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ENTREPRENEURSHIP

These lecture notes are compiled by Assoc Prof Mohamad


Saidy Ismail for CUCMS’s MPU2242 / MPU3252) class
discussions with references to “Fundamentals of
Entrepreneurship”, Oxford Fajar, by Sodri Ariffin, et al and
“Entrepreneurship”, Oxford Fajar, by Sariah Hanim and Cecilia
Soon Teik Lan. Students are encouraged to refer directly to
these main reference books.

Cyeberjaya University College of Medical Sciences


Sep 2019

Fundamentals of Entrepreneurship All Rights Reserved


© Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 1
TOPIC 1
DEFINITION AND FUNDAMENTALS OF
ENTREPRENUERSHIP
Note:
This note is a supporting reading materials for students who take
Entrepreneurship. The main reference for this note is Fundamentals of
Entrepreneurship published by Sodri Ariffin, Ismail Ab Wahab
and Zarida Hambali (Oxford Fajar) and a few other books.

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Learning Outcomes

At the end of this chapter, students should be able to:


 understand the principles and theory of
entrepreneurship
 gain a better understanding of the concept of the need
for achievement, locus of control and risk taking
propensity as key dimensions of entrepreneurship in
managing a business organization

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Introduction

 Entrepreneurial activities in the form of producing goods and


services for human needs, selling, trading or exchanging of
goods were in existence since time immemorial.
 Presently, entrepreneurship development is recognized as an
important catalyst that can spur economic growth and
prosperity especially in the countries that practise free market
economy.

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Introduction (cont.)

 Entrepreneurship by definition is a process of identifying the


opportunity, converting the opportunity into marketable
products or services using creative and innovative means
and through the process creates value and wealth to the
society.
 Entrepreneurs are individuals who undertake entrepreneurial
process.

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The Evolution of Entrepreneurship

Entrepreneurship has existed in Malaya since the interaction of


Malacca with foreign traders. However, when the British
colonised the Malay Peninsular, they changed the structure of
the society and practised the “divide and rule” system in which
the Chinese were engaged in mining and business, the Malays
were in administration and agriculture and the Indians were
engaged in rubber plantations.

In such situation, the Chinese society was exposed and had


gone advance in business compared to the Malays and
Indians.

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The Evolution of Entrepreneurship
(contn)

After independence, the Government through its public


policies such as The New Economic Policy (1971-1990),
the National Development Policy (1990-2000) and Vision
2020 has encouraged and supported entrepreneurship
development in Malaysia because entrepreneurs contribute
to the nation’s prosperity as well to the individuals and local
society.

In fact at one time, there was Ministry of Entrepreneurship


Development. Today, it has become a department under
the Ministry of Rural Development.

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Definition of Entrepreneurship

There is no consistent and standard definition on


entrepreneurship.

But Richard Cantillon introduced the word


‘entreprende’ in 1755, a French word which means “to
undertake”, “to try” or to do something”. And this is to
refer to individuals who undertake the risk of new
ventures or enterprise’.

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Definition of Entrepreneurship
(contn)

One of the most comprehensive definition of entrepreneurship is as


what been given by Histrich and Peter (1998):

“Entrepreneurship is the dynamic process of creating incremental


wealth. The wealth is created by individuals who assume major risks in
terms of equity, time and career commitment or provide value for some
products or services.

It is the process of creating something new with value by devoting


the necessary time and effort, assuming the accompanying financial,
psychological and social risks, and receiving rewards of monetary,
personal satisfaction and independence”

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Some Examples of Products with New Values

Airbnb – the world’s largest accommodation provider owns


no real estate

Uber – The world’s largest car hailing compony owns no


vehicle

Fb – The most popular social media company creates no


content

Alibaba – the most valuable retailer has no inventory


Waze – the world’s largest community based traffic and
navigation app

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Entrepreneurship versus
Entrepreneur
 Entrepreneurship refers to an entrepreneurial process while
entrepreneur is the individual that executes the process.
 Entrepreneurship entity or groupings can be categorized
based on the type of entrepreneurial activities being carried
out.
 The entrepreneurship process may comprise several
entrepreneurial activities which might differ from one
organization to the other.
 Types of entrepreneurs are best described in terms of their
motives and their functions as entrepreneurs.

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Who are Entrepreneurs?

Who are Entrepreneurs:


 According to Zimmerer and Scarborough, 2008. “Entrepreneur is an
individual who creates a new venture in the face of uncertainty for the
purpose of achieving profit and growth by indentifying and capitalising
opportunities and assembling the necessary resources to capitalise on the
indentified apportunities”.

 Kuratko and Hodgetts, 2001. “An entrepreneur is an individual who


organises, manages and assumes the risks of a business”.

 In short, entrepreneurs are the pioneers of today’s business success.Their


sense of opportunity, their drive to innovate and their capacity for
accomplishment have become the standard by which free enterprise is
now measured.

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Who are Entrepreneurs? (contn.)

Entrepreneur can also be defined from a functional


approach i.e. based on what an entrepreneur
does, or an indicative approach based on his
characteristics and attributes.

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Other Definition of
Entrepreneurship
Kuratko and Hodgetts (2004)

Entrepreneurship is a dynamic process of vision, change and


creation. It request 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 skill of building a solid business plan, and finally, the
vision to recognise opportunity where others see chaos, contradiction
and confusion”.

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 Adam Smith (1776) widened the scope of
entrepreneurship to include the dynamism
of the personality of an ‘enterpriser’ such
as the ability to foresee potential through
changes in the economy and to take
advantage of the opportunities thereby
created.

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 Jean Babtiste Say (1803)

“Entrepreneurs are individuals with certain


competencies who can influence society by
forming enterprises and likewise were influenced
by society to recognize needs and fulfil them
through skilful management of resources”.

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 Joseph Schumpeter believed entrepreneurship plays a
crucial role in triggering economic development.
 Schumpeter (1934) defined development as the exercising of
new combinations of productive factors.
 Such efforts may result in the introduction of a new product
or a new method of production, the opening of a new market
or the finding of a new source of the inputs supply or the
establishment of a new organization.

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A SUMMARY OF DEFINITIONS
Basic aspects of Entrepreneurship:

 Creation of something new of value or novel (original,


unique and unexpected) for both, the entrepreneur and the market
 Devotion of time and effort
 Assuming necessary risks in many forms
 Involves the rewards, monetary and self satisfaction

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The Importance / Benefits of
Entrepreneurship

NATIONAL DEVELOPMENT
 It a catalyst for economic change & national growth
 Improving the country’s balance of payment by increasing the country’s
Gross National Product (GNP)
 It increases per capita output and income
 Produces more products of high quality
 Creates more job opportunities
 Better way utilizing national resources
SOCIETY DEVELOPMENT
 Improves the lifestyle of the society
 Fulfils the needs / wants of the community
 Create choices of produts through innovative and creative production
techniques
 Reduces waste

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The Importance / Benefits of Entrepreneurship
(contn)

FAMILY DEVELOPMENT
 Increases family income
 Raises living standards of famalies
 Improves social status

SELF DEVELOPMENT
 Maximising potential skills and credibility to face
challenges
 Possesses freedom in carrying out a job
 Maximising the benefits obtained from available
opportunities
 Determining your own performance target

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ENTREPRENEUR SELF-
ASSESEMENT

You can try one of the online tests by accessing your


potential to be a successful entrepreneur:

http://bizmove.com/other/quiz.htm

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DEFINITION OF SMALL & MEDIUM
ENTERPRISE
A business will be deemed as an SME if it meets either one of the following two
specified criteria, namely sales turnover or full-time employees whichever is lower

CATEGORY SMALL MEDIUM


Manufacturing Sales Turnover: Sales Turnover:
RM300,000 to less than RM15 million to less that
RM15 million RM50 million

Full-Time Employees: Full-Time Employees:


5 to less than 75 75 to not exceeding 200
Services and Sales Turnover: RM300,000 Sales Turnover:
Other Sectors to less than RM3 million RM3 million to not exceeding
RM20 million
Full-Time Employees: 5 to Full-Time Employees: 30 to not
less than 30 exceeding 75

Source: “Guideline for New SME definition”. By SME Corp. Malaysia, Secretariat
to the National SME Development, October, 2013
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IN CONCLUSION ….

 Entrepreneurs are individuals who undertake entrepreneurial


process.
 The other conclusion – it is the process of creating something
new with value by devoting the necessary time and effort,
assuming the accompanying financial, psychic and social
risks and receiving the resulting rewards of monetary,
personal satisfaction and independence.
 Entrepreneurship by definition is a process of identifying the
opportunity, converting the opportunity into marketable
products or services using creative and innovative means
and through the process creates new value and wealth to the
society.

Fundamentals of Entrepreneurship All Rights Reserved


© Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 23

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