Introduction to Entrepreneurial Management

Module 1: Defining Entrepreneurship and its related risks and rewards

1. ENTREPRENEURIAL MANAGEMENT MODULE 1: DEFINING ENTREPRENEURSHIP AND ITS RELATED RISKS AND REWARDS ENTREPRENEURIAL MANAGEMENT

2. Learning Outcomes By the end of this topic, you should be able to: History of Entrepreneurship Evolution of Entrepreneurship in the P hilippines Define Entrepreneurship & Entrepreneurial Management The Entrepreneurship Task Four Major Stages of Long-term Ventures Determine the risks and rewards of going into business Identify the difference of Small Businesses and Entrepreneurial Ventures

3. HISTORY OF ENTREPRENEURSHIP In the Earliest period around 1271-1295 , definition of entrepreneurship began as early as the Marco Polo who comes to the Middle East for trade. Marco Polo has signed an agreement with the capitalists to sell their products. In middle ages (15 th century) , Entrepreneur is described as someone who is involved in the care and control of a large production projects. A typical entrepreneur in the middle age was the cleric – the person in charge of great architectural works, such as castles and fortification, public buildings, abbeys and cathedrals. In 17th century, the evolution of entrepreneurship can be related with the relationship between risk and entrepreneurs. Entrepreneurship is the person who signed the contract agreement with the government to provide a service or supply products that have been determined

4. In the 18th century , the person with capital was differentiated from the one who needed capital. The entrepreneur was distinguished from the capital provider. One reason for this differentiation was the industrialization occurring throughout the world. In late 19th and early 20th century, Entrepreneurs are not always associated with the management. The entrepreneur organizes and manages an enterprise for personal gain. The materials consumed in the business , for the use of the land, for the services he employs, and for the capital he requires In 21st century , Entrepreneurs are known as a hero for Free Enterprise market. Entrepreneur of the century created many products and services and is willing to face a lot of risks in the business.

5. EVOLUTION OF ENTREPRENEURSHIP IN THE PHILIPPINES Entrepreneurship has existed in the Philippines . They started business transactions through the barter system – goods and services were means of exchanges. The small and medium enterprises (SMEs) became the embodiment of entrepreneurship in the country. The SME development regulatory framework and policies started in 1935 when the 1935 Philippine Constitution first recorded the national commitment to economic success through industrial and technological growth. The SME sector was given emphasis in the Philippine Development Plan (1972-1976 ).

6. EVOLUTION OF ENTREPRENEURSHIP IN THE PHILIPPINES 1987 Philippine Constitution – reinforced the commitment for the development of the private sector and provided for a wide range of government reforms and reorganizations . Magna Carta for Small Enterprises is the landmark legislation which reflects the current government policy to foster a dynamic SME sector, particularly rural and agricultural-based manufacturing ventures. Republic Act 7882 , the Act Providing Assistance to Women – special role of women in development and supports women entrepreneurs who are engaged in the manufacturing , processing , service and trading businesses . Government financing institutions (GFIs) are mandated to provide assistance to :  Non-governmental organizations (NGOs) engaging in developing women’s enterprises up to Php 2M  Existing women enterprises to the upper limit of Php 50,000  Potential women entrepreneurs with sufficient training up to a limit of Php 25, 000 each

7. ENTREPRENEURIAL MANAGEMENT Entrepreneurial management is the concept of utilizing creative and innovative abilities, skills, and expertise to efficiently open and manage a startup organization. It is the practice of taking entrepreneurial knowledge and executing it for increasing the effectiveness of new business venturing. Also , the means of solving a mass problem through a unique and profitable business solution.

8. ENTREPRENEURSHIP - is the process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, social risks and receiving the resulting rewards of monetary and personal satisfaction and independence. Points to note: Creating something different with value Devoting necessary time & effort Assuming accompanying financial, psychic and social risks Receiving resulting rewards – Monetary, Personal satisfaction, independence

9. ENTREPRENEURSHIP – is a process of developing, organizing and running a new business to generate profit while taking on financial risk. ENTREPRENEUR - a person who organizes and operates business taking on greater than normal financial risk. CONTEMPORARY VIEWS OF ENTREPRENEURSHIP Lloyd Shefsky , in his book, Entrepreneurs are Made Not Born, defined entrepreneur by dividing the word into 3 parts: Entre means to enter, Pre means before, Neur means nerve center. Entrepreneurship is someone who enters business – any business – in time to form change substantially that business nerve center.

10. Karl Vesper. “Entrepreneurship is now a concern of various professions” • Economist: Brings resources, labor, materials and other assets who increases its value • Psychologist: Driven by certain forces; Need to obtain something, to accomplish or escape from authority of others • Businessman: Threat, aggressive competitor, ally, a source of supply, customer or someone good to invest in. • Capitalist: Creates wealth for others, finds better ways to use resources, reduce waste and produce jobs. Albert Shapero , “a kind of behavior that will include: • Initiative taking • Organizing and recognizing of social/economic mechanisms to turn resources and situations to practical account • Acceptance of risks and failures

11. CONTRIBUTIONS OF ENTREPRENEURSHIP TO THE ECONOMY 1. Creates employment . They employ people who possess different competencies and personal values to help them operate the enterprise . 2. Develop new markets . They seek for new buyers of their product . 3. Introduces innovation . 4. Generates new sources of materials . Entrepreneurs are always in constant search for better and cheaper sources of materials . 5. Stimulates investment interest in the new business ventures being created . 6. Improves the quality of life . The new products contribute to the increase in the personal benefit and convenience of people in society . 7. Serves as role model . Entrepreneurs are people to be emulated by younger generations in the community . 8. Brings social benefits to the people . 9. Utilizes and mobilizes indigenous resources 1 0. Provide more alternative for consumers.

12. THE Entrepreneurial TASK If all the requirements in a capitalist economy are in place, the entrepreneur can assume his assigned role in the development of the economy. A review of the contributions of entrepreneurs will reveal that no business, big or small, started without the hand of the entrepreneur. This is made possible because the surviving enterprises are responsible for providing the following: 1. products and services for customers producers; 2. employment; 3. taxes; 4. demand for suppliers' products and services; and 5. training facilities for future entrepreneurs.

13. In the attempt to make profits, the entrepreneur performs the following specific functions: 1. to supply the necessary capital; 2. to organize by buying and combining inputs like materials and labor; 3. to decide on the rate of output, in the light of his expectation about demand; and 4. to bear the risk inherent to the venture.

14. FOUR MAJOR STAGES of Entrepreneurship The transition from a new venture to a successful long-term enterprise consists of at least four major stages. The stages are as follows: prestart-up stage; 2. start-up stage; early growth stage; and late growth stage.

15. The prestart-up stage happens when the entrepreneur starts to question the feasibility of an idea, product, or service. In the start-up stage , the following activities are undertaken: 1. formation of the business; 2. generation of necessary capital; 3. purchase of facilities and equipment; 4.constructing prototype products; and 5. testing the market. The early growth stage follows after establishing feasibility. The late growth stage is the final stage before the new venture matures into a stable enterprise.

16. RISKS OF ENTREPRENEURSHIP There are several potential risks that an entrepreneur may face in opening up their own business : ● Financial Risk - they need funds and careful auditing skills along the process. If not being cautious, the business may go bankrupt . ● Strategic Risk - strategies may easily be outdated because of the fast-paced culture and lifestyle we have, what trends today may not be the same tomorrow. ● Technology Risk - the reality that every company needs technology to run , promote , operate, and manage their business in a technological-driven world . ● Market Risk - the changing and unpredicted shift of the market’s demand and supply may highly affect how an entrepreneur runs their business .

17. RISKS OF ENTREPRENEURSHIP ● Competitive Risk - the reality of the competitors in the market share, and the acceptance that some of them are better and some are not, but giving enough focus on how to do better or extra than them is also a challenge, struggle, and risk . ● Reputational Risk - it is about the challenge and risk of meeting the customer’s expectations of the product or service an entrepreneur offers. It is solely about the company’s image, but the value it drives and gives to its consumers. ● Environmental, Political, and Economic Risk - this sphere is about what an entrepreneur cannot control within his surroundings that can affect his/her business. Things such as wars, earthquakes, economic recessions, inflation, and typhoon

18. REWARDS There are three major biggest rewards of starting own business: ● Personal Freedom - simply means you are in control to do what you love, what inspires you, to execute your creativity, to choose who you work with, and manage your vision for the company. ● Financial Opportunity - to have your own passive income and commissions flowing to your pocket. To manage the finances based on what is more important to you as of running the business. Learning to be responsible and accountable for every small or big monetary reward. ● Ownership - it is different from being self-employed or freelance, starting an own business means creating a different entity within, outside, and like us. It does not only give customers, but also business partners in negotiations, sponsorship , and market community. It can also be passed on to the next generation , help those in need of jobs, and make something diffoffered .

19. Factors of Production Economic Reward Limiting Factor for Rewards Received Land Rent Capital Interest Labor Wage / Salaries Entrepreneur Rent supply and demand industry rates/government mandated rates supply and demand legislation skill of entrepreneur

20. SMALL BUSINESS VS ENTREPRENEURIAL VENTURE It is essential to know the difference between entrepreneurial ventures and small businesses. They both contribute to the growth of the economy in different ways. Both need entrepreneurial action for start-up, but the small business venture tends to stabilize at a certain stage and grows only with inflation.

21. Small business owners are individuals who establish and manage their businesses for the principal purpose of furthering personal goals and ensuring security . A small business is therefore any business that is independently owned and operated, but is not dominant in its field and does not engage in any new marketing or innovative practices Owners of small businesses are not necessarily interested in growth as an objective. Profitability of the business means success to them. Autonomy and security are the primary objectives of some owners of small businesses. They consider themselves successful even if they earn a smaller income than they would have as employees.

22. Entrepreneurial ventures are businesses in which the principle objectives are profitability and growth , three characteristics that distinguish entrepreneurial ventures from the small businesses according to Wickham (2001) are: 1. Innovation . Entrepreneurial ventures thrive through innovation, this could be technological innovation, a new product or a new way of producing, offering a service, marketing or distribution or even the way the organization is structured or managed. Small business is usually involved in delivering an established product or service.

23. 2. Potential for growth. Due to its innovative approach, an entrepreneurial venture has a great deal more potential for growth than a small business. It is in a position to create its own market. The small business operates in an established industry and is unique only in terms of its locality. It operates within a given market. 3. Strategic objectives. The entrepreneurial venture will usually set itself strategic objectives in relation to: - market targets, market development, market share, market position

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