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 (CONTD)

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 (CONTD)

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 (CONTD)

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 (CONTD)

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 (CONTD)

Entrepreneurship and International Management

- There is potential for expansion and growth in foreign markets. - While there are risks, entering a foreign countrys 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 (CONTD)

Identifying a Genuine Business Opportunity
Who are my customers? Where are they?

In what quantities will they buy?

At what price will they buy my product?

Who are my competitors?

Principles of Management Instructor: Sara Aslam

How will my product vary from those of my competitors?

FINANCING THE NEW BUSINESS

Personal Resources

Lenders

Using your own money and money borrowed from friends and relatives to finance the business.

Strategic Alliances

Obtaining funding from traditional lenders (e.g., banks, independent investors, and government loans).

Partnering with established firms such as suppliers in a mutually beneficial relationship.

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

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.

Human Resource Management Instructor: Sara Aslam

FRANCHISING (CONTD)

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 (CONTD)

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
Background of Women Entrepreneurs in Previous Jobs
Engineering/
Manufacturing Marketing 6% 4% Human Resources 3%

What Women Entrepreneurs Say They Like Best About Business Ownership*

Decision making
15%

Achieving goals 10%

Accounting/ Finance 18% Management 25% Sales Pleasing customers Other 16% ControlIndependence 16%

Being her own boss 20%

Setting own hours

21% 23%

ling destiny
17%

17%

Principles of Management Instructor: Sara Aslam

*Multiple responses allowed

THE PERFORMANCE OF ENTREPRENEURIAL ORGANIZATIONS (CONTD)

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!