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ChapterChapter11

The Nature and Importance The Nature and Importance of Entrepreneursof Entrepreneurs

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Development of EntrepreneurshipDevelopment of Entrepreneurship

McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Earliest Period- Marco PoloEarliest Period- Marco PoloMiddle Ages- Theater, Middle Ages- Theater,

Architectural WorksArchitectural Works1717thth Century- Mississippi Century- Mississippi

CompanyCompany1818thth Century- Edison & Whitney Century- Edison & Whitney1919thth & 20 & 20thth Centuries Centuries

Organize/OperateOrganize/Operate InnovationInnovation

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Environmental FactorsEnvironmental Factors Affecting OrganizationsAffecting Organizations

HypercompetitionHypercompetitionChanging TechnologyChanging TechnologyShort Product Life CyclesShort Product Life CyclesNew MarketsNew MarketsChanging Employee Drives/MotivesChanging Employee Drives/MotivesFocus on Sales/ProfitsFocus on Sales/ProfitsAvailable CapitalAvailable Capital

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EconomiesEconomiesMarket-OrientedMarket-Oriented ControlledControlled

CUBACUBAUNITED STATESUNITED STATES

Market Market ConditionsConditions

Innovation Innovation OrientationOrientation

Investment Investment CommunityCommunity

Entrepreneurship Entrepreneurship CultureCulture

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Market ConditionsMarket ConditionsLarge MarketLarge MarketEasy To Form CompanyEasy To Form CompanyPositive Tax StructurePositive Tax StructurePositive Media CoveragePositive Media CoverageCode of Business/Contract LawCode of Business/Contract LawStrong Gov’t Agencies- No Strong Gov’t Agencies- No CorruptionCorruption

Standard-Setting AssociationsStandard-Setting AssociationsIndividual Investment MentalityIndividual Investment Mentality

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Principles forPrinciples for Successful New VentureSuccessful New Venture

1)1) Define MarketDefine Market2)2) Durable Products- Durable Products-

18 Month Customer 18 Month Customer PaybackPayback

3)3) Market Growth = Market Growth = 30-50% in 5 Years30-50% in 5 Years

4)4) Patent ProtectionPatent Protection5)5) No Product No Product

Substitutions Substitutions AvailableAvailable

6)6) Products VariantsProducts Variants7)7) No Strong No Strong

Competition Competition PresentPresent

8)8) Quick Market Quick Market DominanceDominance

9)9) Gross Margin 30-Gross Margin 30-50%50%

10)10)Staged FinancingStaged Financing11)11)ROI = 10X in 5 Years ROI = 10X in 5 Years

(25-30%/Year)(25-30%/Year)12)12)Positive Cash Flow Positive Cash Flow

in 18 Monthsin 18 Months13)13)Strong Management Strong Management

in Industryin Industry

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Infrastructure Infrastructure Needed for InnovationNeeded for Innovation

Long-Term ThinkingLong-Term Thinking

Investment CommunityInvestment CommunityBanksBanks

Venture CapitalistsVenture Capitalists

Informal/Informed Private Informal/Informed Private Investors (Angels)Investors (Angels)

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Entrepreneurship CultureEntrepreneurship Culture

More New More New Ventures Than Ventures Than Anywhere In The Anywhere In The WorldWorld

Concentrated Concentrated AreasAreas

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Successful EntrepreneurSuccessful EntrepreneurInitiates Creation ProcessInitiates Creation ProcessDevotes Time/EffortDevotes Time/EffortAssumes RiskAssumes RiskReceives RewardsReceives Rewards• IndependenceIndependence

• SatisfactionSatisfaction

• MoneyMoney

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Entrepreneurial DecisionEntrepreneurial Decision

Present Present LifestyleLifestyle

New EnterpriseNew EnterpriseDesirableDesirablePossiblePossible

CatalystCatalyst

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Drivers of NewDrivers of New Venture FormationVenture Formation

Desirability InfluencesDesirability Influences Culture/SubcultureCulture/Subculture Family/PeersFamily/Peers TeachersTeachers

Possibility FactorsPossibility Factors GovernmentGovernment BackgroundBackground MarketingMarketing Role ModelsRole Models FinancesFinances

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Types of StartupsTypes of StartupsLifestyleLifestyle

FoundationFoundation

High PotentialHigh Potential

GazellesGazelles

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Entrepreneur &Entrepreneur & Economic DevelopmentEconomic Development

Product-Evolution ProcessProduct-Evolution Process

Iterative SynthesisIterative Synthesis

InnovationInnovation TechnologicalTechnological

BreakthroughBreakthrough

GovernmentGovernment

Technology TransferTechnology Transfer

Intrapreneurship vs. EntrepreneurshipIntrapreneurship vs. Entrepreneurship

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Product EvolutionProduct Evolution

Need RecognitionNeed Recognition

Initiate InnovationInitiate Innovation DevelopmentDevelopment

Press To InventPress To Invent

IndustrialIndustrial

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Careers/EducationCareers/EducationLife SpaceLife Space

Work/OccupationWork/Occupation Individual/PersonalIndividual/Personal Nonwork/familyNonwork/family

Skills RequiredSkills Required TechnicalTechnical Business ManagementBusiness Management PersonalPersonal

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Skills RequiredSkills Required of Entrepreneurof Entrepreneur

TechnicalTechnicalBusinessBusiness

ManagementManagement PersonalPersonal

WritingWriting PlanningPlanning Inner ControlInner Control

Oral Oral CommunicationCommunication

Decision Decision MakingMaking Risk TakingRisk Taking

Monitoring The Monitoring The EnvironmentEnvironment

Human Human RelationsRelations InnovativeInnovative

Use TechnologyUse TechnologyMarketingMarketing(Selling)(Selling)

Change-Oriented Change-Oriented VisionaryVisionary

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Ethics & Social ResponsibilityEthics & Social Responsibility

Ethics- Behavior/Morals in Ethics- Behavior/Morals in BusinessBusiness

Value SystemValue SystemPeer PressurePeer PressureSocial NormsSocial NormsCompetitorsCompetitors Individual vs. CommunityIndividual vs. Community

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FutureFutureEntrepreneurial Education Entrepreneurial Education

Government- PromotionGovernment- Promotion

Society’s SupportSociety’s Support

Corporate IntrapreneurshipCorporate Intrapreneurship

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Entrepreneurial UniversitiesEntrepreneurial Universities

ActivitiesActivities

SeminarsSeminars

ConsultingConsulting

ResearchResearch

Case DevelopmentCase Development

Technology Development Technology Development

& Transfer& Transfer

Joint Ventures & Joint Ventures &

Strategic AlliancesStrategic Alliances

StructuresStructures Business Assistance Business Assistance

CentersCenters IncubatorsIncubators Innovation CentersInnovation Centers Industrial ParksIndustrial Parks Enterprise Development Enterprise Development

CentersCenters Venture Capital ExchangesVenture Capital Exchanges

InputsInputs Guest LecturesGuest Lectures Board of Advisors/TrusteesBoard of Advisors/Trustees InternshipsInternships Student ProjectsStudent Projects Source of FundsSource of Funds