Chapter5: The Challenges of Starting a Business Notes

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International Business
INTB 1202
Ronald S.Thomas

Chapter 5: The Challenges of Starting a Business 5.1 What is an Entrepreneur? A. entrepreneur- someone who identifies a business opportunity and assumes the risk of creating and running a business to take advantage of it a. 3 characteristics i. innovation: thinking up new product/service ii. running a business: setting up business to make profit iii. risk taking: working under uncertainty b. famous entrepreneurs i. Larry Page & Sergey Brin: founders of Google ii. Pierre Omidyar: founder of eBay iii. Marcia Kilgore: founder of Bliss Spa, Soap and Glory, & FitFlops B. starting your own business a. Small Business Administration (SBA)- helps prospective owners set up small businesses, get financing, & manage operations b. you should be: i. self-starter ii. compatible/can work with people iii. good decision maker iv. physical & emotional stamina v. organized, good at planning vi. strong drive vii. aware it can affect family C. entrepreneurs vs. small business owners a. entrepreneurs: innovators, start companies to create new/improved products b. small business owners: “lifestyle business”; start businesses to provide income 5.2 The Importance of Small Business to the US Economy A. small business- independently owned & operated, little influence in industry, employs fewer than 500 people a. generate about 50% of our GDP b. famous small business founders i. Sam Walton: founder of Walmart ii. Steve Case: AOL c. inc. economic development i. create jobs ii. spark innovation iii. provide opportunities for financial success & independence B. job creation a. ½ of US adults self-employed/work for small businesses b. small businesses hire/fire more frequently than big businesses c. strong economy encourages start-ups & expansion C. innovation a. small businesses develop more patents/employee b. discovers better ways to do old things i. ex: Jeff Bezos (founder of Amazon) sold books on Internet D. opportunities for women & minorities a. incr. in # of businesses owned by women & minorities E. small businesses helping big businesses a. supply components i. ex: provide car parts to automobile companies b. provide outsourcing (hire themselves out to help w/ special projects/business functions) i. ex: big company hiring small one to manage health care benefits c. sales agents i. ex: local sporting goods stores selling Adidas and Nike 5.3 What Industries are Small Businesses In? A. industry- group of companies that compete w/ one another to sell similar products a. types of industries (sectors) i. goods-producing: primary purpose is to produce tangible goods 1. ex: manufacturing & construction (2 biggest), agriculture 2. 20% of businesses in US 3. small business manufacturers: EcoScraps, Reveal Entertainment ii. service-producing: primary purpose to provide services 1. ex: retail/wholesale trade, transportation, finance, insurance 2. produces most of GDP 3. most small businesses are retailers a. buy goods from firms & sell -> consumers 4. turning to Internet for start-ups a. Mark Zuckerberg 5. small business owners as wholesalers small businesses by industry 5.4 Advantages and Disadvantages of Small Business Ownership A. advantages a. independence: you’re your own boss b. lifestyle: choose own hours c. financial rewards: can make more money than being employee d. learning opportunities: gain understanding of business functions e. creative freedom & personal satisfaction: work in a field you enjoy B. disadvantages a. financial risk: can face losses b. stress: responsibilities c. time commitment: time-consuming d. undesirable duties: have to do everything/unpleasant things included 5.5 Starting a Business A. ?s to ask before starting a. business idea? feasible? b. type? industry? c. similar to others or innovative? d. start/buy? e. by self or w/ others? f. form of business organization? B. business plan- formal doc that identifies the goals of proposed business and explanation of how goals will be achieved a. description of business b. industry analysis c. mission stmt & core values d. management plan e. description of goods/services f. description of production processes g. marketing & financial plans C. the business idea- identifying something customers w
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