Entrepreneurship and business planning - ch 1

What is entrepreneurship?

Entrepreneurship is the process by which individuals pursue opportunities without regard to the resources they currently control, for the purpose of exploiting future goods and services.

The important idea is that entrepreneurs do not limit themselves to the resources they already possess. They identify an opportunity and then find and assemble the resources needed to pursue it.

Fred Wilson gives a simpler definition: entrepreneurship is “the art of turning an idea into a business.”

In practice, entrepreneurs assemble and integrate the necessary money, people, business model, and strategy to transform an invention or idea into a viable business.

What does GEM stand for, and what does it measure?

GEM = Global Entrepreneurship Monitor.

It measures entrepreneurship using several indicators, including:

• TEA (Total early-stage Entrepreneurial Activity)

• Perceived opportunities

Importantly, GEM approaches entrepreneurship from a behavioral perspective, rather than simply looking at someone's occupation. It puts the behavior of the entrepreneur or potential entrepreneur at the center and focuses on the entrepreneurial process, rather than only the event of starting a business.

What does entrepreneurial behavior involve?

Entrepreneurial behavior involves understanding a problem, grasping its full context, connecting things that were previously unconnected, and having the vision, courage, resourcefulness, and persistence to turn the solution into reality.

This emphasizes that entrepreneurship is not merely “owning a business.” It involves a process of identifying opportunities/problems and taking action to develop solutions.

What is corporate entrepreneurship?

Corporate entrepreneurship is the conceptualization of entrepreneurship at the firm level.

What is entrepreneurial intensity?

Entrepreneurial intensity refers to where a firm falls on the continuum from highly conservative to highly entrepreneurial.

A firm with high entrepreneurial intensity behaves more entrepreneurially: it is proactive, innovative, and willing to take risks.

A firm with low entrepreneurial intensity behaves more conservatively: it tends to wait and see, innovates less, and is more risk-averse.

What are the characteristics of entrepreneurial firms compared with conservative firms?

Entrepreneurial firms are:

• Proactive — they take initiative rather than simply waiting for events to occur.

• Innovative — they actively develop or adopt new ideas.

• Risk-taking — they are willing to accept calculated risks.

Conservative firms:

• Take more of a “wait-and-see” posture

• Are less innovative

• Are risk-averse

How should a firm with high entrepreneurial intensity be managed?

A highly entrepreneurial firm needs to be able to make fast decisions because being proactive requires the organization to act quickly.

Therefore, excessive bureaucracy and organizational layers should be reduced. Too many levels of approval can slow decision-making and make it difficult for the firm to behave proactively.

Why Become an Entrepreneur? 3

The three main reasons are:

1. Desire to be their own boss

2. Desire to pursue their own ideas

3. Financial rewards

What are the four primary characteristics of successful entrepreneurs

The four primary characteristics are:

1. Passion for the business

2. Product/customer focus

3. Tenacity despite failure

4. Execution intelligence

What is product/customer focus?

Product/customer focus is the entrepreneur's strong focus on the products they create and the customers they serve.

What is tenacity despite failure?

Tenacity despite failure means having the ability to persevere through setbacks and failures.

What is execution intelligence?

Execution intelligence is the ability to fashion a solid business idea into a viable business.

How would you characterize the risk-taking propensity of most entrepreneurs?

moderate risk takers

What are the three types of start-up firms?

• Salary-substitute firms

• Lifestyle firms

• Entrepreneurial firms

What is a salary-substitute firm?

A salary-substitute firm is a business that basically provides its owner or owners with a similar level of income to what they could earn in a conventional job.

Its main purpose is therefore to provide the owner with an income rather than necessarily pursuing major innovation or rapid growth.

What is a lifestyle firm?

A lifestyle firm provides its owner or owners with the opportunity to pursue a particular lifestyle while making a living from it.

The business supports the owner's desired way of life rather than being focused primarily on creating a highly innovative or rapidly growing organization.

What is an entrepreneurial firm?

An entrepreneurial firm brings new products and services to the market by creating and seizing opportunities regardless of the resources it currently controls.

This definition connects directly back to the chapter's general definition of

What positive economic impact do entrepreneurial firms have? 2

1. Innovation — entrepreneurial firms introduce new ideas, products, services, and approaches.

2. Job creation — entrepreneurial activity creates employment.

How do entrepreneurial firms positively affect society?

Entrepreneurial firms introduce new products and services that enhance people's lives.

How do entrepreneurial firms positively affect larger firms? 2

Entrepreneurial firms can support larger companies in two important ways:

1. They can make cutting-edge products for large companies.

2. They can specialize in producing products and services for larger firms.

What is creative destruction?

Creative destruction is Joseph Schumpeter's concept describing how entrepreneurs develop new products and technologies that, over time, make existing products and technologies obsolete.

Why does creative destruction stimulate economic activity?

Creative destruction stimulates economic activity because entrepreneurs introduce new and improved products and technologies that replace older ones.

What are the four steps of the entrepreneurial process?

Step 1: Deciding to become an entrepreneur
The individual makes the decision to pursue entrepreneurship.

Step 2: Developing successful business ideas
The entrepreneur develops and evaluates the opportunity and business idea.

Step 3: Moving from an idea to an entrepreneurial firm
The entrepreneur takes the actions necessary to transform the idea into an actual business.

Step 4: Managing and growing the entrepreneurial firm
Once established, the firm must be managed and developed so that it can continue and grow.

What activities are included in Step 2: Developing successful business ideas?

• Recognizing opportunities and generating ideas

• Feasibility analysis

• Developing an effective business model

• Industry and competitor analysis

• Writing a business plan

What activities are included in Step 3: Moving from an idea to an entrepreneurial firm?

• Preparing the proper ethical and legal foundation

• Assessing a new venture's financial strength and viability

• Building a new-venture team

• Getting financing or funding

What does Step 4: Managing and growing the entrepreneurial firm involve?

• Unique marketing issues

• The importance of intellectual property

• Preparing for and evaluating the challenges of growth

• Strategies for firm growth

• Franchising

What is GRIT?

passion and perseverance for your long-term goals.