chapter 6 part iii starting your own business: the entrepreneurship alternative

Chapter 6part III

Starting Your Own Business: The Entrepreneurship

Alternative

Chapter Objectives1. Define the term entrepreneur and distinguish among

entrepreneurs, small-business owners, and managers.2. Identify three different types of entrepreneurs.3. Explain why people choose to become entrepreneurs.4. Discuss conditions that encourage opportunities for

entrepreneurs.5. Describe the role of entrepreneurs in the economy.6. Identify personality traits that typically characterize

successful entrepreneurs.7. Summarize the process of starting a new venture.8. Explain how organizations promote intrapreneurship.

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

What Is An Entrepreneur?

• A person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business.

• Websites– Entrepreneurial Leadership– Entrepreneur– EntreWorld

Categories of Entrepreneurs

Categories of Entrepreneurs

• Classic entrepreneurs—person who identifies a business opportunity and allocates available resources to tap that market.

Categories of Entrepreneurs

• Intrapreneur—entrepreneurially oriented person who develops innovations within the context of a large organization.

• Change Agent—manager who tries to revitalize an established firm to keep it competitive.

• Why People Become Entrepreneurs

• U.S. Adults Currently Engaged in Starting a Business

Reasons to Choose Entrepreneurshipas a Career Path

• Desire to Be Your Own Boss– Self-management is the motivation of many

entrepreneurs

• Financial Success– Entrepreneurs:Entrepreneurs:

• Are wealth creatorsAre wealth creators• Believe they won’t get rich working for othersBelieve they won’t get rich working for others

– Path to riches can be long and uncertainPath to riches can be long and uncertain

Reasons to Choose Entrepreneurshipas 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

• Factors Supporting and Expanding Opportunities for Entrepreneurs

The Environment for Entrepreneurs• Globalization

– Creates many opportunities for entrepreneurs

– Allows products to be sold overseas– Provides international talent pool

The Environment for Entrepreneurs

• Education– Tremendous growth in educational

opportunity for would-be entrepreneurs via:• College Classes• Business schools helping students start

businesses• Other organizations like the Center for

Entrepreneurial Leadership

The Environment for Entrepreneurs• Information Technology

– Provided a big boost for entrepreneurs– Helps entrepreneurs work quickly and

efficiently, provide attentive customer service, increase sales, and project a professional image

– Has created demand for new products– Internet is also a challenge for

entrepreneurs– Customers can go online, quickly get

needed information, and buy from anywhere in the world

The Environment for Entrepreneurs

• Demographic and Economic Trends– Demographic trends create opportunities

for new goods and services

The Environment for Entrepreneurs

• Entrepreneurship around the World– Growth of entrepreneurship is a worldwide

phenomenon– Level of entrepreneurship varies

considerably even among industrialized nations

• Levels of Entrepreneurial Activity in 10 Countries

Influence of Entrepreneurs onthe Economy

• American entrepreneurs have given the world goods and services that have changed the way people live, work, and play

• Products include:– Ball-point pens– Netscape Navigator software– Fiberglass skis– Velcro fasteners– FedEx delivery service– MacDonald's

Influence of Entrepreneurs onthe Economy

• Influence of Entrepreneurs on the Economy

Influence of Entrepreneurs onthe Economy

• Innovation– Entrepreneurs:

• Create new products• Build new industries• Bring new life to old industries

– Since WWII, behind:• 2/3rds of Inventions• 95% of major innovations

Influence of Entrepreneurs onthe Economy

• Job Generation– Vital source of new jobs– Typically hire small numbers of employees

per firm . . . spread over many companies– See potential employees where

established firms overlook them– Gazelles

Influence of Entrepreneurs onthe Economy

• Diversity– Entrepreneurship offers excellent

economic opportunities for women and minorities

Characteristics of Entrepreneurs

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

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

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

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

• Think You Might Be a Good Entrepreneur?

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

Starting a New Venture

• Buying an Existing Business– Some prefer not to assume the risks of

starting a new firm

• Buying a Franchise– Another less risky

way to begin a business

Starting a New Venture

• Creating a Business Plan– Online Resources for Preparing a Business

Plan

Starting a New Venture

• Finding Financing– Seed Capital—initial funding needed to

launch a new venture.

– Debt Financing—borrowed funds that entrepreneurs must repay.

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.

Starting a New Venture• Finding Financing

– Angel Investors—wealthy individuals who invest directly in a new venture in exchange for an equity stake.

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)• Thermo Electron• Xerox• Intuit