COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

Entrepreneurship and Business Development

Freshman Program
 Course Objectives
At the end of this course students will be able to:
1. Define entrepreneurship within the context of society
2. Identify business opportunities
3. Prepare business plan
4. Distinguish forms of business ownership
5. Comprehend intellectual property rights in business practices
6. Define basic marketing concepts
7. Formulate context-based marketing strategies
8. Identify and evaluate sources of financing new ventures
9. Manage business growth and transition
[Link] ethical business with all stakeholders
2
23-Nov-21 Department of Management, DDU
 Core Course

Chapter One:The Nature Of Entrepreneurship

Core Course
Chapter Two:Business Planning
Chapter Three:Business Formation
Chapter Four:Product or Ser vices Development
Chapter Five:Marketing
Chapter Six:Financing the new venture
Chapter Seven:Managing Growth and
Transition
Department of Management, DDU 3
 Chapter One
The Nature Of Entrepreneurship
1. Definition and philosophy of EntrepreneurshipVs Entrepreneurs
1. Historical origin of entrepreneurship
2. Type of Entrepreneurs
3. Role within the economy
4. Entrepreneurial Competence and Environment
1. Entrepreneurial Mindset
2. Demographic Factors
3. Entrepreneurial Environment
5. Entrepreneurship,creativity and innovation

11
 Learning Outcome
After completing this chapter, students will be able to:
1. Define the term entrepreneurship and entrepreneur
2. Identify types of entrepreneur
3. Recognize the role of entrepreneurship in the economy
4. Analyze the entrepreneurial competences
5. Differentiate the term creativity and innovation
 The Nature of Entrepreneurship
1.1 Entrepreneurship:Historical Perspective
The term entrepreneur comes from French
term
„entreprendre‟,meaning "to undertake"

or from words "Entre" = "between" + "prendre" =

―taker".

The verb is ―entreprendre‖or to undertake.

5/4/2020
 The Nature of Entrepreneurship
Entrepreneurship:Historical Perspective (Continued)
Historical Development of Entrepreneurship:
Ancient • Manage large commercial projects through the
Period resources provided to them.

14th Century • Tax Contractors – pay money to government to get

license for collecting taxes.

17th • Signed a contractual agreement with the

government to supply products/services at a fixed
Century price.
1776 Adam • Undertook the formation of an organization for
Smith commercial purposes.
• Unusual foresight to recognize demand for G & S
 The Nature of Entrepreneurship
Entrepreneurship:Historical Perspective (Continued)
Risk taker:buy products at a known price and sell it at an
18th Century Richard unknown price.
Cantillon • Entrepreneurial role and capital providing/venture
capitalist/ role were differentiated

• Organizes and operates an enterprise for

19th – 20th C. personal goal. Capital + Materials/Land/Labor +
Own Skill

1934 Joseph • Force of“creative destr uction”

Schumpeter • Innovators who use the process to change old ways
• Entrepreneur:inventor
Middle 20th • Reform pattern of production ( new products, old in
C. new ways, and new in new ways)
Entrepreneurship: Risk, Innovation and Newness
The Nature of Entrepreneurship
Entrepreneurship:Definition (Continued.)
Definition 3:Definitions From Different Perspectives
 3.1. Economist: an entrepreneur is one who brings resources (labor, materials, and
other assets) into combination that makes their value greater than before and also the
one who introduces changes and innovations.

 3.2. Psychologist: an entrepreneur is 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.

 3.3. Capitalist Philosopher: an entrepreneur is one who creates wealth for others as
well, who finds better way to utilize resources and reduce waste and who produce job
5/4/2020 Department of Management, AAU
which others are glad to get. 49
 The Nature of Entrepreneurship
Definition of Entrepreneurship

1. Entrepreneurship is the process of identifying

opportunities in the market place, arranging the
resources required to pursue these opportunities
and investing the resources to exploit the
opportunities for long term gains.
It involves creating incremental wealth by bringing
together resources in new ways to start and operate
an enterprise.
The Nature of Entrepreneurship
Definition of Entrepreneurship (continued..)
2. Entrepreneurship is the processes through which individuals become
aware of business ownership then develop ideas for, and initiate a business.
3. Entrepreneurship can also be defined as the 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. In this case an individual should come up with something
different and better in order to the named as entrepreneur.
 The Nature of Entrepreneurship
Definition of Entrepreneurship
continued..

4. 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.
 In general, the process of entrepreneurship
includes five critical [Link] are:.
1. The ability to perceive an opportunity.
2. The ability to commercialize the perceived
opportunity [Link]
3. The ability to pursue it on a sustainable
basis.
4. The ability to pursue it through systematic
means.
5. The acceptance of risk or failure.
 Conceptual Model of Entrepreneurship
Figure 1.1 The person
Personality, skill, experience,
motives, and psychological
preferences

The organization The task

Structure, rules, policies, Entrepreneurship Perceiving opportunity,
culture, human resource marshalling resources,
system, communication providing leadership

The environment
Availability of resource,
infrastructure, competitive pressures,
social values, rules and regulations,
technology
In General an entrepreneur is;

Entrepreneur is one who identifies

and sensitizes the opportunities,
innovate the ideas,raises money,
assembles inputs and set and
mange the organization,and
assumes the responsibility for it.
 An entrepreneur can be
defined as follows:
1. An entrepreneur is any person who creates and develops a
business idea and takes the risk of setting up an enterprise to
produce a product or service which satisfies customer needs.
2. An entrepreneur can also be defined as a professional who
discovers a business opportunity to produce improved or new
goods and services and identifies a way in which resources
required can be mobilized.
An entrepreneur can be defined as follows:
(Continued…..)
3. An entrepreneur is an individual who: has the ability to identify and pursue a
business opportunity; undertakes a business venture; raises the capital to
finance it; gathers the necessary physical, financial and human resources
needed to operate the business venture; sets goals for him/herself and others;
initiates appropriate action to ensure success; and assumes all or a major
portion of the risk!

4. An entrepreneur is a person who: create the job not a job-seeker; has a dream,
has a vision; willing to take the risk and makes something out of nothing
 The Nature of Entrepreneurship
Entrepreneurship: Historical Perspective
What is entrepreneurship? And who is an entrepreneur?
Related concepts:
o Entrepreneur: a person who undertakes a certain project
o Entrepreneurship: how the entrepreneur does what S/he
wants
o Entrepreneurial process: means through which new
value is created as a result of a project
 Entrepreneur Vs Entrepreneurship
Entrepreneur Entrepreneurship
Refers to person: Refers to process:
Visualizer Vision
Creator Creation
Organizer Organization
Innovator Innovation
Technician Technology
Initiator Initiative
Decision maker Decision
Planner Planning
Leader Leadership
Motivator Motivation
Programmer Action
Risk taker(bearer) Risk taking(bearing)
Communicator Communication
Administrator Administration
 1.2 Types of Entrepreneurs
[Link] individual entrepreneu r : owns his own independent organization.
5 1

[Link]: does entrepreneurial work within large organization

Employee Entrapreneur: inside entrepreneur who follows the goal
of the organization and gets support and resources from the
organization
Self-employed Entrapreneur: develops a business based on a
business format/model of another company
Low risk alternative because he operates within the set
policies and procedures

Department of Management, AAU 5/4/2020

 Types of Entrepreneurs
Types of Entrepreneurs:
27
1. The individual entrepreneur: owns his own independent organization.
2. Intrapreneur: does entrepreneurial work within large organization
– Intrapreneurship is the practice of using entrepreneurial skills without taking off the
risks or accountability associated with entrepreneurial activities.

Employee Entrapreneur:
Self-employed Entrapreneur
3. The Entrepreneurial organization/Corporate entrepreneurship/
– create an internal environment in which all of its members can be motivated to
contribute in some way to the entrepreneurial function.
 ENTREPRENEUR VS INTRAPRENEUR
BASIS FOR COMPARISON ENTREPRENEUR INTRAPRENEUR
Meaning Entrepreneur refers to a person who set up his Intrapreneur refers to an employee of
own business with a new idea or concept. the organization who is in charge of
undertaking innovations in product,
service, process etc.
Approach Intuitive Restorative
Resources Uses own resources. Use resources provided by the
company.
Capital Raised by him. Financed by the company.
Enterprise Newly established An existing one
Dependency Independent Dependent
Risk Borne by the entrepreneur himself. Taken by the company.
Works for Creating a leading position in the market. Change and renew the existing
organizational system and culture.
 ENTREPRENEUR VS MANAGER
BASIS FOR COMPARISON ENTREPRENEUR MANAGER
Meaning Entrepreneur refers to a person Manager is an individual who
who creates an enterprise, by takes the responsibility of
taking financial risk in order to controlling and administering
get profit. the organization.

Focus Business startup Ongoing operations

Primary motivation Achievement Power
Approach to task Informal Formal
Status Owner Employee
Reward Profit Salary
Decision making Intuitive Calculative
Driving force Creativity and Innovation Preserving status quo
Risk orientation Risk taker Risk averse
 BUSINESSMAN VS ENTREPRENEUR

BASIS FOR COMPARISON BUSINESSMAN ENTREPRENEUR

Meaning A businessman is someone who An entrepreneur is a person who

sets up a business with an starts an enterprise with a new
existing idea offering products idea or concept, undertaking
and services to the customers. commercial activities.
Market Position Market Player Market Leader
Nature Calculative Intuitive
Market Creates place in existing markets Creates new market
Risk factor Less Comparatively high
Methods applied for doing things Conventional Unconventional
Approach Holistic Atomistic
Orientation Profit People
Competition Very high Low
• Which one is your area of interest after graduation ?
 Employee Entrapreneur
or

 Self-employed Entrapreneur

• WHY?
 Discussion
 Is an entrepreneurs are same in developing and developed
countries? Why?
 Cont…………

Entrepreneurs have different approaches in developed and developing

countries.
Entrepreneurs in developing countries is not expected to be innovators but
need to be imitators.
Because
private capital is shy,
 skill and technological knowledge is highly deficient
and
 socio economic infrastructure do not have many innovators, such countries
need ‘imitators’ who can implement the invasions made in developed countries.
 Cont……………..
Types of Entrepreneurs
1. Innovating entrepreneurs
 aggressive assemblage of information & the analysis of results derived from sound
combination of factors.

 introduces new goods,

 inaugurates new method of production,

 discovers new market and

 reorganizes the enterprise.

34
 Cont……………..
2. Adaptive or imitative entrepreneurs
Readiness to adopt successful innovations
Do not innovate the changes themselves, they only imitate techniques
and technology innovated by others.
Practically suitable for the developing countries
Bringing a mushroom drive of imitation of new combinations of factors
of production already available in developed regions.
Imitative entrepreneurs face lesser risks and uncertainty than innovative
entrepreneurs.
35
3. Fabian entrepreneurs
Very cautious and skeptical while practicing any change.
Have neither the will to introduce new changes nor the desire to adopt new methods
Imitate only when it becomes perfectly clear that failure to do so would result in a loss
of the relative position in the enterprise.
Are lazy and shy
Their dealing are determined or dominated more by customs, religion,
and past practices.
Not much interested in taking risk and try to follow the footsteps of their
predecessors.

36
 Cont………….
4. Drone entrepreneurs
refusal to adopt and use opportunities to make changes in production formula
May even suffer losses but they are not ready to make changes in their existing
production methods.
 struggle to exist, not to grow.
 straggler as they continue to operate in their traditional way and resist
changes.
 blind follow traditional methods of production even when it causes loss
to him.

37
3. Samrawit Fikru. was a computer programmer and software
developer who often found herself staying late at the office.
When she went to get a taxi, it took forever to find one late at
night and the drivers would charge double the day time rates.

On top of this, she did not feel safe getting into a taxi with a
driver she did not know.

• At the age of 22, having identified the gap in the market,

she took $2,000 of her own savings and started Hybrid
Design, a software and applications developing company
and introduced RIDE, a transport and booking platform in
Ethiopia that is phone-based just like Uber. RIDE started
as an SMS-focused request in 2014.

38
2. Bethlehem Tilahun owner of sole Rebels
in 2005 after graduating from Unity
University , a private university in Addis,
she convinced her grandmother to let her
open a workshop on her land.
From a small space she began creating
footwear based on traditional Ethiopian
footwear.
She has managed to bridge the
African/West divide by combining local
products including recycled tire soles (her
trademark) and locally sourced fibers with
more western style designs.
Biruke Tekeste

Is founder of Hope Entertainment, Hope is an entertainment production house

focusing on Ethiopian music and film. With more than 950 Ethiopian music video
uploads , 350 thousand subscribers and 357 million views Biruk has
now posted as the number you tube channel in east Africa.
 MARK ZUCKERBERG

Mark Zuckerberg is an American programmer, philanthropist, and Internet entrepreneur. He is the

chairman, chief executive, and co-founder of the social networking website Facebook. Together with
his college roommates and fellow Harvard University students Eduardo Saverin, Andrew McCollum,
Dustin Moskovitz, and Chris Hughes, he launched Facebook from Harvard’s dormitory rooms.
 MICHAEL DELL

Michael Saul Dell is an American business magnate, investor,

philanthropist, and author. He is the founder and CEO of Dell Inc.,
one of the world’s leading sellers of personal computers (PCs).
 BILL GATES

Topping in the list of top 10 richest entrepreneurs in the world with a net worth of $76 billion is Bill
Gates. No doubt, he is always included in the list of top 10 successful entrepreneurs in the world. He
is an American business magnate, philanthropist, entrepreneur, programmer, and investor. Gates is
one of the best-known entrepreneurs of the personal computer revolution.
 1.3 Role of Entrepreneurs in Economic
Development
1. Improvement in per capita Income/Wealth Generation
2. Generation of Employment Opportunities
3. Inspire others Towards Entrepreneurship
4. Balanced Regional Development
5. Enhance the Number of Enterprise
6. Provide Diversity in Firms
7. Economic Independence
8. Combine Economic factors
9. Provide Market efficiency
10. Accepting Risk
11. Maximize Investor‘s Return
1.4 Entrepreneurial Competence and
Environment
Entrepreneurial Mindset
Who Becomes an Entrepreneur?
1. TheYoung Professional
2. The Inventor
3. The Excluded
 Entrepreneurial Mindset
I. Qualities of an Entrepreneur
1. Opportunity-seeking
2. Persevering
3. Risk Taking
4. Demanding for efficiency and quality
5. Information-seeking
6. Goal Setting
7. Planning
8. Persuasion and networking
9. Building self-confidence
10. Listening to others
11. Demonstrating leadership
 Entrepreneurial Mindset
II. Entrepreneurial Skills
I. General Management Skills:
II. Strategy Skills
III. Planning Skills
IV. Marketing Skills
V. Financial Skills
VI. Project Management Skills
VII. Time Management Skills
2. People Management Skills:
I. Communication Skills
II. Leadership Skills
III. Motivation Skills
IV. Delegation Skills
V. Negotiation Skills
 Entrepreneurial Mindset
[Link] EntrepreneurialTasks
1. Owning Organizations
2. Founding New Organizations
3. Bringing Innovations to Market
4. Identification of Market Opportunity
5. Application of Expertise
6. Provision of leadership
7. The entrepreneur as manager
 Entrepreneurial Mindset
[Link] of the Entrepreneur
Who benefits from the Entrepreneur's wealth?
 No Entrepreneur works in a vacuum: the venture they create
touches the lives of many people.
 Benefiters From Entrepreneurial Wealth;
Stakeholders:
 Employees
 Investors
 Suppliers
 Customers
 The local community
 Government
Who benefits from the Entrepreneur's wealth?
65
Benefits Employees
Investors:
Government Shareholder

or
Lab
Lenders

Venture

Provide
Inputs
Local
Community Customer
Suppliers
1.5 Entrepreneurship and Environment
1.6 Phases of Business Environment

A. External Environment
 Economic Environment
 Legal Environment
 Political Environment
 Socio-Cultural Environment
 Demographic Environment
B. Internal Environment
 Raw Material
 Production/Operation
 Finance
 Human Resource
1.7Creativity, Innovation and
Entrepreneurship
Creativity
 the ability/process to develop new ideas and to discover new
ways of looking at problems and opportunities.
Innovation
 the ability to apply creative solutions to those problems and
opportunities in order to enhance people‘s lives or to enrich
society

Entrepreneurship = Creativity + Innovation

68
CREATIVITY VS INNOVATION BASIS FOR
CREATIVITY INNOVATION
COMPARISON
Meaning Creativity is an act Innovation is the
of creating new introduction of
ideas, imaginations something new and
and possibilities. effective into the
market.
Process Imaginative Productive
Quantifiable No Yes
Related to Thinking Introducing
something new something new
Money No Yes
Consumption
Risk No Yes
1.7.1 Creativity

Source: Microsoft, Local Software Economy Initiative Training Material 69

 BASIS FOR COMPARISON INVENTION INNOVATION
Meaning Invention refers to the Innovation implies the
occurrence of an idea for a implementation of idea for
product or process that has product or process for the very
never been made before. first time.
What is it? Creation of a new product. Adding value to something
already existing.
Concept An original idea and its working Practical implementation of new
in theory. idea.
Skills required Scientific skills Set of marketing, technical and
strategic skills.
Occurs when New idea strikes a scientist. A need is felt for a product or
improvement in existing
product.
Concerned with Single product or process. Combination of various
products and process.
Activities Limited to R & D department. Spread across the organization.
5/4/2020 Department of Management, AAU 71
[Link] Steps in the Creative Process
• Step1: Opportunity or problem Recognition: A person
discovers that a new opportunity exists or a problem needs
resolution.
• Step2: Immersion: the individual concentrates on the problem
and becomes immersed in it. He or she will recall and collect
information that seems relevant, dreaming up alternatives
without refining or evaluating them.
• Step 3: Incubation: the person keeps the assembled information
in mind for a while. He or she 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. Verification procedures
include gathering supporting evidence, using logical persuasion,
and experimenting with new ideas.
 1.7.1 Creativity (Continued…)
BARRIERS TO CREATIVITY

1. Searching for the one „right‟answer

2. Focusing on being logical

3. Blindly following the rules

4. Constantly being practical

5. Viewing play as frivolous

6. Becoming overly specialized

7. Avoiding ambiguity

8. Fearing looking foolish

9. Fearing mistakes and failure

73
10. Believing that ‗Iam not creative‘
1.7.2 The Innovation Process
1. Analytical planning: carefully identifying the product or
service features, design as well as the resources that will
be needed.
2. Resources organization: obtaining the required
resources,materials, technology,human or capital resources
3. Implementation: applying the resources in order to
accomplish the plans
4. Commercial application: the provision of values to
customers, reward employees and satisfy the stakeholders.
1.7.3 Areas of Innovation (Continued)
 New means of informing the customer about the product
(new advertising system):message and means
 New means of managing relationship within the organization (new internal
relationship management system): internal communication channels.

 New ways of managing relationships between organizations

(new external relationship management system)

Principles Of Innovation:
 Action-oriented: constant search for new ideas
 Simple and understandable product,process or service 77
 Management Tips
 Challenging the myths about entrepreneurs
• Entrepreneurs are born, not made.
Not true! Talent gained and enhanced by experience is a foundation for entrepreneurial success.
• Entrepreneurs are gamblers.
Not true! Entrepreneurs are risk takers, but the risks are informed and calculated.
• Money is the key to entrepreneurial success.
Not true! Money is no guarantee of success. There’s a lot more to it than that; many entrepreneurs start
with very little.
• You have to be young to be an entrepreneur.
Not true! Age is no barrier to entrepreneurship; with age often come experience, contacts, and other
useful resources.
• You have to have a degree in business to be an entrepreneur.
Not true! But, it helps to study and understand business fundamentals.