entrepreneurship and new venture

7/31/2019 Entrepreneurship and New Venture

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Copyright 2005 by Houghton Mifflin Company. All

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The Nature of Entrepreneurship

The Role of Entrepreneurship in Society

Job Creation

Innovation Importance to Large Businesses

Strategy for Entrepreneurial Organizations

Choosing an Industry

Emphasizing Distinctive Competencies Writing a Business Plan

Entrepreneurship and International Management


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Structure of Entrepreneurial Organizations

Starting the New Business

Financing the New Business

Sources of Management Advice Franchising

The Performance of Entrepreneurial Organizations

Trends in Small-Business Start-ups

Reasons for Failure

Reason for Success


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After studying this chapter, you should beable to: Discuss the nature of entrepreneurship.

Describe the roles of entrepreneurship in society. Understand the major issues involved in choosing

strategies for small firms and the role of internationalmanagement in entrepreneurship.

Discuss the structural challenges unique to small

firms. Understand the determinants of the performance of

entrepreneurial firms.


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Entrepreneurship The process of planning, organizing, operating,

and assuming the risk of a business venture.Entrepreneur

Someone who engages in entrepreneurship.Small Business

A business that is privatelyowned by one individual or a

small group of individuals. It has sales and assets that are

not large enough to influenceits environment.


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Research Findings: Most new businesses fail within the first few years of

being founded. Those that survive often do sobecause the entrepreneur works for little income.

Most (more than 99%) U.S. businesses are small withfewer than 100 employees. Most U.S. workers work for small businesses. The majority of small businesses are owner-operated. Small business is a strong presence in both mature

and emerging economies. It has a strong effect on jobcreation, innovation, and is important to bigbusinesses.


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Job Creation Small business creates 80% of new jobs in the

U.S.

Industry sectors dominated by small business

have added the most jobs.

Small business accounts for 38%

of all jobs in high-technologysectors and for 96% of all

U.S. exporters.


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Innovation Historically, major innovations are as likely to

come from small businesses as from large firms.

Much of what is created in the high-technologysectors comes from start-up companies.


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Three Basic Strategic Challenges Choosing an industry in which to compete.

Emphasizing distinctive competencies.

Writing a business plan.


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Emphasizing Distinctive Competencies Identifying a niche in an established market, not

currently being exploited, that offers a competitive

advantage to small businesses. Identifying New Markets

Using the transfer of an existing product/service to anew market entrepreneurs can create new industries,products, or services.

First-Mover Advantage Exploiting an opportunity before any other firm does.


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Writing a Business Plan A business plan is a document that summarizes

the business strategy and structure.

The plan should include:

business goals and objectives.

strategies used to achieve

these goals and objectives. a plan of how the entrepreneur

will implement these strategies.


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Entrepreneurship and International

Management There is potential for expansion and

growth in foreign markets.

While there are risks, entering a

foreign countrys market can

be a real catalyst for success.


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Starting a New Business Buying an Existing Business Business has a proven ability to draw customers and

make a profit.

Networks (e.g., customers and suppliers) are alreadyestablished.

Negative: New owners inherit any existing problems.

Starting from Scratch

Avoids problems associated with previous owners.Allows freedom to choose suppliers, equipment,

location, and workers.

Negative: More business risk and uncertainty.


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Identifying a Genuine Business

Opportunity


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Who are my

customers?

Where are they?

At what price

will they buy my

product?In what

quantities will

they buy?

Who are my

competitors?

How will my

product vary from

those of my

competitors?


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Personal Resources Using your own money and

money borrowed fromfriends and relatives tofinance the business.

Strategic Alliances Partnering with established

firms such as suppliers in amutually beneficialrelationship.

Lenders Obtaining funding from

traditional lenders (e.g.,banks, independentinvestors, and government

loans). Venture Capital

Companies Groups of small investors

who provide capital funds to

small high-growth potentialstart-up firms in exchangefor an equity position (stock)in the firms.


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Small-Business Investment Companies(SBICs) SBICs are investor-owned companies that borrow

money from the SBA and, in turn, loan it to small

business with high growth potential. Minority Enterprise Small-Business Investment

Companies (MESBICs) specialize in financingbusinesses owned by minorities.

SBA Financial Programs

The Small Business Administration has severalfinancing programs (e.g., SBA-guaranteed loans) forsmall businesses that are unable to get privatefinancing at reasonable terms.


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Advisory Boards

Management

Consultants

The Small BusinessAdministration

Networking


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Franchising Agreement Operation of the franchised business by the

entrepreneur (the franchisee) under a license by a

parent company (the franchiser). The entrepreneur pays the parent company for

use of trademarks, products, formulas, and

business plans.


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Advantages of franchising Reduced financial risk of new business success

through experience provided by franchiser.

Training, financial, and management support byfranchiser.

Disadvantages Start-up fees to purchase franchise.

Limitations of franchise (market area, product,

customers).

Imposed operational controls of franchiser.


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Source:U.S. Census Bureau, Statistical Abstract of the United States: 1999 (119th Edition) Washington, D.C., 1999.


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Trends in New Business Start-Ups The emergence of E-commerce Internet-based business

Crossovers to small business by former large-business employees

Increased entrepreneurial opportunities forminorities

and women Better survival rates for small businesses


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Reasons for Failure Managerial incompetence/

inexperience of theentrepreneur.

Neglect in not devotingsufficient time and effort tothe business.

Weak control systems thatdo not warn of impending

problems. Insufficient capital to

sustain the business until itstarts to turn a profit.

Reasons for Success Hard work, drive, and

dedication by theentrepreneur.

Careful analysis of marketconditions provides insightsabout business conditions.

Managerial competencethrough training and

experience contributes tosuccess.

Luck sometimes plays arole.


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