WEEK 02

ENTREPRENEURSHIP

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WHAT IS ENTREPRENEURSHIP?

1. Entrepreneurship refers to an individual or a small group of partners who strike out

on an original path to create a new business.
2. Peter F. Drucker states that an entrepreneur is one who always searches for changes,
responds to them and exploits them as an opportunity. He further states that innovation
is the specific tool of the entrepreneur.
3. Joseph A. Schumpeter states that an entrepreneur is a person who introduces
innovative changes in an enterprise.

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 ANTECEDENTS OF ENTREPRENEURSHIP

1. Opportunity-based entrepreneurship (Jinjiang et al, 2019).

2. Market-driven entrepreneurship (Ali et al, 2019). Ali (2019) stated that “market-
driven entrepreneurship combines marketing and entrepreneurship logic, addressing
opportunities in the market”.

3. Entrepreneurial skill ((Nururly et al, 2018). There are some reasons why
entrepreneurship requires skill or talent due to creativity and market awareness (Bonny et
al, 2015).

4. Entrepreneurship and innovation are the creation of value (Maritz et al, 2015). Further,
the two constructs required new specific learning and industrial challenges (Maritz et
al, 2014).

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5. Entrepreneurship is shaped by technology, and in the end provides entrepreneurial
opportunities (Nambisan, 2016). Nambisan (2016) also stated that digital technologies
solved the problems of uncertainty in entrepreneurial processes and outcomes.

6. Another source of entrepreneurship is education or what we call by term

“entrepreneurship education”. Entrepreneurship education is used to transform society
(Ratten et al, 2020).

7. Social problems

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CLASSIFICATION OF ENTREPRENEURS

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ENTREPRENEURS AND TYPES OF BUSINESS

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CHARACTERISTICS OF ENTREPRENEURS

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 THE LEGAL STRUCTURE FOR ENTREPRENEURS

A legal structure is the legal business structure that your organisation takes. Your legal
structure determines things like the amount of tax you pay, or the type of grants or
investment that you may receive.

Sole-Proprietorship. A sole proprietorship is the easiest type of business to organize. A

sole proprietor can even use her own social security number and need not apply for a federal
taxpayer identification number.

A sole proprietor is 100 per cent personally liable for all the company's debts and
obligations.

Partnership. A general partnership is easy to form and operate. However, it also provides
no liability protection for the partners. Each general partner is completely liable for the
debts of the partnership.

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Corporation. A corporation can provide protection to a founder against the liabilities of
the company. If managed properly (e.g., setting up a separate corporate bank account, not
paying personal expenses through the corporation, having the corporation's board of
directors authorize certain corporate actions) the corporation can protect the founder.

Limited Liability Company. A hybrid form of organization, a limited liability company

(LLC) provides the limited liability protection of a corporation, while avoiding double
taxation. Because it is taxed like a partnership, it can be more flexible than a corporation.

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The most common legal structures used in the SOCIAL ENTREPRENEURSHIP are:

• Unincorporated association (which may also be a registered charity)

• Company limited by guarantee (which may also be a registered charity)

• Company limited by shares

• Industrial & Provident Society

• Community interest company- CIC (shares or guarantee)

• B Corporation

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ENTREPRENEURIAL PROCESS

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 OPPORTUNITY EVALUATION

There are five basic questions that you should ask as you evaluate an opportunity.

• Is there a sufficiently attractive market opportunity?

• Is your proposed solution feasible, both from a market perspective and a technology
perspective?
• Can we compete (over a sufficiently interesting time horizon): is there sustainable
competitive advantage?
• Do we have a team that can effectively capitalize of this opportunity?
• What is the risk/reward profile of this opportunity, and does it justify the investment
of time and money?

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 PLANNING

STRATEGY

There are four main areas of strategy: determination of the target customer set, business
model, position and objectives. These are described briefly below and in more depth in the
sections devoted to these topics.

TARGET CUSTOMERS

The target customer is the set of potential buyers who are your focus as you design your
company’s solution. The more you know about them, the better off you are. Your
characterization should be both qualitative and quantitative.

You should investigate any alternatives the customer has for solving or working around the
problem or need that you are targeting. You should understand the buying process in detail,
including who are the decision makers and who influences the decision.

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BUSINESS MODEL

The business model is your theory about how you will make money. It involves a definition
of a solution to the customer’s need, a hypothesis about how and how much the customer
will pay for that solution. If there are any assumptions required for your theory to be true
(such as the existence of complementary products or services, or the customer’s willingness
to change business processes) these should also be articulated.

POSITION

“Position” refers both to how your company is differentiated from any competitors and
how it relates to other companies in the value chain. This is an opportunity to define, at a
fundamental level, what your company will do and what it will not do.

An element of the position is your company’s vision: how it wants to be known or thought
of. A compelling vision is necessary to inspire investors, recruit and motivate employees,
and excite customers and partners.

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MILESTONES / OBJECTIVES

As a first step toward creating your operating plan, you should create a set of high-level
objectives for your business. This should include:

• Key milestones (prototype, product, customer, partnerships.)

• Share or penetration into your chosen market
•

A clear articulation of objectives will allow you to set priorities for your venture, which
will be critical as you face the many tough decisions that any entrepreneur must face.

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 OPERATING PLAN

Your operating plan is where you spell out all of the things that you plan to do and what
they will yield for your business. The activities will cover all areas of the business:
marketing, selling, engineering, etc. These activities should yield products by a certain
date, possibly partners, customers, etc. These activities will drive the financial performance
of the company.

Your operating plan will be a combination of plans, i.e., these people working on this topic
for this period of time will produce result X, and forecasts or projections, i.e. predictions
about what results will occur. The primary and most important forecast concerns revenue,
but predictions about the costs of materials and other things may be important as well. The
operating plan is the core of your business, and you should make it as good as you can –
your plans should be as thorough as possible and your forecasts should be based on the
best and most complete evidence you can compile.

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Begin with your strategy and break down what needs to be accomplished to achieve your
objectives – this is the basis of your plan. The more detailed and fine-grained analysis you
can develop, the more accurate and reliable your plan will be.

COMPANY TIMELINE This is a representation of all the major accomplishments or

deliverables that are necessary for you to achieve your strategy.

STAFFING PLAN This is the document where you capture all of the hiring your firm will
do (skills, experience and timing).

BUDGET The budget is where all the pieces of the operating plan come together and are
expressed in financial terms. This is a critical document for managing your business.

FINANCING PLAN This includes the capital needs of the company, the timing of those
needs and the desired/expected sources of that capital.

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PLANNING PROCESS

Here are a few important principles:

• The actual budget, staffing plans, etc. are then driven by estimates of what it takes to
accomplish the tasks in the required timeframe.
• Build a plan that captures everything (so that you are not hurt by surprises or
unexpected expenses)
• Revenue: detailed bottom-up plan, based on best information about customer
groupings, conversion rates, and sales activity.
• Expenses: usually people-driven – build in realistic hiring timetables, training,
learning curve, benefits, travel, etc.
• Program expenses: mostly marketing – must support the plan and estimates should be
equally comprehensive
• The plan must close – all pieces tie together.

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The plan becomes more manageable when you break it down into major functional areas.
The traditional breakdown is as follows, but you don’t have to be bound by this except in
so far as you should follow Generally Accepted Accounting Practice.

• Marketing
• Sales
• Research and development
• Operations
• Finance
• People management
• Processes & Infrastructure

EXECUTION

Execution is organized by the core functional areas of the company.

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