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Chapter 1: Entrepreneurship 1Copyright 2002 Prentice Hall Publishing Company

The Foundations of Entrepreneurship

The Foundations of Entrepreneurship

Chapter 1: Entrepreneurship 2Copyright 2002 Prentice Hall Publishing Company

The World of the EntrepreneurThe World of the Entrepreneur

A new business is born every 11 seconds in A new business is born every 11 seconds in the United Statesthe United States

Study of influential Americans Study of influential Americans the the defining issue of the 21defining issue of the 21stst Century: Century: Entrepreneurship!Entrepreneurship!

One of 12 Americans is actively involved in One of 12 Americans is actively involved in trying to start a new business. trying to start a new business.

Entrepreneurial Activity Across the GlobeEntrepreneurial Activity Across the Globe

1.4%

1.6%

1.8%

2.0%

2.2%

3.3%

3.4%

5.4%

6.8%

8.5%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Percent

Finland

J apan

France

Denmark

Germany

Great Britain

Italy

Israel

Canada

United States

Cou

ntry

Percentage of Adult Population Working to Start a New Business

Chapter 1: Entrepreneurship 4Copyright 2002 Prentice Hall Publishing Company

What is an Entrepreneur?What is an Entrepreneur?

One who creates a new business in the face One who creates a new business in the face of risk and uncertainty for the purpose of of risk and uncertainty for the purpose of achieving profit and growth by achieving profit and growth by identifying opportunities and assembling identifying opportunities and assembling the necessary resources to capitalize on the necessary resources to capitalize on them. them.

Chapter 1: Entrepreneurship 5Copyright 2002 Prentice Hall Publishing Company

Characteristics of EntrepreneursCharacteristics of Entrepreneurs Desire for responsibilityDesire for responsibility Preference for moderate riskPreference for moderate risk Confidence in their ability to succeedConfidence in their ability to succeed Desire for immediate feedbackDesire for immediate feedback High level of energyHigh level of energy Future orientationFuture orientation Skilled at organizingSkilled at organizing Value achievement over moneyValue achievement over money

Chapter 1: Entrepreneurship 6Copyright 2002 Prentice Hall Publishing Company

The Type E PersonalityThe Type E Personality

Common Traits of Entrepreneurs:Common Traits of Entrepreneurs:

Aggressively pursues goals; pushes self and othersAggressively pursues goals; pushes self and others

Seeks autonomy, independence and freedom from boundariesSeeks autonomy, independence and freedom from boundaries

Sends consistent messages; very focusedSends consistent messages; very focused

Acts quickly, often without deliberatingActs quickly, often without deliberating

Keeps distance and maintains objectivityKeeps distance and maintains objectivity

Pursues simple, practical solutionsPursues simple, practical solutions

Willing to take risks; comfortable with uncertaintyWilling to take risks; comfortable with uncertainty

Exhibits clear opinions and values; has high expectationsExhibits clear opinions and values; has high expectations

Impatient; just do it mentalityImpatient; just do it mentality

Positive, upbeat, optimistic; communicates confidencePositive, upbeat, optimistic; communicates confidence

Chapter 1: Entrepreneurship 7Copyright 2002 Prentice Hall Publishing Company

Common Themes in Definitions Common Themes in Definitions of Entrepreneurshipof Entrepreneurship

DefiningEntrepreneurship

TheEntrepreneur

Innovation

Organization Creation

CreatingValue

Profit orNonprofit

Growth

Uniqueness

Process

Chapter 1: Entrepreneurship 8Copyright 2002 Prentice Hall Publishing Company

The Development of The Development of Entrepreneurship TheoryEntrepreneurship Theory

18th Century

Richard Cantillon: Coins term

entrepreneur

(go-between or between taker)

Entrepreneur bears risks and plans,

supervises, organizes, and owns factors of

production

Chapter 1: Entrepreneurship 9Copyright 2002 Prentice Hall Publishing Company

The Development of The Development of Entrepreneurship TheoryEntrepreneurship Theory

19th Century

Jean Baptiste Say:

Proposed that profits from entrepreneurship

were separate from profits of capital

ownership

Distinction made between those who supplied funds and earned interest and

those who profited from managerial abilities

Chapter 1: Entrepreneurship 10Copyright 2002 Prentice Hall Publishing Company

The Development of The Development of Entrepreneurship TheoryEntrepreneurship Theory

20th Century

Joseph Schumpeter:

Described the entrepreneur as

someone who is an innovator and someone

who creatively destructs

Peter Drucker:

Described the entrepreneur as someone who

maximizes opportunity

Chapter 1: Entrepreneurship 11Copyright 2002 Prentice Hall Publishing Company

Myths About Myths About EntrepreneurshipEntrepreneurship

1. Successful entrepreneurship takes only a great idea.1. Successful entrepreneurship takes only a great idea.

2. Entrepreneurship is easy.2. Entrepreneurship is easy.

3. Entrepreneurship is a risky gamble.3. Entrepreneurship is a risky gamble.

4. Entrepreneurship is found only in small businesses.4. Entrepreneurship is found only in small businesses.

5. 5. Entrepreneurial ventures and small businesses are identical.Entrepreneurial ventures and small businesses are identical.

Chapter 1: Entrepreneurship 12Copyright 2002 Prentice Hall Publishing Company

The Entrepreneurial The Entrepreneurial ProcessProcess

Exploring the Entrepreneurial

Context

IdentifyingOpportunities/PossibleCompetitive Advantage

Starting the Venture:Starting the Venture:

Researching FeasibilityResearching Feasibility

Planning the VenturePlanning the Venture

Organizing the VentureOrganizing the Venture

Launching the VentureLaunching the Venture

Managing the Venture:Managing the Venture:

Managing ProcessesManaging Processes

Managing PeopleManaging People

Managing GrowthManaging Growth

Special IssuesSpecial Issues

Chapter 1: Entrepreneurship 13Copyright 2002 Prentice Hall Publishing Company

Rewards of Being an Rewards of Being an EntrepreneurEntrepreneur

High degree of independence freedom from constraints

Get to use a variety of skills and talents

Freedom to make decisions

Accountable to only yourself

Opportunity to tackle challenges

Feeling of achievement and pride

Potential for greater financial rewards

Chapter 1: Entrepreneurship 14Copyright 2002 Prentice Hall Publishing Company

Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic factorsDemographic and economic factors Shift to a service economyShift to a service economy Technological advancementsTechnological advancements Independent lifestylesIndependent lifestyles E-Commerce and the World Wide WebE-Commerce and the World Wide Web International opportunitiesInternational opportunities

Chapter 1: Entrepreneurship 15Copyright 2002 Prentice Hall Publishing Company

Challenges of Challenges of Being an EntrepreneurBeing an Entrepreneur

Must be comfortable with change and uncertainty

Must make a bewildering number of decisions

May face tough economic choices

Must be comfortable with taking risks

Need many different skills and talents

Must be comfortable with the potential for failure

Chapter 1: Entrepreneurship 16Copyright 2002 Prentice Hall Publishing Company

The Cultural Diversity of The Cultural Diversity of EntrepreneurshipEntrepreneurship

Young entrepreneursYoung entrepreneurs WomenWomen Minority-owned enterprisesMinority-owned enterprises Immigrant entrepreneursImmigrant entrepreneurs Part-time entrepreneursPart-time entrepreneurs Home-based businessesHome-based businesses Family businessesFamily businesses CopreneursCopreneurs Corporate castoffsCorporate castoffs Corporate dropoutsCorporate dropouts

Chapter 1: Entrepreneurship 17Copyright 2002 Prentice Hall Publishing Company

Nine Deadly Mistakes of Nine Deadly Mistakes of EntrepreneurshipEntrepreneurship

1.1. Management incompetenceManagement incompetence2.2. Lack of experienceLack of experience3.3. Poor financial controlPoor financial control4.4. Failure to develop a strategic planFailure to develop a strategic plan5.5. Uncontrolled growthUncontrolled growth

Chapter 1: Entrepreneurship 18Copyright 2002 Prentice Hall Publishing Company

Nine Deadly Mistakes of Nine Deadly Mistakes of EntrepreneurshipEntrepreneurship

(continued)(continued)

6.6. Poor locationPoor location7.7. Improper inventory controlImproper inventory control8.8. Incorrect pricingIncorrect pricing9.9. Inability to make the entrepreneurial Inability to make the entrepreneurial

transitiontransition

Chapter 1: Entrepreneurship 19Copyright 2002 Prentice Hall Publishing Company

Differences Between Small Businesses Differences Between Small Businesses and Entrepreneurial Venturesand Entrepreneurial Ventures

Independently owned,