MGT602 Handouts Set 2

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TABLE OF CONTENTS

LESSON 1: THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP.........................................................1 LESSON 2: THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP.........................................................4 LESSON 3: ENTREPRENEURIAL PROCESS/START UPS.............................................................................................6 LESSON 4: THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND .........................................................10 LESSON 5: THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (CONTINUED…) ...................12 LESSON 6: THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (CONTINUED…) ...................14 LESSON 7: THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (CONTINUED…) ...................16 LESSON 8: THE INDIVIDUAL ENTREPRENEUR.........................................................................................................18 LESSON 9: THE INDIVIDUAL ENTREPRENEUR (CONTINUED…) .....................................................................20 LESSON 10: THE INDIVIDUAL ENTREPRENEUR (CONTINUED…)...................................................................22 LESSON 11: INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES...........................................................25 LESSON 12: INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (CONTINUED…)........................28 LESSON 13: INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (CONTINUED…)........................30 LESSON 14: INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (CONTINUED…)........................32 LESSON 15: INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (CONTINUED…)........................34 LESSON 16: CREATIVITY AND THE BUSINESS IDEA ...............................................................................................35 LESSON 17: CREATIVITY AND THE BUSINESS IDEA ...............................................................................................37 LESSON 18: LEGAL ISSUES FOR THE ENTREPRENEUR..........................................................................................40 LESSON 19: LEGAL ISSUES FOR THE ENTREPRENEUR..........................................................................................43 LESSON 20: LEGAL ISSUES FOR THE ENTREPRENEURS........................................................................................45 LESSON 21: CREATING AND STARTING THE VENTURE.......................................................................................47 LESSON 22: CREATING AND STARTING THE VENTURE (CONTINUED….) ..................................................49 LESSON 23: CREATING AND STARTING THE VENTURE (CONTINUED….) ..................................................51 LESSON 24: CREATING AND STARTING THE VENTURE (CONTINUED….) ..................................................53 LESSON 25: THE MARKETING PLAN...............................................................................................................................55 LESSON 26: THE MARKETING MIX..................................................................................................................................58 LESSON 27: THE ORGANIZATIONAL PLAN.................................................................................................................61 LESSON 28: THE ORGANIZATIONAL PLAN (CONTINUED….) ............................................................................63 LESSON 29: THE ORGANIZATIONAL PLAN (CONTINUED….) ............................................................................65 LESSON 30: THE FINANCIAL PLAN..................................................................................................................................68 LESSON 31: THE FINANCIAL PLAN (CONTINUED….).............................................................................................70 LESSON 32: PRO FORMA SOURCES AND USES OF FUNDS.....................................................................................73 LESSON 33: PRO FORMA SOURCES AND USES OF FUNDS.....................................................................................75 LESSON 34: BANK LENDING DECISIONS .....................................................................................................................77 LESSON 35: SOURCES OF CAPITAL...................................................................................................................................79 LESSON 36: SOURCES OF CAPITAL...................................................................................................................................81 LESSON 37: CAPITAL SOURCES IN PAKISTAN ............................................................................................................83 LESSON 38: VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (CONTINUED….) ........................87 LESSON 39: VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (CONTINUED….) ........................88 LESSON 40: VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (CONTINUED….) ........................89 LESSON 41: VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (CONTINUED….) ........................91 LESSON 42: VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (CONTINUED….) ........................94 LESSON 43: NEW VENTURE EXPANSION STRATEGIES AND ISSUES...............................................................95 LESSON 44: NEW VENTURE EXPANSION STRATEGIES AND ISSUES (CONTINUED….) ..........................97 LESSON 45: ENTREPRENEURSHIP & PAKISTAN......................................................................................................100

Lesson 1

1. To introduce the concept of entrepreneurship and its historical development.
2. To explain the entrepreneurial decision process.
3. To identify the basic types of start-up ventures.
4. To explain the role of entrepreneurship in economic development.
5. To discuss the ethics and racial responsibility of entrepreneurs.

NATURE AND DEVELOPMENT OF ENTREPRENEURSHIP

The term entrepreneur comes from the French and translates "between-taker" or "go-between."

Earliest Period

In this period the money person (forerunner of the capitalist) entered into a contract with the go-between to sell his goods. While the capitalist was a passive risk bearer, the merchant bore all the physical and emotional risks.

Middle Ages

In this age the term entrepreneur was used to describe both an actor and a person who managed large production projects. In such large production projects, this person did not take any risks, managing the project with the resources provided. A typical entrepreneur was the cleric who managed architectural projects.

17th Century

In the 17th century the entrepreneur was a person who entered into a contract with the government to perform a service Richard Cantillon, a noted economist of the 1700s, developed theories of the entrepreneur and is regarded as the founder of the term. He viewed the entrepreneur as a risk taker who "buy[s] at certain price and sell[s] at an uncertain price, therefore operating at a risk."

18th Century

In the 18th century the person with capital was differentiated from the one who needed capital. In other words, entrepreneur was distinguished from the capital provider. Many of the inventions developed during this time as was the case with the inventions of Eli Whitney and Thomas Edison were unable to finance invention themselves. Both were capital users (entrepreneurs), not capital providers (venture capitalists.) Whitney used expropriated crown property. Edison raised capital from private sources. A venture capitalist is a professional money manager who makes risk investments from a pool of equity capital to obtain a high rate of return on investments.

19th and 20th Centuries

In the late 19th and early 20th centuries, entrepreneurs were viewed mostly from an economic perspective. The entrepreneur "contributes his own initiative, skill and ingenuity in planning, organizing and administering the enterprise, assuming the chance of loss and gain." Andrew Carnegie is one of the best examples of this definition, building the American steel industry on of the wonders of industrial world, primarily through his competitiveness rather than creativity. In the middle of the 20th century, the notion of an entrepreneur as an innovator was established. Innovation, the act of introducing something new, is one of the most difficult tasks for the entrepreneur. Edward Harriman and John Pierpont Morgan are examples of this type of entrepreneur. Edward reorganized the Ontario and southern railroad through the northern pacific trust and john developed his large banking house by reorganizing and financing the nation’s industries. This ability to innovate is an instinct that distinguishes human beings from other creatures and can be observed throughout history.

DEFINITION OF ENTREPRENEUR

The concept of entrepreneurship from a personal perspective has been explored in this century. This exploration is reflected in the following three definitions of an entrepreneur: In almost all definitions of entrepreneurship, there is agreement that we are talking about a kind of behavior that includes:

1. . Initiative taking.
2. The organizing and reorganizing or social/economic mechanisms to turn resources and situations to practical account.
3. .The acceptance of risk or failure.

To an economist, an entrepreneur is one who brings resources, labor, materials, and other assets into combinations that make their value greater than before, and one who introduces changes, innovations, and a new order. To a psychologist, such a person is typically driven by certain forcesthe need to obtain something, to experiment, to accomplish or perhaps to escape the authority of others. Entrepreneurship is the dynamic process of creating incremental wealth. Our definition of entrepreneurship involves four aspects:

1. Entrepreneurship involves the creation process.
2. It requires the devotion of the necessary time and effort.
3. It involves assuming the necessary risks.
4. The rewards of being an entrepreneur are independence, personal satisfaction, and monetary reward.

For the person who actually starts his or her own business there is a high failure rate due to poor sales, intense competition, lack of capital or lack of managerial ability.