WHAT IS ENTREPRENEURSHIP? UNIT 1 ENTREPRENEURSHIP AND THE ECONOMY

CHAPTER 1 What is Entrepreneurship?

DEFINITIONS Venture new business that involves risk. Entrepreneurs are people who take on creating, organizing, and owning a business. Entrepreneurship is the process of recognizing an opportunity, testing it in the market, and gathering resources necessary to go into business. Pages 6-7 in text

QUESTIONS What kind of resources would you need to start a retail business (where you sell products directly to the person that will use them)? What kind of resources would you need to start a service business like landscaping, house cleaning, or pet sitting?

DEFINITIONS GOODS are tangible (or physical) products SERVICES are intangible (nonphysical) products A NEED is a basic requirement for survival, such as food and shelter. A WANT is something that you do not have to have for survival, but would LIKE to have. page 11 in text

ECONOMIC SYSTEMS FOUR ECONOMIC QUESTIONS 1.What goods and services should be produced? 2.What quantity of goods and services should be produced? 3.How should goods and services be produced? 4.For who should goods and services be produced? page 7in text

COST, PRICE AND PROFIT Products and services are usually sold for a certain amount of money. This is the PRICE of the item. The PRICE of and item must include all of the COSTS plus some additional markup to make a PROFIT. page 7in text

FREE ENTERPRISE SYSTEM Also called CAPITALISM or MARKET ECONOMY. People can make economic decisions: 1.People can choose what products to buy. 2.People can choose to own private property. 3.People can choose to start a business and compete with other businesses. Making a PROFIT is the primary incentive of free enterprise. page 8in text

MARKET STRUCTURES A MARKET STRUCTURE is the nature and degree of competition among businesses in the same industry. A MONOPOLY has only one seller (phone company). An OLIGOPOLY has a few competitors (auto industry).

FIVE KEY COMPONENTS OF THE ENTREPRENEURIAL PROCESS 1.The entrepreneur 2.The environment 3.The opportunity 4.Startup resources 5.The new venture organization

#1 THE ENTREPRENEUR… …is the driving force of the start-up process …recognizes opportunity …pulls together the resources to exploit that opportunity …creates a company to execute the opportunity in the marketplace …brings to the process all of his or her life experiences..is a calculated risk taker …has the passion and persistence to see the venture through from idea to market

#2 THE ENVIRONMENT Four categories of environmental variables that affect a new venture’s ability to start and grow: 1.The nature of the environment, whether it’s uncertain, fast-changing, stable or highly competitive. 2.The availability of resources, such as skilled labor, start-up capital, and sources of assistance

#2 THE ENVIRONMENT 3.Ways to realize value, such as favorable taxes, good markets, and supportive government policies. 4.Incentives to create new business. Enterprise zones are specially designated areas of a community that provide tax benefits to new businesses locating there. They also provide grants for new product development.

#3 THE OPPORTUNITY A good opportunity can be turned into a business. An opportunity is an idea that has commercial value. The idea has value only when customers are ready and willing to buy the product. An idea plus a market equals opportunity. New businesses are founded on recognized opportunities in the environment.

#4 START-UP RESOURCES When an entrepreneur is ready to execute a concept for a new business, he or she must use creative talent to pull together the necessary resources. The start-up resources include: capital skilled labor management expertise legal and financial advice Facility (aka-physical plant) equipment customers

#5 THE NEW VENTURE ORGANIZATION The execution of the new business concept The new venture organization is the infrastructure of the business. It is the foundation that supports all of the products, processes, and services of the new business. Through the new venture organization, the entrepreneur can create value to benefit himself or herself and the employees, customers, and economy.