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Entrepreneurship
Chapter 3 Creating Business from Opportunity
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.2
The Business Definition The offer—what will the business
offer the customers? Target market—who will it serve? Production and delivery capability
—how will it provide the products & services it sells?
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.3
Types of Business Manufacturing—makes tangible
products & sells them through distributors or directly.
Wholesale—buys in bulk from manufacturers & sells smaller quantities to retailers.
Retail—sells individual items to consumers.
Service—sells time/expertise to consumers.
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.4
Defining an Organization Core Values Mission Vision Culture
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.5
Organizational Core Beliefs Beliefs entrepreneurs use to guide
organizations.Example: My restaurant will support local organic farmers.
Core beliefs affect: materials used in production prices charged how customers are treated
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.6
Mission Statement A concise statement of
Target customers Products & services Markets served Use of technology Importance of public issues &
employees Focus on survival, profitability, &
growth
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.7
Vision Overall view of desired company
future state Built upon core values & beliefs Compelling across the organization Employees need to be empowered
to fulfill it
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.8
Culture Largely shaped by leadership Core values in action Includes
Risk tolerance & innovation Orientation with respect to people,
teams, & outcomes Attention to detail Communication norms
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.9
Routes to Finding Opportunities
Self- or group-developed business ideas
Research on “hot” business ideas or growth areas
Product or service idea first & search for a market or business second
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.10
Factors of Competitive Advantage
1. Quality2. Price3. Location4. Selection5. Service6. Speed/turnaround
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.11
What Is Your USP? Unique Selling Proposition—what
attracts customers away from the competition and toward a business?
1. Compare what your business offers to what competitors offer.
2. Are you at a cost advantage or disadvantage?
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.12
Competitive AnalysisYour Company
Competitor #1
Competitor #2
Competitor #3
Quality
Price
Convenience
Selection
Service
TOTAL
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.13
Define the Unit of Sale Manufacturing—one order Wholesale—a dozen Retail—one item Service—one hour of time or one
completed task Combination—average sale per
customer
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.14
Average Sale Per Customer
Average sale per customer – Average cost of sale per customer Average gross profit per customer
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.15
Unit of Sale as a Combination
of Different Items
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.16
Cost of Goods Sold (COGS)
COGS = cost of labor and materials required to make one additional unit
COSS (cost of services sold) = cost of
labor and materials required to provide one additional unit of service
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.17
Economics of One Unit (EOU) Method for seeing if a business can
be profitable
If one unit of sale is profitable, the whole business is likely to be profitable.
Selling price per unit – COGS per unit = Gross profit per unit
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.18
Economics of One Unit (EOU) —Manufacturing
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.19
Economics of One Unit (EOU) —Wholesale
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.20
Economics of One Unit (EOU) —Retail Business
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.21
Economics of One Unit (EOU) —Service Business
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.22
Economics of One Unit (EOU) —Example
Entrepreneurship, 2nd EditionMariotti and Glackin with NFTE
© 2010 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.23
The Entrepreneur’s Strategy: Start a business with a profitable EOU Hire others to create the units Increase volume of units being sold Start new businesses or expand
opportunities
Result: The entrepreneur creates jobs and wealth.