1. Chapter 1 What is Entrepreneurship
Entrepreneurship and the Economy
Section 1

2. Small Business and Entrepreneurship
Entrepreneur: An individual who undertakes the creation, organization, and ownership of a business.
Venture: A new business undertaking that involves risk.
Entrepreneurship: The process of recognizing an opportunity, testing it in the market, and gathering resources necessary to go into business.
Entrepreneurial: Acting like an entrepreneur or having an entrepreneurial mind set.

3. Entrepreneurship Today
1 in 3 households is involved with a new venture or small business.
90% of all businesses are small businesses (fewer than 100 employees)
62% of these are home based businesses

4. Economic Systems
Economics: The study of how people choose to allocate scarce resources to fulfill their unlimited wants.
What goods and services should be produced?
What quantity of good and services should be produced?
How should good and services be produced?
For whom should goods and services be produced?

5. Free Enterprise System
Also called Capitalism, or a market economy
People have the right to make economic choices.
People can choose what products to buy.
People can choose to own private property.
People can choose to start a business and compete with other businesses.

6. The Profit Motive
Profit: Money that is left after all expenses of running a business have been deducted from the income.
Measures success
Risk of failure
Should encourage the production of quality products that meets consumers needs and wants.

7. The Role of Competition
Competition is a basic characteristic of a free enterprise system.
Businesses compete on price and non price factors.
What are some non price factors?
Stores can lower prices by increasing volume.
Entrepreneurs typically avoid competing on price factors.

8. Market Structures
The nature and degree of competition among businesses operating in the same industry.
Perfect Competition
Numerous buyers and seller, nobody affects the price.
Monopolistic Competition
Many sellers produce similar but differentiated products. Dominate small portion of market.
Monopoly
One seller dominates and can control supply and therefore prices.
Oligopoly
A few competing firms

9. Basic Economic Concepts
Goods and Services
Needs and Wants
Factors of Production:
Land
Labor
Capital-Equipment, factory, tools, and goods used to create products. Includes $$$ for expenses.
Entrepreneurship
Scarcity: Occurs when demand exceeds supply.

10. Supply and Demand Sellers want the highest price possible.
Buyers want the lowest price possible.
Heavy demand and short supply prices goes up.
Heavy supply but little demand prices goes down.
Prices stabilize where demand equals supply.

11. Demand
The quantity of goods or services that consumers are willing and able to buy.
As price goes up the quantity demanded goes down.
Inverse Relationship

12. Demand Elasticity
Elastic Demand: Refers to situations in which a change in price creates a change in demand.
Depends on the number of substitutes
Inelastic Demand: A change in price has very little effect on demand for products.
No substitutes
Diminishing Marginal Utility: Price alone does not determine demand. Other factors income, taste, amount already owned plays a role as well.

13. Supply
The amount of a good or service that producers are willing to provide.
Producers are more willing to supply products when the price is high.
Direct Relationship

15. Surplus, Shortage, and Equilibrium
Supply and demand is continuously moving
Surplus: More supplies than needed.
Any price above the equilibrium price
Shortages: Fewer supplies than needed.
Any price below the equilibrium price.
Equilibrium: The point at which consumers buy all of a product that is supplied. There is neither a shortage or surplus.

16. Economic Indicators
Gross Domestic Product (GDP): The total market values of good and services produced by workers and capital within a nation during a given period.
The Federal Reserve (FED): A government agency that controls the economy and regulates the nation’s money supply.
Tells bank what percentage of money they can lend
Controls interest rates
Buys and sells government securities to increase or decrease the money supply.

17. The Business Cycle
The general pattern of expansion and contraction that the economy goes through.

18. Government Reactions to Business Cycle
Economy growing rapidly
Raise interest rates
Raise Taxes
Economy slipping into a recession
Increase the money supply
Lower interest rates
Lower Taxes

19. What Entrepreneurs Contribute
Recognize consumer wants
Provide Jobs
Change Society
Create new wants to be satisfied

20. Small Businesses & Entrepreneurial Ventures
Create jobs for themselves
Create lifestyles to meet personal goals
Examples:
Innovate and grow the venture
Create new value
Expand to regional, national, or global level
Examples:

21. Section 2 The Entrepreneurial Process
Chapter 1
What is Entrepreneurship?

22. Famous Entrepreneurs Pick an entrepreneur you respect. Short bio.
Personal data
Business/product/service
Competitive advantage (what makes this product/service more desirable)
What characteristic(s) does this person possess that you feel contribute to their success?

23. History of Entrepreneurship
Large Diversified Companies
Little competition from Japan or Europe
1970s
High Interest Rates
International Competition
Technology Revolution starting
1980s
More government regulation
Smaller entrepreneurial companies emerging

24. History of Entrepreneurship
Less job security
Fewer benefits
Move to a service based economy
Rise of the Internet

25. The Entrepreneurial Start-Up Process
The Environment
The Opportunity
Start-Up Resources
The New Venture Organization

26. The Entrepreneur The driving force Recognizes opportunity
Creates the company
Life Experiences
Risk Taker
Passion
Persistence

27. The Environment The Nature of the Environment
Stable, changing, competitive, uncertain
The Availability of Resources
Skilled labor, start up capital, sources of assistance
Ways to Realize Value
Favorable taxes, good markets, governmental policies
Incentives to Create New Businesses
Enterprise Zones: Specially designated areas of a community that provide tax benefits to new businesses locating there.

28. The Opportunity An idea that has commercial value.
But you also need a market
Idea + Market = Opportunity

29. Start-Up Resources Capital Skilled Labor Management Expertise
Legal and Financial Advice
Facility
Equipment
Customers

30. The New Venture Organization
The infrastructure of the business.
Execution of the business concept
Create value to benefit:
Yourself
Employees
Customers
Economy

31. Business Failure
Business Failure: A business that has stopped operating with a loss to creditors.
Files Chapter 7 Bankruptcy
Loses money for creditors, investors, or anyone else who lent it money.
Discontinuance: A business that may be operating under a new name, or a business where the owner has purposely discontinued to start a new one.
This would not be considered a failure.