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ENTREPRENEURSHIP T E N T H E D I T I O N

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ENTREPRENEURSHIP T E N T H E D I T I O N

ROBERT D. HISRICH, PhD Bridgestone Chair of International Marketing and

Associate Dean of Graduate and International Programs College of Business Administration

Kent State University

MICHAEL P. PETERS, PhD Professor Emeritus

Carroll School of Management Boston College

DEAN A. SHEPHERD, PhD Randall L. Tobias Chair in Entrepreneurial Leadership and

Professor of Entrepreneurship Kelley School of Business

Indiana University

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ENTREPRENEURSHIP, TENTH EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2017 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2013, 2010, and 2008. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper.

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ISBN 978-0-07-811284-3 MHID 0-07-811284-2

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All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.

Library of Congress Cataloging-in-Publication Data Names: Hisrich, Robert D., author. | Peters, Michael P., author. | Shepherd, Dean A., author. Title: Entrepreneurship / Robert D. Hisrich, Michael P. Peters, Dean A. Shepherd. Description: Tenth edition. | New York, NY : McGraw-Hill Education, [2017] | Includes index. Identifiers: LCCN 2015036942 | ISBN 9780078112843 (alk. paper) Subjects: LCSH: New business enterprises. | Entrepreneurship. | Business planning. | Business enterprises—Finance. | Success in business. Classification: LCC HD62.5 .H577 2017 | DDC 658.4/21—dc23 LC record available at http://lccn.loc .gov/2015036942

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.

www.mhhe.com

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http://lccn.loc.gov/2015036942
http://lccn.loc.gov/2015036942
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To our wives, Tina, Debbie, and Suzie,

and children, Kary, Katy, Kelly, Christa, Kimberly, Jack, and Meg,

and grandchildren, Rachel, Andrew, Sarah and Jack,

for their supportive entrepreneurial spirit

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ROBERT D. HISRICH

Robert D. Hisrich is the Bridgestone Chair of International Marketing and Associate Dean of Graduate and International Programs at the College of Business Administration at Kent State University. He holds a B.A. from DePauw University and an M.B.A. and a doc- torate from the University of Cincinnati. Professor Hisrich’s research pursuits are focused on entrepreneurship and venture crea- tion: entrepreneurial ethics, corporate entrepreneurship, women and minority entrepreneurs, venture financing, and global venture creation. He teaches courses and seminars in these areas, as well as in marketing management, and product planning and development. His inter- est in global management and entrepreneurship resulted in two Fulbright Fellowships in Budapest, Hungary, horary degrees from Chuvash State University (Russia) and University of Miskolc (Hungary), and being a visiting faculty member in universities in Austria, Australia, Ireland, and Slovenia. Professor Hisrich serves on the editorial boards of several prominent journals in entrepreneurial scholarship, is on several boards of directors, and is author or co- author of over 300 research articles appearing in journals such as Journal of Marketing, Jour- nal of Marketing Research, Journal of Business Venturing, Journal of Developmental Entrepreneurship, and Entrepreneurship Theory and Practice. Professor Hisrich has authored or coauthored 36 books or their editions, including Marketing: A Practical Management Approach, How to Fix and Prevent the 13 Biggest Problems That Derail Business, Interna- tional Entrepreneurship: Starting, Developing and Managing a Global Venture (3rd edition), and Technology Entrepreneurship: Value Creation, Protection, and Capture (2nd edition).

MICHAEL P. PETERS

Michael P. Peters is a Professor Emeritus at the Marketing Department at Carroll School of Management, Boston College. He has his Ph.D. from the University of Massachusetts, Amherst, and his M.B.A. and B.S. from Northeastern University. Presently retired from full-time teaching, Professor Peters has been a visiting professor at the American College of Greece’s Graduate School of Business in Athens, Greece. There he developed an entre- preneurship and business planning component in its M.B.A. program. In addition, he con- tinues to write, lecture, serve on numerous boards, and assist in the management of a family business. Besides his passion for assisting American entrepreneurs in new ventures, he has consulted and conducted seminars and workshops worldwide related to entrepre- neurship, international and domestic decision-making for new product development, mar- ket planning, and market strategy. He has published over 30 articles in journals such as the Journal Business Research, Journal of Marketing, Journal of Marketing Research, Journal of International Business Studies, Columbia Journal of World Business, Journal of Busi- ness Venturing, and Sloan Management Review. He has coauthored three texts, Marketing a New Product: Its Planning, Development and Control; Marketing Decisions for New and Mature Products; and Entrepreneurship, now in its 9th edition. He was Department Chair and Director of the Small Business Institute at Boston College for more than 16 years. He loves photography, tennis, golf, and kayaking on Cape Cod Bay.

A B O U T T H E A U T H O R S

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DEAN A. SHEPHERD

Dean A. Shepherd is the David A. Jacobs Chair of Strategic Entrepreneurship at the Kelley School of Business, Indiana University. Dean received his doctorate and M.B.A. from Bond University (Australia). His research is in the field of entrepreneurial leadership; he investigates both the decision-making involved in leveraging cognitive and other resources to act on opportunities and the processes of learning from experimentation, in ways that ultimately lead to high levels of individual and organizational performance. Dean has published, or has accepted for publication, over 100 papers primarily in the top entrepreneurship, general management, strategic management, operations management, and psychology journals.

ABOUT THE AUTHORS vii

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P R E F A C E

Starting and operating a new business involves considerable risk and effort to overcome the inertia against creating something new. In creating and growing a new venture, the entrepreneur assumes the responsibility and risks for its development and survival and enjoys the corresponding rewards. This risk is compounded for entrepreneurs who go international or who are in fact born global. The fact that consumers, businesspeople, and government officials from every part of the world are interested in entrepreneurship is evident from the increasing research on the subject, the large number of courses and seminars on the topic, the more than two million new enterprises started each year (despite a 70% failure rate), the significant coverage and focus by the media, and the realization that this is an important aspect of the economics of the developed, developing, and even controlled economies. Who is the focus of all this attention? Who is willing to accept all the risks and put forth the effort necessary to create a new venture? It may be a man or a woman, someone from an upper-class or lower-class background, a technologist or someone lacking technological sophistication, a college graduate, or a high school dropout. The person may be an investor, manager, nurse, salesperson, engineer, student, teacher, homemaker, or retiree. It is always someone able to juggle work, family, and civic responsibilities while meeting payroll. To provide an understanding of this person and the process of creating and growing a new venture on an international basis, this 9th edition of Entrepreneurship is divided into five major sections. Part 1—The Entrepreneurial Perspective introduces the entrepreneur and the entrepreneurial process from both a historical and research perspective. The role and nature of entrepreneurship as a mechanism for creating new ventures and affecting economic development are presented, along with career aspects and the future direction of entrepre- neurship. The characteristics and background of entrepreneurs are discussed, as well as some methods for individual self-assessment. Following the presentation on corporate entrepreneurship, this part concludes with a discussion on strategies for generating and exploiting new entries. Part 2—From Idea to the Opportunity focuses on the aspects of creativity and inno- vation and all the elements in the entrepreneurial process that are a part of creating the new venture. Focus is on the various sources of ideas as well as trends occurring through this decade. Specific attention is also paid to various creative problem-solving technologies, identifying domestic and international opportunities, as well as other legal concerns in forming and launching the venture. Part 3—From the Opportunity to the Business Plan focuses on the all-important business plan. First, the overall business plan and its various aspects are presented. Then, a chapter is devoted to each of the major components of the business plan: the marketing plan, the financial plan, and the organizational plan. Part 4—From the Business Plan to Funding the Venture focuses on the most diffi- cult aspects of creating and establishing a new venture—raising capital. First, the aspects of debt versus equity and internal versus external funding are discussed. After a discussion of the alternative sources of capital (self, family and friends, suppliers and trade credit,

viii

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government grants and programs, private placements, and commercial banks), specific attention is given to three financing mechanisms: informal risk capital, venture capital, and going public. Part 5—From Funding the Venture to Launching, Growing, and Ending the New Venture presents material related to establishing, developing, and ending the venture. Particular attention is paid to developing the entrepreneurial strategy, establishing strate- gies for growth, managing the new venture during growth, early operations, expansion, and accessing external resources for growth. Managerial skills that are important to the suc- cessful performance and growth of the new venture are included in this part, which also addresses methods for ending the venture. Specific topics examined include mergers and acquisitions, franchising, joint ventures, and human and financial resources needed for growth. To make Entrepreneurship, 9th edition, as meaningful as possible to students, each chapter begins with chapter learning objectives and a profile of an entrepreneur whose career is especially relevant to the chapter material. Numerous business examples occur throughout each chapter along with important Web sites to assist the reader in getting started. Boxed summaries of articles in the news (As Seen in Business News) that illustrate the chapter discussion and Ethics boxes discussing ethical issues are found in all the chap- ters. Each chapter concludes with research tasks, class discussion questions, and selected readings for further research and study. At the end of the book is a selection of Cases that can be used along with any chapter, as well as listing of other appropriate cases on a chapter-by-chapter basis. Many people—students, business executives, entrepreneurs, professors, and publishing staff—have made this book possible. Of great assistance were the detailed and thoughtful comments of our reviewers:

Kristopher Blanchard Juliet Tracy Upper Iowa University Palm Beach State College

Rachel Collins Wilson Tammy Sohakett Middle Tennessee State University Ohio Northern University

Special thanks go to Brandon Shields for preparing this manuscript in a timely manner and to David Kralik for providing research material and editorial assistance for this edition. Also thanks to SEC attorney, Emily Renwick, for editing the securities material in Chapter 12. We are deeply indebted to our spouses, Tina, Debbie, and Suzie, whose support and under- standing helped bring this effort to fruition. It is to future entrepreneurs—our children Kary, Katy, Kelly, Christa, Kimberly, Jack, and Meg and grandchildren Rachel, Andrew, Sarah, and Jack—and the new generation they represent—that this book is particularly dedicated. May you always beg for forgiveness rather than ask permission.

Robert D. Hisrich Michael P. Peters

Dean A. Shepherd

PREFACE ix

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C O N T E N T S I N B R I E F

PART 1 THE ENTREPRENEURIAL PERSPECTIVE 1

1 The Entrepreneurial Mind-Set 2 2 Corporate Entrepreneurship 32 3 Generating and Exploiting New Entries 56

PART 2 FROM IDEA TO THE OPPORTUNITY 83

4 Creativity and the Business Idea 84 5 Identifying and Analyzing Domestic and International

Opportunities 116 6 Protecting the Idea and Other Legal Issues for the

Entrepreneur 154

PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN 179

7 The Business Plan: Creating and Starting the Venture 180 8 The Marketing Plan 210 9 The Organizational Plan 240 10 The Financial Plan 266

PART 4 FROM THE BUSINESS PLAN TO FUNDING THE VENTURE 289

11 Sources of Capital 290 12 Informal Risk Capital, Venture Capital, and

Going Public 312

PART 5 FROM FUNDING THE VENTURE TO LAUNCHING, GROWING, AND ENDING THE NEW VENTURE 355

13 Strategies for Growth and Managing the Implications of Growth 356

14 Accessing Resources for Growth from External Sources 382 15 Succession Planning and Strategies for Harvesting and

Ending the Venture 412

PART 6 CASES 437

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C O N T E N T S

PREFACE viii

PART 1 THE ENTREPRENEURIAL PERSPECTIVE 1

1 THE ENTREPRENEURIAL MIND-SET 2 Opening Profile: Ewing Marion Kauffman 3 The Nature of Entrepreneurship 6 How Entrepreneurs Think 7

Think Structurally 7 Bricolage 8 Effectuation 9 Cognitive Adaptability 11

As Seen in Business News: Do Entrepreneurs Benefit from Paranoia? 12

The Intention to Act Entrepreneurially 16 Entrepreneur Background and Characteristics 17

Education 17 Age 17 Work History 18

Role Models and Support Systems 18 Moral-Support Network 19 Professional-Support Network 19

Sustainable Entrepreneurship 20 Ethics: An Organization’s Code of Ethics 21

2 CORPORATE ENTREPRENEURSHIP 32 Opening Profile: Robert Mondavi 33 Causes for Interest in Corporate Entrepreneurship 36 Managerial versus Entrepreneurial Decision Making 37

Strategic Orientation and Commitment to Opportunity 37 Commitment of Resources and Control of Resources 39 Management Structure and Reward Philosophy 39

Ethics: Do Entrepreneurs and Managers Differ in Ethical Conduct? 40

Growth Orientation and Entrepreneurial Culture 41 Establishing a Culture for Corporate Entrepreneurship 41 Leadership Characteristics of Corporate Entrepreneurs 45

Establishing Corporate Entrepreneurship in the Organization 46

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As Seen in Business News: Opportunity or Not? 48 Problems and Successful Efforts 48 Learning from Failure 49

3 GENERATING AND EXPLOITING NEW ENTRIES 56 Opening Profile: Justin Parer 57 New Entry 58 Generation of a New Entry Opportunity 59

Resources as a Source of Competitive Advantage 59 Creating a Resource Bundle that is Valuable, Rare,

and Inimitable 60 Assessing the Attractiveness of a New Entry Opportunity 62 Information on a New Entry 62

As Seen in Business News: Elevator Pitch for Project Alabama 63

Comfort with Making a Decision under Uncertainty 64 Decision to Exploit or Not to Exploit the New Entry 64

Entry Strategy for New Entry Exploitation 65 Environmental Instability and First-Mover (Dis)Advantages 66 Customers’ Uncertainty and First-Mover (Dis)Advantages 68

Ethics: Do the Right Thing 70 Lead Time and First-Mover (Dis)Advantages 70

As Seen in Business News: Provide Advice to an Entrepreneur About Being More Innovative 72

Risk Reduction Strategies for New Entry Exploitation 73 Market Scope Strategies 73 Imitation Strategies 74 Managing Newness 76

PART 2 FROM IDEA TO THE OPPORTUNITY 83

4 CREATIVITY AND THE BUSINESS IDEA 84 Opening Profile: Elon Musk—The Iron Man Entrepreneur 85 Trends 87

Wearable Trend 87 Green Trend 87 Payments 88 Maker Trend 88 Mobile Trend 88 Health Trend 88 The Internet of Things 89

Sources of New Ideas 89 Consumers 89 Existing Products and Services 89 Distribution Channels 89 Federal Government 89

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As Seen in Business News: Does R&D Spending Correlate to Being the Most Innovative? 90

Research and Development 91 Methods of Generating Ideas 91

Focus Groups 91 Brainstorming 91 Brainwriting 92 Problem Inventory Analysis 92

Creative Problem Solving 93 Brainstorming 93 Reverse Brainstorming 94 Gordon Method 94 Checklist Method 94 Free Association 95 Forced Relationships 95 Collective Notebook Method 95 Attribute Listing 96 Big-Dream Approach 96 Parameter Analysis 96

Innovation 97 Types of Innovation 97 Defining a New Innovation (Product or Service) 98 Classification of New Products 99

Opportunity Recognition 101 Product Planning and Development Process 101

Establishing Evaluation Criteria 102 Ethics: Factors that Shape Trust in Business

and Innovation 103 Idea Stage 103 Concept Stage 104 Product Development Stage 106 Test Marketing Stage 107

E-Commerce and Business Start-Up 107 Using E-Commerce Creatively 107 E-Commerce Channels 108 Web Sites 108 Dedicated Mobile-Optimized Web Sites and Apps 109 Mobile-Optimized Web Site 110 Dedicated Mobile Apps 110 Doing E-Commerce as an Entrepreneurial Company 111

5 IDENTIFYING AND ANALYZING DOMESTIC AND INTERNATIONAL OPPORTUNITIES 116 Opening Profile: Richard China 117 Introduction 120 Opportunity Recognition and the Opportunity Assessment Plan 121 Information Sources 122

General Assistance 122

CONTENTS xiii

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General Information Sources 123 Industry and Market Information 123

As Seen in Business News: When Recession Strikes, Go Global 124 Competitive Company and Product/Services

Information 124 Government Sources 125 Search Engines 125 Trade Associations 126 Trade Publications 126

The Nature of International Entrepreneurship 126 The Importance of International Business to the Firm 126 International versus Domestic Business 126

Political 127 Economic 129 Social 131

Ethics: Aligning Corporate Social Responsibility With Company Operations 132

Technological 132 Culture 133

Language 134 Social Structure 135 Religion 135 Political and Economic Philosophy 135 Education 136 Manners and Customs 136 Aesthetics 137

Available Distribution Systems 137 Motivations to Go Global 137 Strategic Effects of Going Global 138 Foreign Market Selection 139 As Seen in Business News: Tesco Exits the U.S. Market 140 Entrepreneurial Entry Strategies 142

Exporting 142 Nonequity Arrangements 144 Direct Foreign Investment 144

Entrepreneurial Partnering 147 Aspects of International Trade 147

General Agreement on Tariffs and Trade (Gatt) 148 Trade Agreements and Free Trade Areas 148 Entrepreneur’s Strategy and Trade Agreements 148

Implications for the Global Entrepreneur 149 Appendix 5A: Example Outline of an International Business Plan 152

6 PROTECTING THE IDEA AND OTHER LEGAL ISSUES FOR THE ENTREPRENEUR 154 Opening Profile: Chet Kanojia 155 What is Intellectual Property? 156 Need for a Lawyer 156 How to Select a Lawyer 157

xiv CONTENTS

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Legal Issues in Setting Up the Organization 157 As Seen in Business News: Advice to an Entrepreneur

Regarding the Role of Intellectual Property in Software Start-Ups 158

Patents 159 International Patents 160 The Provisional Application 160 The Patent Application 160 Patent Infringement 161

Business Method Patents 161 Start-Up without a Patent 163 Trademarks 163 As Seen in Business News: Provide Advice to an Entrepreneur

Inventor about how to Make Patents Pay 164 Registering the Trademark 165

Copyrights 165 Trade Secrets and Noncompetition Agreements 166 Ethics: Noncompete Agreements: Do Employees Have an Ethical

Responsibility to Restrain from Revealing Trade Secrets to a New Employer? 167

Licensing 169 Product Safety and Liability 171 Insurance 171 Sarbanes-Oxley Act 173 Contracts 173

PART 3 FROM THE OPPORTUNITY TO THE BUSINESS PLAN 179

7 THE BUSINESS PLAN: CREATING AND STARTING THE VENTURE 180 Opening Profile: Steve Hafner 181 Planning as Part of the Business Operation 182 What is the Business Plan? 183 Who Should Write the Plan? 184 Scope and Value of the Business Plan—Who Reads the Plan? 185 As Seen in Business News: The Elevator Pitch 186 How Do Potential Lenders and Investors Evaluate the Plan? 186 Ethics: Protecting Your Business Idea 188 Presenting the Plan 188 Information Needs 188

Market Information 189 Operations Information Needs 192

Financial Information Needs 193 Using the Internet as a Resource Tool 193 Writing the Business Plan 194

Introductory Page 196 Executive Summary 196

CONTENTS xv

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Environmental and Industry Analysis 197 Description of Venture 199 Production Plan 201 Operations Plan 201 Marketing Plan 202 Organizational Plan 202 Assessment of Risk 203 Financial Plan 203

As Seen in Business News: An Unusual Start-Up: Elevator Pitch for Coffee Pouches 204

Appendix 204 Using and Implementing the Business Plan 204

Measuring Plan Progress 205 Updating the Plan 206

Why Some Business Plans Fail 206

8 THE MARKETING PLAN 210 Opening Profile: Neal Blumenthal 211 Industry Analysis 212

Competitor Analysis 213 Marketing Research for the New Venture 214

Step One: Defining the Purpose or Objectives 214 Step Two: Gathering Data from Secondary Sources 214 Step Three: Gathering Information from Primary Sources 215

As Seen in Business News: Provide Advice to an Entrepreneur on How to Build a Web Site 217

Step Four: Analyzing and Interpreting the Results 220 Difference between a Business Plan and a Marketing Plan 220 Understanding the Marketing Plan 220 Characteristics of a Marketing Plan 221 The Marketing Mix 223 Ethics: Employee’s Right to Privacy 224 Steps in Preparing the Marketing Plan 224

Defining the Business Situation 224 Defining the Target Market: Opportunities and Threats 225 Considering Strengths and Weaknesses 227 Establishing Goals and Objectives 228 Defining Marketing Strategy and Action Programs 228 Marketing Strategy: Consumer versus

Business-to-Business Markets 232 As Seen in Business News: Web-Based Marketing Research:

Advice to an Entrepreneur 233 Budgeting the Marketing Strategy 233 Implementation of the Market Plan 234 Monitoring the Progress of Marketing Actions 234 Appendix 8A: The Social Media Plan 238

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9 THE ORGANIZATIONAL PLAN 240 Opening Profile: Sara Blakely 241 Developing the Management Team 242 Legal Forms of Business 243

Ownership 243 Liability of Owners 243

As Seen in Business News: Advice to an Entrepreneur: Issues to Consider in Delegating Responsibility 244

Costs of Starting a Business 246 Continuity of Business 246 Transferability of Interest 247 Capital Requirements 247 Management Control 248 Distribution of Profits and Losses 248 Attractiveness for Raising Capital 249

Tax Attributes of Forms of Business 249 Tax Issues for Proprietorship 249 Tax Issues for Partnership 249 Tax Issues for Corporation 251

The Limited Liability Company versus the S Corporation 251 S Corporation 251

Advantages of an S Corporation 252 Disadvantages of an S Corporation 252

Ethics: What Ethical Responsibilities Does a Partner Have when there is a Conflict of Interest? 253

The Limited Liability Company 253 Advantages of an LLC 254

Designing the Organization 254 Building the Management Team and a Successful

Organization Culture 256 The Role of a Board of Directors 257 As Seen in Business News: Elevator Pitch for Unique

Travel Start-Up 258 The Board of Advisors 259 The Organization and Use of Advisors 260

10 THE FINANCIAL PLAN 266 Opening Profile: Tony Hsieh 267 Operating and Capital Budgets 269 Ethics: Ethical Dilemma 270 Forecasting Sales 271 Pro Forma Income Statements 272 Pro Forma Cash Flow 275 As Seen in Business News: What to do When

Cash Runs Out 277

CONTENTS xvii

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Pro Forma Balance Sheet 279 Break-Even Analysis 281 Pro Forma Sources and Applications of Funds 282 Software Packages 283 As Seen in Business News: Elevator Pitch

for Safe Driving Apps 284

PART 4 FROM THE BUSINESS PLAN TO FUNDING THE VENTURE 289

11 SOURCES OF CAPITAL 290 Opening Profile: Matt Flannery and Jessica Jackley 291 An Overview 293

Debt or Equity Financing 293 Internal or External Funds 294

Personal Funds 294 Family and Friends 295 As Seen in Business News: The Real Impact of Business

Incubators 296 Commercial Banks 297

Types of Bank Loans 297 Cash Flow Financing 298 Bank Lending Decisions 299

Role of the SBA in Small-Business Financing 300 Research and Development Limited Partnerships 301

Major Elements 301 Procedure 301 Benefits and Costs 302 Examples 302

Government Grants 303 Procedure 304 Other Government Grants 304

Private Financing 305 Types of Investors 305 Private Offerings 306 Regulation D 306

Bootstrap Financing 307

12 INFORMAL RISK CAPITAL, VENTURE CAPITAL, AND GOING PUBLIC 312 Opening Profile: Richard Branson 313 Financing the Business 316 Private Equity 318 Informal Risk-Capital Market 318 As Seen in Business News: Angellist—The Future of

Investing? 320

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Crowdfunding 323 Venture Capital 324

Nature of Venture Capital 324 Overview of the Venture-Capital Industry 324

As Seen in Business News: Entrepreneurs’ Preferences in Venture Capital 325

Venture-Capital Process 329 Locating Venture Capitalists 333 Approaching A Venture Capitalist 334

Valuing Your Company 335 Factors in Valuation 336 Ratio Analysis 337 Liquidity Ratios 337 Activity Ratios 337 Leverage Ratios 338 Profitability Ratios 338 General Valuation Approaches 339 General Valuation Method 340 Valuation Turned Upside Down—Evaluating an Internet

Company 341 Deal Structure 342 Going Public 343

Advantages 343 Disadvantages 344

Timing of Going Public and Underwriter Selection 346 Timing 346 The Registration Statement 347 Procedure 347

Legal Issues and Blue-Sky Qualifications 348 Legal Issues 348 Blue-Sky Qualifications 348

After Going Public 348 Aftermarket Support 349 Relationship with the Financial Community 349 Reporting Requirements 349

PART 5 FROM FUNDING THE VENTURE TO LAUNCHING, GROWING, AND ENDING THE NEW VENTURE 355

13 STRATEGIES FOR GROWTH AND MANAGING THE IMPLICATIONS OF GROWTH 356 Opening Profile: Brian and Jennifer Maxwell 357 Growth Strategies: Where to Look for Growth Opportunities 358

Penetration Strategies 359 Market Development Strategies 360 Product Development Strategies 360 Diversification Strategies 361

CONTENTS xix

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As Seen in Business News: To Grow or Not to Grow is the Question 362

Example of Growth Strategies 363 Implications of Growth for the Firm 363

Pressures on Human Resources 363 Pressures on the Management of Employees 364 Pressures on the Entrepreneur’s Time 364 Pressures on Existing Financial Resources 364

Overcoming Pressures on Existing Human Resources 364 Ethics: Lessons from Enron 365 Overcoming Pressures on the Management of Employees 366 Overcoming Pressures on Entrepreneurs’ Time 367

Basic Principles of Time Management 368 Overcoming Pressures on Existing Financial Resources 369