Ch 01 Entrepreneurship 2010 Notes

Chapter 1: EntrepreneurshipChapter 1: Entrepreneurship 11Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company

The Foundations of Entrepreneurship

The Foundations of Entrepreneurship


Learning ObjectivesLearning ObjectivesDescribe the entrepreneurial profile and Describe the entrepreneurial profile and

evaluate one’s potential as an entrepreneurevaluate one’s potential as an entrepreneurDescribe the benefits and drawbacks of Describe the benefits and drawbacks of

entrepreneurshipentrepreneurshipExplain the forces that are driving the Explain the forces that are driving the

growth of entrepreneurshipgrowth of entrepreneurshipExplain the cultural diversity of Explain the cultural diversity of

entrepreneurshipentrepreneurshipDescribe the important role small businesses Describe the important role small businesses

play in our nations economyplay in our nations economy


Learning ObjectivesLearning Objectives

Describe 10 deadly mistakes of Describe 10 deadly mistakes of entrepreneurship & explain how to entrepreneurship & explain how to avoid themavoid them

Explain how entrepreneurs can avoid Explain how entrepreneurs can avoid becoming another failure statisticbecoming another failure statistic


What is an entrepreneur?What is an entrepreneur?

One who creates new business – face risk One who creates new business – face risk & uncertainty for the purpose of & uncertainty for the purpose of achieving profit & growth by identifying achieving profit & growth by identifying significant opportunities & assembling significant opportunities & assembling the necessary resources to capitalize on the necessary resources to capitalize on them. them.


The World of the EntrepreneurThe World of the Entrepreneur In the U.S., entrepreneurs start between 3 In the U.S., entrepreneurs start between 3

million and 4.5 million businesses a year!million and 4.5 million businesses a year! In Malaysia as for the year 2007:In Malaysia as for the year 2007:3, 506,559 (Total number of businesses)3, 506,559 (Total number of businesses)2008 there are almost 3,568,095 total 2008 there are almost 3,568,095 total

number of businessesnumber of businesses


The World of the EntrepreneurThe World of the Entrepreneur

Many world largest companies continue Many world largest companies continue to engage in massive downsizing to engage in massive downsizing campaigns, cutting number of managers campaigns, cutting number of managers & workers on their payrolls : this has & workers on their payrolls : this has encouraged entrepreneurial activity & encouraged entrepreneurial activity & the no longer notion of job securitythe no longer notion of job security


Characteristics of EntrepreneursCharacteristics of Entrepreneurs

Desire for responsibility: Desire for responsibility: Preference for moderate risk: Preference for moderate risk: Confidence in their ability to succeed:Confidence in their ability to succeed:


Characteristics of EntrepreneursCharacteristics of Entrepreneurs Desire for immediate feedback: Desire for immediate feedback: High level of energy:High level of energy: Future orientationFuture orientation


Characteristics of EntrepreneursCharacteristics of EntrepreneursSkill at organising: Skill at organising: Value of achievement over money:Value of achievement over money:


Characteristics of EntrepreneursCharacteristics of EntrepreneursHigh degree of commitment:High degree of commitment:Tolerance for ambiguity: Tolerance for ambiguity: Flexibility:Flexibility:


Difference between an entrepreneur Difference between an entrepreneur and a small businessmanand a small businessman

CharacteristicsCharacteristics EntrepreneurEntrepreneur Small BusinessSmall Business

TimeTime Unlimited time -Unlimited time - Limited – Limited –

Nature of jobNature of job Flexible – Flexible – Rigid – Rigid –



Decision-Decision-makingmaking

Makes own Makes own decision & use decision & use creativitycreativity

Follow Follow decisions made decisions made by othersby others

Effort & Effort & commitmentcommitment

Continuously Continuously keep updated keep updated with current & with current & future future technological dev technological dev

Not attracted to Not attracted to changes & changes & technological technological breakthroughbreakthrough



Risk-Risk-takertaker

Takes calculated or Takes calculated or moderate risk – moderate risk –

Low risk taker – Low risk taker –

GoalGoal Starts a venture & Starts a venture & commits on expansion of commits on expansion of venture – venture –

Solely to gain Solely to gain profits to support profits to support & earn a living. & earn a living. Always struggle Always struggle to obtain profit.to obtain profit.


EntrepreneurshipEntrepreneurship

One characteristic of entrepreneurs stands out:One characteristic of entrepreneurs stands out:

Diversity!Diversity! AnyoneAnyone – regardless of age, race, gender, color, – regardless of age, race, gender, color,

national origin, or any other characteristic – national origin, or any other characteristic – can become an entrepreneur (although not can become an entrepreneur (although not everyone should). everyone should).

It is not a genetic trait – it is a skill that most It is not a genetic trait – it is a skill that most people can learn people can learn


Benefits of Small Business Benefits of Small Business OwnershipOwnership

The opportunity to:The opportunity to: Create your own destinyCreate your own destiny Make a differenceMake a difference Reach your full potentialReach your full potential Reap impressive profitsReap impressive profits Contribute to society and to be recognized for Contribute to society and to be recognized for

your effortsyour efforts Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it


Drawbacks of Small Business Drawbacks of Small Business OwnershipOwnership

Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work



Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work Lower quality of life until the business gets Lower quality of life until the business gets

establishedestablished

9.8%

16.8% 16.7%15.9%

15.2%

9.3%8.5%

3.9%

2.2% 1.7%

0.0%

2.0%

4.0%6.0%

8.0%

10.0%

12.0%14.0%

16.0%

18.0%

Under25

25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

Age

Owner Age at Business Formation



Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work Lower quality of life until the business gets establishedLower quality of life until the business gets established

High levels of stressHigh levels of stress Complete responsibilityComplete responsibility DiscouragementDiscouragement


What’s feeding the What’s feeding the Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroes: Entrepreneurs as heroes: Entrepreneurial education :Entrepreneurial education :



Demographic and economic factors: Demographic and economic factors: Shift to service economy: Shift to service economy: Technological advancements:Technological advancements:



Independent lifestyles: Independent lifestyles: E-Commerce and the World Wide Web:E-Commerce and the World Wide Web:


Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

International opportunities: small International opportunities: small companies have expanded successfully into companies have expanded successfully into foreign markets rely on the following foreign markets rely on the following strategies:strategies:

Researching foreign markets thoroughly;Researching foreign markets thoroughly; Focusing on single country initiallyFocusing on single country initially Utilize government resources to help small Utilize government resources to help small

companies establish international presencecompanies establish international presence Forging alliances with local partners Forging alliances with local partners


The Cultural Diversity of The Cultural Diversity of EntrepreneurshipEntrepreneurship

Young entrepreneurs:Young entrepreneurs: Women entrepreneurs:Women entrepreneurs:



Minority-owned enterprises:Minority-owned enterprises:

Immigrant entrepreneurs: Immigrant entrepreneurs:

Part-time entrepreneurs:Part-time entrepreneurs:



Home-based businesses: booming – 80% are Home-based businesses: booming – 80% are very small & have no employees. Factors very small & have no employees. Factors make home entrepreneurs first choice:make home entrepreneurs first choice:

Operating buss from home keeps start-up & Operating buss from home keeps start-up & operating cost minimumoperating cost minimum

Allow to maintain flexible lifestyle & work Allow to maintain flexible lifestyle & work stylestyle



Technology transforming homes into Technology transforming homes into electronic cottages with million dollars in electronic cottages with million dollars in salesale

Family businesses Family businesses

Copreneurs : couplesCopreneurs : couples



Corporate castoffs: Corporate castoffs: Corporate dropouts:Corporate dropouts:

A Profile of Small Business by Industry

Service40%

Retail20%

Construction12%

Wholesale8% Manufacturing

6%Finance

8%

Other6%


Small Businesses...Small Businesses... Make up 99% of all the businesses in the Make up 99% of all the businesses in the

U.S.U.S.

Employ 51% of the nation's private sector Employ 51% of the nation's private sector workforce.workforce.

Create more jobs than big businesses.Create more jobs than big businesses.

Are leaders in offering training and Are leaders in offering training and advancement opportunities to workers – advancement opportunities to workers – offer more general skills instruction & offer more general skills instruction & training than large ones.training than large ones.


Produce 51% of the nation's private Produce 51% of the nation's private GDP.GDP.

Account for 47% of business sales.Account for 47% of business sales.

Small Businesses...Small Businesses...(continued)(continued)

100%

81%

65%

54%46%

40%36%

32% 29% 27% 25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% o

f S

mal

l F

irm

s S

urv

ivin

g

New 1 2 3 4 5 6 7 8 9 10

# of Years in Business

Small Business Survival Rate


Ten Deadly Mistakes of Ten Deadly Mistakes of EntrepreneurshipEntrepreneurship

1.1. Management mistakes:Management mistakes:

2.2. Lack of experienceLack of experience

3.3. Poor financial control:Poor financial control:



4. Weak marketing efforts4. Weak marketing efforts

5. Failure to develop a strategic plan:5. Failure to develop a strategic plan:



(continued)(continued)

6.6. Uncontrolled growth:Uncontrolled growth:

7.7. Poor location: Poor location:

8.8. Improper inventory control:Improper inventory control:



Incorrect Pricing :Incorrect Pricing : Inability to make Entrepreneurial Transition:Inability to make Entrepreneurial Transition:


Putting Failure Into PerspectivePutting Failure Into PerspectiveEntrepreneurs are Entrepreneurs are notnot paralyzed by the paralyzed by the

prospect of failure – excitement of prospect of failure – excitement of building new buss from scratchbuilding new buss from scratch

Failure – a natural part of the creative Failure – a natural part of the creative process – those never fail are those never process – those never fail are those never do anything. do anything.

Successful entrepreneurs learn to fail Successful entrepreneurs learn to fail intelligently – learn why they failedintelligently – learn why they failed..


Avoiding the Pitfalls of Avoiding the Pitfalls of Small Business FailureSmall Business Failure

Know your business in depthKnow your business in depth

Develop a solid business planDevelop a solid business plan

Manage financial resources: need to have Manage financial resources: need to have adequate start-up capital. Estimate how adequate start-up capital. Estimate how capital is required & then double the capital is required & then double the figure.figure.


Avoiding the Pitfalls of Avoiding the Pitfalls of Small Business FailureSmall Business Failure

Understand financial statements: Understand financial statements:

Learn to manage people effectivelyLearn to manage people effectively

Keep in tune with yourself:Keep in tune with yourself:


SME’s in MalaysiaSME’s in MalaysiaDefinition of SME’s:Definition of SME’s: For manufacturing, manufacturing related For manufacturing, manufacturing related

services and agro based industry: Companies services and agro based industry: Companies with annual sales turnover not exceeding RM with annual sales turnover not exceeding RM 25 million or full time employees not exceeding 25 million or full time employees not exceeding 150150

Services, primary agriculture, information and Services, primary agriculture, information and communication technology (ICT): Companies communication technology (ICT): Companies with annual sales turnover not exceeding RM 5 with annual sales turnover not exceeding RM 5 million or full time employees not exceeding 50million or full time employees not exceeding 50


SME’s in MalaysiaSME’s in Malaysia

Distribution of Companies by size: Distribution of Companies by size: Preliminary statistics by DOS: Dec 2005 Preliminary statistics by DOS: Dec 2005 (total establishment: 523,132)(total establishment: 523,132)

Micro : 411, 849 (78.9%)Micro : 411, 849 (78.9%)Small: 95,490 (18.3%)Small: 95,490 (18.3%)Medium: 11,657 (2.2%)Medium: 11,657 (2.2%)Large: 4,136 (0.8%)Large: 4,136 (0.8%)



Distribution of SME’s by Sector (Total Distribution of SME’s by Sector (Total SME’s: 518,996)SME’s: 518,996)

Agriculture: 32,126 (6.2%)Agriculture: 32,126 (6.2%)Manufacturing: 37, 866 (7.3%)Manufacturing: 37, 866 (7.3%)Services: 449,004 (86.5%)Services: 449,004 (86.5%)



Contribution of SME’sContribution of SME’s

Manufacturing: RM103.307 million (39%)Manufacturing: RM103.307 million (39%)Services: 156,035 (59%)Services: 156,035 (59%)Agriculture: 5,942 (2%)Agriculture: 5,942 (2%)


Business Support SystemBusiness Support System Refers to assistance & services given by Refers to assistance & services given by

government or private agencies to help government or private agencies to help entrepreneurs start new buss or develop entrepreneurs start new buss or develop an existing one:an existing one:

1.1. Technical assistance – offered to Technical assistance – offered to entrepreneurs to expose on production entrepreneurs to expose on production methods & systematic management – methods & systematic management – exp SIRIM, MARA, MARDI, RRI exp SIRIM, MARA, MARDI, RRI


Business Support SystemBusiness Support System2. Marketing assistance2. Marketing assistance- To help entrepreneurs distribute & market their products To help entrepreneurs distribute & market their products

locally & internationally – MITI, MATRADE, FAMA & locally & internationally – MITI, MATRADE, FAMA & GUTHRIEGUTHRIE

3. Infrastructure assistance3. Infrastructure assistance- Assist in getting business premises- MARA, PKEN, SIRIM, Assist in getting business premises- MARA, PKEN, SIRIM,

UDA, KPLB, BPIM, MIDAUDA, KPLB, BPIM, MIDA4. Information System4. Information System-- Info available in statistics, new research findings, Info available in statistics, new research findings,

technology, research – MITI, MATRADE, MARDI, SIRIM, technology, research – MITI, MATRADE, MARDI, SIRIM, MIDA & FRIMMIDA & FRIM

5. Research & Development5. Research & Development-- Research conducted are project feasibility studies, Research conducted are project feasibility studies,

marketing research & technology – MARDI, SIRIM, higher marketing research & technology – MARDI, SIRIM, higher learning institutions learning institutions


Business Support SystemBusiness Support System6.6. Financial assistanceFinancial assistance- Provide financing facilities to entrepreneurs – Provide financing facilities to entrepreneurs –

commercial banks, licensed financial companies & commercial banks, licensed financial companies & gov agencies gov agencies

7.7. Advisory ServicesAdvisory Services- Important for entrepreneurs in managing their buss Important for entrepreneurs in managing their buss

– rebate or tax reduction – given for services – rebate or tax reduction – given for services acquired under the training scheme recognised by acquired under the training scheme recognised by Ministry of Human ResourceMinistry of Human Resource

8. Training, seminars & workshops 8. Training, seminars & workshops -- Consist of management training, efficiency, skills & Consist of management training, efficiency, skills &

motivation – to the purpose of exposure to buss motivation – to the purpose of exposure to buss management & inculcate entrepreneurial management & inculcate entrepreneurial characteristics – MEDEC, PUNB, MARA, NPC & characteristics – MEDEC, PUNB, MARA, NPC & SEDC SEDC


Other Government Support Other Government Support AgenciesAgencies

Small and Medium Industries Development Small and Medium Industries Development Corporation (SMIDEC), government provide Corporation (SMIDEC), government provide various forms of financial assistance and various forms of financial assistance and capacity- building programmes to nurture capacity- building programmes to nurture SMEs' development SMEs' development

encourage small-and medium- sized encourage small-and medium- sized entrepreneurs to enter into and invest in the entrepreneurs to enter into and invest in the targeted and promoted economic sectors targeted and promoted economic sectors

Documents

Ch 01 Entrepreneurship 2010 Notes