Entrepreneurship, Chapter 1 & 2

Entrepreneurial firms

-Bring new products and services to market by creating and seizing opportunities regardless of the resources they currently control -Values: refers to worth, importance, or utility

Lifestyle firms

-Provide their owner or owners the opportunity to pursue a particular lifestyle, and earn a living while doing so -Not innovative, nor do they grow quickly

Examples of Value Proposition -Starbucks: EXPLAIN -FedEx: EXPLAIN

-To create an experience around the consumption of coffee, an experience that people would weave into their lives. "The Third Place" -When your package absolutely, positively has to get there overnight

The Benefits of Entrepreneurship (continued) New innovations and industries -______ -______

-innovation -job creation

The Benefits of Entrepreneurship (Summary)

-new innovations and industries -Economic and social development

entrepreneurship textbook definition

-the process by which individuals pursue opportunities without regard to resources they currently control for the purpose of exploiting future goods and services

5 Steps to Generating Creative Ideas

1. Preparation 2. Incubation 3. Insight 4. Evaluation 5. Elaboration

An opportunity has four essential qualities:

1. attractive 2. timely 3. durable 4. anchored in a product, service, or business that creates or adds value for its buyer or end-user.

The Benefits of Entrepreneurship -____% of all jobs were created by firms that were five years old or less (the Kauffman Foundation, 2015) -Firms with 500 or fewer employees created two million of the roughly three million (2/3) private sector ____ in 2014 -Entrepreneurship has generated 60 to 80 percent of net new jobs annually over the last decade.

70; jobs

window of opportunity

A metaphor describing the optimal time period in which a firm can realistically enter a new market.

Day-In-The-Life Research:

A type of anthropological research, where the employees of a company spend a day with a customer.

Externally stimulated

An entrepreneur decides to launch a firm, searches for and recognizes an opportunity, and then starts a business

Internally stimulated

An entrepreneur recognizes a problem or an opportunity gap and creates a business to address the problem or fill the identified gap

Why do people become entrepreneurs?

Be their own boss Pursue their own ideas Pursue financial rewards

Unique ______ -We are all surrounded by similar resources but entrepreneurs just put them together in slightly different ways Ex. Peloton

Combinations

The Theory of Economic Development by Joseph Schumpeter, economist

Creative destruction: because new products and technologies are typically better than those they replace in the availability of improved products and technologies increases consumer, demand, creative destruction stimulates economic activity -Refers to the incessant product and process innovation mechanism by which new production units replace outdated ones. It was coined by Joseph Schumpeter (1942), who considered it 'the essential fact about capitalism

Salary-substitute firms examples

Dry, cleaners, convenience, stores, restaurants, accounting firms, retail stores, and hair styling salons Common and easy products and services

Elaboration

Elaboration is the stage during which the creative idea is put into a final form: The details are worked out and the idea is transformed into something of value, such as a new product, service, or business concept. -Business plan is written -There is a connection between an awareness of environmental trends and the personal characteristics of the entrepreneur because the two facets of opportunity recognition are interdependent.

Evaluation

Evaluation is the stage of the creative process during which an idea is subjected to scrutiny and analyzed for its viability.

Most entrepreneurial ventures are started in one of two ways:

Externally stimulated Internally stimulated

_____ can act entrepreneurially

Firms

_________ (GEM): a joint research effort among several international universities and the International Council for Small Business that tracks entrepreneurship in 112 countries, including the United States

Global Entrepreneurship Monitor

Incubation

Incubation is the stage during which a person considers an idea or thinks about a problem; it is the "mulling things over" phase.

Insight

Insight is the flash of recognition when the solution to a problem is seen or an idea is born. It is sometimes called the "eureka" experience. Recognizes an opportunity

______ Research -If you are starting from scratch, simply typing "new business ideas" into a search engine will produce links to newspaper and magazine articles about the "hottest" and "latest" new business ideas. -If you have a specific topic in mind, setting up Google mail alerts will provide you with links to a constant stream of newspaper articles, blog posts, and news releases about the topic. -Targeted searches are also useful

Internet

Changing demographics of entrepreneurs _____ entrepreneurs -A desire to pursue an entrepreneurial career is high among millennials. -Despite this desire, in 2013 only 3.6 percent of all businesses in the United States were owned by someone under the age of 30. -A 2016 study by EY and EIG found that the biggest obstacles preventing millennials from starting businesses are lack of finances, lack of desire, fear of failure, and lack of knowledge of the business start-up process

Millennial

Changing demographics of entrepreneurs _____ entrepreneurs -There has been a substantial increase in minority entrepreneurs in the United States. -According to recent estimates, there are eight million minority-owned firms in the United States—a 38 percent increase since 2007. -14.6% of all business startups by minority founders (2012) and 1.5% in 2007 -An important factor facilitating the growth of minority entrepreneurs is the number of organizations that promote and provide assistance

Minority

Characteristics of Successful Entrepreneurs

Passion for the business Product/customer focus Tenacity despite failure Execution intelligence

Lifestyle firms examples

Personal trainers, golf and tennis pros, owners of bed and breakfast, and tour guides

Preparation

Preparation is the background, experience, and knowledge that an entrepreneur brings to the opportunity recognition process.

Gaps in the Marketplace

Products that consumers need or want that aren't available in a particular location or aren't available at all. -A product or service is needed by a specific group of people but doesn't represent a large enough market to be of interest to mainstream retailers or manufacturers

Changing demographics of entrepreneurs _____ entrepreneurs -The number of seniors starting businesses is substantial and growing. -The percentage of individuals age 62 and older starting a business increased from 4.2 percent in 1988 to 5.4 percent in 2015. -Many people in the 60 and older age range have substantial business experience, financial resources, and excellent vigor and health. This makes them excellent candidates to start businesses in many industries

Senior

Salary-substitute firms

Small firms that yield a level of income for their owner or owners that is similar to what they would earn when working for an employer

The entrepreneurial process steps:

Step 1. Decision to become an entrepreneur Step 2. Developing successful business ideas Step 3. Moving from an idea to an entrepreneurial firm Step 4. Managing and growing an entrepreneurial firm

Innovation

The process of creating something new, which is central to the entrepreneurial process

Entrepreneurship: (class definition)

The process of creating value by bringing together a unique combination of resources to exploit an opportunity

brainstorming

The process of generating several ideas about a specific topic.

Entrepreneurship Definition: Creating _____ -Entrepreneurs create value where there was none before. -The key is to move beyond _____ (and entrepreneurs frequently are not the actual inventor) to a business concept that is market-centered and creates new sources or forms of value -"The process of creating value by bringing together a unique combination of resources to exploit an opportunity."

Value; invention

Changing demographics of entrepreneurs _____ entrepreneurs -While men are more likely to start businesses than women, the number of women-owned businesses is increasing. -According to a study commissioned by American Express OPEN, as of 2016, there were 11.3 million women-owned businesses in the United States. -Over the past nine years, the number of women- owned businesses has grown at a rate five times faster than the national averag

Women

process

a chain of events that take place over time

Mind map:

a diagram used to visually organize information. -It is hierarchical and shows the relationships among pieces of the whole

opportunity

a favorable set of circumstances that creates a need for a new product, service, or business.

Focus group:

a gathering of 5 to 10 people who are selected because of their relationship to the issue being discussed.

Business plan

a written document that describes all the aspects of a business venture in a concise manner

An individual's imagination is the only limiting factor to brainstorming. Asking students to complete a _____ is a popular technique that is used in classrooms to teach brainstorming. To compile a bug report, students are instructed to list 50 to 75 conditions or "things" that "bug" them in their everyday lives.

bug report

Strong-tie relationships

characterized by frequent interaction, such as ties between coworkers, friends, and spouses.

Weak-tie relationships

characterized by infrequent interaction, such as ties between casual acquaintances.

All firms fall along a conceptual continuum that ranges from highly ______ to highly ______.

conservative; entrepreneurial

Other Techniques -Firms use a variety of other techniques to generate ideas. Some companies set up _______ that meet regularly to discuss needs, wants, and problems that may lead to new ideas. -Other companies conduct varying forms of anthropological research, such as ______.

customer advisory boards; day-in-the-life research

Trends create opportunities for entrepreneurs to pursue. The most important trends to follow are ______ trends, ____ trends, ______ advances, and ______ action and regulatory changes One of the most important attributes of a good entrepreneur is having a keen ______ ability. Trends are interconnected.

economic; social; technological; political; observation

Myth: most new business _____ In the US, according to the Bureau of Labor Statistics, over half the businesses started are still in existence five years later.

fail

business model

it's plan or recipe for how it creates, delivers, and captures value for it stakeholders

Entrepreneurial firms' impact on larger firms -Many smaller firms provide the building blocks for which _____ firms operate -Evidence shows that many entrepreneurial firms have built their entire business models around producing products and services that increase the efficiency, and or effectiveness of larger firms

larger

Working outside an industry may provide a ______, though; they may innovate in new ways -Founder of Uber did not work in the transportation industry and Elon Musk did not work in the automobile industry

new set of eyes

Three Approaches Entrepreneurs Use to Identify an Opportunity: - - -

observe trends; solve a problem; find gaps in the marketplace

The essence of entrepreneurial behavior is identifying _____ and putting useful ideas into practice.

opportunities

Entrepreneurship is _____ driven behavior, as opposed to resource constrained behavior. What does this mean?

opportunity; we want to pursue the opportunity even if we do not possess all the necessary resources

Corporate entrepreneurship:

practice of established firms with an orientation toward acting entrepreneurially

Entrepreneurship is a _____- a chain of events that take place over time. The "idea" is only the start - if the idea is not converted into something (i.e. "brought to market") it is not entrepreneurship.

process

Types of Opportunities -New _____ or service -New ______ -Geographic, market -New _____ materials -New ways of ______ -Amazon, Netflix

product; markets; raw; organizing

Entrepreneurial Firms' impact on society -New ____

products and services

opportunity recognition

refers to the process of perceiving the possibility of a profitable new business or a new product or service. That is, an opportunity cannot be pursued until it's recognized.

Cognitive Factors -Opportunity recognition may be an innate skill or a cognitive process. -There are some who think that entrepreneurs have a "____ sense" that allows them to see opportunities that others miss. -This sixth sense is called ________

sixth; entrepreneurial alertness

The extent and depth of an individual's _____ network affects opportunity recognition. People who build a substantial network of social and professional contacts will be exposed to more opportunities and ideas than people with sparse networks. Research results suggest that between 40% and 50% of people who start a business got their idea via a social contact.

social

In a related study, the differences between ____ entrepreneurs (those who identified their business ideas on their own) and ______ entrepreneurs (those who identified their ideas through social contacts) were examined. The researchers found that network entrepreneurs identified significantly more opportunities than solo entrepreneurs, but were less likely to describe themselves as being particularly alert or creative.

solo; network

entrepreneurial alertness

the ability to notice things without engaging in deliberate search

Entrepreneurial intensity:

the position of a firm on this continuum

Creativity

the process of generating a novel or useful idea.

solo entrepreneurs

those who identified their business ideas on their own

network entrepreneurs

those who identified their ideas through social contacts

An idea is a _________

thought, an impression, or a notion.

Prior Industry Experience (helps with opportunity recognition) -Working in an industry -They spot a market niche that is _______ -They build _____ within their industry who may provide insights that lead to recognizing opportunities

underserved; networks

Conservative: ______ Entrepreneurial: _____

wait and see approach; proactive, risk takers

Example of Economic Trend Creating a Favorable Opportunity A _____ economy favors start-ups that help consumers ____ money. -An example is GasBuddy.com, a company started to help consumers save money on gas.

weak; save

For an entrepreneur to capitalize on an opportunity, its _______ must be open.

window of opportunity

Once the market for a new product is established, its _______ opens. As the market grows, firms enter and try to establish a profitable position. At some point, the market matures, and the window of opportunity _____.

window of opportunity; closes