Health economics and entrepreneurship notes for pharmaceutical students prepared by pharmacist Paul Malaba

1. HEALTH ECONOMICS
AND
ENTREPRENEURSHIP
PS06211
PAUL MALABA
BPHARM

2. 5.1.1 The concepts and
principles of
entrepreneurship
a) Principles of entrepreneurship
b) The importance of entrepreneurship in
relation to employment
c) Entrepreneur’s contribution to National
Development
d) Explain National Strategy for Economic
Empowerment and Poverty Reduction
(NSEGPR)/MKUKUTA objectives and the
National Development Vision 2025

3. What is entrepreneurship?
The concept of entrepreneurship was
first established in the 1700s, and the
meaning has evolved ever since.
Many simply equate it with starting
one’s own business.
◦ But it is believed to be more than that as
nowadays the term has been extended to
include social and political forms of
entrepreneurial activity.

4. What is entrepreneurship? Cont,,,
To some economists, entrepreneurship
involves bearing the risk of a new
venture if there is a significant chance
for profit.
Others emphasize the entrepreneur’s
role as an innovator who markets his
innovation.
Still other economists say that
entrepreneurs develop new goods or
processes that the market demands and

5. Some definitions
 Entrepreneurship is a force of “creative
destruction.” Joseph Schumpeter (1883-1950)
The entrepreneur carries out “new combinations,”
thereby helping render industries obsolete.
Established ways of doing business are destroyed by
the creation of new and better ways to do them.
An entrepreneur is someone who actually
searches for change, responds to it, and exploits
change as an opportunity. Peter Drucker (1909-2005)

6. Some definitions cont,,,
Entrepreneurship is the process of creating something
new with value by devoting necessary time and effort,
assuming the accompanying risks and receiving the
resulting rewards - Hisrich 85
Entrepreneurship is the dynamic process of creating
incremental wealth. The wealth is created by individuals
who assume major risks, provide value for products or
services for specific gains - Ronstadt 84
Entrepreneurs are Individuals who pursue opportunities
regardless of resource availability - Stevenson,
Grousbeck, Roberts and Bhide 99

7. Some definitions cont,,,
Entrepreneurs are People who enter new or
established markets - Lumpkin and Dess 97
Entrepreneurs are Individuals who create new
organizations - Gartner 98
Entrepreneurs are Persons who are ingenious
and creative in finding ways to add to their own
wealth, power and prestige - Boumol 98

8. Definition cont,,,
In deed there is no single universal
definition but it can be simply
defined as
◦The process of undertaking innovations
which are deemed necessary or profitable
while embracing the accompanied risks .

9. What Makes Someone an
Entrepreneur
Who can become an entrepreneur?
◦There is no one definitive profile.
◦Successful entrepreneurs come in
various
◦ages, income levels, gender, and
race.

10. Sources: National Federation of Independent Business and Wells Fargo Bank
11%
33%
32%
16%
6%
2%
0%
5%
10%
15%
20%
25%
30%
35%
Percent of Owners
Under 25 25-34 35-44 45-54 55-64 65 or over
Age
Owner Ages at Business Formation

11. 3A of entrepreneur
 Entrepreneur is an innovative process
characterized by 3A
 Aspiration
 Attitude
 Action

12. Who can become an
entrepreneur? Cont,,,,
◦Entrepreneurs differ in education and
experience.
◦But research indicates that most
successful entrepreneurs share certain
personal attributes, including:
◦creativity, dedication, determination,
flexibility, leadership, passion, self-
confidence, and “smarts.”

13. Personal attributes cont,,,
Creativity is the spark that drives the development of new
products or services or ways to do business.
◦ It is the push for innovation and improvement. It is
continuous learning, questioning, and thinking outside of
of prescribed formulas.
Dedication is what motivates the entrepreneur to work
hard, 12 hours a day or more, even seven days a week,
especially in the beginning, to get the endeavor off the
ground. Planning and ideas must be joined by hard work to
to succeed.
◦ Dedication makes it happen.

14. Determination is the extremely strong desire to achieve
success. It includes persistence and the ability to
bounce back after rough times.
◦ It persuades the entrepreneur to make the 10th phone
call, after nine have yielded nothing. For the true
entrepreneur, money is not the motivation. Success is the
motivator; money is the reward.
Flexibility is the ability to move quickly in response to
changing market needs. It is being true to a dream while
also being mindful of market realities.

15. Leadership is the ability to create rules and to set goals. It is the
capacity to follow through to see that rules are followed and goals are
are accomplished.
Passion is what gets entrepreneurs started and keeps them
there. It gives entrepreneurs the ability to convince others to believe
believe in their vision. It can’t substitute for planning, but it will help
help them to stay focused and to get others to look at their plans.
Self-confidence comes from thorough planning, which
reduces uncertainty and the level of risk. It also comes from
expertise. Self-confidence gives the entrepreneur the ability to listen
listen without being easily swayed or intimidated.

16. “Smarts” consists of common sense joined with
knowledge or experience in a related business or
endeavor. The former gives a person good instincts, the
latter, expertise.
◦ Many people have smarts they don’t recognize. A person who
successfully keeps a household on a budget has organizational
and financial skills. Employment, education, and life
experiences all contribute to smarts.
Every entrepreneur has these qualities in different degrees.
But what if a person lacks one or more?
◦ Many skills can be learned. Or, someone can be hired who has
has strengths that the entrepreneur lacks.
The most important strategy is to be aware of strengths and
to build on them.

17. Why Become an Entrepreneur?
Some reasons as to why people opt for an entrepreneurial
career include;
◦ Redundancy
◦ Frustrations from the current job
◦ Some people are actually repulsed by the idea of
working for someone else.
◦ Other people decide to become entrepreneurs
because they are disillusioned by the bureaucracy
or politics involved in getting ahead in an
established business or profession.
◦ Some people are simply attracted to
entrepreneurship by the advantages of starting a
business.

18. 41%
36%
27%
25%
5%
0% 10% 20% 30% 40% 50%
Percent ofOwners
Joinedfamily business
Wantedmore control over
future
Tiredof working forsomeone
else
Wantedto fulfill lifelong goal
Have beendownsizedorlaid
off
Source: Dun & Bradstreet 19th Annual Small Business Survey, 2000

19. Advantages of
entrepreneurship
Entrepreneurship offers a greater possibility
of achieving significant financial rewards
than working for someone else.
It provides the ability to be involved in
the total operation of the business, from
concept to design and creation, from sales to
business operations and customer response.
It offers the prestige of being the person
in charge.

20. It gives an individual the opportunity to build
equity, which can be kept, sold, or passed on to the
next generation.
Entrepreneurship creates an opportunity for a
a person to make a contribution. Most new
entrepreneurs help the local economy. A few—
through their innovations—contribute to society
society as a whole.

21. Other important terms
Economics –
• It is the social science that studies how individuals
and organizations in society engage in production,
distribution and consumption.
Health economics
◦ Health economics is a branch of economics
concerned with issues related to efficiency,
effectiveness, value and behavior in the
health services and consumption of health care.
◦ In broad terms, health economists study the
functioning of the health care systems as well as
health-affecting behaviors such as smoking.

22. Other important terms
◦Enterprise
◦ A project undertaken or to be undertaken, especially
one that is important or difficult or that requires
boldness or energy:
◦Business Venture (small business)
◦ It is a start-up entity developed with the
intention of profiting financially
◦ Created based on demand of the market
(needs of consumers) or a lack of supply in
the market
◦ Created by entrepreneurs or investors

23. ◦ Joint venture:
◦ A legal entity created by two or more businesses joining
together to conduct a specific business enterprise with
both parts sharing profits and losses
◦ Corporate venturing,- can be defined in two
ways
◦ The activity of a large company investing money in
a smaller company in return for a share of its profits:
◦ The fact of a large company creating a new business
within the existing structure of the company:

24. ◦Intra-preneurship
◦ Intrapreneurship is the act of behaving like an
entrepreneur while working within a large organization.
◦ Describes enterpreneurer like activities that are given
within large organization to their employees e.g. when
large entities spin-off organizations., corporate venturing
◦Intrapreneurs
◦ Are usually employees within a company who are
assigned a special idea or project, and are instructed to
develop the project like an entrepreneur would.

25. Important terms cont,,,
Inversion
It is the direct creation of better or more effective
products, processes, services, technologies, or
ideas that are accepted by markets,
governments, and society. It is the use of
imagination
Innovation differs from invention in that
innovation refers to the use of a new idea or
method, whereas invention refers more directly
to the creation of the idea or method itself.

26. Innovation cont,,,,,
Therefore, Innovation is the process by which an idea
or invention is translated into a product or service for
which people will pay, or something that results from
this process.
In summary:
innovation = (invention + creation)
= (imagination + use of imagination)
= Introduction of a new idea or process or product
/service.

27. Innovation process schematically:
Challenge/ Problem
Invention
Creation
1
2
3

28. Innovation cont,,,,,
It all starts when opportunity knocks
We have to get from an idea to reality
But first we need the idea creativity plays a big role
Once we have a creative solution we need innovation,
Finally we have to make sure that the innovation makes
business sense
◦ We can have dozens of ideas each day, but not nearly all are
opportunities; only ideas that have commercial potential are!
◦ However, having more ideas clearly improves the chances of
having a viable one.

29. So innovation requires a large
element of creativity

30. There are four distinct types of innovation, these are as follows:
 Invention - described as the direct creation of a new product, service
or process
 Extension - the expansion of a product, service or process
 Duplication - defined as replication of an already existing product,
service or process
 Synthesis - the combination of existing concepts and factors into a
new formulation
Innovation

31. Obstacles to Creativity
Thinking(believing) you are not creative .
Loathing (hating, disliking) criticism
 Fearing to look foolish
 Fearing mistakes and failures (see it as learning!)
Trying to have one “right/best” answer
Being a creature of habit
 Mental models
 Paradigms (shared models)
 You “follow the rules” blindly

32. Obstacles to Creativity
cont…
Trying to be “practical” exclusively
Tendency to avoid ambiguity
Focusing exclusively on “logic”
 Lack of confidence
 Being overconfident
Becoming overly specialized

33. Improving Creativity
Realizing the obstacles to your creativity and
working against them.
Expecting to be creative (self full-filling
prophecy!)
Expecting and tolerating failure, seeing it as a
learning opportunity
Challenging customs, routines, etc. Thinking
outside the box
Think in opposite ways
Study other cultures

34. Improving Creativity
cont…
See problems as interesting challenges
Always ask whether there is a better way
Take creativity training, take a class
Support yourself and others
Create some thinking spaces (music, comfort, etc.), or while
running?
Thinking time, schedule it! Minimize distractions
Listen to others (they have different “models!”)
Be a lifelong student.

35. The impact of Culture on
entrepreneurship
The culture of a community may
influence how much entrepreneurship
there is within it.
A community that accords the highest status
to those at the top of hierarchical
organizations or those with professional
expertise may discourage entrepreneurship.
A culture or policy that accords high status
to the “self-made” individual is more likely to
encourage entrepreneurship.

36. The importance of
entrepreneurship in relation to
employment
Worldwide, economies are in the process of
prolonged transition and structural
adjustments.
◦ In the process, responsibility for wealth and job
creation is being transferred from the public sector
to the private sector of enterprise.
The disengagement of the public sector from the
management of enterprises, and the effects
including “retrenchment” will continue to cause
uncertainties in job markets for “white-collar”
employees and job seekers.

37. Employment cont,,,
The private sector must meet world standards of
productivity and efficiency in the use of human
as well as other resources.
◦ This will retard the creation of new jobs, especially in
large enterprise sector.
At present and in the future, job seekers will find
a shortage of jobs and they will have to consider
new options and opportunities and compete for
them.
◦ Some will need to engage in the small and medium
enterprise sector. …..NEED for ENtRePreneurship

38. Employment cont,,,:
FACTORS WHICH AFFECT EMPLOYMENT
OPPORTUNITIES
They include;
Globalisation of trade and
industry
Political change
Demography
Cultural change
Natural resources
Technological change
Development of Physical
infrastructure
Development of institutional
infrastructure
Legal position
Labour market

39. Entrepreneur’s contribution to
National Development
It is a common agreement today that
entrepreneurship is necessary for stimulating
economic growth and employment opportunities in all
societies.
In the developing world, successful small businesses
are the primary engines of
job creation,
income growth, and
poverty reduction.
Therefore, government support for entrepreneurship is
a crucial strategy for economic development.

40. General contribution of
entrepreneurs to ND
Include;
◦ Reduction of unemployment rate
◦ Raise of per capita income
◦ Effective Provision of social services eg.
Education, health, communication etc
◦ General improvement in standard of lives due
to invention of new technologies.
◦ Entrepreneurship is a key ingredient for
economic dynamism.