by Robert Hisrich Michael P.Peters

The Nature & Importance of Entrepreneurs Chapter One

( American Entrepreneur) (English entrepreneur)

 Do the profile of these people fit your perception of the career of an entrepreneur?  What does it takes to start and operate a successful business To understand this better, learn about

 Historical Evolution Of Entrepreneurship  Earliest Period  Middle Ages  17 th Century  18 th Century  19 th & 20 th Century

Go-Between is Marco Polo Sign contract with a money person(Venture capitalist) to sell his goods Loan the Merchant Adventurer at a 22.5% rate VC passive risk bearer MA took active role in trading- active risk bearer (Physical, emotional) MC completes trip successfully profits were divided- VC taking 75% & MA 25% Earliest Period

Actor & person who managed large production projects Individual didn’t take risks but only managed the project using the resources provided Usually by the Govt of the Country Middle Ages

Re-emergent connection of risk with entrepreneurship developed E person who entered into contractual agreement with the government to perform a service or to supply products 17 th Century

Person with capital was differentiated from the one who needed capital E was distinguished from the capital provided(Venture capitalist) One reason for differentiation was the industrialization occurring throughout the world Invention developed during this time were reaction to the changing world 18 th Century VC- professional money manager who makes risk investments from a pool of equity to obtain high ROR on the investments

E were viewed from Economic Perspective ‘E’ organizes & operates an enterprise for personal gain Pays prices for material consumed in the business, for land, personal services he employs, capital he requires 20 th Century- Notion of an E as an innovator was established 19 th & 20 th Century

An Entrepreneur (ahn’tra pra nur) is a person who recognizes a viable idea for a business product or service and carries it out. Any person (any age) who starts and operates a business is an entrepreneur.

Process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychological, and social risks; & receiving the resulting rewards of monetary and personal satisfaction

The process of initiating a business venture, organizing the necessary resources and assuming the associated risks and rewards

WHO ARE ENTREPRENEURS? Start with a vision Unhappy with current job Bring resources for new venture Hardworking Distinguishable

 New business idea  Business plan  Legal form  Finance resources STARTING AN ENTREPRENEURIAL FIRM

one who brings resources, labor, material and other assets into combinations that make their value greater than before and also who introduces changes, innovations and a new order such a person is driven by certain forces- need to obtain or attain something, to experiment, to accomplish, or perhaps to escape the authority of others an entrepreneur is a threat, an aggressive competitor same entrepreneur may be an allay, source of supply, a customer who creates wealth for others, as well as finds better ways to utilize resources, reduce waste & produce jobs others are glad to get Economist : Psychologist One businessman Another Businessman

All definitions of entrepreneurship includes Newness, organizing, creating, wealth and risk taking Entrepreneurs are found in all professions

Def stresses on Four basic aspects 1.Creation process– creating something new value to entrepreneur & audience for which it is developed 2. Entrepreneurship requires the devotion of the necessary time and effort time & effort to create something new & make it operational 3. Risk take a variety of forms, depending on the effort of the entrepreneur 4. rewards of being entrepreneur– independence- personal satisfaction- for profit entrepreneurs, monetary reward also comes into play

What then causes a person to make this difficult decision ? Poor sales Lack of capital Lack of managerial talent Lack of managerial talent Intense competition Intense competition Financial Risk Financial Risk Emotional risk Emotional risk

Individuals have difficulty bringing their ideas to the market & creating a new venture Yet entrepreneurial decisions have resulted in several new businesses through out the world Despite recession- inflation- high interests rate, lack of infrastructure-economic uncertainty & high probability of failure

Deciding to become an entrepreneur by leaving present activity Changing from present life style  Work Environment  Disruption

Change Environment  Not easy to leave career  Two work environments 1.R&D : individuals develop new product ideas & leave to form their own companies when these ideas are not accepted by their employers 2.Marketing : become familiar with customers unfilled needs & wants- start enterprise Disruption Negative force – retired Relocted due to a move by other family member in a dual-career family Who have been fired 12% new business listings in the yellow pages increased during layoff period Educational degree-MBA Student who is not promoted after receiving an MBA-frustrated & start new company

WHEN INDIVIDUAL PERCEIVES THAT FORMING A NEW ENTERPRISE IS BOTH What causes this personal disruption to result in a new company being formed ? Desirable Possible Aspects of a situation that make it desirable to start a new company Factors making It possible to create a new venture

Desirability of New Venture Formation Cultural SubCultrual Family Teachers Peers  American culture places a high value on beings one’s own boss  In some countries establishing a new business is not are not as highly valued-failure might be disgrace  American culture places a high value on beings one’s own boss  In some countries establishing a new business is not are not as highly valued-failure might be disgrace  No culture is totally for or against entreprenshuip  Silicon valley- subcultures support & even promote- forming of new company –as one of the best occupations  No culture is totally for or against entreprenshuip  Silicon valley- subcultures support & even promote- forming of new company –as one of the best occupations  High % of the founders of Co’s had fathers OR mothers who valued independence  Encouragement by teachers- influence to regard E as a desirable & viable career path  No “E” courses a person takes-increases probability of starting Venture  Standford is in the Silicon  Encouragement by teachers- influence to regard E as a desirable & viable career path  No “E” courses a person takes-increases probability of starting Venture  Standford is in the Silicon  Meeting place where E & potential entrepreneurs can discuss ideas-problems & solutions spawns more new companies than an area where these are not available

Possibility of New Venture Formation Government Background Marketing Finance Role Models  Provides infrastructure to help/support a new venture  Give roads-communication systems-transportation system- utilities- & economic stability – TAX RATE can suppress company formation-since Co wont have money to start & grow  Provides infrastructure to help/support a new venture  Give roads-communication systems-transportation system- utilities- & economic stability – TAX RATE can suppress company formation-since Co wont have money to start & grow  E must have necessary background-Education, previous business experience – skills needed to form & manage a new enterprise  Entrepreneurs are not born: they develop  E must have necessary background-Education, previous business experience – skills needed to form & manage a new enterprise  Entrepreneurs are not born: they develop  Presence of market of sufficient size- must also be a level of marketing know-how to put together the best total package of product, price, distribution & promotion needed for successful product launching  A Co. is more easily formed when the driving force is more from market demand than a technology push  Presence of market of sufficient size- must also be a level of marketing know-how to put together the best total package of product, price, distribution & promotion needed for successful product launching  A Co. is more easily formed when the driving force is more from market demand than a technology push  Financial resources must be readily available  Most start ups comes from personal savings-credit-friends- relatives, there is often a need for additional seed capital  Financial resources must be readily available  Most start ups comes from personal savings-credit-friends- relatives, there is often a need for additional seed capital  Most powerful influence in making Co seem possible  see someone else succeed makes it easier to picture yourself engaged in a similar activity  Frequent comment of E “if that person could do it, so can I”  Most powerful influence in making Co seem possible  see someone else succeed makes it easier to picture yourself engaged in a similar activity  Frequent comment of E “if that person could do it, so can I”

The future of Entrepreneurship In spite of the difference conceptual perspectives, there are common aspects: risk taking, creativity, independence & rewards The future for “E” is bright – we are living in the age of entrepreneurship

Educational institutes Government Society Corporation Universities & colleges offering courses in ‘E’ E education in Europe is also growing 1970’s – 90’s 400 universities offering E courses Support as tax incentives, buildings, roads and a communication system to facilitate this creation process Understands that new enterprises create jobs & increase economic output in the area Society support of entrepreneurship will continue U.S entrepreneurial processes are considered honorable and prestigious pursuits major factor of this societal approval is media-played powerful role by reporting on the entrepreneurial spirit– articles in newspapers- uplifts the image of the entrepreneur & focuses on their contributions to society Large companies special form of interests in entrepreneurship – intrapreneurship- in the future Companies want to create more new business through intrapreneurship