ecd lecture 1 - challenges of entrepreneurship

Enterprise Creation & Development

Lecture 1:

Challenges of Entrepreneurship

Mr Khoo Chen En

(6460 8016; kce3@np.edu.sg)

ECD Oct 14/Lecture 1/kce 1

Enterprise Creation & Development

Challenges of Entrepreneurship

Generation of Business Opportunities

Scanning the Business Environment

Importance of the Business Plan

Starting the Business

Financing the Business I

Financing the Business II

Developing the Business

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Assessment System

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Weightage BazaarBusiness

plan

Mid semester test

30%14 Jan 2015 (Wed)

(Time and Venue to be confirmed)

Individual Assignment 1 (Week 5)(3-5 page report)

20%

What you intend to sell during the First Step! bazaar -26 Nov 2014, Wed 3pm

Your business idea -26 Nov 2014, Wed 3pm

GroupAssignment 2 30%

1) Bazaar – 17 Jan 2015 (Sat)

2) Post mortem & next step report – 28 Jan 2015, Wed 3pm

Comprehensivebusiness plan – 28 Jan 2015, Wed 3pm

Tutorialparticipation

20%10% class participation

10% presentation for assignment 2

ECD Oct 14/Lecture 1/kce

Recommended Text

• Donald F. Kuratko ENTREPRENEURSHIP –THEORY, PROCESS AND PRACTICE, 9th Edition, CENGAGE, Chp 1,2 & 4

• Justin G. Longenecker, Carlos W. Moore, J. William Petty and Leslie E. Patch, SMALL BUSINESS MANAGEMENT – AN ENTREPRENEURIAL EMPHASIS, International Edition, Thomson South-Western, Chp 1

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Lecture Objectives

• Definitions

• Why be an Entrepreneur?

• Entrepreneurial Attributes

• Different Types of Risk

• Stress and the Entrepreneur

• Entrepreneurial Ethics

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Successful Entrepreneurs

• Larry Page, CEO of Google

• Age : 41 (born 1973)

• Net Worth US$20.3B (2012)

• Son of a computer science professor

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Successful Entrepreneurs

• Olivia Lum, Chairman & Group CEO, Hyflux

• Age 52 (born 1962)

• Net Worth:US$460M (2011)

• Adopted at birth by a poor elderly woman, never knew her biological parents

• Started company at age 28, with $20,000 savings

• Ernst & Young World Entrepreneur Of The Year 2011

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Successful Entrepreneurs• Michael Masterson, Serial

Entrepreneur

• Age : 64 (born 1950)

• Co-started/turned-around dozens of multi-million dollar businesses across diverse industries (several above US$350M)

• Born in poor New York neighbourhood in family of 7 children

• Started first business at age 11

• Author of several New York Times and Wall Street Journal bestsellers

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Key Definitions

Entrepreneur:

• Derived from French word “entreprendre”, which means “to undertake”

• Innovator/Developer who recognizes & seizes opportunities; converts those opportunities into workable/marketable ideas; adds value through time, effort, money, skills; takes calculated risksof starting a business to implement these ideas & realizes rewards from these efforts

• Entrepreneurs are born AND made

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Key Definitions

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Difference between “Inventor”, “Innovator” & “Entrepreneur”:

• Inventor: Creates new technology or product ... often not yet ready for market

• Innovator: Transforms new or existing technology, product, service, business model, customer experience into something ready for market

• Entrepreneur: Recognizes & seizes opportunity, assumes risks, TAKES ACTION to create & develop business to pursue opportunity

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Key Definitions

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Difference b/w “Small Business Owner” & “Entrepreneur”:

• Small Business Owner: Create business that provides oneself & perhaps a few others with a job, at satisfactory profits

• Entrepreneur: Create & develop a fast-growing, highly profitable, eventually self-sustaining business, that is dominant in its area/industry, often with focus on continuous innovation

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Key Definitions

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5 Levels of Entrepreneurs (based on actual real-life role instead of fictitious title):

• Level 0: Employee

• Level 1: Self-Employed / Technician

• Level 2: Manager

• Level 3: Leader / Owner Entrepreneur

• Level 4: Investor Entrepreneur

• Level 5: Highest-Level Entrepreneur

[Source: Bradley J. Sugars, ‘’Billionaire in Training’, MacGraw Hill 2006]

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Why be an Entrepreneur?

Profit

Personal satisfaction

Independence

Freedom

Personal fulfillment

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Model of Entrepreneurial Motivation

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[Source: Douglas W. Naffziger, Jeffrey S. Hornsby and Donald F. Kuratko, ‘A Proposed Research Model of Entrepreneurial Motivation’, Entrepreneurship Theory and Practice, Spring 1994:33]

Intrinsic/ extrinsic rewards

Firm outcomes

Decision to behave

entrepreneurially

Entrepreneurial strategy

Entrepreneurial management

Implementation / Outcome perception

Personal Expectation / Outcome comparison

PC PE PG

BE IDEA

•PC= personal characteristics•PE= personal environment•PG= personal goals•BE= business environment

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Key Elements in Entrepreneur’s Background

Supportive childhood family environment.

Having a father who is self-employed helps.

Education is important.

Aged 22-45 when starting venture.

Work history: dissatisfied with company job but has technical knowledge.

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Entrepreneurial Attributes

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Internal locus of control

Self-confidence & Optimism

Need/drive to achieve

IndependenceOpportunityorientation

Creativity & Innovativeness

Calculated risk taking

Tolerance for Failure

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Entrepreneurial Attributes

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VisionIntegrity & Reliability

Commitment, Determination & Perseverance

High energy level

Team BuildingInitiative &

Responsibility

Tolerance for ambiguity

(ability to thrive in a fluid situation)

Persistent problem-solving

Seeking Feedback

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The Entrepreneurial Journey

• Entrepreneurs emerge as a function of value-creation process.

• emergence of the opportunity

• emergence of the venture and

• emergence of the entrepreneur.

• Socially situated process that involves numerous actors and events.

• Processes include emotions, impulses, and physiological responses as individuals react to a diverse, multifaceted, and imposing array of activities, events and developments.

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Different Types of Risk

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THE DARK SIDE OF ENTREPRENEURSHIP

Financial Risk

Psych

ic R

isk

Car

eer

Ris

kFamily & Social Risk

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Stress and the Entrepreneur

What is entrepreneurial stress?

• Discrepancies between a person’s expectations and

ability to meet demands need to be looked up to by your staff,

need to build up the company fast, need to put systems in place, market to

difficult markets do you have the ability to do it? the bigger the gap, the

higher the stress becomes

• Discrepancies between the individual’s expectations

and personality

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Stress and the Entrepreneur

• Engage in constant communication activities interacting with customers, suppliers, regulators, lawyers & accountants (stakeholders) people in your company, outside your company, behind the scenes

• Entrepreneurs must bear the cost of their mistakes while playing a multitude of roles – salesperson, recruiter, spokesperson & negotiator need to wear a lot of different hats

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Stress and the Entrepreneur

• Lack of support from colleagues that may be available to managers in a large corporation

• Require a large commitment of time & energy, often at the expense of family & social activities.

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Sources of Stress

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Loneliness – isolated from persons in whom they can confide

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Sources of Stress

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Immersion in Business – most entrepreneurs are married to the business.

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Sources of Stress

• People problems

Successful entrepreneurs are to some extent perfectionists and know or insist how they want things done (need to have vs good to have!)

• Need to achieve

Achievement brings satisfaction

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Stress and the Entrepreneur

• What kind of behaviour does an entrepreneur exhibit when stressed?

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Stress and the Entrepreneur• Stress can result from personality

• ‘Type A’ behaviour

• Impatient, demanding & over strung

• Chronic & severe sense of urgency want to be better

than competitors

• Constant involvement in multiple projects subject to deadlines

• Neglect all aspects of life except work

• Tendency to take on excessive responsibility

• Tendency to speak faster than most people

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Dealing With Stress

NetworkingGetting

away from it all

Communicatingwith employees

Finding satisfaction outside the company

DelegatingMental health check-up (or counselling)

Knowing self and

business/life partners

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Defining Entrepreneurial Ethics

• Provide the rules for how society conducts any activity in an ‘acceptable’ manner.

• Entrepreneurs are confronted by shareholders, customers, managers, the community, government, employees, unions, peers and so on.

• Values, mores and societal norms all constantly fluctuate.

• ‘Deciding what is good or right or bad and wrong in such a dynamic environment is necessarily ‘situational’.

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Chinese milk powder contaminated with melamine sickens 1,253 babies

Sanlu, China's biggest milk powder manufacturer, sold contaminated milk after farmers laced their produce with industrial chemicals to increase its protein content

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India turning into hub for fake medicines

The global fake-drug industry, worth about US$90 billion, causes the deaths of almost 1Mpeople a year.

Tricks of the trade include sticking fraudulent labels on expired products, filling vials with water, putting chalk powder in medicine packets.

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/10/AR2010091006700.html

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Types of Morally Questionable ActsTYPE DIRECT EFFECT EXAMPLES

Non-role Against the firm - Expense account cheating-- Embezzlement

Role failure Against the firm -Superficial performance appraisal-- Not confronting expense account cheating

Role distortion

For the firm - Bribery-- Manipulating suppliers

Role assertion

For the firm - Not withdrawing product line in face of initial allegations of inadequate safety

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Source: James A. Water and Frederick Bird, ‘Attending to Ethics in Management’, Journal of Business Ethics, 5, 1989:494

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Corruption Perceptions Index

• Globally oriented entrepreneurs are going to face a myriad of business environments in the Asia–Pacific

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Social Entrepreneurship

• Social Entrepreneurs innovate & act according to the desire to create & sustain social value for others.

• Their assets & wealth are used to create community benefit.

• Profits & surpluses are reinvested in the business & community rather than distributed to shareholders.

• There is either a double or triple bottom-line paradigm that balances economic, social and possibly environmental returns.

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Conclusion

The more you know, the more prepared you will be when opportunity knocks. If you are lazy and wile your time away, you would not know how to take advantage of opportunities even if they stared you in the face.

Li Ka Shing

ECD Oct 14/Lecture 1/kce

Recall Lecture Objectives

• Definitions

• Why be an Entrepreneur?

• Entrepreneurial Attributes

• Different Types of Risk

• Stress and the Entrepreneur

• Entrepreneurial Ethics

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