Chapter 1 Entrepreneurship and the Entrepreneurial MindSet Entrepreneurship

Chapter 1 Entrepreneurship and the Entrepreneurial Mind-Set Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -1

LEARNING OBJECTIVES 1. To introduce the concept of entrepreneurship and explain the entrepreneurial process. 2. To introduce effectuation as a way that expert entrepreneurs sometimes think. 3. To develop the notion that entrepreneurs learn to be cognitively adaptable. 4. To acknowledge that some entrepreneurs experience failure and to recognize the process by which they maximize their ability to learn from that experience. 5. To recognize that entrepreneurs have an important economic impact and ethical and social responsibility Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -2

Concepts and Definitions v Entrepreneur: is commonly seen as an innovator ( a generator of new ideas, and business processes. ) 1. v a) Entrepreneur is a person who starts an enterprise. Entrepreneurship Can be described as a process of an action of an entrepreneur to establish his enterprise. b) Creative activity. It is the ability to create and build something from almost nothing. c) Is the attitude of mind to seek opportunities, take risks and obtain benefits by setting up a business enterprise. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -3

Concepts and Definitions The process of creation is called (entrepreneurship). Ø The entrepreneur is the actor and entrepreneurship is the act. Ø The outcome of the actor +act = is called the enterprise. Ø Enterprise: is the business organization that is formed and which provides goods and services, creates jobs contributes to national income, exports and over all economic development Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -4

Definitions of the entrepreneurs mind-set Entrepreneurial Mind-set: Involves the ability to make sense about the opportunities in the context of changing goals , act, and mobilize even under uncertain condition. To be good in this task the individuals must develop a cognitive adaptability. Cognitive adaptability : Describe the point to which entrepreneurs are dynamic, flexible, self adaptable + engaging to the process of generating multiple decision frame works focused on sensing dealing out change in their environments and then acting on them. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -5

Achieving cognitive adaptability by 1. Comprehension questions – Aids understanding of the nature of the environment before addressing an entrepreneurial challenge. 2. Connection tasks – Stimulates thinking about the current situation in terms of similarities and differences with situations previously faced and solved. 3. Strategic tasks – Stimulates thoughts about which strategies are appropriate for solving the problem (and why) or pursuing the opportunity (and how). 4. Reflection tasks – Stimulates thinking about their understanding and feelings as they progress through the entrepreneurial process. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition

Definition of Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort; assuming the additional financial, psychic, and social risks and uncertainties; and receiving the resulting rewards of monetary and personal satisfaction. Entrepreneurial action - Behavior in response to a judgmental decision under uncertainty about a possible opportunity for profit Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -7

The definition stresses 4 basic aspects of being an entrepreneur First, entrepreneurship involves the creation process— creating something new of value to both said entrepreneur and to the audience for which is it developed. Second, entrepreneurship requires the devotion of the necessary time and effort. (appreciate the amount of time spending in creating something new) Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -8

The definition stresses 4 basic aspects of being an entrepreneur (con’t) Third part of the definition involves the rewards of being an entrepreneur. The most important of these rewards is independence, followed by personal satisfaction, for some entrepreneurs, money becomes the indicator of the degree of success achieved. Forth -Entrepreneurs must decide to act even in the face of uncertainty over the outcome of that action. ( they respond to and create change through their entrepreneur action) Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -9

3 Kinds of Behavior 1. 2. Initiative taking ( Idea of the project) The organizing and reorganizing of social and economic mechanisms to collect resources in innovative ways 3. The acceptance of risk, that can ambiguity or the possible for failure Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -10

The Entrepreneurial Process Ø Is The process of pursuing a new venture. The process has 4 phases: 1. Opportunity identification - The process by which an entrepreneur comes up with the opportunity for a new venture. Ø How by looking at the Market size & The length of the window of opportunity are the primary bases for determining risks and rewards. Ø Window of opportunity - The time period available for creating the new venture. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition

The Entrepreneurial Process 2. Develop a Business plan - The description of the future direction of the business. 3. Determine the Resources Required : The Entrepreneur must determine the resources needed for addressing the opportunity 4. Manage the enterprise: is the last stage of the process and it required to implement the business plan. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -12

Table 1. 1 - Aspects of the Entrepreneurial Process Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition

How Entrepreneurs Think Entrepreneurs in particular situations may think differently when faced with a different task or decision environment. Ways of thought : Entrepreneurs need to sometimes: 1. Effectuation v There A. are two ways that task can be organized : Causal process it’s a process that 1. Starts with a desired outcome. 2. Focuses on the means to generate that outcome. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition

How Entrepreneurs Think B. Effectuation process it’s a process that 1. Starts with what one has (who they are, what they know, and whom they know). 2. Selects among possible outcomes. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -15

How Entrepreneurs Think (cont. ) 2. Be cognitively adaptable. Entrepreneurs who are able to increase cognitive adaptability have an improved ability to: 1. Adapt to new situations. 2. Be creative. 3. Communicate one’s reasoning behind a particular response. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition

How Entrepreneurs Think (cont. ) 3. Learning from Business Failure ◦ Uncertainty, changing conditions, and insufficient experience can contribute to failure among entrepreneurial firms. It occurs when a fall in revenue or rise in expenses of project fail. ◦ Loss of a business can result in a negative emotional response from the entrepreneur. . Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition

How Entrepreneurs Think (cont. ) An entrepreneur’s motivation is not simply from personal profit but from: 1. Loyalty to a product. 2. Loyalty to a market and customers. 3. Personal growth. 4. The need to prove oneself. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition 1 -18

Ethics and Social Responsibility of Entrepreneurs Business ethics - The study of behavior and morals in a business situation. Personal value systems tend to be influenced by: 1. Peer pressure. 2. General social norms in the community. 3. Pressures from their competitors. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition

Role of Entrepreneurship in Economic Development Innovation is important key to the economic development. 3 types of innovation: 1. Ordinary - New products with little technological change. 2. Technological – New products with significant technological advancement. 3. Break-through – New products with some technological change. Entrepreneurship, Published by: Mc. Graw Hill, 8 th edition