Chapter Three

Entrepreneurs, Managers,
and Employees
McGraw-Hill/Irwin
Introduction to Business

2007 The McGraw-Hill Companies, Inc., All Rights

Reserved.

The Role of the Entrepreneur

Entrepreneur
- a person ready to supply the enterprise
energy, boldness, courage, spirit, expertise
necessary to start and grow a business

See the qualities of an entrepreneur at

sideroad.com
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Commercial Opportunities
First mover advantage
- the competitive advantage gained by being
first to develop a new product or process

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Organizational Opportunities
Intrapreneurship
- Entrepreneurial activity that takes place
inside an established company

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Risks of Entrepreneurship
1. Entrepreneurs often overestimate their
ability to create new products
2. Entrepreneurs underestimate how
difficult it is to reach prospective
customers
3. Entrepreneurs may not realize how much
ready cash is needed to see a small
business through its critical birth period
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Why Be an Entrepreneur?
Entrepreneurs are often driven by the
challenge of creating valuable new goods
and services
Many entrepreneurs are intrinsically
motivated

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Creative Destruction
The process by which old, inefficient
companies are driven out of business and
replaced by new more efficient ones.
Smaller companies with cutting edge
products often become takeover targets of
larger, more established companies.

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The Agency Problem

Delegate
- giving up decision-making authority to other
people

Agency problem
- the problem that arises because of the
separation of the ownership and control of
a business

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The Agency Theory Problem

Figure 3.3
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The Agency Problem

Managers
- employees to whom a companys owners
delegate responsibility for using its
resources to create profitable goods and
services

Stock options
- the right o buy a stock at a certain price
and to benefit from increases in the stocks
value in the future by selling it

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Levels of Managers
Board of directors
- experienced business executives from
inside and outside of a company who are
elected by their companys shareholders to
act as their representatives

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Levels of Managers
Chief executive officer
- a companys top manager, responsible for
overseeing the operations of the company

Top managers
- employees who are responsible for
developing a companys business model
and ultimately responsible for its success or
failure
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Levels of Managers
Middle managers
- employees in charge of a companys
various functions
- responsible for using resources
productively to increase its profitability

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Levels of Managers
First-line managers
- employees at the base of the managerial
hierarchy
- often called
supervisors

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Levels of Management

Figure 3.4
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Profitability: Efficiency and

Effectiveness
Efficiency
- a cost-focused measure of how
productively a companys resources are
being used to produce goods and services

Effectiveness
- a revenue-focused measure of how
competitive the firms business model is

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The Relationship Between Efficiency,

Effectiveness, and Profitability

Figure 3.6
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Four Functions of Managers

Figure 3.7
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Managerial Functions
Planning
- a process that managers use to select the
best business model and goals for their
company

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Managerial Functions
Organizing
- a process managers use to create a
companys organizational structure

Organizational culture
- the set of values, norms, and beliefs shared
by members of an organization that
determine how well they work together to
further the companys goals
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Managerial Functions
Leading
- the ability to develop a plan and motivate
others to pursue it

Cross-functional team
- a group of people from different functions
who work together on a particular project

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Managerial Functions
Controlling
- the process of evaluating whether or not a
company is achieving its goals and taking
action if it is not

Benchmarking
- the practice of comparing a businesss
strengths and weaknesses to those of its
competitors
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The Role of the Employee

Role
- the set of tasks a person is expected to
perform because of the position he or she
holds in an
organization

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Career Management
Mentor
- a person who provides advice, guidance,
and technical knowledge to other people
(mentees) in order to help them advance
their careers

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