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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


Introduction to Business

© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter Three

Entrepreneurs, Managers, and Employees

The role of the entrepreneur
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

Commercial opportunities
Commercial Opportunities

  • First mover advantage

    • the competitive advantage gained by being first to develop a new product or process

Organizational opportunities
Organizational Opportunities

  • Intrapreneurship

    • Entrepreneurial activity that takes place inside an established company

Risks of entrepreneurship
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

Why be an entrepreneur
Why Be an Entrepreneur?

  • Entrepreneurs are often driven by the challenge of creating valuable new goods and services

  • Many entrepreneurs are intrinsically motivated

Creative destruction
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.

The agency problem
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

The agency problem1
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

Levels of managers
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

Levels of managers1
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

Levels of managers2
Levels of Managers

  • Middle managers

    • employees in charge of a company’s various functions

    • responsible for using resources productively to increase its profitability

Levels of managers3
Levels of Managers

  • First-line managers

    • employees at the base of the managerial hierarchy

    • often called supervisors

Profitability efficiency and effectiveness
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

Four functions of managers
Four Functions of Managers Profitability

Figure 3.7

Managerial functions
Managerial Functions Profitability

  • Planning

    • a process that managers use to select the best business model and goals for their company

Managerial functions1
Managerial Functions Profitability

  • 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

Managerial functions2
Managerial Functions Profitability

  • 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

Managerial functions3
Managerial Functions Profitability

  • 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

The role of the employee
The Role of the Employee Profitability

  • Role

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

Career management
Career Management Profitability

  • Mentor

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