7-Entrepreneurship and New Venture Management

ENTREPRENEURSHIP AND NEW

VENTURE MANAGEMENT

LECTURE 6 Lecturer: Sara Aslam

Fall 2011

Kinnaird College for Women

THE NATURE OF ENTREPRENEURSHIP

Entrepreneurship

The process of planning, organizing, operating, and assuming the risk of a business.

Entrepreneur

Someone who engages in entrepreneurship.

Small Business

- A business that is privately owned by one individual or a small group of individuals.

- It has sales and assets that are not large enough to influence its environment.

Principles of Management

Instructor: Sara Aslam

THE ROLE OF ENTREPRENEURSHIP IN SOCIETY

Job Creation

- Industry sectors dominated by small business have

added the most jobs.



THE ROLE OF ENTREPRENEURSHIP IN

SOCIETY (CONT’D)

Innovation

- Historically, major innovations are as likely to come

from small businesses as from large firms.

- Much of what is created in the high-technology

sectors comes from start-up companies.



THE ROLE OF ENTREPRENEURSHIP IN SOCIETY

(CONT’D)

Importance to Large Business

Most products made by large manufacturers are sold to

customers by small businesses.

Small businesses as suppliers provide large firms with

essential services, supplies, and raw materials.

Large businesses outsource many routine business

operations such as packaging, delivery, and distribution

to small businesses.



STRATEGY FOR

ENTREPRENEURIAL ORGANIZATIONS

Three Basic Strategic Challenges

Choosing an industry in which to compete.

Emphasizing distinctive competencies.

Writing a business plan.



STRATEGY FOR ENTREPRENEURIAL

ORGANIZATIONS (CONT’D)

Emphasizing Distinctive Competencies

- Identifying a niche in an established market, not

currently being exploited, that offers a competitive

advantage to small businesses.

Identifying New Markets

- Using the transfer of an existing product/service to

a new market entrepreneurs can create new

industries, products, or services.

First-Mover Advantage

- Exploiting an opportunity before any other firm

does.





Writing a Business Plan

- A business plan is a document that summarizes the

business strategy and structure.

- The plan should include:

business goals and objectives.

strategies used to achieve

these goals and objectives.

a plan of how the entrepreneur

will implement these strategies.





Entrepreneurship and International Management

- There is potential for expansion and growth in foreign

markets.

- While there are risks, entering a foreign country’s

market can be a real catalyst for success.



STRUCTURE OF ENTREPRENEURIAL

ORGANIZATIONS

Starting a New Business

- Buying an Existing Business

Business has a proven ability to draw customers and make a

profit.

Networks (e.g., customers and suppliers) are already

established.

Negative: New owners inherit any existing problems.

- Starting from Scratch

Avoids problems associated with previous owners.

Freedom to choose suppliers, equipment, location, and workers.

Negative: More business risk and uncertainty.



STRUCTURE OF ENTREPRENEURIAL


Identifying a Genuine Business Opportunity

Who are my

customers?

Where are they?

At what price

will they buy my

product? In what

quantities will

they buy?

Who are my

competitors?

How will my

product vary from

those of my

competitors?



FINANCING THE NEW BUSINESS

Personal Resources

Using your own money

and money borrowed from

friends and relatives to

finance the business.

Strategic Alliances

Partnering with

established firms such as

suppliers in a mutually

beneficial relationship.

Lenders

Obtaining funding from

traditional lenders (e.g.,

banks, independent

investors, and government

loans).

Venture Capital

Companies

Groups of small investors

who provide capital funds

to small high-growth

potential start-up firms in

exchange for an equity

position (stock) in the firms. Principles of Management


Franchising Agreement

- Operation of the franchised business by the

entrepreneur (the franchisee) under a license by a

parent company (the franchiser).

- The entrepreneur pays the parent company for use of

trademarks, products, formulas, and business plans.

FRANCHISING

Human Resource Management


FRANCHISING (CONT’D)

Advantages of franchising

- Reduced financial risk of new business success through

experience provided by franchiser.

- Training, financial, and management support by franchiser.

Disadvantages

- Start-up fees to purchase franchise.

- Limitations of franchise (market area, product, customers).

- Imposed operational controls of franchiser.



THE PERFORMANCE OF ENTREPRENEURIAL


Trends in New Business Start-Ups

The emergence of E-commerce

Crossovers to small business by former large-business employees

Increased entrepreneurial opportunities for minorities and women

Better survival rates for small businesses



WHERE WOMEN ENTREPRENEURS COME FROM

AND WHAT THEY LIKE ABOUT WORK

Management

25%

Accounting/

Finance

18%

Sales

21% Other

23%

Background of Women

Entrepreneurs in Previous Jobs

Marketing

6%

Human

Resources

3%

Engineering/

Manufacturing

4%

*Multiple responses allowed

Decision making

15%

Achieving goals

10%

Being her

own boss

20%

Setting own

hours

17%

Control-

ling destiny

17%

Pleasing

customers

16%

Independence

16%

What Women Entrepreneurs Say They

Like Best About Business Ownership*



THE PERFORMANCE OF ENTREPRENEURIAL


Reasons for Failure

Managerial incompetence/

inexperience of the

entrepreneur.

Neglect in not devoting

sufficient time and effort to

the business.

Weak control systems that

do not warn of impending

problems.

Insufficient capital to sustain

the business until it starts to

turn a profit.

Reasons for Success

Hard work, drive, and

dedication by the

entrepreneur.

Careful analysis of market

conditions provides insights

about business conditions.

Managerial competence

through training and

experience contributes to

success.

Luck sometimes plays a

role.



Thank You!

Documents

7-Entrepreneurship and New Venture Management