Entrepreneurship
Chapter Seven
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Learning Objectives
LO1 Describe why people become entrepreneurs and what
it takes, personally.
LO2 Summarize how to assess opportunities to start a new
company.
LO3 Identify common causes of success and failure.
LO4 Discuss common management challenges.
LO5 Explain how to increase your chances of success,
including good business planning.
LO6 Describe how managers of large companies can foster
entrepreneurship.
7-2
Entrepreneurship
Entrepreneurship


The pursuit of lucrative opportunities by
enterprising individuals.
Discovering, evaluating, and capitalizing on
opportunities to create new and future goods
and services.
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Entrepreneurship
Small business

A business having fewer than 100 employees,
independently owned and operated, not
dominant in its field, and not characterized by
many innovative practices.
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Entrepreneurship
 Entrepreneurial
venture
 A new business
having growth and
high profitability as
primary objectives.
7-5
Some Myths About Entrepreneurship
1.
2.
3.
4.
5.
6.
Entrepreneurs are born, not made.
Anyone can start a business
Entrepreneurs are gamblers
Entrepreneurs want the whole show to
themselves
Entrepreneurs are their own bosses and
completely independent.
Entrepreneurs work longer and harder than
managers in big companies.
7-6
Some Myths About Entrepreneurship
7. Entrepreneurs experience a great deal of stress and pay
a high price.
8. Start a business and fail and you’ll never raise money
again.
9. Money is the most important start-up ingredient.
10. Entrepreneurs should be young and energetic.
11. Entrepreneurs are motivated solely by the quest for the
almighty dollar.
12. Entrepreneurs seek power and control over others.
7-7
Entrepreneurship
 Entrepreneur
 Individuals who
establish a new
organization without
the benefit of
corporate
sponsorship.
 Intrapreneurs
 New-venture
creators working
inside big companies.
7-8
Mega-Entrepreneurs Who
Started in Their 20s
Table 7.2
7-9
Who is The Entrepreneur?
Figure 7.1
7-10
The Idea
 A great product, a
viable market, and
good timing are
essential ingredients
in any recipe for
success.
7-11
What Business Should You Start?
An entrepreneur should consider opportunities in:
Technological
Economic
discoveries
Demographic
changes
Lifestyle and taste
changes
dislocations
Calamities
Government
initiatives and rule
changes.
7-12
What Business Should You Start?
Franchising

An entrepreneurial alliance between a franchisor
(an innovator who has created at least one
successful store and wants to grow) and a
franchisee (a partner who manages a new store
of the same type in a new location).
7-13
Question
Which Internet model charges fees to
advertise on a site?
A. Transaction fee model
B. Subscription model
C. Advertising support model
D. Affiliate model
7-14
The Internet
 Transaction fee
 Advertising support
model
model
 Charging fees for
 Charging fees to
goods and services.
advertise on a site.
 Subscription model
 Charging fees for site
visits.
7-15
The Internet
 Intermediary model
 Charging fees to
bring buyers and
sellers together.
 Affiliate model
 Charging fees to
direct site visitors to
other companies’
sites.
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Social Entrepreneurship
 Social
entrepreneurship
 Leveraging resources
to address social
problems
7-17
Examples of Social Entrepreneurship
Companies
Table 7.3
7-18
What Does it Take, Personally?
1.
2.
3.
4.
5.
6.
Commitment and determination
Leadership
Opportunity obsession
Tolerance of risk, ambiguity, and uncertainty
Creativity, self-reliance, and ability to adapt
Motivation to excel
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Entrepreneurial Strategy
Matrix
Figure 7.2
7-20
Success and Failure
 Anticipate risk
 Consider the role of the economic environment
 Utilize business incubators
 Realize there are common management
challenges
 Going public with an initial public offering (IPO)
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Biggest Start-Up Mistake
7-22
Question
A _____________ is a protected environment
for small businesses.
A. Business incubator
B. Small business office
C. SBA
D. Service incubator
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Success and Failure
Business incubators
 Protected
environments for
new, small
businesses
7-24
Common Management Challenges
You might not enjoy it
Survival is difficult
Growth creates new challenges
It’s hard to delegate
Misuse of funds
Poor controls
Mortality and succession
7-25
Going Public
Initial public offering (IPO)

Sale to the public, for the first time, of federally
registered and underwritten shares of stock in
the company
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Increasing Your Chances of Success
Opportunity analysis

A description of the good or service, an
assessment of the opportunity, an assessment of
the entrepreneur, specification of activities and
resources needed to translate your idea into a
viable business, and your source(s) of capital.
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Opportunity Analysis
Table 7.4
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Planning
 Business plan
 A formal planning
step that focuses on
the entire venture
and describes all the
elements involved in
starting it.
7-29
Outline of a Business Plan
7-30
Outline of a Business Plan
7-31
Five Key Factors
The people
The opportunity
The competition
The context
Risk and reward
7-32
Nonfinancial Resources
Legitimacy

People’s judgment of a company’s acceptance,
appropriateness, and desirability, generally
stemming from company goals and methods that
are consistent with societal values.
7-33
Nonfinancial Resources
Social capital

A competitive advantage in the form of
relationships with other people and the image
other people have of you.
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Building Support for your Idea
Clear the investment with your immediate
boss
Make cheerleaders who will support your
idea
Horse trading for support, time, money, and
other resources
Get the blessing of relevant higher-level
officials
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Building Intrapreneurship
 Skunkworks
 A project team
designated to
produce a new,
innovative product.
7-36
Building Intrapreneurship
Bootlegging

Informal work on projects, other than those
officially assigned, of employees’ own choosing
and initiative.
7-37
Entrepreneurial Orientation
Entrepreneurial orientation

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
7-38
Characteristics of
Entrepreneurial Orientation
Allow independent action
Innovativeness
Risk taking
Proactiveness
Competitive aggressiveness
7-39
Video: Pillow Pets
What was the impetus for Jennifer Telfer to
start Pillow Pets?
How did she expand the business?
7-40