EntrepreneurshipEntrepreneurship

Chapter 07Chapter 07

Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Learning ObjectivesLearning Objectives

LO1 Describe why people become entrepreneurs and what it takes, personally

LO2 Summarize how to assess opportunities to start a new company

LO3 Identify common causes of success and failureLO4 Discuss common management challengesLO5 Explain how to increase your chances of success, including

good business planningLO6 Describe how managers of large companies can foster

intrapreneurship and an entrepreneurial orientation

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EntrepreneurshipEntrepreneurship

Entrepreneurship The pursuit of lucrative opportunities by

enterprising individuals. Entrepreneur

Individuals who establish a new organization without the benefit of corporate sponsorship

Intrapreneurs New-venture creators working inside big

companies.7-3

EntrepreneurshipEntrepreneurship

Small business A business having fewer

than 100 employees, independently owned and operated, not dominant in its field, and not characterized by many innovative practices.

Entrepreneurial venture A new business having

growth and high profitability as primary objectives.

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Some Myths About EntrepreneurshipSome Myths About Entrepreneurship

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Some Myths About EntrepreneurshipSome Myths About Entrepreneurship

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Mega-Entrepreneurs WhoMega-Entrepreneurs WhoStarted in Their 20sStarted in Their 20s

7-7Table 7.2

Who is The Entrepreneur?Who is The Entrepreneur?

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Figure 7.1

The IdeaThe Idea

A great product, a viable market, and good timing are essential ingredients in any recipe for success.

What else ?

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What Business Should You Start? What Business Should You Start?

An entrepreneur should consider opportunities in: Technological

discoveries Demographic changes Lifestyle and taste

changes Screwed up industries

Economic dislocations

Calamities Government

initiatives and rule changes.

Skill, likes,success7-10

What Business Should You Start? What Business Should You Start?

Franchising An entrepreneurial alliance between a franchisor

(an innovator who has created at least one successful store and wants to grow) and a franchisee (a partner who manages a new store of the same type in a new location).

McDonalds Fees, rules, %

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The InternetThe Internet

Transaction fee model Charging fees for goods

and services. Subscription model

Charging fees for site visits.

Advertising support model Charging fees to

advertise on a site.

7-12

The InternetThe Internet

Intermediary model Charging fees to bring

buyers and sellers together.

Affiliate model Charging fees to direct

site visitors to other companies’ sites.

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What Does it Take, Personally? What Does it Take, Personally?

1. Commitment and determination 2. Leadership3. Opportunity obsession4. Tolerance of risk, ambiguity, and uncertainty5. Creativity, self-reliance, and ability to adapt6. Motivation to excel7. What else?

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Entrepreneurial StrategyEntrepreneurial StrategyMatrixMatrix

7-15Figure 7.2

Sources of CapitalSources of Capital

7-16

Success and Failure Success and Failure

Anticipate risk---Business Plan Consider the role of the economic environment Utilize business incubators Realize there are common management

challenges Going public with an initial public offering (IPO) Who, What, When, Where, Why and How

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Common Management ChallengesCommon Management Challenges

You might not enjoy it Survival is difficult Growth creates new challenges, new competitors It’s hard to delegate Misuse of funds, lack of funds Poor controls Mortality Employees

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Success and Failure Success and Failure

Business incubators Protected

environments for new, small businesses

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Going PublicGoing Public

Initial public offering (IPO) Sale to the public, for the first time, of federally

registered and underwritten shares of stock in the company

7-20

Increasing Your Chances of SuccessIncreasing Your Chances of Success

Opportunity analysis A description of the good or service, an

assessment of the opportunity, an assessment of the entrepreneur, specification of activities and resources needed to translate your idea into a viable business, and your source(s) of capital.

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Opportunity AnalysisOpportunity Analysis

7-22Table 7.3

PlanningPlanning

Business plan A formal planning step

that focuses on the entire venture and describes all the elements involved in starting it.

Capital people will demand and so should you.

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Outline of a Business PlanOutline of a Business Plan

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Outline of a Business PlanOutline of a Business Plan

7-25

Five Key FactorsFive Key Factors

The people, including you

The opportunity The competition The context Risk and reward

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Non financial ResourcesNon financial Resources

Legitimacy Networks Top-Management Teams Advisory Boards Partners

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Non financial ResourcesNon financial Resources

Legitimacy People’s judgment of a company’s acceptance,

appropriateness, and desirability, generally stemming from company goals and methods that are consistent with societal values.

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Non financial ResourcesNon financial Resources

Social capital A competitive advantage in the form of

relationships with other people and the image other people have of you.

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Building Support for your IdeaBuilding Support for your Idea

Clear the investment with your immediate boss

Make cheerleaders who will support your idea

Horse trading for support, time, money, and other resources

Get the blessing of relevant higher-level officials

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Checklist for Choosing IdeasChecklist for Choosing Ideas

7-31Table 7.5

Checklist for Choosing IdeasChecklist for Choosing Ideas

7-32Table 7.5

Building IntrapreneurshipBuilding Intrapreneurship

Skunk works A project team

designated to produce a new, innovative product.

Bootlegging Informal work on

projects, other than those officially assigned, of employees’ own choosing and initiative.

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Management Challenges in Management Challenges in IntrapreneurshipIntrapreneurship

Failing to foster innovation Overreliance on a single project Spread intrapreneurial efforts over too many

projects Politics Nay sayers

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Entrepreneurial OrientationEntrepreneurial Orientation

Entrepreneurial orientation The tendency of an organization to identify and

capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods or services

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Characteristics of Entrepreneurial Characteristics of Entrepreneurial OrientationOrientation

Allow independent action Innovativeness Risk taking Proactiveness Competitive aggressiveness Foster creativity

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