Management Chapter 2

• Entrepreneurship - Identification, Evaluation, and Exploitation of Entrepreneurial Opportunities
• Entrepreneurial Opportunity - An occasion to create new products or services that can be sold at a price greater than their cost of production
• Entrepreneurship process

  A) Opportunity Identification

  B) Opportunity Evaluation

  C) Opporunity Exploitation

  
• J. Schumpeter - believed that entrepreneurs create value in an economy.
• Opportunity Identification - Entrepreneurs are not able to take advantage of opportunities unless they know they exist
• Factors of Opportunity Identification

  • Entrepreneurial alertness
  • Information asymmetry
  • Social networks
  • Cross-cultural experience
  • Identification of means-ends relationships
• Entrepreneurial alertness 


  Recognizing a trend and acting on it (Opportunity Identification Factor)
• Example of entrepreneurial alertness

  • Youtube Music - trend people using music streaming services more
• Information asymmetry


  Individuals vary in terms of the information to which they have access
• Social networks


  Individual's patterns of social relationships
• Cross-cultural experience


  Experience living in a foreign country, access to different types of products, services, customer problems
• Identification of means-ends relationships


  Understanding how to turn new technology into a product or service that will be desired by customers
• Example of identifying means-ends relationships

  • VR-AR Technology - Hollolens or Apple Vision Pro
• Opportunity evaluation - Entrepreneurs must determine if they have a good idea or viable opportunity to provide the desired outcomes
• Opportunity Evaluation

  Be honest with yourself - May purposely ignore or accidentally overlook important factors that will limit the potential success of the opportunity
• Feasibility Analysis - study of the practicality of an idea to support a business
• Entrepreneurial Risk - likelihood and magnitude of the opportunity’s downside loss
• downside loss - resources (money, relationships, etc.) that the entrepreneur could lose
• Opportunity Evaluation - Factors of Risk Perception

  • Law of Small Numbers – relying on small samples of information to guide decisions (Positively biased)
  • Illusion of Control - May depend on luck rather than entrepreneurial skill
• Opportunity Exploitation - Activities and investments committed to gain returns from new products or services
• Should exploit opportunity when:

  • Customers will value new products or services AND they provide market demand
  • Perceive have support of important stakeholders
  • Perceive management team is capable
• Examples of stakeholders - Employees, suppliers, investors, government
• Corporate entrepreneurship - The process in which an individual, or group, creates a new organization within a corporation.
• Corporate entrepreneurship

  Corporate entrepreneurship can work in both new and established firms
• Corporate entrepreneurship

  The organizations created during this process continue to work closely with “parent” company
• Four general types of Corporate Entrepreneurship

  • Sustained Regeneration
  • Organizational Rejuvenation
  • Strategic Renewal
  • Domain Definition
• Sustained Regeneration - Development of new cultures, processes, or structures to support new production innovations

  (Ex. Mitsubishi - innovation machines)
• Organizational Rejuvenation - Improve a firm’s ability to execute strategies and focuses on new processes instead of new products

  (Ex. General Electric)
• Strategic Renewal - Change competitive strategy

  (Ex. Walmart has difficulty to change its strategy to focus on more affluent customers)
• Domain Definition – Firm proactively seeks to create a product market position that competitors have not recognized. First entrant in market segment

  (Ex. Amazon.com - Book online)
• Commercial Entrepreneurship – Individuals or corporations pursue opportunities for the purpose of generating sales and profits
• Social Entrepreneurship – Recognition, evaluation, and exploitation of opportunities that create social value as opposed to personal or shareholder wealth
• Success Factors in Social Entrepreneurship

  • Network relationships
  • Capital
  • Public's acceptance of new venture
• Types of opportunities

  • Creation of new products or services (heart stent)
  • New geographical markets
  • New raw materials or alternatives (ethanol)
  • New methods of production
  • New methods of organizing (Netflix)
• Financial Exploitation

  • Internal Financing (Seed finance) - own funds, family, friends
• Three forms of External Financing

  • Angel Investors - investors who provide capital to new companies
  • Venture capitalists - investment firms that supply funds to new ventures
  • Bank financing - financial institutions that offer loans to new companies
• Important differences between f

  A) Angel

  B) Venture

  C) large

  D) smaller

  E) banks

  F) payback