Unit Title: Understanding Entrepreneurship Unit Reference Number: L/504/4408 Guided Learning Hours: 100 Level: Level 4 Number of Credits: 12

Unit purpose and aim(s): This unit aims to give learners a sound understanding of:

the concepts of enterprise and entrepreneurship, how entrepreneurs contribute to the economy

the characteristics and skills of entrepreneurs

barriers faced by entrepreneurs

entrepreneurial motivations and influences

innovation and creativity

political and economic issues including business support processes

Learning Outcome 1 The learner will: Understand the concepts of entrepreneurship and enterprise, and the

characteristics that differentiate the various types of entrepreneurs and business owners, and the importance of entrepreneurs and SMEs to the economy.

Assessment Criteria The learner can:

Indicative Content

1.1 Define and explain the terms: entrepreneurship, entrepreneurs, enterprise and owner-managers.

1.1.1 Define and explain the meanings of entrepreneurship and enterprise and the various forms these can take. 1.1.2 Identify the differences between entrepreneurs, serial entrepreneurs, intrapreneurs, and owner managers growth objectives, ability to identify opportunities, attitude to innovation and risk, strategic vision.

1.2 Explain and discuss the importance of entrepreneurship and small businesses to the economy.

1.2.1 Explain the role and characteristics of micro, small and medium sized businesses in the economy in terms of relative size, turnover, numbers of employees, value of turnover, role in national economies, etc., using the EU (or alternative) definitions of these businesses. 1.2.2 Explain the importance of business start-ups and small firms to the economy sources of innovative products and services, generating new employment opportunities, wealth creation and revenue from taxation of profits.

1.3 Identify and explain the key differences between small businesses and large corporations.

1.3.1 Explain the differences and relevance of those differences between small and large firms in terms of:

structure & management

organisational culture

financial complexity and access to funding

skills requirements

attitude to staff training and development

the ability to manage red-tape and legal compliance

the ability of small firms to be flexible and respond

rapidly to market demand.

Learning Outcome 2 The learner will: Understand characteristics and motivations that influence the way

entrepreneurs operate, and the specific skills they use to succeed. Assessment Criteria The learner can:

Indicative Content

2.1 Identify the range of skills typically exhibited by successful entrepreneurs.

2.1.1 Describe the combination of entrepreneurship skills that typify entrepreneurs or differentiate them from other business managers opportunity spotting, developing networks, strategic vision, product commercialisation, ability to harness resources, tenacity, etc. 2.1.2 Describe several examples of successful international entrepreneurs to illustrate how the skills are employed, for example: Richard Branson (Virgin), Bill Gates (Microsoft), James Dyson (Dyson), Anita Roddick (Bodyshop), Michael Dell (Dell), Alan Sugar (Amstrad), Duncan Bannatyne (Dragons Den), Mo Ibrahim (Celtel), Wale Tinubu (Oando PLC).

2.2 Explain and discuss key arguments and interpretations relating to entrepreneurial personality and characteristics.

2.2.1 The key arguments:

Are entrepreneurial skills inborn in certain people? (The Made or Born Argument)

Can entrepreneurship be taught or learned? Is it a transferable management skill?

Does growing up in an entrepreneurial environment influence the potential to be entrepreneurial?

2.2.2 Characteristic traits of owner-managers:

the need for achievement

the need for independence

the locus of control (believe you can exercise control over your environment)

ability to live with uncertainty and take measured risks. 2.2.3 Characteristic traits of entrepreneurs:

opportunistic

innovative

self-confident

proactive and self-motivated

visionary with flair

willingness to take far greater risks and live with greater uncertainty.

2.2.4 Entrepreneurial motives:

Push (necessity-based) motives vs. pull (opportunity-based) motives.

Personal / life style motives desire to prove personal ability or achievement / make a mark / create personal wealth / gain social recognition or prestige / create a legacy for family future / competitive instincts.

Desire to develop and grow a strong and profitable business or business empire.

Desire to minimise unbalanced risk / dislike of imposed authority / desire to prove oneself.

2.3 Explain and discuss the concept of the need for family support to ensure survival of a new business.

2.3.1 Explain Family Support argument

The pros and cons of the argument that the strategic objectives of the business and the objectives of the family (or families) associated with the business must be aligned if the business is to succeed.

Learning Outcome 3 The learner will: Understand the various barriers faced by entrepreneurs when starting a new

business or when growing an existing small business. Assessment Criteria The learner can:

Indicative Content

3.1 Identify and explain the barriers to business start-up.

3.1.1 Describe and explain the various barriers that entrepreneurs may experience when starting a new business, including:

Barriers relating to the entrepreneurs own skills, knowledge and abilities, competence and confidence to successfully establish a new business.

Sales and marketing problems including issues of researching and understanding markets.

Financial problems including identifying and accessing appropriate forms of finance for start-up, and the need for possible security against borrowing.

Resource implications for the business, including both staff and physical resources.

Identifying essential issues of statutory and legal compliance, or registrations needed to operate the business.

3.1.2 Describe and explain the options an entrepreneur might have to overcome these barriers.

3.2 Identify and explain the barriers to growing an existing small business.

3.2.1 Describe and explain the various barriers that entrepreneurs may experience when expanding a small business, including:

Barriers relating to the entrepreneurs own financial position, renewed exposure to financial risk, or the need to give up some personal control in order to delegate to and trust new functional managers.

Barriers to market entry including the size of the market, problems of market penetration, numbers and relative strength of competitors, and costs of achieving market share.

Financial problems including identifying and accessing appropriate forms of finance to fund each stage of the

growth, especially for innovative / high-tech businesses.

Resource implications for the business, including expansion of both staff and physical resources.

Organisational issues relating to the impact that growth strategies may have on the existing staff and the culture within the business.

3.3 Identify and explain the importance of creating an innovative or enterprising culture to support small business growth.

3.3.1 Explain the meaning and the key features of enterprise cultures and how an organisation can benefit from creating such a culture. 3.3.2 Describe the ways in which an entrepreneur might seek to create an enterprising culture within a business, including:

Encouraging suggestions from staff for new ideas or innovations.

Allowing time and resources for staff to work on new ideas.

Creating a positive, supportive and blame-free environment in which staff feel valued.

Accepting failure as an acceptable risk, as a normal part of the process and without any blame.

Building innovation targets into the staff appraisal process.

Acknowledging or rewarding successful ideas.

Learning Outcome 4 The learner will: Understand the entrepreneurial motivations and influences that will affect the

ways in which a small business might develop and grow. Assessment Criteria The learner can:

Indicative Content

4.1 Define the traditional concept of the business life-cycle and its inherent weaknesses in explaining how businesses develop.

4.1.1 Explain the five-stage linear business life-cycle model and why it is unsatisfactory in the context of options for growth and development of small businesses. 4.1.2 Describe and explain the various growth and development options that a small firm might follow, including:

Failure to survive the start-up stage, and voluntary or involuntary closure.

Achievement of break-even and profitable trading levels and continuation as a lifestyle business without subsequent growth.

Continuation as a family business via succession planning.

Achievement of break-even and profitable trading levels and continuation to grow to maturity & decline.

Achievement of break-even and profitable trading levels and continuation to grow further.

Trade sale / merger / acquisition by another company, or a pre-defined exit strategy.

Stock market flotation.

Continued expansion and success.

4.2 Explain and discuss how the entrepreneurs own objectives and motivations will change at each stage of business development.

4.2.1 Explain how the personal objectives, business priorities and decision-making processes of entrepreneurs change as they progress from start-up, to relative stability, and subsequent growth. 4.2.2 Explain the importance of strategic thinking to the development of growth strategies in small firms as a factor that differentiates growth-firms from lifestyle businesses.

4.3 Explain and discuss the importance of succession planning in small firms.

4.3.1 Explain the purpose and process of succession planning in business, and in particular in family firms. 4.3.2 Explain and describe the problems that can occur relating to succession planning in small firms.

4.4 Explain and discuss the importance of exit strategies for entrepreneurs.

4.4.1 Explain what is meant by exit strategies and why it may be important for an entrepreneur to identify exit options in the early stages of planning a new business. 4.4.2 Describe some of the exit strategy options available to entrepreneurs (or investors in small firms), including:

trade sale to another company

sale of the company equity to an external investor to facilitate future growth

sale to a management buy-out

closure of the business and sale of assets.

Learning Outcome 5 The learner will: Understand the concepts of innovation and creativity, their importance to the

economy, and the roles that both play in entrepreneurship and business development.

Assessment Criteria The learner can:

Indicative Content

5.1 Define and explain the terms innovation and creativity.

5.1.1 Define the meaning of innovation and creativity and explain how they interrelate. 5.1.2 Describe the different aspects of innovation that comprise the innovation spectrum and explain the importance of breakthrough innovations in creating competitive advantage for businesses.

5.2 Explain and discuss the importance of encouraging technological innovation and high-growth

5.2.1 Explain the importance of high-tech and high-growth firms as contributors to economic wealth and the creation of new employment opportunities.

potential enterprises.

5.2.2. Explain the different requirements that high-growth and high-tech enterprises have compared with conventional lifestyle businesses specialist management teams, support for research and development, staged funding for growth. 5.2.3 Explain why high-tech businesses often need to access several stages of funding in order to grow e.g.

research & development funds

proof-of-concept funding

pre-market product development and patenting

market launch

seed funding for growth

venture capital for expansion etc. 5.2.4 Explain how business incubation and support programmes can improve the potential for high-growth and high-tech start-ups to succeed and grow.

5.3 Explain the importance of protecting intellectual property for innovations.

5.3.1 Describe the main types of property rights protection:

patents

patent licensing

copyrights

trade marks

brand names

industrial & commercial secrets. 5.3.2 Explain some of the limitations of IPR protection and why some entrepreneurs adopt a straight to market strategy:

Concern that competitors may copy a patent application.

Expensive, time consuming and requires specialist legal expertise.

Even 20 years protection may be insufficient to generate a satisfactory return on research and development costs.

Patents (and copyrights etc) are only meaningful if they can be successfully defended.

Learning Outcome 6 The learner will: Understand the political and economic issues facing entrepreneurs and

government support agencies, and identify the range of business support processes that governments may offer to encourage and support entrepreneurial development.

Assessment Criteria The learner can:

Indicative Content

6.1 Define and explain the political and economic factors that can influence the success of small enterprises.

6.1.1 Describe and explain some of the political and economic issues that impact on the operations of small businesses:

The conflicting need for regulatory controls and the disproportionate impact this has on the resources of small firms.

The tendency of governments to regard small enterprises as the solution to economic downturns, whilst simultaneously cutting back on support services for those businesses when it is most needed.

The lack of continuity of business support caused by changes in national and regional government.

The lack of coherent funding support e.g. for start-up grants, market research, and skills training.

The lack of affordable finance and loans for small firms due to the reluctance of commercial banks to lend to them.

6.2 Explain and discuss ways in which new and early stage enterprises can be encouraged and supported.

6.2.1 Identify and explain ways in which governments can create the right environment and fiscal conditions to encourage the development and growth of new enterprises.

Availability of business support expertise.

Access to loans and investment funding.

Enterprise friendly taxation policies.

Tax incentives to encourage risk-investment.

Start-up loans and grants for innovation development.

Encouraging collaboration with academic research.

Encouraging development partnerships with larger businesses.

Supporting international market access and export trade development.

6.2.2. Identify and explain the main types of business support agencies used by small firms, e.g:

Chambers of Commerce.

Local Enterprise agencies and partnerships.

Economic development agencies (public or private sector).

Inward Investment Agencies.

International Trade Agencies and overseas embassies.

Export Documentation and Export Credit services.

Private commercial banks.

6.3 Define and explain the issues relating to individuals and small enterprises that operate in the grey economy.

6.3.1 Describe the potential attractions and pitfalls of operating illegal part-time or full-time business activities without being registered as a business avoidance of paying taxes or complying with legal regulations etc. 6.3.2 Describe and explain the problems faced by governments with illegal or unregistered individuals and small firms operating in the grey economy lack of regulation and control, risk of unsafe or dangerous practices, loss of taxation to the economy, no recompense for unsatisfied customers, etc.

Assessment:

Assessment of this unit will be by a three hour examination. Recommended Reading:

- Burns, P., Entrepreneurship and Small Business, 3rd

ed. (2011), Palgrave Macmillan, Basingstoke (Core Text)

- Butler, D., Enterprise Planning and Development, (2006), Elsevier, Oxford - ABE Study Manual, Business Start-up and Entrepreneurship (2013)