CH 01 Entrepreneurship 2010 Notes

The Foundations of Entrepreneurship
Chapter 1: Entrepreneurship
Copyright 2005 Prentice Hall Inc. A Pearson Education Company
Learning Objectives
Describe the entrepreneurial profile and evaluate ones potential as an entrepreneur Describe the benefits and drawbacks of entrepreneurship Explain the forces that are driving the growth of entrepreneurship Explain the cultural diversity of entrepreneurship Describe the important role small businesses play in our nations economy
Chapter 1: Entrepreneurship Copyright 2005 Prentice Hall Inc. A Pearson Education Company
Learning Objectives
Describe 10 deadly mistakes of entrepreneurship & explain how to avoid them Explain how entrepreneurs can avoid becoming another failure statistic
What is an entrepreneur?
One who creates new business face risk & uncertainty for the purpose of achieving profit & growth by identifying significant opportunities & assembling the necessary resources to capitalize on them.
The World of the Entrepreneur

In the U.S., entrepreneurs start between 3 million and 4.5 million businesses a year! In Malaysia as for the year 2007: 3, 506,559 (Total number of businesses) 2008 there are almost 3,568,095 total number of businesses
The World of the Entrepreneur
Many world largest companies continue to engage in massive downsizing campaigns, cutting number of managers & workers on their payrolls : this has encouraged entrepreneurial activity & the no longer notion of job security
Characteristics of Entrepreneurs
Desire for responsibility: Preference for moderate risk: Confidence in their ability to succeed:

Desire for immediate feedback: High level of energy: Future orientation
Skill at organising: Value of achievement over money:
High degree of commitment: Tolerance for ambiguity: Flexibility:
10
Difference between an entrepreneur and a small businessman

Characteristics Entrepreneur Time Unlimited time Small Business Limited
Nature of job
Flexible
Rigid
11

Decisionmaking Makes own decision & use creativity Follow decisions made by others
Effort & commitment
Continuously keep updated with current & future technological dev

Not attracted to changes & technological breakthrough

12

Risktaker Takes calculated or moderate risk Low risk taker
Goal
Starts a venture & commits on expansion of venture
Solely to gain profits to support & earn a living. Always struggle to obtain profit.
13
Entrepreneurship
One characteristic of entrepreneurs stands out: Diversity! Anyone regardless of age, race, gender, color, national origin, or any other characteristic can become an entrepreneur (although not everyone should). It is not a genetic trait it is a skill that most people can learn
14
Benefits of Small Business Ownership

The opportunity to: Create your own destiny Make a difference Reach your full potential Reap impressive profits Contribute to society and to be recognized for your efforts Do what you enjoy and to have fun at it
15
Drawbacks of Small Business Ownership

Uncertainty of income Risk of losing your entire investment Long hours and hard work
16

Uncertainty of income Risk of losing your entire investment Long hours and hard work Lower quality of life until the business gets established
17
Owner Age at Business Formation

18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
16 . 8 %
16 . 7 % 15 . 9 % 15 . 2 %
9.8%
9.3%
8.5%
3.9% 2.2% 1. 7 %
Under 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 25 Age
65+

Uncertainty of income Risk of losing your entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Complete responsibility Discouragement
19
Whats feeding the Entrepreneurial Fire

Entrepreneurs as heroes: Entrepreneurial education :
20

Demographic and economic factors: Shift to service economy: Technological advancements:
21

Independent lifestyles: E-Commerce and the World Wide Web:
22
Feeding the Entrepreneurial Fire

International opportunities: small companies have expanded successfully into foreign markets rely on the following strategies: Researching foreign markets thoroughly; Focusing on single country initially Utilize government resources to help small companies establish international presence Forging alliances with local partners
23
The Cultural Diversity of Entrepreneurship

Young entrepreneurs: Women entrepreneurs:
24
Minority-owned enterprises:
Immigrant entrepreneurs: Part-time entrepreneurs:
25
Home-based businesses: booming 80% are very small & have no employees. Factors make home entrepreneurs first choice: buss from home keeps start-up & operating cost minimum
Operating
Allow
to maintain flexible lifestyle & work
style
26

Technology
transforming homes into electronic cottages with million dollars in sale

Family businesses Copreneurs : couples
27
The Cultural Diversity of Entrepreneurship Corporate castoffs: Corporate dropouts:
28
A Profile of Small Business by Industry

Construction 12% Retail 20% Wholesale 8% Manufacturing 6% Finance 8%
Other 6%
Service 40%
Small Businesses...
Make up 99% of all the businesses in the U.S. Employ 51% of the nation's private sector workforce. Create more jobs than big businesses. Are leaders in offering training and advancement opportunities to workers offer more general skills instruction & training than large ones.
30
Small Businesses...
(continued)
Produce 51% of the nation's private GDP. Account for 47% of business sales.
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Small Business Survival Rate

100% 100% 81% 65% 54% 46% 40% 36% 32% 29% 27%
% of Small Firms Surviving
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% New
25%
10
# of Years in Business
Ten Deadly Mistakes of Entrepreneurship

1.
Management mistakes:
2.
Lack of experience
Poor financial control:
3.
33

4. Weak marketing efforts
5. Failure to develop a strategic plan:
34

(continued)
6.
7.
8.
Uncontrolled growth: Poor location: Improper inventory control:
35

Incorrect Pricing : Inability to make Entrepreneurial Transition:
36
Putting Failure Into Perspective
Entrepreneurs are not paralyzed by the prospect of failure excitement of building new buss from scratch
Failure a natural part of the creative process those never fail are those never do anything.
Successful entrepreneurs learn to fail intelligently learn why they failed.
37
Avoiding the Pitfalls of Small Business Failure
Know your business in depth Develop a solid business plan Manage financial resources: need to have adequate start-up capital. Estimate how capital is required & then double the figure.
38
Avoiding the Pitfalls of Small Business Failure
Understand financial statements:

Learn to manage people effectively Keep in tune with yourself:
39
SMEs in Malaysia
Definition of SMEs: For manufacturing, manufacturing related services and agro based industry: Companies with annual sales turnover not exceeding RM 25 million or full time employees not exceeding 150
Services, primary agriculture, information and communication technology (ICT): Companies with annual sales turnover not exceeding RM 5 million or full time employees not exceeding 50
40
SMEs in Malaysia
Distribution of Companies by size: Preliminary statistics by DOS: Dec 2005 (total establishment: 523,132)
Micro : 411, 849 (78.9%) Small: 95,490 (18.3%) Medium: 11,657 (2.2%) Large: 4,136 (0.8%)
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SMEs in Malaysia
Distribution of SMEs by Sector (Total SMEs: 518,996) Agriculture: 32,126 (6.2%) Manufacturing: 37, 866 (7.3%) Services: 449,004 (86.5%)
42
SMEs in Malaysia
Contribution of SMEs
Manufacturing: RM103.307 million (39%) Services: 156,035 (59%) Agriculture: 5,942 (2%)
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Business Support System
1.
Refers to assistance & services given by government or private agencies to help entrepreneurs start new buss or develop an existing one: Technical assistance offered to entrepreneurs to expose on production methods & systematic management exp SIRIM, MARA, MARDI, RRI
44

2. Marketing assistance To help entrepreneurs distribute & market their products locally & internationally MITI, MATRADE, FAMA & GUTHRIE 3. Infrastructure assistance Assist in getting business premises- MARA, PKEN, SIRIM, UDA, KPLB, BPIM, MIDA 4. Information System Info available in statistics, new research findings, technology, research MITI, MATRADE, MARDI, SIRIM, MIDA & FRIM 5. Research & Development Research conducted are project feasibility studies, marketing research & technology MARDI, SIRIM, higher learning institutions
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Financial assistance Provide financing facilities to entrepreneurs commercial banks, licensed financial companies & gov agencies 7. Advisory Services Important for entrepreneurs in managing their buss rebate or tax reduction given for services acquired under the training scheme recognised by Ministry of Human Resource 8. Training, seminars & workshops Consist of management training, efficiency, skills & motivation to the purpose of exposure to buss management & inculcate entrepreneurial characteristics MEDEC, PUNB, MARA, NPC & SEDC
6.
46
Other Government Support Agencies
Small and Medium Industries Development Corporation (SMIDEC), government provide various forms of financial assistance and capacity- building programmes to nurture SMEs' development encourage small-and medium- sized entrepreneurs to enter into and invest in the targeted and promoted economic sectors
47

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The Foundations of Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

The World of the Entrepreneur

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

The World of the Entrepreneur

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Desire for immediate feedback: High level of energy: Future orientation

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Difference between an entrepreneur and a small businessman

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Difference between an entrepreneur and a small businessman

Effort & commitment

Continuously keep updated with current & future technological dev

Not attracted to changes & technological breakthrough

Difference between an entrepreneur and a small businessman

Starts a venture & commits on expansion of venture

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Benefits of Small Business Ownership

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Drawbacks of Small Business Ownership

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Drawbacks of Small Business Ownership

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Owner Age at Business Formation

Drawbacks of Small Business Ownership

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Whats feeding the Entrepreneurial Fire

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Whats feeding the Entrepreneurial Fire

Demographic and economic factors: Shift to service economy: Technological advancements:

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Whats feeding the Entrepreneurial Fire

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Feeding the Entrepreneurial Fire

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

The Cultural Diversity of Entrepreneurship

Young entrepreneurs: Women entrepreneurs:

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

The Cultural Diversity of Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

The Cultural Diversity of Entrepreneurship

to maintain flexible lifestyle & work

The Cultural Diversity of Entrepreneurship

transforming homes into electronic cottages with million dollars in sale

The Cultural Diversity of Entrepreneurship Corporate castoffs: Corporate dropouts:

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

A Profile of Small Business by Industry

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Small Business Survival Rate

% of Small Firms Surviving

Ten Deadly Mistakes of Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Ten Deadly Mistakes of Entrepreneurship

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Ten Deadly Mistakes of Entrepreneurship

Uncontrolled growth: Poor location: Improper inventory control:

Copyright 2005 Prentice Hall Inc. A Pearson Education Company