Chapter Three

Entrepreneurs, Managers,
and Employees
McGraw-Hill/Irwin
Introduction to Business

2007 The McGraw-Hill Companies, Inc., All Rights

Reserved.

Learning Objectives
1.

2.

3.

Describe the nature of entrepreneurship and the

kinds of entrepreneurial opportunities that can
increase the profitability of business commerce,
occupations, and organizations.
Identify how the process of creative destruction
leads to the emergence of new companies, the
decline of established companies and raises a
societys standard of living.
Appreciate the problems involved in aligning the
interests of a manager with those of a companys
owners.
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Learning Objectives
4. Distinguish the three different levels of
managers and understand the different roles
they perform to increase efficiency,
effectiveness, and profitability.
5. Differentiate between two main approaches
employees can take to their jobs and the way
their performance affects their long-term
career prospects.

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The Role of the Entrepreneur

Entrepreneur
- a person ready to supply the enterprise
energy, boldness, courage, spirit, expertise
necessary to start and grow a business

See the qualities of an entrepreneur at

sideroad.com
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Forms of Entrepreneurial Opportunities

Figure 3.1

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Commercial Opportunities
First mover advantage
- the competitive advantage gained by being
first to develop a new product or process

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Organizational Opportunities
Intrapreneurship
- Entrepreneurial activity that takes place
inside an established company

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Risks of Entrepreneurship
1. Entrepreneurs often overestimate their
ability to create new products
2. Entrepreneurs underestimate how
difficult it is to reach prospective
customers
3. Entrepreneurs may not realize how much
ready cash is needed to see a small
business through its critical birth period
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Why Be an Entrepreneur?
Entrepreneurs are often driven by the
challenge of creating valuable new goods
and services
Many entrepreneurs are intrinsically
motivated

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Types and Motives for Enterprise

Figure 3.2

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The Agency Problem

Delegate
- giving up decision-making authority to other
people

Agency problem
- the problem that arises because of the
separation of the ownership and control of
a business

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Question?
Who are employees to whom a companys
owners delegate responsibility for using
its resources to create profitable goods
and services?
A. Managers
B. Chiefs of Staff
C. Deputy Chiefs
D. Directors
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The Agency Problem

Managers
- employees to whom a companys owners
delegate responsibility for using its
resources to create profitable goods and
services

Stock options
- the right o buy a stock at a certain price
and to benefit from increases in the stocks
value in the future by selling it
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The Agency Theory Problem

Figure 3.3
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Levels of Managers
Board of directors
- experienced business executives from
inside and outside of a company who are
elected by their companys shareholders to
act as their representatives

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Levels of Managers
Chief executive officer
- a companys top manager, responsible for
overseeing the operations of the company

Top managers
- employees who are responsible for
developing a companys business model
and ultimately responsible for its success or
failure
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Levels of Managers
Middle managers
- employees in charge of a companys
various functions
- responsible for using resources
productively to increase its profitability

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Levels of Managers
First-line managers
- employees at the base of the managerial
hierarchy
- often called
supervisors

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Levels of Management

Figure 3.4
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Levels and Types of Managers

Figure 3.4
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Profitability: Efficiency and

Effectiveness
Efficiency
- a cost-focused measure of how
productively a companys resources are
being used to produce goods and services

Effectiveness
- a revenue-focused measure of how
competitive the firms business model is

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The Relationship Between Efficiency, Effectiveness, and

Profitability

Figure 3.6
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Four Functions of Managers

Figure 3.7
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Question?
Which managerial function is a process that
managers use to select the best
business model and goals for their
company?
A. Leading
B. Organizing
C. Planning
D. Controlling
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Managerial Functions
Planning
- a process that managers use to select the
best business model and goals for their
company

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Stages of the Planning Process

1. Choose which business model to pursue
2. Decide how to allocate the organizations
resources
3. Select the goals and targets that will be
used to measure how efficiently and
effectively the business model is working

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Managerial Functions
Organizing
- a process managers use to create a
companys organizational structure

Organizational culture
- the set of values, norms, and beliefs shared
by members of an organization that
determine how well they work together to
further the companys goals
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Managerial Functions
Leading
- the ability to develop a plan and motivate
others to pursue it

Cross-functional team
- a group of people from different functions
who work together on a particular project

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Managerial Functions
Controlling
- the process of evaluating whether or not a
company is achieving its goals and taking
action if it is not

Benchmarking
- the practice of comparing a businesss
strengths and weaknesses to those of its
competitors
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The Role of the Employee

Role
- the set of tasks a person is expected to
perform because of the position he or she
holds in an
organization

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Career Management
Stage 1: Preparing for Work
Stage 2: Entering the Workforce
Stage 3: Early Career
Stage 4: Midcareer
Stage 5: Late Career

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Career Management
Mentor
- a person who provides advice, guidance,
and technical knowledge to other people
(mentees) in order to help them advance
their careers

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Video The Syl Tang Story

Syl Tang is a Chinese American woman living and
working in New York City. She is the CEO of
HipGuide.com, an entrepreneurial business
she pioneered.
1. If HipGuide.com founder and owner Syl Tang
were to choose the right goals to pursue for
the business model but does a poor job in the
area of efficiency, what is the likely result?
2. What qualities does Tang have that ensure her
success as an entrepreneur?
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