SECTION I. THE CHALLENGE OF ENTREPRENEURSHIP

Copyright © 2016 Pearson Education, Inc. Chapter 1, Page 1

SECTION I. THE CHALLENGE OF ENTREPRENEURSHIP

CHAPTER 1. THE FOUNDATIONS OF ENTREPRENEURSHIP

Part 1: Learning Objectives

• Define the role of the entrepreneur in business in the United States and around the

world.

• Describe the entrepreneurial profile and evaluate your potential as an entrepreneur.

3A. Describe the benefits of entrepreneurship.3B. Describe the drawbacks of entrepreneurship.

• Explain the forces that are driving the growth of entrepreneurship.
• Explain the cultural diversity of entrepreneurship.
• Describe the important role small businesses play in our nation’s economy.
• Put failure into the proper perspective.
• Explain how an entrepreneur can avoid becoming another failure statistic.

Part 2: Class Instruction

The World of the Entrepreneur LO 1 Around the world growing numbers of people are realizing their dreams of owning and operating their own business. Entrepreneurship is thriving and is essential to a strong global economy. Downsizing by large companies has resulted in a new population of entrepreneurs. Today small companies have the competitive advantage as they can move faster to exploit market opportunities and use modern technology to quickly create products and service that once took years.A study by the Global Entrepreneurship Monitor (GEM) found that 12.7 percent, or one in eight people, of the adult population in the United States is working to start a business.Eastern European countries, China, Vietnam, and other nations whose economies were state–controlled and centrally planned now hold potential for entrepreneurs. (Refer to Figure 1.1 and Table 1.1)

(Essentials of Entrepreneurship and Small Business Management 8e Norman Scarborough) (Solution Manual all Chapters) 1 / 4

Copyright © 2016 Pearson Education, Inc. Chapter 1, Page 2 What Is an Entrepreneur? LO 2 An entrepreneur is one who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying significant opportunities and assembling the necessary resources to capitalize on them. Although many people come up with great business ideas, most never act on their ideas.One reason the U.S. economy has been so successful over time is the constant churn that results from the rapid pace at which entrepreneurs create new businesses, destroy old ones, and upend entire industries with their creativity and ingenuity. (Refer to Figure 1.2) Studies have identified several characteristics entrepreneurs tend to exhibit, but none of them has isolated a set of traits required for success. A brief summary of the

entrepreneurial profile includes:

• Desire for responsibility
• Preference for moderate risk (risk eliminators)
• Self-reliance
• Confidence in their ability to succeed
• Determination
• Desire for immediate feedback
• High level of energy
• Future orientation. Opportunity entrepreneurs start businesses because they spot

an opportunity in the marketplace. Necessity entrepreneurs start businesses because they cannot find work any other way. Serial entrepreneurs repeatedly start businesses and grow them to a sustainable size before striking out again.

• Skill at organizing
• Value of achievement over money

Other characteristics of entrepreneurs include:

High degree of commitment Tolerance for ambiguity Creativity Flexibility Resourceful. Bootstrapping is a strategy that involves conserving money and cutting costs during start-up so that entrepreneurs can pour every available dollar into their businesses. 2 / 4

Copyright © 2016 Pearson Education, Inc. Chapter 1, Page 3 Willingness to work hard Tenacity Entrepreneurs are not of one mold; no one set of characteristics can predict who will become entrepreneurs and whether they will succeed. Diversity seems to be a central characteristic of entrepreneurs. Anyone can become an entrepreneur. It is a practical discipline; it is a skill that most people can learn. (Refer to Figure 1.3) Consider using You Be the Consultant: “Decoding the DNA of the Entrepreneur” at this point.

The Benefits of Entrepreneurship LO 3A

The primary benefits entrepreneurs enjoy include the:

Opportunity to Create Your Own Destiny Opportunity to Make a Difference. Social entrepreneurs use their skills not only to create profitable businesses, but also to achieve economic, social and environmental goals for the common good.Opportunity to Reach Your Full Potential Opportunity to Reap Impressive Profits Opportunity to Contribute to Society and Be Recognized for Your Efforts Opportunity to Do What You Enjoy and Have Fun at It

The Potential Drawbacks of Entrepreneurship LO 3B With these potential rewards, entrepreneurship also presents risk and uncertainty.Individuals who prefer the security of a steady paycheck, a comprehensive benefits package, a two-week paid vacation, and the support of a corporate staff probably should not go into business for themselves. Entrepreneurs may experience: 3 / 4

Copyright © 2016 Pearson Education, Inc. Chapter 1, Page 4 Uncertainty of Income: The entrepreneur is the last one to be paid, as employees must be paid first. While it is possible for an entrepreneur to earn more working for themselves, their may end up earning less.Risk of Losing Your Entire Investment Long Hours and Hard Work Lower Quality of Life Until the Business Gets Established High Levels of Stress. Refer to Figure 1.4 for Sources of Stress for Small Business Owners Complete Responsibility Discouragement

Behind the Boom: What’s Feeding the

Entrepreneurial Fire LO 4 Some of the most significant factors that have led to this age of entrepreneurship include: • Entrepreneurs as heroes • Entrepreneurial education • Demographic and economic factors • Shift to a service economy • Technological advancements • Independent lifestyles

• The Internet, cloud computing, and mobile marketing. Cloud computing:

Internet-based subscription or pay-per-use software services that allow business owners to use a variety of business applications, from database management and inventory control to customer relationship management and accounting. (Refer to Figure 1.5) • International opportunities. Micromultinationals are small companies that operate globally from their inception.Consider using You Be the Consultant: “College: The Ideal Place to Launch a Business” at this point.

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