1. Entrepreneurship Chapter Six
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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 entrepreneurship.

3. Entrepreneurship Entrepreneurship
the process by which enterprising individuals initiate, manage, and assume the risks and rewards associated with a business venture

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.

5. Entrepreneurship Entrepreneurial venture
A new business having growth and high profitability as primary objectives.

6. Some Myths About Entrepreneurship
Anyone can start a business
Entrepreneurs are gamblers
Entrepreneurs want the whole show to themselves
Entrepreneurs are their own bosses and completely independent.
Entrepreneurs work harder than managers in big companies.
Entrepreneurs experience a great deal of stress

7. Some Myths About Entrepreneurship
Entrepreneurs are motivated solely by the quest for the dollar
Entrepreneurs seek power and control over others
If an entrepreneur is talented, than success will happen quickly
Any entrepreneur with a good idea can raise venture capital.
If an entrepreneur has enough start-up capital, s/he can’t miss.
Unless you attained a high score on your SATs or GMATs, you’ll never be a successful entrepreneur

8. Entrepreneurship Entrepreneur Intrapreneurs
Individuals who establish a new organization without the benefit of corporate sponsorship.
Intrapreneurs
New-venture creators working inside big companies.

9. Who is The Entrepreneur?
Figure 6.2

10. The Idea
A great product, a viable market, and good timing are essential ingredients in any recipe for success.

11. An entrepreneur should consider opportunities in:
The Opportunity
An entrepreneur should consider opportunities in:
Technological discoveries
Demographic changes
Lifestyle and taste changes
Economic dislocations
Calamities
Government initiatives and rule changes.

12. The Opportunity 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).

13. The Next Frontiers
One fascinating opportunity for entrepreneurs is outer space.
Other new ventures in space include satellites for automobile navigation, tracking trucking fleets, monitoring flow rates, and leaks in pipelines.
Testing designer drugs in the near-zero-gravity environment.
Using remote sensing to monitor global warming, spot fish concentrations, and detect crop stress for precision farming.

14. Question Which Internet model charges fees to advertise on a site?
Transaction fee model
Subscription model
Advertising support model
Affiliate model
The correct answer is c – advertising support model. See next slide

15. The Internet Five successful business models 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.

16. The Internet Intermediary model Affiliate model
Charging fees to bring buyers and sellers together.
Affiliate model
Charging fees to direct site visitors to other companies’ sites.

17. Side Streets Side street effect Starting a new business can be risky.
Side street effects can be those unexpected opportunities that arise as you come to unknown places in your new business.

18. What does it take, personally?
Commitment and determination – successful entrepreneurs are decisive, tenacious, disciplined, willing to sacrifice, and able to immerse themselves totally in their enterprises.
Leadership – self-starters, team builders, superior learners, and teachers.
Opportunity obsession – intimate knowledge of customers’ needs, market driven, and obsessed with value creation and enhancement.

19. What does it take, personally?
Tolerance of risk, ambiguity, and uncertainty – calculated risk takers, risk minimizers, tolerant of stress, able to resolve problems.
Creativity, self-reliance, and ability to adapt – open-minded, restless with the status quo, able to learn quickly, highly adaptable, creative, skilled at conceptualizing, and attentive to details.
Motivation to excel – clear results orientation, set high but realistic goals, strong drive to achieve, know your own weaknesses and strengths, and focus on what can be done rather than on the reasons things can’t be done.

20. Entrepreneurial Strategy Matrix
Figure 6.3
P&G new product, small investment
Virgin Galactic’s space tourism
Low startup cost, no competition
Most small businesses

21. Success and Failure Anticipate risk
Consider the role of the economic environment
Utilize business incubators
Realize there are common management challenges
Going public with an initial public offering (IPO)

22. Percentage of Companies Using Source of Capital

23. Question
A _____________ is a protected environment for small businesses.
Business incubator
Small business office
SBA
Service incubator
The correct answer is a – business incubator. See next slide.

24. Success and Failure Business incubators
Protected environments for new, small businesses

25. Common Management Challenges
Exhibit 6.4

26. Common Management Challenges
You might not enjoy it
If you don’t want to sell, you don’t want to be an entrepreneur
Survival is difficult
Small businesses feel mistakes more strongly
Growth creates new challenges
Start-up mentality is often “high performance, cheap labor”
Growth requires hiring people at higher wages that are less dedicated than the founders
It’s hard to delegate
Leadership deteriorates into micromanagement
Misuse of funds
Failure to use money that is available properly

27. Common Management Challenges
Poor controls
Aversion to record keeping
People like to spend money, don’t focus on fundamentals like customers and creating value
Mortality
Companies outlive entrepreneurs when:
the company has gone public
the entrepreneur has planned an orderly succession, usually to a family member.
Going public
Initial stock offerings (IPOs) - selling to the public, for the first time, federally registered and underwritten shares of stock in the company.

28. 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

29. Planning and Resources Help You Succeed
The first step in planning is to do an opportunity analysis.
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.

30. Opportunity Analysis

31. Planning The next step is to develop a business plan. Business plan
A formal planning step that focuses on the entire venture and describes all the elements involved in starting it.

32. Outline of a Business Plan

33. Outline of a Business Plan

34. Five Key Factors The people The opportunity The competition
The context
Risk and reward

35. Five Key Factors
People should be energetic and have skills and expertise directly relevant to the venture.
Opportunity should allow a competitive advantage that can be defended.
Identify current competitors and their strengths and weaknesses, predict how they will respond to the new venture, indicate how the new venture will respond to the competitors’ responses, identify future potential competitors, and consider how to collaborate with actual or potential competitors.
Context should be favorable, regulatory and contain economic perspectives.
Risk must be understood and addressed as fully as possible.

36. Selling the Plan
The goal is to get investors to agree on and back up the written plan.
The plan should be marketed in order to obtain the necessary funding for the business.

37. Nonfinancial Resources
Legitimacy
Networks
Top-Management Teams
Advisory Boards
Partners

38. Nonfinancial 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.

39. Nonfinancial Resources
Social capital
A competitive advantage in the form of relationships with other people and the image other people have of you.
Social capital provides a
lasting source of
competitive advantage.

40. Nonfinancial Resources
Top management team
Advisory Boards
Assemble a group of people willing to serve as an advisory board.
Partners
Partners can help one another access capital, spread the workload, share the risk, and share expertise.

41. Corporate Entrepreneurship
Build Support for your ideas
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

42. Building Intrapreneurship
Skunkworks
A project team designated to produce a new, innovative product.

43. Building Intrapreneurship
Bootlegging
Informal work on projects, other than those officially assigned, of employees’ own choosing and initiative.

44. Managing Intrapreneurship is Risky
Failing to foster innovation
Overreliance on a single project
Spread intrapreneurial efforts over too many projects

45. 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

46. Characteristics of Entrepreneurial Orientation
Entrepreneurial orientation is determined by five tendencies
Allow independent action
Innovate
Take Risks
Be Proactive
Be Competitively aggressive

47. Video: New Grads
Why is there a growing interest in entrepreneurship among college students?
What are the rewards from creating your own business?
Can anyone become an entrepreneur?