Chapter Five: Entrepreneurship and Small Business Management ...
Chapter Five: Entrepreneurship and Small Business Management Lecture Notes: 1. What is Entrepreneurship? Strategic thinking and risk taking behaviour that results in the creation of new opportunities for individuals and/or organizations. 2. Who are entrepreneurs? a. Risk-taking individuals who take actions to pursue opportunities and situations others may fail to recognize or may view as problems or threats. b. They are founders of businesses that become large-scale enterprises. c. People who: buy a local franchise outlet, open a small retail shop, or operate a self-employed service business 3. Intrapreneurs: People who introduce a new product or operational change in an existing organizations – example: Ken Kurtargi (Inventor of the Play station) 4. Changing conditions lead to entrepreneurial opportunities:
5. Typical entrepreneurial backgrounds and experiences: a. Parents were entrepreneurs or self-employed b. Families encourages responsibility, initiative, and independence c. Have tried more than on business venture d. Have relevant personal or career experience e. Become entrepreneurs between 22 and 45 years of age f. Have strong interests in creative production and enterprise control g. Seek independence and sense of mastery 6. What are small and medium-sized businesses? (SME) a. Small-sized business: for goods producing firms, with 100 or fewer employees; for service firms, with 50 or fewer employees, micro-enterprise fewer than 5 employees, 50% of private labour force works in small businesses b. Medium –sized business: from 101 to 499 employees 7. How can they be established? a. By starting a new business b. Buying an existing business c. Buying and running a franchise 8. 97% of small firms make up of all goods producing employer business in Canada. 9. 95% of small firms make up of all service producing employer business in Canada. 10. From 1991 – 2002: a. Average number of new small/medium business set up every year: 135,000 b. Average number of small/medium business closing down: 127,000 c. Net average of new small/medium business every year: 8,000 11. Family businesses: a. Owned and run by the family
b. Largest percentage of businesses worldwide c. Can provide an ideal business situation d. Problems unique with family business: family business feud (occurs when family members have major disagreements over how the business should be run), succession problem (the issue of who will run the business when the current head leaves) e. Solution to the succession problem: succession plan (describes how the leadership transition and related financial matters will be handled) 12. Forms of legal ownership: sole proprietorship, partnership, corporation 13. Ways of financing a new venture: a. Sources of outside financing: debt financing (involves borrowing money that must be repaid over time, with interest), equity financing (involves exchanging ownership shares for outside investment monies) b. Equity financing alternatives: venture capitalists, initial public offering (IPOs), angel investors (a wealthy individual willing to invest in a new venture in return to equity in a new venture) Chapter Notes: 1. Personality traits and characteristics of entrepreneurs: internal locus of control, high energy level, selfconfidence, tolerance for ambiguity, self-reliance and desire for independence, high need for achievement, flexibility, and passion and action orientation. 2. Entrepreneurs tend to have unique backgrounds and personal experiences – childhood experiences and family environment 3. Necessity-based entrepreneurship: takes place because other employment options don’t exist 4. Franchise: a form of business where one business owner sells to another the right to operate the same business in another location. 5. The Small Business Administration (SBA) says that some 85% of small firms are already conducting business over the internet. 6. Why main small businesses fail? Bad judgement and management mistakes of several types: a. Lack of experience b. Lack of expertise (in financing, purchasing, selling, and production) c. Lack of strategy and strategic leadership (not taking the time to craft a vision and mission, and strategy) d. Poor financial control e. Growing too fast (not taking the time to consolidate a position, fine-tune the organization, and systematically meet the challenges of growth) f. Insufficient commitment (to the requirements of running a competitive business) g. Ethical failure (temptations of fraud, deception, and embezzlement) 7. A first-mover advantage comes from being first to exploit a niche or enter a market 8. Stages in the life cycle of an entrepreneurial firm:
9. A business plan describes the direction for a new business and the financing needed to operate it.
5. Typical entrepreneurial backgrounds and experiences: a. Parents were entrepreneurs or self-employed b. Families encourages responsibility, initiative, and independence c. Have tried more than on business venture d. Have relevant personal or career experience e. Become entrepreneurs between 22 and 45 years of age f. Have strong interests in creative production and enterprise control g. Seek independence and sense of mastery 6. What are small and medium-sized businesses? (SME) a. Small-sized business: for goods producing firms, with 100 or fewer employees; for service firms, with 50 or fewer employees, micro-enterprise fewer than 5 employees, 50% of private labour force works in small businesses b. Medium –sized business: from 101 to 499 employees 7. How can they be established? a. By starting a new business b. Buying an existing business c. Buying and running a franchise 8. 97% of small firms make up of all goods producing employer business in Canada. 9. 95% of small firms make up of all service producing employer business in Canada. 10. From 1991 – 2002: a. Average number of new small/medium business set up every year: 135,000 b. Average number of small/medium business closing down: 127,000 c. Net average of new small/medium business every year: 8,000 11. Family businesses: a. Owned and run by the family
b. Largest percentage of businesses worldwide c. Can provide an ideal business situation d. Problems unique with family business: family business feud (occurs when family members have major disagreements over how the business should be run), succession problem (the issue of who will run the business when the current head leaves) e. Solution to the succession problem: succession plan (describes how the leadership transition and related financial matters will be handled) 12. Forms of legal ownership: sole proprietorship, partnership, corporation 13. Ways of financing a new venture: a. Sources of outside financing: debt financing (involves borrowing money that must be repaid over time, with interest), equity financing (involves exchanging ownership shares for outside investment monies) b. Equity financing alternatives: venture capitalists, initial public offering (IPOs), angel investors (a wealthy individual willing to invest in a new venture in return to equity in a new venture) Chapter Notes: 1. Personality traits and characteristics of entrepreneurs: internal locus of control, high energy level, selfconfidence, tolerance for ambiguity, self-reliance and desire for independence, high need for achievement, flexibility, and passion and action orientation. 2. Entrepreneurs tend to have unique backgrounds and personal experiences – childhood experiences and family environment 3. Necessity-based entrepreneurship: takes place because other employment options don’t exist 4. Franchise: a form of business where one business owner sells to another the right to operate the same business in another location. 5. The Small Business Administration (SBA) says that some 85% of small firms are already conducting business over the internet. 6. Why main small businesses fail? Bad judgement and management mistakes of several types: a. Lack of experience b. Lack of expertise (in financing, purchasing, selling, and production) c. Lack of strategy and strategic leadership (not taking the time to craft a vision and mission, and strategy) d. Poor financial control e. Growing too fast (not taking the time to consolidate a position, fine-tune the organization, and systematically meet the challenges of growth) f. Insufficient commitment (to the requirements of running a competitive business) g. Ethical failure (temptations of fraud, deception, and embezzlement) 7. A first-mover advantage comes from being first to exploit a niche or enter a market 8. Stages in the life cycle of an entrepreneurial firm:
9. A business plan describes the direction for a new business and the financing needed to operate it.
