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Chapter 6

RSM100Y1 Chapter 6 Notes

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Rotman Commerce
Michael Khan

RSM100Y1 Textbook Notes Chapter 6  An entrepreneur is a risk taker in the private enterprise system, a person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business.  Entrepreneurs differ from small-business owners because one of their major goals is expansion and growth.  Entrepreneurs combine their ideas and drive with money, employees, and other resources to create a business that meets a need.  Managers are employees who direct others to reach an organization’s goals whereas entrepreneurs’ main responsibility is to use the resources of their organizations to accomplish their goals.  One major trait that differs from managers is the willingness to take on the risks of starting a new venture.  Classic entrepreneur: a person who sees a business opportunity and sets aside resources to gain access to that market.  Serial entrepreneur: a person who starts one business, runs it, and then starts and runs more businesses, one after another.  Social entrepreneur: a person who sees societal problems and uses business principles to develop new solutions.  People become entrepreneurs for one or more of four major reasons: o Being Your Own Boss  One of the biggest reasons for becoming an entrepreneur.  Being your own boss means having to make all the important decisions.  You are also engaged in most (if not all) of the communication related to your business (with suppliers, customers etc.). o Financial Success  Entrepreneurs often believe they have an idea for a better product and want to be the first to bring it to the market to reap the financial rewards.  Entrepreneurs believe they won’t achieve their greatest success if they are working for someone else. o Job Security  While working for someone your job is never fully safe. Recent trends to cut costs by downsizing have resulted in many losing their jobs.  Having your own business doesn’t guarantee job security, but research has found that most newly created jobs come from small businesses. o Quality of Life  Entrepreneurship is a good career option for people who want to improve their quality of life.  Results in independence and some freedom to decide when, where, and how to work.  Lifestyle entrepreneur: a person who starts a business to reduce work hours and create a more relaxed lifestyle.  First thing to do when you want to start your own company is to do some research about the environment where you want to do business. o See if the economy, for example, is staled or booming, you may find opportunities.  Four additional factors that support and expand opportunities for entrepreneurs: o Globalization  Entrepreneurs market their products abroad and hire international talent.  Most Canadian small businesses have international sales (mostly in the U.S.).  The role of entrepreneurs is growing in most industrialized countries, in newly industrialized countries, and in the emerging free-market countries in central and eastern Europe.  Worldwide, +9% of adults are starting or managing a new business.  Thailand (27%), Peru (26%), Colombia (23%) and more. o Education  In the past 20 years, more educational opportunities have been offered for would-be entrepreneurs.  Courses can be taken in university/college about entrepreneurship.  Many schools offer opportunities to intern with a start up or to work toward launching a company.  Many other organizations have opened in recent years to teach entrepreneurship to young people. o I.e. The Kauffman Center for Entrepreneurial Leadership.  Students who major in entrepreneurship or take entrepreneurship courses are 3X more likely to start their own business or to help someone else to start a business.  Record number of college students are launching their own businesses – while still in school.  I.e. Ryan Dickerson and the Rylaxer. o Information Technology  Computer and communications technologies have merged, and their costs have dropped (helps entrepreneurs compete with big firms).  Information technolofy helps entrepreneurs to work quickly and efficiently and to provide immediate and helpful customer service.  Also increases sales and gives businesses a professional image.  Homepreneurs: entrepreneurs who run home-based businesses.  A recent study said that +90% of successful companies now use at least one social media tool.  Social networking is more useful to small firms because in smaller organizations, there is more room for innovation because it requires fewer processes to adopt. o Demographic and Economic Trends  Two groups that are most likely to start their own businesses are:  Immigrants to NA  People between the ages of 55 and 64  Older entrepreneurs have access to their retirement funds and home equity for financing.  Many boomers plan to work after retiring for two reasons:  Just to keep working  The want to add to their income and savings  Demographic trends such as the aging of the population, the growth of ethic groups, and two-income families lead to new markets for products and services.  I.e. food that caters to ethic preferences.  Successful entrepreneurs often have parents who were entrepreneurs – or who had dreams of starting their own business.  Successful entrepreneurs are likely to be: o Curious o Passionate o Self-motivated o Honest o Courageous o Flexible  Especially important traits for successful entrepreneurs are: o Vision  Entrepreneurs generally begin with a vision (an overall idea for how to make their business idea a success).  It is then followed with energy and excitement.  True entrepreneurs can turn situations in which accidental discoveries are made, into opportunities.  I.e. discovery of penicillin. o High Energy Level  Entrepreneurs work long and hard to make their visions a reality.  Most spend 70 hours a week on their new business (includes start-up design, marketing, sales, and finances).  This time can affect their other job (if they have one) and their personal life and thus, they need a high level of energy if they want to succeed. o Need to Achieve  Entrepreneurs have a strong desire to do well, which helps them to enjoy the challenge of reaching difficult goals.  Also promotes a commitment to personal success. o Self-Confidence and Optimism  Entrepreneurs believe they can succeed, and their self- confidence and excitement leads to optimism in others.  Entrepreneurs see opportunities where others see danger. o Tolerance for Failu
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