Marketing Manager Course - Chapter 08
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Chapter
8
Entrepreneurship
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
After reading this chapter, you should be able to:
Distinguish between an entrepreneurship and a
small business.
Develop negotiation, networking, and leadership
skills that can help you as an entrepreneur.
Recognize why some entrepreneurships fail.
Analyze the advantages and disadvantages of the
legal forms of enterprises.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives(continued)
Learn how capital is raised through debt and
equity financing and recognize the merits of each
approach.
Evaluate alternative forms of entrepreneurship,
such as franchising, spin-offs, and
intrapreneurships.
Recognize and evaluate entrepreneurship as a
career path and a source of innovation and new job
opportunities.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Introduction
Creating a new enterprise is one of
the greatest management
challenges.
Entrepreneurs have built
successful companies by being able
to exploit unmet needs in the
market.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
What is Entrepreneurship?
The process of creating a
business enterprise capable of
entering new or established
markets.
It involves deploying resources
and people in a unique way to
develop a new organization.
An entrepreneur is an
individual who creates an
enterprise that becomes a new
entry to a market.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Entrepreneurship Myths
Myth 1: Entrepreneurs are born, not made.
Myth 2: It is necessary to have access to money to
become an entrepreneur.
Myth 3: An entrepreneur takes a large or irrational
risk in starting a business.
Myth 4: Most successful entrepreneurs start with a
break-through invention.
Myth 5: Entrepreneurs become successful on their
first venture.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Entrepreneurial Venture versus
Small Business Management
Small Business Entrepreneurship
Independently owned and Growth is one of the most
operated important goals
Small in size The goal is to become a
Does not dominate its medium-sized firm of 100-
markets 499 employees; or
Has less than 100 A large firm with 500 or
employees more employees.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Importance of Entrepreneurship
Job Creation
Entrepreneurship accounts for most new jobs in
the U.S. economy.
Innovation
Entrepreneurships are responsible for
introducing a major proportion of new and
innovative products and services into market.
Opportunities for Diverse People
People of diverse background can improve their
economic status by becoming entrepreneurs.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Key Characteristics of Entrepreneurs
High need for achievement
Internal locus of control
Willingness to take risks
Self-confidence
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Entrepreneurial Skills
Negotiation skills
Ability to obtain resources that are
controlled by other individuals.
Networking skills
Gather information and build alliances
Personal network
Business network
Leadership skills
Provide a shared vision
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Starting and Managing an
Entrepreneurship
New Ideas come from:
newspapers, magazines, and trade journals
inventions or discoveries
trade shows and exhibitions
hobbies
family members
business school classes
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Why Entrepreneurships Fail
Lack of capital
Poor knowledge of the market
Faulty product design
Human resource problems
Poor understanding of the
competition
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Business Plan
Once an entrepreneur conceives a
good idea for a new venture, next
critical step is to prepare a business
plan.
It is a blueprint that maps out the
business strategy for entering markets.
It explains the business to potential
investors.
It develops strategies and tactics to
minimize risk of failure.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Key Components of the
Business Plan
Description of the product or service
Analysis of market trends and potential competitors
Estimate for pricing the product or service
Estimate for the time it will take to generate profits
Plan for manufacturing the product
Plan for growth and expansion of the business
Sources of funding
Plan for obtaining financing
Organizational and management plan
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Legal Forms of Entrepreneurship
Proprietorship – business owned by an individual
Partnership – association of two or more
persons acting as co-owners of a business
Corporation – legal entity separate from the
individuals who own it
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Proprietorship
Advantages Disadvantages
Easy to create Unlimited liability
Owner keeps all profits Harder to obtain credit
Owner makes all and capital
decisions
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Partnership
Advantages Disadvantages
Ease of formation Unlimited liability for firm’s
Direct share of profits debt
Division of labor and Limited continuity of life of
management responsibility enterprise
More capital available than in Difficulty in obtaining capital
a sole proprietorship Partners share responsibility
Less governmental control for other partners’ actions.
and regulation
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Corporation
Advantages Disadvantages
Owners’ liability for the Extensive government
firm’s debt limited to their regulation of activities
investment High corporation fees
Ease of raising large amounts Corporate capital, profits,
of capital dividends, and salaries
Ease of transfer of ownership double-taxed
through sale of stock Activities limited to those
Life of enterprise distinct stated in charter.
from owners
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Sources of Financial Resources
Debt Financing – obtaining a
commercial loan setting up a plan to repay
the principal and interest
Equity Financing – raising money by
selling part ownership of the business to
investors
Private investors
Venture capitalists
Public offerings of stock
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
