Entrepreneurship: Successfully Launching New Ventures, 6th Edition Solution Manual

Name: Entrepreneurship: Successfully Launching New Ventures, 6th Edition Solution Manual
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Ace your coursework with Entrepreneurship: Successfully Launching New Ventures, 6th Edition Solution Manual, designed to simplify complex topics.

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From “Preparing Effective Business Plans” by Bruce R. Barringer
Part 1: Strength of Business Idea
For each item, circle the most appropriate answer and make note of the (-1), (0), or (+1)
score.
Low Potential (-1) Moderate Potential (0) High Potential (+1)
1. Extent to which the
idea:
 Takes advantage of
an environmental
trend
 Solves a problem
 Addresses an
unfilled gap in the
marketplace
Weak Moderate Strong
2. Timeliness of entry to
market
Not timely Moderately timely Very timely
3. Extent to which the
idea “adds value” for
its buyer or end user
Low Medium High
4. Extent to which the
customer is satisfied
by competing
products that are
already available
Very satisfied Moderately satisfied Not very satisfied
or ambivalent
5. Degree to which the
idea requires
customers to change
their basic practices
or behaviors
Substantial changes
required
Moderate changes
required
Small to no changes
required

Part 2: Industry-Related Issues
Low Potential (-1) Moderate Potential (0) High Potential (+1)
1. Number of
competitors
Many Few None
2. Stage of industry life
cycle
Maturity phase or
decline phase
Growth phase Emergence phase
3. Growth rate of
industry
Little or no growth Moderate growth Strong growth
4. Importance of
industry’s products
and/or services to
customers
“Ambivalent” “Would like to have” “Must have”
5. Industry operating
margins
Low Moderate High
Part 3: Target Market and Customer-Related Issues
Low Potential (-1) Moderate Potential (0) High Potential (+1)
1. Identification of
target market for the
proposed new venture
Difficult to identify May be able to identify Identified
2. Ability to create
“barriers to entry” for
potential competitors
Unable to create May or may not be able
to create
Can create
3. Purchasing power of
customers
Low Moderate High
4. Ease of making
customers aware of
the new product or
service
Low Moderate High
5. Growth potential of
target market
Low Moderate High

Part 4: Founder- (or Founders-) Related Issues
Low Potential (-1) Moderate Potential (0) High Potential (+1)
1. Founder or founders
experience in the
industry
No experience Moderate experience Experienced
2. Founder or founders
skills as they relate to
the proposed new
venture’s product or
service
No skills Moderate skills Skilled
3. Extent of the founder
or founders
professional and
social networks in the
relevant industry
None Moderate Extensive
4. Extent to which the
proposed new venture
meets the founder or
founders personal
goals and aspirations
Weak Moderate Strong
5. Likelihood that a
team can be put
together to launch
and grow the new
venture
Unlikely Moderately likely Very likely
Part 5: Financial Issues
Low Potential (-1) Moderate Potential (0) High Potential (+1)
1. Initial capital
investment
High Moderate Low
2. Number of revenue
drivers (ways in
which the company
makes money)
One Two to three More than three
3. Time to break even More than two
years
One to two years Less than one year
4. Financial
performance of
similar businesses
Weak Modest Strong
5. Ability to fund initial
product (or service)
development and/or
initial startup
expenses from
personal funds or via
bootstrapping
Low Moderate High

Overall Potential
Each part has five items. Scores will range from -5 to +5 for each part. The score is a
guide—there is no established rule-of-thumb for the numerical score that equates to high
potential, moderate potential, or low potential for each part. The ranking is a judgment
call.
Score
(-5 to +1)
Overall Potential of the
Business Idea Based on
Each Part
Suggestions for
Improving the
Potential
Part 1:
Strength of Business
Idea
High potential
Moderate potential
Low potential
Part 2:
Industry-Related
Issues
High potential
Moderate potential
Low potential
Part 3:
Target Market and
Customer-Related
Issues
High potential
Moderate potential
Low potential
Part 4:
Founder- (or
Founders-) Related
Issues
High potential
Moderate potential
Low potential
Part 5:
Financial Issues
High potential
Moderate potential
Low potential
Overall Assessment High potential
Moderate potential
Low potential
Summary—briefly summarize your justification for your overall assessment:

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Part 2: Sample Course Outlines
333
Week 9: Class 1 Building a New-Venture Team Chapter 9
Week 9: Class 2 Building a New-Venture Team
Case 9.1 or Case 9.2
Chapter 9
Week 10: Class 1 Getting Financing or Funding Chapter 10
Week 10: Class 2 Guest Speaker on Getting Funding or Financing;
Local Venture Capitalist or Business Angel
Case 10.1
Week 11: Class 1 Individual Exam #2 Chapters 6–10
Week 11: Class 2 Unique Marketing Issues
Case 11.2
Chapter 11
Week 12: Class 1 The Importance of Intellectual Property Chapter 12
Week 12: Class 2 The Importance of Intellectual Property
Case 12.1 or Case 12.2
Chapter 12
Week 13: Class 1 Preparing for and Evaluating the Challenges of Growth Chapter 13
Week 13: Class 2 Preparing for and Evaluating the Challenges of Growth
You Be the VC 13.1 or You Be the VC 13.2
Case 13.1
Chapter 13
Week 14: Class 1 Strategies for Firm Growth Chapter 14
Week 14: Class 2 Strategies for Firm Growth

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Part 2: Sample Course Outlines
334
Sample Weekly Schedule
Entrepreneurship
Based on 15-Week Semester
(Class Meets Once a Week)
Date Topic Assigned
Reading
Week 1 Introduction to Entrepreneurship
Case 1.1 or Case 1.2
You Be the VC 1.1 or You Be the VC 1.2
Chapter 1
Week 2 Recognizing Opportunities and Generating Ideas
Case 2.1 or Case 2.2
Chapter 2
Week 3 Feasibility Analysis
Case 2 in the Case Appendix
You Be the VC 3.1 or You Be the VC 3.2

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Part 2: Sample Course Outlines
335
Week 12 The Importance of Intellectual Property
Case 12.1 or Case 12.2
Chapter 12
Week 13 Preparing for and Evaluating the Challenges of Growth
You Be the VC 13.1 or You Be the VC 13.2
Case 13.1
Chapter 13
Week 14 Strategies for Firm Growth
Case 14.1 or Case 14.2
Chapter 14
Week 15 Franchising
Case 15.1 or Case 15.2
Chapter 15
Final Exam Administered During Final Week Chapters 11–15 or
comprehensive

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Part 3: Student and Instructor Resources
336
PART 3
STUDENT AND INSTRUCTOR RESOURCES
This portion of the Instructor’s Manual contains resources that may be helpful to you and
your students throughout the course of the semester.
LIST OF USEFUL WEB SITES IN THE TEACHING OF ENTREPRENEURSHIP
Entrepreneurship-Focused Periodicals
Periodical Web Site Address
Bloomberg Businessweek www.businessweek.com
Economist http://www.economist.com/
Entrepreneur www.entrepreneur.com
Fast Company www.fastcompany.com
Harvard Business Review https://hbr.org
Home Business Journal

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Part 3: Student and Instructor Resources
337
College Startup http://www.collegestartup.org
Dorm Room Fund http://dormroomfund.com
eCorner http://ecorner.stanford.edu/
Entrepreneurship.org www.entrepreneurship.org/
Entrepreneurship Education on the Web http://eweb.slu.edu
Escape From Cubicle Nation http://www.escapefromcubiclenation.com/
Global Entrepreneurship Monitor www.gemconsortium.org
Global Student Entrepreneur Awards www.gsea.org
Growththink www.growththink.com

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Chapter 1: Introduction to Entrepreneurship
1
CHAPTER 1
INTRODUCTION TO ENTREPRENEURSHIP
LEARNING OBJECTIVES
After studying this chapter students should be ready to:
1. Describe entrepreneurship, corporate entrepreneurship, and the characteristics of
entrepreneurial firms.
2. Discuss three main reasons people decide to become entrepreneurs.
3. Identify four main characteristics of successful entrepreneurs.
4. Explain five common myths regarding entrepreneurship.
5. Discuss the three types of start-up firms.
6. Discuss the changing demographics of entrepreneurs in the United States.
7. Discuss the positive effects of entrepreneurship and entrepreneurial firms on
economies and societies.
8.

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Chapter 1: Introduction to Entrepreneurship
4
IV. Characteristics of Successful Entrepreneurs
A. Passion for the Business. The number one characteristic shared by successful
entrepreneurs is passion for the business. This passion typically stems from
the entrepreneur’s belief that the business will positively influence people’s
lives.
B. Product/Customer Focus. An entrepreneur’s keen focus on products and
customers typically stems from the fact that most entrepreneurs are, at heart,
craftspeople.
C. Tenacity Despite Failure. Because entrepreneurs are typically trying
something new, the failure rate associated with their efforts is naturally high.
Developing a new business may require a certain degree of experimentation
before a success is attained. Setbacks and failures inevitably occur during the
process. The litmus test of entrepreneurs is their ability to persevere through
setbacks and failures.
D. Execution Intelligence. The ability to effectively execute a business idea
means developing a business model, putting together a new-venture team,
raising money, managing finances, leading employees, and so on.
V. Common Myths About Entrepreneurs
A. Myth 1: Entrepreneurs Are Born, Not Made. This myth is based on the
mistaken belief that some people are genetically predisposed to be an
entrepreneur.
B. Myth 2: Entrepreneurs Are Gamblers. Entrepreneurs are usually moderate risk
takers, as are most people.
C. Myth 3: Entrepreneurs Are Motivated Primarily by Money. It is naïve to think
that entrepreneurs don’t seek financial rewards. As discussed previously,
however, money is rarely the primary reason entrepreneurs start new firms.

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Chapter 1: Introduction to Entrepreneurship
5
VI. Types of Start-Up Firms
A. Salary-Substitute Firms. Are small firms that afford their owner or owners a
similar level of income to what they would earn in a conventional job.
1. Examples of salary-substitute firms are dry cleaners, convenience stores,
restaurants, accounting firms, and hairstyling salons.
B. Lifestyle Firms. Provide their owner or owners the opportunity to pursue a
particular lifestyle and earn a living while doing so.
1. Examples of lifestyle firms include ski instructors, golf pros, and tour
guides.
C. Entrepreneurial Firms. Bring new products and services to market by creating
and seizing opportunities.
1. Examples of entrepreneurial firms are Dropbox, Facebook, and Uber.
VII. Changing Demographics of Entrepreneurs
A. Women Entrepreneurs. Although men are still more likely to start businesses
than women, the number of women-owned businesses is increasing.
According to a study commissioned by American Express and OPEN, there
were 11.3 million women-owned businesses in the United States in 2016.
B. Minority Entrepreneurs. There has been a substantial increase in minority
entrepreneurs in the United States. In 2012 (the most recent stats available),
there were 8 million minority-owned firms.
1.

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Chapter 1: Introduction to Entrepreneurship
6
1. Innovation. Innovation is the process of creating something new, which is
central to the entrepreneurial process. Small innovative firms are 16 times
more productive than larger innovative firms in terms of patents per
employee.
2. Job creation. According to the SBA, small businesses create a substantial
number of net new jobs in the United States. Firms with 500 or fewer
employees created more than 7 million out of the 11 million new jobs
created during the recent economic recovery.
B. Entrepreneurial Firms’ Impact on Society. The innovations of entrepreneurial
firms have a dramatic impact on society. Think of all the new products and
services that make our lives easier, enhance our productivity at work, improve
our health, and entertain us. Many of these products and services were
conceived and brought to market by entrepreneurial firms.
C. Entrepreneurial Firms’ Impact on Larger Firms. In addition to the impact
entrepreneurial firms have on the economy and society, entrepreneurial firms
have a positive impact on the effectiveness of larger firms.
1. For example, some entrepreneurial firms are original equipment
manufacturers, producing parts that go into products that larger firms
manufacture and sell.
2. Thus, many exciting new products are not solely the result of the efforts of
larger companies with strong brand names. They were produced with the
cutting-edge component parts or research development efforts provided by
entrepreneurial firms.
3. The evidence shows that many entrepreneurial firms have built their entire
business models around producing products and services that help larger
firms be more efficient or effective.
IX. The Entrepreneurial Process
 Figure 1.3 in the book (and reproduced earlier in this review) models the

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Chapter 1: Introduction to Entrepreneurship
7
1. Developing a successful business idea includes opportunity recognition,
feasibility analysis, developing an effective business model, industry and
competitor analysis, and writing a business plan.
C. Moving from an Idea to an Entrepreneurial Firm (Chapters 7–10). This is a
critical stage in the entrepreneurial process.
1. This section deals with preparing the proper ethical and legal foundation,
assessing a new venture’s financial strength and viability, building a new-
venture team, and getting financing or funding.
D. Managing and Growing an Entrepreneurial Firm (Chapters 11–15). Given
today’s competitive environment, all firms must be managed and growth
properly maintained to ensure their ongoing success. This is the final stage of
the entrepreneurial process.
1. This section deals with unique marketing issues, the importance of
intellectual property, preparing for and evaluating the challenges of
growth, strategies for growth, and franchising.
X. Developing Skills for your Career
A. Whether you want to be an entrepreneur or not, the contents of this book
address a number of “employability” skills that are critical to have a
successful career in organizations. Key among these skills are ethics and
social responsibility, critical thinking, collaboration, and data literacy.
BOXED FEATURES: QUESTIONS FOR CRITICAL THINKING
Note: Each boxed feature in the textbook is followed by four questions. The questions
can be used for individual or group assignments or can be used to stimulate classroom
discussion. The following are suggested answers for the questions at the end of each

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Chapter 1: Introduction to Entrepreneurship
11
Answer: The companies benefit because they get low cost grassroots marketing.
Also, when a company’s target market is young people, this allows for peer-to-
peer selling. Finally, it helps these companies in their recruitment process.
4. What types of start-ups would benefit the most from starting campus ambassador
programs?
Answer: It is likely that such programs help companies that sell a product or a
service to consumers and not businesses. In addition, if the target demographic
is young people, these programs help in grassroots marketing.
REVIEW QUESTIONS
1-1. Do you anticipate that entrepreneurship will continue spreading throughout the
world, or do you think its appeal will subside over time?
Answer: All indicators point to entrepreneurship continuing to spread throughout
the world. The primary reasons are: (1) the downsizing of large firms, which
have placed a large number of people off the job market that would rather start
their own firm than work for another large firm; (2) the push for improved
efficiency and effectiveness on the part of firms and individuals, which has
provided entrepreneurs the opportunity to meet needs; (3) the rapid pace of
change that is taking place worldwide, which provides entrepreneurs additional
opportunities to meet needs; and (4) the increasing recognition that
entrepreneurship is the engine that fuels economic growth and prosperity
worldwide. Most students will argue that there is no reason to think the appeal of
entrepreneurship will subside over time. The need to solve problems and meet
unmet needs is universal worldwide.
1-2. What key insights does the GEM study provide us about entrepreneurship?

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Chapter 1: Introduction to Entrepreneurship
12
1-3. What does evidence show us about the rate of failure associated with
entrepreneurial ventures?
Answer: One criticism of entrepreneurship, which is often repeated in the press,
is that the majority of new businesses fail. It simply isn’t true. The often used
statistic that 9 out of 10 businesses fail in their first few years is an exaggeration.
According to the Bureau of Labor Statistics, over half the businesses started are
still in existence five years later.
1-4. What is entrepreneurship?
Answer: The standard definition for entrepreneurship is that it’s “the process by
which individuals pursue opportunities without regard to resources they
currently control.” It can occur at the individual level, the team or group level, or
at the corporate level. There are other definitions of entrepreneurship. Fred
Wilson, a venture capitalist, defines entrepreneurship as “the art of turning an
idea into a business.” Both definitions focus on behaviors. In general,
entrepreneurship is associated with the task of identifying opportunities and
putting useful ideas into practice.
1-5. In what ways is an entrepreneur who just launched a restaurant different from
someone who just took a job as the general manager of a restaurant owned by a
major restaurant chain?
Answer: Entrepreneurial firms, which are the focus of this book, bring new
products and services to market by seizing opportunities. The person who just
launched a restaurant is bringing a new product or service to market, and is
assuming the risk associated with doing that. The person who just took a job as
the general manager of a restaurant isn’t bringing something new to market.
Although the person is assuming employment risk, he/she isn’t assuming the risk
of owning a business.

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Chapter 1: Introduction to Entrepreneurship
13
1-8. Of the three primary reasons people become entrepreneurs, which one is given
most commonly and why?
Answer: Be their own boss. The reason this is the most common motivation for
becoming an entrepreneur is either because some people have a long-standing
ambition to be their own boss or because they become frustrated working in
traditional jobs. For many people, a traditional job may be too confining and
they yearn for the freedom that entrepreneurship brings.
1-9. Why is passion such an important characteristic of successful entrepreneurs?
Answer: The passion that an entrepreneur feels for his or her business typically
stems from a belief that the business will positively influence people’s lives. It is
important that this passion exist because the process of starting and building a
new firm is demanding.
1-10. What is it about passion that makes it particularly compatible with the
entrepreneurial process?
Answer: Passion is particularly important because, although rewarding, the
process of starting a firm or building a business is demanding. Absent passion,
the demands would outweigh the potential rewards for people who are not
passionate about what they’re doing.
1-11. Why is product/customer focus an important characteristic of successful
entrepreneurs?
Answer: Although all parts of the entrepreneurial process are important,
ultimately if a new business does not have a successful product that is directed
toward a receptive market the business will fail. A product/market focus also
involves the diligence to spot product opportunities and to see them through to
completion.
1-12. What is it about “tenacity” that makes it such an important characteristic for

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