ENTREPEPE

CHAPTER 1: NATURE AND RELEVANCE OF ENTREPRENEURSHIP

Lesson 1: Concept of Entrepreneurship

• economic and personal rewards

• opportunity seeking and exploitation

• encountering risks and uncertainties

• resource mobilization

Definitions:

• "Having profits from bearing uncertainty and risk” (Knight, 1921)

• "Carrying out new combinations of firm organization – new products, new services, new sources of raw material, new methods of production, new markets, new forms of organization.“ (Schumpeter, 1934)

• "Decisions and judgements about the coordination of scarce resources.“ (Casson, 1982)

Countries with Strong Entrepreneurship:

1. United States – One of the friendliest countries for entrepreneurs in the world. It is a home for thousands of successful entrepreneurs.

2. China – This emerging country is home to budding entrepreneurs who manufacture different products that range from toys, gadgets, electronics and cars.

3. Singapore – A small country that controls a significant portion of the economy in Asia. Many of their entrepreneurs innovate on existing services for local and international use.

4. Canada – Entrepreneurs in Canada are exploring the opportunities over the internet.

5. India – Entrepreneurship plays a dominant role in the country’s economic landscape, with the government providing a venue, Delhi Huts, to start up entrepreneurs which promote local handicrafts.

6. Taiwan – Entrepreneurship is encouraged here through the small and medium enterprise incubation centers for the purpose of nurturing young firms, new products and technologies.

7. Hong Kong – A knowledge-based economy known as a “shopping haven”.

8. Thailand – The extent of government support to entrepreneurs is very evident. Tourism for international markets and agricultural exports are the two major sources of income generated by Thai entrepreneurs.

9. Malaysia – Its current emphasis is on tourism as a business venture for entrepreneurs is gaining popularity.

10. South Korea – The enterprising spirit is quite obvious in such companies as Samsung and Kia that have now become well-known even outside the country.

Entrepreneurship in the Philippines
The Philippines is an entrepreneurial country, where 99.7% of all firms operating in the country are small and medium enterprises (SME) employing 69% of the labor force and 47% of the 803,476 registered establishments are SMEs owned by women.

Lesson 2: Development of Entrepreneurship

The Earliest Period

• An entrepreneur is a person who sells goods on behalf of the goods’ owner.

• Enters into a formal agreement with a capitalist, bore all risks of possible damage and losses.

The Middle Ages

• An entrepreneur is a person who merely managed the projects using the resources provided by the government.

• Did not assume any risks at all.

The 17th Century

• An entrepreneur is a person who would enter into a formal agreement with the government to provide products or services.

• A risk taker and a bearer of uncertainty.

The 18th Century

• An entrepreneur was distinguished from the capitalist.

• Someone who coordinates, leads, and manages all the activities of the firm.

The 19th and 20th Century

• Entrepreneurs are innovators who seek opportunities and lead “existing means of production into new channels”.

• A little distinction between an entrepreneur and a manager.

The 21st Century

• Entrepreneurs are considered as heroes of free enterprise.

• Creativity and innovation was used to exploit high growth potentials.

• Significant changes due to the Internet.

Evolution of Entrepreneurship in the Philippines

• It started through the barter system wherein goods and services were the means of exchanges.

• Then, countries moved towards a money economy when people used different forms of money to pay for the goods they bought.

• However, when we were colonized for hundreds of years, the structure of society, economy, education, and political system were changed.

• We became family-centered, Catholic, capitalist, and a democratic country.

• After independence, the Philippine government realized the importance of entrepreneurship to individuals, society, and the country, and how it contributes to the nation’s economic development.

Contribution of Entrepreneurship

• Entrepreneurship has a huge impact on the economy and in society

• It was Joseph Schumpeter, an Austrian economist who articulated the importance of entrepreneurship to the economy and in society in 1934

• The increase in entrepreneurial activities has also initiated changes in the structure of business and society

1. Creates Employment - When entrepreneurs put up their business, they employ people who possess different competencies and personal values to help them operate the enterprise.

2. Develops New Market - They are opportunity seekers, creative and resourceful. They seek new buyers or customers. They go beyond the existing places where their products are sold.

3. Introduces Innovation - Innovations can be something ordinary or technological or breakthrough. Due to innovation, other businesses fold, while others will open or flourish. Some even restructure like merging or buying out firms, to respond to the changes that are required in order to become sustainable in the business.

4. Generates New Source of Materials - Entrepreneurs are always in constant search for better and cheaper sources of materials they need. Finding new materials providers or suppliers help in the economic growth of the place.

5. Stimulates Investment Interest in the New Business Ventures Being Created - When entrepreneurs engage in a new business, it stirs curiosity for other people to invest in the business because of the benefits it offers. This new investment contributes to economic growth.

6. Improves the Quality of Life - The new products and services developed by the entrepreneur contribute to the increase in the personal benefit and convenience of people in society. The use of automatic gadgets in cooking or washing clothes, mobiles phones, internet service, agricultural machines leads to a better quality of life.

7. Serves as Role Model - Entrepreneurs are people to be emulated by younger generations in the community and society. The attitude, behavior and personality traits like pro activeness, opportunity recognition, risk-taking, alertness and creativity are some of the characteristics that will also make them successful entrepreneurs in the future.

8. Bring Social Benefits to the People - Entrepreneurs pay taxes for every product or service sold to the market. The income derived from all these taxes by the government are then used for the people, especially the poor to have access to education and health as well as improvement in infrastructure facilities like roads and bridges.

9. Utilizes and Mobilizes Indigenous Resources - SMEs will always look for cheaper and local materials to supply their needs. This saves much in terms of foreign currency as local enterprises patronize their own resources and they do not become dependent on imported materials.

10. Produces More Alternative Sources for Consumers - The stiff competition in the market for quality and cheaper products and services requires the entrepreneurs to come up with more products consumers can choose from.

CHAPTER 2: ENTREPRENEURS AND ENTREPRENEURIAL COMPETENCIES

“Entreprendre” - French word meaning to undertake

An entrepreneur is a founder and creator of the enterprise who makes use of the opportunities that abound to start or grow business, knowing that there are risks involved in such undertaking

FROM AN ECONOMIST’S POINT OF VIEW - Someone who brings resources, labor, materials and other assets into combinations that make their value greater than before Someone who introduces changes, innovations and a new order

FROM A PSYCHOLOGIST'S POINT OF VIEW - A person who is “typically driven by certain forces such as the need to obtain or attain something, to experiment, to accomplish, or perhaps to escape the authority of others”

FROM A MANAGEMENT PERSPECTIVE - Someone who identifies opportunities, plans, mobilizes resources, manages, and assumesthe risks of a business to have a positive impact on society

COMMON PROFILE DIMENSIONS

A. CALCULATED RISK-TAKING
● doing everything possible to get the odds in their favor, and they often avoid taking unnecessary risk.

B. COMMITMENT
● the unwavering dedication to work for the common good of the society through one’s business

C. FEEDBACK-SEEKING
● the taking of steps to know how well they are doing and how they might improve their performance

D. PERSEVERANCE
● the determination to succeed by overcoming obstacles and setbacks
● entrepreneurs will not easily give up when problems come their way

E. DRIVE TO ACHIEVE
● the internal desire to pursue and attain challenging goals
● entrepreneurs examine the situation, plan how to achieve their goals given the condition

F. SELF-CONFIDENCE
● the belief that together with the other people, things can be done in the business

G. OPPORTUNITY ORIENTATION
● the constant awareness of opportunities that exist in everyday life

H. INNOVATIVENESS
● the ability to come up with something different or unique
● can be in terms of a new product, service, process, market or technology
● this trait is often related to creativity or “thinking outside the box”

I. RESPONSIBILITY
● the willingness to put themselves in situations where they are personally responsible for the success or failure of the business operation

J. TOLERANCE FOR FAILURE
● using it as a learning experience
● serious setbacks and disappointments become an integral part of the learning process.

Entrepreneurs Think This Way

1. Actuate Self-Assessment and Choose Course of Action

The entrepreneur determines what they have, such as knowledge, skills, resources, and people they know. Then they choose from possible outcomes.

Courses of Action:

• Convince an investor to invest the needed money to start the business.

• Invite friends and relatives and show what unique ethnic items you intend to sell.

• Opt to sell directly or online instead of having a store to minimize expenses.

2. Generate Multiple Decision Models

This thinking process enables entrepreneurs to reflect, comprehend, and control their learning and intellectual ability. Based on what they observe or feel, they come up with several decision-making models centered on reasonable solutions and acting on the situation.

According to Kazmi:

3. Learn from Failure

Causes of failure may include:

• Lack of business experience

• Inability to attract new funding

• Lack of new product development effort

• Lack of supply of needed raw materials

• Family conflict over management

• Resignation of skilled workers

Failure often results in negative emotions like anger, guilt, anxiety, and hopelessness, which can hinder learning and motivation to try again.
Self-determination, proactive thinking, and a positive mindset help entrepreneurs recover.

Lesson 3: Entrepreneurial Competencies

Definition:
The sum total of the personality, skills, and knowledge that the entrepreneur possesses, which are necessary to effectively perform their functions and responsibilities.

According to Camuffo, Gerli, and Gubitta (2012), entrepreneurial competencies can be divided into functional, behavioral, and cross-functional groups.

Functional Competencies

Skills organized into clusters regarding the main areas of managerial knowledge, such as:

• Accountancy

• Finance

• Control

• Marketing

• HR Management

• Organization

• Operations

• Internationalization

• Strategy

These enable the entrepreneur to manage the organization effectively.

Behavioral Competencies

Specific behaviors grouped into five clusters:

• Self-awareness

• Self-management

• Social awareness

• Relationship management

• Cognitive competencies

• Cross-Functional Competencies

Broad, overall skills grouped into:

• Goal and action management cluster

• People management cluster

• Analytical reasoning cluster

It is ideal for entrepreneurs to demonstrate these at an advanced level to contribute to better firm performance.

Man and Chan (2002) further categorized all identified competencies into relevant activities and behaviors in the SMEs context.

Six Competency Areas identified in literature are grouped together as:

• Opportunity Competencies – related to recognizing and developing market opportunities through various means.

• Relationship Competencies – related to person-to-person or individual-to-group interactions.

• Conceptual Competencies – related to different conceptual abilities, which are reflected in the behaviors of an entrepreneur.

• Organizing Competencies – related to the organization of different internal and external human, physical, financial, and technological resources.

• Strategic Competencies – related to setting, evaluating, and implementing the strategies of the firm.

• Commitment Competencies – the drive of an entrepreneur to move ahead with the business.

Important factors that determine the entrepreneurial decision-making process:

1. Rational/Scientific Method in Decision-Making – Involves the use of a structured process to arrive at a decision, often requiring management quantitative techniques.

2. Use of Intuition in Decision-Making – Relies on “gut feel” to make decisions.

3. Affect Infusion – Suggests that entrepreneurs’ current moods influence judgments or decisions.

4. Attribution Style – Refers to the self-serving bias of entrepreneurs, where they tend to attribute positive outcomes to internal causes and negative outcomes to external causes.

5. Counterfactual Thinking – An afterthought in decision-making in which the procedures followed are reviewed and alternative courses of action are considered.

6. Over-Confidence – The tendency to believe they know more than they actually do, failing to recognize the limits of their own knowledge.

7. Knowing-Style – A decision-making style that combines analytical and conceptual thinking, focusing on gathering facts and data before deciding.

8. Creative Style – A decision-making style characterized by holistic and conceptual thinking, with an emphasis on creativity and experimentation.