School of Mechanical And

Industrial Engineering

Entrepreneurship for engineers

(IEng5242)

Lecture One
: Introduction to Entrepreneurship

Prepared by: Fekadu B.

1
February: 2023
1. Introduction to Entrepreneurship
Meaning of the terms entrepreneur, entrepreneurship
and owner manager;

Entrepreneurial Process

Characteristics of Entrepreneurs

Entrepreneurial Competences

Motivation for starting a business

Success factors for entrepreneurs

Drawbacks /Weakness/ of entrepreneurship

Elements involved in Entrepreneur

 Why We Study Entrepreneurship
 Scientists and Engineers who want to lead companies need

to know how to back up ideas with numbers.

 You will lead the complex business processes involved

in commercialization.

 You learn how to make trade-offs among features, benefits,

price, markets, and operations.

 You learn how to adapt uncertainty and change.

 You learn techniques for managing people.

 Meaning of Entrepreneur and Entrepreneurship
What is an Entrepreneur?
Entrepreneur is a person who owns, organizes, manages and
runs an enterprise by assuming the risk of a business or
enterprise.
 Entrepreneur is a person who establishes a new business
venture and is a visionary leader.
“a person who dreams great dreams” (Hisrich)
Entrepreneur is a person who has the ability to see and
evaluate business opportunities to gather the necessary resources
to take advantage of them, and to initiate appropriate action to
ensure success. (Meredith, 1982)
Entrepreneur is someone who is specialized in taking
4 judgmental decisions about the coordination of scarce resources.
 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.
Peter Drucker: states, as Entrepreneur is someone who
always searches for change responds to it, and exploits it as
an opportunity.
Example: It is the entrepreneur who only knows
Opening of new university near the society
Opening of Hotels near tourists„ attraction-center etc.

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A person who creates a new business in the face of risk and
uncertainty for the purpose of achieving profit and growth by
identifying opportunities and assembling the necessary
resources to capitalize on those opportunities.
Generally Entrepreneur is an individual who:
Has the ability to identify and pursue a business
opportunity.
Undertake a business venture.
Raises the capital to finance it.
Gathers the necessary resources.
Set goals for himself/herself and others.
Assumes major portion of the risk.
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 The difference between a Businessman and
an Entrepreneur
 Business man  Entrepreneur
 A person who makes his place in  A person who creates the market
the market with his efforts and for his own business.
dedication
 A person who starts a business on  A person who brings his unique
an old concept or idea. idea to run a startup company
 Business man is a market player.  Entrepreneur is a market leader,
because he is the first to start
 A businessman is focused towards such a kind of enterprise
profit, he may not give more  An entrepreneur is a people
importance to its employees, focused in essence, he gives more
customers importance to its employees,
customers
 The difference between a Businessman and
an Entrepreneur
Businessman Entrepreneur
 The risk factor is low but  Takes risks and they may
faces a huge competition from competitors later but they will
the rivals due to similarity of remain untouched.
products or services.

Copyright © 2016 Pearson Education Ltd.

 What is Entrepreneurship?
 Entrepreneurship is the process of designing, launching
and running a new business, which is often initially a small
business.
 The people who create these businesses are
called entrepreneurs.
Entrepreneurship: is the capacity and willingness to
develop, organize and manage a business venture along with
any of its risks to make a profit.
 It is typically focus on the launching and running of businesses,
due to the high risks

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 Cont…
 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”
Entrepreneurship is very rarely a get rich-quick
proposition; rather, it is one of building long-term value and
durable cash flow streams.

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 Generally Entrepreneur and Entrepreneurship
 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.
 Entrepreneurship is an economic concept. Economics
describes four factors of production, namely, land, labor,
capital and entrepreneurial ability (organizational skill).
 Entrepreneur is also a person who combines various
factors of production, processes the raw material, creates
utility in the product and converts the raw material into a
finished product, organizes the marketing function and sells the
11 product in the market in order to earn profit.
 Cont…

Entrepreneur Entrepreneurship Enterprise

The person The process The outcome

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 Factors Influencing Entrepreneurship

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 Entrepreneurial Process
 Entrepreneurial process can be defined as the steps taken

in order to establish a new enterprise.

 It is driven by opportunity/market

It is driven by a lead entrepreneur and an entrepreneurial team

 It is resource parsimonious and creative

 It depends on the fit and balance system

It is integrated and holistic

 Steps in the Entrepreneurial Process
 There are 5 steps in the Entrepreneurial Process
Discovery
Concept Development
Resourcing
Actualization and
Harvesting
1. Discovery: The step in which the entrepreneur generates
ideas, recognizes opportunities, and studies the
market.
Idea
Opportunity
 Innovation
 Steps in the Entrepreneurial Process
2. Concept Development: Develop a business plan: a
detailed proposal describing the business idea.
 Objective
 Executive Summary
 Mission Statement
3. Resourcing: The step in which the entrepreneur identifies
and acquires the financial, human, and capital resources
needed for the venture startup, etc.
 Start-up resources
 In the steps of resourcing:
 Apply for loans, grants and assistance
 Identify potential investors
 Identify hire employees
 Steps in the Entrepreneurial Process
4. Actualization: The step in which the entrepreneur
operates the business and utilizes resources to achieve
its goals.
 Grand Opening
 Day-to-Day Operations
5. Harvesting: The step in which the entrepreneur decides on
business’s future growth/ development, or demise.
 What is your 5-year or 10-year plan?
 Consider adding locations or providing different
products/services
 Will you go public?
 Entrepreneurial Process stages
 Income generation: is the initial stage in the entrepreneurial
process in which tries to generate surplus or profit.
 They are often taken on part- time involvement to supplement income.
e.g. a man with farm might rear some poultry birds to gain some profit.
Self-employment: is the 2nd stage in the entrepreneurial process
and refers to an individual‟s fulltime involvement in his own
occupation.
e.g. a person who starts a tea shop remains happy and satisfied
 Entrepreneurship: is the terminal stage of the entrepreneurial
process where in after setting up a venture one looks for
diversification and growth.
An entrepreneur is always in search of new challenges.
An entrepreneur can leave a perfectly running business to start another venture
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if he so desires.
 Entrepreneurs Vs. Intrapreneurs
 Entrepreneurs are people that notice opportunities and take
the initiative to mobilize resources to make new goods and
services.

 Intrapreneurs also notice opportunities and take initiative to

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

 Intrapreneurs often become entrepreneurs.

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 Entrepreneur and Intrapreneurs
 Entrepreneur  Intrapreneurs
 Is an owner who set up  Is an employee of the organization
his own business with a who is in charge of undertaking
new idea or concept. innovations in product, service,
process etc.
 Independent  Dependent
 Uses own resources.  Use resources provided by the
company.
 Risk is borne by the company
 Risk is borne by the
entrepreneur himself.
 Capital raised by him.  Capital financed by the company.
 Newly established  An existing enterprise
enterprise
 Entrepreneurial Skills
 The following are foundational skills entrepreneurs need to
run and operate a successful business:
Communication Skills
– Writing, Speaking & Listening
Human Relations, communication and negotiation Skills
Mathematical or financial Skills
Problem Solving & Decision Making Skills
Planning and leadership skills
Technical Skills
Basic Business / marketing Skills
Project Management Skills
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 Importance of Entrepreneurship
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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 Importance of Entrepreneurship
 To the nation
Provides larger employment
Results in wider distribution of wealth
Mobilizes local resources, skills and savings
Accelerates the speed of economic development
Stimulates innovation & efficiency

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 Wage Employment Vs Entrepreneurship
Wage Employment  Entrepreneurship

 Work for Others  Own Boss

 Follow Instructions  Make own plans
 Routine Job  Creative activity
 Earning is fixed, never  Can be negative sometimes,
negative generally surplus
 Does not create wealth  Creates Wealth, contributes to
 Can choose from- GDP
 Government service  Can choose from-

 Public Sector  Industry

 Private Sector  Trade or Service Enterprise

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 Outcomes of Entrepreneurship
Economic growth
New industry formation
Job creation
 Four key elements in Entrepreneurship
Vision (Identifying emerging opportunities)
Innovation (Doing some thing new)
Risk taking (Assuming different types of risks; financial,
psychological, social)
Organizing (Coordinating resources and creating
enterprise)

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 Owner Managers
Owner manager:
 The owner-managers are a person who both owns and
manages a business enterprise.
 Owner-managers of an enterprises are workers who hold a
job in an incorporated enterprise, in which they:
 Alone, or together with other members of their families or
one or a few partners, hold controlling ownership of the
enterprise; and
 Have the authority to act on its behalf as regards contracts
with other organizations and the hiring and dismissal of
persons.

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 Owner Managers and Entrepreneurs
 Both managers and entrepreneurs are answerable for producing
results, ------the results are, of course, different.
 Both are accountable.
 Both have to produce results through people working with them
though they deal with different sets of people.
 They are not effective in the long run, if they are loners.
 Both are decision-makers but the decisions are different as
their tasks vary.
 Both have to operate under constraints, which are
understandably different.

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 Owner Managers and Entrepreneurs
 Both have to follow sound principles of management like
planning, staffing, delegation and control.
 Generally Similarities between Managers and Entrepreneurs
 To produce results
 To produce results through people
 To take decisions .
To cooperate under constraints
To follow sound principles of management
 A successful organization needs both entrepreneurship and
management.

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 The Entrepreneur Vs the Owner Manager
Entrepreneur:
a. Entrepreneurial function is the organization of production:
 Entrepreneurship is an economic concept.
 Economics describes four factors of production, namely, land, labor,
capital and entrepreneurial ability (organizational skill).
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
[Link] entrepreneur is the owner of the business who enjoys the
position of an employer.

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 The Entrepreneur Vs the Owner Manager
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.
 Limited scope for innovativeness, creativity and imagination
 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
30 -Risk bearing capacity is an entrepreneurial quality.
 Characteristics of Entrepreneurs
1. Need for Achievement

2. Willingness to take risks:-financial, careers, family ,

3. Self-Confidence: internal and external locus of control
4. Innovation: The entrepreneurial manager 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-rounders
7. A need to seek refugee: escape from environmental factor
a. The “Foreign Refugee”
b. Corporate Refugee.
31 c. Other types of Refugees
 Cont…
 Other types of “ refugees” mentioned are the following:
[Link] parental (paternal) refugee
 Who leaves a family business to show the parent that “I can do it
alone”.
[Link] feminist refugee
 Who experiences discrimination and elects to start a firm in which she
can operate independently male chauvinist.
[Link] 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.
[Link] educational refugee
 Who tires of an academic program and decide to go into business.

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 Entrepreneurial Competences
 Entrepreneurial competence refers to a set of skills and
behaviors needed to create, develop, manage, and grow a business
venture.
 It also includes the ability to handle the risks that come with
running a business.
 Entrepreneurs have some competences which distinguish them
from the general population and even from hired professional
manager.
 Opportunity seeking and initiative:
 Successful entrepreneurs have the following characteristics:
 They do things before asked or forced to by events
 They act to extend the business into new areas, products or services
 They seize unusual opportunities to start a new business, obtain
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financing, equipment, land work space or assistance.
 Entrepreneurial Competences
Calculated risk taking:
 The behavioral indicators are:
Deliberately calculates risks and evaluates alternatives
Taking action to reduce risks or control outcomes
Placing self in situations involving a challenge or moderate risk
Persistence:
 The behavioral indicators are:
Taking action in the face of a significant obstacle
Taking repeated actions or switches to an alternative strategy to meet
a challenge or overcome an obstacle
Taking personal responsibility for the performance necessary to
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achieve goals and objectives
 Entrepreneurial Competences
Commitment to work contract:
 The behavioral indicators are:

Making a personal sacrifice or expending extra ordinary

effort to complete a job

Striving to keep customers satisfied and working with

employees to make things for customers ready

Placing long term good will over short term gain

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 Entrepreneurial Competences
Demand for efficiency and quality;
 The behavioral indicators are:
Finds ways to do things better, faster, or cheaper
Acts to do things that meet or exceed standards of excellence
Develops or uses procedures to ensure work is completed on
time or that work meets agreed upon standards of quality

Effectiveness+Efficiency+Quality+good time management = Success

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 Entrepreneurial Competences
 Goal setting:
 The behavioral indicators are:
Sets goals and objectives that are personally meaningful and
challenging
Articulates clear and specific long range goals
Sets measurable short term objectives
Information seeking:
 The behavioral indicators are:
Personally seeks information from clients, suppliers or competitors
Does personal research on how to provide a product or service
Consults experts for business or technical advice
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 Entrepreneurial Competences
Systematic planning and monitoring:
 The behavioral indicators are:
Plans by breaking large tasks down into time-constrained sub-tasks
Revises plans in light of feedback on performance or changing
circumstances
Keeps financial records and uses them to make business decisions
 Persuasion and networking:
 The behavioral indicators are:
Uses deliberate strategies to influence or persuade others
Uses key people as agents to accomplish own objectives
Acts to develop and maintain business contracts
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 Entrepreneurial Competences
Independence and self-confidence:
 The behavioral indicators are:
Seeking autonomy from the rules or control of others
Sticking with own judgment in the face of opposition or early lack of
success
Expressing confidence in own ability to complete a difficult task or
meet a challenge

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 Motivation for starting 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 includes:
a) Desire for independence
b) Desire to exploit an opportunity
c) Motivation/ Turning a hobby or previous work experience in to a
business
d) Financial Incentive/ Perception of Advantages- If a person feels
that he can earn better or overall gains in terms of money.
e) Influenced by Culture, Community, Family Background, Teachers,
Peers, etc.
40 f) Government Policies
 Cont…
II. “Push” Influence: Many people are pushed into founding
a new enterprise by variety of factors including:
a. Job Dissatisfaction/Redundancy
b. Unemployment (or threat of) /Joblessness
c. Disagreement with previous employer
d. Retirement
e. Relocation
f. Boredom-this is applicable to many ladies from well to do
families. With their army of servants to take care of home, they
find an opportunity to keep the boredom away and start
ventures
 The dividing line between those “pulled” and “pushed” Influences
41 motivation for starting a business is often blurred.
 Success factors for entrepreneurs
 Most new ventures is succeed because their founders are
capable individuals.
 The entrepreneurial team:
The term “team” is used because entrepreneurs do not
start business by themselves; they have teams, parents,
close associates, or extensive networks of advisors.
 Venture product or services:
Nearly all-successful ventures start small and grow
incrementally; few “gear-up” with substantial organizations
for a big-bang start.
 Incremental expansion of products and services also tend
to stay within the bounds of positive cash flow.
 Success factors for entrepreneurs
Marketing and timing:
Successful entrepreneurs tend to have a clear vision of both
existing and potential customers.
There are no short cuts; innovation requires market demand,
not simply a good ideas.
Market potential is critically influenced by timing of new
products or services.
 Success factors for entrepreneurs
Business Ideology: From an entrepreneur„s perspective,
every venture has an ideology, a philosophy or rationale for
existing.
A business ideology, is defined as a system of beliefs
about how one conducts an enterprise.
These beliefs include-
 Commitment to providing customers with value,
 The ability to take calculated risks,
 The determination to grow and to control the fate of
the business,
 The perspective of creating wealth realistically, and so
on.
 Success factors for entrepreneurs
Desire for independence:
 They wish for autonomy believing that independence of
action is the only sure way to get what they need.
Whilst entrepreneurs may share some of these characteristics,
no one single trait can be said to be the secret of
entrepreneurial success.
 Self-determination:
 They probably have great faith in their ability to control their
personal environment, rejecting too high an influence of
chance or fate.
 Drawbacks /Weakness/ 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 inefficiency.
c. Disagreement between members: 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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 Cont…
f. Risk of losing your entire investment: 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.
g. 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.
h. 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.
I. Long working hours and hard work
47 J. High levels of stress
 Elements involved in Entrepreneur
1. Risk
Risk: is a possibility of deviation from a desired outcome that
is expected from applied to a business risk translates in to the
possibility of losses associated with the assets and the earning
potential of the firm.
Business risks can be classified in to two broad category
market risk and pure risk.
 Entrepreneurs face a number of different types of risk.
a. Political risk:-
b. Business risk:-
c. Economic risk:-
d. property risk
e. Personal risk
 Elements involved in Entrepreneur
2. Information
Information gives the following importance to the
entrepreneur'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.
 Elements involved in Entrepreneur
Sources of information
Information's are obtained from two main methods of data
collection.
That is primary data collection and secondary data collection
 Collection of primary data:
 Observation method
 Interview method
 Through questioner
Secondary data are available in
 Various publication of the central state and local government
 Technical and trade journals
 Books, magazines and newspapers
 Reports & Public records and statistics, historical documents.
 Elements involved in Entrepreneur
Before using secondary data the entrepreneur must see that
following characteristics
[Link] 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.
[Link] of data:- The data that are suitable for one enquiry
may not be suitable for another enquiry, then the entrepreneur
has to check the suitability of the data properly.
[Link] of data:- sufficient to properly fulfill your stated
purpose; relevant – has a rational link to that purpose; and
limited to what is necessary.
“you do not hold more than you need for that purpose.”
 Ten Deadly Mistakes of Entrepreneurship
1. Management mistakes 6. Uncontrolled growth
2. Lack of experience 7. Poor location
3. Poor financial control 8. Improper inventory control
4. Weak marketing efforts 9. Incorrect pricing
5. Failure to develop a strategic 10. Inability to make the
plan “entrepreneurial transition”

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 Putting Failure into Perspective
 Failure is a natural part of the creative process.
 Failures are simply stepping stones along the path to success.
 The “secret” to success is the ability to;
fail intelligently,
learning why you failed
Then avoid making the same mistake again.
As an inventor, Edison made 1,000 unsuccessful attempts at
inventing the light bulb.
 When a reporter asked, "How did it feel to fail 1000 times?"
Edison replied, "I didn't fail 1000 times. The light bulb was an
invention with 1,000 steps."

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 Current Entrepreneurial Trends
 One way to identify business opportunities is to study current
trends that provide opportunities for entrepreneurs.

Internet businesses social entrepreneurship

service businesses focus on technology

outsourcing and
home-based businesses
strategic alliances

green businesses corporate ventures

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 Entrepreneurial Myths-NOT facts
Entrepreneurs are Lucky
Entrepreneurs 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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 In class discussion
 Who is an Entrepreneur?

 What are the profiles of Entrepreneurs?

 Are Entrepreneurs Born or Made?

 What is the distinction between Entrepreneurship and

Entrepreneurs?

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