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PowerPoint Presentation to Accompany Management Third Canadian Edition John R. Schermerhorn, Jr. Barry Wright Prepared by: Jim LoPresti University of Colorado,

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Presentation on theme: "PowerPoint Presentation to Accompany Management Third Canadian Edition John R. Schermerhorn, Jr. Barry Wright Prepared by: Jim LoPresti University of Colorado,"— Presentation transcript:

1 PowerPoint Presentation to Accompany Management Third Canadian Edition John R. Schermerhorn, Jr. Barry Wright Prepared by: Jim LoPresti University of Colorado, Boulder Revised by: Dr. Shavin Malhotra Ryerson University, Toronto, Ontario

2 2 Management Fundamentals - Chapter 5 2 Chapter 5: Entrepreneurship and Small Business Management

3 3 Management Fundamentals - Chapter Define entrepreneurship and list the characteristics of entrepreneurs. 5.2 Describe various types of small businesses and explain why many small businesses fail. 5.3 Outline how to create a new venture. Chapter 5 Learning Objectives 3

4 4 Management Fundamentals - Chapter 5  Entrepreneurship Strategic thinking and risk-taking behaviour that results in the creation of new opportunities for individuals and/or organizations.  Entrepreneurs Risk-taking individuals who take actions to pursue opportunities and situations others may fail to recognize or may view as problems or threats. The Nature of Entrepreneurship 4

5 5 Management Fundamentals - Chapter 5  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. 5 The Nature of Entrepreneurship

6 6 Management Fundamentals - Chapter 5  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 6 The Nature of Entrepreneurship

7 7 Management Fundamentals - Chapter 5 Figure 5.2 Personal traits and characteristics of entrepreneurs. 7 The Nature of Entrepreneurship

8 8 Management Fundamentals - Chapter 5  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. 8 The Nature of Entrepreneurship

9 9 Management Fundamentals - Chapter 5  Reasons for women and member of visible minorities becoming entrepreneurs: Out of necessity (necessity-based entrepreneurship) Gain economic independence. Provide a pathway to career success that may be blocked otherwise. 9 The Nature of Entrepreneurship

10 10 Management Fundamentals - Chapter 5  Common myths about entrepreneurs: Entrepreneurs are born, not made. Entrepreneurs are gamblers. Money is the key to entrepreneurial success. You have to be young to be an entrepreneur. You must have a degree in business to be an entrepreneur. 10 The Nature of Entrepreneurship

11 11 Management Fundamentals - Chapter 5  Social Entrepreneurship: A unique form of ethical entrepreneurship that seeks novel ways to solve pressing social problems. Social enterprises have a social mission to help make lives better for underserved populations. 11 The Nature of Entrepreneurship

12 12 Management Fundamentals - Chapter 5  Small businesses … Ones with 100 or fewer employees. Independently owned and operated. 48 percent of the private labour force works in small businesses. Accounts for 23% of Canada’s GDP. Are established by: Starting a new business. Buying an existing business. Buying and running a franchise. Entrepreneurship and Small Business 12

13 13 Management Fundamentals - Chapter 5  Internet or Web-based Entrepreneurship Internet entrepreneurship is the use of the internet to pursue an entrepreneurial venture. The Internet offers numerous entrepreneurial opportunities. Nearly 85% of small businesses are conducting business over the internet. 13 Entrepreneurship and Small Business

14 14 Management Fundamentals - Chapter 5  Web-based business models include: Advertising model Brokerage model Community model Freemium model Infomediary model Merchant model Referral model Subscription model 14 Entrepreneurship and Small Business

15 15 Management Fundamentals - Chapter 5  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 15 Entrepreneurship and Small Business

16 16 Management Fundamentals - Chapter 5  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 16 Entrepreneurship and Small Business

17 17 Management Fundamentals - Chapter 5 Figure 5.3 Eight reasons why many small businesses fail. 17 Entrepreneurship and Small Business

18 18 Management Fundamentals - Chapter 5  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? New Venture Creation 18

19 19 Management Fundamentals - Chapter 5  Life cycle of entrepreneurial firms Birth stage Breakthrough stage Maturity stage  Each stage poses different managerial challenges and requires different managerial competencies. 19 New Venture Creation

20 20 Management Fundamentals - Chapter 5 Figure 5.4 Stages in the life cycle of an entrepreneurial firm. 20 New Venture Creation

21 21 Management Fundamentals - Chapter 5  Basic items that should be included in a business plan: Executive summary Industry analysis Company description Product and services description Market description Marketing strategy Operations description Staffing description Financial projection Capital needs Milestones 21 New Venture Creation

22 22 Management Fundamentals - Chapter 5  Forms of legal ownership Sole proprietorship Partnership General partnership Limited partnership Limited liability partnership Corporation Limited liability corporation (LLC) 22 New Venture Creation

23 23 Management Fundamentals - Chapter 5  Financing the new venture Sources of outside financing Debt financing Equity financing Equity financing alternatives Venture capitalists Initial public offerings Angel investors 23 New Venture Creation

24 COPYRIGHT Copyright © 2014 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.

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