The earliest computers were highly technical machines, understandable only to scientists. Steven Jobs reasoned that if computers were made easier to use and less expensive, the public would buy them. He was right. With $1,300 (most of which came from the sale of his second-hand Volkswagen van), Jobs produced what he called the Apple I computer. The success of the Apple I gave him the money to finance the design of new and improved personal computers.
In 1980 Apple sold its stock to the public for the first time, with a market value of $1.79 billion!
Bill Gates was intrigued by the success of the new personal computers entering the market in the 1970s. Gates realized that the success of personal computers would depend on the availability of "user-friendly" (easy-to-use) software. In 1975 he co-founded Microsoft Corporation, which designs the basic operating software for all IBM and IBM-compatible personal computers.
Today Microsoft Corporation is the world's largest software company, and Bill Gates, by owning 40 percent of its stock, has become the world's youngest billionaire.
Steven Jobs and Bill Gates are good examples of successful entrepreneurs. The term entrepreneur typically is used to refer to anyone who owns or operates a small business — the corner laundry, a
video store, or a lawn-mowing business.
However, when the term was coined by French
economist Jean Baptiste Say in 1800, he used it to describe a very important economic activity. An entrepreneur, Say explained, is a person who is able to make decisions that allow more efficient use of economic resources. Say's definition emphasizes the importance of management decisions that produce new and better ways to operate a business. Say would not have considered the owner of a laundry or landscaping business to be an entrepreneur, unless he or she developed a new system or product.
Say would have considered Jobs and Gates entrepreneurs along with Ray Kroc. Before 1960, hamburger stands could be found throughout the United States, but few of their owners were true entrepreneurs. Kroc, the founder of McDonald's, developed a new way to organize hamburger production to guarantee fast, friendly service and uniform quality. Other entrepreneurs who have been an important part of America's economic history are Henry Ford, who revolutionized automobile production; the Kellogg Brothers, who developed methods for producing crispy flakes of wheat and corn; and Clarence Birdseye, who made frozen foods available to consumers. Today, more than ever before, the imagination and energy of entrepreneurs continues to fuel the growth of the American economy.
Who Becomes an Entrepreneur? Many people have studied successful entrepreneurs to find out just what type of personality they have. The truth is that entrepreneurs come in all ages, shapes, sizes, and personalities. In fact, it is impossible to clearly define the characteristics of successful entrepreneurs, and this is what makes them so interesting. Here are a few examples:
• Some entrepreneurs started at an early age. Naeemah Suluki combined baby-sitting with tutoring. With regular clients, she earned more than your average sitter! Daryl Bernstein, organized about 50 businesses by age 15. He started enterprises for everything from walking dogs to taking trash cans in and out.
• Some entrepreneurs develop and sell ordinary products. Michael and Irene Szyliowicz sold their own special blend of cocoa. In fact, in 1992 they sold seven tons of cocoa to individuals and other retailers. Ed Lowe discovered that the clay granules gas stations used to absorb grease and oil could be used as cat-box filler. Lowe packaged the granules as "Kitty Litter" and started a company that earns millions of dollars each year. And Ron Rice, a high school teacher, developed the coconut oil-based Hawaiian Tropic Tanning Oil in his garage with a $500 investment. He did his own market research during the summer when he worked as a lifeguard.
• Some entrepreneurs find new ways to sell. Lane Nemeth did not develop a new product, but she did find a unique way to promote and sell educational toys. She discovered that educational toys were not always available at typical toy stores. Since she couldn't raise the money to open her own store, she decided to sell her toys at home "toy parties" hosted by friends. Nemeth's firm, Discovery Toys, now has a national sales force that uses this marketing strategy.
• Some entrepreneurs work to perfect ideas they have had for years. As a college student, Fred Smith believed that a successful air freight business could operate independently of the major airlines. He identified a need for overnight letter and small package delivery and used his energy and vision to organize Federal Express, a company that reached over $ 1 billion in sales just 10 years after it was launched.
The list of successful entrepreneurs goes on and on. Their stories are always interesting and different. Still, these entrepreneurs have much in common. They are people who own and operate their own businesses in hopes of earning a profit. The search for profits is the driving force behind production in a free enterprise system. In order to make a profit, entrepreneurs must create useful products or services, develop efficient methods of production, finance production, and market products or services at prices that exceed costs. Entrepreneurs enter business knowing that success is not guaranteed, and if plans fail, they could lose money.
What Strategies Do Entrepreneurs Use?
Many people regard entrepreneurs as lucky business people with "bright ideas." While they certainly have good ideas, their success is seldom based on luck. Successful entrepreneurs often follow one or more of these paths.
• Unexpected opportunities. A major producer of animal medicines got started in the 1950s when companies producing antibiotics for humans were embarrassed to sell to veterinarians.
• Changing market conditions. In the United States, hospitals have traditionally treated most illnesses and medical problems. Recently, entrepreneurs have organized walk-in emergency clinics, birthing centers, X-ray labs, and other facilities that provide specific medical services at lower costs than hospitals. Similarly, consumer concern about personal health has created a market for health spas, exercise equipment, and even exercise apparel. Early computer developers believed that computers would be used primarily for scientific research. During the 1950s, IBM became the industry leader by providing computers to business.
• Improving a product or process. Early cameras required cumbersome and fragile glass plates. George Eastman developed an inexpensive, light, but rugged cellulose film that completely changed photography. Eastman-Kodak continues to be a leader in the field.
• Providing an alternative product or service. Tylenol and other aspirin substitutes were developed to meet the needs of the relatively small number of people who could not take aspirin. Today the "headache relief market is dominated by aspirin substitutes. Federal Express and others in the air freight business - UPS, Emery, DHL -provided a service the U.S. Postal Service did not consider important - i.e., overnight delivery of packages. This service is in great demand today and it is extremely profitable.
• Identifying population trends. Changing population trends provide many opportunities. The growth in the number of working mothers has created a need for more child-care facilities. Similarly, as the population "ages" in the 1990s, there will be greater demand for additional nursing homes or other health-care alternatives.
Traveling these pathways requires creative and energetic business people. But the true key for success as an entrepreneur is the careful study of the marketplace to identify opportunities for products or services that meet consumers' needs and make more efficient use of our resources.
In this chapter you will learn about what it takes to be an entrepreneur and about the risks and rewards of business ownership. You also will have the opportunity to apply these principles as you and your class begin the process of forming and operating your student company.