AE

DEFINITION OF AN ENTREPRENEUR (CH.1)

One who creates a new business in the face of risk and uncertainty for the purpose
of achieving profit and growth by iden fying opportuni es and assembling the
necessary resources to capitalize on them?

-       THE
RELATION BETWEEN CREATIVITY, INNOVATION AND
ENTREPRENEURSHIP (CH.3)
■ CRATIVITY – the ability to develop new ideas and to discover new ways of looking at
problem and opportuni es; thinking new things.
■ INNOVATION – the ability to apply crea ve solu ons to problems or opportuni es to
enhance or to enrich people’s lives; doing new things
■ ENTREPRENEURSHIP – the result of a disciplined, systema c process of applying crea vity
and innova on to the needs and opportuni es in the marketplace.
▶ ENTREPRENEURS connect their crea ve ideas with the purposeful ac on and structure
of an enterprise.
CAN WE LEARN TO BE CREATIVE?
Yes by overcoming paradigms and by suspending conven onal thinking long enough to
consider new and different alterna ves!
➢ Entrepreneurship requires both le -and right-brained thinking.
■ Right-brained thinking draws on divergent reasoning, the ability to create a mul ple,
diverse ideas.
■ Le -brained thinking counts on convergent reasoning, the ability to evaluate mul ple
ideas and to choose the best solu on to a problem.
THE CREATIVE PROCESS OF AN IDEA SET UP

1. Prepara on
Get your mind ready for crea ve thinking. ‫ﻓﺘﺮة اﻟﺤﻀﺎﻧﺔ‬
▶ Adopt the a tude of a lifelong student.
▶ Read … a lot … and not just in your field of exper se.
▶ Clip ar cles of interest to you and save them.
▶ Take me to discuss your ideas with other people.
▶ Join professional or trade associa ons and a end their mee ngs.
▶ Study other countries and their cultures.
▶ Travel to new places.
▶ Develop your listening skills.
▶ Eliminate crea ve distrac ons
2. Inves ga on
Get your mind ready for crea ve thinking.
▶ Develop Solid understanding of the problem
▶ Study the problem and understand its basic components
▶ Who are you compe tors? What makes you different? What are their problems?
What made them successful?
3. Transforma on
▶ Involves viewing both the similari es and the differences among the informa on
collected.
▶ Two types of thinking are required:
⦁ Convergent – the ability to see the similari es and the connec ons among
various and o en diverse data and events.
⦁ Divergent – the ability to see the differences among various data and events.

▶ How can you transform informa on into purposeful ideas?

▶ Grasp the “big picture” by looking for designs that arise.
▶ Rearrange the elements of the situa on.
▶ Use synec cs, taking two seeming nonsensical ideas and combining them.
▶ Remember that several approaches can be successful. If one fails, jump to
another.
4. Incuba on
■ Allow your subconscious to reflect on the informa on collected :
▶ Walk away from the situa on.
▶ Take the me to daydream.
▶ Relax – and play – regularly.
▶ Dream about the problem or opportunity.
 ▶ Work on the problem in a different environment
5. Illumina on
It may take place a er 5 min or a er 5 years, it’s when you feel it down in your spinal cord …
■ All previous stages come together to formulate an innova ve
6. Verifica on
■ Validate the idea as accurate and useful.
▶ Is it really a be er solu on?
▶ Will it work?
▶ Is there a need for it?
▶ If so, what is the best applica on of this idea in the marketplace?
▶ Does this product or service fit into our core competencies?
▶ How much will it cost to produce or to provide?
▶ Can we sell it at a reasonable price that will produce a profit?

         WHAT IS SWOT, – FORCE FIELD ANALYSIS – MIND MAPPING (CH.3)

Mind-mapping
▶ A graphical technique that encourages thinking on both sides of the brain,
visually displays relationships among ideas, and improves the ability to
see a problem from many sides.
■ Force Field Analysis
■ A useful technique for evaluating the forces that support and oppose a
proposed change.
■ Three columns:
■ Center: Problem to be addressed
■ Left: Driving forces
■ Right: Restraining forces
■ Score each force (-1 to +4) and add them.
-          WHAT IS A (PATENT – TRADEMARK – SERVICE MARK – COPYRIGHT?)

▶ Patent – a Cer ficate from the Patent and Trademark Office to the inventor of product,
giving the exclusive right to make, use, or sell the inven on for 20 years from the date of
filing the patent applica on.

-
PROTECTING YOUR IDEAS
▶ TRADEMARK – any distinctive word, symbol, design, name, logo, slogan, or
trade dress a company uses to identify the origin of a product or to distinguish it
from other goods on the market.
▶ SERVICE MARKS – the same as a trademark except that it identifies the source
 of a service e rather than a product.
▶ COPYRIGHT – an exclusive right that protects the creators of original works of
authorship such as literary, dramatic, musical, and artistic works.
Type of What It Covers
Protection

Copyright Works of original

authorship

Trademark Logos, names,

phrases

Design patent Look of an

original product

Utility patent How an original

product works

Business method A business

patent process

ELEMENTS OF FEASIBILITY ANALYSIS ( CH.4 )

FIELD (INDUSTRY) AND MARKET FEASIBILITY ANALYSIS

Two areas of focus:
1. Determining how attractive a Field is overall as a “home” for a new enterprise.
2. Identifying possible niches a small enterprises can occupy profitably
 1- INDUSTRY AND MARKET FEASIBILITY ANALYSIS ASSESS
Industry attractiveness using six macro forces:
1. Sociocultural
2. Technological
3. Demographic
4. Economic
5. Political and legal
6. Global

Five Forces Model

Five forces interact with one another to determine the se ng in which Enterprises compete
and, hence, the a rac veness of the industry:
▶ compe on among Enterprises in the Field
▶ Bargaining power of suppliers
▶ Bargaining power of buyers
▶ Threat of new entrants
▶ Threat of subs tute products or services
1. RIVALRY AMONG OTHER ENTERPRISES
▶ Strongest of the five forces
Enterprise is more a rac ve when:
▶ Number of compe tors is large, or, at the other extreme, quite small
▶ Compe tors are not similar in size or capacity
▶ Field is growing fast
▶ Opportunity to offer a differen ated product or service exists
2. BARGAINING POWER OF SUPPLIERS
▶ The greater the leverage of suppliers, the less a rac ve the enterprise.
Industry is more a rac ve when:
▶ Subs tutes are available
▶ Switching risks are low
▶ Safe exit plans with no with low financial losses
▶ Public opinion is more aware by the problem
3. BARGAINING POWER OF BUYERS
Buyers’ influence is high when number of customers is small and cost of switching to a
compe tor’s low.
▶ A field is more a rac ve when:
▶ Beneficiary switching costs are high
▶ Number of poten al beneficiaries is large
 ▶ Beneficiaries want differen ated products
▶ Beneficiaries find it difficult to collect informa on for comparing suppliers
4. THREAT OF NEW ENTRANTS
▶ The larger the pool of poten al new entrants, the less a rac ve an industry is.
Industry is more a rac ve to new entrants when:
▶ Advantages of economies of scale are absent.
▶ Capital requirements to enter are low
▶ Beneficiaries are not loyal to exis ng enterprises
▶ Government does not restrict the entrance of new entrants
5. THREAT OF SUBSTITUTES
▶ Subs tute products or services can turn an industry on its head.
Industry is more a rac ve to new entrants when:
▶ Quality subs tutes are not readily available
▶ Prices of subs tute products are not significantly lower than those of the
industry’s products
▶ Buyers’ switching costs are high

2- PRODUCT OR SERVICE - FEASIBILITY ANALYSIS

▶ Determines the degree to which a product or service idea appeals to poten al
Beneficiary and iden fies the resourced necessary to produce it.
▶ Two ques ons:
▶ Are Beneficiaries willing to acquire our product or service?
 ▶ Can we provide the product or service to customers at a profit?
▶ Primary research: Collect data firsthand and analyze it.
1. Customer surveys and ques onnaires
2. Focus groups

▶ Secondary research: Gather data that already has been compiled and analyze it.
1. Prototypes
2. Small Network trials
Financial Feasibility Analysis
▶ Capital requirements –an es mate of how much start-up capital is required to launch the
business.
▶ Es mated earnings – forecasted income statements
▶ Return on investment – Combining the previous two es mates to determine how much
investors can expect their investments to return.
DEVELOPING AND TESTING A BUSINESS MODEL
▶ Key ques ons to address:
1. What value does the business offer customers?
2. Who is my target market?
3. What do they expect of me as my customers?
4. How do I get informa on to them, and how do they want to get the product?
5. What are the key ac vi es to make all this come together, and what will they
cost?
6. What resources do I need to make this happen, including money?
7. Who are the key partners I will need to a ract to be successful?

      BUSINESS MODELING TECHNIQUE ( CH.4 )

1- Develop the business model canvas (‫)ﻟﻮﺣﺔ ﻗﻤﺎﺷﻴﺔ‬
 2- Test the Value Proposi on with customers
▶Ask customers:
▶ Do we really understand the customer problem the business model is trying to
address?
▶ Do these customers care enough about this problem to spend their hard-earned
money on our product?
▶ Do these customers care enough about our product to help us by telling others
through word-of-mouth?
3- Test the product with Prototyp ‫اﻟﻨﻤﺎذج‬
Entrepreneurs test their Enterprise models on a small scale before commi ng serious
resources to launch a business that might not work .
Recognizes that an Enterprise idea is a hypothesis that needs to be tested before taking
it full scale
▶ Test early versions of a product or service using a lean start-up: a process of rapidly
developing simple prototypes to test key assump ons by engaging real customers
▶ Begin the lean start-up process using a minimal viable product: the simplest version of a
product or service with which an entrepreneur can create a sustainable business
4- Pivots business model un l ready to expand .
▶ Pivots: the process of making changes and adjustments in the business model on the
basis of the feedback a company receives from customers.
1. Product pivot
2. Customer pivot
3. Revenue model pivot
CONCLUSION
▶ There are no guarantees for success.
▶ Crea ng a business plan will be valuable primarily because of the process itself.
▶ The business planning process may provide insight to increase the chances for success.
▶ The business plan: Entrepreneurs benefit; lenders and investors demand it!

 - STRATEGIC MANAGEMENT PROCESS AND THE MAIN TYPES

OF STRATEGIES (CH.5)
Strategic Management Process
Step 1 Develop a vision and translate it into a mission statement.
Step 2 Assess strengths and weaknesses.
Step 3 Scan environments for opportunities and threats
Step 4 Identify key success factors.
Step 5 Analyze competitions.
Step 6 Create goals & objectives
Step 7 Formulate strategies
Step 8 Translate plans into actions
Step 9 Establish accurate controls
Step 1: Develop a Vision and Create a Mission Statement
▶ Vision – the result of an entrepreneur’s dream of something that does not exist
yet and the ability to paint a compelling picture of that dream for everyone to see.
▶ A clearly defined vision:
▶ Provides direction
▶ Determines decisions
▶ Motivates people
▶ Allows for perseverance in the face of adversity
▶ Addresses question: “What business are we in?”
The mission is a written expression of how the company will reflect an
entrepreneur’s values, beliefs, and vision – more than just “making
money.” Serves as a “strategic compass.”
▶ Elements of a mission statement:
▶ Purpose of the company: What are we in business to accomplish?
▶ Business we are in: How are we going to accomplish that purpose?
▶ Values of the company: What principles and beliefs form the foundation of
the way we do business?

Step 2: Assess Company Strengths and Weaknesses

▶ Strengths
Positive internal factors a company can help the company to accomplish its mission,
goals, and objectives.
▶ Weaknesses
Negative internal factors that prevent the company to accomplish its mission, goals, and
objectives.
▶ Opportunities
Positive external factors the company can build on it to accomplish its mission, goals,
and objectives.
▶ Threats
Negative external factors that resist the firm's ability to accomplish its mission, goals,
and objectives.

Step 3: Scan environment for opportunities and threats

Step 4: Identify Key Success Factors
▶ Key success factors (KSFs): factors that determine the success of
Market participants.
▶ The keys to unlocking the secrets of competing successfully in a particular
market segment.
Step 5: Analyze Competitors
▶ NFIB study: Small business owners believe they operate in a highly
Competitive environment and the level of competition are increasing.
Yet, 97 percent of all U.S. businesses do not systematically track the
progress of their key competitors

Competitor Analysis
▶ Direct competitors
▶ Offer the same products and services
▶ Customers often compare prices, features and deals among these
competitors when they shop
▶ Significant competitors
▶ Offer some of the same or similar products or services
▶ Product or service lines overlap but not completely
▶ Indirect competitors
▶ Offer same or similar products in only a small number of areas
 Analyzing key competitors allows an entrepreneur to:
▶ Avoid surprises from existing competitors’ new strategies and tactics.
▶ Identify potential new competitors and the threats they pose.
▶ Improve reaction time to competitors’ actions.
▶ Anticipate rivals’ next strategic moves.
Techniques do not require unethical behavior:
▶ Monitor industry and trade publications.
▶ Talk to customers and suppliers.
▶ Debrief employees, especially sales representatives and purchasing
agents.
▶ Attend trade shows and conferences and study competitors’ sales
literature.
▶ Watch for competitor’s employment ads.
▶ Conduct patent searches for patents competitors have filed.
▶ Learn about the kinds of equipment and raw materials competitors are
importing from joint connections
▶ Buy competitors’ products and “benchmark” them.
▶ Get competitors’ credit reports.
▶ Use the Internet to learn more about competitors.
▶ Visit competing businesses to observe their operations

Step 6: Create Company Goals and Objectives

▶ Goals: Broad, long-range attributes to be accomplished.
▶ Google: Organize the world's information and make it universally
accessible and useful
▶ Objectives: More detailed, specific targets of performance that are S.M.A.R.T.
▶ Specific
▶ Measurable
▶ Assignable
▶ Realistic (yet challenging)
▶ Timely
Step 7: Formulate Strategies
 Strategy - a road map of the actions an entrepreneur draws up to achieve
a company’s mission, goals, and objectives.
It is the company’s game plan for gaining a competitive advantage.

1- Cost Leadership
▶ Goal:
To be the low-cost producer in the industry (or market segment).
▶ Low-cost leaders have advantages:
▶ Reaching buyers who buy on the basis of price
▶ The power to set the industry’s price floor.
▶ Cost Leadership works well when:
▶ Buyers are sensitive to price changes.
▶ Competing firms sell the same commodity products.
▶ A company can benefit from economies of scale.
2- Differentiation
▶ Company seeks to build customer loyalty by positioning its goods or services in a
unique or different fashion.
▶ Idea is to be special at something customers value.
▶ Key: Build basis for differentiation on a distinctive competence, something that
the small company is uniquely good at doing in comparison to its competitors.
▶ Examples: Siwa - Dahab

3- Focus
▶ Company selects one or more customer segments in a market, identifies
customers’ special needs, wants, or interests, and then targets them with a
product or service designed specifically for them.
▶ Strategy builds on the differences among market segments. Rather than try to
 serve the total market, the company focuses on serving a niche (or several
niches) within that market
Step 8: Translate Strategies into Action Plans
Survey of senior executives:
Companies achieved only 63% of the results in their strategic plans.
▶ Create projects by defining:
▶ Purpose
▶ Scope
▶ Contribution
▶ Resource requirements
▶ Timing
Step 9: Establish Accurate Controls
▶ Plan establishes the standards against which actual performance is measured.
▶ Entrepreneur must:
▶ Identify and track key performance indicators.
▶ Take corrective action

BALANCED SCORECARDS
▶ A set of measurements unique to a company that includes both financial and
operational measures
▶ Gives managers a quick, yet comprehensive, picture of a company’s overall
performance.
Five Perspectives:
1. Customer: How do customers see us?
2. Internal Business: At what must we excel?
3. Innovation and Learning: Can we continue to improve and create value?
4. Financial: How do we look to shareholders?
5. Corporate Citizenship: Do we meet our responsibility to society as a
whole, the environment, the community, and other external stakeholders?

A Plan Must Pass Three Tests

1. The Reality Test – proving that :
▶ A market really does exist for your product or service.
▶ You can actually build or provide it for the cost estimates in the plan.
2. The Competitive Test – evaluates:
▶ An enterprise position relative to its competitors.
 ▶ Management’s ability to create an enterprise that will gain an edge over its
rivals.
3. The Value Test – proving that:
▶ A venture offers investors or lenders an attractive rate of return or a high
probability of repayment.
Why Take the Time to Build an Entrepreneurship ( Business )Plan?
▶ Although building a plan does not guarantee success, it does increase your
chances of succeeding in business.
▶ A plan is like a road map that serves as a guide on a journey through unfamiliar,
harsh, and dangerous territory.
Don’t attempt the trip without a map!

Factors Affecting the Choice the companies form

▶ Tax considerations
▶ Liability exposure
▶ Start-up and future capital requirements
▶ Control
▶ Managerial ability
▶ Business goals
▶ Management succession plans
▶ Cost of formation
Major Forms of Ownership
▶ Sole Proprietorship
▶ General Partnership
▶ Limited Partnership
▶ Corporation
▶ S Corporation
▶ Limited Liability Company

DIFFERENCE BETWEEN SOLE PARTNERSHIP, LIMITED LIABILITY AND A

CORPORATION (CH.6)
GENERAL PARTNERSHIP

▶ An association of two or more people who co-own a business for the

purpose of making a profit.
▶ Always wise to create a partnership agreement states in writing the terms
under which the partners agree to operate the partnership and that protects
each partner’s interests in the business.
▶ The best partnerships are built on trust and respect.

ADVANTAGES OF THE PARTNERSHIP

▶ Easy to establish
▶ Complementary skills of partners
▶ Division of profits
▶ Larger pool of capital
▶ Ability to attract limited partners
▶ Minimal government regulation
▶ Flexibility
▶ Taxation
DISADVANTAGES OF THE PARTNERSHIP

▶ Unlimited liability of at least one partner

▶ Capital accumulation
▶ Difficulty in disposing of partnership interest without dissolving the
partnership
▶ Lack of continuity in case of argument
▶ Potential for personality and authority conflicts
DIFFERENCE BETWEEN LIMITED PARTNER AND GENERAL PARTNER -(CH.6)

▶ GENERAL PARTNERS
▶ Take an active role in managing a business.
▶ Have unlimited liability for the partnership’s debts.
▶ Every partnership must have at least one general partner.
▶ LIMITED PARTNERS
▶ Cannot participate in the day-to-day management of a company.
▶ Have limited liability for the partnership’s debts

SOLE PARTNERSHIP

ADVANTAGES OF THE SOLE PROPRIETORSHIP

▶ Simple to create
▶ Least costly form to begin
▶ Profit incentive
▶ Total decision making authority
▶ No special legal restrictions
▶ Easy to discontinue

DISADVANTAGES OF THE SOLE PROPRIETORSHIP

▶ Unlimited personal liability

▶ Limited skills and capabilities
▶ Feelings of isolation
▶ Limited access to capital
▶ High percentage of Lack of continuity of the business

LIMITED LIABILITY COMPANY (LLC)

▶ Same like an S Corporation but is not subject to the same restrictions.

TWO DOCUMENTS REQUIRED:

▶ Articles of organization
 ▶ Operating agreement
AN LLC CANNOT HAVE MORE THAN TWO OF THESE FOUR CORPORATE
CHARACTERISTICS:
▶ Limited liability
▶ Continuity of life
▶ Free transferability of interest
▶ Centralized management

CORPORATION

TYPES OF CORPORATIONS:

▶ PUBLICLY HELD – a corporation that has a large number of shareholders and

whose stock usually is traded on one of the large stock exchanges.

▶ CLOSELY HELD – a corporation in which shares are controlled by a relatively

small number of people, often family members, relatives, or friends.

A corporate is a separate legal entity from its owners.

TYPES OF CORPORATIONS:
 ▶ DOMESTIC – a corporation doing business in the state in which it is
incorporated.

▶ FOREIGN – a corporation doing business in a state other than the state in

which it is incorporated.

▶ ALIEN – a corporation formed in another country but doing business in

another country

▶ .

DISADVANTAGES OF THE CORPORATION

▶ Cost and time of incorporation process

▶ Potential for diminished managerial incentives

▶ Legal requirements and regulatory “red tape”

▶ Potential loss of control by founder(s)

ADVANTAGES AND DISADVANTAGES OF BUYING EXISTING BUSINESS (CH.6)

ADVANTAGES OF BUYING A BUSINESS

▶ It may continue to be successful

▶ It may already have the best location

▶ Employees and suppliers are established

▶ Equipment is already installed

▶ Inventory is in place and trade credit is established

▶ New owners can “hit the ground running”

▶ New owners can use the previous owner’s experience

▶ Financing is easier to obtain

▶ It’s a bargain!
DISADVANTAGES OF BUYING A BUSINESS

▶ It’s a “loser”

▶ Previous owner may have created ill will

▶ “Inherited” employees may be unsuitable

▶ The location may have become unsatisfactory

▶ Equipment and facilities may be obsolete or inefficient

▶ Change and innovation can be difficult to implement

▶ Inventory may be outdated or obsolete

▶ Accounts receivable may be worth less than face value

THE ACQUISITION PROCESS (CH.6)

THE FRANCHISING RELATIONSHIP BETWEEN THE FRANCHISOR AND THE
FRANCHISEE (CH.7)