Infolink University

College
Hawassa Campus

Entrepreneurship And
Innovation
By:- Abualem Mengistu (PHD Candidate)
July/2023
Different Definitions of Entrepreneur by Different People:
• Carl: the entrepreneur becomes the CHANGE AGENT
who transforms resource into useful goods and
services.
• J. Schumpeter: the entrepreneur seek "to reform or
revolutionize the pattern of production by exploiting
an invention or, more generally, an untried
technological possibility for producing a new
commodity or producing an old one in a new way, by
opening up a new source of supply of materials or a
new outlet for products. Entrepreneurship essentially
consists in doing things that are not generally done in
the ordinary course of business routine"
Different Definitions of Entrepreneur by Different People:
• Peter Drucker: Entrepreneurs ALLOCATE RESOURCES "to
opportunities rather than to problems."
• Robert Rostald: Entrepreneurship is the dynamic process
of creating incremental wealth.
• David Silver: An entrepreneur is "energetic, single-
minded (not dependant)" person having a mission and
clear vision, he or she intends to create out of this vision
a product or service in a field many have determined is
important to improve the lives of millions."
• David Holt: Entrepreneurs are those who incubate new
ideas, start enterprises based on those ideas, and
provide added value to society based on their
independent initiative.
 History of Entrepreneurship
• The history of entrepreneurship started with
bartering, as people traded goods for other
goods. However, the barter system relied on
each party having something the other party
needed: enter the invention of money.
• Exchanging these goods and services with
others was the birth of entrepreneurship.
History of Entrepreneurship Cont…
The first instances of entrepreneurship centered
on the exchange of goods between ancient
tribal societies. The development of
agricultural skills created the opportunity for
even more entrepreneurship, and this
eventually evolved into more specialized skills
and tasks, from crafting jewelry to making
weapons to crafting tools for working with
crops.
 Role of entrepreneurship for economic
development
• Entrepreneurs are the innovators; they
identify business opportunities, plan to
address market needs, gather resources, and
manage the process of building business.
Entrepreneurs create jobs, transfer technology
to the market and create value, adding
immeasurably to our well being.
Entrepreneurs make unique contributions to a
country's economy.
 Role of entrepreneurship for economic
develop…….
• Using innovations to grow their business, they
provide concrete benefits to the national
economy. In general they play role in reducing
unemployment, stabilizing inflation, normalize
balance of payment and business cycle and so
on.
 Entrepreneurship, creativity and
innovation
• Innovation is the process of entrepreneurship.
Innovation implies action, not just a new idea.
• For an idea to have value, it must be proven
useful or be marketable. Innovation is the
transition of creative idea into a useful
application.
It requires four things to be fulfilled.
1.Analytical planning: - analytically working out the details of
product design or service, to develop marketing (i.e.,
marketing strategy), obtain finance and plan operation.
2.Organizing recourses: - obtaining materials, technology,
human resource and capital.
3.Implementation: - here the plan is changed to reality
where accomplishment in establishing organization,
product design, manufacturing and services are achieved.
4.Commercial application: - it is the stage where creative
idea transforms into application. This commercial
application provides value to customers (utility), reward
for employees (salary), revenue for investors (profit) and
satisfaction for founders.
• Now, it is necessary to see the distinction (difference)
between creativity, invention and innovation.
Creativity is the ability to bring something new into
existence. Here, there is no action to make the idea a
reality. It is the seed that inspires entrepreneurship and
it is the prerequisite to invention.
Invention is the creation of something new, which results in
new knowledge
Innovation is the process of doing new things. It is the
transformation of creative ideas into useful applications,
which results in new products, services or processes.
E.g. Thomas Edison's light bulb was only a curiosity until
he developed an electric system supplying power to
consumers.
 To improve your capacity of generating new ideas:
• copy somebody else's successful idea,
• combine two or more ideas to form a new one,
• solve problems to people,
• find what the competitors are doing,
• develop hobby, build on your skills,
• turn wastes into useful things,
• brainstorm the idea,
• talk and listen to people,
• make lists and play around with,
• look for gaps in the market, and
• find new ways to do things
 The entrepreneurial process has four steps
• Phase 1:
– Identifying and evaluating business opportunity (in view of
risk, competition, market, ...)
• Phase 2:
– Developing business plan
• Phase 3:
– Determining the resources required for business ....
Financial, Human, Operating/material (facilities which
allow people to do their jobs such as buildings, vehicles,
office equipment, machinery, raw materials, etc.)
• Phase 4:
– Managing the enterprise
 Chapter Two
Women entrepreneurship

• Theoretical perspectives and empirical evidence.

• The importance of women’s entrepreneurship is
evident to the business community itself. In
order to achieve the growth potential of the
economy, women need to take a more active role
in the economy, be it as entrepreneurs, or as
workers. As entrepreneurs, women in economy
represent only 10% of the business owners.
• In fact, self-employment and home-based work
have expanded opportunities for women’s
participation in the labor force in recent years,
trends that are characterized by lack of
security, lack of benefits, and low income. This
observation suggests that entrepreneurship
may represent for women an important means
to circumvent unemployment and, in some
countries, a way out of poverty.
 FACTORS INFLUENCING FEMALE
ENTREPRENEURSHIP
• In spite of the growing number of female
entrepreneurs, the share of female
entrepreneurship is still significantly low when
compared to their participation rate. For
example, female entrepreneurs account for
approximately 30 percent of the total number
of entrepreneurs in the Western world,
whereas more than 40 percent of employees
are female.
Challenges Of Women Entrepreneurship

Social-cultural barriers
Economic barriers
Legal barriers
 Chapter Three
Entrepreneurship Competency Development
• Entrepreneurial competencies are defined
as underlying characteristics possessed by a
person, which result in new venture creation.
These characteristics include generic and
specific knowledge, motives, traits, self-
images, social roles, and skills that may or may
not be known to the person.
Marketing and new venture
development
 1. STRATEGIC MARKETING
According to Alfred D. Chandler (1962), he defined strategy as “The
determination of the basic long-term goals and objectives of an
enterprise
and adoption of the course of action and the allocation of
resources necessary for carrying out these goals.”
• Here, we can note that Chandler refers to three aspects:
 Determination of basic long-term goals and objectives.
 Adoption of courses of action to achieve these objectives; and
 Allocation of resources necessary for adopting the course of
action.
• According to William F. Glueck (1972), “A unified, comprehensive
and integrated plan designed to assure that the basic objectives
of the enterprise are achieved.”
• In general, strategy is a game plan that helps achieve the
organizational goals or objectives. Strategy is a means to an end.
The organization can achieve its goals or objectives using different
strategies (game plans). For example, if the goal of the organization
is to increase its market share (sales volume), it should set the
following strategies in order to achieve its goal.
1. Price reduction
2. Increased spending on ads.
3. Increasing the size of sales force.
4. Increasing distribution network/channels
5. Increasing sales promotion.
6. Product differentiation.
• The goal of growth of sales volume (market share) can be achieved
only by increasing expenditure or lowering profit margins per unit.
 strategic marketing planning
(Business strategic planning)
• From very beginning, when an organization is
established, it has to set its mission.
Organizations relate their existence to satisfying
a particular need of the society.
• After formulating its mission statement, the next
step is the SWOT analysis. For SWOT analysis,
the business follows “The business strategic
planning process.
The Business strategic planning process is
as follows:
1. Business mission
2. External Environment (Opportunities and threats) analysis.
3. Internal Environment (strengths and weaknesses) SWOT
4. Goal Formulation analysis
5. strategy formulation
6. Program Formulation
7. Implementation
8. Feed -back and Control.
 1. Business mission

• From very beginning, when an organization is established,

it has to set its mission. Organizations relate their existence
to satisfying a particular need of the society. They do this in
terms of their mission statement. Mission is a statement,
which defines the role that an organization plays in the
society.
• Each business unit needs to define its specific mission
within the broader company mission.
 2. External Environment Analysis
/opportunity & Threat Analysis/.

• Once the business unit has formulated its mission

statement, the business manager needs to
monitor the external and internal environment to
achieve its goals. As far as the external
environment is concerned, a business unit has to
monitor key external macro environment forces
(demographic, economic, technological, political
legal, social/cultural that affect its ability to gain
profits).
 2. External Environment
Analysis /opportunity & Threat
•
Analysis/. Cont…
Opportunities:- A major purpose of environmental
scanning is to discern new marketing opportunities.
• * A marketing opportunity is area of buyer need in
which a company can perform profitably
• Threats:- Some developments in the external
environment represent threats. An environmental
threat is a challenge posed by an unfavorable or
development that would lead, in the absence of
defensive marketing action, to deterioration in sales
or profits.
3. Internal Environment Analysis/ strengths and
weaknesses analysis/

• Each business needs to evaluate its internal

strengths and weaknesses periodically. It can do so
by using a form called a checklist for performing
strengths/ weaknesses analysis. Management or
an outside consultant – reviews the business’s
marketing, finance, manufacturing and
organizational competencies and rates each factor
as a major strength, minor strength, neutral factor,
minor weakness, or major weakness.
 4. Goal formulation

• The overall evaluation of a company’s

strength, weaknesses, opportunities, and
threats is called SWOT analysis. Once the
company has performed its SWOT analysis,
it can proceed to develop specific goals for
planning period. This stage of the business
strategic planning process is called goal
formulation.
 5. Strategy formulation

• Goals indicate what a business unit wants to

achieve. Strategy is a game plan for how to
get there. In other words, goals indicate the
destination to reach, whereas strategy
shows the way to reach the destination.
Every business must tailor a strategy for
achieving its goals.
 6. Program formulation:

• Once the business unit has developed its principal

strategies, it must work out detailed supporting
programs. A program is a broad term, which
includes goals, policies, procedures, rules and steps
to be taken in putting a plan into action. A program
could be major as well as minor. An example of
minor program could be a one-week training
program for supervisory development.
 7. Implementation

• A clear strategy and a well thought –out supporting

program may be useless if the firm fails to implement
them carefully. A good strategy coupled with
supporting programs is only one element of business
success. According to McKinsey’s 7-S framework, the
hardware of success include strategy, structure, and
systems in a company while the software of success
include style, skills, staff, and shared values in a
company.
 8. Feedback and Control

• As it implements its strategy, the firm needs

to track the results and monitor new
developments in the internal and external
environment. Some environments are fairly
stable from year to year. Other environments
evolve very slowly in a fairly predictable way.
Still other environments change rapidly in
major and unpredictable ways. Nevertheless,
the company can count on thing: the
 2. The Marketing Perspective
• Marketing is about making money from satisfied
customers; without satisfied customers there can be no
more future for any commercial organization, though,
marketing is an attitude of mind about satisfying the
customer rather than a set of sales techniques, and to
understand the customer you need to take what is called
a marketing perspective.
• The customer is the buyer of the product or service.
This person may not be clam person as the consumer, or
user of the product or service. Understanding customer
and consumer needs and motivations in central to
marketing for small firms.
 Cont….
• In marketing terms customers buy benefits. They do
not buy features or characteristics of a product or
service. We do not buy oil for our cars because we
like it, but because it makes the engine run smoothly,
extends the engine’s life and reduces our repair bills.
What is more, the benefits that customer’s value
may be different to those valued by the consumers of
a product or service.
 The Marketing Mix
• Each element of the marketing mix is
unique for every business. Indeed the
development of such a unique mix is the
aim of the marketing strategy of the
business. Marketing mix consists of
product, price, promotion and place
(distribution) or 4P’S.
 1. Product (Service)

• This is often the heart of the marketing mix.

However, the product or service must not be a
straight jacket constraining that mix. It must be
flexible and capable of adoption to the
changing needs of the customer.
• It is always important to know why customers
buy products and what particular features and
benefits they value most. A particular product
or service might include:- design and technical
features, performance, quality, range (size,
color etc), maintenance and running cost,
safety, before and after sale, product
availability and image (fashion).
 2. Price
• Pricing is of course, an important part of the marketing
mix. Too many small firms, however, compete primarily
on price simply because the other elements in the
marketing mix are insufficiently different from their
competitors. However, price is more usually a barrier to
sales rather than a positive inducement.
• The price charged for a particular product or service must
to reflect the value of the ‘package of benefits, to the
customer, often the value to the customer for a product
or service can be different in different circumstances.
• Many firms, of all sizes, use a ‘cost-plus’ pricing formula
with this approach you simply add up all the costs and
add on a margin. The option of pricing high or ‘skimming
may seem strange at first, Higher prices implies lower
volume of sales, unless you are able to offer something
that is uniquely different from the competition and highly
valued by the customer.
 3. Promotion
• This is concerned with how well a firm
communicates its sales message to existing and
potential customers. When products or services
are very similar, this is often one of the few ways
that they can differentiated from the competition.
• There are many ways of promoting a business.
When a company promotes its products and
services directly to potential customers it is called
direct promotion. Often this is undertaken through
the sales force. It includes:- direct face-to-face
selling, telephone selling, direct mail, exhibitions
and special demonstrations but this method is
expensive.
 4. Place (distribution)
• The place element of the marketing mix is about getting the
goods or services to the right place at the right time for the
customer. For a shop that means location, frequently the most
important element of the mix for them. For other business it is
about physical distribution (moving goods) and distribution
channels (which outlets to use).
• Distribution channels is concerned with the out-lets you use
for selling to customers. Ideally, you would seek to have
channels that give you maximum control at the most
reasonable cost. However, remember that the choice of
distribution channel could create a very real competitive
advantage for you.
 Marketing research
• Marketing Research: is an indispensable marketing tool for
assessing buyer wants and behavior and market size.
Marketing research is a formalized means of acquiring
information to assist in the making of marketing decisions.
• marketing research as the function that links the consumer,
customer, and public to the marketer through information- used
to identify and define marketing opportunities and problems;
generate, refine, and evaluate marketing actions; monitor
marketing performance; and improve understanding of marketing
as a process.
• Marketing research is the systematic design, collection, analysis,
and reporting of data relevant to specific marketing situation
facing an organization.
• Market research is the first activity of marketing management
process.
 Methods of collecting market information

• Personal interviews – these are for collecting qualitative data

particularly on attitudes, behavior and even the language the
customer might use. However, interviews are time consuming
and expensive.
• Telephone interview – there are increasingly being used simply
because they are for cheaper than personal interviews.
However, the sample may be biased by considering only
telephone owners and it is difficult to contain ‘body language’
that is possible on interview.
• Postal questionnaires – these are quick & low cost. However, it
is easy for the respondent to refuse or forget to respond.
Questionnaires are used to collect simple, factual information.
Developing marketing strategy for business organization includes:

• 1. Target market selection strategy

• 2. Product positioning strategy
• 3. Price setting strategy
• 4. Distributions channels strategy
• 5. Promotion strategy
 1. Target market selection strategy

Strategic decisions involving target markets includes:

I. Follow mass marketing approach:-
• This is the method of producing a product in bulk amount and
supply to the whole market. This approach sometimes does
not work for small business enterprises, as they do not have
financial strength to manufacture goods and services in bulk.
II. Concentrate only on the portion of the market:-
• In this case a business organization produces a limited amount
of product and supplies it to a specified market segment.
Compared with mass marketing, this strategy does not require
large amount of money and that is why most small business
enterprises prefer this strategies.
 2. Product positioning strategy:-

• Following production, the product will be introduced or

offered to the market for the first time. At this stage, the
product may not be known and wanted by the customer.
Thus, the product should be promoted to get the attention of
customers. In short, business enterprises should have clear
cut product positioning strategy that makes the product alive
and profitable, and attract, satisfy and retain customers at
different stages of product life cycle.
 3. Price setting strategy:-

• The third component of business enterprise strategy is

price setting. Once the product is positioned, the next
step is to set the price based on different price setting
strategies
1. Market Skimming Pricing
 it is setting a high price for a new product to skim
maximum revenue layer by layer from the segments
II. Market Penetration-Pricing
setting a low price for a new product in order to penetrate
the market quickly and deeply to attract a large number
of buyers quickly and win a large market share.
 4. Distribution channel strategy:-

• It is clear that, a product of any enterprises

does not have value unless it is taken to the
market and reached customers. Thus, business
enterprises should design and exercise a
distribution their product, services and their
enterprise.
 5. Promotion strategy
There are two strategies
push and pull strategies

Push: it involves pushing the product through

distribution channels to final consumers

Pull strategy: producer directs its marketing

activities (primarily advertising and consumer
promotion) toward the final consumer to induce
them to buy the product
Managing Growth and Transition
 Introduction
• The growth of small business is similar to that of a
human being who passes through the stages of
infancy, childhood, adulthood and old age. An
enterprise may be considered growing when
there is a permanent increase in its sales turn
over, assets, volume of output, etc. Business
growth is a natural and on -going process. Many
business firms started small and have become big
through continuous growth. But growth may be
restricted by constraints of market demand,
finance, technology, management skills etc.
• a successful new entry provides the
opportunity for the entrepreneur to grow
his/her business. For example, introducing a
new product into an existing market provides
the opportunity to take market share from
competitors; entry into a new market provides
the opportunity to service a new group of
customers, and a new organization has a
chance to make and built upon its first sales.
TYPES OF GROWTH STARTEGIES

• The main strategies for growth are as follows

1. Expansion
2. Diversification
3. Mergers and
4. Sub – contracting
 Expansion
• Expansion and diversification are forms of internal growth.
Internal growth implies increase in the scale of operations
without joining hands to the other firms. The firm expands
its product market scope.
• Expansion may take place in the following forms;
• Market penetration- is increasing the sale of existing
products in the existing markets.
• Market development- is exploring new markets for
existing products.
• Product development- is developing new or modified
products for sale in the existing markets.
 Diversification
• Diversification is the process of entry in the field of
business which is new to an enterprise either in terms
of markets or technology or both.
Diversification is suitable for the following reasons
• When the firm can’t attain its growth strategies by
expansion alone.
• When diversification promises greater profitability
than expansion.
• When the financial resources of the firm are much or
excess of the requirement of expansion.
 Types of Diversification
• There are four types of diversification
– Horizontal integration
– Vertical integration:- backward and forward
External Growth Strategy (Joint Ventures,
Mergers, or Takeovers)

• External growth occurs when two or more

firms combine together in one firm. It is also
called integrate growth strategy.
 Joint Ventures
• When two or more independent firms together
establish a new enterprise, contribute to the
total equity capital and participate in its
business operations, it is known as a joint
venture. A joint venture is a temporary
partnership or consortium between two or
more companies for a specified purpose. Firms
within a country as well as firms in different
countries may participate in a joint venture.
 Merger
• Merger is an external growth strategy. A
merger means a combination of two or more
firms into one. It may occur in two ways:
• Takeover or acquisition of one company by
another(absorption), and
• Creation of new company by complete
consolidation of two or more units
 Sub-Contracting
• Sub contracting hiring another firm to perform
some of the manufacturing process or to give sub
assemblies that will be included in the finished
product. Such contracting is also used t describe
contractual arrangements between government
agencies and industrial concerns. For example,
civic authorities enter into sub-contracts with
business concerns. Under such contract business
firms carry out the specified work on roads, parks,
etc. civic authorities in exchanging of specified fee.