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Business Management 2A

24 March 2011

Lecturer

• Mrs C Jasson• Department Of Business Management• Office: D-Ring 532• Tel: (011) 559-4432• Consulting Hours:

• Mondays 10:00 tot 11:00• Wednesdays 11h00 tot 13h00• Thursdays 13:00 tot 15:00• Or per appointment

• Important arrangements ONB 2A 02

Module test: 4 May or 12 May (Thursday) 16:00 – 17:00

Venue: DLab [Chapters 1 – 6] (= 40 % of module mark) Continuous assessment:

2 Edulink tests (= 10% of module mark)Test 1: 11-15 April (Chapters 1 – 4)Test 2: 26 – 30 May (Chapters 7 – 9)

Exam: Tuesday 31 Mei – 14h00 – 17h00

•Other important information

1 Class attendance

2 Participation

•Other important information

Class test0%

Edulink test5%

Edulink test5%

Module test40%

Exam50%

•Other important information

3 Tests

•Other important information4 Presentation

•Other important information

5 Class reps

•Cell phones•Punctuality•Bladder control•University policy• Language & grammar•Neat appearance

•Preparation

•Other important information6 Minor irritations!

Test tip! One each day!

Lecture 1

Chapter 1The nature & development

of entrepreneurship

Chapter 2The entrepreneur

Definition of an entrepreneur

An entrepreneur is a person who sees an

opportunity in the market, gathers resources and

creates and grows a business venture to satisfy

these needs. He/she takes the risk of the venture

and is rewarded with profit if it succeeds.

Why does a country need entrepreneurs?

• Economic development can be derived from the entrepreneurial

activity in a country

• Economic growth

• Employment creation

• Wealth creation

• Skills are needed in SA;

• Young, qualified entrepreneurs;

Where does Entrepreneurship come from?

• Entrepreneurship developed first from the economist• Richard Cantillon (1680 – 1734) introduced the term “entrepreneur” •Derived from the French word “entreprendre” which means “to undertake”• Cantillon defined the entrepreneur as one who buys at certain prices and sells at uncertain prices, thereby undertaking a risk in exchange for a potential profit;

• Jean Baptiste Say (1767 – 1832) defines an entrepreneur as someone who uses knowledge, judgment, management capabilities , leadership & technical abilities, to move existing ‘economic resources’ from areas of low productivity to areas of higher productivity.

Where does Entrepreneurship come from?

• In the process he associates the entrepreneur with innovation – he views entrepreneurs as change agents [Say = father of entrepreneurship]

Where does Entrepreneurship come from?

• Joseph Schumpeter (1883 – 1950) really launched the field of entrepreneurship by associating it with innovation•His main contribution to economic studies was his theory of business cycles

Schumpeter:

“The essence of entrepreneurship lies in the perception and exploration of new opportunities in the realm of business…it always has to do with bringing about a different use of national resources in that they are withdrawn from their traditional employ and subjected to new combinations”

Where does Entrepreneurship come from?• Schumpeter stated that entrepreneurs undertook five

types of innovations:• The introduction of a new good or quality of good• The introduction of a new method of production• The opening of a new market• The utilisation of new sources of supply for raw materials or

intermediate goods• The carrying out of some new organisational form of the

industry• The economists (1700 – 1950) were mainly interested

in understanding the role played by the entrepreneur as the motor of the economic system (What the entrepreneurs do)

Where does Entrepreneurship come from?• The Behaviourists (psychologists, psychoanalysts,

sociologists and other specialists of human behaviour)[1960 – 1980, goal was to define entrepreneurs and their characteristics] • Max Weber viewed entrepreneurs as innovators,

independent people whose role as business leaders conveyed a source of formal authority• David McClelland (1971) defined the entrepreneur as

someone who exercised control over production that is not just for his personal consumption (need for achievement)

Where does Entrepreneurship come from?

• Since the 1980’s the field of entrepreneurship started to explode –Management Sciences perspective• Publication of the first-ever encyclopedia• First major annual conference dedicated to this

field (Babson conference)• [focused on what entrepreneurs do]• From 1985’s – Social perspective – focused on what support is needed by entrepreneurs

Where does Entrepreneurship come from?

• Entrepreneurial perspective – [1990 onwards] Focus on what is entrepreneurial activities and what competencies are required to perform them]• Does not look at only the individual entrepreneurial

behaviour but also the more complex forces of entrepreneurship• Entreprenology (Fillion) = a comprehensive

multidisciplinary understanding of the entire entrepreneurial process

Research trendsPeriod Topics Authors

What do they do? (1700-1950)

Economic Cantillon, Say, Schumpeter

Who are they? (60’s-80’s)

Behaviourists Weber, McClelland, Rotter, De Vries

What do they do? (80’s) Management sciences

Drucker, Mintzberg

What support do they need? (mid 80’s)

Sociologists Gartner, Welsh, Bygrave, Reynold

Competencies Entrepreneurs Timmons, Vesper, Brockhaus

Many diverse meanings over the years;We need a comprehensive understanding of the process;Overall we can define it as a field of study about the

entrepreneur;Entrepreneurship is an applied research field;However we have not yet studied the behaviour of

entrepreneurs well;

Entreprenology (Fillion)The study of the behaviour of the entrepreneur

The theory behind entreprenology

BehaviouristsFlexible models;

Multi-dimensionalMulti-disciplinary

EconomistsInnovation;

Drive development;

ENTREPRENEUR• Starts & runs his own business;• Object: to make a profit;• Innovative behaviour;• Employs time, effort, resources, &

takes risks; • Reward required: success, financial

& personal satisfaction

• The act of being an entrepreneur;• More than just starting a business;

• The emergence & growth of new businesses;

• Causes changes in the economy;• Process of identifying unmet

needs, allocate resources, and create value for self and society.

ENTREPRENEURSHIP

Entrepreneur & Entrepreneurship

SMALL BUSINESS• Limited growth potential;• Stabilizes at some point;• Object: personal goals/security;• Limited innovative behaviour;• Focus on delivery/client service;• Certain benefits to remaining small; • Criteria:• National Small Business Act 26 of

2003 (Amended)

• Main objective: growth & profit;• Innovation;• Venture into new territory;• Real creators of employment;• Greater growth potential;• Listing on JSE or international

markets;

ENTREPRENEURAL VENTURE

Venture VS Small Business

An entrepreneurial orientationEntrepreneurial Orientation Value system Culture

Experience

Entry of entrepreneurs

Acquired abilities Inherent abilities

Results of entrepreneurship

Products/services

Cooperative environmentExternal support

Supportive environment Finance Laws

Training

•3 domains

Entrepreneurship Man

agem

ent

Leadership

Discovery Exploitation

Success factors of entrepreneurs

Creativity Innovation

Perseverance

RelationshipsPositive attitude

Leadership

Commitment

Succes factors of managers

Planning

Competitors

KnowledgeMarket

Insight

Focus

KYC

Opportunity

Business Plan

Resources?

Start

Manage

Entrepreneurial process

• Change agents;• See opportunities others don’t;• Create wealth;• Their roles?• Challenges?• Survivalist?• Emerging entrepreneur?• Opportunities for

Entrepreneurship?• Necessity of Entrepreneurship?

•Focus on Entrepreneurs

• Economic actors – the creators & drivers of business;• SA problem: low growth, unemployment & poverty;• Living standard depends on customer satisfaction

levels;• Advances prosperity of small communities & country;• 1/18 adults in SA are entrepreneurs – too low;• Drive to increase the number of entrepreneurs

•A catalyst for economic activity

Entrepreneurs at various levels of entrepreneurial sophistication

Basic survivalistNo economic independence; little involvement with other entrepreneurs (individualism)Entrepreneurial activities: isolated from markets; unaware of own potential; illiterate; few income-generating activities

Pre-entrepreneursFollows the groups initiatives (collectivism)Entrepreneurial activities: welfare-orientated; not expected to be self-sustaining; needs training in entrepreneurial competency

Subsistence entrepreneursSelf-employed, independent income generation; temporary market stall or standEntrepreneurial activities: inexperienced in business management – needs general support in technical and management skills

Micro-entrepreneurs0 to 9 employees; operating license from local authority, fixed workshopEntrepreneurial activities: difficult to get loans from banks. Assistance projects focus on credit rather than training and technical assistance

Small-scale entrepreneurs10 to 49 employeesEntrepreneurial activities: qualifies for bank loan; well educated

•Background of entrepreneurs•Family

• Frequently parents were entrepreneurs, but not in SA•Education

• The biggest barrier – overcome by tertiary education•Personal values

• High values high success rate•Age

• In their 20’s-30’s – usually worked beforehand •Work experience

• Opportunities spotted during employment

•Characteristics of entrepreneurs

• Passion• Locus of control• Need for independence• Need for achievement• Risk taking and uncertainty• Creativity and innovation• Determination and persistence

•Role models & support systems

•Social;•Personal;•Extended;•Other

•Benefits:• Joint:

• Marketing;• Buying of raw material;• Tendering

• Sharing:• Intelligence;• Containers;• Supplier info;• Mentor services;

Push/pull factors

IndependenceAchievementRecognitionPersonal developmentPersonal wealth

UnemploymentJob insecurityDisagreement with bossBad fit with organizationOut of options

Opportunity

Necessity

E

Why do small business fail?

Finance:Banks don’t want the risk;

Few MFI’sBad business plans

Markets:Follow others;No marketing;

No info on consumer demands

Technology:Competitive advantage;NRF, SABS have SMME development programs

People:Manage employee attitudes;

Build team spirit;Life-long learning;Be a role model;

Challenges…

Women & emerging entrepreneurs

• >40-80< of SA workforce is in the informal sector & most are women;•Economic role of women has evolved;•Adverse conditions:• Overworked, uneducated, denied finance,

facing discrimination, tradition•Education, skills & mindset determine entry into formal market

Types of women entrepreneurs

Traditional Innovative

Domestic Radical

Attachment to traditional gender roles

Attac

hmen

t to

entr

epre

neur

ial i

deas

Barriers women entrepreneurs face

•Limited start up funds;•No support structures & networks;•Work-life balance;•Socio-cultural attitudes;•Discrimination & bias;•Lack of/inappropriate education & training;•Surviving male domination•Life skills (confidence, communication etc)

Male VS female entrepreneurs

Characteristics Male Female

Starting Laid the foundation – women must follow

Latecomers – uninformed & unaware that they can conduct business

Type Manufacturing/construction. In 21st Century - diversified

Service related, eg. Coffee shops, hairdressing, training

Relationships Short term orientated- focus on results!

Strong relationship focus with eg. banks, suppliers etc

Funding Barrier if too little collateral Worse barrier & source of discrimination

Support Friends, spouse, business partners

Spouse, associations, family, networks

•New “labels” for entrepreneurship• Emerging entrepreneurship

• Previously disadvantaged groups• Survivalist and micro enterprises (informal sector)

• Propensity to create employment or grow is limited by a lack of skills, knowledge and resources

• Not recognised by the mainstream businesses • Denied basic inputs needed to develop their businesses• = the typical street vendors

• Opportunity and necessity entrepreneurship• Youth entrepreneurship

• Umsobomvu Youth Fund

•Technopreneurs

Use technological innovations & translate such

technology into successful

produces or services.

Amazon.com;Dell Computers

•Social entrepreneurs

Recognizes a social problem & uses entrepreneurial principles to organize, create & manage a venture to achieve social change

Muhammad YunusFounder of Grameen Bank

•Tourism entrepreneurs

• A South African term coined by Dr Blade Nzimande used to describe government officials or politicians who uses their powers & influence to secure government tenders & contracts

•Tenderpreneur

Homework & preparation

And Test Tip!