Entrepreneurship defined
Hisrich et al (2002) defines entrepreneurship as the process of creating new value by developing the necessary time and effort assuming the accompanying financial psychological and social skills and receiving the results rewards of monetary and personal satisfaction and independence.
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 or career commitment of providing value for some products or service. The product/service itself may/may not be new or unique but value must somehow be infused by the entrepreneur by securing and allocating the necessary skills and resources
The word entrepreneur means individuals who undertake meaning those who undertake the risk of starting an enterprise. They are contractors who bore the risks of profit and loss. Schumpeter (2004) defines an entrepreneur as a person who reforms or revolutionalise the pattern of production by exploiting an invention or more generally an untried technological possibility of producing a new commodity/producing an old one in a new way, by opening up a new source of supply of materials or new outlet for products.
The Oxford dictionary defines an entrepreneur as a ‘person who attempts to profit by risk and imitativeness”. However, a French economist Jean-Baptist Say said ‘entrepreneurs shift economic resources from an area of lower productivity into an area of high productivity and greater yield”
Given the above-mentioned definitions it becomes difficult to still identifying entrepreneurs. The question that comes –
Is the local butcher, computer retailer, general dealer an entrepreneur?
Versper (2004) explains that its nature is a matter of individual perception, while other philosophers see entrepreneurs as exploitative adventures.
Entrepreneurs have become:
q Economic heroes
q Are held in high esteem
q Held up as role models to be emulated
q Have the courage and self belief to turn their dreams into realities
q Freedom of spirit
q Creative
q Vision
q Zeal
It can be concluded that entrepreneurs create value by exploiting some form of change for example in
q Technology
q Materials
q Improving of the quality of service provided.
This process is called innovation. Innovation is associated with the development of a new and better product/process. It is about doing things differently. Mintzeberg (1983) defines innovation as the means to break away from established patterns.
There is an old adage that says
‘Necessity is the mother of all inventions ‘that can be twisted and put in business that “necessity is the mother of Business Start-ups.
Simply put when there arise a need it raises questions in the mind of an inventor that in turn gives solutions to the problem in question.
Entrepreneurial Opportunities
Exists for those who can produce products and services desired by customers. It involves a product/service that is so attractive to customers that they are willing to pay their hard earned money for it. Therefore, entrepreneurship is a desirable and timely innovation that creates value for interested buyers and users.
Small Business Defined
The term SB/SME encompasses a heterogeneous group of businesses, ranging from a single artisan working at home and producing handicrafts to sophisticated software products firms selling in specialized global niches. There is no universally accepted definition of a small and medium business. The definition of what constitutes a SME varies (Taylor and Adair 1994; Reed, 1998); it is generally based on the number of employees and financial turnover what is, or not, an SME is usually defined by the number of employees of the firm and definitions vary from country to country. Definitions used in developed nations will often have a higher size thresholds than those in less developed countries, for example in Mauritius, firms fewer than 10 employees are considered micro enterprises and firms with 10-49 employees are considered SME’s (Wignaraja & O’Neil, 1999) while in Japan, firms with fewer than 300 employees are considered small (Whitacker, 1997). In addition, some developed countries such as Australia and Canada differentiate between manufacturing firms and other firms, in Canada for example a small business is considered to be a manufacturing firm with fewer than 1000 paid employees or any other firm with fewer than 50 paid employees while a medium –sized business has between 100 & 500 paid employees.
According to Barrow (1998: 6) “A small business is a firm that is small to its market, is managed by its owners and not part of a large enterprise.” Strokes (1995: 7). A small business in the true sense operates independent of other business enterprise; it’s small and may not even be in a position to satisfy its market. Stokes concurs with Barrow in defining small businesses when he states “small business may be difficult to define on paper but easy when you recognize them in operation. Generally there seem to be fundamental differences in practice which enable to distinguish between small and large firms.” From Barrow’s definition it follows that the business ventures will be practiced at a small scale and some cases being individually owned, whilst Strokes also indirectly agreed that these ventures are small and measurement of whether they are small could be best identified when compared to large ventures and their practices.
In Zimbabwe Small Enterprise businesses (SEDCO) defines a small business enterprise as “a business that is independently owned.” In our own context a small business has only one owner. The small enterprise business according to Small Enterprise Business Development Corporation (SEDCO) is not dominant in its field. It was observed in the Zimbabwean situation that some never grow large since owners adopt a more relaxed approach in running the business (Nikisi, undated). Kapor, Mugwara and Chidavaenzi (1997) reiterate, “At present there is no universally agreed definition of small enterprise sector in Zimbabwe. The definition has many variants depending upon who is using it and for which purpose the definition is made.” Generally definitions used are based on a number of employees, turnover levels, capital base, fixed assets and degree of formalization (Kapor, Mugwara and Chidavaenzi, 1997).
Other factors that determine the size of the business are:
q Reason for existence of that business
q Objectives and goals of the business
q Amount and nature of resources
q Size of the economy
q Asset value of the company
q Dollar per sale volume
Therefore, a Small Business is a business, which is independently owned and operated. It does not usually expand or diversify in operations.
THE ROLE OF SME’S IN ZIMBABWE
Curran estimated that in 1980 there were about 1.9 million UK SME’s, but by 1990 the total had risen to 2.8million. He went on to assert that small businesses still comprise the great majority of all businesses in the UK with well over 90% having fewer than 20 employees. The small firm is of much importance to the development of a country and some reasons offered for the continued existence of the small business are that:
q Limitations of economies of scale allow for the participation of SME’s and thus fill the void that would otherwise exist if they were not present.
q SME’s allow the entrepreneurs to exploit their entrepreneurial flair at a small scale. Later they will get experience and maybe grow to become large corporate
q SME’s offer a more personal service and are able to adapt to the whims of the customer easily. This culminates in the improvement of the quality of life of the nation
q SME’s can afford to band together in order to enjoy economies of scale (through bulk buying). For example, in the purchase of raw materials and products for resale. This will enable a reduction in input costs, which is then translated into the manufacturing or provision of a relatively more affordable product for the market.
q Small firms also offer greater in the manufacture of products by allowing for subcontracting
q SME’s provide for the satisfaction of aesthetic needs, thus, those in the art industry are able to provide such services as interior, paintings and crafts
q SME’s are of economic importance to our country since they contribute towards the Gross Domestic Product (GDP) through increased production. Growth in GDP is traditionally made possible by the growth of SME’s
q Poverty is a very serious malaise that afflicts almost all developing countries, every SME almost always create employment opportunities
q SME’s provide a vital link of interdependence that ends in synergistic gains, which benefit the economy as a whole. No business unit exists as a stand alone- unit. Every business will have to buy from other firms and sell to other different firms and/or owners. Businesses (big/small) play a complementary role on their functions and activities
q Small businesses allow for competition to prevail. Monopoly power is disadvantageous to the countries and the economy as a whole, if it is not controlled and contained. Thus, participation of SME’s allows for the creation of a free market system and this will prove beneficial if it is well regulated by the government
q Small enterprises allow for innovation. Individuals and their small business units provide the major source of new ideas, concepts and technical inventions. By their nature large businesses tend to concentrate on the production of tries and tested products, that is, those that are considered to be less risky. They will then leave production of the risky items to the SME’s
q The Zimbabwean economy is undergoing so much stress that any further collapse of even one firm brings with it further unwanted anguish, poverty and stress. If it can be avoided no further SME’ should be allowed to go under.
q Politically the government’s effort of indigenization of the economy will be best served if SME’s are created and allowed to enlarge their operations. Further SME’s can be used as a vehicle of ensuring a more equitable distribution of national wealth by particularly enabling more indigenous players to come on the economic scene.
q SME’s are particularly being encouraged to engage in the export business. Invariably this will lead to the improvement of the Balance of Payments (BOP) and enable a stabilization of the foreign exchange rates.
Why Start Your Own Business
q They want to get rich quickly
q Those who are disadvantaged in the labour market often because of prejudice discrimination and sheer lack of education, professional or technical qualifications also find business start up attractive
q To have the opportunity for personal independence
q To create employment
q Circumstances i.e. retrenchment, death of bread winner, inheritance
q Community Services
q Job security- with your own business you are assured that your job is always there and your are able to work and rest when you want
q Family employment – employment for family members is assured
q Challenge – some people want challenges that come with a balance between success and failure
Shortcomings of Going into Business
q Sales fluctuations – with formal employment salary is regular but not in business
q Competition – one may succeed in the initial stages but there are changes and challenges in the market that are difficult to predict
q Increased Responsibility
q Financial losses – due to poor decision making in inventory volumes- they may be too low or too high
q Employee Relations – poor HR Management results in demotivation and discontentment
q Risk of Failure
CHALLENGES
Zimbabwean informal sector, previously dominated by low income groups is poised for growth as more people resort to self help and income generating projects thus, creating thousands of jobs for locals and contributing to the mainstream economy.
Faced with rising employment levels orchestrated by the current economic climate, many Zimbabweans have taken up the challenge of reviving the economy through setting up business enterprises.
This new drive has seen small to medium enterprises (SME) industries being created and run by ordinary Zimbabwean’s who previously did not dream of owning/running a business while years ago people would jostle for jobs at factories, mines, etc. These days the slogan is ‘create your own job and contribute to national development’
Government figures show that about 80% of the Zimbabwean economy is in the hands of small business i.e. small farmers, small miners, small exporters, small marketers, small producers etc. All these people combined form a big part of the economy.
The SME sector has grown to become one of the biggest employers in Zimbabwe, particularly at a time when employment within the formal sector is shrinking and not paying well.
According to estimates from the CZI at least 70% of Zimbabweans working population is employed in the informal sector. Thus the figure could rise as more and more people are developing their entrepreneurial skills through vocational training so as to be able to venture into product-manufacturing businesses.
Current Business Challenges
q Foreign currency shortages
q High interest rates
q High inflation rates
q Technological changes
q Unethical practices
q HIV/Aids Pandemic
q Succession issues
q Brain drain
q Shortages of raw materials
1. Foreign currency shortages
This has been caused by reduced quantities of goods and services exported and the reduction of Foreign Direct Investment which bring in the following other benefits to a nation like:
q Poverty alleviation and social welfare.
q Employment creation
q The promotion of forward and backward linkages in the host economy, development of human capital,
q The implementation of internationally acceptable codes of employment practice,
q Improving the access of the host economy to world markets, and augmenting corporate tax revenues.
2. High Interest Rate
This cost of borrowing money. Currently, it is very expensive to borrow and very uneconomic and making it not conducive for business people to borrow and invest in their businesses.
3.Technological changes
Technology changes faster than countries developing can cope and Zimbabwe is not spared by the concept of the Global village, advent of the internet (e-banking, e-marketing etc), the use of modern technology, e.g. mobile phone, laptops, ATM’s etc, the concept of borderless market that has increased the bargaining power of customers, more suppliers
3 Unethical Practices
q There is rampant corruption (misuse of office for personal gain)
q Bribery (by government officers, other co-employees, Zimra officials etc
q Offers for lunch, drinks groceries, hampers
q Stock holding
q Black market Dealing
q Nepotism
q Pollution
q Tribalism
(Argument for bribe is that it is necessary to “grease” the palms of others to get assistance BUT entrepreneurs should desist from these kinds of practices for continuity)