1. INTRODUCTION TO ENTREPRENEURSHIP
A Definition of Entrepreneurship
The concept of entrepreneurship has a wide range of meanings. On the one
extreme an entrepreneur is a person of very high aptitude who pioneers change, on
the other extreme of definitions, anyone who wants to work for himself or herself is
considered to be an entrepreneur.
The word entrepreneur originates from the French word, entreprendre, which
means "to undertake." In a business context, it means to start a business. The
Merriam-Webster Dictionary presents the definition of an entrepreneur as one who
organizes, manages, and assumes the risks of a business or enterprise.
Schumpeter's View of Entrepreneurship
Austrian economist Joseph Schumpeter 's definition of entrepreneurship placed an
emphasis on innovation, such as:
new products
new production methods
new markets
new forms of organization
Wealth is created when such innovation results in new demand. From this
viewpoint, one can define the function of the entrepreneur as one of combining
various input factors in an innovative manner to generate value to the customer
with the hope that this value will exceed the cost of the input factors, thus
generating superior returns that result in the creation of wealth.
Entrepreneurship vs. Small Business
Many people use the terms "entrepreneur" and "small business owner"
synonymously. While they may have much in common, there are significant

2. differences between the entrepreneurial venture and the small business.
Entrepreneurial ventures differ from small businesses in these ways:
Amount of wealth creation - rather than simply generating an income
stream that replaces traditional employment, a successful entrepreneurial
venture creates substantial wealth, typically in excess of several million
dollars of profit.
Speed of wealth creation - while a successful small business can generate
several million dollars of profit over a lifetime, entrepreneurial wealth
creation often is rapid; for example, within 5 years.
Risk - the risk of an entrepreneurial venture must be high; otherwise, with the
incentive of sure profits many entrepreneurs would be pursuing the idea and the
opportunity no longer would exist.
Innovation - entrepreneurship often involves substantial innovation beyond what a
small business might exhibit. This innovation gives the venture the competitive
advantage that results in wealth creation. The innovation may be in the product or
service itself, or in the business processes used to deliver it.
Entrepreneur
A person who is able to identify business opportunities and implement actions to
maximize on the opportunities. An entrepreneur initiates enterprise creation,
undertakes risks, and manages resources to establish and operate a business
enterprise that is capable of self-sustainance.
Definition According To J.B. Say
According to a French economist, J. B. Say, an entrepreneur is a person who shifts
economic resources out of an area of lower productivity into an area of higher
productivity and greater yield.
Entrepreneur In Developing Economies
In the case of a developing economy like ours (Kenya) the concept of an

3. entrepreneur is understood differently. An entrepreneur in a developing economy is
one who starts an industry (old or new), undertakes risks, bares uncertainities and
also performs the managerial functions of decision-making and co-ordinating.
He also puts new processes based on technological research into operation.
He is called an entrepreneur even if he imitates any techniques of production from
a developed economy.
The term entrepreneur has now been attributed to all small industrialists, traders
and agriculturalists. Hence, all people who are gainfully engaged in work of
manufacturing, distribution or service in other sectors are called entrepreneurs.
The entrepreneur can be considered as the fourth factor of enterprise. The
enterprise is the basic unit of an economic organisation. It produces goods and
services worth more than the resources used. Enterprise is an undertaking,
especially one which involves four factors, land, labour, capital and now the
entrepreneur. It involves the willingness to assume risks in undertaking an
economic activity.
image
It also involves innovation, risk taking, and decision making. Enterpreneurs are the
persons who start new enterprises. The entrepreneur and enterprise are
linked as the success of an enterprise depends on the entrepreneur.
Intrapreneur
This is an employed staff e.g manager who innovates for the company and takes
risks only on behalf of the employer. He is therefore an intra company
entrepreneur for whom the term intrapreneur is coined. Intrapraneurs are,
therefore, the main entrepreneurs in large companies who innovate and take risks
on behalf of their employer.
These are creative people usually working together as teams, who function as

4. entrepreneurs within corporations. The idea is to use a company‟s existing
resources such as human, financial and physical resources to launch new products
and gain more profit.
Intrapreneurship
This is the development within a large co-operation of internal markets and
relatively small autonomous business units producing products, services or
technologies that employ the firms‟ resources in a unique way. It gives the
managers of the co-operation the freedom to take initiatives and try new ideas. It
is entrepreneurship within an existing business.
ENTREPRENEURSHIP AND INNOVATION
Creativity is the ability to generate ideas while innovativeness is the ability to
implement the appropriate ideas. An entrepreneur is expected to be creative and
innovative so as to be able to solve problems, cope with business challenges, plan
and implement activities successfully.
An entrepreneurs innovativeness is reflected in the following ways:
Initiating new ideas
Initiative is the ability to start acting on an idea. Entrepreneurs are crusaders of
new ideas. They do not wait for conditions to be perfect to act on a new idea.
They act on them and solve obstacles and difficulties as they arise. As a result an
entrepreneur creates an advantage over their competitors.
Searching for new information
An entrepreneur is always open for information which facilitates the generation of
new ideas for the business.

5. Translating ideas and information into a business venture
Excellent ideas and information are not enough. An “average” idea acted upon and
developed is far better than a “very good” idea that dies because it is not followed
up. Entrepreneurs are action-oriented and translate good ideas to actions.
Inquisitiveness
An entrepreneur is always curious to know what is happening in the business
environment. This ability of being inquisitive and sensitive to the environment
upgrades the entrepreneur‟s level of thinking and approach to business problems.
Perseverance
Entrepreneurs do not give in to failure. Rather, they seek out the faults and
weakness and then correct them. They persevere in their effort to overcome
problems and setbacks and eventually win.
Removing mental blocks and acceptance
Mental blocks and acceptance are traits that inhibit creativity and innovativeness.
Some of these are traditional methods and beliefs. An entrepreneur has the ability
to remove these barriers and encourage clear thinking and independence in his or
her venture.
ENTREPRENEURIAL CONTRIBUTION TO ECONOMIC DEVELOPMENT
Utilization of Local Resources
Local resources, some of which would be otherwise declared useless, are put to
more gainful use. The value of the resources is improved. For example, the
conversion of waste products such as nylon papers to make plastic posts,
bottletops from used bottles to make door curtains, sisal fibre to make the world‟s
famous “ciondo” etc.

6. Promotion of Technology
Entrepreneurs are very creative hence they contribute to the utilization and
development of technology. For example, the development of the energy saving
jiko, wheel chairs, washing machines, vegetable and fruit cutting machines,
charcoal refrigerators etc.
Capital Formation
Entrepreneurs help in the creation of wealth for the country through job creation (
as employees save their salaries and wages through the banking system and other
systems, they contribute to capital formation). As the entrepreneurs pay tax and
save their earnings they too directly contribute to capital formation.
Creation Of Employment Opportunities
Entrepreneurs help in solving the unemployment problem. Majority of indigenous
Kenyan entrepreneurs are in Small Scale and Jua Kali Sector which is a major
employer in the country.
Promotion of an Entrepreneurial Culture
By portraying successful images, entrepreneurs become models to the upcoming
Kenyan generation. A country which embraces entrepreneurial culture is bound to
be economically stable.
Export Promotion
Many products manufactured by the Kenyan Jua Kali/Small Enterprise sector find
their way to foreign markets and in return Kenyan entrepreneurs identify foreign
markets. Through these activities, entrepreneurs are able to earn the country
foreign exchange.

7. Favourable Balance of Payment
The improvement of the Jua Kali Sector has seen a reduction in the rate of loss
through import only. There is now a balance between the import and export
business.
The rate of improvement of industries in Kenya has gone up as a result of an
improvement in the Jua Kali and Small Scale Enterprises sector.
Improved Marketing of Locally Produced Products
The improvement in the Jua Kali sector has resulted in an improvement in the
internal and external markets. With the current competition, every business is
compelled to produce quality products/services and aggressively market the same.
Improved Infrastructure
Creation of businesses leads to improved cities and towns which in turn result in
improvement of roads, banking services, telephone network, electricity etc.
Promotion of Talent and Hobbies
The Jua Kali and Small Scale Enterprise Sector encourages young people to exploit
their talents.
Improved Growth In Gross Domestic Product
There is now favourable trade internally and this has seen an increase in economic
growth.
Self-reliance
Entrepreneurs enable citizens to survive comfortably without too much borrowing.
ENTREPRENEURSHIP AND SELF-EMPLOYMENT

8. This is a state in which a person puts his effort in a business or an activity that
belongs to him/her. He or she works independently and earns a living from it.
An entrepreneur is one who recognises an opportunity and takes the risks as a
business owner of providing a needed product or service for which an adequate
reward (profit) is realised. Thus both risk and profit are involved.
These descriptions both fit entrepreneurship and self-employment so they are one
and the same, although entrepreneurship is a more serious and deliberate level of
self-employment.
Factors To Consider Before Going Into Self-employment
Business Idea
Skills (Technical/Managerial)
Market
Capital (Opening, Working or Long-term)
Machinery (Technology)
Raw materials
Location (Strategic)
Legal Issues
Competition
REASONS FOR SELF-EMPLOYMENT
Need to improve personal income
Besides the inability to secure any type of employment this is the most basic
reason which causes many low income earners to directly embark on business by
way of self employment. Inflation often impairs the ability of low income earners to
afford basic necessities of life to an extent they have to look for alternative ways of
ensuring survival, and this may lead them to set up small
business.

9. Inability to secure a desirable job
The number of Kenyans eligible for employment is very high. There are not enough
employment opportunities in the formal sector. The small business sector has the
capacity to create many jobs.
Influence of others
Although many aspiring entrepreneurs make a personal decision to go into business
there are also strong indications that just as many if not more get courage to take
the plunge as a result of influence or inspiration gained from close associates such
as friends or relatives already in business.
To fulfil a life long ambition
There are those people in society whose ultimate goal is to go into business at
some defined point life no matter how attractive wage employment might seem.
These people are usually highly motivated internally and do not need extrinsic
motivators to go into business. They are often high achievers who aim for self
fulfilment which comes from doing something unique.
To seek more independence
These are people who prefer to be introduced to a task without being led every
step required for the accomplishment of the task. They like to be left alone to think
and develop their own initiative. When guided closely they feel belittled, frustrated
and impatient. Occasionally these people rebel and will often end up in self
employment if the present opportunity does not give them the opportunity to seek
challenge and contribute their own ideas.
Love for adventure
Innovative people thrive on exploring new ideas and opportunities even if the
outcome might be uncertain and risky. They derive satisfaction from the thrills that

10. arise from a mixture of success and uncertainity.
Dissatisfaction with wage employment
This may be as a result of ,
poor prospects of career advancement
delayed promotions
lack of recognition or appreciation of special accomplishments
poor terms of service
unsatisfactory working conditions
pending redundancy
Favourable environment
These include
appropriate incentives eg access to credit facilities
laws governing small enterprise creation
access to raw materials and machinery
good infrastructure eg roads telephone networks electricity
inexpensive cost of labour
CHARACTERISTICS OF ENTREPRENEURS
Introduction
M. M. P. AKhouri, formerly Executive Director, National Institute for
Entrepreneurship and Small Business Development (NIESBUD), New Delhi,
describes an entrepreneur in words that clearly bring out the characteristics of an
entrepreneur. He describes entrepreneur “as a character who combines
innovativeness, readiness to take risk, sensing opportunities, identifying and
mobilizing potential resources, concerns for excellence and who is persistent in
achieving the goal.”

11. Characteristics
1. An eye for opportunity: Many entrepreneurs start by finding a need and
quickly satisfying it. They are always alert to opportunities. They are very
much quick to see and grab opportunities. They plan intellectually and
anticipate carefully how to achieve their goals in realizing an opportunity.
2. Independence: Even though most entrepreneurs know how to work within
the framework for the sake of profits, they enjoy being their own boss.
They like doing things their own way. The characteristics of independence
and the sense of determination are the drives that make anentrepreneur
start their own business. In a way, their own business fulfills their need for
independence.
3. An appetite for hardwork: Most entrepreneurs start out working long,
hard, hours with little play. Entrepreneurs are always at work even when
other people have stopped. They are persistent and strongly believe that
working hard will help them attain their goals. They hence focus on the
end result.
4. Self-confidence: Entrepreneurs must demonstrate extreme selfconfidence
in order to cope with all the risks of operating their own business. Most
successful entrepreneurs are confident of achieving realistic and
challenging goals. They get into business or industry with a high level of
self-confidence. This, couples with a sense of effectiveness ultimately
contribute to the success of the venture.
5. Discipline: Successful entrepreneurs resist the temptation to do what is
unimportant or the easiest but have the ability to think through what is
the most essential. Entrepreneurs are economically efficient, do not like to
waste time and they like to see work completed. They use discipline as a
guide to their destination.

12. 6. Judgement: Successful entrepreneurs have the ability to think quickly and
make a wise decision. This is possible because they have a plan, they have
an economic goal, they know what they want and they know what they
can do.
Entrepreneurs are unaffected by personal likes and dislikes. They stand
beyond these types of prejudices as they are realistic in their approach. At
the time of their need they select experts rather than friends and relatives
to assist them. They usually avoid emotional and sensitive attitude
towards their business or problem.
7. Ability to accept change: Change occurs frequently when you own your
own business, the entrepreneur thrives on changes and their business
grow. An entrepreneur may need to change his/her plans in order to help
the business grow. Entrepreneurs look at many solutions to their
problems. They realize that other people may know how to do something
better. Entrepreneurs can choose the best way to do something, even if it
is different from how they want to do it.
8. Make stress work for them: On the roller coaster to business success, the
entrepreneur often copes by focusing on the end result and not the
process of getting there. Entrepreneurs are capable of working for long
hours and solving different complexities at the same time. As the captain
of an industry or an enterprise, an entrepreneur faces a number of
problems and in right moment he takes right decisions which may involve
physical as well as mental stress.
9. Need to achieve: Although they keep an “eye” on profit, this is often
secondary to the drive toward personal success. Entrepreneurs have
strong desire to achieve higher goals. Their inner self motivates their
behaviour towards high achievement. To an entrepreneur, winning is
achievement.

13. 10. Focus on profits: Successful entrepreneurs always have the profit
margin in sight and know that their business success is measured by
profits.
11. Risk-bearing: Entrepreneurs are the persons who take decisions under
uncertainty and thus they are willing to take risk, but they never gamble
with the results. They choose moderate risk rather than play wild
gamble.They, therefore, undertake calculated risk which is high enough to
be exciting, but with a fairly reasonable chance to win.
12. Locus of control: Closely consistent with McClelland‟s theory of need for
achievement, is the belief in internal locus of control. According to Rotter‟s
locus of control theory, an individual perceives the outcome of an event as
being either within or beyond his personal control. Entrepreneurs believe
in their own ability to control the consequences of their endeavour by
influencing their socio-economic environment rather than leave everything
to luck. They strongly believe that they can govern and shape their own
destiny.
13. Creative and Innovators: Successful entrepreneurs are innovators.
They constantly put their efforts in introducing new products, new method
of production, opening new markets and reorganizing the enterprise. They
always try not to be satisfied with conventional and routine way of doing
things, but always think of how they can do them in a better way.
14. Leadership: Entrepreneurs should possess the quality of leadership.
Leadership is the ability to exert interpersonal influence by means of
communication towards the achievement of goals. Entrepreneurs as
leaders should provide the necessary spark of motivation by guiding,
inspiring, assisting and directing the members of the group for
achievement of unity of action, efforts and purpose. According to George
R. Terry: “Leadership is the activity of influencing people of strive willingly
for group objectives”. Thus, entrepreneur, as the leader of the group, can

14. ensure high performance by creating a well-to-do environment among
others. They must have the capability to arrive at prompt and correct
direction and win the confidence of their subordinates. Being the leader of
the enterprise, they should possess the following characteristics:
o Existence of followers
o Assumption of responsibility
o Empathy conduct
o Exemplary conduct
o Developing teamwork
o Common objectivity
o Facilitating change
o Building morale
o Maintenance of discipline
o Active participation
15. Hence, entrepreneurs by their own leadership styles and behaviour
reduce the problems with careful listening and proper handling of
situations. Good administrative work depends upon effective leadership of
the entrepreneur.
16. Ability to mobilize resources: Entrepreneurs must have the ability to
marshal all the inputs to obtain the end product. They have to mobilize
6Ms, i.e. Man, Money, Material, Machinery, Market and Method effectively
to realize the final product as entrepreneurship is a function of gap filling
and input completing.
17.
Conclusion
Entrepreneurs have many qualities that help them their businesses
successful. However, an entrepreneur does not have to possess all the
qualities. In that case he has either to learn or hire the services of those
who possess the qualities he does not have.

15. GENERATING A BUSINESS IDEA
A business idea is a prerequisite for a person venturing into business. It could be
defined as an entrepreneurs understanding of:
1. Self
2. Market and
3. Product or service
which helps to generate ideas and determine which idea would be best to develop
into a business opportunity.
Generating business ideas requires entrepreneurs to be constantly aware of their
environment and economic needs of people living in that environment.
It is important that entrepreneurs are original in their ideas to be able to follow
them through to success. They must avoid the “Me too” syndrome.
SOURCES OF BUSINESS IDEA
Business ideas are all around you. Some business ideas come from a careful
analysis of market trends and consumer needs; others come from serendipity. If
you are interested in starting a business, but don't know what product or service
you might sell, exploring these ways of getting business ideas flowing will help you
choose.
Examine your own skill set for business ideas.
Do you have a talent or proven track record that could become the basis of a
profitable business? To find a viable business idea, ask yourself, "What have I
done? What can I do? Will people be willing to pay for my products or services?"
Keep up with current events and be ready to take advantage of business
opportunities.
If you read or watch the news regularly with the conscious intent of finding
business ideas, you'll be amazed at how many business opportunities your brain

16. generates. Keeping up with current events will help you identify market trends,
new fads, industry news - and sometimes just new ideas that have business
possibilities.
For instance, African dishes have become very popular with the Kenyan people and
there are now entrepreneurs who are running successful restaurants specializing in
African dishes. One such restaurant is „amaica‟ restaurant, Luyha name for cooking
place situated in Nairobi and which is a popular eating place even for foreigners
visiting Kenya because of its delicious African dishes.
Invent a new product or service.
Think back 30 years ago. Nobody ever appreciated the adverse effect on using
kerosene lanterns in rural African homes. But one young Kenyan, Evans Wadongo,
whose eye sight has been affected to date because of using kerosene lanterns
during his initial years of schooling, has seen the need to save other Kenyans for
suffering the same effects by inventing a solar-powered LED lantern
which he hopes will ultimately improve education and reduce poverty and hunger
among the rural population of Kenya.
Look around and ask yourself, "How could this situation be improved?" Ask people
about additional services that they'd like to see. Focus on a particular target
market and brainstorm business ideas for services that that group would be
interested in.
Add value to an existing product.
The difference between raw wood and finished entertainment unit is a good
example of putting a product through an additional process which increases its
value, but additional processes are not the only way value can be added. You might
also add services, or combine the product with other products. For instance, a local
farm which sells produce also offers a vegetable delivery
service; for a fee, consumers can have a box of fresh vegetables delivered to their

17. door each week.
What business ideas can you develop along these lines? Focus on what products
you might buy and what you might do to them or with them to create a profitable
business.
Really. Once you develop an entrepreneurial frame of mind, you'll see that finding
business ideas is just as easy as finding leaves on trees.
Investigate other markets.
Some business ideas aren't suited to local consumption - but appeal greatly to a
foreign market. Kilifi residents for instance, think that the chameleon is one urgly
scary creature, but one entrepreneur discovered that there was a good market for
this creature abroad and is now doing booming business by harvesting these
creatures and exporting them to the foreign market. Finding out about other
cultures and investigating other market opportunities is an excellent way to find
business ideas.
Improve an existing product or service.
A few years ago, the baby coat for example, was a simple woven basket like
product which had only space for the baby to sleep. The current baby coat is a
great improvement on this as it is now wooden or metal, lifted up, it wide, covered
by a net to keep away flies and mosquitoes, and has a place where the baby‟s
diaper can be changed. This change has been necessitated by the
modern mother‟s change in taste.
There are very few products (or services) that can't be improved. Start generating
business ideas by looking at the products and services you use and brainstorming
ideas as to how they could be better.
Get on the bandwagon.
Sometimes markets surge for no apparent reason; masses of people suddenly

18. "want" something, and the resulting demand can't be immediately met. For
example, during the Obama campaign fo the presidency of American, there was an
insatiable demand among some Kenyans for anything with the portrait of President
Obama or on which his name was printed, be it a cap, T-shirt, wristband, head
band, etc and many entrepreneurs, especially in Kisumu capitalized on this
business idea.
Look at existing businesses and the products and services they offer and determine
if there's a need for more of those products or services. If there is, develop
business ideas to fit the market gap.
Are you brimming with ideas for starting a business now? Write your business ideas
down. Let them swirl around in your head and coalesce. And keep an open mind
and continue to assess everything you read and hear from an entrepreneurial point
of view. You don't want to run with the first business idea you think of; you want to
discover the idea that's best suited to your skills and desires. Dream, think, plan -
and you'll be ready to transform that business idea into the business you've always
wanted.
Other Sources:
Newspapers/magazines
Exhibitions/shows
Hobbies
Interests
Through surveys
Brainstorming
Matching skills with opportunities and
Social interaction and employment