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Entrepreneurship

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Entrepreneurship ­ MGT602
VU
Lesson 10
THE INDIVIDUAL ENTREPRENEUR (continued...)
LEARNING OBJECTIVES
1.
To identify some key entrepreneurial feelings and motivations.
2.
To identify key elements in an entrepreneur's background.
3.
To discuss the importance of role models and support systems.
4.
To identify the similarities and differences between male and female entrepreneurs.
5.
To explain the differences between inventors and entrepreneurs.
ROLE MODELS AND SUPPORT SYSTEMS
One of the most important factors influencing entrepreneurs in their career choice is role models. Role
models can be parents, relatives, or successful entrepreneurs in the community. Role models can also serve
in a supportive capacity as mentors during and after the new venture is launched. This support system is
most crucial during the start-up phase.
It is important that an entrepreneur establish connections to support resources early in the venture
formation process. As contacts expand they form a network with density (extensiveness of ties between two
individuals) and centrality (the total distance of the entrepreneur to all other individuals.) The strength of ties
between the entrepreneur and any individual is dependent on the frequency, level, and reciprocity of the
relationship. An informal network for moral and professional support benefits the entrepreneur.
Moral-Support Network
It is important for the entrepreneur to establish a moral support network of family and friends. Most
entrepreneurs indicate that their spouses are their biggest supporters. Friends can provide advice that is
more honest than that received from others, plus encouragement, understanding, and assistance.
Relatives can also be sources of moral support, particularly if they are also entrepreneurs.
Professional-Support Network
The entrepreneur also needs advice and counsel, which can be obtained from members of a professional
support network. A mentor-protégé relationship is an excellent way to secure the needed professional
advice. The mentor is a coach, sounding board, and advocate. The individual selected needs to be an expert
in the field. An entrepreneur can initiate the "mentor-finding process" by identifying and contacting a
number of experts. The mentor should be periodically apprised of the progress of the business so that a
relationship can gradually develop.
Another source of advice is a network of business associates. Self-employed individuals who have
experience in starting a business are good sources. Clients and buyers are also important as they provide
word-of-mouth advertising.
Suppliers are good components of the professional-support network-they help to establish credibility with
creditors and customers, and provide good information on trends in the industry. Trade associations are
good network additions, as they keep up with new developments and can provide overall industry data.
Affiliations with individuals developed in hobbies, sporting events, civic involvements and school alumni
groups are excellent sources of referrals, advice, and information.
Each entrepreneur needs to establish both a moral- and a professional-support network to share problems
with and gain overall support.
MALE VERSUS FEMALE ENTREPRENEURS
Women are now starting new ventures at three times the rate of men. Women form over 70 percent of all
new businesses. Women now own over 8.5 million small businesses, an increase of over 45 percent since
1990. In some respects female entrepreneurs possess very different motivations, business skills, and
occupational backgrounds. Factors in the start-up process for male and female entrepreneurs are different,
especially in such areas as support systems, sources of funds, and problems.
Men are motivated by the drive to control their own destinies. Women tend to be more motivated by the
need for achievement arising from job frustration.
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Entrepreneurship ­ MGT602
VU
Departure points and reasons for starting the business are similar for both men and women. Both
generally have a strong interest and experience in the area of their venture. For men, the transition to a new
venture is easier when the venture is an outgrowth of a present job. Women often leave a previous
occupation with a high level of frustration and enthusiasm for the new venture rather than experience.
Start-Up Financing
Males often have investors, bank loans, or personal loans in addition to personal funds as sources of start-
up capital. Women usually rely solely on personal assets or savings. Obtaining financing and lines of credit
are major problems for women.
Occupations
Both groups tend to have experience in the field of their ventures. Men more often have experience in
manufacturing, finance, or technical areas. Most women usually have administrative experience, often in
service-related fields.
Personality
Both men and women tend to be energetic, goal-oriented, and independent. Men are often more confident
and less flexible and tolerant than women.
Backgrounds
The backgrounds of male and female entrepreneurs tend to be similar. Women are little older when they
embark on their careers. Men often have studied in technical- or business-related areas, while women tend
to have liberal arts education. Many women business owners are empty nesters or single and need business
insurance as well as personal life insurance.
Support Groups
Men usually list outside advisors as most important supporters, with spouse being second. Women list their
spouse first, close friends second, and business associates third. Women usually rely more heavily on a
variety of sources for support and information than men.
Nature of the Venture
Women are more likely to start a business in a service-related area. Men are more likely to enter
manufacturing, construction, or high-technology fields.
MINORITY ENTREPRENEURSHIP
It is difficult to research race and ethnicity as entrepreneurial factors as the differences in behavior of
various groups must be understood in the context of the environment and economic opportunities
available. Most literature dealing with minority entrepreneurship has focused on the characteristics of the
group under study.
In terms of ownership, one study found:
The lowest participation rate is for blacks.
The second highest but fastest growing rate is for Hispanics.
The highest rate is for Asians.
Studies have also found differences in education, age, family background, and age when starting the
venture. Black businesses tend to be smaller and less profitable, but there are no differences in survival
rates between black- and white-owned businesses. Studies have also found differences between ethnic
groups in benefiting from community resources. Entrepreneurship has increased among Asians, African
Americans, Hispanics, and Native Americans.
ENTREPRENEURS VERSUS INVENTORS
An inventor, an individual who creates something for the first time, is a highly driven individual motivated
by his or her own work and personal ideas.
An inventor:
Tends to be well-educated.
Has family, educational, and occupational experiences that contributes to
freethinking.
Is a problem solver.
Has a high level of self-confidence.
Is willing to take risks.
Has the ability to tolerate ambiguity and uncertainty.
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Entrepreneurship ­ MGT602
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A typical inventor places a high premium on being an achiever, and is not likely to view monetary benefits
as a measure of success.
An inventor differs from an entrepreneur.
An entrepreneur falls in love with the new venture, while the inventor falls in love with the invention.
The development of a new venture based on an inventor's work often requires the expertise of an
entrepreneur.
KEY TERMS
Motivations
What causes people to do something
Need for achievement
An individual's need to be recognized
Need for independence
Being one's own boss-one of the strongest needs of an entrepreneur
Professional-support network
Individuals who help the entrepreneur in business activities
Role models
Individuals influencing an entrepreneur's career choice and style
Social status
The level at which an individual in viewed by society
Work history
The past work experiences of an individual
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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