Business & Innovative Company Creation Lecture 1.

Aims 1. Importance of entrepreneurship 2. Corporate entrepreneurship 3. Reasons to become entrepreneur 4. Characteristics of successful entrepreneur 5. Types of E firms 6. Impact of E firms on economy and society

What is to be done to maintain a new firm? a solid business idea passion about the idea motivation good information an effective business plan a sound execution

What is E? Derives form the French word entre – “between” and prendre – “to take” It was used to describe people: - who take on the risk between buyers and sellers; - who undertake a task such as starting a new venture

Inventor and entrepreneur Inventor creates smth new Entrepreneur assembles and then integrates all the resources needed – money, people, business model, strategy, risk-bearing ability – to transform invention into a viable business.

Entrepreneurship A process by which individuals pursue opportunities without regard to resources they currently control Opportunities can be pursued by an individual or a group of individuals

E requires 1. creativity 2. drive 3. willingness to take a risk 4. hard work 5. desire to be useful

New positions Firms divide into: - conservative – wait and see position - highly entrepreneurial – proactive innovators - Chief Innovation Officer - Vice President of Innovation

Reasons to become E - be one’s own boss - pursue one’s own ides - pursue financial rewards

Characteristics of successful E - passion for the Business (belief in positive effect of his business) - product/customer focus (to satisfy customer needs) - tenacity despite failure - execution intelligence (ability to fashion a solid idea into a viable business)

Common myths about E 1.born, not made 2.Gamblers 3.Motivated primarily by money 4.Should be young and energetic 5.Love the spotlight

Types of start-up firms 1. salary-substitute firms (small firms that yield a level of income similar to what one can earn as an employer 2. life-style firms (provide the opportunity to pursue a particular life-style and earn a living ) 3. entrepreneurial firms (bring new product and services to market and create a new value – worth, importance, utility regardless of the resources they currently control)

Demographics of Entrepreneurs 1. women E – constantly growing Spheres: - health care - professional services - construction - agricultural services - transportation - communications - public utilities

2. Minority E Growing Spheres: - services industry - all sectors of economy

Senior E – 55 and older Increasing rapidly Reasons: - corporate downsizing - desire for personal fulfillment - growing worries

Young E – 21and younger Less than women but increasing

Entrepreneurship’s Importance Joseph Schumpeter in 1934 in The Theory of Economic Development argued: Entrepreneurs develop new products and technologies that over time make current products and technologies obsolete It is creative destruction The new products and technologies also increase the productivity of all elements of a society

Economic impact of E firms Reasons of impact on a economy’s strength and stability especially small firms with form 500 to 20 employers - Innovation – central to E process (55%) - Job creation (2/3) - Globalization (97% of exporters)

E impact on society New products and services make our lives easier, enhance our productivity, improve our health, entertain us - mobile phones - Internet shopping - overnight package delivery - digital photography - microwave ovens, etc.

E impact on larger firms - make larger firms to be more effective and efficient

Steps of Entrepreneurial Process 1. Deciding to become an e 2. Developing successful business idea 3. Moving form an idea to a firm 4. Managing and growing the firm

Review Questions 1. Why does entrepreneurship is being practices in many countries? 2. Which type of a new business is more entrepreneurial – 1. started to pursue a unique opportunity or 2. started out of necessity? 3. How does an E firm differentiate from any other firm?

4. Why do people become E? 5. Why is that people who start their own firms to be independent typically do not grow their firms beyond their immediate control? 6. Why are the financial rewards far fewer than imagined?

7. What are the characteristics of successful E? 8. Myths about E 9. Major differences between 3 types of firms 10. What role does money play in motivating to become E?

11. What is creative destruction? 12. Demographic make-up of E in your county 13. Describe your E firms’ impact on economy, society and larger firms

Written task Business idea: 1. Open a chain of small walk-in restaurants that serve only one meal (cereal). Make the process of buying it inviting enough to become an alternative to fast food. Determine the location

Which questions would you ask the firm’s founders before making your funding decision? What answers would satisfy you? Would you fund the firm only on the information you are provided on the firm’s web-site?

2. To help people reduce their expenditures on shipping purchased heavy things 3. To create a business concept to help busy families at meal type

Literature 1. Bruce R. Barringer, R. Duane Ireland – Entrepreneurship.

Starting a firm Identifying opportunities Opportunity is a favorable set of circumstances that creates a need for a new product, service or business The key to opportunity recognition is to identify a product or service that people need and are willing to buy, not one that an E wants to sell

Two ways to start business 1. external stimulation. E decides to launch a firm, searches for opportunity, starts business (Amazon.com) 2. internal stimulation. E recognizes a problem or an opportunity gap, and creates business to fill it Opportunity is tough to spot

Opportunity qualities 1. attractive 2. durable 3. timely 4. anchored in a product, service or business that creates or adds value for its buyer or user

Window of Opportunity Window of opportunity is a metaphor It is the time period in which a firm can realistically enter a new market When the market matures the window closes

Opportunity and idea Idea is a thought, impression, notion Idea may or may not meet the criteria of opportunity If it does not the firm fails It is critical to understand whether the idea fills a need and meets the criteria od opportunity

How to identify opportunities Factors: - economic - social - technological advances - political action - regulatory status

Two ways to identify opportunities 1. study and observe them carefully 2. understand emerging trends by purchasing customized forecasts and market analyses form independent research firms

Analyzes of social trends - family and work patterns – number of two- income households and number of single-parent families - the aging of the population - increasing diversity in the workplace - globalization of industries - proliferation of computers and the Internet - continual increase in the number of cell phones - new forms of music and other types of intertainment

Economic forces Affect consumers’ level of disposable income Drop in interest rates? Decline in the stock market? Who has money to spend? Increase of women in labor? Teens as labor force?

Technological advances Dovetail with economic and social changes to create opportunities Mobile phones – mobile population E-commerce – busy people - Provide opportunities to help people satisfy basic needs in a better and more convenient way - Products emerge to advance technology

Political Action and Regulatory Status New laws create opportunities to start firms Political instability and terrorism –products to protect physical assets and intellectual property

Second approach To identify opportunities is to recognize the problems How? - to observe - to analyze one’s life - to foresee new trends - serendipitous discovery (chance discovery) - solving problem + enviromental trends

3 way - Gaps in the Marketplace - customers’ unsatisfied needs

E personal characteristics - prior experience - corridor principle (leading to new venture opportunities) - cognitive factors (sixth sense – entrepreneurial alertness) - extent and depth of social networks

Solo E – identify their business ideas ob their own Network E – identify their ideas through social contacts Strong-tie relationships Weak-tie relationships

Creativity is the process of generating a novel or useful idea Opportunity creation is a creative process It is subdivided into 5 stages: - preparation – background, knowledge, experience - incubation – mulling things over - insight – idea and its solution are born - evaluation – idea is scrutinized and analyzed - elaboration – business plan is written

Techniques for Generating Ideas Search for the best way of capitalizing on opportunity 1. Brainstorming – to generate ideas quickly - focus on one topic - enthusiasm

Behavior - no criticism - freewheeling - accept even crazy things