CASE 11-2

SERENDIPITY ENTERPRISES, INC.

1. Describe the possible advantages and disadvantages for Blake by incorporating.

Could a proprietorship have been more advantageous?

ANSWER:
Possible Advantages:
The major reason for incorporating was to protect his family. As by incorporating SEI
there were more shareholders to the company which in turn reduces the risk of
liabilities and the loses borne by the company. Also the profits will be earned equally
and will not create any confusion in terms of returns.
Possible Disadvantages:
His shares in the company will be limited as there will be employees and other
investors who will have their shares in the company. So he may or may not be the
major shareholder.
NO. A proprietorship would not have been more advantageous because he invested
his family assets in it. And if he had to die his family assets would have been at risk.
Also a dispute over his property in 1985 when Serendipity was still a sole
proprietorship had resulted in a serious lawsuit, and although he won the suit, he
realised that had the decision gone the other way, his family assets would have been at
risk. With the business growing, there was a higher risk of litigation, so Blake decided
to separate business and personal assets.

2. Explain the problems faced by entrepreneurs for succession. In Blakes situation, what
are his options?

ANSWER:
When Blake found that he had cancer and that the cancer was spreading he started
thinking about how his business would be controlled in his absence. He was still a
young a man in his 40s, and he had 3 sons. His oldest son, a junior in college, had
worked in the business for several years and was skilled at desk-top work as well as
graphics development. Blake had staff which included an office manager and several
excellent employees, but non who could take over as the head of a corporation. Apart
for that he wondered how he could protect his familys interest because his wife and
sons were minority stake holders, having acquired stock at incorporation from assets
that were transferred to the company so when Blake realised that if he died suddenly,
there would be a succession problem and he also wondered what would happen to his
stock.
In Blakes situation he had options like;
a. He could have given his position to his oldest son who had worked in the business
for several years and was skilled at desk-top work as well as graphics
development.
b. And start training his son and employees to be capable to take responsibilities and
run the business in his absence.
 c. Also guide and give the other two sons knowledge about the company and give
them shares of the company so that when they grow up their careers and future are
set and the family is secured.
d. He could have given is company on lease. By doing this, his family would have
earned an income and the business would have still been running.

3. What other forms of business could Blake have chosen? Explain the possible
advantages and disadvantages of each.

ANSWER:
1. Desktop publishing tutorials
Due to the multiple applications of desktop publishing and its huge relevance,
more individuals are seeking to learn how to use the various software packages
used by desktop publishers. You can make additional income by teaching other
people how to use programs like Photoshop, Microsoft publisher, Corel Draw, and
so on.
Advantages:
a. Few employees are required.
b. Guaranteed income.
c. Flexible timings.
d. Flexible working days.
e. Can be done at home.

Disadvantages:
a. Many competitors with the same job

2. Print communication
Businesses are constantly in need of print materials for communicating their
products and services to potential customers. Examples of these materials include
brochures, fliers, ads, handbills, and posters. These materials are very effective for
offline advertising, as they help spread word of businesses to customers who
cannot be reached through online advertising.
Advantages:
a. Few employees are required.
b. Guaranteed income.
c. Flexible timings.
d. Flexible working days.
e. Can be done at home.

Disadvantages:
a. Many competitors with the same job

3. Business branding
Some desktop publishers specialize in helping businesses build their brand
through the design of professional logos, letterheads, business cards, and catalogs.
As this option caters to business owners, it has huge profit potential.
Advantages:
 a. Few employees are required.
b. Guaranteed income.
c. Flexible timings.
d. Flexible working days.
e. Can be done at home.

Disadvantages:
a. Many competitors with the same job
b. Difficult to get the best business owners.

CASE 1-1

PROGRESS THROUGH INNOVATION

1. Explain McCormicks experience in entrepreneurial terms based on the concepts of

Adam Smith and Carl Menger.

ANSWER:
 Many innovations have occurred, but their significance has been forgotten along with
most of their inventors. Never the less, efforts by a few inspired entrepreneurs have
changed society in extraordinary ways. One of them was inventor and entrepreneur
Cyrus McCormick, who created a revolution in agriculture with the first mechanical
reaper. He invented the reaper in1831 and unveiled it in the Shenandoah Valley,
cutting 6 acres of wheat in less time than a healthy farmer could cut one acre. The
McCormick reaper replaced the way farmers had harvested grain for more than 2000
years, and the farm productivity had increased more than tenfold. The idea began with
McCormicks father, who was determined to and a way to provide more food for
Americas flowing population. He had witnessed starvation in the cities and
undernourished children in township, and the answer, in his mind was to create a new
method of harvesting food grains. Until that time farmers would sow only what they
could reap, and the amount they could reap was limited to what they could cut with a
hand sickle or scythe. McCormicks father died with his dream unfulfilled, but young
Cyrus pursued the idea.
When the first reaper went into production, it created chaos among farmers because
those who had McCormick suddenly out produced their neighbours by a substantial
amount and could market grain at very low price. The farmer who worked only with a
scythe quickly realised that he had to accept the inevitable change and purchase a
reaper or lose his farm. However during those days farmers had little money and
could not afford the McCormick harvester so McCormick founded International
Harvester Corporation this aloud the farmers use the reaper and pay on credit basis,
and he soon set up sales offices in every state and territory in the country. Later
McCormick refined his credit policies and introduced instalment sales with low down
payments and periodic payments.
McCormick was an inventor turned entrepreneur who recognised the value of
marketing at the same time he hired the best people he could find with marketing and
engineering talent. He encouraged them to think and act independently, and many
unusual innovations were made. For example, the company introduced four colour
advertisement and posters; these were the forerunners of billboards. Later he created
brochures to attract customers, and these evolved into mail-out orders that were
among the first efforts at direct marketing.
In short McCormick was a very hard working and a successful inventor and
entrepreneur who worked for the people and always encouraged his employees to do
better and to bring out their hidden talents.

2. Cyrus McCormick was responsible for the first mechanical reaper and the critical idea
of interchangeable parts; however, the success of McCormick is often attributed to his
ability to organize a company with exceptionally talented engineers and marketers
who were responsible for most of the firms innovations. Evaluate this statement in
terms of the classic idea of an entrepreneur and the concept of corporate
entrepreneurship.

ANSWER:
 Cyrus McCormick was responsible for the first mechanical reaper and the critical idea
of interchangeable parts; however, the success of McCormick is often attributed to his
ability to organize a company with exceptionally talented engineers and marketers
who were responsible for most of the firms innovations.
By encouraging the engineering employees and giving them incentives, appreciating
their work and rewarding them and giving them and all the other attention and
guidance they need, the employees tend to work harder and better and produce the
best long lasting and reliable machines.
Also by encouraging the marketing employees and giving them incentives,
appreciating their work and rewarding them and giving them and all the other
attention and guidance they need and the best facilities they need, the employees tend
to work harder and better and end up making unusual inventions. For example, the
company introduced four-color advertisement and posters; these were the forerunners
of billboards.
For direct marketing brochures can be created to attract the customers.

3. Compare McCormicks contributions that led to a revolution in agriculture with Apple

Computers introduction of the microcomputer that revolutionized how we think
about information technology.

ANSWER: