ENTREPRENEURSHIP

DR. FONKAM NKAM MONGWA

 INTRODUCTION
• Entrepreneur is derived from the French
entreprendre, meaning “to undertake.”
– The entrepreneur is one who undertakes to
organize, manage, and assume the risks of a
business.
– Although no single definition of entrepreneur
exists and no one profile can represent
today’s entrepreneur, research is providing an
increasingly sharper focus on the subject
 A Summary Description
of Entrepreneurship
• Entrepreneurship (Robert C. Ronstadt)
– The dynamic process of creating incremental wealth.
– This wealth is created by individuals who assume
major risks in terms of equity, time, and/or career
commitment of providing value for a product or service.

– The product or service itself may or may not be new or

unique but the entrepreneur must somehow infuse
value by securing and allocating the necessary skills
and resources.
 An Integrated Definition
• Entrepreneurship
– A dynamic process of vision, change, and creation.
• Requires an application of energy and passion towards the
creation and implementation of new ideas and creative solutions.
– Essential ingredients include:
• The willingness to take calculated risks—in terms of time, equity,
or career.
• The ability to formulate an effective venture team; the creative
skill to marshal needed resources.
• The fundamental skills of building a solid business plan.
• The vision to recognize opportunity where others see chaos,
contradiction, and confusion.
 Different views
• A) schumpeter: Josept schumpeter, an eminent economist described
an entrepreneur as one who seeks to reform or revolutionalise the
pattern of production by exploiting an innovation or more generally an
untried technological possibility for producing a new commodity or
product an old one in a new ay, by opening up a new source of
supply of material or a new outlet of products

• The schumpeter theory sees the potential profitabley opportunities

and explooit them. Therefore to him, an entrepreneur is one who
innovates, raises money, collect imputs, organises talent, provides
leadership and sets the organisation innovation to the entrepreneur.
He did not not equate an entrepreneur with an inventor
 Different views
• An inventor creates a snew product while shumpeters entrepreneur
exists if the factors of production are combined for the first time also.

ASSUMPTIONS
• Existence of developed banking system to avoid scarcity of capital
• Existence of high level technology
• Existence of private initiative and broad based entrepreneurial
processes

• Walkers theory of profit. Also called rent throry of profit was says that
profit is regarded as a rent of differentitial ability that an entrepreneur
may possess over the others
 Different views
• Peter Drucker: He extedned schumpters definition of entrepreneurs
as initiators of meta-events. He added the concepts of creative
imitation and entrepreneurial judo
 Entrepreneurship: A Mindset
• Entrepreneurship is more than the mere creation
of business:
– Seeking opportunities
– Taking risks beyond security
– Having the tenacity to push an idea through to reality

• Entrepreneurship is an integrated concept that

permeates an individual’s business in an
innovative manner.
 An Integrative Model of Entrepreneurial Inputs
and Outcomes

Source: Michael H. Morris, P. Lewis, and Donald L. Sexton, “Reconceptualizing Entrepreneurship:

An Input-Output Perspective,” SAM Advanced Management Journal 59, no.1 (Winter 1994): 21–31.
 Who Are Entrepreneurs?
Entrepreneurs, driven by an intense
commitment and determined
perseverance, work very hard. They are
optimists who see the cup as half full
rather than half empty. They strive for
integrity. They burn with the competitive
desire to excel.
 Common Characteristics/Traits
Associated with Entrepreneurs
• Commitment, • Tolerance for Ambiguity
Determination, and • Calculated Risk Taking
Perseverance • Integrity and Reliability
• Drive to Achieve
• Tolerance for Failure
• Opportunity Orientation • High Energy Level
• Initiative and • Creativity and
Responsibility
Innovativeness
• Persistent Problem • Self-confidence and
Solving
Optimism
• Seeking Feedback • Independence
• Internal Locus of Control • Team Building
 The Myths of Entrepreneurship
• Myth 1: Entrepreneurs Are Doers, Not
Thinkers
• Myth 2: Entrepreneurs Are Born, Not Made
• Myth 3: Entrepreneurs Are Always Inventors
• Myth 4: Entrepreneurs Are Academic and
Social Misfits
• Myth 5: Entrepreneurs Must Fit the “Profile”
• Myth 6: All Entrepreneurs Need Is Money
 The Myths of Entrepreneurship
• Myth 7: All Entrepreneurs Need Is Luck
• Myth 8: Ignorance Is Bliss For Entrepreneurs
• Myth 9: Entrepreneurs Seek Success But
Experience High Failure Rates
• Myth 10: Entrepreneurs Are Extreme Risk
Takers (Gamblers)
The Corridor Principle
States that with every venture
launched, new and unintended
opportunities often arise.
 Approaches to
Entrepreneurship
• Schools of Thought Approach
• Process Approaches
 Entrepreneurial Schools-of-Thought Approach

Macro View
{ Environmental School of Thought
Financial School of Thought
Displacement School of Thought

{
Entrepreneurial Trait School
of Thought (People School)
Venture Opportunity School
Micro View of Thought
Strategic Formulation School
of Thought
 Macro View (External locus of control)
a) The Environmental School of Thought
It Considers the external factors that affect a potential
entrepreneur’s lifestyle
b) The Financial/Capital School of Thought
– Based on the capital-seeking process—the search for seed
and growth capital.
• The Displacement School of Thought
– Alienation drives entrepreneurial pursuits
• Political displacement (laws, policies, and regulations)
• Cultural displacement (preclusion of social groups)
• Economic displacement (economic variations)
 The Micro View (internal locus of control)
a) The Entrepreneurial Trait School of Thought
– Focuses on identifying traits common to successful
entrepreneurs.
• Achievement, creativity, determination, and technical
knowledge
b) The Venture Opportunity School of Thought
– Focuses on the opportunity aspect of venture
development—the search for idea sources, the
development of concepts, and the implementation of
venture opportunities.
• Corridor principle: New pathways or opportunities will arise that
lead entrepreneurs in different directions
c) The Strategic Formulation School of Thought
• Emphasizes the planning process in successful venture
development.
 Ronstadt Views Strategic Formulation
as a Leveraging of Unique Elements
• Unique Markets: mountain gap strategies
• Unique People: great chef strategies
• Unique Products: better widget strategies
• Unique Resources: water well strategies
 Process Approaches
• Integrative Approach
• Entrepreneurial Assessment
Approach
• Multidimensional Approach
• a) Integrative Approach
– Built around the concepts of input to the
entrepreneurial process and outcomes from the
entrepreneurial process.
– Focuses on the entrepreneurial process itself and
identifies five key elements that contribute to the
process.
– Provides a comprehensive picture regarding the
nature of entrepreneurship that can be applied at
different levels.
 An Integrative Model of
Entrepreneurial Inputs and Outcomes
Inputs Outcomes
The •A going venture
Environmental Entrepreneurial Entrepreneurial •Value creation
opportunities Process Intensity
•New products,
Identify Number of events
Entrepreneurial services
Opportunity (and)
individuals degree of •Processes

An Assess and entrepreneurship •Technologies

organizational acquire •Profits and/or
context necessary personal
Innovation Proactive- benefits
resources ness
Unique •Employment,
business Implementation Risk taking asset, and
concepts revenue
Resources growth
b) Entrepreneurial Assessment Approach
– Stresses making assessments qualitatively,
quantitatively, strategically, and ethically in
regard to the entrepreneur, the venture, and the
environment
 b) Entrepreneurial Assessment
Approach
Type
of
Venture

Qualitative,
Quantitative,
Type Strategic, and Type
of Ethical of
Entrepreneur Environment

ASSESSMENTS

Do the Results of the Assessments Make Sense Given:

Stage of Entrepreneurial Career

Prior Experience Early Mid Late

and Education Career Career Career
c) Multidimensional Approach
– Views entrepreneurship as a complex,
multidimensional framework that emphasizes the
individual, the environment, the organization, and
the venture process.
 Multidimensional Approach

Individual(s)

Environment Organization

Process
 Entrepreneurs in Cameroon
• Reasons for the exceptional entrepreneurial activity in
the Cameroon. include:
– A national culture that supports risk taking and seeking
opportunities.
– Cameroonians’ alertness to unexploited economic
opportunity and a low fear of failure.
– Cameroonian. leadership in entrepreneurship education at
both the undergraduate and graduate level.
– A high percentage of individuals with professional,
technological or business degrees who are likely to
become entrepreneurs.
 Procedures of Business
creation in Cameroon
• The creation of an enterprise in Cameroon
requires the sponsor to fulfill certain
administrative and legal procedures.
• The procedures are found at the
Cameroon chamber of commerce mines
and industry or at
Administrative procedures
1) paying of taxes (patent) as follows
 LEGAL PROCEDURES
The legal procedures comprise of two steps

Step 1) Choice of legal form

This is adapted to the wishes of promoter in such a way as to best

preserve his interests, both fiscal and social

This is governed by

•The uniform act relating to general commercial law

•The uniform act relating to commercial companies and economic
interest groups
• The uniform act organising securities
• The civil code
• Law No 90/31 of 10th Aug 1990, governing commercial activities in
Cameroon

 In order to carry out a commercial or industrial activity in Cameroon,

you need to choose your form of business.
 (general partnership, limited partnership, Limited Liability company and
economic interest group)
 Companies can also take the form of cooperative societies governed
by law No. 92/6 of 14th Aug, 1992 and its decree of implementation No
92/455/PM of 23rd Nov,1992

This law led to the formation of many cooperatives and common initiative
groups
2) Other administrative formalities relating to the creation of industrial
and commercial companies

• Declaration of existence with the taxation and

registration services and registration in the business
register
• Registration in the trade and personal property credit
register
• Declaration of existence with the social insurance fund
• Declaration of existence at the provincial inspector of
labour
• Insertion in a newspaper empowered to publish legal
notices
• Registration with the consular card-index of the chamber
of commerce industry and mines.
• The creation of an enterprise necessitate the respect of
certain formalities, notably, in the administrative and
judicial procedures

• These procedures are available at the Cameroon

Chamber of commerce industry and mines (CCIMA) or
at Information Center for economic document (arm of
Chamber of commerce), CIDE
Conceptual model of entrepreneurship
Outline of the Entrepreneurial
Organization
Imagination
Imagination

Acceptance
Acceptance
Flexibility
Flexibility of
of Risks
Risks
 Aspects of Entrepreneurship
Venture
Financing

Corporate Social
Entrepreneurship Entrepreneurship

Trends in Women
Entrepreneurial
Entrepreneurship and Minority
Cognition
Research Entrepreneurs

Global
Entrepreneurial
Entrepreneurial
Education
Movement
Family
Businesses
 Entrepreneurship Theory
• Entrepreneurs cause entrepreneurship.
– Entrepreneurship is a function of the entrepreneur:

– Entrepreneurship is the interaction of skills related to inner control, planning and goal setting, risk taking, innovation, reality perception, use of feedback, decision making, human
relations, and independence.

E  f (e )
 Typology of Entrepreneurial Styles

Source: Thomas Monroy and Robert Folger, “A Typology of Entrepreneurial Styles:

Beyond Economic Rationality,” Journal of Private Enterprise IX(2) (1993): 71.
 The Dark Side of
Entrepreneurship
• The Entrepreneur’s Confrontation with Risk
– Financial risk versus profit (return) motive varies
in entrepreneurs’ desire for wealth.
– Career risk—loss of employment security
– Family and social risk—competing commitments
of work and family
– Psychic risk—psychological impact of failure on
the well-being of entrepreneurs
 Opportunity Identification:
The Search for New Ideas
• Opportunity identification is central to
entrepreneurship and involves:
– The creative pursuit of ideas
– The innovation process
• The first step for any entrepreneur is the
identification of a “good idea.”
– The search for good ideas is never easy.
– Opportunity recognition can lead to both personal
and societal wealth.
 Entrepreneurial Imagination
and Creativity
• How entrepreneurs do what they do:
– Creative thinking + systematic analysis =
success
– Seek out unique opportunities to fill needs
and wants
– Turn problems into opportunities
– Recognize that problems are to solutions
what demand is to supply
 The Role of Creative Thinking
• Creativity
– The generation of ideas that result in the
improved efficiency or effectiveness of a system.
• Two important aspects of creativity exist:
– Process
• The process is goal oriented; it is designed to attain a
solution to a problem.
– People
• The resources that determine the solution.
The Critical Thinking Process
 The Creative Climate
• Characteristics of a creative climate:
– A trustful management that does not overcontrol the personnel
– Open channels of communication among all business members
– Considerable contact and communication with outsiders
– A large variety of personality types
– A willingness to accept change
– An enjoyment in experimenting with new ideas
– Little fear of negative consequences for making a mistake
– The selection and promotion of employees on the basis of merit
– The use of techniques that encourage ideas, including suggestion
systems and brainstorming
– Sufficient financial, managerial, human, and time resources for
accomplishing goals
Innovation and the Entrepreneur
• Innovation:
– Is the process by which entrepreneurs convert
opportunities into marketable ideas.
– Is a combination of the vision to create a good idea
and the perseverance and dedication to remain with
the concept through implementation.
– Is a key function in the entrepreneurial process.
– Is the specific function of entrepreneurship.
 The Innovation Process
• Types of • Sources of Innovation
Innovation – Unexpected occurrences
– Incongruities
– Invention
– Process needs
– Extension – Industry and market
– Duplication changes
– Demographic changes
– Synthesis
– Perceptual changes
– Knowledge-based
concepts
Type Description Examples
Invention Totally new product, service, Wright brothers—airplane
or process Thomas Edison—light bulb
Alexander Graham Bell—telephone

Extension New use or different Ray Kroc—McDonald’s

application of an already Mark Zuckerberg—Facebook
existing product, service, Barry Sternlicht—Starwood Hotels &
or process Resorts

Duplication Creative replication of an Wal-Mart—department stores

existing concept Gateway—personal computers
Pizza Hut—pizza parlor

Synthesis Combination of existing Fred Smith—Fed Ex

concepts and factors into a Howard Schultz—Starbucks
new formulation or use
 Major Innovation Myths
• Myth 1: Innovation is planned and predictable
• Myth 2: Technical specifications should be
thoroughly prepared
• Myth 3: Creativity relies on dreams and blue-
sky ideas
• Myth 4: Big projects will develop better
innovations than smaller ones
• Myth 5: Technology is the driving force of
innovation success
 Entrepreneurship and
Small Business Management
6-1 Becoming an Entrepreneur
6-2 Small Business Basics
6-3 Starting a Small Business

50
6-1
Becoming an Entrepreneur
.

51
 WHAT DOES IT TAKE?
Entrepreneurs are more
• persistent • self-confident
• inquisitive • creative
• energetic • reliable
• goal oriented • competitive
• independent

Chapter 6 52
 WHAT DOES IT TAKE?
(continued)
Entrepreneurs have
• problem-solving skills
• tolerance for ambiguity
• strong integrity
• personal initiative
• ability to secure resources
• capability to learn from failure
• willingness to work hard

Chapter 6 53
 RISKS
Recognizing risks
• Lack of adequate capital
• Low sales
• Higher than expected expenses
• Competitive pressure
• An owner unprepared to manage a growing
business
• Operations requiring more time than the owner
is willing to commit

Chapter 6 54
 55

Starting an Entrepreneurial
Firm
Starts with a viable business idea
Develop a business plan
Select a legal form of business
Determine financial resources
Tactics to become owner
 56

Becoming A Business Owner

3 Basic Legal Forms

● Sole Proprietorship = unincorporated

business owned by an individual for profit
● Partnership = unincorporated business
owned by two or more people
● Corporation = artificial entity created by the
state and existing apart from its owners.
 57
Financing Resources

● Crucial concern for entrepreneurs

Debt Financing – money
to be repaid at a later
date

Equity Financing – funds

invested in exchange
for ownership in the
company
 58
Tactics
Start a New Business
Ways to Become a Business Owner
– Advantage – develop and design own way
– Disadvantage – long time to get off ground and to
make profitable

Buy an Existing Business

– Advantage – shorter time and existing track record
– Disadvantage – need to pay for goodwill
 59
Tactics
Buy a Franchise = an agreement to sell a
Ways to Become a Business Owner
product or service of another
– Advantage – management help is provided by
owner
– Disadvantage – lack of control

Participate in a Business Incubator =

shared office space, management, support
services, management advice
6-2
Small Business Basics
Goals
Identify important characteristics
of small businesses.
Recognize the competitive
advantages of small businesses.
Identify problems faced by many
small businesses.
60
 61
Starting a New Business
• Since the 1990, the number of businesses in
the Cameroon. economy has not been growing
faster than the labor force

• The annual number of business launches

continues to increase but their success rates
are on the decrease

Manager’s Challenge: Intermedics

 Five types of Small Business
Owners

Rewarded by chance to Thrive on the challenge Enjoy chance to balance

work on something new of building a larger, more work and personal life
and creative profitable business

Idealists Optimizers Hard Jugglers Sustainer

24% 21% Workers 20% s
20% 15%

Get personal satisfaction High energy people who enjoy

from being a business handling every detail of their
owner own business

SOURCE: Study conducted by Yankelovish Partners, reported in Mark Henricks, “The-Cast,” Entrepreneur (March 2000), 14-16.

62
 SMALL BUSINESS
OWNERSHIP
• Description of a small business
– Owner is usually the manager
– Operates in one or very few locations
– Typically serves a small market
– Not dominant in its field
• Small business employment
• Ownership diversity

Chapter 6 63
Checkpoint >>

How can small businesses compete successfully with

larger businesses?

Answer
 Smaller businesses are able to provide more personalized products
and services to their customers.
 They are able to provide products and services where smaller orders
and projects are required and tend to fill unique customer needs,
which larger companies do not provide.

Chapter 6 64
 COMMON REASONS FOR SMALL
BUSINESS FAILURE
• Not keeping adequate records
• Not having enough start-up money
• Lack of management experience
• Lack of experience with the type of business
• Not controlling operating expenses
• Poor location for the business
• Failure to manage credit offered to customers

Chapter 6 65
Checkpoint >>

List common reasons for small business failure.

Answer
 not keeping adequate records
 insufficient start-up money
 lack of management experience
 lack of experience with the type of business
 not controlling operating expenses
 poor location
 failure to manage credit

Chapter 6 66
6-3
Starting a Small Business
Goals
Recognize important factors to be
considered when starting a
business.
Describe the elements of a
business plan.
Identify types and sources of
financing for a small business.
67
 Key Terms
• business plan
• start-up financing
• short-term financing
• long-term financing

Chapter 6 68
 THE BUSINESS DECISION
• An idea plus experience
• Right place and time
• Team approach
• Preparation and research

Chapter 6 69
Checkpoint >>

Why is it important to use a team approach when

starting a new business?

Answer
 A team approach allows employees to feel valued and motivated to
take personal responsibility for the benefit of the business.
 Owners cannot expect to be able to do everything alone. Building a
team will allow the business to increase productivity and, ultimately,
profits.

Chapter 6 70
 WHAT IS A
BUSINESS PLAN?
• A business plan is a written description of
the business idea and how it will be
carried out, including all major business
activities.

Chapter 6 71
 72
Business Plan
• Document specifying the business
details prepared by an entrepreneur
prior to opening a new business
Clear vision Sources & uses
Realistic financial of start-up funds
projections & operating
Target market funds
Industry and
competitors
Management team
Critical risks that could
threaten success
 73
Writing the Business Plan
 Description of the business and why it is unique
 Profile of potential
High-Tech customers
Start-up Business and
Plan Basic market needs
Points

 Key ingredient of the business that will attract millions

of customers
 Why customers will buy from this company rather
than competitors
 What the company has accomplished so far,
including partnerships or early customer relationships
 74
Writing the Business Plan

High-Tech Start-up Business Plan Basic Points

 Entrepreneur’s background and role in the company

 Specific data about where the company is located,
key management people, and contact information
 Essential information about funding received so far,
funding and staffing needs, and expectations for
growth of the business over the next year

Ethical Dilemma: Closing the Deal

 ELEMENTS OF A
BUSINESS PLAN
• Description of the Business
– The business idea
– Major products and services
– Ownership structure
– Strengths/weaknesses
– Long- and short-term goals

Chapter 6 75
 ELEMENTS OF A
BUSINESS PLAN (continued)
• Description of Competition
– Characteristics of the industry
– Condition of the economy
– Strengths and weaknesses of major
competitors

Chapter 6 76
 ELEMENTS OF A
BUSINESS PLAN (continued)
• Customer Analysis
– Description of customers
– Location, number, and resources of
customers
– Sales forecasts

Chapter 6 77
 ELEMENTS OF A
BUSINESS PLAN (continued)
• Operations Plan
– Organization of the company
– Description of major operations
– Analysis of resources needed
– Human resource plans

Chapter 6 78
 ELEMENTS OF A
BUSINESS PLAN (continued)
• Marketing Plan
– Description of major marketing activities
– Description of resources needed
– Schedule of marketing activities

Chapter 6 79
 ELEMENTS OF A
BUSINESS PLAN (continued)
• Financial Plans
– Start-up costs
– Short- and long-term financial needs
– Sources of financing
– Budgets and financial statements

Chapter 6 80
 STEPS IN DEVELOPING THE
BUSINESS PLAN
• Gather and review information
• Develop the strategic alternatives
• Write the plan
• Ask an expert to review the plan

Chapter 6 81
Checkpoint >>

What is the “strategic alternatives” in a business plan?

Answer
 Strategic alternatives are alternative plans for production, staffing,
financing, and so on.
 Even the best business plan cannot predict every possible
circumstance.
 An alternate plan allows a business to be prepared for the
unforeseeable.

Chapter 6 82
 FINANCING
THE SMALL BUSINESS
• Types of financing
– Start-up financing
– Short-term financing
– Long-term financing
• Sources of financing
– Owner-supplied funds
– Borrowed funds

Chapter 6 83
 Checkpoint >>

In addition to owner-supplied capital, what are several

other sources of financing for a small business?

Answer
 Borrowed money may come from banks, finance companies, or other
individuals, such as friends and family.
 Some suppliers may also be willing to extend credit.

Chapter 6 84