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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.

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.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

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.
Entrepreneurship and Small Business Management, 1/e
By Steve Mariotti and Caroline Glackin

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

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.
Entrepreneurship and Small Business Management, 1/e
By Steve Mariotti and Caroline Glackin

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

THE EVOLUTION OF ENTREPRENEURSHIP THEORY

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

THE EVOLUTION OF ENTREPRENEURSHIP THEORY

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

THE EVOLUTION OF ENTREPRENEURSHIP THEORY

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

10

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

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.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

11

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

THE IMPORTANCE OF ENTREPRENEURSHIP TO MALAYSIAN ECONOMY


1.

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

What Is an Entrepreneur?

Employees work for someone elses business. Entrepreneurs start their own businesses and work for themselves.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

14

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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.
Entrepreneurship and Small Business Management, 1/e
By Steve Mariotti and Caroline Glackin

16

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

17

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

My Trip

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

18

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

19

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

20

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

21

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

22

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

23

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

24

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

25

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

26

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Lecture 14 December 2011

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

27

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Why Be an Entrepreneur?

Control over time


Fulfillment Creation/ownership Control over compensation Control over working conditions
2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

28

Benefits and Costs of Becoming an Entrepreneur


Benefits Independence Satisfaction Financial reward Self-esteem Contribution to society
Entrepreneurship and Small Business Management, 1/e
By Steve Mariotti and Caroline Glackin

Costs Business failure Obstacles Loneliness Financial insecurity Long hours/hard work Strain on personal relationships
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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

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.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

30

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Keys to Avoiding Missteps

Explore options thoughtfully and systematically


Research Educational courses and workshops Formal mentors Informal advisors


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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Learn from the experience of others


Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

33

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

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
Entrepreneurship and Small Business Management, 1/e
By Steve Mariotti and Caroline Glackin 2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

34

Use SWOT Analysis to Evaluate Business Ideas

Strengths
Weaknesses Opportunities Threats
2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

35

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.
Entrepreneurship and Small Business Management, 1/e
By Steve Mariotti and Caroline Glackin

36

2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Pathways to Entrepreneurship

Start and build a new business


Inherit a business Secure franchise rights Buy an existing business License or purchase technology
2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

37

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.
2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

38

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Measure of earnings

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin

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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2012 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Entrepreneurship and Small Business Management, 1/e


By Steve Mariotti and Caroline Glackin