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144
Chapter 10
Entrepreneurial Ventures
How many of your students dream of starting a new business someday? When
you ask this question in class, you may be surprised and impressed by the
number of your students who are interested in the possibility of becoming an
entrepreneur. This chapters presents information to provide students with a
foundational knowledge of major entrepreneurial issues in today’s dynamic
business environment.
LEARNING OBJECTIVES
1. Define entrepreneurship and explain why it’s important.
2. Explain what entrepreneurs do in the planning process for new ventures.
4. Describe how entrepreneurs lead organizations.
5. Explain how managers control organizations for growth, downturns, and
exiting the venture.
It’s Your Career
Being Entrepreneurial Even If You Don’t Want to Be an Entrepreneur
As a student, you are learning which course topics most interest you and where
your future lies. Deciding on a career is an essential first step. To get where
you’d like to go, you must develop a plan that will help you to meet your career
objectives. We suggest you might want to think “entrepreneurial” in developing
your career strategy. What does that mean?
1. Take control of your career.
2. Think outside the box.
4. Don’t be afraid to fail.
CHAPTER OUTLINE
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10-1. THE CONTEXT OF ENTREPRENEURSHIP
Entrepreneurs engage in a variety of activities through their performance
of the four managerial functions of planning, organizing, leading, and
controlling.
A. What is Entrepreneurship? Entrepreneurship is important to
1. There are key differences between entrepreneurial
ventures and small businesses.
2. Organizations that pursue opportunities, are characterized
by innovative practices, and have growth and profitability
as their main goals are entrepreneurial ventures, while a
B. Entrepreneurship Versus Self-Employment? Are
entrepreneurship and self-employment the same?
1. Self-employment refers to individuals who work for profit
or fees in their own business, profession, trade, or farm.
Three points of comparison:
a. Entrepreneurs and self-employed individuals
a legally recognized organization.
C. Why is Entrepreneurship Important? The importance of
entrepreneurship can be found in four areas:
1. Innovation. Entrepreneurial firms act as “agents of
2. Number of new start-ups. According to the U.S. Bureau of
Labor Statistics, the growth rate of new start-ups has been
steady every year since 2005.
3. Job creation. Job creation is important to overall long-term
4. Global entrepreneurship. Entrepreneurship contributes to
the growth and development of a country.
D. The Entrepreneurial Process.
advantages.
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3. Start the venture.
4. Manage the venture.
E. What Do Entrepreneurs Do?
Entrepreneurs create something, search for a change, respond to
it, and exploit it.
F. Social Responsibility and Ethics Issues Facing
located is important for achieving their business goals.
b. In a survey of employees from businesses of various sizes,
20 percent of employees at companies with 99 or fewer
employees disagreed when asked if they thought their
organization was highly ethical.
FUTURE VISION: The Growth of Social Business
The number of business that exist to “do good” in the world is expected to
increase as future entrepreneurs—the millennial generation—are motivated by
more than profit. Perhaps because they have been more exposed to global
issues and social concerns as a result of the Internet, this generation is more
aware of poverty, gender inequity, climate change, and terrorism. The
generation also questions consumerism and may be more comfortable marrying
business with social concerns.
The following discussion questions are posed:
Talk About It 1: How can a social entrepreneur decide if they should make their
venture a for-profit or not-for-profit business?
Talk About It 2: Do you think consumers are skeptical of for-profit businesses that
claim to have a social cause as a mission?
10-2. START-UP AND PLANNING ISSUES
Entrepreneurs must first identify opportunities and possible competitive
1. Peter Drucker identified the following seven potential sources
of opportunity that entrepreneurs might seek to identify in the
external context:
a. The unexpected
b. The incongruous
c. The process need
d. Industry and market structures
e. Demographics
f. Changes in perception
g. New knowledge
B. Researching the Venture’s Feasibility—Ideas. Where do ideas
come from?
1. Generating Ideas. Sources for an entrepreneurial venture
10-1.
3. A more structured evaluation approach that an entrepreneur
might want to use is a feasibility study—an analysis of the
1. What types of products or services are competitors offering?
2. What are the major characteristics of these products or
services?
3. What are their products’ strengths and weaknesses?
4. How do they handle marketing, pricing, and distributing?
5. What do they attempt to do differently from other competitors?
6. Do they appear to be successful at it? Why or why not?
7. What are they good at?
8. What competitive advantage(s) do they appear to have?
9. What are they not so good at?
10. What competitive disadvantage(s) do they appear to have?
11. How large and profitable are these competitors?
1. A good business plan covers six major areas:
a. Executive summary
b. Analysis of opportunity
F. The Sharing Economy. Business arrangements that are based
on people sharing something they own or providing a service for a
fee are known as the sharing economy.
10-3. ORGANIZING ISSUES
When the start-up and planning issues for the entrepreneurial venture
have been addressed, the entrepreneur begins to consider the
organization of the proposed business.
A. Legal Forms of Organization.
1. In organizing a new business, the entrepreneur must first
2. An entrepreneurial venture may be organized in one of
3. These three basic ways, together with variations of these
alternatives, offer the six possible choices listed below (see
Exhibit 10-4):
a. Sole proprietorship: the form of legal organization
in which the owner maintains sole and complete
1. As the business grows, the entrepreneur must hire
employees to help in the business. At this point, the
2. Organizational design choices are based on the six key
elements of organizational structure presented in Chapter
11.
C. Human Resource Management Issues.
1. As an entrepreneurial venture grows, additional employees
will need to be hired to perform the increased workload.
2. Employee recruitment. An entrepreneur wants to ensure
3. Employee retention. Getting competent and qualified
people into the venture is just the first step in effectively
1. If changes are needed in the entrepreneurial venture, often
it is the entrepreneur who first recognizes the need for
1. Organizations must continually innovate new products and
services if they want to compete successfully.
3. The entrepreneur must provide the supervisory support,
10-4. LEADING ISSUES
1. It has been difficult to identify specific personality traits that
all entrepreneurs share.
2. Evidence suggests an entrepreneur is likely to have a
3. Studies have shown that entrepreneurs have greater risk
1. Successful entrepreneurial ventures must be quick and
2. Empowered employees can provide that flexibility and
speed. When employees are empowered, they often
3. It’s hard for many entrepreneurs to empower employees
4. Entrepreneurs can begin by using participative decision-
1. Leading the Venture: leadership combines the
unpredictability of the future with the gifts of individuals.
2. Leading Employee Work Teams: the three most common
entrepreneurial teams are: empowered teams (teams that
have the authority to plan and implement process
improvements), self-directed teams (teams that are nearly
autonomous and responsible for many managerial
activities), and cross-functional teams (work teams
composed of individuals from various specialties who work
together on various tasks).
LEADER MAKING A DIFFERENCE
Mark Zuckerberg started Facebook in his dorm room in 2004 when he was just
19 years old. Today, the company, which made Zuckerberg the world’s youngest
self-made billionaire, generates more than $12 billion in annual revenue and
employs 12,000 people. Zuckerberg’s leadership skills are clear. A demanding
leader, he is also passionate and recognized for his inquisitive, persistent nature.
What can you learn from this leader making a difference?
10-5. CONTROLLING ISSUES
Entrepreneurs must consider a number of issues relating to the control of
1. Planning for Growth: Entrepreneurs need to address
2. Organizing for Growth: The key challenges for an
3. Controlling for Growth: Maintaining good financial records
and financial controls over cash flow, inventory, customer
B. Managing Downturns.
1. Recognizing Crisis Situations: Some signals of potential
performance decline include inadequate or negative cash
flow, excess number of employees, unnecessary and
cumbersome administrative procedures, fear of conflict
2. Dealing with Downturns, Declines, and Crises
a. It’s important to have an up-to-date plan for
covering crises.
b. This plan should focus on providing specific details
1. Business Valuation Models
2. Other Important Considerations in Exiting a Venture: These
ANSWERS TO REVIEW AND DISCUSSION QUESTIONS
10-1. What do you think would be the hardest thing about being an
entrepreneur? What do you think would be the most fun?
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10-2. Why are entrepreneurs important to society?
10-3. Would a good manager be a good entrepreneur? Discuss.
10-4. Why do you think many entrepreneurs find it hard to step aside and let
others manage their business?
10-5. Do you think a person can be taught to be an entrepreneur? Why or why
not?
Some people have the ‘right stuff’ when it comes to starting their own business.
They have a proactive personality, they are comfortable with risk, they have a
good support group, and they have been put in the right situation at the right time
to seize an opportunity. Does this mean that if an aspiring entrepreneur doesn’t
have the right personality, or friends and family, that you won’t succeed?
PERSONAL INVENTORY ASSESSMENTS
153
ETHICS DILEMMA
In this dilemma, students are asked to consider a situation in which a business
grows so quickly it has trouble maintaining some of practices that it uses as
selling points. In this particular case, the business is operating without
completing the background checks on service providers it has promised
customers have been conducted. Students should recognize the potential
problems that could arise given the nature of the business. What ethical issues
do they see in the case? And what are the implications for various stakeholders
in this situation?
10-8. What ethical dilemmas are involved with choosing not to conduct
background checks?
10-9. Should you focus on providing timely placements or taking the extra time to
complete background checks? Explain your answer.
(LO: 1, Define entrepreneurship and explain why it’s important, AACSB: Ethical
understanding and reasoning abilities)
SKILLS EXERCISE: DEVELOPING GRIT
WORKING TOGETHER: TEAM EXERCISE
In this exercise, students are asked to brainstorm business ideas that could be
started on their campus. Working in groups of three or four students, students
should take one idea and explore it further. Students should identify their
competitive advantage, discuss feasibility issues, potential competitors, and
financing. Students should then write and executive summary to share with the
class. (LO: 2, Explain what entrepreneurs do in the planning process, AACSB:
Analytical thinking)
MY TURN TO BE A MANAGER
• To be an entrepreneur, you must first have an idea. Entrepreneurs get
their ideas from many sources; however, an idea often hits when the
entrepreneur steps out of his or her own comfort zone. Start by exposing
yourself to new ideas and information. Subscribe to social media feeds for
Explain what entrepreneurs do in the planning process for new ventures,
AACSB: Analytical thinking)
• Explore the innovations or business ideas of others. Visit
www.springwise.com, a website that discovers and shares innovative
ideas from around the world and www.socialbusiness.org, a website that
shares ideas and businesses that are creating positive social change.
Add your thoughts and reflections on what you learn to your idea journal.
(LO: 2, Explain what entrepreneurs do in the planning process for new
ventures, AACSB: Analytical thinking)
• Interview an entrepreneur. Ask how he or she discovered his or her
business idea. What challenges did he or she face in starting the
business? What do you think made the business succeed? (LO: 2,
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10-10. Why do so many entrepreneurs experience failure?
10-11. Do you think someone could be an immediate success when starting a
business? Or is a first failure really necessary?
10-12 Is a growth mindset something you are born with? Or, can you develop a
growth mindset?
10-13. Entrepreneurs are important because of the impact they have on the
world around them. List and explain the different ways Edwins Restaurant
benefits its community.
10-14. What characteristics do you think Brandon Chrostowski possesses that
have helped him make this business a success?
Copyright © 2018 Pearson Education, Inc.
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Responses to this question will vary but will probably include characteristics such
as compassion, leadership, determination, and innovativeness. (LO: 4, Describe
how entrepreneurs lead organizations, AACSB: Analytical thinking)
10-15. Instead of a restaurant, Chrostowski could have opened only a nonprofit
cooking school or training center to help former felons receive job training that
would have benefitted them. Why is adding on the restaurant helpful?
10-16. Many entrepreneurs want to grow their business. Could Chrostowski grow
this business? How?
