Chapter 2: Entrepreneurship - BEC111

Learning Outcomes

• Define the term entrepreneur.
• Discuss the concept of entrepreneurship and the entrepreneurial process.
• Explain the role of entrepreneurs in small businesses and the economy.
• Differentiate between small business owners and entrepreneurs.
• Analyze the skills, experiences, and traits of entrepreneurs.
• Evaluate and recommend business opportunities.
• Explain the concept of a feasibility study and its importance.

Introduction to Entrepreneurship

• Entrepreneurs create and build something of value for consumers.
• Entrepreneurs bear the risk of business failure.
• Entrepreneurship involves calculated risk-taking and resource mobilization.

Definitions of an Entrepreneur

• Economists: View entrepreneurs as profit-seekers who mobilize production factors.
• Marxists: View entrepreneurs as exploiters of labor for personal gain.
• Business Managers: See entrepreneurs as small business managers.
• Behavioral Scientists (Psychologists/Sociologists): View entrepreneurs as creative, innovative, and opportunistic individuals who love risk and change.

Importance of Entrepreneurship

• Contributes significantly to the economy and GDP growth.
• Addresses issues of poverty, inequality, and unemployment.
• Emphasized in South African policy documents since 1994.

Role of Small Business Owners vs. Entrepreneurs

• Small business owners focus on income and business survival.
• Entrepreneurs seek growth and take calculated risks for expansion.
• Both contribute to economic development but differ in growth intentions and risk tolerance.

Entrepreneurial Traits and Characteristics

• Achievement Motivation: Driven to succeed.
• Internal Locus of Control: Belief that success or failure is based on personal actions.
• Innovation and Creativity: Develop new ideas and methods.
• Risk-Taking: Willing to take calculated risks.
• High Energy and Confidence: Positive outlook and high confidence levels.
• Desire for Feedback and Tolerance for Ambiguity: Open to feedback and comfortable with uncertainty.
• Flexibility, Passion, and Commitment: Adaptable, dedicated, and motivated to excel.

Reasons for Becoming an Entrepreneur

• Skills and Knowledge: Leveraging acquired skills and education.
• Experience: Leveraging industry experience and network.
• Opportunities and Independence: Realizing market needs and desiring independence.

Types of Entrepreneurs

• Necessity Entrepreneurs: Pushed into entrepreneurship due to lack of employment options.
• Opportunity Entrepreneurs: Pulled into entrepreneurship by market opportunities.

Entrepreneurial Process

1. Decision to become an entrepreneur.
2. Assess entrepreneurial abilities and skills.
3. Evaluate availability of resources.
4. Identify and assess business opportunities.
5. Conduct a feasibility study.
6. Write a business plan.
7. Implement the business plan.

Entrepreneurial Skills

• Strategic Skills: Holistic business view and planning skills.
• Marketing Skills: Ability to market products/services effectively.
• Project Management Skills: Managing projects efficiently.
• Human Relations Skills: Managing relationships with employees, customers, etc.

Key Resources for Entrepreneurship

• Financial Resources: Capital needed to start the business.
• Human Resources: Skilled personnel necessary for operations.
• Physical Resources: Facilities, equipment, land, etc.

Formulating New Venture Ideas

• Analyze economic trends, industry life cycles, and growth industries.
• Identify outsourcing opportunities and evaluate investment potential.

Evaluating Business Opportunities

• Growth Potential: Likelihood of sustainable growth.
• Market Need: Clearly defined market demand.
• Competitive Advantage: Unique selling points and sustainability.
• Timing and Rewards: Appropriate market conditions and beneficial returns.

Buying an Existing Business

Advantages

• Established customer base and employee experience.
• Historical data for planning and known supplier relationships.
• Available inventory and equipment.

Disadvantages

• Possible undesirable location and poor business image.
• Inherited employees and potential operational challenges.
• Liabilities from past contracts and obsolete inventory/equipment.

Franchising

• Buying rights to use a company's business model, brand, and practices.
• Examples: KFC, Nando's, McDonald's.
• Limits creativity and innovation for the franchisee.

Corporate Entrepreneurship

• Developing new businesses within an existing corporation using internal processes and resources.
• Example: Development of a new product/division within a larger company.

Feasibility Study

• Essential to determine the viability of a business idea before writing a business plan and seeking funding.

Defining a Small Business in South Africa

• Guided by the National Small Business Act of 1996 (amended in 2003).
• Based on number of employees, sales volumes, capital assets, and market share.

Characteristics of Small Businesses in South Africa

• Fewer than 200 employees.
• Turnover below 64 million rand.
• Capital assets below 23 million rand.
• Direct managerial involvement by owners.

Role of Small Businesses in the Economy

• Significant employment contributors (~75% of South African active population).
• Innovation hubs and contributors to economic growth and equality.
• Essential for poverty alleviation and fostering economic independence.

Conclusion

• Entrepreneurship drives business innovation and economic development.
• Entrepreneurs must assess their abilities, resources, and market opportunities diligently.