Solutions 6-1

ESSENTIALS OF CONTEMPORARY
BUSINESS 1ST EDITION BOONE

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CHAPTER 6
Vocabulary

1. business incubator
2. intrapreneurship 11. angel investors
3. classic entrepreneur 12. entrepreneur
4. business plan 13. franchising
5. venture capitalists 14. seed capital
6. social entrepreneurs
7. crowd funding
8. equity financing 15. serial entrepreneur
9. franchisee 16. franchisor
10. debt financing

Analysis of Learning Goals

LO 6.1: 1. F, 2. T, 3. F, 4. F, 5. T.

LO 6.2 Responses will vary. Factors that help support and expand opportunities for
entrepreneurs include globalization, education, and information
technology. An example to consider is how globalization has helped
entrepreneur Terry Gou. The rapid globalization of business has created
many opportunities for entrepreneurs. Entrepreneurs market their
products abroad and hire international talent. Gou founded Hon Hai
Precision Industry Company Ltd in 1974. He combined technical
Solutions 6-2

excellence with low-cost labor and now owns one of the world’s largest
electronics manufacturers.
LO 6.3 1. F 2. F 3. F 4. T 5. T 6. T

LO 6.4 Responses will vary. There are many different sources of Other People’s
Money (OPM). The term describes funds that entrepreneurs raise from
friends, family, outside investors and banks. Debt financing describes
loans that must be repaid. It includes personal credit cards and loans
from finance companies. Equity financing occurs when investors supply
money in return for shares of the company. Venture capitalists invest in
early-stage, high-potential, and growth companies. Angel investors are
wealthy individuals who invest money in exchange for equity. New
financing methods, like crowd funding, use the internet to solicit small
sums of money from individuals and groups.

LO 6.5: 1. F, 2. T, 3.T, 4. T, 5. F, 6. T.

LO 6.6:
1. A serial entrepreneur starts one business, runs it, and then starts and runs
additional businesses in succession.
2. A classic entrepreneur identifies a business opportunity and allocates
available resources to tap that market.
3. A social entrepreneur uses business principles to solve social problems.

LO 6.7: 1. T 2. F 3. T 4. T 5. F 6. T

LO 6.8:
Organizations encourage intrapreneurial activity within the company in a
variety of ways, including hiring practices, dedicated programs such as
skunkworks, access to resources, and wide latitude to innovate within
established firms. Coming up with the ideas for these products,
developing them, and testing them before bringing them to market takes
time and resources. Former 3M CEO George Buckley believes that the
only way to do this is to allocate both time and money in support of
intrapraneurship. Despite the recent recession, Buckley maintained $1
billion for research and development. 3M allows its researchers to devote
15 percent of their time to pursue their own ideas. One recent successful
product that resulted from this is the first electronic stethoscope with
Bluetooth technology. The company also awards annual Genesis Grants,
worth up to $100,000, to 3M scientists for research.

Self Review

True or False: 1. F, 2.T, 3. F, 4. F, 5. T, 6. F, 7. T, 8. T, 9. T, 10. F, 11. F,

12. F, 13. F, 14. F, 15. F.

Multiple Choice: 1. c, 2. c, 3. e, 4. c, 5. d, 6. a, 7. d, 8. e, 9. d, 10. a

Application Exercise
 Solutions 6-3

1. Marissa has several positive traits that will help her become a successful
entrepreneur. She has already taken classes from a business college that will help
enhance her skills. She already has some sort of vision as to what direction she
would like to go in. Marissa also has a tolerance for both ambiguity and
uncertainty, realizing that starting her own business will leave her faced with
unexpected challenges along the way. Also, she is prepared to work long hours
and remain dedicated.

2. It is important that Marissa is aware that entrepreneurs rarely find themselves

sticking to their business plan since opportunities and challenges present
themselves along the way. However, it is important to have a direction in mind for
where she would like her business to go. Although it is good that she knows she
wants to have a jewelry business, Marissa should narrow her idea in order to
consider how her product will be marketable. Will she use the appeal of
handmade jewelry? Will her jewelry be for all ages and styles? Will any of her
profit from the jewelry go towards charity?

Short Essay Questions

1.List your interests and abilities. Include your values and beliefs, your goals and
dreams, things you like and dislike doing, and your job experiences.
• Make another list of the types of businesses that match your interests and
abilities.
• Read newspapers and business and consumer magazines to learn about
demographic and economic trends that identify future needs for products that
no one yet offers.
• Carefully evaluate existing goods and services, looking for ways you can
improve them.
• Decide on a business that matches what you want and offers profit potential.
• Conduct marketing research to determine whether your business idea will
attract enough customers to earn a profit.
• Learn as much as you can about the industry in which your new venture will
operate, your merchandise or service, and your competitors. Read surveys that
project growth in various industries.
Solutions 6-4

2. Although the demand for skilled employees remains high in many industries,
working for a company, even a Fortune 500 firm, is no guarantee of job
security. In fact, over the past ten years, large companies sought efficiency by
downsizing and eliminated more jobs than they created. As a result, a growing
number of American workers—both first-time job seekers and laid-off long-
term employees—are deciding to create their own job security by starting their
own businesses. While running your own business doesn’t guarantee job
security, the U.S. Small Business Administration has found that most newly
created jobs come from small businesses, with a significant share of those jobs
coming from new companies.11

3. Today, more than 100 U.S. universities offer full-fledged majors in

entrepreneurship, dozens of others offer an emphasis in entrepreneurship, and
hundreds more offer one or two courses in how to start a business. A number of
schools offer opportunities to intern with a start-up or actually work toward
launching a company. The Entrepreneurship and Innovation Group at
Northeastern University in Boston, which is staffed by professors who are
entrepreneurs themselves, provides students with the chance to work in
entrepreneurial settings in a variety of industries including retail, commercial
real estate development, financial services, health care, and high-growth
technology. There are also several groups, like Students in Free Enterprise
(SIFE) and the Association of Collegiate Entrepreneurs that have chapters on
many college campuses in the United States and Canada.