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Entrepreneurship Lecture Notes Part 1

Part One of Entrepreneurship Lecture Notes on Students Enterprise Club at www.studentsenterpriseclub.com.
This is a Study guide for intending Entrepreneurs.

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Entrepreneurship Lecture Notes Part 1

  1. 1. Entrepreneurship •Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". •This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. •The most obvious form of entrepreneurship is that of starting a new outfit referred as new Business-Startup however, in recent years, the term has been extended to include social and political forms of entrepreneurial activity. • When entrepreneurship is describing activities within a firm or large organization it is referred to as intra-preneurship and may include corporate venturing, when large entities spin-off organizations.
  2. 2. 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, possessing characteristics found in only a very small fraction of the population. • 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.
  3. 3. Characteristics of entrepreneurship • Entrepreneurial activities are substantially different depending on the type of organization and creativity involved. • Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part- time) to major undertakings creating many job opportunities. Many "high value" entrepreneurial ventures seek venture capital or angel funding (seed money) in order to raise capital to build the business. • Angel investors generally seek annualized returns of 20-30% and more, as well as extensive involvement in the business. Many kinds of organizations now exist to support would-be entrepreneurs including specialized government agencies, business incubators, science parks, and some NGOs. • In more recent times, the term entrepreneurship has been extended to include elements not related necessarily to business formation activity such as conceptualizations of entrepreneurship as a specific mindset (see also entrepreneurial mindset) resulting in entrepreneurial initiatives e.g. in the form of social entrepreneurship, political entrepreneurship, or knowledge entrepreneurship have emerged.
  4. 4. Some theory of Entrepreneurship • In the 20th century, the understanding of entrepreneurship owes much to the work of economist Joseph Schumpeter in the 1930s and other Austrian economists such as Carl Menger, Ludwig von Mises and Friedrich von Hayek. • In Schumpeter, an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior innovations across markets and industries, simultaneously creating new products including new business models. • In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. The supposition that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such is hotly debated in academic economics. • An alternate description posited by Israel Kirzner suggests that the majority of innovations may be much more incremental improvements such as the replacement of paper with plastic in the construction of a drinking straw.
  5. 5. Some theory of Entrepreneurship • 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.
  6. 6. Concept of Entrepreneurship • It has assumed super importance for accelerating economic growth both in developed and developing countries. • It promotes capital formation and creates wealth in country. • It is the hope and dreams of millions of individuals around the world. • It reduces unemployment and poverty and it is a pathway to prosper. • Entrepreneurship is the process of exploring the opportunities in the market place and arranging resources required to exploit these opportunities for long term gain. • It is the process of planning, organising, opportunities and assuming. • It is a risk of business enterprise. It may be distinguished as an ability to take risk independently to make utmost
  7. 7. 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.
  8. 8. Recommended Reading Peter F. Drucker:Innovation & Entrepreneurship