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Chapter 5

Chapter 5 - The Nature of Entrepreneurship.doc

4 Pages
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Department
Global Management Studies
Course Code
GMS 200
Professor
Sui Sui

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CHAPTER 5 – ENTREPRENEURSHIP AND S MALL BUSINESS THE N ATURE OF ENTREPRENEURSHIP - Entrepreneurship: is risk-taking behaviour that results in new opportunities ⋅ Who are the Entrepreneurs? - Entrepreneur: is willing to pursue opportunities in situations others view as problems or threats ⋅ Characteristics of Entrepreneurs o Internal locus of control: entrepreneurs believe that they are in control of their own destiny; they are self-directing and like autonomy o High energy level: entrepreneurs are persistent, hardworking, and willing to exert extraordinary efforts to succeed o High need for achievement: entrepreneurs are motivated to accomplish challenging goals; they thrive on performance feedback o Tolerance for ambiguity: entrepreneurs are risk takers; they tolerate situations with high degrees of uncertainty o Self-confidence: entrepreneurs feel competent, believe in themselves, and are willing to make decisions o Passion and action orientation: entrepreneurs try to act ahead of problems; they want to get things done and not waste valuable time o Self-reliance and desire for independence: entrepreneurs want independence; they are self-reliant; they want to be their own boss, not work for others o Flexibility: entrepreneurs are willing to admit problems and errors, and to change a course of action when plans aren’t working - Entrepreneurs have unique backgrounds and personal experiences o Childhood experiences and family environment – entrepreneurs with parents who were entrepreneurial and self-employed are encouraged of responsibility, initiative, and independence o Career or work history – entrepreneurs who try one venture often go on to others o Entrepreneurs tend to emerge during certain windows of opportunity, most start aged 22-45 o May have unique and deeply embedded life interests – strong interest in creative production, enjoy product initiation, working on the unknown, and finding unconventional solutions ⋅ Diversity and Entrepreneurship - Necessity-based entrepreneurship – they start new ventures b/c they have few or no other employment and career options - The number of women who are self-employed rose at a rate of over 8 percent annually ENTREPRENEURSHIP AND S MALL BUSINESS - Small business – has fewer than 100 employees, independently owned and operated, and doesn’t dominate its industry, spend a lot of money on R&D - Microenterprises: refers to organizations with under 10 employees - Medium-sized Enterprises: refers to organizations with 100-500 employees - Reasons for small businesses o Wanting to be your own boss and control your future o Going to work for a family-owned business o Seeking to fulfill a dream - How to get Started o Buy an existing one, or buy and run a franchise – where a business owner sells to another the right to operate the same business in another location - Internet Entrepreneurship o The internet creates an array of entrepreneurial possibilities – e-commerce ⋅ Family Businesses - Family business: is owned and controlled by members of a family - Ideal situation – everyone working together, sharing values and a common goals, and knowing that what they do benefits the family - Family business feud – when members of the controlling family get into disagreements about work responsibilities, business strategy, operating approaches, finances, or other matters; can be between spouses, among siblings, between parents and children - Succession Problem: is the issue of who will run the business when the current head leaves o About 30% of family firms survive to the second generation, 12% survive to the third, and only 3% are expected to survive beyond that - Succession Plan: describes how the leadership transition and related financial matters will be handled o A succession plan should include at least procedures for choosing or designating the firm’s new leadership, legal aspects of any ownership transfer, and any financial and estate plans relating to the transfer ⋅ Why Small Businesses Fail - A high portion of businesses fail within their first five years of operation - The government counts any business that closes, whether it’s due to the death or retirement of an owner, sale to
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