ENTREPRENEURSHIP I
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Transcript of ENTREPRENEURSHIP I
ENTREPRENEURSHIP I
Babs Bailey Carryer
Fall 2002
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Goals of course
• To distinguish between an idea and a business opportunity– Inventor vs. entrepreneur
• To understand the value of and know how to conduct market research to help identify a market opportunity– Marketplace advantage(s)
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Entrepreneurship
• Why do we care?– Creation of jobs
»5% of young and fast growing companies create 77% of new jobs
»15% of them account for 94% of all these new jobs
»Fortune 500 employed 1 in 5 in 1980; now 1 in 14
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Entrepreneurship continued
• 70% of companies that are hiring ≤ 4 years old
• 70-80% of jobs are with companies ≤ 20 people
• > 95% of the wealth in America has been created by entrepreneurs since 1980
• Millionaires are self-made : > 80% accumulated their wealth in 1 generation
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PA entrepreneurship
• PA: > 200K businesses– 98% = small (< 500)
• + Almost 400K self employed• Women owned businesses
increasing at 65%– 78% nationwide
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Large companies
Small businesses
1920 2000
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New venture creation
0
200
400
600
800
1,000
1,200
1950s 1970s 1990s
Growth of New Ventures Per Year (in 000s)
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Small businesses• Only 3% of US businesses > $10 million• Responsible for half of all innovation in
the U.S.• Small businesses create 75%of all net
new jobs• Very small (< 20) = 50% of this growth• Represent over 99% employers; 52% of
workers
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Small businesses continued
• Provide 52% of private sector output
• Represent 96% of all exporters of goods
• Receive 28% of all federal contract $
• 53% are home based • 3% are franchises
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Business dissolution rates
Time Period All Firms Firms creating 1-4 jobs
After 2 years 44% 8%
After 4 years 50% 20%
After 6 years 60% 24%
After 8 years 71% 47%
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Survival rates
Firmsclosingin each
year
92 93 94 95 Firmssurviving
until96
All firms 7.3 6.7 5.8 4.7 75.5
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Entrepreneurship
• What is it?
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Entrepreneurship =
• Way of thinking• Spotting opportunity• Taking initiative• Implementation driven• Resource utilization• Acceptance of risk/failure
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Entrepreneur
One who brings resources, labor, material and other assets into combinations that make their value greater than before.
An entrepreneur is also one who introduces changes, innovations and a
new order.
Thinkers who do.
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Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by individuals who assume the major risks in terms of equity, time and /or career commitment providing value for a product or service. The product or service may or may not be new or unique but value must somehow be infused by the entrepreneur.
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Examples
• Nolan Bushnell - in 1972 founded Atari (electronic games) on $500. In 1976 he sold it to Warner Communications for $28 m
• Ross Perot started EDS with $1K• Michael Dell started selling computer
parts by mail order while a Freshman at the University of Texas
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The right time to start a business
Time
Market Size
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Characteristics• Focus• Drive • Energy• Self confidence• Don’t start by wanting to get rich but
to do something extremely well• Not seeking the trappings of success,
but success itself
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Characteristics continued
• Most have history of entrepreneurship• Sports • Expulsion or fired• 2/3 are 1st children• 40% were raised by self-employed
parents (vs. 18% of general population)
• Entrepreneurial test
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Entrepreneurs do
• Seldom invent and market unique products but build ventures around incremental innovations and modifications
• Enter industries in their growth phase, not infancy
• Find fulfillment in their work• Start more than one company
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Entrepreneurial know-how• Resource utilization - entrepreneurs
know how to do more with less• Selling ability• Recognize business opportunities:
– Markets in flux– Industries with low capital requirements– Customers will pay for customization– Unit sale can support direct sales effort
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Risk tolerance
• Entrepreneurs pick a relatively low level of risk and then come up with suggestions as to how to increase returns at the given level of risk
• Bankers pick a return that they aspire to and then come up with ideas to reduce the risk involved at that level
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Innovation• Entrepreneurs don’t have common
personalities but a commitment to innovation
• Entrepreneurship refers not to an enterprise’s size or age, but to a certain kind of activity
• Innovation is the effort to create purposeful, focused change in an enterprise’s economic or social potential
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How innovation occurs
• 1. Unexpected occurrences– IBM– Ford and Edsel
• 2. Incongruities– Alcon– Steel– Shipping
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Innovation continued
• 3. Process needs– Media - Linotype and modern advertising
• 4. Industry and market changes– Galt
• 5. Demographic changes– Woolworths vs Walmart
• 6. Changes in perception– Obsession with health in spite of
improvements
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7. New knowledge• Computer
– Binary arithmetic– Calculating machine in early 19th C– Punch card for the U.S. census of 1890– Audion tube, invented in 1906– Symbolic logic, created between 1910 -
1913– Programming/feedback concepts from
WWI efforts to develop anti-aircraft guns– The knowledge was available by 1918,
but the 1st computer appeared in 1946
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Effective innovations start small. They are not grandiose. They try to do one specific thing. It may be the elementary idea of putting the same number of matches in a matchbox. This simple notion gave the Swedes a world monopoly on matches for half a century.
Peter Drucker
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We succeeded (in the Normandy Invasion) because we didn’t know it was impossible.
Winston Churchill