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Chapter 5

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Global Management Studies
GMS 200
Masoomeh Moharrer

WHAT IS ENTREPRENEURSHIP?  Entrepreneurship • Strategic thinking and risk-taking behaviour that results in the creation of new opportunities for individuals and/or organizations.  Entrepreneurs • Risk-taking individuals who take actions to pursue opportunities and situations others may fail to recognize or may view as problems or threats.  Entrepreneurs are … • Founders of businesses that become large-scale enterprises. • People who:  Buy a local franchise outlet  Open a small retail shop  Operate a self-employed service business • People who introduce a new product or operational change in an existing organization. CHARACTERISTICS OF ENTREPRENEURS: • Internal locus of control: entrepreneurs believe that they control their own destiny; they are self-directing and like autonomy. • High energy level: entrepreneurs are persistent, hard working, and willing to exert extraordinary efforts to succeed. • High need for achievement: entrepreneurs are motivated to act individually to accomplish challenging goals; they thrive on performance feedback. • Tolerance for ambiguity: entrepreneurs are risk takers; they tolerate situations with high degrees of uncertainty. • Self-confidence: entrepreneurs feel competent, believe in themselves, and are willing to make decisions. • Action-oriented: entrepreneurs try to act ahead of problems; they want to get things done quickly and do not want to waste valuable time. • Desire for independence: entrepreneurs want to be independent; they are highly self-reliant and want to be their own boss rather than to work for others. Background Experiences: • Parents were entrepreneurs or self-employed. • Families encouraged responsibility, initiative, and independence. • Have tried more than one business venture. • Have relevant personal or career experience. • Become entrepreneurs between 22 and 45 years of age. • Have strong interests in creative production and enterprise control. • Seek independence and sense of mastery.  Reasons for women and member of visible minorities becoming entrepreneurs: • Out of necessity (necessity-based entrepreneurship) • Gain economic independence. • Provide a pathway to career success that may be blocked otherwise.  Common myths about entrepreneurs: • Entrepreneurs are born, not made. • Entrepreneurs are gamblers. • Money is the key to entrepreneurial success. • You have to be young to be an entrepreneur. • You must have a degree in business to be an entrepreneur. WHAT IS SPECIAL ABOUT SMALL BUSINESSES?  Small businesses …ones with 100 or fewer employees, independently owned and operated. • 48 percent of the private labour force works in small businesses. • Are established by: • Starting a new business. • Buying an existing business. • Buying and running a franchise.  Internet Entrepreneurship • The Internet offers numerous entrepreneurial opportunities. • Nearly 85% of small businesses are conducting business over the internet.  Family businesses …owned and financially controlled by family members. • In US, family businesses account for 78% of new job creation • 60 % of the nation’s employment. • Can provide an ideal business situation. • Problems unique to family businesses: • Family business feud  when members of the controlling family get into disagreements about work responsibilities, business strategy, operating approaches, finances, or other matters.  Succession problem  transferring leadership from one generation to the next. The succession plan should include:  Procedures for choosing or designating the firm’s new leadership.  Legal aspects of any ownership transfer.  Any financial and estate plans relating to the transfer.  Small businesses have a high failure rate––60 to 80 percent of new businesses fail in their first five years of operation. Reasons for new business failure include poor cash flow, uncontrolled growth, etc.  Reasons for small business failures: • Lack of experience • Lack of expertise • Lack of strategy and strategic leadership • Poor financial control – not keeping track of numbers • Growing too fast
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