Chapter 1

The Quiet Giant

New Ventures

© 2009 by Prentice Hall 1-1

 Free enterprise is the economic basis for all
entrepreneurial activity
 It means that any individual is free to

transform an idea into a business

 The opportunities for potential entrepreneurs

are unlimited

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 During the last 10 years, new ventures have
emerged at the rate of 500,000 per year
 Entrepreneurial ventures such as Apple

Computer, FedEx, Intel, Microsoft, and

Google captured the economic spotlight

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 In the new millennium, we have witnessed the
number of smaller businesses in the United
States soar to more than 26 million
 672,000 new businesses were created in

2005, the largest number in U.S. history

 74 million Americans stated they plan to start

a new venture within the next 5 years

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 Women-owned ventures increased from 5.4
million in 1997 to 7.7 million in 2006
 Entrepreneurs pay more than 54% of all

individual income taxes

 Approximately one new firm with employees

is established every year for every 300 adults

in the United States

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 This global success has at least three key
components
1. Large businesses have adapted and learned to
become more entrepreneurial
2. New entrepreneurial ventures have been
blossoming (1.4 million new jobs created in the
past 10 years)
3. Thousands of new ventures have been founded,
many established by women, minorities, and
immigrants

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 New and emerging ventures make two
indispensable contributions to the world
economy
1. They are an integral part of the renewal process
that pervades and defines market economies
2. New and emerging ventures are the essential
mechanism by which millions enter the economic
and social mainstream of our global society …
“The Entrepreneurial Dream”

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 Entrepreneurship is a dynamic process of vision,
change, and creation. It requires an application of
energy and passion toward the creation and
implementation of new ideas and creative solutions.
Essential ingredients include the willingness to take
calculated risks—in terms of time, equity, career; the
ability to formulate an effective venture team; the
creative skill to marshal the needed resources; the
fundamental skill of building a solid business plan;
and finally, the vision to recognize opportunity where
others see chaos, contradiction, and confusion.

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 Generation E
◦ Nearly 80% of would-be entrepreneurs in the United
States are between the ages of 18 and 34
◦ E = f(e) states that entrepreneurship is a function of
the entrepreneur
 Keep in mind that entrepreneurship is more
than the mere creation of a business.
Although this is an important facet, it’s not
the complete picture
 An entrepreneurial perspective can be
developed in individuals

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 The quest for new venture creation as well as
the willingness to sustain that venture is
directly related to an entrepreneur’s
motivation

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Expectation/ Intrinsic/Extrinsic
Outcome Rewards
Comparison

PC PE PG

Decision to Entrepreneuri Entrepreneurial Firm PC = P

Behave al Strategy Management Outcomes PE = P
Entrepreneurially PG = P
BE = B
BE IDEA

Implementation/
Outcome
Perception

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 Independence
 Financial opportunities
 Community service
 Job security
 Family employment
 Challenge

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 Sales fluctuations
 Competition
 Increased responsibilities
 Financial losses
 Employee relations
 Laws and regulations
 Risk of failure

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 Business failure can be defined as a halt of
operations
 Specific causes of failure

◦ Incompetence
◦ Unbalanced experience
◦ Lack of managerial experience
◦ Lack of experience in the line
◦ Neglect
◦ Fraud
◦ Disaster

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 Examining failures leads to two conclusions:
1. Termination rates vary by region of the country
2. Survival rates vary by industry
 The new venture survival rate
◦ The most recent statistics show an overall 31.2%
survival rate over a 7-year period

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 Inadequate records
 Expansion beyond resources
 Lack of information about customers
 Failure to diversify market
 Lack of marketing research
 Legal problems
 Nepotism
 One person management
 Lack of technical competence
 Absentee management

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