1. Please sit in a group of 5/6 students

2. MID I Date- 20/06/14 Time- 4:00PM Venue- NAC 517 Syllabus- Chp. 01-05
MCQ (20*1) = 20
T/F (20*1) = 20
Written question (2*10) = 20
Total 60 Marks.
Duration: 80 minutes
Date- 20/06/14
Time- 4:00PM
Venue- NAC 517
Syllabus- Chp

3. The Role of Entrepreneurs in a Competitive Economy
Chapter 6
The Role of Entrepreneurs in a
Competitive Economy

4. Chapter Overview
People are increasingly choosing the path of entrepreneurship
To become an entrepreneur, learn as much as possible by:
Completing academic programs
Gaining practical experience working
Reading newspaper and magazine articles and biographies of successful entrepreneurs

5. What Is An Entrepreneur?
A person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business.
Entrepreneurs own and run their businesses with the goal of building significant firms that create wealth and add jobs.
Entrepreneurs are visionaries. They identify opportunities and take the initiative to quickly gather the resources they need to start their businesses quickly.
Entrepreneurs differ from small business owners
1. Both possess the same drive, creative energy, and desire to become big-business owners.
2. Most small business owners (versus entrepreneurs) are content to operate a business that provides a comfortable living.
3. Typical entrepreneurs try to make the business grow.
4. Entrepreneurs combine their ideas and drive with money, employees, and other resources to create a business that fills a market need.

6. Categories of Entrepreneurs
Classic entrepreneur
person who identifies a business opportunity and allocates available resources to tap that market.
Serial entrepreneur
person who starts one business, runs it, and then starts and runs additional businesses in succession
Social entrepreneur
person who recognizes societal problems and uses business principles to develop innovative solutions.

7. Categories of Entrepreneurs (In earlier edition)

8. Why People Become Entrepreneurs

9. Reasons to Choose Entrepreneurship as a Career Path
Desire to Be Your Own Boss
Self-management is the motivation of many entrepreneurs
Financial Success
Entrepreneurs:
Are wealth creators
Believe they won’t get rich working for others
Path to riches can be long and uncertain
People become entrepreneurs for different reasons, including:
1. Desire to be own boss
2. Desire to succeed financially
3. However, the path to riches is uncertain and typically very long
4. Desire to improve upon and attain job security
5. However, job security is not guaranteed to the entrepreneur; but greater control is.

10. Reasons to Choose Entrepreneurship as a Career Path
Job Security
Many workers lack job security
Growing percentage of Americans create their own by starting their own firms
Quality of Life
Gives the founder some choice over when, where, and how to work
Many work extraordinarily long hours often at the whim of their customers
6. Job security is dependent on customers and investors
7. The entrepreneur’s commitment to employees and customers assists in securing job longevity
8. Dissatisfaction with current employment situation
9. Insufficient rewards and recognition
10. Believe that their ideas represent opportunities to fulfill customer needs
11. Desire for better quality of life

11. Factors Supporting and Expanding Opportunities for Entrepreneurs
1. A favorable public perception,
2. the availability of financing,
3. the falling cost and widespread availability of information technology,
4. globalization,
5. entrepreneurship education, and
6. changing demographic and economic trends

13. Characteristics of Entrepreneurs

14. Characteristics of Entrepreneurs
Vision
Have an overall idea for how to make a business inspiration a success
High Energy Level
Willingly work hard to realize their visions
Need to Achieve
Need to work hard because they want to excel
Vision – an overall idea for how to make their business ideas a success, and then they passionately pursue the plan.
High Energy Level
1. Entrepreneurs willingly work hard to realize their visions – often work a full-time job in addition to their entrepreneurial work, in order to pay bills during startup.
2. Because of small staffs and resource constraints, the founder has to do more.
3. The challenge is to balance the required hard work with rest, recreation, family, and maintenance of health.
Need to Achieve – their strong competitive drive helps them to enjoy challenges involved with reaching their goals.

15. Characteristics of Entrepreneurs
Self-Confidence and Optimism
Believe in ability to succeed, and they instill their optimism in others
Tolerance for Failure
Entrepreneurs view setbacks and failures as learning experiences
Not easily discouraged or disappointed when things don’t go as planned
Self-Confidence and Optimism – believe in their ability to succeed and instill their optimism in others
Tolerance for Failure
1. view setbacks and failures as learning experiences
2. not easily discouraged or disappointed if initial plans fail

16. Characteristics of Entrepreneurs
Creativity
Entrepreneurs typically conceive new ideas for goods and services
Devise innovative ways to overcome difficult problems and situations
Tolerance for Ambiguity
Take the uncertainties associated with launching a venture in stride
Creativity
1. typically conceive new ideas for goods and services
2. devise innovative ways to overcome obstacles
3. often achieve by making creative improvements, rather than revolutionizing entire industry single-handedly
Tolerance for Ambiguity
1. Entrepreneurs take in stride the uncertainties associated with launching a new venture.
2. They are not gamblers, but are willing to take risks even when conditions are uncertain or ambiguous.
3. They manage ambiguity by remaining close to their customers, so they can adjust accordingly.

17. Characteristics of Entrepreneurs
Internal Locus of Control
Believe that they control their own fates
Take personal responsibility for the success or failure of their actions rather than believing in luck or fate
1. believe they can control their fates
2. Sometimes they may have such a high internal locus of control that they have difficulty sharing control of business when growth makes delegation necessary.

18. Starting a New Venture Selecting a Business Idea
Finding something you love to do and are good at doing
Determining whether your idea can satisfy a need in the market
Success also depends on your offering being appealing to the marketplace
Guidelines that are helpful in determining if an idea makes for a good entrepreneurial undertaking:
a. List interests and abilities, values and beliefs, goals and dreams, likes and dislikes, job experiences.
b. List types of businesses that match your interests and abilities.
c. Learn about demographic and economic trends that indicate future market needs.
d. Evaluate existing goods and services.
e. Select a business that matches what you want and what offers potential profit.
f. Conduct marketing research.
g. Learn as much as possible about potential industry.

19. Starting a New Venture Buying an Existing Business Buying a Franchise
Some prefer not to assume the risks of starting a new firm
Buying a Franchise
Another less risky way to begin a business
Consider buying an existing business.
1. Advantages: employees already in place, serve established customers, deal with familiar suppliers, the good or service is already known in the marketplace, necessary permits and licenses are already secured, obtaining financing may be easier.
2. Locate a business to buy by: contacting Chamber of Commerce; talking with lawyers, accountants and insurance agents.
3. Analyze the performance of potential purchase.
Consider buying a franchise.
1. Reduces risk
2. However, franchisees must agree to follow the procedures mandated by franchiser

20. Starting a New Venture Finding Financing
Seed Capital—initial funding needed to launch a new venture.
Debt Financing—borrowed funds that entrepreneurs must repay.
1. 41% begin with $10,000 or less
2. Vast majority of entrepreneurs rely on personal financing:
personal savings: credit cards advances, retirement savings, refinancing of assets
money from partners, family, and friends
3. Debt Financing – borrowing money that must be repaid
a. Personal credit cards interest rates are very high often used if debt is expected to be short term
b. Bank loans – utilized by more white-owned business than minority-owned. Business plan is reviewed, entrepreneur’s credit history is evaluated, anticipated ability to show a profit, more likely to fund expansion of currently successful small business than a startup, community banks are more likely to fund startups than large national banks
4. SBA-backed loans – only a small percentage of startups

21. Starting a New Venture Finding Financing
Equity Financing—funds invested in new ventures in exchange for part ownership.
Venture Capitalists—business firm or group of individuals who invest in new and growing firms.
Equity Financing
Sources include: family, friends, business partners, venture capital firms, private investors
Drawbacks include:
1. investment partners may not agree on future direction of the business
2. if agreement cannot be reached, one partner may have to buy out the other
Venture Capitalists
1. business organizations, or groups of private individuals that invest in new and growing firms
2. expect high and quick return rates
3. tend to invest in technology and communications efforts
4. receive a great deal of press, because of large sums provided; however, fund very few firms

22. Starting a New Venture Finding Financing
Angel Investors—wealthy individuals who invest directly in a new venture in exchange for an equity stake.
1. wealthy individuals willing to invest directly in return for equity stakes
2. invest more money and more frequently in startups than venture capitalists
3. typically successful entrepreneurs themselves
4. often focus investing efforts in special areas, such as women-owned or minority owned, or special focus ventures
5. angel networks are springing up to aid in locating such individuals

23. Intrapreneurship
Intrapreneurship—process of promoting innovations within the structure of an existing organization.
Helps retain employees who might otherwise leave to start their own businesses
Intrapreneurship practiced in:
3M (e.g. skunkworks)
Handled in a variety of ways:
1. Establishing company-wide policies and procedures that give employees freedom to explore new products and technologies.
2. Hire specifically to secure individuals with these skills and interests.
3. Establish Skunkworks projects to allow employees who conceive an idea to utilize internal resources to develop ideas.
4. Pacing programs, which focus on products and technologies that the company sees as having potential for rapid marketplace growth.
5. Giving intrapreneurs ready access to company resources, such as talented staff.
6. Giving wide latitude to carry out ideas.
7. Are bold about adopting ideas from people both internal and external to the company.
8. Encouragement for employees to leave firms if that fit would be better.