INTRODUCTION TO ENTREPRENEURSHIP
Introduction
Small scale enterprises play a major role in the development of a country’ economy. Small
enterprises create many jobs, provide a variety of goods and services, contribute a lot of revenue
and promote the use of locally available resources.
This sub-module unit introduces the concept of entrepreneurship and its importance in the
promotion of the national development of a country.
Specific Objectives
By the end of the sub-module unit, the trainee should be able to:
Define various terms used in entrepreneurship.
Explain the differences between self and salaried employment
Explain the contribution of employment towards national development
Content
Terms used in entrepreneurship
i) Entrepreneurship
It is the process of scanning the environment in order to identify a business opportunity,
gathering resources with the aim of establishing a profit making enterprise, under conditions of
risk. According to (Hisrich, 2008). It is the process of creating something new with value by
devoting the necessary time and effort, assuming the personal or company, financial, psychic,
and social risks, and receiving the resulting rewards of monetary and personal satisfaction and
independence.
ii) Entrepreneur
This is a person who is able to identify a business opportunity within an environment, gather the
necessary resources and take reasonable risk to start a successful business enterprise.
An entrepreneur is also defined as an individual who establishes and manages a business for the
principal purpose of growth and development. The entrepreneur is characterized principally by
innovative behavior and will employ strategic management practices in a business
iii) Enterprise
It is a business organisation that provides goods and services. It is a business concern whose
purpose is profit and has growth potential.
iv) Business
It refers to any activity under taken by an individual or organisation for the purpose of
production and/or provision of goods and services to make profit.
v) Creativity
Creativity is the ability to bring something new into existence, often through imaginative skills.
It can also be defined as originality or progressiveness.
1
,vi) Innovation
It is the process of doing things in a new way. Having a new use for old things is also innovation.
To some people innovation refers to “an end product, idea, practice or product perceived as new
by the individual” (Rogers and Shoemaker, 1971)
Difference between self employment and salaried employment
Self employment
Self employment is a situation in which a person starts and operates a business enterprise. Since
entrepreneurial skills drive people into self employment, entrepreneurship training is therefore
expected to prepare trainees for starting and operating their enterprises effectively.
Self employment does not only improve the standard of living of an entrepreneur, but also
enables him/her to become an active contributor to the social and economic activities a nation.
Self employment is a situation in which individuals create and run/operate their own income
generating activities.
Advantages of entrepreneurs in self employment
There are several benefits an entrepreneur may derive from self employment. These include the
following:
i) Personal satisfaction
Personal satisfaction is the feeling of accomplishment that one derives from self employment
ii) Independence:
This means freedom from the control of others. One is able to use one’s knowledge, skills and
abilities. There are no external pressures, interference and orders, which one must follow. Self
employed people have more freedom of action compared to employed people.
iii) Income
This is the amount of money left after all expenses have been paid. By being self employed, one
is able to generate an income for oneself.
iv) Job security
This is the assurance of continued employment and income. It does not have the mechanism of
separation such as lying off, firing or retiring.
v) Status:
This is a person’s social rank or position in society. One earns recognition from members of the
society.
Disadvantages
i) Possible loss of invested capital.
Invested capital refers to the entrepreneurs’ money used in starting and operating the enterprise.
If a business succeeds the profits are high, if it fails, the invested capital is lost.
ii) Uncertain income
Earnings from the business are unpredictable therefore there is no guaranteed amount of income
from the business.
iii) Long working hours
2
,Entrepreneurs shoulder all the responsibilities of the business thus spending most of their time
attending to the business requirements.
iv) Competition
Entrepreneurs commonly operate small scale businesses that are unable to compete favourably
with large enterprises.
v) Lack of skilled personnel
Small businesses are unable to employ and retain qualified personnel due to their limited income.
Salaried employment
Xc `Salaried employment is a process in which an individual is hired for a period of time,
which may range from a few months to a few years, and is paid a given amount of money as
salary or wages for the work done.
The merits and demerits of salaried employment are varied and largely depend on a person’s
qualification, experience and specialisation area. The merits and demerits are also determined by
the magnitude of growth, investment ability, and profit and government support of a given
organisation.
Defined working hours, guaranteed income, delegation of duties and specialisation are some of
the main advantages of being in salaried employment. However, salaried employment is affected
largely by organisational elements such as change of management, especially where new
management introduces new policies, rules, conditions of employment and other statutory
requirements to the organisation. Job security is not guaranteed and personal satisfaction and
motivation is not wholly experienced.
Importance of entrepreneurship in national development
Entrepreneurship contributes greatly to the economy of the country by providing an impetus for
economic growth. The following are some of the key contributions of entrepreneurship to
national development.
i) Creation of employment: An entrepreneur does not only create employment for himself
but also for others. Most jobs in many economies come from the entrepreneurial
activities.
ii) Utilisation of resources; These include proper and adequate utilisation of local labour
iii) Improvement of standard of living. Entrepreneurship raises the standards of living of the
people of a nation by providing goods and services. Similarly, it helps in provision of the
basic needs of society in areas which large firms cannot reach.
iv) Generation of government revenue – This is revenue for the government in form of
licence fees, taxes and through promotion of national productivity by contributing to the
gross domestic product (GDP). They do this by selling products and services thus
reducing the expenditure for imports.
v) Innovation of technological development – This is done through utilisation of technology
which is locally available.
3
, vi) Conservation of foreign exchange: The use of foreign exchange can be minimised by
offering goods produced locally in place of imported goods.
Suggested learning activities
i) Present various ways in which entrepreneurship contributes towards national development
ii) Demonstrate various ways in which the employer and the employee benefit from
entrepreneurship development.
iii) Identify different entrepreneurial activities within your locality and explain their benefits to
the community
4
Introduction
Small scale enterprises play a major role in the development of a country’ economy. Small
enterprises create many jobs, provide a variety of goods and services, contribute a lot of revenue
and promote the use of locally available resources.
This sub-module unit introduces the concept of entrepreneurship and its importance in the
promotion of the national development of a country.
Specific Objectives
By the end of the sub-module unit, the trainee should be able to:
Define various terms used in entrepreneurship.
Explain the differences between self and salaried employment
Explain the contribution of employment towards national development
Content
Terms used in entrepreneurship
i) Entrepreneurship
It is the process of scanning the environment in order to identify a business opportunity,
gathering resources with the aim of establishing a profit making enterprise, under conditions of
risk. According to (Hisrich, 2008). It is the process of creating something new with value by
devoting the necessary time and effort, assuming the personal or company, financial, psychic,
and social risks, and receiving the resulting rewards of monetary and personal satisfaction and
independence.
ii) Entrepreneur
This is a person who is able to identify a business opportunity within an environment, gather the
necessary resources and take reasonable risk to start a successful business enterprise.
An entrepreneur is also defined as an individual who establishes and manages a business for the
principal purpose of growth and development. The entrepreneur is characterized principally by
innovative behavior and will employ strategic management practices in a business
iii) Enterprise
It is a business organisation that provides goods and services. It is a business concern whose
purpose is profit and has growth potential.
iv) Business
It refers to any activity under taken by an individual or organisation for the purpose of
production and/or provision of goods and services to make profit.
v) Creativity
Creativity is the ability to bring something new into existence, often through imaginative skills.
It can also be defined as originality or progressiveness.
1
,vi) Innovation
It is the process of doing things in a new way. Having a new use for old things is also innovation.
To some people innovation refers to “an end product, idea, practice or product perceived as new
by the individual” (Rogers and Shoemaker, 1971)
Difference between self employment and salaried employment
Self employment
Self employment is a situation in which a person starts and operates a business enterprise. Since
entrepreneurial skills drive people into self employment, entrepreneurship training is therefore
expected to prepare trainees for starting and operating their enterprises effectively.
Self employment does not only improve the standard of living of an entrepreneur, but also
enables him/her to become an active contributor to the social and economic activities a nation.
Self employment is a situation in which individuals create and run/operate their own income
generating activities.
Advantages of entrepreneurs in self employment
There are several benefits an entrepreneur may derive from self employment. These include the
following:
i) Personal satisfaction
Personal satisfaction is the feeling of accomplishment that one derives from self employment
ii) Independence:
This means freedom from the control of others. One is able to use one’s knowledge, skills and
abilities. There are no external pressures, interference and orders, which one must follow. Self
employed people have more freedom of action compared to employed people.
iii) Income
This is the amount of money left after all expenses have been paid. By being self employed, one
is able to generate an income for oneself.
iv) Job security
This is the assurance of continued employment and income. It does not have the mechanism of
separation such as lying off, firing or retiring.
v) Status:
This is a person’s social rank or position in society. One earns recognition from members of the
society.
Disadvantages
i) Possible loss of invested capital.
Invested capital refers to the entrepreneurs’ money used in starting and operating the enterprise.
If a business succeeds the profits are high, if it fails, the invested capital is lost.
ii) Uncertain income
Earnings from the business are unpredictable therefore there is no guaranteed amount of income
from the business.
iii) Long working hours
2
,Entrepreneurs shoulder all the responsibilities of the business thus spending most of their time
attending to the business requirements.
iv) Competition
Entrepreneurs commonly operate small scale businesses that are unable to compete favourably
with large enterprises.
v) Lack of skilled personnel
Small businesses are unable to employ and retain qualified personnel due to their limited income.
Salaried employment
Xc `Salaried employment is a process in which an individual is hired for a period of time,
which may range from a few months to a few years, and is paid a given amount of money as
salary or wages for the work done.
The merits and demerits of salaried employment are varied and largely depend on a person’s
qualification, experience and specialisation area. The merits and demerits are also determined by
the magnitude of growth, investment ability, and profit and government support of a given
organisation.
Defined working hours, guaranteed income, delegation of duties and specialisation are some of
the main advantages of being in salaried employment. However, salaried employment is affected
largely by organisational elements such as change of management, especially where new
management introduces new policies, rules, conditions of employment and other statutory
requirements to the organisation. Job security is not guaranteed and personal satisfaction and
motivation is not wholly experienced.
Importance of entrepreneurship in national development
Entrepreneurship contributes greatly to the economy of the country by providing an impetus for
economic growth. The following are some of the key contributions of entrepreneurship to
national development.
i) Creation of employment: An entrepreneur does not only create employment for himself
but also for others. Most jobs in many economies come from the entrepreneurial
activities.
ii) Utilisation of resources; These include proper and adequate utilisation of local labour
iii) Improvement of standard of living. Entrepreneurship raises the standards of living of the
people of a nation by providing goods and services. Similarly, it helps in provision of the
basic needs of society in areas which large firms cannot reach.
iv) Generation of government revenue – This is revenue for the government in form of
licence fees, taxes and through promotion of national productivity by contributing to the
gross domestic product (GDP). They do this by selling products and services thus
reducing the expenditure for imports.
v) Innovation of technological development – This is done through utilisation of technology
which is locally available.
3
, vi) Conservation of foreign exchange: The use of foreign exchange can be minimised by
offering goods produced locally in place of imported goods.
Suggested learning activities
i) Present various ways in which entrepreneurship contributes towards national development
ii) Demonstrate various ways in which the employer and the employee benefit from
entrepreneurship development.
iii) Identify different entrepreneurial activities within your locality and explain their benefits to
the community
4
