ENTREPRENEURS

HIP
B.com (Hons)
5th semester
Hailey college of Commerce
Instructor :Touseef Ahmad

Chapter 1
The Foundations of
Entrepreneurship

Chapter Outline
The world of entrepreneurs
What is entrepreneurship?
The benefits of entrepreneurship
The potential drawbacks of Entrepreneurship
Role of Entrepreneurship in Economic

Development
The power of small business
Ten Mistakes of Entrepreneurship

The World of the

Entrepreneur
In the U.S., entrepreneurs start between 3

million and 4.5 million businesses a year!

Approximately 10.5% of Americans are
actively involved in trying to start a new
business.
84% of entrepreneurs start first time
78% of Americans believe in Entrepreneurship
Downsizing in all over the world (Increasing
Unemployment )

The Global Entrepreneurship Monitor (GEM)

2011 Global Report finds an upsurge in

entrepreneurship around the world
entrepreneurs are now numbering near 400
million in 54 countries -- with millions of new
hires and job creation expectations in the
coming years.

The World of the

Entrepreneur
Global Entrepreneurship Monitor (GEM) study

reports:
Men are twice as likely to start a business as

women.
Most entrepreneurs turn to family members and
friends for capital.
Entrepreneurs are most likely to launch
businesses when they are
between the ages of 25 and 44.

Ch. 1: The Foundations of Entrepreneurship

1-6

The World of the

Entrepreneur
Every year U.S. entrepreneurs launch 850,000

new businesses.

Entrepreneurial spirit - the most significant

economic development in recent history.

Ch. 1: The Foundations of Entrepreneurship

1-7

Ch. 1: The Foundations of Entrepreneurship

Economic growth is effect, entrepreneur is

the
cause.
Entrepreneurs
explore
opportunities, convert ideas into viable
business proposition and provide new
products and services to the society by
bringing together and combining various
factors of production. They change life style
of the people.

What is Entrepreneurship?
The word entrepreneur derives
from the French words entre, meaning
between, and prendre, meaning to
take. The word was originally used
to describe people who take on the
risk between buyers and sellers or
who undertake a task such as
starting a new venture.
1-11

What is an
Entrepreneur?
One who creates a new business in the face of
risk and uncertainty for the purpose of
achieving profit and growth by identifying
opportunities and assembling the necessary
resources to capitalize on them.
Simply Define:
Process of creating something new and
assuming the risks and rewards.
Robert D.Hisrich, M.P.Peters &
D.A.Shepherd

What is Entrepreneurship?
Academic Definition (Stevenson & Jarillo)
Entrepreneurship is the process by which individuals pursue

opportunities without regard to resources they currently

control.

Venture Capitalist (Fred Wilson)

Entrepreneurship is the art of turning an idea into a business.

Explanation of What Entrepreneurs Do

Entrepreneurs assemble and then integrate all the resources

needed the money, the people, the business model, the

strategyneeded to transform an invention or an idea into a
viable business.

1-13

Entrepreneur is one who creates a new

business, taking certain risks and uncertainty,

for the purpose of achieving profit and growth,
by identifying opportunities and assembling
the necessary resources.
Entrepreneurship :
1) Identifying an opportunity
2) Pursuing that opportunity beyond your
current resources
3) Believing that the opportunity can be
achieved.

One who creates a new business in the face of

risk and uncertainty for the purpose of achieving
profit and growth by identifying opportunities and
assembling the necessary resources to capitalize
on them.
Finding innovation and market gaps for new
products and services.
Entrepreneurship is about creativity. Entrepreneurs
use innovation and hard work to overcome obstacles
to their success.
Entrepreneurship is about fun. Nothing feels better
than focused effort and accomplishment.

Ch. 1: The Foundations of Entrepreneurship

1 - 15

Introduction of a new product or service that is an

improvement in the quality of an existing product or
service.
Introduction of a new process or method that
increases productivity.
The opening of a new market, particularly an

export market in a new territory.

The conquest of a new source of supply of
raw materials, half-manufactured products
or alternative materials.
The creation of a new organization.

Tom s decision in the late 1960s to create

Domino's Pizza based on home delivery and

Jeff Bezos's decision in 1995 to launch
Amazon.com as a totally online bookstore are
examples of innovative distribution strategies
that revolutionized the marketplace.

Entrepreneur is a person who starts an

enterprise. The process of creation called
entrepreneurship. The entrepreneur is the
actor and entrepreneurship is the act. The
outcome of the actor and the act is called the
enterprise. An 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.

To put it very simply an entrepreneur is

someone who perceives opportunity

,organizes resources needed for exploiting
that opportunity and exploits it.
Computers, mobile phones, washing
machines, ATMs, Credit Cards, Courier
Service, and Ready to eat Foods are all
examples of entrepreneurial ideas that got
converted into products or services.

You can also choose to be like Mr. Patel of

Nirma who was a chemists assistance and

has a Rs. 2500 crore company today. Did you
know that the original Mr.
Bata was a cobbler? And now has stores in
more than 30 countries all over the world.

Entrepreneur performs the function of risk and

uncertainty bearing. Every decision pertaining to

development of new products, adapting new
technologies, opening up new markets involves risk
Entrepreneurs seek disequilibrium a gap between the
wants and needs of the customers and the products
and services that are currently available in the
markets. The entrepreneurs then bring together the
factors of production necessary to produce, offer and
sell desired products and services. They invest and risk
their money and other people's money to produce
products and/or services that can be sold at a profit.

The tapal Story

Transforming A Vision Into Reality

Tapal Tea is born

Established in 1947 by Adamali Tapal
Started business due to market opportunity

and potential growth rather than prior

experience
A small shop next to Jodia Bazar
Success to low overhead costs and personal
customer service

Market Segmentation
Adamali Tapal segments market
Tea stall consumers
Tea brewed at home Family Mixture

2nd Generation steps in

Faizullah Tapal takes control after Father loses

interest in business
Business has grown and management control
remains with few employees
Both Father and Son reluctant to manage
business

Aftab Tapal Joins the Family

Business
Trained in Sri Lanka
Looked after warehousing, blending,

packaging, shop sales and customer service.

Passionate about the tea business after
working in it.

Business Strategy
Avoiding direct competition with foreign

brands
Focus on ignored or overlooked niche
Introduction of colour coded packaging
Appointed distributors rather than vertically
integrating as was industry norm
Larger premises built in Korangi, financed by
sale of assets one at a time to avoid cash flow
problems

Introduction of mechanization
Acquisition of building in Jodia Bazar to

maintain contacts
Reorganization of job functions such as
finance, marketing etc
Employee leaves to open a competing business

Introduction of Danedar, which has a milder

taste but strong in flavour

Achievements
Pioneered in mechanized soft packaging for

tea in Pakistan
1st to introduce Kenyan tea; exporting tea to 5
continents, metal free tea bags; tea plantation
in Shinkiari, Northern Areas
Established Hum Qadam, an entrepreneurial
resource centre for the disadvantaged.

IFFAT RAZA
Company profile:Ideal Star
Business type:Plastic recycling

MESSAGE
Never say sky is the limit,the moon has foot
prints

SUCCESS STORY
Driven by courageous patience
At 45, single parent of four children
She had to chose her own destiny
2005, pet bottles crushing unit has her own

enterprise in district Lahore

One of the few women in this business type

Monis Rahman (chairperson of

naseeb networks and founder
of rozee.com)

Characteristics of entrepreneurs
Desire for responsibility
personal responsibility for the outcome of their venture

o Preference for moderate risk

Risk taker but not wild risk taker

o Confidence in their ability to succeed

Optimistic .

o Desire for immediate feedback

Nick Gleason ..city soft Inc.

o High level of energy

create

More energetic than average personColin Angle and Helen

iRobot spent 18 hours a day with their 6 employees to
software and assembling robots.

o Future Orientation
Always searching for opportunities
Serial Entrepreneurs
Opportunity entrepreneur
Necessity entrepreneurs

o Skill at organizing
building a business from sketch .right people to accomplish goal

o Value of achievement over Money

o High degree of commitment
Be DEAF when people tell YOU that
you cannot fulfill your dreams! Always think: God and I can do this!

Tolerance for ambiguity

Flexibility

ability to adapt the changing demand and technological changes

..rigidity lead to failure

o Tenacity
Such is the case with Thomas Edison, whose most
memorable invention was the light bulb
Milton Hershey his first three candy making business failed he
created Lancaster caramel company which became very
successful.
Never say I have failed
Say I have not yet succeed

THE BENEFITS OF
ENTREPRENEURSHIP
Opportunity to create your own destiny
Doug Danforth flower shop
Oprah winfrey started reporter for radio station
..Harpo production, Harpo films, Harpo studios

o Opportunity to make difference

o Opportunity to reach your full potential
o Opportunity to reach impressive profits
Two third of American millionaires are entrepreneurs
Forbes 400 richest people 75% are entrepreneurs

Opportunity to contribute to society and be

recognized for your effort

SME contribution in economy and local business s

o Opportunity to do what you enjoy and have fun

Most of entrepreneurs enter to field in which

they have interest
Harvey advice
Find a job doing what you love, and you have to
never work a day in your life

Bill Gates 1955

By linking his Microsoft

software to IBM's first

PCs, he dominated the
industry.

He developed a two-prong

strategy of expanding
the market while
maintaining a strong
hold on competitors.

Michael Dell 1965

Created a new model for PC

sales

Cutting out the retail

middleman and custombuilding computers to suit

buyers needs put Dell at the
front of the class of PC
makers.

Tom Anderson & Chris De Wolfe

Founders of MySpace.com
Registering 160,000 people per

day with no marketing.

As of September 2007, there are

over 200 million accounts.

Oprah Winfrey1954

Oprah Winfrey turned her

name into one of the most
successful and respected
brands in the world.
Leveraged that fame into
other interests:
magazines, Web sites,
film and television
production and Social
Entrepreneurship.

Chad Hurley, 29, Steve Chen, 28 & Jawed

Karim, 27

Founders of YouTube
Broadcasts 100 million

short videos daily on

myriad(countless)
subjects

Sold to Google

1930, Harland Sanders

Opened Sanders
Court & Cafe in the
front room of a gas
station.
Colonel Sanders
began franchising in
1952.
Awarded the first
franchise to Pete Harman
in Salt Lak City, Utah.

Potential drawbacks of
Entrepreneurs

Uncertainty of income
Risk of losing your entire investments
Long hours and hard work
Lower quality of life until the business get established
High level of stress
Complete responsibility
Discouragement

BEHIND THE BOOM: WHAT'S FEEDING

THE ENTREPRENEUR FIRE?

What forces are driving this entrepreneurial trends in our economy ?

Which factors led to this age of entrepreneurship?

 Entrepreneurs as Heroes

intangible source for inspiration

Bill Gates (Microsoft corporation)
Jeff Bezos (Amazon.com)
Michel Dell (Dell computers )
o

Entrepreneurial Education

popular course of study

career path as entrepreneur
o Demographic and Economic factors

Age, gender, income

22-45
o

Shift to a service industry

America: service sector produce 92% jobs 68 % of GDP.

 The services sector plays a vital role in sustaining the growth of Pakistans economy, with a share of

57% percent in GDP, and 44 percent (which includes construction sector) in employed labor force. A
cross-country comparison shows share of services sector in GDP is currently about 75 percent in
developed countries; within Asia, share of services in GDP was 65 percent in Singapore, followed by 54
percent in case of Sri Lanka, 57 percent for Pakistan, 52 percent for India and 42 percent for
Indonesia.

 Technological Advancements

Usage of computers, color machines, Fax, answering machines

currently all these technology are within the budget of small
business..difficult to produce heavy machine and
establish factories
Independent life styles
Independent and the World Wide Web
International opportunities :

Access to international market

THE CULTURAL DIVERSITY OF

ENTREPRENEURSHIP

Young entrepreneurs :

Desire to create own destiny

Generation X( between 1965 and 1976)
80% of all business
Generation E
Taylor Dickman
at the age of 15 cool Tronics
Women entrepreneurs:
Still faces discriminations
Nearly 6 % of adult women have their own
business .
Glass Ceiling
Discriminatory barrier that prevents women and
minorities from rising to
positions of power or
responsibility, as within a corporation.
Minority Entrepreneurs

 Part Time Entrepreneurs

15 millions Americans are PE

Minimum risk
May become full time Entrepreneur
Home- Based Entrepreneurs

53% of business are home based

80% of them have no employee
$ s427 billion a year sales
minimum start up cost
In past cottage industry
High tech businesses

 Family based business :

two or more family member control business

o

Copreneurs
Co owners of business

personality conflicts
Common vision
Respect each other talent
Not superior and subordinate (full and equal partners)
Appreciate and acknowledge each other
Clear division of duties based on the skills of partners
Ability of encouragement

o Corporate castoff : have extensive on-the-job experience

and are dislocated workers
due primarily to corporate
downsizing.
o Entrepreneur magazine surveyed the companies on its
franchise 500 list and discovered that 77 percent report
that's corporate castoff
Corporate Dropouts leave organizations to pursue a

better way of life spearheaded by the trust gap over job

security.

 Social entrepreneurs:

who use their skills not only to create profitable business

but also achieve social and environmental goals for common good .
Ron Gonen, a former consultant start a business to create a

business that can address the problem of garbage disposal and

also generate a profit. Recycle Bank.

Economic, social and environmental

THE TEN DEADLY MISTAKES

Management Mistakes
Lack of experience

technical knowledge about the business going to start

Experience regarding operations of business.
Poor Financial controls

Sufficient amount of capital to start business

Undercapitalization
Misjudgment about the financial requirement
shoestring
Poor Cash flow management

Weak Marketing Efforts

Failure to develop a strategic plan

Neglecting strategic management process

Uncontrollable Growth
Growth must be planned and controlled
Expansion requires changes in organization
structure
Financial controls and also managerial expertise.

Poor Location
Poor location without studying & investigation

Improper inventory control

Insufficient inventory level
Proper type of inventory

Incorrect Pricing
How much cost to make, market, and deliver their
product

Inability to make the Entrepreneurial

transition

Entrepreneur should delegate authorities

Dont push into areas where they are not

capable

Putting Failure into perspective

Entrepreneurs not paralyzed by failure

Learn from failure
Failure is natural part of creative process
The only people who never fail are those who never do anything or never attempted
new thing

Babe Ruth
Baseball player
Record of home run in career for many years 714
BUT how many knows record for strikeouts
1330???

Harland David Sanders, the famous KFC couldn't sell his

chicken. More than 1,000 restaurants rejected him.

Walt Disney was fired by a newspaper editor because he

"lacked imagination and had no good ideas."

Several more of hisbusinesses failedbefore the premiere of his
movie Snow White. Today, most childhoods wouldn't be the
same without his ideas.
Albert Einstein didn't speak until age four and didn't read until

age seven. His teachers labeled him "slow" and "mentally

handicapped.
Oprah Winfrey was fired from her television reporting job

because they told her she wasn't fit to be on screen.

HOW TO AVOID PITFALLS

Know your Business in Depth

Right experience for business

Study your business
Personal contact with suppliers, customer, trade
association and relevant laws
Develop a solid business plan
Manage financial resources

Cash flow management

Understanding financial statements

Basic understanding of business and finance

Working capital management
Learn to manage people effectively

trained and motivated employees

Keep in tune with yourself

Physically and mentally in your business

Success of business depends on your presence and
attention

Working

capitalis a common measure of a

company'sliquidity, efficiency, and overall health.
Because
it
includescash,inventory,
accounts receivable,accounts payable,
the
portion ofdebtdue within one year, and other
short-term accounts, a company's working capital
reflects the results of a host of company
activities, includinginventory management, debt
management,revenuecollection, and payments
to suppliers.

Small Businesses ...

Make up 99.7% of the 30.14 million

businesses in the U.S.

Employ 51% of the nations private sector
workforce.
Create more jobs than big businesses.
60% to 80% of net new jobs over the last

decade

Are leaders in offering

training and advancement opportunities to

workers.

Small Businesses ...

(continued)

Produce 51% of the nations private GDP.

Account for 47% of business sales.
Create 13 times more patents per employees

than large companies.

Zipper, light bulb, FM radio, laser,

air conditioning, escalator,

personal computer,
automatic transmission,
and many more!

Gazelles : small corporation that are growing

at 20 percent or more per year with at least

$100,000 annual
sales. They create 70 % new jobs.

1 - 63

SMALL BUSINESS IN
PAKISTAN
Contribute 40 % to GDP
Employs 80 % of non agricultural labor force

 The Small and Medium Enterprise Development Authority (SMEDA) estimates that in Pakistan, small and

medium enterprises (SMEs) with less than 100 employees constitute nearly 90% of all 3.5 million private
firms that employ 80% of the non-agricultural labor force; and their share in the annual GDP is
40%9. Their firm structure is dominated by sole proprietorship and most are family run businesses with no
culture of taking it to the pubic (IPOs).

SME Definition

Enterprise Category

Employment Size (a)

Paid Up Capital (b)

Annual Sales (c)

Small & Medium Enterprise (SME)

Up to 250

Up to Rs. 25 Million

Up to Rs. 250 Million

Institution

Small

Medium

SME Bank

Total Assets of Rs. 20 million

Total Assets of Rs. 100 million

Federal Bureau of Statistics

Less than 10 employees

N/A

Punjab Small Industries

Corporation

Fixed investment. up to Rs. 20 million excluding land and

building

N/A

Punjab Industries
Department

Fixed assets with Rs. 10 million excluding cost of land

Sindh Industries
Department

Entity engaged in handicrafts or manufacturing of consumer or producer goods with fixed capital
investment up to Rs.10 million including land & building

State Bank of Pakistan (SME

Prudential Regulations)
An entity , ideally not being a public limited company, which does not employee more than 250
persons ( manufacturing) and 50 persons (trade / services) and also fulfills one of the following
criteria:
(i)A trade / services concern with total assets at cost excluding land and buildings up to Rs 50
million.
(ii)A manufacturing concern with total assets at cost excluding land and building up to Rs 100
million.
(iii)Any concern (trade, services or manufacturing) with net sales not exceeding Rs 300 million as
per latest financial statements.

GEM Pakistan

Pakistan's estimated population in 2011 is over 187 million making it the world's sixth

most-populous country, behind Brazil and ahead of Bangladesh.

80 million people in the age bracket of 15 to 40 years.
SMEs constitute nearly 90% of all the enterprises in Pakistan
employ 80% of the nonagricultural labor force. share in the annual GDP is 40%.
The industrial belt of Gujranwala, Sialkot is famous for its entrepreneurial spirit and the
contribution to the Pakistani economy

 The textile based SMEs are the back bone of

the economy.

The factor-driven stage is marked by high rates of agricultural

self-employment. Countries in this stage compete through lowcost efficiencies in the production of commodities or low valueadded products. Sole proprietorshipsi.e., the self-employed
probably account for most small manufacturing firms and service
firms. Almost all economies experience this stage of economic
development. These countries neither create knowledge for
innovation nor use knowledge for exporting.
To compete in the efficiency-driven stage, countries must
have efficient productive practices in large markets, which allow
companies to exploit economies of scale. Industries in this stage
are manufacturers that provide basic services.
The innovation-driven stage is marked by an increase in
knowledge-intensive activities (Romer 1990). In the innovationdriven stage knowledge provides the key input. In this stage the
focus shifts from firms to agents in possession of new
knowledge.s The agent decides to start a new firm based on
expected net returns from a new product. The innovation-driven
stage is biased towards high value added industries in which
entrepreneurial activity is important.

CHAPTER 1
THE FOUNDATION OF
ENTREPRENEURSHIP

END

Discuss importance of entrepreneurship in

economic development of Pakistan.

( submission date: )
Group assignment :
write down summary of 10 to 15 pages on
Global entrepreneurship report on Pakistan and
have to present. 4 members in each group.
Note : do not give any exuse to increase gr`o
(Submission date: )

Learning outcomes

Hope fully at the end of chapter you are able to answer following question.

Define the role of entrepreneurship in united states and across the world?
Describe the entrepreneur profile and evaluate your potential as an entrepreneur?
Describes the benefits and drawbacks of entrepreneurship?
Explain the cultural diversity of entrepreneurship?
Describe important role of small business play in our nation ?
Describe 10 deadly mistakes of entrepreneurship and explain how to avoid them?
Put failure into proper prospective
Explain how entrepreneurs can avoid becoming another failure statistics?

Wait one more thing

ASSIGNMEN
T NO 1