Becoming an Entrepreneur: Starting Your Journey and Finding Your Way

By Thomas Zimmerer Ph.D. and Jennifer M. Jolly, M.S. in Entrepreneurship

This book is written to assist prospective entrepreneurs and actively established businesses to succeed. The reality is that the current failure rate of new businesses is unacceptably high, and this book is designed to reduce this failure rate by providing potential and current entrepreneurs with a proven, step-by-step process to objectively evaluate both the financial and strategic decisions that drive successful new business creation. As well what aids established businesses in continuing to grow and expand profitably. The material throughout this book represents what I have learned in researching, teaching, and consulting with businesses for over 45 years.

Every chapter includes practical and essential exercises to be completed by the reader which reinforce the critical concepts that influence effective decision-making. Successful entrepreneurship has been the most significant driver for creating personal wealth in our society and spurring economic growth.

This book's ultimate objective is to provide a proven vehicle to assist any individual with the desire and motivation to achieve financial independence through business creation and growth.

• Language: English
• Publisher: Newman Springs Publishing, Inc.
• Release date: Apr 3, 2024
• ISBN: 9798890617927

Book preview

Table of Contents

Title

Copyright

Chapter 1: Entrepreneurship

What Are the Internal Psychological Forces That Motivate and Drive Entrepreneurs Like Yourself?

Recognized Traits of Successful Entrepreneurs—How Do You Match Up?

The Opportunity to Shape My Own Future

Possessing Both the Skills and Passion

Types of Entrepreneurial Business Ventures—Which One Fits Your Life Plan?

Creative Destruction Is the Continual Process That Drives Our Economy

Your Challenge

Global Entrepreneurship Means Global Competition

Changing Realties for Today's Global Competitive Environment

Entrepreneurs Must Know That Success Is Based on Recognizing That Customers Rule

Organizational Growth—the Continually Evolving Entrepreneurial Organization

How To Do This—Developing and Retaining an Entrepreneurial Culture

Chapter 2: The Essential Steps from Creative Ideas to Potential Market Viability

Your Search for the Valuable Idea—the Basics of Innovation

Releasing the Power of Your Human Creativity—the Process of Becoming a Creative Thinker and Innovator

Screening and Evaluating Ideas in Search of Opportunities

It Is Essential to Understand Your Market In-Depth

Understanding the Purchasing Process—Recognizing Barriers and Opportunities

Identifying Specific Unmet or Under-met Needs

The Impact of Technology and the Targeted Market Niche

Additional Analytical Steps in Conducting Your Market Evaluation

Who Are Your Realistic Potential Adopters?

Evaluating Your Potential Adopters in Greater Detail

Creating Your Firm's Potential Adopter Profile

Building Your Firm's Opportunity Evaluation Model

The Final Assessment of Your Business Opportunity: Six Critical Steps

Opportunity Review Process

The Ugly Market Realities That Must Be Considered

Entrepreneurial Exercises

Entrepreneurial Exercise 2.1

Entrepreneurial Exercise 2.2

Entrepreneurial Exercise 2.3

Entrepreneurial Exercise 2.4

Entrepreneurial Exercise 2.5

Entrepreneurial Exercise 2.6

Chapter 3: Creating Your Business Model by Assessing the Industry Defining Your Targeted Market Niche and Identifying and Evaluating the Competitors

Macroenvironmental Analysis—the Realities of a Changing World Can Impact Your Business

Cross Impact Analysis and Environmental Scanning

Components of the Macroenvironment

Industry Assessment

Assessing the Competitive Behavior in an Industry

Competitor Analysis

Constructing a Competitive Profile Matrix

Value Chain Analysis

Constructing Your Firm's Business Model

Entrepreneurial Exercises

Entrepreneurial Exercise 3.1

Entrepreneurial Exercise 3.2

Environmental Exercise 3.3

Entrepreneurial Exercise 3.4

Entrepreneurial Exercise 3.5

Entrepreneurial Exercise 3.6

Entrepreneurial Exercise 3.7

Entrepreneurial Exercise 3.8

Chapter 4: Creating Effective Entrepreneurial Marketing Strategies

What You Must Know about the Customer and the Market

Understanding Market Segmentation

Effective Marketing Strategies and Tactics Are Most Effective When Market-Driven and Customer-Focused

From Market Research and Analysis to the Development and Implementation of Marketing Strategies

Components of Marketing Strategy

Product Strategies

Place Strategy

Pricing Strategies

Promotion Strategies

Marketing via Social Media

Promotion Activities for Entrepreneurial Businesses

Analyzing Sales Effectiveness

Entrepreneurial Exercises

Entrepreneurial Exercise 4.1

Entrepreneurial Exercise 4.2

Entrepreneurial Exercise 4.3

Entrepreneurial Exercise 4.4

Entrepreneurial Exercise 4.5

Entrepreneurial Exercise 4.6

Entrepreneurial Exercise 4.7

Entrepreneurial Exercise 4.8

Chapter 5: Building a Solid Financial Plan

Financial Analysis of the Start-Up Expenses

Mastering the Basic Financial Statements

Pro Forma Financial Statement and Break-Even Analysis

Pro Forma Income Statement

Pro Forma Balance Sheet

Ratio Analysis

Liquidity Ratios

Current Ratio

Quick Ratio

Leverage Ratios

Debt Ratio

Debt to Net Worth

Times Interest Earned Ratio

Operating Ratios

Average Inventory Turnover Ratio

Average Collection Period Ratio

Net Sales to Total Assets Ratio

Net Sales to Working Capital Ratio

Profitability Ratios

Net Profit on Sales Ratio

Conclusions

Entrepreneurial Exercises

Entrepreneurial Exercise 5.1

Entrepreneurial Exercise 5.2

Entrepreneurial Exercise 5.3

Entrepreneurial Exercise 5.4

Chapter 6: Understanding and Managing Cash Flow

Cash and Profits Are Not the Same—Cash is King

Creating Your Firm's Cash Budget

Avoiding a Cash Crisis

Accounts Receivable

Inventory

Accounts Payable

Avoiding the Cash Crunch

Investing Cash

Entrepreneurial Exercises

Entrepreneurial Exercise 6.1

Entrepreneurial Exercise 6.2

Entrepreneurial Exercise 6.3

Entrepreneurial Exercise 6.4

Chapter 7: Your Role as Founder and Leader of the Entrepreneurial Team

The Funder as Leader

Intelligence, Personality, Values, and Character

Intelligence

Personality

Values

Character

Without Effective Leadership, the Growth of the Business Will Be Limited

Leadership Must Be Active, Not Passive

Selecting Team Members Who Fit Your Firm's Needed Skills and Values

Organizational Performance and Profitability Depends on Establishing Performance Expectations

Creating a High Performance Venture Culture

Creating and Maintaining a Positive Ethical Environment

Entrepreneurial Exercises

Entrepreneurial Exercise 7.1

Entrepreneurial Exercise 7.2

Entrepreneurial Exercise 7.3

Entrepreneurial Exercise 7.4

Entrepreneurial Exercise 7.5

Entrepreneurial Exercise 7.6

Entrepreneurial Exercise 7.7

Chapter 8: Structuring the New Business Venture and Addressing Critical Legal Issues

Protecting Your Firm's Intellectual Property

Patents and the Patent Process

Trademarks and Service/Marks

Copyrights

Trade Secrets

Founder's Agreement—An Absolute Must for a New Business

Selecting the Most Appropriate Form of Business Ownership

Sole Proprietorship

Partnership

Partnership Agreement

Advantages of a Partnership

Disadvantages of a Partnership

Dissolution and Termination of a Partnership

Limited Partnership and the Master Limited Partnership

Corporation—C Corporation

Corporation—S Corporation

Limited Liability Company (LLC)

Is There a Best Form of Business Ownership?

Business Licenses and Permits

The Employment Agreement and Contract Law

Sales Contracts

Selecting an Attorney

Entrepreneurial Exercises

Entrepreneurial Exercise 8.1

Entrepreneurial Exercise 8.2

Entrepreneurial Exercise 8.3

Entrepreneurial Exercise 8.4

Chapter 9: Funding Your Business—Equity and Debt Alternatives

Financing Your Dream

Equity Capital

Sources of Equity Financing for Start-Up Business Ventures

Angel Investors

Crowdfunding

Venture Capital Firms

Professional Investors—the Due Diligence Process, Risk, and Rewards

Pre-Initial Public Offering/Mezzanine Financing

Types of Equity Financing Instruments

Common Stock

Warrants and Options

Preferred Stock

Factors Influencing Your Ability to Raise Equity Capital

Debt Financing

Commercial Banks

Credit Unions and Savings and Loans Associations (S&Ls)

Nontraditional Sources of Debt Financing

Possible Local and State Government Sources of Capital

Small Business Administration (SBA)

SBIR and STTR Grant Programs

SBA Express

SBA Division of Minority Enterprise Development

Entrepreneurial Exercise

Entrepreneurial Exercise 9.1

Entrepreneurial Exercise 9.2

Entrepreneurial Exercise 9.3

Entrepreneurial Exercise 9.4

Entrepreneurial Exercise 9.5

Chapter 10: Creating a Winning Business Plan

The Business Plan Allows You to Tell Your Story

The Value of Writing a Business Plan

The Nature of Your Business Plan

The Challenge of the Business Plan

The Structure of the Business Plan

I. Executive Summary

II. Vision and Mission Statement

III. Company History (if relevant)

IV. Industry Profile

V. Market Analysis

VI. Business Profile

VII. Company's Products and Services

VIII. Competitor Analysis

IX. Marketing Strategies

X. Financial Analysis

XI. Entrepreneurial Team

XII. Organizational Structure

XIII. Business Strategies and Tactics

XIV. Investment or Loan Proposal

XV. Appendices and All Relevant Supporting Documents

Presenting the Business Plan

Entrepreneurial Exercises

Entrepreneurial Exercise 10.1

Chapter 11: Structuring the Deal

Understand Both Strategic and Financial Investors

Valuing an Entrepreneurial Start-Up Company

Example of a Draft Private Placement Memorandum

Entrepreneurial Exercises

Entrepreneurial Exercise 11.1

Entrepreneurial Exercise 11.2

Entrepreneurial Exercise 11.3

Chapter 12: Leading Your Rapidly Growing Business

The Impact of Rapid Growth—the Need to Focus on People and Processes

Increasing Sophisticated Management Systems

Growing Your Business through What Is Termed an Intrapreneurial Orientation

Building an Innovative and Creative Intrapreneurial Oriented Organization—Think Fun

The Role of Organizational Champions

Developing and Supporting Intrapreneurial Teams

Strategic Challenges for a Growing Business

Strategies for Market Leaders

Strategies for Niche Creators

Strategies for Competing in the Growth Stage

Strategies for Competing against New Market Entries

Strategies for Dealing with Competition from Substitute Products or Services

Potential Global Strategies

Final Thoughts on Your Role in Achieving Growth

Entrepreneurial Exercises

Entrepreneurial Exercise 12. 1

Entrepreneurial Exercise 12.2

Entrepreneurial Exercise 12.3

Entrepreneurial Exercise 12.4

Entrepreneurial Exercise 12.5

Chapter 13: Harvesting Your Business

Knowing When and Why to Harvest Your Business

Contingency Planning and the Management Succession Process

Sale of your Business to Insiders—Employee Stock Ownership Plans (ESOPs)

Selling the Venture to Outsiders

Merger with Another Business

Going Public on a Listed Financial Exchange

Bankruptcy

Chapter 7 Bankruptcy

Chapter 11 Bankruptcy

Entrepreneurial Exercises

Entrepreneurial Exercise 13.1

Entrepreneurial Exercise 13.2

Effective Hiring:: A Nine-Step Process Including Customizable Application Forms and Exercises

About the Authors

cover.jpg

Becoming an Entrepreneur: Starting Your Journey and Finding Your Way

Thomas Zimmerer Ph.D. and Jennifer M. Jolly, M.S. in Entrepreneurship

Copyright © 2024 Thomas Zimmerer Ph.D.

All rights reserved

First Edition

NEWMAN SPRINGS PUBLISHING

320 Broad Street

Red Bank, NJ 07701

First originally published by Newman Springs Publishing 2024

ISBN 979-8-89061-791-0 (Paperback)

ISBN 979-8-89061-793-4 (Hardcover)

ISBN 979-8-89061-792-7 (Digital)

Printed in the United States of America

This book is dedicated to my late wife and Jennifer's mother, Linda. A genuinely loving woman who was an inspiration to us both.

Chapter 1

Entrepreneurship

Entrepreneurship is the process by which an entrepreneur undertakes the process of creating a new business venture. Entrepreneurship requires a risk-taker. Every new business venture entails both the possibility of success as well as the potential for failure. Entrepreneurship implies the acquisition of needed resources and the organization and management of these resources. Entrepreneurship involves the identification of an opportunity. The excitement of the entrepreneurship is captured in the quotation above by the globally recognized serial entrepreneur, Sir Richard Branson. Business opportunities are like buses. There's always another one coming. Opportunity drives entrepreneurship.

An entrepreneur is an individual who chooses to create a new venture based on what she or he believes is a viable business idea that can be shaped into a model that, when operationalized, creates greater customer value than that of current market competitors. In some cases, the new business venture involves more than one entrepreneur. These new business ventures focus on what the entrepreneur believes is an opportunity. Entrepreneurs are willing to accept risk based on their confidence that their business model is capable of successfully overcoming the competitive forces that exist in the market.

The eminent scholars, the late Jeffery Timmons and Stephen Spinell, wrote that effective entrepreneurs are internally motivated, high energy leaders with a unique tolerance for ambiguity, a keen eye toward mitigating risk, and a passion for discovery and innovation.¹ In a 1990 article, H. H. Stevenson and J. C. Jarillo defined entrepreneurship as the process by which individuals pursue opportunities without regard to resources they currently control.² These thought leaders in entrepreneurship clearly viewed entrepreneurship as somewhat unique individuals. This does not imply that only a very limited portion of the population has the ability to become successful entrepreneurs.

What Are the Internal Psychological Forces That Motivate and Drive Entrepreneurs Like Yourself?

Decades of research from the academic discipline of organizational behavior, human motivation, decision-making, and psychology provide valuable insight into the factors that influence an individual to become an entrepreneur. Consider first the individual's fundamental belief in success itself. Entrepreneurs have what is termed an internal locus of control. That is, they believe that they control their destiny and chances for success, in contrast with individuals with an external locus of control who believe that success is, to a large degree, a product of external forces beyond their personal control. Other components of personality theory that seem to apply to entrepreneurs are a high level of consciousness represented by an acceptance of responsibility, dependability, and persistence, which interact to provide the entrepreneur with the capacity to endure the frustration which is normally associated with new venture formation. Additionally, the personality traits of openness to experience speak to the entrepreneur's drive to express creativity and satisfy curiosity. Entrepreneurs seek new and superior solutions to problems as opposed to the acceptance of the familiar. A third personality trait that affects entrepreneurs is termed emotional stability. Individuals who score high in this personality trait are capable of managing stress and tend to demonstrate more self-confidence and emotional security within themselves.

Recognized Traits of Successful Entrepreneurs—How Do You Match Up?

Drawing on the classic research of David McClellan, entrepreneurs have a very high need for achievement. The need for achievement is defined as the drive to excel and strive for success.³ Based on this seminal work and those mentioned above, much of the recognizable characteristics of successful entrepreneurs include the following:

high level of personal confidence in their ability to succeed

passion for what they do

preference for moderate risk

risks are systematically reduced through the ability to cope with ambiguity

high levels of energy, focused on problem identification and solution

the acceptance of a challenge based on self-confidence in their ability to overcome obstacles

high levels of perseverance and tenacity

When many individuals are initially asked why entrepreneurs start new business ventures, most respond quickly with the to make money answer. However, while many entrepreneurs recognize that they must create financially viable businesses to reach their goals, they also view wealth as a result of success, not the sole driving force to achieve success. In reality, most truly successful entrepreneurs value achievement over the simple creation and accumulation of wealth. Money is certainly one measure of achievement. However, for individuals who are socially conscious entrepreneurs, the maximization of wealth is not always the number one consideration. Their critical outcome is measured in terms of how all their work directly contributes to their fundamental goals. For example, the Salvation Army and Goodwill Industries operate successful retail businesses to the purpose of using the net revenue to serve the needs of the poor, disabled, or persons attempting to get their lives back on track.

The Opportunity to Shape My Own Future

Entrepreneurs often describe the motivation to create a business because it allows them to shape their own destiny. In many cases, it is virtually impossible to separate the entrepreneur from their business. They are motivated by the intrinsic rewards which flow from proving that their ideas were correct and that their business contributes to their community. Their passion to make a difference through their pursuits of an opportunity drives many entrepreneurs more than the financial rewards.

Possessing Both the Skills and Passion

Serial entrepreneur Mark Moore discusses the logical process a potential entrepreneur should follow in selecting a new business venture: First, determine what are your best skills, abilities, and knowledge base, and what activities inspire your passion.

An entrepreneur should always play from their strengths and be guided by their personal passions. These factors will assist the entrepreneur in selecting an industry with which they will be most compatible and have an expected probability of becoming successful. Further, Moore suggests that the entrepreneur thoughtfully scan the business environment for energizing market segments that possess high growth potential as opposed to markets that have limited growth opportunities. Lastly, when a market niche is identified which possesses growth potential and attractive profit margins, you need to make a final decision as to the creation of a business venture within the market niche that incorporates your skills, abilities, knowledge, experience, and passion. The proposed business venture must also be of a size and scope that will match your resources and their potential to attract additional financial capital and outside resources.

These initial steps serve to guide you toward a business venture with the highest potential opportunity. Each person has a unique set of skills, abilities, knowledge, and passions that will influence their ability to create a successful business, know yours, and make smart choices. There are always new, energizing, and exciting market niches, but not every one of them is a sufficient fit with the potential entrepreneur. The time that it takes to objectively analyze yourself and the market opportunities can help avoid a business decision that becomes, at best, a marginal success. Focusing on the intersection between your skills, abilities, knowledge, and passions with a market niche with above-average growth potential and attractive profit margins that are also compatible with your current or potential resources significantly improves the probability of creating a growing business.

Entrepreneurs are indeed very complex individuals. This diverse and expanding group will not be easily defined by an overly simplistic set of personality traits and motivational drivers. Decades of research have provided clues as to the driving forces that help us identify individuals with the potential to achieve success as entrepreneurs, yet this research does not prove a basic model that guarantees success. Every individual must search within themselves for their own level of passion to achieve defined goals and stated dreams. Entrepreneurs struggle to continually enhance their skills and gain confidence in their abilities. Entrepreneurs succeed every day, and this reinforces their inner entrepreneurial spirit. The power to succeed and the willingness to do what it takes to do so shapes the lives of entrepreneurs, moves society forward, and keeps the economy evolving.

Types of Entrepreneurial Business Ventures—Which One Fits Your Life Plan?

There are three major categories of entrepreneurial business ventures. Many small businesses are what can be termed salary replacement businesses. As the name implies, the entrepreneur opens and operates the business as a way of earning a living for herself and her family. These businesses may have begun from modest initiatives but, over time, have grown larger in size. These mom-and-pop family-owned businesses can be significant in size and be substantial market leaders in their local geographic region. In many ways, these family owned businesses are the backbone of many small towns, and they add flavor to many a large city, giving a small-town experience to local customers. Many of these organizations are multigenerational family businesses that actually represent owners, managers, and employees who are actively involved in the business for decades or longer. The goal of each generation is to prosper and pass on to the next generation an increasingly competitive and financially solid business. These businesses become the source of income for an increasing number of families. This is the largest category of businesses in the United States.

A second type of business can be termed a lifestyle firm. As the name implies, these business ventures are an outgrowth of a desire by the entrepreneur to pursue a specific lifestyle, such as a sport or a hobby. In this scenario, the entrepreneur already has a well-developed set of skills and knowledge. Examples can range from sailing, to baking elaborate cakes, playing video games, or planning events for friends. Entrepreneurs can build a thriving business with the activities that already inspire a lifelong passion. Individuals who love global travel may become travel agents or offer their services as travel guides. Consider the number of small bookstores operated and owned by entrepreneurs with a love of books and learning. Despite the intense competition created by the online market retailers Barnes and Nobel and Amazon.com, these entrepreneurs strive to build a community around the sense that the book buying experience should be a personalized experience. Education-oriented entrepreneurs are another group who tend to be motivated by ideals greater than profits. Men and women who are very often far more committed to educating children than to becoming personally wealthy have gone on to create and operate successful private schools. Lifestyle businesses are often the product of the passion to accomplish specific internal goals in the entrepreneur's life. Many are equally linked to the entrepreneur's desire to do what they feel will contribute most to society. Social entrepreneurs use their passion to improve a segment of society.

The types of firms for which entrepreneurship is most recognized are the new venture firms. With this type of business, an entrepreneur will use all the previously discussed tools, talents, resources, and opportunities in the creation of new products and services and will enter the market with new and innovative business models. These businesses stem from the creative and often highly innovative ideas of the founder. Ventures formed by these entrepreneurs face the unrelenting challenges of competitors as the new business attempts market entry. Identifying an opportunity is not enough to succeed. Having a unique product or service is also no guarantor of success. Excellent marketing tactics and business plans that remain on paper do not equate to success. Only execution matters. Entrepreneurs must not only recognize opportunity and then generate a new product or service to fill a perceived need. They must also establish a business that is capable of creating value for their target customer while also competing effectively against all competitors. The new product or service does not operate in a vacuum. Rather, in a dynamic marketplace where other firms are anxious to protect their hard-earned market share and will work tirelessly to retain every customer. I firmly believe that entrepreneurship is the most challenging career imaginable.

Creative Destruction Is the Continual Process That Drives Our Economy

The entrepreneurial firms that accomplish these challenging feats are the businesses whose products and services drive the evolutionary process in our society. Joseph Schumpeter, the godfather of entrepreneurship, described the process that drives the economy forward as creative destruction.⁴ Creative destruction describes how new and superior products and services replace existing products or services within our highly competitive market environment. Entrepreneurship continually reshapes our economy through new and innovative products and services. Every economy depends on entrepreneurs like yourself to drive it forward. For a brief moment, consider how our entrepreneurial process has improved the delivery of health care, communications, travel, technology, and overall quality of life. When people speak of the good old days, seldom can anyone identify specifics as to what was better than today. Today, we live longer, stay healthier, work in jobs with less physical labor, and enjoy entertainment options unheard of before. Entrepreneurs have brought us a better life. Joseph Schumpeter's concept of creative destruction is linked to the role of innovation in any society. Innovation results in the introduction of new products or services, the discovery of new evolving market niches, new production technologies, new marketing and disruption techniques, and even new forms of organization.

Your Challenge

The twenty-first century is proving to offer you a global business environment filled with unprecedented opportunities. Opportunities will require that you accept the challenges before you and continuously strive to solve the problems facing you through the creation of businesses driven by creativity, innovation, risk-taking, and personal courage. Entrepreneurs are problem solvers who willingly accept these challenges. Our global heroes are now the entrepreneurs whose actions are changing economies across the globe. Business history has taught us that established businesses are not necessarily the sources of our best new creative ideas. Established businesses seem to lose their once acute risk-taking attributes as success too often results in increasingly bureaucratic behaviors. Although founded by aggressive entrepreneurs, their businesses evolve over time into ridged structures populated by risk-averse leaders whose overall leadership focus changes from that of a problem solver to a defender of the new profitable status quo. Despite an abundance of financial, human, and material resources, the established firms in some industries display insensitivity to emerging opportunities. Problems can often be opportunities in disguise. When established firms choose to respond to changing market reality in what appears to be an apathetic fashion, new competitors can emerge with solutions never predicted by their forebears. Consequently, entrepreneurial opportunities abound under these conditions.

Revolutionary products and services successfully brought to market replace existing products and services. Many of today's revolutionary new products are the result of the efforts of risk-taking innovative entrepreneurs. New business models replace existing ones, and the beneficiary of this process of creative destruction is the consumer. Economies prosper as new products and services generate ever-increasing employment and wealth. Business history abounds with the stories of drastic decline of once powerful industries and well-established business firms. The replacements are new entrepreneurial firms that customers decide better serve their needs and wants. This is creative destruction in action benefiting both the entrepreneur and society.

Entrepreneurs will always flourish in an economic system where the true power rests in the hands of consumers with freedom of choice. The entrepreneurial process is evolutionary in nature. The survival of any business is dependent on its leadership to continue to act as an entrepreneur. Professor Schumpeter did not condemn all businesses to decline, but only those who fail to remain alert and to the market and evolving consumer needs and wants. The economics of a free market system places the power of business survival in the hands of the consumer. Every business must recognize and respect the dynamic and often volatile nature of a competitive marketplace. Entrepreneurs must face and conquer the competitive pressures to meet or exceed the ever-changing expectations of target customers in both domestic and the global markets.

External forces serve to accelerate and shape change as well. The continued evolving forces of science and technology, economic conditions, social norms and demographics, government policies, and regulation serve to generate a dynamic and competitive environment in which all businesses must struggle to survive. External forces, trends, and events continually interact to reshape and redefine the competitive landscape in which firms must compete. In reality, all firms operate in a business environment whose nature is shaped by the demands of customers, the behaviors of competitors, and the often-volatile forces of numerous dynamic external factors. For you to be successful, you must master the complexity of our truly dynamic marketplace. In chapter 3, you will study in greater detail how to predict these changes and how they might be creating opportunities.

Global Entrepreneurship Means Global Competition

Competition has rapidly become global in scope. Access to the internet has leveled the playing field and serves to provide a vehicle that supports and facilitates global commerce. The implication of an increasingly expanding global market is an example of an external force that continues to impact entrepreneurship. Entrepreneurs will quickly discover that this explosive technology is truly a competitive double-edged sword. A United States entrepreneur can market and deliver their products worldwide, but so can your global competitors. The clear beneficiary will continue to be the global consumer. Consumers have demonstrated that they are virtually immune from prejudice against the products manufactured in countries other than the US. The question of choice is rooted in the product or service that best meets the consumer's needs, at a price that the consumer is willing to pay. Customer loyalty is simply not what it used to be. Global competitors are confident that if their product meets or exceeds expectations, they will win customer loyalty. Customers practice what is termed enlightened self-interest. Entrepreneurs the world over are discovering that financial resources are themselves global. New and innovative products and services are increasingly able to attract capital. Money, in the form of new venture investors, flows to entrepreneurs whose products and services are viewed as highly potentially profitable. The national origin of the business has become much less important than it once was. The entrepreneur with the potential to serve global economic needs has the potential to contribute to their nation's well-being.

Changing Realties for Today's Global Competitive Environment

A few of the realities of the changes in our global environment includes, but are certainly not limited to, the following:

Increasing growth in opportunities that stem from international trade agreements that open markets for goods and services are benefitting entrepreneurs through increased access to global markets.

Global communications via the internet has had the effect of making consumers aware of products and services far beyond their traditional purchasing boundaries. The internet allows you to target potential customers without the expense of a physical location. In effect, the internet has served to reduce the competitive barriers to entry through providing a more level competitive environment.

Global economic change is accelerating. New technologies are spreading across the globe rapidly, aided by the internet and sophisticated information collection and sharing methods. The speed at which new knowledge becomes available to the competitive environment has served to enhance global competition. Beyond technology, changes in national economic systems offer economic freedom and therefore presents new market opportunities. Economic transparency and openness serve to inform the world of potential market opportunities. Consider the rapid growth of the demand for luxury items in China. This shift created tremendous growth in the middle class in that nation and has led to true wealth among the upper class. Global entrepreneurs driven by consumers with the wealth and desire to possess what might be termed a higher personal lifestyle responded to meet these unmet needs. The growth in global economics can be linked to the expansion of entrepreneurship and increasing economic well-being in both the developed and developing nations.

A global explosion of new knowledge and innovation led to the realities discussed above. Research is being conducted by more scholars worldwide than ever before. Nations have identified that investment in research and development produces new knowledge that is understood to be the raw material needed for innovation. Innovation is clearly an initial and critical component in the entrepreneurial process.

There exists a higher level of transparency of actions and information. Fewer innovations remain secret. As stated above, the internet supports the transfer of information and encourages its sharing. In some ways, there seems to be a declining respect for intellectual property rights. In a global market, many nations do not recognize intellectual property rights to the same extent as developed nations. Entrepreneurs in nations who do not recognize intellectual property rights often exploit patented subject matter. Products based on these patents then appear in the global marketplace at prices that reflect the lack of consideration for the expense incurred in the original technology development.

The pace of economic change has also accelerated. Lastly, competitive pressures have produced a continuing effort to make individual organizations more efficient. Developed countries have witnessed organizational downsizing to reduce expense while also outsourcing organizational functions to achieve lower cost to attempt to retain lower product costs. Established firms have recognized that the bloated top-heavy organizational structures of the past are no longer competitive and are attempting to behave in a more entrepreneurial fashion.

These changes can be viewed as both positive and negative, but they are unquestionably shaping the competitive world in which you will be creating and leading your new business venture. The global changes just discussed do suggest that opportunities are being created in new locations and through continually evolving technologies. These opportunities deserve to be investigated by you.

Entrepreneurs Must Know That Success Is Based on Recognizing That Customers Rule

Decades ago, because of the geographic limit of