1. Entrepreneurship Chapter 07 Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

2. Learning Objectives LO1 Describe why people become entrepreneurs and what it takes, personally LO2 Summarize how to assess opportunities to start a new company LO3 Identify common causes of success and failure LO4 Discuss common management challenges LO5 Explain how to increase your chances of success, including good business planning LO6 Describe how managers of large companies can foster intrapreneurship and an entrepreneurial orientation 7-2

3. Entrepreneurship  Entrepreneurship  The pursuit of lucrative opportunities by enterprising individuals.  Entrepreneur  Individuals who establish a new organization without the benefit of corporate sponsorship  Intrapreneurs  New-venture creators working inside big companies. 7-3

4. Entrepreneurship  Small business  A business having fewer than 100 employees, independently owned and operated, not dominant in its field, and not characterized by many innovative practices.  Entrepreneurial venture  A new business having growth and high profitability as primary objectives. 7-4

5. Some Myths About Entrepreneurship 7-5

6. Some Myths About Entrepreneurship 7-6

7. Mega-Entrepreneurs Who Started in Their 20s 7-7 Table 7.2

8. Who is The Entrepreneur? 7-8 Figure 7.1

9. The Idea  A great product, a viable market, and good timing are essential ingredients in any recipe for success.  What else ? 7-9

10. What Business Should You Start? An entrepreneur should consider opportunities in:  Technological discoveries  Demographic changes  Lifestyle and taste changes  Screwed up industries  Economic dislocations  Calamities  Government initiatives and rule changes.  Skill, likes,success 7-10

11. What Business Should You Start?  Franchising  An entrepreneurial alliance between a franchisor (an innovator who has created at least one successful store and wants to grow) and a franchisee (a partner who manages a new store of the same type in a new location).  McDonalds  Fees, rules, % 7-11

12. The Internet  Transaction fee model  Charging fees for goods and services.  Subscription model  Charging fees for site visits.  Advertising support model  Charging fees to advertise on a site. 7-12

13. The Internet  Intermediary model  Charging fees to bring buyers and sellers together.  Affiliate model  Charging fees to direct site visitors to other companies’ sites. 7-13

14. What Does it Take, Personally? 1.Commitment and determination 2.Leadership 3.Opportunity obsession 4.Tolerance of risk, ambiguity, and uncertainty 5.Creativity, self-reliance, and ability to adapt 6.Motivation to excel 7.What else? 7-14

15. Entrepreneurial Strategy Matrix 7-15 Figure 7.2

16. Sources of Capital 7-16

17. Success and Failure  Anticipate risk---Business Plan  Consider the role of the economic environment  Utilize business incubators  Realize there are common management challenges  Going public with an initial public offering (IPO)  Who, What, When, Where, Why and How 7-17

18. Common Management Challenges  You might not enjoy it  Survival is difficult  Growth creates new challenges, new competitors  It’s hard to delegate  Misuse of funds, lack of funds  Poor controls  Mortality  Employees 7-18

19. Success and Failure  Business incubators  Protected environments for new, small businesses 7-19

20. Going Public  Initial public offering (IPO)  Sale to the public, for the first time, of federally registered and underwritten shares of stock in the company 7-20

21. Increasing Your Chances of Success  Opportunity analysis  A description of the good or service, an assessment of the opportunity, an assessment of the entrepreneur, specification of activities and resources needed to translate your idea into a viable business, and your source(s) of capital. 7-21

22. Opportunity Analysis 7-22 Table 7.3

23. Planning  Business plan  A formal planning step that focuses on the entire venture and describes all the elements involved in starting it.  Capital people will demand and so should you. 7-23

24. Outline of a Business Plan 7-24

25. Outline of a Business Plan 7-25

26. Five Key Factors  The people, including you  The opportunity  The competition  The context  Risk and reward 7-26

27. Non financial Resources  Legitimacy  Networks  Top-Management Teams  Advisory Boards  Partners 7-27

28. Non financial Resources  Legitimacy  People’s judgment of a company’s acceptance, appropriateness, and desirability, generally stemming from company goals and methods that are consistent with societal values. 7-28

29. Non financial Resources  Social capital  A competitive advantage in the form of relationships with other people and the image other people have of you. 7-29

30. Building Support for your Idea  Clear the investment with your immediate boss  Make cheerleaders who will support your idea  Horse trading for support, time, money, and other resources  Get the blessing of relevant higher-level officials 7-30

31. Checklist for Choosing Ideas 7-31 Table 7.5

32. Checklist for Choosing Ideas 7-32 Table 7.5

33. Building Intrapreneurship  Skunk works  A project team designated to produce a new, innovative product.  Bootlegging  Informal work on projects, other than those officially assigned, of employees’ own choosing and initiative. 7-33

34. Management Challenges in Intrapreneurship  Failing to foster innovation  Overreliance on a single project  Spread intrapreneurial efforts over too many projects  Politics  Nay sayers 7-34

35. Entrepreneurial Orientation  Entrepreneurial orientation  The tendency of an organization to identify and capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods or services 7-35

36. Characteristics of Entrepreneurial Orientation  Allow independent action  Innovativeness  Risk taking  Proactiveness  Competitive aggressiveness  Foster creativity 7-36