Documenti di Didattica
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5–3
PRESENDED BY: NAYAN PRAKASH GANDHI
Learning Objectives
• After studying this chapter, you should be able
to:
– Discuss the nature of entrepreneurship.
– Describe the roles of entrepreneurs in society.
– Understand the major issues involved in choosing
strategies for small firms and the role of international
management in entrepreneurship.
– Discuss the structural challenges unique to
entrepreneurial firms.
– Understand the determinants of the performance of
entrepreneurial firms.
90 90
70 70
60 60
50 50
40 40
30 30
20 20
10 10
0 0
Under 20–99 100–499 500–999 1,000 Under 20–99100–499 500–999 1,000
20 or more 20 or more
Number of Employees Number of Employees
(a) (b)
• Job Creation
– Small business creates 80% of new jobs in the U.S.
– Industry sectors dominated by small business have
added the most jobs.
– Small business accounts for 38%
of all jobs in high-technology
sectors and for 96% of all
U.S. exporters.
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PRESENDED BY: NAYAN PRAKASH GANDHI
The Role of Entrepreneurship in Society
(cont’d)
• Innovation
– Historically, 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.
5–9
PRESENDED BY: NAYAN PRAKASH GANDHI
Representative Jobs Created and Lost by
Big Business, 1990–1999
JOB GAINS
Toys “ ” –3,400
Us
Quaker –16,340 Wal-Mart + 639,000
Oats
Dayton +100,000
National –21,100 Hudson
Semi-
Conductor Albertson ’s +45,000
5–11
PRESENDED BY: NAYAN PRAKASH GANDHI
Strategy for
Entrepreneurial Organizations
Construction Retailing
Other 1.7
B A
Number of units produced Number of units produced
(a) Standard economies-of-scale curve (b) Change in technology that shifts economies of
scale and may make small business production
possible
Figure 5.4
5–14
PRESENDED BY: NAYAN PRAKASH GANDHI
Strategy for Entrepreneurial Organizations
• Emphasizing Distinctive Competencies
– Identifying a niche in an established market, not
currently being exploited, that offers a competitive
advantage to small businesses.
• Identifying New Markets
– Using the transfer of an existing product/service to a
new market entrepreneurs can create new industries,
products, or services.
• First-Mover Advantage
– Exploiting an opportunity before any other firm does.
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PRESENDED BY: NAYAN PRAKASH GANDHI
Strategy for Entrepreneurial Organizations
(cont’d)
5–16
PRESENDED BY: NAYAN PRAKASH GANDHI
Strategy for Entrepreneurial Organizations
(cont’d)
5–17
PRESENDED BY: NAYAN PRAKASH GANDHI
Structure of Entrepreneurial Organizations
• Starting a New Business
–Buying an Existing Business
• Business has a proven ability to draw customers and make a
profit.
• Networks (e.g., customers and suppliers) are already
established.
• Negative: New owners inherit any existing problems.
–Starting from Scratch
• Avoids problems associated with previous owners.
• Freedom to choose suppliers, equipment, location, and
workers.
• Negative: More business risk and uncertainty.
5–18
PRESENDED BY: NAYAN PRAKASH GANDHI
Structure of Entrepreneurial Organizations
(cont’d)
• Identifying a Genuine Business Opportunity
Where are they?
Who are my
customers?
At what price
will they buy my
In what product?
quantities will
they buy?
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PRESENDED BY: NAYAN PRAKASH GANDHI
Financing the New Business (cont’d)
• Small-Business Investment Companies (SBICs)
– SBICs are investor-owned companies that borrow
money from the SBA and, in turn, loan it to small
business with high growth potential.
– Minority Enterprise Small-Business Investment
Companies (MESBICs) specialize in financing
businesses owned by minorities.
• SBA Financial Programs
– The Small Business Administration has several
financing programs (e.g., SBA-guaranteed loans) for
small businesses that are unable to get private
financing at reasonable terms.
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PRESENDED BY: NAYAN PRAKASH GANDHI
Sources of Management Advice
Advisory Boards
Management
Consultants
Networking
5–22
PRESENDED BY: NAYAN PRAKASH GANDHI
Sources of Help for Entrepreneurs
Source: Siropolis, Nicholas C., Small Business Management, Fifth Edition. Copyright © 1994 by Houghton Mifflin Company. Used with permission.
5–23
PRESENDED BY: NAYAN PRAKASH GANDHI
Franchising
• Franchising Agreement
– Operation of the franchised business by the
entrepreneur (the franchisee) under a license by a
parent company (the franchiser).
– The entrepreneur pays the parent company for use of
trademarks, products, formulas, and business plans.
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PRESENDED BY: NAYAN PRAKASH GANDHI
Franchising (cont’d)
• Advantages of franchising
– 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).
– Imposed operational controls of franchiser.
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PRESENDED BY: NAYAN PRAKASH GANDHI
The Performance of
Entrepreneurial Organizations
• Business 200,000
Start-Up
Business Start-Ups
150,000
Successes
and 100,000
Failures
50,000
0
Business Closures
50,000
100,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Year
Source: U.S. Census Bureau, Statistical Abstract of the
United States: 1999 (119th Edition) Washington, D.C., 1999. Figure 5.5
5–26
PRESENDED BY: NAYAN PRAKASH GANDHI
The Performance of Entrepreneurial
Organizations (cont’d)
• Trends in New Business Start-Ups
– The emergence of E-commerce
– Crossovers to small business by former large-
business employees
– Increased entrepreneurial opportunities for minorities
and women
– Better survival rates for small businesses
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PRESENDED BY: NAYAN PRAKASH GANDHI
Where Women Entrepreneurs Come From
and What They Like About Work
Background of Women What Women Entrepreneurs Say They
Entrepreneurs in Previous Jobs Like Best About Business Ownership*
Engineering/
Manufacturing
Marketing 4% Human Decision making Achieving goals
6% Resources 15% 10%
3%
Source: Wall Street Journal, May 24, 1999, p. R12. *Multiple responses allowed Figure 5.6
5–28
PRESENDED BY: NAYAN PRAKASH GANDHI
The Performance of Entrepreneurial
Organizations (cont’d)
• Reasons for Failure • Reasons for Success
– Managerial – Hard work, drive, and
incompetence/inexperience dedication by the
of the entrepreneur. entrepreneur.
– Neglect in not devoting – Careful analysis of market
sufficient time and effort to conditions provides insights
the business. about business conditions.
– Weak control systems that – Managerial competence
do not warn of impending through training and
problems. experience contributes to
– Insufficient capital to sustain success.
the business until it starts to – Luck sometimes plays a
turn a profit. role.
5–29
PRESENDED BY: NAYAN PRAKASH GANDHI