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Chapter Three

McGraw-Hill/Irwin Introduction to Business. © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Three. Entrepreneurs, Managers, and Employees. The Role of the Entrepreneur. Entrepreneur

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Chapter Three

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  1. McGraw-Hill/Irwin Introduction to Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Three Entrepreneurs, Managers, and Employees

  2. The Role of the Entrepreneur • Entrepreneur • a person ready to supply the enterprise – energy, boldness, courage, spirit, expertise – necessary to start and grow a business See the qualities of an entrepreneur at sideroad.com

  3. Commercial Opportunities • First mover advantage • the competitive advantage gained by being first to develop a new product or process

  4. Organizational Opportunities • Intrapreneurship • Entrepreneurial activity that takes place inside an established company

  5. Risks of Entrepreneurship • Entrepreneurs often overestimate their ability to create new products • Entrepreneurs underestimate how difficult it is to reach prospective customers • Entrepreneurs may not realize how much ready cash is needed to see a small business through its critical “birth” period

  6. Why Be an Entrepreneur? • Entrepreneurs are often driven by the challenge of creating valuable new goods and services • Many entrepreneurs are intrinsically motivated

  7. Creative Destruction • The process by which old, inefficient companies are driven out of business and replaced by new more efficient ones. • Smaller companies with cutting edge products often become takeover targets of larger, more established companies.

  8. The Agency Problem • Delegate • giving up decision-making authority to other people • Agency problem • the problem that arises because of the separation of the ownership and control of a business

  9. The Agency Theory Problem Figure 3.3

  10. The Agency Problem • Managers • employees to whom a company’s owners delegate responsibility for using its resources to create profitable goods and services • Stock options • the right o buy a stock at a certain price and to benefit from increases in the stock’s value in the future by selling it

  11. Levels of Managers • Board of directors • experienced business executives from inside and outside of a company who are elected by their company’s shareholders to act as their representatives

  12. Levels of Managers • Chief executive officer • a company’s top manager, responsible for overseeing the operations of the company • Top managers • employees who are responsible for developing a company’s business model and ultimately responsible for its success or failure

  13. Levels of Managers • Middle managers • employees in charge of a company’s various functions • responsible for using resources productively to increase its profitability

  14. Levels of Managers • First-line managers • employees at the base of the managerial hierarchy • often called supervisors

  15. Levels of Management Figure 3.4

  16. Profitability: Efficiency and Effectiveness • Efficiency • a cost-focused measure of how productively a company’s resources are being used to produce goods and services • Effectiveness • a revenue-focused measure of how competitive the firm’s business model is

  17. The Relationship Between Efficiency, Effectiveness, and Profitability Figure 3.6

  18. Four Functions of Managers Figure 3.7

  19. Managerial Functions • Planning • a process that managers use to select the best business model and goals for their company

  20. Managerial Functions • Organizing • a process managers use to create a company’s organizational structure • Organizational culture • the set of values, norms, and beliefs shared by members of an organization that determine how well they work together to further the company’s goals

  21. Managerial Functions • Leading • the ability to develop a plan and motivate others to pursue it • Cross-functional team • a group of people from different functions who work together on a particular project

  22. Managerial Functions • Controlling • the process of evaluating whether or not a company is achieving its goals and taking action if it is not • Benchmarking • the practice of comparing a business’s strengths and weaknesses to those of its competitors

  23. The Role of the Employee • Role • the set of tasks a person is expected to perform because of the position he or she holds in an organization

  24. Career Management • Mentor • a person who provides advice, guidance, and technical knowledge to other people (mentees) in order to help them advance their careers

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