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The Foundations of
Entrepreneurship
The Foundations of
Entrepreneurship
Prof Purshottam Prof Purshottam PatilPatil
Copyright 2008 Prentice Hall Publishing 2Chapter 1: Entrepreneurship
The World of the The World of the EntrepreneurEntrepreneur
Every year in the U.S., Every year in the U.S., entrepreneurs launch 850,000 entrepreneurs launch 850,000 new businesses.new businesses.
Entrepreneurial spirit - the most Entrepreneurial spirit - the most significant economic development significant economic development in recent history.in recent history.
GEM study: 11.3 percent of adult GEM study: 11.3 percent of adult population in the U.S. is actively population in the U.S. is actively involved in trying to start a new involved in trying to start a new business. business.
Copyright 2008 Prentice Hall Publishing 3Chapter 1: Entrepreneurship
The World of the The World of the EntrepreneurEntrepreneur
GEM studyGEM study Globally 9.4 percent of adults are Globally 9.4 percent of adults are
actively engaged in trying to start a actively engaged in trying to start a business.business.
Men are twice as likely as women to Men are twice as likely as women to start a business (exactly the start a business (exactly the oppositeopposite trend in the U.S., trend in the U.S., however).however).
Nearly one-third of global Nearly one-third of global entrepreneurs are between the ages entrepreneurs are between the ages of 25 and 44. of 25 and 44.
Copyright 2008 Prentice Hall Publishing 4Chapter 1: Entrepreneurship
What Is an What Is an Entrepreneur?Entrepreneur?
One who creates a new business One who creates a new business in the face of risk and in the face of risk and uncertainty for the purpose of uncertainty for the purpose of achieving profit and growth by achieving profit and growth by identifying opportunities and identifying opportunities and assembling the necessary assembling the necessary resources to capitalize on them. resources to capitalize on them.
Copyright 2008 Prentice Hall Publishing 5Chapter 1: Entrepreneurship
Characteristics of Characteristics of EntrepreneursEntrepreneurs
Desire for responsibilityDesire for responsibility Preference for moderate risk – risk Preference for moderate risk – risk
eliminatorseliminators Confidence in their ability to Confidence in their ability to
succeedsucceed Desire for immediate feedbackDesire for immediate feedback High level of energyHigh level of energy Future orientation – serial Future orientation – serial
entrepreneursentrepreneurs Skilled at organizingSkilled at organizing Value achievement over moneyValue achievement over money
Copyright 2008 Prentice Hall Publishing 6Chapter 1: Entrepreneurship
EntrepreneurshipEntrepreneurship
One characteristic of One characteristic of entrepreneurs stands out:entrepreneurs stands out:
Diversity!Diversity! AnyoneAnyone – regardless of age, race, – regardless of age, race,
gender, color, national origin, or gender, color, national origin, or any other characteristic – can any other characteristic – can become an entrepreneur become an entrepreneur (although not everyone should). (although not everyone should).
Copyright 2008 Prentice Hall Publishing 7Chapter 1: Entrepreneurship
Benefits of Benefits of EntrepreneurshipEntrepreneurship
The opportunity to:The opportunity to: Create your own destinyCreate your own destiny Make a differenceMake a difference Reach your full potentialReach your full potential Reap impressive profitsReap impressive profits Contribute to society and to be Contribute to society and to be
recognized for your effortsrecognized for your efforts Do what you enjoy and to have Do what you enjoy and to have
fun at it fun at it
Copyright 2008 Prentice Hall Publishing 8Chapter 1: Entrepreneurship
Drawbacks of Drawbacks of EntrepreneurshipEntrepreneurship
Uncertainty of incomeUncertainty of income Risk of losing your entire Risk of losing your entire
investmentinvestment Long hours and hard workLong hours and hard work
Small Business Owners' Work WeekNumber of Hours Worked per Week
Less than 30 hours11%
30 to 40 hours24%
41 to 50 hours28%
51 to 60 hours20%
More than 60 hours17%
Source: Adapted from Dun & Bradstreet 21st Annual Small Business Survey Summary Report, 2002, p. 35.
Copyright 2008 Prentice Hall Publishing 10Chapter 1: Entrepreneurship
Drawbacks of Drawbacks of EntrepreneurshipEntrepreneurship
Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work
Lower quality of life until the Lower quality of life until the business gets establishedbusiness gets established
Entrepreneurs' Age at Business Formation
18 - 2412.0%
25 - 3432.3%
35 - 4430.6%
45 - 5417.4%
55 - 646.7%
Over 651.0%
Source: 2004 Global Entrepreneurship Monitor.
Copyright 2008 Prentice Hall Publishing 12Chapter 1: Entrepreneurship
Drawbacks of Drawbacks of EntrepreneurshipEntrepreneurship
Uncertainty of incomeUncertainty of income Risk of losing your entire investmentRisk of losing your entire investment Long hours and hard workLong hours and hard work Lower quality of life until the business gets Lower quality of life until the business gets
establishedestablished
High levels of stressHigh levels of stress Complete responsibilityComplete responsibility DiscouragementDiscouragement
Copyright 2008 Prentice Hall Publishing 13Chapter 1: Entrepreneurship
Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire
Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic Demographic and economic
factorsfactors Shift to a service economyShift to a service economy Technological advancementsTechnological advancements Independent lifestyleIndependent lifestyle E-commerce and the World E-commerce and the World
Wide WebWide Web
$94.0
$117.7
$142.5
$169.5
$199.3
$232.1
$-
$50.0
$100.0
$150.0
$200.0
$250.0
Re
ve
nu
es
(in
Bill
ion
s)
2003 2004 2005 2006 2007 2008
Year
U.S. Retail E-Commerce Revenues
Source: eMarketer, 2005.
Copyright 2008 Prentice Hall Publishing 15Chapter 1: Entrepreneurship
Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire
Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic Demographic and economic
factorsfactors Shift to a service economyShift to a service economy Technological advancementsTechnological advancements Independent lifestylesIndependent lifestyles E-commerce and the World E-commerce and the World
Wide WebWide Web International International
opportunitiesopportunities
Copyright 2008 Prentice Hall Publishing 16Chapter 1: Entrepreneurship
The Cultural The Cultural Diversity of Diversity of
EntrepreneurshipEntrepreneurship Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs
Why Women Start Businesses
Gain control over my schedule
46%
Saw a market opportunity and
decided to pursue it
24%
Frustrated with "glass ceiling" at
big companies23%
Other reasons7%
Source: Center for Women’s Business Research, 2004.
Copyright 2008 Prentice Hall Publishing 18Chapter 1: Entrepreneurship
The Cultural The Cultural Diversity of Diversity of
EntrepreneurshipEntrepreneurship Young entrepreneursYoung entrepreneurs Women entrepreneursWomen entrepreneurs Minority-owned enterprisesMinority-owned enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs
Copyright 2008 Prentice Hall Publishing 19Chapter 1: Entrepreneurship
The Cultural The Cultural Diversity of Diversity of
EntrepreneurshipEntrepreneurship Home-based businessesHome-based businesses Family businessesFamily businesses CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts
Small Business by Industry
Service39.2%
Retail20.5%
Construction11.8%
Wholesale7.4%
Manufacturing5.8%
Finance8.0%
Other7.3%
Source: U.S. Small Business Administration, 2005.
Copyright 2008 Prentice Hall Publishing 21Chapter 1: Entrepreneurship
Small Small Businesses...Businesses...
Employ 51 percent of the nation’s Employ 51 percent of the nation’s private sector workforce.private sector workforce.
Create more jobs than big Create more jobs than big businesses.businesses.
Are leaders in offering training Are leaders in offering training and advancement opportunities and advancement opportunities to workers.to workers.
Copyright 2008 Prentice Hall Publishing 22Chapter 1: Entrepreneurship
Produce 51 percent of the Produce 51 percent of the nation’s private GDP.nation’s private GDP.
Account for 47 percent of Account for 47 percent of business sales.business sales.
Create 13X more innovations Create 13X more innovations per employee than large per employee than large companies.companies. Zipper, FM radio, laser, air Zipper, FM radio, laser, air
conditioning, escalator, light conditioning, escalator, light bulb, personal computer, bulb, personal computer, automatic transmission, and automatic transmission, and many more!many more!
Small Small Businesses...Businesses...
100%
81%
65%
54%46%
40%36%
32% 29% 27% 25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% o
f S
mal
l F
irm
s S
urv
ivin
g
New 1 2 3 4 5 6 7 8 9 10
# of Years in Business
Small Business Survival Rate
Source: NFIB Business Policy Guide, 2003, p. 16.
Copyright 2008 Prentice Hall Publishing 24Chapter 1: Entrepreneurship
Ten Deadly Mistakes of Ten Deadly Mistakes of EntrepreneurshipEntrepreneurship
1.1. Management mistakesManagement mistakes
2.2. Lack of experienceLack of experience
3.3. Poor financial controlPoor financial control
4.4. Weak marketing effortsWeak marketing efforts
5.5. Failure to develop a strategic Failure to develop a strategic planplan
Copyright 2008 Prentice Hall Publishing 25Chapter 1: Entrepreneurship
Ten Deadly Mistakes of Ten Deadly Mistakes of EntrepreneurshipEntrepreneurship
6.6. Uncontrolled growthUncontrolled growth
7.7. Poor locationPoor location
8.8. Improper inventory controlImproper inventory control
9.9. Incorrect pricingIncorrect pricing
10.10. Inability to make the Inability to make the “entrepreneurial transition”“entrepreneurial transition”
Copyright 2008 Prentice Hall Publishing 26Chapter 1: Entrepreneurship
Putting Failure into Putting Failure into PerspectivePerspective
Entrepreneurs are Entrepreneurs are notnot paralyzed by the prospect of paralyzed by the prospect of failure.failure.
Failure – a natural part of the Failure – a natural part of the creative process. creative process.
Successful entrepreneurs learn Successful entrepreneurs learn to fail to fail intelligentlyintelligently..
Copyright 2008 Prentice Hall Publishing 27Chapter 1: Entrepreneurship
Avoiding the Avoiding the Pitfalls of Pitfalls of
Small Business Small Business FailureFailure
Know your business in depthKnow your business in depth Develop a solid business planDevelop a solid business plan Manage financial resourcesManage financial resources Understand financial Understand financial
statementsstatements Learn to manage people Learn to manage people
effectivelyeffectively Keep in tune with yourselfKeep in tune with yourself