Kathleen R.

Allen

LAUNCHING NEW
VENTURES – AN
ENTREPRENEURIAL
APPROACH, 7E

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 Understanding
Entrepreneurship
Chapter 1

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 Chapter Objectives
⚫Define entrepreneurship.
⚫Explain the role of entrepreneurship
in economic growth.
⚫Distinguish entrepreneurial
ventures from small businesses in
terms of their purpose and goals.
⚫Describe the evolution of
entrepreneurship.
⚫Identify today’s broad trends in
entrepreneurship.
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Definition of
Entrepreneurship
“The process by which individuals—
either on their own or in organizations
—pursue opportunities without regard
to the resources they currently
control.” ~ Stevenson
⚫Entrepreneurship is a mindset
that is:
◦ Opportunity-focused
◦ Risk taking
◦ Innovative
◦ Growth-oriented
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 The Role of
1.1

Entrepreneurship in the
Economy
⚫ Not a linear process:
o Phase 1: Find a problem in a market or
industry; research to understand the
industry, potential market, and any issues
the entrepreneur might face.
o Phase 2: Validate the hypotheses the
entrepreneur has made about the
customer, solution and proposed business
model.
o Phase 3: Business design, planning &
execution.

⚫Affected by external variables:

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 1.1a Economic Growth
⚫Technological innovation is
critical.
⚫The entrepreneur identifies new
customer segments or needs,
existing needs not satisfied, or
new ways of manufacturing and
producing.
⚫Technology lowers the cost of
information and transportation.
⚫Globalization means goods and
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Figure 1.2-
Entrepreneurship
and Technological Change

•Entrepreneur
•Opportunity
•Resources
•New Venture
•Customer Needs
•Emerging segments
•Unsatisfied needs
•New methods of manufacture & distribution
•Economic Growth
•Technological Change

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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 1.1b New Industry Formation
⚫New industries are born when
technological change produces a
novel opportunity that an
enterprising entrepreneur seizes.
⚫Industry life cycles: birth, growth,
decline

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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Figure 1.3-
The Industry Life Cycle

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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 1.1c Job Creation
⚫U.S. Small Business
Administration (SBA) defines a
small business as one with fewer
than 500 employees.
⚫Small businesses represent 99.7
percent of all employers and pay
more than 45 percent of the total
U.S. private payroll.
⚫Small businesses have generated
65 percent of net new jobs over
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Table 1.1- Number of
Employer Firms by Startups
& Non-Startups

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 1.1c Job Creation
⚫Economic development in three
categories of countries:
◦ Factor-driven economies
●Created out of necessity and rely on
unskilled labor and extraction of natural
resources
◦ Efficiency-driven economies
●Growing and in need of improving their
production processes and quality of goods
produced
◦ Innovation-driven economies
●The most advanced and where business
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 The Nature of
1.2

Entrepreneurial Startups
⚫An entrepreneurial venture brings
something new to the
marketplace.
⚫Three primary characteristics:
1. Innovative
2. Value-creating
3. Growth-oriented

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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Risk and the
1.2a

Entrepreneurial Venture
⚫Risk is an inherent part of the
entrepreneurial process.
⚫What changes over time with
more information and validation
from the market is the impact of
that risk.
⚫The fuzzy front end occurs prior to
launch.
◦ The entrepreneur must gather
information about the industry and
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Figure 1.4-
Risk and Impact in Startups

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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Risk and the
1.2a

Entrepreneurial Venture
⚫It is not clear what prompts
someone to become a budding
entrepreneur.
◦ Push – the mechanism that drives
someone to become a nascent
entrepreneur because all other
opportunities for income appear tor
be absent or unsatisfactory.
◦ Pull – the mechanism that attracts an
individual to an opportunity and
creates a “burning desire” to launch a
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 Risk and the
1.2a

Entrepreneurial Venture
⚫Many entrepreneurs drop out of
the process as they move from
intention to preparation and
execution.
⚫Many also give up before the new
business makes the transition to
an established firm.
⚫The SBA reports that about half of
new business will survive 5 years
or more, and 1/3 will survive 10
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 1.2b New Business Failure
⚫One reason for failure is that
entrepreneurs come up with a
solution looking for a problem;
they have not identified a real
need in the market.
⚫Sometimes the solution does not
differ from what is already in the
market.
⚫Sometimes the business model is
not tested.
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 1.2b New Business Failure
⚫The firms most likely to survive
over the long term are those that
display superior levels of reliability
& accountability in performance,
processes and structure.
⚫Failure is a fact of life which must
be dealt with.
⚫The vital issue for an entrepreneur
is to minimize the cost of possible
failure to recover quickly.
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 Brief History of the
1.3

Entrepreneurial Revolution
⚫United States was founded on the
principle of free enterprise.
⚫The term entrepreneur didn’t
come into popular use until the
1980s.

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 The Decades of
1.3a

Entrepreneurship
⚫1960’s – bigger was better
⚫1970’s – three trends that would
forever change the face of
business
◦ Macroeconomic turmoil, international
competition & technical revolution
⚫1980’s – business in terrible shape
⚫1990’s – The Information Age
⚫2000’s – The Knowledge Economy
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Figure 1.5-
The Decades of
Entrepreneurship

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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 Current Entrepreneurial
1.4

Trends
⚫Digital Anonymity
⚫Return to Domestic Manufacturing
& Craft
⚫Big Data
⚫The Lean Startup Movement

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 1.5 Looking Ahead
⚫Part One: Entrepreneurship &
Opportunity
◦ Chapter 1: Understanding Entrepreneurship
◦ Chapter 2: Preparing for the Entrepreneurial
Journey
◦ Chapter 3: Recognizing and Shaping an
Opportunity
⚫Part Two: Feasibility Analysis (Ch 4-9)
⚫Part Three: Business Design (Ch 10-15)
⚫Part Four: Planning for Growth and
Change (Ch 16-17)
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distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 New Venture Action Plan
⚫Read broadly about entrepreneurs
and new ventures to get ideas for
what makes a successful venture
⚫Interview an entrepreneur to
better understand the
entrepreneurial mindset
⚫Research new trends, particularly
in an industry in which you’re
interested
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a password-protected website for classroom use.