0c514Module-1 Part-3 Entrepreneurial Organizational Forms

8/6/2019 0c514Module-1 Part-3 Entrepreneurial Organizational Forms

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What Is a Small Business? The Small Business Administration

(SBA), a government assistance agency,

relies on number of employees and totalannual sales in determining if a businessis small.

A small business as one that isindependently owned and managed and

does not dominate its market.


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Why Being Small is Efficient?

Lower transaction cost in small entity More flexibility

Innovation often possible in small

flexible units


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Distinctions between Entrepreneurship

and Small Business

The key distinctions

between small- businessownership andentrepreneurship are:

VisionAspiration

Strategy


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What Is a Business Plan?

Document in which the entrepreneursummarizes her or his business strategy for theproposed new venture and how that strategy

will be implemented


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Crafting the Business Plan

Setting Goals andObjectives

Sales Forecasting

Financial Planning


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Starting the Small Business

Buying an Existing

Business Starting from Scratch


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Starting from ScratchEntrepreneurs must determine: Who are my customers? Where are they? At what price will they buy my

product? In what quantities will they buy? Who are my competitors? How will my product differ from

those of my competitors?


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Financing the Small Business Family and Friends

Personal Savings Lending Institutions

Investors GovernmentalAgencies


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Trends in Small-Business

Start-Ups Emergence of E-Commerce

Opportunities for Minorities

and Women

Global Opportunities

Better Survival Rates


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Reasons for Failure Managerial incompetence or

inexperience. Neglect.

Weak control systems.

Insufficient capital.


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Reasons for Success Hard work, drive and

dedication.

Market demand for theproducts. or services being

provided. Managerial competence.

Luck.


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ORGAN

IZA

TIONA

LFORMS


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Corporate Entrepreneurship Entrepreneurs

Individuals acting independently or as part of

an organization who create a new venture ordevelop an innovation and take risks entering

innovations into the marketplace

Can be any manager or employee in an

organization Corporate entrepreneurship

Process whereby an individual or a group in

an existing organization creates a newventure or develo s an innovation


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Corporate Entrepreneurship Strategic Renewal:corporate

entrepreneurial efforts that result in significantchanges in an organization's strategy and

structure Corporate Venturing:corporate

entrepreneurial efforts that lead to the creationof new business organizations within the

corporate organization The concepts both suggestchanges in the

strategy and structure of an existingcorporation, which may involve innovation for

the industry.


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What Is a

Franc

hise?

Arrangement in which a buyer(franchisee) purchases the right to sellthe product of the seller (franchiser)


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Advantages and

Disadvantages ofFranchisingAdvantages:

ToFranchiser:

Rapid growth by usinginvestment moneyprovided byfranchisees

ToFranchisee: Business ownership

and access tobig-business managementskills

Low failure rate

Disadvantages:

ToFranchisee:

Highstart-up costs Contributionofa

percentage ofsales toparentcorporations


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Mergers,Acquisitions,

Divestitures and Spin-Offs Mergers and Acquisitions (M&As)

Merger is the union of two corporations toform a new corporation

Acquisition is the purchase of one companyby another

Divestitures and Spin-Offs

Divesture isa strategy w

hereby a firmsellsone ormore ofitsbusinessunits

Spin-offisa strategy ofsetting uponeormore corporate unitsasnew,

independentcorporations


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Joint Ventures and Strategic Alliances,

ESOPs and Institutional Ownership

Joint Ventures and Strategic Alliances

Strategicalliance occurs whentwo ormoreorganizations collaborate onaproject formutualgain

Jointventure involves jointownership ofthenew venture

Employee stock ownership programs (ESOP)allows employees to own a significant share of the

corporation through trusts established on theirbehalf

Institutional Ownership Institutionalinvestor isalarge investorthat

purchaseslarge blocksof corporate stock


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Advantages and Disadvantages of

Sole Proprietorships

Advantages:

Freedom Easy to form

Low start-up

costs Tax benefits

Disadvantages:

Unlimited liability Lack of continuity

Difficulty borrowing

money


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What Is a General Partnership?

Business with two or more owners whoshare in both the operation of the firm and

the financial responsibility for its debt


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Advantages and

Disadvantages of PartnershipsAdvantages:

Ability to grow byadding new talentand money

Few legal

requirements Partnership

agreement as aprivate document

Tax benefits

Disadvantages:

Unlimited liability

Lack of continuity

Difficulty intransferring

ownership


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Alternatives to GeneralPartnerships

Limited Partnership Limited partners do notshare ina firms

managementandare liable foritsdebts

only to th

e limitsofsaidpartnersinvestments

General (orActive) partners activelymanage a firmandhave unlimited

liability foritsdebts


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What Is a Corporation?

Business that is legally considered an entityseparate from its owners and is liable for itsown debtsowners liability extends to the

limits of their investments


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CorporationCorporations may:

Sue and be sued

Buy,hold and sell property

Make and sell products

Commit crimes and be tried andpunished for them


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Advantages and Disadvantages of

Incorporation

Advantages: Limited liability Continuity Easy to transfer

ownership Ability to raise money

Disadvantages: Take-over threat via

tender offer High start-up costs Heavily regulated by the

government Charter required

Double taxation


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Three Forms of Business

0c514Module-1 Part-3 Entrepreneurial Organizational Forms

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