Unit One Entrepreneurship What is an Entrepreneur Name
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Unit One Entrepreneurship
What is an Entrepreneur? Name an Entrepreneur. n Give three reasons for becoming an Entrepreneur. n List three skills or abilities needed to be your own boss. n Are you now, or have you ever been, an Entrepreneur? n Is being an Entrepreneur a career move? n
Unit 1 Vocabulary n n n n Achiever Brainstorm Business Broker Business Cycle Business Failure Capital Competition Corporate Venture Discontinuance Demand Demographics Diminishing Marginal Utility Economics n n n n Elastic Demand Entrepreneurial Entrepreneurship Enterprise Zones Equilibrium Factors of Production Foundation Skills Free Enterprise System Franchisee Franchisor Goodwill Goods
Unit 1 Vocabulary n n n n Gross Domestic Product Investment Innovation Inelastic Demand Market Structure Monopoly Need New Venture Organization Niche Oligopoly Online Business Opportunity Outsourcing Profile n n n n Profit Role Model Scarcity Services Specialty Magazine Start-up Resources Supply Strategic Alliance Trade Show Trade Magazine Values Venture Want
Unit 1 Essential Question 1 n What are the concepts and processes associated with successful entrepreneurial performance?
Essential Question 1 A (MKT-EN-1 A) n What is entrepreneurship?
Entrepreneurship • Entrepreneurship: The process of recognizing an opportunity, testing the market, and gathering resources necessary to go into business. • Entrepreneurial: Acting like an entrepreneur or having a similar mind set.
Entrepreneurship • Entrepreneur: An individual who undertakes the creation, organization, and ownership of a business venture. They accept the risks and responsibilities of business ownership to gain profit and personal satisfaction. • Venture: A new business undertaking that involves risk.
Essential Question 1 B (MKT-EN-1 B) n What are the characteristics of successful entrepreneurs?
Why Be An Entrepreneur? Rewards • Being Your Own Boss • Doing Something You Enjoy • Having the Opportunity to be Creative • Freedom to Set Your Own Schedule • Controlling Your Salary • Contributing to the Community Costs and Risks • Working Long Hours • Having an Uncertain Income • Being Fully Responsible • Risking One’s Investment
Persistent • Willing to work until job is done, no matter what it takes.
Creative • Looks for new ways to solve old problems.
Responsible • Takes responsibility for decisions and actions.
Inquisitive • Conduct research and asks questions to solve problems.
Goal-oriented • Know where to go and how to get there.
Independent • Sets own agendas and schedules.
Self-demanding • Have high expectations of themselves.
Self-confident • Believe in themselves.
Risk-taking • Are not reckless. Looks for opportunity with a reasonable chance of success.
Restless • Once their goals are achieved, they start looking for new challenges.
Action-oriented • Doers as opposed to spectators.
Enthusiastic • Energetic and passionate about their pursuits.
Foundational Skills • Communication Skills – Person to person, telephone, and written skills. • Math Skills – Basic math, record keeping, budgeting, and preparing financial statements. • Problem-solving Skills – Able to use logic and creative solutions. • Decision-making Skills – Able to choose the best option from among many.
Human Relations Skills • Teamwork Skills – Coordinate and manage work teams, respecting others, being flexible, leadership. • Social Skills – Able to interact well with employees, customers, and vendors.
Technical Skills • Computer Skills – Understands the use of technology, word processing, spreadsheet, database, e-mail, and the Internet.
Business Skills • Basic Business Skills – Understands how the economy works, and fundamental concepts of finance, marketing, and management. Keeps up to date on current events. • Organizing and Planning Skills – Uses logical thinking and time management skills. • Adaptability Skills – Able to change with the constantly changing business and economic environment.
Essential Question 1 C (MKT-EN-1 C) n What are the reasons for planning an entrepreneurial businesses?
Home-based Businesses • 6 million in mid-1980’s • 41 million in late 1990’s
Outsourcing • Outsourcing: Contracting with another company for services. – Allows greater efficiency, saving time and money. – Decreases overhead investment or debt. – Lowers regulatory compliance burdens. – Makes companies more attractive to investors because more capital is sent directly into money making activities.
Service Businesses • Services: Intangible things that businesses do for us that enhance our lives. • Fastest growing business segment in the U. S. Economy today.
Internet Businesses • Online Business: A business that conduct business by means of the internet. • Small businesses that use the internet have grown 46% faster than those who do not. • www. prairietumbleweedfarm. com
Essential Question 1 D (MKT-EN-1 D) n What is the entrepreneurial discovery process?
Recognizing Opportunity n Entrepreneurial thinking is about generating ideas and recognizing opportunities. Creativity and Innovation: Creativity is the result of innovation: finding new ways of doing things. n Idea vs. Opportunity: n Ideas are generated though creative thinking. n Opportunity is an idea that has commercial value. n Many opportunities come from fulfilling a niche: a small specialize market. n
Recognizing Opportunity n Finding opportunity by understanding industry: An industry is a grouping of businesses with a common purpose. n The marketplace and economics of every industry is constantly changing which creates profitable niche opportunities. n Knowing the inner workings of the industry and the industry trends allows the entrepreneur to identify opportunity. n Learn and understand what the customer problems are and create a business to fix them. n
Essential Question 1 E (MKT-EN-1 E) n What are current global trends and opportunities?
Global Trends n Diminishing trade barriers n NAFTA and CAFTA n EU n Most n favored nation status Advances in technology have made the world “smaller”
Global Trends n Global Opportunities n Asia n Enormous and diverse continent n China is the number one importer of US goods n Latin America n Diverse community of nations with many cultural differences n Includes traditional as well as modern cultures n Tends to make buying decisions based on family needs as opposed to individual needs
Global Trends n Europe n Entrepreneurship and risk-taking are not highly encouraged n Market difficult to define due to no common European culture n Great cultural differences between individual nations n High degree of socialism affects the thinking toward individual wealth as well as the distribution of wealth, individualism and power n Market segmentation a must to sell similar products across national borders
Global Trends n Regions n Russia, in transition Eastern European nations, African nations, and the Middle East n Very risky opportunity due to unstable governments and US politics and policies n Must thoroughly understand culture and business practices n How currency is exchanged and handled may affect profits
Essential Question 1 F (MKT-EN-1 F) n How are opportunities for business creation determined?
Learn to Recognize Opportunity • Think Creatively about Opportunity • Think outside the box. • Get from here to there. • Work with unrelated items.
Essential Question 1 G (MKT-EN-1 G) n How are ideas for business generated?
Creative Sources of Ideas • People Watching • Demographic Changes – Characteristics of human populations and population segments. • Become an Insatiable Reader • Your Own Experiences • Hobbies – many hobbies can be turned into successful ventures.
Creative Sources of Ideas • Work – Look for opportunities at your work. – Is there room in the market for a similar business? – Are there gaps in the network of suppliers? – Is there a need for services which are not being provided?
Creative Sources of Ideas • Consult Outside Sources – Trade magazines – Specialty magazines – Newspapers
Creative Sources of Ideas • Consult Outside Sources - Trade shows and exhibitions - Internet - Government agencies
Starting Versus Buying a Business • Being creative and opportunistic does not always mean that you must start a business from scratch. You may also enter a family business or buy an existing business.
Entering a Family Business Up-side Down-side · Families have a greater · Owners can never get degree of trust and away from their business. togetherness. · Families have difficulty · The family team can viewing the venture and achieve more than others. its problems objectively. · Only one-third of family run businesses survives the second generation.
Buying an Existing Business Positives · · · Has a location and a physical plant. Has experienced employees. Has goodwill – loyal customer base. Has established procedures in place. Has substantial inventory. Has established trade credit.
Buying an Existing Business Negatives · Most businesses are put up for sale because they are not successful. · The business may have a poor reputation. · Inventory may be dated and equipment or facilities may need repairs. · Employees may lack the skills necessary to keep the business competitive.
Buying an Existing Business Franchise · A legal agreement to begin a new business in the name of a recognized company. · Franchisee – The buyer of a franchise. · Franchiser – The seller of a franchise.
Buying an Existing Business Franchise • Has the same positives as other existing businesses with different negatives. - Purchase or initial investment costs are very high. - You may have to pay additional costs for advertising. - You may have to pay a percentage of your annual sales. - Lack of freedom. Must operate and run the business by the franchiser’s guidelines.
Unit 1 Essential Question 2 n What are the fundamental concepts of business ownership?
Essential Question 2 A (MKT-EN-2 A) n What is the relationship of competition to our private, free enterprise system?
Resources • Resources: All the things used in producing goods and services. Also known as factors of production.
Factors of Production • Land: Everything contained in the earth or found in the sea.
Factors of Production • Labor: Full and parttime workers, managers, public workers and professional people.
Factors of Production • Capital: Money as well as buildings, equipment and tools needed for the operation of a business.
Factors of Production • Entrepreneurship: Skills of the people who are willing to risk their time and money to run a business.
Scarcity • Scarcity: Condition that exists when people’s wants and needs exceed their resources.
Economic Systems 1 What goods and services should be produced? 2 How should the goods and services be produced? 3 For whom should the goods and services be produced?
Economic Systems • Market Economy: No government involvement in economic decisions. – Consumers decide what should be produced with their purchases. – Businesses decide how products will be produced. – People with money decide for whom products should be produced.
Economic Systems • Command Economy: The government makes all economic decisions. – The dictator or central committee decides what should be produced. – The government decides how products will be produced because it runs all businesses. – The government decides for whom products should be produced.
Economic Systems • Mixed Economy: No economy is 100% market or command therefore, to what degree or how much does the government get involved in the market?
Free Enterprise System People have the right to make economic choices. • Can choose what products to buy. • Can choose to own property. • Can choose to start a business and compete with others.
Competition: The struggle between companies. • Forces companies to become efficient. • Keeps prices down and quality up.
Types of Competition • Price Competition: Goes on the assumption, all things being equal, customers will buy the product that is lower in price. • Non-price Competition: – Quality – Service – Location – Reputation
Risk & Profit • Risk: Potential for loss or failure. – As the potential for earning gets greater, so does the risk. • Profit: Money left after all expenses. – Main incentive of a free enterprise system. – Risk of failure serves as a positive function to encourage quality.
Market Structures • Market Structure: Refers to the nature and degree of competition among business operating in the same industry. The market structure will affect the market price. • Market structure groupings: – Perfect Competition – Monopolistic Competition – Monopoly – Oligopoly
Essential Question 2 B (MKT-EN-2 B) n What are the effects of competition on buyers and sellers?
Goods and Services • Goods and services are the products our economic system produces to satisfy customer needs and wants. – Goods: Tangible products. – Services: Intangible products. – Needs: Basic requirement for survival such as food, water, clothing, and shelter. – Wants: Anything that is not needed for survival.
Supply and Demand • Demand: The amount of goods and services that consumers are willing and able to buy.
Supply and Demand • Law of Demand: Price is inversely proportional to demand. • P D P R I C E QUANTITY
Supply and Demand Types of Demand • Elastic: A small change in price causes a significant change in demand. • Inelastic: Any change in price has little to no effect on demand. – No acceptable substitute. – Price change is small relative to buyer income. – Product is a perceived necessity.
Supply and Demand • Supply: The amount of goods and services that producers are willing and able to provide.
Supply and Demand • Law of Supply: Producers are more willing to supply products in greater amounts when the price is high. • P S P R I C E QUANTITY
Supply and Demand • Surplus: Occurs when quantity supplied exceeds quantity demanded. P R I C E QUANTITY
Supply and Demand • Shortage: Occurs when quantity demanded exceeds quantity supplied. P R I C E QUANTITY
Supply and Demand • Equilibrium: Occurs when the amount of product supplied equals the amount of product demanded. P R I C E QUANTITY
What Entrepreneurs Contribute • Entrepreneurs are the mechanism by which the economy turns demand into supply. • Entrepreneurs are a principal source of venture capital. • Entrepreneurs provide jobs. • The most successful entrepreneurs change society. • Entrepreneurs are the catalyst that make economic progress happen.
Unit 1 Essential Question 3 n What are the concepts, systems, and tools needed to gather, access, synthesize, evaluate, and disseminate information for use in making business decisions?
Essential Question 3 A (MKT-EN-3 A) n How is technology used in marketing information management?
Technology in Market Research methods include: documentation, observation, experiment, test, simulation and market investigation n The main research tool is the questionnaire. n • Pen and paper method • Online formats
Technology in Market Research n Point of Sale (POS) data gathering include: • Name • Zip Code • Address • Telephone number n Internet data gathering methods include: • Website tracking including app tracking • Social media data mining
Technology in Market Research n Geographical Information Systems (GIS) is used in the site selection analysis. • Analyzes different factors such as infrastructure, physical capital, knowledge capital, customer profiles and geodemographic information • Answers the question “where should we our new business, new store, or new distribution service? ”
Technology in Market Research n Experimental technologies being developed include: • Neuroscience: Measures brain waves and other biometric measures like temperature, blinking, breathing, and pulse to assess reactions to brands, logos and experiences on a continuous basis. • Telepresence: Allows for focus groups to be conducted using multiple locations in a virtual room.
Technology in Market Research n Experimental technologies being developed include: • Eye tracking: Measures how ad elements are perceived, retained and recalled to explain how advertising is processed or how consumers process packaging in stores. • Implicit association analysis: Uses reaction times or accuracy on completing tasks to measure the motivational power of logos or brand names.
Essential Question 3 B (MKT-EN-3 C) n What options do businesses have to obtain market research data (i. e. primary and secondary research)?
Types of Data Primary data: Data obtained for the first time and used specifically for the particular problem or issue under study. n Secondary data: Data already collected for some purpose other than the current study. n
Data Collection n Primary data can be obtained by: - the survey method - the observation method - the experimental method n Secondary data can be obtained by a number of agencies. - Internet Sources - US and Government Sources - Specialized Research Companies - Business Publications and Trade Organizations
Essential Question 3 C (MKT-EN-4 H) n What is the market segment for your proposed business?
Conducting Market Research The Research Process • • • Define information needs. Collect secondary data. Collect primary data. Organize the data. Analyze the data. – Is there a market for the product? – How big is the market? – Will the industry support the business?
Analyzing the Industry • Industry: A collection of businesses with a common line of product or service. • Factors of an Industry – Carrying Capacity: The industry’s ability to support new growth. Is there room for a new business like yours?
Analyzing the Industry • Factors of an Industry – Uncertainty: The degree of stability or instability in an industry. Industries that are fast-changing present a high degree of uncertainty. – Complexity: The number and diversity of contacts that a business must deal with. The more suppliers, customers, and competitors, the more complex the business environment.
Analyzing the Industry • Factors of an Industry – Stage of Life: Where the business is in the business cycle; birth, growth, maturity, or decline. The business owner must develop business strategies that are compatible with the stage of the business’s life.
Analyzing the Industry • Are there Barriers to Entry? Things that keep new business from entering the industry or succeeding in the industry.
Analyzing the Industry • Barriers to Entry – Economies of Scale: Big businesses can produce products more quickly and cheaper than small businesses. · Can be overcome by finding a niche that no one else serves.
Analyzing the Industry • Barriers to Entry – Brand Loyalty: Occurs when customers buy products from companies they know. · Can be overcome by increasing your brand awareness, which requires money for advertising.
Analyzing the Industry • Sources of Supply – Must have access to affordable sources of inventory, raw materials, and goods. · Supplier location · Trade discounts · Alternate sources
Analyzing the Industry • Technology – Allows companies to improve their business process. · Maintains competitiveness · Must be periodically updated
Analyzing the Industry • Competition – Know the market share: the portion of the total sales generated by all the competing companies in a given market. – Is there a niche: a small segment of the market, usually based on customer needs. – Identify the market position: a specific market niche for a product.
Analyzing the Industry • Competition – Determine the competitive advantage: a feature that makes a product more desirable than its competitor’s products. – Gather competitive intelligence: • Visit the competitor’s outlets. • Buy your competitor’s products. • Search the internet and your competitors website.
Identifying Your Customers • Market: A group of all potential customers (people or businesses) who share common needs and wants, and who have the ability and willingness to buy the product. • Target Market: The segment of the market that the company will focus its efforts. • Market Segmentation: Dividing the total market into smaller groups of people who share specific needs and characteristics.
Essential Question 3 D (MKT-EN-3 D) n What are the characteristics of effective data collection instruments?
Data Sampling n When designing a survey, marketers must determine the number of people to include in their survey. • Population: The entire target group of people under study. • Sample: Part of the target population that represents it accurately. • Bias: Inaccuracies introduced into the results due to errors in measurement, coverage, and nonresponsive. • Error: Determined by the sample size with respect to the population. The greater the sample size, the lower the margin of error.
Data Sampling 1. 2. 3. Provide clear and detailed instructions for completing the data collection instrument. Provide definitions and clarifying information for individual items and terms. Make definitions of data elements consistent with standard definitions and analytic conventions when appropriate and feasible.
Data Sampling 4. 5. 6. 7. Determine whether another organization is already collecting data related to the items you plan to collect. Any deviations from accepted usage should be explained. Indicate subpopulations to include and/or exclude in the reporting. Be clear about the date or time period the survey should reflect.
Data Sampling 8. 9. 10. If more than one analytic convention is commonly used for a given measure, indicate the preferred convention. Use standard language. Avoid jargon and abbreviations. Keep questions short and simple. Make categories as concrete as possible. Use simple and exact terms.
Data Sampling 11. 12. If response categories are supposed to be mutually exclusive and exhaustive, make sure all possible categories are included on the survey. If in doubt about whether categories are exhaustive, include a response option of "other, please specify. " If data may be unknown or missing, be sure to include an “unknown/missing” option.
Data Sampling 13. 14. 15. Provide a “not applicable” response for questions that may not be applicable to all respondents. Do not combine two separate ideas inappropriately and request a single response. Design the item sequence of the survey such that it increases the respondent's ability to complete the survey.
Data Sampling 16. 17. Keep topic-related questions together and provide transitions between topics. Be sure that return address, fax number, and contact information are included on the form itself as well as in accompanying letter. Consider including an addressed, postage-paid envelope to return the survey.
Essential Question 3 E (MKT-EN-3 F) n What techniques are used to process marketing information?
Processing Marketing Information n Information processing refers to the collection, storage, manipulation, distribution and presentation of data. • • • Analyzed by using computers or by manual methods. Databases and spreadsheets make it very easy to analyze information. Information can be presented in line graphs, histograms, bar charts, pie charts, etc. so it is easy to make sense of the information.
Scientific Method for Creating a Business n Entrepreneurship is an art. It’s also a science. • The reason there are so few successful entrepreneurs is because there’s no single factor for success -- it takes a great idea, a network of resources and a ton of hard work and time to create a lasting, profitable business.
Scientific Method for Creating a Business n The scientific element of entrepreneurship is the one that can make or break the logical foundation of your company. You need to know who your customers are, what they want and how to give it to them if you want to have a shot at success.
Scientific Method for Creating a Business n 1. Ask a question. • Before you start looking for answers, you need to know what your question is. For business owners, it’s an exploration of possibilities for product development and marketing.
Scientific Method for Creating a Business n 1. Ask a question. • What exactly does your customers need? Your business should be solving a problem for your customers. n If you already have an idea, write it down. If you can’t form it in words, you might not have a problem/solution idea strong enough to fuel a successful business. n
Scientific Method for Creating a Business n 1. Ask a question. • Make something people want – NOT YOU! You must talk to your customers n You have your customers use your product n • Check your ego – “It does not matter what YOU think, it only matters what your customers think. ”
Scientific Method for Creating a Business n 1. Ask a question. • If you’re trying to market your product, ask why your customers would be interested in buying your product or engaging with your brand. n n n What will make someone interested in engaging with you? What elements of your brand are most important to display? What media are used by your target audience?
Scientific Method for Creating a Business n 2. Research your subject. • Find as much information as you can on the subject. Talk to potential customers n Talk to and visit competitors. n • Take your research seriously. Find out what makes your target market tick. n Hold a focus-group meeting. n Use existing market research to build a full perspective. n
Scientific Method for Creating a Business n 2. Research your subject. • Your competitors will provide valuable information n n Figure out what they’re doing. How are they doing it? Most importantly, how you can differentiate yourself from them? What is your unique value proposition? What marketing and branding conventions have worked for similar companies in the past.
Scientific Method for Creating a Business n 3. Create a hypothesis. • For business owners, the hypothesis is a business plan. • Hypotheses formalize your assumptions. Acknowledge that your assumptions are, in fact, assumptions. n Do not continue along an incorrect path never realizing your expectations are based on preconceived notions. n
Scientific Method for Creating a Business n 3. Create a hypothesis. • Avoid “Confirmation Bias” - Only paying attention to those that like your product/idea. • Take the time to constantly test, challenge and refine your assumptions, you’ll end up with an accurate and functional model for your business.
Scientific Method for Creating a Business n 4. Experiment to test your hypothesis. • This is one of the most important steps. It’s not enough to merely establish an idea, you have to put that idea to the test. n n n Conduct a survey Develop a prototype and present it to a group of beta testers. Run multiple campaigns simultaneously to find the best message and medium for your audience.
Scientific Method for Creating a Business n 5. Review your data and form a conclusion. • You have to concretely and objectively measure the results. You must be able to quantify qualitative data, such as customer opinions, to form solid conclusions about your hypothesis.
Scientific Method for Creating a Business n 5. Review your data and form a conclusion. • For marketing strategies, the bottom line is always ROI. You need to calculate exactly how much money you spent on a specific campaign, and exactly how much new business that campaign generated.
Scientific Method for Creating a Business n 5. Review your data and form a conclusion. • You’ll need to measure everything you can and review that data objectively to form a definitive conclusion that answers your original question.
Scientific Method for Creating a Business n 6. Publish your results and invite others to expand. • Get feedback on the results you’ve found. • Allow customers to try your product/service and let you know what they think. • Take their feedback and criticism and use it to make your product better. • You will never have a perfect product/service, but you can get closer to by constantly revising and refining.
Scientific Method for Creating a Business n n The scientific method is designed to gain objective knowledge and refine that knowledge by continually testing it in real environments. To get started with sufficient momentum, you’re going to need: • A solid idea. • A great team to support your execution of that idea.
Scientific Method for Creating a Business n n n The scientific method is the greatest tool you have to create and maintain a lasting business model. Business is always changing, incorporating new information into existing models, or adding new models to a greater body of knowledge. Similarly, an entrepreneur must constantly challenge their assumptions, build on what they already know, and make adjustments to stay relevant in their environment.
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