Entrepreneurship

By the end of the topic, the learner should be able to:

i. Explain the meaning of entrepreneurship
ii. Discuss the importance of entrepreneurship to an economy
iii. Describe characteristics of an entrepreneur
iv. Generate business ideas
v. Identify a business opportunity
vi. Evaluate a business opportunity
vii. Explain the need for a business plan
viii. Discuss factors that influence entrepreneurship practices in Kenya
ix. Discuss the causes of business success
x. Recognize the need for ethical practices in business

Meaning of entrepreneurship

This is the process of identifying business opportunities and gathering the necessary resources to start and run a business.

An entrepreneur who identifies business opportunities and gets the necessary resources in order to start and run a business. The entrepreneur therefore creates new businesses or transform the existing ones in the face of risks and uncertainties in order to make profits.

An entrepreneur is therefore a business owner; he starts and organizes the business (the factors of production in appropriate combination)

Importance of entrepreneurship to an economy

i. Creation of employment

Through entrepreneurship,jobs are created which help in absorbing people who would otherwise have been jobless e.g. people employed in the jua kali sector.

ii. Formation of capital

Profit earned by entrepreneurs may be used
to expand the business or even to start other businesses. Wages and salaries paid to the employees is a source of capital to them.

iii. Raising standards of living

Entrepreneurs pay wages and salaries to their employees which enable them to acquire goods and services they need to live comfortable lives. Entrepreneurs also provide a wide variety of goods and services to consumers hence leading to improved living standards.

iv. Encourages the use of local resources

Entrepreneurship makes it possible to use/exploit local resources. Idle resources such as scrap metal may be used to make jikos.

v. Improving infrastructure

The existence of businesses in the economy makes the government establish or improve infrastructure such as roads, communication facilities and water. At other times, entrepreneurs may combine forces to improve infrastructure in their area of operation.

vi. Savings on imports

Local entrepreneurs are able to produce goods and services that are a substitute to imports. This helps the country to reduce the amount of money required to pay for such imports.

vii. Reducing foreign dominance of the economy

Participation of local entrepreneurs in various business activities helps in reducing
investments by foreigners in the particular area.

viii. Promotion of technology/promotion of innovation, research and evelopment

Entrepreneurs are creative and they come up with new and better ways of accomplishing tasks. Most of the inventions and innovations in our society have been developed by entrepreneurs.

ix. Promotion of entrepreneurial culture/helps in the creation of role models

Successful entrepreneurs/entrepreneurial ventures encourage other members of society to initiate their own businesses and hence act as role models in the business world.

x. It contributes to government revenue

Taxes and fees paid by entrepreneurial ventures constitute part of government revenue /income that helps it to facilitate its operations.

xi. It promotes economic growth

Entrepreneurs produce goods and services. This increases the volume of goods and services in the economy leading to expansion of the economy.

xii. It may promote self

Actualization and esteem-By initiating businesses in which they are their own bosses, entrepreneurs pride is boosted and this may promote the overall productivity of the economy.

Characteristics of an entrepreneur

A good entrepreneur should have the following characteristics:

a) Desire to achieve

An entrepreneur is a person who wishes to excel and has the drive to succeed while competing with others. He/she always tries to accomplish something new.

b) Ability to solve problems

An entrepreneur is expected to struggle with determination to get solutions even under difficult situation so that the business can succeed.

c) Risk taker

Entrepreneurs take viable business ventures even when they are not sure of the returns. They assess situations and take calculated risks.

d) Initiative

An entrepreneur should be aggressive in implementing ideas well ahead of other businesses so that he/she can be ahead of them.

e)Time consciousness

An entrepreneur should be able to use time wisely and avoid wasting it. A wise and quickly implemented decision may mean success in business whereas time lost may mean failure.

f) Creativity and innovation

An entrepreneur should be able to generate new ideas as well as think of the best ways of putting them into practice.

g)Independence and self confidence

Entrepreneurs are their own bosses and should believe in their ability to do things and succeed.

h) Persistence

and patience

An entrepreneur should not give up when challenges arise. Sometimes, he/she takes time and make a repeated action or adopts a different course of action in order to overcome such challenges so as to reach the target

i) Decisive

Entrepreneurs have strong problem, solving and decision making skills. The business environment is such that decision has to be made quickly to respond to any situation that may arise.

j) Persuasive

Convincing people to believe in their ideas and buy their products keeps entrepreneurs in business

k)Goal-oriented

Entrepreneurs are achievers who work towards set goals.They continually monitor progress to determine whether they are achieving the goals they have set and where improvements need to be made.

l) Seek information

Entrepreneurs use various methods to get the relevant information that is necessary for the success of the business.

m)Concern for high quality products

An entrepreneur should strive to cope or beat the existing standards of quality. This will enable him/her succeed in a competitive market.

n) Commitment to work

An entrepreneur places priority on getting tasks accomplished. To achieve this he/she may make extra ordinary personal sacrifice e.g. working until very late.

o) Concern for customer satisfaction

An entrepreneur should ensure that customers are satisfied so as to continue being/remain loyal to the business.

p) Desire to feedback

An entrepreneur should be interested in knowing how the business is performing.

Generating Business Ideas For an entrepreneur, the first step in starting a business begins with an idea (business idea).

Business ideas are all about thoughts on possible businesses an entrepreneur can start or improve. It indicates among other things;
a) The products to produce/sell
b) Who the business will sell to (market)
c) Where the business will be located
d) How the will be run (management)
e) Why the business is needed (objectives)

Sources of Business Ideas

i. Newspapers

Local newspapers like the Daily Nation, East African e.t.c especially in the business and advertising sections have a lot of information
about commercial opportunities as well as personal services.

ii. Shows and exhibition

Visiting shows and exhibitions organized by
manufactures and distributors and asking questions from the sales persons.Entrepreneurs can also get business ideas from products displayed in such shows.

iii. Magazines and journals

Reading magazines and journals with business
information may equip an entrepreneur with new business ideas.

iv. Hobbies

These are activities pursued for pleasure but they can also serve as a source of business ideas e.g. photography.

v. Vocational training and experience

A business idea may be developed from one’s own area of training or experience e.g. a teacher may use ideas from his/her training to start a private school.

vi. Surveys and market research

This involves conducting an investigation
to gather information from consumers on what products they require.

vii. Recycling/using waste products

Some waste products could be converted into useful products e.g. scrap metal for making jikos,old tyres for making sandals e.t.c

viii. Listening to what people say

By listening keenly to what people say,one can identify unsatisfied needs e.g. complaints about goods and services in the market. These complaints may form a basis of a business idea for an entrepreneur.

ix. Identifying a market gap (niche)

An entrepreneur may try to identify/spot the needs of consumers which are not being met by the existing goods and services.

x. Brain storming

An entrepreneur can engage other people in a discussion on how best to develop businesses.

xi. Listing attributes of a product

By listing the attributes of a product that is already existing in the market, one can find new use for the product.

xii. Copying/improving an existing business

This involves identifying the weaknesses of a business and trying to come up with solutions.

Business Opportunity

A good business plan is not necessarily a business opportunity. A business idea becomes a business opportunity if it is viable i.e. it can be developed into a successful/profitable business enterprise.A business opportunity is a favourable chance that an entrepreneur accepts for investment. It exists where there is a gap to be filled in the needs of the market.Examples of such gaps include:
a)In availability of products This is where goods and services needed by the consumers are not available at all in the market.
b)Poor quality products A business opportunity exists if one offers better quality goods and services than those of the existing businesses.
c)Insufficient quantities This is where the goods supplied are not enough to meet the demand/need of the consumers.
d)Unaffordable prices A business opportunity exists where one would charge affordable prices.