MN3194 Entrepreneurship
Aims and objectives
The aim of this course is to:
• Gain a thorough understanding of how economics can contribute
to entrepreneurship.
• To enable students to design, structure, and execute the process
of launching a new venture.
• How social entrepreneurship creates impact and how to measure
it.
Learning outcomes
At the end of the course and having completed the essential reading and
activities students should be able to:
• Describe the theoretical insights and recent empirical findings of the
economics of Entrepreneurship.
• Explain how entrepreneurship drives economic change and growth.
• Outline the historical context and impact of social entrepreneurship.
• Analyse viable business models.
• Design market research frameworks, develop and evaluate business
models
Essential reading
• Osterwalder, A and Y. Pigneur. Business Model Generation (John Wiley & Sons 2010)
• Osterwalder, A and Y. Pigneur. Value Proposition Design (John Wiley & Sons 2014)
• Drucker, P. Innovation and Entrepreneurship: Practice and Principles.
• Koltai, S. and Muspratt, M. Peace through Entrepreneurship: Investing in a Startup
Culture for Security and Development.
• Acs, Z. and Audretsch, D. Handbook of Entrepreneurship Research: An
Interdisciplinary Survey and Introduction. 2nd edition (New York: Springer, 2011)
• Blank, S. and Dorf, B. The Startup Owner’s Manual. (Pescadero: K & S Ranch, 2012)
• Mullins, John. The New Business Road Test: What entrepreneurs and executives
should do before launching a lean start-up. (FT Press, 2013) fifth edition
• Additional Reading for each lecture / Case Studies
Assessment
• This course is assessed by a three-hour and fifteen-minute
closed-book written examination.
• a) Discuss how you would apply the PEST analysis framework in
order to determine the level of stability of an economy.
• b) Discuss, at what stage of a start-up, venture capital or public
sector funding may be strategically more advantageous.
Assessment
• Homework presentations – 10 points
• Midterm (Written exam) – 20 points
• Short Summaries – 10 points
• Group Project – 20 points
• Final Exam – 40 points
Blocks
• Block 1: The History of Entrepreneurship
• Block 2: The Economics of Entrepreneurship
• Block 3: The Entrepreneurship Ecosystem
• Block 4 Social Entrepreneurship
• Block 5 Business Models & Ideation
• Block 6 Key Partners & Alliances
• Block 7 Key Activities as an Entrepreneur
• Block 8 Value Proposition (VP) & Unique Selling Proposition (USP)
• Block 9 Customer Development
• Block 10 Customer Relationships
Entrepreneurship is the pursuit of
opportunity beyond resources
controlled.
Professor Howard Stevenson, HBS
“Pursuit”
Implies a singular, relentless focus.
Entrepreneurs often perceive a short window of
opportunity.
They need to show tangible progress to attract
resources, and the mere passage of time
consumes limited cash balances.
Consequently, entrepreneurs have a sense of
urgency that is seldom seen in established
companies, where any opportunity is part of a
portfolio and resources are more readily available.
“Opportunity”
Implies an offering that is novel in one or more of four ways. The opportunity may
entail:
1) pioneering a truly innovative product;
2) devising a new business model;
3) creating a better or cheaper version of an existing product;
or
4) targeting an existing product to new sets of customers.
These opportunity types are not mutually exclusive. For example, a new venture
might employ a new business model for an innovative product.
Likewise, the list above is not the collectively exhaustive set of opportunities
available to organizations.
Many profit improvement opportunities are not novel – and thus are not
entrepreneurial–for example, raising a product’s price or, once a firm has a
scalable sales strategy, hiring more reps.
“Beyond resources controlled”
Implies resource constraints.
At a new venture’s outset, its founders control only their own human,
HOW WILL WE
social, and financial capital.
Many entrepreneurs bootstrap: they keep expenditures to a bare
COMMUNICATE
minimum while investing only their own
personal funds.
INtime and, as necessary, their
THE FUTURE?
In some cases, this is adequate to bring a new venture to the point
where it becomes self-sustaining from internally generated cash flow.
With most high-potential ventures, however, founders must mobilize
more resources than they control personally: the venture eventually
will require production facilities, distribution channels, working
capital, and so forth.
• SME entrepreneurship
• Corporate entrepreneurship
• Startup entrepreneurship
COMMONLY KNOWN • Social entrepreneurship
ENTREPRENEURSHIP • Innovative entrepreneurship
TYPES • Hustler entrepreneurship
• Imitator entrepreneurship
• Researcher entrepreneurship
• Buyer entrepreneurship
• They create new businesses
WHY ENTREPRENEURSHIP IS • They add to the national income
IMPORTANT? • They also create social change
• They help others grow
Earliest Period
• Marco polo , as a go-between was
an Italian.
• He wants to trade routes to the far
East.
• As a go-between, He had to sign a
contract with a money person to
sell his goods. In the contract
merchant-adventurer took a loan
at 22.5% rate including insurance .
• Capitalist was the passive risk bearer and
merchant-adventurer took the active role in
trading, bearing all physical and
emotional risks.
• When the merchant-adventurer successfully sold
the goods and completed the trip, the profits were
divided with the capitalist taking most of them(upto
75%), while the merchant-adventurer settled for the
remaining
25 %.
Middle Ages
• Entrepreneur used to describe both as
an actor and a person who managed
large production projects.
• Individuals did not take any risks
because all the resources used to
provided by the government of the
country, all an entrepreneur should do
is to manage it.
• A typical entrepreneur in
the middle age was the
priest.
• The person in charge of
great architectural works
used to build castles and
fortifications, public
buildings, abbeys, and
cathedrals.
17th Century
• The connection of the risk with entrepreneurship
developed in the 17 th century.
• An entrepreneur was a person who entered into a
contract with the government to perform a service
or to supply stipulated products.
• John law, a frenchman was one of the
entrepreneur in that period.
•The founder of the royal bank of France and the
Mississippi Company,which had an exclusive
franchise to trade between France and the new
world.
• Monopoly on french trade eventually led to
collaspe of the company.
• Richard Cantillion, a well-known English
economist at the beginning of the 17th
century, understood Law’s mistake.
• He viewed the entrepreneur as a risk taker,
observing that merchants, farmers,
craftsmen, and others sole proprirtors “buy
at a certain price and sell at an uncertain
price, therefore operating at a risk. ”
18th Century
• In the 18th century, the person with capital
was differentiated from the one who
needed capital.
• The entrepreneur was distinguished from
the capital provider.
• One reason for this differentiation was the
industrialization occuring throughout the
world.
• Eli Whitney was an American
inventor best known for inventing
the cotton gin. This was one of
the key inventions of the
industrial Revolution.
• Thomas Edison, the inventor of many
inventions. He was developing new
technologies and was unable to finance his
inventions himself.
• Edison was a capital user (an entrepreneur),
not a provider (a venture capitalist).
19th & 20th Centuries
• In the late 19th and early 20th centuries,
entrepreneurs were frequently not
distinguished from managers and were
viewed mostly from an economic
perspective.
• The entrepreneur organizes and manages
an enterprise for peersonal gain.
•The materials consumed in the business,
for the use of the land, for the services he
employs, and for the capital he requires.
• Andrew Carnegie is one of the best examples
of this definition.
• Carnegie, who descended from a poor
scottish family, made the American Steel
Industry one of the wonders of the industrial
world.
In the middle of the 20th Century
• The function of the entrepreneurs is to recreate or revolutionize the pattern of
production by introducing an invention.
• Innovation, the act of introducing some new ideas, is one of the most difficult tasks
for the entrepreneur.
• Edward Harriman, who reorganized
the railroad in the United States.
• John Morgan, who developed his large
banking house by reorganizing and
financing the nation’s industries.
• Traditional technologies innovations
(translators, computers, lasers) that are
usually associated with the word
invention.
GROWTH OF ENTREPRENEURSHIP I
Settlements Towns
Buying Selling
Aptitude Skills
Production
Efficiencies
Competition
GROWTH OF ENTREPRENEURSHIP II
Trade Trade Routes
Trade & Trade Routes Money
Money Markets
Industrialisation
The New Age
- Research by the Kauffman Foundation shows that in the United States
alone, entrepreneurs launch 476,000 businesses each month
- “Small businesses have been at the core of our economy’s growth over the
last few years,” says Winslow Sargeant, chief counsel of the U.S. Small
Business Administration’s Office of Advocacy.
- Entrepreneurial activity is essential to a strong global economy. Many of
the world’s largest companies continue to engage in massive downsizing
campaigns, dramatically cutting the number of employees on their
payrolls.
- “castoffs” from large corporations (in which many of these individuals
thought they would be lifetime career climbers) with solid management
experience and many productive years left before retirement.
The New Age
- the largest companies in the United States (those with 500 or more employees)
fired 1.7 million net jobs; during the same period, small businesses with fewer
than 20 employees created 287,000 net jobs
- Twenty-five years ago, competitive conditions favored large companies
- Today, with the pace of change constantly accelerating, small companies
have the competitive advantage.
- Small nimble competitors can dart into and out of niche markets as they
emerge and recede, they can move faster to exploit market opportunities, and
they can use modern technology to create, within a matter of weeks or months
new products
- in the United States—one in eight people—is working to start a business
What Is an Entrepreneur?
An entrepreneur is one who creates a new business in the
face of risk and uncertainty for the purpose of achieving
profit and growth by identifying significant opportunities
and assembling the necessary resources to capitalize on
them.
Entrepreneurs are important change agents in the global
economy, uprooting staid industries with fresh new
business models that spot market opportunities and deliver
the products and services customers want.
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Who Is an Entrepreneur?
by relatives…
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Who Is an Entrepreneur?
by relatives…
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The entrepreneurial profile
- Desire for responsibility
Entrepreneurs feel a deep sense of personal responsibility for the outcome of
ventures they start.
- Preference for moderate risk:
The common belief that entrepreneurs prefer taking big risks is a myth.
- Self-reliance
Because their resources usually are limited, they end up performing many jobs
themselves.
- Confidence in their ability to succeed
- Determination
The entrepreneurial profile
- Desire for responsibility
Entrepreneurs feel a deep sense of personal responsibility for the outcome of
ventures they start.
- Preference for moderate risk:
The common belief that entrepreneurs prefer taking big risks is a myth.
- Self-reliance
Because their resources usually are limited, they end up performing many jobs
themselves.
- Confidence in their ability to succeed
- Determination
Failure was not an option for them
The entrepreneurial profile
- Desire for immediate feedback
Entrepreneurs enjoy the challenge of running a business, and they like to
know how they are doing and are constantly looking for feedback.
- High level of energy
Entrepreneurs are more energetic than the average person.
- Future orientation
Entrepreneurs have a well-defined sense of searching for opportunities and
stay focused on the future
- Should see potential where most people see only problems or nothing at
all
The entrepreneurial profile
- Skill at organizing
- Value of achievement over money
Achievement seems to be entrepreneurs’ primary motivating force; money is
simply a way of “keeping score” of accomplishments - a symbol of
achievement.
- High degree of commitment
Entrepreneurship is hard work, and launching a company successfully requires
total commitment from an entrepreneur.
- Tolerance for ambiguity
- Creativity
The entrepreneurial profile
- Flexibility
Ability to adapt to the changing needs and preferences of their customers and the changing
demands of the business environment
- Resourceful
Bootstrapping - a strategy that involves conserving money and cut- ting costs during start-up so
that entrepreneurs can pour every available dollar into their businesses.
- Willingness to work hard
Be ready to invest at least 10,000 hours practicing and honing skills
- Tenacity
Obstacles, obstructions, and defeat typically do not dissuade entrepreneurs from doggedly
pursuing their visions
Most Important Qualities of an Entrepreneur
The difference
- Entrepreneurs - Managers
1. are concerned with
1. interested in spotting and
managing available
capitalizing on
opportunities resources
2. Develop a plan to prepare a
2. Who prepare sumptuous specific dish and then
meals when handed a create a process for
hodgepodge of ingredients making that dish in the
and given the task of using most efficient, expeditious
their creativity to come up fashion.
with an appetizing menu.
2 types of entrepreneurs
- Opportunity entrepreneurs - Necessity entrepreneurs
entrepreneurs who start
entrepreneurs who start businesses because
businesses because they they cannot find work
spot an opportunity in the any other way.
marketplace.
Serial entrepreneurs
Entrepreneurs who repeatedly start businesses and grow them to a
sustainable size before striking out again – Serial entrepreneurs.
-Leapfroggers: who start a company, manage its growth until they get
bored, and then sell it to start another.
-Jugglers: who start and manage several companies at once.
Social entrepreneurs
Entrepreneurs entrepreneurs who use their skills not only to
create profitable businesses but also to achieve economic, social, and
environmental goals for the common good.
The Benefits of Entrepreneurship
- Opportunity to Create Your Own Destiny
- Opportunity to Make a Difference
- Opportunity to Reach Your Full Potential
- Opportunity to Reap Impressive Profits
- Opportunity to Contribute to Society and Be Recognized for Your
Efforts
- Opportunity to Do What You Enjoy and Have Fun at It
info: More than two-thirds of the billionaires on the Forbes list of the 400 richest
Americans are first-generation entrepreneurs!
More than 80 percent of middle-class millionaires, those people with a net worth
between $1 million and $10 million, own their own businesses or are part of professional
partnerships.
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The Potential Drawbacks of Entrepreneurship
- Uncertainty of Income
- Risk of Losing Your Entire Investment
- Long Hours and Hard Work
- Lower Quality of Life Until the Business Gets Established
- High Levels of Stress
- Complete Responsibility
- Discouragement
info: Wells Fargo/Gallup Small Business Index survey reports that 83 percent of small
business owners say that if they were choosing a career again, they would still become
small business owners.
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Sources of stress
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Questions before you start
● What is the worst that could happen if I open my business and it fails?
● How likely is the worst to happen? (Am I truly prepared to launch my
business?)
● What can I do to lower the risk of my business failing?
● If my business were to fail, what is my contingency plan for coping?
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Factors successfully push entrepreneurial development
- Entrepreneurs as heroes
- Entrepreneurial education
- Demographic and economic factors
- Shift to a service economy
- Technology advancements
- Independent lifestyle
- The Internet, cloud computing, and mobile marketing
- International opportunities
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The Cultural Diversity of Entrepreneurship
- Young entrepreneurs
- Women entrepreneurs
- Minority enterprises
- Immigrant entrepreneurs
- Part-time entrepreneurs
- Home-based businesses
- Family businesses
- Copreneurs
- Corporate castoffs
- Corporate dropouts
- Retiring people
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The Cultural Diversity of Entrepreneurship
- Young entrepreneurs
- Women entrepreneurs
- Minority enterprises
- Immigrant entrepreneurs
- Part-time entrepreneurs
- Home-based businesses
- Family businesses
- Copreneurs
- Corporate castoffs
- Corporate dropouts
- Retiring people
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The Cultural Diversity of Entrepreneurship
- Young entrepreneurs
- Women entrepreneurs
- Minority enterprises
- Immigrant entrepreneurs
- Part-time entrepreneurs
- Home-based businesses
- Family businesses
- Copreneurs
- Corporate castoffs
- Corporate dropouts
- Retiring people
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Putting Failure into Perspective
” Because of limited resources, inexperienced management, and
lack of financial stability, small businesses suffer relatively
high mortality rates “
Failure is a natural part of the creative process!
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How to Avoid the Pitfalls
- Know your business in depth
- Build a viable business model—and test it
- Develop a solid business plan
- Understand financial statements
- Manage financial resources
- Learn to manage people effectively
- Set your business apart from the competition
- Maintain a positive attitude
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