Exam #1 Principles of Entrepreneurship

principles of innovation

- Be action oriented. - Make the product, process, or service simple and understandable. - Make the product, process, or service customer-based. - Start small. - Aim high. - Try/test/revise. - Learn from failures - Follow a milestone schedule. - Reward heroic activity. - Work, work, work.

the major misconceptions of innovation

- Innovation is planned and predictable - Technical specifications must be thoroughly prepared -Innovation relies on dreams and blue-sky ideas - Big projects will develop better innovations than smaller ones - Technology is the driving force of innovation success

employee perspective

- Out of fear for my job, I must conform. - Mistakes must be avoided. - Avoiding risks is security. - I must know everything about my job. - Try and be smartest one on my team. - How I look externally is key. - Promotion is my goal.

what is the experiential nature of creating a sustainable enterprise

- emergence of the opportunity -emergence of the venture -end emergence of the entrepreneur

Advantages of Acquiring an Ongoing Venture

- less fear about successful future operation - reduced time and effort - purchasing at a good price

Entrepreneurship definition (Robert C. Ronstadt)

- the dynamic process of creating incremental wealth

mythology associated with gazelles

-Gazelles are the goal of all entrepreneurs. -Gazelles receive venture capital. -Gazelles were never mice. -Gazelles are high tech. -Gazelles are global.

Factors affecting negotiations

-Information (company performance, competition, gather information from numerous sources) -Pressure (partners, negotiators) -Alternatives (parties with no alternatives have an interest in concluding negotiations quickly) -Time (having more time than the other party can be beneficial)

sources of ethical dilemmas

-Pressure from inside and outside interests -Changes in societal values, mores, and norms

entrepreneurial leadership combines what two capacities of the pursuit of innovation

-capacity to lead -capacity to risk

methods for getting a business started

-creating a new venture -acquiring an existing venture -obtaining a franchise

types of people involved with contemporary small business

-entrepreneur (invents a business that works with or without them) -managers (produces results through employees by developing and implementing effective systems) -technician ( perform specific tasks according to systems and standard management developed)

What are the macro - views ?

-environmental school of thought -financial/capital school of thought -displacement school of thought

ways to develop your creativity

-recognize relationships (look for different or unorthodox relationships) -develop a functional perspective (viewing things and people in terms of how they can satisfy your needs and help complete a project) -using your brains

entrepreneurship is more than the mere creation of business, it ...

-seeks opportunities -takes risks beyond security -has the tenacity to push an idea through to reality

leadership is measured in:

-sense of opportunity -drive to innovate -capacity for accomplishment

sources of innovative ideas

-unexpected occurrences -incongruities (overnight package delivery) process needs (sugar free products) -industry and market change (healthcare industry) -demographic changes -perceptual changes -knowledge based concepts (mobile smartphone technology)

approaches to creating a new venture

1) new-new approach 2) new-old approach

some of the most common idea killers

1. naah 2. can't 3. that's the dumbest thing I've ever heard 4.yeah, but if you did that.. 5. we already tried that years ago

ways to develop right hemisphere skills

1. using metaphors and analogies to describe things and people in your conversations and writing 2. taking off your watch when you are not working 3. suspending your initial judgement of ideas, new acquaintances, movies, tv programs, and so on 4. recording your hunches, feelings, and nutrition and calculating the accuracy

entrepreneurial components of the U.S. economy include:

1.Large firms have increased profitability by returning to their "core competencies" through restructuring and downsizing. 2.New entrepreneurial companies have been blossoming in new technologies and new markets. 3. Thousands of smaller firms established by women, minorities, and immigrants have strengthened the economy

Franchisee obligations include

1.Make a financial investment in the operation. 2.Obtain and maintain a standardized inventory and/or equipment package usually purchased from the franchisor. 3.Maintain a specified quality of performance. 4.Follow a franchise fee as well as a percentage of the gross revenues. 5.Engage in a continuing business relationship.

The cost of franchising

1.The basic franchising fee 2.Insurance 3.Opening product inventory 4.Remodeling and leasehold improvements 5.Utility charges 6.Payroll 7.Debt service 8.Bookkeeping and accounting fees 9.Legal and professional fees 10.State and local licenses, permits, and certificates

franchisor provides

1.The company name 2.Identifying symbols, logos, designs, and facilities 3.Professional management training for each independent unit's staff 4.Sale of merchandise necessary for the unit's operation, equipment to run the operation, and the food or materials needed for the final product 5.Financial assistance, if needed 6.Continuing aid and guidance to ensure that everything is done in accordance with the contract

entrepreneurial firms make two indispensable contributions to an economy

1.They are an integral part of the renewal process that pervades and defines market economies. 2. They are the essential mechanism by which millions enter the economic and social mainstream of society

ways to develop left hemisphere skills

1.step by step planning of our work and life activities 2. reading ancient, medieval, and scholastic philosophy 3.establish timetables for all your activities 4.using and working with a computer program 5.detailed fantasizing and visualizing of things and situations in the future 6. drawing faces, caricatures, and landscapes

explain displacement school of thought (macro view)

Alienation drives entrepreneurial pursuits. •Political displacement (laws, policies, and regulations) •Cultural displacement (preclusion of social groups) •Economic displacement (economic variations) External locus of control

a strategy for ethical responsibility

Establish a strategy for ethical responsibility that encompasses: •Ethical consciousness •Ethical process and structure •Institutionalization

disadvantages of franchising

Franchise fees Franchisor control Unfulfilled promises of franchisor

Typical Creative Process

Phase 1: Background or knowledge accumulation Phase 2: The incubation process Phase 3: The idea experience Phase 4: Evaluation and implementation

business Incubators

Provide services such as management training and office space.

dynamic states approach to entrepreneurship

Stresses dependency of venture on environment and the interaction of: •The dominant logic of the firm •The business model •Value creation

entrepreneurial stress

The extent to which entrepreneurs' work demands and expectations exceed their abilities to perform as venture initiators, they are likely to experience stress

advantages of franchising

Training and guidance Brand-name appeal A proven track record Financial assistance

gazelle definition

a business establishment with atleast 20% sales growth in each year for 5 years, starting with a base of at least 100,000 in annual sales

unicorn

a private start up company with a 1 billion market value (minecraft)

social trend

aging demographics, health and fitness growth, senior living

ecosystem

an agglomeration of interconnected individuals, entities, and regulatory bodies in an area

franchising

any arrangement in which the owner of a trademark, trade name, or copyright has licensed others to use it in selling goods and services

prospective franchisee must receive FDD when?

before signing a contract

the innovation process uses ..

both the right and left side of the brain

synthesis

combination of existing concepts and factors into a new formulation or use ( fred smith - fedex)

new-new approach

concept is brand new -one designs and a unique good or service

duplication

creative replication of an existing concept (walmart -department stores)

franchise disclosure document

developed to provide guidance in complying with the franchise disclosure rule that requires franchisors to make full presale disclosure about their franchises

types of trends

economic, social, technology, political

Entrepreneurial Ecosystems

ecosystem and entrepreneurial ecosystem

what are the micro-views?

entrepreneurial trait school of thought (people school) -venture opportunity school of thought -strategic formulation school of thought

Phases of Economic Development

factor-driven, efficiency-driven, innovation-driven

economic trends

higher disposable incomes, dual wage-earner families, performance pressures

government trends

increased regulations, petroleum prices, terrorism

name some business assets

inventory furniture, equipment, fixtures accounts receivables trademarks, patents, copyright, business name goodwill

entrepreneurial newness framwork

its in slide point chapter 7. know this for the test

technology trends

mobile technology, e-commerce, internet advances

extension

new use or different application of an already existing product (ex: facebook)

processes associated with the right hemisphere

nonverbal, synthesizing, seeing analogies, nonrational, spatial, intuitive, and imaginitive

risks versus reward analysis

points out the the importance of getting an adequate return on the amount of money risked

what is the difference between small business owners and entrepreneurs?

small business owners - manage their business by expecting stable sales, profit and growth entrepreneurs - focus their efforts on innovation, profitability, and sustainable growth

entrepreneurial ecosystem

social and economic environment affecting local entrepreneurship

decacorn

start ups with a 10 billion dollar or more market value ( facebook)

entrepreneur is derived from ..

the French word entreprendre, meaning to "undertake"

franchisee

the purchaser of a franchise

franchisor

the seller of the franchise

invention

totally new product, service, or process (ex: wright brothers -airplane)

true or false: Creativity is a process that can be developed and improved. Some individuals have a greater aptitude for creativity than others.

true

true or false: Entrepreneurship is an integrated concept that permeates an individual's business in an innovative manner.

true

true or false: Entrepreneurship is the symbol of business tenacity and achievement.

true

true or false: entrepreneurs create over 400000 new businesses each yeat

true

true or false: most innovations result from a conscious, purposeful search for new opportunities

true

processes associated with the left hemisphere

verbal, analytical, abstract, rational, logical, and linear

integrated definition of entrepreneurship

•A dynamic process of vision, change, and creation (Requires energy and passion toward the creation and implementation of innovative ideas and creative solutions)

reasons for the exceptional entrepreneurial activity in the united states include

•A national culture that supports risk taking and seeking opportunities. •Americans' alertness to unexploited economic opportunity and a low fear of failure. •U.S. leadership in entrepreneurship education at both the undergraduate and graduate levels. •A high percentage of individuals with professional, technological, or business degrees who are likely to become entrepreneurs.

entrepreneurial persistence

•An entrepreneur's choice to continue with an entrepreneurial opportunity regardless of counterinfluences or other enticing alternatives.

gazelles as leaders in innovation...

•Are responsible for 55% of innovations in 362 different industries and 95% of radical innovations. •Produce twice as many product innovations per employee as do larger firms. •Obtain more patents per sales dollar than do larger firms.

explain financial/capital school of thought (macro view)

•Based on the capital-seeking process—the search for seed and growth capital. (external locus of control)

integrative approach to Entrepreneurship

•Built around the concepts of input to the entrepreneurial process and outcomes from the entrepreneurial process. •Focuses on the entrepreneurial process itself and identifies five key elements that contribute to the process. •Provides a comprehensive picture regarding the nature of entrepreneurship that can be applied at different levels.

type A personalities (entrepreneur)

•Chronic and severe sense of time urgency •Constant involvement in multiple projects subject to deadlines •Neglect of all aspects of life except work •A tendency to take on excessive responsibility, combined with the feeling that "Only I am capable of taking care of this matter" •Explosiveness of speech and a tendency to speak faster than most people

explain the environmental school of thought (macro view)

•Considers the external factors that affect a potential entrepreneur's lifestyle. (external locus of control)

Online Ethical Dilemmas in E-Commerce

•Continuing to obtain consumer trust •Protecting business's online reputation •Avoiding tactics that betray trust •Continuing to exhibit strong ethical responsibility •Establishing an ethical strategy

characteristics associated with the entrepreneurial mindset

•Determination and perseverance •Drive to achieve •Opportunity orientation •Initiative and responsibility •Persistent problem solving •Seeking feedback •Internal locus of control •Tolerance for ambiguity -Calculated risk taking -High energy level -Creativity and innovativeness -Vision -Passion -Independence -Team building

impediments to creativity

•Either/or thinking (concern for certainty) •Security hunting (concern for risk) •Stereotyping (abstracting reality) •Probability thinking (seeking predictable results)

strategic formulation school of thought (micro view)

•Emphasizes the planning process in successful venture development. •Strategic formulation is a leveraging of unique elements: (Unique markets—mountain gap strategies, Unique people—great chef strategies, Unique products—better widget strategies, Unique resources—water well strategies)

a code of ethics provides a clear understanding of the need for

•Ethical administrative decision making •Ethical behavior of employees •Explicit rewards and punishments based on ethical behavior

complexity of ethical decisions

•Extended consequences •Multiple alternatives •Mixed outcomes •Uncertain ethical consequences Personal implications

entrepreneur perspective

•Fear fuels me. •Mistakes help me learn. •Calculated risks are my security. •Continuous learning is my approach. •Seek a team of people smarter than me. •How I appear internally is more important. •The entrepreneurial journey is my goal.

entrepreneurial trait school of thought (internal locus of control)

•Focuses on identifying traits common to successful entrepreneurs. (Achievement, creativity, determination, and technical knowledge)

explain venture opportunity school of thought (internal locus of control)

•Focuses on the opportunity aspect of venture development—the search for idea sources, development of concepts, and implementation of venture opportunities. (Corridor principle: New pathways or opportunities will arise that lead entrepreneurs in different directions.)

Reasons for Unethical Behavior

•Greed •Distinctions between activities at work and activities at home •Lack of a foundation in ethics •Survival (bottom-line thinking) •Reliance on others

types of creativity

•Idea creativity •Material creativity •Organization creativity •Relationship creativity •Event creativity •Inner creativity •Spontaneous creativity

who are entrepreneurs?

•Independent individuals, intensely committed and determined to persevere, who work very hard. •Confident optimists who strive for integrity. They burn with the competitive desire to excel and use failure as a learning tool

new old approach

•Individuals "piggy-backing" on someone else's idea by improving a product or service in an area in which it is not currently available. •Offer a product/service that is difficult to copy.

efficiency driven phase

•Industrialization and increased economies of scale •Capital-intensive large organizations

restoration orientation

•Involves both distracting oneself from thinking about the failure event and being proactive toward secondary causes of stress.

loss orientation

•Involves focusing on the particular loss to construct an account that explains why the loss occurred.

ethical rationalizations used to justify questionable conduct to involve believing that the activity...

•Is not "really" illegal or immoral •Is in the individual's or the firm's best interest •Will never be found out •Helps the firm so the firm will condone it

innovation definition

•Is the process by which entrepreneurs convert opportunities (ideas) into marketable solutions. •Is a combination of the vision to create a good idea and the perseverance and dedication to remain with the concept through implementation. •Is a key function in the entrepreneurial process. •Is the specific function of entrepreneurship.

entrepreneurial cognition

•Knowledge structures that people use to make assessments, judgments, or decisions involving opportunity evaluation, venture creation, and growth.

innovation driven phase

•Knowledge-intensive businesses •Service sector expands

sources of entrepreneurial stess

•Loneliness •Immersion in business •People problems •Need to achieve

Types of Entrepreneurs

•Millennipreneurs—under age 35 and define success by the positive social or environmental impacts of their business •Ultrapreneurs—focus on environmental and social concerns •Serialpreneurs—have four or more operating companies •Boomerpreneurs—55 years or older and convinced their business has a positive social impact

Myths of Entrepreneurship

•Myth 1: Entrepreneurs are doers, not thinkers. •Myth 2: Entrepreneurs are born, not made. •Myth 3: Entrepreneurs are always inventors. •Myth 4: Entrepreneurs are academic and social misfits. •Myth 5: Entrepreneurs must fit the profile. •Myth 6: All entrepreneurs need is money. •Myth 7: All entrepreneurs need is luck. •Myth 8: Entrepreneurship is unstructured and chaotic. •Myth 9: Most entrepreneurial initiatives fail. •Myth 10: Entrepreneurs are extreme risk takers.

ways entrepreneurs cope with stress

•Networking •Getting away from it all •Communicating with employees •Finding satisfaction outside the company •Delegating Exercising rigorously

business accelerators

•Offer support services and funding opportunities. •Entrepreneurs offer equity in their company.

framework of frameworks approach to entrepreneurship

•Offers a more dynamic view of entrepreneurship. •Allows for the profession to move forward. •Identifies the static and dynamic elements of new theories, typologies, or frameworks of importance.

entrepreneurs self destructive characteristics

•Overbearing need for control and power •Sense of distrust •Overriding desire for success •Unrealistic external optimism

Ideas are distilling into opportunities through:

•Personal work, experience, and education •General industry knowledge •Prior market knowledge •Prior customer understanding •Specific interest knowledge •Previous knowledge

social cognition theory

•Posits that knowledge structures (mental models of cognitions) can be ordered to optimize personal effectiveness within given situations.

global entrepreneurship Monitor

•Provides an annual assessment of the entrepreneurial environment of over 100 countries and 70 economies. •Accounts for 75% of the world's population and 90% of the world's GDP. •250 million entrepreneurs worldwide will potentially create more jobs.

promote ethical behaviors by:

•Providing flexibility, innovation, and support of initiative and risk taking •Removing barriers for entrepreneurial middle managers •Including an ethical component to corporate training

what are some considerations when buying a business?

•Request that the seller retain a minority interest in the business or establish the final purchase price dependent on the performance of the business over a three-to-five-year span. •Buyers should be wary of any promises made without written corroboration. •Spending time with the seller's books, reconstructing financial statements to determine how much cash is actually available, is an absolute. •Interview the owner, vendors, competitors, customers, and employees.

ethical codes of conduct

•Statements of ethical practices or guidelines to which an enterprise adheres. •Are becoming more prevalent in industry. •Are proving to be more meaningful in terms of external legal and social development. •Are more comprehensive in terms of their coverage. •Are easier to implement in terms of the administrative procedures used to enforce them.

metacognitive model

•Study of the higher-order cognitive process that resulted in the entrepreneur framing a task effectually, and thus why and how a particular strategy was included in a set of alternative responses to the decision task (metacognition).

factor driven phase

•Subsistence agriculture and extraction businesses •Heavy reliance on labor and natural resources

organizational barriers that invite unethical behaviors

•Systems •Structures •Policies and procedures •Culture •Strategic direction •People

the dark side of entrepreneurship

•The Entrepreneur's Confrontation with Risk •Financial risk versus profit (return) motive varies in entrepreneurs' desire for wealth. •Career risk—loss of employment security. •Family and social risk—competing commitments of work and family. •Psychic risk—psychological impact of failure on the well-being of entrepreneurs.

cognitive adaptability

•The ability to be dynamic, flexible, and self-regulating in one's cognitions given dynamic and uncertain task environments.

entrepreneurial motivation

•The quest for new-venture creation as well as the willingness to sustain that venture.

key questions to ask when buying a venture

•Why is the business being sold? •What is the current physical condition of the business? •What is the condition of the inventory? •What is the state of the company's other assets? •How many of the employees will remain? •What type of competition does the business face? •What does the firm's financial picture look like?

Essential ingredients of entrepreneurship

•Willingness to take calculated risks—in terms of time, equity, or career •Ability to formulate an effective venture team •Creative skill to marshal needed resources •Fundamental skills of building a solid business plan •Vision to recognize opportunity where others see chaos, contradiction, and confusion