in a way, which fits
with their personal motivations.
 They are more intent on survival than seeking innovative
change and growth.
1. Limited scope for innovativeness, creativity and
imagination
2. Managerial jobs are transferable
-As a manager in the business organization, his job is
transferable from office to office, from one unit and location
to another location
Managers do not bear-risk
-Risk bearing capacity is an entrepreneurial quality
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 Characteristics of Entrepreneurs /personal competencies
1. Need for Achievement:- vision
2. Willingness to take risks:-financial, careers, family ,
3. Self-Confidence:- internal and external locus of control
4. Innovation:-. The entrepreneurial manger is constantly looking for
innovations, not by waiting for a flash of inspirations, but through
an organized and continuous search for new ideas
5. Total Commitment
6. All-round
7. A need to seek refuge:- escape from environmental factor
a. The “Foreign Refugee”
b. Corporate Refugee.
c. Other Refugees
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Other types of “ refugees” mentioned are the following:

1.The parental (paternal) refugee

Who leaves a family business to show the parent that “I can do it
alone”.
2.The feminist refugee
Who experiences discrimination and elects to start a firm in which
she can operate independently male chauvinist.
3.The housewife refugee
 Who starts her own business after her family is grown or at some

other point when she can free herself from household

responsibilities.
4.The educational refugee
 Who tires of an academic program and decide to go into business.
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 Entrepreneurial Decision Process/motivations of a
business
The reason for small firm formation can be divided between
“pull” and “push” influences.
I.“Pull” Influence
 Some individuals are attracted towards small business
ownership by positive motive such as a specific idea which
they are convinced will work. ”Pull” motives include:
a) Desire for independence
b) Desire to exploit an opportunity
c) Turning a hobby or previous work experience in to a
business
d) Financial Incentive
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 Con’t...
e) Perception of Advantages- If a person feels that he can
earn better or overall gains in terms of money.
f) Government Policies

g) Spotting an Opportunity
h) Motivation
i) Influenced by Culture, Community, Family Background,
Teachers, Peers, etc.

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“Push” Independence
 Many people are pushed into founding a new enterprise by
variety of factors including:
 Redundancy ==> Being without a job (idleness)
 Unemployment (or threat of)
 Disagreement with previous employer
 Job Dissatisfaction
 Relocation
 Lay off
 Retirement
 Boredom- This is applicable to many ladies from
well to do families.
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Success factors for entrepreneurs
 Most new ventures succeed because their founders
are capable individuals.

1) The entrepreneurial team

2) Incremental growth of product or services

3) Marketing and timing: Market potential is critically

influenced timing of new products or services.

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1. Management mistakes
2. Lack of experience
3. Poor financial control
4. Weak marketing efforts
5. Failure to develop a strategic plan
6. Uncontrolled growth
7. Poor location
8. Improper inventory control
9. Incorrect pricing
10. Inability to make the “entrepreneurial transition”
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Outcomes of Entrepreneurship
 Economic growth
 New industry formation
 Job creation

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Drawbacks of entrepreneurship
a. Limited resource:- entrepreneurship mostly starts from
small investment or contribution of owners are more
than one individual
b. Lack of experience:- most of entrepreneurs have no
experience and this may lead to in efficiency
c. Disagreement between member: if the owner of
entrepreneur is more than one person, disagreement
between them can be created. This disagreement can
limit the operation of the business.
d. Uncertainty of income:- opening and running a
business provide no guarantee that an entrepreneur
will earn enough money to survive
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e. Risk:- starting or buying a new business involves risk
and the higher rewards the greater the risk
entrepreneurs usually face. This is why entrepreneurs
tend to have evaluate risk very carefully
f. Lower quality of life until the business gets established:-
the long hour and hard work needed to launch a business
can take their tall in the rest of the entrepreneurs life
g. Complete responsibility:- it is great to be the boss but
many entrepreneurs find they must make decision on
issues about which they are not knowledgeable. When
there is no one to ask the pressure can build quickly the
realization that, the decisions they make are the cause of
success or failure.
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 To an Individual
 Provides Self Employment for the entrepreneur
 Entrepreneur can provide employment for near &
dear one
 Entrepreneurship often provides an employment
and livelihood for next generations
 Freedom to use own ideas – Innovation and
creativity
 Unlimited income / higher retained income
 Independence
 Satisfaction
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 To the nation

a) Provides larger employment

b) Results in wider distribution of wealth

c) Mobilizes local resources, skills and savings

d) Accelerates the speed of economic development

e) Stimulates innovation & efficiency

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 Elements involved in Entrepreneurship

1.RISK:- Simply stated risk is “a condition in

which there is a possibility of an adverse
deviation from a desired outcome that is
expected or hoped from applied to a business
risk translates in to the possibility of losses
associated with the assets and the earning
potential of the firm. ”
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Business risks can be classified in to two broad category market
risk and pure risk.
Entrepreneurs face a number of different types of risk. These
can be grouped in to basic areas.
a. Political risk:-
b. Business risk:-
c. Economic risk:-
d. property risk
e. Personal risk

 Reading Assignment…. 35
 2.Information
Information gives the following importance to the businessmen’s
 To know the position of their competitors that is their strength
and weaknesses, business strategy they use and their long term
plan.
 To know threats and opportunity in doing business
 Helps to design long term objectives and goals indicate capital
requirement (labor, capital and machinery)
 Helps to know market position locally and internationally.
 
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Sources of information
 Information are obtained from two main

methods of data collection. That is primary data

collection and secondary data collection
1. Collection of primary data:
 Observation method
 Interview method

 Through questioner

 Other methods which includes warranty cards,

consumer panels, etc

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2. Collection of secondary data:-Secondary data are
available in
 Various publication of the central state and local

government
 Various publications of foreign government or
international bodies and their subsidiary
organization.
 Technical and trade journals

 Books, magazines and newspapers

 Reports

 Public records and statistics, historical documents.

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By way of caution, the entrepreneur before using
secondary data must see that the process following
characteristics

1.Reliability of data
a. Who collected the data?
b. What were the sources of data?
c. Were they collected by using proper
methods?
d. At what time they collected. Etc.
2.Suitability of data:- the data that are suitable for one
enquiry may not be suitable for another enquiry, then
the researcher has to check the suitability of the data
properly.
3.Adequacy of data
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Kinds of Entrepreneurship
1.Women Entrepreneurs.
2.Founders and other Entrepreneurs.
a. Founding Entrepreneurs /Founders/
b.General mangers and
c.Franchisees
3.High-Growth and low-Growth Firms
a.Marginal Firms
b.Attractive Small Companies and
c.High potential ventures.
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 Founding Entrepreneurs /Founders/: Generally
considered to be the “Pure” entrepreneurs, funders may be
inventors who initials business as an the basis of new or
improved products or services. Founders refer to
entrepreneurs who bring new firms into existence.
 General managers : As new firms become well
established, founders become less innovators and more
administrators. Thus, we recognize another class of
entrepreneurs called general managers. General Managers
preside over the operation of successful ongoing business
firms. They manage the week to week and month – to
month production, marketing and financial functions of
small firms
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 Franchisees :A system in which semi-independent
business owners (franchisees) pay fees and royalties to
a parent company (franchiser) in return for the right to
become identified with its trademark, to sell its
products or services, and often to use its business
format and system.

Reading Assignment
What is franchise & franchisee in business? 42
 Creativity is the ability to develop new ideas & to
discover new ways of looking at problems &
opportunities.
 Innovation is the ability to apply Creative solutions to
those problems & opportunities in order to enhance
people’s lives or to enrich society.
 Entrepreneurship is the result of a disciplined,
systematic process of applying creativity & innovation to
needs & opportunities in the market place.
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 Creative ideas are needed anywhere there are
problems with unknown solutions
 An entrepreneur’s creativity is often the difference
between success and failure in business.
 To be creative, entrepreneurs need to keep their
mind and eyes open to their environment.
 Some people believe that they are not creative.
(Consider as a gift of God )
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From Creativity to Entrepreneurship

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 Creativity is thinking new things, and innovation is
doing new things
 
 Researchers believe that entrepreneurs succeed by
thinking and doing new things or old things in new
ways .
Entrepreneurship = creativity + innovation

 People can develop their creative potential through

learning and practice.

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End of the lesson

Thank You

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