Entrepreneurship

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Chapter 5

• Entrepreneurship

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• Amazon.com, Inc. is an American e-commerce
  company based in Seattle, Washington. It was one
  of the first major companies to sell goods over
  the Internet. Founded by Jeff Bezos in 1994, and
  launched in 1995, Amazon.com began as an online
  bookstore but soon diversified its product lines
  by adding VHSs, DVDs, music CDs, MP3s, computer
  software, video games, electronics, apparel,
  furniture, food, toys, and more.
• Amazon has established separate websites in
  Canada, the United Kingdom, Germany, Austria,
  France, China, and Japan. It ships globally on
  selected products.
• It made its first annual profit in 2003.

                                                             
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Hotmail.com

• Sabeer Bhatia was born in Chandigarh, India in
  1968.
• went to Stanford in 1989 to pursue his M.S. in
  Electrical Engineering.
• At Stanford, he was inspired by entrepreneurs
  such as Steve Jobs and Scott McNealy eventually
  deciding to become one himself. Instead of
  pursuing a Ph.D. after his Masters, he decided to
  join Apple in 1991.
• After a brief stint at Apple, Sabeer joined a
  startup company called Firepower Systems Inc,
  where he spent two years. In 1994, Sabeer started
  working on new ideas for the Internet and he
  teamed up with Jack Smith, a colleague from Apple
  Computer, Inc.

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Hotmail (Cont.)

• The two came up with the concept of a web-based
  database entitled Javasoft. While pursuing this
  idea, they subsequently realised the potential of
  a web-based e-mail system and thus decided to
  create one called HoTMaiL (the uppercase letters
  spelling out HTML - the language used to write
  the base of a webpage).In order to attract
  attention, the e-mail service was provided for
  free and revenue was obtained through the
  advertising on the website. Draper Fisher
  Ventures invested 300,000 on the project and the
  service was launched on July 4, 1996.
• In less than six months, the website attracted
  over 1 million subscribers. As the interest in
  the web-based email provider increased, Microsoft
  eventually took notice and on December 30, 1997,
  Hotmail was sold to Microsoft for a reported sum
  of 400 million.

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Hotmail (Cont.)
http//www.businessweek.com/smallbiz/news/coladvic
e/book/bk990903.htm
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Entrepreneur Unveils New Tourist Spacecraft
Sir Richard Branson
Burt Rutan
http//www.nytimes.com/2008/01/23/science/space/23
cnd-spaceship.html?_r1orefslogin
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Fostering Entrepreneurship

• Learning Goals

1. Explain the nature of entrepreneurship and
the impact the environment has on it
2. Describe the competencies that contribute to
entrepreneurs success
3. Outline the planning essentials for potential
entrepreneurs
4. Describe the basic essentials of corporate
entrepreneurship
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Entrepreneurs and External Factors

• Entrepreneurs create something for the purpose of
  gain while accepting the risk and uncertainty
  associated with their ventures.
• Entrepreneurs typically incorporate at least one
  of the following
• Something new
• Something better
• An underserved or new market
• New delivery system or distribution channel

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Entrepreneurship Its Meaningand Scope
Common Components of Entrepreneurship
What is Entrepreneurship?
Somethingnew
Somethingbetter

• The creation of an innovative organization for
  the purpose of economic gain or growth under
  conditions of risk or uncertainty

New deliverysystem ordistribution channel
Entering an underserved or new market
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How Does the Environment Affect Entrepreneurship?

• Open and free markets
• Deregulation
• Political climate
• Economic and technological conditions
• Support system

• Availability of capital and loans
• Tax rates and policies
• Support services SBA, SBDCs, venture capital
  firms, chambers of commerce, etc.

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How Does the Environment Affect Entrepreneurship?

• Business incubation a business support process
  that accelerates the successful development of
  start-up and fledging companies by providing
  entrepreneurs with an array of targeted resources
  and services
• Common features in business incubators

• Management and technical guidance
• Networking
• Rental space/flexible leases
• Shared business services and equipment
• Psychological and moral support
• Assistance in obtaining financing

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Is a Small Business an Entrepreneurial Firm?

• Small businessone that is independently owned
  and operated and which is not dominant in its
  field of operation. refer to anyone who owns a
  major equity stake in a company with fewer than
  500 employees.

• SBA defines size by number of employees or
  dollars of sales, depending upon industry

• Small business firm may be entrepreneurial,
  depending upon its initiatives

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Are Family Businesses Entrepreneurial Firms?

• Family business one owned and managed mostly by
  people who are related by blood and/or marriage

• May or may not be entrepreneurial

• 30 of family businesses survive to the second
  generation, 12 to the third generation, and 3
  to the fourth and beyond

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Common Attributes of Successful
Entrepreneurs(adapted from Figure 5.1)
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Competencies of Successful Entrepreneurs
Self management
Communication
Successful entrepreneurs

• Need forachievement
• Desire forindependence
• Self confidence
• Self sacrifice

Planningand administration
Teamwork
Strategic action
Multicultural
Specialized Knowledge
Varies by type of business launched
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Importance of Self-Confidence and Optimism
I think its important to see this clear path and
not be discouraged when people throw stones at
it, because they will. You will have to be
willing to see the path, believe in it, and have
the stamina and persistence to stick with it.
You have to stand your ground and have confidence.
Denise Divine Founder of Devine Foods
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Strategic Action Competency Interrelated Strategi
c Practices of Successful Entrepreneurs
Delivering products and services that are
perceived as high quality and that are seen by
its customers or clientsas adding value
Developing or improving products and services on
a regular basis
Generating new customers or clients that expand
revenue
Focusing marketing expenditures and developing
customer-oriented employees
Maintaining financial control of the firm
Establishing a strong commitment to ethical
practices
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Planning and Administration Competency Snapshot
Do your homework prior to starting the
business. Make sure the market truly needs your
service or product. Finally, make sure you can
differentiate your service or product from the
competition in a way that is beneficial to the
customer. Stay focused on your goals, but be
flexible enough to modify your business plan to
match what the market is truly asking for. As
evidenced of why this is important 75 percent of
my firms revenue today is from services we
didnot offer in my original business plan.
Daniel Driesenga Founder and CEO Driesenga
Associates
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Communication Competency

• Successful entrepreneurs score higher than 82
  percent of the population on their ability to
  express support and encouragement

• Successful entrepreneurs succeed by helping other
  peopletheir employees, partners, investors,
  suppliersbecome successful themselves

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Planning Essentials for Entrepreneurs

• Business Plan

• Snapshot

• Describes the basic idea that is the foundation
  for the start-up and outlines how that idea can
  be turned into reality

Someone once said If you dont know where
youre going, any road will take you there. You
need to know exactly where you want to go, what
route youre going to take, when you will arrive
and what you are to do upon arrivalno guesswork
at all. You need to determine whether there is a
demand for your service and, if so, what
constitutes your market. Don DoggettManagement
Counselor Counselors to Americas Small Business
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Business Plan Essential Components
I. Executive Summary

• What, how, why, where, and when must be summarized

II. Business Description Component

• The name of the business
• The potential and uniqueness of the new venture

(continued)
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Business Plan Essential Components (contd)
III. Marketing Component

• Convince investors that sales projectionsand
  competition can be met
• Identify target market, market position,market
  share, pricing strategy
• Evaluate all competition and state why andhow
  you will be better than your competitors
• Identify advertising plans with cost estimates

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Business Plan Essential Components (contd)
IV. Location Component

• Describe the advantages of your location (zoning,
  tax laws, wage rates) list the production needs
  in terms of facilities (plant, storage, office
  space) and equipment (machinery, furnishings,
  supplies)
• Indicate proximity to your suppliers

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Business Plan Essential Components (contd)
V. Management Component

• Supply résumés of all key people in the
  management of your venture
• Describe the legal structure of your venture
  (sole proprietorship, partnership, or
  corporation)
• Give information on how and how much everyone is
  to be compensated

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Business Plan Essential Components (contd)
VI. Financial Component

• Describe the needed sources for your funds and
  the uses you intend for the money
• Develop an estimated budget, cash flow statement,
  and profit and loss statement
• Create stages of financing for purposes of
  allowing evaluation by investors at various points

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Business Plan Essential Components (contd)
VII. Potential Critical-Risks Component

• Any potentially unfavorable industry-wide trends,
  such as price cutting by competitors
• Design or manufacturing costs in excess of
  estimates
• Sales projections not achieved
• Product development schedule not met
• Provide some alternative courses of action

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Business Plan Essential Components (contd)
VIII. Milestone Schedule Component

• Develop a timetable or chart to demonstrate when
  each phase of the venture is to be completed

IX. Appendix or Bibliography
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How to Start the Business
Buy Strategy
Start-up strategy
Other options
Franchise strategy
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Principle of Affordable Loss

• The conscious determination of the amount of
  resources (money, time, and effort) entrepreneurs
  are willing to commit to an idea, which, in turn,
  influences the choice of strategies and methods
  needed to generate early revenues

• Addresses tension between excessive analysis and
  quick action

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Finding Funds
Venture capitalist
Business angel
Entrepreneur,family,friends
Private sectorfinancialinstitutions
Businessincubators,government agencies (SBA)
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Factors That Favor a Global Start-Up(adapted
from Figure 5.2)
Foreign Financing is Better
Human Resources Are Dispersed Among Countries
Target Customers Require an International Presence
Global Start-Up
Foreign Competition Will Quickly Enter the Market
Domestic Inertia Could Impede Later Efforts
to Internationalize
Domestic Market is Too Small to Support Expenses
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Recommendations to Ensure a Successful Family
Business
Clear Job ResponsibilitiesAnd Authority
Relationships
Explicit Hiring CriteriaFor Family Members
Commitment toResolving Conflicts Quickly
Plan for ManagementTransitions
Use of OutsideAdvisors/Directors
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Corporate Intrepreneurship

• What is Corporate Intrepreneurship?

• Refers to the fostering of entrepreneurial
  behavior within established companies to product
  growth and profits.
• Essential for the survival of firms

• Who Is a Corporate Entrepreneur?

• Someone in an organization who champions turning
  new ideas into profitable realities

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Fostering Corporate Intrepreneurship
Commitment from senior management
Flexible organization design
Autonomy of the venture team
Incentivesand rewardsfor risk taking
Appropriatelydesigned controlsystem
Competent and talented people who
exhibit entrepreneurialbehaviors and attitudes