CHAPTER 6 ENTREPRENEURSHIP AND SMALL BUSINESS BOH 4

CHAPTER 6 ENTREPRENEURSHIP AND SMALL BUSINESS BOH 4 M 1

2 The Nature of Entrepreneurship

What is entrepreneurship? 3 Ø Entrepreneurship _________________ and ___________ behavior that results in the creation of new opportunities for individuals and/or organizations. Ø Entrepreneurs Risk-taking __________ who take actions to pursue ____________ and situations ___________ ____________or may view as problems or threats.

What is entrepreneurship? 4 Ø Entrepreneurs are … Founders of businesses that become large-scale enterprises. People who: Buy a local franchise outlet Open a small retail shop Operate a self-employed service business People who introduce a new product or operational change in an existing organization.

What is entrepreneurship? 5 Ø Typical characteristics of entrepreneurs: Internal locus of control High energy level High need for achievement Tolerance for ambiguity Self-confidence Passion and action-orientation Self-reliance and desire for independence Flexibility

What is entrepreneurship? 6 Ø Typical entrepreneurial backgrounds and experiences: Parents were entrepreneurs or self-employed. Families encouraged responsibility, initiative, and independence. Have tried more than one business venture. Have relevant personal or career experience. Become entrepreneurs between 22 and 45 years of age. Have strong interests in creative production and enterprise control. Seek independence and sense of mastery.

What is entrepreneurship? 7 Ø Reasons for women becoming entrepreneurs: Being motivated by a new idea. Doing for themselves what they were already doing for other employers. Seeking a pathway to opportunity.

What is entrepreneurship? 8 Ø Common myths about entrepreneurs: Entrepreneurs are born, not made. Entrepreneurs are gamblers. Money You is the key to entrepreneurial success. have to be young to be an entrepreneur. must have a degree in business to be an entrepreneur.

9 Entrepreneurship and Small Business

What is special about small businesses? 10 Ø Small businesses … Ones with _________employees. Independently owned and operated. Constitute 99 percent of American businesses. Are established by: Starting a new business. Buying an existing business. Buying and running a franchise.

What is special about small businesses? 11 Ø Entrepreneurship and the Internet … The Internet offers numerous entrepreneurial opportunities. ___________________ Businesses are limited only by personal creativity. Business-to-Business (B 2 B) ventures are possible.

What is special about small businesses? 12 Ø International business entrepreneurship … Provides strategic opportunities for small businesses. Creates exporting and importing opportunities. Supported through appropriate governmental and non-governmental organizations.

What is special about small businesses? 13 Ø Family businesses … Owned and financially controlled by family members. Largest percentage of businesses worldwide. Can provide an ideal business situation. Problems unique to family businesses: Family business feud Succession problem

What is special about small businesses? 14 Ø Reasons for small business failures: Lack of experience Lack of expertise Lack of strategy and strategic leadership Poor financial control Growing too fast Insufficient commitment Ethical failure

15 New Venture Creation

How does one start a new venture? 16 Ø Important issues in new venture creation: Does the entrepreneur have good ideas and the courage to give them a chance? Is the entrepreneur prepared to meet and master the test of strategy and competitive advantage? Can the entrepreneur identify a market niche that is being missed by other established firms? Can the entrepreneur identify a new market that has not yet been discovered by existing firms? Can the entrepreneur generate first-mover advantage by exploiting a niche or entering a market before competitors?

How does one start a new venture? 17 Ø Questions that keep a new venture focused on its customers … Who is your customer? How will you reach key customer market segments? What determines customer choices to buy or not buy your product/service? Why is your product/service a compelling choice for the customer? How will you price your product/service for the customer? How much does it cost to make and deliver your product/service? How much does it cost to attract a customer? How much does it cost to support and retain a customer?

How does one start a new venture? 18 Ø Life cycle of entrepreneurial firms _______________________________ Ø Each stage poses different managerial challenges and requires different managerial competencies.

How does one start a new venture? 19 Ø Basic items that should be included in a business plan: Executive summary Industry analysis Company description Product and services description Marketing strategy Operations description Staffing description Financial projection Capital needs Milestones

How does one start a new venture? 20 Ø Forms of legal ownership ___________________ General partnership Limited liability partnership __________________ Limited liability corporation (LLC)

21 How does one start a new venture? What resources support entrepreneurship and business development? Ø Ø Financing the new venture Sources of outside financing Debt financing Equity financing alternatives Venture capitalists Initial public offerings Angel investors Promoting entrepreneurship in large enterprises Intrapreneurship Skunkworks Ø Business incubators Ø Small Business Development Centers