Chapter 1:

1: What forces have led to the boom in entrepreneurship in the U.S. and across
the globe?

Forces that have influenced the U.S. entrepreneurial boom include:

 The dream of owning and operating a business

 The effect of downsizing
 The belief that “small is beautiful”
 The opportunity to enter profitable niche markets
 The growing international and e–commerce markets
2: What is an entrepreneur? Give a brief description of the entrepreneurial
profile?

An entrepreneur is one who creates a new business in the face of risk and uncertainty for
the purpose of achieving profits and growth by identifying opportunities and assembling the
necessary resources to capitalize on them. The entrepreneur has a:

 Desire for responsibility

 Preference for moderate risk (risk eliminators)
 Confidence in their ability to succeed
 Determination
 Desire for immediate feedback
 High level of energy
 Future orientation (serial entrepreneurs)
 Skill in organization
 Value of achievement over money
In addition, other characteristics of an entrepreneurial profile include:

 High degree of commitment

 Tolerance for ambiguity
 Flexibility
 Tenacity
3: Inc. Magazine claims, “Entrepreneurship is more mundane than it’s sometimes
portrayed … you don’t need to be a person of mythical proportions to be very,
very successful in building a company.” Do you agree? Explain.

Anyone can become an entrepreneur. There are no limitations to this form of economic
expression and the skills of entrepreneurship and innovation can be learned. There are
thousands of examples where people have become highly successful with ordinary businesses.
This combination of skills, desire, passion and drive and an understanding of the market
opportunity may result in entrepreneurial success.

4: What are the major benefits of business ownership?

Major benefits of business ownership include the opportunity to:

 Gain control over your own destiny

 Make a difference
 Reach your full potential
 Realize unlimited profits
 Contribute to society and be recognized for your efforts
 Do what you enjoy

5: The Potential Drawbacks of Entrepreneurship

With these potential rewards, entrepreneurship also presents risk and uncertainty.
Entrepreneurs may experience:

 Uncertainty of income: “The entrepreneur is the last one to be paid.”

 Risk of losing their entire investment
 Long hours and hard work
 Lower quality of life until the business gets established
 High levels of stress
 Complete responsibility
 Discouragement
6: Briefly describe the role of the following groups in entrepreneurship: women,
minorities, immigrants, “part-timers,” home-based business owners, family
business owners, copreneurs, corporate castoffs, and corporate dropouts.
6.These entrepreneurial groups may face challenges in the following areas:
technology and market opportunities.
Women often face discrimination in the workplace. Entrepreneurship offers women
opportunities for economic growth.
Minorities also face discrimination in the workplace and can benefit from entrepreneurship.
Immigrant entrepreneurs arrive with more education and experience. Their dedication and
desire to succeed enables them to achieve their dreams.
Part–timers have the best of both worlds and can ease into a business without sacrificing a
steady paycheck and benefits.
Home–based businesses are booming. Technology and this “Homecoming” support nearly 44
percent of US households with some form of home office activity.
Family businesses are an integral part of our economy. 90 percent of U.S businesses are family
owned.
Copreneurs are entrepreneurial couples that work together. They represent the fastest growing
business sector.
Corporate Castoffs have extensive on–the–job experience and are dislocated workers due
primarily to corporate downsizing.
Corporate Dropouts leave organizations to pursue a better way of life spearheaded by the “trust
gap” over job security.
7: What contributions do small businesses make to our
economy?

Small businesses contribute to local economies by bringing growth and innovation

to the community in which the business is established. Small businesses also help
stimulate economic growth by providing employment opportunities to people who may not be
employable by larger corporations.

8: These causes of small business failure may include:

1. Management mistakes

2. Lack of experience
3. Poor financial control
4. Weak marketing efforts
5. Failure to develop a strategic plan
6. Uncontrolled growth
7. Poor location
8. Improper inventory control
9. Incorrect pricing
10. Inability to make the “entrepreneurial transition”
9: How can the small business owner avoid the common
pitfalls that often lead to business failures?

1. Know their business in depth.

 2. Develop a solid business plan in writing.
3. Manage financial resources.
4. Understand financial statements.
5. Learn to manage people effectively.
6. Set your business apart from the competition.
7. Maintain a positive attitude.
10: Why is it important to study the small business failure
rate?
It is important to know what the major causes of small business failures are so that the
prospective entrepreneur can avoid those pitfalls. Understanding these causes of failure may
enable entrepreneurs to learn and avoid these mistakes and improve their chance for business
success.
11: Explain the typical entrepreneur’s attitude toward failure?
Risk is inherent to all future actions. Entrepreneurs are not necessarily high–risk takers, but
rather prefer, and are willing to accept and manage, low–to–moderate risk situations. Some
consider entrepreneurs as “calculated” risk takers.

12: One entrepreneur says that too many people “don’t see that by spending their
lives afraid of failure, they become failures. But when you go out there and risk as
I have, you’ll have failures along the way, but eventually the result is great
success if you are willing to keep risking . . . For every big ‘yes’ in life, there will
be 199 ‘nos.’” Do you agree? Explain.

students to discuss what “failure” and its relationship to “learning” means in an entrepreneurial context.
Entrepreneurs may take the view that “the business failed, I didn’t.” Expect students to support their
conclusion leveraging information from the text
13: What advice would you offer an entrepreneurial friend who has just suffered a
business failure?
 do not despair, You can't cross the sea merely by standing and staring at the water

14. Noting the growing trend among collegiate entrepreneurs launching

businesses while still in school, one educator says, “A student whose main
activity on campus is running a business is missing the basic reason
for being here, which is to get an education.” Do you agree? Explain.

Yes I agree because will vary and expect them to take a clear position and support their response based
on chapter concepts. Where and how learning takes place may be an important part of this discussion.
 Chapter two:
Chapter Review:
1. Understand the importance of strategic management to a small business. Strategic planning, which
often is ignored by small companies, is a crucial ingredient in business success. The planning process
forces potential entrepreneurs to subject their ideas to an objective evaluation in the competitive
market.
2. Explain why and how a small business must create a competitive advantage in the market. The goal
of developing a strategic plan is for the small company to create a competitive advantage—the
aggregation of factors that sets the small business apart from its competitors and gives it a unique
position in the market. Every small firm must establish a plan for creating a unique image in the minds of
its potential customers.
3. Develop a strategic plan for a business using the nine steps in the strategic planning process. • Small
businesses need a strategic planning process designed to suit their particular needs. It should be
relatively short, be informal and not structured, encourage the participation of employees, and not
begin with extensive objective setting. Linking the purposeful action of strategic planning to an
entrepreneur’s little ideas can produce results that shape the future. Step 1. Develop a clear vision and
translate it into a meaningful mission statement. Highly successful entrepreneurs are able to
communicate their vision to those around them. The firm’s mission statement answers the first question
of any venture: What business am I in? The mission statement sets the tone for the entire company.
Step 2. Assess the company’s strengths and weaknesses. Strengths are positive internal factors;
weaknesses are negative internal factors.
Step 3. Scan the environment for significant opportunities and threats facing the business. Opportunities
are positive external options; threats are negative external forces. Step 4. Identify the key factors for
success in the business. In every industry, key factors determine a firm’s success, and so they must be an
integral part of a company’ strategy. Key success factors are relationships between a controllable
variable (e.g., plant size, size of sales force, advertising expenditures, product packaging) and a critical
factor that influences the firm’s ability to compete in the market. Step 5. Analyze the competition.
Business owners should know their competitors almost as well as they know their own companies. A
competitive profile matrix is a helpful tool for analyzing competitors’ strengths and weaknesses.
Step 6. Create company goals and objectives. Goals are the broad, long-range attributes that the firm
seeks to accomplish. Objectives are quantifiable and more precise; they should be specific, measurable,
assignable, realistic, timely, and written down. The process works best when subordinate managers and
employees are actively involved. Step 7. Formulate strategic options and select the appropriate
strategies. A strategy is the game plan the firm plans to use to achieve its objectives and mission. It must
center on establishing for the firm the key success factors identified earlier. Three strategic options
include cost leadership, differentiation, and focus strategies. Step 8. Translate strategic plans into action
plans. No strategic plan is complete until the owner puts it into action. Step 9. Establish accurate
controls. Actual performance rarely, if ever, matches plans exactly. Operating data from the business
serve as guideposts for detecting deviations from plans. Such information is helpful when plotting
future strategies. The strategic planning process does not end with these nine steps; rather, it is an
ongoing process that the owner will repeat.
4. Discuss the characteristics of three basic strategies:
low-cost, differentiation, and focus. • Three basic strategic options are cost leadership, differentiation,
and focus. A company pursuing a cost leadership strategy strives to be the lowest-cost producer relative
to its competitors in the industry. • A company following a differentiation strategy seeks to build
customer loyalty by positioning its goods or services in a unique or different fashion. In other words, the
firm strives to be better than its competitors at something that customers value. A focus strategy
recognizes that not all markets are homogeneous. The principal idea of this strategy is to select one (or
more) segment(s), identify customers’ special needs, wants, and interests, and approach them with a
good or service designed to excel in meeting these needs, wants, and interests. Focus strategies build on
differences among market segments.
5. Understand the importance of controls such as the balanced scorecard in the planning
process.
• Just as a pilot in command of a jet cannot fly safely by focusing on a single instrument,
an entrepreneur cannot manage a company by concentrating on a single measurement.
The balanced scorecard is a set of measurements unique to a company that includes
both financial and operational measures and gives managers a quick yet comprehensive picture of the
company’s total performance.