1. 1 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Chapter 3: Starting a New Business

2. 2 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Learning Objectives To understand that the idea for a new business can come from anywhere, but the most common source is the work experience of the entrepreneur To see that the advisability of entering an industry depends on how well the customers are being served by the companies already in the industry To comprehend the basic strategies that may be adopted by new firms are low cost, differentiation, and focus To be aware of the fact that the great majority of businesses in the United States are operated by one person, rather than some kind of partnership, despite some important advantages of multiple-person management

3. 3 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Innovation and Entrepreneurship Innovation does not ensure company survival Entrepreneurship and innovation are not the same thing Many new businesses are similar to existing businesses

4. 4 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Source of Business Ideas Prior job Improving upon an existing idea Seeing a need in the marketplace Hobby or a vocational interest

5. 5 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 The Inside-Out Approach Also called “idea generation” Identify your most promising skills Use skills as foundation for a business

6. 6 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 The Outside-In Approach Also called “opportunity recognition” What need in the market is not filled? Use environmental scanning Searching for trends that can become opportunities

7. 7 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Serendipity Recognition of unexpected opportunities Willingness to act on the opportunities

8. 8 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Barriers to Entering an Industry Customer attitudes and habits Switching costs Response of existing competitors

9. 9 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Start-Up Strategies Low-cost strategy Differentiated strategy Focus strategy

10. 10 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Low-Cost Strategy Company offers its products or services for less than its competitors Examples include low-cost airlines

11. 11 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Differentiation Strategy Product or service is discernibly different from competition recognized and valued by customers

12. 12 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Focus Strategy Focus on a specific market segment Target a specific geographical area

13. 13 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Start-Up Alone or With Partner Most businesses are owned by one person Partnerships have a slightly better success rate

14. 14 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 The New Business and the Business Plan Business plans address the topics that an entrepreneur must consider Ask others to read the plan and provide feedback