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Entrepreneurship Theory Process and Practice 10th Edition Kuratko Solutions Manual Full Chapter PDF
Entrepreneurship Theory Process and Practice 10th Edition Kuratko Solutions Manual Full Chapter PDF
CHAPTER OUTLINE
FEATURED CONTENT
The Entrepreneurial Process: Facing Your Fears!
LEARNING OBJECTIVES
1 To explain the challenge of new-venture start-ups
2 To review common pitfalls in the selection of new-venture ideas
3 To present critical factors involved in new-venture development
4 To examine why new ventures fail
5 To study certain factors that underlie venture success
6 To analyze the traditional venture evaluation process methods: profile analysis, feasibility
criteria approach, and comprehensive feasibility method
7 To highlight the contemporary venture evaluation methods: design methodology and the
lean start-up methodology
The complexity of factors involved in new-venture start-up (as shown in Figure 6.1) makes it
difficult to clearly assess and evaluate each one. In addition, the difficulty of obtaining reliable
data on failed firms adds to this dilemma. Improvements are being made, however, and new-
venture assessment is becoming a stronger process.
A number of pitfalls may occur in the selection of a new venture: lack of an objective
evaluation of the venture, lack of insight into the market, inadequate understanding of technical
requirements, poor financial understanding, lack of venture uniqueness, and failure to be aware
of legal issues.
When assessing a new venture, an entrepreneur needs to consider several critical factors:
the uniqueness of the good or service, the amount of capital investment required to start the
venture, the growth of sales, and the availability of the product.
Some major reasons new ventures fail are inadequate knowledge of the market, faulty
product performance, ineffective marketing and sales effort, inadequate awareness of
competitive pressures, rapid product obsolescence, poor timing, and undercapitalization. In
drawing together these and other reasons, recent research reveals three major categories of
causes for failure: product/market problems, financial difficulties, and managerial problems. In
addition, entrepreneurs face internal and external problems.
The feasibility of the entrepreneur’s product or service can be assessed by asking the
right questions, by making a profile analysis of the venture, and by carrying out a comprehensive
feasibility study.
LECTURE NOTES
Uniqueness
Range of uniqueness in a new venture can be considerable.
Uniqueness is further characterized by the length of time a nonroutine venture will
remain nonroutine.
Investment
Required capital investment can vary considerably.
Extent and timing of funds needed is critical.
Key questions to ask to determine the amount of funding needed during the start-up
phase:
• Will industry growth be sufficient to maintain break-even sales to cover a high fixed
cost structure during the start-up period?
• Do the principal entrepreneurs have access to substantial financial reserves to protect
a large initial investment?
Growth of Sales
Key questions to ask about growth of sales during the start-up phase:
• What is the growth pattern anticipated for new-venture sales and profits?
• Are sales and profits expected to grow slowly or level off shortly after start-up?
• Are large profits expected at some point with only small or moderate sales growth?
• Are both high sales growth and high profit growth likely?
• Will there be limited initial profits with eventual high-profit growth over a multiyear
period?
In answering these questions, it is important to remember that most ventures fit into one
of the three following venture classifications:
• Lifestyle ventures
o Independence, autonomy, and control are the primary driving forces.
o Sales and profits are deemed to provide a sufficient and comfortable living for the
entrepreneur.
• Small profitable ventures
o Financial considerations play a major role.
o Autonomy and ownership control are important factors.
• High-growth ventures
o Significant sales and profit growth are expected.
o May be possible to attract venture capital money.
o May be possible to attract funds raised through public or private placements.
Product Availability
Goods or services must be available.
Lack of product availability can affect the company’s image and its bottom line.
Customer availability
• Risk continuum (two extremes):
o Customers willing to pay cash before delivery.
o Venture begun not knowing exactly who will buy the product.
• Two critical considerations:
o How long will it take to determine who the customers are?
o What are the customers’ buying habits?
TECHNICAL FEASIBILITY
• Functional design of the product and attractiveness in appearance
• Flexibility for ready modification
• Durability of the materials from which the product is made
• Reliability
• Product safety
• Reasonable utility
• Ease and low cost of maintenance
• Standardization
• Ease of processing or manufacture
• Ease in handling and use
MARKETABILITY
Three major areas involved: (1) investigating the full market potential and
identifying customers (or users) for the goods or service, (2) analyzing the extent
to which the enterprise might exploit this potential market, and (3) using market
analysis to determine the opportunities and risk.
DESIGN DEVELOPMENT
Utilizes skills we all possess but are generally ignored due to more conventional
problem solving practices.
Takes the initial concept idea and develops a proof of concept that elicits
feedback from relevant stakeholders.
Design-Centered Entrepreneurship
The entrepreneur applies design methods in four action stages of developing an
opportunity.
• Ideation
• Prototyping
• Market engagement
• Business model
3. Many entrepreneurs lack objectivity and have no real insight into the market. Why
are these characteristics considered pitfalls of selecting new ventures?
Engineers and technically trained people are particularly prone to falling in love with an
idea for a product or service. They seem unaware of the need for the careful scrutiny they
would give to a design or project in the ordinary course of their professional work.
Some entrepreneurs show a managerial short-sightedness. Also, they do not understand
the life cycle that must be considered in introducing a new product or service.
4. Many entrepreneurs have a poor understanding of the finances associated with their
new venture and/or have a venture that lacks uniqueness. Why are these
characteristics considered pitfalls of selecting new ventures?
Sometimes entrepreneurs are ignorant of costs or are victims of inadequate research and
planning. Quite often they tend to underestimate development costs by wide margins. A
new venture should be unique. It ought to have special characteristics and/or design
concepts that draw the customer to it, and it should provide performance or service that is
superior to competitive offerings.
5. Describe each of the five critical factors involved in the prestart-up and start-up
phases of a new venture.
(1) UniquenessThe range of uniqueness in a new venture can be considerable,
extending from fairly routine to highly nonroutine. What separates the routine from
the nonroutine venture is the amount of innovation required during prestart-up.
Venture uniqueness is further characterized by the length of time a nonroutine venture
will remain nonroutine.
(2) InvestmentThe capital investment required to start a new venture can vary
considerably. Another critical issue is the extent and timing of funds needed to move
through the venture process.
(3) Growth of salesThe growth pattern needs to be anticipated for new-venture sales
and profits. Key questions to answer: Are sales and profits expected to grow slowly
or level off shortly after start-up? Are large profits expected at some point with only
small or moderate sales growth? Or are both high-sales growth and high-profit growth
likely? It is important to remember that most ventures can be classified as: life-style
ventures, smaller profitable ventures, or high-growth ventures.
(4) Product availabilityEssential to the success of any venture is the availability of a
salable good or service at the time the venture opens its doors. Lack of product
availability in finished form can affect the company’s image and its bottom line.
(5) Customer availabilityIf the product is available before the venture is started, the
likelihood of venture success is considerably better than otherwise. Venture risk is
affected by the availability of customers for start-up. A critical consideration is how
long it will take to determine who the customers are and what their buying habits are.
7. Identify and discuss two examples of financial difficulties that can cause a venture to
fail.
(1) Assuming debt too earlyAssuming debt financing too soon and in too large
amounts can result in debt service problems.
(2) Venture capital relationship problemsEntrepreneurs may have different goals and
motivations that cause the venture to fail.
8. Identify and discuss two examples of managerial problems that can cause a venture
to fail.
(1) Concept of a team approach: Hiring and promoting personnel because they are family
or friends, not because they are qualified. Examples: incompetent support
professionals, poor relationship with parent companies, and venture capitalists.
(2) Human resource problems: An owner who can’t relate to employees or never fulfills
promises can cause a venture to fail. Examples: kickbacks and subsequent firings,
verbal agreements not honored, deceit by the venture capitalist or the president.
10. How can asking the right questions help an entrepreneur evaluate a new venture?
What types of questions are involved?
Asking the right questions can help the entrepreneur by screening an idea before
implementing it, taking into account the feasibility and possible profits to be had from the
idea.
The types of questions involved include these: Is it a new product/service idea? Has a
prototype been tested by independent testers? Has it been taken to trade shows? Is the
product or service easily understood? What is the overall market? Has market research
been conducted? What distribution and sales methods will be used? How will the product
be made? Will the business concept be developed and licensed to others, or developed
and sold away? Can the company get or has it already lined up the necessary skills to
operate the business venture?
11. Explain the traditional methods of new venture evaluation: profile analysis,
feasibility criteria approach, and comprehensive feasibility method.
The profile analysis is a tool that enables entrepreneurs to judge a business venture’s
potential by sizing up the venture’s strengths and weaknesses along with a number of key
The feasibility criteria approach is a criteria selection list, based on questions from which
entrepreneurs can gain insights into the visibility of their venture.
12. Describe the contemporary methods of new venture evaluation: design methodology
and the lean start-up methodology.
Mirroring the general design approach of companies like IDEO that tackle problems in
industries ranging from medicine to consumer products, Stanford University has founded
an Institute of Design (known as the d school) and the Rotman School of Management at
the University of Toronto has built a curriculum based on the power of design.
Design is a learning process that shapes and converts ideas into form, whether that is a
plan of action, an experience, or a physical thing. Mistakes and failures along the way are
to be seen as opportunities to learn and adapt.
Design development utilizes skills we all possess but are generally ignored due to more
conventional problem solving practices. This takes an initial concept idea and develops a
proof of concept that elicits feedback from relevant stakeholders. Several criteria must be
met: concept feasibility, concept desirability, and concept viability.
Based on your analysis, what three recommendations would you make to the company’s
management?
The major competitor is a large national franchise unit that—in addition to its regular
foodservice menu of pizzas, salads, soft drinks, and desserts—offers door-to-door delivery. This
delivery service is very popular with the university students and has helped the franchise unit
capture approximately 40 percent of the student market. The second competitor is a “pizza
wagon” that carries precooked pizzas. The driver circles the university area and sells pizzas on a
first-come, first-served basis. The pizza wagon starts the evening with 50 pizzas of all varieties
and sizes and usually sells 45 of them at full price. The last 5 are sold for whatever they will
bring. It generally takes the wagon all evening to sell the 50 pizzas, but the profit markup is
much higher than that obtained from the typical pizza sales at the franchise unit. The other
competitor offers only in-house services, but it is well known for the quality of its food.
George does not believe that it is possible to offer anything unique. However, he does believe
that a combination of door-to-door delivery and high-quality, in-house service can help him win
15 to 20 percent of the local market. “Once the customers begin to realize that ‘pizza is pizza,’”
George told his partner, “we’ll begin to get more business. After all, if there is no difference
between one pizza place and another, they might just as well eat at our place.”
Before finalizing his plans, George would like to bring in one more partner. “You can never have
too much initial capital,” he said. “You never know when you’ll have unexpected expenses.” But
the individual whom George would like as a partner is reluctant to invest in the venture. “You
really don’t have anything unique to offer the market,” he told George. “You’re just another ‘me
too’ pizzeria, and you’re not going to survive.” George hopes he will be able to change the
potential investor’s mind, but if he is not, George believes he can find someone else. “I have 90
days before I intend to open the business, and that’s more than enough time to line up the third
partner and get the venture under way,” he told his wife yesterday.
QUESTIONS
1. Is there any truth to the potential investor’s comment? Is the lack of uniqueness going to hurt
George’s chances of success? Explain.
2. If George were going to make his business venture unique, what steps might he take? Be
complete in your answer.
3. In addition to the uniqueness feature, what other critical factors is George overlooking?
Identify and describe three, and give your recommendations for what to do about them.
Examine the following points for conducting business on E-Bay. Based on our chapter
material how would you analyse an E-Bay entrepreneurial opportunity? Would you consider
pursuing E-Bay? Why or why not?
Fledgling entrepreneurs are flocking to eBay because of the ease with which users can start a
business. In 2015, more than 150 million active users conducted business on eBay, contributing
to nearly $150 billion of commerce volume through eBay’s online platforms. Taking the
following steps will get you well on your way to starting a successful eBay business.
Research the market. Selling on eBay does not excuse anyone from the usual legwork
involved in starting a business. In order to determine the right market, research should be
conducted on how much items in a given category are selling for on eBay as well as elsewhere.
Marketplace Research is a subscription based tool available through eBay that allows you to
view historical pricing information for products.
Develop a specialty. The more specialized your business becomes, the more confidence
your customers will have in your offerings and the less time you will spend addressing questions
about the random products you found in your basement. Most sellers start by selling used items,
but eventually, the successful eBay seller will develop a niche to allow for greater economies of
scale.
Access assistance. You will certainly make mistakes as you build your eBay business, but
many of your questions can be answered by accessing eBay’s help files or by reading the
discussion boards, through which successful sellers provide feedback and advice.
Invest in your business. If you plan to start your eBay business by selling off old items
lying around your home, you will not need to invest much, if any, upfront capital; however, as
your business grows, a few items will come in handy. First, designating a computer to be used
solely for your eBay transactions will allow you to fully deduct it on your taxes. Second, a
regulation postal scale will save you several hours waiting in line at the post office. Finally, a
decent camera is a must. Posting poor-quality photos of your merchandise will lead your
customers to wonder about the quality of the rest of your business.
Develop a system. As with any business, policies and procedures become increasingly
important the larger your business becomes. Standardizing your templates or buying some
through eBay’s Seller Tools section will help to streamline the process. In addition, establishing
a routine for corresponding with your customers regarding their questions and concerns will
enable you to prevent any minor issues from escalating into major problems.
Offer PayPal. As an accepted form of payment, approximately 95 percent of buyers prefer
to pay online. Although less popular, some customers might prefer to pay with personal checks
and money orders, so allowing these forms of payment can make those customers less familiar
with online shopping more comfortable.
Know your numbers. eBay charges listing and final value fees, which can add up if you
have to post your merchandise multiple times; however, the cost of gaining access to eBay’s
customer base is insignificant when compared to the cost of using traditional advertising
channels. If you expect your product to take several auctions to sell, cover your costs by charging
higher seller fees.
Colymbus arcticus, Linn. Syst. Nat. vol. i. p. 221.—Lath. Ind. Ornith. vol. ii.
p. 800.—Ch. Bonaparte, Synopsis of Birds of United States, p. 420.
Colymbus arcticus, Black-throated Diver, Richards. and Swains. Fauna
Boreali-Americana, vol. ii. p. 475.
Black-throated Diver, Nuttall, Manual, vol. ii.
Mergus Albellus, Linn. Syst. Nat. vol. i. p. 209.—Lath. Ind. Ornith. vol. ii. p.
831.—Ch. Bonaparte, Synopsis of Birds of United States, p. 398.
Smew or White Nun, Mergus Albellus, Wils. Amer. Ornith. vol. viii. p. 126,
pl. 71, fig. 4. Male.
The Smew, or White Nun, Nuttall, Manual, vol. ii. p. 467.
4/ ,
12third toe 1 11/12, its claw 4 1/2/12; fourth toe 1 10/12, its claw 5/12.
Weight 1 lb. 8 oz.
Adult Female. Plate CCCXLVII. Fig. 2.
The Female is much smaller. The feathers of the hind part of the
head and neck are also elongated so as to form a crest. The bill, iris,
and feet, are coloured as in the male. All the lower parts are white,
excepting a broad band of light grey across the middle of the neck,
and a narrow portion of the sides, which are of a deeper tint. There is
a patch of brownish-black on the lore and beneath the eye; the upper
part of the head and half of the hind neck, are light reddish-brown;
the rest of the hind neck, and all the upper parts, bluish-grey, darker
behind, and in the middle of the back approaching to black. The
wings as in the male, that is black, with a large patch of white, and
two narrow transverse bands of the same; the tail dusky grey.
Length to end of tail 15 1/4 inches, to end of claws 16 1/2, to end of
wings 14 1/2; extent of wings 25. Weight 1 lb. 4 oz.
GADWALL DUCK.
I have met with this species along the whole of our Atlantic coast,
from Eastport in Maine to Texas. It is, however, more abundant in the
interior than in most of our maritime districts, and is particularly so on
the tributaries of the Ohio, Missouri, and Mississippi. In the early part
of autumn and late in spring many are found on the margins of our
great lakes. Yet the Gadwall has been represented as not plentiful in
the United States, probably on account of its being generally
dispersed, and not congregated in particular districts.
The Creoles of Louisiana name it “Violon,” on account of the
whistling sound of its wings. It arrives in the neighbourhood of New
Orleans and the mouths of the Mississippi along with the Widgeon,
and is fond of the company of the Red-head, to which it is about
equal as an article of food. The Gadwalls are usually seen in small
flocks, and during winter resort to the larger lakes and the pools in
the interior of the great marshes, adjoining the waters of the Gulf. In
that part of the country they feed on small fish, insects, and aquatic
grasses. Fewer of them are found in Massachusetts and the State of
New York than elsewhere, and this probably on account of these
districts being more elevated and less marshy than those farther
south. My friend Dr Bachman informs me that they are rather
plentiful in South Carolina, where they are considered good eating,
and where they arrive in the beginning of October, but are more
frequently met with at that season, and in early spring, than during
winter, when a single individual may sometimes be seen in a flock of
other ducks.
While we were in the Texas, in the latter part of April and the
beginning of May, we found the Gadwall quite abundant on all the
inland ponds and streams, as well as on the brackish pools and
inlets of the islands and shores of Galveston Bay. Many of them had
paired and separated from the other ducks; and I was assured that
this species breeds there, as does the Dusky Duck, the Mallard, the
Blue-winged Teal, the Widgeon, and the Shoveller, the young of all
these species being plentiful in the end of June and beginning of
July. I was satisfied as to the truth of the repeated assurances I had
received on this subject, by observing the manners of individuals of
all these species before my departure from that country. After a
continuance of rainy weather, Gadwalls are found in great numbers
on the vast prairies of Oppelousas and Attacapas, where I have
been told they continue until very late in spring, and some remain to
breed.
This species dives well on occasion, especially on being wounded.
At the appearance of danger, it rises on wing—whether from the
ground or from the water—at a single spring, in the manner of the
Mallard, and, like it also, ascends almost perpendicularly for several
yards, after which it moves off in a direct course with great celerity. I
have never seen it dive on seeing the flash of the gun; but when
approached it always swims to the opposite part of the pond, and,
when the danger increases, flies off. On being wounded, it
sometimes by diving makes its escape among the grass, where it
squats and remains concealed. It walks with ease, and prettily, often
making incursions upon the land, when the ponds are not
surrounded by trees, for the purpose of searching for food. It nibbles
the tender shoots and blades of grasses with apparent pleasure, and
will feed on beech-nuts, acorns, and seeds of all kinds of gramineæ,
as well as on tadpoles, small fishes, and leeches. After rain it alights
in the corn-fields, like the Mallard, and picks up the scattered grains
of maize. The common notes or cry of the female have a
considerable resemblance to those of the female Mallard; but the cry
of the male is weaker as in that species.
It is by no means shy in the Western Country, where I have often
found it associating with other species, which would leave the pond
before it. Near the sea, however, it is much more wary, and this no
doubt on account of the greater number of persons who there follow
shooting as a regular and profitable employment. From the following
note of my friend Dr Bachman, you may judge how easily this fine
species might be domesticated.
“In the year 1812 I saw in Dutchess County, in the State of New
York, at the house of a miller, a fine flock of ducks, to the number of
at least thirty, which, from their peculiar appearance, struck me as
differing from any I had before seen among the different varieties of
the tame Duck. On inquiry, I was informed that three years before, a
pair of these ducks had been captured in the mill pond, whether in a
trap, or by being wounded, I cannot recollect. They were kept in the
poultry-yard, and, it was said, were easily tamed. One joint of the
wing was taken off, to prevent their flying away. In the following
spring they were suffered to go into the pond, and they returned daily
to the house to be fed. They built their nest on the edge of the pond,
and reared a large brood. The young were perfectly reconciled to
domestication, and made no attempts, even at the migratory season,
to fly away, although their wings were perfect. In the following
season they produced large broods. The family of the miller used
them occasionally as food, and considered them equal in flavour to
the common duck, and more easily raised. The old males were more
beautiful than any that I have examined since; and as yet
domestication had produced no variety in their plumage.”
The migration of this species extends to the Fur Countries, where it
is said to breed. The description of a male killed on the
Saskatchewan River, on the 22d of May 1827, is given in the Fauna
Boreali-Americana; and I have a fine male procured by Dr
Townsend on the Columbia River.
Anas strepera, Linn. Syst. Nat. vol. i. p. 200.—Lath. Ind. Ornith. vol. ii. p.
859.—Ch. Bonaparte, Synopsis of Birds of United States, p. 383.
Gadwall, Anas strepera, Wils. Amer. Ornith. vol. viii. p. 120, pl. 71, fig. 1.—
Richards. and Swains. Fauna Bor.-Amer. vol. ii. p. 440.
Gadwall or Grey, Nuttall, Manual, vol. ii. p. 383.
Titian R. Peale.”
Inclosed in Mr Peale’s letter was the following note from Dr Rowan
“to the Messrs Peales.”
“On Saturday last I wrote to you of the Rail Bird breeding near this
place. I then described one that I caught last summer, which was
unlike the Rail in the fall season, and I presumed that all in the wet
ground were the same, but this day my men mowing around the
pond started up two of the usual kind. The hen flew a few rods, and
then flew back to her young in an instant, when they caught her
together with her four young, which I herewith send you. Many more
can be caught. I have seen them in our meadow every month of the
year, but they never make a great noise except when very fat on the
wild oat’s seed. From the above you will conclude that they do not
migrate to the south, but breed here. Respectfully,
Thomas Rowan.”
Rallus jamaicensis, Brisson Sup. p. 140.—Gmel. Syst. Nat. vol. ii. p. 718.—
Lath. Ind. Ornith. vol. ii. p. 761.