Essentials of Entrepreneurship and Small
Business Management
Ninth Edition, Global Edition
Chapter 1
The Foundations of
Entrepreneurship
Prepared by the GCC at AOU, Kuwait Branch
Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved.
Learning Objectives
• Describe the benefits of entrepreneurship.
• Describe the drawbacks of entrepreneurship.
• Explain the forces that are driving the growth of entrepreneurship.
• Explain the cultural diversity of entrepreneurship.
• Describe the important role that small businesses play in our nation’s economy.
• Put failure into the proper perspective.
• Explain how an entrepreneur can avoid becoming another failure statistic.
• Discover how the skills of entrepreneurship, including critical thinking and problem
solving, written and oral communication, teamwork and collaboration, leadership, creativity,
and ethics and social responsibility, apply to every career choice and every avenue of life.
Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved.
The World of the Entrepreneur (1 of 2)
Global Growth of Entrepreneurship
Around the world, growing numbers of people are realizing their dreams of
owning and operating their own business
Entrepreneurship is thriving and essential to a strong global economy
Factors Driving Entrepreneurship
Downsizing by large companies
Small companies now hold a competitive advantage:
Ability to move faster to exploit market opportunities.
Use of modern technology to quickly create products and services.
The World of the Entrepreneur (2 of 2)
Global Perception of Entrepreneurs
68% of working adults worldwide perceive entrepreneurs as
having high status. (Source: Global Entrepreneurship Monitor)
Emerging Opportunities
Potential for entrepreneurship in:
Eastern European countries
China
Vietnam
Nations transitioning from state-controlled, centrally planned
economies.
What is an Entrepreneur?
What is an Entrepreneur?
An entrepreneur is one who creates a new business in the face of risk
and uncertainty for the purpose of achieving profit and growth by
identifying significant opportunities and assembling the necessary
resources to capitalize on them
The Role of Entrepreneurship in the Economy
The global economy thrives on entrepreneurial activity:
Constant mix: Entrepreneurs create new businesses, destroy old ones,
and disrupt industries.
Driving factors: Creativity and ingenuity.
What is an Entrepreneur?
Characteristics of Entrepreneurs:
Desire for responsibility Future orientation
Skilled at organizing
Preference for moderate risk
Value achievement over money
Willingness to break rules High degree of commitment
Self-reliance Tolerance for ambiguity
Confidence in success Creativity
Flexibility
Determination
Resourcefulness
Desire for immediate feedback Willingness to work hard
High energy level Tenacity
Competitiveness
Anyone – regardless of age, race, gender, color, national origin, or any other
characteristic – can become an entrepreneur (although not everyone should).
What is an Entrepreneur
Entrepreneurial Types:
Opportunity Entrepreneurs
Start businesses by spotting market opportunities
Necessity Entrepreneur
Start businesses due to lack of alternative work opportunities.
Serial Entrepreneurs
Repeatedly start and grow businesses to a sustainable size.
Figure 1.3 Most Important Qualities of an Entrepreneur
Source: Ryan Westwood, “What Traits Do We Need to Succeed as Entrepreneurs?” Forbes, September 4, 2015,
www.forbes.com/sites/ryanwestwood/2015/09/04/what-traits-do-we-need-tosucceed-as-entrepreneurs/#4d7f537f8ff4.
Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved.
Benefits of Entrepreneurship
The opportunity to:
Create your own destiny.
Make a difference.
Social entrepreneurs use their skills not only to create profitable businesses,
but also to achieve economic, social and environmental goals for the common
good.
Reach your full potential
Reap impressive profits.
Contribute to society and to be recognized for your efforts.
Do what you enjoy and to have fun at it.
Drawbacks of Entrepreneurship
Uncertainty of income
The entrepreneur is the last one to be paid, as employees must
be paid first. While it is possible for an entrepreneur to earn
more working for themselves, their may end up earning less.
Risk of losing your entire investment
Long hours and hard work
Lower quality of life until the business gets established
High levels of stress
Discouragement
Feeding the Entrepreneurial Fire
Entrepreneurs as heroes
Entrepreneurial education
Demographic factors
Shift to a service economy
Technology advancements
Independent lifestyle
The Internet, cloud computing, and mobile marketing.
International opportunities – micro multinationals
The Cultural Diversity of Entrepreneurship
Entrepreneurs Across All Walks of Life
Entrepreneurs come from diverse Unique Entrepreneurial
backgrounds and include: Groups
Copreneurs:
Young Entrepreneurs
Entrepreneurial couples
Women Entrepreneurs
working together as co-
Minority Enterprises owners.
Diverse Types of Entrepreneurs Corporate Castoffs
Immigrant Entrepreneurs Encore Entrepreneurs
Retiring Baby Boomers
Part-Time Entrepreneurs
Home-Based Businesses
Family Businesses
The Power of Small Businesses
The Role of Small Businesses in the U.S. Economic Impact of Small Businesses
Economy Account for 43% of total private
Big businesses are more visible, but small payroll.
businesses dominate the U.S. economy. Job Creation
Small businesses created 63% of
99.7% of all U.S. businesses are considered
small. net new jobs
Gazelles: High-Growth Small
Defining Small Businesses Businesses
No universal definition, but generally: Small companies growing at 20% or
Employ fewer than 100 people more per year with at least $100,000 in
Concentrated industries annual sales.
Impact:
Service
Create 70% of net new jobs in the
Construction
Retail economy.
Figure 1.9 Small Businesses by Industry
Source: Based on data from “Statistics of U.S. Businesses, U.S. and States, NAICS Sectors, Small Employment Sizes,” United States
Census Bureau, 2013, www.census.gov/econ/susb/.
Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved.
Putting Failure into Perspective
Challenges for Small Businesses Intrapreneurs and Failure
Entrepreneurs acknowledge failure
Small businesses face high mortality rates
due to: as a likely part of their journey.
They are not paralyzed by fear of
Limited resources
failure.
Inexperienced management Keys to Entrepreneurial Success
Lack of financial stability Failing Intelligently:
Learn from failure to avoid
Small Business Failure Rates
repeating mistakes.
Failure Statistics: Essential Traits:
21% fail within two years of start-up. Persistence
51% fail within five years. Resilience: The ability to bounce
back from failure.
Avoiding the Pitfalls of Small Business Failure
1. Know your business in-depth 7. Manage financial resources
2. Build a viable business 8. Understand financial
model – and test it statements
3. Use lean start-up principles 9. Build the right team
4. Know when to pivot 10. Learn to manage people
effectively
5. Develop a solid business plan
11. Set your business apart from
6. Understand financial the competition
statements
12. Maintain a positive attitude
Developing Career Skills
Critical thinking and problem solving
Written and oral communication
Teamwork and collaboration
Leadership
Creativity
Ethics and social responsibility
Chapter 1 Discussion Questions
1-1. What forces have led to the boom in entrepreneurship in the United States and around the globe?
1-2. What is an entrepreneur? Give a brief description of the entrepreneurial profile.
1-3. Coming up with great business ideas may seem easy, but only a true entrepreneur capitalizes on them to turn
them into reality. Why are entrepreneurs considered an important agents of change in this global economy?
1-4. Which of the potential drawbacks to business ownership are most crucial?
1-5. One hallmark of successful entrepreneurs is the ability to “fail intelligently.” How can an entrepreneur do so?
1-6. How can the small business owner avoid the common pitfalls that often lead to business failures?
1-7. If one is planning to venture into business, what is the most crucial ingredient in preparing for a successful
business?
1-8. What are the main reasons for young people to be start their own business?
Chapter 1 Online Videos and Podcasts
These online videos may enhance class discussion and provide additional
insight for the chapter topics. You may consider searching “entrepreneur,”
“small business” along with more specific topics.
Eye to Eye: Richard Branson (7:10 minutes)
http://www.youtube.com/watch?v=Q6hILGfbqSg&feature=PlayList&p=3BE9FC907D0E88E9&index=33
The Most Successful Small Business in the World (10:41 minutes)
http://www.youtube.com/watch?v=YtkV6bZB8ZY
Richard Branson Advice to Entrepreneurs (4:03 minutes)
http://www.youtube.com/watch?v=VH35Iz9veM0
Sunrise – Young Entrepreneurs Making Millions (4:35 minutes)
http://www.youtube.com/watch?v=3LEprgHwv9o
Advice for Young Entrepreneurs: How to Be Taken Seriously (3:20 minutes)
http://www.youtube.com/watch?v=YcbwbCgB0-U
Mark Cuban’s 12 Rules for Start-Ups (2:18 minutes)
http://www.youtube.com/watch?v=camXWnD4QcI
