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Entrepreneurship

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Entrepreneurship ­ MGT602
VU
Lesson 6
THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued...)
LEARNING OBJECTIVES
1.
To explain the aspects of the entrepreneurial process.
2.
To explain the differences between entrepreneurial and managerial domains.
3.
To explain the organizational environment conducive for entrepreneurship.
4.
To identify the general characteristics of an entrepreneur.
5.
To explain the process of establishing entrepreneurship in an organization.
CORPORATE VERSUS ENTREPRENEURIAL CULTURE
Smaller, aggressive, entrepreneurial firms are developing more new products and becoming dominant in
certain markets. Many companies are attempting to create the same spirit, culture, and rewards of
entrepreneurship in their organizations.
The typical corporate culture has a climate and reward system that favors conservative decision making.
Emphasis is on gathering large amounts of data as the basis for a rational decision. Risky decisions are
often postponed until hard facts are gathered or a consultant is hired.
Often there are so many approvals required that no individual feels personally responsible for the project.
The guiding principles in a traditional corporate culture are:
1. Follow instructions given
2. Do not make mistakes
3. Do not fail
4. Do not take initiative
5. Stay within your turf and protect your backside
6. This restrictive environment is not conducive to creativity, flexibility, and risk taking
The guiding principles of entrepreneurs
Aspects of an Entrepreneurial culture are quite different:
1.
Develop visions, goals, and action plans
2.
Be rewarded for actions taken
3.
Suggest, try, and experiment
4.
Create and develop
5.
Take responsibility and ownership
There are differences in the norms of the two cultures.
The traditional culture is hierarchical in nature, with established procedures, lines of authority, and
control mechanisms. These support the present corporate culture, and do not encourage new venture
creation.
The culture of an entrepreneurial firm has a flat organizational structure with networking, teamwork,
sponsors, and mentors. Close working relationships help establish an atmosphere or trust that facilitates
accomplishment of visions. Individuals make suggestions across functional areas, resulting in cross-
fertilization of ideas.
The two cultures produce different types of individuals and management styles.
Motivation
Traditional managers are motivated primarily by promotion and typical corporate rewards.
Entrepreneurs and entrepreneurs thrive on independence and the ability to create. Entrepreneurs expect
their performance to be suitably rewarded.
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Entrepreneurship ­ MGT602
VU
There are also time orientation differences.
Managers emphasize the short run, entrepreneurs the long run, and entrepreneurs somewhere in between.
Entrepreneurs use a midpoint mode between delegation of managers and direct involvement of
entrepreneurs.
Entrepreneurs and entrepreneurs are moderate risk takers; managers are much more cautious. Most
entrepreneurs fail at least once, and Entrepreneurs learn to conceal risky projects from management until
the last possible moment. Traditional managers tend to be most concerned about those at higher levels,
entrepreneurs serve self and customers, and Entrepreneurs add sponsors.
CLIMATE FOR ENTREPRENEURSHIP
In establishing an Entrepreneurial environment, certain factors and leadership characteristics need to be
present. The first of these is that the organization operates on the frontiers of technology. Since research
and development are key sources for new product ideas, the firm must operate on the cutting edge of
technology and encourage and supporting new ideas instead of discouraging them.
Second is experimentation, or trial and error, is encouraged. Successful new products usually do not appear
fully developed; instead they evolve. A company wanting to establish an Entrepreneurial spirit has to
establish an environment that allows mistakes and failures. Without the opportunity to fail, few corporate
Entrepreneurial ventures will be developed.
Third an organization should make sure that there are no initial opportunity parameters, such as turf
protection, inhibiting creativity in new product development.
Fourth, the resources of the firm need to be available and easily accessible. Often, insufficient funds are
allocated not to creating something new but instead to solving a problem that have an immediate effect on
the bottom line. Some companies, such as Xerox, 3M, and AT&T have established separate venture capital
areas for funding new internal ventures.
Fifth a multidisciplinary team approach needs to be encouraged. One key to Entrepreneurial success is the
existence of "skunkworks" involving key people. Developing the needed team work for a new venture is
further complicated by the fact that a team member's promotion within the corporation is related to
performance in the current position, not in the new venture. The corporate environment must establish a
long time horizon for evaluating the success of the overall program.
Sixth the spirit of entrepreneurship cannot be forced on individuals; it must be voluntary. Most managers
in a corporation are not capable of being successful Entrepreneurs. Those who do emerge from this self
selection process must be allowed the latitude to carry a project through to completion. An Entrepreneur
falls in love with the new venture and will do almost anything to ensure its success.
The seventh characteristic is a reward system. The Entrepreneur needs to be appropriately rewarded for
the energy and effort expended on the new venture. An equity position in the new venture is one of the
best motivational methods.
Eight a corporate environment favorable for entrepreneurship has sponsors and champions throughout
the organization that supports the creative activity and resulting failures.
Finally the Entrepreneurial activity must be whole-heartedly supported by top management.
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Table of Contents:
  1. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:DEFINITION OF ENTREPRENEUR
  2. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:Possibility of New Venture Formation
  3. ENTREPRENEURIAL PROCESS/START UPS:GOVERNMENT AS AN INNOVATOR
  4. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND:ENTREPRENEURIAL PROCESS
  5. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…)
  6. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):CLIMATE FOR ENTREPRENEURSHIP
  7. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):PROBLEMS AND SUCCESSFUL EFFORTS
  8. THE INDIVIDUAL ENTREPRENEUR:ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS
  9. THE INDIVIDUAL ENTREPRENEUR (continued…):Personal Values, Work History, MOTIVATION
  10. THE INDIVIDUAL ENTREPRENEUR (continued…):ROLE MODELS AND SUPPORT SYSTEMS
  11. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES:INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES, Minority interests
  12. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):DIRECT FOREIGN INVESTMENT
  13. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):BARRIERS TO INTERNATIONAL TRADE
  14. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):ENTREPRENEURIAL PARTNERING
  15. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):SOURCES OF NEW IDEAS
  16. CREATIVITY AND THE BUSINESS IDEA:METHODS OF GENERATING NEW IDEAS, CREATIVE PROBLEM SOLVING
  17. CREATIVITY AND THE BUSINESS IDEA:PRODUCT PLANNING AND DEVELOPMENT PROCESS
  18. LEGAL ISSUES FOR THE ENTREPRENEUR:NEED FOR A LAWYER, PATENTS
  19. LEGAL ISSUES FOR THE ENTREPRENEUR:TRADEMARKS, LICENSING
  20. LEGAL ISSUES FOR THE ENTREPRENEURS:PRODUCT SAFETY AND LIABILITY, INSURANCE
  21. CREATING AND STARTING THE VENTURE:WHAT IS THE BUSINESS PLAN, PRESENTING THE PLAN
  22. CREATING AND STARTING THE VENTURE (Continued….):WRITING THE BUSINESS PLAN
  23. CREATING AND STARTING THE VENTURE (Continued….):
  24. CREATING AND STARTING THE VENTURE (Continued….):WHY SOME BUSINESS PLANS FAIL, MARKETING PLAN
  25. THE MARKETING PLAN:MARKET RESEARCH FOR THE NEW VENTURE
  26. THE MARKETING MIX:STEPS IN PREPARING THE MARKETING PLAN
  27. THE ORGANIZATIONAL PLAN:DEVELOPING THE MANAGEMENT TEAM, LEGAL FORMS OF BUSINESS
  28. THE ORGANIZATIONAL PLAN (Continued….)
  29. THE ORGANIZATIONAL PLAN (Continued….):THE LIMITED LIABILITY COMPANY
  30. THE FINANCIAL PLAN:OPERATING AND CAPITAL BUDGETS
  31. THE FINANCIAL PLAN (Continued….):PRO FORMA INCOME STATEMENTS, PRO FORMA CASH FLOW
  32. PRO FORMA SOURCES AND USES OF FUNDS:PERSONAL FUNDS, FAMILY AND FRIENDS
  33. PRO FORMA SOURCES AND USES OF FUNDS:COMMERCIAL BANKS
  34. BANK LENDING DECISIONS:SMALL BUSINESS ADMINISTRATION LOANS
  35. SOURCES OF CAPITAL:GOVERNMENT GRANTS
  36. SOURCES OF CAPITAL:PRIVATE PLACEMENT, BOOTSTRAP FINANCING
  37. CAPITAL SOURCES IN PAKISTAN:PROVINCIAL LEVEL INSTITUTIONS, FINANCIAL INSTITUTIONS
  38. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  39. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  40. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  41. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  42. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  43. NEW VENTURE EXPANSION STRATEGIES AND ISSUES:JOINT VENTURES, ACQUISITIONS
  44. NEW VENTURE EXPANSION STRATEGIES AND ISSUES (Continued….):DETERMINING THE PRICE FOR AN ACQUISITION
  45. ENTREPRENEURSHIP & PAKISTAN:GENDER DEVELOPMENT STATUS WOMAN AS AN ENTREPRENEUR IN PAKISTAN