Chapter 2

The Context of
Entrepreneurship
 Learning Objectives
 Discuss the various aspects of today’s economy
 Explain the legal factors that are part of the context
of entrepreneurship
 Describe the changing world of work and its impact
on entrepreneurship
 Discuss the role that social responsibility and ethics
play in the context of entrepreneurship
 Explain opportunities and their role in
entrepreneurship
 Describe competitive advantage and explain why
it’s important

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 Issues Affecting
Entrepreneurship in Action
 Characteristics of today’s economy

 Legal factors

 The changing world of work

 Social responsibility and ethics

3
 Important Characteristics of
Today’s Economy
 What forces are “driving” today’s
economy?
 What are the implications?
 What will it take to be successful in
this context?

4
 Driving Forces of Today’s
Economy
 The Role of Information
 Technological Trends
 Globalization
 Changing Demographics

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 Driving Forces of Today’s
Economy
 The Role of Information
– Has set the tone for today’s economy
 Technological Trends
1. Increasing rate of technological change
2. Increasing commercialization of innovations
3. Increasing knowledge intensity
4. Increasing recognition that advanced information
technologies are critical

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 Driving Forces of Today’s
Economy
 Globalization
– The linking of economies and cultures that
fosters a business and competitive
situation in which organizations have no
national boundaries
 Demographics
– The vital statistics of a population
• For example, gender, age, and income levels

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 Emerging Demographic Trends
1. The world’s population is growing geometrically
and at a very fast rate
2. The world’s population is getting older and
younger at the same time
3. The world’s population continues on the move
4. Most of the world’s economically active live in
cities and urban areas
5. The division of the world’s population is
categorized into three broad groups

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 The Division of the World’s
Population (3 Broad Groups)
 The Poor
– Includes individuals with household incomes of
less than $700 per year
– About 1.1 billion people
– Account for 2 percent of the world’s income
 The Middle Class
– Includes individuals with family incomes of
between $700 and $7,500 per year
– About 3.5 billion people
– Earn about 33 percent of the world’s income

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 The Division of the World’s
Population (cont’d)
 The Consumer Class
– Includes individuals with household
incomes above $7,500 per year
– About 1.1 billion people
– Claim about 64 percent of the world’s
income

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Implications of the Driving Forces
of Today’s Economy
 Continual turbulence and change
 Reduced need for physical assets
 Vanishing distance
 Compressed time

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 Critical Success Factors
 Four critical success factors for
succeeding in today’s economy
1. The ability to embrace change
2. The ability to be creative and innovative
3. Vision and leadership
4. Total quality culture

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 Developing Your Creativity

1. Relax
2. Exercise Your Mind
3. Determine What You Want to do
4. Look for Ways to Tackle Issues
5. Look for Ways to do Things Better

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Legal Factors

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 Social Responsibility and Ethics
 Social Responsibility
– The obligation of organizational decision makers
to act in ways that recognize the interrelatedness
of business and society
 Stakeholders
– Individuals or groups of individuals who have a
stake in or are significantly influenced by an
organization’s actions
 Ethics
– Involves the rules and principles that define right
and wrong decisions

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Possible Organizational
Stakeholders

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 Environmental Opportunities
 Opportunities
– Positive external trends that provide unique
and distinct possibilities for creating value
 Sources of Opportunity (External Context)
1. The unexpected
2. The incongruous
3. The process need
4. Industry and market structures
5. Demographics
6. Change in perception
7. New knowledge
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Five Categories of Opportunities

1. Redesigning Product or Services

2. Redifferentiating Products or Services
3. Resegmenting the Market
4. Completely Reconfiguring the Market
5. Developing Breakthrough Competitive
Strengths

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 Understanding Competitive
Advantage
 Competitive Advantage
– What sets and organization apart; a company’s
competitive edge
– Necessary for long-term success and survival

 Three Views on Competitive Advantage

1. The industrial organization (I/O) approach
2. Resource-based view (RBV)
3. The guerrilla view

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