Kathleen

Kathleen R.
R. Allen
Allen

LAUNCHING NEW
VENTURES – AN
ENTREPRENEURIAL
APPROACH, 7E

© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Understanding Entrepreneurship
Chapter 1

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service or otherwise on a password-protected website for classroom use.
 Chapter Objectives
Define entrepreneurship.
Explain the role of entrepreneurship in
economic growth.
Distinguish entrepreneurial ventures from
small businesses in terms of their purpose
and goals.
Describe the evolution of entrepreneurship.
Identify today’s broad trends in
entrepreneurship.
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
 Definition of Entrepreneurship
“The process by which individuals—either on their
own or in organizations—pursue opportunities
without regard to the resources they currently
control.” ~ Stevenson
Entrepreneurship is a mindset that is:
◦ Opportunity-focused
◦ Risk taking
◦ Innovative
◦ Growth-oriented

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service or otherwise on a password-protected website for classroom use.
 The Role of
1.1

Entrepreneurship in the Economy

Not a linear process:
o Phase 1: Find a problem in a market or industry;
research to understand the industry, potential
market, and any issues the entrepreneur might face.
o Phase 2: Validate the hypotheses the entrepreneur
has made about the customer, solution and proposed
business model.
o Phase 3: Business design, planning & execution.

Affected by external variables:

◦ Economic environment, competition, new laws and
regulations, labor supply, sources of capital, and more
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
 Figure 1.1-
The Entrepreneurial Process

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service or otherwise on a password-protected website for classroom use.
 1.1a Economic Growth
Technological innovation is critical.
The entrepreneur identifies new
customer segments or needs, existing
needs not satisfied, or new ways of
manufacturing and producing.
Technology lowers the cost of
information and transportation.
Globalization means goods and services
can be traded anywhere in the world.
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service or otherwise on a password-protected website for classroom use.
 Figure 1.2- Entrepreneurship
and Technological Change

New methods of Technol

Emerging ogical
Unsatisfied
manufacture
New needs
Opportunity
Resources
Venture&
segments Change
distribution

Entrepreneur Customer Needs Economic Growth

© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
 1.1b New Industry Formation
New industries are born when
technological change produces a novel
opportunity that an enterprising
entrepreneur seizes.
Industry life cycles: birth, growth, decline

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service or otherwise on a password-protected website for classroom use.
 Figure 1.3-
The Industry Life Cycle

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service or otherwise on a password-protected website for classroom use.
 1.1c Job Creation
U.S. Small Business Administration (SBA)
defines a small business as one with
fewer than 500 employees.
Small businesses represent 99.7 percent
of all employers and pay more than 45
percent of the total U.S. private payroll.
Small businesses have generated 65
percent of net new jobs over the past 15
years.
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service or otherwise on a password-protected website for classroom use.
 Table 1.1- Number of Employer
Firms by Startups & Non-Startups

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service or otherwise on a password-protected website for classroom use.
 1.1c Job Creation
Economic development in three categories
of countries:
◦ Factor-driven economies
 Created out of necessity and rely on unskilled labor
and extraction of natural resources
◦ Efficiency-driven economies
 Growing and in need of improving their production
processes and quality of goods produced
◦ Innovation-driven economies
 The most advanced and where business compete
based on innovation and entrepreneurship
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service or otherwise on a password-protected website for classroom use.
 The Nature of
1.2

Entrepreneurial Startups
An entrepreneurial venture brings
something new to the marketplace.
Three primary characteristics:
1. Innovative
2. Value-creating
3. Growth-oriented

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service or otherwise on a password-protected website for classroom use.
 Risk and the
1.2a

Entrepreneurial Venture
Risk is an inherent part of the
entrepreneurial process.
What changes over time with more
information and validation from the
market is the impact of that risk.
The fuzzy front end occurs prior to launch.
◦ The entrepreneur must gather information
about the industry and market, test the
business model, and determine the conditions
under which she will move forward.
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service or otherwise on a password-protected website for classroom use.
 Figure 1.4-
Risk and Impact in Startups

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service or otherwise on a password-protected website for classroom use.
 Risk and the
1.2a

Entrepreneurial Venture
It is not clear what prompts someone to
become a budding entrepreneur.
◦ Push – the mechanism that drives someone to
become a nascent entrepreneur because all
other opportunities for income appear tor be
absent or unsatisfactory.
◦ Pull – the mechanism that attracts an
individual to an opportunity and creates a
“burning desire” to launch a business and
capture a market.
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service or otherwise on a password-protected website for classroom use.
 Risk and the
1.2a

Entrepreneurial Venture
Many entrepreneurs drop out of the
process as they move from intention to
preparation and execution.
Many also give up before the new business
makes the transition to an established
firm.
The SBA reports that about half of new
business will survive 5 years or more, and
1/3 will survive 10 years or more.
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service or otherwise on a password-protected website for classroom use.
 1.2b New Business Failure
One reason for failure is that
entrepreneurs come up with a solution
looking for a problem; they have not
identified a real need in the market.
Sometimes the solution does not differ
from what is already in the market.
Sometimes the business model is not
tested.

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service or otherwise on a password-protected website for classroom use.
 1.2b New Business Failure
The firms most likely to survive over the
long term are those that display superior
levels of reliability & accountability in
performance, processes and structure.
Failure is a fact of life which must be dealt
with.
The vital issue for an entrepreneur is to
minimize the cost of possible failure to
recover quickly.
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
 Brief History of the
1.3

Entrepreneurial Revolution
United States was founded on the
principle of free enterprise.
The term entrepreneur didn’t come into
popular use until the 1980s.

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service or otherwise on a password-protected website for classroom use.
 The Decades of
1.3a

Entrepreneurship
1960’s – bigger was better
1970’s – three trends that would forever
change the face of business
◦ Macroeconomic turmoil, international
competition & technical revolution
1980’s – business in terrible shape
1990’s – The Information Age
2000’s – The Knowledge Economy

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service or otherwise on a password-protected website for classroom use.
 Figure 1.5-
The Decades of Entrepreneurship

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service or otherwise on a password-protected website for classroom use.
 1.4 Current Entrepreneurial Trends
Digital Anonymity
Return to Domestic Manufacturing & Craft
Big Data
The Lean Startup Movement

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service or otherwise on a password-protected website for classroom use.
 1.5 Looking Ahead
Part One: Entrepreneurship & Opportunity
◦ Chapter 1: Understanding Entrepreneurship
◦ Chapter 2: Preparing for the Entrepreneurial Journey
◦ Chapter 3: Recognizing and Shaping an Opportunity
Part Two: Feasibility Analysis (Ch 4-9)
Part Three: Business Design (Ch 10-15)
Part Four: Planning for Growth and Change (Ch
16-17)

© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
 New Venture Action Plan
Read broadly about entrepreneurs and new
ventures to get ideas for what makes a
successful venture
Interview an entrepreneur to better
understand the entrepreneurial mindset
Research new trends, particularly in an
industry in which you’re interested

© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.