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Chapter 5

Chapter 5 - Entrepreneurship and Small Business Management.docx

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Global Management Studies
GMS 200
Franklin Ramsoomair

Chapter 5: Entrepreneurship and Small Business Management ● Entrepreneurship – creating new business by strategic thinking and taking risk ● Entrepreneur – individuals who establish businesses on their own o willing to pursue opportunities in situations others view as problems or threats o founders of businesses that become large-scale enterprises o respond quickly to changes o show greater flexibility o try to use economies of scale, but it’s difficult ● 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, hard working, 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 takes; they tolerate situations with high degree 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 bosses, not work for others. o Flexibility: Entrepreneurs are willing to admit problems and errors, and are willing to change a course of action when plans aren’t working. ● Necessity-Based Entrepreneurship: takes place because other employment options don’t exist ● Agency theory states that individuals try to make as much money as possible. Using this theory, entrepreneurs try to cut costs wherever possible. ● Entrepreneurs have to remember that 50% of small businesses fail in the first 4 years of operation. ● Tritech, Dell and Microsoft are small companies. ● National Bank of Canada, General Motors, and 3M are large corporations. ● Small Business o Are ones with or 100 or fewer employees. o Independently owned and operated o 48 percent of all private sector employees work in small businesses. o The World Bank estimates that one of the strongest factors in the growth of any nations GMP (Gross National Product) is small business. o Small business owners can react quickly to changes. o Nearly 85% of small businesses are conducting business over the internet. ● Small businesses fail because: o lack of experience o lack of expertise o lack of strategy and strategic leadership o poor financial control o growing too fast o insufficient commitment o ethical failure ● Franchising o The style of franchise grants the franchisee the right to sell a widely recognized product or brand: product and trademark franchising. o The style of franchise grants the franchisee the right to market the product and trademark and use a complete operating system: business format franchising. o Franchises account 41% for percent of all retail trade. ● Family Business – owned and controlled by members of a family ● Family Business Feud – occurs when family members have major disagreements over how the business should be done ● Succession Problem – the issue of who will run the business when the current head leaves ● Succession Plan – describes how the leadership transition and related financial matters will be handled ● Intrapreneurship – when you have an organization and you appoint people who are working to come up with new products within the organization ● Intrapreneur – a person within a corporation who is given the freedom and resources to initiate projects, business ventures, etc. ● What are Skunk works? An experimental laboratory or department of a company or institution, typically smaller than and independent of it
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