Issuu

SOLUTION MANUAL FOR LAUNCHING NEW VENTURES AN ENTREPRENEURIAL APPROACH 8TH EDITION BY KATHLEEN R. ALLEN CHAPTER 1-17

CHAPTER 1

Understanding Entrepreneurship SUMMARY AND AUTHOR’S NOTE This chapter sets the stage for a course in entrepreneurship that delves into how to conceive, create, develop, launch, and grow a new business. At a macro level, the chapter addresses the role of entrepreneurs in the global economy, their impact on industry and business formation, and their economic role through disruptive innovation and the creation of new value and new jobs. Importantly, the chapter clearly distinguishes entrepreneurial ventures from the more common small lifestyle or economic core businesses, which is critical to understanding the fundamental theme of this book--to encourage an entrepreneurial way of thinking about any business To put entrepreneurship into a historical context, the chapter offers a brief history of the entrepreneurial revolution as well as major current trends:: intelligent technology, such as artificial intelligence; augmented and virtual reality; synthetic biology; and genomics. It also includes a breakdown of the rest of the book so students enjoy a complete picture of the depth and complexity of the field of entrepreneurship. I have always believed that it is important for students to understand their entrepreneurial roots, their potential impact on business and society as entrepreneurs, and the effects of their entrepreneurial efforts on the global economy. So, even though many students may want to skip this first chapter, you should encourage a discussion on the issues raised. The better they understand the importance of entrepreneurship to the world, the greater the possibility they may choose to start meaningful businesses that have a positive impact on society.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Define entrepreneurship.



Explain the role of entrepreneurship in economic growth.

Chapter 1: Understanding Entrepreneurship



Distinguish entrepreneurial ventures from small businesses in terms of their purpose and goals.



Describe the evolution of entrepreneurship as a field of study since the 1960s.



Identify today’s broad trends in the field of entrepreneurship.

CHAPTER OUTLINE 1.1 The Role of Entrepreneurship in the Economy 1.1a Entrepreneurs Spur Economic Growth 1.1b Entrepreneurs Create New Industries 1.1c Entrepreneurs Create Jobs 1.2 The Nature of Entrepreneurial Startups 1.2a Risk and the Entrepreneurial Venture

1.2b New Business Failure

1.3 Why Entrepreneurship Is What It Is: A Brief History That You Need to Understand 1.3a The Decades of Entrepreneurship 1.4 Current Entrepreneurial Trends 1.4a Intelligent Technology 1.4b Digital 1.4c Disruption 1.5 Looking Ahead: The Organization of the Book

SUGGESTIONS FOR QUESTIONS ON KEY ISSUES The following questions can be used for discussion purposes or as short-response exam questions. 1.

Define the term entrepreneurship. Entrepreneurship is a mindset or way of thinking that is opportunity-focused, innovative, and growth-oriented. Entrepreneurs recognize opportunity, gather the resources required to act on the opportunity, and drive the opportunity to completion.

2. How do entrepreneurial ventures differ from small businesses? Schumpeter described entrepreneurs as equilibrium disrupters who introduce new products and processes that change the way we do things, whereas small business owners typically operate a business to make a living or create a job. Examples of small businesses include shops, restaurants, and professional service businesses. They form what has been called the “economic core.” Entrepreneurial ventures, by contrast, tend to be innovative, growth oriented, and value creating, meaning they solve problems in new ways. 2.

As the mayor of your community, what incentives would you put into place to encourage entrepreneurship?

Chapter 1: Understanding Entrepreneurship

Students’ answers will vary, but they may suggest tax incentives for locating the business in a developing area of the community or labor incentives such as paying half the wages of workers who are trained for positions in the new company. They may also suggest a community incubator with low-cost space and services for startup businesses. But they should also be encouraged to think “out of the box” about what would attract new businesses to start or locate in their community. 3.

Describe the current environment for entrepreneurship. Compare that environment to another country in a different part of the world. To introduce this topic, you might want to have students look at the current GEM (Global Entrepreneurship Monitor) study, arguably the most comprehensive on entrepreneurship at a global level. It can be found at https://www.gemconsortium.org/ Students’ responses will vary, but in general, the current environment is providing more opportunities, more resources, and more support for new entrepreneurs than at any time in history. Paradoxically, we have seen a continuous decline in entrepreneurship in the U.S. at the same time as ”necessity entrepreneurship is sparking new growth in other parts of the world.

Which of the entrepreneurial trends discussed in the chapter will have the biggest impact, and why? Most students will probably say that virtual reality and augmented reality are the most impactful, often because they are familiar with applications of these technologies in video games. Of course, students can make equally strong cases for any of the other trends discussed in the chapter and should be encouraged to do so. Acquiring a good understanding of how we define impact would be important to deciding which trends are most impactful. In fact, agreeing on a definition before considering the trends discussed in the chapter might be the most effective way to deal with this question.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP If your course includes experiential activities, the experiential exercises in each of the chapters will help students apply what they have learned in real-life situations. The entrepreneur interview has been a staple of entrepreneurship courses for years and you will find some form of it in many of the exercises. To be effective, it’s important that students prepare their questions so they can elicit the maximum amount of free-flowing conversation and insights from the entrepreneur. Students can only accomplish this if they do some background research on the entrepreneur so that they don’t waste time asking questions about things that were easy to find online. The questions below will help the student interviewer to formulate some questions for the entrepreneur.

Interview an entrepreneur in an industry or business that interests you. Be sure to choose someone you don’t know (no relatives or friends); choose someone who has started and is still running his or her business. Focus the interview on how and why this entrepreneur started his or her business. Think about the following when deciding on the questions you will ask: a.

Chapter 1: Understanding Entrepreneurship

a. Why is this person an entrepreneur? b. What influenced the entrepreneur to identify and pursue this opportunity? c. How did the entrepreneur’s background (family history, prior education, and work experience) affect the opportunity discovered? d. Describe the opportunity that the entrepreneur decided to pursue and the process the entrepreneur used to evaluate the opportunity. e. How did the entrepreneur evaluate the opportunity? f. What criteria did the entrepreneur use to decide whether to pursue the opportunity? g. What were the perceived risks of this opportunity and how did the entrepreneur expect to manage them? h. What did the entrepreneur do to turn the opportunity into a business? i. Identify specific activities the entrepreneur undertook to develop the opportunity into a business. j. Identify when the entrepreneur did these activities (provide dates: month and year). k. Identify important contacts and individuals who were helpful during the startup process. l. What major problems did the entrepreneur encounter along the way? m. How were these problems solved? n. What advice would the entrepreneur give to someone thinking about pursuing an opportunity? o. Why was this entrepreneur successful? Be sure to collect the following demographic information online if possible and to demonstrate that you chose an entrepreneur who was not a relative or close friend. o Contact information o The entrepreneur’s name, address, title, company name, and phone number o How did you find this person and why did you choose her or him? 2.

Analyze how the factors in Question 1 affect this entrepreneur’s success. This exercise extends the learning from the first exercise. Assuming the chosen entrepreneur is successful, students will have a natural tendency to want to focus on the business when considering why they became successful. Therefore, you will have to help them understand that the business resulted from the entrepreneur’s decisions, his or her experiences, and how that entrepreneur created the opportunity in the first place. Ask the students to investigate the entrepreneur’s motivations, networking efforts, and decision strategy BEFORE starting the business.

Chapter 1: Understanding Entrepreneurship

CHAPTER 2

Preparing for the Entrepreneurial Journey SUMMARY AND AUTHOR’S NOTE Entrepreneurship is very much a way of thinking and a personal journey that incorporates a set of learned skills that can be applied in a variety of settings. This concept of learned skills is important because about two-thirds of students will go to work for someone else after graduation, either as their career or to prepare themselves to go out on their own with a business. Although we don’t expect everyone to become entrepreneurs, we can enlighten our students and help them to see that learning some entrepreneurial skills and thinking like an entrepreneur can give them huge advantages in their career, whatever they choose to do. Research has never proven that there are specific traits uniquely characteristic of entrepreneurs, not even my personal view that it takes passion to be an entrepreneur. The fact is that in any field or endeavor, similar characteristics apply—passion, perseverance, creativity, and so forth— whether you’re an artist or an entrepreneur. However, entrepreneurs do have a set of behaviors and skills that enables them to more effectively recognize an opportunity and pull together the resources necessary to turn that opportunity into a commercial venture. Fortunately, these behaviors and skills can be taught. This chapter will give students a good sense of what those entrepreneurial skills are and how they can apply the entrepreneurial mindset in their lives. The chapter focuses on students as individuals to help them discover their personal likes and dislikes relative to business, to prepare for the challenges of entrepreneurship, and to refine their life goals.

CHAPTER OBJECTIVES After reading this chapter, students will be able to: 

Dispel the myths about entrepreneurs.



Understand the many pathways to entrepreneurship.



Appreciate the challenges and opportunities of entrepreneurship.



Prepare to become an entrepreneur.

CHAPTER OUTLINE Profile 2.1: One Journey That Inspired an Industry 2.1 Saying Goodbye to Stereotypes 2.1a Myth 1: It Takes a Lot of Money to Start a Business 2.1b Myth 2: It Takes a Great Idea

Chapter 1: Understanding Entrepreneurship

2.1c Myth 3: The Bigger the Risk, the Bigger the Reward 2.1d Myth 4: A Business Plan Is Required for Success 2.1e Myth 5: Entrepreneurship Is for the Young and Reckless 2.1f Myth 6: Entrepreneurship Cannot Be Taught 2.2 Paths to Entrepreneurship 2.2a The Home-Based Entrepreneur 2.2b The Serial or Portfolio Entrepreneur 2.2c The Nonprofit Entrepreneur 2.2d The Corporate Entrepreneur

2.3 The Challenges and Opportunities of Entrepreneurship 2.4 Preparing to Become an Entrepreneur 2.4a Find a Mentor 2.4b Build a Professional Network 2.5c Learn about Entrepreneurs 2.5d Understand Personality and Business Preferences 2.5e Improve or Acquire Critical Skills 2.5f Study an Industry

PG>xx</PG> <PG>xx</PG> <PG>xx</PG> <PG>xx</PG> <PG>xx</PG> <PG>xx</PG> <PG>xx</PG> <PG>xx</PG>

RELEVANT CASE STUDY The following case study offers an opportunity to discuss how one entrepreneur prepared to become an entrepreneur. Instructor notes for the case can be found at the end of this manual. Case 3: Andrew Mason and Groupon, Inc.

ANSWERS TO QUESTIONS ON KEY ISSUES These questions can be used to lead a class discussion or as short-answer questions on a quiz or test. 1.

Why are there so many myths about entrepreneurs? In general, people rely on myths and stereotypes to categorize or explain behavior or to characterize individuals so that they can be compared to others. The media often rely on myths and stereotypes to convey information quickly and those myths become part of the culture. However, because entrepreneurs are such a diverse group, it is nearly impossible to formalize these generalizations.

How do corporate entrepreneurs differ from other types of entrepreneurs? Corporate entrepreneurs—those who act like entrepreneurs inside large companies—are distinct from other entrepreneurs in that they take on projects for their firms that the company would normally not touch. That is because these projects involve activities that are typically new to the company, so the risk of failure is high, or outside the company’s core competencies. Such projects operate under a high degree of uncertainty, so they are

Chapter 1: Understanding Entrepreneurship

often managed separately from the core business activities. Recognizing that it is nearly impossible to re-engineer and redesign an entire organization, many companies have chosen from several options to simulate the entrepreneurial environment required for innovation to occur: Opportunistic model, enabler model, advocate model, or producer model. 3.

What are the steps you should take to prepare yourself for entrepreneurship? To prepare for entrepreneurship, it is important to consider your reasons for wanting to own a business, assess your physical and emotional readiness to start a business, identify the kind of lifestyle you want to have, and determine the type of business environment that best suits you.

What might explain the rise in interest in social or nonprofit entrepreneurship? One could debate whether there is more interest in social entrepreneurship now or whether we’re simply reading more about it or hearing more about it in the news. In any case, entrepreneurs who focus on solving social issues and problems or finding sustainable solutions in their businesses are increasing in number. The Internet, blogs, video sharing, and other means of communication have served to create a heightened awareness of problems around the world. Entrepreneurs are problem solvers, so it is natural that students would see opportunity in solving social problems.

Why are more ventures started by teams than by solo entrepreneurs? More ventures are started by teams because the global business environment is more complex and no one person has all the knowledge and experience to successfully launch a new venture. With a team, responsibility and risk are shared, and the team benefits from the aggregate experience, contacts, and financial statements.

SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP The following experiential exercises can help students think about and apply what they have learned. 1.

Identify an entrepreneur who is leading the kind of personal and business life that you aspire to lead. Interview that person to find out more about how he or she achieved that lifestyle. During the interview, and ONLY if the two of you have developed a rapport, approach the entrepreneur about the possibility of becoming your mentor. Encourage students to think boldly about whom they might want to interview. It is probably best to find someone within a reasonable distance of where the student lives, although phone or Skype mentoring sometimes works. Students should go to the interview having already done some background research on the entrepreneur and also prepared to give a compelling story about themselves to elicit interest from the entrepreneur in becoming a mentor.

Entrepreneurship is a journey, and many people contribute to that journey. Begin a contact portfolio that will contain the names of all the people you meet as you network. Record

Solution Manual for Launching New Ventures An Entrepreneurial Approach 8th Edition By Kathleen R. Al