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Entrepreneurship

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Entrepreneurship ­ MGT602
VU
Lesson 2
THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP
LEARNING OBJECTIVES
1.
To introduce the concept of entrepreneurship and its historical development.
2.
To explain the entrepreneurial decision process.
THE ENTREPRENEURIAL DECISION PROCESS
(Deciding to become an entrepreneur by leaving present activity)
Many individuals have difficulty bringing their ideas to the market and creating new venture. Yet
entrepreneurship and the actual entrepreneurial decisions have resulted in several million new businesses
being started throughout the world. Although no one knows the exact number in the United States.
Indeed, millions of ventures are formed despite recession, inflation, high interest rates, and lack of
infrastructure, economic uncertainty and the high probability of failure
The entrepreneurial decision process entails a movement from something to something-- a movement
from a present life style to forming a new enterprise.
To leave a present live-style to create something new comes from a negative force--disruption. Many
companies are formed by people who have retired, moved, or been fired. Another cause of disruption is
completing an educational degree.
The decision to start a new company occurs when an individual perceives that forming a new enterprise is
both desirable and possible.
Desirability of New Venture Formation
(Aspects of a situation that make it desirable to start a new company)
The perception that starting a new company is desirable results from an individual's culture, subculture,
family, teachers and peers.
American culture places a high value on being your own boss, being a success and making money
therefore, it is not surprising to find a high rate of company formation in the United States. On the other
hand in some countries making money is not as valued and failure may be a disgrace. The rate of business
formation in these countries is not as high. Many subcultures that shape value systems operate within a
cultural framework.
Studies indicate that a high percentage of founders of companies had fathers and/or mothers who valued
independence. Encouragement to form a company is also gained from teachers, who can significantly
influence individuals. An area having a strong educational base is also a requirement for entrepreneurial
activity. Peers are important, also, as is an area with an entrepreneurial pool and peer-meeting place.
Possibility of New Venture Formation
(Factors making it possible to create a new venture)
Although the desire of new venture formation derived from the individual's culture, subculture, family,
teachers and peers needs to be present before any action is taken, the second feature necessary centers
around this question "What makes it possible to form a new company?"
Formal education and previous business experience give a potential entrepreneur the skills needed to
form and manage a new enterprise. Although educational systems are important in providing the needed
business knowledge, individual will tend to be more successful in forming in fields in which they have
worked. The government also contributes by providing the infrastructure to help a new venture.
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Entrepreneurship ­ MGT602
VU
The market must be large enough and the entrepreneur must have the marketing know-how to put
together the entire package.
Finally, financial resources must be readily available. Although most start-up money comes from personal
savings, credit, and friends, but there is often a need for additional capital. Risk-capital availability plays an
essential role in the development and growth of entrepreneurial activity.
KEY TERMS
Foundation companies
A type of company formed from research and development that usually does not go public.
Gazelles
Very high growth ventures.
Government as an innovator
A government active in commercializing technology
High-potential ventures.
A venture that has high growth potential and therefore receives great investor interest
Entrepreneurship
Entrepreneurship within an existing business structure
Iterative synthesis
The intersection of knowledge and social need that starts the product development process
Lifestyle firm
A small venture that supports the owners and usually does not grow
Ordinary innovation
Z new product with little technological change
Possibility of new venture formation
Factors making it possible to create a new venture
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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