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Aakash Patel860863310BUS 146 Midterm 108/11/2011

1.) The definition of corporate entrepreneurship has been modified over the last 30years through the works of scholars and researchers. One researcher has definedcorporate entrepreneurship as an innovation that is a very broad concept that includesthe creation and implementation of new ideas or behaviors. According to researcherShaker A. Zahra, corporate entrepreneurship can involve activities that are both informaland formal, in which the goal is to create new businesses in established companiesthrough market development and product/process innovations. Discussed will be anexplanation of the 3 main routes to corporate entrepreneurship, along with the variousforms of intellectual property.

The first route to corporate entrepreneurship that well discuss is strategic

renewal. Although strategic renewal can be defined in various ways, we will definestrategic renewal as to when a company uses its resources innovational skills to replace ormodify their image and/or product in order to stay current or fresh with todaystrends and ideas. If successful, this can lead to a highly improved competition position inthe corporate world. An example of corporations that used strategic renewal is Wal-Mart.Wal-Mart has been known to carry almost all products that people use daily, along withspecialized items as well. It was also a company that already had some of the lowestprices on products in comparison to other stores. So how does a company like Wal-Marttry to modify its store model to provide even better services and gain even more profitafter everything it already provides? Wal-Mart has now renovated many of their stores toinclude groceries. Its quite simple, but such a simple change in a business model can

make a large difference. This small strategic renewal allows customers to not only buytheir daily materialistic items, but they can buy fresh produce along with any other fooditem you could buy at an ordinary grocery store.

The second route to corporate entrepreneurship is innovation. Innovation involvesthe introduction of something entirely new (or modified) to the marketplace. An exampleof innovation is Nissans electric vehicle, the Leaf. Of course, there are quite a few otherautomobile corporations that have electric vehicles as well. But what makes Nissaninnovative is that their Nissan Leaf is 100% all electric, unlike any other vehicles whichuse gasoline or another power source as well.

The third route to corporate entrepreneurship is through corporate venturing.Corporate venturing is the entrepreneurial effort that leads to the creation of new businessorganizations within the corporate organization, such as a subdivision company. A greatexample of a company that uses corporate venturing is Microsoft. Microsoft has over 150other smaller companies and stakes within itself. A specific example would beMicrosofts purchase of Skype Communications based in the country of Luxembourg; thecompany is now worth over $8.5B. This is just one example of how many largercorporations use some of their funds to purchase or have stake in other smallercompanies.

There are various forms of intellectual property that should be detailed in order to


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protect the image and ideas of a company or product. The first form of intellectualproperty is a copyright. Copyrighting gives exclusive rights to individuals for theprotection of their literary or artistic productions. The second form of intellectualproperty is a trademark. Trademarking represented by a distinctive symbol, name, motto,or mark with a companys products. This trademark registration can be done at any

Patent and Trademark Office. The third form of intellectual property is a patent.Patenting provides protection for the owner, along with exclusive rights, to hold, transfer,and license the production/sale of a product or process as an intellectual property right.

2.)Some of the most valuable and powerful sources of equity funding for new

ventures are venture capitalists. Venture capital (VC) is highly sought by startupcompanies who are at an early stage of their business growth, but many VC investmentsare made in later-stage and expansion stages of a company. Not only does VC providecapital to startup companies, but it also provides market research and strategy,management, contacts, and other assistance. Venture capital is also referred to as risk

capital; even though VC startup companies have a high potential of gaining tremendousprofit, they also have a high risk of losing that profit. The typical venture capitalfinancing for start-up companies is between $2-50M. Further details will be explainedabout the various sources to which an entrepreneur can obtain venture capital, and howventure capitalization can be divided into two major components.

Venture capitalization can be divided into two major components of financing:Debt financing and equity financing. Debt financing involves a payback of the funds plusinterest (fee). Equity financing involves offering some of the ownership in the venture.As previously stated, there are numerous sources for an entrepreneur to obtain capital tostart a business. The first source that will be discussed is commercial banking. There areabout 8,528 commercial banks operating in the US today, so its no surprise that thissource of capital is one of the most common sources of debt financing. Most of thesebank loans are secured by inventories, receivables, or other assets. However, some bankswill make unsecured short-term loans, as well as a large number of intermediate-termloans with maturities that range rom one to five years. An example of using commercialbank loans involves Kenya Commercial Bank Ltd (Bloomberg.com). KNCB is EastAfricas largest lender by assets. This bank uses its new 7-year loan, which consists of$105M from the International Finance Corporation, in order for it to provide capital toother small businesses and for mortgages. With the use of IFCs capital, KNCB was ableto use the interest received from the businesses that borrowed the money to increase itsnet income by 20%.

A second source that entrepreneurs can use to obtain venture capital for theirbusiness is to use public offerings, which is part of equity financing. Public offerings areaccepted after a corporation goes public. When a company goes public, it is raisingcapital by selling securities, such as stocks, on the public market.To begin public offerings, a company will create an initial public offering (IPO). An IPOis a term used to represent the registered public offering of a companys securities for thefirst time. An example of a company that used an IPO to get public offerings for itscompany is LinkedIn Corporation. LinkedIn is a professional networking site. It had aprofit of $15.5M through stocks in 2010, and since the IPO was created, their shares


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quickly doubled by 109%, making the company worth $8.9B.The last source of venture capital that will be discussed is through angel

financing. Angel financing is a type of informal risk capitalism, which involves wealthypeople in the US who are looking for investment opportunities; these people are knownas business angels. There are five general groups of angel investors: Corporate angles,

entrepreneurial angels, enthusiast angles, micromanagement angels, and professionalangels. Angels are usually entrepreneurs or former businessmen from larger corporationswho have enough net worth to invest their own money into different ventures. Anexample of an angel investing company would be Maple Leaf Angels. This is a Toronto-based organization, which meets once a month to review investment opportunities. Untilnow, they have had 8 angel investing transactions totaling more than $3M. Meetingsconsist of a few presentations, which are made to 30 well known qualified angels.

3.)There are various forms of business organization that can be discussed, along with

their advantages and disadvantages in accordance to liability and capital funding. The 3

main forms of business organization are sole proprietorship, partnership, and corporation.The first form of business organization that will be discussed is soleproprietorship. A sole proprietorship is a business that is operated and owned by a singleperson. This means that the business has no other connection apart from its owner. Thisowner has unlimited liability and also has the right to all of the profits that the businessincurs, along with the liability for the debts and obligations of the business. An advantageof sole proprietorship is the ease of formation and sole ownership of profits. In addition,owners are free of corporate business taxes. However, some of the disadvantages of soleproprietorship include unlimited liability, lack of continuity, and less available capital.An example of a sole proprietorship is an individual who owns a small shoe store.Theres no franchise or other owners; its just the owner who owns all the inventory andthe shop itself and sells what he could to take the profits for his or herself.

Another form of business organization is a partnership. A partnership includestwo or more people that both have a part-ownership of a single business. According to thedefault, it is assumed in a partnership that there is equal ownership among the partners,unless stated otherwise stated in an agreement or signed contract. A few advantages of apartnership are the ease of formation, direct rewards by sharing profits, and flexibility.On the other hand, a disadvantage of partnerships includes a lack of continuity in case apartner dies, goes insane, etc. Another disadvantage of a partnership is that the ownersare bound by the acts of just one partner. An example of a partnership would be openingup a mini-mart between three friends. The friends would divide the expenses, forexample, and would each run the store at a given schedule. At the end of the day, theywould share the profits either equally or whatever each owners percentage is by acontracted agreement.

One last form of business organization to be discussed here is a corporation.According to John Marshall, the Supreme Court Justice, a corporation is an artificialbeing, invisible, intangible, and existing only in contemplation of the law. What thisreally means is that a corporation is created in accordance to state laws and generallycreated when a monetary transaction or property by prospective shareholders takes placein exchange for capital stock in the corporation. A couple of the main advantages to a


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corporation is limited liability and unlimited life, since a corporation can continue to itsnext appointed president if a the current president or CEO dies or steps down from theposition. However, one of the biggest disadvantages to corporations is double taxationdue to corporate status. Along with more taxes, there are also many more regulations tofollow and activity restrictions. An example of a corporation is Target. It is a large

company with billions in revenue, and has appointed positions that will carry its name tothe next generation (assuming the corporation doesnt file bankruptcy one day).

4.)Creativity is one of the biggest factors in determining whether an entity can

sustain or not in its current economy of finances and trends. The creative processinvolves four phases of creative development. These phases will be discussed in furtherdetail, but the general phases are titled as the following: Background or knowledgeaccumulation, the incubation process, the idea experience, and evaluation andimplementation.

The first phase is the background or knowledge accumulation. This is the phase

where the basic understanding of all aspects of the production of a product, service, orbusiness venture is learnt. Most successful creations have been followed by carefulinvestigation and research. This information gathering can be achieved by reading,joining professional groups to discuss a particular field of business, attend professionalmeetings and seminars, travel to new places, and other similar ways. An example of thisprocess involves a young man named Mark Zuckerberg and his website, Facebook.Zuckerberg is a Harvard undergrad and a computer programming genius. With hisknowledge and his idea of creating a place where friends (initially only for Harvardstudents) can meet online and reconnect virtually, the first phase was simple forZuckerberg.

Phase two is the incubation process. This is the phase where creative people havesuccessful ideas due to the saturation of a tremendous amount of information that theyhave acquired during the first phase. It is proof that distancing yourself from the veryinformation you have learned will help your mind create great ideas subconsciously. Thisis done through instances such as daydreaming, sleeping, practicing your hobbies, ordoing anything else that is unrelated to the information you have learnt and need ideasfor. An example of this process is when Mark Zuckerberg envisions that his site shouldnot be only for Harvard or college students, but to anyone who has internet access.

Phase three is the idea experience. This part of the process seems to be the mostexciting and anticipated of all the phases. This is where the solution or idea that theindividual has been seeking is finally discovered. However, this is also the phase that anormal person falsely perceives as the only factor of creativity. An example of thisprocess is when Zuckerberg discovers the potential to make millions, if not billions, ofdollars by allowing Facebook to have infinite accounts to the public, which changed ourculture greatly right next to Myspace. Having done this, through advertisements, MarkZuckerberg was on his way to a life-changing idea.

The last phase is evaluation and implementation. Phase four is the most difficultof the phases because it involves a lot of courage, self-discipline and responsibility, anddetermination. Evaluation and implementation was complex in the beginning. ThoughMark Zuckerberg knew how to create his site and make it fully functional,


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implementation took a long time through its beta testing. This is quite understandableknowing Facebook has over 250 million users.

5.)Almost all prospective entrepreneurs want to know the best way for entering

business, or in other words, how to start a venture for oneself. The three most commonmethods of doing this are by creating a new venture, acquiring an existing venture, orobtaining a franchise. These methods each have their advantages and disadvantages. Themost successful way to approach a new business venture is to design a unique product orservice that is not being offered in todays market but would be in high demand if it wascreated and sold.

The first method discussed the creation of a new business venture. Creating a newventure involves two methods of approach: the new-new approach and the new-oldapproach. The new-new approach is related to new products or services that are enteredinto the market frequently. An advantage to this method is that modern advertising cangreatly help sales for innovative products through sites such as Google and Facebook.

The disadvantage, however, is that most new products fail to sustain its market and newideas can die quickly. This method is usually used for MP3 players, new smartphones,television sets, GPS, and other products that involve a great deal of research anddevelopment. The Apple corporation and its smartphone, the iPhone, exemplify this new-new method. Apple was one of the first designers of a smartphone that was very user-friendly and had an application store for users to purchase games and other software. Itwas a revolutionary product and since its creation, many other companies have started atrend of similar style phones. However, most small businesses do not start with acompletely innovative idea. Instead, there are individuals who start ventures that onlyimprove a product that is already on the market. This is known as the new-old approach.An example of this approach is Motorolas smartphone, the Droid. This phone hasincreased competition for Apples iPhone by implementing its own app store just likeApple did.

The next method of entering a business venture is by acquiring an existingbusiness venture. An entrepreneur might see a business that is for sale and he/she wouldbe able to purchase the existing venture and start running its operations. The disadvantageof this method is that this can be risky for most entrepreneurs, because if your newownership leads to decreased sales, it could really damage the businesss reputation. Anadvantage of this method is that it takes a lot less time and money to own and operate anexisting business. An example of this method might be a person who wants to own asports store. Though this individual does not have the money to obtain permits and builda store from scratch, he/she would be able to purchase an existing sports store. Thus,there would be no worry and no effort needed to find a location and submit applicationsto contractors, etc.

The last method for obtaining a business venture is by obtaining a franchise. Anexample is an owner who wants to buy a Subway; he would become a franchisee. Inorder to do this, the individual must obtain a trademark, trade name, or copyright licenseto use the brand image. The advantage to doing this is that the franchise company willguide you from the beginning to the end with knowledge and training on how to run thebusiness. Also, franchises are usually well established, meaning there is an indirect


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clientele of people who already enjoy your franchise products; thus, the corporation andnot the owner handle marketing. A disadvantage of obtaining a franchise is that there arefranchisee fees that must be paid to the corporation. This means a deduction from theprofits that the owners worked so hard to get.

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