Chapter 1 Ee

THE BASIC OF
ENTREPRENEURSHIP AND
BUSINESS
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After studying this chapter you
should be ready to describe:
 The Basic of Entrepreneurship and
It‟s Risks
 Types of Business Organizations
 Types Of Entrepreneur According
To Business Activity
 Identifying, Analyzing, Evaluating
and Choosing Business
Opportunity.
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THE DEFINITION OF ENTREPRENEUR
 The word „entrepreneur‟ was originated from a
French word „entreprende‟ which means “willing to
take responsibility or willing to try something new”.

 In Bahasa Malaysia, the root word for usahawan
(entrepreneur) is usaha which means effort or
willingness to do or complete a task.

 According to the Oxford Dictionary; entrepreneur is
defined as someone who is handling a business
and taking business risk.

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THE DEFINITION OF ENTREPRENEURSHIP
 Entrepreneurship is the process by which
individuals pursue opportunities without regard
to resources they currently control
(Barringer:2008).
 According to Robert C. Ronstadt:
◦ Entrepreneurship is the dynamic process of
creating incremental wealth. This wealth is
created by individuals who assume the major
risks in terms of equity, time, and/or career
commitment of providing value for some
product or service. The product or service
itself may or may not be new or unique but
value must somehow be infused by the
entrepreneur by securing and allocating the
necessary skills and resources.

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Be Their Own Boss
Pursue Their Own
Ideas
Pursue Financial
Rewards
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The Characteristic of an Entrepreneur
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o Realise the importance of his/her
contribution to the society and country
o Avoid selfishness
o Commited to his/her work
o Always strive for excellence, focus on
his/her work, confident, punctual and
disciplined
o Innovative and creative
o Able to lead and manage
o Responsible and trustworthy
o Has a vision
o Dare to take risk and never give up
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SUCCESSFUL
ENTREPRENEUR
Passion for the
business
Execution
intelligent
Product/
customer
focus
Tenacity despite
failure
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 Myths 1: Entrepreneurs Are Doers, Not Thinkers.
 Myths 2: Entrepreneurs Are Born, Not Made.
 Myths 3: Entrepreneurs Are Always Inventors.
 Myths 4: Entrepreneurs Are Academic and Social
 Misfits.
 Myths 5: Entrepreneurs Must Fit the Profile.
 Myths 6: All Entrepreneurs Need Is Money.
 Myths 7: All Entrepreneurs Need Is Luck.
 Myths 8: Entrepreneurship Is Unstructured and
Chaotic.
 Myths 9: Most Entrepreneurial Initiatives Fail.
 Myths 10: Entrepreneurs Are Extreme Risk
Takers……. The Gamblers.


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1. Uncertainty of Income
2. Risk of Losing Entire Investment
3. Long Hours and Hard Work
4. High Stress Level
5. Difficulty in Obtaining Customers
6. Complete Responsibility
7. Difficulty in Obtaining Loans
8. Discouragement
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 There are three popular forms
of business ownerships which
are:
1. Sole proprietorship
2. Partnership
3. Company

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 A sole proprietorship is an attractive
form of legal status for a new
business.
 It is formed under the Business
Registration Act 1956(Amendment
1978) and the Procedures of
Business Registration 1957.
 Solely owned and operated by an
individual


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i. Willing to accept sole responsibility for
the firm’s performance(success or
failure).
ii. Willing to work long hours.
iii. Has strong organizational skills,
leadership skills and communication
skills
iv. Has previous experience working in the
industry in which he is competing in at
present.



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 A partnership is formed under the Business
Registration Act 1956 (Amendment 1978) and
the Procedures of Business Registration 1957.
 It is a business owned by at least two or more
individuals but not exceeding 20 peoples.
 Types of Partnership
i. General Partnership
 All partners have unlimited liabilities.
 They are personally liable for all obligations of the firm.
ii. Limited Partnership
 Some of the partners have limited liabilities, that is,
they share the firm’s profit or losses but do not take an
active role in managing the business.




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 All companies in Malaysia are governed by
the Companies Act 1965.
 There are two types of companies which
are:
a) Private limited companies.
◦ Is a company limited by shares and owned by
a group of people with at least two or more
individuals but not exceeding 50 people.
◦ The members’ personal liabilities are limited
to the par value of their shares.
◦ The name of a private limited company ends
with the word ‘Sendirian Berhad’.



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 Is a company limited by shares with at least
seven or more individuals and there is no
maximum limit in terms of membership.
 The company shows its status by using the
word „Berhad‟ or „Bhd‟ after the company
name.
 The term „public‟ means publicly held. The
shares of stock can be easily purchased or
sold by investors. The public can also buy
and sell the shares of the company.


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1. Self-Employed
- Manage own business
- Has a few workers

Examples: retailer, lawyer and doctor who owns a small law
firm/small private clinic
• Team Building
- They will always look forward to improve or
expand their business
- Their business expansion depends on the number of
workers
- In order to achive their goals, they work effectively in a
team

Ex: A tailor shop which is expands and becomes a famous and fancy
boutique.
TYPES OF ENTREPRENEUR ACCORDING TO BUSINESS
ACTIVITY
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2. Free Mover
They set up a company, then produce and sell their
own products. In some cases, they use their name on
the products as their business marketing strategy.

Ex: Ramly Burger, Tamin Soy Sauce, Aminah Hassan’s
Sauce, Hanafi Bin Ramli (HBR) and others.

3. Franchiser
- a company or manufacturer that grants franchises
- they develop effective business using branches in
different location

Ex: Kentucky Fried Chicken, Pizza Hut, Mc Donalds,
Ayamas, Sen Heng, Restoran Nasi Kandar Kayu, Radix
Fried Chicken
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4. Large Enterprise

Ex: Makro, Carrefour, Giant, IKEA, The Store.

• Entrepreneur with Large Economy of Scale

“The production costs will become lower if the quantity
produced becomes higher; in other words; the economy of
scale can be enjoyed”

Explanation: The increase in output causes a decrease in
the average cost of each unit. Products can be sold at
lower price, and at the same time the volume of sales can
be increased.

This type of entrepreneur will explore a large scale of
business which involves big capital and a lot of employees.

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5. Capital Accumulator

They start-up a banking/financial institution. This
kind of business need a large amount of financial capital
and assets as well as multi level of mangement staff.

Ex: Maybank, AmBank, RHB, Hong Leong, Affin
Bank, Public Bank and insurance companies.

6. Business Buyer
They buy an ongoing business. They have to have a
large amount of financial capital. Information on
‘business to sell’ can be obtained from the newspapers
and electronic media.


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7. Buy n Sell Entrepreneur
They buy problematic business entity (for
example: those businesses that are involved in
bancruptcy), then try to overcome/solve the
problems (ex: by injecting funds) and sell the
business with higher price.

8. A Techno/Cyber Entrepreneur
An entrepereneur who is interested in creating
new ideas, normally apply the technology
advancement in creating, developing and
marketing his new products.

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 The process of identifying, analyzing, and choosing the
business opportunity is not an easy task. These processes
are crucial in setting up a business.
 Four (4) major steps for an entrepreneur, before starting a
business.
Step 1: Identifying the Consumers’ Needs and Wants.

Step 2: Analyzing the environmental factors, self
evaluation and values practised in the society.

Step 3: Evaluating Business Opportunities.

Step 4: Choose a business opportunity and write the
business plan.


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Step 1: Identifying the Consumers’ Needs and Wants
 Entrepreneurs create goods and services even before the
consumers realize that they need/want the specific goods and
services.
 What are the human needs?
 Each of us has three primary/basic needs: food, clothing
and shelter,
 Instead of that, there are also nine basic human needs
which are important to human.

The 9 Needs:
Security, Adventure, Freedom
Exchange, Power , Expansion
Acceptance, Community, Expression

 On the other hand, human wants can be influenced by
culture, level of education, affordability, and personality traits.
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Maslow's Hierarchy of Needs
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Examples:

NEEDS WANTS
Having lunch at home Having lunch at
luxurious restaurant,
hotel etc
Own a terrace house Own a bungalow
Own an ordinary car Own a BMW, Mercedes
Benz, Rolls Royce
Human needs and wants are variety and unlimited. This
phenomenon creates many business opportunities in
offering goods and services.
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Step 2: Analysing the environment, self evaluation and
values practised in the society
In searching for the business opportunities, entrepreneurs will have to
consider 3 major aspects: the environmental factor, self evaluation, values
practised in the society.
Environmental Factors

1. Population structure, level of income, & taste
2. Survey on import & export data
3. Survey on local/domestic resources
4. Industrial Networking
5. Development Plans by the Government & Private
sectors
6. Identifying business opportunities through local and
overseas/foreign media
7. Research on local social problems
8. Get information on rules and regulations.
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Self Evaluation

1. Experience
2. Knowledge and Skills
3. Financial Capital
4. Interest
5. Networking
Values in the Society

The business that is going to be set up is not against the
values held in the society.
-Drugs, child labour
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Step 3: Evaluating Business Opportunities.
 The process of evaluating business opportunities can help
entrepreneurs to choose the BEST and the RIGHT one.
 With the right choice, entrepreneurs can give all their attention,
commitment and effort just to concentrate on the BEST business
opportunity (at one time).
 The FOUR aspects to be considered before choosing the right
business opportunity:

1) The Business is Legal
2) Level of monopoly power and competition
3) Capital and Financial Requirements
4) The Risks

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Step 4: Choose a business opportunity and start writing
the business plan.
 After deciding what type of business you want to
begin, then prepare a Business Plan which covers the:
 Organizational Plan
 Management Plan
 Operation Plan
 Financial Plan



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