Chapter 1: Textbook
passion
Entrepreneurship is not unique to any country, gender, race, age, or socio-economic sector. Entrepreneurs can be found in some form in every country, in every age group, and (increasingly) in women as often as in men. The mindset of the entrepreneur can be understood and practiced, and the skills and behaviors of the entrepreneur can be learned and applied. The only characteristic of entrepreneurs that is arguably intrinsic is ____________, the drive to achieve something.
*1990s*
More than perhaps anything else, the *___________* were characterized as the Information Age. The commercial Internet emerged midway through the decade and suddenly global competition and resources were more readily available than ever before. The Internet made entrepreneurship and the ability to compete alongside large established companies in the same markets a reality. Furthermore, with more and more jobs being shipped overseas, employees learn that job security was no linger a fact of life. US companies quickly discovered that their competitiveness lay in the control of information and new ideas, and clearly the Internet was to plat an important role in this new view of the world. The late 1990s brought the "dot com" bubble and the rush of the venture capital community to position itself for what appeared to be a new way of doing business. At the same time, the interest in non-Internet-related technology was waning as investors saw a much quicker return on their investment in the world of e-commerce.
economic growth; new industry formation; job creation
The entrepreneurial process provides many benefits to society, including __________________, ______________________, and _________________.
global economic turmoil; green power; the women's market; the Gen Y consumer movement called "mass mingling"
many entrepreneurial trends have happened: In the 1980s, the solo entrepreneur was prevalent; in the 1990s, team-based entrepreneurship became the norm. Today 4 major trends have emerged as significant and will affect entrepreneurs' thinking for the foreseeable future: ______________________, ________________, ________________, and ____________________________.
catalyst; ringmaster
Ad the leader, an entrepreneur essentially plays two roles - that of the ___________, initiating and driving the process, and that of a _______________ in a 3-ring (or more) circus, managing the process through all its changes.
value
An entrepreneurial venture creates new _________ in a number of important ways. Entrepreneurs create new jobs that don't merely draw from existing businesses; and by finding niches in the market, entrepreneurs serve customer needs that are currently unserved. Moreover, entrepreneurs typically have a vision of where they want their businesses to go, and generally that vision is regional, national, or (more often) global.
*early 1980s*
By the *________________*, business was in terrible shape. The Fortune 500 saw a record 27% drop in profits. Marge mills and factories were shutting down; manufacturing employment was declining; and yet, ironically, productivity remained the same or actually increased. New, smaller manufacturers were still generating jobs -- and not only manufacturing jobs, but service jobs as well. To become competitive, the smaller, more flexible, entrepreneurial manufacturers had hired subcontractors who could perform tasks such as bookkeeping and payroll more efficiently. These service firms developed to support the needs of the product sector, but they also inspired the creation of other service firms: people who work often need day-care or maid services, so even more jobs were being created. With the creation of all these jobs, it is no wonder that the 1980s was called the true "Decade of Entrepreneurship" by many, including the dean of management science, Peter Drucker, who was not alone in asserting that the US was rapidly and by necessity becoming an entrepreneurial economy. On the heels of the emergence of Silicon Valley and its legendary entrepreneurs, the mainstream press began to focus on business activities, creating many popular magazines such as "Inc" and "Entrepreneur".
creative
Frequently, people say, "I'm being entrepreneurial," when what they mean to say is that they're being ___________.
"creative destruction"
From one of the earliest definitions of entrepreneurship, proposed by Austrian economist Joseph Schumpeter, we learn that entrepreneurship is a form of "_________________________." Breaking down old ways of doing things to create new value.
*mid-1960s*
In the *___________*, gigantic companies were the norm. Genreal Motors in the 1960s was so large that it earned as much as the 10 biggest companies in Great Britain, France, and West Germany combined. The reason why US companies enjoyed such unrestricted growth at that time was that they lacked competition from Europe and Japan. Therefore, job security for employees was high, and companies tended to diversify and grow by acquiring other businesses.
life cycles
New Industry Formation: An industry is simply the people and companies that engage in a category of business activity such as semiconductors or food services. New industries are born when technological change produces a novel opportunity that enterprising entrepreneurs seize. This suggests that industries have _____________-they're born, they grow, they decline, and they die. The earliest stage of an industry is a time of rapid innovation and change as young firms struggle to become the industry standard bearers with their technology. As these entrepreneurial firms achieve noticeable levels of success, more and more firms desiring to capitalize on the potential for success enter the industry. As the industry grows, it generally becomes more fragmented as a result of som many firms competing for position. At some point consolidation begins to occur as the stronger firms begin to acquire the smaller firms. Eventually, the number of firms in the industry stabilizes, and if innovation ceases to occur, the industry output may actually begin to decline.
*1970s* macroeconomic turmoil; international competition; technological revolution
The *__________* saw the beginning of 3 significant trends that would forever change the face of business: ________________________, __________________________, and the ______________________. A volatile economic climate the likes of which had not been seen since WWII dominated the 1970s. The Vietnam War economy brought inflation, the dollar was devalued, food prices skyrocketed as a consequence of several agricultural disasters, and the formation of OPEC sent gas prices up 50%. Furthermore, by the late 1970s the Federal Reserve had let interest rates rise to a prime of 20% with the result that there was no borrowing, no spending, and a recession that spilled into the 1980s, bringing with it an unemployment rate of 10%. To compound the effects of the economy on business, by 1980 1/5 of all US companies faced foreign competitors that had far more favorable cost structures with much lower labor costs. Imports, particularly in the automobile and machine tools industries, were suddenly taking a significant share of the market from US businesses. The 3rd event affecting business at that time was the technological revolution brought about by the introduction in 1971 of the Intel microprocessor, the Mets Altair personal computer in 1975, and the Apple II computer in 1977. Microprocessors succeeded in rendering whole categories of products obsolete -- such things as mechanical cash registers and adding machines, for example --- and effectively antiquated the skills of the people who made them. Increasing the pressure on business, the government ushered in a new era of business regulation with the Environmental Protection Agency, the Occupational Safety and Health Agency, and the Consumer Product Safety Commission, all of which increased costs to businesses. On the opposite front, deregulation forced planes, trucks, and railroads to compete, and in general big companies no longer had control of the marketplace.
*new millenium*
The *_____________________* ushered in what many refer to as the "knowledge economy", brought about by increased globalization and the competitive shift to more "knowledge-based economic activity." In the new economy, the primary resource is knowledge rather than raw materials and physical labor. Today the differences in economic performance in regions of the world can largely be explained by the presence or absence of entrepreneurship capital, which is essential to the development of new business models that monetize knowledge. Entrepreneurship capital is characterized by social networks that link entrepreneurs to educational institutions, industries, network brokers, and to resources. The knowledge economy of the 2000s is also described by low-cost competition from Asia and Central and eastern Europe that came about when transfer costs were driven down in the telecommunications and computer sectors, making it easier and less expensive to move capital and information. Consequently, most routine tasks in production and manufacturing are now more efficiently accomplished in low-cost locations. Without a doubt, the 2000s are also influenced by the commercial Internet. In 1998, the media declared that dot com was the business of the future--that it would change the way business is conducted forever. By the spring of 2000m the dot com bubble had burst and funding for dot com ventures virtually disappeared overnight. However, what remained was a distribution channel that had huge potential and merely required good business models to sustain it. The Internet also influenced the evolution of the media and entertainment industries with new media companies such as Demand Media pioneering innovative ways to generate revenues from advertising and from providing real-time user-generated content to the internet. Renewed interest in non-interest technologies was one of the results of the dot com crash of 2000 as investors turned to solid technologies that could be protected through patents and developed a growing interest in green tech, biotech, and biomedical devices.
*Factor-driven economies* *Efficiency-driven economices* *Innovation-driven economies*
The Global Entrepreneurship Monitor identified 3 categories of countries: -*_______________________* that rely on unskilled labor and the extraction of natural resources. Here businesses are created out of necessity. examples are Uganda, Guatemala, and Algeria. -*______________________* that are growing and in need of improving their production process and quality of goods produced. Examples are Argentina, Russia, and South Africa. -*__________________________*, which are the most advanced, are where businesses compete based on innovation and entrepreneurship. Examples are Denmark, Israel, United Arab Emirates, and the US. Entrepreneurship occurs in all 3 categories, but it is clearly driven by different factors in each, and those factors determine the types and size of businesses found in those countries.
The Internet, Social Media, and Mass Mingling: The Internet will certainly be the foundation for many entrepreneurial trends for some time to come. In the current decade, the internet has succeeded in disintermediating aspects of the value chain and in lowering the barriers to entry in some industries. Internet businesses now provide tremendous access to information and personalization as well as an easy way for entrepreneurs to see goods without the need for physical location. It has also become the vehicle for next-generation media companies like facebook, that create new and interesting ways to attract advertising dollars and major advertisers, who want to do a more effective job of targeting their customers and look to communities of interest to find them. Furthermore, these same activities are now moving to Smartphones because good marketers understand that one-to-one contact with a customer on the phone is more likely to result in a sale than an Internet ad that requires a potential customer to click on it. The Internet and Social Media are not new trends but they are producing new trends, particularly in the consumer markets. One new trend is called "mass mingling," and it has been adopted enthusiastically by the Gen Y or New Millienial Generation, those born after 1982. This generation spends a large portion of their day online and connecting with others through Facebook, Twitter, and the current crop of services that help them find, track, connect to, and ultimately meet other people--Google Latitude, Loopt, and FireEagle. Mass mingling is about making it easy for a lot of people to meet up for a common purpose. ____________ has been the leader in facilitating mass mingling.
nascent fuzzy front end
The process of new venture formation id characterized by 4 stages and 3 transitions or decision points. The first transition point occurs when an individual, acting independently or as an employee of a firm, decides to start a business. A ___________ entrepreneur is an individual who intends to start an independent business; a nascent corporate venturer (or nascent intrapreneur) is someone who intends to start entrepreneurial ventures inside a large corporation. The 2nd transition point comes about during the gestation of a new venture and includes all the startup processes that lead to the birth of a firm and to the resulting infant firm. These startup processes included feasibility analysis, business planning, and resource gathering, among other activities. Once the new venture survives startup, it typically does one of 3 things: (1) it may grow at a rate higher than normal, (2) it may persist or survive to move into the adolescent (4th) stage, or (3) it may be abandoned by its founders. Borrowing a term from product development, we can call the period pf time prior to firm birth the __________________, which simply means that the activiies undertaken at this point are often unclear and subject to change as more information is obtained. The fuzzy front end has been modeled in economic terms. Simply put, the amount of investment an individual is willing to make in a new product-or, in this case, in a new venture-is a function of the probability of its success, the value of that success, and the cost of failure [Inv = f (PS + VS+CF)]. A change in any one of these values will alter the economics of the bet. The nascent entrepreneur uses the time spent in the fuzzy front end to calculate the probability of success as an entrepreneur, what that success will mean in terms of return on his or her investment of time, money, and effort, and what the risk of cost of failure might be. Those probability estimates are highly subjective; however, if the nascent entrepreneur uses the time in the fuzzy front end to gather information about the industry and market, test the business concept through feasibility analysis, and determine the conditions under which he or she is willing to move forward and start the business, much of the subjectivity will be eliminated. Moreover, the risk of startup will be reduced. and the probability associated with the 3 outcomes will be more accurate.
revenue; growth
The success of a business model is measured in many ways, but certainly by the more traditional metrics of ___________ and __________.