7-entrepreneurship and new venture management
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ENTREPRENEURSHIP AND NEW
VENTURE MANAGEMENT
LECTURE 6 Lecturer: Sara Aslam
Fall 2011
Kinnaird College for Women
THE NATURE OF ENTREPRENEURSHIP
Entrepreneurship
The process of planning, organizing, operating, and assuming the risk of a business.
Entrepreneur
Someone who engages in entrepreneurship.
Small Business
- A business that is privately owned by one individual or a small group of individuals.
- It has sales and assets that are not large enough to influence its environment.
Principles of Management
Instructor: Sara Aslam
THE ROLE OF ENTREPRENEURSHIP IN SOCIETY
Job Creation
- Industry sectors dominated by small business have
added the most jobs.
Principles of Management
Instructor: Sara Aslam
THE ROLE OF ENTREPRENEURSHIP IN
SOCIETY (CONT’D)
Innovation
- Historically, major innovations are as likely to come
from small businesses as from large firms.
- Much of what is created in the high-technology
sectors comes from start-up companies.
Principles of Management
Instructor: Sara Aslam
THE ROLE OF ENTREPRENEURSHIP IN SOCIETY
(CONT’D)
Importance to Large Business
Most products made by large manufacturers are sold to
customers by small businesses.
Small businesses as suppliers provide large firms with
essential services, supplies, and raw materials.
Large businesses outsource many routine business
operations such as packaging, delivery, and distribution
to small businesses.
Principles of Management
Instructor: Sara Aslam
STRATEGY FOR
ENTREPRENEURIAL ORGANIZATIONS
Three Basic Strategic Challenges
Choosing an industry in which to compete.
Emphasizing distinctive competencies.
Writing a business plan.
Principles of Management
Instructor: Sara Aslam
STRATEGY FOR ENTREPRENEURIAL
ORGANIZATIONS (CONT’D)
Emphasizing Distinctive Competencies
- Identifying a niche in an established market, not
currently being exploited, that offers a competitive
advantage to small businesses.
Identifying New Markets
- Using the transfer of an existing product/service to
a new market entrepreneurs can create new
industries, products, or services.
First-Mover Advantage
- Exploiting an opportunity before any other firm
does.
Principles of Management
Instructor: Sara Aslam
STRATEGY FOR ENTREPRENEURIAL
ORGANIZATIONS (CONT’D)
Writing a Business Plan
- A business plan is a document that summarizes the
business strategy and structure.
- The plan should include:
business goals and objectives.
strategies used to achieve
these goals and objectives.
a plan of how the entrepreneur
will implement these strategies.
Principles of Management
Instructor: Sara Aslam
STRATEGY FOR ENTREPRENEURIAL
ORGANIZATIONS (CONT’D)
Entrepreneurship and International Management
- There is potential for expansion and growth in foreign
markets.
- While there are risks, entering a foreign country’s
market can be a real catalyst for success.
Principles of Management
Instructor: Sara Aslam
STRUCTURE OF ENTREPRENEURIAL
ORGANIZATIONS
Starting a New Business
- Buying an Existing Business
Business has a proven ability to draw customers and make a
profit.
Networks (e.g., customers and suppliers) are already
established.
Negative: New owners inherit any existing problems.
- Starting from Scratch
Avoids problems associated with previous owners.
Freedom to choose suppliers, equipment, location, and workers.
Negative: More business risk and uncertainty.
Principles of Management
Instructor: Sara Aslam
STRUCTURE OF ENTREPRENEURIAL
ORGANIZATIONS (CONT’D)
Identifying a Genuine Business Opportunity
Who are my
customers?
Where are they?
At what price
will they buy my
product? In what
quantities will
they buy?
Who are my
competitors?
How will my
product vary from
those of my
competitors?
Principles of Management
Instructor: Sara Aslam
FINANCING THE NEW BUSINESS
Personal Resources
Using your own money
and money borrowed from
friends and relatives to
finance the business.
Strategic Alliances
Partnering with
established firms such as
suppliers in a mutually
beneficial relationship.
Lenders
Obtaining funding from
traditional lenders (e.g.,
banks, independent
investors, and government
loans).
Venture Capital
Companies
Groups of small investors
who provide capital funds
to small high-growth
potential start-up firms in
exchange for an equity
position (stock) in the firms. Principles of Management
Instructor: Sara Aslam
Franchising Agreement
- Operation of the franchised business by the
entrepreneur (the franchisee) under a license by a
parent company (the franchiser).
- The entrepreneur pays the parent company for use of
trademarks, products, formulas, and business plans.
FRANCHISING
Human Resource Management
Instructor: Sara Aslam
FRANCHISING (CONT’D)
Advantages of franchising
- Reduced financial risk of new business success through
experience provided by franchiser.
- Training, financial, and management support by franchiser.
Disadvantages
- Start-up fees to purchase franchise.
- Limitations of franchise (market area, product, customers).
- Imposed operational controls of franchiser.
Principles of Management
Instructor: Sara Aslam
THE PERFORMANCE OF ENTREPRENEURIAL
ORGANIZATIONS (CONT’D)
Trends in New Business Start-Ups
The emergence of E-commerce
Crossovers to small business by former large-business employees
Increased entrepreneurial opportunities for minorities and women
Better survival rates for small businesses
Principles of Management
Instructor: Sara Aslam
WHERE WOMEN ENTREPRENEURS COME FROM
AND WHAT THEY LIKE ABOUT WORK
Management
25%
Accounting/
Finance
18%
Sales
21% Other
23%
Background of Women
Entrepreneurs in Previous Jobs
Marketing
6%
Human
Resources
3%
Engineering/
Manufacturing
4%
*Multiple responses allowed
Decision making
15%
Achieving goals
10%
Being her
own boss
20%
Setting own
hours
17%
Control-
ling destiny
17%
Pleasing
customers
16%
Independence
16%
What Women Entrepreneurs Say They
Like Best About Business Ownership*
Principles of Management
Instructor: Sara Aslam
THE PERFORMANCE OF ENTREPRENEURIAL
ORGANIZATIONS (CONT’D)
Reasons for Failure
Managerial incompetence/
inexperience of the
entrepreneur.
Neglect in not devoting
sufficient time and effort to
the business.
Weak control systems that
do not warn of impending
problems.
Insufficient capital to sustain
the business until it starts to
turn a profit.
Reasons for Success
Hard work, drive, and
dedication by the
entrepreneur.
Careful analysis of market
conditions provides insights
about business conditions.
Managerial competence
through training and
experience contributes to
success.
Luck sometimes plays a
role.
Principles of Management
Instructor: Sara Aslam
Thank You!
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