Entrepreneurship Chapter-1 Finance
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Transcript of Entrepreneurship Chapter-1 Finance
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Chapter 1: Entrepreneurship 1Copyright 2002 Prentice Hall Publishing Company
The Foundations of
Entrepreneurship
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Chapter 1: Entrepreneurship 2Copyright 2002 Prentice Hall Publishing Company
The World of the Entrepreneur
A new business is born every 11 seconds
in the United States
Study of influential Americansthedefining issue of the 21st Century:
Entrepreneurship!
One of 12 Americans is actively involvedin trying to start a new business.
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Entrepreneurial Activity Across the Globe
1 . 4 %
1 . 6 %
1 . 8 %
2 . 0 %
2 . 2 %
3 . 3 %
3 . 4 %
5 . 4 %
6 . 8 %
8 .5%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
Percent
Finland
Japan
France
Denmark
Germany
Great Brit ain
Italy
Israel
Canada
Unit ed States
Count
ry
Percentage of Adult Population Working to Start a New Business
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Chapter 1: Entrepreneurship 4Copyright 2002 Prentice Hall Publishing Company
Who is an Entrepreneur?
One who creates a new business in the
face of risk and uncertainty for the
purpose of achieving profit and growthby identifying opportunities and
assembling the necessary resources to
capitalize on them.
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Chapter 1: Entrepreneurship 5Copyright 2002 Prentice Hall Publishing Company
Characteristics of Entrepreneurs
Desire for responsibility
Preference for moderate risk
Confidence in their ability to succeed
Desire for immediate feedback High level of energy
Future orientation
Skilled at organizing
Value achievement over money
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Chapter 1: Entrepreneurship 6Copyright 2002 Prentice Hall Publishing Company
The Type E Personality
Common Traits of Entrepreneurs:
Aggressively pursues goals; pushes self and others
Seeks autonomy, independence and freedom from boundaries
Sends consistent messages; very focused
Acts quickly, often without deliberating
Keeps distance and maintains objectivity
Pursues simple, practical solutions
Willing to take risks; comfortable with uncertainty
Exhibits clear opinions and values; has high expectations
Impatient; just do it mentality
Positive, upbeat, optimistic; communicates confidence
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7/28Chapter 1: Entrepreneurship 7Copyright 2002 Prentice Hall Publishing Company
Common Themes in Definitionsof Entrepreneurship
DefiningEntrepreneurship
TheEntrepreneur
Innovation
Organization
CreationCreating
Value
Profit or
Nonprofit
Growth
Uniqueness
Process
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The Development ofEntrepreneurship Theory
18th Century
Richard Cantillon:
Coins term
entrepreneur
Entrepreneur bears
risks and plans,
supervises,organizes, and
owns factors of
production
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9/28Chapter 1: Entrepreneurship 9Copyright 2002 Prentice Hall Publishing Company
The Development ofEntrepreneurship Theory
19th Century
Jean Baptiste Say:
Proposed that profits
from entrepreneurshipwere separate from
profits of capital
ownership
Distinction made
between those who
supplied funds and
earned interest andthose who profited from
managerial abilities
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Chapter 1: Entrepreneurship 10Copyright 2002 Prentice Hall Publishing Company
The Development ofEntrepreneurship Theory
20th Century
Joseph Schumpeter:
Described theentrepreneur as
someone who is aninnovator and someone
who creativelydestructs
Peter Drucker:
Described the
entrepreneur assomeone who
maximizes opportunity
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Chapter 1: Entrepreneurship 11Copyright 2002 Prentice Hall Publishing Company
Myths AboutEntrepreneurship
1. Successful entrepreneurship takes only a great idea.
2. Entrepreneurship is easy.
3. Entrepreneurship is a risky gamble.
4. Entrepreneurship is found only in small businesses.
5. Entrepreneurial ventures and small businesses are identical.
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Chapter 1: Entrepreneurship 12Copyright 2002 Prentice Hall Publishing Company
The EntrepreneurialProcess
Exploring the
Entrepreneurial
Context
Identifying
Opportunities/Possible
Competitive Advantage
Starting the Venture:
Researching Feasibility
Planning the Venture
Organizing the Venture Launching the Venture
Managing the Venture:
Managing Processes
Managing People
Managing Growth
Special Issues
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Chapter 1: Entrepreneurship 14Copyright 2002 Prentice Hall Publishing Company
Feeding / Foster / Boost up
the Entrepreneurial Fire
Entrepreneurs as heroes
Entrepreneurial education
Demographic and economic factors
Shift to a service economy
Technological advancements
Independent lifestyles
E-Commerce and the World WideWeb
International opportunities
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Chapter 1: Entrepreneurship 15Copyright 2002 Prentice Hall Publishing Company
Challenges of
Being an EntrepreneurMust be comfortable with change and uncertainty
Must make a bewildering number of decisionsMay face tough economic choices
Must be comfortable with taking risks
Need many different skills and talents
Must be comfortable with the potential for failure
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Chapter 1: Entrepreneurship 16Copyright 2002 Prentice Hall Publishing Company
The Cultural Diversity of
Entrepreneurship
Young entrepreneurs
Women
Minority-owned enterprises
Immigrant entrepreneurs Part-time entrepreneurs
Home-based businesses
Family businesses
Intrapreneurs
Corporate castoffs: unwanted, second hand goods
Corporate dropouts
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Chapter 1: Entrepreneurship 17Copyright 2002 Prentice Hall Publishing Company
Nine Deadly Mistakes of
Entrepreneurship
1. Management incompetence
2. Lack of experience
3. Poor financial control
4. Failure to develop a strategic plan
5. Uncontrolled growth
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Chapter 1: Entrepreneurship 18Copyright 2002 Prentice Hall Publishing Company
Nine Deadly Mistakes of
Entrepreneurship(continued)
6. Poor location
7. Improper inventory control
8. Incorrect pricing
9. Inability to make the entrepreneurial
transition
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Chapter 1: Entrepreneurship 19Copyright 2002 Prentice Hall Publishing Company
Differences Between Small Businessesand Entrepreneurial Ventures
Independently owned,
operated, and financed
Less than 100 employees
Doesnt emphasize new
or innovative practices
Little impact on industry
Innovative practices
Goals are profitability and growth
Seeks out new opportunities
Willingness to take risks
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Chapter 1: Entrepreneurship 20Copyright 2002 Prentice Hall Publishing Company
Benefits of Small Business
Ownership
The opportunity to:
create your own destiny
make a difference
reach your full potential
reap unlimited profits
contribute to society and be recognized for
your efforts do what you enjoy and have fun at it
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Chapter 1: Entrepreneurship 21Copyright 2002 Prentice Hall Publishing Company
Drawbacks of Small Business
Ownership
Uncertainty of income
Risk of losing your entire investment
Long hours and hard work
Lower quality of life until the business getsestablished
High levels of stress
Complete responsibility Discouragement
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Chapter 1: Entrepreneurship 22Copyright 2002 Prentice Hall Publishing Company
Small Businesses
Make up 99% of all businesses in theUnited States.
Employ 53% of the nation's private
sector workforce. Create more jobs than big businesses.
Are leaders in offering training andadvancement opportunities toworkers.
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Chapter 1: Entrepreneurship 23Copyright 2002 Prentice Hall Publishing Company
Produce 51% of the nation's privateGDP.
Account for 47% of business sales.
Create 4X more innovations per R & Ddollar spent than medium-size firms
and 24X as many as large companies.
Small Businesses(continued)
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Small Business by Industry
Services
39.2%
Retail
20.5%Wholesale
7.4%
Manufacturing
5.8%
Construction11.8%
Financial
8.0%Other
7.3%
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Chapter 1: Entrepreneurship 25Copyright 2002 Prentice Hall Publishing Company
The Small Business
Failure Record 24% of new businesses fail after two
years.
51% fail within four years.
63% fail within six years.
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0%
20%
40%
60%
80%
100%
%o
fSmallF
irms
Survivin
g
New 2 4 6 8 10
# of Years in Business
Small Business Survival Rate
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Chapter 1: Entrepreneurship 27Copyright 2002 Prentice Hall Publishing Company
Avoiding the pitfalls ofSmall Business Failure
Know your business in depth
Develop a solid business plan
Manage financial resources Understand financial statements
Learn to manage people effectively
Keep in tune with yourself
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Ch t 1 E t hi 28
Motto (Slogan) for Entrepreneurs
Conceive it- Imagine, envision, envisage
Believe it- Accept, consider, think
Achieve it!- Attain, reach, realize, do it.