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Entrepreneurship and Business Management

The challenges of entrepreneurship Module 1

Think about it Can I be an entrepreneur? How do I do a SWOT analysis to determine strengths, weaknesses, opportunities and threats? Why are some entrepreneurs successful, while others fail?

The roles of entrepreneurs and intrapreneurs Unit 1.1

An entrepreneur is a person who: Identifies a need. Makes use of the production factors to enable him or her to develop a product or service. Fulfils (satisfies) this identified need of a consumer. Is willing to take a calculable risk. Is the owner of the business. Receives all the profit or suffers the losses.

An intrapreneur is a person who: Is already in an established organisation. Realises that the business has to remain competitive and that changes therefore have to take place. Does the same as an entrepreneur, but only as part of an existing enterprise. Acts for the benefit of somebody else’s business Is not carrying the risk and will receive a salary.

Similarities between an intrapreneur and an entrepreneur: Both identify an opportunity or need. Both take a moderate (not very big) risk (although the risk is carried by the entrepreneur). Both have confidence.

Personal qualities of the entrepreneur Unit 1.2

Personal qualities of entrepreneurs Table 1.1: Generic personal qualities of entrepreneurs Personal quality A brief description Confidence in their ability to succeed Entrepreneurs must have confidence. They should be realistic enough to realise that it may take some time to achieve success, i.e. make a profit. Preference for moderate risk Entrepreneurs have the ability to take risks. This risk can be limited by doing proper market research and drawing up a business plan. Desire for responsibility One of the main reasons for becoming an entrepreneur may be that you want to be in charge of your personal life as well as what you earn.

Personal qualities of entrepreneurs Table 1.1: Generic personal qualities of entrepreneurs (continued) Personal quality A brief description Energetic Entrepreneurs have to work very hard to be successful. Ability to identify opportunities An entrepreneur identifies an unfulfilled (unsatisfied) need and tries to satisfy this need before somebody else does. Organising skills Entrepreneurs must therefore be able to: Put together the natural resources that they have. Be able to organise their staff. Make arrangements for finance. Ensure that all the legal aspects are in place.

Personal qualities of entrepreneurs Table 1.1: Generic personal qualities of entrepreneurs (continued) Personal quality A brief description The urge/need to achieve An entrepreneur must be driven by success and realise that nobody else can be blamed for failure. It is solely up to the entrepreneur to make a success of the business. Desire for immediate feedback An entrepreneur must have measurements in place to evaluate (determine) how the business is doing. This can be done by evaluating sales figures and comparing these figures with a sales forecast that has been made. Feedback can also be obtained by, for example, providing customers with an after-sales questionnaire.

Activity 1.1 Test your knowledge of this section by completing Activity 1.1 (page 3 of your Student’s Book)

Personal resources of the successful entrepreneur Unit 1.3

The three of the most important personal resources Knowledge and skills. Contacts and friends. Finance.

Knowledge and skills Knowledge Skills You cannot be a plumber without the proper training. Skills You may have the knowledge to be a plumber, but you must also have the practical skills to actually do the job. You must have: Technical skills. Management skills. Conceptual skills.

Contacts and friends It is very important to do networking. Figure 1.2: An entrepreneur sorting through her network of friends and clients

Finance Where will you get finance? There are only two possibilities: You will either have to provide it yourself (own capital). You will have to borrow it from a financial institution (such as a bank) or somebody else (borrowed capital). A proper business plan is needed to try to get a loan from a financial institution. Bear in mind the cost of interest when making use of borrowed capital.

SWOT analysis Entrepreneurs have to do a personal SWOT analysis to determine their strengths and weaknesses, as well as possible opportunities and threats. They will also have to do a SWOT analysis for the business. But what is meant by ‘a personal SWOT analysis’?

A SWOT analysis Figure 1.3: A SWOT analysis

VIDEO: ASK YOURSELF THIS QUESTION

Case study 1.1 Test your knowledge of this section by completing Case study 1.1 (page 5 of your Student’s Book)

Activity 1.2 Test your knowledge of this section by completing Activity 1.2 (page 6 of your Student’s Book)

Activity 1.3 Test your knowledge of this section by completing Activity 1.3 (page 6 of your Student’s Book)

The economic importance of an entrepreneur Unit 1.4

The economic importance of an entrepreneur The development of natural resources. The creation of employment opportunities. An increase in production. A free-market system that is dependent on the entrepreneur.

The three sectors of an economy Figure 1.4: The three sectors of an economy

Activity 1.4 Test your knowledge of this section by completing Activity 1.4 (page 7 of your Student’s Book)

The merits/advantages of entrepreneurship Unit 1.5

Advantages and disadvantages of entrepreneurship Table 1.2: Advantages/merits and disadvantages of entrepreneurship Advantages/merits Disadvantages Gaining control over your own destiny (future) Can control your hours of work. Can make managerial decisions yourself. Can be socially responsible. Can determine where and with whom you want to work. Can challenge yourself to work even harder. You have the opportunity to make the most of your strengths and skills. It can be very hard to take full responsibility. for your own destiny. You have to deal with uncertainty and threats which you may not be able to control.

Advantages and disadvantages of entrepreneurship Table 1.2: Advantages/merits and disadvantages of entrepreneurship (continued) Advantages/merits Disadvantages Reaching your full potential (what you are capable of) Shifting the borders of income. Ultimately, becoming what you wish to become in life. It entails self-actualising, The status that you may gain. Bettering the lives of other people by becoming involved in the community. Contributing in general to the economy of a country. There is no guarantee that you will be successful. You can reach your full potential when successful, but the opposite may also happen.

Advantages and disadvantages of entrepreneurship Table 1.2: Advantages/merits and disadvantages of entrepreneurship (continued) Advantages/merits Disadvantages Reaping unlimited profits You can shift the border of your income. When you work for someone else, you are contributing to their financial future all the time, and to your own financial future to the extent to which they decide. There is no secured income. For instance, you may have a low or no income at the beginning owing to the costs of starting your business. As an entrepreneur, your income is directly related to your efforts and the success of your business.

Advantages and disadvantages of entrepreneurship Table 1.2: Advantages/merits and disadvantages of entrepreneurship (continued) Advantages/merits Disadvantages Contributing to society and getting recognition for your efforts Entrepreneurs create wealth and job opportunities for others. This can therefore improve the life of societies. Government also provides incentives to reward entrepreneurs for their efforts. It may be hard to keep up with changes in society and to carry full social responsibility. Also, new legislation may impose extra duties on the entrepreneur.

Why entrepreneurs fail Unit 1.6

Why entrepreneurs fail Management incompetence. Lack of experience. Poor financial control. Figure 1.5: Entrepreneurs can fail for a variety of reasons

Figure 1.6: Key factors, such as a business plan, have to be kept in mind so as to be successful

How to avoid pitfalls Unit 1.7

Keys to a successful business Table 1.3: Keys to a successful business Key to success A short description Prepare a business plan A business plan should contain at least the following elements: • A brief description of the business. • A marketing plan. • A financial plan. • A management plan. • A SWOT analysis. Know your business Do you know your product? Do you know who your competitors are? Do you know how to market your product? Do you know your target market? Do you know the strengths and weaknesses of your business? Have you identified the opportunities and threats?

Keys to a successful business Table 1.3: Keys to a successful business (continued) Key to success A short description Understand financial statements Do you have knowledge of the: Income Statement? Cash Flow Statement? Balance Sheet? Learn to manage people effectively It is said that people are the most important ‘asset’ of a business. Know your employees by knowing their skills and what they need (want) to achieve. Motivate (encourage) and train your staff. Have proper rules and regulations in place. Let them sign a code of conduct. Have clear disciplinary and grievance procedures in place.

Keys to a successful business Table 1.3: Keys to a successful business (continued) Key to success A short description Understand entrepreneurial transition Focus on the unique needs of entrepreneurs so that you understand the difference between leadership and management. Recognise entrepreneurial behaviours and how they impact on (affect) organisations. Realise why changes in this behaviour are very important to the long-term viability of the business. Acquire powerful skills to enhance (improve) entrepreneurial traits and the transition to visionary leadership.

Case study 1.2 Test your knowledge of this section by completing Case study 1.2 (page 10 of your Student’s Book)

Self-analysis Unit 1.8

Do you see yourself as an entrepreneur? Figure 1.7: Signs that you might be an entrepreneur!

VIDEO: ARE YOU A LOGICAL THINKER WITH AN APPETITE FOR RISK?

Activity 1.6 – 1.7 Test your knowledge of this section by completing Activity 1.6 – 1.7 (page 12 of your Student’s Book)

(page 12 – 13 of your Student’s Book) Summative assessment Test your knowledge of this section by completing the Summative assessment (page 12 – 13 of your Student’s Book)