Chapter 1 What Is Entrepreneurship

What Is
Entrepreneurship?
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Chapter 1 What Is Entrepreneurship?
What Is
Entrepreneurship?
1.1 Entrepreneurship and the Economy
1.2 The Entrepreneurial Process
2
What Is Entrepreneurship?
1.1
Discuss the role of small business and

entrepreneurship in the economy.
Describe economic systems.
Explain how economics is about making choices.
Discuss the role of economic indicators and
business cycles.
Describe what entrepreneurs contribute to the
economy.
Section 1.1 Entrepreneurship and the Economy 3
1.1
Entrepreneurship is the primary catalyst for

economic growth.
To be a successful entrepreneur requires an

understanding of how the economy works.

1.1
entrepreneur need
venture want
entrepreneurship factors of production
entrepreneurial scarcity
economics demand
free enterprise system elastic demand
profit inelastic demand
market structure diminishing marginal utility
monopoly supply
oligopoly equilibrium
goods Gross Domestic Product
services business cycle
Small Business and

Entrepreneurship
As an entrepreneur, you entrepreneur
accept the risks and an individual who
undertakes the creation,
responsibilities of business organization, and
ownership. ownership of a business

Small Business and

Entrepreneurship
Creating and running a venture a new
business venture requires business undertaking
that involves risk
a variety of skills.

Small Business and

Entrepreneurship
Starting a home-based entrepreneurship
business calls for acting like an
entrepreneur or having an
entrepreneurship on the entrepreneurial mind-set
part of the owner.
entrepreneurial the
About one in three process of recognizing an
households is involved in opportunity, testing it in
an entrepreneurial the market, and gathering
resources necessary to
enterprise. go into business

Entrepreneurship Today
Knowledge of economics economics the study of

contributes to an how people allocate
scarce resources to fulfill
understanding of how their unlimited wants
entrepreneurs and
customers interact.

Economic Systems
An economic system includes a set of laws,

institutions, and activities that guide economic
decision making.

Economic Systems
? ?
What goods and What quantity of
services should be goods and services
produced? should be produced?
All economic systems attempt

to answer four basic questions.
? ?
For whom should
How should goods and
goods and services be
services be produced?
produced?

The Free Enterprise

System
Most democratic nations free enterprise system
have a free enterprise an economic system in
which people have
system. important rights: to make
economic choices of what
products to buy; to own
private property; and to
choose to start a
business and compete
with other businesses

The Free Enterprise

System
Making a profit is a profit money that is left
primary incentive of free over after all expenses of
running a business have
enterprise. been deducted from the
income

The Free Enterprise

System
Perfect competition is a market structure the
market structure in nature and degree of
competition among
which there are numerous businesses operating in
buyers and sellers and no the same industry;
single buyer or seller can market structure affects
market price
affect price.

The Free Enterprise

System
The government may grant monopoly a market
a temporary monopoly to structure in which a
particular commodity has
an inventor. only one seller

The Free Enterprise

System
Under antitrust laws, oligopoly a market
some forms of oligopoly structure in which there
are just a few competing
are illegal. firms

Basic Concepts
goods and services factors of production
basic concepts of economics
supply and demand

scarcity
theory

Goods and Services
Goods and services are goods tangible (or

the products of our physical) products of our
economic system that
economic system. satisfy consumers’ wants
and needs
services intangible
(nonphysical) products
that satisfy consumers’
wants and needs

Goods and Services
Entrepreneurs respond to want something that

consumers’ wants and you do not have to have
for survival, but would
needs with goods and like to have
services.
need a basic
requirement for survival

Factors of Production
There are four basic factors of production

factors of production: the resources businesses
use to produce the goods
and services that people
land want
labor
entrepreneurship
capital

Scarcity
The principle of scarcity scarcity the difference

means giving up one thing between demand and
supply; limited resources
in order to have something
else.

Supply and Demand

Theory
In a free enterprise system, demand the quantity of
the price of a product is goods or services that
consumer are willing and
determined by demand. able to buy at various
prices

Supply and Demand

Theory
The degree to which elastic demand
demand for a product is situations in which a
change in price creates a
affected by its price is either change in demand
governed by elastic
demand or inelastic inelastic demand
situations in which a
demand. change in price has little
or no effect on demand
for products

Supply and Demand

Theory
Due to the law of diminishing marginal
diminishing marginal utility the effect or law
that establishes that price
utility, even when a alone does not determine
product’s price is low, demand, and other
people will not keep buying factors, such as income,
taste, and the amount of
it indefinitely. product already owned,
play a role as well

Supply and Demand

Theory
Supply is continually supply the amount of
shifting in the marketplace. goods or services that
producers are willing to
provide

Supply and Demand

Theory
If something is in heavy demand, but in short
supply, prices will go up.
If something is in heavy supply, but in short

demand, prices will go down.

Supply and Demand

Theory
Because supply and equilibrium the point at
demand are continually which consumers buy all
of a product that is
shifting in the marketplace, supplied; at this point,
the change creates there is neither a surplus
surpluses, shortages, and nor a shortage
equilibrium.

Economic Indicators and

Business Cycles
The federal government Gross Domestic
publishes statistics that help Product the total
market values of goods
entrepreneurs understand and services produced
the economy and predict by workers and capital
possible changes. within a nation during a
given period
The Gross Domestic

Product is an example of
an economic indicator.

Economic Indicators and

Business Cycles
There are four stages of the business cycle the
business cycle: growth, general pattern of
expansion and
recession, depression, and contraction that the
recovery. economy goes through

What Entrepreneurs Contribute
provide
turn demand
venture
into supply
capital
What
Entrepreneurs
create Contribute provide
more jobs
wants
promote
changes in
society

Small Businesses and

Entrepreneurial Ventures
The difference between small businesses and
entrepreneurial ventures is that owners start small
businesses to create jobs for themselves.
Founders of entrepreneurial ventures have a desire

to innovate, grow, and create new value.

1.1
1. Discuss the role of small business and

entrepreneurship in the economy.
Entrepreneurs start by responding to society's

wants and end up changing society, thereby
creating even more wants to be satisfied. As a
result, entrepreneurs are the catalysts that make
economic progress happen.

1.1
2. Describe economic systems.
Economic systems include a set of laws,

institutions, and activities that guide economic
decision making. There are several kinds:
traditional, pure market, command, and mixed.

1.1
3. Explain how economics is about making

choices.
Because resources are in limited supply, if the

consumer wants one thing, he or she may have
to give up something else.

1.1
4. Discuss the role of economic indicators and

business cycles.
The federal government provides statistics (economic

indicators) that help entrepreneurs understand the
state of the economy and predict possible changes.
Business cycles are general patterns of expansion
and contraction that the economy goes through.

1.1
5. Describe what entrepreneurs contribute to

the economy.
Entrepreneurs recognize consumer wants and see the

economic opportunities in satisfying them. Entrepreneurs are
a principal source of venture capital. Entrepreneurs provide
jobs. In doing so, they provide for their own and others’
financial security. Entrepreneurs change society through the
businesses they create and by responding to society’s wants
and needs.

1.2
Describe entrepreneurship from a historical

perspective.
Discuss the five components of the
entrepreneurial start-up process.
Explain how to achieve business success.
Section 1.2 The Entrepreneurial Process 37

1.2
The entrepreneurial start-up process includes:

the entrepreneur
the environment
the opportunity
start-up resources
the organization

1.2
enterprise zones new venture organization

opportunity business failure
start-up resources discontinuance

The History of
Entrepreneurship
Entrepreneurship has been a distinct feature of
American culture since the American Revolution,
but it was not until the 1980s that it became a
popular topic.

The History of Entrepreneurship
More government
Large diversified
regulation; smaller
companies
companies emerge
1960s 1970s 1980s 1990s
Volatile economic No job security; move to

climate; beginning of service-based economy
technology revolution influenced by technology

The Entrepreneurial
Start-Up Process
The five components of the entrepreneurial
start-up process work together to create a new
business.
the entrepreneur
the environment
the opportunity
start-up resources
the new venture organization
The Entrepreneurial
Start-Up Process
The entrepreneur is the driving force of the
start-up process.
Entrepreneurs recognize opportunities and pull

together the resources to exploit opportunities.

The Environment
The nature of The availability

the environment of resources
Four Categories of
Environmental Variables
Ways to Incentives to
realize value create new
businesses

The Environment
New businesses seek enterprise zones

enterprise zones that specially designated
areas of a community that
provide incentives. provide tax benefits to
new businesses locating
there; communities may
also provide grants for
new product development

The Opportunity
A good opportunity can be opportunity an idea

turned into a business. that has commercial value
An idea plus a market

equals an opportunity.

Start-Up Resources
When entrepreneurs are start-up resources the

ready to start up a new capital, skilled labor,
management expertise,
business, they must use legal and financial advice,
creative talent to put facilities, equipment, and
together the necessary customers needed to start
a business
start-up resources.

The New Venture

Organization
The fifth component of the new venture
start-up process is the organization the
infrastructure or
execution of the new foundation that supports
venture organization. all the products,
processes, and services
of a new business

The Facts About

Business Failure
A business failure files business failure a business
that has stopped operating,
Chapter 7 bankruptcy. with a loss to creditors, and
one that no longer appears on
the tax rolls
A business that disappears discontinuance

a business that disappears
from the tax rolls may be a from the tax rolls because it
failure or a discontinuance. may be operating under a
new name or because the
owner has purposely
discontinued in order to
start a new business

How Entrepreneurs Can Succeed
4. Plan and manage effectively
3. Assemble an expert team to execute

the business concept
2. Test the opportunity in the marketplace
1. Recognize opportunity

1.2
1. Describe entrepreneurship from a historical

perspective.
Entrepreneurship has been a distinct feature of

American culture since the American Revolution.
Enterprising colonists found innovative ways to
introduce new products and services. In the
1980s entrepreneurship became a popular topic.

1.2
2. Discuss the five components of the

entrepreneurial start-up process.
The entrepreneurial start-up process includes

the environment, the opportunity, start-up
resources, and the new venture organization.

1.2
3. Explain how to achieve business success.
The chances of a new business succeeding are good with

effective planning and management. Entrepreneurs must
learn how to recognize opportunity, test that opportunity in
the marketplace, and assemble a team with the necessary
expertise to execute the business concept.

The Digital Economy

Over the past century, the world’s economy has undergone
drastic changes. Individual economies used to be local, such
as farmers and merchants who sold to their communities.
Today, these same businesses can sell their products

globally because of the widespread use of information
technology (IT).

Tech Terms
e-business
a company that does business over an electronic network
e-commerce
the act of selling products and services over the Internet
information age
the era of history that began in the 1970s when computers became
popular with the masses

Tech Terms
information technology (IT)
any technology that is used to communicate or exchange information
intranet
an electronic network used to communicate in-office with staff
technology infrastructure
all the hardware and software used to support electronic
communication

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What Is
Entrepreneurship?
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Back to Table of Contents

1.1 Entrepreneurship and the Economy

1.2 The Entrepreneurial Process

Discuss the role of small business and

Entrepreneurship is the primary catalyst for

To be a successful entrepreneur requires an

Section 1.1 Entrepreneurship and the Economy 4

Small Business and

Section 1.1 Entrepreneurship and the Economy 6

Small Business and

Section 1.1 Entrepreneurship and the Economy 7

Small Business and

Section 1.1 Entrepreneurship and the Economy 8

Knowledge of economics economics the study of

Section 1.1 Entrepreneurship and the Economy 9

An economic system includes a set of laws,

Section 1.1 Entrepreneurship and the Economy 10

All economic systems attempt

Section 1.1 Entrepreneurship and the Economy 11

The Free Enterprise

Section 1.1 Entrepreneurship and the Economy 12

The Free Enterprise

Section 1.1 Entrepreneurship and the Economy 13

The Free Enterprise

Section 1.1 Entrepreneurship and the Economy 14

The Free Enterprise

Section 1.1 Entrepreneurship and the Economy 15

The Free Enterprise

Section 1.1 Entrepreneurship and the Economy 16

goods and services factors of production

basic concepts of economics

supply and demand

Section 1.1 Entrepreneurship and the Economy 17

Goods and Services

Goods and services are goods tangible (or

Section 1.1 Entrepreneurship and the Economy 18

Goods and Services

Entrepreneurs respond to want something that

Section 1.1 Entrepreneurship and the Economy 19

There are four basic factors of production

Section 1.1 Entrepreneurship and the Economy 20

The principle of scarcity scarcity the difference

Section 1.1 Entrepreneurship and the Economy 21

Supply and Demand

Section 1.1 Entrepreneurship and the Economy 22

Supply and Demand

Section 1.1 Entrepreneurship and the Economy 23

Supply and Demand

Section 1.1 Entrepreneurship and the Economy 24

Supply and Demand

Section 1.1 Entrepreneurship and the Economy 25

Supply and Demand

If something is in heavy supply, but in short

Section 1.1 Entrepreneurship and the Economy 26

Supply and Demand

Section 1.1 Entrepreneurship and the Economy 27

Economic Indicators and

The Gross Domestic

Section 1.1 Entrepreneurship and the Economy 28

Economic Indicators and

Section 1.1 Entrepreneurship and the Economy 29

Section 1.1 Entrepreneurship and the Economy 30