INTRODUCTION TO ENTREPRENEURSHIP
The word entrepreneurship was first introduced by a French economist Richard Cantillon during the early 18th century. Entrepreneur is a French word ‘‘entreprendre’’ which literally means ‘‘under take’. An entrepreneur is also referred to as ‘‘a risk taker’’ who buys commodities at certain prices and sells at a relatively higher price.
Definitions of an Entrepreneur
There is not a universally acceptable definition for an entrepreneur, different scholars have defined entrepreneurs according to what they seem to be attributing to the qualities of them (entrepreneurs).
1. The Middleman – Richard Cantillon (1751): He defines an entrepreneur as someone who bridges between a supplier and the market and takes a profit by facilitating the exchange process
2. The merchant – J. B. Say (1800) He defined an entrepreneur as one who shifts economic resources from an area of lower yield to an area of higher economic yield.
3. The Risk Taker – Knight, (1921) He defined Entrepreneurs as the organizers of uncertainty who recognize and seize opportunities that result from uncertainties.
4. The Innovator – Joseph Schumpeter (1934) Schumpeter defines an entrepreneur as one who destroys the existing economic order by introducing new products and services, by creating new forms of organization, or by exploiting new raw materials.
In summary,
An entrepreneur is one who sees a need and brings together resources to meet that need.
An entrepreneur is an individual who generates or identifies innovative business ideas and mobilizes the resources needed to turn the idea into a successful business.
Definitions of Entrepreneurship
• Stoner defines Entrepreneurship as the ability to make factors of production like land, labour and capital into new goods and services.
• Schumpeter (1994), Entrepreneurship is a process of creative destruction that involves restructuring a previously stable market in order to create new and better systems.
• Ronstadt (1984), who argues that: “Entrepreneurship is the dynamic process of creating incremental wealth.”
In summary;
Entrepreneurship is the process of exploring the opportunities in the market place and arranging resources required to exploit these opportunities for long term gain.
Business refers to any activity that deals with buying and selling of goods or providing a service with an aim of making a profit.
Why We Study Entrepreneurship
- Introduces learners to marketing skills with the aim of making profits. This includes marketing of laboratory services, supplies, and consumables.
- Teaches learners skills in starting up and managing small-scale and medium businesses/enterprises. For example, starting up a basic laboratory, distributing laboratory supplies, a basic clinic, or a basic drug shop.
- Enables the youth to develop a positive attitude and culture towards work, business, self-employment, entrepreneurship, creativity, and other careers in the business area.
- Helps individuals to learn how to make use of available resources in the economy. This includes human potential, knowledge and skills, and natural resources such as forests, lakes, and land, appropriately and effectively.
- Helps to acquire knowledge for scanning the environment, identifying relevant business opportunities, selecting a product or project, and manufacturing the product. For example, identifying gaps in laboratory services and establishing a lab that meets the set standards.
- Teaches entrepreneurs how to mobilize resources to start up small businesses.
- Helps learners to learn skills that are useful in enabling business growth and expansion.
- For academic purposes.
Terminologies Used in the Study of Entrepreneurship
1. Resource: Refers to an endowment that may exist in an area/locality.
- A resource is something that can be used for making profits or benefits, whether that be a source, supply, or support.
There are five types of resources entrepreneurs have to mobilize and manage:
- Financial resources (money)
- Human resources (manpower)
- Physical resources
- Time resource (moments)
- Informational resources (messages)
2. Business Opportunity: Refers to situations in the marketplace in which new goods or services can be introduced and sold at a price greater than their cost of production, i.e., at a profit.
3. Need: Refers to a basic that an individual must have in order to survive as a human being. Examples of needs include physiological needs and self-actualization needs, i.e., shelter, food, water, etc.
4. Good: Refers to an item that is tangible or physical and visible and has monetary value. Examples include a car, furniture, buildings, books, foodstuffs, etc.
5. Assets: These are resources owned by the business. They include money, stock of goods, land, buildings, goods and services paid for in advance, etc.
There are two types of assets:
- Current assets
- Fixed assets
Current Assets: These are resources owned by the business for a short period of time, i.e., for less than one year. Examples include stock, cash at hand, cash at bank, debtors, etc.
Fixed Assets: These are resources owned by the business for a long period of time, i.e They are used for running the business and are not intended for resale. They are kept within the business to create wealth. Examples include machinery, land, vehicles, equipment, computers, etc.
6. Liabilities: Refers to the financial obligations of the business. There are claims by outsiders against the business. Examples include creditors, bank loans, bank overdrafts, services that other people paid for in advance, outstanding expenses, etc.
There are two types of liabilities:
- Current liabilities
- Long-term liabilities
Current Liabilities: These are debts that must be paid quickly, within one year. For example, creditors, bank overdrafts, services, electricity bills, outstanding rent, etc.
Long-Term Liabilities: These are debts that must be paid after a long period of time. They can take more than one trading period, i.e., long-term loans for 3 years, 7 years, etc.
7. Debit Note: Refers to the document sent by the seller to the buyer to correct an undercharge in the original invoice.
8. Invoice: This is a demand note. It shows the items taken and the amount one is supposed to pay.
9. Dividends: Refers to payments to shareholders.
10. Salary: Refers to a fixed periodical payment to a non-manual employee, usually expressed in annual terms. It is usually paid on a monthly basis.
11. Wage: Refers to payment made to manual workers. It is usually expressed as a rate per hour.
12. Capital: Refers to the money invested in the business by the owner.
- Fixed Capital: Refers to capital tied in the form of fixed assets that are maintained in the business for a long period of time. Examples include machinery, land, vehicles, equipment, computers, etc.
- Working Capital: Refers to the difference between the current liabilities and the current assets.
- Borrowed Capital: Refers to money borrowed for investment purposes.
- Liquid Capital: Refers to current assets in liquid or cash form.
- Circulating Capital: Refers to the value necessary to keep the business running and necessary to keep the day-to-day activities going.
13. Depreciation: Refers to the gradual reduction in the value of fixed assets through usage in the production process and during business operations.
14. Profits: This is income normally earned by business persons. It is earned when the selling of goods and services exceeds cost and expense.
15. Contract: Refers to a legally binding agreement between two or more parties that creates, modifies, or terminates a legal relationship.
16. Transaction: Business activities involving receipt or payment of money through buying and selling.
17. Drawings: Refers to the money or assets that an owner withdraws from a business for personal use.
18. Income Statement: Refers to a financial statement that shows the revenues, expenses, and profits of a business over a period of time.
19. Taxes: Refers to the mandatory payments that individuals and businesses make to the government to fund public services.
20. Supply Chain Management: Refers to the process of managing the flow of goods and services from suppliers to customers.
21. Corporate Social Responsibility (CSR): Refers to the obligation of a business to consider the interests of society as a whole in its decision-making.
Importances or Roles of Entrepreneurship
To the country:
- Employment opportunities: Entrepreneurs create new businesses, which in turn create new jobs. For example, a young entrepreneur who starts a tech startup may hire software engineers, marketers, and customer service representatives.
- Training & mentorship platform: Entrepreneurs often provide training and mentorship to their employees, helping them to develop new skills and advance in their careers. For example, a successful entrepreneur who owns a chain of restaurants may mentor young people who are interested in starting their own food businesses.
- Improves research: Entrepreneurs often invest in research and development to create new products and services. For example, a pharmaceutical entrepreneur may invest in research to develop new drugs and treatments for diseases.
- GDP in terms of exports: Entrepreneurs who export their products and services contribute to the country’s GDP. For example, a fashion entrepreneur who exports clothing to other countries is contributing to the country’s GDP.
- Revenue in terms of taxation: Entrepreneurs pay taxes on their businesses’ profits, which generates revenue for the government. For example, a manufacturing entrepreneur who makes a profit of 1 million may pay 200,000 in taxes to the government.
- Tool to regulate inflation: Entrepreneurship can help to regulate inflation by increasing competition and driving down prices. For example, if a new entrepreneur opens a grocery store in a town, it may force existing grocery stores to lower their prices in order to compete.
- Leads to industrialization: Entrepreneurship can lead to industrialization by creating new industries and businesses. For example, an entrepreneur who invents a new type of engine may start a company to manufacture and sell the engine, which could lead to the creation of a new industry.
- Infrastructure development: Entrepreneurs often invest in infrastructure development, such as building new roads, bridges, and schools. For example, a real estate entrepreneur may build a new shopping mall in a developing area, which could lead to the construction of new roads and other infrastructure.
- Diversification of the economy: Entrepreneurship can help to diversify the economy by creating new businesses in different sectors. For example, a tech entrepreneur may start a new software company, which could help to diversify the economy away from traditional industries such as manufacturing and agriculture.
To an individual:
- Provides one’s destiny: Entrepreneurship allows individuals to take control of their own lives and create their own destiny. They are not beholden to a boss or a company, and they can choose to work on projects that they are passionate about.
- Self-employment and reliance: Entrepreneurs are self-employed, which means that they are not dependent on a paycheck from someone else. They are responsible for their own success or failure.
- Enjoys lots of money: Entrepreneurs have the potential to earn a lot of money, especially if their businesses are successful. However, it is important to note that entrepreneurship is not a get-rich-quick scheme, and it takes hard work and dedication to succeed.
- An opportunity to make a difference: Entrepreneurs can make a difference in the world by creating new products and services that solve problems and improve people’s lives. For example, a social entrepreneur may start a company that provides affordable housing to low-income families.
- Helps one to reach his/her potential: Entrepreneurship can help individuals to reach their full potential by allowing them to pursue their passions and dreams. It can also help them to develop new skills and learn from their mistakes.
- Enjoyment of one’s work: Entrepreneurs often enjoy their work because they are passionate about what they do. They are not working for someone else, and they are free to make their own decisions.
- Contribute to the society and be recognized for it: Entrepreneurs can contribute to society by creating new jobs, paying taxes, and investing in their communities. They can also be recognized for their achievements and contributions.
To the organization:
- Competitive advantage: Entrepreneurship can give organizations a competitive advantage by allowing them to be more innovative and responsive to market changes. For example, a small business may be able to adapt to new trends more quickly than a large corporation.
- Expansion of the company: Entrepreneurship can help organizations to expand by creating new products and services, entering new markets, and increasing sales. For example, a manufacturing company may start a new division to produce a new product line.
- Increased revenue: Entrepreneurship can help organizations to increase revenue by generating new sales and profits. For example, a retail store may increase its sales by opening a new location.
- Good image: Entrepreneurship can help organizations to improve their image by creating new products and services that are seen as innovative and customer-focused. For example, a company that develops a new environmentally friendly product may improve its image among consumers.
- Leads to innovation: Entrepreneurship is often associated with innovation, as entrepreneurs are constantly looking for new ways to improve their products and services. For example, a tech company may develop a new software product that is more user-friendly and efficient than existing products.
- Creates an environment that sustains businesses: Entrepreneurship can help to create an environment that sustains businesses by providing access to capital, mentorship, and other resources. For example, a government may create a small business incubator that provides office space, training, and networking opportunities to new entrepreneurs.
- Improved productivity: Entrepreneurship can help to improve productivity by encouraging organizations to be more efficient and effective. For example, a manufacturing company may invest in new machinery that can produce more products with fewer workers.
To the industry:
- Competitiveness: Entrepreneurship can increase competitiveness in an industry by introducing new products and services, and by driving down prices. For example, a new entrant to the telecommunications industry may offer lower prices for phone calls, which could force existing companies to lower their prices in order to compete.
- Innovation/creativity: Entrepreneurship is often associated with innovation and creativity, as entrepreneurs are constantly looking for new ways to improve their products and services. For example, a fashion designer may create a new line of clothing that is more stylish and affordable than existing lines.
- Cost reduction: Entrepreneurship can help to reduce costs in an industry by introducing new technologies and processes. For example, a manufacturing company may develop a new process that allows it to produce products more efficiently and at a lower cost.
- New processes are created: Entrepreneurship can lead to the creation of new processes and technologies, which can benefit the entire industry. For example, a tech entrepreneur may develop a new software platform that can be used by other companies in the industry.
- Knowledge creation: Entrepreneurship can lead to the creation of new knowledge, as entrepreneurs often conduct research and development to create new products and services. For example, a pharmaceutical entrepreneur may conduct research to develop a new drug that can treat a disease.
To the community:
- Employment: Entrepreneurship creates employment opportunities for people in the community. For example, a new restaurant may hire cooks, waiters, and dishwashers.
- Improved image: Entrepreneurship can improve the image of a community by creating new businesses and jobs, and by investing in the community. For example, a new coffee shop may attract customers from outside the community, which can help to improve the community’s image.
- Increased standards of living: Entrepreneurship can help to increase the standard of living in a community by creating new jobs, paying taxes, and investing in the community. For example, a new factory may create jobs that pay higher wages than existing jobs in the community.
- Creation of role models: Entrepreneurs can be role models for young people in the community, showing them that it is possible to start their own businesses and be successful. For example, a young entrepreneur who starts a successful tech company may inspire other young people to start their own businesses.
- Infrastructure development: Entrepreneurs often invest in infrastructure development, such as building new roads, bridges, and schools. For example, a real estate developer may build a new shopping mall in a community, which could lead to the construction of new roads and other infrastructure.
CHARACTERISTICS/QUALITIES OF ENTREPRENEURS
Qualities or Personal Entrepreneurial Characteristics (PEC) of successful entrepreneurs refers to the desired traits which enable an entrepreneur to do what is expected of him or her and succeed in business.
Personal Entrepreneurial Characteristics (PECs) are the desired traits that enable an entrepreneur to succeed in business.
The word “quality” can be used interchangeably with “Personal entrepreneurial characteristics” also popularly known as PECs. These are;
- Opportunity seeking: Entrepreneurs are able to identify and seize opportunities that others may overlook. For example, they may see a need for a new product or service, or they may find a way to improve an existing product or service.
- Commitment to the work: Entrepreneurs are passionate about their work and are willing to put in long hours and hard work to achieve their goals. They are also committed to satisfying their customers and providing them with the best possible products or services.
- Persistence: Entrepreneurs are persistent and never give up, even when faced with challenges or setbacks. They are determined to succeed and will work tirelessly to overcome any obstacles that stand in their way.
- Risk taking: Entrepreneurs are willing to take calculated risks in order to achieve their goals. They are not afraid to try new things or to invest in new ventures. However, they are also careful not to take unnecessary risks that could jeopardize their business.
- Demand for efficiency and equality: Entrepreneurs are always looking for ways to improve their efficiency and productivity. They are also committed to providing their customers with the best possible value for their money.
- Goal setting: Entrepreneurs set clear and specific goals for themselves and their businesses. They are also able to break down their goals into smaller, more manageable steps. This helps them to stay on track and to achieve their goals more easily.
- Information seeking: Entrepreneurs are constantly seeking out new information that can help them to improve their businesses. They read books, attend conferences, and network with other entrepreneurs. They are also willing to learn from their mistakes and to make changes to their businesses as needed.
- Systematic planning and monitoring: Entrepreneurs are organized and efficient. They develop detailed plans for their businesses and they track their progress regularly. This helps them to stay on track and to make adjustments as needed.
- Persuasion and networking: Entrepreneurs are able to persuade others to support their businesses. They are also good at networking and building relationships with other entrepreneurs, investors, and customers.
- Self-confidence: Entrepreneurs have a strong belief in themselves and their abilities. They are confident that they can succeed, even when faced with challenges or setbacks.
- Perseverance: Entrepreneurs are able to overcome challenges and setbacks. They are persistent and never give up on their dreams.
- Intelligence: Entrepreneurs are able to use their knowledge and skills to start and grow successful businesses. They are also able to learn from their mistakes and to make changes as needed.
- Use of resources: Entrepreneurs are able to make the most of the resources they have available. They are not afraid to take risks and to invest in their businesses.
- Leadership skills: Entrepreneurs are able to lead and motivate others. They are also able to create a positive work environment and to inspire their employees to achieve their goals.
- Highly competitive: Entrepreneurs are always looking for ways to improve their businesses and to stay ahead of the competition. They are also willing to take risks in order to achieve their goals.
- Interpersonal relationship: Entrepreneurs are able to build strong relationships with their customers, employees, and other stakeholders. They are also able to communicate effectively and to resolve conflicts.
- Emotional stability: Entrepreneurs are able to handle stress and pressure. They are also able to stay calm and focused, even when things are difficult.
- Unique skills: Entrepreneurs often have unique skills that set them apart from others. They may include unique customer care skills, business planning skills, unique record keeping skills and the unique stock keeping skills.
- Tolerance: Entrepreneurs despite the difficulties and challenges they face, they keep running their businesses and finding better methods of running their business.
- Other traits include
- Problem-solving ability
- Communication skills
- Flexibility
- Optimism
Barriers to Entrepreneurship
Barriers to entrepreneurship are factors that hinder development of entrepreneurship.
- Poor Entrepreneurial Skills: Many entrepreneurs lack essential skills such as creativity, innovation, endurance, and flexibility. This hinders the overall success and sustainability of entrepreneurial ventures. Example: An entrepreneur who lacks creativity and innovation may struggle to develop new products or services that meet the needs of customers.
- Lack of Business and Technical Skills: Entrepreneurs require skills in marketing, accounting, management, and other technical areas to effectively manage their ventures. Example: An entrepreneur who lacks marketing skills may struggle to promote their business and attract customers.
- Lack of Role Models: Uganda faces a scarcity of entrepreneurial role models, limiting the number of aspiring entrepreneurs. Successful entrepreneurs are often admired but not emulated.This lowers the inspiration and willingness to pursue careers in entrepreneurship. Example: In a community where there are few successful entrepreneurs, people may be less likely to aspire to start their own businesses.
- Lack of Business Ethics: Unethical behaviors, such as unpaid loans, exploited employees, substandard goods, and tax evasion, contribute to the failure of many businesses. Example: An entrepreneur who engages in unethical behavior, such as selling counterfeit goods or evading taxes, may damage their reputation and lose customers.
- Lack of Continuity: Few Ugandan firms survive the death of their founders, limiting the passing on of enterprises to the new generation. Example: A family business may struggle to survive if the founder dies and there is no one to take over the business.
- Political Instability: Decades of political instability in various regions of Uganda have resulted in the loss of entrepreneurs, savings, and business assets. This forces business closures and creates an unfavorable environment for entrepreneurship. Example: An entrepreneur who operates in a country with a history of political instability may be at risk of losing their business due to violence or economic disruption.
- Business Administrative Procedures: Complex regulations, favoritism, corruption, and weak enforcement mechanisms dominate the business environment, pushing businesses into the informal economy. Example: An entrepreneur who has to deal with complex and burdensome regulations may be discouraged from starting or growing their business.
Other Causes of Early Failure of Entrepreneur Ventures:
Lack of access to financing/Lack of sufficient capital
Poor or total lack of business planning
Death of the entrepreneur
Poor managerial skills
Heavy taxes
Competition from existing companies
Uncertainties like weather, wars, etc.
Inadequate market
Poor financial management
Poor business location
Poor infrastructure
Possible Solutions to the Above Challenges
- Poor entrepreneurial skills: Provide training and education programs to help entrepreneurs develop the skills they need to succeed.
- Lack of business and technical skills: Offer business and technical assistance programs to help entrepreneurs learn the skills they need to manage their businesses effectively.
- Lack of role models: Promote successful entrepreneurship stories and provide opportunities for aspiring entrepreneurs to network with successful entrepreneurs.
- Lack of business ethics: Promote ethical business practices and enforce laws and regulations against unethical behavior.
- Lack of continuity: Encourage entrepreneurs to develop succession plans to ensure that their businesses can continue to operate after their death.
- Political instability: Promote political stability and security to create a favorable environment for entrepreneurship.
- Business administrative procedures: Simplify and streamline business regulations and procedures to make it easier for entrepreneurs to start and grow their businesses.
- Excessive, complex taxation: Reduce taxes and simplify the tax code to make it easier for entrepreneurs to comply with tax laws.
- Lack of access to finance: Provide access to financing options, such as loans and grants, to help entrepreneurs start and grow their businesses.
- Low purchasing power: Promote economic development and job creation to increase the purchasing power of consumers.
- Poor or total lack of business planning: Encourage entrepreneurs to develop comprehensive business plans before starting their businesses.
- Death of the entrepreneur: Encourage entrepreneurs to develop succession plans to ensure that their businesses can continue to operate after their death.
- Lack of sufficient capital: Provide access to financing options, such as loans and grants, to help entrepreneurs get the capital they need to start and grow their businesses.
- Poor managerial skills: Provide training and education programs to help entrepreneurs develop the managerial skills they need to succeed.
- Heavy taxes: Advocate for tax policies that are favorable to entrepreneurs and small businesses.
- Competition from existing companies: Encourage entrepreneurs to differentiate their products or services from those of their competitors.
- Uncertainties like weather, wars, etc.: Encourage entrepreneurs to develop contingency plans to deal with uncertainties.
- Inadequate market: Conduct market research to identify opportunities and assess the demand for products or services.
- Poor financial management: Provide training and education programs to help entrepreneurs develop the financial management skills they need to succeed.
- Poor business location: Choose a business location that is accessible to customers and has the necessary infrastructure.
- Poor infrastructure: Advocate for improved infrastructure to create a more favorable environment for entrepreneurship.
Factors that encourage growth of entrepreneurship
- Availability of funds: Access to capital, including loans, grants, and investments, is essential for entrepreneurs to start and grow their businesses.
- Availability of technology: Technological advancements, such as the internet, e-commerce platforms, and mobile devices, have made it easier for entrepreneurs to reach customers, manage their businesses, and innovate.
- Good infrastructure: Reliable transportation, communication, and energy networks are crucial for entrepreneurs to operate their businesses efficiently.
- Appropriate knowledge and skills: Entrepreneurs need the necessary knowledge and skills to identify opportunities, develop business plans, manage finances, and market their products or services.
- Favorable government policies: Government policies that support entrepreneurship, such as tax incentives, regulations, and access to government contracts, can create a conducive environment for businesses to thrive.
- Individual strengths and talents: Entrepreneurs often possess unique strengths and talents, such as creativity, innovation, and risk-taking ability, which are essential for entrepreneurial success.
- Availability of markets: Access to domestic and international markets is crucial for entrepreneurs to sell their products or services and generate revenue.
- Availability of resources: Natural resources, such as minerals, forests, and agricultural land, can provide opportunities for entrepreneurs to develop businesses based on these resources.
- Culture: A culture that values entrepreneurship, innovation, and risk-taking can encourage individuals to start their own businesses.
- Natural factors: Favorable natural factors, such as climate and soil conditions, can support the development of agriculture-based businesses.
- Political stability: A stable political environment is essential for entrepreneurs to operate their businesses without fear of disruption or uncertainty.
- Fair competition: Fair competition promotes innovation and efficiency, allowing entrepreneurs to compete on a level playing field.
- Social security: Social security systems, such as healthcare and unemployment benefits, can provide a safety net for entrepreneurs, reducing the risks associated with starting a business.
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