Introduction to Entrepreneurial Management PDF

Entrepreneurial Management Module 1 By: Leilani Coloso-Dusaban, DBA University of St. La Salle Bacolod College of Business and Accountancy MK204 Entrepreneurial Management MK204 Entrepreneurial Management This course introduces marketing management students to the basi...

Entrepreneurial Management Module 1 By: Leilani Coloso-Dusaban, DBA University of St. La Salle Bacolod College of Business and Accountancy MK204 Entrepreneurial Management MK204 Entrepreneurial Management This course introduces marketing management students to the basics of Entrepreneurship and the managerial function of an entrepreneur. This course evaluates the risks, rewards and benefits of doing business versus seeking employment. It helps students recognize and determine the steps necessary to design and develop a startup for-profit business and to open and operate a small business enterprise. It describes the basic forms of small business ownership and identifies the necessary financial competencies needed by the entrepreneur. This course will further allow students to explores the creation and management of start-up businesses. It concentrates on initial strategy, location, financing, staffing, daily activities, controls and documentation.  Learning Objectives  Understood the concept of entrepreneurship and differentiated the entrepreneur’s role compared with a business person  Analyzed the process of evolution of entrepreneurship and the different learned individuals who contributed to the theory and practice of entrepreneurship.  Assessed the risks, benefits and rewards of entrepreneurship. The Concept of Entrepreneurship  Entrepreneurship started in France after the French Revolution. It was the start of capitalism and feudalism (20th century)  The word entrepreneur was coined by Jean Baptiste Say – a renowned French economist  It promotes doing something different (new) rather than making the existing better.  Joseph Schumpeter believed that entrepreneurship provides a dynamic disquilibria brought about by the innovative entrepreneur that brings a healthy economy. Entrepreneurship  By definition:  Economists –  “...consists in doing things that are not generally done in the ordinary course of business routine; it is essentially a phenomenon that comes under a wider aspect of leadership. --Cantillon, 1725  “entrepreneurship, rigorously defined, refers to the creation of a new economic entity centered on a novel product or service or, at the very least, one which differs significantly from products or services offered to elsewhere in the market” --Joseph schumpeter,1934 The Evolution of Entrepreneurship Contributor Contribution to Entrepreneurship and/or and Year of The Entrepreneurship Thought Contributed Contribution Jean Baptiste Say Refers to the shifting of economic resources out of an area of 1800 lower and into higher productivity and greater yield. Carl Menger Involves in obtaining information, calculation, an act of will and 1871 supervision. Joseph Schumpeter The finding and promoting new combinations of productive 1910 factors. Harvey Liebenstein The reduction of organizational inefficiency. 1970 Israel Kirzner The identification of market arbitrage opportunities. 1975 Albert Shapiro Involves a kind of behavior that includes initiative taking, 1975 organizing, and recognizing social mechanism to turn rowena ginafe p. vargas, mba resources and situations to practical account and the acceptance of risks and failures. The Evolution of Entrepreneurship Contributor Contribution to Entrepreneurship and/or and Year of The Entrepreneurship Thought Contributed Contribution W. Ed Mc Mullan and The building of new growth for organizations. Wayne A. Long 1990 Howard Stevenson The pursuit of opportunity beyond the resources currently 1992 under one's control. Jeffrey Timmons The ability to create and build a vision from practically nothing. 1994 Peter Drucker The process of starting one's own, new and small business. It 1998 is also the process of innovation and new venture creation through four major dimensions - individual, organizational, environmental, process - aided by the collaborative networks in government, education and institutions. Robert Hisrich Involves the creation process, requires the devotion of the 2001 necessary time and effort, assumes the accompanying financial, psychic and social risks and receives the resulting rowena ginafe p. vargas, mba rewards of monetary and personal satisfaction and independence. The Role of Entrepreneurship in Economic Growth Economic Growth  Is the increase in value of goods and services produced by an economy.  It is measured as the percent rate of increase in real gross domestic product or GDP.  In economics, economic growth refers to growth of potential output (production) at full employment, which is caused by growth in demand, or output. I. Contributions of Entrepreneurship to the Economy  Entrepreneurship employs the various resources present in the economy.  Entrepreneurs need manpower for the business operations.  It is said that Entrepreneurship is the backbone of the economy.  An entrepreneur is in their ability to innovate goods and services.  An entrepreneur is their ability to gain international popularity and prestige for their country.  Their willingness to take risk, risk that society will otherwise be hesitant to take.  Although many people do not recognize it, entrepreneurs also profoundly inspire budding and potential entrepreneurs. Theories that Explain how Economies Grow  Theories of economic growth maybe classify into three broad groups:  Consists of theories viewing economic growth as a natural and inevitable process.  Explains economic development as a rational process brought about when men respond to opportunities in the environment to promote their own self-interest or material welfare.  Views economic development as a result of economically irrational yet psychologically and sociologically satisfying activities of enterprising men. GENERAL EXPLANATIONS 1. Law of nature - in 1932, Spengler explained economic development by likening a culture or society to a living organism that grows, lives, and dies; it is a part of life and is something to be expected. 2. Invisible Hand – 18th century, Adam Smith advanced the principle. According to Smith, any society including a very under developed one can be made to prosper with little or no intervention from government because economic is brought about as a natural course of things. 3. Cultural Diffusion – Anthropologist introduced the idea that over the ages and across the years, societies have been involved in different social experiments in various economic, political, religious or social aspects of life. GENERAL EXPLANATIONS 4. Racial Heritage – The belief that one race is superior to another on the basis of color, build and other genetic heritage has been around for a long time. 5. Climate conditions – Ellsworth Huntington, wrote the most of the great civilizations flourished in the tropics or the far north. He maintained that the most stimulating climate for man involves an average temperature range between winter and summer of 40 to 60 F with moderate rainfalls and frequent mild storms. 6. Challenge of the natural environment – advanced by A,J. Toynbee, it traces economic and cultural changes to a combination of natural (geographic) phenomena and socio-psychological pressure of stimuli. ECONOMIC EXPLANATIONS: 1.Technology improvements and division of labor – Adam Smith, believed that the intervention of better machines and equipment brought about increased productivity, which together with specialization or division of labor made economic growth possible. 2. Neo-classical growth model – develop by Robert Solo and Paul Samuelson in the 1950’s, this model assumes that countries use their resources efficiently and that there are diminishing returns to capital and labor increases. 3. Endogenous Growth Theory – included a theory of technological advancement. These models also incorporated a new concept of human capital, the skills and knowledge that make workers productive. ECONOMIC EXPLANATIONS: 4. Big Push Theory – one popular theory in the 70’s was that of the “Big Push” which suggested that countries needed to jump from one stage to another through a virtuous cycle in which large investments in infrastructure and education coupled to private investment would move the economy to a more productive stage. 5. Population Changes – according to David Ricardo, population increases eventually lead to stagnation or a final stationary state o the economy. However, according to John Maynard Keynes, the capitalist or entrepreneurs are most likely to invest their resources when there is demand for the commodity. 6. Entrepreneurship – economist recognized that for production to take place, someone had to mobilize all resources ( land, labor and capital ). SOCIO - PSYCHOLOGICAL EXPLANATIONS: 1. Sociological Factors – sociologist explain economic growth in terms of social or cultural values, norms and other structures that differentiate modern and traditional economies. Modern Societies Traditional Societies a. Unemotional a. Emotional b. Interested in themselves b. Interested in the general welfare of the community c. Able to relate to others c. Relate to others in (social roles as buyers, in terms of unique sellers, qualities qualities middlemen, etc.) SOCIO - PSYCHOLOGICAL EXPLANATIONS: d. Known for accomplishments d. Known for who they are (status, position in the organization, etc. ) e. Able to relate to others e. Tie-up economic relationship (such as specific employer – employee, economic terms, defined manufacturer and limited by a labor contract) customer, etc. ) and with all sorts of other relationship involving kinship, political, religious and other social structures. 2. Psychological Factors – identified positively as one, which enterprising individuals seek to fulfill in the need to achieve. As a product of individual human behavior, that is, of a person’s decision thoughts and actions. What is Entrepreneurship?  The act of building and creating a business enterprise.  A process of doing something new (CREATIVE) and something different (INNOVATIVE) for the purpose of creating wealth for the individual and adding value to society. Idea PITCHING  Choose 3 ideas  Prepare short elevator pitch 2 mins  What is the idea  What need does it address  Why will the market buy it  How will you sell it  Where will you source raw mat, where will you sell  Who is the TM rowena ginafe p. vargas, mba CATEGORIES OF ENTERPRISES Micro-Enterprise Asset Size: less than P3 Million Small Enterprise Asset Size: Over P3M to P15M Medium Enterprise Asset Size: Over P15M to P100M Large Enterprise Asset Size: Over P100M ASSET SIZE EXCLUDES THE VALUE OF LAND Benefits of Entrepreneurship Creates employment Improves quality of life Contributes to more equitable distribution of income and therefore eases social unrest Risks of Entrepreneurship Risk of failure Unpredictable business conditions  Risks of Entrepreneurship Long hours of work Unwanted or unexpected responsibilities Rewards of Entrepreneurship Have unlimited opportunity to make money Rewards of Entrepreneurship Overcome challenges and feel fulfilled Be Creative Entrepreneurs may be categorized into the following:  1. Small Business Entrepreneur  A small business is independently owned and operated and doesn’t have plans to expand into a large company. According to the U.S. Small Business Administration (SBA  Local restaurant that you take visitors to when they come to town  Favorite coffee shop Entrepreneurs may be categorized into the following:  2. Large Business Entrepreneur  A large business entrepreneur refers to the leaders of large companies and corporations such as Jollibee and Cebu Pacific. These types of entrepreneurs are often C-level executives like a CEO.  Its goal is to expand by developing new products or services — or even  buying smaller companies  — to meet consumer  demand. Entrepreneurs may be categorized into the following:  3. Startup Entrepreneur  A startup entrepreneur is the founder of a scalable company. Startups are often technology focused and are either bootstrapped or rely on funding from outside investors.  Examples of startups include Canva, Airbnb, Square, and Uber, to name a few. Entrepreneurs may be categorized into the following:  4. Solo Entrepreneur  A solo entrepreneur, or solopreneur as they’re often referred to, is someone who operates a one-person business. Similar to a small business entrepreneur in that they are independently owned, a solopreneur doesn’t work with partners. These types of entrepreneurs often run service- based businesses like consulting, coaching, or freelancing.  freelancers currently make up 36% of the workforce and the personal coaching industry is valued at over $1 billion.  A great example of a solopreneur is Inge Hunter, an Instagram marketing specialist. Entrepreneurs may be categorized into the following:  5. Innovator Entrepreneur  Apple. Google. Amazon. Tesla. What word comes to mind when you think of these companies? Innovation.  The brains behind these brands — Steve Jobs, Larry Page, Jeff Bezos, and Elon Musk — are examples of innovator entrepreneurs.  But what exactly makes them innovators? And how can you tell if you’re an innovator entrepreneur?  To start, ask yourself these questions:  Do you have a product or service that’s unlike anything else that’s on the market?  Are you solving a problem with your product or service?  Are you addressing a market or customer that no one else is?  If you find yourself nodding along to these questions, then you may be an innovator entrepreneur with a groundbreaking business on the horizon. Entrepreneurs may be categorized into the following:  6. Imitator Entrepreneur  These types of entrepreneurs take an existing business, product, or service, and make it better.  Many entrepreneurs fall into this category. There can only be a few true innovators, after all — most businesses are usually an iteration of something that already exists..  Whitney Wolfe Herd, the founder of Bumble. After co- founding the dating app Tinder, she went on to create a new dating app that addressed a different market and focused on empowering women. Today, Bumble has around 45 million active users and is valued at over $3 billion. Entrepreneurs may be categorized into the following:  7. Social Entrepreneur  This type of entrepreneur strives to make a difference with their company, on either a small scale or a global one.  Leaders at nonprofits are great examples of Celina Reyes-Alejandrino and Maan Aguila of Simula PH social entrepreneurs. Entrepreneurs may be categorized into the following:  8. Buyer Entrepreneur  Rather than building a business, a buyer entrepreneur either buys or funds another business to help them grow.  This type of entrepreneur typically has extensive experience building companies throughout their career and uses that expertise to improve the companies they buy.  Warren Buffet, the CEO of Berkshire Hathaway, is a buyer entrepreneur. Entrepreneurs may be categorized into the following:  9. Hustler Entrepreneur  They are driven, highly-motivated, and hustle hard to get to the top. These types of entrepreneurs are often a natural when it comes to sales and will pitch their product or service to anyone and everyone they meet.  Spanx founder Sara Blakely is the definition of a hustler entrepreneur. The self-made billionaire built Spanx from the ground up — from creating the first prototype of the now-famous shapewear to personally reaching out to major retailers to get them to carry her clothing line.  Are you the type of person who doesn’t flinch at a rejection email, always has your elevator pitch ready to go, and will stop at nothing to get your business in front of the right people? Entrepreneurs may be categorized into the following:  10. Researcher Entrepreneur  They have in-depth expertise about the product or service they offer and are motivated to share that knowledge with their customers.  Christy Harrison, a registered dietician, certified intuitive eating counselor, and author, is a great example of a researcher entrepreneur. Harrison uses her background and expertise to offer private coaching and online courses around an anti-diet perspective. Through her membership business, Harrison is able to use her research-driven offerings to educate her community about topics that are important to them.  Entrepreneurial Process Opportunity Decide to Start a Define and Analyze Economics of New New business New Ventures Businesses LAUNCH Attracting Legal form of Business Stakeholders and Org. & taxation Financing Resources Planning issues GROWTH Grow and Operate the business HARVEST Become Cash Sell the Go Public Liquidate Cow Business