Study Notes for MNE 2601 – Larry Mowbray
ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT
MNE 2601
TOPIC 1
STUDY UNIT 1
Chapter 1: The Nature and Development of Entrepreneurship (Pg 3 – TB)
Introduction: The Economic impetus of Entrepreneurship
Economic development can be directly attributed to the level of entrepreneurial activity in a country. A combination
of all types of businesses from Small, Medium, and Micro enterprises (SMME’s), to large National and International
organisations (Private and Public owned) collectively determines the overall state of the economy.
GDP or the – real Gross Domestic Product – is the value of all production within a country’s geographical boundaries,
and it is used to measure the growth activity within our economy – that is, whether the economy is growing or
declining. The Economic growth rate is determined by the year-on-year change in the value of real GDP.
Employment is also closely linked to the state of the economy. During periods of poor economic growth, less job
opportunities are available. The importance of entrepreneurs is crucial for the improvement of the South African
economy and is also regarded as the best opportunity that exists.
Most entrepreneurial activity takes place in small, medium and micro enterprises (SMME’s). SMME’s form 97.5% of all
businesses in RSA, they generate 35% of GDP, employ 55% of all formal private sector employees and contribute 43%
of the total value of salaries and wages paid in RSA.
The Development of Entrepreneurship Theory (entreprenology)
The progress in entrepreneurship and our understanding of entrepreneurs can be divided into five periods according
to Fillion (1991).
Period Topics Authors and Researchers
1. What entrepreneurs do 1700 – From an Economic perspective Cantillon, Say, Schumpter
(1950)
2. Who entrepreneurs are 1960 – From a Behavioural perspective Weber, McClelland, Rotter,
(1980) De Vries
3. What entrepreneurs do 1980 – From a Management science Drucker, Mintzberg
perspective (finance, marketing,
operations, human resources)
4. What support is needed by From a Social perspective, Gartner, Welsh, Bygrave,
entrepreneurs 1985 – including economists, Reynold
geographers and sociologists.
5. What entrepreneurial activities From an Entrepreneurial Timmons, Vesper,
are, and what competencies perspective Brockhaus
are required to perform them
1990 –
Page | 1
,Study Notes for MNE 2601 – Larry Mowbray
Defining Entrepreneurship, Small business and Entrepreneurial ventures
Entrepreneur and Entrepreneurship (Pg 9 – TB)
Entrepreneurship: is the emergence and growth of new business. The motivation for entrepreneurship is to make a
profit. Entrepreneurship involves the process that causes changes in the economic system through innovations of
individuals who respond to opportunities in the market.
In the process entrepreneurs create value for themselves and society.
Defining an entrepreneur remains a problem as researchers and academics never seem to reach agreement. Some
definitions of an entrepreneur are given below:
Carland, Hoy, Boulton & Carland: An entrepreneur is an individual who establishes and manages a business for the
main purposes of profit and growth. The entrepreneur is characterised principally by innovative behaviour and
employ strategic management practices in the business.
Watson: The distinguishing factors of entrepreneurs are mostly innovation, and then opportunity recognition and
growth in a business
An entrepreneur can be defined as follows: “an entrepreneur is a person who sees an opportunity in the market,
gathers resources and creates and grows a business venture to meet these needs. The entrepreneur bears the risk of
the venture and is rewarded with profit if it succeeds.
The key concepts of an entrepreneur that follow the definitions above are:
Identifying an opportunity: A real business opportunity must exist
Innovation and creativity: Some new and different is required
Getting resources: Capital labour and operating equipment must be found
Creating and growing a venture: Refers to the starting of a new business venture or the conversion of an existing
business
Taking risks: Personal and financial risks are involved for the person who embarks on the entrepreneurial process.
Being rewarded: Reward is an essential element of the free market system. It can be in the form of profit or an
increase in the value of the business.
Managing the business: The entrepreneurial process requires planning, organisation, leadership and control of all
the functions in the business venture.
Small business
It is important to distinguish between entrepreneurial ventures and small businesses. Both are crucial to the
performance of the economy but serve different economic functions.
Watson: Small business owners are individuals who establish and manage their businesses for the principal purpose
of furthering personal goals and ensuring security. The activities of artisans/craftsmen, administration/manager and
security/family are indicated as characteristics of small business ownership.
Carland: Therefore, a small business is any business that is independently owned and operated, but is not dominant in
its field and does not engage in any new marketing practices.
Page | 2
,Study Notes for MNE 2601 – Larry Mowbray
The National Small Business Amendment Act 26 of 2003 offers an official definition of small business in South Africa.
The Act covers all sectors of the economy, as well as all types of enterprises, and consists of two parts – qualitative
and quantitative criteria:
Qualitative criteria
...which relate to the ownership structure of the business, specifies that it must:
Be a separate and distinct business entity
Not be part of a group of companies
Include any subsidiaries and branches when measuring the size
Be managed by its owners
Be a natural person, sole proprietorship, partnership or a legal person, such as a close corporation or company.
Quantitative criteria
...quantitative criteria are presented in the Schedule to the Act and classify businesses into micro, very small, small
and medium, using the following guidelines in respect of different sectors of the economy:
Total full-time paid employees
Total annual turnover
Total gross asset value (excluding fixed property)
Small business owners are not necessarily interested in growth as an objective, they regard themselves as successful
when their businesses are profitable.
Entrepreneurial Ventures (Pg 10 – TB)
Entrepreneurial ventures are businesses in which the principal objectives are profitability and growth. Three
characteristics distinguish the entrepreneurial venture from small business (Wickham);
Innovation: Entrepreneurial ventures thrive on innovation, be it technological innovation, a new product or a new way
of producing, offering a service, marketing or distributing or even the way in which an organisation is structured or
managed. Small business is usually only involved in delivering an established product or service.
Potential for growth: Due to its innovative approach, an entrepreneurial venture has a great deal more potential for
growth than a small business. It is in a position to create its own market. The small business operates in an established
industry and is unique only in terms of its locality.
Strategic Objectives: The entrepreneurial venture will usually set itself strategic objectives in relation to:
Market targets
Market development
Market share
Market position
The small business rarely cares about these aspects. Its objectives seldom go beyond survival, sales and profit targets.
Entrepreneurial ventures are the ones that create employment. Both ventures require entrepreneurial action for
start-up, but the small business will tend to stabilise at an early stage and only grow with inflation.
Entrepreneurial Development (Pg 10 – TB)
Page | 3
, Study Notes for MNE 2601 – Larry Mowbray
A model for Entrepreneurial development
Factors that influence the entry of entrepreneurs are:
Entrepreneurial orientation:
Family and roles models
Education
Culture
Work experience
Personal orientation (creativity and innovation, autonomy, risk taking, proactiveness, competitive)
A supportive environment:
Financing
Training and development
The fundamental infrastructure requirements such as roads, electricity, water and communications are vital
factors in entrepreneurial development.
Infrastructure:
A cooperative environment
The domains of Entrepreneurship, Management and Leadership
Not all entrepreneurs are good managers or leaders, but certain management and leadership skills are critical for
entrepreneurial success.
Entrepreneurs are innovative and have the ability to identify business opportunities and grow them into businesses by
applying the necessary resources. Once established, the business needs to be managed and the role of the
entrepreneur then changes to that of a manager, which includes functions such as planning, organising, leadership
and control.
The various business functions also have to be managed; these functions include marketing, purchasing, production,
human resources, administration, public relations and finance.
Success factors of Entrepreneurs
Entrepreneurial Factors Managerial Factors
Creativity and Innovation Planning – systematic approach
Risk orientated – calculated risks Knowledge of competitors
Leadership Mainly market orientated
Good human relations Client service
Positive attitude High – Quality work
Perseverance Financial insight and management
Commitment Business knowledge and skills
The use of experts
Page | 4
ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT
MNE 2601
TOPIC 1
STUDY UNIT 1
Chapter 1: The Nature and Development of Entrepreneurship (Pg 3 – TB)
Introduction: The Economic impetus of Entrepreneurship
Economic development can be directly attributed to the level of entrepreneurial activity in a country. A combination
of all types of businesses from Small, Medium, and Micro enterprises (SMME’s), to large National and International
organisations (Private and Public owned) collectively determines the overall state of the economy.
GDP or the – real Gross Domestic Product – is the value of all production within a country’s geographical boundaries,
and it is used to measure the growth activity within our economy – that is, whether the economy is growing or
declining. The Economic growth rate is determined by the year-on-year change in the value of real GDP.
Employment is also closely linked to the state of the economy. During periods of poor economic growth, less job
opportunities are available. The importance of entrepreneurs is crucial for the improvement of the South African
economy and is also regarded as the best opportunity that exists.
Most entrepreneurial activity takes place in small, medium and micro enterprises (SMME’s). SMME’s form 97.5% of all
businesses in RSA, they generate 35% of GDP, employ 55% of all formal private sector employees and contribute 43%
of the total value of salaries and wages paid in RSA.
The Development of Entrepreneurship Theory (entreprenology)
The progress in entrepreneurship and our understanding of entrepreneurs can be divided into five periods according
to Fillion (1991).
Period Topics Authors and Researchers
1. What entrepreneurs do 1700 – From an Economic perspective Cantillon, Say, Schumpter
(1950)
2. Who entrepreneurs are 1960 – From a Behavioural perspective Weber, McClelland, Rotter,
(1980) De Vries
3. What entrepreneurs do 1980 – From a Management science Drucker, Mintzberg
perspective (finance, marketing,
operations, human resources)
4. What support is needed by From a Social perspective, Gartner, Welsh, Bygrave,
entrepreneurs 1985 – including economists, Reynold
geographers and sociologists.
5. What entrepreneurial activities From an Entrepreneurial Timmons, Vesper,
are, and what competencies perspective Brockhaus
are required to perform them
1990 –
Page | 1
,Study Notes for MNE 2601 – Larry Mowbray
Defining Entrepreneurship, Small business and Entrepreneurial ventures
Entrepreneur and Entrepreneurship (Pg 9 – TB)
Entrepreneurship: is the emergence and growth of new business. The motivation for entrepreneurship is to make a
profit. Entrepreneurship involves the process that causes changes in the economic system through innovations of
individuals who respond to opportunities in the market.
In the process entrepreneurs create value for themselves and society.
Defining an entrepreneur remains a problem as researchers and academics never seem to reach agreement. Some
definitions of an entrepreneur are given below:
Carland, Hoy, Boulton & Carland: An entrepreneur is an individual who establishes and manages a business for the
main purposes of profit and growth. The entrepreneur is characterised principally by innovative behaviour and
employ strategic management practices in the business.
Watson: The distinguishing factors of entrepreneurs are mostly innovation, and then opportunity recognition and
growth in a business
An entrepreneur can be defined as follows: “an entrepreneur is a person who sees an opportunity in the market,
gathers resources and creates and grows a business venture to meet these needs. The entrepreneur bears the risk of
the venture and is rewarded with profit if it succeeds.
The key concepts of an entrepreneur that follow the definitions above are:
Identifying an opportunity: A real business opportunity must exist
Innovation and creativity: Some new and different is required
Getting resources: Capital labour and operating equipment must be found
Creating and growing a venture: Refers to the starting of a new business venture or the conversion of an existing
business
Taking risks: Personal and financial risks are involved for the person who embarks on the entrepreneurial process.
Being rewarded: Reward is an essential element of the free market system. It can be in the form of profit or an
increase in the value of the business.
Managing the business: The entrepreneurial process requires planning, organisation, leadership and control of all
the functions in the business venture.
Small business
It is important to distinguish between entrepreneurial ventures and small businesses. Both are crucial to the
performance of the economy but serve different economic functions.
Watson: Small business owners are individuals who establish and manage their businesses for the principal purpose
of furthering personal goals and ensuring security. The activities of artisans/craftsmen, administration/manager and
security/family are indicated as characteristics of small business ownership.
Carland: Therefore, a small business is any business that is independently owned and operated, but is not dominant in
its field and does not engage in any new marketing practices.
Page | 2
,Study Notes for MNE 2601 – Larry Mowbray
The National Small Business Amendment Act 26 of 2003 offers an official definition of small business in South Africa.
The Act covers all sectors of the economy, as well as all types of enterprises, and consists of two parts – qualitative
and quantitative criteria:
Qualitative criteria
...which relate to the ownership structure of the business, specifies that it must:
Be a separate and distinct business entity
Not be part of a group of companies
Include any subsidiaries and branches when measuring the size
Be managed by its owners
Be a natural person, sole proprietorship, partnership or a legal person, such as a close corporation or company.
Quantitative criteria
...quantitative criteria are presented in the Schedule to the Act and classify businesses into micro, very small, small
and medium, using the following guidelines in respect of different sectors of the economy:
Total full-time paid employees
Total annual turnover
Total gross asset value (excluding fixed property)
Small business owners are not necessarily interested in growth as an objective, they regard themselves as successful
when their businesses are profitable.
Entrepreneurial Ventures (Pg 10 – TB)
Entrepreneurial ventures are businesses in which the principal objectives are profitability and growth. Three
characteristics distinguish the entrepreneurial venture from small business (Wickham);
Innovation: Entrepreneurial ventures thrive on innovation, be it technological innovation, a new product or a new way
of producing, offering a service, marketing or distributing or even the way in which an organisation is structured or
managed. Small business is usually only involved in delivering an established product or service.
Potential for growth: Due to its innovative approach, an entrepreneurial venture has a great deal more potential for
growth than a small business. It is in a position to create its own market. The small business operates in an established
industry and is unique only in terms of its locality.
Strategic Objectives: The entrepreneurial venture will usually set itself strategic objectives in relation to:
Market targets
Market development
Market share
Market position
The small business rarely cares about these aspects. Its objectives seldom go beyond survival, sales and profit targets.
Entrepreneurial ventures are the ones that create employment. Both ventures require entrepreneurial action for
start-up, but the small business will tend to stabilise at an early stage and only grow with inflation.
Entrepreneurial Development (Pg 10 – TB)
Page | 3
, Study Notes for MNE 2601 – Larry Mowbray
A model for Entrepreneurial development
Factors that influence the entry of entrepreneurs are:
Entrepreneurial orientation:
Family and roles models
Education
Culture
Work experience
Personal orientation (creativity and innovation, autonomy, risk taking, proactiveness, competitive)
A supportive environment:
Financing
Training and development
The fundamental infrastructure requirements such as roads, electricity, water and communications are vital
factors in entrepreneurial development.
Infrastructure:
A cooperative environment
The domains of Entrepreneurship, Management and Leadership
Not all entrepreneurs are good managers or leaders, but certain management and leadership skills are critical for
entrepreneurial success.
Entrepreneurs are innovative and have the ability to identify business opportunities and grow them into businesses by
applying the necessary resources. Once established, the business needs to be managed and the role of the
entrepreneur then changes to that of a manager, which includes functions such as planning, organising, leadership
and control.
The various business functions also have to be managed; these functions include marketing, purchasing, production,
human resources, administration, public relations and finance.
Success factors of Entrepreneurs
Entrepreneurial Factors Managerial Factors
Creativity and Innovation Planning – systematic approach
Risk orientated – calculated risks Knowledge of competitors
Leadership Mainly market orientated
Good human relations Client service
Positive attitude High – Quality work
Perseverance Financial insight and management
Commitment Business knowledge and skills
The use of experts
Page | 4
