EBE part 1 & 2

  1. -A number of concepts have been derived from the idea of entrepreneur: entrepreneurial,entrepreneurship, and entrepreneurial process. The idea that an entrepreneur undertakes certainprojects offers an understanding to the nature of entrepreneurship
    -entrepreneurial is an adjective that describes how the entrepreneur undertakes whatthey do

    -entrepreneurship is what the entrepreneur does-entrepreneurial process in which the entrepreneur engages is the means through whichnew value is created as a result of the project: the entrepreneurial venture-effective entrepreneurs work to reward all the stakeholders in their ventures, not just investors-innovation has been a critical characteristic and some entrepreneurs seek profit-limitingsocial responsibilities.
  2. -The entrepreneur can be considered as:
    -a manager undertaking an activity-- in terms of the particular tasks they perform

    -an agent of economic change --in terms of the effects they have on economic systemsand the changes they drive

    -an individual -- in terms of their psychology, personality and personal characteristics
  3. The entrepreneurs tasks
    --Owning Organizations: many entrepreneurs do own their own companies but ownership lies withthose who invest. If an entrepreneur actually owns the business then he or she is an investor anda manager.

    --Founding New Organizations: the entrepreneur is the person who undertakes the task of briningtogether different elements of the organization and giving them separate legal identity.

    --Bringing Innovations to Market: the entrepreneur goes beyond just inventing something new,but also bringing that innovation to the marketplace and giving value to customers---Identification of market opportunity: entrepreneur must identify opportunities and pursue themwith suitable innovation

    --Application of Expertise: they have special ability in deciding how to allocate scarce resources insituations where info is limited. They have skill.--Provision of leadership: Leadership is essential in being an entrepreneur

    --Entrepreneur as a manager: entrepreneur takes on no task that is different from tasks byordinary managers at some time or another. Entrepreneur is a manager.
  4. The role of the entrepreneur
    -Efficient means that resources are distributed in an optimal way that is the satisfaction thatpeople can gain from is maximized.

    -Lack of knowledge in the future is call uncertainty. If we know the likelihood of variouspossibilities then uncertainty becomes risk. There is a market for risk. People want to avoid riskand are willing to pay to have it taken away. Entrepreneurs can take risk off peoples hands andare willing to buy it.-To an economist, risk results from making an investment. Risk is the probability that the returnfrom an investment may be less than expected

    -Some say primary role of entrepreneurs is one of maximizing returns that shareholders get fromtheir investments.

    -Entrepreneurs are also info seekers and process market information.
  5. economic effects of entrepreneurial activity
    -economists recognize 3 economic factors:

    • raw materials,
    • labor,
    •  capital

    All products andservices are combinations of these.
  6. The entrepreneur as a person
    An understanding of how different views of the nature of an individualpersonality have been introduced into definitions of and understanding of the entrepreneur.
    - ‘Great person’ notion that entrepreneurs can be destined for greatness just as importantscientists or artists. It is not very useful however.

    - Social Misfit notion that entrepreneurs are misfits at heart.-- they are unable to fit into existingsocial situations.- Personality Type- entrepreneurs can have different personality types to determine how they actin different situations

    - Personality Trait-- While a personality may be of a particular type, it has a trait.

    -Ability trait-- relate to specific ability of problem solving, planning innovativeness ornegotiation skills.-Temperamental traits- those concerned with public actions (introversion vs extroversion)-Dynamic traits- those concerned with internal motivation

    -Social Development approaches-- the way people behave is not predetermined. An entrepreneuris not born, they are made. Factors leading to social development: Innate, Acquired, and Social.

    -Cognitive Approaches-- attempts to develop an understanding of how humans obtain info and useit.
  7. Entrepreneurship: a style of management
    a recognition that entrepreneurship is a style of management aimed atpursuing opportunity and driving change

    • --Entrepreneurial management may be distinguished from conventional management by:
    • -a focus on change rather than continuity
    • -a focus on new opportunities rather than resource conservation
    • -organization-wide rather than specific-function management

    -Entrepreneurs are manager who are willing to venture: to create change and to pursueopportunity rather than maintain status quo and conserve resources.
  8. The human dimension: leadership, power, and motivation
    -Leadership, power, and motivation are interrelated and interdependent tools which theentrepreneur can use to control the venture and give it direction

    -Leadership is the power to focus and direct the organization. Entrepreneurial leadership is basedon the communication of vision.

    -Power is the ability to influence the course of actions within the organization. Power is based onthe control of resources and the symbolic dimensions of the organization, particularly the visionwhich drives it-Motivation is the ability to encourage an individual to take a particular course of action. Motivationis based upon an understanding of drives and the ability to reward effort.
  9. Who becomes an entrepreneur?
    -The inventor is someone who has developed an innovation and who has decided to make acareer out of presenting that innovation to the market.

    -A wide variety of people can become entrepreneurs. Common backgrounds include inventors withnew business ideas; managers unfulfilled by working in established organizations; displacedmanagers; young professionals; and people excluded from the established economy.
  10. Characteristics of the successful entrepreneur.
    -Whatever their background, successful entrepreneurs are characterized by being hardworking orself-starting; setting high personal goals; having resilience and confidence in their abilities; beingreceptive to new ideas and being assertive in presenting them; being attuned to newopportunities, receptive to change and eager to learn; and being confident with power anddemonstrating a commitment to others.

    -They also must be comfortable with power.
  11. Entrepreneurial Skills
    -Important management skills include:

    -strategy skills: consider business as a whole and how it fits in marketplace

    -planning skills: considering what future might offer

    -marketing skills: ability to see past firm’s offerings-financial skills: ability to manage money-project management skills: ability to organize projects, to set objectives and schedules

    -Time manage skills: ability to use time productively-Leadership skills: ability to inspire people to work in a specific way and undertake tasks

    -Motivation skills: ability to enthuse people and get them motivated

    -Delegations skills: ability to allocate tasks to different people

    -Communication skills: ability to use spoken and written language to express ideas-Negotiation skills: ability to understand what is wanted from a situation
  12. Effective entrepreneurs
    -Effective entrepreneurs use a variety of formal management skills combined with industryknowledge and personal motivation

    -The way entrepreneurs manage their ventures is dependent on the culture in which they operate.

    Effective entrepreneurs are sensitive to cultural values
  13. The supply of entrepreneurs, forces which encourages entrepreneurship
    -The supply of entrepreneurs is determined by 3 factors
    • -The supply of entrepreneurs is determined by 3 factors:
    • pull factors which promoteentrepreneurship as a positive option;
    • push factors which drive people out of the establishedeconomy; and
    • inhibitors which prevent the entrepreneurial option’s being taken up.

    -Some important pull factors include: financial rewards of entrepreneurship; freedom to work foroneself; sense of achievement; freedom to pursue a personal innovation

    -Some important push factors include: limitations of financial rewards from conventional jobs; jobsecurity; being unemployed in the established economy-Some important inhibitors include: an inability to secure start-up capital; high cost of start-upcapital; legal restrictions; lack of training
  14. Influences on the move to entrepreneurship
    -Managers make the move to entrepreneurship after considering the way the option for anentrepreneurial career can satisfy economic, social, and self-development needs

    -Economic needs: include the requirement to earn a particular amount of money and the need forthat income to be stable and predictable

    -Social needs: these represent the desire a person has to be part of, and to fit into, a wider groupand their desire to be recognized and respected

    -Developmental needs: relate to the desire a person has to achieve personal goals and to grow.

    -Valence- the way we are attracted to different options
  15. The initiation decision, the factors that influence the decision to initiate a venture and howthese factors might be modeled.-The initiation decision has come
    -The initiation decision has come under continued scrutiny and is being explored from economic,social psychological, and cognitive psychology perspectives. A number of models have beenproposed.
  16. The initiation process
    -The pre-initiation phase is one that demands a number of activities on the part of theentrepreneur. Consistencies in the pattern of these activities across different types of entrepreneurare the subject of a growing number of studies. The extent of activity does seem to be correlatedwith the level of initial investment the venture requires
  17. -Entrepreneurial Success can be understood in 4 interacting aspects:
    -performance of the venture

    -the people who have expectations from the venture

    -the nature of those expectations

    -actual outcomes relative to expectations
  18. The success of the entrepreneurial venture must be understood through 3 dimensions:
    - the stakeholders who have an interest in the venture;

    -stakeholder expectations of the venture; and

    -actualoutcomes relative to those expectations
  19. personal goals manifest at 3 levels:
    economic (monetary rewards);

    social (fulfilling relationshipswith others);

    self-developmental (the achievement of personal satisfaction)

    -The most effective entrepreneurs define objectives for success in relation to all the venture’sstakeholders (not just the investors) and operate with a keen sense of social responsibility
  20. the main factors involved in the success of a new venture
    -Many successful entrepreneurs have demanded that their businesses operate with a higher levelof social responsibility than other businesses operating in their sectors

    -Success factors: The venture exploits a significant opportunity; The opportunity the venture aimsto exploit is well defined; The innovation on which the venture is based is valuable; The entrepreneur brings the right skills to the venture; The business has the right people; Theorganization has a learning culture and its people a positive attitude; Effective use of the network;Financial resources are available; The venture has clear goals and its expectations are understood.
  21. The criteria used to set objectives for the entrepreneurial venture andto monitor its performance
    -Performance venture is subject to a variety of measures including:

    • absolute financialperformance,
    • financial performance ratios,
    • financial liquidity ratios,
    • absolute stock marketperformance,
    • stock market ratios,
    • market presence,
    • growth,
    • innovation,
    • customer assesment
  22. How entrepreneurial success impacts on social responsibility.
    -The issue of corporate social responsibility is complex and of growing interest. There is no clearpicture as to whether, in general, accepting higher levels of responsibility increases or decreasesshareholder value.

    -Values are the core set of beliefs and principles deemed to be desirable by a group

    -Ethics are the conception of which actions are right or wrong, what people should seek or avoid.

    -Business ethics are these, but related to business

    -Corporate social responsibility is the categories of economic, legal, ethical and discretionaryactivities of a business entity adapted to the values and expectations of a wider society
  23. Social responsibility and business performance
    In many ways, different types of entrepreneurship (social versus conventional) might be seen asdifferent prioritization’s of stakeholders within a general entrepreneurship framework
  24. What business failure actually means
    -Failure has many degrees and is an integral part of venturing. Good entrepreneurs learn fromfailure.-Degrees of failure:
    1. The business continues to exist as a legal entity under the control of the entrepreneur

    a. the business performs well financially but does not meet the social and selfdevelopment needs of the entrepreneur

    b. the business fails to achieve set strategic objectives

    c. the business fails to perform as well as planned but is financially secure

    d. the business fails to perform as well as planned and needs more financial support

    2. The business continues to exist as an independent entity but the entrepreneur loses control

    a. the business is taken over as a going concern by new management

    b. the business is taken over with restructuring

    3. The business does not continue to exist as an independent entity

    a. the business is taken over as a going concern and absorbed into another company

    b. the business is broken up and its assets disposed of
  25. Three changes that drive the entrepreneur
    1. The financial dimension Entrepreneurship is an economic activity which is most concerned with building stable, profitable businesses which must survive in a competitive environment. The new world created by the entrepreneur must be a more valuable one than which existed before.Entrepreneurs create new value  not just someone wins and some loses  entrepreneurs do more than just shift existing wealth around  new value can be shared in a variety of ways

    2. The personal dimension Some entrepreneurs need a sense of achievement, having a sense of creating something or of ‘making a whole new world’. Or entrepreneurs may be motivated by the challenge that the competitive environment presents. So it is often not the final destination that matters, but the journey (the build-up).

    3. The social dimension: What makes entrepreneurs want to drive changes in the structure of society:- Provide the society with new products and access to new services- Provide fellow citizens with jobs- Help make the economic system competitiveThe entrepreneur envisages a kind of world or the possibility of a better world (often part of their vision and so their mission). To achieve this, the entrepreneur has to operate with some degree of social responsibility.
  26. The entrepreneur is responsible for bringing together these four interacting contingencies to create new value:
    1. The entrepreneur: The entrepreneur is the manager who drives the whole process forward. They work singly or in management teams.

    2. Opportunity: An opportunity is the gap left in a market by those who currently serve it. The entrepreneur is responsible for scanning the business landscape for unexploited opportunities or possibilities that something important might be done both differently from the way it is done at the moment and, critically, better than it is done at the moment.

    3. (Business) Organization: Organizations can take on a variety of forms, depending on a number of factors; their size, their rate of growth, the industry they operate in, the types of product or service they deliver, the age of the organization and the culture that it adopts.It has been found more effectively to think in terms of organization in a wider sense as being a network of relationships between individuals, with the entrepreneur sitting in the center. The network view gives a good insight in how entrepreneurial ventures establish themselves, how they locate themselves competitively, and how they sustain their position in their market by adding value to people’s lives.

    • 4. Resources: Resources include:
    • - The money that is invested in the venture
    • - The people who contribute their efforts
    • - Knowledge and skills to it
    • - Physical assets such as productive equipment and machinery, building and vehicles
    • - Intangible assets such as brand names, company reputation and costumer goodwill

    Key function of the entrepreneur is to attract investment to the venture to use it to build up a set of assets which allow the venture to supply its innovation competitively and profitably.At first, the entrepreneur plays a critical role in identifying opportunity, building and leading the organization, and attracting and managing resources  when the company grows, it develops processes and systems, and the people within it adopt distinct roles.In this way, entrepreneurial ventures quickly take on a life of their own. They become quite distinct from the entrepreneur who established them.
  27. Key function of the entrepreneur
    is to attract investment to the venture to use it to build up a set of assets which allow the venture to supply its innovation competitively and profitably.At first, the entrepreneur plays a critical role in identifying opportunity, building and leading the organization, and attracting and managing resources  when the company grows, it develops processes and systems, and the people within it adopt distinct roles.In this way, entrepreneurial ventures quickly take on a life of their own. They become quite distinct from the entrepreneur who established them.
  28. The entrepreneurial process is dynamic  success comes from the contingencies of the entrepreneur, the opportunity, the organization and resources coming together and supporting each other over time.

    • 1. Opportunity-organization fit:
    • Essential features for opportunity of an organization:
    • - Assets the things which it possesses
    • - Structure how it arranges communication links within itself
    • - Process how it adds value to its inputs to create its outputs
    • - Culture the attitudes, beliefs and outlooks that influence the way people behave within the organization

    • 2. Resource-organization configuration
    • Resources include:
    • - People
    • - Money
    • - Productive assets

    Configuration of resources is the way in which a particular ix of resources is brought together and blended to form the organization’s assets, structure, process and its culture.

    • 3. Resource-opportunity focus:
    • The entrepreneur must decide what resources will make up the organization. The entrepreneur must be single-minded and focus those resources definitely and unambiguously on to the opportunity that has been identified since the performance of the entrepreneurial organization depends on how well the contingencies of opportunity, organization and resources are linked together.
  29. Learning organizations
    • Learning organizations
    • So the three aspects above make the organization fit the opportunity it aims to exploit, configure the resources to shape the organization and focus the resources in pursuit of the opportunity.They merely provide different perspectives on the same underlying management process.However:
    • - Leadership must be applied constantly
    • - Entrepreneurial organization must be a learning organization
    • - It must not only respond to opportunities and challenges but also reflect on the outcomes
    • - They must modify future responses in the light of experienceSo assets and structures must be modified as the organization grows and changes and, critically, learns from its successes and failures.
  30. People build highly structured societies. Within these societies we join together in organizations.An organization is an arrangement of relationships in that it exists in the space between people. Conclusion: whatever the organizational arrangement is at the moment, there is probably a better way of doing things.The world is dynamic  Technological progress quickly changes the rules
  31. In terms of satisficing behavior:- An opportunity is
    -A apportunity is the possibility to do things both differently from and better than how they are being done at the moment. In economic terms, differently means an innovation has been made. Better means the product offers a utility, in terms of an ability to satisfy human needs, that existing products do not.

    - Organizations must base their decisions on the knowledge they have to hand, and their ability to use it. Furthermore, they make their decisions while following the rules they have laid down for themselves and the rules of the culture that shapes their lives.

    - Business opportunity can be seen as a landscape  ‘open ground,’ ‘areas which are build up’, ‘areas with old buildings’ etc.  so organizations know where to move and to start building.
  32. Business opportunity
    chance to do something differently and better
  33. Innovation
    way of doing something differently and better
  34. All goods are made up of three factors
    • - natural raw materials,
    • - physical and mental labour
    • - capital.

    An innovation is a new combination of these three things.
  35. Innovation is a much broader concept than just inventing new products.Important areas in which valuable innovations might be made:
    • 1. New products: Most common innovation is the creation of a new product. This may:
    • - Exploit an established technology
    • - Outcome of a whole new technology
    • - A radically new way of doing something
    • - An improvement on an existing theme
    • Branding can also be a way to satisfy emotional needs -> personal statement

    2. New services: A service is an act which is offered to undertake a particular task or solve a particular problem. It can effectively use branding. It is beneficial to stop thinking about ‘products’ and ‘services’ as distinct types of business and to recognize that all offerings have product and service aspects.

    3. New production Techniques: Innovation can be made in the way in which a product is manufactured. It must either allow them to obtain the product at lower cost, or to be offered a product of higher or more consistent quality, or to be given a better service in the supply of the product.

    4. New operating practices: Services are delivered by operating practices which are, to some extent, routinized. These routines provide a great deal of potential for entrepreneurial innovation. By standardizing your product preparation, advantages can be gained.

    • 5. New ways of delivering:
    • the product or service to the costumerDistribution can only be a success when costumers know of your product. The potential for innovation can include the route (the path the product takes from the producer to the user) or the means of managing its journey.
    • A common innovation is to take a more direct route by
    • 1. cutting outdistributors or intermediaries. Another approach is
    • 2. to focus on the distribution chain and to specialize in a particular range of goods (‘category busting’).

    • 6. New means of informing the costumer about the product: 
    • Demand will not exist if the offering is not properly promoted to them. Promotion consists of: a message and a means. Venture often do not have the resources to invest in high-profile advertising so they are encouraged to develop new means of promoting their products (for example ‘free publicity’).
    • 7. New ways of managing relationships: within the organizationCommunication channels are guided b y the organization’s structure. The structure of the organization offers considerable scope for value-creating innovations.

    • 8. New ways of managing relationships between organizations:
    • The way in which organizations communicate and relate to each other is very important. Many entrepreneurial organizations have made innovation in the way in which they work with other organizations into a key part of their strategy.Organizations see that managing the relationship with their costumers is important. Some organizations succeed in breaking the barrier between their organization and their customers.

    An entrepreneurial venture does not have to restrict itself to just one innovation or even one type of innovation. Success can be built on a combination of innovations.
  36. High and low pioneering-innovativeness, distinguished on:
    • - the basis of a variety of strategic characteristics
    • - the selection of which reflects the innovation discovered
    • - the business opportunity and resources available
    • - the personal preferences of the entrepreneur

    Table 11.1 It’s quite simple actually. You should take a look at the table in the book.
  37. Opportunity motivates entrepreneurs. It is the thing that attracts their attention and draws their actions. They try to take control of opportunities.Entrepreneurs always scan the business landscape looking for new ways of creating value. This value can take form of:
    • - new wealth
    • - a chance to pursue an agenda of personal development
    • - creating social change
  38. Things that drive an entrepreneur:
    - dissatisfaction with the present, although many can still enjoy the what is

    - satisfaction with the journey

    - creating a space for themselves to take pride in what they have achieved
  39. The best ideas are
    those which are inspired by a clear need in the marketplace rather than those that result from uninformed invention.
  40. One of the misconceptions about entrepreneurs is
    • That they are ‘wanderers’ of the business world; they hop from industry to industry. Entrepreneurs need certain experience or knowledge of the field they will work in. Some important elements of this knowledge include knowledge of:
    • - the technology behind the product or service supplied;
    • - how the product or service is produced;
    • - costumers’ needs and the buying behavior they adopt;
    • - distributors and distribution channels;
    • - the human skills utilized within the industry;
    • - how the product or service might be promoted to the costumer;
    • - competitors: who they are, the way they act and react.
  41. Business success, and the accumulation of wealth this brings, creates a number of possibilities for the entrepreneur and their ventures to dispose of that wealth:
    1. Reinvestment: The business reinvests some of the profits it has generated.

    2. Rewarding stakeholders: Entrepreneurs exist in a tight network of relationships with a number of other internal and external stakeholders who are asked to give their support to the venture. They take risks, therefore they are being rewarded.

    • 3. Investment in other ventures: (optional -> if reinvestment within the venture has taken place, and the stakeholders have been rewarded for their contributions, and there are still funds left over, then alternative investments might be considered)The entrepreneur may:
    • - Start a new venture;
    • - Provide investment support to another entrepreneur.

    4. Personal reward(optional): Created value can be used for personal consumption or entrepreneurs can put their money into altruistic projects. This may reflect their desire to make a mark on the world outside the business sphere.

    5. Keeping the score(optional): Money is just a way of quantifying what they have achieved; a way of keeping the score of their performance. The money value of their venture is a measure of how good their insight was, how effective their decision making was, and how well they put their ideas into practice.
  42. The entrepreneur calls upon support of a certain number of groups:
    • 1. The employees: Being rewarded by:
    • - Being paid a salary
    • - A possibility of owning a part of the firm through share schemes
    • - Developing social relationships
    • - Gaining personal development

    • 2. The investors: Two sorts of investors:
    • - Stockholders -> buy a part of the firm, they are entitled to a share of any profits made. The return the stockholders receive depends on the how the business performs.
    • - Lenders -> people who offer money to the venture on the basis of it being a loan. They do not own a part of the firm. Lenders expect a rate of return which is agreed independently of how the business performs before the investment is made.

    3. The suppliers: Suppliers are the individuals and organizations who provide the business with the materials, productive assets and information it needs to produce its outputs. They are being paid with money.Supplying goods may involve an investment in developing a new product or providing a back-up support.

    4. The customers: Customers may need to make an investment in using a particular supplier. When costumers decide to use the products offered by a new venture rather than one with an established track record, they may be exposing themselves to some risk. Costumers expect high quality products.

    5. The local community: The way businesses operate may affect the people who live and other businesses which operate nearby. The responsibilities a company has towards the local community include legal or formal responsibilities as well as ethical responsibilities.

    6. The government: The government provides businesses with political and economic stability, education and health care. Because these services cost money the government taxes individuals and businesses. In general, governments aim to support entrepreneurial businesses because they have an interest in their success. Entrepreneurs bring economic prosperity, provide social stability and generate tax revenue.

    • So:
    • - customers can be rewarded for their loyalty;
    • - higher payments may be used to motivate employees;
    • - profits can be used to support projects in local community;
    • - distributing the rewards created by the venture is a great responsibility.
  43. Modern decision theory clearly distinguishes among decisions made under conditions of risk, of uncertainty and of ambiguity. All these decision types are based on knowledge of three information sets:
    1. The set of states in the world -> outside the active control of an entrepreneur

    2. The sets of acts -> the choices that the entrepreneur can make and has control over. Acts are made in anticipation of the state of the world that will obtain.

    3. The sets of outcomes -> outcomes result from the intersection of an act with a state of the world. They are the payoff expected to happen if the entrepreneur does ‘this’ and ‘that’ occurs.
  44. Decisions are made on the basis of knowledge about states, acts and outcomes. The different types of decision:
    1. Decisions under certainty -> the actual state of the world that will occur is known definitely. The decision maker simply selects the act that gives the highest returns (rare).

    2. Decisions under risk -> the states that might occur are known, but it is not known for definite which one will occur. What is known is the probability with which each state might occur.

    3. Decisions under uncertainty -> a manager might have a good knowledge of what might happen, he or she does not usually have detailed knowledge of the actual probabilities of what will happen.

    4. Decisions under ambiguity -> based on intuition. Decisions under ambiguity lie between those under uncertainty and risk. There is no definite probability for the things that might happen (risk), but the situation is not one of complete uncertainty either.

    5. Decisions under ignorance -> not only are the possibilities not known, but even what might happen is not known.

    So what entrepreneurs actually do is not take on risk but act to convert uncertainty (and ignorance) into risk (via ambiguity) by using their judgement to analyze and clarify the eventualities (states) thatmight occur estimate their probabilities and then identify the acts that will maximize payoffs given these eventualities.
Card Set
EBE part 1 & 2