Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 1 Chapter 5...

Copyright © 2005 by South-Western, a division of Thomson LearningAll rights reserved

1

Chapter 5

Entrepreneurship


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Learning Objectives

• Explain the role of entrepreneurs and how external factors impact their ventures.

• Describe the personal attributes that contribute to entrepreneurs’ success.

• Outline the planning essentials for potential entrepreneurs.

• State the role of intrapreneurs and how organizations can foster intrapreneurship.


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Entrepreneurs and External Factors

• Entrepreneurs create something for the purpose of gain while accepting the risk and uncertainty associated with their ventures.

• Entrepreneurs typically incorporate at least one of the following:– Something new– Something better– An underserved or new market– New delivery system or distribution channel


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Entrepreneurs and External Factors (cont.)

• Business incubators are organizations designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services.

• Common features found in business incubators include:– An existing building is used to accommodate tenants– Tenants are offered below-market rent and flexible lease

arrangements– Incubator provides shared services– Incubator fosters psychological or moral support


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Entrepreneurs and External Factors (cont.)

• Small business owners refer to anyone who owns a major equity stake in a company with fewer than 500 employees.

• A family business is one owned and managed mostly by people who are related by blood and/or marriage.– Each of these may or may not be considered an

entrepreneur


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Common Attributes of Successful Entrepreneurs(adapted from Figure 5.1)

PersonalAttributesPersonal

Attributes• Need for Achievement• Desire for Independence• Self-Confidence• Self-Sacrifice

• Need for Achievement• Desire for Independence• Self-Confidence• Self-Sacrifice

Technical ProficiencyAttributes

• Varies by Type of Business Started

ManagerialCompetencies Attributes

ManagerialCompetencies Attributes• Strategic Action• Planning and Administration• Teamwork• Communication• Self-Management

SuccessfulEntrepreneurs

SuccessfulEntrepreneurs


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Planning Essentials for Entrepreneurs

• A business plan describes the basic idea that is the foundation for the start-up and outlines how that idea can be turned into reality.– One challenge is to avoid exaggeration in development of

the business plan

• Deciding how to start the business.– Buy Strategy

– Start-Up Strategy

– Franchise Strategy

– Other Strategic Options


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Planning Essentials for Entrepreneurs (cont.)

• Assessing Affordable Loss– Principle of affordable loss – the conscious determination of

the amount of resources entrepreneurs are willing to commit to an idea, which, in turn, influences the choice of strategies and methods needed to generate early revenues

• Finding Funds– Common sources include:

The entrepreneur and other members of team, family, and friends.

Financial institutionsVenture capital firmsBusiness angelsBusiness incubators


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Factors That Favor a Global Start-Up(adapted from Figure 5.2)

Foreign Financing is Better

Foreign Financing is Better

DomesticMarket is Too

Small to SupportExpenses

DomesticMarket is Too

Small to SupportExpenses

HumanResources Are

Dispersed AmongCountries

HumanResources Are

Dispersed AmongCountries

ForeignCompetition WillQuickly Enter the

Market

ForeignCompetition WillQuickly Enter the

Market

TargetCustomers

Require an InternationalPresence

TargetCustomers

Require an InternationalPresence

DomesticInertia Could Impede

Later Efforts toInternationalize

DomesticInertia Could Impede

Later Efforts toInternationalize

GlobalStart-UpGlobal

Start-Up


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Recommendation to Ensure a Successful Family (adapted from Figure 5.3)

Commitment toResolving Conflicts

Quickly

Clear Job ResponsibilitiesAnd Authority Relationships

Explicit Hiring CriteriaFor Family Members

Plan for ManagementTransitions

Use of OutsideAdvisors/Directors


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Corporate Intrapreneurship

• Corporate intrapreneurship refers to the fostering of entrepreneurial behavior within established companies to product growth and profits.

• An intrapreneur is someone in an organization who champions turning new ideas in profitable realities.


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Fostering Intrapreneurship

• Organizations that foster intrapreneurship have the following characteristics.– Commitment from senior management

– Flexible organizational design

– Autonomy of the venture team

– Competent and talented people

– Incentives and rewards for risk taking

– An appropriately designed control system


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Fostering Intrapreneurship

• Skunkworks are islands of intrapreneurial activity within larger organizations.

Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 1 Chapter 5...

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