CHAPTER2Integrity, Ethics, and Social Entrepreneur

CHAPTER
2
Integrity, Ethics,
and Social
Entrepreneurship
© 2020 Cengage Learning®. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole
or in part.
LEARNING OBJECTIVES
By studying this chapter, you should be able to…
2-1 Define integrity, and understand its importance to
small businesses.
2-2 Explain how integrity applies to various stakeholder
groups.
2-3 Identify some common challenges and benefits of
maintaining integrity in small businesses.
2-4 Suggest practical approaches for building a
business with integrity.
2-5 Define social entrepreneurship, and describe its
influence on small companies and startup

opportunities.
or in part.
2-1 WHAT IS INTEGRITY?
• Integrity – A general sense of honesty and reliability
that is expressed in a strong commitment to doing the
right thing, regardless of the circumstances.
• “Doing anything for money” can quickly lead to
distortions in business behavior.
• Acting with integrity requires that an individual first
consider the welfare of others.
• Many small business owners strive to achieve the
highest standards of honesty, fairness, and respect in
their business relationships.
or in part.
2-2 INTEGRITY AND THE INTERESTS
OF MAJOR STAKEHOLDERS (slide 1 of 3)
• Closely tied to integrity are ethical issues,

which go beyond what is legal or illegal to
include more general questions of right and
wrong.
• A recent Ethics Resource Center survey
indicated that employees witness various
forms of misconduct in their workplaces, with
the most frequently observed offenses
involving abusive behavior and lying to
employees.
or in part.
2.1 Most Frequently Observed Forms of Workplace Misconduct
or in part.
• When making decisions, small business owners guided by
integrity must consider the interests of several different groups:
• Owners.
• Customers.
• Employees.
• The community.
• The government.

• Individuals in these groups are sometimes referred to as
stakeholders.
• Stakeholders – Individuals or groups that either can affect or
are
affected by the performance of the company.
• Because the interests of various stakeholder groups sometimes
conflict, decisions can be very difficult to make.
or in part.
2.2 Four Types of Responsibilities for Small Businesses
Type of
Responsibility
Societal
Expectation
General Focus
Economic Required Be profitable.
Legal Required Obey all laws, adhere to all
regulations.
Ethical Expected Avoid questionable practices.
Discretionary Desired/Expected Be a good corporate citizen,
and
give back.

Source: Adapted with permission from Archie B. Carroll and
Ann. K. Buchholtz,
Business and Society: Ethics, Sustainability, and Stakeholder
Management, 9e
(Mason, OH: Cengage Learning, 2015), p. 35.
or in part.
• The concerns of important stakeholders are
fundamental to the management of a business.
• If neglected, any one group can use its influence to
negatively affect the performance of the company.
• Therefore, stakeholder interests should be carefully
considered and widely balanced.
or in part.
2-2a The “Big Three” Stakeholders—
Owners, Customers, and Employees (slide 1 of 2)
PROMOTING THE OWNERS’ INTERESTS
• A company’s owners have a clear and reasonable right to
benefit from the

financial performance of the business.
• In a business with more than one owner, high standards of
integrity require
an honest attempt to promote the interests of all the owners,
which include a
commitment to financial performance and protection of the
firm’s reputation.
CARING ABOUT CUSTOMERS
• Those companies that take customers seriously and serve them
well are
likely to have more of them.
• Companies with integrity recognize the importance of treating
their
customers with care.
• When a company delivers an excellent product with first-rate
service,
customer satisfaction and healthy sales are likely to follow.
or in part.
2-2a The “Big Three” Stakeholders—
Owners, Customers, and Employees (slide 2 of 2)
VALUING EMPLOYEES
• Showing proper appreciation for employees as human beings
and as

valuable members of the team is an essential ingredient of
managerial integrity.
• According to recent research, when employees feel that they
are
valued and socially connected at work, they tend to be highly
engaged and much more productive.
• Small business owners must give much thought to the
standards of
conduct that guide everyday behavior.
• Lapses in integrity are passed down from superiors to
subordinates,
replicating like a life-threatening virus that spreads throughout
the
organization.
or in part.
2-2b Social Responsibility
and Small Business (slide 1 of 2)
• Most people consider an ethical small business to be
one that acts as a good citizen in its community.
• Social responsibilities – A company’s ethical
obligations to the community.
• Companies have increasingly shown commitment to
the communities where they do business.

• Their contribution starts with creating jobs and adding to local
tax revenues, but many entrepreneurs feel a duty to give back
even more to the community in return for the local support they
enjoy—and they usually benefit from increased goodwill as a
result.
or in part.
2-2b Social Responsibility
and Small Business (slide 2 of 2)
• Entrepreneurs should think carefully about
their community commitments, because
building a business on a foundation of “doing
good” may add to a small company’s financial
burden.
• Research suggests that most small business
owners exercise great integrity, but some tend
to cut corners when it comes to social
responsibilities if profits will be affected.
or in part.
2-2c Integrity and
Governmental Regulations

• Government regulations encompass workplace safety,
equal employment opportunities, fair pay, clean air,
and safe products, to name a few.
• Entrepreneurs must obey governmental laws and
follow applicable regulations if they want to maintain
their integrity and avoid jail time.
• One glaring example of unethical behavior by small
firm management is fraudulent reporting of income and
expenses for income tax purposes.
• This conduct includes skimming (that is, concealing some
income), as well as improperly claiming personal expenses to
be business-related.
or in part.
2-3 THE CHALLENGES AND BENEFITS
OF ACTING WITH INTEGRITY
• Small firms’ limited resources and desire to
succeed make them especially vulnerable to
allowing or engaging in unethical practices.
or in part.
2-3a Small Companies and

the Legitimacy Lie (slide 1 of 3)
• Because startups do not have a history and a reputation
to lean on when trying to sell customers on their new
product or service or to impress other important
stakeholders, entrepreneurs often are uniquely tempted
to resort to telling what some researchers call legitimacy
lies.
• That is, they sometimes misrepresent the facts or create false
impressions to mislead others intentionally and earn their
confidence.
• Telling legitimacy lies threatens the reputation of the
business and the trust that goes along with it.
• If (when) the truth is revealed, future sales or support could
very
well be compromised.
or in part.
• Research has shown that customers are less likely to
decide to purchase if they have significant questions
about the product or service that the new venture is
offering, about those who represent and/or run the
business, and about the organization itself.
• These features are called PRO factors—Products,

Representatives, and the Organization—to emphasize that they
can promote firm performance when customers are satisfied
with
them.
• Advertising, publicity programs, social media tools, and
other promotional strategies are used to address PRO
factors.
or in part.
• A small firm’s legitimacy is staked on the reputation of its
owner, but
it is important to highlight and honestly bolster the credibility
of
anyone who represents the venture.
• It is best to make the credentials (educational background,
expertise,
industry experience, etc.) of key employees known, as well as to
encourage those employees to participate in trade, business, and
community organizations where they can build important
relationships
and associations.
• The business itself can establish legitimacy by:
• Setting up a high-quality website.
• Insisting on professional behavior from all employees.
• Forming strategic alliances with well-respected partner firms.

or in part.
2-3b Integrity and the Internet
(slide 1 of 3)
• An issue of great concern to Internet users is personal
privacy.
• Businesses and consumers often disagree about how private
the identity of visitors to websites should be.
• Example: Businesses use cookies (digital “ID tags”) to collect
data on consumers’ buying habits and create a more
personalized shopping experience and offer convenience to the
buyer, but they may also sell the cookies to media-buying
companies and other interested groups.
• To minimize customer concerns, a company must be
honest and transparent with customers about its practices
and draft a privacy policy that conforms to the guidelines
provided by organizations like the Better Business
Bureau or through consultation with an attorney.
or in part.
(slide 2 of 3)

• The extent to which an employer may monitor an employee’s
Internet activity is also hotly debated.
• Many workers believe it is inappropriate for employers to
monitor their
e-mail, a practice they consider to be an invasion of privacy.
• Many employers, on the other hand, are concerned that
employees
may be engaging in “cyberslacking” at the office—that is,
wasting
company time dealing with personal e-mail, shopping online,
and
surfing the Internet—and are convinced such activity hinders
workplace productivity.
• Companies that choose to monitor workers’ Internet use
should
be sure to develop a carefully worded and legally sound policy
first, and then ensure that all employees are aware of it.
• Those choosing to take an even more cautious approach have
employees sign a monitoring consent form when they are first
hired.
or in part.
(slide 3 of 3)
• Widespread use of the Internet has also focused

attention on the issue of protecting intellectual
property.
• Intellectual property – Original intellectual creations,
including inventions, literary creations, and works of art, that
are protected by patents, copyrights, trademarks, design
rights, and trade secrets.
• The law allows originators of intellectual property to
require compensation for its use.
• However, the Internet has made it easy for millions of users to
copy intellectual property free of charge.
or in part.
2-3c Integrity and
Doing Business Abroad
• Cultural differences may complicate ethical decision making
for
small firms operating abroad.
• Ethical imperialism – The belief that the ethical standards of
one’s own country can be applied universally.
• The Foreign Corrupt Practices Act makes it illegal for U.S.
businesses to use bribery in their dealings anywhere in the
world.
• Ethical relativism – The belief that ethical standards are
subject

to local interpretation.
• This implies that anything goes if the local culture accepts it.
• One-time practices may set a pattern for future behaviors.
• Example: Offering a bribe to make a business deal often
creates
expectations for more of the same in the future.
or in part.
2-3d The Integrity Edge (slide 1 of 2)
• Research supports the notion that ethical business
practices are good for business.
• The advocacy group Business for Social Responsibility
contends that there are numerous long-term benefits of
adopting ethical and responsible business practices:
• Improved financial performance.
• Enhanced brand image and reputation.
• Increased sales and customer loyalty.
• Improved productivity and quality.
• Better recruitment and reduced employee turnover.
• Fewer regulatory inspections and less paperwork.
• Improved access to capital.

or in part.
2-3d The Integrity Edge (slide 2 of 2)
• Perhaps the greatest benefit of integrity in
business is the trust it generates.
• When customers and employees trust a small
company to act with integrity, their support can help
keep the company going.
or in part.
2-4 BUILDING A BUSINESS
WITH INTEGRITY
• The goal of a small business owner with
integrity should be to operate honorably in all
areas of practice, which sets the entrepreneur
on a path toward crafting a worthy legacy.
• Those at the top must provide the leadership,
culture, and training that support appropriate
ethical perspectives and proper behavior.
or in part.
2-4a The Foundations of Integrity

(slide 1 of 2)
• The business practices that a firm’s leaders and
employees view as right or wrong reflect their
underlying values.
• Underlying values – Beliefs that provide a foundation for
ethical behavior in an individual or a firm.
• An individual’s beliefs affect what that person does on
the job and how she or he acts toward customers and
others.
• Business behavior, then, reflects a person’s commitment to
honesty, respect, truthfulness, and so forth—in other words, to
integrity in all of its dimensions.
or in part.
2-4a The Foundations of Integrity
(slide 2 of 2)
• Values that serve as a foundation for integrity
in business are based on personal views of the
role of humankind in the universe and,
naturally, are part of basic philosophical and/or
religious convictions.
• Since these principles are reflected in the business
practices of firms of all sizes, a leader’s personal
commitment to certain basic values is an important
determinant of his or her firm’s commitment to

business integrity.
or in part.
2-4b Leading with Integrity
• In a small organization, the influence of a
leader is more pronounced than it is in a large
corporation where leadership can be diffused.
• In a small company, a leader’s behavior has
much greater influence on employees than his
or her stated philosophy does.
• The leader’s conduct establishes the culture of the
company, underscoring what is allowed or
encouraged or what is prohibited.
• Thus, the dominant role of this one person (or the
leadership team) shapes the ethical performance of the
small company, for good or for ill.
or in part.
2-4c An Ethical
Organizational Culture (slide 1 of 2)
• An organizational culture that supports integrity is key to

achieving appropriate behavior among a firm’s employees.
• To define ethical behavior in a company, the owner-manager
of a
small firm should formulate a code of ethics similar to that of
most large corporations.
• Code of ethics – Formally established standards of employee
behavior communicated by a business owner.
• Authors Kenneth Blanchard and Norman Vincent Peale
suggest
that an ethics policy be based on the following five fundamental
principles:
1. Purpose.
2. Pride.
3. Patience.
4. Persistence.
5. Perspective.
or in part.
2-4c An Ethical
Organizational Culture (slide 2 of 2)
• Codes of ethics can shape and improve conduct in
organizations in
a number of ways:
• By defining behavioral expectations.
• By communicating that those expectations apply to employees
at all

levels in the business.
• By helping employees convey the company’s standards of
conduct to
suppliers and customers.
• By serving as a guide for handling peer pressure.
• By providing a formal channel for communicating with
superiors without
fear of reprisal.
• A well-written code expresses the principles to be followed by
employees of the firm and gives examples of these principles in
action.
• If a code of ethics is to be effective, employees must be aware
of its
nature and convinced of its importance, and the entrepreneur’s
behavior must be consistent with his or her own stated
principles.
or in part.
2-4d Better Business Bureaus
• Many small companies join Better Business
Bureaus (BBBs) to promote ethical conduct
throughout the business community.
• BBBs encourage ethical practices in the following
ways:
• By providing consumers with free information to help them

make informed decisions when dealing with a company.
• By creating an incentive for businesses to adhere to proper
business practices and earnestly address customer
complaints.
• By resolving questions or disputes concerning purchases
through mediation or arbitration.
or in part.
2-4e The Ethical Decision-
Making Process (slide 1 of 3)
STEP 1: DEFINE THE PROBLEM
• How you define the problem is important because this will
guide
where you look for solutions.
• Looking for the root of the problem is the best place to start in
your search for a solution to a challenging ethical problem.
STEP 2: IDENTIFY ALTERNATIVE SOLUTIONS TO THE
PROBLEM
• It is tempting to go with an “obvious” solution or one that has
been
used in the past, but often this is not the best answer—even if it
is
ethical.

• Be open-minded, and consider creative alternatives.
• Seeking advice from trusted friends and advisers who have
faced
similar situations can spur your thinking and lead to options
that
you might otherwise overlook.
or in part.
STEP 3: EVALUATE THE IDENTIFIED ALTERNATIVES
• Ask yourself the following four questions when you prepare to
make a decision about the things you think, say, or do:
1. Is it the truth?
2. Is it fair to all concerned?
3. Will it build goodwill and better friendships?
4. Will it be beneficial to all concerned?
• Perhaps the most widely recommended principle for ethical
behavior is simply to follow the Golden Rule: “Treat others as
you
would want to be treated.”
• Writing down your thoughts about alternatives, listing the
ethical
pros and cons of each alternative, or ranking all potential
options

based on their overall merits and then narrowing the list to the
two
or three best solutions to consider further will allow you to
make a
better selection.
duplicated, or posted to a publicly accessible w ebsite, in whole
or in part.
STEP 4: MAKE THE DECISION
• Keeping your vision and core values in mind is essential to
making
solid decisions that do not compromise your ethical standards.
STEP 5: IMPLEMENT THE DECISION
• Avoiding action on the decision may allow a small problem to
grow into a major crisis, and it may cause you to spend more
time
thinking about the problem when other important matters
deserve
your attention.
STEP 6: EVALUATE THE DECISION
• If the situation has not gotten better, or if new information has
come
to light indicating that your decision was not the most ethical
course

of action, you may need to reopen the matter to make things
right.
or in part.
2-5 SOCIAL ENTREPRENEURSHIP:
A CONTINUING TREND
• Social entrepreneurship – Entrepreneurial
activity that provides innovative solutions for
social issues.
• A social entrepreneur is one who comes up
with innovative solutions to society’s most
pressing needs, problems, and opportunities
and then makes them happen.
or in part.
2-5a Social Entrepreneurship and
the Triple Bottom Line
• Social entrepreneurs focus on an expanded set
of priorities—a triple bottom line, which takes
into account a venture’s impact on people,
profits, and the planet.

or in part.
2-5b Small Business and the
Natural Environment (slide 1 of 3)
• Escalating concern for the environment has
spawned a shift toward sustainable small
businesses.
• Sustainable small businesses – A profitable
company that responds to customers’ needs while
showing reasonable concern for the environment.
• This trend recognizes that a company must be
profitable to stay in business, but it also promotes the
use of eco-friendly practices (careful use of
resources, energy conservation, recycling, etc.)
through all facets of a company’s operations.
or in part.
SUSTAINABILITY MATTERS
• Environmentalism – The effort to protect and preserve the
environment.
• The commitment to the cause of environmentalism makes

financial
sense for many businesses.
• Example: Though more expensive to construct, LEED-certified
buildings
(facilities that have been built to strict standards promoting
energy and
water conservation, reduced CO2 emissions, and improved
indoor air
quality) can decrease energy costs from operations by as much
as
20 percent, and healthier workplace environments improve
employee
productivity, reduce illness and absences, improve recruitment,
and
raise retention—all of which can create a net savings for the
company.
• However, some small businesses can be adversely impacted by
environmental protection laws.
• Examples: Fast lube and oil change centers, medical waste
disposal
operations, and self-service car washes.
or in part.
• Firms whose products leave minimal environmental impact are

generally preferred by customers over competitors whose
products
pollute.
• The Small Business Administration (SBA), the Environmental
Protection Agency (EPA), and other public and private
resources
stand ready to help small businesses comply with environmental
regulations.
GREEN OPPORTUNITIES FOR SMALL BUSINESSES
• Small companies are sometimes launched precisely to take
advantage of opportunities created by environmental concerns.
• Creating environmentally friendly products and services
requires
creativity and flexibility, areas in which small businesses tend
to
excel.
or in part.
Key Terms
code of ethics
environmentalism
ethical imperialism
ethical relativism
integrity
intellectual property
social entrepreneurship

social responsibilities
stakeholders
sustainable small businesses
underlying values
�CHAPTER�2��Integrity, Ethics, �and Social
EntrepreneurshipLEARNING OBJECTIVES2-1 WHAT IS
INTEGRITY?2-2 INTEGRITY AND THE INTERESTS OF
MAJOR STAKEHOLDERS (slide 1 of 3)2.1 Most Frequently
Observed Forms of Workplace Misconduct2-2 INTEGRITY
AND THE INTERESTS OF MAJOR STAKEHOLDERS (slide 2
of 3)2.2 Four Types of Responsibilities for Small Businesses2-
2 INTEGRITY AND THE INTERESTS OF MAJOR
STAKEHOLDERS (slide 3 of 3)2-2a The “Big Three”
Stakeholders—�Owners, Customers, and Employees (slide 1 of
2)2-2a The “Big Three” Stakeholders—�Owners, Customers,
and Employees (slide 2 of 2)2-2b Social Responsibility �and
Small Business (slide 1 of 2)2-2b Social Responsibility �and
Small Business (slide 2 of 2)2-2c Integrity and �Governmental
Regulations2-3 THE CHALLENGES AND BENEFITS OF
ACTING WITH INTEGRITY2-3a Small Companies and �the
Legitimacy Lie (slide 1 of 3)2-3a Small Companies and �the
Legitimacy Lie (slide 2 of 3)2-3a Small Companies and �the
Legitimacy Lie (slide 3 of 3)2-3b Integrity and the Internet
�(slide 1 of 3)2-3b Integrity and the Internet �(slide 2 of 3)2-
3b Integrity and the Internet �(slide 3 of 3)2-3c Integrity and
�Doing Business Abroad2-3d The Integrity Edge (slide 1 of
2)2-3d The Integrity Edge (slide 2 of 2)2-4 BUILDING A
BUSINESS �WITH INTEGRITY2-4a The Foundations of
Integrity (slide 1 of 2)2-4a The Foundations of Integrity (slide
2 of 2)2-4b Leading with Integrity2-4c An Ethical
�Organizational Culture (slide 1 of 2)2-4c An Ethical
�Organizational Culture (slide 2 of 2)2-4d Better Business
Bureaus2-4e The Ethical Decision-�Making Process (slide 1 of
3)2-4e The Ethical Decision-�Making Process (slide 2 of 3)2-
4e The Ethical Decision-�Making Process (slide 3 of 3)2-5
SOCIAL ENTREPRENEURSHIP: A CONTINUING TREND2-5a

Social Entrepreneurship and the Triple Bottom Line2-5b Small
Business and the Natural Environment (slide 1 of 3)2-5b Small
Business and the Natural Environment (slide 2 of 3)2-5b Small
Business and the Natural Environment (slide 3 of 3)Key Terms

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CHAPTER
1
The Entrepreneurial
Life
or in part.
LEARNING OBJECTIVES
By studying this chapter, you should be able to…
1-1 Explain the importance of small businesses and
entrepreneurship in our society.

1-2 Describe what it means to be a small
entrepreneurial firm.
1-3 Identify how small businesses can compete against
the giants.
1-4 Understand what might motivate you to be a small
business owner with all its risks and uncertainties.
1-5 Discuss ways to build a successful business as a
part of your life legacy.
or in part.
1-1 SMALL SIZE,
GREAT SIGNIFICANCE
• Entrepreneurs who start and lead small businesses make a
significant contribution to the economy and to quality of life.
• There are 27.8 million businesses in the United States with
fewer
than 500 employees, accounting for 99.7 percent of all
businesses—and 90 percent have fewer than 20 employees!
• Fifty-five million people work in small businesses,
representing 49
percent of all employees and 42 percent of all salaries paid to
employees.
• Small enterprises hire 43 percent of all high-tech employees

(scientists, engineers, computer programmers, and others).
• Many small companies have gone global, representing 97
percent
of all exporters.
or in part.
1-2 SMALL BUSINESS AND
ENTREPRENEURSHIP GO TOGETHER
• It is important to understand the terms small
business and entrepreneurship.
or in part.
1-2a What Is a Small Business?
(slide 1 of 3)
• Definitions of small business are usually
arbitrary, based on some predetermined
numerical measurement, such as the amount
of revenue or profit or the number of
employees.
• The criteria often depend on the purpose for
identifying small companies.

or in part.
(slide 2 of 3)
• Small firms also differ depending on the
amount of growth potential they have.
• There are three types of small companies,
based on their growth potential:
1. Microbusinesses (lifestyle businesses) – A small
firm that provides minimal profits to its owner.
2. Attractive small firms – A small firm that provides
substantial profits to its owner.
3. High-potential ventures (gazelles) – A small firm
that has great prospects for growth.
or in part.
(slide 3 of 3)
• Small business – A business with growth
potential that is small compared to large
companies in an industry, has geographically

localized operations, is financed by only a few
individuals, and has a small management
team.
or in part.
1-2b What Is Entrepreneurship?
(slide 1 of 2)
• Entrepreneur – A person willing to create
value, in either a new or an existing business,
while assuming both the risks and the rewards
for his or her efforts.
• Entrepreneurship – A four-stage process that
involves the relentless pursuit of an opportunity
without regard to owning all the resources
needed to capture the opportunity.
or in part.
1-2b What Is Entrepreneurship?
(slide 2 of 2)
• From beginning to end, entrepreneurship
involves four stages:
1. Identifying an attractive opportunity.
2. Acquiring the critical resources needed for growing

the business.
• Entrepreneurs generally think differently about resources
than do employee-managers.
• Bootstrap – Doing more with less in terms of resources
invested in a business, and, where possible, controlling the
resources without owning them.
3. Executing the plan.
4. Harvesting the business.
or in part.
1.1 The Entrepreneurial Process
or in part.
1-2c Entrepreneurs:
Born or Made? (slide 1 of 2)
• Desirable and acquirable attitudes and
behaviors of entrepreneurs:
• Leadership abilities.
• Opportunity obsession.
• Commitment and determination.
• Motivation to excel.

• Courage.
• Tolerance of risk, ambiguity, and uncertainty.
• Creativity, self-reliance, and adaptability.
or in part.
1-2c Entrepreneurs:
Born or Made? (slide 2 of 2)
• An almost certain way to fail as an
entrepreneur is to do the following:
• Overestimate what you can do.
• Lack an understanding of the market.
• Hire mediocre people.
• Fail to be a team player (usually the result of taking
oneself too seriously).
• Be a domineering manager.
• Fail to share ownership in the business in an
equitable way.
or in part.
1-2d Types of Entrepreneurs
(slide 1 of 3)
SECOND-STAGE ENTREPRENEURS

• At some point after a new firm is established, it may be
purchased
or taken over by a second-generation family member or another
individual who may have been managing the company.
FRANCHISEES
• Franchisee – An entrepreneur whose power is limited by a
contractual relationship with a franchising organization.
• The franchisee is authorized to market the company’s products
or
services and expects the franchisor to provide support in
operating the business.
• Such support will usually include operating systems, training,
financing, advertising, and other services.
• In addition to paying an annual franchising fee, the franchisee
will
usually pay a portion of the company’s profits to the franchisor.
or in part.
(slide 2 of 3)
SOCIAL ENTREPRENEURS
• Social entrepreneurship – Entrepreneurial
activity whose goal is to find innovative

solutions to social needs, problems, and
opportunities.
ENTREPRENEURIAL TEAMS
• Entrepreneurial teams – Two or more people
who work together as entrepreneurs on one
endeavor.
or in part.
(slide 3 of 3)
INTRAPRENEURS
• Intrapreneurship – A process within an existing corporation
involving an employee who assumes the responsibility for
taking a
new idea and converting it into a profitable product, service, or
a
process.
• Thus, an intrapreneur mostly creates value for the company,
rather
than starting his or her own new business.
• A primary benefit for an intrapreneur is having access to
corporate
resources, combined with the economies of scale enjoyed by a
large corporation.

• A drawback is that employees who exhibit an entrepreneurial
spirit
can become frustrated by the bureaucracy within large
corporations.
or in part.
1-3 CAN A SMALL COMPANY
COMPETE WITH BIG COMPANIES?
• Any business that can make its product or
service cheaper, faster, and better can be
competitive.
• Ways small firms can gain a competitive
advantage over larger competitors include:
• Building an internal culture based on integrity.
• Focusing on customers.
• Emphasizing quality in operations.
• Being innovative.
• Finding a distinct market segment—a niche market.
or in part.
1-3a Integrity and Responsibility
• The starting point of any competitive
advantage is having a commitment to integrity.

• Consistently operating with integrity can set a
small business apart, with a reputation of being
trustworthy.
• Trust is the foundation of all relationships, including
those in business.
• Above all else, the core values of the
entrepreneur, as reflected in what she or he
says and does, determine the culture within a
business.
or in part.
1-3b Customer Focus
• Small businesses have a greater potential to
provide good customer service than larger
firms do.
• They have the advantage of being able to serve
customers directly and effectively, avoiding the
layers of bureaucracy and corporate policies that
tend to stifle employee initiative.
or in part.

1-3c Quality Performance
• Small business owners are often able to insist
on high levels of quality without experiencing
the frustration of a large-company CEO who
may have to push a quality philosophy through
layers of bureaucracy.
or in part.
1-3d Innovation
• Innovation, both in products or services and in
competitive strategies, is within the reach of
the small business in ways that were not
thought possible a few years ago.
• Access to technology has helped smaller firms
compete and, in many cases, has clearly leveled
the playing field with larger companies.
or in part.
1-3e Niche Markets
• Numerous small businesses are uniquely
positioned to capture niche markets.
• Niche market – A specific group of customers with

an identifiable but narrow range of product or
service interests.
or in part.
1-4 MOTIVATIONS FOR
OWNING A BUSINESS
• Understanding clearly why you want to own a
small business and what motivates you are
vital to eventually achieving fulfillment through
your business.
or in part.
1-4a Types of Entrepreneurial
Motivations (slide 1 of 4)
• Four fundamental reasons for owning a
company:
1. Personal fulfillment.
2. Personal satisfaction.
3. Independence.
4. Financial rewards.

or in part.
1.2 Entrepreneurial Motivations
or in part.
PERSONAL FULFILLMENT
• Only when your company is about something more significant
than yourself will you have a sense that what you are doing is
meaningful and well worth the effort.
• Business owners outrank all other occupational groups in
terms of
overall contentment based on the following six criteria:
1. Emotional health.
2. Physical health.
3. Job satisfaction.
4. Healthy behavior.
5. Access to basic needs.
6. Self-reporting of overall life quality.
• Personal fulfillment extends to employees of small companies
as well.
• Working as a team provides a sense of belonging for both
owner-

managers and employees.
or in part.
PERSONAL SATISFACTION
• Small business owners feel rewarded in working with a
product or
providing a service and being good at it.
• Entrepreneurs are energized by enjoyable associations within
their businesses.
• Entrepreneurs enjoy friendships with other business owners,
frequently learning from one another.
• If they are visible within the community, small business
owners
can garner the respect of those who live there.
INDEPENDENCE
• Many people have a strong desire to make their own decisions,
take risks, and reap the rewards.

or in part.
FINANCIAL REWARDS
• In general, self-employed individuals are more likely to create
greater personal wealth than persons who work for others.
• Ideally, the owner should be compensated for two basic
activities:
1. Payment for personal time in managing the company, coming
in the
form of a salary.
2. A return for investing personal money in the business, which
should
relate to the amount invested and the riskiness of the business,
coming in the form of cash dividends and any increase in the
value of
the business as it grows.
• A majority of entrepreneurs do not become rich quickly.
• A more realistic goal is to “get rich slowly.”
or in part.
1-4b Influencers in Deciding to
Owning a Business (slide 1 of 2)
• Family and friends and the desire to leave a

difficult work situation are common influencers
when making the decision to own a business.
or in part.
1-4b Influencers in Deciding to
Owning a Business (slide 2 of 2)
FAMILY AND FRIENDS
• Not surprisingly, many small business owners worked
in their family’s business before founding their own
ventures.
THE DESIRE TO LEAVE A DIFFICULT SITUATION
• Reluctant entrepreneurs – A person who becomes
an entrepreneur because of some severe hardship.
• Corporate refugees – A person who becomes an
entrepreneur to escape an undesirable job situation.
or in part.
1-4c Why Your Perceptions Matter?
(slide 1 of 5)
• Knowing your motivations is important in starting a

business.
• But that is not enough.
• You also need to understand if your perceptions of what it
takes
to be successful in business are accurate.
• Paradigm shift – A change in how we fundamentally
see a situation.
• The question for someone wanting to start a business
is, “What will it take for me to create a successful
business?”
• Your answer will depend largely on your past experiences,
which influence how you see the situation.
or in part.
(slide 2 of 5)
• According to Michael Gerber, three
personalities come into play when a person is
starting a business:
1. The technician personality.
2. The manager personality.
3. The entrepreneur personality.

or in part.
1.3 Understanding Your Business Personalities
or in part.
(slide 3 of 5)
THE TECHNICIAN PERSONALITY
• Technician personality – A personality that focuses on an
already developed technical skill, wants to be left alone to get
the
job done, and is primarily concerned about the present.
• A technician personality tends to do the following:
• Use short-term thinking with little planning for future growth
and
change.
• Be paternalistic (he or she guides the businesses much as he or
she
might guide family members).
• Define marketing strategy in terms of the traditional
components of
price, quality, and company reputation.
• Be reluctant to delegate.
• Focus on sales efforts that are primarily personal.

or in part.
(slide 4 of 5)
THE MANAGER PERSONALITY
• Manager personality – A personality that is pragmatic
and likes order and planning operations.
• A manager personality tends to do the following:
• Avoid paternalism.
• Delegate authority as necessary for growth.
• Employ diverse marketi ng strategies.
• Use different types of sales approaches.
• Obtain original financing from more than two sources.
or in part.
(slide 5 of 5)
THE ENTREPRENEUR PERSONALITY
• Entrepreneur personality – A personality that
focuses on the business and providing results for
customers.

• The entrepreneurial personality tends to do the
following:
• Ask the question, “How must the business work?”
• See the business as a system for producing outside results for
the customer and, in so doing, producing profits.
• Start with a picture of a well-defined future, and then attempt
to change the present to match the vision.
• Develop strategies for the business by first seeing the whole
picture.
or in part.
1-5 WHAT DO YOU WANT
YOUR LEGACY TO BE?
• Entrepreneurial legacy – Material assets and
intangible qualities passed on to both heirs and society.
• Includes:
• Money.
• Good or bad family relationships.
• A record of integrity or greed.
• Building a legacy is an ongoing process that begins
with the launch of the firm and continues throughout its
operating life.
• Part of the legacy is the company’s contribution to the

community.
• A worthy legacy includes a good balance of values and
principles important to the entrepreneur .
or in part.
Key Terms
attractive small firm
bootstrap
corporate refugees
entrepreneur
entrepreneur personality
entrepreneurial legacy
entrepreneurial teams
entrepreneurship
franchisee
high-potential venture (gazelles)
intrapreneurship
lifestyle business
manager personality
microbusiness
niche market
paradigm shift
reluctant entrepreneurs
small business
social entrepreneurship
technician personality
�CHAPTER�1��The Entrepreneurial LifeLEARNING
OBJECTIVES1-1 SMALL SIZE, �GREAT SIGNIFICANCE1-2
SMALL BUSINESS AND ENTREPRENEURSHIP GO

TOGETHER1-2a What Is a Small Business?�(slide 1 of 3)1-2a
What Is a Small Business?�(slide 2 of 3)1-2a What Is a Small
Business?�(slide 3 of 3)1-2b What Is Entrepreneurship?
�(slide 1 of 2)1-2b What Is Entrepreneurship? �(slide 2 of
2)1.1 The Entrepreneurial Process1-2c Entrepreneurs: �Born
or Made? (slide 1 of 2)1-2c Entrepreneurs: �Born or Made?
(slide 2 of 2)1-2d Types of Entrepreneurs �(slide 1 of 3)1-2d
Types of Entrepreneurs �(slide 2 of 3)1-2d Types of
Entrepreneurs �(slide 3 of 3)1-3 CAN A SMALL COMPANY
COMPETE WITH BIG COMPANIES?1-3a Integrity and
Responsibility1-3b Customer Focus1-3c Quality
Performance1-3d Innovation1-3e Niche Markets1-4
MOTIVATIONS FOR �OWNING A BUSINESS1-4a Types of
Entrepreneurial Motivations (slide 1 of 4)1.2 Entrepreneurial
Motivations1-4a Types of Entrepreneurial Motivations (slide 2
of 4)1-4a Types of Entrepreneurial Motivations (slide 3 of 4)1-
4a Types of Entrepreneurial Motivations (slide 4 of 4)1-4b
Influencers in Deciding to Owning a Business (slide 1 of 2)1-4b
Influencers in Deciding to Owning a Business (slide 2 of 2)1-4c
Why Your Perceptions Matter?�(slide 1 of 5)1-4c Why Your
Perceptions Matter?�(slide 2 of 5)1.3 Understanding Your
Business Personalities1-4c Why Your Perceptions
Matter?�(slide 3 of 5)1-4c Why Your Perceptions
Matter?�(slide 4 of 5)1-4c Why Your Perceptions
Matter?�(slide 5 of 5)1-5 WHAT DO YOU WANT �YOUR
LEGACY TO BE?Key Terms
INSTRUCTIONS SMB1000 - DISCUSSION 1
After reading the chapters in this module, review the following
three (3) topics below. Choose and post your response to one
(1) topic. Then review and reply to a classmate who posted on a
different topic. For example, if you posted a reply to topic #1,
review and reply to a classmate who posted on topic #2 or #3.
l
#1

Chapter 1
High-Potential Ventures
Many see every small business as a high-potential venture. How
realistic is that? Are most small businesses high-potential
ventures or do they tend to be less lucrative?
#2
Chapter 2
The Greatest Issue?
In a survey of small businesses, respondents said the most
difficult ethical issue they faced was relationships with
customers, clients, and competitors. Discuss ethical issues you
believe fit into those categories and how a business can address
them.
#3
Chapter 2
Social Responsibility Meeting obligations to society and the
environment may cost a business more money. Is social
responsibility only an issue for large corporations or is it
important for small businesses to make this part of their
operations? Discuss the impact of social responsibility on a
small firm and how they should respond.
In order to earn the full points for this assignment, you must:
· Begin your post with the Chapter # and topic
· Clearly and accurately explain your answer based on factual
information. (25 points)
· Include examples, illustrations and/or applications in your
answer. If you copy information from the Internet, you must
cite your source. (25 points)
· Respond to one of your classmate's post on one of the OTHER
topics. (25 points)
· Explain the reason for your agreement or disagreement or why
you think the post is important, and/or provide examples of the
point(s) made. Just replying "I agree with you" does not
constitute a valid reply. (25 points)

CHAPTER2Integrity, Ethics, and Social Entrepreneur

CHAPTER2Integrity, Ethics, and Social Entrepreneur

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