ASSIGNMENT – Entrepreneurial Profits come from discovering opportunist

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Entrepreneurship begins with a creation of an idea, it may be a new idea or an ideas already being used elsewhere but not fully exploited geographically.

What makes it a viable venture is that the entrepreneur has noticed a niche in the market; this could come with an improvement to the product, new location of sale, a source of cheaper raw materials. In general, it this comes with creativity and innovation to identify an opportunity that can be successfully pursued.

I will use Schumpeterian model as the basis of my paper. The two theories that Scumpeter developed concering Entreprenusrhip were that;

Innovation and technological change of a nation comes from Entrepreneurship and they were the main drivers of economic development.

The drivers of innovation and the economy are big corporations that have resurces and the capital to invest in research and development.

Schumpeter's research on entreprenership has contributed highly to the consequent studies and theories that followed.

Gartiner 1985 looks at certain elements that characterise an entrepreneur, such as;

Finding a business opportunity

Capital and Resources

Product/ Services production and marketing

Organisation Structure

Economic Response

Theory of Entrepreneurship

1Cunningham & Lischerson 1991:1 defines an Entrepreneur in the line of activities from creation, founding, adapting to managing a new venture.

From earlier studies, it is clear that two trends have taken pre-eminence in terms of the development research of Entrepreneurship. The first was the study that was done by Turgot and Say 1803, and they concluded that an entrepreneur was on who created and develops new businesses. The second trend was from the view that an entrepreneur was an innovator. This was concluded by Cantillion and Schumpter, and was also supported by the study carried out by Bruyat and Julien 2000, 167.

From the above analogies and studies carried, my definition of entrepreneurship is an individual or unit in an organisation that identifies a gap in the market and exploits it. This could be through the development of a new product, a new and more efficient was of a line of production, discovering a geographical opportunity that has not been exploited before, this could as well be the discovery of a new source of raw materials, labour etc. that is lower than the current direct costs of production.

The Schumpeterian Model shows an entrepreneur as n innovator that is a driven individual whose actions are forced by the pursuit of profits. The model mainly looks at;

Innovation and profit

Innovation and the driving activities

Behaviour of profits in the activities taken on by the entrepreneur.

Jennings (1994) supports the Schumpeter's criteria of entrepreneurship. Jennings though emphasises the strategic characteristic of the new venture as a result of the introduction of new goods, new methods, new sources of supply etc.

Equilibrium: It has been discussed in previous research and studies that entrepreneurial activities can not be predicted, and by their nature cannot be included in the Equilibrium model. It has been said that their activities do not incorporate or include the homogenous elements that can be formulated in a mathematical and economic models.

As these models assume that all remains the same and nothing is changing, and will therefore not include them. As concluded by [2] William J. Baumol, the role of the Schumpter's entrepreneurs is to challenge all equilibria, and that of Kirzner works towards achieving them.

Entrepreneurship and EVA

It has been discussed that the mere availability of capital and resources does guarantee economic profit. Purhit and Rahman 1995. this brings the matter of how an entrepreneur can measure the success of his venture.

Measuring performance is the foundation of any business, it looks at measuring your activities and how you manage them. Therefore an important element of entrepreneurship is how to evaluate the performance of the venture. An estimate of performance can be assumed based on gathered knowledge and information, and an expected value can be derived from that. The challenge of measuring value of an entrepreneusship is contructing an aggregate measure that would reflect the total amount of activitiy that has taken place in a given area.

I believe the best measurement model is Economic Value Added (EVA). EVA is the best method of measuring the true profitability of the new venture. This method of measurement will help the entrepreneur steer correctly the activities that will influence profitability.

Economic Value Added is basically the excess return to investors in this case entrepreneurs and in principle the bigger the EVA , the bigger the market value. From this evaluation the entrepreneur can clearly assess the true success of the business. EVA is not only a financial metric, but can also be used as a management system that is focussed on wealth creation.

Another aspect that would prove beneficial to entrepreneurs is the fact that EVA model also looks at the future EVA which is the investor's expectations for future growth.

The advantage of EVA as a measurement tool for entrepreneur is that it would cover profit and loss and the balance sheet, and give an evaluation on all factors of production.

The ultimate goal should be to improve EVA.

3Erik Stern's notion is that managers should focus on higher returns with EVA as the balance mechanism as it looks at all drivers of value.


It is essential that before any venture is taken on, one possess the knowledge, and perhaps in some instances expertise. But more so knowledge is the key factor, and will determine the growth objectives in terms of qualitative and quantitative measures. The information could be used to asses the competitive position, product quality, consumer and customer position, production and service costs, location etc.

Knowledge will determine the strategy the entrepreneur will adopt to enter such an already existing competitive market.

It is important he has adequate information about the economy, the market; he should have key people in buyer organisation on his speed dial so to speak. Therefore he has to be ready and willing to be involved in a lot of networking activities, where he can have a chance to socialise with buyers, sellers and any other key related party that is relevant to the success of his venture. He has to create a strong rapport with the respective parties to get first hand information on potential avenues of business opportunities in the environment. This will assist in understanding the demand and choice of his potential customers as well the source of affordable raw materials.

Information technology is clearly one tool that can be used to gather information and exploit the competitive advantage gaps in the economy. The Mintzberg's illustration models sums up the information needed for an entrepreneur to ensure his success. This model helps to assess if the opportunity is worthwhile for the entrepreneur and how it can be successfully exploited. This model can also be used for strategic planning to ensure successful operation, and be useful model for the entrepreneur's growing business.Russell Davison

Not sure heading

It has always been assumed that entrepreneurs by their nature are spontaneous, and no mathematical or economic model can predict or precisely illustrate their behaviour patterns. This notion was taken on by Eatwell, Milgate and Newman 1987:151.

As much as it may be assumed that they are spontaneous, I believe an entrepreneur selectively and effectively calculates every possible avenue and opportunity and stays a step ahead. Its ones ability to see opportunity not yet apparent to the wider market at that particular time. It clearly requires research through information gathering, and involves insight into activities that will foster and bring about high gains.

Entrepreneur as a manager

The entrepreneur has the vision of the venture, therefore plays a very important role in ensuring production and effective distribution of his goods is successful. He will usually be the leader and manage most of the processes of wealth creation.

The ultimate goal is profit maximisation, and this would affect the equilibrium of supply and demand (Jennings 1994).

Kickul and Gundry 2002:87, looked into the study of the integration of entrepreneurial processes; and the effect on the organisations actions and performance. They found that the entrepreneurs' personal attributes were highly embedded in the way the firm operated and functioned.

The strategy the entrepreneur adopts will shape the internal policies and procedures. The general ides is to generate ideas that will continuously try to gain competitive advantage on the market and the ultimate ain of wealth creation.

Entrepreneurship and Economic Development

Entrepreneurship has a huge impact on the static equilibrium and the flow of the economy. It brings in different and new aspects of the factors of production.

Entrepreneurship I believe challenges the firm's existing marketing resources, skills and strategy; it drives or even forces a shift in the industry. It brings out the competitive edge in the market that drives innovativeness and the pushes the capabilities of the organisations.

It has created a free market economy where all mechanisms have underlying and continuous industrial evolution.

The study by J.A Schumpeter says that entrepreneurship is the focal point that aides the development process by the mere fact that they create opportunities for production technology by exploiting new markets, products and services etc.

All these aspects do embrace a certain amount of rick but at the same time do increase the demand for continued and increased investment in the economy. This in turn brings about higher capital accumulation and the demand for increased rate of savings in the economy is enhanced.

I think it's an important factor of economic development, and therefore consumers would also be a key factor as they are determinants in the structural change of the economy with their spending capabilities. It raises the productivity and also helps in the transfer of technology, which is another way of commercialising new products and services.

Entrepreneurship brings about employment opportunities and also improves innovation facilities therefore bringing about industrialisation in the economy. I think it helps in the redistribution of wealth in the country by empowering and promoting social welfare. [4] Saha 1989 explains this in totality.


Entrepreneurship is about recognising opportunity through information search and knowledge of the current market condition. It looks at risk taking, business strategies and resource acquisition. It is as a result of a balancing of opportunities, ideas, risks, uncertainties and wealth creation.One has to have an alertness and the need for achievement ( Kaufmann and Dant 1998:6).

"The success of an entrepreneurship is determined by how effectively they exploit emerging niches, how closely they pay attention to enhancing customer value, and how effective they are at creating a systems strategy that consistently delivers value Lucskiw 1998

Essentially for organisations to grow and continuously strive for success, they will have to adopt entrepreneurial ideas as part of their strategy. This will initiate an enterprising process that will bring about a flow of innovative ideas that may result in attaining a competitive advantage. It has to be kept in mind at all times that there is always a better way of doing things than what is currently taking place. This can be used as a motivating factor, and endeavour to seek opportunities at all times. As a result, it is a vital part of economic development.

Challenges are faced such as knowledge and information gathering, and how to coordinate their utilization of capital, skills and ideas. The entrepreneur has to accept that investment in information technology and expertise would be essential in the long run as the business grows.