Chapter 1_Entrepreneurship and small, medium and micro enterprises.ppt

©2019 Juta and Company (Pty) Ltd Entrepreneurship and how to establish your own business 6e
Entrepreneurship and how to
establish your own business
6th Edition
Tersia Botha (Editor)

Chapter 1: Entrepreneurship and
small, medium and micro enterprises
• Defining entrepreneurship
• The relationship between entrepreneurship,
a SME and small business management
• Types of entrepreneurial businesses
• Corporate entrepreneurship or
intrapreneurship
• Key success factors of entrepreneurs
• Dealing with external factors

Learning outcomes
After you have studied this chapter, you should be
able to:
• Define the terms ‘entrepreneur’ and ‘entrepreneurship’
• Indicate the relationship between entrepreneurship, a small
business enterprise and small business management
• Explain the various types of entrepreneurial businesses
• Explain corporate entrepreneurship/intrapreneurship
• Explain the key success factors of entrepreneurs
• Explain how entrepreneurs should deal with external factors
that affect their businesses

Introduction
• Employment opportunities abound in
private and public sector organisations
• Entrepreneurial activity has a crucial
influence on the national economy
• Direct correlation between job creation and
the level of entrepreneurial activity in an
economy

Defining entrepreneur and
entrepreneurship
• Entrepreneurs - ability to identify and seize an
opportunity, and create and develop a business
by adding value to the business
• Entrepreneurship is the process of establishing
a business, from the identification of a business
opportunity and innovation through to
planning, start-up, managing and growing the
business

Relationship between entrepreneurship,
SME and small business management
• Starts as a small/micro enterprise and is
manages by one person and they aim to grow
the business
• Once satisfied with the growth of the business,
they become a small business manager
• Danger at this stage is that the entrepreneur
has good ideas but insufficient expertise to
implement ideas

Relationship between entrepreneurship,
SME and small business management
(cont.)
• Successful business manager must be able
to:
- Plan, organise, lead and control business functions
- Organise efficient operation of tasks
- Ensure interpersonal and inter-group competence
- Facilitate formal communication during scheduled
meetings
- Compile and implement necessary policies and
procedures

Types of entrepreneurial
business
• Can be classified:
- Informal
- Micro
- Very small
- Small
- Medium
- Large

Types of entrepreneurial
business (cont.)
• The formal small business:
- Small and micro business sector:
1. Micro business has 5 or less employees and a turnover
of less than R100000
2. Very small business has between 1 and 10 employees
3. Small business had between 11 and 50 employees

Corporate entrepreneurship or
intrapreneurship
• Corporate entrepreneurship (or intrapreneurship) is
the creation of a business or businesses within an
existing large business, using new ideas and
exploiting opportunities
• Makes it possible for large businesses to:
– adapt to changes in the market entrepreneurially;
– experiment in the market;
– Diversify from the core business; establish new distribution
channels;
– make profits from new businesses

Franchisors and franchisees
• Franchising - arrangement in which an
individual or business (the franchisor) grants
an independent party (the franchisee) the
right to sell the products or services of the
business according to guidelines set down by
the franchisor

Franchisors and franchisees
(cont.)
• Franchisor is an entrepreneur
• Franchisee is a corporate entrepreneur
• Franchisee’s do not have the freedom to
experiment and operate their business
according to their own vision
• Franchisors usually fall into the medium to
large business category

Key success factors of
entrepreneurs
• Entrepreneurs have distinctive characteristics
• Each entrepreneur achieves success because
of a unique combination of factors
• There is no typical entrepreneur –
entrepreneurs possess various characteristics
or skills

Key success factors of
entrepreneurs (cont.)
• As an entrepreneur it is important to know
your strengths and your weaknesses
• Strengths can be positively applied
• Weaknesses can be addressed by one of the
following:
- Personal development
- Attending courses
- Appointing staff and/or experts to compensate
where needed

The skills, expertise and aptitudes
of an entrepreneur
• Successful entrepreneurs have
skills/expertise/aptitudes that can be applied
profitably in any business
• Skills - manual work that can be learned
• Expertise - based on knowledge you acquire
by studying or experience
• A person is born with aptitude and talent

The important personal
characteristics of entrepreneurs
• Perseverance: confidence in themselves and their
business
• Commitment to the business: dedicate all their skills,
expertise and resources to establishing and building
the business
• Involvement in the business: perform tasks
themselves and communicate well with staff and
others
• Willingness to take risks: take calculated risks

The important personal
characteristics of entrepreneurs
(cont.)
• Sound human relations: work closely with other people
and realise the importance of good business
relationships
• Creativity and innovative ability: creativity refers to a
persons imagination and innovative ability refers to the
use of creative abilities
• Positive attitude and approach: learn from failures and
they are realistic and able to identify opportunities in
adverse situations

The important functional
management skills of entrepreneurs
• The management skills of an entrepreneur are
an indication of how well he or she can
perform important tasks in a business

(cont.)
• Important aspects of management skills:
• Planning a business before it is established
• General management skills and the use of
advisors
• Customer service
• Knowledge of competitors
• Market orientation

(cont.)
• Important aspects of management skills
(cont.):
• The importance of quality products or services
• Accounting for your own purposes
• Insight to expenditure, income, profit and loss
• Ability to use income wisely

Dealing with external factors that
affects entrepreneurship
• External factors will influence the ability of the
entrepreneur to exploit his or her potential
• External factors:
- Economic conditions: interest rate
- Technological changes: keep up with technological
development

Dealing with external factors that
affects entrepreneurship (cont.)
– Social and cultural forces: identify opportunities for
growth in market share among large sections of the
population
– Political and legislative variables: realise opportunities
that arise after political adjustments
– Physical variables: Keep abreast of the availability and
price of resources
– International forces: By using technologically advanced
communication channels, an entrepreneur can expand
and establish a business in another country.

Summary
• The importance of entrepreneurial business at all
levels is essential to a country’s economic
development, wealth and employment creation
• The entrepreneur who applies certain talents, skills
and expertise in the start-up, development and
growth of a business was introduced as a person
who continuously creates and innovates to build and
develop a business of recognisable value.

Summary (cont.)
• Many entrepreneurs start small businesses, but
then prefer to remain small due to lifestyle
preferences
• Entrepreneurs are found in a variety of types of
businesses
• All the success factors including the skills,
expertise, aptitude; personal qualities;
management skills and external factors

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