Marketing Manager Course - Chapter 08

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Entrepreneurship

leaming Objectives

Afterreading this chapter, you should be able to:

e Distinguish between an entrepreneurship and a

small business

e Develop negotiation, networking, and leadership

Skills that can help you as an entrepreneur

e Recognize why some entrepreneurships fail

e Analyze the advantages and disadvantages of the

legal forms of enterprises

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leammeg Objective S(continue d)

e Learn how capital is raised through debt and

equity financing and recognize the merits of each

approach

e Evaluate alternative forms of entrepreneurship,

such as franchising, spin-offs, and

intrapreneurships

e Recognize and evaluate entrepreneurship as a

career path and a source of innovation and new job

n

e Creating a new enterprise Is one of

the greatest management

challenges

e Entrepreneurs have built

successful companies by being able

to exploit unmet needs in the

market

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Whatis

e The process of creating a

business enterprise capable of

entering new or established

markets

e It involves deploying resources

and people in a unique way to

develop a new organization

e An entrepreneur 1s an

individual who creates an

enterprise that becomes a new

⁄

—

—

yth 1: Entrepreneurs are born, not made

Entre pre neurship Myths

e Myth 2: It 1s necessary to have access to money to

become an entrepreneur

e Myth 3: An entrepreneur takes a large or irrational

risk in starting a business

e Myth 4: Most successful entrepreneurs start with a

Entre pre ne unal Venture versus

small Busmess Management

e Independently owned and —_e Growth is one of the most operated important goals

e Small in size e The goal is to become a

e Does not dominate its medium-sized firm of 100-

markets 499 employees; or

e Has less than 100 e A large firm with 500 or

employees more employees

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The Importance of Entre pre ne urship

e Job Creation

>» Entrepreneurship accounts for most new Jobs 1n

the U.S economy

e Innovation

> Entrepreneurships are responsible for introducing a major proportion of new and innovative products and services into market

e Opportunities for Diverse People

> People of diverse background can improve their economic status by becoming entrepreneurs

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e High need for achievement

e Internal locus of control

e business school classes

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Why Emtre pre ne urships kh 1l

e Lack of capital

e Poor knowledge of the market

e Faulty product design

e Human resource problems

e Poor understanding of the

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Business Plan

e Once an entrepreneur conceives a

øood Idea for a new venture, next

critical step is to prepare a business

plan

elt is a blueprint that maps out the

business strategy for entering markets

e It explains the business to potential

investors

e It develops strategies and tactics to

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e Analysis of market trends and potential competitors Ê

e Estimate for pricing the product or service |

e Estimate for the time it will take to generate profits; , |

e Plan for growth and expansion of the business |

e Plan for obtaining financing

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e Proprietorship — business owned by an individual

e Partnership -— association of two or more

persons acting as co-owners of a business

e Corporation - legal entity separate from the

individuals who own it

Pro pne torship

e Owner keeps all profits e Harder to obtain credit

e Owner makes all and capital

|

P| [> Partne rship

e Ease of formation e Unlimited liability for firm’s

e Direct share of profits debt

e Division of labor and e Limited continuity of life of

management responsibility enterprise

e More capital available thanin © Difficulty in obtaining capital

a sole proprietorship e Partners share responsibility

e Less governmental control for other partners’ actions

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|

P| [> Comoration

e Owners’ liability for the e Extensive government

firm’s debt limited to their regulation of activities

investment e High corporation fees

e Ease of raising large amounts —_e Corporate capital, profits,

of capital dividends, and salaries

e Ease of transfer of ownership double-taxed

through sale of stock e Activities limited to those

e Life of enterprise distinct stated in charter

from owners

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eDebt Financing - obtaining a

commercial loan setting up a plan to repay

the principal and interest

eEquity Financing - raising money by

selling part ownership of the business to

Managmeg Growth

e Entrepreneurs need to manage business

srowth by establishing benchmarks based

on:

> Market data

> A thorough analysis of the firm’s ability to handle

increased demand without sacrificing quality

e The business plan is a way for planning

crowth targets and managing to them

e Too much growth can strain operations \! oy

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Problems of Growmeg Too Quic kly

e Cash flow crisis as a result of spending most

available cash on expansion and not meeting

obligations to creditors

e Kmployees are likely to experience stress from

rapid changes and growth

e Accounting and information systems are not

adequate for the larger business

e Growing so quickly that control is lost

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sof

Innovation

e Exploring and developing

new technologies and new

ways of doing things

e Vital for the future viability

Applications: Managementis Everyone’s

Busme ss—Forthe Manager

e As an entrepreneurship grows, the owner must

learn how to manage a growing and increasingly

complex enterprise

eA key success factor is the entrepreneur’s ability to

delegate responsibilities and duties to others

e As the firm grows, the entrepreneur must

incorporate the role of manager

> Being more systematic in dealing with business issues

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Applications: Managementis Everyone’s

Busme ss— For Managing Teams

e Many entrepreneurships are started by founding

teams of two or more people

e Teams can bring more ideas, creativity, and

competencies to a new venture

e Entrepreneurs in teams must learn how to share

power and authority with partners and develop

ways to settle conflicts

>» Advisory board can provide counsel

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Applications: Managementis Everyone’s

Busine ss— For ndwiduals

e Entrepreneurs must temper overconfidence

e Overconfidence occurs when decision makers have

overly optimistic assessments and fail to examine

all available information