Why entrepreneurship is important

8-1

http://www.youtube.com/watch?v=D0hqFntuLcI&hd=1

• Unscheduled Quiz 5

• Do you want to take the unscheduled quiz/contest? 

– If you design and fly a paper plane and the paper plane reaches 

a distance further than Dr. Wang’s paper plane

– You get 6 points

– You get 0 points if your plane falls at a shorter distance than Dr. 

Wang’s plane

– You can select and use only one piece of paper/no trial run

– If you withdraw from the contest, you get 3 points 

8-2

•

Entrepreneurs

hip 

– the creation of new value by an existing 

organization or new venture that involves the 

assumption of risk.

8-3

Recognizing

Entrepreneurial Opportunities

• New value can be created in:

– Start-up ventures

– Major corporations

– Family-owned businesses

– Non-profit organizations

– Established institutions

8-4

Entrepreneurial Opportunities

Start-ups

• Current or past

work

experiences

• Hobbies that grow into businesses or lead 

to inventions

• Suggestions by friends or family

• Chance events

• Change

8-5

Entrepreneurial Opportunities

Established firms

• Needs of existing customers

• Suggestions by suppliers

• Technological developments that lead to new advances

• Change

8-6

Entrepreneurial Opportunities

• Opportunity recognition

– the process of discovering and evaluating 

changes in the business environment, such 

as a new technology, socio-cultural trends, or 

shifts in consumer demand, that can be 

exploited.

8-7

Opportunity Analysis Framework

8-8

Exhibit 8.1

Entrepreneurial Opportunities

• Discovery phase

– the process of becoming aware of a new 

business concept.

– May be spontaneous and unexpected

– May occur as the result of deliberate search 

for new venture projects or creative solutions 

to business problems

8-9

Opportunity Recognition Process

• Opportunity evaluation phase

– involves analyzing an opportunity to 

determine whether it is viable and strong 

enough to be developed into a full-fledged 

new venture.

• Talk to potential target customers

• Discuss it with production or logistics managers

• Conduct feasibility analysis

8-10

Characteristics of Good Opportunities

Attractive Achievable

Durable Value 

creating

8-11

• Those planes which beat Dr. Wang’s can compete for a higher score!

– If you design and fly a paper plane and the paper plane reaches a distance further than ALL OTHER PLANES designed by those who beat Dr. Wang’s paper plane

– Winner get 6 points X 2(number of total wins) (The plane becomes more valuable because it is the best product)

– You get 0 points and lose your previous 6 points if your plane is not the winner (winner takes all)

– You

must

compete one-on-one with another player (we’ll have a tournament!)

– You spend 6 points for a new plane for every contest (operating your business needs money)

– Every fly consumes the paper(6 points) including trial run

– You can borrow points/issue debts from your classmates/lenders who didn’t take part of the previous game and pay interests (points) back. Your debt is secured by your current class participation points and needs to be paid even if you lose

– You can accept points from your classmates as investments. The points you accept translate into ownership of your venture. Your investors share your winning points proportional to their investment and lose their investment/points if you don’t win the contest. 

– Do you want to sell your winning plane at the price that Dr. Wang offers you? 

8-12

Entrepreneurs

• Identify opportunities

• Gather resources to support the venture

• Lead to compete

– Succeed or fail

Sources of Capital for Start-Up Firms

8-14

Exhibit 8.2

Entrepreneurial Resources

• Human capital

• Social capital

• Government resources

– Small Business Administration

– Government contracting

– State and local governments

8-15

http://www.sba.gov/

Entrepreneurial Leadership

• Launching a new venture requires a 

special kind of leadership

– Courage

– Belief in one’s convictions

– Energy to work hard

8-16

Entrepreneurial Leadership

• Three characteristics

– Vision

– Dedication and drive

– Commitment to excellence

8-17

Entrepreneurial Leadership

• Vision may be entrepreneur’s most 

important asset

– Ability to envision realities that do not yet exist

– Exercise a kind of transformational leadership

– Able to share with others

8-18

Entrepreneurial Leadership

• Dedication and drive are reflected in hard 

work

– Patience

– Stamina

– Willingness to work long hours 

– Internal motivation

– Intellectual commitment to the enterprise

– Strong enthusiasm for work and life

8-19

Entrepreneurial Leadership

• To achieve excellence, entrepreneurs 

must

– Know the customer

– Provide quality products and services

– Pay attention to details

– Continuously learn

– Surround themselves with good people

8-20

Example: 10 Management Lessons

• It’s all about 

perseverance

• Understand the value of 

mentorship and teamwork

• Stick to your niche

• Stay on top of news that 

affects your clients

• Communication is key

• Capitalization is crucial 

• Communicate 

unwavering honesty and 

integrity

• Stay on top of the curve

• Take ownership in your 

clients’ success

• Never stop marketing

8-21

http://entrepreneur.com/

Entrepreneurial Strategy

• Best strategy for the enterprise will be 

determined to some extent by

– A viable opportunity, sufficient resources, and 

skilled and dedicated entrepreneurial team

– Other conditions in the business environment

8-22

Entry Strategies

• Pioneering new 

entry

– a firm’s entry into an 

industry with a radical 

new product or highly 

innovative service that 

changes the way 

business is conducted.

8-23

https://www.pandora.com/

Entry Strategies

• Imitative new entry

– a firm’s entry into an industry with products or 

services that capitalize on proven market 

successes and that usually has a strong 

marketing orientation.

8-24

Entry Strategies

• Adaptive new entry

– a firm’s entry into an industry by offering a 

product or service that is somewhat new and 

sufficiently different to create value for 

customers by capitalizing on current market 

trends.

8-25

Examples of Adaptive New Entrants

8-26

Exhibit 8.3

Elements of a Blue Ocean Strategy

• Create uncontested market space

• Make the competition irrelevant

• Create and capture new demand

• Break the value/cost tradeoff

• Pursue differentiation and low cost 

simultaneously.

8-27

Generic Strategies

• Overall cost leadership

– Simple organizational structures

– More quickly upgrade technology and 

integrate feedback from the marketplace

– Make timely decisions 

that affect cost

8-28

http://www.youtube.com/watch?v=CxfqdMX96C0&hd=1

Generic Strategies

• Differentiation

– Use new technology

– Deploy resources in a radical new way

• Focus

– Niche strategies fit the small business mold

8-29

Combination Strategies

• Entrepreneurial firms are often in a strong 

position to offer a combination strategy

– Combine best features of low-cost, 

differentiation, and focus strategies

– Flexibility and quick decision-making ability of 

a small firm not laden with layers of 

bureaucracy

8-30

Competitive Dynamics

• Competitive dynamics

– Intense rivalry, involving actions and 

responses, among similar competitors vying 

for the same customers in a marketplace.

8-31

Model of Competitive Dynamics

8-32

Exhibit 8.4

Why Do Companies Launch New Competitive Actions?

• Improve market position

• Capitalize on growing demand

• Expand production capacity

• Provide an innovative new solution

• Obtain first mover advantages

8-33

Threat Analysis

• Threat analysis

– A firm’s awareness of its closest competitors 

and the kinds of competitive actions they 

might be planning.

• Market commonality

• Resource similarity

8-34

Five “Hardball” Strategies

Devastate rivals’ profit sanctuaries

Plagiarize with pride

Deceive the competition

Unleash massive and overwhelming force

Raise competitors’ costs

8-35

Types of Competitive Actions

• Strategic actions 

– Major commitments of distinctive and specific resources to strategic initiatives.

• Tactical actions 

– Refinements or extensions of strategies usually involving minor resource commitments.

8-36

Likelihood of Competitive Reaction

• How a competitor is likely to respond will 

depend on three factors

– Market dependence

– Competitor’s resources

– The reputation of the firm that initiates the 

action (actor’s reputation)

8-37

Choosing Not to React

• Forbearance

– a firm’s choice of not 

reacting to a rival’s 

new competitive 

action.

• Co-opetition

– A firm’s strategy of 

both cooperating and 

competing with rival 

firms.

8-38

Extra credit

• What do you learn from the entrepreneurial paper plane game from the perspective of entrepreneurship? (maximum 10 points)