Chapter 1: The Foundations of Entrepreneurship PDF

Chapter 1: The Foundations of Entrepreneurship Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved Learning Objectives (1 of 3) 1. Define the role of the entrepreneur in business in the United States and around the world. 2. Describe the entrepreneurial profile....

Chapter 1: The Foundations of Entrepreneurship Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved Learning Objectives (1 of 3) 1. Define the role of the entrepreneur in business in the United States and around the world. 2. Describe the entrepreneurial profile. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Learning Objectives (2 of 3) 3-A. Describe the benefits of entrepreneurship. 3-B. Describe the drawbacks of entrepreneurship. 4. Explain the forces that are driving the growth of entrepreneurship. 5. Explain the cultural diversity of entrepreneurship. 6. Describe the important role that small businesses play in our nation’s economy. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Learning Objectives (3 of 3) 7. Put failure into the proper perspective. 8. Explain how an entrepreneur can avoid becoming another failure statistic. 9. Discover how the skills of entrepreneurship, including critical thinking and problem solving, written and oral communication, teamwork and collaboration, leadership, creativity, and ethics and social responsibility, apply to every career choice and every avenue of life. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. The World of the Entrepreneur (1 of 2) Every year U.S. entrepreneurs launch more than 6.6 million new businesses. Entrepreneurial spirit - the most significant economic development in recent history. Globally, nearly one in eight adults is actively engaged in launching a business. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Figure 1.1 Entrepreneurial Activity across the Globe Source: Based on data from Donna Kelley, Slavica Singer, and Mike Herrington, Global Entrepreneurship Monitor 2016/17 Global Report, Global Entrepreneurship Monitor, 2017, pp. 39–102. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Table 1.1 Entrepreneurship-Friendly Nations Which nations provide the best environment for cultivating entrepreneurship? A recent study ranked 137 countries on the quality of the entrepreneurial ecosystem in each nation using the Global Entrepreneurship and Development Index (GEDI), an index that includes a variety of factors that range from the availability of capital and workforce quality to attitudes toward entrepreneurs and technology available. The maximum GEDI score is 100. GEDI Score, Top Ten Countries GEDI Score, Bottom Ten Countries 1. United States 83.4 128. Venezuela 13.0 2. Switzerland 78.0 129. Nicaragua 12.7 3. Canada 75.6 130. Malawi 125 4. Sweden 75.5 131. Guinea 12.1 5. Denmark 74.1 132. Burkina Faso 11.9 6. Iceland 73.5 133. Bangladesh 11.8 7. Australia 72.5 134. Mauritania 11.6 8. United Kingdom 71.3 135. Sierra Leone 11.4 9. Ireland 71.0 136. Burundi 11.4 10. Netherlands 67.8 137. Chad 8.8 Source: Global Entrepreneurship Index, The Global Entrepreneurship and Development Institute, 2017, https://thegedi.org/global-entrepreneurship-and-development-index/. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. The World of the Entrepreneur (2 of 2) Global Entrepreneurship Monitor (GEM) study: – 12.6% of the U.S. population aged 18 to 64 is engaged in entrepreneurial activity. – 68% of working adults around the world perceive entrepreneurs as having high status. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. What is an Entrepreneur? Entrepreneur: ‒ One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Figure 1.2 Percentage of Start-Up Companies in the United States Source: Business Dynamics Statistics Data Tables: Firm Age, U.S. Department of Commerce, U.S. Census Bureau, 2017, www.census.gov/ces/dataproducts/bds/data_firm.html. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Characteristics of Entrepreneurs (1 of 2) Desire for responsibility Desire for immediate Preference for moderate feedback levels of risk High level of energy Willingness to break the Competitive rules Future orientation Self-reliance – Opportunity Confidence in their ability entrepreneurs to succeed – Necessity Determination entrepreneurs – Serial entrepreneurs Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Characteristics of Entrepreneurs (2 of 2) Skilled at organizing Flexibility Value achievement over Resourcefulness money Willingness to work hard High degree of Tenacity commitment Tolerance for ambiguity Creativity Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Figure 1.3 Most Important Qualities of an Entrepreneur Source: Ryan Westwood, “What Traits Do We Need to Succeed as Entrepreneurs?” Forbes, September 4, 2015, www.forbes.com/sites/ryanwestwood/2015/09/04/what-traits-do-we-need-tosucceed-as-entrepreneurs/#4d7f537f8ff4. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Entrepreneurship One characteristic of entrepreneurs stands out: diversity! Anyone – regardless of age, race, gender, color, national origin, or any other characteristic – can become an entrepreneur (although not everyone should). Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Benefits of Entrepreneurship The opportunity to: – Create your own destiny. – Make a difference. – Reach your full potential. – Reap impressive profits. – Contribute to society and to be recognized for your efforts. – Do what you enjoy and to have fun at it. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Drawbacks of Entrepreneurship Uncertainty of income Risk of losing your entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Discouragement Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Feeding the Entrepreneurial Fire (1 of 3) Entrepreneurs as heroes Entrepreneurial education Demographic factors Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Figure 1.4 Global Entrepreneurial Activity by Age Group Source: Based on Zoltán J. Ács, László Szerb, and Erkko Autio, Global Entrepreneurship Index, 2016, Global Entrepreneurship and Development Institute, p. 2. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Feeding the Entrepreneurial Fire (2 of 3) Entrepreneurs as heroes Entrepreneurial education Demographic factors Shift to a service economy Technology advancements Independent lifestyle The Internet, cloud computing, and mobile marketing Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Figure 1.5 U.S. Online Retail Sales Source: Based on data from Forrester Research, 2016. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Feeding the Entrepreneurial Fire (3 of 3) Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technology advancements Independent lifestyle The Internet, cloud computing, and mobile marketing International opportunities – micromultinationals Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. The Cultural Diversity of Entrepreneurship (1 of 4) Young entrepreneurs Women entrepreneurs Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Figure 1.6 Characteristics of Women-Owned Businesses Source: Based on data from the 2016 State of Women-Owned Businesses Report, American Express OPEN, 2016, p. 3. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. The Cultural Diversity of Entrepreneurship (2 of 4) Young entrepreneurs Women entrepreneurs Minority-owned enterprises Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Growth of New Entrepreneurs by Minority Group Figure 1.7 Percentage of New Entrepreneurs in the U.S. by Minority Group, 1996 and 2016 Source: Based on data from Robert Fairlie, Arnobio Morelix, and Inara Tareque, The Kauffman Index of Startup Activity, Kauffman Foundation, August 2017, p. 31. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. The Cultural Diversity of Entrepreneurship (3 of 4) Young entrepreneurs Women entrepreneurs Minority-owned enterprises Immigrant entrepreneurs Part-time entrepreneurs Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. The Cultural Diversity of Entrepreneurship (4 of 4) Home-based businesses Family businesses – Family-owned business Copreneurs Corporate castoffs Encore entrepreneurs Retiring baby boomers Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Figure 1.8 Entrepreneurial Activity in the U.S. by Age Group Source: Based on data from Robert W. Fairlie and Inara Tareque, 2017 Kauffman Index of Startup Activity, Kauffman Foundation, 2017, p. 34. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. The Power of Small Businesses (1 of 2) Small businesses: – Make up 99.7% of the 28.8 million businesses in the United States – Employ 48% of the nation’s private sector workforce – Create more jobs than big businesses ▪ Created 63% of net new jobs over the last decade ▪ 5% of small companies create 67% of net new jobs in the economy – Gazelles Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Figure 1.9 Small Businesses by Industry Source: Based on data from “Statistics of U.S. Businesses, U.S. and States, NAICS Sectors, Small Employment Sizes,” United States Census Bureau, 2013, www.census.gov/econ/susb/. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. The Power of Small Businesses (2 of 2) Small businesses: – Produce 48.5% of the nation’s private GDP. – Account for 47% of business sales. – Create 16 times more patents per employees than large companies. ▪ Zipper, FM radio, the laser, air conditioning, the escalator, the lightbulb, the personal computer, automatic transmission, and many more! Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Putting Failure into Perspective Entrepreneurs are not paralyzed by the prospect of failure. Failure: a natural part of the creative process. Successful entrepreneurs learn to fail intelligently. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Figure 1.10 Small Business Failure Rate Source: Based on data from “Survival Rates of Establishments, by Year Started and Number of Years Since Starting, 1994–2016,” Business Employment Dynamics, U.S. Bureau of Labor Statistics, www.bls.gov/bdm/entrepreneurship/bdm_chart3.htm. Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Avoiding the Pitfalls of Small Business Failure (1 of 2) Know your business in-depth Build a viable business model – and test it Use lean start-up principles Know when to pivot Develop a solid business plan Understand financial statements Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Avoiding the Pitfalls of Small Business Failure (2 of 2) Manage financial resources Understand financial statements Build the right team Learn to manage people effectively Set your business apart from the competition Maintain a positive attitude Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Developing Career Skills Critical thinking and problem solving Written and oral communication Teamwork and collaboration Leadership Creativity Ethics and social responsibility Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Conclusion Entrepreneurs: – Are an important part of the free enterprise system – Are a diverse and talented group of people – Represent a cross-section of society as a whole – Are able to enhance the profitability of their businesses through acquiring additional knowledge and experience Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved. Copyright Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved.