ch02 process of entrepreneurship

8/6/2019 Ch02 Process of Entrepreneurship

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Process of EntrepreneurshipProcess of Entrepreneurship

Decision to Become anEntrepreneur

Introduction toEntrepreneurship


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Developing Successful BusinessIdeas

Recognizing Opportunities & generatingIdeas

Feasibility Analysis

Industry & Competitor Analysis

Developing an Effective Business Model

Chapter

2-5


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Moving from an Idea to anEntrepreneurial Firm

Building a new Venture Team

Assessing a new ventures financial strength &viability

Preparing a proper ethical & legal foundation

Writing a Business Plan

Getting Finance or Funding

Chapter

6-10


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Managing & growing anEntrepreneurial Firm

Managing & Growing an Entrepreneurial Firm

The importance of intellectual Property

Preparing for & evaluating the challenges of

growth

Strategies for firm growth

Franchising

Chapter

11-15


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Recognizing opportunities & generating ideasRecognizing opportunities & generating ideas

y Buyandhold.com: Filling a Void in the Online Investing Marketplace

Geoffery M. Tudisco worked for shareholder Communication Corporation

SCC worked for Dividend Reinvestment Plan.(DRIP). Enable individuals to

purchase stock directly from company with investment as low as $25. The

company offers service called Direct Purchase plan Clearing House .

Soon after Tudisco was hired SCC made an effort to offer clearing house facilitythrough website while partnering a company Netstockdirect.com.

However when Netstock redesign a website just remove all indication that

clearing house was a partner. Tudisco highlighted the issue to Peter Breen the

boss. On the approval he made within 30 days a new website having all DRIP

plans. One step ahead he also develop an idea of buy & hold brokerage services.

Once been forwarded to the higher management both Peter Breen & Tudiscodidnt get a positive response. In response to that both have left the company

and started their own company with the name buyandhold.com to pursue

their own idea. SCC failed to recognize the idea and the people who did it get it

successful as they can see the dire need of the people who would like to have

save investment of $20/trade and can subscribe the service by $6.99/month.

SSC has failed to realized & created an opportunity Gap which was filled by both

Breen & Tudisco by generating an idea and recognizing the need of the customer.


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Identifying & Recognizing OpportunitiesIdentifying & Recognizing Opportunities

y Entrepreneurs recognize an opportunity and turn it into a

successful Business.

y An opportunity is a Favorable set of Circumstances that creates a

need for a product, service or a business.

y

Most entrepreneurial firms are started in either of the ways Externally Stimulated: An entrepreneur decides to launch a firm, search for &

recognize an opportunity and then starts a Business.

Internally Stimulated: An entrepreneur recognized a problem or an

opportunity gap and creates a business to fill it. Eg. Buyand hold.com

y Opportunities for any product , service or business are always

tough to find. Opportunity recognition is part art & science. Relying on instinct is an art, while

having analytical examination is science.

Opportunity has 4 essential qualities 1) Attractive 2) Durable 3) Timely

4) anchored in a product service or business that creates a value to its

customer.


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Identifying & Recognizing OpportunitiesIdentifying & Recognizing Opportunities

y Difference between an opportunity & Idea Idea is a thought, impression or notion. It may or may not meet the criteria of an

opportunity.

y Window of Opportunity The term window of opportunity is a metaphor

describing the time period in which a firm can

realistically enter a new market.x Once the market for a new product is established, its

window of opportunity opens, and new entrants flow in.

x At some point, the market matures, and the window ofopportunity (for new entrants) closes.

y 2 Ways to identify an opportunity

y Observing Trends

y Solving a Problem


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Observing TrendsObserving Trends

y The first approach to identifying opportunities is to observe trends &

study how they create opportunities for entrepreneurs to pursue.

y Economic Factors, Social Factors, Technological advances, and political

and Regulatory changes are the most important trends to follow.

y

2 ways to handle the trends are; They can study and observe them. Some are better at this than others, depending

on their personal characteristics & levels of motivation.

Understand emerging trend is to purchase customized forecasts & market analysis

from independent research firms.


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Environmental Trends Suggesting BusinessEnvironmental Trends Suggesting Business

or Product Opportunity Gapsor Product Opportunity Gaps

Economic Forces

State of the economy level ofdisposable income consumer

spending patterns

Social Forces

Social & cultural trendsdemographic changes what

people think is in

Technological Advances

New technologies emergingtechnologies

New user of oldtechnologies

Political & RegulatoryChanges

New changes in Politicalarena

New Laws & Regulations

Business, Product orService Opportunity Gap

Difference between what's available &What's possible

New Business,Product and

Service Idea


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y Economic Forces:y It affects consumers level of disposable income. When incomes are

high, people are most likely to spend on buying products orservices that enhance their lives.

y

Individual sector s of the economy have a direct impact onconsumer buying patterns. Eg, decrease in interest rate leads tonew home construction and furniture sale. Decrease in stockmarket has a reverse impact of reduction in demand of newproducts or services.

y Many entrepreneur took advantage of this trend in coming ahead

while bringing new ideas in filling this economic despondency. Theyprovided consultancy or make their own firm to give solutions orprovided with product or services to fill the gap eg; is the onlinemarketplace by developing web solution to buy & sell products orservices.


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y Social Forces:y An understanding of the impact of social forces on trends & how

they affect new product, services and business ideas is a

fundamental piece of the opportunity recognition puzzle.

y Example for this will be love of the people for fast food restaurants

is because they are busy with their work have less time.

Introduction of sony walkman is not because people wanted

smaller radios but in actual they wanted to listen music while on

the move. Some of the recent social trends that allow for new

opportunities are; Family & work patterns, the aging of the population, increasing diversity in the

workplace, globalization of industry, increasing focus on health care and fitness,

use of internet & computers, massive use of cell phones, new forms of music's &

other types of entertainment.


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y Technological Advances:y Acquiring the pace of technological changes it is important for the

entrepreneurs to foresee the opportunities lies with the

technological advances.

y Example of real networks was created to add video capabilities to

the internet, which took the internet era into the next level.

y Advances in technology frequently dovetail with economic and

social changes to create opportunities.

y Creation of cell phone is a technological achievement but it was

motivated by an increasingly mobile population that found manyadvantages to having the ability to communicate with its coworkers,

customers, friends and families from anywhere.


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y Political Action & Regulatory Changes:y Political & Regulatory changes also provide the basis for

opportunities. For example New laws create opportunity for

entrepreneurs to start firms to help companies comply with these

laws.y Act of terrorism today have created an opportunity for data base

designer firms to work for those companies, hotels or Government

organizations to save & protect their secret data's somewhere on

the servers where their interest can be served. This expands the

backup data industry


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ChangingEnvironmental Trend

Economic Trend Teenagers with more cash &

disposal Income Increased Interest in the stock

Markets

Social Trend Increasing job preoccupation

by working parents or families

Interest in Health care

Technological Trend

Development of the Internetservices

Political &Regulatory Trends

Development of new laws

Resulting NewBusiness, Product &service opportunity

Economic Trend Designer cloths, compact discs,

DVD players, games console Online Brokerage services,

stock research, Magazine

Social Trend Restaurants microwavable

dinners, food delivery system

Fitness Centers

Technological Trends Ecommerce, Improved Supply

Chain Management


Back up Data basedevelopment

Companies thatResulted

Economic Trend Gap, Banana republic, MTV saga,

Palm Buyandhold.com, the street.com,

motley fool.

Social Trend McDonalds, KFC, Pizza Hut,

Burger King

Fitness Equipment, Curves Int.

Technological Trends

Yahoo, Amazon, aoline, ChemConnect


Prima tech


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How Are Opportunities Identified?How Are Opportunities Identified?(1 of 1)(1 of 1)

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Second Approach: Solving a Problem

Sometimes identifying

opportunities simply

involves noticing a problem

and finding a way to

solve it

These problems can be

pinpointed through observing

trends and through more simple

means, such as intuition,

serendipity, or chance

Some business ideas are clearly

initiated to solve a problem

For example, Symantec Corp.created Norton antivirus

software to guard computers

against viruses


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Solving a ProblemSolving a Problem

y Sometimes identifying opportunities simply involves noticing a

problem & finding a way to solve it. These problems can be

pinpointed though observing trends & through more simple means,

such as intuition or chance.

y There are many problems that have yet to be solved.

y Some business ideas just emerged from the recognition of

problems in emerging trends.

y Example of Norton antivirus to rid computer for viruses, while

McAfee develop software's to save computers from hackers.

y

Rob Glaser 1995 sees the problem of No way to play audio &video on the internet have developed software while seeing the

opportunity & business resulted is Real networks. Same is the case

with Jerry Yang while seeing the need of organize directory of

favorite websites come with an idea of yahoo.com


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Personal Characteristics of EntrepreneurPersonal Characteristics of Entrepreneur

y Researchers have identified several characteristics that tend to

make some people better at recognizing opportunities than others.

y Opportunity Recognition refers to the process of perceiving the

possibility of a profitable new business, product or services.

y

Characteristics are; Prior Experience

Cognitive Factor

Social Networks

Creativity


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y Prior Experience Several studies shows that prior experience in an industry helps

entrepreneurs recognize business opportunities.

Normally entrepreneurs develop new business, product or

services ideas while working in the same industry.

By working in an industry an individual may spot a market niche

that is underserved. Example of buyandhold.com by Tudisco is

based on prior experience.

Once an entrepreneur starts a firm new venture opportunities

became apparent. This is called the corridor principle.


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y Cognitive Factors Opportunity recognition may be an innate skill or a cognitive

process.

Entrepreneurs have entrepreneurial alertness which is the ability

to notice things without engaging in deliberate search.

Research finding says for alertness some times it needs

purposeful efforts & sometimes its happen by innate skills.

In other words entrepreneurs may be better than others at

sizing up the marketplace & inferring the likely implication.


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y Social Networks The extent & depth of an individuals social networks affects

opportunities recognition.

People who build a substantial network of social & professionalcontacts will be exposed to more opportunities & ideas than people

with sparse networks. This exposure can lead to new business starts.

Network entrepreneurs identifies more opportunities than soloentrepreneurs but were less likely to be recognized as alert orcreative as they work in networks rather than a single entity.

Entrepreneurs normally got good ideas through weak tierelationships rather than strong tie relationships. Reason is thatpeople you met every day or like minded individuals have similarideology. While one can get a good idea even through a discussionwith those whom we never give special attention in life, likeservants, gardener, electrician.


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Social NetworksSocial Networks(3 of 3)(3 of 3)

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Strong-Tie Relationships Weak-Tie Relationships

These relationships, which

typically form between like

minded individuals, tend to

reinforce insights and ideas that

people already have

The relationships, which form

between casual acquaintances,

are not as apt to be between

like-minded individuals, so one

person may say something to

another that sparks a

completely new idea

Why weak-tie relationships lead to more new business

ideas than strong-tie relationships


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y Creativity It is the process of generating a novel or useful idea.

Opportunity recognition may be, at least in part, a creative process.

For an individual the creative process can be broken into five stages.

x

Preparationx Preparation is the background experience & knowledge that an entrepreneur

brings to the opportunity recognition

x Incubation

x Stage in which a person considers an idea or think about a problem

x Insight

x Its a flash of recognition- when the solution to a problem is seen or an idea is

bornx Evaluation

x Idea is subjected to scrutiny & analyzed for its viability

x Elaboration

x Creative idea is put into a final form the details are worked out and the idea istransformed into something of value. In case of new business here business planis normally been written.


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Preparation

Incubation

Insight

Evaluation

Elaboration


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Opportunity Recognition ProcessOpportunity Recognition Process

EnvironmentalTrends

Economic Factor

Social Factor

Technological AdvancesPolitical & regulatory

Changes

PersonalCharacteristics ofanEntrepreneur

Prior ExperienceCognitive Factors

Social Networks

Creativity

Business, Productor service

opportunity Gap

New Business

Product &

Service Ideas


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Techniques for Generating IdeasTechniques for Generating Ideas

y In general, Entrepreneurs identify more ideas than opportunities

because many ideas are typically generated to find the best way to

capitalize on an opportunity.

y Brainstorming: used to generate a number of ideas quickly, notused for analysis or decision making.

y Focus Group: 5 to 10 people together for generating new

business idea

y Surveys: gathering information through a sample of

individuals

y Other Techniques: Customer advisory Board

y


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Protecting Ideas From Being Lost orStolenProtecting Ideas From Being Lost orStolen

y Step 1

The idea should be put in a tangible form such asentered into a physical idea logbook or saved on acomputer disk, and the date the idea was first thought

of should beentered.y Step 2

The idea should be secured. This may seem like anobvious step, but is one that is often overlooked.

y

Step 2 Avoid making an inadvertent or voluntary disclosure

of an idea, in a manner that forfeits the right to claimexclusive rights to it.

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Case Study Assignment No. 2Case Study Assignment No. 2

y Case 2.2

Align Technology: Making Braces More

Bearable (Pg 48)

www.invisalign.com

ch02 process of entrepreneurship

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