IE 001

Engineering Manage-
ment
Entrepreneurship
ENTREPRENEURSHIP
INTENDED LEARNING OUTCOMES:
1. Understand what is entrepreneurship
2. Identify and understand the differences between
entrepreneurial ventures and small businesses.
3. Understand the importance of entrepreneurship
4. Understand the entrepreneurial process
5. Understand what do entrepreneurs do.
6. Issues and challenges faced by entrepreneurs
ENTREPRENEURSHIP
What is Entrepreneurship?
- is the process of starting new businesses,
generally in response to opportunities.
- Entrepreneurs are pursuing opportunities by:
 changing,
 revolutionizing,
 transforming, or
 introducing new products or services.
ENTREPRENEURSHIP
Entrepreneurial Ventures vs. Small
Business:
Entrepreneurial ventures - organizations that
pursue opportunities, are characterized by
innovative practices, and have growth & profitability
as their main goals.
Small business - is one that is independently
owned, operated, and financed; has fewer than 100
employees; doesn’t necessarily engage in any new
or innovative practices; and has relatively little
impact on its industry.
ENTREPRENEURSHIP
Why is Entrepreneurship Important?
- The importance of entrepreneurship can be
shown in three (3) areas:
a) innovation
b) number of new start ups
c) job creation
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A) Innovation
- is a process of changing, experimenting,
transforming, revolutionizing, and a key
aspect of entrepreneurial activity.
- entrepreneurial firms act as “agents of
change” by providing an essential source of
new and unique ideas that may otherwise go
untapped.
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B) Number of new start-ups
- all businesses, whether they fit the definition
of entrepreneurial ventures or not, were new
start-ups at one point in time, the most
suitable measure we have of the important
role of entrepreneurship is to look at the
number of new firms over a period of time.
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C) Job creation
- small businesses accounted for most of the
net new jobs. In the US, over the last 15
years, small businesses have created some
65% of the net new jobs. Small organizations
have been creating jobs at a fast pace even
as many of the world’s largest and
well-known global corporations continued to
downsize.
THE ENTREPRENEURIAL PROCESS

The Entrepreneurial Process is com-

posed of four (4) key steps:
1. Exploring the entrepreneurial context
- the context includes the realities of today’s
economic, political/legal, social, and work
environment
2. Identifying opportunities and possible
competitive advantages
THE ENTREPRENEURIAL PROCESS

3. Starting the venture

- included in this phase are researching the
feasibility of the venture, planning the
venture, organizing the venture, and
launching the venture.
4. Managing the venture
- which includes managing processes, managing
people, and managing growth.
WHAT ENTREPRENEURS DO

What Do Entrepreneurs Do?

1. Assess the potential for the entrepreneurial
venture and deal with start-up issues.
2. Research the venture’s feasibility, uncovering
business ideas, looking at competitors, and
exploring financing options.
3. Plan the venture, planning includes activities
such as developing a viable organizational
mission, exploring organizational culture issues,
and creating a well-thought-out business plan.
WHAT ENTREPRENEURS DO

4. Launch the venture, which involves setting goals

and strategies, and establishing the technology-
operations methods, marketing plans, informa-
tion systems, financial-accounting systems, and
cash flow management systems.
5. Manage the venture, the various processes that
are part of every business: making decisions,
establishing action plans, analyzing external and
internal environments, measuring and evaluating
performance, and making needed changes.
Managing the venture also includes human
resources management.
WHAT ENTREPRENEURS DO

6. Manage the venture’s growth including

developing and designing growth strategies,
dealing with crises, exploring various avenues for
financing growth, placing a value on the venture,
and even eventually exiting the venture, as
needed.
ISSUES IN ENTREPRENEURSHIP
Issues & Challenges Facing En-
trepreneurs:
1. Social responsibility and ethics
- the company’s responsibility to the community
and the environment
2. Start-up and planning issues
- identifying environmental opportunities and
competitive advantage
- 7 potential sources of opportunities per the
late Peter Drucker are:
 the unexpected - which could either be unexpected
success (good news) or unexpected failure (bad news)
ISSUES IN ENTREPRENEURSHIP
 the incongruous - something that exhibits
inconsistencies and incompatibilities in the way it
appears
 the process needs - happens when technology
doesn’t immediately come up with the “big discovery”
that’s going to fundamentally change the nature of
some product or service
 industry and market structures - when changes in
technology change the structure of an industry and
market, existing firms can become obsolete if they’re
not attuned to the changes or are unwilling to change.
Changes in social values and consumer tastes can shift
the structures of industries and markets.
 demographics – the changing characteristics of the
world population that influence industries and market,
consumer buying power and desire for goods/services.
ISSUES IN ENTREPRENEURSHIP
 changes in perception – perception is one’s view of
reality, when it takes place, the facts do not vary, but
their meanings do. This may mean changes in people’s
psychographic profiles, what they value, what they
believe in and what they care about.
 new knowledge – which is a significant source of
entrepreneurial opportunities.
- researching the venture’s feasibility
 A feasibility study – is an analysis of the various
aspects of a proposed entrepreneurial venture
designed to determine its feasibility. It gives
descriptions of the most important elements of the
entrepreneurial venture and the entrepreneur’s
analysis of the viability of these elements. Exhibit 1
shows an outline of a feasibility study.
ISSUES IN ENTREPRENEURSHIP
Exhibit 1 – A Feasibility Study
ISSUES IN ENTREPRENEURSHIP
A Feasibility Study (continuation)
ISSUES IN ENTREPRENEURSHIP
 Competitors – some possible questions about
competitors:
- What types of products or services are competitors offering?
- What are the major characteristics of these products or services?
- What are their products’ strengths and weaknesses?
- How do they handle marketing, pricing, and distributing?
- What do they attempt to do differently from other competitors?
- Do they appear to be successful at it? Why or why not?
- What are they good at?
- What competitive advantage(s) do they appear to have?
- What are they not so good at?
- What competitive disadvantage(s) do they appear to have?
- How large and profitable are these competitors?
ISSUES IN ENTREPRENEURSHIP
 Financing – getting financing is not easy, possible
financing options are shown below:
ISSUES IN ENTREPRENEURSHIP
- planning the venture
A business plan - a written document that
summarizes a business opportunity and defines and
articulates how the identified opportunity is to be
seized and exploited. A good business plan covers
six (6) major areas:
a) executive summary
b) analysis of opportunity
c) analysis of the context
d) description of the business
e) financial data and projection
f) supporting documentation
ISSUES IN ENTREPRENEURSHIP
3. Organizing issues
- determining the legal ownership of the business
which could be:
 Sole proprietorship - a form of legal organization in
which the owner maintains sole and complete control
over the business and is personally liable for business
debts.
 General partnership - is a form of legal
organization in which two or more business owners
share the management and risk of the business.
 Limited liability partnership (LLP) - is a legal
organization formed by at least 1 general partner/s
(those who operate/manage the business, has
unlimited liability) and limited partner/s (passive
investors).
ISSUES IN ENTREPRENEURSHIP
 A corporation – or a C corporation is a legal
business entity that is separate from its owners and
managers. A closely held corporation is owned by a
limited number of people who do not trade the stock
publicly.
 S Corporation – or a Subchapter corporation is a
specialized type of corporation that has the regular
characteristics of a corporation but is unique in that
the owners are taxed as a partnership as long as
certain criteria are met.
 Limited liability company (LLC) - is a relatively
new form of business organization that’s a hybrid
between partnership and a corporation, it offers the
liability protection of a corporation, the tax benefits of
a partnership, and fewer restrictions than an S
corporation.
ISSUES IN ENTREPRENEURSHIP
- organizational design & structure could be:
 Mechanistic structure - would be preferable when
cost efficiencies are critical to the venture’s
competitive advantage, when more control over
employees’ work activities is important, if the venture
produces standardized products in a routine fashion,
and when the external environment is relatively stable
and certain.
 Organic structure - would be most appropriate when
innovation is critical to the organization’s competitive
advantage; for smaller organizations where rigid
approaches to dividing and coordinating work aren’t
necessary; if the organization produces customized
products in a flexible setting; and where the external
environment is dynamic, complex, and uncertain.
ISSUES IN ENTREPRENEURSHIP
- human resource management issues
 Employee recruitment
 Employee retention

4. Leading issues
- the entrepreneur as a leader
- employee empowerment
5. Controlling issues
- managing growth
 planning for growth
 organizing for growth
 controlling for growth
ISSUES IN ENTREPRENEURSHIP
- managing downturns
 recognizing crisis situations
 dealing with downturns, declines & crises
 controlling for growth
- exiting the venture
 business valuation methods which can fall into 3
categories:
a) asset valuations
b) earning valuations
c) cash flow valuations