2. The Nature of
Entrepreneurship
10–2
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.
3. How easy or difficult is it
to distinguish between a
small and a large
business?
10–3
4. The Role of Entrepreneurship in
Society
10–4
‘‘ The family name is on the door. It’s more than
just a job. ’’
- William Wrigley,
CEO of Wrigley’s Co.
6. The Importance of Small Business
10–6
Job creation
1. Small business creates majority of the new jobs in the society.
2. Small business accounts for 38% of all jobs in high-technology
sectors and for 96% of all U.S. exporters.
Innovation
1. Historically, major innovations are as likely to come from small
businesses as from large firms.
2. Much of what is created in the high-technology sectors comes
from start-up companies.
Importance to big businesses
1. Most products made by large manufacturers are sold to
customers by small businesses.
2. Large businesses outsource many routine business operations
such as packaging, delivery, and distribution to small businesses.
7. 10–7
Representative Jobs Created and Lost by
Big Business, 1993–2005
10–7
All businesses create and eliminate jobs. Because of
their size… This figure provides several representative
examples of job creation.
12. 2. Emphasizing distinctive
competencies.
Identifying Niches in Established Markets
Identifying New Markets
1. Using the transfer of an existing product/service to explore
a new market.
2. Creating new industries/products/services.
First-Mover Advantage
1. Exploiting an opportunity before any other firm does.
10–12
13. 3. Writing a Business Plan
A business plan is a document that summarizes the
business strategy and structure. It should include:
1. business goals and objectives.
2. strategies used to achieve these goals and objectives.
10–13
15. 10–15
Starting the New Business – Entrepreneurs are choosing
whether they will produce goods, or they will base on services.
Buying an Existing Business
Decision about buying an existing business or starting from scratch.
Example:
Starting from Scratch
Avoids problems associated with previous owners.
Freedom to choose suppliers, equipment, location, and workers.
Negative: More business risk and uncertainty.
16. Financing the New Business
10–16
Personal Resources
Using your own money and money borrowed from friends and relatives to
finance the business.
Strategic Alliances
Lenders
Venture Capital Companies
Venture capital companies are groups of small investors making profits on
companies with rapid growth potential.
Small-Business Investment Companies (SBICs)
Investor-owned companies that borrow money from the SBA to loan to small
business with high growth potential.
18. Franchising
10–18
Franchising agreement is a contract between an entrepreneur
(the franchisee) and a parent company (the franchiser).
The entrepreneur pays the parent company for the use of its
trademarks, product, formulas, and business plans.
19. The Performance of Entrepreneurial
Organizations (cont’d)
10–19
Reason for success:
Hard work
Careful analysis of
market conditions
Managerial competence
Luck
Reason for failure:
Not knowing how to
make business decisions
Neglecting
Weak control system
Insufficient capital
