Chapter Three Entrepreneurs, Managers, and Employees © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

3- 3 The Role of the Entrepreneur Entrepreneur -a person ready to supply the enterprise – energy, boldness, courage, spirit, expertise – necessary to start and grow a business See the qualities of an entrepreneur at sideroad.com sideroad.com

3- 4 Commercial Opportunities First mover advantage -the competitive advantage gained by being first to develop a new product or process

3- 5 Organizational Opportunities Intrapreneurship -Entrepreneurial activity that takes place inside an established company

3- 6 Risks of Entrepreneurship 1.Entrepreneurs often overestimate their ability to create new products 2.Entrepreneurs underestimate how difficult it is to reach prospective customers 3.Entrepreneurs may not realize how much ready cash is needed to see a small business through its critical “birth” period

3- 7 Why Be an Entrepreneur? Entrepreneurs are often driven by the challenge of creating valuable new goods and services Many entrepreneurs are intrinsically motivated

3- 8 Creative Destruction The process by which old, inefficient companies are driven out of business and replaced by new more efficient ones. Smaller companies with cutting edge products often become takeover targets of larger, more established companies.

3- 9 The Agency Problem Delegate -giving up decision-making authority to other people Agency problem -the problem that arises because of the separation of the ownership and control of a business

3- 10 The Agency Theory Problem Figure 3.3

3- 11 The Agency Problem Managers -employees to whom a company’s owners delegate responsibility for using its resources to create profitable goods and services Stock options -the right o buy a stock at a certain price and to benefit from increases in the stock’s value in the future by selling it

3- 12 Levels of Managers Board of directors -experienced business executives from inside and outside of a company who are elected by their company’s shareholders to act as their representatives

3- 13 Levels of Managers Chief executive officer -a company’s top manager, responsible for overseeing the operations of the company Top managers -employees who are responsible for developing a company’s business model and ultimately responsible for its success or failure

3- 14 Levels of Managers Middle managers -employees in charge of a company’s various functions -responsible for using resources productively to increase its profitability

3- 15 Levels of Managers First-line managers -employees at the base of the managerial hierarchy -often called supervisors

3- 16 Levels of Management Figure 3.4

3- 17 Profitability: Efficiency and Effectiveness Efficiency -a cost-focused measure of how productively a company’s resources are being used to produce goods and services Effectiveness -a revenue-focused measure of how competitive the firm’s business model is

3- 18 The Relationship Between Efficiency, Effectiveness, and Profitability Figure 3.6

3- 19 Four Functions of Managers Figure 3.7

3- 20 Managerial Functions Planning -a process that managers use to select the best business model and goals for their company

3- 21 Managerial Functions Organizing -a process managers use to create a company’s organizational structure Organizational culture -the set of values, norms, and beliefs shared by members of an organization that determine how well they work together to further the company’s goals

3- 22 Managerial Functions Leading -the ability to develop a plan and motivate others to pursue it Cross-functional team -a group of people from different functions who work together on a particular project

3- 23 Managerial Functions Controlling -the process of evaluating whether or not a company is achieving its goals and taking action if it is not Benchmarking -the practice of comparing a business’s strengths and weaknesses to those of its competitors

3- 24 The Role of the Employee Role -the set of tasks a person is expected to perform because of the position he or she holds in an organization

3- 25 Career Management Mentor -a person who provides advice, guidance, and technical knowledge to other people (mentees) in order to help them advance their careers