Entrepreneurship Flashcards
What is entrepreneurship?
Entrepreneurship is identifying an opportunity and accessing resources to capitalize on it
What type of company is entrepreneurship associated with?
Small, young businesses
Explain how entrepreneurship is not limited to small, young businesses and give some examples
When companies change/vary their products (eg. apple moving past computers and into smartphones)
Small but not young: small convenience stores that have been passed down from one generation to the next
Young but not small: Tesla
What defines a small business?
Less than 100 employees
What defines a young business?
Having existed for less than 5 years
What is the importance of entrepreneurship?
98.1% of businesses in Canada are small, and they contribute +30% annually to GDP. They force existing companies to be more innovative and creative in order to stay competitive
Explain how governments support small businesses
- They give small business a lower tax rate then individuals (11% compared to 17%). They will often also pay less tax than big companies
- The government will often give advice and funding to help businesses get started
- It is very easy and cheap for businesses to become established and operational
What are the three key components of the entrepreneurial process?
- Entrepreneur
- Identify opportunity
- Access resources
What is the entrepreneurial process influenced by?
PEST
When is the entrepreneurial process successful?
When the entrepreneur sees an opportunity and has an interest in pursuing it
How do you begin the entrepreneurial process?
The process begins with the entrepreneur identifying an opportunity and then accessing resources. If the entrepreneur doesn’t see the opportunity and decide they want to chase it, it won’t happen
What are the two parts of opportunity recognition?
- Idea generation
2. Screening
Explain idea generation in terms of opportunity recognition
It often originates in events relating to work, daily life, hobbies, or chance happenings. When you solve a problem, the solution sells itself. People do this by listening to complaints and frustrations, combining different functions, simplifying a product, offering a cheaper or more convenient version, or ask what jobs customers are after
Explain screening in terms of opportunity recognition
During this process the entrepreneur weeds out bad ideas, which saves time and money. It ensures that you have a viable idea with a competitive advantage
Explain how the three-component screening process tells you if you have a good idea
- Make sure your idea is valuable. Prove that it solves a problem that enough customers are willing to pay for, through surveys of target audience
- Make sure your idea is unique. Prove that it is different from existing products and substitutes, and that it can’t or won’t be easily imitated. Ask who the competitors are and how they will react
- Make sure your idea is feasible. Prove that it is marketable and financially viable by showing that there are enough customers willing to buy it. Look at the sales of competitors to see if there is a big enough market, and ask yourself if you can reach and win those customers, as well as overcome barriers to entry, and what forces affect your profitability (Five Forces Analysis)
What is are two important safety points that entrepreneurs should think about when thinking about entering an industry?
- Does the idea have low exit costs? How much am I going to lose if I decided to exit the market?
- If there is a longer time to profitability or greater up-front investment needed it is a risker venture
What are the factors that help you evaluate your business opportunity?
- Product/value added
- Customer market
- Competition/rivalry
- Suppliers
- Substitutes
- Barriers to entry
- PEST
How does product/value added affect your business opportunity?
You need to be able to have customers come back again and again, instead of making a one-time purchase
How does customer market affect your business opportunity?
You market should be large and (ideally) growing, and you need to be able to reach those customers
How does competition/rivalry affect your business opportunity?
You should not enter an industry where there are giant companies dominating the industry that can crush you easily
How do suppliers affect your business opportunity?
If there are a lot of suppliers, it is easy to switch between them and you will have relatively low input costs
How do substitutes affect your business opportunity?
If there are few substitutes but high switching costs it may be difficult to get customers to switch to you company. If there are low switching costs then they will switch to you easily because they have few options
How do barriers to entry affect your business opportunity?
If there are low barriers to entry it is easy to enter the industry and competitors are not easily willing to fight you. You will have the networks you need in order to get established
How does PEST affect your business opportunity?
It tells you what future and current conditions favour your products
If you discover that you have a valuable, unique, and feasible idea, what is the next step?
Find and access resources
What are three ways that new entrepreneurs can access resources?
- Bootstrapping
- Debt or Equity financing
- Crowdfunding
Explain how new entrepreneurs can use bootstrapping to access resources
Bootstrapping is doing more with less. Young entrepreneurs often make due with as few resources as possible, or they use other people’s resources where possible. They also often use free stuff to their advantage
Explain how new entrepreneurs can use debt financing to access resources, some advantages/disadvantages, and where you can access this resource
Debt financing is when your put your company in debt to another (often through loans). You still maintain ownership of your company, but you have to pay more than what you borrowed back in interest. You can get debt financing through financial institutions and suppliers
Explain how new entrepreneurs can use equity financing to access resources, some advantages/disadvantages, and where you can access this resource
Equity financing is when you sell part ownership of your business to another company or to an investor. There are no financial payments to make, but you lost ownership control of your business. You can get equity financing through savings, “love money,” or private investors
Explain how new entrepreneurs can use crowdfunding to access resources
Crowdfunding is a rewards-based program where the entrepreneur shares their idea or business on a platform (often a website), and people offer money to contribute to their venture. When people contribute, they are often offered a free or discounted product from that company or a small piece of ownership in the company
What is a social entrepreneurship?
A company that exists somewhere between the “for-profit” and “not-for-profit” aspects of business.
What did Alter quote about social entrepreneurships in 2006?
“Social Enterprises generate social value while operating with the financial discipline, determination & innovation of private sector businesses.”
What are the key facets of social enterprises?
- They help overcome market inequities/failures
- Social value is the primary objective BUT financial sustainability is imperative
- Forms of business vary
- They thrive within highly constrained and complex environments
How do social enterprises help overcome market inequities/failures?
Market inequities happen when markets don’t address all societal needs. This often happens in areas of education, health, environment, food insecurity, and poverty. Social enterprises seek innovative solutions to these problems
Why is it important for social enterprises to have financial sustainability as well as social value?
Donations are not predictable or reliable. Having economic value keeps the social enterprise running, and is the means to the end goal (not the end goal itself). Social enterprises need to create their own revenue stream
Explain the idea of dual stakeholders in terms of social entrepreneurship
Social enterprises have more than one stakeholder (those served and those supporting), and the supporting stakeholders will have more resources the served stakeholders. The supporters pay to cover served groups costs, helping the social enterprise to cover costs in their own business
Explain how the forms of social enterprises can vary
Social enterprises can be anywhere along the “for-profit not-for-profit scale,” as long as their end goal is creating social value
Explain how social entrepreneurs thrive within highly constrained and complex environments
Social entrepreneurs are super entrepreneurs. They are very good at using limited resources (bootstrapping), and using those resources to maximize returns/social value they create
What value do for-profit enterprises and social enterprises each bring to the market. Do they complement each other?
For-profit enterprises make it possible to earn money and to bring innovations to market, while social enterprises make it possible for EVERYONE to have access to food, clothing, education, etc. The two enterprises complement each other
Explain the concept behind the Grameen Bank and explain how it is a social enterprise
It provides (micro-credit) loans to women in impoverished areas of rural Bangladesh. In those areas there is a lot of poverty, where they have no access to reasonable small loans. The Grameen bank helps women start businesses so they are able to invest in children’s education, and building their own homes. It is self-sustaining: loans are repaid, and then capital is given to others. It is a social enterprise because it creates social value and is self-sustaining
Explain the concept behind SOS and explain how it is a social enterprise
A laurier grad started helping people study for exams (not tutoring specifically but started becoming bigger and bigger groups). It started at laurier but has spread across Canada and the united states. SOS funds educational development projects in Latin America and is self-sustaining: volunteers run review sessions and student fees (donated money for the sessions) funds projects in Latin America
Explain how SOS is a create example of a social enterprise with dual stakeholders
The students that pay for the tutoring help to pay to support students in developing countries. It provides a unique value to the paying customers as well as to the recipients of the money
Explain the concept behind Tom’s and explain the debate around whether it is a social enterprise
Tom’s is a for-profit company that donates one pair of shoes for each pair it sells. It has similar one-for-one initiatives in other sectors as well as shoes (i.e. sight, water, and safe births). It could be argued whether Tom’s is a true social enterprise or a for-profit enterprise with a strong social mission
Explain why Tom’s would choose to donate shoes to developing countries
In poor countries where not everyone can afford shoes, there would be bugs that would get into the cracks of feet and almost always had a fatal result
What is the connection between management preferences in Diamond-E and social entrepreneurship?
If management has a strong social motivation, it will become part of the company’s strategy
How do traditional enterprises differ from social enterprises in terms of value definition and financial priority?
Traditional enterprises place an economic value on investment. They are concerned with making money for profit and making returns on investment. Social enterprises place a social value on investment. They are concerned with having enough money to continue running the business and create more value
How do traditional enterprises differ from social enterprises in terms of their focus on social benefit?
In traditional enterprises social benefit is not their top priority, but it still will be somewhere on the consideration list (after the profit focus). In social enterprises social benefit is their number one priority
How do traditional enterprises differ from social enterprises in terms of who they serve/their stakeholders?
Traditional enterprises serve their investors and their customers. Social enterprises serve those in need and the people who buy their product
How do traditional enterprises differ from social enterprises in terms of their organizational form?
Traditional enterprises are for-profit, while social enterprises can take various forms between for-profit and not-for-profit
Explain how enterprises think differently or similarly about achieving financial stability in traditional or social entrepreneurships
Traditional: if you are not financially stable you won’t be able to go anywhere and you won’t grow
Social: if you are not financially stable you will not be able to keep your door open
Explain how enterprises think differently or similarly about meeting customer needs in traditional or social entrepreneurships
Both traditional and social enterprises place a high value on meeting their customer needs so that their company can thrive
Explain how enterprises think differently or similarly about building a distinct competitive advantage in traditional or social entrepreneurships
Distinctive competition advantage is important to both kinds of enterprises but is different in different ways
Social: needs to adds a value to a society that hasn’t already met those needs
Traditional: you need to be different in an way that lets you compete on value instead of just on price
Explain how enterprises think differently or similarly about gaining employee commitment in traditional or social entrepreneurships
In both enterprises, you need committed, passionate, loyal employees who are willing to put in the work
Explain how enterprises think differently or similarly about encouraging innovation and creativity in traditional or social entrepreneurships
In both enterprises, you need to be able to expand and meet new customer needs through new innovations
Explain how enterprises think differently or similarly about building quality products and services in traditional or social entrepreneurships
Traditional: you need to be able to match the quality that customers are expecting for the price that customers are paying
Social: it’s still important to think about quality even with social enterprises. Eg. You don’t want the building you make to collapse soon after being built
