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Entrepreneurship: Theory, Process, Practice Learn the true process of a successful entrepreneur with ENTREPRENEURSHIP: THEORY. Download PDF Entrepreneurship: Theory, Process, Practice, PDF Download Entrepreneurship: Theory, Process, Practice, Download. Trove: Find and get Australian resources. Books, images, historic newspapers, maps, archives and more.
It can also compensate for personal shortcomings. Simple problems bore them, unsolvable ones do not warrant their time. They believe that their accomplishments and setbacks are within their own control and influence and that they can affect the outcome of their actions.
When they decide to participate in a venture, they do so in a very calculated, carefully thought out manner. In many cases this vision develops over time as the individual begins to learn what the firm is and what it can become.
Most successful entrepreneurs have highly qualified, well-motivated teams that help handle the growth and development of the venture. Dealing with Failure Entrepreneurs use failure as a learning experience. They have a tolerance for failure.
Kuratko D., Frederick H., O'Connor A. Entrepreneurship: Theory, Process, and Practice
The most effective entrepreneurs are realistic enough to expect difficulties and failures. If entrepreneurs deal effectively with grief that emanates from failure then they will not become disappointed, discouraged, or depressed. In adverse and difficult times, they will continue to look for opportunity. The Grief Recovery Process Grief is a negative emotional response to the loss of something important triggering behavioral, psychological, and physiological symptoms.
The emotions generated by failure i. However, avoiding negative emotions is unlikely to be successful in the long-run Research indicates that entrepreneurs may recover more quickly from a failure if they oscillates between a loss and a restoration orientation. The Entrepreneurial Experience The prevalent view of entrepreneurship in the literature is that entrepreneurs create ventures.
Its narrow framing, however, neglects the complete process of entrepreneurship. The creation of sustainable enterprises involves three parallel, interactive phenomena: None are predetermined or fixed—they define and are defined by one another. The Dark Side of Entrepreneurship Certain negative factors may envelop entrepreneurs and dominate their behavior.
Although each of these factors has a positive aspect, it is important for entrepreneurs to understand their potential destructive side as well. A typology of entrepreneurial styles helps describe the risk-taking activity of entrepreneurs. In this model, financial risk is measured against the level of profit motive the desire for monetary gain or return from the venture. Stress and the Entrepreneur To achieve their goals, entrepreneurs are willing to tolerate the effects of stress: Lacking the depth of resources, entrepreneurs must bear the cost of their mistakes while playing a multitude of roles, such as salesperson, recruiter, spokesperson, and negotiator.
Simultaneous demands can lead to role overload. Entrepreneurs often work alone or with a small number of employees and therefore lack the support from colleagues. A basic personality structure, common to entrepreneurs and referred to as type A personality structure, describes people who are impatient, demanding, and overstrung.
Loneliness—Entrepreneurs are isolated from persons in whom they can confide. They tend not to participate in social activities unless there is some business benefit. They work long hours, leaving them with little or no time for civic recreation.
People Problems—Most entrepreneurs experience frustration, disappointment, and aggravation in their experience with people. Need to Achieve—Achievement brings satisfaction. However, many entrepreneurs are never satisfied with their work no matter how well it is done. Networking—One way to relieve the loneliness of running a business is to share experiences by networking with other business owners.
Getting Away from It All—The best antidote could be a well-planned vacation. Communicating with Employees—Entrepreneurs are in close contact with employees and can readily assess the concerns of their staff. Finding Satisfaction Outside the Company—Entrepreneurs need to get away from the business occasionally and become more passionate about life itself; they need to gain some new perspectives.
Delegating—Entrepreneurs find delegation difficult because they think they have to be at the business all the time and be involved in all aspects of the operation. Exercising Rigorously—Research demonstrates the value of exercise regimens on relieving the stress associated with entrepreneurs. The Entrepreneurial Ego Certain characteristics that usually propel entrepreneurs into success also, if exhibited in the extreme have destructive implications for entrepreneurs.
As there is no simple universal formula for solving ethical problems, entrepreneurs have to choose their own codes of conduct; the outcome of their choices makes them who they are. Ethics represents a set of principles prescribing a behavioral code that explains what is good and right or bad and wrong.
Ethics may outline moral duty and obligations. Legality provides societal standards but not definitive answers to ethical questions. Because deciding what is good or right or bad and wrong is situational, instead of relying on a set of fixed ethical principles, entrepreneurs should an ethical process for making decisions. The Matter of Morality Requirements of law may overlap at times but do not duplicate the moral standards of society. Some laws have no moral content whatsoever.
Some laws are morally unjust. Some moral standards have no legal basis. Legal requirements tend to be negative, morality tends to be positive. Business decisions, in the context of entrepreneurial ethics are complex.
Establishing a Strategy for an Ethical Enterprise Entrepreneurs need to commit to an established strategy for ethical enterprise. Ethical Codes of Conduct A code of content is a statement of ethical practices or guidelines to which an enterprise adheres. Ethical Responsibility A strategy for ethical responsibility should encompass three major elements: Ethical Considerations of Corporate Entrepreneurs Recognize the fine line between resourcefulness and rule breaking. Recognize that unethical consequences that can result in organizations where there are barriers to innovation.
Recognize that companies can take action to combat unethical behavior by: In attempting better to understand the driving forces within entrepreneurs, we can gain a more complete perspective if we take a psychological look at entrepreneurs and consider the entrepreneurial mind-set. Part of that mind-set includes the package of mental processes that entrepreneurs possess, which include attention, remembering, producing and understanding language, solving problems, and making decisions.
Entrepreneurial cognition refers to the knowledge structures that people use to make assessments, judgments, or decisions involving opportunity evaluation, venture creation, and growth. This process is metacognitive.
Kuratko D., Frederick H., O'Connor A. Entrepreneurship: Theory, Process, and Practice
The process responsible for ultimately selecting a response i. Entrepreneurs have a tolerance for ambiguity, are calculated risk takers, and exude passion. What do these characteristics mean for any potential entrepreneur?
Entrepreneurs face uncertainty compounded by constant changes that introduce ambiguity and stress into every aspect of the enterprise. A tolerance for ambiguity exists when the entrepreneur can deal with the various setbacks and changes that constantly confront him or her.
Successful entrepreneurs are not gamblers—they are calculated risk takers. These strategies include getting others to share inherent financial and business risks with them—for example, by persuading partners and investors to put up money, creditors to offer special terms, and suppliers to advance merchandise. Entrepreneurial passion is a fundamental emotional experience for entrepreneurs. It is a discrete emotion that is quite intense being described as an underlying force that fuels our strongest emotions, or the intensity felt when engaging in activities that are of deep interest, or the energy that enables entrepreneurs to achieve peak performance.
Is it true that most successful entrepreneurs have failed at some point in their business careers? Entrepreneurs use failure as a learning experience; hence, they have a tolerance for failure. How should failure be dealt with by entrepreneurs? As noted above, the most effective entrepreneurs are realistic enough to expect difficulties and failures. If they can deal effectively with any grief that emanates from the failure then they will not become disappointed, discouraged, or depressed by a setback or failure.
In this way entrepreneurs will believe that they learn more from their early failures to form the foundation of later successes. Research shows that an entrepreneur recovers more quickly from a failure if he or she oscillates between a loss and a restoration orientation. This oscillation means that the entrepreneur can gain the benefits of both orientations while minimize the costs of maintaining either for an extended period.
Be complete in your answer. The dark side of entrepreneurship is a destructive course that exists within the energetic drive of a successful entrepreneur. There are three major traits that are associated with the dark side of entrepreneurship: All potential entrepreneurs need to be aware that the dark side of entrepreneurship exists. What are the four specific areas of risk that entrepreneurs face?
Describe each. The four specific areas of risk are as follows: Financial risk—In most new ventures the individual puts a significant portion of his savings or other resources at stake. Career risk—A question frequently raised by would-be entrepreneurs is whether they will be able to find a job or go back to their old jobs if their venture should fail.
Family and social risk—Entrepreneurs expose their families to the risk of an incomplete family experience and the possibility of permanent scars. Psychic risk—The greatest risk may be to the well-being of the entrepreneur. What are the four causes of stress among entrepreneurs? How can an entrepreneur deal with each of them? There are four causes of stress: To reduce stress, entrepreneurs must define the cause of the stress.
After clarifying the cause of stress, the entrepreneur can combat excessive stress by acknowledging its existence, developing coping mechanisms, and probing personal unacknowledged needs.
Describe factors associated with the entrepreneurial ego. The factors associated with the entrepreneurial ego include: Ethics must be based more on a process than on a static code.
What does this statement mean? Do you agree? Why or why not? Yes, I agree, because we live in an ever-changing environment where each day is different and each decision has differing alternatives and circumstances.
A small pharmaceutical firm has just received permission from the Food and Drug Administration FDA to market its new anticholesterol drug.
Although the product has been tested for five years, management believes that serious side effects may still result from its use, and a warning to this effect is being printed on the label. If the company markets this FDA-approved drug, how would you describe its actions from an ethical and legal standpoint?
Use Figure 2. There is nothing illegal about marketing the product, because all necessary actions were taken to get the drug approved by the FDA and the benefits must have outweighed the side effects. On the other side, however, marketing the product may not be unethical, because the company is providing information concerning the side effects on the product for the consumer, and therefore, the consumer must make the choice.
Management may continue to put more money into the research and development of the product. The four distinct roles are non-role, role failure, role distortion, and role assertion. Role failure includes superficial performance appraisals and not confronting expense account cheating by employees. Role assertion refers to socially questionable acts such as not withdrawing a product in the face of product safety allegations.
Why do complex decisions often raise ethical considerations for the entrepreneur? The reasons why business decisions of entrepreneurs are so complex are as follows: Cal Whiting believes entrepreneurs need to address the importance of ethics in their organizations.
However, he is unsure of where to begin in his own company because the entire area is unclear to him. What would you suggest? Where can he begin? What should he do? Be as practical as you can in your suggestions. Cal Whiting needs to carefully examine his organization in order to determine actions that might be considered morally questionable.
From there he can develop a code of conduct that would represent the ethical positions expected of all employees. Finally, he can follow the four principles for ethical management involved in the holistic approach. These include: What is the concept of entrepreneurial motivation and how has it been depicted? Because motivation plays an important part in the creation of new organizations, theories of organization creation that fail to address this notion are incomplete.
Therefore, one research approach is the motivational process that an entrepreneur experiences. Explain the concept of entrepreneurial persistence and how it is being examined. Entrepreneurs are not intimidated by difficult situations. Although entrepreneurs are extremely persistent, they are realistic in recognizing what they can and cannot do and where they can get help to solve difficult but unavoidable tasks.
Experience and persistence teaches lessons to entrepreneurs that are used to vault them into future successes.
The decision to persist is influenced by personal characteristics of the entrepreneur as well as by feedback from the environment.
In the past month, he has received loan applications from three entrepreneurs. All three have fledgling businesses with strong potential. However, Paul believes it is important to look at more than just the business itself; the individual also needs close scrutiny.
The three entrepreneurs are 1 Robin Wood, owner of a small delicatessen located in the heart of a thriving business district; 2 Richard Trumpe, owner of a ten-minute oilchange-and-lube operation; and 3 Phil Hartack, owner of a bookstore that specializes in best sellers and cookbooks. In the past, Jane has recommended 87 people for loans, and only two of these ventures have failed.
This success rate is much higher than that for commercial loans in general. Which of the three applicants do you think comes closest to having the mind-set of an ideal entrepreneur?
To which applicant would you recommend that the bank lend money? Defend your answer. Can these three entrepreneurs do anything to improve their entrepreneurial profile and their chances for success? Be specific in your answer. It has produced and marketed a number of different toys and appliances that have done very well in the marketplace.
Late last year, the product designer at the company, Tom Berringer, told the president, Paula Glades, that he had invented a small, cuddly, talking bear that might have a great deal of appeal.
Entrepreneurship: Theory, Process, Practice, 4th Edition
The bear is made of fluffy brown material that simulates fur, and it has a tape inside that contains 50 messages. The Glades Company decided to find out exactly how much market appeal the bear would have. Fifty of the bears were produced and placed in kindergartens and nurseries around town.
The results were better than the firm had hoped. One of the nurseries reported: Based on these data, the company decided to manufacture and market 1, of the bears. At the same time, a catchy marketing slogan was formulated: The first batch of 1, bears sold out within a week.
The company then scheduled another production run, this time for 25, bears. Last week, in the middle of the production run, a problem was uncovered.
The process of making the bear fur was much more expensive than anticipated. The company is now faced with two options: It can absorb the extra cost and have the simulated fur produced, or it can use a substitute fur that will not last as long.
Specifically, the original simulated fur will last for up to seven years of normal use; the less-expensive simulated fur will last for only eight months. Some of the managers at Glades believe that most children are not interested in playing with the same toy for more than eight months; therefore, substituting the less-expensive simulated fur for the more-expensive fur should be no problem.
Others believe that the company will damage its reputation if it opts for the substitute fur. The final decision on the matter rests with Paula Glades. People on both sides of the issue have given her their opinion.
The bear looks the same. Is the recommendation of the marketing vice president legal? Is it ethical? If you were advising Paula, what would you recommend?
Reflection Exercise: By being self-confident and articulating the value your business provides your clients, people will in turn share your enthusiasm and grow more comfortable maintaining their business relationship with you.
Your customers will not believe in someone who does not believe in him- or herself, so be confident and outspoken about what you have to offer.
The following steps will get you started: Be genuine in your excitement.
Keeping customers happy is hard enough without having to maintain a false image. People are more inclined to download from businesses they trust, and the entrepreneurs associated with those businesses are instrumental in building their confidence.
To start a business requires a tremendous amount of enthusiasm and energy; do not be afraid to let it show when you talk with potential customers. If people are excited about you, they are more willing to compromise when it comes time to do business.
Redefine rejection as learning. You can please some of the people all of the time and all of the people some of the time, but you cannot please all of the people all of the time. Remembering this truism is important when trying to win customers. Embracing rejection is a trait that all successful entrepreneurs eventually develop: You will learn much more from your failures than you will from your successes.
When people are not receptive to what you have to say, tweak your message or find another group of people. Even the best ideas will have their naysayers, so listen to both positive and negative feedback, improve your message, and start again.
Convey personal successes. Do not hide your accomplishments. Starting a business is hard work—when your dedication pays off, let it be known.
People like to believe that they are backing a winner, so talking about your victories is a sure way to get people to see you in that light. Also, remember that lessons learned are milestones; relaying your experiences and what you have gained from them demonstrates that you are wise enough to learn and grow so that you will not make the same mistakes twice. Empathize with others.
Empathizing with your customers lets them know that you understand their position and, more importantly, you are interested in helping them. Being creative and willing to customize your product to fit the needs of an organization will show the people involved how much their business means to you.
Are you ashamed to be proud of your accomplishments and what you have to offer? Do you think that if people believe in you, they will believe in your business, and if they believe in your business, they will most likely become a customer? Explain your thinking here. Please read the following business situations and write the number in the blank that shows the degree to which you personally feel they are ethically acceptable.
Never Acceptable Indifferent Always Acceptable 1 2 3 4 5 6 7 1. In order to increase profits, a general manager used a production process that exceeded legal limits for environmental pollution.
Because of pressure from his brokerage firm, a stockbroker recommended a type of bond that he did not consider to be a good investment. A small business received one-fourth of its gross revenue in the form of cash. The owner reported only one-half of the cash receipts for income tax purposes.
A company president found out that a competitor had made an important scientific discovery that would sharply reduce the profits of his own company. A highway building contractor deplored the chaotic bidding situation and cutthroat competition. He reached an understanding with other major contractors to permit bidding that would provide a reasonable profit.
A company president recognized that sending expensive Christmas gifts to downloading agents might compromise their positions. However, he continued the policy because it was common practice and changing it might result in loss of business.
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A corporate director learned that his company intended to announce a stock split and increase its dividend. On the basis of this information, he bought additional shares and sold them at a gain following the announcement.
A corporate executive promoted a loyal friend and competent manager to the position of divisional vice president in preference to a better-qualified manager with whom he had no close ties.
An engineer discovered what he perceived to be a product design flaw that constituted a safety hazard. His company declined to correct the flaw. The engineer decided to keep quiet rather than take his complaint outside the company. A comptroller selected a legal method of financial reporting that concealed some embarrassing financial facts that would otherwise have become public knowledge.
Here is how entrepreneurs responded. Provide some examples from your own experiences at school, work, or sports. Be specific from your own examples. Enron, Tyco, Arthur Andersen, and Computer Associates were all guilty of unethical practices during a period of economic prosperity. Historically, misconduct and bad judgment often have coincided with periods of great prosperity.
This period was made notorious by, among other people, Ivar Kreuger. Kreuger founded an international conglomerate in wooden matches by lending money to foreign governments in return for nationwide match monopolies—the money from such loans came from the sale of stock.
The following list explains five ways investors are demanding more information from companies to ensure that corporate accounting is not finagling the financials. Bring hidden liabilities back onto the balance sheet. Though they are legitimate, SPEs have been controversial for nearly 30 years. Current practices allow removal of an SPE from the balance sheet if an investor is willing to contribute just 3 percent of its capital.
Highlight the things that matter. Anything less than 5 or 10 percent of earnings or assets generally was considered immaterial to overall performance and allowed to be left off the statements. Now the SEC and the Financial Accounting Standards Board are evaluating the qualitative factors in addition to the quantitative factors. List the risks and assumptions built into the numbers.
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A corporate director learned that his company intended to announce a stock split and increase its dividend.
Establishing a Strategy for Ethical Enterprise A. Behind Every Good Decision: Experience and persistence teaches lessons to entrepreneurs that are used to vault them into future successes. Siedel Negotiating So Everyone Wins: