CHAPTER 1 ENTREPRENEURSHIP TODAY
المادة الدراسية:
CHAPTER OVERVIEW
The role of entrepreneurship in today’s economy is portrayed in this opening chapter. Because of a number of societal and economic factors, big business has become a less important force than in years past. The emergence of entrepreneurship has changed the way in which business is conducted worldwide and promises to continue to do so.
LEARNING OBJECTIVES
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Entrepreneurship emerged as a leading economic force during the 1980s and the 1990s.
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The nature of the United States economy is undergoing important changes as we start the 21st century.
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Countries worldwide have discovered entrepreneurship as a promising source of economic vitality.
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Small business has what it takes to compete successfully with much larger organizations.
CHAPTER OUTLINE
I. Entrepreneurship in the United States
A. Industry Structure
1. As we look back at recent decades, starting with 1955, we see the emphasis on big business slowly giving way to an awakening of the advantages and attractions of entrepreneurship.
2. The number of new businesses has increased steadily during the past 40 years. During the past 10–15 years the increases have been dramatic.
3.
One indicator of the significance of small business as a factor in our economy is the number of people per business establishment. In 1955 there were 38 people for every one business. That number has declined steadily since then and by 2000 had fallen to 12.7.
B. Organizational Strategies and the Practice of Downsizing
1.
The popularity of entrepreneurship is based in part on the practice of downsizing in so many of our country’s big firms.
2.
Not only has the practice of downsizing forced many people into a position of considering entrepreneurship because they are unemployed, but it has also shaken the confidence of people pursuing a career with a large corporation.
3.
Although many managers defend the practice of downsizing by saying it is essential for the survival of companies, critics point out that many of the layoffs have come on the heels of record corporate profits, and that executive bonus plans are often closely linked to cost-reduction accomplishments.
C. Societal Change: The End of Jobs?
1. Some observers feel that technological changes are taking place in such a way that jobs are becoming less important to organizations.
2.
This point of view gives rise to the possibility that we will someday see the end of jobs.
D. Consequences for the Individual
1. Organizations no longer provide the kind of job security and career opportunities they once did.
2.
With a diminished need for managers in big companies comes the prospect of many people deciding to become independent in pursuing their economic needs.
II. The Global Scene
A. China has become a major force in entrepreneurship, with aggressive small businesses changing international commerce in profound ways.
B. Other examples of increasing interest in entrepreneurship can be found in the wide range of projects sponsored by the World Bank.
III. Entrepreneurship in a Changing Environment
A. Changes in Markets
1. Outsourcing is the practice by which organizations arrange for outside firms or individuals to do work that had been done within the organization. This practice gives small businesses many opportunities to develop big companies as clients.
2. Many markets have seen fragmentation develop as more and more companies seek to serve carefully defined niches.
B. New Markets
1.
For the past 20 years or so small firms have found opportunities in serving a segment of the population with a concern for the environment.
2. Much of retailing is being transacted through electronic, rather traditional, means. This shift has been called changing from marketplace to marketspace.
C. The Competitive Advantages of Small Business
1. Small business owners tend to develop close relationships with their customers.
2. Small business has an excellent record of innovation.
3. Flexibility and the ability to respond quickly to changes in the competitive environment characterize successful small firms.
SUGGESTED RESPONSES TO DISCUSSION QUESTIONS
1. What are the major reasons for entrepreneurship becoming so important in our economy?
As large corporations become less able to provide secure and attractive career opportunities, people turn to alternatives; one of the alternatives is entrepreneurship. Another reason for entrepreneurship’s importance is the independence it offers. The opportunity to take advantage of a route toward self sufficiency has great appeal to growing numbers of people.
2. What are the two leading explanations for the massive job losses that have characterized the nation’s leading firms in recent years?
The first is that large corporations must cut costs to survive, and to cut costs in any significant way means laying off large numbers of employees. A competing explanation is that the bonus plans of executives require cost reductions of a magnitude that can be reached only through widespread job elimination.
3. Will the concept of jobs become obsolete?
Technology is changing our organizations in many ways. Perhaps the most important of these changes over the long run concerns the way work is performed. The human element is used in a different way and has become expendable in many operations. Furthermore, where it continues to be needed, the traditional employer‑employee relationship is often restructured.
4. Give some examples of the sources of strength of the entrepreneurial movement in different countries.
In addition to the United States, other countries where entrepreneurship has had a particularly vigorous upsurge in recent years include China, Bangladesh, and other countries worldwide.
5. What is outsourcing and how has it given a boost to entrepreneurship?
If a company uses outsourcing, it uses an outside supplier to perform tasks that were previously completed in-house. This has given a boost to entrepreneurship because many large firms now outsource to small firms to complete tasks.
6. Define marketspace and explain how it represents an opportunity for entrepreneurs.
Marketspace refers to business done electronically instead of the company having a physical location. It is an opportunity for entrepreneurs since this industry is still developing. New methods and insights concerning customer service could provide great opportunities.
LINK TO THE BUSINESS PLAN
As stated in this chapter, fragmentation of markets occurs when markets become divided into unique and distinctive parts. This fragmentation of markets has created great opportunities for small businesses that often serve small markets. Identifying the niche market that the company will serve is one of the most important steps in starting a business. Many businesses fail because they have failed to adequately address this issue. The business plan should answer the following:
What specific niche market will the business serve?
If this is a product that is sold to the final consumer, include typical age, sex, income, geographic area, etc.
If this product is sold to businesses, identify the industries, typical size, geographic area, etc.
Why has this niche market been chosen?
Do other small companies serve this niche?
Do large companies serve this niche?
HELPFUL WEBSITES
http://www.kc.frb.org/SPCH&BIO/Entrepreneurship-Cerner-042805-final.pdf
This is an excellent description of the role of entrepreneurship as a source of growth in an economy. The article, which compares and contrasts the record of the U.S. with other nations, was written by the President and C.E.O. of the Kansas City Federal Reserve Bank.
http://www.nowpublishers.com/now/product.aspx?product=ENT&doi=0300000001§ion=ch01
This is a readable and broad-based review of several issues concerning growth (at the level of the firm, industry, and economy) and its relationship to entrepreneurship.
This is the U.S. House of Representatives Small Business committee’s website. It covers a variety of topics dealing with the role of small business in our economy and government programs to support small business and entrepreneurship.