chapter 1 Flashcards
Entrepreneurs
start own business
recognize opportunities that others may not have noticed
shift economic resources from low productivity to high with greater yield
add value to scarce resources
Free Enterprise System
Economic system in which businesses are privately owned and operate relatively free of government interference
based on voluntary exchange
Entrepreneurs and the Free Enterprise Economy
encourages entrepreneurs who use resources efficiency to satisfy consumer needs by rewarding them with profit
Voluntary Exchange
transaction between two parties who agree to exchange money for a product or service
both parties agree and will have benefits
5 Roots of Opportunity
1 Problems the business can solve 2 Changes in laws situations or trends 3 Inventions of totally new products or services 4 Competition 5 Technological advances
Profit as Signal
profit sign that an entrepreneur has added value to the scarce resources they used
lack of sign that entrepreneur is not using resources well and is not adding value to resources
Business opportunity and 4 Characteristics
1 Attractive to customers
2 Will work in your business environment
3 Can be executed in available window
4 Resources and skills available
Cost/Benefit Anaylsis
decision making process in which the costs of taking an action are compared to the benefits
Using cost/benefit analysis
can be inaccurate unless opportunity cost is considered
Opportunity Cost
Cost of missing next best investment
value of what must be given up in order to obtain something else
SWOT
Strengths
Weaknesses
Opportunities
Threats
Strengths
capabilities and positive points that entrepreneurs has from experiences to contacts
internal to organization
Weaknesses
negatives entrepreneurs faces
lack of capital or training or failures to set up a workable accounting system
external to organization
Opportunities
positive external events or circumstances that can help the entrepreneur get ahead of competition
Threats
external factor event or circumstance that can harm the business
competitors legal issues or declining economy
Porters strategy framework
delineates cost leadership and differentiation as low cost and product uniqueness strategies
Small Business
0 to 500 full time employees with annual sales less than 5 million
Why be an Entrepreneur
control over time fulfillment creation/ownership control over compensation control over working conditions
Benefit examples
independence satisfaction financial reward self esteem contribution to society
Cost examples
business failure obstacles loneliness financial insecurity long hours/hard work strain on personal relationships
Benefit defined
money earned and knowledge and experience gained
Cost defined
money and time invested
Entrepreneurial Options
social entrepreneurship
venture philanthropy
green entrepreneurship
Strategy defined
a plan for how an organization or individual plans to perform and outdo competitors
Path to Small Business
start from beginning buy an existing business secure a franchise rights license technology do not steal creativity
Franchise defined
a business that markets a product or service developed by a franchisor typically in the manner specified by that franchisor
Acquisition defined
the purchase of a business
Due Diligence
the exercise of reasonable care in the evaluation of a business opportunity
Faces of Entrepreneurship
Gazelle
Microenterprise
Lifestyle Business
Gazelle
company that achieves the annual growth rate of 20% or greater typically measured by the increase of sales revenue
Microenterprise
a firm with 5 or less employees initial capitalization requirements of under $35,000 and the consistent operational involvement of the owner
Lifestyle Business
microenterprise that permits its owners to follow a desired pattern of living
7 Rules for a Successful Business
1 recognize opportunity 2 evaluate with critical thinking (SWOT) 3 Build a team 4 create a business plan 5 gather resources 6 establish ownership 7 create wealth
