APPENDIX SUMMARY – MANAGING ENTREPRENEURIAL VENTURES
The Context of Entrepreneurship
ü Differentiate between entrepreneurial ventures and small businesses.
ü Explain why entrepreneurship is important in the United States and globally.
ü Describe the four key steps in the entrepreneurial process.
ü Explain what entrepreneurs do.
ü Discuss why social responsibility and ethics are important considerations for entrepreneurs.
Entrepreneurial ventures are organizations that are pursuing opportunities, are characterized by innovative practices, and have growth and profitability as their main goals. Small businesses are independently owned, operated, and financed; have fewer than 100 employees; don’t necessarily engage in any new or innovative practices; and have relatively little impact on their industry.
Entrepreneurship is important in the United States because it impacts innovation, the number of new start-ups, and job creation. Entrepreneurship is important globally because research shows that the level of entrepreneurial activity in a country affects its economic growth. (See Exhibit 1.)
The four steps in the entrepreneurial process are: exploring the entrepreneurial context, identifying opportunities and possible competitive advantages, starting the venture, and managing the venture.
Entrepreneurs are creating something new, something different. They assess the potential for the venture and then deal with start-up issues. Once the entrepreneur has made the decision to proceed, then he or she deals with planning, organizing, leading, and controlling the venture.
Social responsibility and ethics are important considerations for entrepreneurs because they need to run their ventures responsibly and ethically. In addition, some entrepreneurs have capitalized on the market opportunities associated with protecting the environment.
Start-Up and Planning Issues
ü Discuss how opportunities are important to entrepreneurial ventures.
ü Describe each of the seven sources of opportunity.
ü Explain why it’s important for entrepreneurs to understand competitive advantage.
ü List possible financing options for entrepreneurs.
ü Describe the six major sections of a business plan.
Opportunities are important because they represent positive trends in external environmental factors that can be exploited.
The seven sources of potential opportunity include: the unexpected, the incongruous, the process need, industry and market structure changes, demographics, changes in perception, and new knowledge. (See Exhibits 2 and 3.)
Entrepreneurs need to understand competitive advantage because that’s what will set apart their entrepreneurial venture from competitors.
Possible financing options include the entrepreneur’s personal resources, financial institutions, venture capitalists, angel investors, initial public offerings, governmental business development programs, and unusual sources (such as business plan competitions). (See Exhibit 4.)
The six major parts of a business plan are executive summary, analysis of opportunity, analysis of the context, description of the business, financial data and projections, and supporting documentation.
Organizing Issues
ü Contrast the six different forms of legal organization.
ü Describe the organizational design issues that entrepreneurs face.
ü Discuss the unique HRM issues entrepreneurs face.
ü Describe what an innovation-supportive culture looks like.
There are six forms of legal organization: sole proprietorship, general partnership, limited liability partnership (LLP), C corporation, S corporation, and limited liability company (LLC). (See Exhibit 5.)
Entrepreneurs must choose an appropriate organizational structure that best fits their venture’s needs and encompasses the six key elements of organizational structure: work specialization, departmentalization, chain of command, span of control, amount of centralization-decentralization, and amount of formalization. In addition, the entrepreneur must decide whether a more mechanistic or more organic structure is best.
The two main HRM issues entrepreneurs face involve employee recruitment and employee retention.
An innovation-supportive culture is one in which employees perceive that supervisory support and organizational reward systems are consistent with a commitment to innovation.
Leading Issues
ü Explain what personality research shows about entrepreneurs.
ü Discuss how entrepreneurs can empower employees.
ü Explain how entrepreneurs can be effective at leading employee work teams.
Studies of entrepreneurs show common personality traits such as high level of motivation, abundance of self-confidence, high energy level, resourcefulness, and relatively high need for autonomy. Another trait is a proactive personality, which describes those individuals who are more prone to take actions to influence their environment.
Even though it’s often difficult for them to do, entrepreneurs can empower employees by using participative decision making, delegation, and job redesign.
Leading employee work teams requires that entrepreneurs shift from the traditional command-and-control style to a coach-and-collaboration style.
Controlling Issues
ü Describe how entrepreneurs should plan, organize, and control growth.
ü Describe the boiled frog phenomenon and why it’s useful for entrepreneurs.
ü Discuss the issues an entrepreneur needs to consider when deciding whether to exit the entrepreneurial venture.
Growing the venture successfully requires planning, organizing, and controlling. Growth should be planned, but not be overly rigid in planning. The key organizing challenges in growth include finding capital, finding people, and strengthening the organizational culture. (See Exhibit 6.) It’s also important to reinforce already-established organizational controls.
The “boiled frog” phenomenon is based on a classic psychological experiment and refers to the fact that entrepreneurs need to be alert to the subtle signs of problems.
When an entrepreneur is considering whether to exit the entrepreneurial venture, he or she needs to consider how to value the business and how to exit the business as carefully as it was launched. (See Exhibit 7.)