Chapter 03: Entrepreneurship, Franchising and
Small Businesses
Layout of Chapter:
|
1.
Entrepreneurship
|
2.
Franchising
|
|
3.
Small Businesses
|
4.
Small Businesses Start-up: Business Plan
|
1.
Entrepreneurship
Entrepreneur: A person who takes the risks necessary to
organize and manage a new business and receives the financial profits and
non-monetary rewards. E.g. Edwin Land who developed Polaroid Camera.
Intrapreneur: An entrepreneurial person employed by a
corporation and encouraged to be innovative and creative. Example: 3M,
Hewlett-Packard of USA.
Traits/ Characteristics of Entrepreneur:
1.
Need for achievement: Strong desire for
success.
2.
Low need to conform: Do what they really
wish to.
3.
Persistence: Work hard, doggedly doing what
is best for the business.
4.
High-energy level: Work long hours. 60- 80
hours a week. Since planning, organizing, direction, creating strategy and
finding funds need more hours.
5.
Risk-taking tendency: People with strong
desire for success tends to take risk.
Risks of Entrepreneurship:
1.
Business Risk - Entering
into the business. Risk of potential failure.
2.
Financial Risk - Investing
most, if not all, of financial resources.
3.
Career Risk - Leaving a secure job for a venture with a highly uncertain
future.
4.
Family & Social Risk - Little
time for family.
Reasons for failure:
(a)
People jump into business too quickly.
(b)
Shortage of funds - Realistic
planning for the money needed.
(c)
Failure to plan - A
detailed business plan is necessary.
(d)
Poor managerial qualities - Lack of
ability to deal with people.
2.
Franchising.
A
system for selecting distribution of goods and services under a brand name
through outlets owned by independent business owners.
Franchise: The right to use a business name (e.g. Pizza Hut,
Wimpy’s, McDonald’s) and sell its goods/ product and services in a specific
geographical territory.
Franchisee: The independent owner of a franchise outlet who
enters into an agreement with a franchisor (parent company).
Franchisor: The licensing company in the franchise agreement.
Elements of Franchising Business:
1.
A contractual agreement between the
franchisee (person) and the franchisor (company).
2.
Branded goods or services.
3.
Operation by a business person for the
purpose of earning profit.
4.
Monitoring by the franchisor, so that
standard procedures and standardized products or services are used (the quality
is maintained).
Advantages of owning a Franchise:
·
Guidance – Managerial guidance from the
franchisor.
·
Brand Name – the right to use a nationally
promoted brand name.
·
Proven Product & method of operating
the business.
·
Financial Assistance.
Disadvantages of owning a Franchise:
·
Costs – in the form of franchise fees and
also paying the franchisor a percentage of the franchise’s profits (Royalty).
·
External Control – loss of internal control
over promotional activities, financial records, hiring, service producers, and
managerial development.
·
Weak Training Program (offered by some
franchisors).
3.
Small
Business.
One
that is independently owned & operated and is not dominant in its field of
operation.
What characterizes a Small Business?
The
criteria suggest that smallness depends on your point of view. A small business
is one that is not dominant in its industry and that can be started with a
moderate investment.
1.
Retailing and Services: The amount varies
depending on the industry.
2.
Wholesaling: The maximum number of
employees cannot exceed 500.
3.
Manufacturing: The business must have 250
or fewer employees.
4.
Special Trade Construction: The maximum
amount of sales is $7 Million, regardless of industry.
What is INCUBATOR?
It
is a facility, office, shop, or location in which fledgling businesses can
share space, costs, services, and information to grow their firms and become
strong enough to leave and operate independently.
Small Business Administration (SBA):
An
independent agency of the federal government, Created in 1953 to protect the
interests of small business owners. The agency provides help and support to
small businesses. It provides loans and managerial assistance, if needed;
encourages small businesses owned by minorities/ economically & socially
disadvantaged. Also offers courses, information and training.
Small Business Opportunities/ Areas
of Economy that Small Businesses are operating:
A.
Manufacturing: Almost 30% of all
manufacturing companies are considered small. E.g. Printing shops, steel
fabricating shops, clothing manufacturers, cabinet/ furniture shops and
bakeries.
B.
Service: Intangible products that can not
be physically possessed and that involve performance or effort.
·
Business Services: Accounting firm,
computer programmer, software writer etc.
·
Personal Services: Beauty parlours, Barber
shops, baby-sitter etc.
·
Repair Services: Jewelry, Plumbing, Car
fixing, Furniture and appliance repair etc.
·
Entertainment & recreation services:
Racetracks, Cinema Halls/ Theatres, amusement parks, golf courses and bowling
alleys.
·
Hotels & Motels.
C.
Wholesaling: Selling to other sellers (i.e.
other retailers/ wholesalers/ industrial firms). These businesses serve as a
link between manufacturers and retailers.
D.
Retailing: Selling goods to ultimate
consumers/ users.
E.
Home-based business: Businesses in which an
individual works or conducts activities from home. In USA, about
22% of total work force now works out of the home. E.g. desktop publishing,
computer counseling, event planning, catering, day care, home/ apartment
cleaning, and pet services.
4.
Small Business Start-Up
Starting
any business requires careful investigation and planning. A person can improve
his/ her chances of success by taking the time to write a Business Plan.
Business Plan: A
written document that describes the business, the good or service, the
consumers, the competition, the financing, and all activities necessary to
enter business and make or sell a good or service.
It
is the game plan of the new business. It can also be used as a Prospectus,
Proposal, or Blue Print or book.
The
business plan also serves to show banks or investors that the individual is
organized, serious about the business, and willing to discuss all aspects of
the business.
================
X ================
thank you for your suggestion
ReplyDelete