The primary focus of a small business owner is expansion, growth, and income. On the other hand, the main focus of an entrepreneur is to develop a business that satisfies an unmet need in the market.
An entrepreneur takes the risk in coming up with a novel approach to provide goods and services, to differentiate him or herself from the rest of the business people in the market.
Innovation and creativity are the main keystones for any entrepreneur as this is what determines whether the customer will prefer your goods or those of other existing businesses. Additionally, almost every business or industry has some level of concentration and hence competition that may be a barrier to entrepreneurs. However, with creativity and innovation, it is easier to provide the same differentiated products and services and end up gaining a competitive advantage over the competitors.
An entrepreneur and entrepreneurship
An entrepreneur is defined as an individual who begins or manages a business at considerable risk to make a profit.
Entrepreneurship refers to starting and running a business at a risk, to meet a certain need and earn a profit.
Five (5) main characteristics of a successful entrepreneur
- Creative and resourceful
- Optimistic and future-oriented
Creative and resourceful – Entrepreneurship begins with an idea, which should not obvious as the main intention is to set yourself different from the rest. What will your potential customers find from the business that is not in the others, or which is better packaged than competitors? Without creativity, an entrepreneur may find it hard to establish a new business in any industry. “The type of training and education that entrepreneurs need depends on the nature of the start-up business”.
Passionate – Sometimes things do not happen as we expect them to happen. However, what drives you to keep improving your business even after making no to minimal sales the first time you enter the market. A passionate entrepreneur understands that what they are doing and the intrinsic motivation attached to the business is greater and priority to income.
Motivated – The entrepreneur will need to find what motivates them to set goals and objectives and hold on until they achieve them.
Optimistic and future-oriented – An entrepreneur needs to focus on long term objectives, moving forward, and should know what exactly they want.
Persuasive – The entrepreneur will need people, be it customers or business partners. Persuasiveness will drive that sale and give them the confidence to approach potential sponsors and partners.
Challenges of entrepreneurship / challenges that entrepreneurs face when starting up.
- Lack of or insufficient financing for instance due to the high cost of starting a business of choice.
- The challenge of team-building as entrepreneurs often lack the experience of managing a team, which pose a challenge of picking a team.
- Dealing with the unknown as entrepreneurship is purely all about risk-taking
- The Challenge of making decisions because the business solely depends on the entrepreneur’s strategies.
What is entrepreneurship?
- pursuit of opportunity beyond resources controlled
- risk taking
What are the phases of the entrepreneurship process?
- Phase 1: Find a problem in a market or industry; research to understand the industry, potential market, and any issues the entrepreneur might face
- Phase 2: Validate the hypotheses the entrepreneur has made about the customer, solution and proposed business model.
- Phase 3: Business design, planning & execution.
What benefits to society does entrepreneurship provide?
- economic growth
- new industry formation
- job creation
- also, entrepreneurs usually don’t run the businesses they start like small businesses do (don’t manage company basically)
What external variables affect entrepreneurship?
- Economic environment competition,
- new laws and regulations
- labor supply
- sources of capital
Three primary characteristics of entrepreneurial startups as opposed to small businesses as a whole?
- value creating
- growth oriented
What is the fuzzy front end?
- occurs prior to launch
- the entrepreneur must gather information about the industry and market
- test the business model
- determine the conditions under which she will move forward
- AMOUNT OF INVESTMENT IS FUNCTION OF PROBABILITY OF SUCCESS, VALUE OF SUCCESS, AND COST OF FAILURE
What are push & pull factors?
- 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.
Characteristics of a “Solopreneurship”
- Some home-based businesses are hobby business, consulting or free-lance businesses.
- But many others are entrepreneurial ventures that compete in the same arena as large, brand-name businesses.
- Technology has made it possible to do business from anywhere.
- According to the SBA, 51% of small businesses are home-based.
Characteristics of the Serial/Portfolio Entrepreneur
- For some entrepreneurs, it’s the thrill of starting a business that they like, and once the business is established, they move on to create another.
- An entrepreneur who owns a stake in several ventures is called a “portfolio entrepreneur.”
Characteristics of Nonprofit Entrepreneur
- Nonprofit, socially responsible businesses typically focus on educational, religious or charitable goals.
- They seek tax-exempt status so that they can attract donations.
- Contrary to popular belief, nonprofit businesses can and should make a profit, but that profit must stay within the company rather than be distributed to owners.
Why do new businesses fail?
- 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 offered
- sometimes business model is not tested
- The firms most likely to survive over the long term are those that display superior levels of reliability & accountability in performance, processes and structure
What are some current entrepreneurial trends?
- digital anonymity (snapchat)
- return to domestic manufacturing (cheaper & now 3D printing)
- big data
- lean startup movement
Myths about Entrepreneurship
- It takes a lot of money to start a business.
- It takes a great idea.
- The bigger the risk, the bigger the reward.
- A business plan is required for success.
- Entrepreneurship is for the young and reckless.
- Entrepreneurship cannot be taught.
- Some existing organizations encourage entrepreneurship to remain competitive
- Opportunistic Model: wait for a leader or project to emerge
- Enabler Model : Google (part of the culture)
- Advocate Model: assign ownership to an individual or department
- Producer Model: “skunkworks” (Lockheed Martin and IBM)
Challenges & Opportunities of Entrepreneurship
-Entrepreneurs are more likely to come from poor or middle-class families than from wealth
- Historically, entrepreneurs have been used to doing without
- Entrepreneurs create opportunity from unmet needs or unsolved problems, and gather resources to exploit that opportunity
- no formula for success
What are things you can do to aid yourself in entrepreneurship?
- find a mentor
- build a network (strong ties & weak ties)
- learn about entrepreneurs
- understand personality & business preferences
- improve or acquire critical skills
What is an industry?
- environment in which a new business operates
- grouping of businesses that intact in a common environment as part of a value chain or distribution channel for a particular good
- defined by product or service
Difference between market & industry
- market is defined by customers
- industry defined by product or service
Why is it important to study the industry in which a new venture will operate?
- It represents the external environment in which the business will be operating.
- Can the entrepreneur make a profit significant enough to make the effort worthwhile?
- return on investment important
- Not easy to identify where an industry begins and ends
- Cultures may be different globally for the same industry
- Your business could cross more than one industry
- Must gather and synthesize an enormous amount of information
Sources of Primary Industry Data
- Industry observers and analysts
- Suppliers and Distributors
- Employees of key firms in the industry
- Professionals from service organizations
- Trade shows
The industry is the context in which
an entrepreneur’s business will operate
The value chain consists of
all the companies that contribute to the development and distribution of products and services
- end of value chain has highest risk & highest cost of doing business
The first contact with customers should
be about understanding problems
What is important in gathering demand data?
- ask a question that seeks an outcome “how do you want to use a communication device?” (no boundaries on customer)
How do you draw conclusions from marketing research?
- Entrepreneurial decision making is more art than science
- Data gathered must be analyzed, synthesized, and result in some conclusions about market feasibility
- Organize the data into meaningful categories
- Threats and challenges can be identified
One of the weakest portions of any feasibility analysis or business plan is
the competitive analysis
- Entrepreneurs often underestimate or ignore the competition
- They will underestimate what it takes in resources and skills to establish a presence in the market
first, identify the _ market & then
- identify the competition
What are the 3 types of competitors?
- direct (same customers with same resources)
- indirect/substitute (same customers with different resources… starbucks v. grocery store)
- emerging/potential (grocery store that might develop a coffee shop inside)
What is bad competition?
- great performance & happy customers
- good business is a bad competitor
How should you deal with competition?
- The best way to stave off competition is to provide meaningful differentiation in your solutions to customer needs (niche market)
- Continue market research after launch; it should be an ongoing process over the life of the business
- Focus on developing relationships with key people in the supply chain, and key customers (Business relationships take time to develop; once trust is in place, its difficult for a competitor to overcome it)
3 categories of knowledge
- intellectual capacity: tacit knowledge
- intellectual assets: explicit knowledge that is documented in physical form
- intellectual property: legal rights
What is a trade secret? Examples?
any formula, pattern, device or compilation of information which is used in one’s business, and which gives an opportunity to obtain an advantage over competitors who do not know or use it
- customer info, chemical formulas, marketing strategies
Why can a trade secret be beneficial over other IP rights?
- Broader scope of knowledge and information protected potentially
- Does not require disclosure
- Exclusive rights not limited in time
What are the elements of a trade secret violation claim? What are the remedies?
- Actually a secret?
- Reasonable protection measures used?
- Improper disclosure or acquisition?
- attorney fees
What is the inevitable disclosure doctrine?
- can’t use trade secrets from former employees
What is a trademark?
- symbol, logo, word, design, (sound, color, fragrance, business establishment design) that is used to identify a business or a product in commerce
What are the functions of a trademark?
- Indicates the source or origin of goods or services
- Assures consumers of the quality of goods bearing the mark
- Creates business goodwill and brand awareness
Life of a trademark?
- as long as actively using it & pay renewal fee
- if turns a generic term, no long trademarked
- can have common law trademark tho if ur first to use it
Hierarchy of Trademarks
- fanciful (no other meaning before, Xerox)
- arbitrary (common meaning does not relate to use)
- suggestive ( indicates the nature of the products or services used, but requires imagination to identify the characteristic)
- descriptive (have to show second meaning to be registrable)
Examples of TRADEMARK infringement
- infringement: likely to cause confusion
What are copyrights? Life?
- original works, which protects the form in which it appears, NOT the idea (so the code, but not the idea for the app)
- life of author + 70 years (95 for anon)
- rights: reproduction, preparation of derivative works, distribution, public performance, public display, digital transmission performance
What is not copyrightable?
- unauthorized sound recordings
Trademarks have to provide _ while copyrights do not
- notice of a potential infringement to an infringer
- access (can be presumed)
- defendant’s work “substantially similar”
- virtually identical in cases of thin copyright
- actual damages plus profits
- statutory damages
What are ethics?
- the moral code by which we live and conduct business
- most dilemmas not huge scandals
- Avoiding criminal acts is not the same as acting ethically
- Being ethical is about doing the right thing all the time – and being proud of acting honorably
- But the business environment has many “gray areas
4 approaches to ethical issues
- Dogmatism: “I simply will never lie or cheat or steal.”
- Egoism: “Everyone needs to look out for himself.”
- Relativism or situational: “When in Rome, do what the Romans do.”
- Subjectivism: “Ethics is simply a point of view.”
When do ethical issues arise?
- conflicts of interest
- survival tactics
- responding to incentives
- stakeholder pressure
- pushing the legal limit
- learning from real life dilemmas
Questions for developing code of ethics
- Will the actions taken result in the greatest good for all parties involved?
- Will the actions respect the rights of all parties?
- Are the actions just? Will anyone be hurt?
- Would I be proud of my actions if reported in the news?
What are some ways to become socially responsible?
- Target disadvantaged markets
- Employ disadvantaged individuals
- Procure products and supplies from emerging economies, from environmentally conscious sources
- Create products or services that have social value
- Donate products, services or revenues
- Donate expertise
- Produce for social good
What are core values?
- These are the fundamental believes a company holds about business and life
- Based on the personal values and beliefs of the founders
What is purpose?
- This is your company’s fundamental reason to be in business
- Not necessarily a unique characteristic of the business
- What is crucial is that the purpose be authentic, must mean what it says
- A properly conceived purpose will be broad, enduring and inspiring
What is a mission?
A mission is an overriding objective that mobilizes everyone to achieve it