Chapter 1 - Discovering entrepreneurship and small business management Flashcards
Entrepreneur
a person who focuses on an opportunity in either a
new or existing business, to create value, while assuming both the risk and the
reward in a form of profit. An entrepreneur is someone who identifies a business idea, explores the
feasibility and viability of the idea, and then implements the idea by establishing
a business and managing it successfully.
Entrepreneur cycle
A. Identify business idea
B. Explore the idea’s feasibility and viability
C. Start the business: access production means
D. Manage the business: ensure sustainability
Feasibility
Feasibility refers to whether the idea can be converted
into a business.
Viability
in-depth investigation of whether the business idea can be marketed
and can yield sustainable profit.
Entrepreneurship
In this book, entrepreneurship is defined as the process by which
entrepreneurs pursue opportunities without regard to the resources that they
control. This essentially means the ability of the entrepreneur to combine all other
production means – natural resources, capital and labour – to ensure that their
businesses become successful.
Small business management
Small business in the South African context refers to a business that is
independently owned, managed and controlled; it is essentially not in its field of
operations and usually employs fewer than 50 people, with a turnover not
exceeding R5 million per year.
Features of a successful entrepreneurs
- Skills, expertise and aptitudes
- Personal characteristics
- Ability to take risks
- Need for achievement
- Commitment to the business
- Perserverance
- Good personal relationships
- Involvement in the business
- Knowledge of functional management
Entrepreneurs should be able to understand and execute the following
functions:
Operations: producing goods
Marketing: transferring goods and services to customers to satisfy their needs
Human resources: staff recruitment, training, compensation and retention
General management: overarching activities that are important for the entire
enterprise or business, including planning, organising, leading and control
Administration: obtaining data, keeping records and analysing them in order
to track results
Public relations: this deals with the business as a whole and the promotion of
its image
Procurement: making sure the business has all the production means it needs
to realise its objectives
Finance: managing the financial affairs of the business, including efficient use
of funds and investment decisions.
Types of entrepreneurs
- Basic survivalist - This refers to an entrepreneur who operates a business to survive until such time
that he/she gets a formal sector job or a good entrepreneurial opportunity. A good example is
tradesmen looking for work through advertising their trades on boards outside a
hardware store - Pre-entrepreneur - This person operates as a social entrepreneur, where profit is not the motive for
running the business. Examples of social entrepreneurs are
those people who run stalls at market places, selling similar products to many
other stall holders at the same market. - Subsistence entrepreneur - This refers to people running independent businesses at a small scale to generate
an income for themselves. A fitting example
would be people who have stalls on street corners selling chips, cooldrinks,
cigarettes, airtime or clothing. - Microentrepreneur - This type of entrepreneur obtains an operating license from the local authorities,
but has difficulty obtaining a loan from the bank. A home-based mechanic is a
typical example of this type of entrepreneur. - Small-scale entrepreneur -This refers to someone operating as an entrepreneur in a formal sector and
employing between 10 and 49 employees. Most of these entrepreneurs qualify for
bank loans because they can provide collateral security to the bank. A typical
example of this type of entrepreneur would be someone who runs a bookkeeping
establishment.
6.Social entrepreneurship -Despite the elusiveness of the definition of social entrepreneurship, it can be
defined as the desire of entrepreneurs to obtain justice in society and to ensure
that all people have a decent quality of life.
- Technological entrepreneur - Technological entrepreneurs are entrepreneurs pursuing investment in a project
that assembles and deploys specialised individual and heterogeneous assets
related to the advancement of the specific and technological knowledge. The
objective is to create value forthe venture. - Tourism entreprenuer - Tourism entrepreneurs are entrepreneurs operating in three subsectors, namely:
Accommodation: The entrepreneurs in this subsector specialise in the
provision of accommodation services, for example, hotels, guest houses, etc.
Hospitality: These entrepreneurs focus more on businesses, such as
restaurants.
Travel agency services: These types of entrepreneurs focus on travel
arrangements of clients, such as air ticketing services, car hires, travel guides
and hotelreservations. - Youth entrepreneurs - Young entrepreneurs are young business owners pursuing business interest. Their
ages range between 18 and 35 years of age in terms of the South African definition
of youth.
Intrapreneur
An intrapreneur is someone who has no need to start an independent business,
but wishes to use entrepreneurial abilities in an existing enterprise. An intrapreneur uses his or her creativity and
entrepreneurial insights to develop new and unique products or services with the
aim of satisfying an identified need for a product or service. Intrapreneurs are
people who are given the liberty and incentives to create and market their own
ideas.
Intrapreneurship
Intrapreneurship refers to the development of new business ideas and
opportunities within a large and established corporation.
Differences between entrepreneurs and intrapreneurs
Entrepreneurs take risks to start their businesses. Once they are established,
they manage their businesses to make sure that they run successfully.
Entrepreneurs display creative and innovative approaches to ensure that their
businesses have a competitive edge over competitors. Lastly, entrepreneurs
identify new products and opportunities with the aim of developing or using these
for their own profit.
Intrapreneurs do not take the risk of establishing their own businesses. They
operate within the safety of existing organisations. Intrapreneurs would usually be
appointed by owners because of their business insight. They can often be found
managing new business units. Intrapreneurs also strive for creativity and
innovation while identifying new products and opportunities.
Importance of family business
Family businesses
have been making a positive contribution to the South African economy for the
past 300 years. Various scholars and practitioners highlight that family businesses
are fast becoming the dominant form of business enterprise in both developed
and developing economies.
Defining a family business
A family business is fundamentally different from other forms of business. The key
difference is that the business affairs of a family business are closely and
intricately intertwined with the personal financial affairs of the family, as well as
with the power relationships, blood ties, emotional bonds and inheritance issues
within that family. At least 51 per cent of the business is owned by a single family
At least two family members are involved in the management or operational
activities in the business
Transfer of leadership to the next generation of family members is anticipated.
Advantages of family business
- Transgenerational potential
- Commitment and loyalty
- Longer term view of business therefore the business perseveres and survives better in tough economic times
- Better communication for effective decision making = honesty, openness and consistency
- Provide value and quality to customer
- Flexible = quicker decision making
- Stronger relationship and value-laden with stakeholders
- Trust, shared values, shared vision and determination
