CS443 Chapter 1: Introduction to Entrepreneurship

CS443 Course
Introduction To Entrepreneurship
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Spring 2009, Modern Science & Arts University

Chapter One: Introduction To Entrepreneurship

Instructor:
Al-Motaz Bellah Alaa Al-Agamawi

Chapter Source, “chapter one: what business do you want to start” from “entrepreneurship:
starting and operating a small business” book, by Steve Mariotti, 2007, Pearson Education
Inc.
Introduction to Entrepreneurship Course Chapter 1 By: Motaz Al-Agamawi

Difference Between Products and Services
2

Products: some thing that exist in nature or is made by human being.
Service: is work that provide time, skills or experience in exchange for money.

Products is tangibles, meaning that it can be touched.
Services is intangibles, meaning that you can not actually touch it.


Definition of Employee
3

Some one who earns a living by working for some one else’s business is an employee.
Employees all have one thing in common…
They do not own a business.
They work for other who do.
They know how much money they can earn.
The money they earn is limited to Salary, Bonuses and Stock Options.


Definition of Entrepreneur
4

P l start their own business and work for themselves are called E
People h i b i d kf h l ll d Entrepreneurs.
An Entrepreneur is someone who recognize an opportunity to start a business that
other people may not have noticed and jump on it.
Unlike Employees Entrepreneur…
Own his or her business.
Own the profit that his/her business earns
earns.
Own the decision of reinvest profits in business or use it to pay him/herself.
The word Entrepreneur first surfaced in France in Seventeenth century…
It
I was used to describe some who undertook a project.
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After while it came to mean someone who start a new business…
Who start a new kind of business or
new or improved way of doing business

Example for Entrepreneur
5

Steve Jobs and Stephen Wozniak were barely out of College when
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they invented the personal computers in a Garage in Cupertino,
California. Now Apple Sells millions of iPhones, iPods, iBooks and other
innovative Products.
Bill Gates and his friend Paul Allen were handing out at Harvard
Square newsstand and stopped th l t t issue of P l El t i On
S t d d t d the latest i f Popular Electronics. O
the cover was a picture of a build-it yourself microprocessor kit called
the Altair 8800 “This is our chance ” said Allen to Gates. Gates spent 5
8800. This chance, Gates
weeks writing the Basic program for the machine and in the winter 1975-
the world first microprocessor SW company was born “Microsoft”. (Source “
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What the Best CEOs Know” by Jeffrey A Krames, McGrawHill Book)

Free Enterprise
6

Free Enterprise is on voluntary exchange.
Voluntary exchange is a trade between two parties who agree to trade money
for products or services.
No one is forced to trade, each is excited by the opportunity the trade offers.
Both parties agree to the exchange because they both benefit.

We all benefit from living is a free enterprise system because…
It Discourage entrepreneurs who waste resources by driving them out of
business.
It Encourage entrepreneurs who use resource efficiently to sa s y customer
cou age e ep e eu s o esou ce e c e y o satisfy cus o e
needs by reward them with profit.

What is Small Business?
7

S ll Business employees less than 100 and have yearly sales less than 5
Small B i l l th dh l l l th
Million (this is the US Small business Administration)
This definition can varies from country to another depending on many
parameters including market size, demand and other factors.
Most multimillion dollar companies started as small, entrepreneurial venture. This
is why Entrepreneurship is often called the engine of economy.
In the USA which is the most Entrepreneurship country in the world…
22.4 million non-agriculture small business (according to 2001 Small Business
Administration)
14% of fastest growing companies in US started with less than 1,000 USD
(Inc, October 2002).
Small Business represent more than 99% of all employers (S ll B i
(Small Business
Administration, December 2000)

Business and Profit
8

P fi means that the amount of money coming in business must be greater
Profit h h f i i b i tb t
than the amount of money required to pay the bills.
No matter how big or small a business, business must make a profit.
When starting a business it is good rule to expect to lose money for the first
period which could various from 3 to 6 months.
Closing a business is nothing to be ashamed of if you learn from the
experience. Most successful entrepreneurs open and closed more than one business
during their lives.
E t
Entrepreneur may change business many times over life ti i response t
h b i ti lif time in to
changing competition and consumer needs.
Entrepreneur choice is directly affect how much profit the business makes…
Trade-off: you are giving up one thing for other.

Cost & Benefit of Becoming & Entrepreneur
9

B fi i l d
Benefit includes…
Independence
Satisfaction
Financial reward
Self-Esteem
Cost includes…
Business Failure
Obstacles
L li
Loneliness
Financial Insecurity
Long Hours/Hard word


Desire of Making Money is not only a Good Reason
10

Starting a business is an opportunity and like any opportunity it should be
evaluated by taking a careful look at cost and benefit.
The desire to make money, alone is not a good enough reason to start business.
Financial rewards of owning your business may not happened until you put in
years of hard work.
Desire to k
D i t make money may not b enough t k
t be h to keep you going through the
i th h th
difficulty of early period.
Most successful companies have been founded by an entrepreneur with a
powerful and motivated dream.


Henry Ford’s (Entrepreneur of the chapter) Case study
11

F dd
Ford dreamed of a h
d f horseless carriage that average American can drive.
l i h A i di
Ford needed this strong vision to sustain him through years of Business Failure.
By the time he was almost forty, ford had been trying to get his vision off the
ground for many years.
Several his attempts to produce and sell cars failed.
He continued to direct all his effort toward making his vision real and created the
Ford Motor Company.
By the time he was fifty, Ford was one of the riches and most famous men in the
ld
world.
After 100 years Ford Motors Company is still a major American Company.
The dream provides the motivation to Succeed.
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What vision will sustain you?

Henry Ford’s (Entrepreneur of the chapter) Case study
12


In Class Activity
13

Do you have What it takes?
Uncalculated quiz, it will not affect your score.
It is a self evaluation quiz to determine if you have what it takes to be an
entrepreneur.
You have ten minutes to complete the quiz.


How do Entrepreneurs find Opportunity?
14

An Entrepreneur definition “An Entrepreneur creates value by exploiting an
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invention or, more generally an untried technology possibility for producing a new
commodity or producing an old one in anew way, by opening up a new source of
supply of material or a new outlet for products by reorganizing an industry,…”.
products, industry
By Joseph Schumpeter, in 1900s.

Five basic ways the Entrepreneur find opportunities to create a new business…
Use a new technology to produce a new product.
Use an existing technology to produce a new product.
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Use an existing technology to produce an old product in a new way.
Find a new source of resources that might enable him/her to produce a product
more cheaply
cheaply.
Develop a new market for an existing product.

Internal/External Opportunities
15

An Internal Opportunity is one that comes from inside you- from hobby or an
interest, or even a passion.
An External Opportunity are circumstances you notice that make you say to
yourself, “That would make a great business”.
The best business opportunity often combine both internal and external factor.
Ideally, a business that you are passionate about fills a huge need in the
marketplace.


Entrepreneurs Creativity
16

Peter Drucker pointed that for a business to be entrepreneurial, it should exploit
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changes in the world…
These changes can be technological, like the explosion in computer
Microsoft,…
technology that led Bill Gates to start Microsoft
Drucker defines an Entrepreneur as some one who “always search for change
responds to it and exploits it as an opportunity”
Entrepreneur recognize opportunity while other people see only problems.
The Entrepreneur recognize that the problem was actually an opportunity.
Where there are dissatisfied customer, there are definitely an opportunity.
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Bill Gates is a problem solver, before he started Microsoft, most SW was
complicated and confusing to average person. Gates decided to use his
programming aptitude to create SW that should be User Friendly fun and easy
Friendly-fun
for average person.

Train Your Mind to Recognize Business Opportunity
17

First step to become an Entrepreneur is to train you mind to…
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Recognize opportunity.
Next step is to let your creativity fly.
Develop your Entrepreneurial skills by asking your self the following questions:
What frustrates me the most when I try to buy something?
What product or service would really make my life better?
What makes me annoyed for angry?
What product or service would take away my aggravation?
Entrepreneurs not only fume about products and services they would love to have
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in their lives. Imagine by asking yourself questions like…
What is the one thing you would love to have more than any-thing else?
What would it look like? Taste Like?
What would it do?

An Idea isn’t Necessarily an Opportunity
18

Not every business idea you may have is an opportunity
opportunity.
An Opportunity is an idea that is based on what consumers need or want.
Successful business sells products or services that customers need at a prices they are
willing to pay.
illi


An Idea isn’t Necessarily an Opportunity
19

“ An opportunity has the qualities of being attractive durable and timely and is
attractive, durable,
anchored in a product or service which creates or adds value for it buyer or end user”,
by Jeffry Timmons. Timmons defines a business opportunity as an idea, plus the following
four characteristics
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It is attractive to customers.
It will work in your business environment.
It can be executed in the window of opportunity that exists.
You have the resources and skills to create the business, or you know
someone who does and who might want to form the business with you.
Window of opportunity is the amount of time you have to get your business idea
to market.
For id t b
F idea to be an opportunity, it must l d t th d l
t it t lead to the development of a product or service
t f d t i
that is of value to a customer.

Cost/Benefit Analysis
20

To turn opportunity into a business you will have to invest both time and money.
Before making this investment, look carefully at two factors…
Cost: The money and time you have to invest.
Benefits: The money you will earn and the knowledge and experience you
will gain.
Cost/benefit analysis can be inaccurate, without including opportunity cost…
Opportunity cost: is the cost of your next best investment.
Each time you make a decision about what to do with your time, energy and
money, think about the cost of opportunity that you are giving up.


SWOT- Strengths, Weakness, Opportunity, Threats
21

Strength Weakness
All of the capabilities and positive points
f h bili i d ii i All of the negative that the entrepreneur
that the entrepreneur has, from experience faces, such as lake of capital or training or
to contacts. failure to set up a workable accounting
system.

Opportunity Threats
Any luck break or creativity insight that can Anything that can jeopardize the existence of
help the entrepreneur get ahead of the
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the business to intimidate the entrepreneur,
competition from competitors to legal issues.


Opportunity is Situational
22

Opportunity is situational, meaning it is depending on situations. You cannot
generalize about when or where an opportunity might appear.
Wisdom was that only the biggest telecom companies were going to be in a
position of exploit in the internet and the opposite has been true, however
Entrepreneurs have penetrated and indeed dominated the market for Internet
based
b d services. AOL Google< N t
i AOL, G l < Netscape and Y h rather than AT&T.
d Yahoo, th th AT&T
It can take a huge cooperation (think dinosaurs) over six years to develop and
implement a new business strategy. Entrepreneurs, in contrast, can dart in and out of
the markets like roadrunners.
According to a study by the National Science Foundation, 95% of technological
innovation s ce world Ware II have been developed and exploited by
o a o since o d a e a e bee de e oped a d e p o ed
entrepreneurial companies.

Five Roots of Opportunity in the Marketplace
23

There are five roots of opportunity in the market place that entrepreneurs can
exploit:
Problems that your business can solve.
Changes in law, situations or trends.
Inventions of totally new products or services.
Competition. If you can find a way to beat the competition on the price,
location, quality, reputation, reliability or speed, you can create a very
f lb i ith i ti d t i
successful business with an existing product or service.
Technology Advances. Scientist may invent new technology but
entrepreneurs figure out how to use and sell it.


What/Why a Business Plan?
24

A business plan is a document thoroughly explains a business idea and how it will be
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carried out. The plan should include:
All cost and a marketing plan.
financed.
An explain how the business will be financed
An estimate of what the earnings are expected to be.
The number 1 reason to write a business plan is to organize your thoughts before
starting a business.
Bankers and other potential investors, will refuse to see an entrepreneur who doesn’t
have a business plan.
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A well-written BP will show investors that you have carefully though through what
you intend to do.
Business Plan will save you time and money because before you start you will figure
money,
out many required details.

Seven Rules for Building Successful Business
25

Recognize an Opportunity.
Evaluate it with Critical Thinking.
Build a Team.
Write.
Gather Resources.
Decide Ownership.
Create Wealth.


Chapter Assignment…
26

From the text Book, Application Exercise, Page 30.
Describe three business opportunities, each in half A4 maximum.
Use Checklist (in text book page 30), to evaluate the three business opportunities.
Chose the best business opportunity and write a SWOT.
Write a cost/benefit analysis to analysis the cost and benefits to start this
business.

Assignment Deadline: Newt Week lecture.
A D dl N W kl


Bonus Activity…
27

Go to…
http://money.cnn.com/galleries/2007/fortune/0711/gallery.power_25.fortune//index.html

Chose one of the 25 most powerful people in Business and in one A4 page…
Describe his journey in one paragraph using your own words.
List the most important milestones which made his in the list, from your own point of view.
Describe why he was your choice in one paragraph.
Use the internet and get more details about the person you chose and write it in a
maximum of 10 lines using your own wording.

By doing this activity you will take bonus (same weight of assignment)
Else you will not loose score
Activity Deadline: Newt Week lecture.

Extra Resources for Entrepreneur of the Chapter…
28

For Henry Ford you can visit:
http://en.wikipedia.org/wiki/Henry_Ford
http://www.hfmgv.org
//
http://inventors.about.com/od/fstartinventors/a/HenryFord.htm
http://www.time.com/time/time100/builder/profile/ford.html
http://www.encyclomedia.com/video-henry_ford.html
// /
http://thinkexist.com/quotes/henry_ford/


29

thank you…

CS443 Chapter 1: Introduction to Entrepreneurship

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