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Transcript of Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 7-7- 1 Bateman Snell...
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Bateman Snell
Management
5thEdition
Competingin theNew Era
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Part TwoChapter 7 - New Ventures
Chapter OutlineIndependent EntrepreneursSpin-OffsIntrapreneurship
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Learning ObjectivesLearning Objectives
After studying Chapter 7, you will know: the activities of entrepreneurship how to find and evaluate ideas for new business ventures what it takes to be a successful entrepreneur how to write a great business plan the important management skills, resources, and strategies
needed to avoid failure and achieve success key criteria for deciding whether your start-up should be
global from the outset
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Learning Objectives (cont.)Learning Objectives (cont.)
After studying Chapter 7, you will know: the process of spinning off new ventures how to foster intrapreneurship and entrepreneurial
orientation in large companies
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IntroductionIntroduction
Entrepreneurship occurs when an enterprising individual pursues a lucrative
opportunity entrepreneurs generate new ideas and turn them into business
venturesA small business
has fewer than 100 employees is independently owned and operated is not dominant in its field is not characterized by many innovative practices
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Introduction (cont.)Introduction (cont.)
Entrepreneurial venture has growth and high profitability as its primary objectives is managed aggressively develops innovative strategies, practices, and products
Sources of new venture creation independent entrepreneurship - individual establishes a new
organization without the benefit of corporate support spin-offs - corporate managers become entrepreneurs by
splitting from the parent firm and creating a new business intrapreneurs - corporate entrepreneurs who create a new
venture working in big organizations
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Independent EntrepreneursIndependent Entrepreneurs
Why become an independent entrepreneur? enjoy the challenge and profit potential, seek independence experience the satisfaction in building something from
nothing may have limited opportunities elsewhere new immigrants may be blocked from conventional means of
advancement
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Independent Entrepreneurs (cont.)
Independent Entrepreneurs (cont.)
The role of the business environment entrepreneurs find success in favorable business
environments success depends upon the foresight and talent to survive
hostile environments business incubators - protected environments for new, small
businessesoffer low rents and shared costsoften universities provide technical and business serviceshave been successful throughout the U.S. and other regions of the world
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Independent Entrepreneurs (cont.)
Independent Entrepreneurs (cont.)
What business should you start? The idea - a great product, an untapped market, and good
timing are essential ingredients for success personal inspiration is a great source of ideasidea may be the founder’s desire to build a great organization
sees the product as a vehicle for the company
The opportunity - entrepreneurs spot, create, and exploit opportunities in a variety of ways
The next frontier - outer spaceentrepreneurs face huge obstacles
Side streets - heading down a road reveals unknown places and unexpected opportunities begin to appear
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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To spotopportunities,be aware of:
Technologicaldiscoveries
CalamitiesEconomic
dislocations
Demographicchanges
Governmentrules changes
Spotting OpportunitiesSpotting Opportunities
Lifestyle andtaste changes
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Successfulentrepreneurstypically have:
Commitmentand determination
Creativity,self-reliance,adaptability
Tolerance ofrisk and
uncertainty
Leadership
Motivationto excel
Opportunityobsession
What Does It Take To Be A Successful Entrepreneur?What Does It Take To Be A Successful Entrepreneur?
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(cont.)Independent Entrepreneurs
(cont.)What does it take to be successful?
Making good choicesnew ventures differ along two dimensions
innovation - creation of something new and different risk - probability of major financial loss
psychological risk to reputation and egoentrepreneurial strategy matrix
matrix helpful in determining whether a particular venture meets entrepreneur’s particular objectives
matrix helps identify effective strategiesnew ventures do not always require cutting-edge technology or a new product
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Low HighRisk
(probability of a major loss)
High innovation
High risk
Low innovationLow risk
Low innovation
High risk
High innovation
Low risk
Low
High
Inno
vati
on(c
reat
ing
a un
ique
and
Dif
fere
nt p
rodu
ct/s
ervi
ce)
The Entrepreneurial Strategy Matrix
The Entrepreneurial Strategy Matrix
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14 Independent Entrepreneurs
(cont.)Independent Entrepreneurs
(cont.)Planning
business plan - formal planning step in starting a new business that focuses on the entire venture and describes all the elements involved in starting it
focuses on the venture’s market, strategies, and future directionopportunity analysis - description of the product or service
assessment of the opportunity and the entrepreneur specification of required activities and resources sources of capital
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15 Independent Entrepreneurs
(cont.)Independent Entrepreneurs
(cont.)Planning cont.)
key planning elementspeople - should be energetic, and have skills and relevant expertiseopportunity - should allow a competitive advantage that can be defended
competition - identify competitors and their strengths and weaknesses
predict competition’s responses to a new venture consider how to collaborate with competitors
contexts - economic and regulatory environments should be favorable
risk - must be understood and fully addressed
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16 Independent Entrepreneurs
(cont.)Independent Entrepreneurs
(cont.)Planning (cont.)
selling the plan - important is whom you try to convince to back the plan
passive versus sophisticated investorstoday plans need to be developed and enacted quickly
nonfinancial resources - crucial to success of new venturenetworks - create social capitaltop management teams - affect company image, develop long-term plans, support daily activities, and create information networks
advisory boards - provide expertise about a variety of specific business matters and pass judgment on new ideas
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17 Independent Entrepreneurs
(cont.)Independent Entrepreneurs
(cont.)Planning (cont.)
nonfinancial resources (cont.)partners - help one another access capital, spread the workload, share the risk, and furnish expertise
must: acknowledge one another’s talents communicate honestly listen to one another learn to trust each other
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18 Independent Entrepreneurs
(cont.)Independent Entrepreneurs
(cont.)Entrepreneurial hazards
hazards of striking out on your own are manymay find out after starting a company that you don’t enjoy itsurvival is difficultfailure can be devastating
mortality - fate of the venture after the founder’s deathventure can outlive founder if:
company has gone public founder has planned an orderly family succession
entrepreneurs seldom do either
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19 Independent Entrepreneurs
(cont.)Independent Entrepreneurs
(cont.)Entrepreneurial hazards (cont.)
inadequate delegation - entrepreneur’s desire to personally control every aspect of the business
managers and workers depend too heavily on entrepreneur’s decisions
results in lost opportunities and failure to develop employees misuse of funds - two types of mistakes
apply financial resources to the wrong usesmaintain inadequate control over financial resources
poor planning and controls - failure to anticipate problemsaversion to record keepingfailure to be vigilant over other aspects of the business
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20 Independent Entrepreneurs
(cont.)Independent Entrepreneurs
(cont.)Global start-ups
a new venture that is international from the very beginning costs of doing business internationally have decreased
reduced the competitive advantage of large organizationspresented opportunities for new ventures
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Where are thebest people?
Domesticor globaloutlook?
Where is financingeasiest and
most suitable?
Will domestic inertiacripple international
operations?
Will global operatorscompete?
Where are theTargeted customers?
Should Business Begin Domestically Or Globally?
Should Business Begin Domestically Or Globally?
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Spin-OffsSpin-Offs
Spin-off division that splits from its parent company to become an
independent company make products similar to those of owners’ former employers
Why spin-offs occur occur frequently approved spin-off
established company senses an opportunity it cannot pursue with internal resources
can profit by selling its patents or investing in the new enterprise employer approval of spin-off is not necessary
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Success/failure
Attractmanagement
team
Attractcapital
Productlife cycle
Type ofindustry
Establishedbusiness
Spin offto new
ventures
Stages Of The Spin-Off ProcessStages Of The Spin-Off Process
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Spin-Offs (cont.)Spin-Offs (cont.)
The spin-off process early stage - spin-offs occur most often at the early stages of
the product life cycle industry types - offer different opportunities for spin-offs
fragmented industry - few entry barriers permit many competitors
mature industry undergoing change - new competitors may have advantage over established competitors
declining industry - established companies often seek opportunity in newer industries
regardless of the situation, spin-off entrepreneur faces important challenges
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Spin-Offs (cont.)Spin-Offs (cont.)
The spin-off process (cont.) attracting management teams and capital
entrepreneur’s time usually spent pursuing her/his specialty must build a strong management team
search for capital is the greatest challenge for spin-off owners
Change in industry structure may be the most critical hazard for entrepreneurial firms is a common hazard
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IntrapreneurshipIntrapreneurship
Building support for your idea clear the investment with your immediate boss or bosses make cheerleaders - people who support the manager before
formal approval from higher levels horse trading- offer promises of payoffs from the project in
return for sponsor support get the blessing of relevant higher officials
guarantee the project’s technical and political feasibility
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Intrapreneurship (cont.)Intrapreneurship (cont.)
Building intrapreneurship skunkworks - project team designated to produce a new,
innovative producthave specific goals and time frameheaded by respected manager
bootlegging - informal (secretive) efforts by managers and employees to create new products or new processes
Organizing new corporate ventures strategic alliances may be required for large scale innovation large companies outsource for innovation, providing
entrepreneurial opportunities for small firms
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Intrapreneurship (cont.)Intrapreneurship (cont.)
Hazards in intrapreneurship obvious risk: the effort can fail subtler, but possibly greater, risk is failing to foster
intrapreneurship greatest risk is overreliance on a single project it is also risky to spread intrapreneurial efforts over too many
projects hazards are related to scale
one large project is a threat as are too many underfunded projects
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Entrepreneurial orientation tendency of an organization to engage in activities designed
to identify and capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods and services
five tendenciesallow independent actioninnovativenessrisk takingbe proactivecompetitive aggressiveness
Intrapreneurship (cont.)Intrapreneurship (cont.)