INTRODUCTION TO ENTREPRENEURSHIP

A Definition of Entrepreneurship The concept of entrepreneurship has a wide range of meanings. On the one extreme an entrepreneur is a person of very high aptitude who pioneers change, on the other extreme of definitions, anyone who wants to work for himself or herself is considered to be an entrepreneur. The word entrepreneur originates from the French word, entreprendre, which means "to undertake." In a business context, it means to start a business. The Merriam-Webster Dictionary presents the definition of an entrepreneur as one who organizes, manages, and assumes the risks of a business or enterprise. Schumpeter's View of Entrepreneurship Austrian economist Joseph Schumpeter 's definition of entrepreneurship placed an emphasis on innovation, such as:

new products new production methods new markets new forms of organization

Wealth is created when such innovation results in new demand. From this viewpoint, one can define the function of the entrepreneur as one of combining various input factors in an innovative manner to generate value to the customer with the hope that this value will exceed the cost of the input factors, thus generating superior returns that result in the creation of wealth. Entrepreneurship vs. Small Business Many people use the terms "entrepreneur" and "small business owner" synonymously. While they may have much in common, there are significant

differences between the entrepreneurial venture and the small business. Entrepreneurial ventures differ from small businesses in these ways:

Amount of wealth creation - rather than simply generating an income stream that replaces traditional employment, a successful entrepreneurial venture creates substantial wealth, typically in excess of several million dollars of profit. Speed of wealth creation - while a successful small business can generate several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid; for example, within 5 years.

Risk - the risk of an entrepreneurial venture must be high; otherwise, with the incentive of sure profits many entrepreneurs would be pursuing the idea and the opportunity no longer would exist. Innovation - entrepreneurship often involves substantial innovation beyond what a small business might exhibit. This innovation gives the venture the competitive advantage that results in wealth creation. The innovation may be in the product or service itself, or in the business processes used to deliver it. Entrepreneur A person who is able to identify business opportunities and implement actions to maximize on the opportunities. An entrepreneur initiates enterprise creation, undertakes risks, and manages resources to establish and operate a business enterprise that is capable of self-sustainance. Definition According To J.B. Say According to a French economist, J. B. Say, an entrepreneur is a person who shifts economic resources out of an area of lower productivity into an area of higher productivity and greater yield. Entrepreneur In Developing Economies In the case of a developing economy like ours (Kenya) the concept of an

entrepreneur is understood differently. An entrepreneur in a developing economy is one who starts an industry (old or new), undertakes risks, bares uncertainities and also performs the managerial functions of decision-making and co-ordinating. He also puts new processes based on technological research into operation. He is called an entrepreneur even if he imitates any techniques of production from a developed economy. The term entrepreneur has now been attributed to all small industrialists, traders and agriculturalists. Hence, all people who are gainfully engaged in work of manufacturing, distribution or service in other sectors are called entrepreneurs. The entrepreneur can be considered as the fourth factor of enterprise. The enterprise is the basic unit of an economic organisation. It produces goods and services worth more than the resources used. Enterprise is an undertaking, especially one which involves four factors, land, labour, capital and now the entrepreneur. It involves the willingness to assume risks in undertaking an economic activity. image It also involves innovation, risk taking, and decision making. Enterpreneurs are the persons who start new enterprises. The entrepreneur and enterprise are linked as the success of an enterprise depends on the entrepreneur. Intrapreneur This is an employed staff e.g manager who innovates for the company and takes risks only on behalf of the employer. He is therefore an intra company entrepreneur for whom the term intrapreneur is coined. Intrapraneurs are, therefore, the main entrepreneurs in large companies who innovate and take risks on behalf of their employer. These are creative people usually working together as teams, who function as

entrepreneurs within corporations. The idea is to use a companys existing resources such as human, financial and physical resources to launch new products and gain more profit. Intrapreneurship This is the development within a large co-operation of internal markets and relatively small autonomous business units producing products, services or technologies that employ the firms resources in a unique way. It gives the managers of the co-operation the freedom to take initiatives and try new ideas. It is entrepreneurship within an existing business.

ENTREPRENEURSHIP AND INNOVATION

Creativity is the ability to generate ideas while innovativeness is the ability to implement the appropriate ideas. An entrepreneur is expected to be creative and innovative so as to be able to solve problems, cope with business challenges, plan and implement activities successfully. An entrepreneurs innovativeness is reflected in the following ways:

Initiating new ideas

Initiative is the ability to start acting on an idea. Entrepreneurs are crusaders of new ideas. They do not wait for conditions to be perfect to act on a new idea. They act on them and solve obstacles and difficulties as they arise. As a result an entrepreneur creates an advantage over their competitors.

Searching for new information

An entrepreneur is always open for information which facilitates the generation of new ideas for the business.

Translating ideas and information into a business venture

Excellent ideas and information are not enough. An average idea acted upon and developed is far better than a very good idea that dies because it is not followed up. Entrepreneurs are action-oriented and translate good ideas to actions. Inquisitiveness An entrepreneur is always curious to know what is happening in the business environment. This ability of being inquisitive and sensitive to the environment upgrades the entrepreneurs level of thinking and approach to business problems.

Perseverance

Entrepreneurs do not give in to failure. Rather, they seek out the faults and weakness and then correct them. They persevere in their effort to overcome problems and setbacks and eventually win.

Removing mental blocks and acceptance

Mental blocks and acceptance are traits that inhibit creativity and innovativeness. Some of these are traditional methods and beliefs. An entrepreneur has the ability to remove these barriers and encourage clear thinking and independence in his or her venture. ENTREPRENEURIAL CONTRIBUTION TO ECONOMIC DEVELOPMENT Utilization of Local Resources Local resources, some of which would be otherwise declared useless, are put to more gainful use. The value of the resources is improved. For example, the conversion of waste products such as nylon papers to make plastic posts, bottletops from used bottles to make door curtains, sisal fibre to make the worlds famous ciondo etc.

Promotion of Technology Entrepreneurs are very creative hence they contribute to the utilization and development of technology. For example, the development of the energy saving jiko, wheel chairs, washing machines, vegetable and fruit cutting machines, charcoal refrigerators etc. Capital Formation Entrepreneurs help in the creation of wealth for the country through job creation ( as employees save their salaries and wages through the banking system and other systems, they contribute to capital formation). As the entrepreneurs pay tax and save their earnings they too directly contribute to capital formation. Creation Of Employment Opportunities Entrepreneurs help in solving the unemployment problem. Majority of indigenous Kenyan entrepreneurs are in Small Scale and Jua Kali Sector which is a major employer in the country. Promotion of an Entrepreneurial Culture By portraying successful images, entrepreneurs become models to the upcoming Kenyan generation. A country which embraces entrepreneurial culture is bound to be economically stable. Export Promotion Many products manufactured by the Kenyan Jua Kali/Small Enterprise sector find their way to foreign markets and in return Kenyan entrepreneurs identify foreign markets. Through these activities, entrepreneurs are able to earn the country foreign exchange.

Favourable Balance of Payment The improvement of the Jua Kali Sector has seen a reduction in the rate of loss through import only. There is now a balance between the import and export business. The rate of improvement of industries in Kenya has gone up as a result of an improvement in the Jua Kali and Small Scale Enterprises sector. Improved Marketing of Locally Produced Products The improvement in the Jua Kali sector has resulted in an improvement in the internal and external markets. With the current competition, every business is compelled to produce quality products/services and aggressively market the same. Improved Infrastructure Creation of businesses leads to improved cities and towns which in turn result in improvement of roads, banking services, telephone network, electricity etc. Promotion of Talent and Hobbies The Jua Kali and Small Scale Enterprise Sector encourages young people to exploit their talents. Improved Growth In Gross Domestic Product There is now favourable trade internally and this has seen an increase in economic growth. Self-reliance Entrepreneurs enable citizens to survive comfortably without too much borrowing. ENTREPRENEURSHIP AND SELF-EMPLOYMENT

This is a state in which a person puts his effort in a business or an activity that belongs to him/her. He or she works independently and earns a living from it. An entrepreneur is one who recognises an opportunity and takes the risks as a business owner of providing a needed product or service for which an adequate reward (profit) is realised. Thus both risk and profit are involved. These descriptions both fit entrepreneurship and self-employment so they are one and the same, although entrepreneurship is a more serious and deliberate level of self-employment. Factors To Consider Before Going Into Self-employment

Business Idea Skills (Technical/Managerial) Market Capital (Opening, Working or Long-term) Machinery (Technology) Raw materials Location (Strategic) Legal Issues Competition

REASONS FOR SELF-EMPLOYMENT Need to improve personal income Besides the inability to secure any type of employment this is the most basic reason which causes many low income earners to directly embark on business by way of self employment. Inflation often impairs the ability of low income earners to afford basic necessities of life to an extent they have to look for alternative ways of ensuring survival, and this may lead them to set up small business.

Inability to secure a desirable job The number of Kenyans eligible for employment is very high. There are not enough employment opportunities in the formal sector. The small business sector has the capacity to create many jobs. Influence of others Although many aspiring entrepreneurs make a personal decision to go into business there are also strong indications that just as many if not more get courage to take the plunge as a result of influence or inspiration gained from close associates such as friends or relatives already in business. To fulfil a life long ambition There are those people in society whose ultimate goal is to go into business at some defined point life no matter how attractive wage employment might seem. These people are usually highly motivated internally and do not need extrinsic motivators to go into business. They are often high achievers who aim for self fulfilment which comes from doing something unique. To seek more independence These are people who prefer to be introduced to a task without being led every step required for the accomplishment of the task. They like to be left alone to think and develop their own initiative. When guided closely they feel belittled, frustrated and impatient. Occasionally these people rebel and will often end up in self employment if the present opportunity does not give them the opportunity to seek challenge and contribute their own ideas. Love for adventure Innovative people thrive on exploring new ideas and opportunities even if the outcome might be uncertain and risky. They derive satisfaction from the thrills that

arise from a mixture of success and uncertainity. Dissatisfaction with wage employment This may be as a result of ,

poor prospects of career advancement delayed promotions lack of recognition or appreciation of special accomplishments poor terms of service unsatisfactory working conditions pending redundancy

Favourable environment These include

appropriate incentives eg access to credit facilities laws governing small enterprise creation access to raw materials and machinery good infrastructure eg roads telephone networks electricity inexpensive cost of labour

CHARACTERISTICS OF ENTREPRENEURS Introduction M. M. P. AKhouri, formerly Executive Director, National Institute for Entrepreneurship and Small Business Development (NIESBUD), New Delhi, describes an entrepreneur in words that clearly bring out the characteristics of an entrepreneur. He describes entrepreneur as a character who combines innovativeness, readiness to take risk, sensing opportunities, identifying and mobilizing potential resources, concerns for excellence and who is persistent in achieving the goal.

Characteristics 1. An eye for opportunity: Many entrepreneurs start by finding a need and quickly satisfying it. They are always alert to opportunities. They are very much quick to see and grab opportunities. They plan intellectually and anticipate carefully how to achieve their goals in realizing an opportunity. 2. Independence: Even though most entrepreneurs know how to work within the framework for the sake of profits, they enjoy being their own boss. They like doing things their own way. The characteristics of independence and the sense of determination are the drives that make anentrepreneur start their own business. In a way, their own business fulfills their need for independence. 3. An appetite for hardwork: Most entrepreneurs start out working long, hard, hours with little play. Entrepreneurs are always at work even when other people have stopped. They are persistent and strongly believe that working hard will help them attain their goals. They hence focus on the end result. 4. Self-confidence: Entrepreneurs must demonstrate extreme selfconfidence in order to cope with all the risks of operating their own business. Most successful entrepreneurs are confident of achieving realistic and challenging goals. They get into business or industry with a high level of self-confidence. This, couples with a sense of effectiveness ultimately contribute to the success of the venture. 5. Discipline: Successful entrepreneurs resist the temptation to do what is unimportant or the easiest but have the ability to think through what is the most essential. Entrepreneurs are economically efficient, do not like to waste time and they like to see work completed. They use discipline as a guide to their destination.

6. Judgement: Successful entrepreneurs have the ability to think quickly and make a wise decision. This is possible because they have a plan, they have an economic goal, they know what they want and they know what they can do. Entrepreneurs are unaffected by personal likes and dislikes. They stand beyond these types of prejudices as they are realistic in their approach. At the time of their need they select experts rather than friends and relatives to assist them. They usually avoid emotional and sensitive attitude towards their business or problem. 7. Ability to accept change: Change occurs frequently when you own your own business, the entrepreneur thrives on changes and their business grow. An entrepreneur may need to change his/her plans in order to help the business grow. Entrepreneurs look at many solutions to their problems. They realize that other people may know how to do something better. Entrepreneurs can choose the best way to do something, even if it is different from how they want to do it. 8. Make stress work for them: On the roller coaster to business success, the entrepreneur often copes by focusing on the end result and not the process of getting there. Entrepreneurs are capable of working for long hours and solving different complexities at the same time. As the captain of an industry or an enterprise, an entrepreneur faces a number of problems and in right moment he takes right decisions which may involve physical as well as mental stress. 9. Need to achieve: Although they keep an eye on profit, this is often secondary to the drive toward personal success. Entrepreneurs have strong desire to achieve higher goals. Their inner self motivates their behaviour towards high achievement. To an entrepreneur, winning is achievement.

10.

Focus on profits: Successful entrepreneurs always have the profit

margin in sight and know that their business success is measured by profits. 11. Risk-bearing: Entrepreneurs are the persons who take decisions under uncertainty and thus they are willing to take risk, but they never gamble with the results. They choose moderate risk rather than play wild gamble.They, therefore, undertake calculated risk which is high enough to be exciting, but with a fairly reasonable chance to win. 12. Locus of control: Closely consistent with McClellands theory of need for achievement, is the belief in internal locus of control. According to Rotters locus of control theory, an individual perceives the outcome of an event as being either within or beyond his personal control. Entrepreneurs believe in their own ability to control the consequences of their endeavour by influencing their socio-economic environment rather than leave everything to luck. They strongly believe that they can govern and shape their own destiny. 13. Creative and Innovators: Successful entrepreneurs are innovators. They constantly put their efforts in introducing new products, new method of production, opening new markets and reorganizing the enterprise. They always try not to be satisfied with conventional and routine way of doing things, but always think of how they can do them in a better way. 14. Leadership: Entrepreneurs should possess the quality of leadership. Leadership is the ability to exert interpersonal influence by means of communication towards the achievement of goals. Entrepreneurs as leaders should provide the necessary spark of motivation by guiding, inspiring, assisting and directing the members of the group for achievement of unity of action, efforts and purpose. According to George R. Terry: Leadership is the activity of influencing people of strive willingly for group objectives. Thus, entrepreneur, as the leader of the group, can

ensure high performance by creating a well-to-do environment among others. They must have the capability to arrive at prompt and correct direction and win the confidence of their subordinates. Being the leader of the enterprise, they should possess the following characteristics:
o o o o o o o o o o

Existence of followers Assumption of responsibility Empathy conduct Exemplary conduct Developing teamwork Common objectivity Facilitating change Building morale Maintenance of discipline Active participation

15.

Hence, entrepreneurs by their own leadership styles and behaviour

reduce the problems with careful listening and proper handling of situations. Good administrative work depends upon effective leadership of the entrepreneur. 16. Ability to mobilize resources: Entrepreneurs must have the ability to marshal all the inputs to obtain the end product. They have to mobilize 6Ms, i.e. Man, Money, Material, Machinery, Market and Method effectively to realize the final product as entrepreneurship is a function of gap filling and input completing. 17. Conclusion Entrepreneurs have many qualities that help them their businesses successful. However, an entrepreneur does not have to possess all the qualities. In that case he has either to learn or hire the services of those who possess the qualities he does not have.

GENERATING A BUSINESS IDEA A business idea is a prerequisite for a person venturing into business. It could be defined as an entrepreneurs understanding of: 1. Self 2. Market and 3. Product or service which helps to generate ideas and determine which idea would be best to develop into a business opportunity. Generating business ideas requires entrepreneurs to be constantly aware of their environment and economic needs of people living in that environment. It is important that entrepreneurs are original in their ideas to be able to follow them through to success. They must avoid the Me too syndrome. SOURCES OF BUSINESS IDEA Business ideas are all around you. Some business ideas come from a careful analysis of market trends and consumer needs; others come from serendipity. If you are interested in starting a business, but don't know what product or service you might sell, exploring these ways of getting business ideas flowing will help you choose. Examine your own skill set for business ideas. Do you have a talent or proven track record that could become the basis of a profitable business? To find a viable business idea, ask yourself, "What have I done? What can I do? Will people be willing to pay for my products or services?" Keep up with current events and be ready to take advantage of business opportunities. If you read or watch the news regularly with the conscious intent of finding business ideas, you'll be amazed at how many business opportunities your brain

generates. Keeping up with current events will help you identify market trends, new fads, industry news - and sometimes just new ideas that have business possibilities. For instance, African dishes have become very popular with the Kenyan people and there are now entrepreneurs who are running successful restaurants specializing in African dishes. One such restaurant is amaica restaurant, Luyha name for cooking place situated in Nairobi and which is a popular eating place even for foreigners visiting Kenya because of its delicious African dishes. Invent a new product or service. Think back 30 years ago. Nobody ever appreciated the adverse effect on using kerosene lanterns in rural African homes. But one young Kenyan, Evans Wadongo, whose eye sight has been affected to date because of using kerosene lanterns during his initial years of schooling, has seen the need to save other Kenyans for suffering the same effects by inventing a solar-powered LED lantern which he hopes will ultimately improve education and reduce poverty and hunger among the rural population of Kenya. Look around and ask yourself, "How could this situation be improved?" Ask people about additional services that they'd like to see. Focus on a particular target market and brainstorm business ideas for services that that group would be interested in. Add value to an existing product. The difference between raw wood and finished entertainment unit is a good example of putting a product through an additional process which increases its value, but additional processes are not the only way value can be added. You might also add services, or combine the product with other products. For instance, a local farm which sells produce also offers a vegetable delivery service; for a fee, consumers can have a box of fresh vegetables delivered to their

door each week. What business ideas can you develop along these lines? Focus on what products you might buy and what you might do to them or with them to create a profitable business. Really. Once you develop an entrepreneurial frame of mind, you'll see that finding business ideas is just as easy as finding leaves on trees. Investigate other markets. Some business ideas aren't suited to local consumption - but appeal greatly to a foreign market. Kilifi residents for instance, think that the chameleon is one urgly scary creature, but one entrepreneur discovered that there was a good market for this creature abroad and is now doing booming business by harvesting these creatures and exporting them to the foreign market. Finding out about other cultures and investigating other market opportunities is an excellent way to find business ideas. Improve an existing product or service. A few years ago, the baby coat for example, was a simple woven basket like product which had only space for the baby to sleep. The current baby coat is a great improvement on this as it is now wooden or metal, lifted up, it wide, covered by a net to keep away flies and mosquitoes, and has a place where the babys diaper can be changed. This change has been necessitated by the modern mothers change in taste. There are very few products (or services) that can't be improved. Start generating business ideas by looking at the products and services you use and brainstorming ideas as to how they could be better. Get on the bandwagon. Sometimes markets surge for no apparent reason; masses of people suddenly

"want" something, and the resulting demand can't be immediately met. For example, during the Obama campaign fo the presidency of American, there was an insatiable demand among some Kenyans for anything with the portrait of President Obama or on which his name was printed, be it a cap, T-shirt, wristband, head band, etc and many entrepreneurs, especially in Kisumu capitalized on this business idea. Look at existing businesses and the products and services they offer and determine if there's a need for more of those products or services. If there is, develop business ideas to fit the market gap. Are you brimming with ideas for starting a business now? Write your business ideas down. Let them swirl around in your head and coalesce. And keep an open mind and continue to assess everything you read and hear from an entrepreneurial point of view. You don't want to run with the first business idea you think of; you want to discover the idea that's best suited to your skills and desires. Dream, think, plan and you'll be ready to transform that business idea into the business you've always wanted. Other Sources:

Newspapers/magazines Exhibitions/shows Hobbies Interests Through surveys Brainstorming Matching skills with opportunities and Social interaction and employment