Learning Objective Review - Cengage



Learning Objective Review

1. Discuss the nature of entrepreneurship.

• Entrepreneurship is the process of:

o Planning

o Organizing

o Operating

o Assuming the risk of a business venture

• An entrepreneur is someone who engages in entrepreneurship and in general, starts small businesses.

2. Describe the role of entrepreneurship in society, including job creation, innovation, and its importance to big business.

• Small businesses are an important source of innovation, create numerous jobs, and contribute to the success of large businesses.

3. Understand the major issues involved in choosing strategies for small firms, such as choosing an industry, emphasizing distinctive competencies, and writing a business plan, as well as the role of international management in entrepreneurship.

• In choosing strategies, entrepreneurs need to consider the characteristics of the industry in which they are going to conduct business.

• A small business must also emphasize its distinctive competencies when choosing its strategy.

• Small businesses are usually skilled at

o identifying niches in established markets

o identifying new markets

o acting quickly to obtain first-mover advantages

• Small businesses are usually not skilled at exploiting economies of scale.

• Once an entrepreneur has chosen a strategy, the strategy is normally written down in a business plan to force the entrepreneur to plan thoroughly and to anticipate problems that might occur.

4. Discuss the structural challenges unique to entrepreneurial firms, most notably issues associated with starting and financing a new business, sources of management advice, and franchising..

• With a strategy and business plan in place, entrepreneurs must choose a structure to implement them; all of the structural issues summarized in the next five chapters of this book are relevant to the entrepreneur.

• The entrepreneur has some unique structural choices to make, including whether to buy an existing business or start a new one.

• In determining financial structure, an entrepreneur has to decide

o how much personal capital to invest in an organization

o how much bank and government support to obtain

o whether to encourage venture capital firms to invest.

5. Understand the determinants of the performance of small firms, including trends in small business start-ups and common reasons for failure and success.

• Several interesting trends characterize new-business start-ups today. There are several reasons why some new businesses fail and others succeed.

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