NATURE & IMPORTANCE OF ENTREPRENEURS

Learning Objectives

1. To introduce the concept of entrepreneurship and its historical development.

2. To explain the entrepreneurial decision process.3. To identify the basic types of start-up ventures.4. To explain the role of entrepreneurship in economic

development.5. To discuss the ethics and racial responsibility of

entrepreneurship.

Entrepreneurial Careers & EducationOverall Objectives for a Course in Entrepreneurship

• Understand the role of new & smaller firms in the economy• Understand the relative strengths & weaknesses of different types of enterprises• Know the general characteristics of an entrepreneurial process• Asses the student’s own entrepreneurial skills• Understand the entrepreneurial process and product planning & development process• Know alternative methods for identifying and evaluating business opportunities and the factors that

support and inhibit creativity• Develop an ability to form, organize and work in interdisciplinary teams• Know the general correlates of success and failure in innovation and new venture creation• Know the generic entry strategies for new venture creation• Understand the aspects of creating and presenting a new venture business plan• Know how to identify, evaluate and obtain resources• Know the essentials of Marketing planning, Financial planning, Operations planning, Organization

planning, Venture Launch planning• Know how to manage and grow a new venture• Know the managerial challenges and demands of a new venture launch• Understand the role of entrepreneurship in existing organizations

Nature & Development of Entrepreneurship

• Entrepreneurship– The process of planning, organizing, operating, and

assuming the risk of a business.• Entrepreneur

– Someone who engages in entrepreneurship.• Small Business

– A business that is privately owned by one individual or a small group of individuals; it has sales and assets that are not large enough to influence its environment.

History of Entrepreneurship

Entrepreneur – Individual who takes risks and starts something new.

• Early period.

• Middle Ages.

• 17th Century.

• 18th Century.

• 19th and 20th Centuries.Entrepreneur as an innovator – An individual developing

something unique.

Definition of Entrepreneur Today

Entrepreneur– Someone who engages in entrepreneurship.– Individual who takes risks and starts something new.– An individual developing something unique.

Entrepreneurship– Process of creating something new and assuming the risks

and rewards.– Process of planning, organizing, operating, and assuming

the risk of a business.– The dynamic process of creating incremental wealth.

Definition of Entrepreneur Today

• Initiative taking.• Organizing & re-organizing of social & economic mechanisms

to turn resources & situations to practical effect.• Acceptance of risk of failure.

Entrepreneurship – the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risks and receiving the resulting rewards of monetary and personal satisfaction and independence.

Four basic aspects…1) Creation process, 2) Devoting necessary time & effort, 3) Assuming necessary risks, 4) Receiving the rewards.

SHEILA C. JOHNSONBlack Entertainment Television (BET)

The Job-Creating Power of Entrepreneurship

• First African-American woman to become a billionaire and first to own three professional sports teams.

• BET debuted in 1980.

• Johnson developed many of the network’s most successful shows like Teen Summit.

• Now a part owner in Mistral and CEO of Salamander Hospitality.

What causes a person to make this difficult decision?

Let us look at the entrepreneurial decision process next.

The Entrepreneurial Decision Process

Entrepreneurial Decision Process – Deciding to become an entrepreneur by leaving present activity.

Change from present lifestyle

Desirability of new venture formation

Possibility of new venture formation

NOTABLE ENTREPRENEURS The Job-Creating Power of Entrepreneurship

• French immigrant Élruthère Irènèe du Pont de Nemours started Du Pont in 1802.

• David McConnell borrowed $500 from a friend to start Avon.

• George Eastman started Kodak with a $3,000 investment in 1880.

• Jeff Bezos started Amazon.com with investments from his family and friends.

YOU’RE NEVER TOO YOUNG to be an ENTREPRENEUR

The Job-Creating Power of Entrepreneurship

• Leanna Archer – At 12 years old, she has her own hair care line.

• Alexis Holmes – Started baking for a fundraiser, now the 16-year-old owns her own bakery.

• Jack Short & Daniel Lyons – The two medical students started Factory Green, a carbon neutral apparel company, as undergrads.

• Mark Zuckerberg – Launched Facebook as a Harvard freshman.

YOU’RE NEVER TOO OLD to be an ENTREPRENEUR EITHER!

The Job-Creating Power of Entrepreneurship

Age Range Percent Identified as Self-Employed

55 to 59 28%60 to 65 36%66 to 70 42%

SMALL BUSINESS STATISTICS

• There are 26.8 million small businesses in the U.S.

• Of all nonfarm business in the U.S., almost 97% are considered small.

• Small businesses account for over 50% of the GDP.

• Small businesses generate 60-80% of new jobs.

• About 80% of U.S. workers first jobs were in small business.

BUSINESS FAILURES are LOWER THAN the REPORTS

• Owner closing a business to start another is reported as a “failure.”

• Changing forms of ownership is reported as a “failure.”

• Retirement is reported as a “failure.”

THEY DID WHAT?Famous Business Failures

• Tommy Hilfiger – First store went bankrupt

• Milton Hershey – First confectionary failed

• H.J. Heinz – Company went bankrupt six years after start

• Walt Disney – First film company went bankrupt

• Henry Ford – First two car companies failed

• L.L. Bean – Almost went bankrupt in first year

Types of Start-ups

• Lifestyle firm – a small venture that supports the owners and

usually does not grow.

• Foundation company – a type of company formed from

research & development that usually does not go public.

• High-potential venture – a venture that has high growth

potential and therefore receives great investor interest.

• Gazelles – very high growth ventures.

Role of Entrepreneurship in Economic Development • Job Creation

– Small business creates 80% of the new jobs in the U.S.– Industry sectors dominated by small business have added the most jobs.– Small business accounts for 38% of all jobs in high-technology sectors and for

96% of all U.S. exporters.

• Innovation– Historically, major innovations are as likely to come from small businesses as

from large firms.– Much of what is created in the high-technology sectors comes from start-up

companies.

• Importance to Large Businesses– Most products made by large manufacturers are sold to customers by small

businesses.– Small businesses as suppliers provide large firms with essential services,

supplies, and raw materials.– Large businesses outsource many routine business operations such as packaging,

delivery, and distribution to small businesses.

Role of Entrepreneurship in Economic Development

• Product-evolution process – process for developing & commercializing an innovation.

• Iterative synthesis – the intersection of knowledge & social need that starts the product development process.

• Ordinary innovations – new products with little technological change.

• Technological innovations – new products with significant technological advancement.

• Breakthrough innovations – new products with some technological change.

Role of Entrepreneurship in Economic Development

Three methods of bridging the gap between science and the marketplace.

• Government as an innovator – a government active in commercializing technology.Technology transfer – commercializing technology in laboratories into new products.

• Intrapreneurship – Entrepreneurship within an existing organization.

• Entrepreneurship

Entrepreneurial Careers & EducationTypes of Skills Required in Entrepreneurship

Technical Skills

• Writing• Oral communication• Monitoring environment• Technical business management• Technology• Interpersonal• Listening• Ability to organize• Network building• Management style• Coaching• Being a team player

Business Management Skills

•Planning & goal setting• Decision making• Human relations• Marketing• Finance• Accounting• Management• Control• Negotiation• Venture launch• Managing growth

Personal Entrepreneurial Skills

• Inner control / Discipline• Risk taker• Innovative• Change oriented• Persistent• Visionary leader• Ability to manage change

Ethics & Social Responsibility of Entrepreneurs

• Ethics – the study of whatever is right and good for humans.

• Business ethics – the study of behavior and morals in a business situation

or the study of business practices in the light of human values.

Ethics & Social Responsibility of Entrepreneurs

Faced with daily stressful situations & difficulties the possibility exists of the entrepreneur establishing a balance between ethical exigencies, economic expediency & social responsibility, a balance that may be different from that made by a business manager.

• A manager’s attitudes regarding CSR are related to the organizational climate , supportive of laws & professional code of ethics.

• An entrepreneur usually develops an internal ethical code dependent more on personal value systems.

The Future of Entrepreneurship

Entrepreneurship means different things to different people, even today. The common aspects are, however,

risk taking, creativity, independence & rewards.The future for entrepreneurship appears very bright indeed… as it is endorsed by

A) Educational institutions• Number of universities offering courses increasing each year• Faculty teaching it increasing each year• Several unique entrepreneurial education programs also increasing• Academic research program on entrepreneurship is followed by training

and education

The Future of Entrepreneurship

B) Governments• Increasing interest in promoting the growth of entrepreneurship• Entrepreneurs provided with govt. support like tax incentives, industrial

estates, communication, etc.• Lawmakers understand that new enterprises create jobs & increase

economic prosperity• Venture capital availability is increasing – both govt. & private – in part due

to measures like reduced capital gains tax, etc.

C) Society• Encourages entrepreneurial activity providing motivation & public support• Media provides impetus by reaching success stories far & wide

D) Corporations• Increasing interest in intrapreneurship for their own growth

NATURE & IMPORTANCE OF ENTREPRENEURSClass discussion

1. What should the content be for an Entrepreneurship course?

2. Should Ethics & Social Responsibility be a part of this course or is it just ‘politically correct’ to have it?

3. What is the role of Government in Entrepreneurship? Should only the market reward / punish inappropriate behavior?

4. What excites you about being an entrepreneur? What are your major concerns?