SMALL BUSINESS AND CORPORATE

ENTREPRENEURSHIP:
CONTRASTING ENTERPRISE

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OBJECTIVES

Describe the environment of small business and

how it is changing
Identify the most common causes for small
business failure
Explain the important success factors for small
business enterprises
Describe corporate entrepreneurship
Discuss the major approaches to corporate
entrepreneurship
Describe emerging ways corporations are
encouraging entrepreneurship

ENTREPRENEURSHIP
Fundamental concepts: Creativity, and Innovation

SmallbusinessandCorporateentrepreneurshiparetwohighly
contrastingapproachestonewventurecreationandboth
contributetohighqualitylifeindevelopedcountries.

SMALL BUSINESS
Services, local professional practices, and
merchandisersthat all of us rely on
Clothiers, shoe store, convenience stores,
restaurants, laundries, gas stationswe all need
to function
Without accounting firms, dentists, pharmacies,
and attorneys, we would lack important services
Without music stores, florists, photography,
shops, candy stores, beauty salons and book
stores, life would be bland/tasteless

WHAT IS SMALL BUSINESS?

Independently owned and

managed business that
does not dominate its
market

SMALL BUSINESS PLAYS A

CRITICAL ROLE IN ECONOMY
Job Creation
Innovation

Importance to
Big Businesses

POPULAR AREAS OF SMALL BUSINESS

ENTERPRISE

Manufacturing
5%
Finance &
Insurance
Other
10%
1.7%

Services
Retailing
Construction
Wholesale
Financial
8%
Insurance
Wholesaling
Transportati
on
Construction
Manufacturi
10%
ng
Transportation
5%

Retailing
22.7%

Services
37.6%

ROLE RESPONSIBILITIES OF SMALL

BUSINESS
OWNERS
Investment Finance

Customer Relations

Personnel and Human Resources

Cash Control

Bookkeeping

Inventory Control

Purchasing

Marketing and Sales

Leadership

Business Planning

RISK & FAILURE

External Factors of Failure economic business cycle, fluctuating

interest rates, interrupted supplies, labor market trends, inflation,
government regulations and unstable financial markets

Personal Factors of Failure 52% of all business failures to

management issues, and as much as 90% of small business
failures to incompetent managers

Inexperience lack of technical skills or management insight, in

other instance, capable individuals start new enterprises within their
respective fields but cannot manage their resources or provide
leadership for their employees

Arrogance - particularly inventors and innovators become

egocentrically occupied

Mismanagement bad decisions in critical situations,

Overinvestment, Poor Inventory Control, Poor Financial Control

Poor Business Philosophy & Lack of Planning

RESOLUTIONS FOR SUCCESS

Plan Well
Reversing the factor of Failure a proper attitude is important, the
owner must have a purpose for being in business and want to provide
customers with the value for their money
Understanding the Purpose of Being in Business Clarity of
purpose, distinct competency

10

TYPES OF BUSINESS ORGANIZATIONS

Type of Business
73%

7%

20%

Sales Revenue
89%
5%

6%

Sole Proprietorship

Partnership

Corporations

COMPARATIVE SUMMARY: THREE FORMS OF

BUSINESS
Business
Form

Liability

Continuity

Management

Investment
Sources

Proprietorship

Personal,
limited

Ends with death

or decision of
owner

Personal,
unrestricted

Personal

General
Partnership

Personal,
unlimited

Ends with death

or decision of
any partner

Unrestricted or
depends on
partnership
agreement

Personal by
partner(s)

Corporation

Capital
invested

As stated in
charter,
perpetual or for
specified period
of years

Under control of Purchase of

board of
stock
directors, which
is selected by
stockholders

Copyright 2003 Prentice Hall, Inc.

4 - 12

SOLE PROPRIETORSHIPS
Advantages:

Disadvantages:

Freedom

Unlimited Liability

Simple to form

Limited resources

Low start up
costs

Limited fundraising
capability

Tax benefits

Lack of continuity
Unlimited Liability
Legal principle holding owners responsible
for paying off all debts of a business

PARTNERSHIPS
Advantages:

Disadvantages:

More talent and

money

Unlimited Liability

More fundraising
capability
Relatively easy to
form
Tax benefits

Disagreements among
partners
Lack of continuity

Unlimited Liability
Legal principle holding owners responsible
for paying off all debts of a business

Remember
WHEN TWO MEN IN BUSINESS
ALWAYS AGREE, ONE OF THEM
IS UNNECESSARY.
WILLIAM WRIGLEY
JR.

But
An exit plan is still crucial!

WHAT IS A CORPORATION?

An artificial being, invisible, intangible, and existing only in

contemplation of the law.

CORPORATIONS

Advantages:
Limited Liability
Continuity
Stronger
fundraising
capability

Disadvantages:
Double Taxation
Fluid control
Complicated and
expensive to
form

TYPES OF CORPORATIONS

Closely Held (Private) Corporation

Publicly Held (Public) Corporation
Limited Liability Corporation (LLC)
Professional Corporation
Multinational or Transnational Corporation

STOCKHOLDERS
OWNERS OF CORPORATIONS
Stock: Share of ownership in a corporation
Common Stock
Preferred Stock

CORPORATE GOVERNANCE HIERARCHY

Stockholders
Board of Directors

Officers

SPECIAL ISSUES IN CORPORATE OWNERSHIP

Joint
Joint Ventures
Ventures &
&
Strategic
Strategic Alliances
Alliances
Employee
Employee Stock
Stock
Ownership
Ownership Programs
Programs
(ESOPS)
(ESOPS)
Institutional
Institutional
Ownership
Ownership

SPECIAL ISSUES IN CORPORATE OWNERSHIP

Mergers &
Acquisitions
(M&As)

Divestitures
& Spin-offs

ENTREPRENEURSHIP VS. SMALL BUSINESS

Entrepreneur: Accepts
the risks and
opportunities of
creating, operating and
growing a new business

Small Business Owner:

Does not have plans for growth

TRENDS IN SMALL BUSINESS START-UPS

Emergence of
E-commerce
Crossovers From
Big Business
Opportunities for
Minorities & Women
Global
Opportunities
Increased
Survival Rates

REASONS FOR SUCCESS AND FAILURE

Reasons for Failure
Poor management
Neglect
Weak control
systems
Insufficient capital

Reasons
Reasons for
for
Success
Success
Hard
Hard work,
work, drive,
drive,
dedication
dedication
Market
Market demand
demand
Strong
Strong
management
management
Luck!!!
Luck!!!

EIGHT REASONS WHY MANY SMALL

BUSINESSES FAIL.

MANAGEMENT - CHAPTER 6

26

GETTING STARTED

Buying an
Existing
Business

Starting
From
Scratch

FINANCING THE SMALL BUSINESS

Personal resources
Loans
Venture capital companies
Small-business investment companies
Small Business Association (SBA)
Financial aid and management advice

FRANCHISING

An Ownership Opportunity
Advantages
Advantages
Proven
Proven
business
business
opportunity
opportunity
Access
Access to
to
management
management
expertise
expertise

Disadvantages
Disadvantages
Start-up
Start-up costs
costs
On-going
On-going
payments
payments
Management
Management
rules
rules and
and
restrictions
restrictions

TYPES OF INNOVATION
Radical Innovation
The launching of inaugural breakthroughs.
These innovations take experimentation and determined vision, which are not
necessarily managed but must be recognized and nurtured.
Incremental Innovation
The systematic evolution of a product or service into newer or larger markets.
Many times the incremental innovation will take over after a radical innovation
introduces a breakthrough.

TABLE

DEVELOPING AND SUPPORTING RADICAL AND

INCREMENTAL INNOVATION
3.4

Radical

Incremental

Stimulate through challenges and puzzles.

Set systematic goals and deadlines.

Remove budgetary and deadline constraints

when possible.

Stimulate through competitive pressures.

Encourage technical education and exposure

to customers.

Encourage technical education and exposure

to customers.

Allow technical sharing and brainstorming

sessions.

Hold weekly meetings that include

key management and marketing staff.

Give personal attentiondevelop

relationships of trust.

Delegate more responsibility.

Encourage praise from outside parties.

Set clear financial rewards for meeting goals

and deadlines.

Have flexible funds for opportunities that

arise.
Reward with freedom and capital for new
projects and interests.