1. 7-1

2. Chapter Entrepreneurship 7 7McGraw-Hill/Irwin Management, 7/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3. 7-3 Learning Objectives  After studying Chapter 7, You will know:  Why people become entrepreneurs, and what it takes, personally.  How to assess opportunities to start new companies.  Common causes of success and failure.  Common management challenges.  How to increase your chances of success, including good business planning.  How to foster intrapreneurship and an entrepreneurial orientation in large companies.

4. 7-4 Entrepreneurship  Entrepreneurship occurs when an enterprising individual pursues a lucrative opportunity  Entrepreneurs initiate and build organizations  Entrepreneurship involves creating new systems, resources, or processes to produce new goods or services and/or serve new markets

5. 7-5 Entrepreneurship vs. Small Business  Small Businesses have fewer than 100 employees, are independently owned and operated, thy are not dominant in their field and are not characterized by many innovative practices  Entrepreneurial ventures are new businesses that have growth and high profitability as their primary objectives

6. 7-6 Myths about Entrepreneurship

7. 7-7 Why Become an Entrepreneur  Entrepreneurs start their own firms because of:  The challenge  The profit potential  Roadblocks at big corporations  Frustration by bureaucracy or other features of corporate life  The enormous satisfaction they hope lies ahead

8. 7-8 Why Become an Entrepreneur

9. 7-9 What does it take to Succeed?  Innovation and creativity  They possess knowledge and skills in  Management  Business  Networking

10. 7-10 What Business Should You Start?  Entrepreneurs generally look for two things when starting a business  The idea itself  An opportunity  Other Opportunities include  Franchises  Financial services  Heal services and health-related things  Travel  Education

11. 7-11 The Next Frontier  Space – Burt Rutan has started the first private business to launch people into space  The Internet is a seemingly limitless frontier  Side streets – these are unexpected opportunities that appear as you begin down a road and learn from trial and error

12. 7-12 What Does it Take, Personally?  There is no single personality type that will predict entrepreneurial success  Common characteristics include:  Commitment and determination  Leadership skills  Opportunity obsession  Tolerance of risk, ambiguity, and uncertainty  Creativity, self-reliance, and ability to adapt  Motivation to excel

13. 7-13 Success and Failure  Start up companies have at least two major liabilities  Newness  Smallness  Factors that influence success and failure are:  Risk  Economic environment  Management related hazards  Initial public stock offerings

14. 7-14 Increasing Your Chances of Success  Start by conducting an opportunity analysis  A description of the product or service, an assessment of the opportunity and the entrepreneur  Create a business plan  This is a formal planning step that focuses on the entire venture and describes all the elements involved in starting it

15. 7-15 Opportunity Analysis

16. 7-16 Business Plan

17. 7-17 Increasing Your Chances of Success  Crucial to the success of the organization are many non-financial resources  Legitimacy – People’s judgments of a company’s acceptance, appropriateness, and desirability, generally stemming, from company goals and methods that are consistent with societal values  Networks  Management teams  Advisory Boards  Partners

18. 7-18 Intrapreneurship  Large corporations are more than passive bystanders in the entrepreneurial explosion  Established companies try to find and pursue new and profitable ideas – to do so they need entrepreneurs

19. 7-19 Intrapreneurship

20. 7-20 Building Support for Your Idea  Start by clearing the investment with your boss – formally get approval to pursue the idea  Recruit cheerleaders – people who will support the idea prior to formal approval  Be prepared to horse trade – promise payoffs in return for support, time, money and other resources  Expect to get the blessing – this usually involves a formal presentation

21. 7-21 Building Intrapreneurship  Two common approaches used to stimulate intrapreneurial activity are  Skunk works – a project team designated to produce a new, innovative product  Bootlegging – Informal work on projects, other than those officially assigned, of employees’ own choosing and initiative

22. 7-22 Management Challenges  Organizations that encourage intrapreneurship face risks  The effort can fail  Over reliance on a single project  Efforts are spread over too many projects  The hazards are also related to scale  One large project is a threat  Too many under funded projects are a threat as well

23. 7-23 Entrepreneurial Orientation  This is the tendency of an organization to identify and capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods or services  Determined by five tendencies  Allowing independent action  Innovation  Taking risks  Being proactive  Being competitively aggressive

24. 7-24 Looking Ahead  Chapter 8 Organizational Structure  How differentiation and integration influence an organization’s structure.  How authority operates.  The roles of the board of directors and the chief executive officer.  How span of control affects structure and managerial effectiveness.  Why effective delegation is important.  The difference between centralized and decentralized organizations.  The different ways organizations can be structured.  The unique challenges of the matrix organization.  The nature of important integrative mechanisms.

25. 7-25 The Idea  Many great organizations have been built based on the founder’s desire to build a great organization rather than to offer a particular product After a job in corporate design turned out to be unsatisfying, Jennifer Velande found a creative outlet for herself—designing handbags. Soon, with the help of her friend Robin Newberry, Jennifer turned this “hobby” into a unique business concept. 1154 Lill now gives customers the opportunity to design their own original handbags. Return

26. 7-26 The Opportunity  Entrepreneurs spot, create, and exploit opportunities in a variety of ways  To spot opportunities, entrepreneurs think carefully about events and trends as they unfold  Technological discoveries  Demographic changes  Lifestyle and taste changes  Economic dislocations  Calamities  Government initiatives and rule changes Return

27. 7-27 Risk  A fundamental problem with most entrepreneurs is they are unrealistic about the market demands or unrealistic about the costs of meeting those demands  Mel Gibson (pictured right) risked $25 million of his own money to film The Passion of the Christ, an idea he believed in. Return

28. 7-28 Economic Environment  Money is a critical resource for all new businesses  Entrepreneurs must have the foresight and talent to survive when the environment becomes more hostile  Business incubators are one way to prepare for the unexpected; these are protected environments for new, small business; they offer benefits such as low rents and shared costs Return

29. 7-29 Initial Public Stock Offerings  IPO’s offer a way to raise capital through the sales of federally registered and underwritten shares of the company  Advantages include raising more capital, reducing debt and enhancing net worth  Disadvantages include the expense, time, and effort involved; along with the tendency to become more interested in the stock price and capital gains Return

30. 7-30 Management-Related Hazards  You might not enjoy it  Survival is difficult  Growth creates challenges  It’s hard to delegate  Misuse of funds  Poor controls  Death Return