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Chapter 2: Introduction to
Business

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Business Defined
A business is an enterprise that provides
products or services desired by
customers.

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Business Management
Management is the act of getting people
together to accomplish desired goals and
objectives using available resources efficiently
and effectively.
Management comprises planning, organizing,
staffing, leading or directing, and controlling an
organization (a group of one or more people or
entities) or effort for the purpose of
accomplishing a goal.

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Resourcing encompasses the deployment and

manipulation of human resources, financial
resources, technological resources and natural
resources.
Since organizations can be viewed as systems,
management can also be defined as human
action, including design, to facilitate the
production of useful outcomes from a system.
This view opens the opportunity to 'manage'
oneself, a pre-requisite to attempting to manage
others.

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Key Business Decisions

Product
What type of product should be produced?
Preschool Programs, daycare service, tuitions

Production
How should the product be produced? Teaching &
learning.

Promotion
How should the product be promoted? Flyers/brochures,
roadshow, community services

Financing
How should the company obtain funds to finance the cost
of producing the product? NGO, Government Sponsored,
Company, joint-venture, Sole proprietorship,

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Business Decisions

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Key Stakeholders
Owners
Entrepreneurs/Sole proprietors
Co-owners (joint-venture)
Stockholders (pt. Ltd/Sdn. Bhd.)

Employees
Admin, teachers, etc

Suppliers
Franchisor, product/service
suppliers

Customers
Parents/children

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Planning Ahead Study Questions
What is entrepreneurship?
What is special about small businesses?

How does one start a new venture?

What resources support entrepreneurship and

business development?

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Study Question 1: What is
entrepreneurship?
Entrepreneurship
Strategic thinking and risk-taking behavior that results
in the creation of new opportunities for individuals
and/or organizations.
Entrepreneurs
Risk-taking individuals who take actions to pursue
opportunities and situations others may fail to
recognize or may view as problems or threats.

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Definition of Entrepreneur

Our common understanding:

The boss
The business owner
The risk taker
One who starts a small business
The resourceful person

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Entrepreneurs are
Founders of businesses that become large-scale
enterprises.
People who:
Buy a local franchise outlet
Open a small retail shop
Operate a self-employed service business

People who introduce a new product or operational

change in an existing organization.

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Typical characteristics of entrepreneurs:

Internal locus of control

High energy level
High need for achievement
Tolerance for ambiguity
Self-confidence
Passion and action-orientation
Self-reliance and desire for independence
Flexibility

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Personal traits and characteristics of entrepreneurs.

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Typical entrepreneurial backgrounds and

experiences:
Parents were entrepreneurs or self-employed.
Families encouraged responsibility, initiative, and
independence.
Have tried more than one business venture.
Have relevant personal or career experience.
Become entrepreneurs between 22 and 45 years of
age.
Have strong interests in creative production and
enterprise control.
Seek independence and sense of mastery.

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Common myths about entrepreneurs:

Entrepreneurs are born, not made.

Entrepreneurs are gamblers.

Money is the key to entrepreneurial success.
You have to be young to be an entrepreneur.

You must have a degree in business to be an

entrepreneur.

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Why become an entrepreneur?

Being able to do own thing
Greater control over own working
environment
More opportunities for continuous
growth and mobility
Flexibility in lives
Huge financial rewards

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Types of Entrepreneurs
Owning own business may be a life time pursuit or just one
part of your career. Serial entrepreneurs start, grow, and
sell several business over the course of their career.
Approaches to the types of entrepreneurs vary across a
wide spectrum. Ray Smilor recognizes 3 kinds of
entrepreneurs:
1. Aspiring entrepreneurs
Dream of starting a business; hope to be their own bosses,
but not yet made the leap from their current employment
into a startup; 7 millions in US

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2. Lifestyle entrepreneurs
Have developed an enterprise that fits their
individual circumstances and style of life.
To earn income for themselves and families.
Referred as small business , develop ventures
that are essential to a communitys well being; >
13 millions in US; running business from home, e.g
service firms, consulting practices, sales, technical
and administrative support, repair service, and arts.

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3. Growth entrepreneurs
Have both the desire and ability to grow as fast and
as large as possible.
Most dynamic job generators in the American
economy.
E.g. In US : 300,000 entrepreneurial companies
with 50 employees, 20 % increase per year,
employment grows at an estimated rate of 150,000
jobs per year (David Birch at Cognetics, inc.,
Cambridge, Massachusetts)

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Disadvantages of lifestyle
entrepreneurs
limited fund, no possibilities of selling part of the
company for cash to pay for growth;
not provide a way for investors to get a return on
their investment through the sale of their
ownership position in the company.
Being dishonest with yourself at an early stage
about the control and lifestyle issues will lead to
serious and unpleasant conflicts with investors.

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Growth entrepreneurs, are much less driven by

control or lifestyle. They recognize that to grow
quickly they will have to sell part of their
company to raise cash.
These investors will apply various level of
control. They want to build a valuable company
and then sell it either to an established company
or public. They are willing to trade control for
growth and wealth creation.

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Entrepreneurship
Entrepreneurship is more than simply starting a
business.
It is the process of creating something new with value by
devoting the necessary time and effort, assuming the
accompanying financial, psychic (physical) and social risks,
and receiving the resulting financial rewards, personal
satisfaction and independence.
Entrepreneurial success is simply a function of the ability of
an entrepreneur to see these opportunities in the
marketplace, initiate change (or take advantage of change)
and create values through solutions.
Entrepreneurship can include small business, business
owned by women, high technology start ups, home based
business, family owned business.

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Forms of Entrepreneurship

1. Social Entrepreneurship
2. Business Entrepreneurship
3. Techno Entrepreneurship

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Social Entrepreneurship
Any creative and innovative solution applied to
solve social problems (Mohammad Yunus,
2007)
It involves social mission
Profit and/or entrepreneurial processes

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Business Entrepreneurship
Its about the study of systems, structure, and
staffing to make a large corporation stay
competitive, innovative, and profitable on a
sustainable basis.

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Mother
Teresa did
what no
other
person has
done
before to
take care of
the poor,
destitute
and sick

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Lance Armstrong
7 times Tour de
France champion
His real victory is
with the LAF where
he helps hundreds
of cancer victims

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Sir Edmund Hillary was first to

conquer Mt. Everest

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Sir Edmund Hillary came back to Nepal and
helped the Sherpas improve their living
conditions.

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Banker to the poor

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Mohammad Yunus
Taught Developmental Economics at the
University of Chitagoong in Bangladesh.
Economics, right at the outskirt of the
University, poverty was everywhere.
He found out that all that was needed by the
poor was a loan of 27 chakas. Thats how the
Grameen Bank started.

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Why are they entrepreneurs?

They had little or no

resources at all but they
survived and achieved what
they wanted in life.

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Entrepreneurship and the Internet

The Internet offers numerous entrepreneurial
opportunities.
Online buying and selling
Dot-com businesses

Businesses are limited only by personal creativity.

Business-to-Business (B2B) ventures are possible.

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International business entrepreneurship

Provides strategic opportunities for small businesses.

Creates exporting and importing opportunities.

Supported through appropriate governmental and
non-governmental organizations.

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Study Question 2: What is special about
small businesses?
Small businesses
Ones with 100 or fewer employees.
Independently owned and operated.
50 percent of the private labour force works in
small businesses.
Are established by:
Starting a new business.
Buying an existing business.
Buying and running a franchise.

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Family businesses

Owned and financially controlled by family members.

Largest percentage of businesses worldwide.
Can provide an ideal business situation.
Problems unique to family businesses:
Family business feud
Succession problem

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Reasons for small business failures:

Lack of experience
Lack of expertise
Lack of strategy and strategic leadership
Poor financial control
Growing too fast
Insufficient commitment
Ethical failure

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Eight reasons why many small
businesses fail.

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Study Question 3: How does one start
a new venture?
Important issues in new venture creation:
Does the entrepreneur have good ideas and the courage to give
them a chance?
Is the entrepreneur prepared to meet and master the test of
strategy and competitive advantage?
Can the entrepreneur identify a market niche that is being
missed by other established firms?

Can the entrepreneur identify a new market that has not yet
been discovered by existing firms?
Can the entrepreneur generate first-mover advantage by
exploiting a niche or entering a market before competitors?

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Questions that keep a new venture focused on its

customers
Who is your customer?
How will you reach key customer market segments?
What determines customer choices to buy or not buy your
product/service?
Why is your product/service a compelling choice for the
customer?
How will you price your product/service for the customer?
How much does it cost to make and deliver your
product/service?
How much does it cost to attract a customer?
How much does it cost to support and retain a customer?

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Life cycle of entrepreneurial firms

Birth stage
Breakthrough stage

Maturity stage

Each stage poses different managerial

challenges and requires different managerial
competencies.

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Stages in the life cycle of an
entrepreneurial firm.

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Basic items that should be included in a business plan:

Executive summary
Industry analysis
Company description
Product and services description
Market description
Marketing strategy
Operations description
Staffing description
Financial projection
Capital needs
Milestones

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Forms of legal ownership

Sole proprietorship
Partnership
General partnership
Limited partnership
Limited liability partnership

Corporation
Limited liability corporation (LLC)

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Financing the new venture

Sources of outside financing
Debt financing

Equity financing

Equity financing alternatives

Venture capitalists
Initial public offerings
Angel investors

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Promoting entrepreneurship in large enterprises

Intrapreneurship

Skunk works

Business incubators
Small Business Development Centers

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Activity
What characteristics do you have to be a successful
entrepreneur?
Find a profile of a successful entrepreneur who
inspires you and
share it to the class. What are the characteristics that
you can learn from her or him to be a successful
entrepreneur?

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THANK YOU