MNE2601_Detailed Summary.

Introduction To Entrepreneurship And Small Business Management. 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 – (1950) From an Economic perspective Cantillon, Say, Schumpter 2. Who entrepreneurs are 1960 – (1980) From a Behavioural perspective Weber, McClelland, Rotter, De Vries 3. What entrepreneurs do 1980 – From a Management science perspective (finance, marketing, operations, human resources) Drucker, Mintzberg 4. What support is needed by entrepreneurs 1985 – From a Social perspective, including economists, geographers and sociologists. Gartner, Welsh, Bygrave, Reynold 5. What entrepreneurial activities are, and what competencies are required to perform them 1990 – From an Entrepreneurial perspective Timmons, Vesper, Brockhaus ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 2 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. ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 3 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. 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 ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 4 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) 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 ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 5 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 The Entrepreneurial process (Pg 22 – TB) The entrepreneurial process is a process through which a new venture is created. This process results from the efforts of the entrepreneur who brings the required resources together to form an organisation with which to pursue a business opportunity. The entrepreneurial process has four distinct phases: 1) Identifying and evaluating the opportunity: An opportunity is a gap in the market which is not currently served. A good opportunity is attractive, durable and timely and vests in a product or service that creates or adds value to the market which it serves. Identifying and evaluating an opportunity is a difficult task as an entrepreneur must deliberately formulate ideas which can be converted into a business opportunity. A number of techniques can be used to generate ideas from:  The entrepreneur’s skills, expertise or aptitude  Common needs  Existing unsolved problems  Everyday activities  Others In order to convert ideas into opportunities, each short-listed idea requires a feasibility and viability study. A feasibility study: is a general examination of the potential of an idea to be converted into a new business venture, with its primary focus on the ability of the entrepreneur to pursue the idea and match his skills with what is required. A viability study: is an in-depth investigation into the potential of the idea to be converted into a new business venture. 2) Developing the business plan: A good and detailed business plan must be developed in order to exploit the opportunity identified. The business plan is important in developing the opportunity as well as determining the resources required, how they will be obtained and how to manage the resulting business venture successfully. ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 6 By compiling a business plan, the entrepreneur is ‘forced’ into thinking about the various aspects of the enterprise resulting in an information gathering and self examination process. A diligently prepared business plan therefore helps reduce the risk of the venture. 3) Determining the resources required: Resources consist of the following:  Financial resources – Capital for investing in the venture which can take the form of cash, credit or loans  Human resources – People (employees)  Physical resources – Assets such as equipment, machinery, buildings and vehicles etc... When determining the resources required, the process would start with evaluating one’s own resources and how much investment or loans will be needed to start operating. Resources cannot be determined without a cash flow projection, which is done simultaneously with the development of the business plan. 4) Starting and Managing the enterprise: Once the minimum start-up capital has been acquired, the entrepreneur must put it to use by implementing the business plan. Initially the business may be relatively small employing (if any) only one or two employees. Once the business starts to grow it becomes important to determine the variables required for success. ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 7 STUDY UNIT 2 Chapter 2: The Entrepreneur (Pg 29 – TB) Introduction: The Entrepreneur Entrepreneurs play a fundamental role in providing goods and services to customers, and also contribute to solving the problem of unemployment. It is for these reasons that the South African economy requires more entrepreneurs. Due to the unemployment crisis in South Africa, more people are choosing entrepreneurship as their career path. Whilst others are being forced to create their own employment due to the poor job market. The entrepreneur as a catalyst for economic activity Entrepreneurship is a key driver within an economy, which is highly valued and a key contributor to economic and social growth. Entrepreneurs in South Africa are seen as the primary creators and drivers of new businesses. Entrepreneurs play a vital role in the survival and growth of any emerging economy, and thus provide a critical solution to slow economic growth, low employment rates and unsatisfactory levels of poverty. Entrepreneurs at various levels of entrepreneurial sophistication Entrepreneurs can be found at different levels of entrepreneurial sophistication, based on the nature of their entrepreneurial activities. The 5 levels are discussed below: 1) Basic survivalists: No economic independence, little involvement with other entrepreneurs within their social network (individualism) Entrepreneurial activities: Isolated from markets, unaware of their own potential, illiterate, few incomegenerating activities. An example would be that of a person standing on a street corner, holding a sign board advertising that he will wash cars in exchange for R10. 2) Pre – entrepreneurs: Follow the group’s initiative (collectivism) Entrepreneurial activities: Welfare-orientated approach, not expected to be self-sustaining and requiring training in entrepreneurial competency. An example would be that of a person selling items on the side of the road with ten other pre-entrepreneurs selling exactly the same products at exactly the same prices. 3) Subsistence entrepreneurs: Self employed, independent income generation, temporary market stall or stand. Entrepreneurial activities: Inexperienced in business management and still needs general support and training in technical and management skills. An example would be street vendors. 4) Micro entrepreneurs: Zero to nine employees, operating from a fixed workshop with an operating license from a local authority. Entrepreneurial activities: Difficulty in getting loans from banks. Focus on credit rather than training and technical assistance. An example would be an entrepreneur who runs a home-based business such as a hairdressing salon. 5) Small – scale entrepreneurs: Ten to 49 employees. Entrepreneurial activities: Qualifies for a loan from a bank. Well – educated and has adequate collateral to apply for a loan. An example would be a small accounting or law firm. ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 8 The background and characteristics of entrepreneurs Entrepreneurs need to internalise and adopt entrepreneurial attitudes and characteristics. Entrepreneurial characteristics can contribute to the background of the entrepreneur as in the case where the entrepreneur is brought up in an entrepreneurial family environment. Other qualities are hardworking, honesty, ambition and persistence in overcoming numerous failures, and always striving for excellence and constant self – improvement. The background of entrepreneurs 1) Childhood family environment: It is often found that entrepreneurs have at least one parent who was (or still is) an entrepreneur. Entrepreneurship is best learnt through experience to through contact with family members who are entrepreneurs. 2) Education: Education is seen as one of the most significant barriers to entrepreneurial activity. Higher levels of education are associated with significantly higher levels of entrepreneurial activity. 3) Personal values: Research indicates that certain values nourish entrepreneurship. These include individuality, leadership qualities, ambition, opportunity focus, honesty and ethical behaviour. The nature of the entrepreneur in terms of opportunism, institution and individuality diverge significantly from the bureaucratic organisation and the planning, rationality and predictability of its managers. 4) Age: According to a study in 2001, the highest number of entrepreneurs is found in the 35 to 54 year age group. Most of these entrepreneurs would have worked for some organisation before embarking on their own venture. In 2006, it was found that this age group was tending toward 25 to 34 years of age, an indication that nowadays people start businesses from a very young age. 5) Work experience: Entrepreneurs who are most likely to succeed are those who have gone on to do training after school and have work experience. They have therefore seen entrepreneurial opportunities from an employment base. The characteristics of entrepreneurs 1) Passion: For people who wish to start a business, it is preferable that they pursue business activities for which they have a passion. If entrepreneurs pursue a business activity that they find interesting and fascinating, there is a much higher likelihood of success. 2) Locus of control: Entrepreneurs are typically keen to be in control and have good delegation skills. They have a high degree of autonomy and do not want to be told what to do. 3) Need for independence: Related to the desire for control is the need for independence. Many entrepreneurs leave their employer to start their own venture, this stems from their desire to be independent and to make their own decisions. ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 9 4) Need for achievement: The need for achievement is closely linked to the entrepreneurial motivation to excel. McCelland states that entrepreneurs have a great need for achievement when compared with other individuals. Niemann & Bennett agree that entrepreneurs are self starters who are internally driven to compete and pursue challenging goals. 5) Risk taking and uncertainty: Risk taking involves more than just the risk of losing financial resources should the venture fail it can also include social and personal risks. Liquidation can result in financial ruin, and entrepreneurs will have to face the social stigma associated with failure and well as the personal distress of letting down investors, employees, clients and their families. 6) Creativity and innovation: Creativity and innovation are sources of creating a competitive advantage. Whether it is to create new products and services or to invent new ways to cut costs and improve existing products, creativity and innovation are seen as the key ingredient to establish a niche market and to determine an organisations competitive edge. 7) Determination and persistence: In an ever changing economic, social, political and technical environment it is necessary to maintain focus, determination and persistence. Role models and support systems Entrepreneurs need role models and support systems to develop and implement their ideas. They also require support for the development and growth of their business, that is, a network system . Types of network systems: 1) Social networks: These include communication and the exchange of information, an example of this would be where two entrepreneurs exchange business cards at a social gathering (pub, golf course, etc...) 2) Personal networks: This includes people which whom the entrepreneur has day-to-day direct contact, such as customers. 3) Extended networks: These networks are focused on a network of organisations rather than an individual. 4) Other networks: These include:  The internet  Suppliers  Investors  Bankers  Lawyers, etc Many benefits can be derived from Networks as it opens various support avenues for entrepreneurs. Push and Pull factors Many South Africans are forced to become entrepreneurs due to retrenchment, job frustration and job losses. ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 10 Botha distinguishes between push and pull factors and states that entrepreneurs who take advantage of business opportunities and therefore start a business due to a gap that was spotted in the market are normally pulled towards entrepreneurship. These entrepreneur types are known as opportunity entrepreneurs. People who start businesses as a result of not having any other employment options are usually pushed towards entrepreneurship. These entrepreneur types are known as necessity entrepreneurs. Push factors are those factors that encourage entrepreneurship when there are no other choices or alternatives, these include  Unemployment  Job insecurity as in the case of a person working on a contract basis.  Disagreement with management, career limitations and setbacks in a conventional job.  Not fitting in with the organisation, or the inability to pursue personal innovation in a conventional job.  The limitations of financial rewards from conventional jobs.  Having no other alternatives. Pull factors are those factors that encourage people to leave their conventional jobs in the pursuit of becoming an entrepreneur, these include  Independence: the freedom to work for one-self  Achievement: a sense of acknowledgement gained from managing one’s own venture  Recognition: a desire to gain the social standing achievement by entrepreneurs  Personal development: the freedom to pursue personal innovation  Personal wealth: the financial rewards of entrepreneurship Challenges facing Entrepreneurs and SMME’s in South Africa (Pg 35 – TB) In South Africa there are a disappointingly high number of small and micro enterprises that fail during the first few years of operation. The largest percentage of small businesses fails during the first two years of their existence due to cash flow problems that arise because they could not manage growth. The challenges facing new entrepreneurs include; 1) Access to start-up and expansion finance: Raising money in capital markets, including for bank loans, is a minefield for start-ups, and often entrepreneurs launch their business using their own money. Statistics show that more than 80% of start-ups are financed by the founders personal savings, entrepreneurs then rely on debt or retained earnings to finance growth. Over the past few years the Government through the Department of Trade and Industry and Khula Enterprise Finance, has designed and implemented incentives, subsidies and schemes that have improved SMME’s access to finance. However, a significant number of SMMEs’ are still not able to access affordable start-up and expansion finance. ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 11 The reasons for this lack of access to finance include:  Risk aversion of the banking sector towards SMME’s. SMME’s are regarded as been high risk borrowers and this view is exacerbated by the high percentage of SMME business failures.  There has been a decline in alternative financial institutions. A large number of Micro Finance Institutions (MFIs) have gone under, limiting access to finance for SMMEs.  Inadequate funding proposals and business plans. Poorly prepared and presented business plans deter financial institutions from granting finance. Where entrepreneurs have presented adequate business plans and collateral and are still denied finance from a financial institution, the entrepreneur has the right to know why their loan applications were rejected. The above challenges can be overcome by:  Business success: The business success and profitability of SMMEs need to be improved. A sound business understanding, experience and exposure to the business environment are critical when accessing finance. Enhanced and improved business performance of small and micro businesses will make them more attractive to financiers.  Financial products: Financial institutions and MFIs should provide SMMEs with appropriate financial products and information on where and how to obtain finance should be made available.  Training: People who wish to become entrepreneurs need to be trained and coached in conducting research on and presenting funding proposals, feasibility studies and business plans. This would require accessing business development services.  Financial guidance: Financial institutions should provide guidance and direction to SMMEs that have been denied finance, and also give them viable reasons why their loan request(s) were rejected. 2) Access to markets: SMMEs do not give enough priority to marketing in their overall business approach. Most them do not probe and segment their markets, analyse customer demand, know their competition or interpret trends. Many entrepreneurs especially from the previously disadvantaged sector tend to ‘follow the group’ hoping that success can be achieved by following what others are doing. The above constraints may be addressed by the following:  Marketing training: SMMEs need to be provided with effective marketing training. It is imperative to constantly upgrade marketing appeal and competencies by putting more effort and budget allocations towards marketing training.  Commitment to marketing: SMME entrepreneurs need to appreciate that to be successful, they must demonstrate an early awareness of and commitment to marketing. Most SMMEs place all their attention and focus on the production and finance functions without any clearly defined marketing activities/functions.  Commitment to the market: SMMEs need to place the needs of the market at the forefront of their business concerns. This will lead to the necessary attitude and behaviour for developing superior value for customers and ensuring superior business performance. It is crucial for entrepreneurs to remain close to their customers and to remain ‘tuned in’ to their wants and needs. Developing new products without a market can result in both product and business failure.  Market-orientated products: SMMEs should focus their efforts on supplying only those products and services which are demanded by the market. Market research is therefore an important step to make before even ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 12 starting a business venture. The products and services which can be offered and supplied by the entrepreneur must first be measured against the market demand for those products and services before the venture gets started.  Networking: Business Development Service agencies (BDS agencies) should assist SMMEs to gain access to markets by facilitating vertical and horizontal (networking) business linkages. 3) Access to appropriate technology: The lack of technology is another constraint facing SMMEs. The use of appropriate technology is one of the most important factors behind a successful SMME’s competitive advantage. Successful SMMEs constantly upgrade operational and production equipment and techniques. The use of up-to-date and new technology leads to:  Better and more competitive products and services  Improved efficiency  Reduce operational and production costs  Improved quality of products and services 4) Access to human resources: It is the entrepreneur who has to gather and mobilise the other production resources (land, labour and capital) to create a new business venture or to change the direction of an existing firm. Human resources are widely acknowledged as being the ‘most precious asset’ of a business. Issues involved in human resource management include addressing the skills, attitudes and expectations of employees and those of the entrepreneurs themselves. Entrepreneurs need to address the attitudes and expectations of their employees. They can do this by:  Building team spirit by doing team building exercises away from the work environment.  Nurturing life-long learning in themselves and their employees  Ensuring that their employees regard meeting customer needs as their responsibility  Initiating an intrapreneurial climate within the organisation, allowing employees more freedom of choice  Being role models for their employees  Practicing a code of ethics to ensure an ethical foundation in the business Women and emerging Entrepreneurs (Pg 35 – TB) Although entrepreneurship and business in general have been male dominated, the trend is changing and the economic role of women is been recognised. Types of women business owners can be distinguished as follows:  Traditional: Traditional women business owners are highly committed to entrepreneurial ideas, as well as to conventional gender roles. They are motivated to start a business due to economic pressure at home, which contributes to the push factor in the economy. Their primary focus is to keep overheads, wages and costs low. ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 13  Innovative: Innovative women business owners are highly committed to entrepreneurial ideas but not to traditional gender roles. They start their business because of limited career prospects in large organisations, they are ambitious and their business has high priority.  Domestic: Domestic women business owners are not committed to entrepreneurial ideas but have a high attachment to traditional gender roles. They usually give up work to have children. Their motives are selffulfilment, expression of creative skills and a search for personal autonomy. Most of their businesses are run from home and are often geared with low-volume production of high quality goods and services.  Radical: Radical women business owners have little commitment to entrepreneurial ideas or to traditional gender roles. They are usually young without children, well educated but have limited work experience. This type cannot be seen as entrepreneurial venture seekers. New labels for Entrepreneurs (Pg 40 – TB)  Emerging entrepreneurs: refers to previously disadvantaged groups  Survivalist and micro entrepreneurs: Petty traders in the informal sector (such as shoeshine boys)  Opportunity and necessity entrepreneurs: Motivational drivers been seen as choice (Pull factors – opportunity seekers) or necessity driven (Push factors)  Youth entrepreneurs: Some schools provide students with entrepreneurship as a subject choice,  Technology entrepreneurs: Entrepreneurs who take advantage of new scientific developments, especially in the areas of information technology, biotechnology and engineering science and offering their benefits to the world.  Social entrepreneurs: Individuals with innovative solutions to society’s most pressing social problems. As opposed to a business entrepreneur who seeks value in the creation of new markets and profit margins, the social entrepreneur aims for value in the form of transformational change that will benefit disadvantaged communities and generally society at large.  Tourism entrepreneurs: This is the largest industry in the world and also the biggest employer. Many opportunities are available for entrepreneurs in the tourism industry, especially in South Africa. Entrepreneurs versus Inventor (Pg 44 – TB) ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 14 An inventor creates something new but lacks the skills to sell it. An entrepreneur will take over from the inventor and start a business venture in order to market the new invention. Male entrepreneurs vs Female entrepreneurs (Pg 39 – TB) The comparison between Male and Female entrepreneurs include:  Women forge relatively strong ties, whilst men forge relatively weak ties  Women form relatively egalitarian coalitions, whilst men forge relatively hierarchical coalitions  Men have set the foundation of the business environment  Men are predominately involved in manufacturing and construction, whilst women are more involved in coffee shops and guest houses (more services related)  Men are more short term orientated, whilst women forge strong relationships with service providers such as bankers  Male support groups include friends, professional acquaintances, and colleagues, whilst female support groups include network groups or associations ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT Page | 15 TOPIC 2 STUDY UNIT 3 Chapter 3: Creativity and Business opportunity (Pg 55 – TB) Introduction Entrepreneurship is a day to day challenge, and the moment you do not experience the unique challenge anymore, look for a salaried job! Once a new venture has started up and become established, it is very likely that the products and, or services of the new venture will compete with other corporate giants. Various foreseen and unforeseen obstacles will hamper immediate growth and expansion. Creativity: “Creativity can be defined as the process of generating ideas that result in the improved efficiency or effectiveness of a system.” One of the primary driving forces that assist entrepreneurs to compete and survive in the market today is creative behaviour. Creative behaviour and creative thinking lead to innovative actions and even processes. When one considers the most successful entrepreneurs in the world, many of them have only changed the existing or conventional into the new. These actions are the result of intense creativity, and innovation a skill that differentiates entrepreneurs.