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Chapter 5 Entrepreneurship. Amazon.com, Inc. is an American e-commerce company based in Seattle, Washington. It was one of the first major companies to.

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Presentation on theme: "Chapter 5 Entrepreneurship. Amazon.com, Inc. is an American e-commerce company based in Seattle, Washington. It was one of the first major companies to."— Presentation transcript:

1 Chapter 5 Entrepreneurship

2 Amazon.com, Inc. is an American e-commerce company based in Seattle, Washington. It was one of the first major companies to sell goods over the Founded by Jeff Bezos in 1994, and launched in 1995, Amazon.com began as an online bookstore but soon diversified its product lines by adding VHSs, DVDs, music CDs, MP3s, computer software, video games, electronics, apparel, furniture, food, toys, and more. Amazon.com, Inc. is an American e-commerce company based in Seattle, Washington. It was one of the first major companies to sell goods over the Internet. Founded by Jeff Bezos in 1994, and launched in 1995, Amazon.com began as an online bookstore but soon diversified its product lines by adding VHSs, DVDs, music CDs, MP3s, computer software, video games, electronics, apparel, furniture, food, toys, and more.Americane-commerceSeattle, WashingtonJeff BezosVHSsDVDsCDsMP3scomputer softwarevideo games electronicsapparelfurniturefoodtoysAmericane-commerceSeattle, WashingtonInternetJeff BezosVHSsDVDsCDsMP3scomputer softwarevideo games electronicsapparelfurniturefoodtoys Amazon has established separate websites in Canada, the United Kingdom, Germany, Austria, France, China, and Japan. It ships globally on selected products. Amazon has established separate websites in Canada, the United Kingdom, Germany, Austria, France, China, and Japan. It ships globally on selected products.Canada United KingdomGermanyAustriaFranceChina JapanCanada United KingdomGermanyAustriaFranceChina Japan It made its first annual profit in It made its first annual profit in 2003.

3 Hotmail.com Sabeer Bhatia was born in Chandigarh, India in Sabeer Bhatia was born in Chandigarh, India in 1968.ChandigarhIndia1968ChandigarhIndia1968 went to Stanford in 1989 to pursue his M.S. in Electrical Engineering. went to Stanford in 1989 to pursue his M.S. in Electrical Engineering.M.S. At Stanford, he was inspired by entrepreneurs such as Steve Jobs and Scott McNealy eventually deciding to become one himself. Instead of pursuing a Ph.D. after his Masters, he decided to join Apple in At Stanford, he was inspired by entrepreneurs such as Steve Jobs and Scott McNealy eventually deciding to become one himself. Instead of pursuing a Ph.D. after his Masters, he decided to join Apple in 1991.Steve JobsScott McNealyPh.D. AppleSteve JobsScott McNealyPh.D. Apple After a brief stint at Apple, Sabeer joined a startup company called Firepower Systems Inc, where he spent two years. In 1994, Sabeer started working on new ideas for the Internet and he teamed up with Jack Smith, a colleague from Apple Computer, Inc. After a brief stint at Apple, Sabeer joined a startup company called Firepower Systems Inc, where he spent two years. In 1994, Sabeer started working on new ideas for the Internet and he teamed up with Jack Smith, a colleague from Apple Computer, Inc.Jack SmithJack Smith

4 Hotmail (Cont.) The two came up with the concept of a web-based database entitled Javasoft. While pursuing this idea, they subsequently realised the potential of a web-based system and thus decided to create one called HoTMaiL (the uppercase letters spelling out HTML - the language used to write the base of a webpage).In order to attract attention, the service was provided for free and revenue was obtained through the advertising on the website. Draper Fisher Ventures invested $300,000 on the project and the service was launched on July 4, The two came up with the concept of a web-based database entitled Javasoft. While pursuing this idea, they subsequently realised the potential of a web-based system and thus decided to create one called HoTMaiL (the uppercase letters spelling out HTML - the language used to write the base of a webpage).In order to attract attention, the service was provided for free and revenue was obtained through the advertising on the website. Draper Fisher Ventures invested $300,000 on the project and the service was launched on July 4, HTMLJuly HTMLJuly In less than six months, the website attracted over 1 million subscribers. As the interest in the web-based provider increased, Microsoft eventually took notice and on December 30, 1997, Hotmail was sold to Microsoft for a reported sum of $400 million. In less than six months, the website attracted over 1 million subscribers. As the interest in the web-based provider increased, Microsoft eventually took notice and on December 30, 1997, Hotmail was sold to Microsoft for a reported sum of $400 million.MicrosoftDecember MicrosoftDecember

5 Hotmail (Cont.)

6 Sir Richard BransonRichard BransonBurt Rutan Entrepreneur Unveils New Tourist Spacecraft

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8  Learning Goals 1. Explain the nature of entrepreneurship and the impact the environment has on it 2. Describe the competencies that contribute to entrepreneurs’ success 3. Outline the planning essentials for potential entrepreneurs 4. Describe the basic essentials of corporate entrepreneurship

9 Entrepreneurs and External Factors Entrepreneurs create something for the purpose of gain while accepting the risk and uncertainty associated with their ventures. Entrepreneurs create something for the purpose of gain while accepting the risk and uncertainty associated with their ventures. Entrepreneurs typically incorporate at least one of the following: Entrepreneurs typically incorporate at least one of the following: –Something new –Something better –An underserved or new market –New delivery system or distribution channel

10 What is Entrepreneurship? Common Components of Entrepreneurship Entrepreneurship: Its Meaning and Scope  The creation of an innovative organization for the purpose of economic gain or growth under conditions of risk or uncertainty Something new Something better New delivery system or distribution channel Entering an underserved or new market

11 How Does the Environment Affect Entrepreneurship?  Open and free markets  Deregulation  Political climate  Economic and technological conditions  Support system Availability of capital and loans Tax rates and policies Support services: SBA, SBDCs, venture capital firms, chambers of commerce, etc.

12 How Does the Environment Affect Entrepreneurship?  Business incubation: a business support process that accelerates the successful development of start-up and fledging companies by providing entrepreneurs with an array of targeted resources and services  Common features in business incubators M anagement and technical guidance N etworking R ental space/flexible leases S hared business services and equipment P sychological and moral support A ssistance in obtaining financing

13  Small business—one that is independently owned and operated and which is not dominant in its field of operation. refer to anyone who owns a major equity stake in a company with fewer than 500 employees.  Small business firm may be entrepreneurial, depending upon its initiatives  SBA defines size by number of employees or dollars of sales, depending upon industry

14  Family business: one owned and managed mostly by people who are related by blood and/or marriage  May or may not be entrepreneurial  30% of family businesses survive to the second generation, 12% to the third generation, and 3% to the fourth and beyond Are Family Businesses Entrepreneurial Firms?

15 Common Attributes of Successful Entrepreneurs (adapted from Figure 5.1) Personal Attributes Need for Achievement Desire for Independence Self-Confidence Self-Sacrifice Technical Proficiency Attributes Varies by Type of Business Started Managerial Competencies Attributes Strategic Action Planning and Administration Teamwork Communication Self-Management Successful Entrepreneurs

16 Self management  Need for achievement  Desire for independence  Self confidence  Self sacrifice Successful entrepreneurs Planning and administration Multicultural Teamwork Strategic action Communication Specialized Knowledge Varies by type of business launched

17 Importance of Self-Confidence and Optimism I think its’ important to see this clear path and not be discouraged when people throw stones at it, because they will. You will have to be willing to see the path, believe in it, and have the stamina and persistence to stick with it. You have to stand your ground and have confidence. Denise Divine Founder of Devine Foods

18 Delivering products and services that are perceived as high quality and that are seen by its customers or clients as adding value Developing or improving products and services on a regular basis Generating new customers or clients that expand revenue Focusing marketing expenditures and developing customer- oriented employees Maintaining financial control of the firm Establishing a strong commitment to ethical practices

19 Planning and Administration Competency: Snapshot Do your homework prior to starting the business. Make sure the market truly needs your service or product. Finally, make sure you can differentiate your service or product from the competition in a way that is beneficial to the customer. Stay focused on your goals, but be flexible enough to modify your business plan to match what the market is truly asking for. As evidenced of why this is important: 75 percent of my firm’s revenue today is from services we did not offer in my original business plan. Daniel Driesenga Founder and CEO Driesenga & Associates

20 Communication Competency  Successful entrepreneurs score higher than 82 percent of the population on their ability to express support and encouragement  Successful entrepreneurs succeed by helping other people—their employees, partners, investors, suppliers—become successful themselves

21 Planning Essentials for Entrepreneurs  Describes the basic idea that is the foundation for the start-up and outlines how that idea can be turned into reality “Someone once said: If you don’t know where you’re going, any road will take you there. You need to know exactly where you want to go, what route you’re going to take, when you will arrive and what you are to do upon arrival—no guesswork at all. You need to determine whether there is a demand for your service and, if so, what constitutes your market.” Don Doggett Management Counselor Counselors to America’s Small Business  Business Plan  Snapshot

22 Business Plan: Essential Components (continued) I. Executive Summary  What, how, why, where, and when must be summarized II. Business Description Component  The name of the business  The potential and uniqueness of the new venture

23 Business Plan: Essential Components (cont’d) III.Marketing Component  Convince investors that sales projections and competition can be met  Identify target market, market position, market share, pricing strategy  Evaluate all competition and state why and how you will be better than your competitors  Identify advertising plans with cost estimates

24 Business Plan: Essential Components (cont’d) IV.Location Component  Describe the advantages of your location (zoning, tax laws, wage rates); list the production needs in terms of facilities (plant, storage, office space) and equipment (machinery, furnishings, supplies)  Indicate proximity to your suppliers

25 Business Plan: Essential Components (cont’d) V.Management Component  Supply résumés of all key people in the management of your venture  Describe the legal structure of your venture (sole proprietorship, partnership, or corporation)  Give information on how and how much everyone is to be compensated

26 Business Plan: Essential Components (cont’d) VI.Financial Component DD escribe the needed sources for your funds and the uses you intend for the money DD evelop an estimated budget, cash flow statement, and profit and loss statement CC reate stages of financing for purposes of allowing evaluation by investors at various points

27 Business Plan: Essential Components (cont’d) VII.Potential Critical-Risks Component  Any potentially unfavorable industry-wide trends, such as price cutting by competitors  Design or manufacturing costs in excess of estimates  Sales projections not achieved  Product development schedule not met  Provide some alternative courses of action

28 Business Plan: Essential Components (cont’d) VIII.Milestone Schedule Component  Develop a timetable or chart to demonstrate when each phase of the venture is to be completed IX.Appendix or Bibliography

29 Other options Franchise strategy Buy StrategyStart-up strategy How to Start the Business

30 Principle of Affordable Loss  The conscious determination of the amount of resources (money, time, and effort) entrepreneurs are willing to commit to an idea, which, in turn, influences the choice of strategies and methods needed to generate early revenues  Addresses tension between excessive analysis and quick action

31 Finding Funds Entrepreneur, family, friends Venture capitalistBusiness angel Business incubators, government agencies (SBA) Private sector financial institutions

32 Factors That Favor a Global Start-Up (adapted from Figure 5.2) Foreign Financing is Better Domestic Market is Too Small to Support Expenses Human Resources Are Dispersed Among Countries Foreign Competition Will Quickly Enter the Market Target Customers Require an International Presence Domestic Inertia Could Impede Later Efforts to Internationalize Global Start-Up

33 Recommendations to Ensure a Successful Family Business Commitment to Resolving Conflicts Quickly Clear Job Responsibilities And Authority Relationships Explicit Hiring Criteria For Family Members Plan for Management Transitions Use of Outside Advisors/Directors

34 Corporate Intrepreneurship  What is Corporate Intrepreneurship? Refers to the fostering of entrepreneurial behavior within established companies to product growth and profits.  Essential for the survival of firms  Who Is a Corporate Entrepreneur?  Someone in an organization who champions turning new ideas into profitable realities

35 Fostering Corporate Intrepreneurship Incentives and rewards for risk taking Commitment from senior management Flexible organization design Autonomy of the venture team Appropriately designed control system Competent and talented people who exhibit entrepreneurial behaviors and attitudes


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