by Robert Hisrich Michael P.Peters

The Nature & Importance of Entrepreneurs

Chapter One

(American Entrepreneur)

(English entrepreneur)

Do the profile of these people fit your perception of the career of an entrepreneur?

What does it takes to start and operate a successful business

To understand this better, learn about

Historical Evolution Of Entrepreneurship Earliest Period Middle Ages 17th Century 18th Century 19th & 20th Century

• Go-Between is Marco Polo• Sign contract with a money person(Venture

capitalist) to sell his goods• Loan the Merchant Adventurer at a 22.5% rate• VC passive risk bearer • MA took active role in trading- active risk

bearer (Physical, emotional)• MC completes trip successfully profits were

divided- VC taking 75% & MA 25%

Earliest Period

• Actor & person who managed large production projects

• Individual didn’t take risks but only managed the project using the resources provided

• Usually by the Govt of the Country

Middle Ages

• Re-emergent connection of risk with entrepreneurship developed

• E person who entered into contractual agreement with the government to perform a service or to supply products

17th Century

• Person with capital was differentiated from the one who needed capital

• E was distinguished from the capital provided(Venture capitalist)

• One reason for differentiation was the industrialization occurring throughout the world

• Invention developed during this time were reaction to the changing world

18th Century

VC- professional money manager who makes risk investments from a pool of equity to obtain high ROR on

the investments

• E were viewed from Economic Perspective• ‘E’ organizes & operates an enterprise for

personal gain• Pays prices for material consumed in the

business, for land, personal services he employs, capital he requires

• 20th Century- Notion of an E as an innovator was established

19th & 20th Century

• An Entrepreneur (ahn’tra pra nur) is a person who recognizes a viable idea for a business product or service and carries it out. Any person (any age) who starts and operates a business is an entrepreneur.

Process of creating something new with value by devoting the necessary time and

effort, assuming the accompanying financial, psychological, and social risks; &

receiving the resulting rewards of monetary and personal satisfaction

The process of initiating a business venture, organizing the necessary

resources and assuming the associated risks and rewards

WHO ARE ENTREPRENEURS?

• Start with a vision

• Unhappy with current job

• Bring resources for new venture

• Hardworking

• Distinguishable

New business idea

Business plan

Legal form

Finance resources

STARTING AN ENTREPRENEURIAL FIRM

one who brings resources, labor, material and other assets into combinations that make their value greater than before and also who introduces changes, innovations and a new order

such a person is driven by certain forces- need to obtain or attain something, to experiment, to accomplish, or perhaps to escape the authority of others

an entrepreneur is a threat, an aggressive competitor

same entrepreneur may be an allay, source of supply, a customer who creates wealth for others, as well as finds better ways to utilize resources, reduce waste & produce jobs others are glad to get

Economist :

Psychologist

One businessman

Another Businessman

All definitions of entrepreneurship includes

• Newness, organizing, creating, wealth and risk taking

• Entrepreneurs are found in all professions

Def stresses on Four basic aspects 1. Creation process– creating something new value to entrepreneur & audience for which it is developed

2. Entrepreneurship requires the devotion of the necessary time and effort

time & effort to create something new & make it operational

3. Risk take a variety of forms, depending on the effort of the entrepreneur

4. rewards of being entrepreneur– independence- personal satisfaction- for profit entrepreneurs, monetary reward also comes into play

What then causes a person to make this difficult decision ?

Poor sales

Lack of capital

Lack of managerialtalent

Intensecompetition

FinancialRisk

Emotionalrisk

• Individuals have difficulty bringing their ideas to the market & creating a new venture

• Yet entrepreneurial decisions have resulted in several new businesses through out the world

• Despite recession- inflation- high interests rate, lack of infrastructure-economic uncertainty & high probability of failure

Deciding to become an entrepreneur by leaving present activity

Changing from present life style

Work Environment

Disruption

Change EnvironmentNot easy to leave

career Two work environments1. R&D : individuals develop

new product ideas & leave to form their own companies when these ideas are not accepted by their employers

2. Marketing : become familiar with customers unfilled needs & wants- start enterprise

Disruption• Negative force – retired• Relocted due to a move

by other family member in a dual-career family

• Who have been fired• 12% new business

listings in the yellow pages increased during layoff period

• Educational degree-MBA• Student who is not

promoted after receiving an MBA-frustrated & start new company

WHEN INDIVIDUAL PERCEIVES THAT FORMING A NEW ENTERPRISE IS BOTH

What causes this personal disruption to result in a new company being formed ?

Desirable Possible

Aspects of a situation that make it desirable to start a

new company

Factors making It possible to create a new venture

Desirability of New Venture Formation

Cultural

SubCultrual

Family

Teachers

Peers

American culture places a high value on beings one’s own bossIn some countries establishing a new business is not are not as highly valued-failure might be disgrace

No culture is totally for or against entreprenshuipSilicon valley- subcultures support & even promote- forming of new company –as one of the best occupations

High % of the founders of Co’s had fathers OR mothers who valued independence

Encouragement by teachers- influence to regard E as a desirable & viable career path

No “E” courses a person takes-increases probability of starting Venture

Standford is in the Silicon Meeting place where E & potential entrepreneurs can discuss

ideas-problems & solutions spawns more new companies than an area where these are not available

Possibility of New Venture Formation

Government

Background

Marketing

Finance

Role Models

Provides infrastructure to help/support a new ventureGive roads-communication systems-transportation system-utilities- & economic stability – TAX RATE can suppress company formation-since Co wont have money to start & grow

E must have necessary background-Education, previous business experience – skills needed to form & manage a new enterpriseEntrepreneurs are not born: they develop

Presence of market of sufficient size- must also be a level of marketing know-how to put together the best total package of product, price, distribution & promotion needed for successful product launchingA Co. is more easily formed when the driving force is more from market demand than a technology push

Financial resources must be readily availableMost start ups comes from personal savings-credit-friends-relatives, there is often a need for additional seed capital

Most powerful influence in making Co seem possible see someone else succeed makes it easier to picture yourself engaged in a similar activityFrequent comment of E “if that person could do it, so can I”

The future of Entrepreneurship

• In spite of the difference conceptual perspectives, there are common aspects: risk taking, creativity, independence & rewards

• The future for “E” is bright – we are living in the age of entrepreneurship

• Educational institutes

• Government

• Society

• Corporation

• Universities & colleges offering courses in ‘E’• E education in Europe is also growing •1970’s – 90’s 400 universities offering E courses

• Support as tax incentives, buildings, roads and a communication system to facilitate this creation process• Understands that new enterprises create jobs & increase economic output in the area

• Society support of entrepreneurship will continue •U.S entrepreneurial processes are considered honorable and prestigious pursuits • major factor of this societal approval is media-played powerful role by reporting on the entrepreneurial spirit– articles in newspapers- uplifts the image of the entrepreneur & focuses on their contributions to society

•Large companies special form of interests in entrepreneurship – intrapreneurship- in the future•Companies want to create more new business

through intrapreneurship