Entrepreneurship

(CMS-109)
Dr.M.TayyebJaved HeadORIC
m.t.javed@pieas.edu.pk
Office:C217
PABX:3243

http://goo.gl/2teRWx

Approved Contents
IntroductiontoEntrepreneurship;
EntrepreneurialProcess;Business
OpportunityIdentification;Market
Assessment;FinancingtheEmergingFirm;
NewProductInnovation;Technology
Commercialization;BusinessPlan
Development;Strategyand
Entrepreneurship;Managingthegrowing
firm

Entrepreneurship @PIEAS

YES YouthEngagementsServiceNetwork
SPEL SocietyforthepromotionofEntrepreneurshipandLeadership
PEN PIEASEntrepreneurshipNetwork
TiE TheIndusEntrepreneurs
GISTTechI GISTGlobalInnovationthroughScience&Technology
TheEntrepreneurialChallenge IBAInvent
"Discover"NUSTBusinessPlanCompetition
SparkCASEBusinessSchool(CBS)Event
SPDC StudentProfessionalDevelopmentConference UETKSK
RYMUNPMUN
CREATE

Opportunities
MobilinkDiscover NUSTBusinessPlanCompetition
AlFikraQatarNationalBusinessPlanCompetition
FLoWCleanEnergyBusinessChallenge
RiceBusinessPlanCompetition
MITCleanEnergyPrize
4

Prosperity through entrepreneurship

Four Rounds
Round1
Thestudentsarerequiredtoresearchand/orseekguidancefrom
expertstocomeupwithanideaandalsotoformteamsthatare
multidisciplinary.Theideaswouldbegradedbyexpertsandupto
top100willbeshortlisted

Round2
Teamswouldgothroughworkshopstoacquireknowledgeabout
howtodevelopanExecutiveSummary(ES),Elevatorpitch(EP),
BusinessPlan(BP)andBusinessPlanPresentation(P).Inthisround
onlyESsandEPsaretobesubmittedbytheteams.Thesewouldbe
gradedbyexpertsandtheuptotop50teamswillbeshortlisted.
6

Four Rounds
Round3
Teamswouldthenbeassignedmentorsfromtheindustrywho
wouldprovideoneononementoringandhelptheteamsin
preparingtheirFinalBusinessPlansandDraftPresentations(DP).
BPsandDPs,submittedbyteams,wouldbegradedbyexpertsand
theuptotop10Finalistswillbeselectedfromeachtrack.

Round4
TheFinalistwouldbeprovidedmentoringandcoachingtoimprove
theirDraftPresentation.Thesepresentationswouldthenbemade
infrontofJudgesfromthetwotracks,whowouldbesuccessful
social,orbusinessentrepreneursorseniorexecutivesfromthe
corporateandindustrialworld,attheGrandFinaleinDec2014.The
judgeswouldselectthetopfiveteamsfromeachtrack.

Entrepreneurship and New

Venture Opportunities
Lecture Outline
Definitions
EntrepreneurshipinPractice
CaseStudies
ProgressthroughInnovation
Luckorpersistence

Text Book:
Entrepreneurship New Venture Creation by David H. Holt

Synopsis for learning

Evolutionofentrepreneurshipfromeconomictheory
Characteristicsofentrepreneurs
Smallbusinessasadimensionofentrepreneurship
Corporateentrepreneurship
Economicdevelopmentandproductivity

Evolution of Entrepreneurship
Suddendiscovery
Americadiscoveredandnourishedbyentrepreneurs now
worldeconomicpower
Risktakerswhoseizeopportunitiestoharnessanduse
resourcesinunusualways
Largecorporationsevolvedfrombackyardenterprises
Fourmainstreameconomicfactors land,labor,capital,and
entrepreneurship
17th centuryFrenchword entreprendre referstoindividuals
whowereundertakers,meaningthosewhoundertookthe
riskofnewenterprise
14th centuryContractors.TaxEntrepreneur

10

Economics and
Entrepreneurship
RichardCantillon,(1755)aFrencheconomistofIrishdescent,
iscreditedwithgivingtheconceptofentrepreneurshipa
centralroleineconomics
AcriticalpointinCantillonsargumentwasthatentrepreneurs
consciouslymakedecisionsaboutresourceallocation
Astuteentrepreneurswouldalwaysseekthebest
opportunitiesforusingresourcesfortheirhighestcommercial
yields

11

Cantillons
Early View of Entrepreneurial Behavior
AwealthyarbitrageurinvestinginEuropeanventures,dealing
inmonetaryexchange,andcontrollingcommodities,suchas
farmproduce,toauctioninhighdemandmarkets

Investment

Transformation

ProfitorLoss

(Entrepreneurbuysfarm
produceatcertainprices)

(Entrepreneurrepacksand
transportsfarmproducetomarket)

(Entrepreneursellsfoodproduce
incityatuncertainprices)

12

Economics and Entrepreneurship.

AdamSmith enterpriserWealthofNations(1776)
individualwhoundertooktheformationofanorganizationfor
commercialpurposes

JeanBaptisteSay(Frencheconomist) AtreatiseonPolitical
Economy,1803:1845
onewhopossessedcertainartsandskillsofcreatingnew
economicenterprises,yetapersonwhohadexceptionalinsight
intosocietysneedsandwasabletofulfillthem.
SaycombinedtheeconomicrisktakerofCantillonandthe
industrialmanagerofSmithintoanunusualcharacter

In1948,JohnStuartMill(Britisheconomist)elaboratedthe
necessityofentrepreneurshipinprivatesector
Entrepreneurbecomefourthfactorofeconomicendeavor

13

Carl Menger (1840-1921)

Subjectivist Perspective of
Economics
PrinciplesofEconomics 1871
In Carls view the economic change does not arise from
circumstances but from an individuals awareness and
understanding of those circumstances
The entrepreneur becomes, therefore, the change agent who
transforms resources into useful goods and services, often
creating the circumstances that lead to individual growth
Envisioned a causal chain of events wherby resources having
no direct use in terms of fulfilling human needs were
transformed into high valued products
14

Mengers Model of Value-Added

Transformation of Resources
Menger assigned
prioritynumbersto
differentevents(or
circumstances)inthis
chainsothathigh
priorityeventwould
havealownumber
(e.g.1)andwouldbe
anultimateenduse
tosatisfyahuman
need

15

Entrepreneurship as a Process
JosephSchumpeter(18831950):entrepreneurshipasaforce
ofcreativedestruction establishedwaysofdoingthingsare
destroyedbycreationofnewandbetterwaystogetthings
done
Entrepreneurshipasaprocessandentrepreneursas
innovatorswhousetheprocesstoshatterthestatusquo
throughnewcombinationsofresourcesandnewmethodsof
commerce
Today,therebirthofentrepreneurshipinhighereducationhas
notcomefromthedisciplineofeconomicsbutfromthose
whoteachsmallbusinessmanagementorwhohaveinstituted
newcoursesinentrepreneurship

16

Fortune 500
Resultofanentrepreneurwhotookasimpleideaand
persisted
WalMartStores
WalMart(netsalestotaled$473.1billion)isbullishaboutitsplans
toopenevenmoresmallstores,whichcompetewithdrugstoresand
smallgrocerystores

ExxonMobil
XOMtotalrevenue $438.26billion DeepwaterprojectsintheGulf
ofMexicoandaliquefiednaturalgasprojectinPapuaNewGuinea
areamongtheventures

Chevron
U.S.ssecondlargestoilcompanytotalrevenue$228.9billion.
17

2011 Pakistan 25
CompanyName

EXCEED
NayaTel
AdvancedResearch
Projects&Technologies
E2ESupplyChain
Management
TRADEKEY
Sofizar
S.K.Stones/AmishMarble
EXPRESSPAC
i2cInc
Meskay&FemteeTrading
AbacusConsulting
Technology
Folio3
FaysalAssetManagement
CorvitNetworks
CityUniversityofScience
andInformation
technology
iTextiles

Rank
1

GrowthRate RevenueRange
1,351.00
510millionUSD

Industry
ConstructionandEngineering

1,076.00

15millionUSD

HighTechandTelecommunications

699.00

15millionUSD

HighTechandTelecommunications

648.00

510millionUSD

TransportationandAviation

424.00

15millionUSD

Professional,ScientificandTechServices

412.00

15millionUSD

HighTechandTelecommunications

302.00

15millionUSD

ConstructionandEngineering

271.00

15millionUSD

ConsumerGoods

246.00

15millionUSD

HighTechandTelecommunications

10

236.00

1050millionUSD

AgricultureandMining

11

192.00

1050millionUSD

Professional,ScientificandTechServices

12

160.00

15millionUSD

Professional,ScientificandTechServices

13

128.00

15millionUSD

FinanceandInsurance

14

86.00

15millionUSD

HighTechandTelecommunications

18
15

83.00

15millionUSD

EducationandTraining

16

64.00

510millionUSD

TextilesandFashion

2011 Pakistan 25
Multilynx
IndependentMedia
Corporation
CottonWeb
Egas
PeshawarModelDegree
College(Boys)
SPEL SyntheticProducts
Enterprises
RoshanPackages
KhushhalFeed&Farms
Rozee.pk
GCS
AlmoizIndustries
RiazTextileMills
InterwoodMobel
RawalpindiFlour&
GeneralMills

17

63.00

1050millionUSD

HighTechandTelecommunications

18

56.00

1050millionUSD

PublicRelations,MediaandPublishing,
Advertising

19

52.00

1050millionUSD

TextilesandFashion

20

47.00

15millionUSD

EnergyandPower,Water

21

45.00

15millionUSD

EducationandTraining

22

35.00

510millionUSD

Automotive

23

33.00

510millionUSD

AgricultureandMining

24

31.00

15millionUSD

AgricultureandMining

25

15millionUSD

HighTechandTelecommunications

25

15millionUSD

HighTechandTelecommunications

25

1050millionUSD

AgricultureandMining

25

1050millionUSD

TextilesandFashion

25

510millionUSD

ConstructionandEngineering

25

510millionUSD

AgricultureandMining

19

Amazing Pakistani Entrepreneurs...

Hakim Muhammad Saeed | Hamdard Pakistan

Haji Muhammad Ali | Student Biryani

Sir Adamjee Dawood | Adamjee Group

M A Habib | Habib Group
Hussain Dawood | Dawood Group

Yusuf Haroon | Dawn Group of Newspapers

Saeed, Ashiq & Bros | Sabro
Mian Aamir Mehmood | Punjab Group of Colleges
Salim Ghauri | NetSol
Mian Muhammad Din | Super Asia
Taher A Khan | Interflow Group
Majeed Nizami | Nawa-i-Waqt Group

Agha Hassan Abedi | An enterprising banker and

philanthropist
Sadruddin Hashwani | Hashoo Group

S H Hashmi | Orient Advertising

Iqbal Qarshi | Qarshi Laboratories
Mian Muhammad Sharif | Ittefaq Group
Shaukat Tarin | different banking organizations
Seema Aziz | CARE Foundation & Sefam
Shaukat Raza Mirza | Engro & PSO

Mian Muhammad Fazal | Orient Group of Companies

Aftab Tapal | Tapal Tea
Byram D. Avari | Avari Hotels
Asad Ali Khan | Abacus Consulting
Khalid Awan | TCS Couriers
Farhan Masood | Solotech

Hanif Rajput | HR Group

Mian Muhammad Mansha | Nishat Group
Syed Babar Ali | Packages, LUMS, Nestle
Izhar Ahmed Qureshi | Izhar Concrete

20

Defining Entrepreneurship
No indisputable definition of entrepreneurship or entrepreneur
Schumpeter provides us with a framework for understanding
both in terms of a process
The entrepreneur seeks to reform or revolutionize the pattern of
production by exploiting an invention or, more generally, an untried
technological possibility for producing a new commodity or
producing an old one in a new way, by opening up a new source of
supply of materials or new outlet for products.
Entrepreneurship, as defined, essentially consists in doing things
that are not generally done in the ordinary course of business
routine.
21

Defining Entrepreneurship
Schumpeterdidnotequateentrepreneurswithinventors
Inventormightonlycreateanewproduct
Entrepreneurwillgatherresources,organizetalent,andprovide
leadershiptomakeitacommercialsuccess

TheviewpointwasmirroredbyPeterDrucker
Entrepreneurialroleasoneofgatheringandusingresources,but
headdedthatresourcestoproduceresults,mustbeallocated
toopportunitiesratherthantoproblems
Entrepreneurshipoccurswhenresourcesareredirectedto
progressiveopportunities,notusedtoensureadministrative
efficiency
Thisredirectionodresourcesdistinguishestheentrepreneurial
rolefromthatofthetraditionalmanagementrole HenryFord

22

Defining Entrepreneurship
Theevolutionoftheconcepthasgeneratedmanydefinitions,
butperhapsrecentonebyRobertRonstadtcaptureits
essence
Entrepreneurshipisthedynamicprocessofcreatingincremental
wealth.Thiswealthiscreatedbyindividualswhoassumethe
majorrisksintermsofequity,time,and/orcareercommitmentof
providingvalueforsomeproductorservice.Theproductor
serviceitselfmayormaynotbeneworuniquebutvaluemust
somehowbeinfusedbytheentrepreneurbysecuringand
allocatingthenecessaryskillsandresources.

23

Defining Entrepreneurship
On the basis of various definitions by different persons, it can
be concluded that an entrepreneur is one who evaluates the new
situations in his environment and directs the making of such
adjustments in the economic systems as he deems necessary
In the process of bringing the new project into the market, the
entrepreneur undertakes number of responsibilities such
as perceiving opportunities for profitable investments, explores
the prospects of starting a enterprise, obtains the license,
arranges the required initial capital, provides personal
guarantees to the financial institutions, supplies the required
technical knowhow, etc.
24

Entrepreneurship
Entrepreneursmakethingshappen.
Theyareindividualswhotakeaconceptandconvertit
intoareality.Aproduct,policyorinstitution.
Theybecomethechampionsofanewprocess,and
theyareenginesofchange.
Entrepreneurshipoccursinallareasoflife.In
business,academy,governmentandNGOs.
Entrepreneursareeverywhere,inWallstreetandthe
Sahel.
25

Importance of Entrepreneur
Entrepreneurisan economicagent who unitesallmeansof
productiontomaximizehisprofitsbyinnovations.
Entrepreneur puts to use capital, labor andtechnologyand
actsasaneconomicagent.
Entrepreneurs are key to the creation of enterprise. They play
vital role for theeconomicdevelopment of a country in the
followingways:

26

i.

Formation of Capital

Entrepreneur helps to mobilize thecapital,

which results in motivating theinvestors
to divert their idle savings inindustrialsecurities
Investment ofpublic money inindustrial
sector helps the country to use suchresourcesforproductive
purposes
Thegrowthrateofcapitalformationwillbeincreased,whichis
highlyessentialforrapid economic development of acountry

27

ii. Balanced Regional

Development
They helpto remove regional disparitiesbysettingup
industriesinthebackwardareas
Government extend various concessionsandsubsidiestothe
entrepreneurswhotakeinitiativetosetupindustriesinthe
underdevelopedregions

28

iii. Generates Employment

Generating employment directly andindirectly
Directly employ themselves by startingtheirownenterprise
Indirectly provide jobs to manyunemployedbysettingup
largeandsmallscaleindustries

29

iv. Improvement of Per Capita

Income
They have the skills of locating andidentifying
opportunities to establish theirownenterprise
Theypossesthecapacitiestoconverttheresourceslikeland,
laborandcapitalintogoodsandservices
This will result in increase in the nationalincomeandwealth
ofanation,andincreaseinthepercapitaincomeofthe
country

30

v. Improvement of Standard of
Living
The initiative taken by entrepreneurs tosetupindustries
helps in removingscarcityofessentialcommodities
New products, varied products andqualitative
products would bemanufacturedtosuittherequirements
of differentsegmentsofmarket
Theeffortsofentrepreneurstosetuplargescaleandsmall
scaleindustriesoffergoods
at a lower price to the consumers andincreasevarietyintheir
consumption

31

vi. National Self-reliance

They help to manufacture indigenoussubstitutestoimported
productswhichreducesthe dependence on foreigncountries
There is possibility of exporting goodsandservices
which leads to earningforeignexchangeforthecountry
Theimport substitutionandexportpromotionensure
economicindependenceandthecountrywillbecomeself
reliant

32

vii. Planning Production

Entrepreneurs are considered aseconomicagentssincethey
uniteallthemeansofproduction,i.e.,land,laborandcapital
Thiswillhelptomakeuseallthefactorsof
production with a proper judgment,
perseverance and with a knowledge of theworldofbusiness
A trueentrepreneurisendowedwithmorethan
average capacities in the task of organizing and
coordinating the variousfactorsofproductiontogethigher
profitsforhisenterprise

33

viii. Backward and Forward

Linkages
The entrepreneur always initiates changeandtries
to maximize his profits byinnovations
Example:Theestablishmentoftextileunit
generates several ancillary units andexpands
demand for cotton, chemicals,dyes,spinning mills,
etc. (BackwardLinkages)
By increasing the supply of textiles, the textileunit
facilitates the growth of opening salesunitsindifferentmarkets,
stitchingofclothes,machinebuildingand other units (Forward
Linkage)

34

ix. Dispersal by Economic

Power
Themodernworldisdominatedbyeconomicpower
Economic power is the natural outcome ofindustrialandbusiness
activity
Industrial development may lead toconcentration
of economic power in fewhandswhich result in the growth of
monopolies
The increasing number of entrepreneurs helpindispersalofeconomic
powerintothehandsofmanyefficientmanagersofnew enterprises

35

Entrepreneurs Can Be Encouraged

and Promoted
Opennesstonewideas,freedomfrom
investigationofoperation,andpromotionand
paybasedonmeritencourage
entrepreneurship.
Excessiveregulation,rigidhierarchy,lackof
freedom,andexcess controldiscourage
entrepreneurship.
36

Requirements of Entrepreneurs
Entrepreneursneedakeeneyetounderstandeconomic,
social,andscientificrealitiesandthecapacityto
understandevolutionaryprocessesinthefuture.
Theyneedtounderstandhowinstitutionswork,and
individualsreactinordertointroduceactivitiesand
productsthatservepeoplesneedandthatare
sustainableeconomicallyandpolitically.
Entrepreneursalsoneeddedicationandcommitments
andthecapacitytoovercomefailure.
37

Entrepreneurship and society

Toencourageentrepreneurship,societyshould
toleratefailureandgivepeopleasecondchance.
.
Obviously,peopleneedtopayfortheirmistakes,
butifthepaymentistoohigh,peoplewillnotbe
daringortakerisks.
Effectivelegalsystemisessentialforpositive
entrepreneurship
38

Marketing & environmental leadership

Aleadermayhavetosellideas,promoteconcepts,
raisefunds,recruitfollowerswhichrequiresmarketing.
Frequently,Environmentalissuesareabstractand
removedfromthedailyreality
Formostpeople marketingenvironmentalissuesisa
challenge.

39

Small Businesspersons
Individualswhosimplysubstituteincome byleavingjobsto
operatelocalstoresorindependentservicebusinesses
ThedistinctionbetweenanentrepreneurandSBPisdelicate
butimportant
Thepersonwhoestablishafastfoodfranchisechainiscalled
entrepbutthelocalrestaurantowneriscalledaSBP

40

Distinguish factors

Visionforgrowth
Commitmenttoconstructivechange
Persistencetogathernecessaryresources
Energytoachieveunusualresults
Prerequisiteforanentrepreneur

41

Corporate Entrepreneurship
Intrapreneurshipisconcernedwithinnovationthatleadsto
newcorporatedivisionsorsubsidiaryventuresinestablished
largefirms
ORIC???

42

Small Business
Lessthan$10Millioninannualsalesandhasfewerthan1000
employees
Exceptiontothesecriteriaflourish
Firmswith100employeescangenerate$50Millionsormore
withhighspeedproductionlines

43

Family Enterprises
Arelocallyownedandoperated,oftenbyonepersoncalleda
soleproprietor
Successionisaseriousproblem
Successfulbusinessownersoftenmustresignthemselvesto
dissolvingtheirfirms

44

Personal Service Firms

Relycruciallyonuniqueskillsoftheirfounders

45

Franchises
Arecreatedbyacontract

46

Type of Small Business:

Advantages and Disadv
Type

Advantages

Disadvantages

FamilyEnterprise

Offers economic
Familyliabilitiesfor
independence;promotes business,unsure
familyunity
succession

PersonalServiceFirms
(PSF)

Offerspersonalfreedom Personalliabilitiesand
anduseoftalentand
lackofsecureincome
skillsforpersonalgrowth withoutclearsuccession

Franchise

Franchisorprovidesmost
businessstartupneeds
withrelative income
security

Less freedomand
adventurethanothers;
contractedtofranchisor
forservicesandroyalty
leasepayment
47

Entrepreneurial Characteristics
Persistent,Selfconfident,Diligent,Creative,Optimisticand
Independentmindedthelistisuseful,butthereareother
characteristicstoconsider
Unusuallygoodhealth,realisticaboutworkinghardanddrivingtowards
measureableresults
JeromeAKatz(1984) 86%ofentrepreneurswhostartnewbusiness
havebachelorsdegree(morethanhalfofthoseinliberalarts)

48

Jerome A Katz (1984)

71%whobuyintoexistingbusinesseshaveBAdegrees
90%hadseveralyearsofpriorexperience
Thedatasuggestthatmostentrepreneursarereasonablywell
educatedwithsolidworkexperience

49

Robert Ronstadt
Startupventureswithbettereducatedyouthwho,
incidentally,oftenhadentrepreneurialparents
Nearly76%hadfatherswhowerealsoentrepreneursand13%
hadmothersinentrepreneurialroles
Averageageofentrepreneursatstartupwas32

50

Milestone Report (1987)

Characteristics of Women Entrepreneurs
Mostwomenentrepreneursstartedbusinessbetweentheage
of38to48
56%weremarried,and42%havechildren
70%ofthosegraduatedinliberalarts
9%inmanufacturing

51

Organization for Economic Co-Operation

and Development

52

Transition economies

53

Developing Countries

54

Case 1-1: Progress through

Innovation
Portuguesenavigationalinstrumentsopenedtheworldto
rapidcolonization
Scottishsteamenginesandpowerloomsvaultedusinto
industrialage
Americantechnologycreatedanindustrialsocietyfoundedon
enginesofgrowthsuchasFordsassemblylinetechnology,
Bellstelephone,andEdisonselectricsystems

55

Cyrus McCormick
Mechanicalreaperin1831 theShenandoahValley,cutting6Acres
ofwheatinlesstimethanahealthyfarmercouldcutoneacre
TheMcCormickReaperreplacedthewayfarmerhadharvestedgrain
formorethan2,000yearsandfarmproductivitywasincreasedmore
thantenfold
Theinventionwasnotasuddenbrainstorm

56

McCormick Reaper
TheideabeginwithMcCormicksfather,whowasdetermined
tofindawaytoprovidemorefoodforAmericasgrowing
population
Thefarmerwhoworkedonlywithascytheorsicklequickly
realizedthathehadtoaccepttheinevitablechange
McCormickfoundedInternationalHarvesterCorporation Pay
oncredit

57

McCormick Reaper
McCormickrefinedhiscreditpoliciesandintroduced
installmentssales
McCormickwasaninventorturnedentrepreneurwho
recognizedthevalueofmarketinghiredthebestpeoplewith
marketingandengineeringtalent
Billboardsandbrochures
200modelsoffieldplantingandharvestingequipments

58

Luck or Persistence
KimMerritt,11years,sampledchocolateatacandystore
Sheworkedafterschool,weekendsandholidays
Afterschoolfundraisingeventdemandexceededcapacityshe
boughtequipments,firedstaff
KimChocolate,occupiedherentirefamilyduringfirstmonth
shehad18,000orders

59