Asas Keusahawanan Kod Kursus: AK1042: DR Ramesh Rao

Asas Keusahawanan Kod Kursus: AK1042
Dr Ramesh Rao
Entrepreneurship and Small Business Management, 1/e

By Steve Mariotti and Caroline Glackin
2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Performance Objectives
Explain what entrepreneurs do. Find and evaluate opportunities to start your own business. Explain how profit works as a signal to the entrepreneur.

THE EVOLUTION OF ENTREPRENEURSHIP THEORY Definition of an Entrepreneur : An entrepreneur is a person who undertakes to do a job Richard Cantillon (1755). The term entrepreneur is a French word first coined by Richard Cantillon. In Malaysia the term usahawan is used for entrepreneur.
THE EVOLUTION OF ENTREPRENEURSHIP THEORY Definition of Entrepreneurship: Entrepreneurship involves not only the process that leads to the setting up of a business entity but also the expansion and development of an on going concern. The study of entrepreneurship is concerned with the entrepreneurial behavior, the dynamics of business set up and expansion and development.
THE EVOLUTION OF ENTREPRENEURSHIP THEORY
Adam Smith (1776) - An entrepreneur is a person who acts as agent in transforming demand into supply. Jean Babtiste Say (1803) - An entrepreneur is a person who shifts resources from an area of low productivity to high productivity.
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John Stuart Mill (1848) - An entrepreneur is a prime mover in the private enterprise.The entrepreneur is the fourth factor of production after land ,labor and capital. Carl Menger (1871) - The entrepreneur acts as an economic agent who transforms resources into products and services.The entrepreneur transforms and gives added value.
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Joseph Aloysius Schumpeter (1934) - An entrepreneur is an innovator. The economy moves through leaps and bounds and the prime mover is the entrepreneur through the process of creative destruction. Alfred Marshall (1936) - The process of entrepreneurship or business development is incremental or evolutionary . It evolves from sole proprietorship to a public company.
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Ibnu Khaldun (Abdul Rahman Mohamed Khaldun) - The entrepreneur is seen as a knowledgeable individual and is instrumental in the development of a city-state where enterprise will emerge. David McClelland - The entrepreneur is a person with a high need for achievement. This need for achievement is directly related to the process of entrepreneurship.
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DEFINITION OF ENTREPRENEURSHIP
It is more than mere creation of business Entrepreneurship is a process of innovation and new venture creation through four major dimensions individual, organizational, environmental and process. The entrepreneurship process is aided by collaborative networks in government, education and institutions.

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DEFINITION OF ENTREPRENEURS
Functional definition of entrepreneurs offers the following definition: Entrepreneurs are individuals who actively form or lead their own business and nurture them for growth and prosperity.

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THE IMPORTANCE OF ENTREPRENEURSHIP TO MALAYSIAN ECONOMY

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Entreprenuership is the symbol of business steadfastness and achievement. Entrepreneurial revolution is critical to economic growth. Entrepreneurship may affect our future in many ways: a. Innovative creation of opportunity Example: Portable phones linked to faxes and laptop will turns cars, train, and airport terminal into offices.
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What Is Business?
Businessbuying and selling products and services
Productsomething tangible that exists in nature or is made by people Serviceintangible work that provides time, skills, or expertise
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What Is an Entrepreneur?
Employees work for someone elses business. Entrepreneurs start their own businesses and work for themselves.

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Entrepreneurs Add Value to Scarce Resources
A scarce (limited) resource is something of value that can be used to make something else or fill a need.
Entrepreneurs add value to scarce resources by what they do with those resources.
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The Economic Questions
What should be produced? When will it be produced? How will it be produced? Who will produce it? Who gets to have what is produced?
An economy is a countrys financial structure. It is the system that produces and distributes wealth.
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My Trip

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Lecture 14 December 2011

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Why Be an Entrepreneur?
Control over time

Fulfillment Creation/ownership Control over compensation Control over working conditions

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Benefits and Costs of Becoming an Entrepreneur

Benefits Independence Satisfaction Financial reward Self-esteem Contribution to society
Costs Business failure Obstacles Loneliness Financial insecurity Long hours/hard work Strain on personal relationships
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Benefit/Cost Analysis
Benefit/Cost Analysisa decision-making process in which the costs of taking an action are compared to the benefits
Benefitsmoney, knowledge, and experience you will gain Costsmoney and time you must invest
Opportunity Costthe value of what must be given up in order to obtain something else
For a benefit/cost analysis to be accurate, opportunity cost must be included.

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Keys to Avoiding Missteps
Explore options thoughtfully and systematically

Research Educational courses and workshops Formal mentors Informal advisors

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Learn from the experience of others


Entrepreneurial Options

Traditional for-profit enterprise Social entrepreneurshipfor-profit enterprise with dual goals of profitability and social returns

Venture philanthropy Green entrepreneurship
Not-for-profit organization
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Not All Ideas are Opportunities
An opportunity is an idea that is based on what consumers need or want and are willing to buy sufficiently often at a high enough price to sustain a business.
Opportunity is situational: dependent on variable circumstances.

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Timmons Business Opportunity = Idea + Four Characteristics

1. Attractive to customers 2. Will work in the business environment 3. Can be executed in an existing window of opportunity 4. Available resources and skills needed to create the business
By Steve Mariotti and Caroline Glackin 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
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Use SWOT Analysis to Evaluate Business Ideas
Strengths
Weaknesses Opportunities Threats

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Five Roots of Opportunity

1. 2. 3. 4. 5. Problems Changes Inventions Competition Technological advances
The best business opportunities often combine both internal and external factors.
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Pathways to Entrepreneurship
Start and build a new business

Inherit a business Secure franchise rights Buy an existing business License or purchase technology

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Profit Is a Sign of Success
Profitamount remaining after costs are deducted from the firms income Profit signals that an entrepreneur is adding value to scarce resources. Entrepreneurs try to make choices (trade-offs) that will increase profit.

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Seven Rules for Building a Successful Business

1. 2. 3. 4. 5. 6. 7. Recognize an opportunity Evaluate it with critical thinking (SWOT) Build a team Write a realistic business plan Gather resources Decide ownership Create wealth
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TOPIC Finding Opportunity in an Existing Business
Performance Objectives
Understand the potential benefits of buying a going concern. Identify potential drawbacks of purchasing a business. Learn how to identify and evaluate purchasing opportunities.
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Performance Objectives (continued)
Learn how to determine the value of a business. Learn how to negotiate and close the deal. Recognize joining a family business as an entrepreneurial pathway.
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Why Buy an Existing Business?
Quicker, easier start-up

Employees bring knowledge/relationships Seller may help with transition
Reduced risk due to established business structure and customer base Cost may be less to buy than to start a similar company
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Potential Pitfalls of Buying an Existing Business

Higher initial investment Known and hidden problems Not a good fit with personality, lifestyle, or work-environment requirements Existing customers may not remain customers after business is bought
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Finding Available Businesses
Direct inquiry/networking (employer, customers, competitors, friends, family) Solicitation by direct mail/advertising
Internet research
Business brokers who buy and sell businesses for a fee
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Evaluating a Business for Sale

Start with background data from owner Scan Internet for press coverage and legal issues Ask outside parties for information: bankers, suppliers, employees, customers Examine internal and financial documents Identify real reason owner is selling Be alert for conflicting information
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Three Methods to Determine Business Value
Asset valuationanalyzes the underlying value of the firms assets Earnings valuationbased on a stream of earnings multiplied by the capitalization factor or by the Price/Earnings ratio
Cash flow valuationuses projected future cash flows and time value of money
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Standards for Asset Valuation

Book valuereported in firms records
Adjusted book valueconsiders actual market value versus the stated book value
Liquidation valuenet cash potentially obtainable from the quick sale of assets Replacement valuecost of newly purchasing the assets
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Determining Variables to Use in Earnings Valuation
Type of earnings

Historical earnings Future earnings under current ownership Future earnings under new ownership Earnings before or after tax? EBIT or operating income?
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Measure of earnings


Non-Financial Factors Affecting the Offer Price
Market space Competitive environment Firms legal and regulatory status Pending physical or labor changes Need for investment in plant, property, and/or equipment Value of customer goodwill
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Asas Keusahawanan Kod Kursus: AK1042

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

THE EVOLUTION OF ENTREPRENEURSHIP THEORY

Entrepreneurship and Small Business Management, 1/e

THE EVOLUTION OF ENTREPRENEURSHIP THEORY

Entrepreneurship and Small Business Management, 1/e

THE EVOLUTION OF ENTREPRENEURSHIP THEORY

Entrepreneurship and Small Business Management, 1/e

THE EVOLUTION OF ENTREPRENEURSHIP THEORY

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

THE IMPORTANCE OF ENTREPRENEURSHIP TO MALAYSIAN ECONOMY

Entrepreneurship and Small Business Management, 1/e

Businessbuying and selling products and services

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurs Add Value to Scarce Resources

Entrepreneurship and Small Business Management, 1/e

The Economic Questions

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Entrepreneurship and Small Business Management, 1/e

Lecture 14 December 2011

Entrepreneurship and Small Business Management, 1/e

Control over time

Entrepreneurship and Small Business Management, 1/e

Benefits and Costs of Becoming an Entrepreneur

Entrepreneurship and Small Business Management, 1/e

Keys to Avoiding Missteps

Explore options thoughtfully and systematically

Research Educational courses and workshops Formal mentors Informal advisors

Learn from the experience of others

Entrepreneurship and Small Business Management, 1/e

Venture philanthropy Green entrepreneurship

Entrepreneurship and Small Business Management, 1/e

Not All Ideas are Opportunities

Entrepreneurship and Small Business Management, 1/e

Timmons Business Opportunity = Idea + Four Characteristics

Use SWOT Analysis to Evaluate Business Ideas

Entrepreneurship and Small Business Management, 1/e

Five Roots of Opportunity

Start and build a new business

Entrepreneurship and Small Business Management, 1/e

Profit Is a Sign of Success

Entrepreneurship and Small Business Management, 1/e

Seven Rules for Building a Successful Business

Entrepreneurship and Small Business Management, 1/e

TOPIC Finding Opportunity in an Existing Business

Entrepreneurship and Small Business Management, 1/e

Performance Objectives (continued)

Entrepreneurship and Small Business Management, 1/e

Why Buy an Existing Business?