Understanding Entrepreneurship: Opportunity Recognition, Ideas, and Industry Analysis - Pr, Study notes of Introduction to Business Management

Download Understanding Entrepreneurship: Opportunity Recognition, Ideas, and Industry Analysis - Pr and more Study notes Introduction to Business Management in PDF only on Docsity! Study Guide for ITE EXAM I CH1 Every entrepreneurial experience is unique, but common features to all -every venture is started by someone who recognizes an opportunity, develops a plan, and executes it -Global Entrepreneurship Monitor (GEM)- increasing interest in entrepreneurship around the globe. Roughly 14% of adults in countries sampled are involved in entrepreneurship, Most of them are very small, but economic impact of these firms is large. Most of the people starting new businesses are taking advantage of an opportunity rather than out of necessity. Motivation to start a new business is not enough. 1/3 of new firms in US fail in first 2 years, while another 20% fail in 4 years. -entrepreneur- derived from French words “entre” meaning “between”, and “prendre” meaning “to take”. Inventors and entrepreneurs are not the same. Entrepreneurship- the process by which individuals pursue opportunities w/o regard to resources they currently control. Entrepreneurial firms: proactive, innovative, and risk taking, ex: apple computers, cisco systems Corporate entrepreneurship- established firms w/ an orientation to acting entrepreneurial. Entrepreneurial Intensity- the position of a firm on the conceptual continuum. -new jobs being created in companies to help w/ innovation, ex: Chief Innovation Officer Why Become and Entrpreneur?: -Be their own boss- doesn’t mean that they’re diff. to work with, or have problems w/ authority - pursue their own ideas -realize financial rewards- typically secondary to other two reasons Characteristics of a successful Entrepreneur: -Passion for the Business-number one characteristic shared by successful entrepreneurs, important because of demands of starting a new business -Product/Customer Focus-obsessed w/ making products that can satisfy customer needs -Execution Intelligence-the ability to take a solid idea and turn it into a viable business. Tenacity despite failure-high failure rate Common Myths about Entrepreneurs: 1. Entrepreneurs are born, not made- no one is genetically predisposed to entrepreneurship. Entrepreneurs do have common traits and characteristics though. 2. Entrepreneurs are Gamblers- entrepreneurs generally take “moderate risk”, myth stems from entrepreneurs having less structured jobs and their strong need to achieve 3. Entrepreneurs are motivated primarily by money 4. Entrepreneurs should be young and energetic-both younger and older are starting to grow, investors favor older rather than younger 5. Entrepreneurs love the spotlight Types of Start-up Firms  Salary substitute firms-firms that basically provide their owner or owners a similar level of income to what they would be able to earn in a conventional job  Lifestyle Firms- Firms that provide their owner or owners the opportunity to pursue a particular lifestyle, and make a living at it  Entrepreneurial Firms- Firms that bring new products and services to the market by creating and seizing opportunities regardless of the resources they control Value- refers to worth, importance, or utility Changing Demographics of Entrepreneurs: all increasing  women entrepreneurs  minority entrepreneurs  seniors  young Entrepreneurships Importance:  huge impact on economy  Creative destruction-developing new products and technologies that over time make current products and technologies obsolete. “innovators” or “agents of change” Techniques for Generating Ideas: Brainstorming- used to generate a number of ideas quickly. Not used for analysis or decision making-leader of group asks to share ideas, then people just react to it w/ new ideas, should be free wheeling and lively, no criticism is allowed, focus on creativity Group Support System (GSS) Software-allows employees to submit ideas anonymously Focus Group- gathering of 5-10 people who are selected b/c of their relationship to the issue being discussed. Help to generate ideas. Weakness is that participants are not random. Strength-helps companies uncover what’s on their customer’s minds. Much of success depends on moderator Survey- method of gathering info. From a sample of individuals, tries to sample “random” in order to compile composite sample of population Self-selected opinion poll- suspect b/c people who participate are either very strong or against support Customer advisory boards-meet regularly to discuss needs, wants, and problems that lead to new ideas Day in the life research- Protecting Ideas: Idea bank- physical or digital place to store ideas Intellectual Property- any product of human intellect that is intangible but has value in the marketplace, ex: patents, trademarks, copyrights, trade secrets CH 3 Feasibility Analysis Feasibility Analysis-the process of determining if a business idea is viable. It’s completed to determine if an idea is worth pursuing and to screen ideas before spending resources on them. It helps prevent personal suffering later on. Seed Money- the initial investment made in a firm. Core Competency-a resource or capability that serves as a source of a firm’s competitive advantage over its rivals. Components of Feasibility Analysis: 1. Product/Service feasibility- an assessment of the overall appeal of the product or service, is it a superior product or service a. Concept Testing-involves showing a preliminary description of the product or service idea to prospective customers to gauge customer interest, desirability, and purchase intent. i. Three purposes: 1. Validate the underlying premise of the product or service idea 2. Help develop the idea 3. Try to estimate Sales Concept statement- concept test includes the following: description of product or service, the intended target market, benefits of product or service, positioning, how it will be sold and distributed Usability Testing-(beta tests) a form of product/service feasibility analysis, which measures a product’s ease of use and the user’s perception of the experience. It Follows a concept test and is the development of a prototype or model of the product, as appropriate and necessary. Prototype- the first physical depiction of a new product. Virtual Prototype-a computer generated 3D image of an idea. It can be viewed from all sides and rotated 360 degrees. 2. Industry/Market feasibility- an assessment of the overall appeal of the market for the product or service being proposed. Three Primary issues:  Industry attractiveness- growth rate, receptivity of new entrant, life cycle, competition, etc. o Primary Research-original research collected by entrepreneur o Secondary Research- using data already collected for some other purpose o Breakthrough Products and Services-establish new markets or new market segments  Market Timeliness o First Mover Advantage-advantage gained by first significant company to move into a new market. Set standard for industry/ brand recognition/market power o Second Mover Advantage-used to describe advantage of studying all the mistakes that were made by the first mover helping to build a better product more efficiently  Identification of a niche market o Niche market- a place within a larger market segment that represents a narrower group of customers with similar interests. Most successful entrepreneurs start here. o Vertical Market- focuses on similar businesses that have specific and specialized needs o Horizontal Market- meets the specific need of a wide variety of industries, rather than a specific one. 3. Organizational feasibility- conducted to determine whether a proposed business has sufficient management expertise, organizational competence, and resources a. Management Prowess-ability of management team- key attributes are the passion of mgt and understanding of industry i. New Venture Team-group of founders, key employees and advisers that either manage or help manage a new business in its start up years. b. Resource Sufficiency-whether the potential new venture has sufficient resources to move forward to successfully develop a product or service idea. The focus should be on non-financial resources i. Clusters- firms of similar nature in close proximity with each other 4. Financial feasibility- a quick financial assessment- most important issues to cover are total start up cash needed, financial performance of similar businesses, overall financial attractiveness of the proposed venture  Total Start up Cash needed-it’s hard to borrow money at first so feasibility analysis should say where money is going to come from. Better to overestimate than underestimate.  Financial Performance of similar Businesses-approximate financial performance based on similar firms. Financial reports or secondary data  Overall Financial Attractiveness of Proposed Venture- projected financial statements for years 1-3 CH 5 Industry and Competitor Analysis Industry Analysis- business research that focuses on the potential of an industry. Industry- a group of firms producing a similar product or service Competitor Analysis- detailed evaluation of a firm’s competitors Firm vs industry Firm=assets, products, culture, teamwork