End-of-Chapter Questions / Chapter 7
Chapter Seven Chapter Seven Small Businesses and Entrepreneurship: Economic Rocket Small Businesses and Entrepreneurship: Economic Rocket
Fuel Fuel
Review Questions Review Questions
1. Review the benefits an entrepreneur might seek in starting a new business. Which
benefits are most appealing to you? Why?
2. Do you recognize any of the entrepreneurial personality characteristics in
yourselves? Which ones? Do you think it’s possible for a person to develop the
characteristics that he or she lacks? Why or why not?
3. What role does failure sometimes play in entrepreneurial success? What can an
entrepreneur gain from failure?
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4. Compare the opportunities and threats that small businesses face. Which
opportunities are most compelling? Which threats are most intimidating? Why?
5. Review the definition of niche marketer, and cite 3 examples of niche marketers.
How has technology affected niche marketing?
6. If you were to launch a new business, would you start from scratch, buy an
established independent business, or buy a franchise? Why?
7. How could you convince family and friends to support your new business launch?
What kind of assurances would they need? What could you do to keep the
funding relationships professional?
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8. Beyond personal resources, what are other funding options for small businesses?
Why don’t more entrepreneurs tap into these resources?
9. What are the key contributions of small business to the U.S. economy? Rank the
benefits in terms of importance, and provide the reasons for your ranking.
10. What factors account for the dramatic differences in entrepreneurship rates around
the world? Do you think entrepreneurship will continue to grow worldwide? Why
or why not?
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Application Questions
1. A huge number of successful businesses—such as Apple, The Cheesecake
Factory, and eBay—were built around the personal passions of their founders.
Consider your own personal passions. What do you love to do? What are you
great at doing? Can you shape any of your interests into a business opportunity?
Why or why not? Be sure to think big. For instance, if you love hanging out with
friends and listening to music, a club promotion business might make sense for
you. What steps would you need to take over the next few years to make your
―dream business‖ real?
2. Identify a person in your neighborhood who started a business from scratch, a
person who bought an existing business, and a person who bought a franchise
(your local chamber of commerce can probably help you identify candidates).
Interview each of the entrepreneurs to learn more about their experiences. What
were the pros and cons of each approach? Would they use the same approach if
they could do it over again? Why or why not? What are their long term goals?
How did the actual experiences of the entrepreneurs you interviewed compare to
the material in the book? Did you hear anything surprising?
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3. The Global Entrepreneurship Monitor (GEM) suggests that only a small% of
entrepreneurs launch ―high expectation‖ businesses—firms that they anticipate will hire 20 or more employees in the next five years. In fact, a 2005 study
suggests that just 9.8% of the world's entrepreneurs expect to create almost 75%
of the jobs generated by new business ventures. Read the summary report on the Internet at the GEM Website (http://www.gemconsortium.org/). Given that ―high
expectation‖ entrepreneurs can have a far-reaching impact on job creation and innovation, how can governments around the world encourage more ―high
expectation‖ entrepreneurship? Consider the impact of taxes, regulations, and government assistance.
4. In many developing countries, the majority of citizens make their living through
microenterprises—informal, tiny businesses that barely yield enough to survive.
Without financial services, most of these entrepreneurs find growth simply
impossible. The Foundation for International Community Assistance (FINCA), a
nonprofit established in 1984, stepped into the gap by providing micro-loans
($50–$500) to the poorest of the poor entrepreneurs, through village banks that
are administered by the people they serve. The FINCA program has been
amazingly successful at breaking the vicious cycle of poverty for its clients.
Check out their story on the Web at www.villagebanking.com. Why has the
FINCA approach worked so well? Do you think it would work in poor
communities in the United States? Why or why not?
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5. The Small Business Administration (SBA) maintains a rich, vibrant Website, and
supports a number of high impact programs to support small business growth. In
fact, every state has at least one local SBA office. Log onto the SBA Website at
www.sba.gov, and spend a few moments browsing. Be sure to check out the
sections on business opportunities and training. Then find the page for the SBA
office nearest your school. How would this information be helpful for local small
businesses? If you started a business, would you personally be likely to use any of
the SBA resources? If so, which ones? Why do you think the government spends
so much money supporting small business growth by providing this array of
resources?
Team Project Team Project
Making Lemonade from Lemons
Take a moment to write down 3 to 5 things that you find frustrating about daily life on a
fairly regular basis (e.g., ―It takes forever to find a parking spot on campus,‖ ―I hate
waiting online at the post office,‖ ―My roommate borrows my favorite jeans way too
often.‖). Be honest . . . use real problems.
Then break into groups of 3 to 5 students, and exchange papers. Take about 3 minutes to
choose one problem on the list that you received, and to develop a product or service idea
that could solve that problem. Then, together with your team, review each person’s idea
and choose the one with the most potential. Working together, take twenty minutes to
further develop the idea into a business concept. Create a logo and a slogan for your
business, and present your idea to the class, along with the problem that your business
will solve. After you’ve heard the ideas from each team, vote with your classmates for
the best new business idea.
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Case Connections Case Connections
Selling Out without Selling Out
If you’re reading this case, chances are good that you’re a member of MySpace. Chaotic,
sexy, and sometimes even profane, MySpace has become a pop culture phenomenon,
with more than 100 million registered users, plus 230,000 new sign-ups each day.
The core concept behind MySpace is self-expression. From day one, co-founders Chris
DeWolfe and Tom Anderson hated the idea of restricting user content in any way, and
they remain adamant that ―MySpace is all about letting people be what they want to be.‖
Hard-core MySpace users, mostly in their teens and twenties, post elaborate profiles that
attract hundreds—sometime thousands—of ―friends.‖ More than 2 million bands use
MySpace to showcase their stuff, in addition to countless aspiring comedians, filmmakers,
and writers. The user-generated site isn’t always pretty, but the ―anything goes‖ vibe is
part of the appeal for its members. According to Alexa, a leading Internet tracking
service, MySpace is currently the world's fourth most popular English-language Website
and the 6th most popular Website in any language. Attracting nearly 85% of all ―social
networking‖ traffic, MySpace remains well ahead of its competition.
Officially launched in 2004, MySpace vaulted to success almost immediately. Tom
Anderson confided to Forbes magazine that the site struggled for only a month before the
idea caught fire: ―One day, in particular, we saw this huge spike because of people telling
each other. It just went crazy from there. We didn’t have this big, long struggle behind it.
We put it up, and it got popular very quickly.‖ MySpace’s popularity continues to
skyrocket without the site spending even a single dollar to attract new users. Nor has
MySpace spent any money building content, since the whole point of the site is that users
do it for them. The wild success of MySpace—from both a user standpoint and a business standpoint—has attracted eager attention from a number of big players in the media
business. In mid-2005, Rupert Murdoch’s News Corp—owner of the Fox Broadcasting Company, DirecTV and a number of other heavy hitting media properties—purchased
MySpace for $580 million. But a year later, the impact of the acquisition on MySpace
still wasn’t clear.
Upsides:
? The infusion of capital from News Corp has spurred development of an amazing
array of new features for MySpace, including the MySpace Records label and a
VoIP service that allows members to call each other over the Web.
? As part of News Corp, MySpace has launched a range of international sites, and
invested in upgrades to increase page load speeds and improve the quality of the
code behind the site.
? The union with News Corp may eventually provide breakthrough content options thfrom other News Corp companies—such as 20 Century Fox—to MySpace users.
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Downsides:
? The freewheeling, ―anti-authority‖ MySpace culture may take on a conservative
corporate dimension that reflects the News Corp culture. MySpace headquarters
have already been consolidated with other News Corp Internet properties, moving
from mellow Santa Monica to buttoned-up Beverly Hills.
? The need to be ―safe,‖ not just for users but for advertisers may impinge on the
free expression that members find so appealing.
? MySpace may find itself vulnerable to up-and-coming competitors—such as
YouTube—who can move more quickly and with fewer restrictions.
You Decide
? Do you think Anderson and DeWolfe made the right choice to sell MySpace?
Why or why not? What would you have done in their place? Explain your
response.
? Do you think Anderson and DeWolfe will remain in the corporate world, or are
they more likely to leave to launch another business independently? Why?
? Will being part of News Corp be an advantage or a disadvantage for MySpace
over the long term? Explain your answer.
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End-of-Chapter Questions / Chapter 7 ? As a user-driven site, MySpace will clearly evolve over time. How do you think
the site will change? Which features do you believe will gain and lose in
popularity? Why?
? Going forward, how can MySpace maintain its offbeat, independent vibe as it
enters the mainstream culture?
Communication Connection
? Imagine for a moment that you are the founder of your own gourmet sandwich
shop in Beverly Hills. You offer a wide variety of delicious sandwiches, using top
quality meats and cheeses, and fresh organic vegetables. You are thrilled that
MySpace headquarters has moved nearby, because you know that computer
programmers typically work long hours, and you are convinced that writing code
makes people particularly hungry. But unfortunately, your shop is not within easy
walking distance and parking in Beverly Hills can be tough. You have decided to
request permission from MySpace to bring a small mobile sandwich cart into their
building a few times a day so that you can walk the halls, offering fresh food. You
know that several other local cafes will request similar access, and you suspect
that MySpace will only give permission to one business. Write a letter to
MySpace requesting access. Be sure to communicate the benefits that you will
offer and to anticipate and respond to their potential objections.
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Sources: ―MySpace Cowboys,‖ by Patricia Sellers, Fortune, September 4, 2006, p.66-74; Q&A: MySpace Founders Chris DeWolfe and Tom Anderson by Natalie Pace, Forbes
Website, January 4, 2006, http://www.forbes.com/technology/2006/01/04/myspace-
dewolfe-anderson-cx_np_0104myspace.html; Alexa Website traffic rankings global,
http://www.alexa.com/site/ds/top_sites?ts_mode=global&lang=none and English
language, http://www.alexa.com/site/ds/top_sites?ts_mode=lang&lang=en, accessed
September 9, 2006; ―MySpace, Global Society, Staying Connected,‖ by Maryanne Murray Buechner, Time magazine Website, August 30, 2006,
http://www.time.com/time/business/article/0,8599,1222589,00.html
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