Becoming an Entrepreneur - Introduction To Business - ثاني ثانوي

7.2 Becoming an Entrepreneur Link to digital lesson www.ien.edu.sa Learning Outcomes Once you have completed this lesson, you should be able to: 7.2.1 Describe key motivations for entrepreneurship. 7.2.2 Recognize the importance of entrepreneurship in the economy. 7.2.3 Understand the resources available to Saudi entrepreneurs. Key Terms Innovation Improvement Focus on REAL LIFE Saleh turned his electronics hobby into a business. He had a small store where he bought and sold old electronic equipment. Saleh began his business with a small bank loan and money saved from working while in college. The business grew steadily and Saleh prepared a specific budget at the start of each year. He was able to spend his money on inventory, advertising, and improvements to his store. This year he used the same budgeting process that he had for the past four years. Based on last year's results, he estimated a sales increase of 8%. Even with the increased expenses, the budget projected another nice profit. The first two months of the year went well. Then the economy faltered and customers cut back on spending. Saleh's sales declined while his expenses continued to increase. Saleh studied his budget to determine why he had problems in the fifth year when his planning had been so successful in the past. LO 7.2.1 MOTIVATIONS FOR OWNING A BUSINESS Being an entrepreneur is incredibly rewarding but, as the case of Saleh highlights, it can be extremely challenging too. At times, you may be discouraged or apprehensive without the security of a regular job in an established company. So, before you decide to start a business, think carefully about the person you are and who you want to be, and how owning a business will help you become that person. In short, it's vitally important that you understand your personal motivations before you get into the small business world. Four fundamental reasons for owning a company are: 1. Personal fulfillment 2. Skills utilization 3. Independence 4. Financial rewards Entrepreneurial Success Lubna Olayan is very well known in the world of business. She was the CEO of the Olayan Financing Group, and now sits on the Board of the group. Her finance and managerial skills and experience were sought after in Saudi Arabian banking and finance. Search for more information about Lubna Olayan's success story and give a brief presentation of the most important positions she held, and her local and international participation. وزارة التعليم Ministry of Education 2024-1446 GE44.PATHWAYS.G02.ITB.SB.PP1.indb 215 7.2 Becoming an Entrepreneur | 215 08/05/2024 09:14

Examples of these motivations are shown in Figure 7-3. Motivations for Founding a Company Personal Fulfilment Skill Utilization Financial Independence Rewards Building Intellectually challenging Problem solving Learning personal new skills financial wealth Making a difference Sense of belonging and working together Being my own boss Controlling my own future Discretionary time and flexibility What would motivate you to own your own company? FIGURE 7-3 Entrepreneurial Motivations Personal Fulfilment Owning a business should provide significant personal fulfilment. All other motivations will not be enough in the tough times. At the core, the primary reason for owning your own business should be to create a product or service that improves life for others. Only when your company is about something more significant than yourself will you have a sense that what you are doing is meaningful and well worth the effort. ليم 216 Chapter 7 | Entrepreneurship and Small Business Management Ministry of Education 2024-1446

Skill Utilization Founding a company enables entrepreneurs to utilize a broad range of skills in carrying out their daily tasks. Entrepreneurs enjoy the process of creating a new business and all the challenges that come with it. Often, this will require problem solving and learning new skills, adding to the entrepreneur's breadth of abilities. Independence Many people have a strong desire to make their own decisions, take risks, and reap the rewards. They find it important to be free to make their own choices in their work. Business owners also have more freedom to decide when to work, when to be with family, and when to join community activities. Of course, independence does not guarantee an easy life. Most entrepreneurs work very hard and for long hours. They must remember that the customer is, ultimately, the boss. However, they do have the satisfaction of making their own decisions within the constraints required to build a successful business. Financial Rewards Like any other job or career, owning a business is a way to earn money and make ends meet. Of course, some entrepreneurs earn lots of money, others receive a modest income for their time and investment, while many entrepreneurs work night and day just to generate enough profits to survive. Ideally, the owner should be compensated for two basic activities: ● Payment for personal time in managing the company, coming in the form of a salary. A return for investing personal money in the business, which should relate to the amount invested and the riskiness of the business, coming in the form of cash dividends and any increase in the value of the business as it grows. CHECKPOINT No doubt, many entrepreneurs are highly motivated by the prospect of making money, which is totally appropriate. But it is important to understand that while some entrepreneurs do become rich quickly, the majority do not. A more realistic goal is to “get rich slowly." Wealth will hopefully come, provided the business is economically viable and the owner has the patience and determination to make it happen. What are the key motivations for owning a business? New Business Opportunities and Saudi Vision 2030 When Saleh was deciding whether to turn his electronics hobby into a business, he had to think about both the opportunities and the risks. Giving up a regular job and stable income is a difficult choice. As a reward, he will have personal control over his own business. He can take personal satisfaction if his idea develops into a successful, profitable company. Saudi Arabia is currently undergoing economic reforms, which provides an excellent opportunity for entrepreneurs with the right characteristics and determination to succeed. Saudi Vision 2030 promotes innovation and supports new business development. Many of its goals will require innovative solutions and the input of entrepreneurial minds to help accomplish them. Individuals are able to capitalize on this opportunity by starting a new business to meet its needs. They can compete with other businesses to sell their products and services and make a profit. Consumers are always looking for new and better choices to meet their wants and needs. Many opportunities begin with the creation of new or improved products and services. An innovation is an invention or creation that is brand new. An improvement is a designed change that increases the usefulness of a product, service, or process. وزارة التعليم Ministry of Education 2024-1446 7.2 Becoming an Entrepreneur | 217

Work as a TEAM New businesses usually need investments from other people. As a team, develop a list of questions you would ask an entrepreneur to determine if the new business would be one in which you would want to invest some of your money. Inventors often develop innovations. Those inventions may become the basis for a new business. The inventor may sell them to another company for development and sale. Recent innovations that may become successful products include miniaturized personal drones, self-driving cars, and 3D printers that allow individuals and small businesses to create products without a manufacturing process. In addition to inventions, innovators create new services that become the basis for a business. For instance, a whole range of e-services have sprung up in response to Saudi Vision 2030. Not all entrepreneurship opportunities emerge from those types of inventions and innovations. Many come from an improved design, more effective procedures, or greater attention to quality. Entrepreneurs are creative problem solvers. Those traits lead to ideas for improved products and services. What do innovation, invention, and improvement have to do with entrepreneurship opportunities? CHECKPOINT Where do entrepreneurship opportunities begin? LO 7.2.2 218 ليم ENTREPRENEURSHIP AND THE ECONOMY Entrepreneurship Across the Globe Entrepreneurship is one of the most important drivers of business around the world. Developed countries rely on entrepreneurship for economic growth and prosperity. The world's largest soft drinks manufacturers and restaurant chains, for instance, owe their rapid expansion and global presence to entrepreneurs who persevered with a goal and exported their products overseas. Many of today's most successful and well-known brands began as part-time projects, started by an enterprising individual in their garage or spare room. Many of these entrepreneurs suffered setbacks and failures on the way to success. These include global technology giants and computer manufacturers, popular social media platforms and online retailers. “Silicon Valley" in Northern California is home to many innovative tech companies that began in this fashion. Today the region attracts some of the world's finest talent, which in turn attracts more entrepreneurs looking for star players to join their new team. Many countries across the globe now have government departments devoted to promoting entrepreneurship. They enact laws and legislation to support entrepreneurship because they believe it plays an important role in achieving evolution and progress. 8 Chapter 7 | Entrepreneurship and Small Business Management Ministry of Education 2024-1446

Entrepreneurship in Saudi Arabia Entrepreneurship is a growing part of the Saudi economy. Small and medium-sized businesses is playing an integral part of the Saudi Vision 2030 strategy to broaden the private sector and diversify the economy. Clearly, it's acknowledged that small ventures can make a big difference. Saudi Arabia's rising profile in the Global Competitiveness Index highlights the culture of innovation and entrepreneurship. As of the close of Q1 2022, there are over 750,000 SMEs in Saudi Arabia - an increase of almost 15% on the previous year (Monsha'at Quarterly Report Q1 2022). These small businesses account for 99.5% of all businesses in the Kingdom. 31.8% of these Saudi SMEs are centered in Riyadh, 20.9% in Makkah, and 7.5% in the Eastern Province. Small businesses are responsible for a significant proportion of employment in Saudi Arabia. SMEs employed 4.9 million as of October 2021, with over 1.8 million of these based in Riyadh Province. SMEs by sector are illustrated in Figure 7-4. FYI Quoted in the 2022 SVC Impact Report, His Royal Highness, Prince Mohammed bin Salman said: "Start-ups and SMEs are key engines for economic growth, as they aim to create jobs, foster innovation and boost exports... we strive to support entrepreneurship." In the same report, the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz recognized "the country's determination to achieve its goals though diversifying the economy base and investing in economic variables to build new national gains in which the citizen is the goal and the source." FIGURE 7-4 Saudi SMEs by Sector (Q1 2022) وزارة التعليم Ministry of Education 2024-1446 Retail (exc motor vehicles): 14% Construction: 13% Food and beverage: 10.2% Rental and leasing: 9.8% Wholesale and retail (exc repair of motor vehicles): 7.3% Specialized construction: 7.2% Wholesale and retail (inc repair of motor vehicles): 5.4% Other personal service activities: 4.4% Transportation and logistics: 3.8% Other: 28.9% (Source: Monsha'at 2022) CHECKPOINT How important are SMEs to the Saudi economy? 7.2 Becoming an Entrepreneur | 219

Could a passion for quality food be the start of a viable small business? LO 7.2.3 RESOURCES FOR SAUDI ENTREPRENEURS Growth of the SME sector would be impossible without a dedicated infrastructure to support small businesses and promote innovation. An extensive range of services and departments are available to provide support to Saudi entrepreneurs and small businesses. FYI Did you know? According to the Monsha'at Quarterly Report Q1 2022, "33% of the Kingdom's adults have plans to open a business in 3 years" and "90% of Saudis see entrepreneurship as a good career choice." Monsha'at Monsha'at is the Saudi Arabian Small and Medium Enterprises General Authority, founded in 2016 to promote entrepreneurship and facilitate business. By 2030, it aims to raise the GDP contribution of Saudi SMEs from 20% to 35%. Its vision is "To empower SMEs sector to drive the growth of Saudi Arabia's economy and realize Vision 2030 objectives and beyond." Likewise, its mission is "Supporting the growth and competitiveness of SMEs by cultivating a growth-oriented entrepreneurial environment and leading collaboration with our strategic partners in public, private, and non-profit sectors locally and internationally." Monsha'at's extensive range of services include an online support center, which has provided assistance to over 20,000 SMEs. The store operation manual provides tools for the retail sector, outlining steps in the journey from the foundation stage, onto the initialization stage and through to the operation stage, providing advice on the legal requirements and additional support. Monsha'at promotes e-business solutions and other innovative technologies that support the growth of start-ups. Some of the high-tech specialisms supported by its Thakaa Centers include artificial intelligence (AI), data science, and cybersecurity. The Nawafth Monsha'at app connects entrepreneurs with specialists who can support them on their endeavors. Monsha'at's financial support services are discussed further in Chapter 8. 220ليم 20 Chapter 7 | Entrepreneurship and Small Business Management Ministry of Education 2024-1446

Center for Digital Entrepreneurship CODE Technological innovation in Saudi Arabia is also supported by the Center for Digital Entrepreneurship, whose aims include: "Providing and understanding of start-up culture and digital entrepreneurship programs." "Reinforcing, strengthening, and enabling the use of modern technology within start-up companies." NET KNOWLEDGE Q Visit the Monsha'at website to explore the range of services and applications that support the running of a small business. Review the types of resources that can be accessed directly online. Choose one of the options and write a short summary about the information available. "Accelerating the digitization of information and strengthening our contribution to the local efforts and outputs under the digital economy." Social Development Bank Another invaluable service for entrepreneurs is the Social Development Bank, which has two key objectives, tying in with Saudi Vision 2030: "Increasing the contribution of small and medium enterprises to the economy" and "Supporting small and medium businesses financially and promoting their growth and prosperity." Research, Development and Innovation Authority One of the most recently established organizations supporting SMEs is the Research, Development and Innovation Authority. The RDIA was approved in 2021, and set up in response to the requirements of Saudi Vision 2030. According to the website, "The authority assumes responsibilities for encouraging and supporting the RDI sector, coordinating the activities of institutions and scientific research centers, proposing policies, legislation, and regulations, and providing sector funding.” The RDIA runs a program of strategic workshops, to equip small businesses with the knowledge and expertise required to succeed in a global competitive marketplace. University Incubation Centers Many universities have their own incubation centers for helping budding entrepreneurs to develop their ideas and gain traction in a competitive marketplace. These often include services for individuals with no prior experience or qualifications in business or entrepreneurship. The KAUST Enterpreneurship Center, for example, offers a free 8-week online course that welcomes all entrepreneurs regardless of level of experience. وزارة التعليم Ministry of Education 2024-1446 CHECKPOINT What support services are available to Saudi entrepreneurs and SMEs? 7.2 Becoming an Entrepreneur | 221

7.2 ASSESSMENT Key Concepts Determine the best answer. 1. Which of the following is not one of the four fundamental reasons for owning a company? a. Personal fulfilment b. Skill utilization c. Becoming famous d. Independence 2. True or False. University Incubation Centers help entrepreneurs to develop their ideas and gain traction in the marketplace. 3. True or False. The services of Monsha'at are provided to support large multi-national corporations and state-owned businesses. Make Academic Connections 4. Communication Interview a small business owner who has operated his or her business for at least three years. Determine the factors that have contributed to success as well as the major challenges that have been faced. Prepare a presentation based on your interview. 2 Chapter 7 | Entrepreneurship and Small Business Management 222 ليم Ministry of Education 2024-1446

LIFE/WORK SKILLS SUPPORTING ENTREPRENEURSHIP BY PROVIDING SOCIAL CAPITAL While social media has connected people across the globe, it is not a substitute for traditional networks and working relationships established over time in the "real" world. Having existing contacts is a great start, but business networking is an invaluable skill that can be honed with practice. Good contacts can help a venture obtain investment and technology resources. But they can also connect the enterprise with a social network that provides access to a wide range of resources beyond the reach of individual team members. A social network is the web of relationships that a person has with other people, including friends from school or college, former employees and business associates, and contacts through community organizations and the local Mosque. But it doesn't end there. A friend from college may not have what you need, but he or she may know someone who does. It is often said that business is all about relationships, a principle that is not lost on successful entrepreneurs. And the power of social networks is expanded tremendously as well-connected people are added to the management team. A healthy system of personal relationships can help a small business access the knowledge and resources it needs to get established and grow. Social networks can be especially helpful in jump-starting sales. Reputable firms may hesitate to do business with a new company lacking a proven track record. But influential advocates can use their pull to help a small business acquire high- profile customers, which may persuade others to give a relatively unknown company a shot at their business, too. For an entrepreneur, having a healthy social network with useful connections can be critical in establishing a solid reputation. Small business owners are finding that they can use networking tools to attract customers, connect with peers, and share advice about common problems. Building an active and robust social network can increase their social capital - the advantage created by an individual's connections within a network of social relationships. However, this advantage doesn't develop overnight. It takes years to build social capital, and the building blocks that support it are well known-being reliable as a friend, being fair in your dealings, and being true to your word. Think Critically 1. Why do you think it is important to build networks with other business professionals in the "real world," and not just online? 2. Think about the networks you have already built in your social life, at school, or other community groups. Do you know people with experience who you can call upon for advice? For example, someone who can help with computer literacy or learning another language? Likewise, do you have skills or expertise that you can share with others in your community? وزارة التعليم Ministry of Education 2024-1446 7.2 Becoming an Entrepreneur | 223