Entrepreneur Review PDF

Who is the Entrepreneur?(Lesson 1) Schumpeter (1957): Entrepreneurs revolutionize production by utilizing new inventions or technologies, creating new products or new methods of production. Forsyth (1993): Entrepreneurs start and manage enterprises, taking full control and assuming risks. Scaborough...

Who is the Entrepreneur?(Lesson 1) Schumpeter (1957): Entrepreneurs revolutionize production by utilizing new inventions or technologies, creating new products or new methods of production. Forsyth (1993): Entrepreneurs start and manage enterprises, taking full control and assuming risks. Scaborough & Zimmerer (1992): Entrepreneurs create new businesses, confront risks and uncertainties, and aim for profit and growth by identifying opportunities and gathering resources. Characteristics of an Entrepreneur (Scaborough & Zimmerer, 1992) Desire for Responsibility: Take personal responsibility for their ventures and prefer control over resources. Preference for Moderate Risks: Take calculated risks by spotting market opportunities. Confidence in Success: Optimistic and confident in their ability to succeed. Desire for Immediate Feedback: Constantly seek performance feedback. High Energy Levels: Have higher energy levels essential for intense efforts in their ventures. Future Orientation: Entrepreneurs focus on seeking future opportunities, prioritizing what can be achieved tomorrow over what has been done yesterday. Skill at Organizing: Building a company “from scratch” resembles piecing together a giant jigsaw puzzle. Entrepreneurs excel at assembling the right people to accomplish tasks effectively. Achieving One’s Goals: Achievement is the primary motivating force for entrepreneurs; money serves merely as a means of “keeping score” of their accomplishments—a symbol of success. High Degree of Commitment: Successfully launching a company demands total commitment from entrepreneurs, helping them navigate business-threatening mistakes and obstacles. Flexibility: True entrepreneurs possess the ability to adapt to the evolving demands of their customers and their businesses. COMPETENCIES THAT ARE MORE CHARACTERISTIC OF SUCCESSFUL THAN OF AVERAGE ENTREPRENEURS. Personality 1. Initiative: Does things before being asked or forced by events. 2. Assertiveness: Confronts problems with others directly. Tells others what they have to do. Achievement Orientation 3. Sees and acts on opportunities: Seizes unusual opportunities to start a new business, obtain financing land, work space, or assistance. 4. Efficiency Orientation: Looks for or finds ways to do things faster or at less cost. 5. Concern for high quality work: States a desire to produce or sell a top or better quality product or service. 6. Systematic planning: Breaks a large task down into subtasks or subgoals. Anticipates obstacles. Evaluates alternatives. 7. Monitoring: Develops or uses procedures to ensure that work is completed or that work meets standards of quality. Commitment to Others 8.Commitment to work contract: Makes a personal sacrifice or expands extraordinary effort to complete a job. CREATIVITY AS A PREREQUISITE TO INNOVATION The Philippine Trade Training Center’s “Entrepreneurship Development Program” highlights that creativity is essential for innovation. While often conflated, creativity and innovation have distinct meanings: creativity is the ability to generate new ideas or concepts, focusing on the inherent skill rather than the act of creation itself. The creative process Involves the evolution of ideas through various stages, where imaginative individuals generate, nurture, and successfully develop concepts. A model of this process is illustrated in Figure 1.1. Various Labels have been applied to stages in the creative process, but most social scientist agree on five stages that is labeled as idea germination, preparation, incubation between invention and innovation as shown in figure 1.2 below: Innovation is the process of translating an idea into a practical application, as depicted in Figure 1.3. It involves persistence in refining product design and services, developing the market, securing financing, and planning operations. ENTREPRENEURIAL OPPORTUNITIES (Lesson 2) Longenecker (1997) outlines three sources of entrepreneurial opportunities: 1. Startup and Buyout Opportunities: Starting a business from scratch often appeals due to the potential for innovation, leveraging ideal conditions (like location and resources), and avoiding the limitations of existing firms. 2. Franchising Opportunities: This involves operating a business model established by another entity. 3. Family Business Opportunities: These arise from inheriting or taking over family- owned enterprises. Starting a business from scratch is a common approach in entrepreneurship, often chosen for several reasons: - To launch a new type of business based on innovative products or services. - To capitalize on favorable conditions like location, equipment, and personnel. - To steer clear of the challenges and commitments associated with existing companies. In terms of ideas for startups, they can be categorized into three types: Type A Ideas: New markets that offer products or services not currently available. Type B Ideas: Innovations in technology or processes. Type C Ideas: Improvements on existing functions, which represent the majority of startup concepts. The sources of startup ideas may come from several possibilities: Personal experiences Hobbies Accidental discovery Deliberate search Longenecker (1997) outlines reasons for buying an existing business instead of starting one from scratch: 1. It reduces uncertainties and unknowns associated with launching a new venture. 2. It allows the acquisition of a business with established operations and relationships. 3. It may provide an opportunity to buy at a bargain price compared to starting anew. To find businesses for sale, potential buyers can seek information from suppliers, distributors, trade associations, and bankers. Important steps include: - Investigating and evaluating the business. - Consulting professionals. - Understanding the reasons for the sale. - Examining the business’s financial condition. Franchising is a marketing system involving a legal agreement between a franchisor and a franchisee, where the franchisee operates according to the franchisor’s terms. Well- known franchises include Jollibee, McDonald’s, and Pizza Hut. The franchisor provides the franchisee with branding, products, and operational guidelines. There are three types of franchising systems: 1. System A: The producer (franchiser) grants a franchise to a wholesaler (franchisee), common in the soft drink industry. 2. System B: The wholesaler acts as the franchisor, typically seen in supermarkets. 3. System C: The producer is the franchisor, and the retailer is the franchisee, prevalent in food chains like McDonald’s and Burger King. Advantage of Franchising Buying a franchise attracts entrepreneurs for the following reasons: Formalized training Financial assistance Proven marketing methods Managerial assistance Quicker start-up time Overall lower failure rates Disadvantages of Franchising On the other hand, franchising has its limitations. They are as follows: The cost of a franchise (royalty payments, promotion costs, inventory and supply cost, and building and equipment costs). Restriction growth Loss of independence Evaluating Franchise Opportunities When the entrepreneur does decided which franchise he would like to buy, the next thing he would have to do is to evaluate the franchise company by undertaking the following: Locating a potential franchise Global franchising opportunities Investigating the franchise New Code of Ethics in Franchising Revised by the International Franchise Association (IFA) in 1994 Key Principles for Franchisors: 1. Conduct business professionally, truthfully, fairly, and responsibly. 2. Use ethical practices in dealings with franchises, consumers, and government. 3. Comply with applicable laws. 4. Offer equal opportunities to minorities, women, and disabled persons. Standards of Conduct for Franchise Relationships: 1. Franchise sales and disclosure 2. Good faith dealing 3. Franchise advisory councils and franchisee associations 4. Termination of franchise agreements 5. Expiration of franchise agreements 6. Transfer of franchise 7. System expansion 8. Supply sources 9. Disputes 10. Discrimination Considered a living document for continuous improvement in ethics Family Businesses Examples of Family Businesses: - Ayala Corporations  - Concepcion Industries - JG Holdings (Gokongwei) - Benpress (Lopez) - Fortune Tobacco (Tan) - SM Group of Companies Definition: - A family business involves ownership or active participation by two or more family members in its operations. Characteristics: - Each family business consists of both familial and business elements. - It has distinct members, goals, and values, which may overlap between the family and the firm. Reasons for the Existence of Families and Business 1. Family Concerns Nurturing Development 2. Business Concerns Survival Profitability The culture of a family business includes various beliefs and behaviors. Cultural patterns in a family business can be identified in three key areas: 1. The actual business operations. 2. The family dynamics. 3. The governance, including the board of directors. - This concept was explained by Longenecker (1997). Hisrich (1998) suggests several ways to generate business ideas: 1. Personal Interests or Hobbies: Explore things you enjoy, as others may also enjoy them. 2. Identify Limitations: Look for gaps or problems in existing products or services. 3. Fill a Need: If something is missing in the market, create a solution. 4. Wish List: Consider what you wish existed in the market but isn’t available. 5. Innovate with Existing Products: Think of new ways to use current products or offer services, such as bringing services directly to workplaces. Managing Small Business: (Lesson 3) Benefits and Opportunities Before starting a business, potential entrepreneurs should consider the benefits of small business ownership: 1. Control Over Your Business: Entrepreneurs gain independence, allowing them to make decisions, take risks, and compete effectively. 2. Full Potential: Small businesses serve as a platform for self-expression and personal growth, challenging entrepreneurs to utilize their skills. 3. Unlimited Profits: While profit isn’t always the main goal, the ability to retain earnings is crucial for business sustainability. 4. Contribution to Society: Entrepreneurs play a vital role in the economy, and their work positively impacts society, fostering customer loyalty over time. Drawbacks of Entrepreneurship: Uncertainty of income: No guaranteed regular income; financial instability is common. Risk of losing invested capital: Low survival rate of small businesses may lead to loss of savings. Psychological impact: Business failure can negatively affect the entrepreneur’s mental well-being. Lower quality of life until the business is established: Starting a business requires working more than eight hours a day. Often results in spending long hours away from family or loved ones. Complete responsibility: Entrepreneurs must make decisions quickly. These decisions can impact the success or failure of the business, which can be stressful for some. Key factors causing for business success or failure include: 1. Business Cycles: Small businesses are highly affected by economic fluctuations, particularly during recessions. 2. Inflation: They are vulnerable to sustained price changes. 3. Interest Rates: Rising interest rates can diminish their net worth, especially when debt is significant. 4. Access to Capital: Small businesses often struggle to secure loans compared to larger companies. 5. Government Regulation: Compliance burdens are heavier for small businesses, which lack the resources of larger firms. Specific Reasons for Business Failures - Management incompetence - Lack of experience - Poor financial control - Lack of capital - Lax customer credit policies - Overinvesting in fixed assets - Inappropriate location - Failure to plan - Lack of a strategic plan - Lack of inventory control - Improper attitudes Recommendations to Avoid Failures - Acquire in-depth knowledge of the business - Engage in thorough planning - Set clear goals and objectives - Analyze and interpret financial statements - Seek professional assistance - Establish networking and linkages for support Entrepreneurial network relationships fall into key categories: Business: Connections with suppliers, clients, and subcontractors. Collegial: Peer networks from trade or professional societies. Professional: Ties with financial, legal, and consulting experts. Organizational: Relationships with former employers, universities, corporations, and government bodies. Social: Networks from professional associations, conferences, and community groups. Other: Family and friendship ties. Fraternal organizations, trade groups, or union memberships also strengthen these networks. SUCCESS STORIES OF ENTREPRENEURS (LESSON 4) WILLIAM WRIGLEY: Early Career: Started as a full-time soap salesman for his father in his teens. Transition to Gum: Used chewing gum as a premium to sell Wrigley’s Scouring Soap, discovering its potential. Brand Creation: Launched his own chewing gum brands in 1892, including Lottaa and Vassar. Product Introductions: Introduced Juicy Fruit in 1893 and Wrigley’s Spearmint shortly after. Market Challenges: Faced competition from the “chewing gum trust” formed by the six largest companies in 1899. Sales Strategy: Personally sold products and understood customer needs, using premiums like lamps and scales to encourage merchants to stock his gum. Advertising Pioneer: Recognized the importance of advertising, using newspapers, magazines, and outdoor posters to promote his brand. Product Focus: Concentrated on producing and advertising Wrigley’s Spearmint, which showed promising results. International Growth: Successfully transformed the company into an international business. MILTON S. HERSHEY: Birth: Milton S. Hershey was born on September 13, 1857, in Pennsylvania. Early Career: Began as a printer’s apprentice, later became a candy maker. Experienced early business failures. Lancaster Caramel Company: Established in 1886, where he used fresh milk for candy production. Chocolate Production: Sold his caramel business in 1900 and focused on chocolate, opening a large manufacturing plant in 1905. Innovation: Pioneered mass production of milk chocolate. Community Development: Built a thriving community with schools, parks, and amenities. Legacy: Continued investing in the community during the Great Depression; emphasized responsibilities of wealth and quality of life. BILL GATES: Name: William H. Gates Birthdate: October 28, 1955 Birthplace: Seattle, Washington Position: Chairman and chief software architect of Microsoft Corporation Company Overview: Microsoft is a global leader in software and internet technologies. Early Interest: Started programming at age 13. Education: Attended Harvard University; developed BASIC for the MITS Altair microcomputer. Microsoft Founding: Co-founded Microsoft in 1975 with Paul Allen, leaving Harvard to pursue it full-time. Vision: Believed in the importance of computers in homes and offices. Investments: Over $4 billion invested in research and development. Published Work: Author of “Business @ the Speed of a Thought,” discussing technology’s role in solving business problems. Gabrielle Bonheur “Coco” Chanel: Full Name: Gabrielle Bonheur “Coco” Chanel Born: 1883, Saumur, France Early Life: Orphaned, raised by aunts who taught her to sew Career Start: Began designing hats in 1908; opened first millinery shop in Deauville Influential Patrons: Mingle with wealthy friends like Etienne Balsan and Arthur Capel Fashion Revolution: Introduced minimalist garments during World War I, opposing Belle Époque styles Business Closure: Closed during German occupation in World War II; reopened in 1954 Notable Designs: - Tricot sailor dress - Little black dress - Women’s pants Signature Accessories: Pearls, quilted handbags, two-tone shoes Chanel No. 5: Launched in 1921, greatly contributing to her wealth and legacy LEVI STRAUSS: Born: February 26, 1829, in Buttenheim, Bavaria. Immigration: Moved to the U.S. in 1847 with family. Early Career: Worked in a dry-goods business in New York. Move to San Francisco: Relocated during the Gold Rush to sell supplies to miners (1853). Founded: Established Levi Strauss & Co. Innovations: Collaborated with tailor Jacob Davis to create riveted denim overalls, known as blue jeans. Community Involvement: Active in San Francisco’s Jewish community and supported various charitable causes. Business Transition: Stepped back from daily operations in the late 19th century. Wealth: Amassed a fortune of nearly $6 million. Philanthropy: Bequeathed significant funds to education and social welfare, leaving a legacy of integrity and generosity.