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Aakash Patel 860863310 BUS 146 Midterm 1 08/11/2011 1.

) The definition of corporate entrepreneurship has been modified over the last 30 years through the works of scholars and researchers. One researcher has defined corporate entrepreneurship as an innovation that is a very broad concept that includes the creation and implementation of new ideas or behaviors. According to researcher Shaker A. Zahra, corporate entrepreneurship can involve activities that are both informal and formal, in which the goal is to create new businesses in established companies through market development and product/process innovations. Discussed will be an explanation of the 3 main routes to corporate entrepreneurship, along with the various forms of intellectual property. The first route to corporate entrepreneurship that well discuss is strategic renewal. Although strategic renewal can be defined in various ways, we will define strategic renewal as to when a company uses its resources innovational skills to replace or modify their image and/or product in order to stay current or fresh with todays trends and ideas. If successful, this can lead to a highly improved competition position in the corporate world. An example of corporations that used strategic renewal is Wal-Mart. Wal-Mart has been known to carry almost all products that people use daily, along with specialized items as well. It was also a company that already had some of the lowest prices on products in comparison to other stores. So how does a company like Wal-Mart try to modify its store model to provide even better services and gain even more profit after everything it already provides? Wal-Mart has now renovated many of their stores to include groceries. Its quite simple, but such a simple change in a business model can make a large difference. This small strategic renewal allows customers to not only buy their daily materialistic items, but they can buy fresh produce along with any other food item you could buy at an ordinary grocery store. The second route to corporate entrepreneurship is innovation. Innovation involves the introduction of something entirely new (or modified) to the marketplace. An example of innovation is Nissans electric vehicle, the Leaf. Of course, there are quite a few other automobile corporations that have electric vehicles as well. But what makes Nissan innovative is that their Nissan Leaf is 100% all electric, unlike any other vehicles which use gasoline or another power source as well. The third route to corporate entrepreneurship is through corporate venturing. Corporate venturing is the entrepreneurial effort that leads to the creation of new business organizations within the corporate organization, such as a subdivision company. A great example of a company that uses corporate venturing is Microsoft. Microsoft has over 150 other smaller companies and stakes within itself. A specific example would be Microsofts purchase of Skype Communications based in the country of Luxembourg; the company is now worth over $8.5B. This is just one example of how many larger corporations use some of their funds to purchase or have stake in other smaller companies. There are various forms of intellectual property that should be detailed in order to

protect the image and ideas of a company or product. The first form of intellectual property is a copyright. Copyrighting gives exclusive rights to individuals for the protection of their literary or artistic productions. The second form of intellectual property is a trademark. Trademarking represented by a distinctive symbol, name, motto, or mark with a companys products. This trademark registration can be done at any Patent and Trademark Office. The third form of intellectual property is a patent. Patenting provides protection for the owner, along with exclusive rights, to hold, transfer, and license the production/sale of a product or process as an intellectual property right. 2.) Some of the most valuable and powerful sources of equity funding for new ventures are venture capitalists. Venture capital (VC) is highly sought by startup companies who are at an early stage of their business growth, but many VC investments are made in later-stage and expansion stages of a company. Not only does VC provide capital to startup companies, but it also provides market research and strategy, management, contacts, and other assistance. Venture capital is also referred to as risk capital; even though VC startup companies have a high potential of gaining tremendous profit, they also have a high risk of losing that profit. The typical venture capital financing for start-up companies is between $2-50M. Further details will be explained about the various sources to which an entrepreneur can obtain venture capital, and how venture capitalization can be divided into two major components. Venture capitalization can be divided into two major components of financing: Debt financing and equity financing. Debt financing involves a payback of the funds plus interest (fee). Equity financing involves offering some of the ownership in the venture. As previously stated, there are numerous sources for an entrepreneur to obtain capital to start a business. The first source that will be discussed is commercial banking. There are about 8,528 commercial banks operating in the US today, so its no surprise that this source of capital is one of the most common sources of debt financing. Most of these bank loans are secured by inventories, receivables, or other assets. However, some banks will make unsecured short-term loans, as well as a large number of intermediate-term loans with maturities that range rom one to five years. An example of using commercial bank loans involves Kenya Commercial Bank Ltd ( KNCB is East Africas largest lender by assets. This bank uses its new 7-year loan, which consists of $105M from the International Finance Corporation, in order for it to provide capital to other small businesses and for mortgages. With the use of IFCs capital, KNCB was able to use the interest received from the businesses that borrowed the money to increase its net income by 20%. A second source that entrepreneurs can use to obtain venture capital for their business is to use public offerings, which is part of equity financing. Public offerings are accepted after a corporation goes public. When a company goes public, it is raising capital by selling securities, such as stocks, on the public market. To begin public offerings, a company will create an initial public offering (IPO). An IPO is a term used to represent the registered public offering of a companys securities for the first time. An example of a company that used an IPO to get public offerings for its company is LinkedIn Corporation. LinkedIn is a professional networking site. It had a profit of $15.5M through stocks in 2010, and since the IPO was created, their shares

quickly doubled by 109%, making the company worth $8.9B. The last source of venture capital that will be discussed is through angel financing. Angel financing is a type of informal risk capitalism, which involves wealthy people in the US who are looking for investment opportunities; these people are known as business angels. There are five general groups of angel investors: Corporate angles, entrepreneurial angels, enthusiast angles, micromanagement angels, and professional angels. Angels are usually entrepreneurs or former businessmen from larger corporations who have enough net worth to invest their own money into different ventures. An example of an angel investing company would be Maple Leaf Angels. This is a Torontobased organization, which meets once a month to review investment opportunities. Until now, they have had 8 angel investing transactions totaling more than $3M. Meetings consist of a few presentations, which are made to 30 well known qualified angels. 3.) There are various forms of business organization that can be discussed, along with their advantages and disadvantages in accordance to liability and capital funding. The 3 main forms of business organization are sole proprietorship, partnership, and corporation. The first form of business organization that will be discussed is sole proprietorship. A sole proprietorship is a business that is operated and owned by a single person. This means that the business has no other connection apart from its owner. This owner has unlimited liability and also has the right to all of the profits that the business incurs, along with the liability for the debts and obligations of the business. An advantage of sole proprietorship is the ease of formation and sole ownership of profits. In addition, owners are free of corporate business taxes. However, some of the disadvantages of sole proprietorship include unlimited liability, lack of continuity, and less available capital. An example of a sole proprietorship is an individual who owns a small shoe store. Theres no franchise or other owners; its just the owner who owns all the inventory and the shop itself and sells what he could to take the profits for his or herself. Another form of business organization is a partnership. A partnership includes two or more people that both have a part-ownership of a single business. According to the default, it is assumed in a partnership that there is equal ownership among the partners, unless stated otherwise stated in an agreement or signed contract. A few advantages of a partnership are the ease of formation, direct rewards by sharing profits, and flexibility. On the other hand, a disadvantage of partnerships includes a lack of continuity in case a partner dies, goes insane, etc. Another disadvantage of a partnership is that the owners are bound by the acts of just one partner. An example of a partnership would be opening up a mini-mart between three friends. The friends would divide the expenses, for example, and would each run the store at a given schedule. At the end of the day, they would share the profits either equally or whatever each owners percentage is by a contracted agreement. One last form of business organization to be discussed here is a corporation. According to John Marshall, the Supreme Court Justice, a corporation is an artificial being, invisible, intangible, and existing only in contemplation of the law. What this really means is that a corporation is created in accordance to state laws and generally created when a monetary transaction or property by prospective shareholders takes place in exchange for capital stock in the corporation. A couple of the main advantages to a

corporation is limited liability and unlimited life, since a corporation can continue to its next appointed president if a the current president or CEO dies or steps down from the position. However, one of the biggest disadvantages to corporations is double taxation due to corporate status. Along with more taxes, there are also many more regulations to follow and activity restrictions. An example of a corporation is Target. It is a large company with billions in revenue, and has appointed positions that will carry its name to the next generation (assuming the corporation doesnt file bankruptcy one day). 4.) Creativity is one of the biggest factors in determining whether an entity can sustain or not in its current economy of finances and trends. The creative process involves four phases of creative development. These phases will be discussed in further detail, but the general phases are titled as the following: Background or knowledge accumulation, the incubation process, the idea experience, and evaluation and implementation. The first phase is the background or knowledge accumulation. This is the phase where the basic understanding of all aspects of the production of a product, service, or business venture is learnt. Most successful creations have been followed by careful investigation and research. This information gathering can be achieved by reading, joining professional groups to discuss a particular field of business, attend professional meetings and seminars, travel to new places, and other similar ways. An example of this process involves a young man named Mark Zuckerberg and his website, Facebook. Zuckerberg is a Harvard undergrad and a computer programming genius. With his knowledge and his idea of creating a place where friends (initially only for Harvard students) can meet online and reconnect virtually, the first phase was simple for Zuckerberg. Phase two is the incubation process. This is the phase where creative people have successful ideas due to the saturation of a tremendous amount of information that they have acquired during the first phase. It is proof that distancing yourself from the very information you have learned will help your mind create great ideas subconsciously. This is done through instances such as daydreaming, sleeping, practicing your hobbies, or doing anything else that is unrelated to the information you have learnt and need ideas for. An example of this process is when Mark Zuckerberg envisions that his site should not be only for Harvard or college students, but to anyone who has internet access. Phase three is the idea experience. This part of the process seems to be the most exciting and anticipated of all the phases. This is where the solution or idea that the individual has been seeking is finally discovered. However, this is also the phase that a normal person falsely perceives as the only factor of creativity. An example of this process is when Zuckerberg discovers the potential to make millions, if not billions, of dollars by allowing Facebook to have infinite accounts to the public, which changed our culture greatly right next to Myspace. Having done this, through advertisements, Mark Zuckerberg was on his way to a life-changing idea. The last phase is evaluation and implementation. Phase four is the most difficult of the phases because it involves a lot of courage, self-discipline and responsibility, and determination. Evaluation and implementation was complex in the beginning. Though Mark Zuckerberg knew how to create his site and make it fully functional,

implementation took a long time through its beta testing. This is quite understandable knowing Facebook has over 250 million users. 5.) Almost all prospective entrepreneurs want to know the best way for entering business, or in other words, how to start a venture for oneself. The three most common methods of doing this are by creating a new venture, acquiring an existing venture, or obtaining a franchise. These methods each have their advantages and disadvantages. The most successful way to approach a new business venture is to design a unique product or service that is not being offered in todays market but would be in high demand if it was created and sold. The first method discussed the creation of a new business venture. Creating a new venture involves two methods of approach: the new-new approach and the new-old approach. The new-new approach is related to new products or services that are entered into the market frequently. An advantage to this method is that modern advertising can greatly help sales for innovative products through sites such as Google and Facebook. The disadvantage, however, is that most new products fail to sustain its market and new ideas can die quickly. This method is usually used for MP3 players, new smartphones, television sets, GPS, and other products that involve a great deal of research and development. The Apple corporation and its smartphone, the iPhone, exemplify this newnew method. Apple was one of the first designers of a smartphone that was very userfriendly and had an application store for users to purchase games and other software. It was a revolutionary product and since its creation, many other companies have started a trend of similar style phones. However, most small businesses do not start with a completely innovative idea. Instead, there are individuals who start ventures that only improve a product that is already on the market. This is known as the new-old approach. An example of this approach is Motorolas smartphone, the Droid. This phone has increased competition for Apples iPhone by implementing its own app store just like Apple did. The next method of entering a business venture is by acquiring an existing business venture. An entrepreneur might see a business that is for sale and he/she would be able to purchase the existing venture and start running its operations. The disadvantage of this method is that this can be risky for most entrepreneurs, because if your new ownership leads to decreased sales, it could really damage the businesss reputation. An advantage of this method is that it takes a lot less time and money to own and operate an existing business. An example of this method might be a person who wants to own a sports store. Though this individual does not have the money to obtain permits and build a store from scratch, he/she would be able to purchase an existing sports store. Thus, there would be no worry and no effort needed to find a location and submit applications to contractors, etc. The last method for obtaining a business venture is by obtaining a franchise. An example is an owner who wants to buy a Subway; he would become a franchisee. In order to do this, the individual must obtain a trademark, trade name, or copyright license to use the brand image. The advantage to doing this is that the franchise company will guide you from the beginning to the end with knowledge and training on how to run the business. Also, franchises are usually well established, meaning there is an indirect

clientele of people who already enjoy your franchise products; thus, the corporation and not the owner handle marketing. A disadvantage of obtaining a franchise is that there are franchisee fees that must be paid to the corporation. This means a deduction from the profits that the owners worked so hard to get.