CHAPTER 1

– LEARNING GOAL 2
■ Review term:
What does “entrepreneur” mean?

Some statistics in the US:

- In 2013, over 23% of companies were started by people
aged 55 to 64
- Women now own over a third of all businesses.
- Businesses owned by minority women are growing faster
than those owned by men or nonminority women.
Entrepreneurs vs. owners/ managers

Entrepreneurs…

• Differ from many small-business owners in their strong

desire to make their business grow.

• Differ from managers through their overriding

responsibility to use the resources of the organization
to accomplish their goals.

• Are willing to take risks.

Entrepreneurship

Entrepreneurship is:
■ The process of recognizing an opportunity
■ Marketplace testing
■ Gathering the resources necessary to go into business.

A venture is a new business undertaking that involves risk.

Categories of entrepreneurs

■ Classic entrepreneur
– Pursues business opportunities and allocates
resources
■ Serial entrepreneur
– Starts one’s business, runs it, and then runs
additional businesses in succession
■ Social entrepreneur
– Focuses on solving society’s challenges through their
business
There are two ways to succeed in business.
(1) to rise through the ranks of large companies
(2) to become an entrepreneur

What are the advantages of each?

Which do you prefer?
■ Working for others
 somebody else assumes the risk and provides you with
benefits like paid vacation time and health insurance.
■ Becoming an entrepreneur

– own your own business and reap the profits from it.
– free to make your own decisions & wealth

– possibility of failure (many small businesses fail each
year.)
– no benefits like paid vacation time, day care, a
company car, or health insurance.  You have to
provide them for yourself!
Why Be an Entrepreneur?

Many entrepreneurs are …

■ driven by the challenge
of creating valuable
new goods and services
■ intrinsically motivated
Other Reasons for Entrepreneurship

■ Entrepreneurs develop their own schedule.

■ Many entrepreneurs run home-based businesses.
■ Entrepreneurs contribute to the economy and help
create jobs.
■ Entrepreneurs are rewarded for assuming risk.
Some home-based business experts say the
best opportunities to start a home-based
business stem from tasks employees do
for their employer.
 What do you think are the
characteristics of an entrepreneur?

?
Personal Characteristics of Entrepreneurs
Personal Characteristics of Entrepreneurs
 Challenges of Entrepreneurship

Other challenges
Challenges of
■ Feeling alone and
Entrepreneurship insecure about
Getting Funds to Start Being Fully Responsible making the right
the Business for the Business decisions
Financial institutions are Business owners must ■ Long work hours
concerned about see that everything gets
whether the business done—from sweeping ■ Uncertain income
would succeed and they the floors to handling levels
would be repaid. financial records.
■ Risk of failure
Risks of Entrepreneurship

Entrepreneurs …
1. often overestimate their ability to create new products
2. underestimate the difficulty in reaching prospective
customers
3. may not realize how much ready cash is needed to see a
small business through its critical “birth” period
• Opportunities for • Entrepreneurship
global expansion majors/ programs
• Access to resources/ offered by universities
customers

• Internet & IT
• Changing customer applications
taste  tools for
• Two-income families competition …
• Aging population…
■ First-mover advantage
– is a superior strategic position enjoyed by the
first firm in a new market
– is a monopoly-like advantage that includes
both a high market share and pricing power.

■ The effects of a first-mover advantage can be

temporary if the position isn't successfully
defended.
■ Biz Term: First mover advantage
■ the competitive advantage gained by being first to develop a new
product or process
– Superior brand recognition; establish product as the industry
standard
– Customer loyalty; advantage when there is a high switching code
for customers
– Market share
– Technology leadership
– Ability to control resources (basing themselves in strategic
positions, establishing premium contracts with key suppliers …)
– …
Disadvantages of being the first mover

Later entrants can …

■ benefit as they don’t need to invest in making buyers
informed about a product (>< The first mover has done
this)
■ avoid mistakes made by the first mover
■ reverse-engineer new products and make them cheaper
or better
■ identify areas of improvement by the first mover and
take advantage of it
■ Biz Term: First mover advantage

– Competitors usually rush to copy & imitate the

first mover’s products to stop their customers
from switching to it

– By this time, however, the first mover has

usually accumulated enough market share,
expertise and customer loyalty to remain on
top.
1. What are some characteristics of
successful entrepreneurs?
risk-taking, self-confident, restless,
goal-oriented, independent, inquisitive,
and enthusiastic
2. What reward is the main reason most
people become an entrepreneur?
being your own boss
3. Identify some of the challenges of
entrepreneurship.
getting funds to start the business and
being fully responsible for it
Have you ever wondered why some countries are relatively
wealthy and others poor?
Economists identified factors of production that seemed to
contribute to wealth :
Which do
you think
is the most
important?
• Traditionally, business and economics textbooks
emphasized only four factors of production: land,
labor, capital, and entrepreneurship.

• But the late management expert and business

consultant Peter Drucker said the most important
factor of production in our economy is and always
will be …………...