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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
Recommended