Business OwnershipTest Marketing
Week 4 – October 26, 2004
FM20731 – Entrepreneurship
2
Women-owned Businesses
• Increased 89% from 1987 to 1997• 8.5 million businesses!• By 1999, $3.6 trillion• 27.5 million employees
– 35-40% greater than Fortune 500 co’s
3
Why the Increase?
• Dissatisfaction with corporate life– Layoffs– Glass ceiling
• Lower pay
• Limited advancement
• Desire for balanced life– A startup is not the answer!
• Desire for challenge– 44% cited this reason for starting a business
• Really, many factors
4
Average Receipts Per Firm
$151,129
$582,482$891,043 $847,639
$1,986,111
$804,677
$259,218
$3,381,951
All firms Firms with Paid Employees
WomenMenEqualAll U.S.
• Why are women’s businesses smaller?
5
Reasons why Smaller?
• Motivational Differences– Other things more important than money
• Flexibility
– Different measures of success than men– Other concurrent pursuits
6
Women-Owned by Industry
3% 2% 2% 2%
17%
9%
55%
10%11%
3% 4% 4%
14%11%
43%
7%
Construct. Manufact. Transport. Wholesale Retail Finance Services Other
Women-owned
All U.S.
• Service companies usually smaller
7
Reasons why Smaller?
• Newer companies– But growing quickly
• Possible obstacles– Access to capital– Banks, SBA, others are changing this
8
Things are Changing• Many women are having success• Second-generation women taking over• Corps working to improve• Women may lead new wave of business
– More modern business styles• Cooperative
• Less hierarchical
• Better for changing environment
9
Minority Entrepreneurs
% Change in Self-Employment 1988-1998
1.1%
28.7%
56.5%
30.1%
White Black Asian Hispanic
10
African-American
• 108% increase in businesses 1987-1997– Almost 900,000– Expected to reach 2.2 million by 2010
• $59.3 billion in revenue in 1997– 109% increase
• 35% in NY, CA, TX, FL• 24% of firms in DC
11
Long History of A.A. Entrep.
• James Forten– Successful Phila. Businessman– Late 18th century
• Madam C. J. Walker– First African-American Female Millionaire– Late 1800’s
• 1910, most likely to be self-employed– Of all ethnic and racial groups
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AA-Owned by Industry
7%
1%
9%
3%
11%
5%
53%
14%11%
3% 4% 4%
14%11%
43%
7%
Construct. Manufact. Transport. Wholesale Retail Finance Services Other
African-American-owned
All U.S.
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Barriers for African-Americans
• Discrimination• Biggest: Access to capital
• As with women, being addressed
14
Asians and Pacific Islanders• 1.06 million businesses in 1997
– 180% increase over 1987
• $275 billion in receipts– 463% increase!
• Majority in CA, NY, TX, and HI– HI has largest %, NY largest number
• Glass ceiling– Viewed as good engineers, no managers
15
Asian Group Owned by Industry
3% 3% 4%6%
21%
8%
44%
11%11%
3% 4% 4%
14%11%
43%
7%
Construct. Manufact. Transport. Wholesale Retail Finance Services Other
Asian & Pacific Islanders
All U.S.
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Asian Group Ethnicity
18.2%
27.7%
9.2% 9.3%
14.8%
10.7%
7.7%
1.7%0.4%
AsianIndian
Chinese Filipino Japanese Korean Vietnamese Other Asian Hawaiian Other
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Asian Successes
• Many industries• 5,000 hotel owners, 8,000 hotels
– 33% have graduate degrees– 80% have at least college degree
• 1/3 of Silicon Valley firms by early 90’s
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Hispanic (in 1997)
• 1.2 million firms
• 1.3 million employed
• $186.3 billion in revenue
• CA, TX, FL, and NY largest numbers
• NM highest % Hispanic-owned
19
Hispanic-Owned by Industry
13%
2%
7%
3%
13%
5%
42%
16%
11%
3% 4% 4%
14%11%
43%
7%
Construct. Manufact. Transport. Wholesale Retail Finance Services Other
Hispanic
All U.S.
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Hispanic-Owned by Ethnicity
39.3%
23.9%
15.7%
10.4%
5.8% 4.8%
Mexican L. American Other Hisp. Cuban PuertoRican
Spanish
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Hispanic Successes
• Various industries• Serving Hispanic community• Restaurant industry
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Family Businesses• Account for 78% of all job creation• 60% of all employment• Over 80% of N. American businesses• Majority of international businesses• 35% of Fortune 500• Some surprises:
– Ford, J&J, Marriott, Motorola, Nordstrom, Philip Morris, Wal-Mart, Walt Disney
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Advantages of Family Business• Stability• Trust• Resilience• Positive public perception• Speed• Ability to sacrifice for long haul
• Only if everyone gets along!
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Disadvantages of Family Business
• Family issues spill over into business• Success in family different than in bus.
25
Entrepreneurial Couples
• 1.8 million by 1993• 66% increase in 80’s
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Ups and Downs of Entrep. Couple
• Spouses can do shifts @ work & home• Marriage and careers intertwined
– Divorce may cause one to lose business
• Conversation at home about business• Too much togetherness• Not enough togetherness if shifts
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Advice for Entrep. Couples• Each have specific responsibilities
– Written agreement can help
• Must have same goals, same vision• What if couple divorces?
– One may have to buy other out
– Might have to sell business• If can’t come up with cash or agree how
– Prenuptial agreement advised• Or postnuptial if already married
28
Bringing in the Children• Only successful 20% of the time!• Only 13% of third generation• Why?
– Don’t want to work the business• Disinterested in industry
• Don’t want to live in parents’ shadow
– Sibling rivalry
– Hard for parents to let go• Want things done their way
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Succession Plan• Transferring assets/ownership is easy• Transferring leadership is hard• Should be done over time• Strategize
– Timing
– When will children be capable?
• Make plans clear!– So children know what is coming
– Everyone should understand expectations
30
Other Issues
• Sell to outsider or employees– An often overlooked option
• Active vs. inactive family members– Will all get same part of business?– Will those that don’t get compensated?
31
Low entry vs. delayed entry• Children start entry level
– Learn business from ground up
– “Earn” it
– May not be good at training own children
• Work elsewhere, come in as management– Don’t know business as well
– Jealousy
• No universal right answer
32
Hiring and Compensation
• Best to hire family only if qualified• Best to pay at market rates• Should have a genuine interest• OK for bonuses, but separately
33
Choosing a Successor
• Problem if several are interested• Appointing one may hurt others• Shared responsibility is difficult
34
Final Project• Teams of 3-5• Best if mix of FM and FD students• There will be work time during class• Today:
– Determine Teams
– Brainstorm product ideas, choose one• Can be a line of products
• You do not need to prototype, but can help
– Create a Mission Statement
– Make plans for test marketing
35
Create a Business Plan• Mission Statement
(wk 3)• Product idea(s) and
description(s)– Test Marketing (wk 4)
• Bus. Envirmnt (wk 2)• Marketing Plan (prior
courses, wk 6)
• Management Team (wk 7)
• Financial Data (wk 9)• Legal Considerations
(wk 7)• Risks & Assumptions
(wk 10)
36
Other Elements You Might Include
• Sources of Financing (week 8)
• Exit Strategy (week 10)
• Insurance Requirements (week 7)
37
Basics of Market Research
• Collect– Gather from sources
• Analyze– Statistics
• Interpret– Theorize
• Systematic– Consistent
– Random
• Relevant!
Collect, analyze, and interpret in a systematic manner data relevant to a particular marketing
question
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Primary Data
• Original information (usually)
• Collected for a specific study
• Can be very expensive
39
Survey Methods: Telephone Study
• Most popular method• Expensive
– People– Computers– Tolls
• Very fast and accurate (+- 3%)• Missing: Unlisted phone numbers
– May be an important part of market
• TV overnights – nightly polls
40
Survey Methods: Personal Survey
• In person, at location – often at a mall
• Can be least expensive– Do it yourself
• Very focused – single location
• Bias problems– People can be suspicious– Answer what they think you want to hear– Make up answers
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Survey Methods: Focus Groups• Gather small representative group to ask detailed questions
• Log session – get to know better
• Usually compensate participants
• Sponsor is frequently not known
• Observers hidden behind one-way mirror
42
Survey Methods: Mail Survey
• Much slower – 10 days to get 80% of those who respond
• Single-digit % response rate typical– Most people throw away– Payment doesn’t help– Selfish reasons increase response rates
• e.g. after-stay hospital survey
• Questions must be worded very carefully• Anonymous and non-threatening
43
Sample
• Representative number of people from a specific universe
• Everyone has equal chance of selection – (i.e. it must be random to be useful)
• Can be surprisingly small and still be useful
44
Other Sources of Primary Data• Customer check-out
– Supermarket discount cards– Radio Shack
• In-store observation– Successful buyers always on floor
• Post-sale survey forms– Warranty forms– Packed with delivery
• Crutchfield
• Negative form “why didn’t you buy”• Newsletter “feedback” forms
45
Homework
• Study for Midterm
• Begin Test Marketing
46
Next Class – November 2
• Midterm Exam
• Teams– Continue working on project