Management Presentation Chapter 5

Management Presentation Chapter 5 Management Presentation Chapter 5 Management Presentation Chapter 5 Management Presentation Chapter 5 Management Presentation Chapter 5 Management Presentation Chapter 5 Management Presentation Chapter 5 Management Presentation Chapter 5

The Nature of Entrepreneurship • Entrepreneurship – The process of planning, organizing, operating, and assuming the risk of a business venture • 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 Question: What is your dream? What opportunities you see in the market? The Role of Entrepreneurship in Society • Research Findings: – Most new businesses fail within the first few years of being founded – More than 97% of U.S businesses are small with fewer than 100 employees – Most U.S workers work for small businesses – The majority of small businesses are owner-operated – Small business is a strong presence in both mature and emerging economies – Small business has a strong effect on job creation, innovation, and is important to big businesses Q: Have you work for a small company or start-up? FIGURE 5.1 The Importance of Small Business in the United States Approximately 86 percent of all U.S businesses employ fewer than 20 people; another 11.7 percent employ between 20 and 99 people In contrast, only about 2.1 percent employ between 100 and 400 workers, and another 0.2 percent employ 500 or more Source: US Census Bureau, 2010 24.5 percent of all U.S workers are employed by firms with fewer than 20 people; another 29.6 percent work in firms that employ between 20 and 99 people 25.5 percent of U.S workers are employed by firms with 100–499 employees, and another 20.3 percent work for businesses that employ 500 or more total employees Entrepreneurship’s Role in Society • Small Businesses’ Role in Job Creation – Create many of the new jobs in the U.S – Dominate sectors that have added the most jobs – Represent 92% of all U.S exporters • Innovation – Major innovations are as likely to come from small businesses as from large firms – Much of what is created in the high-technology sectors comes from start-up companies ? Entrepreneurship’s Importance to Big Business • Most products made by large manufacturers are sold to customers by small businesses • Small businesses as suppliers provide large firms with services, supplies, and raw materials • Large businesses outsource many routine business operations such as packaging, delivery, and distribution to small businesses Strategy for Entrepreneurial Organizations Basic Strategic Challenges Choosing an industry in which to compete Emphasizing distinctive competencies Gaining first mover advantage FIGURE 5.3 Small Business (businesses with fewer than 20 employees) by Industry Small businesses create many new innovative products and services Services are the fastest growing segment of smallbusiness enterprise © 2014 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a FIGURE 5.4 Economies of Scale in Small-Business Organizations In this case, smaller firms may be able to compete more effectively with larger ones because of the drop in per-unit manufacturing cost Strategically Utilizing Distinctive Competencies Seeking Competitive Advantage Identifying niches in established markets Identifying new markets Taking first-mover advantage Emphasizing Distinctive Competencies • Identifying niches in an established market – Finding part of a market not currently being exploited can offer a competitive advantage • Identifying new markets – Transferring an existing product/service to a new market can create new industries/products/services • Taking first-mover advantage – Exploiting a market opportunity before any other firm does can result in a competitive advantage Q: Why you think small businesses are better at discovering the niches than are large businesses? Writing a Business Plan • Business Plan – Is a document that summarizes business strategy and structure – Should include: • Business goals and objectives • Strategies used to achieve these goals and objectives • A plan of how the entrepreneur will implement these strategies Entrepreneurship and International Management • There is potential for expansion and growth in foreign markets • While there are risks, entering a foreign country’s market can be a real catalyst for success • Technology, especially the Internet, has proven to be very helpful to small, international businesses Starting a New Business • Buying an Existing Business – Business has a proven ability to draw customers and make a profit – Networks are already established – Negative: New owners inherit existing problems • Starting from Scratch – Avoids problems associated with previous owners – Allows freedom to choose suppliers, equipment, location, and workers – Negative: More business risk and uncertainty Identifying a Business Opportunity Who are my customers? In what quantities will they buy? Who are my competitors? Where are they? At what price will they buy my product? How will my product differ from those of my competitors? Financing the New Business Personal Resources Strategic Alliances Lenders Venture Capital Companies Sources of New Business Financing Small-Business Investment Companies SBA Financial Programs Financing the New Business • Personal Resources – Using own money and money borrowed from friends and relatives to finance the business • Strategic Alliances – Partnering with established firms such as suppliers in a mutually beneficial relationship • Lenders – Obtaining funding from traditional lenders (e.g., banks, independent investors, and government loans) • Venture Capital Companies – Groups of small investors who provide capital funds to small high-growth potential start-up firms in exchange for an equity position (stock) in the firms Financing the New Business (cont’d) • SBA Financial Programs – Provide assistance (e.g., SBA-guaranteed loans) for small businesses unable to get private financing at reasonable terms • Small-Business Investment Companies (SBICs) – Are investor-owned companies that borrow money from the SBA to loan to small business with high growth potential – Minority Enterprise Small-Business Investment Companies (MESBICs) specialize in financing businesses owned by minorities Seeking New Business Advice Advisory Boards Sources of Management Advice Management Consultants Small Business Administration Networking with Others Sources of Help for Entrepreneurs Outside Help Management Help • • • • • • Boards of directors Management consultants SBA Trade associations Small-business networks Pooling Professional Help • • • • • Accountants Bankers Lawyers Insurance agents Computer consultants Franchising • Franchising Agreement – Operation of the franchised business by the entrepreneur (the franchisee) under a license by a parent firm (the franchiser) – The entrepreneur pays the parent firm for use of trademarks, products, formulas, and business plans Franchising (cont’d) • Advantages – Reduced financial risk of new business success through experience provided by franchiser – Training, financial, and management support by franchiser • Disadvantages – Start-up fees to purchase franchise – Limitations of franchise (market area, product, customers) – Loss of independence due to imposed operational controls of franchiser FIGURE 5.5 Business Start-Up Successes and Failures © 2014 Cengage Learning All rights reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a The Performance of Entrepreneurial Organizations The emergence of E-commerce Crossovers to small business by former large-business employees Trends in New Business Start-Ups Increased entrepreneurial opportunities for minorities and women Better survival rates for small businesses Studies show that 40 percent of all new businesses will survive at least six years Entrepreneurial Success and Failure • Reasons for Failure – Managerial incompetence/ inexperience of the entrepreneur – Neglect in not devoting sufficient time and effort to the business – Weak control systems that not warn of impending problems – Insufficient capital to sustain the business until it starts to turn a profit • Reasons for Success – Hard work, drive, and dedication by the entrepreneur – Careful analysis of market conditions provides insights about business conditions – Managerial competence through training and experience contributes to success – Luck sometimes plays a role  ... of Management Advice Management Consultants Small Business Administration Networking with Others Sources of Help for Entrepreneurs Outside Help Management Help • • • • • • Boards of directors Management. .. employ between 20 and 99 people 25. 5 percent of U.S workers are employed by firms with 100–499 employees, and another 20.3 percent work for businesses that employ 50 0 or more total employees Entrepreneurship’s... percent employ between 100 and 400 workers, and another 0.2 percent employ 50 0 or more Source: US Census Bureau, 2010 24 .5 percent of all U.S workers are employed by firms with fewer than 20 people;