Accompany Management, 10/e John R. Schermerhorn, Jr.
Prepared by: Jim
LoPresti
University of Colorado, Boulder
Published by: John Wiley & Sons, Inc.
Appendix: Entrepreneurship
and Small Business Management
Planning Ahead
—Appendix Study Questions
ØWhat is entrepreneurship?
ØWhat is special about small businesses?
ØHow does one start a new venture?
Study Question 1:
What is entrepreneurship?
Øentrepreneurship ls Strategic thinking and risk-taking
behavior that results in the creation of new opportunities for individuals
and/or organizations.
Øentrepreneurs lRisk-taking individuals who take actions to
pursue opportunities and situations others may fail to recognize or may view as problems or threats.
ØEntrepreneurs are …
-Founders
of businesses that become large-scale enterprises.
-People
who:
-Buy
a local franchise outlet
-Open
a small retail shop
-Operate
a self-employed service business
-People
who introduce a new product or operational change in an existing organization.
ØTypical characteristics of entrepreneurs:
-Internal
locus of control
-High
energy level
-High
need for achievement
-Tolerance
for ambiguity
-Self-confidence
-Passion
and action-orientation
-Self-reliance
and desire for independence
-Flexibility
ØTypical entrepreneurial backgrounds and experiences:
-Parents
were entrepreneurs or self-employed.
-Families
encouraged responsibility, initiative, and independence.
-Have
tried more than one business venture.
-Have
relevant personal or career experience.
-Become
entrepreneurs between 22 and 45 years of age.
-Have
strong interests in creative production and enterprise control.
-Seek
independence and sense of mastery.
ØCommon myths about entrepreneurs:
-Entrepreneurs
are born, not made.
-Entrepreneurs
are gamblers.
-Money
is the key to entrepreneurial success.
-You
have to be young to be an entrepreneur.
-You
must have a degree in business to be an entrepreneur.
ØChanging face of entrepreneurship
-Necessity-based
entrepreneurship:
-Driven
by absolute need.
-Few
to no employment or career options elsewhere.
-Social
entrepreneurship :
-Seeks
novel ways to solve social problems at home and abroad.
-May
include job training for homeless, improving literacy among disadvantaged
youth, providing start-up capital for minority-owned businesses.
ØReasons for women becoming entrepreneurs:
-Being
motivated by a new idea.
-Doing
for themselves what they were already doing for other employers.
-Seeking
a pathway to opportunity.
Study Question 2:
What is special about small businesses?
ØSmall businesses …
-Ones
with 500 or fewer employees.
-Independently
owned and operated.
-Constitute
99 percent of American businesses.
-Are
established by:
-Starting
a new business.
-Buying
an existing business.
-Buying
and running a franchise.
ØEntrepreneurship and the Internet …
-The
Internet offers numerous entrepreneurial opportunities :
-Online
buying and selling
-Dot-com
businesses
-Businesses
are limited only by personal creativity.
ØFamily businesses …
-Owned
and financially controlled by family members.
-Largest
percentage of businesses worldwide.
-Can
provide an ideal business situation.
-Problems
unique to family businesses:
-Family
business feud
-Succession
problem
ØReasons for small business failures:
-Lack
of experience
-Lack
of expertise
-Lack
of strategy and strategic leadership
-Poor
financial control
-growing
too fast
-Insufficient
commitment
-Ethical
failure
Figure A.2Eight reasons why many small businesses fail.
Study Question 3: How
does one start a new venture?
ØImportant issues in new venture creation:
-Does the entrepreneur have good ideas and the courage to
give them a chance?
-Is the entrepreneur prepared to meet and master the test of
strategy and competitive advantage?
-Can the entrepreneur identify a market niche that is being
missed by other established firms?
-Can the entrepreneur identify a new market that has not yet
been discovered by existing firms?
-Can the entrepreneur generate first-mover advantage by
exploiting a niche or entering a market before competitors?
ØLife cycle of entrepreneurial firms
-Birth
stage
-Breakthrough
stage
-Maturity
stage
ØEach stage poses different managerial challenges and
requires different managerial competencies.
ØA business plandescribes the direction for a new business
and the financing needed to operate it.
-Basic items that should be included in a business plan:
Executive
summary
Industry
analysis
Company
description
Product
and services description
Market
description
Marketing
strategy
Operations
description
Staffing
description
Financial
projection
Capital
needs
Milestones
Study Question 3: How
does one start a new venture?
ØForms of legal ownership
-Sole
proprietorship
-Partnership:
General
partnership
Limited
partnership
Limited
liability partnership
-Corporation
-Limited
liability corporation (LLC)
ØFinancing the new venture
-Sources
of outside financing:
-Debt
financing
-Equity
financing
-Equity
financing alternatives:
-Venture
capitalists
-Initial
public offerings (IPO)
-Angel
investors
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