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11- 1
Section 1: The Challenge of
Entrepreneurship

The Foundations
of
Entrepreneurship
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 Learning Objectives
 Define the role of the entrepreneur in
business in the United States and
around the world.
 Describe the entrepreneurial profile.
 Describe the benefits of
entrepreneurship.
 Describe the drawbacks of
entrepreneurship.
 Explain the forces that are driving the
growth of entrepreneurship.
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 Learning Objectives
(continued)

 Explain the cultural diversity of

entrepreneurship.
 Describe the important role that small
businesses play in our nation’s
economy.
 Put failure into the proper
perspective.
 Explain how an entrepreneur can
avoid becoming another failure
statistic. Copyright © 2016 Pearson Education, Inc. 1-4
Entrepreneurship
The process of designing, launching and running
a new business, which typically begins as
a small business, such as a startup company,
offering a product, process or service for sale or
hire

Creativity:
Something new and somehow valuable is
formed. The created item may be
intangible such as an idea, a scientific
theory, …. Copyright © 2016 Pearson Education, Inc. 1-5
The World of the Entrepreneur

 Every month U.S. entrepreneurs launch

514,000 new businesses (One reason the
U.S. economy has been so successful over
time ).
 Entrepreneurial spirit - the most
significant economic development in
recent history.
 GEM study: 12.7% (one in eight people)
of adult population in the United States is
actively involved in trying to start a new
business.
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Entrepreneurial Activity
Across the Globe

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 Entrepreneurial Activity
Across the Globe

The Total Entrepreneurial Activity Index (TEA index)

is the sum of the number of persons starting a
business (starting entrepreneurs) and the number of
owners of businesses that were established less than
3.5 years before the reference date (young
entrepreneurs), as a percentage of the labor force.

The TEA is an index for the degree of new

entrepreneurship by country and is calculated as the
percentage of people who undertake such activities
in comparison to the labor force (population aged 18-
64 years)
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 Entrepreneurial Activity
Across the Globe

Factor-driven economy:
Countries compete primarily on the use of
unskilled labor and natural resources and
companies compete on the basis of price
as they buy and sell basic products or
commodities.

Examples: Egypt, Algeria, Palestine,

Pakistan

Copyright © 2016 Pearson Education, Inc. 1-9

 Entrepreneurial Activity
Across the Globe

Efficiency-driven economy:
Growth is based on the development of
more efficient production processes and
increased product quality.
Examples: Croatia, Brazil, China, Russia,
Tunisia

Copyright © 2016 Pearson Education, Inc. 1 - 10

 Entrepreneurial Activity
Across the Globe

Innovation-driven economy:

Companies compete by producing and

delivering new and different products and
services by using the most sophisticated
processes.
Examples: USA, United Kingdom, Japan,
Republic of Korea.

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Entrepreneurship-
Friendly Nations

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 The World of the
Entrepreneur
Global Entrepreneurship Monitor (GEM)
study:
 Men are twice as likely to start a
business as women.
 Entrepreneurs are most likely to launch
businesses when they are between the
ages of 35 and 44.
 Most people see entrepreneurial activity
as a good career choice.

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Global Entrepreneurship Monitor
(GEM):
A global study conducted by a
consortium of universities
It aims to analyze the level of
entrepreneurship occurring in a wide
basket of countries.
It measures entrepreneurship through
both surveys and interviews to field
experts , conducted by the teams of each
country.
Copyright © 2016 Pearson Education, Inc. 1 - 14
 What Is an
Entrepreneur?
 Entrepreneur:
 One who creates a new business in the
face of risk and uncertainty for the
purpose of achieving profit and growth
by identifying opportunities and
assembling the necessary resources to
capitalize on them.

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Percentage of Start-Up Companies in the United States

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 Characteristics of
Entrepreneurs
 Desire for  High level of energy
responsibility  Future orientation
 Preference for  Opportunity
moderate levels of entrepreneurs
risk: risk  Necessity
eliminators
 Self-reliance entrepreneurs
 Serial
 Confidence in their
ability to succeed entrepreneurs
 Skilled at organizing
 Determination
 Value achievement
 Desire for
immediate over money
feedback
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Characteristics of Entrepreneurs

Opportunity entrepreneurs: start

businesses because they spot an
opportunity in the marketplace.
 Necessity entrepreneurs: start
businesses because they cannot find work
any other way.
Serial entrepreneurs: repeatedly start
businesses and grow them to a
sustainable size before striking out again.

Copyright © 2016 Pearson Education, Inc. 1 - 18

 Characteristics of
Entrepreneurs
 Entrepreneurs tend to exhibit:
 A high degree of commitment
 Tolerance for ambiguity (‫)غموض‬
 Creativity
 Flexibility
 Resourcefulness
Bootstrapping is a strategy that involves
conserving money and cutting costs during start-up
so that entrepreneurs can pour every available
dollar into their businesses
 A willingness to work hard
 Tenacity (‫)االصرار والعناد‬
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 Most Important Qualities

of an Entrepreneur
‫الشغ‬
‫ف‬

‫المرون‬
‫ة‬
‫االستبا‬
‫متصلب‬ ‫قية‬
‫الرأي‬

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 Entrepreneurship

 One characteristic of entrepreneurs

stands out: diversity!

 Anyone – regardless of age, race,

gender, color, national origin, or any
other characteristic – can become an
entrepreneur (although not everyone
should).

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 Benefits of
Entrepreneurship
 The opportunity to:
 Create your own destiny (‫)المستقبل‬.
 Make a difference.
 Reach your full potential.
 Reap (‫ )يجني‬impressive profits.
 Contribute to society and to be
recognized for your efforts.
 Do what you enjoy and to have fun at
it.
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 Drawbacks of
Entrepreneurship
 Uncertainty of income
The entrepreneur is the last one to be
paid, as employees must be paid first
 Risk of losing your entire investment
 Long hours and hard work
 Lower quality of life until the business
gets established
 High levels of stress

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Sources of Stress for
Entrepreneurs

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 Drawbacks of
Entrepreneurship
(continued from 1-16)
 Uncertainty of income
 Risk of losing your entire investment
 Long hours and hard work
 Lower quality of life until the business
gets established
 High levels of stress
 Complete responsibility
 Discouragement

Copyright © 2016 Pearson Education, Inc. 1 - 25

 Feeding the
Entrepreneurial Fire
 Some of the most significant factors that
have led to this age of entrepreneurship
include:
 Entrepreneurs as heroes (as model to
follow)
 Entrepreneurial education
Universities and colleges should include it
in course study

Copyright © 2016 Pearson Education, Inc. 1 - 26

 Feeding the
Entrepreneurial Fire
 Demographic and economic factors
 Many people start their business in age
of 24-44.
 Economic growth that spanned most of
the 80s created significant amount of
wealth among people of this age group
and many business opportunities

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 Feeding the
Entrepreneurial Fire
 Shift to a service economy
In US service sector (low start-up cost)
produce 80% of the jobs and 64% of GDP
(Gross Domestic Product)
GDP:
a monetary measure of the market value of
all final goods and services produced in a
period (quarterly or yearly). Used to
determine the economic performance of a
whole country or region, and to make
international comparisons.
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 Feeding the
Entrepreneurial Fire
 Technology advancements
Technology has changed the ways to do
business, such as computers, voice mail,
e-commerce, fax,…..

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 Feeding the
Entrepreneurial Fire
 Independent lifestyle

 The Internet (www), cloud computing,

and mobile marketing

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Cloud computing:

Internet-based subscription or pay-per-use

software services that allow business
owners to use a variety of business
applications, from database management
and inventory control to customer
relationship management and accounting

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U.S. Online Retail Sales

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 Feeding the
Entrepreneurial Fire
(continued from 1-19)
 Entrepreneurs as heroes
 Entrepreneurial education
 Demographic and economic factors
 Shift to a service economy
 Technology advancements
 Independent lifestyle
 The Internet, cloud computing, and
mobile marketing
 International opportunities

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The Cultural Diversity
of Entrepreneurship

Young entrepreneurs
Women entrepreneurs

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Characteristics of Women-Owned Businesses

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The Cultural Diversity
of Entrepreneurship
(continued from 1-22)

Young entrepreneurs
Women entrepreneurs
Minority-owned enterprises

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Growth of New Entrepreneurs by Minority Group

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The Cultural Diversity of Entrepreneurship

(continued from
1-24)
Young entrepreneurs
Women entrepreneurs
Minority-owned enterprises
Immigrant entrepreneurs
Part-time entrepreneurs

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 The Cultural Diversity of
Entrepreneurship
(continue
Home-based businesses
d)

Family businesses
Copreneurs
entrepreneurial couples who work together
as co-owners of their businesses.
Corporate castoffs
Corporate dropouts
Retiring baby boomers
Copyright © 2016 Pearson Education, Inc. 1 - 39
 The Cultural Diversity of
Entrepreneurship

Corporate castoffs:
Those individuals who are unemployed and
are highly educated and skilled, and had
corporate executive jobs.

Corporate dropouts:
Executives who leave the corporate to
pursue their own dreams and aspirations
by starting their own businesses.

Copyright © 2016 Pearson Education, Inc. 1 - 40

 The Cultural Diversity of
Entrepreneurship
Retiring baby boomers
Baby boomer is a group of people who were
born between 1946 and 1964.
Labeled so because during this period of
time , there was a statistically significant
increase in the number of births that
occurred.
During the 22-year period , 76.4 million
people were born (one quarter of US
population)
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Entrepreneurial Activity
by Age Group

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The Power of Small Businesses
 Small businesses (employs less than 100
people).
Capital: in Jordan defined that business
with a capital less than 25-30JD
 Make up 99.7% of the 27.8 million
businesses in the United States
 Employ 49.2% of the nation’s private
sector workforce
 Create more jobs than big businesses
 Created 64% of net new jobs over the
last decade
 5% of small companies create 67% of
net new jobs in the economy
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The Power of Small Businesses

Gazelles are small companies that are

growing at 20 percent or more per year
with at least $100,000 in annual sales;
they create 70 percent of net new jobs in
the economy

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Small Businesses by Industry

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 The Power of Small
Businesses
(continued from 1-29)
Small businesses:
 Produce 46% of the nation’s private
GDP.
 Account for 47% of business sales.
 Create 16 times more patents per
employees than large companies.
Zipper, light bulb, FM radio, laser, air
conditioning, escalator, personal
computer,
automatic transmission, and many
more!
Copyright © 2016 Pearson Education, Inc. 1 - 46
 Putting Failure into
Perspective
 Entrepreneurs are not paralyzed by the
prospect of failure.
 Failure: a natural part of the creative
process.
 Successful entrepreneurs learn to fail
intelligently.

Copyright © 2016 Pearson Education, Inc. 1 - 47

Small Business Failure Rate

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 Avoiding the Pitfalls of
Small Business Failure
Know your business in depth
Build a viable business model – and
test it
Develop a solid business plan
Understand financial statements
Manage financial resources
Learn to manage people effectively
Set your business apart from the
competition
Maintain a positive attitude
Copyright © 2016 Pearson Education, Inc. 1 - 49
 Avoiding the Pitfalls of
Small Business Failure
The Ten Deadly Mistakes of
Entrepreneurship:
1. Management mistakes
2. Lack of experience
3. Poor financial control
4. Weak marketing efforts
5. Failure to develop a strategic plan

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 Avoiding the Pitfalls of
Small Business Failure
6. Uncontrolled growth
7. Poor location
8. Improper inventory control
9. Incorrect pricing
10. Inability to make the “entrepreneurial
transition”

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 Conclusion
Entrepreneurs:
Are an important part of the free
enterprise system
Are a diverse and talented group of
people
Represent a cross-section of society
as a whole
Are able to enhance the profitability
of their businesses through acquiring
additional knowledge and experience
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 What Is Ahead?
Chapter 2: Ethics and Social
Responsibility
Chapter 3: Inside the Entrepreneurial
Mind: From Ideas to Reality

Section 2: The Entrepreneurial Journey

Begins
Section 3: Launching a Business
Section 4: Growing the Business
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Copyright © 2016 Pearson Education, Inc. 1 - 54