Chapters 1 and 2

1
CHAPTER 9 Strategies for Entrepreneurship and
Innovation
2
Learning Objectives

• Understand the importance of entrepreneurship and
  organizational entrepreneurship
• Be able to create a simple business plan
• Understand the steps in the creation of an
  entrepreneurial venture
• Know the pitfalls associated with new venture
  failures
• Consider the various options for new venture
  funding
• Select an appropriate structure for an internal
  venture
• Be able to create a plan for fostering innovation
  in an existing firm

3
Entrepreneurship

• Entrepreneurship is the creation of new business
• Opportunity recognition or creation
  (entrepreneurial discovery is the intersection of
  a need and a solution)
• Assembling resources to pursue the opportunity,
  including capital (typically associated with a
  business plan)
• Managing activities that bring a new venture into
  existence
• Some ventures are complete start-ups
• Other ventures occur within existing firms
• Organizational entrepreneurship or
  intrapraneurship

4
Entrepreneurs

• Opportunists
• Recognize and take advantage of opportunities
• Resourceful
• Creative
• Visionary
• Hardworking
• Optimistic
• Independent Thinkers
• Excellent Leaders
• Dreamers

5
Difference between Entrepreneur and Administrator

• The entrepreneur Constantly attuned to
  environmental changes that may suggest a
  favorable chance.
• The administrator Preserve resources and reacts
  defensively to possible threats to deplete them

6
Chief characteristics of an entrepreneurial
organization to strategy making

• Strategy making is dominated by active search for
  new opportunities
• Power is centralized in the hands of the chief
  executive
• Bold strike approach
• Growth is the dominant goal

7
Innovation

• Definition of innovation Innovation is how you
  make money from creativity
• Characteristics of Innovators Know their brains
• Diversity of thought is essential
• Collaborate to innovate
• The importance of questions

8
Innovation Strategy
9
Tips for Innovation Strategy

• Devote resources on capturing smaller, moderately
  innovative ideas
• Implement those idea on a steady basis
• Balance the risk and potential reward
• Balance the cost and reward of implementing the
  idea

10
Whats in a Business Plan?

• Executive Summary
• Business Description
• Environmental Analysis (see next slide for
  details)
• Resource Analysis (with a focus on the
  entrepreneur)
• Functional Plans
• Financial Projections
• Implementation Schedule
• End-game Strategy
• Risk Analysis

11
Whats in the Environmental Analysis for a
Business Plan?

• Environmental Analysis
• Market analysis
• Existing competitor analysis
• Supplier analysis
• Evaluation of potential substitutes
• Discussion of entry and exit barriers
• Relevant government regulations and regulators
• Financial condition of the industry
• Availability of funding
• Overall economic factors for the host country
• Availability of technology

12
Sources of Capital for Entrepreneurs In
Hospitality

• Commercial Banks
• Personal Contacts
• Venture Capitalists
• Corporate Partnerships
• Business Angels
• Initial Public Offerings

13
Initial Public (IPO) Offering Process
Select Underwriter Draft Letter of Intent
Assemble the Syndicate
Determine Offering Price
Place the Offering
Revise Print the Prospectus
Draft Prospectus
Present to Potential Investors
Develop Business Plan
Due Diligence
Determine Offering Size
Board Approval
Time
14
First Year Agenda for Entrepreneurial Startups

• Financial Management
• Obtain initial capital
• Establish systems to track revenues and expenses
  and control costs.
• A record-keeping system must be established that
  will satisfy the demands of investors, creditors
  and the internal revenue service.
• Marketing
• Selection of initial product/service offering.
• Selection of initial market.
• Targeted advertising.
• Product / service Development
• Establishment of a system for collecting feedback
  from early customers. Continuous improvement is
  essential.

15
First Year Agenda for Entrepreneurial Startups

• Resource Acquisition
• Site selection and construction.
• Acquisition of machinery, furnishings,
  information systems, utilities and supplies.
• Contracts with suppliers.
• Process Development
• Focus is on production and operations management
  to ensure efficiency, quality and continuous
  improvement.

16
First Year Agenda for Entrepreneurial Startups

• Management and Staffing
• Recruitment of motivated, well-trained employees
• Selection of managers.
• Assignment of responsibilities
• Establishment of personnel policies
• Training
• Compensation system, which may include benefits.
  
• Supportive culture.
• Legal Requirements
• Legal form (sole proprietorship, partnership,
  corporation).
• Other legal requirements and filing of forms.
• Patents and trademarks if necessary.

17
Legal Forms of Business

• Sole proprietorship
• The entrepreneur is the owner and legally liable
  for the venture in its entirety
• Partnership
• Each of the partners contribute resources such as
  money, physical goods, services, knowledge and
  relationships
• Limited partnership means that management
  responsibility and legal liability of partners
  are limited, except that one partner must be a
  general partner with unlimited liability
• Corporation
• Risk of a shareholder is limited to investment in
  stock
• However, the tax advantages of a partnership are
  lost
• S Corporations allow some partnership-type tax
  advantages, but they must meet restrictions and
  have few shareholders

18
Internal and External Problems Faced by
Entrepreneurs

• Internal Problems
• Adequate Capital (15.9)
• Cash Flow (14.9)
• Facilities / Equipment (12.6)
• Inventory Control (12.3)
• Human Resources (12.0)
• Leadership (11.1)
• Organizational Structure (10.8)
• Accounting Systems (10.4)

• External Problems
• Customer Contact (27.3)
• Market Knowledge (19.3)
• Market Planning (14.4)
• Location (11.1)
• Pricing (8.4)
• Product Issues (7.6)
• Competitors (6.3)
• Expansion (5.5)

19
Most Common Sources of Entrepreneurial Failure

• Poor Management Skills
• Lack of Adequate Capitalization
• Product/Service Problems
• External Market Conditions

20
Factors Encouraging or Discouraging Innovation

• Factors Encouraging Innovation
• Vision and culture that support innovation,
  personal growth and risk taking
• Top management support and organizational
  champions
• Teamwork and collaboration a flat management
  hierarchy
• Decentralized approval process
• The ideas of every employee are considered
  valuable
• Excellent communications
• Innovation grants and time off to pursue
  projects
• Large rewards for successful entrepreneurs
• Focus on learning

21
Factors Encouraging or Discouraging Innovation

• Factors Discouraging Innovation
• Rigid bureaucracy and conservatism in decision
  making
• Absence of management support or champions
• Authoritarian leadership and traditional
  hierarchy
• Difficult approval process
• Only the ideas of certain people (researchers or
  managers) are given attention
• Closed-door offices
• Inadequate resources devoted to entrepreneurial
  activities
• Harsh penalties for failure
• Exclusive emphasis on measurable outcomes

22
Exercise for Today

• Each team needs to identify one new product idea
  and one new service idea
• Use the SWOT analysis to analyze the potential,
  risk, and reward

23
Questions for Fridays Class

• Read the article (Technology and Competitive
  Advantages), and answer the following questions
• Since the technology can change the industry
  structure, please identify what technologies
  change the hospitality/tourism industry
  structure!
• How do those technologies change our industry
  structures?
• What are positive and negative effects brought by
  those technologies?
• How do you eliminate those negative effects and
  magnify those positive effects?