Unit1 understanding entrepreneurship
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Unit1 understanding entrepreneurship
- 2. Chapter Objectives To understand the evolution of the term – ‘entrepreneur’ To study the reasons for the current growth in entrepreneurship To list various reasons driving a person to starting a business To explore the characteristics and skills of successful entrepreneurs To classify different types of entrepreneurs To look at the reasons for entrepreneurial failure 2
- 3. The Entrepreneur entreprende, which means – ‘to undertake’ Webster dictionary – one who organizes, manages and assumes the risks of a business or enterprise Richard Cantillion – an entrepreneur is someone who takes the risk of running an enterprise by paying a certain price for securing and using resources to make a product and reselling the product for an uncertain price. 3
- 4. Joseph Schumpeter - an innovator playing the role of a dynamic businessman adding material growth to economic development Timmons - Entrepreneurship is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled 4
- 5. Reasons for Growth of Entrepreneurship Industry Structure New technologies Deregulation and privatization Formation of new business communities Increasing demand for variety Government incentives and subsidies Increasing flow of information 5
- 6. Easier access to resources Entrepreneurial education Return on innovation Entrepreneur as a Hero Self-employment is highly valued Rising dissatisfaction at job Acceptance of ex-entrepreneurs in the job market 6
- 7. Impact of Entrepreneurial Firms Job Creation Economic growth New Technology Serving small markets 7
- 8. Why Start a Business? Control The idea Flexibility Money 8
- 9. Advantages Vs Disadvantages You are the boss All profits are yours There will be great variety in roles and tasks Increases self confidence Work can be very satisfying Success will give you immense satisfaction You are alone All decisions are yours All losses are yours Work may not be satisfying You will need to put in long hours Lack of success will effect self esteem Exiting the business is difficult Pressures will affect social and family life 9
- 10. Entrepreneurial Motivation 10 Entrepreneurial Motivation Personal Characteristics Personal Goals IDEA Environment Entrepreneurial Activity Expectations OutcomesMatch
- 11. Classification of Entrepreneurs Based on Timing of Venture Creation: Early starters Experienced Mature Based on Socio-cultural Variables: 1st generation entrepreneurs From Business families Minority entrepreneurs Women Entrepreneurs 11
- 12. Based on Entrepreneurial Activity: Novice Serial Portfolio 12
- 13. Bianchi (1993) indicated following 6 characteristics 1. being an offspring of self-employed parents; 2. being fired from more than one job; 3. being an immigrant or a child of immigrants; 4. previous employment in a firm with more than 100 people; 5. being the oldest child in the family; and 6. being a college graduate. 13 Entrepreneurial Characteristics
- 14. Entrepreneurial Characteristics Timmons (1996) gave 6 general Characteristics 1. commitment and determination; 2. leadership; 3. opportunity obsession; 4. tolerance of risk, ambiguity and uncertainty; 5. creativity, self-reliance and ability to adapt; and 6. motivation to excel. 14
- 15. Development of Entrepreneurial Skills 1. Creativity and Opportunity Evaluation 2. Real-time Strategy and Decision Making 3. Comfort with Change and Chaos 4. Teamwork 5. Evangelicalism (faith in GOD) , Selling, Negotiation, and Motivation through Influence and Persuasion 6. Oral and Written Communication 7. Basics of Start-Up Finance, Accounting and Law 15
- 16. Entrepreneurial Attitudes Comfortable with lifestyle changes Willingness to break / bend / stretch laws Patience to start small Prepared to make enemies Comfort with confrontations Dealing with failure Willingness to learn 16
- 17. Reasons for Entrepreneurial Failure Lack of experienced management Few trained or experienced human resource Poor financial management Rapid growth Lack of business linkages Weak marketing efforts Lack of information Incorrect pricing Improper inventory control Short term outlook 17
- 18. Entrepreneurs V. Intrapreneurs Entrepreneurs are people that notice opportunities and take the initiative to mobilize resources to make new goods and services. Intrapreneurs also notice opportunities and take initiative to mobilize resources, however they work in large companies and contribute to the innovation of the firm. Intrapreneurs often become entrepreneurs.
- 19. Intrapreneurship Learning organizations encourage intrapreneurship. Organizations want to form: Product Champions: people who take ownership of a product from concept to market. Skunkworks: a group of intrapreneurs kept separate from the rest of the organization. New Venture Division: allows a division to act as its own smaller company. Rewards for Innovation: link innovation by workers to valued rewards.
- 20. Small Business Owners Small business owners are people who own a major equity stake in a company with fewer than 500 employees. In 1997 there were 22.56 million small business in the United States. 47% of people are employed by a small business.
- 21. Employee Satisfaction In companies with less than 50 employees, 44% were satisfied. In companies with 50-999 employees, 31% are satisfied. Business with more than 1000, only 28% are satisfied.
- 22. Advantages of a Small Business Greater Opportunity to get rich through stock options Feel more important Feel more secure Comfort Level
- 23. Disadvantages of a Small Business Lower guaranteed pay Fewer benefits Expected to have many skills Too much cohesion Hard to move to a big company Large fluctuations in income possible
- 24. Who are entrepreneurs? Common traits Original thinkers Risk takers Take responsibility for own actions Feel competent and capable Set high goals and enjoy working toward them Common traits Self employed parents Firstborns Between 30-50 years old Well educated – 80% have college degree and 1/3 have a graduate level degree
- 25. Successful and Unsuccessful Entrepreneurs Successful Creative and Innovative Position themselves in shifting or new markets Create new products Create new processes Create new delivery Unsuccessful Poor Managers Low work ethic Inefficient Failure to plan and prepare Poor money managers
- 26. Entrepreneur One who organizes, manages, and assumes the risks of a business or enterprise. BRAINSTORM TRAITS OF A SUCCESSFUL ENTREPRENEUR
- 27. Inventor Comes up with ideas for entirely new products and services Thomas Edison Alexander Graham Bell Eli Whitney Benjamin Franklin Henry Ford James Naismith
- 28. Innovator Takes existing products or services and changes some aspect of them, such as features, size, or pricing Internet Weapons Money
- 29. Marketing Entrepreneurs They do not change the product itself, but rather the way the product is perceived by consumers. Burger King creates the left handed Whopper
- 30. Types of Entrepreneurs Classification on the basis of 1.Type of business 2.Use of Technology 3.Motivation 4.Growth 5.Stages in Development 6.Others
- 31. Type of business Business entrepreneur: Convert ideas into reality; deal with bothmanufacturing and trading aspect of business (Small trading andmanufacturing business) Trading entrepreneur: Undertakes trading activities; concernedwith marketing (Domestic and international level) Industrial entrepreneur: Undertakes manufacturing activities only;new product development etc (textile, electronics, etc) Corporate entrepreneur: Interested in management part of organisation; exceptional organising, coordinating skills tomanage a corporate undertaking (Ambani, Tata families) Agricultural entrepreneur: Production and marketing of agricultural inputs and outputs (Dairy, horticulture, forestry)
- 32. Characteristics of Entrepreneurs Successful Entrepreneurs Key Personal Attributes Good Technical Skills Strong Managerial Competencies
- 33. Key Personal Attributes Entrepreneurs are Made, Not Born! Many of these key attributes are developed early in life, with the family environment playing an important role Entrepreneurs tend to have had self employed parents who tend to support and encourage independence, achievement, and responsibility Firstborns tend to have more entrepreneurial attributes because they receive more attention, have to forge their own way, thus creating higher self-confidence
- 34. Key Personal Attributes (cont.) Entrepreneurial Careers The idea that entrepreneurial success leads to more entrepreneurial activity may explain why many entrepreneurs start multiple companies over the course of their career Corridor Principle- Using one business to start or acquire others and then repeating the process Serial Entrepreneurs- A person who founds and operates multiple companies during one career
- 35. Key Personal Attributes (cont.) Need for Achievement A person’s desire either for excellence or to succeed in competitive situations High achievers take responsibility for attaining their goals, set moderately difficult goals, and want immediate feedback on their performance Success is measured in terms of what those efforts have accomplished McClelland’s research
- 36. Key Personal Attributes (cont.) Desire for Independence Entrepreneurs often seek independence from others As a result, they generally aren’t motivated to perform well in large, bureaucratic organizations Entrepreneurs have internal drive, are confident in their own abilities, and possess a great deal of self-respect
- 37. Key Personal Attributes (cont.) Self-Confidence Because of the high risks involved in running an entrepreneurial organization, having an “upbeat” and self-confident attitude is essential A successful track record leads to improved self-confidence and self- esteem Self-confidence enables that person to be optimistic in representing the firm to employees and customers alike
- 38. Key Personal Attributes (cont.) Self-Sacrifice Essential Nothing worth having is free Success has a high price, and entrepreneurs have to be willing to sacrifice certain things
- 39. Technical Proficiency Many entrepreneurs demonstrate strong technical skills, typically bringing some related experience to their business ventures For example, successful car dealers usually have lots of technical knowledge about selling and servicing automobiles before opening their dealerships Especially important in the computer industry NOT ALWAYS NECESSARY Business Plan – A step-by-step outline of how an entrepreneur or the owner of an enterprise expects to turn ideas into reality. Planning
- 40. Business Plan A business plan is any plan that works for a business: To look ahead, Allocateresources, Focuson key points, and Preparefor problemsand opportunities. Business plans is for Starting anew business Applying for businessloans Running abusiness Optimizegrowth and development according to priorities.
Editor's Notes
- Have your students identify what each person invented: (Here is some help). The first great invention developed by Thomas Edison was the tin foil phonograph. A prolific producer, Edison is also know for his work with light bulbs, electricity, film and audio devices, and much more. In 1876, at the age of 29, Alexander Graham Bell invented his telephone. Among one of his first innovations after the telephone was the "photophone," a device that enabled sound to be transmitted on a beam of light. Eli Whitney invented the cotton gin in 1794. The cotton gin is a machine that separates seeds, hulls and other unwanted materials from cotton after it has been picked. Benjamin Franklin invented the lightning rod, the iron furnace stove or 'Franklin Stove', bifocal glasses, and the odometer. Henry Ford improved the "assembly line" for automobile manufacturing, received a patent for a transmission mechanism, and popularized the gas-powered car with the Model-T. James Naismith was a Canadian physical education instructor who invented basketball in 1891. Famous Utah Invewntors http://inventors.about.com/od/americaninventors/qt/Utah.htm
- Business Week Slide Show of History’s Greatest Innovations http://images.businessweek.com/ss/07/02/0216_innovations/index_01.htm. Either copy and paste the link in your browser, or while playing the slide show, simply click on the key icon and it will automatically take you there. Discuss with your students what the existing product or service was and how it was changed to make it more appealing.
- Entrepreneur.com has a great article on the Top 10 Successful Marketing Stunts found at http://www.entrepreneur.com/article/159484. Either copy and paste the link in your browser, or while playing the slide show, simply click on the key icon and it will automatically take you there. Here is what it says: It's kind of like dating--that's the bad news. There's a lot of effort involved, and sometimes, there's some humiliation. But when you're an entrepreneur competing for the affections of the world, there's always a new heart and mind to try to win over because attracting customers never ends. So it's no wonder you want to try to bring in a ton of them at once by pulling off a marketing stunt. The good news is, marketing stunts often work. Throughout history, ENTREPRENEURS have tried to be creative about how they inform the public of their product. In 1903, for instance, newspaper publisher Henri Desgrange started a new bicycle road race as a temporary publicity stunt to promote his newspaper, never imagining that the Tour de France would be going strong more than 100 years later. The Miss America Pageant was created in 1921 as a clever way to attract business and tourists to Atlantic City. The Pillsbury Bake-Off, which was launched in 1949, was intended to be a one-time event, but it's become an annual event for the baking company. But history is also littered with tales of marketing stunts that ran amok. According to a 1926 Associated Press article, for instance, there was a candy company in Berlin that tried dropping foil-wrapped chocolates on its citizens to advertise their services. But police had to step in after they received complaints of bruises and of children's Sunday school suits being ruined; they had numerous gripes from bald-headed men who were getting splattered with the sweet treats. In 1976, several airlines launched an ill-conceived marketing stunt and began giving away free drinks to coach passengers in order to convince people to fly. It was apparently popular with the public, but passengers weren't the only ones getting hammered: So were the companies' bottom lines as passengers drank up their profits. In the spirit of helping you learn from other business's successes and failures, we offer our list of 10 marketing stunts that exceeded expectations--and five that badly flopped. 10 Marketing Stunts Done RightCompany: Taco Bell Corp. Year of the Stunt: 1996 The Stunt: In the morning, an ad appeared in The New York Times with a headline that read: "Taco Bell Buys the Liberty Bell." The ad copy explained that Taco Bell was "pleased to announce that we have agreed to purchase the Liberty Bell, one of our country's most historic treasures. It will now be called the 'Taco Liberty Bell' and will still be accessible to the American public for viewing. While some may find this controversial, we hope our move will prompt other corporations to take similar action to do their part to reduce the country's debt." It sounded logical, if distasteful. In another press release, Taco Bell helpfully explained that people had been "adopting" highways for years and that purchasing a national treasure was just a way of furthering that idea. What Happened Next: Thousands of people called in their complaints to the home of the Liberty Bell, the National Historic Park in Philadelphia, but by noon, Taco Bell admitted what many people suspected, since the day was, after all, April 1. The Taco Bell ad was an April Fool's joke, and the media and public ate it up (no pun intended). More than 650 PRINT media outlets and 400 broadcast outlets covered the prank, reaching more than 70 million Americans, according to Taco Bell's marketing department. The company's revenue increased by $500,000 that day, and by $600,000 more the following day, compared to the previous week's sales. Even then-White House spokesperson Mike McCurry, when asked about the Taco Liberty Bell, got inspired to reveal that the Lincoln Memorial had been sold and would from now on be known as the Ford Lincoln Mercury Memorial. Lesson Learned: It can pay to have a sense of humor about YOUR BUSINESS. Company: ProShade Year of the Stunt: 2006 The Stunt: ProShade is a company that makes a 3-in-1 gadget that combines a visor, sunglasses and a lanyard--which is a cord and a hook that allows you to carry something on them, like keys or a pocketknife or what have you. Proshade made an intriguing offer to the National Park Service earlier this year when they proposed to give $4 million to Mount Rushmore in EXCHANGE for getting to put a logo visor on each of the presidents' heads. The company explained in a news release, "The National Park Service needs more support in preserving Mount Rushmore. There's a dearth of funding in the budget to provide the national landmark with the facelift it needs. If they accept, we'd like this to go toward preservation efforts-including a much-needed pressurized wash." What Happened Next: Although the National Park Service didn't take them up on their offer and despite the fact that any decent journalist knew they were being taken, the company received a fair amount of publicity for their outlandish offer. One writer for Adweek summed it up best in a column about ProShade's concern for Mount Rushmore when he said, "This obviously smacks of a blatant publicity stunt, as I can't conceive of anyone agreeing to this offer (especially at such a low price). But I'll write about it, anyway." Lesson Learned: Journalists are human, too--they love a good story. Give it to them, and they just may take you up on writing about it. Company: GoldenPalace.com Year of the Stunt: 2004 The Stunt: Because they're legally restricted from advertising in traditional media, online casino GoldenPalace.com, based in the Caribbean, has devised many marketing stunts to grab the public's attention, from paying people to tattoo their logo on body parts to--earlier this year--purchasing William Shatner's kidney stone for $25,000, so they could auction it off for charity. But their most famous marketing stunt took place a few years back when they bought a partially eaten grilled cheese sandwich for $28,000. But it wasn't just any sandwich: It looked like the likeness of the Virgin Mary had been burned into the bread. What Happened Next: The casino received worldwide attention for their purchase, getting media exposure in everything from USA Today to the BBC to China Daily. CNN, FOX and MSNBC all covered it, as did the evening news networks. The casino likely saw the $28,000 as a bargain, considering that not only did it buy them a lot of media exposure, they were able to milk it for quite awhile. They later generated a few more headlines for buying the pan that the revered grilled cheese sandwich was cooked on, they still sell T-shirts emblazoned with the image of the Virgin Mary grilled cheese sandwich, and they took the blessed food on a world tour, displaying it in places like the Hard Rock Caf� in Las Vegas. They even organized the Goldenpalace.com World Grilled Cheese Eating Championship in early 2005, in which world competitive eaters came to Venice, California, to eat as many grilled cheese sandwiches as possible--and to win $10,000. Lesson Learned: Even the most outlandish marketing stunts--including those involving the often-dicey topic of religion--can work to a company's advantage. The important thing to remember is that the marketing stunt should fit into the character of the business. You could definitely argue that any marketing stunt in the name of charity is only going to make an online gambling casino look better, especially when it's located on an island outside the United States' reach. And if the public's expectations of your business are low to begin with, it's harder for a marketing stunt to blow up in your face. Company: Burger King Year of the Stunt: 1998 The Stunt: Obviously inspired by the good folks at Taco Bell, Burger King put out an ad in USA Today, stating that they'd re-engineered their most famous sandwich in order to benefit 32 million Americans, and now they were ready to present . . . the Left-Handed Whopper. They offered details of how the sandwich had been designed to fit more comfortably in the left hand, including rotating the condiments and redistributing the weight of the toppings. What Happened Next: This one didn't go over quite as well as they'd hoped, since some of those 32 million Americans came into the restaurant and were annoyed to discover they couldn't actually order the Left-Handed Whopper. Still, there was no real backlash when the restaurant chain admitted it had been an April Fool's stunt, and since the ad brought in customers, including many who requested that they receive a right-handed burger, it should be called a success. Lesson Learned: No harm in being inspired by successful marketing stunts that have come before, as long as you provide your own twist. The newspaper ad on April Fool's Day had already been done, but otherwise, it was a creative gag. Certainly, Burger King was encouraged by the prank: They've continued to have a sense of humor when it comes to their marketing, their latest gag being the website, www.subservientchicken.com , which was unleashed on the internet without much fanfare--only a few friends of people who worked for Burger King's ad agency were told about it--allowing word-of-mouth to spread and customers to discover it for themselves. For those of you who haven't heard of it, it's a video of somebody in a chicken suit who will fulfill (almost) any command you type in for it. In the past several months, the site has received nearly 20 million hits, and web surfers spend an average of six minutes playing the game. Seems it never hurts to have a sense of humor. Company: SonicYoga.com Year of the Stunt: 2002 The Stunt: Soon after launching his Manhattan-based yoga school in 2001, owner Jonathan Fields teamed up with Adelphi University to run the first-ever study on determining how many calories yoga burns. Knowing that the idea had media appeal--in fact, Fields also owns a marketing firm called Creative Vibe which he started in 2003--he sent a note to several top fitness magazine editors in New York City, explaining the concept of the study and offering an exclusive to whatever editor reached him first and agreed to do a story on the study. Within a week, Self magazine committed--and even asked to be in the study. What Happened Next: After the article was written, an editor at Self called Fields and mentioned that it was a shame the studio didn't have a yoga instruction video to go with the article. Fields instinctively said, "Oh, we do have a video. It's in post-production, and it'll be out by the publication date." He quickly made up a name for the video and a price so the editor could add that information to the article, then he hung up and turned to his partner and said, "We need to make a yoga video very quickly." They put together a video, which sold out after the magazine hit the shelves. Since then, they've made four more videos. Lesson Learned: There's something to be said for thinking big and on the fly. Fields could have been extremely embarrassed had he not been able to quickly produce a workout video that actually was generally well reviewed. And certainly another lesson to take away from this is that when you're small, teaming up with big names--Adelphi University, Self magazine--can make you seem bigger to the public than you really are. But maybe the best lesson is to emulate Fields' confidence. As Fields puts it, "If you want to be in the news, make news. You don't need connections, you don't need a publicist, but you do need to think way outside the box." Having said that, Fields cautions, "Even in the throes of wild creativity, there's a sound business reason, beyond publicity, to do what you want people to notice. Integrity is paramount."