TOPIC 1 Definition and Fundamentals of Entrepreneurship

 

ENTREPRENEURSHIP These lecture are compiled by Assoc Prof Mohamad Moh amad Saidy Ismailnotes for CUCMS’s MPU2242 / MPU3252) class discussions with references to “Fundamentals of Entrepreneurship”, Oxford Fajar, Fajar, by Sodri Ariffin, et al and “Entrepreneurship”, Oxford Fajar, Fajar, by Sariah Hanim and Cecilia C ecilia Soon Teik Teik Lan. Students are encouraged to refer directly to these main reference books.   Cyeberjaya University College of Medical Sciences Sep 2019

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TOPIC 1 DEFINITION AND FUNDAMENT FUNDAMENTALS ALS OF ENTREPRENUERSHIP Note: This note is a supporting reading materials for students who take Entrepreneurship. The main reference for this note is Fundamentals of Entrepreneurship published by Sodri Ariffin, Ismail Ab Wahab and Zarida Hambali (Oxford Fajar) and a few f ew other books.

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Learning Outcomes At the end of this chapter chapter,, students should be able to to::  understand the principles and theory of entrepreneurship 

gain a better understanding of the concept of the need for achievement, locus of control and risk taking propensity as key dimensions of entrepreneurship in managing a business organization

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Introduction 

Entrepreneurial activities in the form of producing goods and services for human needs, selling, trading or exchanging of goods were in existence since time t ime immemorial.

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Presently,, catalyst Presently entrepreneurship development recognized important that can spur economicisgrowth and as an prosperity especially in the countries that practise free market economy.

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Introduction (cont.) 

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Entrepreneurship by definition is a process of identifying the opportunity,, converting the opportunity into marketable opportunity products or services using creative and innovative means and through the process creates value and wealth to the society. Entrepreneurs are individuals who undertake entrepreneurial process.

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The Evolution of Entrepreneurship

Entrepreneurship has existed in Malaya since the interaction of Malacca with foreign traders. However, However, when the British colonised the Malay Peninsular, they changed the structure of of the society and practised the “divide and rule” system in which the Chinese were engaged in mining and business, the Malays were in administration and agriculture and the Indians were engaged in rubber plantations. In such situation, the Chinese society to was and had gone advance in business compared theexposed Malays and Indians.

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The Evolution of Entrepreneurship (contn)  After independ independence, ence, the Go Governme vernment nt thro through ugh it its s public policies such as The New Economic Policy (1971-1990), the National Development Policy (1990-2000) and Vision 2020 has encouraged and supported entrepreneurship development in Malaysia because entrepreneurs contribute to the nation’s prosperity as well to the individuals and local society. In fact at one time, there was Ministry of Entrepreneurship Development. Today, it has become a department under the Ministry of Rural Development.

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Definition of Entrepreneurship

There is no consistent and standard definition on entrepreneurship. But Richard Cantillon introduced the word ‘entreprende’ in 1755, a French word which means “to undertake”, “to try” or to do something”. And this is to refer to individuals who undertake the risk of new ventures or enterprise’.

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Definition of Entrepreneurship (contn) One of the most comprehensive definition of entrepreneurship is as what been given by Histrich and Peter (1998): “Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by individuals who assume major risks in terms of equity, time and career commitment or provide value for some products or services. It is the process of creating something new with value by devoting effort financial, the necessary time , assuming the accompanying psychological and and social risks rewards of monetary, , and receiving monetary , personal satisfaction and independence”

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Some Examples of Products with New Values

Airbnb – the world’s largest accommodation provider owns no real estate Uber – The world’s largest car hailing compony owns no vehicle Fb – The most popular social media company creates no content Alibaba – the most valuable retailer has no inventory Waze – the world’s largest community based traffic and navigation app Fundamentals of Entrepreneurship

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Entrepreneurship versus Entrepreneur  

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Entrepreneurship refers to an entrepreneurial process while entrepreneur is the individual that executes the process. Entrepreneurship entity or groupings can be categorized based on the type of entrepreneurial activities being carried out. The entrepreneurship process may comprise several entrepreneurial activities which might differ from one organization to the t he other. other. Types of entrepreneurs are best described in terms of their t heir motives and their functions as entrepreneurs.

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Who are Entrepreneurs? Who are Entrepreneurs: 

 According to Zimmerer and Scarborough, Scarborough, 2008. “Entrepreneur “Entrepreneur is an individual who creates a new venture in the face of uncertainty for the purpose of achieving profit and growth by indentifying and capitalising opportunities and assembling the necessary resources to capitalise on the indentified apportunities”.

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Kuratko and Hodgetts, 2001. “An entrepreneur is an individual who organises, manages and assumes the risks of a business”.

In short, aredrive the pioneers of today’s business success.Their sense of entrepreneurs opportunity, their opportunity, to innovate and their capacity for accomplishment have become the standard by which free enterprise is now measured.

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Who are Entrepreneurs? (contn.) Entrepreneur can also be defined from a functional approach i.e. based on what an entrepreneur does, or an indicative approach based on his characteristics and attributes.

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Other Definition of Entrepreneurship Kuratko and Hodgetts (2004) Entrepreneurship is a dynamic process of vision, change and Entrepreneurship creation. It request an application of energy and passion towards the creation and implementation of new ideas and creative solutions. Essential ingredients include the willingness to take calculated risks in terms of time, equity or career; the ability to formulate an effective venture team;skill theof creative to marshal needed fundamental buildingskill a solid business plan, resources; and finally, the the vision to recognise opportunity where others see chaos, contradiction and confusion”.

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 Adam Smith Smith (1776) wid widened ened the scope of entrepreneurship to include the dynamism of the personality of an ‘enterpriser’ such as the ability to foresee potential through changes in the economy and to take advantage created. of the opportunities thereby

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Jean Babtiste Say (1803)

“Entrepreneurs are individuals with certain competencies who can influence society by forming enterprises and likewise were influenced by society to recognize needs and fulfil tthem hem through skilful management of resources”.

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Joseph Schumpeter believed entrepreneurship plays a crucial role in triggering economic development. Schumpeter (1934) defined development as the exercising of new combinations of productive factors. Such efforts may result in the introduction of a new product or a new method of production, the opening of a new market or the finding of a new source of the inputs supply or the establishment of a new organization.

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SUMMARY OF DEFINITIONS A SUMMARY DEFINITIONS Basic aspects of Entrepreneurs Entrepreneurship: hip: 

Creation of something new of value or novel

(original,

unique and unexpected) for both, the entrepreneur and the market

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Devotion of time and effort Assuming necessary risks in many forms Involves the rewards, monetary and self satisfaction

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The Importance / Benefits of Entrepreneurship

NATIONAL NA TIONAL DEVE DEVELOPMENT LOPMENT  It a catalyst for economic change & national growth  Improving the country’s balance of payment by increasing the country’s Gross National Product (GNP) 

It increases per capita output and income  Produces more products of high quality  Creates more job opportunities  Better way utilizing national resources SOCIETY DEVELOPMENT  Improves the lifestyle of the society  Fulfils the needs / wants of the community  Create choices of produts through innovative and creative production techniques  Reduces waste

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The Importance / Benefits of Entrepreneurship (contn)

FAMILY DEVELOPMENT  Increases family income  Raises living standards of famalies 

Improves social status

SELF DEVELOPMENT  Maximising potential skills and credibility to face challenges  Possesses freedom in carrying out a job  Maximising the benefits obtained from available opportunities  Determining your own performance target Fundamentals of Entrepreneurship

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ENTREPRENEUR SELFASSESEMENT

 You can try one of tthe  You he online tests by accessing your potential to be a successful entrepreneur: http://bizmove.com/other/quiz.htm

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DEFINITION OF SMALL & MEDIUM ENTERPRISE  A business will will be deemed as an SME if it meets either one of the following two specified criteria, namely sales turnover t urnover or full-time employees whichever is lower 

CATEGORY

SMALL

MEDIUM

Manufacturing

Sales Turnover: RM300,000 to less than RM15 million

Sales Turnover: RM15 million to less that RM50 million

Full-Time Employees: Full-Time 5 to less than 75

Full-Time Employees: Full-Time 75 to not exceeding 200

Sales Turnover: RM300,000 to less than RM3 million

Sales Turnover: RM3 million to not exceeding

Full-Time Employees: 5 to Full-Time less than 30

RM20 million Full-Time Full-T ime Employees: 30 to not exceeding 75

Services and Other Sectors

Source: “Guideline for New SME definition”. By SME Corp. Malaysia, Secretariat to the National SME Development, October, 2013 Fundamentals of Entrepreneurship

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IN CONCLUSION …. 

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Entrepreneurs are individuals who undertake entrepreneurial process. The other conclusion – it is the process of creating something new with value by devoting the t he necessary time and effort, assuming the accompanying financial, psychic and social risks and receiving the resulting rewards of monetary monetary,, personal satisfaction and independence. Entrepreneurship by definition is a process of identifying the opportunity,, converting the opportunity into marketable opportunity products or services using creative and innovative means and through the process creates new value and wealth to the society.

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