978-1259912191 Chapter 1 Lecture Notes

Chapter 1: The 21st Century Entrepreneur

Table of Contents

Brief Chapter Outline…………………………………………………………………………………..2

Chapter Outline and Lecture notes………………………………………………………………..4

Key Terms……………………………………………………………………………………………….. 11

Suggested Text Responses………………………………………………………………………… 12

Class Activities and Sample Assignments…………………………………………………….15

Discussion Questions for Online/Hybrid classes…………………………………………….17

Lecture Links…………………………………………………………………………………………… 20

Lecture Link 1.1: Entrepreneurs and New Small Business Planning Goals.………..20

Lecture Link 1.2: The Advantages of the Small Business Administration (SBA). .. .21

Lecture Link 1.3: Entrepreneurial Business around the World………………………….23

Bonus Internet Exercises…………………………………………………………………………… 25

Bonus Internet Exercise 1.1: Decline in Employees at Fortune 500 Companies….25

Bonus Internet Exercise 1.2: Entrepreneurial Success Story of Dell Computer…..27

Bonus Internet Exercise 1.3: Ethical Considerations for the New Entrepreneur….29

Critical Thinking Exercises…………………………………………………………………………. 31

Critical Thinking Exercise 1.1: Venture Capital-backed Firmsversus Entrepreneurial

Startups….…………………………………………………………………………………………….

31

Critical Thinking Exercise 1.2: Planning Goals for the New Entrepreneurial

Business…………………………………………………………………………………………………. 33

Critical Thinking Exercise 1.3: Stakeholders and the Entrepreneur…………………..35

Bonus Cases……………………………………………………………………………………………. 37

Bonus Case 1.1: New Entrepreneurs and Unemployment Issues in the United

States…………………………………………………………………………………………………….. 37

Bonus Case 1.2: Bill Gates: The Microsoft Genius………………………………………….39

Bonus Case 1.3: MYMIC, LLC: A Dynamic Approach to Entrepreneurship…………..43

Endnotes………………………………………………………………………………………………… 44

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Chapter 1: The 21st Century Entrepreneur

Brief Chapter Outline

I. Learning Objectives

Explain the rationale behind starting an entrepreneurial business.

Discuss the history of entrepreneurship in the United States.

Identify the type of people who are entrepreneurs.

Describe the impact of entrepreneurial businesses on society.

Discuss the worldwide impact of entrepreneurial businesses.

Define an entrepreneurial business.

II. Why start a business?

Learning Objective 1-1: Explain the rationale behind starting an entrepreneurial

business

a. Enhance the American economy

b. Proven success in entrepreneurial business

c. Obtain economies of scale in industry

d. Achieve entrepreneurial status

e. Small Business Administration (SBA) assistance

III. A brief history of entrepreneurial businesses in the United States.

Learning Objective 1-2: Discuss the history of entrepreneurship in the United

States

a. Entrepreneurial business contribution to success in the United States

b. Timeline of American business

c. Entrepreneurial businesses are the backbone in the nation’s economic

success

IV. Who are entrepreneurial business owners today?



Learning Objective 1-3: Identify the type of people who are entrepreneurs.

V. How does society benefit?



Learning Objective 1-4: Describe the impact of entrepreneurial businesses on

society.

a. Entrepreneurial business development

b. Economic Gardening

c. Create new jobs

d. Tax revenues

e. Improve economic vitality

f. Positive societal change

g. Increase in women entrepreneurs

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Chapter 1: The 21st Century Entrepreneur

VI. Entrepreneurship around the world.



Learning Objective 1-5: Discuss the worldwide impact of entrepreneurial

businesses

a. Worldwide scope of small enterprises

b. SME promotion

c. New venture start-up programs

VII. What is an entrepreneurial business?

Learning Objective 1-6:Define an entrepreneurial business

a. Define small business

b. High-growth, high-tech ventures

c. Entrepreneurial business start-ups

d. Compare and contrast entrepreneurial business and venture

capital-backed firms

e. Business plans for entrepreneurial business and venture capital-backed

firms

VIII. For Review (text page 16)

Chapter Outline and Lecture notes

1. Learning Objectives (text page 2)

Explain the rationale behind starting an entrepreneurial business.

Discuss the history of entrepreneurship in the United States.

Identify the type of people who are small entrepreneurs.

Describe the impact of entrepreneurial businesses on society.

Discuss the worldwide impact of entrepreneurial businesses.

Define entrepreneurial business.

2. Why Start a Business? (text pages 4 through 6)

Learning Objective 1-1:Explain the rationale behind starting an entrepreneurial

business

A. There is great potential for entrepreneurial businesses to provide positive

outcomes in the communities they serve

i. The Small Business Administration (SBA) provides assistance for

current and potential small business owners

1. New business start-up assistance

2. Continued business support

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Chapter 1: The 21st Century Entrepreneur

3. Business development

ii. The development of a entrepreneurial business stimulates the

United States economy

iii. Many entrepreneurial businesses have the potential to become

larger profitable businesses

1. Discuss historical companies that experienced unexpected

growth (Apple is one example for students to discuss)

2. Small businesses are the foundation for all businesses

iv. Historically, small businesses have proven success rates

1. Individuals and groups that initiate their own business have

the potential to become successful entrepreneurs

2. Conduct a survey in class to determine how many students

want to develop a small business and become future

entrepreneurs

v. Individuals become independent when they achieve entrepreneurial

status

vi. Compare and contrast the characteristics of small and large

businesses

1. Historically, small businesses experience an increase in

employment; and larger organizations experience a decline

in employment

2. Small businesses are more efficient because their production

outcomes exceed those of larger organizations

3. Small businesses experience decreased economies of scale

compared to larger organizations because the larger

organizations have lower long-range average cost as their

production continues to increase

4. Small businesses are more efficient because they respond

more quickly to market changes compared to larger

organizations

vii. Business Plan Development

1. The implementation of business plans are a combination of

art and science

2. Many new businesses fail within the first four years of

operation

3. Elements that an entrepreneur must solve for success:

a. Effective sales generation model

b. Sustainable operating profit margins.

c. Being properly financed.

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Chapter 1: The 21st Century Entrepreneur

3. A brief history of entrepreneurial businesses in the United States (text pages 6

and 7)

Learning Objective 1-2: Discuss the history of entrepreneurship in the United

States

A. Small businesses have existed in our society for many years

i. Prior to the 1880s the majority of businesses were small ventures

1. Individuals and groups acquired skills to produce essential

items for themselves, or they bartered and traded

innumerable goods and services

ii. The development of industry occurred after 1880 in the United

States

1. Larger industrial base

2. Robber Barons

3. Economies of scale

4. Dominate new sectors in the economy

5. New small businesses continue to blossom

iii. The Great Depression occurred in the 1930s

1. There was an increase in industrial concentration

2. Trends in businesses revealed a decline in small businesses

iv. Decline in large industries in the 1970s and 1980s

1. Economic turmoil

2. There was a decline in larger firms

3. Japan gained a competitive advantage an dominated an

economic position in the markets

4. There was a decline in large multinational firms

5. New opportunities were advantageous for entrepreneurial

businesses.

4. Who are entrepreneurial business owners today? (text page 8)

Learning objective 1-3: Identify the type of people who are entrepreneurs

A. Entrepreneurs have common motivations to initiate entrepreneurial

businesses

i. Entrepreneurs want to be their own boss

ii. Individuals experience increased personal rewards and self

fulfillment from entrepreneurship

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Chapter 1: The 21st Century Entrepreneur

iii. It is common for entrepreneurs to gain greater financial rewards as a

result of small business ownership

B. Stakeholders are known as individuals and groups that have a stake in the

performance outcome of an organization

i. Individuals or other organizations that impact the success of a

business

ii. They maintain business relationships with key suppliers and clients

to enhance the success of the business

iii. Examples of stakeholders include: competitors, customers,

suppliers, distributors, special interest groups, and employees

C. Entrepreneurs reap the rewards of small business ownership

i. Enhanced sense of joy and self fulfillment

ii. Flexible work schedules

iii. Increased potential to earn greater financial rewards

5. How does society benefit? (text pages 8 through 10)

Learning Objective 1-4: Describe the impact of entrepreneurial businesses on

society.

A. The formation of entrepreneurial businesses enhances the opportunity for

entrepreneurs to implement positive outcomes in the communities they

serve

B. Entrepreneurs impact society

i. The development of entrepreneurial businesses acts as a catalyst

for societal change.

ii. Entrepreneurs who initiate new businesses contribute to

employment opportunities in the community

iii. Entrepreneurs and the growth of their new small businesses

increase tax revenue

iv. Small businesses contribute to economic vitality

C. The implementation of entrepreneurial businesses assures effective

change in society

i. Entrepreneurs garner profits in depressed areas within a community

ii. Entrepreneurial business formation contributes to a healthy and

flexible lifestyle

iii. Entrepreneurs promote local community advantages

iv. Entrepreneurs provide potential employment opportunities for

minorities and women

v. Women entrepreneurs overcome the glass ceiling.

vi. Entrepreneurs have greater control on balancing their family’s

needs.

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Chapter 1: The 21st Century Entrepreneur

6. Entrepreneurship around the world (text page 11)

Learning Objective 1-5: Discuss the worldwide impact of entrepreneurial

business

A. SME’s (small and medium sized enterprises) are one of the strongest

factors in the growth of any nation’s GNP.

B. Entrepreneurs establish international or global businesses

C. Ask students to discuss the pros and cons associated with an

entrepreneur’s decision to establish a entrepreneurial business in the

United States or abroad

D. SME’s:

i. Small and medium sized businesses

ii. Microloan programs to encourage self-development

1. Promotes growth in GNP

a. Direct loans

i. Recipients are entrepreneurs

b. Fast funding

c. High repayment rates

d. Proceeds to poorer nations

e. Proven success in program implementation

E. New venture start-up programs (text page 11)

i. Government interest provides services and facilities

ii. Results encourage development of founding firms

iii. Recent programs encourage high-technology ventures to educated

individuals

iv. Pace of small business startups is increasing around the world.

7. What is an entrepreneurial business? (text pages 11 through 15)

Learning Objective Lesson 1-6: Define an entrepreneurial business

A. Less than 500 employees

B. In Europe, less than 50 employees

C. Small-to-medium-sized business (SMB) or (SME)

D. High-growth, high-tech ventures

i. Well funded by venture capital (angel investment)

1. Specialized investors

2. Capital required equates to $2,000,000 investment

3. Expect extraordinary returns

ii. Harvest plan to exist the business

1. Can sell the business to another firm

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Chapter 1: The 21st Century Entrepreneur

2. Can sell the business to investors

3. Participate in IPO’s

4. The size of the business dictates the sales parameter

iii. Rapid growth

iv. Heavily laden with debt

v. Developed organizational structure

vi. Experienced leadership is required

vii. Operations are initiated in multiple locations simultaneously

viii. High-risk operations

ix. Growth is dependent on speculative business

x. Employs many employees

E. Entrepreneurial business start-up

i. The start-up is self-funded or closely funded

ii. Oriented around a positive cash flow

iii. The management structure takes advantage of founder(s) skills

iv. Operation design in the image of the founder

v. Business is oriented toward the personal goals of the founder(s)

vi. One or less employees is typical

vii. The maximum employees are between 50 and 100

F. Compare and contrast the difference between entrepreneurial businesses

and venture capital-backed firms.

i. An entrepreneurial business has constrained resources and a

venture capital-backed firm’s resources are not constrained.

ii. In a small business a business plan is used as a guide in running

the business; and in a venture capital-backed firm, the business plan

is a promotional tool sent to investors.

G. Business Plans-Another difference in types of firms

i. Size of plan

1. Entrepreneurial business plan is usually 15-25 pages.

2. Venture capital-backed plan is usually 25-45 pages.

ii. Goal of business plan

1. Used as a guide in early development of the business.

2. Provides self- evaluation and analysis of the business.

3. Provides critical information to investors.

iii. Successful business plans have the following characteristics.

1. They do not use cookie-cutter business plan programs.

2. The plan is developed following the chapters of this text.

3. The plan should not intimidate the author by the effort to

4. Prepare a one-page pitch for the business. – example p.16

H. Review (pages 17 and 18)

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Chapter 1: The 21st Century Entrepreneur

Key Terms

Economies of scale: A condition that allows the long-run average cost to continue

downward as production increases. It leads (in its most extreme case) to a condition

where a single firm making 100 percent of the product is the most efficient. In reality this

condition is moderated by the ability of management to control size. (LO 1-1)

Fortune 500: Fortune 500 published annually by Fortune Magazine and documents the

500 largest corporations (by sales) in the United States. (LO 1-1)

Harvest plan: A plan to exit a business. Typically, the owners have the intention to sell

the business to another firm or take it to an IPO. (LO 1-6)

Stakeholders: Individuals or other organizations that impact the success of a business.

(LO 1-3)

United States Small Business Administration (SBA): The SBA is the agency officially

organized in 1953 as part of the Small Business Act of July 30, 1953 to “aid, counsel,

assist and protect, insofar as is possible, the interests of small business concerns.” The

agency provides a wealth of information and assistance at all levels of organizational

development and management. (LO 1-1)

Suggested Text Responses

Opening Vignette – “Bull & Beard”

Student responses will vary.

Exercise 1 – p. 8

Student responses will vary.

Ethical Challenge – p. 10

Student responses will vary.

Exercise 2 – p. 11

Student responses will vary.

Exercise 3 – p. 13

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Chapter 1: The 21st Century Entrepreneur

Student responses will vary

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