MHR 422 Exam
Global Entrepreneurship Monitor (GEM)
- explores the entrepreneurial activity from over five dozen economies around the globe - has become the world's most influential and authoritative source of empirical data and expertise on the entrepreneurial potential of nations Main objectives: - gather data that measure the entrepreneurial activity of nations and other data related to entrepreneurial activity, - examine what national characteristics are related to levels of entrepreneurial activity - explain how differences in entrepreneurial activity are related to different levels of economic growth among nations. GEM distinguishes between two types of entrepreneurial activity within the Total Early‐Stage Entrepreneurial Activity (TEA): 1. Nascent entrepreneurs 2. Owner-managers
Entrepreneurship Ecosystems
- Financing - Government policies - Taxes and bureaucracy - Government programs - School‐level entrepreneurship education and training - Postschool entrepreneurship education and training - R&D transfer - Access to commercial and professional infrastructure - Internal market dynamics - Internal market burdens - Access to physical and services infrastructure - Social and cultural norms Altogether create entrepreneurship ecosystems and determine the degree of entrepreneurial activity in a nation
Amanda's Case Study
Amanda West, 2003 - Feel Good Fast Food: "Amanda's" - inspired by Trader Joes - Target customers: "Bust women age 20-50" - open 30 restaurants Early Concerns - restaurant industry often fails - focus group reacted against healthy&natural =/ good - distrust of a chain that is a social platform first and a restaurant second - Amanda made social position less prominent and emphasized the quality of the product Raising Money - found chef with experience in chains and quick service - used nutritionist to design menu and custom items - pulled together board of advisers - advised that fewer investors was better, needed to broaden range - asking for money is more about selling yourself than your business - sent newsletters to investors and created blog - found architect and real estate broker Landlords hesitant to rent to first-time Entrepreneurs - only 39% success rate in industry - opportunity cost of waiting to find a location Outcome - operating for first 6 months -almost all part- time, Spanish-speaking employees - Lower average check and higher input costs. - Local newspaper publishes positive review of the restaurant. Mostly positive reviews on Yelp. - Closed after 1 year Opportunity was not as attractive as i initially seemed - all about the implementation - implementation was difficult given the tough restaurant industry and problems with concept (contradiction between fast food and health) - location is critical for retail
churning
Creation of new enterprises and destruction of obsolete ones caused by Technological change, deregulation, competition, and globalization presented countless opportunities, which American entrepreneurs seized and commercialized. - gives the economy vitality
Trademark
Exclusive rights to words, symbols or other marks to distinguish goods and services; - registered with the Patent Office. key in differentiating a business's products and services from those of others as well as in franchising arrangements
Langer's Lab Case Study
Identification of the Business Model Bob Langer - professor and scientist - most prolific inventors of all time - looked to colleagues in other science, engineering, and medical disciplines to broaden approach to research Early Success: 1990s - turned down offers from Exxon and joined surgery lab paying half - faced early criticism: "involved in too many fields to be thorough" - identified a problem: delivering drugs via a puff of air into the lungs - worked in research lab with no core research agenda Langer's Lab Today - emphasizes independence - governed by subtle structure - create multidisciplinary environment - researchers encouraged to disclose intellectual property before publishing it Takeaways: - gain/collect experience in different knowledge domains - Ability to recombine and see linkages in a novel way will allow you to recognize and solve problems leading to business opportunities - Create excitement about projects and provide support and guidance but don't micro-manage - "Having a diverse sets of knowledge and developing an ability to integrate this distinct knowledge domains will allow you to break away from the masses!"
Looks like vs Works Like Prototype
Looks Like - appears similar or identical to a final product but does not function as the final product is expected to. - may be made of paper, foam, or potentially 3‐D printed. - - Ex. looks‐like prototype of a new consumer electronic product would have the outer appearance of the device but would not include the electronics and power source of the final, produced product - valuable to test market acceptance of a design before costly, detailed product development is started. Works-Like - operates like the final intended product design—demonstrating product functionality or usability—but often does not appear at all like the end product. wise to seek feedback on both types
Iterative launch strategy Example
Opening a food truck business using a short term truck lease in a single market
Types of Prototyping
Paper Prototyping - the representation of a concept using simple materials such a paper or cardboard, markers, and tape. - Quick and directionally correct is the objective, not perfection. - The goal is to get the basic idea out into the world to get a response from a target customer and to explore what is valuable to the target customer—and to see if there is a real willingness to pay. 3-D Printing Looks-Like Prototyping in Crowdfunding - online crowdfunding (kickstarter) - o demonstrate a new product and its benefits, creators of crowdfunding campaigns often must develop and feature looks‐like prototypes to not only convey their creative vision but also signal their professionalism and dedication to their project. Co-Creation - target customers are engaged early and continuously in the process of idea generation and product development. - asked to share their unique problems, wishes, and aspirations to get deep insights about their wants and needs often before any product design is developed
TEA (necessity)
Push Entrepreneurship % of the adult population that is trying to start or has started a business because all other options for work are either absent or unsatisfactory.
Push vs Pull strategy
Push strategy - aims to push a product through the channel using tools such as trade promotions, trade shows, and personal selling to distributors or other channel members. Pull strategy - create end‐user demand and rely on that demand to pull the product through the channel. - directly targeted to end users - include advertising and consumer sales promotions, such as in‐store specials.
Gauging Demand
Start at larger macro-market and funnel demand down to your segment and geographic location 1. overall market size 2. relevant categories 3. extrapolate overall market data to capture geographic market S-Curve highlights the diffusion of product acceptance over time The market enters a fast growth phase when customer awareness and demand exceed supply.
Three main measures of Entrepreneurial Activity
TEA (total entrepreneurial activity) - the % of the adult population that is either nascent entrepreneurs or owner-managers or both. It measures the overall entrepreneurial activity of a nation. TEA (opportunity) - the % of the adult population that is trying to start or has started a business to exploit a perceived opportunity. They are classified as improvement‐driven opportunity motivated if they additionally seek to improve their income or independence through entrepreneurship. TEA (necessity) - the % of the adult population that is trying to start or has started a business because all other options for work are either absent or unsatisfactory.
Building the Brand
Task of building brand awareness and brand equity. Brand awareness - the customer's ability to recognize and recall the brand when provided a cue. - Marketing practices that create brand awareness also help shape brand image, which is the way customers perceive the brand. Brand equity - the effect of brand awareness and brand image on customer response to the brand - brand equity spurs consumers to pay a premium price for a brand The customer's direct experience with the brand has a strong effect on brand image
Structure
The structure of a new venture changes as it matures. Early on, it is very informal as the founders and a few early hires do a wide variety of tasks. 1. hire people who can "wear many hats", work on a prototype, contact vendors, create budgets, and talk to customers as the need arises. It can often be a mistake to hire a corporate lifer who is used to working in one functional area and having expensive administrative support 2. "overhire." find team members and early‐stage employees who are overqualified for the tasks they will initially be doing. - Although you might save some money by hiring someone else with fewer skills, as a young and resource‐constrained new venture, you won't have the time and money to help that person learn on the job. 3. create a flexible organizational structure. - Although you may have an organizational chart, reporting and communications need to be free to flow throughout the organization.
Trends
To best capture customers, spot trends that are currently influencing their buying behavior and that might influence it in the future. - look at broader macrotrends and then funnel down to a narrower focus on how those trends affect your customer groups. - focus on present micro trends and future macro trends - ex. cycle of babyboomer generation Trends suggest increasing market demand
Determining Resource needs and Acquiring Resources
To determine the amount of capital that a company needs to get started, an entrepreneur should first assess what resources are crucial for the company's success in the marketplace - What does the company expect to do better than any of its competitors? That is where it should put a disproportionate share of its very scarce resources. Ex. If the company is making a new high‐tech product, technological know‐how will be vital, and the most important resource will be engineers and the designs they produce. T - items that are not critical should be obtained as thriftily as possible - A complete set of resources includes everything the business will need, but a business does not have to do all of its work in‐house with its own employees. - often more effective to subcontract the work - find ways of controlling critical resources without owning them
The Competition
To fully identify the competition, start with the customer. How is the customer currently fulfilling the need or want you intend to fill? identify 1. direct competitors 2. indirect competitors 3. substitutes Even if you successfully enter the market, the strength of your competitors enables them to retaliate. - because of their economies of scale and scope, can lower prices to a point that makes it difficult for new ventures to compete. - can spend more on their advertising campaign and other marketing expenditures and increase their visibility due to greater resource reserves or easier access to capital. - good news: many times strong competitors won't bother with new startups because they're so small that they aren't noticeable or because they don't feel threatened
activity
Total Entrepreneurial Activity (TEA): the percentage of adults (age 18-64) in an economy who are nascent and new entrepreneurs. - In economies with low GDP per capita, TEA rates tend to be high, with a correspondingly higher proportion of necessity‐motivated entrepreneurship. - high GDP economies show lower levels of entrepreneurship, but a higher proportion of those with opportunity‐motivations. - To at least some extent then, development levels are associated with particular patterns in the level and type of entrepreneurial activity Entrepreneurship driven by opportunities and not necessity correlates with economic growth
penetration pricing
aims to gain high market share with lower margins and relatively lower prices. - bad idea for startups - never in services (price is a signal)
entrepreneurial process
all the functions, activities, and actions that are part of perceiving opportunities and creating organizations to pursue them Factors that give birth to a new enterprise and influence how it develops from an idea to a viable enterprise. - personal, - sociological - organizational - environmental A person gets an idea for a new business through either a deliberate search or a chance encounter. Whether he or she decides to pursue that idea depends on factors such as alternative career prospects, family, friends, role models, the state of the economy, and the availability of resources. Innovation, triggering event, implementation, growth
Triggering Event
almost always an event that gives birth to a new organization - no better opportunity - fired from job - deliberate career choice - conversation with friend - unexpected financial windfall - deep frustration with one's career 57% of the founders got the idea for their new venture in the industry they worked in 23% got it in a related industry. Hence, 80% of all new high‐potential businesses are founded in industries that are the same as, or closely related to, the one in which the entrepreneur has previous experience. The majority of entrepreneurs' business ideas come from area within their present line of employment or experience. Most successful ideas are driven by the entrepreneur's personal experience.
Revenue Model
breaks down all the sources of revenue that your business will generate - Different revenue categories for a firm are influenced by "drivers" that are directly correlated with the level of revenues the company earns. Sources: - Single Stream - multiple stream - interdependent (razor/blade) - loss leader (sold below market cost to stimulate sales) Ex. if you own a restaurant, your basic revenue model will separate food and beverage into two main sources of revenue. You can take that further and break down the revenue model by meals (breakfast, lunch, and dinner), categories of food (Italian, American, etc.). The more detailed your categories, the more information you can glean about how certain aspects of your business are performing
Price Discrimination
charging different prices to different customer segments. Ex. The lower prices charged to shoppers using store loyalty cards and the differing price structures used to charge airline passengers. - Couponing is a widely used form of price discrimination that rewards customers who care about receiving a discount but does not reward those who don't care enough to put forth the extra effort to redeem the coupon
Targating
compares the defined segments and then selects the most attractive one, which becomes the core customer. - essential because it guides your company's customer selection strategy. - The attractiveness of a segment is related to its size, growth rate, and profit potential - targeting decisions should also reflect your company's specific capabilities and longer‐term goals. an iterative process
The Business Model
consists of two components: 1. a revenue model (revenue categories) 2. a cost model (COGS and operating costs) Basically, the business model is represented by your company's income statement. - Understanding the business model enables entrepreneurs to make decisions that lead to greater revenue for lower costs.
Trade Secrets
cover proprietary information, whether in the form of a recipe, a customer list, or a unique way of conducting business - Protection of chemical formulae, recipes, and industrial processes
Service Marketing
differs from marketing of products
Entrepreneurial and management skills
entrepreneurs should have experience in the same industry or a similar one - Second to industry know‐how is management experience, preferably with responsibility for budgets or accountability for profit and loss
The Risk Matrix
estimates the probability of success/failure for each project based on Difference/Novelty from existing Products (y) and Different customer bases from closest existing markets (x) - evaluates new projects of existing companies - primarily about opportunity identification Reveals: 1. a company has more projects than it can manage well 2. distribution of Big I and little i is lopsided (majority in bottom left)
Distribution
important to understand the entire value chain for the industry you are competing in. - need to lay out the distribution of your product from raw materials all the way to the end consumer
nascent entrepreneurs
individuals who are actively trying to start a new business but who have not yet done so
Vision Statement
informed and forward-looking statement of purpose that defines the long-term destiny of the firm - shared by all founders and employees Elements: - clarity: easily understood - consistency - uniqueness - purposeful: reason for being
Product life cycle
introduction - marketers must educate the customer and secure distribution growth - cultivate customer loyalty and build the brand maturity, - differentiation is important decline - marketing efficiency is critical innovators early adopters early majority late majority laggards
little i vs Big I innovations
little i - small projects necessary for continuous improvements bit don;t provide competitive edge or profitability Big I - new to company/world - push firm to new markets and profits - only 14% of launches were I but accounted for 61% of all profit from innovations - must peruse disciplined process to distribute innovations across spectrum of risk The Tradeoff - higher risk and higher return
Revenue Strategy of Walmart and Amazon
low margins, high volumes
Free Cash Flow
more cash than needed to sustain operations and purchase assets to keep the company on its growth trajectory Cash that is generated in excess of fund required to sustain operations and purchase assets
Owner-managers
owner- managers of a new business that is no more than 3.5 years old
Sweat equity
ownership/equity acquired by the management team reflecting the value of the business of manager past and future efforts Most capital comes from: - family (44%) - Colleague (28%) - Friend(28%) - relative (6%) - Stranger (6%) - Other (6%)
Necessity Driven Entrepreneurs
pushed into starting businesses because they have no other work options and need a source of income. - highest in factor driven economies - with greater economic development levels, the proportion of entrep. with necessity motives declines
Price Skimming
sets high margins; - expect to gain limited market share because your prices will be relatively high - generally better for entrepreneurs with a product that brings something new to the marketplace
Penetration Pricing
setting a low initial price on a new product to appeal immediately to the mass market - classic mistake by entrepreneurs Flaws: 1. attractive ventures are often launched in emerging markets where demand exceeds supply. This means that price is relatively inelastic: Consumers want the product and are willing to pay a premium for it. 2. These new products offer greater value than competitive products, and the price should reflect this greater value 3. price sends a signal to the customer. 4. even if customers flock to the low‐priced product, this rapid increase in demand can sometimes cause serious problems for a startup. Demand at that price may exceed your ability to supply, resulting in stock‐outs 5. these same customers may resist when you try to recapture value by raising prices in the future. They will have developed an internal sense of the value of your product, and they may take this opportunity to try other alternatives.
Entrepreneurship as a personal career
shaped by: Personal attributes - high need for achievement - higher internal locus of control: stronger desire to be in control of their own fate Environment Sociological factors - family responsibilities - age - experience that comes with age vs the optimism and energy of youth
Minimum Viable Product
that version of a new product concept that allows a team to collect the maximum amount of validated learning about customers with the least effort. - developed "just enough" to seek customer's feedback - an output of the prototyping process Others view a MVP as a more evolved prototype that can be used by the customer and actually deliver value to a customer, even in a rough form.
knowledge
the awareness and possession of information, facts, ideas, truths, and principles in an area of expertise. Intellectual capital - the sum of the knowledge assets of a firm. - knowledge is the recipe and intellectual capital is the cookbook Trade-offs in Knowledge Combination •Building DEPTH in a particular discipline •Building BREADTH to increase relevance
Freemium Business Model
the basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons. - your COGS for free offerings can be viewed as a marketing expense
Frequency
the number of times an individual is exposed to a given message during a specific period
Reach
the percentage of a company's target market that is exposed to an ad campaign within a specific period of time
knowledge management
the practice of collecting, organizing, and disseminating the intellectual knowledge of a firm for the purpose of enhancing its competitive advantages. •A learning organization is skilled at creating, acquiring, and sharing new knowledge and at adapting its activities and behavior to reflect new knowledge and insights - must protect knowledge
Prototyping
the process of quickly putting together working models to represent ideas, test various aspects of a design, and gather early customer feedback. - to get a response from a target customer - feedback that can be acted on - focuses on the representation and testing of assumptions can help entrepreneurs develop, test and refine their entrepreneurial idea, ideally resulting in the confirmation of an entrepreneurial opportunity. - can be as simple as a sketch of a product concept, the basic design for a web landing page, or a simulation of new service concept. 1. representing assumptions 2. testing assumptions 3. learning and iterating
Segmentation
the processes marketers use to identify the "right" customers for their company's products and services - homogeneous characteristic with respect to the product Group of customers defined by common characteristics: - demographics: age, gender, education, income - psychographic (lifestyle characteristics) active, individualistic, risk-taking - behavioral: brand loyalty, willingness to adopt new products Identify the most relevant bases for segmentation and then develop segment profiles For "B2C" (business to consumer) - age, gender, income, brand loyalty For B2B (business to business) - Usually easier for a startup - industry type - number of employees - geography
value proposition
the unique value that a product or service provides to its customers and how it is better than and different from those of competitors 1. examine total benefits venture could offer 2. differentiate it from existing competitors 3. validate it with customers New Ventures must differentiate their product or service to make its distinctiveness and value clear to customer
Opportunity-driven entrepreneurship
those entering this activity primarily to pursue an opportunity. - further distinguished as improvement‐driven opportunity motivated if they additionally seek to improve their income or independence through entrepreneurship. - with greater economic development levels, improvement-driven opportunity increasingly accounts for more motives
Gender Distribution of Early‐Stage Entrepreneurial Activity
women are less inclined than men to engage in entrepreneurship, and when they do they appear to do so out of necessity. Differences based on the developmental phases. - Women in factor‐driven economies have the highest TEA rates and the highest rates relative to men - These women are nearly one‐third more likely to start a business out of necessity than men. - Women tend to be the center of the family unit, and in many parts of the world, particularly those with low GDP per capita, women need to find a way to earn extra income - although many factor‐driven economies have just as many women engaging in entrepreneurial activity as men, this is at least partly due to the fact that more women are driven to it by basic necessity Several surveys showed year‐on‐year increases in ratios of female to male opportunity‐motivated rates
Product Strategy
Core product - essential good or service Augmented Product - set of attributes peripherally related to it Ex. Apple manufactures and markets its iPhone, the core product, but it also provides App Store for downloading applications for the phone and an iPhone upgrade program as augmented services. Customer Value Proposition (Positioning Statement) 1. target group and need, 2. brand 3. concept 4. point of difference
Concept Development
Find your passion - find ancillary business surrounding this passion - use as base to identify ideas for business opportunities Idea Multiplication 1. gather stimuli - customer anthropology - observe customer in action in natural environment and identify their pain points 2. Multiply Stimuli - report on findings and brainstorm concept and how to improve on solution - brain-writing: ensures that everyone has chance to contribute 3. Create Customer Concepts - mock-up of product (doesn't need to be functioning) 4. Optimize Practicality - identify features that are unnecessary, impractical, or too expensive - play devil's advocate
Margins
For new ventures, research suggests that gross margins of 40% are a good benchmark that distinguishes more‐attractive from less‐attractive opportunities - important to have higher gross margins early in the venture's life because operating costs during the early years are disproportionately high due to learning curve effects.
Prototypes can be though of as:
- As market research and exploration tools - As physical embodiments of a set of assumptions - As fundraising tools for Crowdfunding efforts - As a coordination device within an entrepreneurial team to identify research and development priorities
Promotion
- advertising - personal selling - sales promotion - public relations
Entrepreneurs face unique Marketing Challenges
- have limited resources - have less time - low brand awareness and customer loyalty Marketing helps entrepreneurs acquire resources by selling their ideas to potential investors and partners - allows entrepreneurs to leverage scarce resources through innovative business approaches
Entrepreneurial Frugality requires
-Low Overhead -High productivity -Minimal ownership of capital assets. so doing, they minimize the amount of capital they need to start their business and make it grow ex. purchasing used office equipment and machinery
Survival rate of businesses
1 year - 81% 2 years - 65% 5 years - 40% 10 years - 25% 99.5% of businesses in the US are small businesses (<500 employees)
Understand prior to launch
1. Customers 2. Competitors 3. Suppliers and Vendors 4. Government 5. The broader global environment
Determining Return on Investment
1. amount invested 2. annual amount earned on that investment Entrepreneurs should invest as little as possible to start their businesses and make sure that their firms will be able to pay them a "dividend" big enough to yield an appropriate annual rate of return
The Customer
1. core customer group or primary target audience (PTA) - most attention - most likely to buy at a price that preserves your margins and with a frequency that reaches your target revenues - collect info on demographics and psychographics (personality and values) 2. secondary target audience (STA) - find product appealing but use less frequently - still need some attention 3. tertiary target audience (TTA). - little attention Understanding the Customer enables the entrepreneur to - create value - capture value - communicate value - deliver value
Entrepreneurship Process
1. recognize opportunity 2. Evaluate opportunity - assess own skills and knowledge - industry, market, and competitive analysis - concept and product analysis 3. Implement Opportunity - resources and funds - people and organization
Before raising capital identify
1. strategy 2. core customers 3. major cost drivers 4. major sources of competitive advantage
Positioning Statement
1. target group and need, 2. brand 3. concept 4. point of difference Positioning - the act of designing the product offering and image to occupy a distinctive place in the target customer's mind - positioning map (price vs ease of use) two characteristics
Lead Time
A protective mechanism - If rivals can imitate an innovation, then lead time may be the major advantage of the innovator. - Maintaining a lead requires continuous innovation When to rely on Lead time - you can develop an innovative cycle (difficult) - temporary gains are sufficient and attractive (rare) - potential to establish a standard
R-W-W Screening
Built on questions about the innovation concept, its potential market, and company's capabilities and competition - about both opportunity identification and implementation - exposes faulty assumptions, gaps in knowledge, and potential risk - screen repeatedly during development Is it real? - Is the market real - is the product real Can we win? - can our product be competitive - can our company be competitive Is it worth doing? - will the product be profitable at an acceptable risk - does launching the product make strategic sense
distribution strategy
Channel Coverage 1. Intensive - fast moving products and consumer goods 2. Selective - bring products to selective distributors 3. Exclusive - luxury products
Selection
Communicating the values you've identified to new team members goes a long way toward making sure there is a fit between the employee and the company. - Every new person added to the company will reinforce the values you've put in place, thereby helping to sustain the company's culture
Startup Capital
Debt and Equity - with debt, you don't have to give up any ownership of the business, but you have to pay current interest and eventually repay the principal you borrow - with equity, you have to give up some of the ownership to get it, but you may never have to repay it or even pay a dividend. Little flexibility in choice of financing - vast majority of entrepreneurs start their businesses by leveraging their own savings and labor - vast majority of new firms will never be candidates for formal venture capital or a public stock offering, find equity capital through personal savings, family, friends, acquaintances,
DIJA
Dow Jones Industrial Average - composed of only 30 of the most widely held stocks
patents
Exclusive rights to a new product, process, substance or design. Utility Patent - typically used to protect an invention - the right to exclude others from making, using, selling, offering for sale, or importing the patented invention during the term of the patent. - lasts for 20 years from the date of filing. - Design Patent: 14 years from date of issue invention must be: - Novel - not obvious - useful Patent as a Signal - very strong signal - increases chances of outside (VC) funding. - Makes technology dependable - has intrinsic value (can be sold).
Copyrights
Exclusive rights to artistic, dramatic, and musical works. protect authors' original creations, including literary, musical, artistic, software, and other intellectual works.
entrepreneurship revolution
Intel and Microsoft are the two major entrepreneurial driving forces in the information technology revolution that has fundamentally changed the way in which we live, work, and play
cycle of commercializing
Knowledge Creation - new technology Knowledge protection - IP rights Knowledge exploitation - fees and royalties
Intellectual Property
Knowledge that a company possesses and considers proprietary. - creations of the mind - can be protected through patents, trademarks, etc
Low vs High Fidelity Prototypes
Low Fidelity: - expresses the rough product concept, either in two‐dimensional or three‐dimensional form, often in material as basic as paper - for the entrepreneur to get ideas out rapidly and to see how potential customers and different stakeholders react. High Fidelity - designed to look like a final completed product concept. - aim is to represent final, detailed assumptions about the product and potentially use the prototype in promotion to customers, partners, or investors Generally, when testing and developing a new product, an entrepreneur moves from several low‐fidelity prototypes to increasingly detailed high‐fidelity prototypes to clarify the existence of a customer need and market opportunity
Profit Potenetial
Must make enough profit to compensate its investors for their investment - the profit after all normal business expenses have been accounted for, including a fair salary for the entrepreneur and any family members who are working in the business - It is possible that a rapidly growing business will have a negative cash flow from operations in its early years, even though it may be profitable - may happen because the business may not be able to generate enough cash flow internally to sustain its ever‐growing needs for working capital and the purchase of long‐term assets such as plant and equipment. Hence, it will have to borrow or raise new equity capital. Also is possible for a company to have a positive cash flow and be unprofitable.
Age Distribution of Early‐Stage Entrepreneurial Activity
People of all ages across all types of economies are engaging in entrepreneurial activity. - entrepreneurial activity is most prevalent for those in their early (age 25-34) and mid‐career (age 35-44) affirming the thought that those with ambition and at least some experience, networks, and other resources view entrepreneurship as a productive path to follow.
The Marketing Mix
Product - Customer Value Proposition - Incremental vs Pioneering Price - penetration pricing - skimming pricing Place - intensive - selective - exclusive Promotion - Push vs pull strategy - Guerrilla marketing
4 P's of Marketing
Product, Price, Place, Promotion
TEA (opportunity)
Pull Entrepreneurship % of the adult population that is trying to start or has started a business to exploit a perceived opportunity. - classified as improvement‐driven opportunity motivated if they additionally seek to improve their income or independence through entrepreneurship unexploited opportunities are the key driver of entrepreneurship
What is entrepreneurship?
Schumpeter: An entrepreneur is the person who destroys the existing economic order by introducing new products and services, by introducing new methods of production, by creating new forms of organization, or by exploiting new raw materials. Bygrave: An entrepreneur is the person who perceives an opportunity and creates an organization to pursue it. Byers: "Entrepreneurship is a management and leadership style that involves pursuing opportunity without regard to resources currently controlled ... they can be acquired."
Marketing Data
Secondary Data - marketers gather form already published sources like an industry study or census report - requires less time and money - should be first avenue Primary Data - marketers collect specifically for a particular purpose through focus groups, surveys, or experiments - limitations include observer bias and lack of statistical significance
The Three Driving Forces (Timmon's Framework)
The crucial ingredients for entrepreneurial success are a superb entrepreneur with a first‐ rate management team and an excellent market opportunity. Opportunity Entrepreneur Resources Luck is where preparations and opportunity meet
S Curve
The graphical depiction that highlights the diffusion of product acceptance over time is:
The opportunity
The idea in itself is not what is important. - Developing the idea, implementing it, and building a successful business are the important things. Would‐be entrepreneurs who are unable to name a customer are not ready to start a business. - They have found an idea but have not yet identified a market need. - must consider the customer and the timing
TEA
Total entrepreneurial activity - % of the adult population that is either nascent entrepreneurs or owner-managers or both. - measures the overall entrepreneurial activity of a nation.
Phases of Economic Development
Used buy GEM Study to categorize the basic nature of each country or region's economy. The relationship between economic growth and entrepreneurship across countries is not linear Factor‐driven phase - dominated by subsistence agriculture and extraction businesses, with a heavy reliance on (unskilled) labor and natural resources. - focus of development efforts tends toward building a sufficient foundation of basic requirements. Efficiency‐driven phase - an economy has become more competitive with further development accompanied by industrialization and an increased reliance on economies of scale, with capital‐intensive large organizations more dominant. - generally accompanied by improved (and improving) basic requirements, and attention is then directed toward developing the efficiency enhancers. Innovation‐driven phase - businesses are more knowledge‐intensive, and the service sector expands
Benchmarking
a process by which a company compares its performance with that of high-performing organizations - learn "best practices" from firms that operate inside and outside your industry of interest
Values
beliefs shared by all members - communicate what kind of work environment founders want to create and what guidelines they use in hiring employees - create the foundation on which your company will grow
Frequency and Price
ideal = perfectly inelastic demand - customer willing to pay any price for product Variables of Price 1. encourages regular purchases 2. accounts for value inherent in product 3. allows for a margin on the sale
Cost model
identifies how you are spending your resources to make money. - firm needs to spend money to influence the revenue drivers Primary Categories: 1. COGS 2. Operating costs
guerrilla marketing
marketing activities that are nontraditional, grassroots, and captivating—that gain consumers' attention and build awareness of the company Word‐of‐mouth marketing: - Giving people a reason to talk about your products and services and making it easier for that conversation to take place. Buzz marketing: - Using high‐profile entertainment or news to get people to talk about your brand. Viral marketing: - Creating entertaining or informative messages that are designed to be passed along in an exponential fashion, often electronically or by email. Issues in Guerrilla Marketing - Identify challenges and develop creative solutions. - Find the "inherent drama" in your offerings, and translate that into a meaningful benefit. - Get people's attention and get a "foot in the door" (generating the first sale). - Create "buzz" once you get in the door (word‐of‐mouth marketing).
Cost-based method
marking up a product based on its cost plus a desired profit margin - often allow entrepreneurs to price too low, "leaving money on the table" Alternative - Perceived Value Pricing - Determining the full value of a product/service and then using effective communications to convince target customers to pay for that value - will usually be perceived as better quality by the customer
Entrepreneur
someone who perceives an opportunity and creates an organization to pursue it
Marginal Cost
the cost of producing one extra unit beyond what is presently produced - should try to understand the potential supplier's marginal costs