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German Entrepreneurship in the Information Age

By Lamar Gary

Supervisor: Dr. Andreas Thümmel Asst. Supervisor: Prof. Marcus Öhlrich

Darmstadt School of Applied Science MBA program. August, 2011

"This thesis was submitted in partial fulfillment of the requirements for the Masters of Business Administration (MBA) degree

at the Darmstadt School of Applied Science (Hochschule Darmstadt), Darmstadt, Germany, August, 10 2011."

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Table of Contents

Part 1 – Entrepreneurship Issues

Introduction 5

I. A Look at Entrepreneurs 1. What kind of person is an entrepreneur? 7 2. The types of entrepreneurship. 11 3. Entrepreneurs out of necessity. 15 II. Assistance and Hindrances to Entrepreneurs 1. Culture and Peer Pressure. 18 2. The Government. 20 3. Financial Abuse. 24 III. Entrepreneurship and Technology 1. The Internet as an entrepreneurial tool. 27 2. Going mobile. 33 3. Important Technology Laws. 35 IV. Innovation and Business Creation 1. Innovation – what exactly is it? 37 2. Lack of Innovation. 39 3. Innovation at work – Blue Ocean Strategies. 40

V. On Advisors 1. Good Advice is a Treasure. 42 PART 2 – LAMARVELOUS ENGLISH UG(haftungsbeschänkt) &CO KG VI. Business Analysis 1. The Mission, Vision, and Business Philosophy. 44 2. The Business Model. 48 3. The Shape of Management. 51 4. The SWOT Analysis for Lamarvelous English 54 5. Porter’s Five Forces Analysis for Lamarvelous English 56 VII. Accounting Setup

1. Managing Costs. 58 2. Determining the Right Price. 59

VIII. Marketing Tactics

1. Guerilla Marketing. 63 2. Our Target Markets. 65 3. Further Analysis. 67 4. Lamarvelous English’s Social Media Features. 71

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IX. The Business Model

1. The Business Model. 73 2. The First Entrepreneurial Mistake. 77 X. Conclusion 79

XII. Appendix 81

Figure 1 81

Figure 2 82

Figure 3 83

Figure 4 84

Figure 5 85

Figure 6 86

Figure 7 87

Figure 8 88

Figure 9 89

Figure 10 90

Figure 11 90

Figure 12 91

Figure 13 92

Figure 14 93

Figure 15 94

Figure 16 95

Works Cited 96

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INTRODUCTION

In the 18th century, the world entered the Industrial age.

Business boomed and times were great all over the world. In the 20th century, society found

itself as the beneficiaries of industry. The German economy boomed like never before after

Second World War reconstruction. In America, people achieved “the American Dream” by

working in plants and factories, and not just with plants and animals. Companies were

desperate to hire workers and produce products, purchased by the new thriving populations.

However, two products were produced at the end of the industrial age that would

change the way business was conducted forever; the computer and the internet in the mid

twentieth century. The invention of these two items moved the world from an Industrial

economy to an Information economy.

As the computer evolved, it became possible for people to do more with less.

Communication was simplified, tedious, arduous calculations that were once nightmares to

have to perform became easy enough for a child to master. Not only did business advance for

those offering products and services, but customers were also able to shop more conveniently,

persuading them to make purchases they would not ordinarily make had they been in the old

economic models of the industrial age. Customers became more informed, forcing companies

to improve their processes and pricing to compete against other businesses.

My thesis paper, entitled German Entrepreneurship in the Information Age, is a

theoretical paper which aims to tackle two major aspects of this new era:

1) It will look into the aspects that make entrepreneurship possible.

2) How does the technology of today’s information age affect entrepreneurialism?

Throughout the thesis, there will be references to American entrepreneurial activity to

compare the entrepreneurial activity of the number one world economy with the facts and

statistics that relate to German entrepreneurship. Since my entrepreneurial venture is in

Germany, it is beneficial to look at some of the factors affecting startups in Germany itself.

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This paper is divided into two parts. The first part will discuss the entrepreneurial

process. It will describe what kind of person becomes an entrepreneur, and what factors an

entrepreneur must consider in starting his company. The second part of the paper will

emphasize the strategies that I have developed in making my own business, an e-commerce

based company in the Hesse district of Germany.

Authors Note:

In the paper, I refer to entrepreneurs and people in the, “he,” third person singular.

This is only to prevent pronoun confusion and can be applied to females just as easily as

males.

In the second part of the paper, mention of “the company” refers to Lamarvelous

English UG (haftungsbeschränkt) & Co. KG, the company that I formed as my project. The

mention of “the founder” refers to myself.

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I. A Look at Entrepreneurs

1. What kind of person is an Entrepreneur?

The Cambridge online dictionary, advanced learner’s edition defines an entrepreneur

as the following:

“Entrepreneur - someone who starts their own business, especially when this involves seeing

a new opportunity” - (Cambridge).

This definition is crucial in understanding a successful company because the

foundation of any successful company is the entrepreneur who began the company in the first

place.

While facts and figures have their place, entrepreneurship is a personal right-brained

function that must start within the inner man. A man’s personal strengths, weaknesses,

temptations, faults, benefits, and more must be analyzed before he starts on such an arduous

undertaking. It can be described just as easily as a spiritual journey as it is a practical business

operation. While business fundamentals come into play as well, the chances for success drop

drastically without an initial self-analysis.

Taking the time to prepare, to analyze and see if one has what it takes to be an

entrepreneur is critical because the path is not easily abandoned and for some, what was seen

as the dream career may turn into a nightmare. (Brodsky, 2011)

Though often overlooked by the average person, the role of the entrepreneur in

forming a powerful firm is the essential element of business study because entrepreneurship

and the entrepreneur itself sets the tone for every aspect of how the company is run and

provides the impetus for its business.

“It is the very origin of all businesses—after all… there would be no business schools

if there had never been any entrepreneurs!"(Rubin, 2011)

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There are certain types of people who thrive as entrepreneurs. Those destined for

entrepreneurship come from all spectrums. On average, there tend to be more men than

women entrepreneurs across borders, with every country having at least a slightly higher male

proportion.1

Entrepreneurs can also be broken down into natives and foreigners, young and old, to

name a few categories. While the thought of entrepreneurship these days rests on genius whiz

kids who make the next Facebook, in actuality, in America, it is the older, more mature

people who are leading the entrepreneurial trend.

“Most of the growth in startups was propelled by 35- to 44-year-olds, followed by

people 55 to 64. Forget Internet whiz kids in their 20’s. It’s the gray-heads who are taking the

reins of the new startup economy. (Reich, 2010)

An entrepreneur is also said to have various personal traits. Of those mentioned, the

most important ones in news articles, magazines and reports tend to converge on courage and

a high propensity of risk tolerance. According to Professor Arthur Cole, the counter argument

to this theory is that there is no specific entrepreneur type – suggesting that anyone and

everyone could, in theory, participate if they wanted to.

“My own personal experience was for ten years we ran a research center in

entrepreneurial history, for ten years we have tried to define the entrepreneur. We never

succeeded. Each of us had some notion of it – what he thought it was, for his purposes, a

useful definition. And I don’t think you’re going to get farther than that.” (Krueger, 1988)

There are however, two traits above all others, and not just bravery, which stands out

in every single entrepreneur. Without these personality traits to some degree, an entrepreneur

is bound to fail in his endeavors; maybe not immediately, but with certainty, eventually.

Every single entrepreneur must have tenacity and resilience. Resilience is the ability to take

setbacks – the idea of standing back up when knocked down. Tenacity is embodied in the

1 See Figure 1 – Battle of the Sexes.

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intense nature that one attempts to perform an event despite, sometimes even to spite, the

forces working against him.

Entrepreneurs have to be overly confident, despite the dangers facing their enterprise,

while also accepting the hardships that come with it. A successful entrepreneur can search and

find a win within every loss and maintain his will to succeed.

The success rate for any new business is approximately 1/10. This means for every

ten businesses that start only one does not fail – not indicating whether or not the business is

even profitable. (Kiyosaki, 1999) An entrepreneur, a person who is fully responsible in the

beginning stages of his company, must be able to have hope and face the brutal facts of

business at the same time. Jim Collins presents the Stockdale Paradox in his book, “Good to

Great,” which attempts to explain why top performing companies greatly differentiate

themselves from mediocre and failing companies.

“The name refers to Admiral Jim Stockdale, who was the highest- ranking United

States military officer in the "Hanoi Hilton" prisoner-of- war camp during the height of the

Vietnam War. Tortured over twenty times during his eight-year imprisonment from 1965 to

1973, Stockdale lived out the war without any prisoner's rights, no set release date, and no

certainty as to whether he would even survive to see his family again…” (Collins, 2001)

When asked about how he survived, Stockdale said that he had never given up on the

“end of the story.” He never lost hope, never lost the vision of his success – in his case,

leaving the P.O.W. camp, but at the same time he never flinched away from facing the facts

of his situation, that he was in a P.O. W. camp, and that if he made the wrong decisions, he

could die – or worse.

In his interview with Collins, his thoughts on facing the facts were clear.

“ ‘Who didn't make it out?’

‘Oh, that's easy,’ he said. ‘The optimists.’

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The optimists were the people Stockdale heard saying things like, “We will be out by

Christmas,” but then December would come and go and they would say, “We’ll be out by

Easter.” Easter would also then come and go, all the while taking its toll on them.

“‘They died of a broken heart.’” (Collins, 2001)

U.S. companies like A&P, Scott Paper, and Addressograph all had rival companies

who shared a game changing fact that would alter their business as they knew it, but unlike

their rivals, they refused to accept the facts as presented to them and make the appropriate

strategic moves based on these facts. A&P execs even had a chance to change their

supermarket into the Wal-Mart versions that are seen today, but they dismissed the polls of

their customers and the sales statistics tallied when they made practice stores to analyze their

customers. They turned billions of dollars away because they did not like the facts that were

presented to them.

Collins suggests the Stockdale Paradox – this dual ability to hope for a positive

outcome and simultaneously face the hard facts that will not allow denial – to be a key factor

in companies that achieve a certain level of greatness. An entrepreneur must have this

paradox ingrained in his being or faces a tumultuous time in the running of his business. An

entrepreneur is dealt the task of facing the problems with an honest view of what is

happening. In essence, no matter how good it may taste, sugar coating poison will still kill

you.

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2. The types of entrepreneurs.

Entrepreneurs are not only those people who start a business up from scratch. They

consist of other facets in a spectrum of entrepreneurship; the start up, the franchisee, and

intrapraneurs – employees who are allowed entrepreneurial freedom from inside the

company. Bertelsmann has an entrepreneurial program to spur new creative thinking within

its company, allowing it to control the resulting assets of freethinking practices. 3M, Scott and

other industrial product companies also let their engineers develop new products under an

intrapreneurial arm of their respective companies. Every company could do this – but many

do not.

No one style of entrepreneurship is better than the other. Each has its own advantages

and disadvantages. For instance, franchising has the advantage of an already formed system,

in place that does not require struggling with its creation. The strenuous start up and building

process is reduced and the franchisor provides the franchisee with support along the way – a

definite advantage. However, a disadvantage to this entrepreneurial method is that the

franchisee must operate in the way that the franchisor wishes as far as details. In a

McDonalds, the ketchup has to be a certain ketchup. In an Applebees restaurant, the

atmosphere has to be friendly and incredibly happy. If you are not a happy person, do not try

and run an Applebees.

Focusing on start up entrepreneurs, there are two types, which for the purposes of this

thesis will be addressed as the lifestyle and the high growth entrepreneur.

“Lifestyle entrepreneurs are those entrepreneurs who are primarily looking for their

business to provide them with a decent standard of living. They are not focused on growth;

rather, they run their business almost haphazardly, with minimal or no systems in place. Their

objective is to manage the business so that it remains small and provides them with enough

income to maintain a certain, typically middle – class lifestyle.” (Rogers, 2009)

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An Inc. magazine survey suggested 20% of their top 500 successful entrepreneurs

started as lifestyle entrepreneurs.

In Germany, many of the entrepreneurs that exist are lifestyle entrepreneurs. At the

most common level, many people associate a German man who decides to go selbständig

with entrepreneurship, but the sub context is ignored. It is usually a decision to become a

lifestyle entrepreneur, most likely in a sole proprietorship function, which by definition limits

growth capability.2

These entrepreneurs often drive through the neighborhoods in their Geschäftswagen,

their truck or van (that they also use for personal tasks). They typically keep their business in

the family and live directly off of the profits from their “mom and pop” style business, rarely

investing their funds into larger cash flow operations – or for that matter back into the

business for further growth opportunities.

The second type of entrepreneur is the high-growth entrepreneur. (Also referred to as

gazelles in America). This person has started from the beginning with goals of attaining

higher and higher profits, with the ultimate goal of wealth, and not just survival.

“The high growth entrepreneur, on the other hand is proactively looking to grow

annual revenues and profits exponentially… The high growth entrepreneur understands that a

successful business is one that has basic business systems – financial management, cash flow

planning, strategic planning, marketing, and so on – in place.” (Rogers, 2009)

There is a differential to make when discussing these two types of entrepreneurs.

“Lifestye entrepreneurs” deal with smaller economic numbers. They are not known for the

high profile, million dollar mergers and acquisitions that are seen on television news, however

they constitute the crux of financial circulation in almost every country in the world.

The initial analysis of statistical information on employment change in over five

million “establishments,” in almost every sector of the U.S. economy, conducted by David

2 See Figure 2 – Reasons for Starting a Business.

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Birsch in 1979, found that two – thirds of the new jobs between 1969 and 1976 were created

in the small business sector and not the large corporations. (Storey, 1994)

As far as the economy is concerned, while major corporations can be compared to the

engine of a car, the small businesses and beginning lifestyle entrepreneurs are to be seen as

the axle and tires, cycling and moving the economy down the road.

Inc Magazine’s Wilson Harrell vividly describes the comparison between the two

entrepreneur types.

“Let’s say a man buys a dry cleaning shop. He goes to work at 7a.m. At 7p.m. he

comes home, kisses the wife, grabs the kids, and goes off to a school play. At his office you’ll

see plaques all over the walls: Chamber of Commerce, Rotary Club, the local Republican or

Democratic club. He’s a pillar of the community, and everybody loves him even the bankers.”

This would represent the lifestyle entrepreneur.

“Change the scenario. After the man buys the dry cleaning shop, he goes home and

tells his wife, “Dear, we’re going to mortgage this house, borrow money from everyone we

can, including your mother and maybe even your brother, and hock everything else, because

I’m about to buy another dry cleaner. Then, I’ll go hock the first to buy another, and then

another, because I’m going to be the biggest dry cleaner in this city, this state, this nation!”

This would be a gazelle. (Rogers, 2009)

So the core initial differentiation an entrepreneur must make is which type of

entrepreneur he is, meaning an intimate and personal investigation must be conducted and the

entrepreneur must then decide what his goals are and which of the two types of entrepreneurs

he would like to be.

This decision may change over the course of time, but the decision serves as a starting

point on the road map of the entrepreneur. What would he be more comfortable with, less

responsibility and sustenance, or high growth and more responsibility, and ultimately more

complexity? Finally, when this analysis is complete, an entrepreneur must understand the

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nature of his idea, and exactly what type of venture he is embarking on, lifestyle or high

growth. He must ask questions like, “Does my idea support lifestyle or high growth

entrepreneurialism?”

Starting any kind of business and deciding whether or not it would be favorable should

be based on facts. It is often viewed as extremely difficult by most, but sometimes individuals

looking for quick millions, unfortunately, play down the severity of the low success rate. Both

sides of the spectrum are not exactly correct and most often than not, based on opinion, and

not fact. Here in Germany, the common consensus is that it is very difficult to have and run a

business, partly due to the fact that people are programmed to think of lifestyle

entrepreneurship and believe the must do every aspect of the business. The success in

America, setting aside the common hindrances for entrepreneurship, contradicts this idea.

For example 2009, the year after the gripping “Great Recession” had captured the

finances of the entire world was an exceptional year for entrepreneurs, according to the

Kauffman Index of Entrepreneurial Activity, which is released by the Ewing Marion

Kauffman Foundation.

“‘Rather than making history for its deep recession and record unemployment, 2009

might instead be remembered as the year business startups reached their highest level in 14

years — even exceeding the number of startups during the peak 1999-2000 technology

boom.’” (Reich, 2010)

Entrepreneurialism has a different face in Germany. Germany’s potential for a start up

boom is high because the economic conditions around the world have recovered, albeit not

fully, and among its European peers, the country leads financially. However, for a reason we

shall briefly discuss later in this thesis, that potential has yet to be fully tapped.

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3. Entrepreneurs Out of Necessity.

There is another type of entrepreneur. This individual may or may not have what it

takes to become an entrepreneur. He may decide to become a lifestyle entrepreneur or a high

growth entrepreneur, but the driving force behind his starting a business differs from the

average entrepreneur. He is the entrepreneur who decides to start a company because he has

no other options for making money, whatsoever. He has been unemployed for too long and

needs some type of income so he hitches his wagons to the stars and decides to “go for it.”3

In 2010, Challenger Gray & Christmas, an outplacement firm, analyzed the Bureau of

Labor’s Statistics. They found that the number of self – employed Americans rose from 8.7

million to 8.9 million in as little as one year. The age findings suggest that the self –

employed people were in the age range of people that should already have set careers, but

what really alarms many economists is why this is the case.

“Self-employment among those 55 to 64 rose to nearly two million, 5 percent higher

than in 2008. Among people over 65, the ranks of the self-employed swelled 29 percent.

Many older people who had expected to retire discovered their 401(k)’s had shrunk and their

homes were worthless. So they became “entrepreneurs,” too.” (Reich, 2010)

Some employees found out that the investments that they had made in mutual funds

stocks and various other retirement plans would not be able to pay for their retirement costs

and have decided to generate money themselves.

This presents multifaceted problems within any economy. A theoretical whiplash

effect may occur, blindsiding the world economy. Many necessity entrepreneurs who joined

the ranks due to high unemployment levels because of the financial crisis may begin to fold

their businesses in the next one to three years. This is because a necessity entrepreneur is not

necessarily well educated in subjects like business strategy, marketing, communication, or

entrepreneurship itself.

3 See Figure 3 – Opportunity vs. Necessity.

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New businesses are vital to job growth, and entrepreneurship does fuel the economy.

Surely, some of America’s new independent workers will build their own companies. But

when the economy is still so hard on so many, it’s important to distinguish between

entrepreneurial zeal and self-employed desperation. (Reich, 2010)

The benefits for an unemployed person to jump into entrepreneurship is what usually

drives people to go this route and not deal with an unsympathetic unemployment office who

tries desperately to shrink its numbers so that their government can look like they are

benefiting society. Entrepreneurship allows them to avoid an “embarrassing” situation where

they have to rely on government assistance, welfare, or Arbeitslosengeld, to survive.

Though earnings insurance is an American term, in Germany there is also a similar

program with the unemployment office, offering some type of insurance that will rescue

entrepreneurs with failing businesses. This ability to insure possible failures can be seen as an

incentive.

“For starters, they could use what might be called “earnings insurance” that would pay

for up to two years part of the difference between what they earned on the old job and what

they earn now on their own. Employed workers would contribute to the insurance fund

through their payroll taxes, as they do with unemployment insurance, but the total bill for

benefits would be unlikely to rise because earnings insurance would get them back to work

quicker and thereby reduce the number of weeks they relied on unemployment benefits.”

(Reich, 2010)

The only problem is, most necessity entrepreneurs have not thought their ideas or even

their capacity for entrepreneurship through, so a spike in the number of entrepreneurs due to

the insurance and artificial income generation does not correlate specifically with an increase

in economic activity. It is almost the equivalent to entrepreneurial bubbles in the market,

which take form in different industries.

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In Germany, the situation is a little different. The percentage of Germans who become

entrepreneurs, starting up business activities for the sake of building a business, is 2.8%, a

considerably low number. Out of the 2.8%, 1% represents the people who became necessity

entrepreneurs.

There are many unforeseen dangers for the necessity entrepreneur. Necessity

entrepreneurs can have a tough time accommodating to the new lifestyle of owning a

business. In particular, the transfer of responsibility from a person’s company to himself can

find him facing new economic challenges. For example, a necessity entrepreneur has to be

able to save a lot more for financial hardships and future retirement, whether it is due to age,

or due to an unforeseen factor that disables his ability to make money. They are no longer

entitled to tax exempt payment matches into retirement programs. They, in effect, have to

fend for themselves. (Reich, 2010)

This may be a wake up call for those who dream of making millions with their own

company, disillusioned by the idea that all business owners are rich, or at least well off.

We find that although necessity entrepreneurs are a major percentage of the business

starters around the world, there has to be a distinct differentiation of goals. A volatile

economy can send some people who use entrepreneurialism as a way out down a

disappointing path, and in a worse case scenario, be their very end. (Reich 2010)

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II. Assistance and Hindrances to Entrepreneurs

1. Culture and Peer Pressure.

Consider Germany as an example of a serious lack in entrepreneurialism. As one of

the main Western powers, it is still unable to significantly participate in a major economic

driver like entrepreneurship, ranking lower than countries like Poland, Malaysia, and even

Kazakhstan. Upon initial inspection, it may not be clear why German has not risen to the

place it should be in when entrepreneurship is involved. The government invests heavily in

promoting entrepreneurship, even offering thousands of dollars in free money for those who

can get through their red tape. There are agencies that offer free money for the entrepreneurs,

provided they fulfill certain requirements. The infrastructure of Germany is excellent with

low tuition fees for tertiary education (as opposed to the U.S.) The government even spends

money on business start up classes via their unemployment office for those necessity

entrepreneurs who find themselves thrust into entrepreneurialism.

Yet, people who are born and raised in Germany, regardless of their nationality, have a

lower chance of engaging in entrepreneurship activities because of an ingrained culture

obsessed with its need for security above all else.4

“Almost one in twelve entrepreneurs in Germany are foreign born. The nationality of

the applicant plays a significant role, but at least one in ten foreigners in Germany start a

business. Within the last decade, German companies have grown by 14.5% while foreign

companies increased 75%. Foreigners from outside of the European Union take their business

ideas to the Aliens’ Office where they have more access to advice – at least they can receive a

direction in which they can head. Foreign citizens are generally not as well educated as their

German born counterparts, have less equity, and thus have to provide additional licenses.

Decent education is almost impossible for foreigners who do not grow up under the German

4 See Figure 4 – German Entrepreneurial Climate

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system, can barely communicate in the language, and have to deal with German rules and

regulations where in their homeland, they would have considerably less to deal with to have a

business of their own. Even though they have to face so many boundaries to entrepreneurism,

the percentages suggest that there is an internal factor that drives foreigners towards

entrepreneurial activities when the natives themselves detest and fear the idea of engaging in a

new business opportunity.

“The figures for foreign startups are significant given the deterrent posed by the

German bureaucracy.” (Total Entrepreneurial Activity, 2011)

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2. The government.

The bureaucracy lies partially in the paperwork that must be filled out in order to

establish a company. You have to register with various organizations including the city and

with IHK – an organization that makes people sign up when them whether necessity

entrepreneur or not.

The fact is, in Germany everything is complicated and just has a daunting appearance.

It is less hassle, and less expense to the entrepreneur, to work at a safe company than to deal

with complicated bureaucracy.

“In 2010, an annual Euro 6.7 billion was saved by simplification measures.” (Federal

Statistic Office, 2011)

Simplification should not be a measure to be taken. It should be the way of running

business.

The legal aspects of forming a company can cause the uninformed entrepreneur plenty

of headaches. A notary must be arranged – the bad ones being expensive and the good ones

even more so. You have to have all of your paperwork in order, and common sense does not

come into play whatsoever. Everything must be documented and proven. The forms for filing

paperwork are a complete nightmare when compared to those of other countries.

“For Europe to nurture Internet companies to adulthood more effectively… it will

have to reduce regulatory, legal and cultural barriers to the creation of a single Internet

market. Web start-ups in places like the United States, Japan and China have a big advantage,

he said, because their huge domestic markets allow a modest initial investment to reap quick

profits that can be reinvested in the business or in expansion. European Web rivals have to

make comparable investments in every new market they enter, but they generate smaller

profits from doing so.”

Elements solely evident in Europe, such as VAT taxes reduce the excitement of

any new tech based entrepreneur, which are increasing in number, to start any venture in a

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European country. Since the focus of this thesis is Germany, a 19% VAT, and new investment

taxes introduced by Angela Merkel, serve as deterrents and not attractors to German

entrepreneurship. Corporate taxes in Germany do not fare well when compared to other

countries.5 There are also small annoyances like the GEZ, which force companies to register

if they have a television, telephone, or a computer. You have to pay the roughly six Euros or

eighteen Euros, depending on how many TVs you have, because there is a possibility that a

person could use these things to access their lousy programming. Most people do not watch

these horrible channels. You have to register anyway, and the government allows this to take

place. It is almost like a “privilege of watching TV tax,” which is absurd.

Ask any politician and they will probably say that Germany has taken major steps to

promote entrepreneurship in the country, and they would be correct. The German government

has built a solid infrastructure to make entrepreneurship. In the country there are a plethora of

highly qualified consultants, and plenty of support schemes for highly organized projects,

properly presented with business plans in tow. However, the rules and the current operating

system of the government is tired and old generation thinking– as well as all of the areas that

it touches, like health, like social welfare, and unfortunately, like education.

“We have to think how we can get competitive again at a European level.”

– Pierre Kosciusko-Morizet (Pfanner, 2010)

In America, the situation is not any better and for the first time in a long time, America

finds itself facing nine percent unemployment rates, which business owners claim is the result

of the uncertainty that the government has instilled into the markets.

“Today's neosocialists are smarter than their ancestors. Instead of outright takeovers,

they are achieving much the same goal through rigid regulations. ObamaCare is a prime

example. Health insurers will eventually be private in name only, as the details of their

5 See Figure 5 – International Tax Rates.

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policies will be dictated by governmental decrees. About the only thing companies will have

any autonomy over--perhaps--will be their corporate logo.” (Forbes, 2010)

A U.S. senator named Christopher Dodd championed a bill that would cut the amount

of compensation, particularly the bonuses of executives from any country that received aid

from the government during the financial crisis. That changed the stakes in business across

America and widened the worry in the market that the government would stick its nose in just

about every aspect of business. He formed the Financial Stability Oversight Council, as a

corporate watchdog. The problem is that there is a fine line between a government institution

that watches a business and one that tells that business what it should or should not be doing –

or how it compensates its paid leaders.

“(Fmr. Senator) Dodd's scheme would create a new regulatory bureaucracy, the

Financial Stability Oversight Council (FSOC), with sweeping powers for itself (and the Fed).

Chief among its tasks would be assessing risk of banks and their products and activities, yet

Washington has demonstrated that it is incapable of judging risk. Washington would have

vast sway over the operations of the U.S. financial system… World banks would have to get

permission from Washington for any innovation. If an institution incurred Washington's

displeasure, bureaucrats could order divestitures of businesses or could even put a firm out of

business.”

The Dodd bill is an open invitation for government to micromanage the whole breadth

of finance in America, including even your local pawnshop. Nationalizing the U.S. financial

system without formally nationalizing it--Karl Marx would be drooling in delight. (Forbes,

2010)

The formation of the FSOC has created lots of uncertainty among the markets. CEOs

are unsure how this new institution and new government regulations will affect their

company’s bottom line. It is this man made uncertainty that hinder the entrepreneurial

movement necessary to build economic growth in the new economy.

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German bureaucracy has made the likes of Wal-Mart and Get Friday, one a retail

powerhouse, the other an online phenomena, leave town. Since German businesses are used to

the dredging anti – capitalistic bureaucracy in their country, they are more accustomed to how

they are supposed to function.

In such an environment, education, specifically tertiary education, becomes an

important factor as to how successful the German entrepreneur will grow in the future. The

growing problem in Germany also has to do with the law, but only because the German

government has high control over the education process.

With regard to entrepreneurial education at schools Germany is very weak and only 31st place

(2005: 29th place).6

There are many signs that the help given to people are not producing enough results.

“According to a 2005 report from the Global Entrepreneurship Monitor, Germany has

a total entrepreneurship activity of 5.1%, ranking the country 24th in the world. The report

also ranks Germany 10th in factors for location, while 1st in public spending on

entrepreneurs. However, the study found that tertiary education provides insufficient

preparation for German entrepreneurs.” (Total Entrepreneurial Activity, 2011)

In Germany, for example the Handlesgesetsbuch (HGB) is a thick book full of

business laws and statutes that every business man needs to accommodate himself with

because the legal system in Germany assumes that when you form a corporation, that you

understand the laws and issues that are in this book. Should there be a discrepancy, the HGB

will decide who is correct and who has broken the rules. It is not until tertiary education that

most students hear about the HGB, if at all.

6 See Figure 6.1 – 6.2

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3. Financial Abuse

One of the worst events that can happen to an entrepreneur is that he actually is very

successful at a blinding rate. Fast success can lead to an entrepreneur into the deadly game of

keep up. Spending more than they can afford on items that they or their business do not need.

Once again, the problem stems from a lack of education. In this case, the entrepreneur is not

educated financially, not educated in entrepreneurship in general, and/or not advised what to

do with the access wealth the business can bring in.

Consider the case of David Hayden, an American entrepreneur. Hayden created an

online company called Critical Path, a company that handles e-mails and other

communication services. He had previously founded a search engine, which he sold back in

1996.

“In 2000, over the course of the year, Mr. Hayden sold $45 million worth of stock, and

continued to borrow against the remainder of his stock held by Robertson Stephens.

Eventually, the loan was increased, first to $5 million, then $20 million. At one point, he

borrowed as much as $30 million against the shares. Although his wealth existed mostly on

ledger sheets, Mr. Hayden believed himself to have become supremely rich and lived life

accordingly.

Mr. Hayden and his second wife, Storey, bought a 7,000-square-foot mansion in one

of San Francisco’s wealthiest neighborhoods for $8 million. The Haydens spent a year

gutting, renovating and decorating the house with a refined yet understated eye, putting

Venetian plaster on the walls and blond oak on the floors. The Haydens also bought property

in Sun Valley, Idaho, for $4 million.

Mr. Hayden put a down payment on a Gulfstream jet. He invested in several start-ups

and started his own venture capital firm. He drove a Ferrari. Together with the television

producer Norman Lear, he bought an original copy of the Declaration of Independence. He

was invited to the White House.

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Some of Mr. Hayden’s co-workers were taken aback by his excesses. ‘I was embarrassed for

him,’ said Wayne Correia, one of the original co-founders of Critical Path who left the

company at the end of 1999. ‘It was the worst case of nouveau riche you can possibly

imagine.’”

For e-companies, online businesses that rely a lot more on typing and code than

physical labor, work, or manufacturing, it becomes even more difficult to prevent getting full

of oneself. The danger of entrepreneurship in this information age is that there is a feeling like

you are untouchable, like you can type your way out of a problem. The exponential factors

affect the brain and the temptation to just enjoy the “good life” is larger than for other “down

to Earth” entrepreneurs.

“For many dot-com multimillionaires at the time, a lavish lifestyle became its own

seduction.

‘Part of the bizarre but interesting psychology of the tech boom was the sense of

hubris people developed, thinking they were impregnable to losses and defeats,’ said Joan

DiFuria, a psychotherapist who is co-founder, with Stephen Goldbart, of the Money, Meaning

and Choices Institute in Kentfield, Calif., north of San Francisco. ‘They had a fantasy that

things could only go up.’ During the boom period, Ms. DiFuria and Mr. Goldbart coined the

phrase ‘sudden wealth syndrome.’”

This boom sickness is not just a result of new technologies and it is not only the e-

commerce entrepreneurs who suffer from this. Booms and busts have been in the world since

items began being traded. Where there is success, there is also greed. Currently, the most

memorable bubble was the housing bubble that burst in 2008.

Hayden, full of himself and the legitimate gains achieved by the leverage he could

utilize because of his company, was experiencing such a bubble in his business and,

accordingly, in his private life. But every entrepreneur must face the brutal facts. The fact

was, his riches were not substantial, and eventually, a correction was due.

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Then the world started to slip. By early 2001, Critical Path was in financial trouble and

the stock was trading near $2. As security against his outstanding loan, the Haydens put up

the San Francisco house, as well as the Sun Valley property.

In November 2001, Robertson Stephens, which by then was owned by Fleet Bank,

began seeking repayment of the personal loan. Mr. Hayden said he would have sold the San

Francisco house, but Robertson Stephens placed a lien on it, making it difficult to do so.

Mr. Hayden said that it was not until September 2000, when he requested a briefing on

hedging, a common practice, that Robertson Stephens discussed it with him.

Mr. Resnick pointed out that if Mr. Hayden had hedged his position, or diversified his

portfolio into other stocks, he could have been protected. ‘Had he acted prudently, he’d still

be rich,’ Mr. Resnick said. Yet Mr. Resnick also faulted Mr. Hayden for not having educated

himself more thoroughly.” (Hafner, 2007)

Once again, education becomes the determining factor between success and failure of

an entrepreneur. An entrepreneur should understand that learning is a never-ending process.

Hayden’s plight stresses the importance of constant learning by the entrepreneur.

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III. Entrepreneurship and Technology

1. The internet as an entrepreneurial tool.

Entrepreneurship has been around for a very long time, even when people were under

the bartering system. With the introduction of currency into the systems all over the world,

people needed to find products, regardless of the practicality of said products to sell to gain

currency. Technology has affected the shrewd businessman in that he always has to know

how it will affect his industry and how he can take advantage of any new technology.

The advent of the car meant that the horse and carriage industry would change. The

implementation of private aircraft alerted the real estate entrepreneurs that they needed to

build wonderful resorts that would hold new travelers from different regions of the world. As

the technology is introduced to the main stream, the smart entrepreneurs react and take

advantage of unseen potential.

Today, new technologies do not mean new markets. However, a new invention or

device serves as a tool to augment basic business and strategic principles. An entrepreneur

does not necessarily have to invent the newest gizmo, but when the newest gizmo comes to

market, he has to know how to use it to increase his profits based on a relevant strategy.

“Bubbles come and bubbles go. It happened with railroads. It happened with

electricity. It happened with radio. It happened with the personal computer. It happened with

the internet. And it will happen again with unforeseen new technologies. Yet through all this

change, great companies have adapted and endured. Indeed, most of the truly great companies

of the last hundred years… trace their roots back through multiple generations of technology

change, be it electricity, the television, or the internet. They’ve adapted and before and

emerged great. The best ones will adapt again.” (Collins, 2001)

New gadgets and technology are always a temptation to new entrepreneurs who

mistake their fancy new technology, as sleek and modern as they may be, for a decent

substitute for proper planning and execution. Instead, entrepreneurs need to use technology as

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an accelerator of the good principles practiced in their company, and most surprisingly should

stay clear of it until they have assessed which technologies coincide with the company’s

mission, vision, or concentration. (Collins, 2001)

When breaking down a company’s value chain, it becomes clearer where and how

technology can assist a company achieve success. The activities in a value chain can be

separated into a technological and a physical component. More specifically, what the machine

should do, and what a human has to do. For example, in an online store, a customer service

activity like contacting a customer a day after purchase to ensure satisfaction can be

performed via an automatic email program. The program could be filtered so that people from

different countries get different thank you messages, and so on. In this case, if the company’s

mission and key strategy induces a need for constant feedback and customer contact, then the

technology is advantageous.

On the other hand, if the same online store had technology, the new Apple software

that everyone is talking about for example, and it helps improve some company operations,

but has no direct impact on the customer service or communication levels to those customers,

then the hardware and software would serve no purpose other than to increase the company’s

“cool status.” (Porter, 1998)

FreeMarkets Inc. was founded in 1995. They promised to save companies up to 15

percent on their purchases through online auctions. FreeMarkets offered real-time feedback

via the internet to show the latest price reduction to help its clients tap a broader range of

suppliers and create more competitive and quickly moving markets, like a real auction.

“Over the course of a few hours, the clients confidently discovered the absolute rock-

bottom prices by pushing every supplier to its “walk away” point. The traditional methods of

issuing requests for quotes, then conducting multiple rounds of negotiations with a narrow list

of candidates, took far longer and often left money on the table for the supplier to claim. The

success FreeMarkets achieved led to a December 1999 initial public offering (IPO) that raised

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nearly US$200 million at a stock price of $48 per share. By the end of the opening day, the

price had skyrocketed to close at $280 per share, which valued the company at a staggering

$8 billion, despite its having revenues of only $13 million in the first nine months of that year.

(Laseter, 2011)

With its success, Freemarkets and companies that used the power of the internet early

and just as successfully, like Google which was founded in 1996, spurred big corporations

that had no internet presence into the world of what was then known as the information

superhighway. This showcases the problem with many B2B start-ups that utilize the internet.

Unless the entrepreneur already has clout, strong financial, technical, and even political

advantages, there is always the risk that his B2B customers can rethink their situation and

build the service that he provides himself. For powerful companies, it is easy to copy an idea.

“Not surprisingly, the big industrial customers using the online auction services of the

startups concluded that owning a B2B e-marketplace could be worth even more than the

savings from the auctions. General Motors Company, which had accounted for 17 percent of

the revenues earned by FreeMarkets during the nine months prior to the IPO, announced a

consortium with rivals Ford Motor Company and Daimler-Chrysler AG just months later, in

early 2000. The new entity, Covisint, would offer online auctions to its members and would

also automate information sharing and a host of transactions among the Detroit Three

automakers and their suppliers. The virtual scale of FreeMarkets was quickly trumped by the

actual scale of existing players.”

Although in 2011, analysts and stock investors have all but forgotten the tech bubble

of the late 90’s and its consequences. Companies that create a buzz this year include Zynga,

LinkedIn, Facebook, Twitter, and Groupon. Amazingly, Zynga earned an approximate $250

million in revenue in 2009, a recession year. There is a stark difference that should be noted

here. Of the aforementioned companies, only Groupon has a sliver of a connection to retail –

but that is not its core function. All of these hit internet companies are social media

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companies, profiting on people’s need to connect with other people who either live far away,

have a lot to say, or both. Other than Amazon.com, there weren’t any internet retail

superstars.

“The next 10 companies on the list of the top 500 Internet retailers as published by

Internet Retailer magazine all existed well before the World Wide Web came to our offices

and homes, and have more sales in total than Amazon. Big-box office-supply retailers Staples,

Office Depot, and OfficeMax take up three of those 10 slots. And although the online channel

accounted for less than 1 percent of its total sales, Walmart garnered sixth place. Even the

perennially troubled Sears made the top 10 by channeling 6.3 percent of its $44 billion in

sales through the Internet. You have to drop to 12th place to find another pure-play online

retailer, Newegg, a purveyor of computer hardware and software that was founded in 2001.

Netflix, founded in 1997 and 14th on the list, offers another example of a company launched

on the promise of the Internet. However, Newegg, Netflix, and Amazon are the only three

nontraditional retailers in the top 25.” (Laseter, 2011)

Amazon and Co’s success are doubly impressive because this decade has become the

second round for internet and technology companies. For the rest of the internet class in the

90’s, the bubble that burst killed the idea of having an internet based business for a lot of

entrepreneurs. Their descents brought on by an insane amount of greed and sheer impudence.

Becoming an entrepreneur, especially after having lived a life where you move from

paycheck to paycheck is very dangerous because in an instant the new entrepreneur realizes

how much more power he is given to do things. This power can corrupt, tempting

entrepreneurs to grow at unsustainable levels and without a solid revenue base, ultimately

destroying the entrepreneur. On top of all that, multiply it by the exponential power of the

internet and you have many tragic entrepreneurial cases that substantiate the idea / fact that

one out of ten businesses that are started fail.

Example 1: Value America.

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“One of the earliest flameouts, Value America Inc., offers a classic case of unbridled

pursuit of scale. Founded in 1996 and funded by such heavyweights as FedEx founder Fred

Smith and Vulcan Capital (the venture company of Microsoft cofounder Paul Allen), the

company sought to sell anything and everything online. Value America used the deep pockets

of its investors to buy full-page advertisements in USA Today. At the end of its first day of

trading as a public company in April 1999, the company achieved a valuation of $2.4 billion;

it filed for bankruptcy a mere 16 months later, in August 2000.” (Laseter, 2011)

Example 2: Webvan Group.

“Webvan Group Inc. similarly sought to be a one-stop shop by delivering everything to the

consumer’s door. Funded by a record-breaking $400 million in four rounds of venture capital

financing, Webvan launched operations in Oakland, Calif., in June 1999. By the end of the

year, it had raised another $400 million to initiate nationwide expansion in the form of 26

additional distribution centers, each carrying a price tag of $35 million. But revenues did not

come as quickly as expected. Rather than meeting the projections to generate positive cash

flow in five quarters, the Oakland facility was operating at less than 30 percent capacity

utilization at the end of 2000. By the spring of 2001, Webvan was losing $100 million per

quarter and its stock price had dropped from a high of $34 at its initial public offering to less

than 30 cents. It shut down in July 2001, just over two years after it began online operations.”

(Laseter, 2011)

An entrepreneurial venture is not doomed to fail because it delves in fad. On the

contrary, when the fad is in, the e – companies do great.

“Twitter's new valuation underscores the soaring price tags for some Web companies.

Over the last month, daily deals site Groupon and online gaming start-up Zynga have filed for

initial public offerings, in moves that some estimate would value those companies at around

$20 billion each upon their stock market debuts.

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‘Twitter is still evolving its business model,’ said Tony Florence, a partner with

venture capital firm New Enterprise Associates. ‘Staying private while you are figuring out

your model makes a lot of sense.’” (Efrati & Ante, 2011)

Tech startups fail when the fundamental business practices, like strategy formation

and the value chain, are not respected. It is always advisable for an entrepreneur to go at his

own pace. There is no need to rush into any major steps, even if the technology moves at a

mile per millisecond.

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2. Going Mobile.

Since 2010 there have been 4.6 billion mobile phones in use, and that number is only

slated to grow to 5 billion and more.7

With today's technology, smaller businesses now have the capability of being just as

powerful as larger companies. Today’s technology, with smart phones, tablets, and everything

wireless the advantages of major corporations have all but disappeared. In an entrepreneur’s

perspective, there is even more capability because the old hindrances of a typical big firm do

not exist. Powerful new technology combined with a fresh vision can perform in ways that

others cannot or will not. It is revenue building, minus the bureaucracy, and minus the blind

traditions.

“In fact … you can argue they're more powerful because they've got less stuff

clogging the technological artery.” (Blue, 2011)

With Apple’s invention of the iphone and ipad, the entire market has been shifted

away from the PC. This change has been gradual and has literally taken a decade to come

about, but slowly more Apple products are being used. And with over 30,000 apps to

experiment with, users will most likely dump their bigger computers altogether. The mobile

market has been established with mobile phones and tablets at the forefront, spawning

imitators and a solid rivalry that has benefited consumers and made a lot of people money.

It also changes the game for entrepreneurs as well, the ones who are fastest to get

mobile benefitting the most. Customers have become easier to access wherever they may be, a

situation that did not exist as little as ten years ago.

There is only one real problem with this burst of fast moving, mobile technology.

More and more, it becomes easier to acquire content for these devices in ways that destroy

some industries and boost others.

7 See Figure – 7 Mobile Phone Usage Chart.

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If you look at any set number of people’s handheld devices, be it a tablet or a mobile

phone, the chances are that you will find some type of “illegal” content on it. In some cases

the intentions are obvious, almost defiant. Look at the ipod from apple or any mp3/mp4

device. They were made to play music that was downloaded. Those businesses saw the need

and delivered technically advanced products that would deliver on that need. The memory and

storage on the devices get bigger because people are downloading more. The number of

legitimately, iStore purchased songs on one of these devices is limited. Apple just took

advantage of the situation and made money from it.

“Apple's iTunes online music store sells legal copies of songs, and while it is certainly

well trafficked, by most estimates it accounts for a tiny percentage of the music loaded onto

iPods.”

William Watkins, the CEO of Seagate, which makes devices and drives to store music

in puts the situation in more clarity.

“‘We're not changing the world. We're building a product that helps people buy more

crap--and watch porn.’” (Gomes)

In the end, an entrepreneur must know how he is utilizing technology to the fullest and

be at peace with the outcome of the product that he is offering. He must accept new

technologies, like mobile computing, and know how to profit from it, not hang up his

business because of it.

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3. Important Technology Laws.

When dealing with technology, and specifically the internet, there are a few

mathematical laws that a smart entrepreneur will keep in the back of his mind. Developed by

intellectual mathematicians, scientists, inventors, and the like, these laws help to explain

many of the technologically based phenomena that have occurred in the last two decades.

Moore’s Law

Moore’s Law shows us that whatever formidable technology we have now, at an

increasingly quicker pace, that technology will be trumped by an ever more innovative and

superior technology – this is due to the steady advancement of transistors.

Moore is quoted as saying, “The number of transistors incorporated in a chip will

approximately double every 24 months,” describing the business of the semi-conductor

industry. Intel, and other competitors have strived to increase the capacity with which

computers can work, thereby increasing everything that they are capable of. According to this

law, a world where television sets, telephones, and radios will all be relics in a museum will

soon be upon us. People will be able to communicate, network, and entertain themselves in

wonderful new ways provided by powerful machines that grow in their capability at an

exponential rate that people themselves will not be able to keep up with.8

Gilder’s Law

Gilder’s Law states that bandwidth access doubles every six to twelve months (three times

computer power). The repercussions of such a development means that bigger files can be

sent with an exponentially increasing amount of speed as time moves on. Just like with

Moore’s Law, this also indicates that as time goes on and better technologies are produced,

the cost of transferring data also significantly reduces itself. This is important because

entrepreneurs now have new ventures that they can enter in, particularly in the media and

music industry. Basically anyone can stream video or audio and become media moguls.

8 See Figure 8 – A Graph of Moore’s Law

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Though this is in theory, the fact is with the ever increasing rate of bandwidth allocations

provided by communication companies, entrepreneurs could change the way media is viewed

in as little as the next five years.

Metcalf’s Law

Metcalf’s Law states that networks increase in value with each additional node, meaning the

more people in a network, the more value the network possesses. The law is a good

explanation as to why Facebook has become such a valuable website in such a relatively short

time.

Greg Papadopoulos, Vice President and Chief Technology Officer at Sun

Microsystems until 2010 noted that the combination of Metcalf’s Law, Moore’s Law, and

Gilder’s Law would lead to a major shake up in the way that we experience life via the

computer.

“The Net Effect forces us to think outside the box--and I mean that literally. Things

that we used to think of as part of a single computer really belong on the Net,” says

Papadopoulos. For example, software is becoming a collection of various service components

brought together from resources across the network, not just CDs to be loaded on PCs. There

is a fundamental shift from one user and one license to one instance of an application serving

millions of users over the Net.”

The implications can already be seen in the number of new cloud computing

entrepreneurial ventures sprouting up across the world. Although at first avoided by major

companies, slowly the major players in business have also opened up to cloud computing as it

becomes more mainstream.

The effects of these laws become really powerful when they are combined.

Exponentially innovative technology combined with exponentially communication outlets,

combined with exponentially valuable networks means that the next round of technically

based entrepreneurs who can utilize the concepts of these three laws can make a fortune in the

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coming years. The proper use of this technology and making key innovations are the key.

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IV. Innovation and Business Creation 1. Innovation – what exactly is it?

Innovation is defined in the Cambridge online dictionary, advanced learner’s edition

as: “the use of a new idea or method.”

Innovation is the spark that creates new businesses, advances civilizations, and makes

life a bit more livable to the everyday citizen. It drives industries from cooking to

manufacturing. For example, Henry Ford innovated the automobile when his company

innovated production automation with the assembly line concept. Steve Jobs’ innovation on

the computing world is felt today and the actual aftermath of Apple’s successful products will

only be realized in the future. However, as previously stated, innovation is not reduced only to

manufacturing and business. If it was, Apple products would not strive to look so sexy. On

the contrary, many of the creative thinkers who drive innovation have little to do with

business at all (or so they would tell you), but instead are incorporated into the business as the

artists and designers of BMW are.

Adrian van Hooydunk, the chief Director of Design at BMW, insists that it is the

artistic aspects that are put into the car that help to create and sustain the BMW brand. Items

like the renown BMW grill and the speed lines, that literally resemble a comet, also play a

part in BMW’s success. He relies heavily on artists and creative types to create the next great

automobile, preparing his team through networking and research, to be ready for whatever

fashion sense or mindset the customer of the future may have.

“As a designer and as a design team, we have a very fine antennae for what is going to

happen in the future.” (Weitzner, 2011)

Innovation can be achieved by allowing both sides of the entrepreneurial being to

flow, both the creative and the analytical. In cases where an entrepreneur has assessed himself

as to having no creative abilities, he can always outsource creativity. There are plenty of

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people in the world who would love to be paid for their creativity. Creatives spend their entire

lives being labeled as eccentric, wierdos, etc. and are outcast from many aspects of society.

When such a person’s abilities are captured and harnessed by the right entrepreneur, the entire

world can change.

Steve Jobs, CEO and co founder of Apple, was one of those creative types. While he

had little sense of “correct business principles,” he knew what would make his company

great. CNBC, an established economics news channel, has recently reported that Apple has

more money than the U.S. government and is the number two wealthiest company, under

Exxon.

In conclusion, it takes a combination of abilities to produce market-moving

innovation. It is not a one or two step process, but requires an entrepreneur’s ability to open

himself to the possibilities and the freedom to make these abilities work for the company’s

good.

“What matters instead is the particular combination of talent, knowledge, team

structures, tools, and processes — the capabilities — that successful companies put together

to enable their innovation efforts, and thus create products and services they can successfully

take to market.” (Jaruzelski & Dehoff, 2011)

Innovation is what brings outside interest into an entrepreneur’s company, whether it

is from investors, customers, or the public at large. It serves as an attractor to pull people to

whatever it is he attempts. The status quo, doing what a company has been doing since its

inception, regardless of its changing environment not only lacks of innovation, but also is

destined to bring down the business. Governments usually suffer from this disease of the

mind. Businesses have the ability to break free, and they should. Boring and monotonous

practices, while safe and proven, do not attract new markets, and do not provide the sizzle

prerequisite required for survival in today’s high speed internet economy. However, there are

many companies that have this very problem of lack of innovation.

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2. Lack of Innovation.

Innovation is at the heart of entrepreneurialism because in the core of his business

venture there is always a sense of, “where others have failed, I will not,” subconsciously

indicating that the entrepreneur will bring something new into the equation.

(Neu means new in German).

However, there is a persistent lack of innovation among companies, big and small

alike. Assumptions are that it is just another example of a company trying to save costs and to

stay away from risky endeavors, but there are other factors also involved in innovation

deprivation. It can depend on the mood of the markets, the type of leadership that a company

has embedded itself with and also on the type of sector a certain company is in. In Germany,

while large corporations have understood the need for innovation in their products, there is

still room for improvement.9

Lately, SMEs that had previously not been involved in innovation activites have found

stimulation to change to making investments in their innovation. Manufacturing SMEs

increasingly got back into the business of innovating since 2004. In 2004, the story was

different for service sectors, which saw less companies innovating than not innovating.

Companies suggested that the main reason they gave up on innovation activities was a lack of

demand for innovations. Meanwhile regulations, funding problems, and lengthy

administrative processes gave them discouragement altogether. (Aschhoff…, 2005)

9 See figure 9 – Innovation and Early Stage Entrepreneurial Activity

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3. Innovation at Work – Blue Ocean Strategies.

Blue Ocean Strategies come from the book of the same name, written by author Kim

W. Chan. In her book, Chan states that it is irrelevant what the competition does when a blue

ocean strategy, one that is based on a totally different market base, is created. The term blue

ocean is based on the idea that when an ocean is filled with elements, it becomes dirty and

tainted, no longer the blue that it was intended to be. Chan relates this to business by calling

staled business strategies, competing in their known markets for the very last cent of their

market base, mostly at detrimental costs to themselves, red ocean strategies. A high growth

entrepreneur wants to avoid red ocean strategies because unless they have a very high rate of

capital, it is difficult to make a name for himself in a red ocean. There are big players there

and the rules are already established without the entrepreneur’s input. It is the equivalent of

getting in the back of a very long line. Chan argues, correctly in the case of entrepreneurs that

it is better to swim in an empty ocean rather than a crowded one.10

As an example Chan starts with Cirque du Soleil, the entertainment company that used

to compete in the same industry as the circus with its lions, tigers, fire breathers, trapeze acts.

The company decided to cut out the most cost heavy elements of the circus that anyone else in

the circus industry would label them as insane for doing. They cut out the animals.

“Cirque du Soleil succeeded because it realized that to win in the future… the only

way to beat the competition was to stop trying to beat the competition.” (Chan, 2005)

Blue oceans can be created through the expansion of existing boundaries of the red

ocean. Cirque de Soleil still has circus likes acts, but transfuses them with the drama of high

theatre, something that was never attempted before.

Blue oceans can also be created by creating a new industry value. While this seems

difficult, it is not impossible. The tablet industry, the one that will soon either overtake or

drastically alter the computer, television, radio and telephone industry was unthinkable in the

10 See Figure 10 – Profit and Growth Sequence of Blue Oceans.

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1990’s, the so called rise of the computer decade. Value creation is the heart of blue ocean

strategy and the key for new entrants to build their own barriers to entry later on in their

operation. Value creation occurs when companies consider utility, price, and cost positions in

their innovation planning. Value to the customer comes from utility and price and value to the

company comes from cost structure and price.

Going against the grain of common thinking, a business that encompasses a blue

ocean strategy will seek differentiation and low cost. Buy giving customers more value and at

the same time decreasing their costs, companies begin to build a value innovation that is

difficult for others to copy.

Blue oceans do not only make the competition irrelevant. They create uncontested

market space, create new demand, and break the traditional value – cost trade off. A great

example of is the “i” products from Apple, the quirky [yellow tail] wine of Australia’s Casella

Wines, and Southwest Airlines, who brought the idea of inexpensive (or less expensive)

flights to America.

In each of these companies, the building blocks to what Chan describes as a good

strategy exist, a clear focus, a diverging value curve, and a tagline that is easy to understand.11

An entrepreneur starting a business does not have to rely on a cookie cutter system,

based on best practice thinking, in order to ensure his success. As Chan constantly argues, it is

differentiation that will determine a successful strategy and make a company stand out. When

the entrepreneur makes his trade-off decisions, what he wants to keep and what he wants to

get rid of, then he is one step closer to innovation without dampers to hold him back.

11 See Figure 11 – The Strategy Canvass of [yellow tail]. However, all truly successful blue ocean strategies can be mapped in this fashion.

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V. On Advisors

1. Good advice is a Treasure.

For the first start up especially, an advisory board is a key step towards reaching his

goals. In the case where an entrepreneur has performed a self-analysis and found that he is not

the most likely candidate to head a systemization process, even systemization can be assisted

through a good advisor. The goal of any high growth entrepreneur should be business

systemization. This is the final step in successfully founding a company. Systemization

allows the entrepreneur to calmly go out, after proper analysis of the mistakes that he has

made throughout the first process, and start a new venture. A high growth entrepreneur does

not want to be CEO and run the company until he is 85 years old, doddering about. Career

entrepreneurs are always looking to spring into the next opportunity that will give them more

return on the investment that it takes to begin the venture in the first place. This is a justified

desire because after the first venture, the entrepreneur has hopefully learned from the mistakes

he has made. On the second, third, and following ventures, he will become better at starting

businesses, meaning the costs, the time it takes to start, and the stress level should decrease

with every new start up – like an economy of scale or a Gilder’s law for entrepreneurial

ventures

Advisory boards consist of lawyers, accountants, tax managers, insurance

representatives, and other various individuals who know their specialty better than the

entrepreneur himself would.

“Other business owners credit their advisory boards with cutting costs; helping with

product development; introducing them to valuable clients, investors, and suppliers; and

eliminating the sense of isolation that can come with running your own business. Most

crucial, an advisory board makes a chief executive answerable to a third party.” (Gardella,

2010)

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Entrepreneurs have to be creative when it comes to finding advisors who will give

them the brutal facts that are key for any substantially effective decisions to be made, but an

advisory board has no right to take over the company and make decisions for the

entrepreneur.

“An advisory board should not be confused with a board of directors. Unlike directors,

advisory board members have no authority over your company. They are simply there to offer

advice that you can take or dismiss. They do not have the legally imposed fiduciary duties of

directors.”

You can start and manage your own board or outsource the job for a fee. Outsourcing

is favored when the entrepreneur knows that he does not have the time it takes (roughly 20 to

30 hours per quarter) to effectively manage a board. (Gardella, 2010)

Robert Kyiosaki, the best selling author of the “Rich Dad” books suggests that the

information an entrepreneur receives is important, but more importantly is whom the

information is coming from. Entrepreneurs are bound to get pressure from family and friends,

who swear that they are competent in everything, telling him why one technique will work

and one strategy won’t work, and so on. Kiyosaki’s suggestion is to beware of free advice –

not to ignore it, but beware and be aware of it and its source.

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Part 2 – Thesis Project: Lamarvelous English UG

(haftungsbeschränkt) & Co. KG

In order to gain the experience of entrepreneurial experience in Germany, as author of this thesis paper, I have grounded a company, headquartered in a home office in Hesse. I experienced firsthand the thrills and difficulties of starting the initial phases of a company. While I have not had enough time to implement any cash collecting activities, Lamavelous English UG (haftungsbeschränkt) & Co. KG is a fully functioning registered company, ready to operate. As the development of the company will take years, the results of my experiment cannot be recorded.

VI. Business Analysis

1. The Mission, Vision, and Business Philosophy.

A mission statement can help a company with goal setting. The goals serve as anchors

for long and short-term goal setting, hiring decisions, and helps to build a solid business

philosophy. “What makes a company distinctive is its sense of mission or purpose. Distinctive

companies know why people come to them rather than other businesses. And what's more, the

customers using their products and services also have a good sense of the company's mission.

It's what keeps them coming back.” (Garrison, 2010)

To ensure that the company has a foundation to drive it well into the future, an

established business philosophy had to be created. An established business philosophy clearly

shows future personnel exactly what the most important values are to the company so that

when a situation arises, particularly an undocumented situation, those in charge of making the

decisions, and those entrusted to carry those decisions out, will have a proper road map as to

which direction they should take. It builds a company culture. Companies like Google are

admired for the company culture that they have created over the years. Granted, as a

beginning entrepreneurial project, Lamarvelous English represents lifestyle entrepreneurship

and will for the first three to five years. The number of personnel is limited to three people or

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under. However, it is exactly in such a situation where a good business philosophy is required,

ensuring that the entrepreneur is thinking about the future as well as the present.

The mission of Lamarvelous English is to make English easier to work with.

The companies vision to build a community of loyal customers who live in our

website, interact with one another, and use our products for all of their English needs. The

company wants to cultivate them from a young age and see them well into adulthood,

confident about their English communication abilities.

The Seven Lamarvelous Principles were developed with this theory of planning in

mind. It reduces the difficulties that come with possible succession (providing the company

stays in business for a long time) by making the driving issues clear.

The Seven Lamarvelous Principles:

1) Impossible means absolutely nothing! – There is never a moment in the company

This means that when facing a problem, no one is allowed to say that something can’t be

done, or that a problem cannot be solved. Impossible is a fools’ word, and can be compared to

other nonsensical words like Jibba-jabba, and gobbledygook. Saying something is impossible

installs a creative mental block and limits the company’s capability to deal with its problems.

2) Stellar management = Stellar employees - we ALWAYS want this.

This incorporates the idea that Lamarvelous English will be run as a bottom up

company where the employees at the bottom of the power structure will be empowered to do

what is best for the company with the other Lamarvelous principles as a guideline. It basically

states that management will be evaluated based on the performance of the employees that are

under them. When an employee has a problem completing any task that affects the way the

company is seen, the manager has to shine and provide guidance, intellect, and support to

ensure that the employee, the person who has the most contact with the customer and/or the

customer’s product, is well taken care of.

3) Stellar employees are to our company as the heart is to the human body.

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As previously mentioned, the employee is the connection between our company and

the customer – making him the most important member of a Lamarvelous team. This is why it

is important to cater to the employee more than the manager. The employee must go through

proper training, be given opportunities to show leadership, and also understand that he is

given every single tool necessary to succeed at his job. As the company grows, this concept of

employee empowerment will ensure that each interaction with the customer will be more than

satisfactory, it will be memorable and profitable.

4) Our customers are celebrities and royalty. We are their biggest fans and treat them as such.

This concept is easy to grasp because the customers have all of the company’s money.

It is the job of any staff member who has interaction with a customer in any way, shape, or

form, to woo him like a potential lover, to get money, and to get approval from the customer.

Customers must then, be treated like a star struck fan would treat a celebrity. Even if

transactions are not direct or instantaneous, the action that sways a customer closer to paying

us for our products, that melts his heart in favor of the company, is beneficial in the end.

5) We will strive to give more to the Earth than we take of it.

This principle focuses on the need to keep ecological waste to a minimum – which is

not a difficult concept for an e – based company. The problem with this principle is that not

everyone else is on board. For example, when asked what was the possibility that Darmstadt’s

city hall would go paperless in the near future, an official employee scoffed and suggested

that the city was a long way off from being paperless. A paperless office would reduce costs,

improve productivity and efficiency – all the while making a positive impact on the planet,

and giving the company a positive reputation to our customers. Many institutions are not on

board with this concept. Our company can start making this option of doing work more than

just a trend.

6) 100% clarity, honesty, responsibility.

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It is the founder’s responsibility to put his will into the company. In the case of

Lamarvelous English, or any company running under these principles, that will is to run a

transparent operation. Covering up mistakes or operating under shame is not good for

business, but amazingly, many companies operate exactly in that way. For years companies

have tried to hide negative results and even have gone as far as to use truthful, but outdated

data to fool people about their financial situation. (Hosking, 2006).

Lamarvelous English will be run with clarity. One of its goals is to build an

atmosphere where an employee or a manger will be more respected when dealing with bad

outcomes successfully, and honestly, instead of trying to hide an uncomfortable situation.

However, in order to do this the culture must be engrained in its staff from the beginning or it

becomes more difficult, costing the company time and money.

7) Money is honey.

The bottom line is still the bottom line. Money helps the company maintain the quality

of its products, and helps the company achieve its growth goals. Though the company

operates mainly online, it will not base its overall success on the number of hits the website

receives or by the number of Facebook fans. Following Jim Collins’ theory about the

hedgehog concept, our main economic driver is the profit per Lamarvelous English member –

and not in reverse.

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2. The Business Model.

The business will operate as a UG (haftungsbeschränkt) & Co. KG in order to

establish a triangular connection between the entrepreneur, the KG and the UG, where the

UG’s sole responsibility is to run the KG, protecting the entrepreneur from any vicious legal

attacks.

The company operates in the language industry; not education alone and not editing

services alone. It takes advantage of a strategy canvass that reduces our need for highly paid

professional translators in order to maximize the amount of profit per website visit – which

comes in line with our Hedgehog concept and creates a blue ocean for the company to swim

in. Our company’s goal is to make English easier for everyone in any way, shape, or form via

various products and services.

Our competitors range from highly developed translation firms to private,

unsophisticated text editing operations. There are translation firms and there are also English

schools like Berlitz, or programs, like Rosetta Stone, which teach customers English already.

There are many book publishers like Cornelson or Westermann, who create books to teach

kids and prepare English students for academic success.

There are also websites that attempt to copy a social network, Facebook copycats who

offer nothing more than the opportunity to interact with other English speaking people. While

our company also attempts this, we offer much more in terms of an entire English experience.

Our strategy is not to compete with these companies, but rather to serve as an

accessory to most of these companies and try to form as many partnerships with various

companies that address the English language as we can.

We offer three types of products:

1) Proofreading Services – which will be executed initially through the founder who is

trained and qualified to edit text, but also through the hiring of freelance editors who can do

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the job as well. Both options will cost the company money to compensate, but with good

legwork, the business can grow to a significant amount in a short period of time – or at least

that is the assumption.

2) Advertising – Advertising space on the website. This is to generate profit based on

the number of visitors we amass at the website, which shifts the marketing goals to focus to

get people to come to the website. We will sell the advertising space on every single page,

generating profit that can support the proofreading leg of our business once the visitor number

increases. We will also advertise through media products that we offer to our visitors.

3) Selling English based products. Lamarvelous English is not going to compete and

sell a book, for example. Lamarvelous English is going to differentiate and sell a quality heft

for school children, designed to assist their learning the language in school. It will provide

people with helpful materials that actually help our visitors who have, or want, to learn

English to learn the language more effortlessly.

Because these are the three bases where the money will come from, the company will

have to offer free content and objects to coincide with these three goals. For our editing

services, the company will operate under the honor system and offer people 100 percent of

their money back if they show us that we edited their text totally wrong.

For our advertising goal, we offer different pages for our visitors to hang out in, like a

gaming page where they can play free English games. For our broadcasts, we will offer

English tips for free – however, we will use product placement inside the English lesson,

keeping track of which lessons are played the most, and charging clients accordingly.

For our English products, we will offer contests that offer free trial English lessons.

This can be accomplished by working out arrangements with the schools themselves. When

our visitors win a free English lesson, we will sell them our assistance products to take with

them into the lesson.

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From these standpoints the business will begin to make a difference in our customers’

lives, making their English experience more enjoyable.

The exceptional part about this business model is that where one part is weak,

because of seasonal lack drop-off, the other parts of the model can compensate for it. As a

note, the proofreading services and the learning assistance products are a wonderful

combination and serve a great target, students, due to the customers renewing themselves

every year.

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3. The Shape of Management.

Management philosophy shapes a company by giving its decision makers a guide they

can live with in the course of hardships within the company. It also assists when having to

deal with numerous people. Though in the start up phase of a business there may be only one

employee, the founder himself, but if the entrepreneurial venture is based on high growth,

then the entrepreneur must plan ahead and prepare for high growth regardless of the present

circumstances. The management philosophy is based on the 7 Lamarvelous principles that

guide any company run with Lamarvelous Holdings (our partner company). These principles

build a company culture to keep our associates and employees in the proper mindset for

working in our professional environment.

Currently the leader of the company has the title of “First Business Commander,”– the

CEO equivalent. The name commander suggests that business is like a war, and in some

cases, it really is. This position is meant typically for an MBA, someone who understands

business concepts that most people who begin proofreading services, as lifestyle

entrepreneurs, usually lack.

The company is non – hierarchal. Each Commander of a different department works

together with the other Commanders and in conjunction with the FBC to ensure that the goals

of the company are being properly met.12

The company is structured within the various team performances. Responsibility will

be based on bottom-up role importance. This means the most responsibility can be found at

the top and the least at the bottom – but not just in word. In many working environments,

managers berate their employees when mistakes are made, and an employee should not be

pushed down when his work is so difficult, and simultaneously the heart of the business.

Supervisors (for example LESs) are responsible for the success of those working under them

12 See Figure 12 – Organizational Chart.

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(LEAs) and the specific Commander of the seven departments would critically evaluate

supervisor performance because they are responsible for their department. This method puts

emphasis on teamwork and not one-upmanship or tactics that could hurt the company.

Upon company growth within the next 3-5 years, the following management positions will

need to be filled:

Marketing & Sales Commander (MSC) – The MSC is in charge of our marketing and getting

our company noticed by potential customers. The MSC is in charge of enhancing the

Lamarvelous English brand, and getting customers to want to give money to us in exchange

for our services and products. The MSC is also responsible for the handling of the advertising

for our customers.

Proofreading Services Commander (PRC) – The PRC is responsible for all of the

Lamarvelous English Supervisors (LESs) and Lamarvelous English Associates (LEAs)

involved with the language correction leg of the business. The main responsibility in this role

is to work together with the supervisors and other employees under him or her to ensure that

this leg of the business runs smoothly. Its role in the beginning of the company’s existence is

cruicial because proofreading is the initial income generator of the company.

• Lamarvelous English Supervisors (LESs) – The individuals will look over the LEAs’

(Lamarvelous English Associates’) work, ensuring the quality level of the work

package in question is achieved and that the package is ready to be sent back to the

customer.

Product Commander (PC)– The PC is responsible for creative and conductive aspects of the

development and implementation of the various products that we will create for our

customers.

Investment &Acquirement Commander (IAC) – The IAC is responsible for investing profits

into various projects, funds, charities, and investments that will benefit the company’s goals.

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He or she is also responsible for the purchase of tools, and equipment that the company needs

for its daily operations.

Customer Satisfaction Commander (CSC) – The CSC has the most important responsibility.

He must keep up with our customers and make sure that they are satisfied. He or she uses

communication and events, in conjunction with the Marketing Commander to keep the

customers that the marketing has already won for the company.

Online Commander (OC) – The OC is responsible for the online arm of the company, the

website, the social media aspects, and the creative layouts of every web page. Since the

business runs from the website, this is very crucial.

Other Professionals to Assist the Management Team.

As the company grows, we will weigh the options of hiring a manager versus consulting an

external consultant for the following departments of the company: Marketing and

Communication, CRM, SEO, Finance and Accounting, Legal, and IT on a needs be basis, as

the strategy of the business requires.

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4. The SWOTAnalysis for Lamarvelous English.

Strengths:

The founder, Lamar Gary, who is well trained in teaching English, editing English text and is

also a native speaker. He has global connections.

As an online based company, it does not have to deal with brick and mortar problems.

Weaknesses:

• The weaknesses also lie within the founder. Whatever the founder’s personal

weaknesses are will affect the company. Outsourcing the operations that the founder is bad at

can be a solution.

• Lack of initial capital to make proper investments.

• Lifestyle and culture of the company goes against common business expectations.

This could affect the ability to negotiate, or to acquire loans.

Threats:

• Lack of capital may cause a rough time in the future. The money goes faster in

Germany due to more, and higher regulatory fees.

• The European debt crisis looms large, threatening alter the whole Euro economy.

• Immigration. The Schengen agreement is being reviewed in various countries due to

the influx of African migrants. Political beliefs aside, the company must prepare in

case the law is changed.

• Copycat entrants may try and replicate the website.

Opportunities:

• There is a chance to get an international customer base.

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• Adding media to the website will bring more customers but it can also lead to other

opportunities as well. Media opportunities are outlets that should be thoroughly

explored.

• Partnerships with other English teaching companies can provide win-win situations.

• The never ending amount of potential customers.13

Given factors from a simple SWOT analysis as criteria for a decision, an entrepreneur can

then choose which combination he would like to tackle. For example, based on the

Lamarvelous English SWOT, the company will engage in an ST, OW strategy. The founder

will use the company’s strengths to try and establish preparations for any possible threats, and

also use the company’s opportunities to offset the company’s weakness.

13 See Figure 13 – The number of tertiary students.

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5. Porter’s Five Forces Analysis for Lamarvelous English.

Porter’s Five Forces, developed by Michael Porter of Harvard Business School

notoriety, describe the dynamic that controls competition among businesses in any industry.

Supplier Power – For our proofreading services, the supplier power is very limited, giving

the company the advantage. Freelancers in America, facing a struggling economy will

bend to the terms that we offer, desperate for any type of income. In effect becoming

inexpensive labor that the company needs to make this work.

Buyer Power – The buyer power is balanced, but leaning to the low side. Purchases are not

done in bulk. The company has to utilize marketing to create demand. The products

offered would, in most cases only be a small fraction of customers’ costs. However,

the products are standard and can be found in other places. Customers can easily shop

around for alternatives.

Rivals – There are literally too many rivals to count. Many websites around the world offer

various aspects of document correction,

what the company offers. The good news is that the companies, websites, or private

contracted workers focus on one aspect of English or another. There are few websites

that offer the comfortable setting that Lamarvelous English strives to provide. There

are many English productions that are also available for free, in a professional and

non-professional way, but they focus solely on teaching and also miss various

opportunities.

Threat of Imitation – with the increase in technology, it is fairly easy for anyone to copy our

website, down to the very pictures. The company has to differentiate itself with the

sense of community that it builds among its visitors, with the products that are not as

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easy to copy, and with patents and copyrights that allow the company to prosecute

copycats.

Barriers to Entry – Other businesses have entered and exited the industry recently. The

barriers to entry are at a medium to low level on the correction side, but can be very

high when it comes to publication and video producing. The high cost of quality

equipment proves to be a significant barrier for the company itself as well.

The internet tends to make many aspects of the industry seem easier to enter. However, as

Lamarvelous English continues its operations, the principles of the five competitive forces

will let the company strive toward differentiation, which comes through making the proper

trade-offs.

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VII. Accounting Setup

1. Managing Costs.

Entrepreneurs are in the best position to ensure that their companies run under a

minimum cost structure because there are no sticky status quos threatening to overrun the

methodology of the company. An entrepreneur has the freedom to initiate low cost strategies

from the beginning, building a low cost foundation that provides the company with the ability

to maximize profits even under moderate sales rates. It also reduces the need to lower prices,

engage in market destroying price wars with rivals, and reduced the chance of lowering

potential profits.

“I never like the idea of reducing prices because of competitive pressure from lower-

quality producers. Not only will you lose margin in the short term, but (also) you will have a

hard time getting prices back where they belong. Nevertheless, I recognize that in some

circumstances, you may feel you have no choice but to reduce prices. When that happens, you

should consider alternatives, such as offering a different—and less expensive—product or

service in addition to the higher-priced one. (Brodsky, 2011)

From a first time entrepreneur’s point of view, having spent time as a consumer,

setting the right price is important. If the price is set too low, meaning his costs are not

covered, it will become difficult to win customers after a proper price adjustment, especially

in a slow economy. Set the price too high, and it can always be adjusted lower, to the

customer’s and the company’s benefit.

Luckily, Lamarvelous English’s operating costs are not very high in the beginning

stages. The biggest cost is that of the freelance administration help that the company has to

hire to free up the founder’s time.

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2. Determining the Right Price.

The next challenge was to decide on how much to charge visitors for a product or a

service.

“Small business owners who don't understand their financial statements and don't

bother to learn how to read them will never make fully informed decisions for their

companies, says Bill Hettinger, co-author of a new book, Finance Without Fear.

Bill Hettinger: It seems like 75 percent-ish don't focus on their finances at all. Some of them

are artistic people and finance is not the skill they are into. But even the folks who have

technical backgrounds don't tend to focus on finances. We find that people wait until they

have some external reason to do so, like when they need to go to the bank for a loan, or they

need a business plan, or there's some sort of shock to the system.”

The founder of Lamarvelous English is one of these “creative, I can’t count,” kind of

people. However, the fact is that all entrepreneurs will have to suck it up and learn

accounting, if only the bare minimum in order to keep track of the money. Accounting is the

language of the company.

“On the most basic level, I've talked to entrepreneurs who have no idea how much

money their companies make. You shouldn't need to ask your accountant that. If you

introduce a new product, you will have no way of determining whether you'll make money off

of it. Or you may buy a $25,000 piece of new equipment and you don't figure out until later

that you'll never make enough money to pay for it.

The other thing we discovered: If you have ever looked through a finance book or class,

they're all based on manufacturing. So you'll learn about raw material purchases and

inventory. They don't talk a lot about service businesses or retail businesses, even though

manufacturing only accounts for a third of our economy today. (Klein, 2011)

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Based on the number of people in Germany enrolled in an MBA program, the program

most likely to require our global communication opportunities, we have developed a goal of

20% of the corrections market:

20%= 35,126 students (potential customers)

We decided to try to reach a goal of 35,000 students this year.

In the beginning of its business life, Lamarvelous English has started only with the idea of

proofreading. These costs have been based on standard cost of proofreading which range from

€0.01 to €0.05 per word. Normally, editors charge per word, or per page. There are 250 words

per double spaced page (normally). With all this in mind and considering the work involved.

The company has created four packages to sell to our visitors and customers.

All of these prices are excluding VAT.

S – for small one to three page documents: €7,99

M – for medium sized documents: €19,99

L – for larger, more extensive works: €49,99

XL – for really important, really big documents: €99,99

Startup and Operating Needs

The initial company forming fees amounted to over €2800, which were split between the

company itself and out of the founder’s pocket. This leaves the company with little to operate

with. Fortunately, daily operations cost little to no money. The company will continue to get

monthly infusions from the founder as well, until it can operate without them.

The company is looking for bank leverage to cover our major expenses covering

starting operating needs. Within this year, the company will have planned to generate enough

income to sustain most monthly business expenses, including a loan rate from the bank. The

company was denied a Kfw bank loan, one of the bank loans that most entrepreneurs in

Germany apply for because they offer better payback rates and various options that make

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acquiring a start up loan from them appealing. When facing such a setback, an entrepreneur

needs to stick it out and take matters into his own hands. The founder had arranged the bare

essentials – the website, and his donated software – and was prepared to run the company

whether he got the loan or not. While the lack of finances makes things more difficult now, as

far as employing people, he will have to take on a minimum salary, work an extra job and

make ends meet somehow.

On a side note, this is a crucial point. An entrepreneur must be clear that everything

may not go his way at first and that he may have to work twice as hard as someone who just

has a job. He may have to work on his business and hold down a job or two. It is the extra

sacrifices required that deters most people, especially in Germany, from being entrepreneurs

in the first place.

Financial Analysis

We have developed a break-even analysis based on our costs. Based on the M

package, which is the most common package to be sold to customers, we would need to sell

129 units to break even.14

If however, the company achieves its goal and actually sells 35,000 M work packages, the

revenue would amount to a bit under €700,000. We would have a total variable cost of a little

over €135,000.

In the end though, the founder has decided to focus his attention on how much money

actually comes into the company’s coffers every month. This is the most important statistic.

“Case in point: Computer game firm Activision Blizzard reported a net of $113

million last year. But it did better than that. It took in an additional $300 million, mostly for

subscriptions to online multiplayer games. It gets the cash now but records the revenue only

over time, as the subscriptions run out. Sass owns $40 million of this stock.

14 See Figure 14 – Break Even Analysis

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“‘I am religious about cash flow,’ says (Martin D.) Sass, who worked in his father's Brooklyn

hardware store as a kid. ‘To me it's the most important number.’” (Fisher)

Cash flow makes or breaks an entrepreneur, no matter the type.

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VIII. Marketing Tactics 1. Guerilla Marketing

Guerilla marketing puts the focus on bootstrapping a marketing plan, spending as little

as possible to get the most customers as possible. There are various marketing weapons that

can be used to engage a guerilla marketing plan, but first a simple four to five step plan had to

be established. The founder was very inspired by an audio that he heard from a friend

featuring the guerilla marketing creator, Jay Conrad Levinson.

Lamarvelous English’s marketing plan centers around six points.

1) The purpose of our marketing is to get people to come to our website – not to get people to

buy something.

2) The benefits we want to stress are confidence, and the ease with which one can operate the

English language with our help. We benefit our visitors and our customers with

excellent proofreading services and with the materials that they need to make their

English usage as successful as it can be.

We benefit them with the fact that we donate every year to support the education of

underprivileged kids through Unicef, and with the pledge to also donate a portion of

our profit towards financing the improvement of developed nation’s schools.

3) Our target audience is... Education experts like professors, lecturers and teachers, but also

students and businesses that have to work with the English language.

4) Our niche is confidence. This is evident in our tagline, “English? No problem.” We want to

build the idea that people who want the English part of their lives, be it work, school,

or socializing, to be stress free come to Lamarvelous English.

5) Our identity lies in the 8 Lamarvelous principles that we operate under.

6) We want to spend 5% of our projected sales on marketing, maximum.

Five percent may seem like a small number, but the plan is not to spend huge amounts

on expensive advertising that eats away at our costs like our ancestors required. In

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today’s world, where almost anything has the potential to go viral, the company wants

marketing to be heavily based on word of mouth.

“ Word-of-mouth marketers have long touted the power of customer referrals.

Recommendations from friends are among the top influences of purchases, according to a

recent study by ForSee Results, a market research firm in Ann Arbor, Michigan.” (Alsever.

2011)

In the next coming months, the company will have to tout the power of word of mouth

marketing to the fullest. It may set some entrepreneurs back, but it should be expected that the

results are not instantaneous. However, with plenty of focus on out targets, and the patience to

let them do our marketing for us, by year’s end there should be a drastic change in the amount

of business activity from when the building phase.

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2. Our Target Market (s)

Our primary target markets are the higher education market – professors, teachers, and

students, specifically in international based courses and programs, and businesses that need an

international presence. There is a steady increase of students who study at a tertiary level.

There are 2,214,112 tertiary students students in Germany alone. Of these, 175,631 students

study Business Administration. This is the subject that has a direct need for global

communication.

Our second target market are the companies who we will offer advertising to, getting

their names, products, or services on the minds of potential customers they may normally not

have access to.

A Need for Our Services

In the global higher education systems, there is a need for presentation work, and

paper documents that will be presented to students, to look clear and professional. The

founder of Lamarvelous English had the initial idea for the company when he noticed that

although ideas were conveyed in some of his classes, the English was not perfect, and it threw

him off a little.

For businesses, whether SME or LE, in an age of globalization, there is a great need to

appear professional to clients, suppliers, and to the general public. This may not be easy as a

non-native speaker. Text that is presented to international parties, regardless of the format,

have to be somewhat impressive. The current need to be able to reach out to the BRIC

countries, the PIIGS countries, and other overseas participants increases the demand for the

services that we provide.

As a former teacher in one of Hessen’s schools, the founder has seen first hand, that

there will always be people, no matter how good they think they are, who need someone to

correct their English writing. There will always be people who want to increase their English

67

capabilities – for whatever reason. The best part about Lamarvelous English however, is that

it is a company that improves the lives of people by lowering their stress levels as far as

English as a foreign language is concerned and allows people who are not the best English

communicators to also get a chance for international communication.

Our Objectives

Though initially, for the purpose of this thesis, the company began only offering proofreading

services, the company offering has evolved. What we offer will be threefold:

1: Correction services – Providing our customers with confidence in their English language

based work.

2: Videos – We want to keep our viewers entertained and informed. The object of the video is

to help our visitors with their learning in a fun way.

3: Products – Games, apps for ipad, iphone, other cell phones, computer software, books, and

other English related products are also a piece of the puzzle that viewers can use as assistance

to learning.

Any marketing will focus heavily on bringing the customer to our website where he or

she can get access to these products and services. The objectives of our marketing is to get

people to visit our internet website (under construction). The business takes off from the

website.

The website’s primary objective is to inform people, helping them understand English.

To make our customers feel comfortable about the language. The secondary objective is to

offer our various English products.

Pricing Objectives

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The pricing objectives of the correction service are to build and lock a loyal customer base

that sees the company as fair and reasonable. It is also to build traffic to view the free video

lessons available on our site.

We also want to build a decent ROI based on the low cost of providing editing services.

The pricing objective of the video service is to get people to view the advertisements and thus

purchase products and services from our sponsors.

For our correction services we have 4 price points ranging from €7.99 to €99.99, depending

on the type of document that must be worked on.15

Advertising and Promotion Efforts

To advertise our website the founder will visit universities, companies, and schools,

and reach out to international students and instructors where they spend most of their time – at

the place of learning. A lot of footwork is needed initially to make the marketing work.

The founder will use flyers, marketing materials such as pens, postcards, etc. for people’s use.

15 See Figure 15 – Lamarvelous English Proofreading Prices.

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3. Further Analysis

Changes in the Target Market

The changes really depend on the Geopolitical scene and the market for businesses,

and also on the number of students enrolling in international, higher education programs. The

globalization trend is not going to disappear because there is too much money to be made.

People will want to take advantage of this. Our company is a tool for these people and

organizations to use.

Any significant changes will have to do with how people communicate and how

people learn/use the English language.

Advantages and Disadvantages in our Target Market

The advantages that the company brings to our target market are as follows:

1. We understand the tertiary and secondary school environment and the needs of

professors, teachers, and students.

2. With the founder’s knowledge of business principles, we make sure that the

businesses we serve are getting the very best, saying exactly what they want to say,

how they want to say it.

3. As a mainly internet based company, we are simple and efficient – no complicated

processes by design.

The disadvantages of our company are:

1. We are a start up and have to work hard to make our services known to our target

market, and to the general public.

2. If there is a potential target in our market who is unfamiliar with the ways of the

computer, it will be almost impossible for him to do business with us and we have to

look in the future to find ways around this (should it be the case).

70

Relevant Aspects of Consumer Behavior

The relevant aspects of consumer behavior to watch out for deal more with the English

correction services we provide to the universities. There tend to be slow periods for this group

(during the summer and winter semesters). This will be offset by the media products and

included advertisements that we offer to customers on a year round basis.

With companies there also seems to be a summer lag, where many people take

vacation. In Germany the vacation time can be a long four weeks or more. (Compared to the

US vacation time of two weeks)

Environment

Germany is one of the largest internet/computer technology usage countries with a

communication system more advanced than the USA as far as internet access capabilities.

This is a definite advantage to our company.

State of the German Economy

The German economy is rising since the financial crisis of ’09, Germany proving to be

one of the most stable countries in the Euro zone. There is money to be made in Germany.

However, Europe, in general, is facing a crisis and troubles in other European countries, like

Portugal, Greece, Spain, and even Italy may have a dragging effect on the German economy,

not to mention the chance that the Euro may not be the monetary unit of choice should

something incredibly drastic happen. The economy’s problems may affect the rate at which

we can sell items to our visitors. If there is unrest in Europe because of the current debt crisis,

which is possible, it could put a serious dent in any global opportunities as fear drives the

market.

State of German Politics

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With the soon coming political shifts in the coming years, there will be new politicians

who need international documents. The company aims to be on the market long enough to

prepare for this major political shift and collect important potential long term customers.

Angels Merkel’s popularity has waned in the last few months and the next elections may

bring major changes to the region.

State of German Population

Our target customers are the majority portions of the population. The professors,

university directors, and business leaders tend to be in the 40 + demographic. We are directly

in position to take a huge market that requires our services. Another range of customers exist

among the actual students who attend university or upper levels of secondary school.16

16 See Figure 16 – Germany’s Geographic Distribution

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4. Lamarvelous English’s Social Media Features.

In order to fully take advantage of the website and its ability to lock in customers, a

social media feature was added to the website. The thought behind the process is to build a

sense of community, thus increasing the cost of exit. Though this cost is a social cost, people

will think twice before leaving when their favorite friends or fellow English lovers frequent

the site. When properly developed, it will build a friendly peer pressure that keeps our

products and services in the eyes of our visitors longer than if we had no social content

whatsoever. That is the power that social media incorporates.

The first thing we have to implement is a chat room, where people can interact

with other people “just like them” over the site. The site needs an administrator or two, and

with time, visitors themselves who frequent enough and have built a solid reputation can be

elected as administrators, controlling the flow of the chat with no compensation required on

the part of the company. Facebook employs a similar model for their group sites where one

person acts as administrator and can add other people as they choose.

A member page has been created after much contemplation. While most

websites create a premium member portion of their website for paying customers, this may

not be the way to go for a fairly free of cost promoting website like lamarvelousenglish.com.

The advantage of placing a chat service on the members’ area is to get important CRM

information that we can use to push various products to our visitors with – as they have to

sign up with pertinent information to become a member. To ensure the safety of customers’

information, it has to be made evidently clear that their information will not be sold, so a

privacy statement must also be developed. The company will create content, give it away “for

free” and then cash in on the information that has been provided as the customer signs up. The

money must be the third step in the chain, and never the second.

Using Facebook, Twitter, LinkedIn, and other social media outlets, a short number of

English aficionados can be found and reached in record time. With the “like” and “tweet”

73

buttons on Facebook and Twitter, respectively, the company can build a strong following

among the international community. The beauty of these devices is that they allow the

company’s name to be spread beyond that of just Germany. There is literally a world market

available.

In order to maintain our visitor likeability the company will have to hire someone to

watch over the communications that go through our website. A chat administrator that has no

official ties to the company can only do so much. Someone from inside the company should

be assigned, as his only duty, to reply to guestbook posts, answer forum questions, and every

now and then drop in on chat conversations to keep the company constantly connected to the

wishes, suggestions and requests that customers will more than likely have. Although this

seems like a given, many websites have faltered for this very reason, lack of customer

feedback.

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IX. The Business Model

1. The Business Model.

Building Space

The business has been established at a home office in Rossdorf, the home of the

entrepreneur to be exact. The company is an internet company, meaning anywhere with

internet access is where our company exists to the public (think Facebook, Twitter, Linked In,

Yelp, etc.) The limited office space is not accessible to the public.

Many high growth companies started inside the garage or some other obscure room of

the founder’s home. Examples of such companies include Dell computers, Hewlett Packard,

Zara, Amazon – the biggest online shop in the world – and many others. Some companies like

Cash Money records (last official net worth $400 million), Echostar (2009 revenue of $2

billion), and Nike (worth $9.754 billion as of 2010) were started from the back of a vehicle!

(Davidson, 2009) (Cha Cha)

Customers can get in touch with us with the speed of their internet connection, 24

hours a day, 7 days a week. We are also connected to any of our suppliers via the internet.

Transportation Issues

There are not many transportation issues except that the company would benefit from

possessing a small, inexpensive company car to allow travel between different cities in the

Rhein-Main area as well as other areas in Germany, for the initial marketing stages. Public

transportation wastes too much time between waiting for each train or bus that could be better

spent for sales. Any future sales personnel will have to find and talk with university officials,

university students, business owners, and other potential customers. In the future, major

contracts in other countries may require international travel in the European area in the future

as well. The leadership must develop a transportation model and implement it as soon as

75

possible. Until then, the only option available is public transportation – which saves money

initially, but can be expensive in terms of time and stress.

Equipment

The company has purchased web equipment, website and domain with hosting

services. Items remaing to be purchased include video equipment for filming, cyber security

for our websites and our customers, and testing services from companies like TÜV,

Testsieger, and etc. Of the above listed equipment, the most important of these are the domain

and hosting services. The other, pricier equipment can be purchased when the company has

built some kind of revenue stream.

Donations

The founder has donated the main hardware equipment: two laptops – a Macbook and

a PC laptop – an ipad for mobile capacity, built in programs, and a wacom pad for designing

purposes.

Inventory Control

“The machines do all the real work.” - Lamar Gary, Lamarvelous English founder

and FBC.

The inventory of the company is not particularly large and so is very easy to inspect

and take account for, initially. A simple MS Excel inventory worksheet suffices at the

moment. Upon company expansion, inventory will be taken every quarter with an ipad to

check that all the materials for product and service creation/distribution are available. As the

cash crop inventory to maintain consists of digital content, most of our product is

electronically controlled and easily accounted for. Though this may not sound like a typical

“business” statement that encourages the hard work it took to perform inventory checks

twenty years ago, or the inventory that many companies today have to deal with every year, it

enforces the concept of leverage in the information age– in this case work leverage. In the

76

information age, activities like searching for items, filing, and recording are all digitized and

easier to use.

The LEAs will use their own computers. Digital inventory of work packages or videos

is handled via computer and easy for the appropriate personnel to access.

Purchasing Requirements

The following materials/services will need to be purchased initially for direct production:

• A hard drive for backing up files.

• 1 Word processing software license (Microsoft Word, etc.) – donated by the founder

• 1 professional video camera (Canon XM2, etc.)

• 1 film editing software license (iMovie, etc. ) donated by the founder

• Patent protection for the Lamarvelous English logo. Other copyrights and patents as

they may apply will also be purchased.

Labor Requirements

The majority of the work involved will be performed by freelancers and consultants and done

as outsourced work. We have no real “labor” force.

Evaluation, Policies, and Rules

The evaluation of employees and supervisors tend to concentrate on the proofreading service

part of our company:

LEAs, who work on a freelance basis, will be evaluated on their speed and

correctness. In the future, a reward policy will be established to honor our good LEAs. LESs

will be evaluated based on their ability to improve the overall performance of their assigned

LEAs. The Regional Supervisor will be evaluated on the satisfaction quotient of the

customers in his or her area.

77

No authority will be delegated to LEAs, but LESs, do have limited supervisory

authority over what happens with their assigned LEAs.

Even though we are using next gen, web 2.0 technologies, we also want to give the

customer a feeling of localization, while simultaneously reaching out across the globe.

78

2.The First Entrepreneurial Mistake

The company hired the counsel of Merz Arnold and Wüpper, out of Darmstadt, to outsource

its tax reporting, accounting and legal needs. This seemed like a strategically excellent idea

because they were the best firm in the area. The notion of nothing but the best for the

company pushed out the reality, and frankly the necessity of our low cost structure intentions.

The company will go bankrupt before it actually begins with the extremely high rates charged

for little work performed due to the unforeseen pace of development.

For the second quarter, the company was charged approximately €624 even though the

company has not gained any customers yet.

The financial support that was to come in the form of a KfW start up bank loan did not

come into fruition. Currently there is no money available to pay this bill off. As an

entrepreneur, this is a classic example of the financial dangers that can occur. It is the basis of

the fear that prevents people from taking the steps to become entrepreneurs, especially in

Germany where one has to pay for insurance, GEZ, etc. and other elements of mere function

that are required by law in the country.

The lesson learned here is that with the aspirations for high growth it is up to the

entrepreneur to also be able to keep himself grounded as well. An entrepreneur has to take

good care that he has the finances in order to start a business. In Germany, the necessary

amount to comfortably begin, without purchasing anything for the business is well over four

thousand euro, even if your business is online. Access to inexpensive, quality is limited in

comparison to bigger countries where one can find a decent tax advisor on almost every

block. If an entrepreneur does not have a lot of money, he needs to refrain from hiring

associates. Instead, the accounting and taxes should be done with the leverage of a computer

program – for the initial period. Regulation of the amount of “services” that are conducted on

his behalf is the key to not breaking his own bank. After the money flows in, then outsourcing

79

these activities to a firm would be possible provided the entrepreneur remained cautious about

the charges that he induces from these firms. Once again, this exposes the need of every

entrepreneur to take stock of his own account and to personally analyze what he can and

cannot do in particular intervals of the entrepreneurial process.

80

X. Conclusion

Germany’s population is decreasing. In order to sustain financial growth,

entrepreneurs are going to have to build new businesses that spur domestic growth and are

able to utilize the global economy that has emerged due to technological advances. To be an

entrepreneur in Germany is quite difficult, but it has never been a better time to start a

business, even with the bureaucracy that one has to face here. If foreigners are able to build

successful businesses, many of them with language capabilities that pale in comparison to

their native counterparts, then there also needs to be an increase of native German

entrepreneurialism.

There needs to be a shift in the way that people think about entrepreneurship.

Throwing money at entrepreneurs that already exist is not enough. The government,

particularly the education department has to put programs in place that grow entrepreneurs

from an early age, providing them with the education necessary to make the growth rate

among entrepreneurs increase. Education of these individuals may not bring success, but with

the proper learning environment, the entrepreneurs of the future will have a stable footing to

go out, create businesses and increase growth.

The culture that inhibits risk taking must be adjusted to a place where people are more

inclined to try what was impossible twenty years ago, spurred on by exponential technology

advances. Today, technology is at a level where many other costs can be cut and problems

that existed twenty years ago have been made null and void.

Anyone can be an entrepreneur. As the world becomes more globalized, a person can

start a business anywhere, any size. However this convenience can also pose a problem from

the viewpoint of government because with the proper internet connection, one can just as

easily start a business on an island. Entrepreneurs will be able to choose where they want to

set up their business. The German government has to put a lot more effort into educating its

81

youth so that in the future, where the computing will be even more tedious than it is now,

there will be people educated and qualified enough to start more tech related businesses and

home grow them. They also have to change the infrastructure so to make it beneficial to start

a company in Germany. Outside of the time it takes to plan and execute strategies, it takes

seven days to start a company in New Zealand. In Germany it takes two weeks or more. That

should change.

There is no specific formula for entrepreneurialism. There are however certain factors

that can determine success or hardship. When economic conditions are favorable, credit is

available, and the entrepreneur is well educated in what he may face, any entrepreneurial

venture is easier than when these factors are not into play.

Every entrepreneur, even the most successful seems to face failure at one point or

another, but the tenacious ones tend to be better off. The ones who have a better reason to

become an entrepreneur other than, “I have no other choice,” have more than just survival in

mind. They have growth in mind, but that alone is not a predicting factor for success.

In Germany, the necessity entrepreneur has just as many chances as the high growth,

extra income entrepreneur to achieve funding, and organize his venture for success. The

culture of entrepreneurship, how it is seen by the people, should develop to the point where

higher percentages of students decide to try out their innovative ideas on the market. In order

for this to happen education needs to be in place so that each individual has a clear view of

the money generation options he possesses. In the end, it is education and the application of

what is learned that will play a huge factor in an entrepreneur’s success or not. The business

itself will live or die based on how the entrepreneur, the person and all he knows, runs it.

82

APPENDIX

The charts and diagrams that emphasize certain points throughout the thesis. Figure 1 – Battle of the Sexes

The number of entrepreneurs in innovation – driven countries tallied by the sexes according to GEM’s 2010

report. Germany sits ranks only above countries such as Finnland, the U.K., Iceland, and Portugal. There has

been a slight increase of female entrepreneurs overall.

Source: © Global Entrepreneurship Research Association (GERA), Brixy, U.; Hundt, C.; Sternberg, R; Vorderwüllbecke, A. Global Entrepreneurship Monitor – Ländersbericht 2010.

83

Figure 2 – Reasons for starting a business.

Compared to the USA statistics, the German (as well as the Netherland and Switzerland) pie chart indicates that

the provision of more freedom is a stronger motivation for its entrepreneurs than monetary motivation.

Legend: Blue – More freedom Red – More income Green – Provide available income Yellow – Other reasons

Source: Global Entrepreneurship Monitor – Ländersbericht 2010.

84

Figure 3 – Opportunity vs. Necessity

The opportunity entrepreneur (Opportunity Gründer) relationship to the Necessity Entrepreneur as a ratio. A

lower number suggests that there are less high growth entrepreneurs than in other countries where the economy

has affected people’s decisions to start their own businesses.

Source: Global Entrepreneurship Monitor – Ländersbericht 2010.

85

Figure 4 – German Entrepreneurial Climate

Three important attributes of Germany’s entrepreneurial climate compared to 21 innovation – driven Global

Entrepreneurship Monitor (GEM) countries, as seen in the Country report for Germany in the GEM for 2010.

Although in Germany the yes percentage for the statement, “Those successful at starting a new business have a

high level of status and respect” lies higher than most countries, the statement, “Most people consider starting a

new business a desirable career choice,” has a higher yes response than only two other countries – one which is

Japan, where the culture most likely plays a part in its low positive response rate.

Source: Global Entrepreneurship Monitor

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86

Figure 5 – International Tax Rates The corporate income tax rate in order of least to greatest. The lower the tax rate, the better it is for entrepreneurs.

Source: OECD website.

Country Central government corporate

income tax rate 2

Adjusted central

government corporate

income tax rate 3

Sub-central government corporate

income tax rate 4

Combined corporate

income tax rate 5

Targeted corporate tax

rates 6

Ireland 12.5 12.5 12.5 Y Iceland 15 15 15 N Belgium* 33.99 (33.0) 33.99 17 Y Chile* 17 17 17 Y Poland* 19 19 19 N Slovak Republic

19 19 19 N

Hungary* 20.0 (16.0) 20 20 Y Turkey 20 20 20 N Czech Republic

21 21 21 Y

Estonia* 21 21 21 Switzerland* 8.5 6.7 14.47 21.17 N Slovenia 22 22 22 Austria 25 25 25 N Denmark 25 25 25 N Greece 25 25 25 Y Netherlands* 25.5 25.5 25.5 Y Finland 26 26 26 N Portugal 25 25 1.5 26.5 Y Israel* 27 27 0 27 Y Luxembourg 22.88 (22.0) 22.88 6.75 27 Y Italy* 27.5 27.5 27.5 N Korea 25 25 2.5 27.5 Y Mexico 28 28 28 Y Norway 28 28 28 Y Sweden 28 28 28 N United Kingdom*

28 28 28 Y

Australia* 30 30 30 Y New Zealand* 30 30 30 N Spain 30 30 30 Y Germany* 15.825

(15.0) 15.825 14.35 30.18 N

Canada 19.5 19.5 11.9 31.43 Y France* 34.43 34.43 34.43 Y United States* 35 32.7 6.54 39.25 Y Japan 30 27.99 11.55 39.54 Y

87

Figure 6.1 – The number of tertiary students in the OECD countries. (2008) In the last 30 years the number of tertiary students rose dramatically. Germany however, has a tertiary student rate under 30 percent. This is not the best situation for future success in the new information age that stresses computing, engineering, and technology advancements over industrial advancements.

Figure 6.2 – The number of people with a secondary education in OECD countries. Germany ranks higher, yet only sits in the middle, and under a few poorer European countries, between 80 percent and under 90 percent. The bulk of these people will end up working for one of the many industries in the country, but never think about engaging in an entrepreneurial project of their own.

source: Bildung 2010 Indikatoren

Über welche Bildungsabschlüsse verfügen Erwachsene?

bildung auf einen blick 2010 27

A1

Indikator A1Über welche Bildungsabschlüsse verfügen Erwachsene? Dieser Indikator untersucht den Bildungsstand der Erwachsenenbevölkerung auf der Grundlage von formalen Bildungsabschlüssen. Als solcher bietet er eine Kenngröße für die den Volkswirtschaften und Gesellschaften zur Verfügung stehenden Kenntnis-se und Kompetenzen. Zur besseren Beurteilung der Entwicklung verfügbarer Kompe-tenzen umfasst die Analyse auch Trenddaten zur Entwicklung der Zahl Erwachsener mit unterschiedlichen Bildungsabschlüssen.

Wichtigste Ergebnisse

Abbildung A1.1

Bevölkerung mit einem Abschluss im Tertiärbereich (2008)Diese Abbildung vergleicht den prozentualen Anteil der 25- bis 34-jährigen Bevölkerung mit einem Abschluss im Tertiärbereich mit dem Anteil der 55- bis 64-jährigen Bevölkerung mit einem Abschluss im Tertiärbereich, nach Altersgruppe.

Der Anteil der Bevölkerung mit einem Abschluss im Tertiärbereich ist in den letzten 30 Jahren deutlich gestiegen. In fast allen Län-dern ist der Anteil der 25- bis 34-Jährigen mit einem Abschluss im Tertiärbereich höher als der entsprechende Anteil in der Genera-tion, die den Arbeitsmarkt bald verlassen wird (55- bis 64-Jährige). Im Durchschnitt der OECD-Länder haben 35 Prozent der jüngeren Altersgruppe einen Abschluss im Tertiärbereich, verglichen mit 20 Prozent der ältesten Altersgruppe. Dieser Anstieg hat Japan und Korea zusammen mit Kanada und dem Partnerland Russische Föderation in die Spitzengruppe geführt, in der über 50 Prozent der jüngeren Altersgruppe über einen tertiären Bildungsabschluss verfügen.

1. Referenzjahr 2002.

Anordnung der Länder in absteigender Reihenfolge des Anteils der 25- bis 34-jährigen Bevölkerung mit einem Abschluss im Tertiärbereich.

Quelle: OECD. Tabelle A1.3a. Hinweise s. Anhang 3 unter www.oecd.org/edu/eag2010. StatLink: http://dx.doi.org/10.1787/888932310092

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bildung auf einen blick 2010 31

A1

die den Arbeitsmarkt bald verlassen wird (55- bis 64-Jährige). Im Durchschnitt der OECD-Länder haben 35 Prozent der jüngeren Altersgruppe einen Abschluss im Ter-tiärbereich, verglichen mit 20 Prozent der ältesten Gruppe, wobei der Durchschnitt für die Gesamtbevölkerung im Alter von 25 bis 64 Jahren bei 28 Prozent liegt. Die Auswei-tung des Tertiärbereichs erfolgte jedoch in den einzelnen Ländern in sehr unterschied-lichem Ausmaß. In Irland, Japan und Korea besteht beim Anteil der Abschlüsse im Tertiärbereich zwischen der ältesten und der jüngsten Altersgruppe eine Differenz von mindestens 25 Prozentpunkten (Tab. A1.3a).

Abbildung A1.3 bietet einen Überblick über die Auswirkungen, die der Anteil von Ab-solventen des Tertiärbereichs bei den 25- bis 34-Jährigen auf den Anteil von Absol-venten des Tertiärbereichs insgesamt (25- bis 64-Jährige) haben wird, wenn sich die aktuelle Situation bei den Bildungsabschlüssen junger Menschen fortschreibt. Die vertikale Achse zeigt die prozentuale Veränderung im Bildungsstand der Gesamtbevöl-kerung durch die Bildungsabschlüsse der jüngeren Alterskohorte, während die hori-zontale Achse das aktuelle Niveau tertiärer Bildungsabschlüsse in den einzelnen Län-dern zeigt.

Im rechten oberen Quadranten sind Länder zu finden, die einen hohen Anteil tertiärer Bildungsabschlüsse aufweisen und die ihren Vorsprung im Lauf der Zeit noch weiter ausbauen dürften. Zu dieser Gruppe gehören Irland, Japan und Korea. Im rechten unteren Quadranten befinden sich die Länder, die zwar einen hohen Bevölkerungsan-teil mit einem Abschluss im Tertiärbereich aufweisen, die aber auf längere Sicht von

1. Ohne ISCED 3C (kurz). 2. Referenzjahr 2002.

Anordnung der Länder in absteigender Reihenfolge des Anteils 25- bis 34-Jähriger (in %) mit mindestens einem Abschluss im Sekundarbereich II.

Quelle: OECD. Tabelle A1.2a. Hinweise s. Anhang 3 unter www.oecd.org/edu/eag2010. StatLink: http://dx.doi.org/10.1787/888932310092

Abbildung A1.2

Bevölkerung mit mindestens einem Abschluss im Sekundarbereich II1 (2008)In Prozent, nach Altersgruppe

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88

Figure 7 – Mobile Phone Usage Chart

The subscribers to services that allow people to use these devices. For example with television, satellite

subscribers and with computer, internet subscribers. Today, people are more likely to own a mobile device

before any of these other devices, increasing the need for new technologies, software, and even new support

accessories.

Source: Prof. Marius Dannenberg, Lecture - Information Technology. Chpt 1. Introduction to Information Technology and Management. (2009) Seite 159

Lecture: „Information Technology“

Chapter 1 Introduction

0

200

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1998 1999 2000 2001 2002 2003 2004 2005

Million Subscribers

PCs

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Source: McKinsey

Electronic Devices: Comparison of worldwide users

89

Figure 8 – Moore’s Law’s Graphical Interpretation

The infamous chart created in 1965 explaining the processing rate will double every two years, thus reducing the

required size and the price.

Source: Intel Museum: http://www.intel.com/about/companyinfo/museum/exhibits/moore.htm?wapkw=ALL(Moore%27s+Law)

90

Figure 9 – Innovation and Entrepreneurial Activity The percentage of early stage entrepreneurs who offer innovative products. Germany lies just over 50% But not

just Germany. Note how all of the countries in the sought after emerging market regions, like the Middle East and Latin America, rank higher in innovation percentages.

Source: GEM global report 2010.

43

the years 2008—2010. !e economies are grouped in the three phases of development, ranked within these groups from low to high based on having at least some international customers.

!e factor-driven economies have, on average, the lowest level of international customers in both the “at least some” and “at least 25%” categories. As the review of industry sectors reveals, more entrepreneurs in the factor-driven group participate in consumer-oriented sectors. !ese tend to be local businesses. In addition, broader market reaches could be impeded by frame-work conditions such as underdeveloped transportation and communication infrastructures or restrictive trade policies. Lebanon, however, is notable for its compara-tively high level of international participation with short distances to the country border for all entrepreneurs.

!e most distinct pattern in the e"ciency-driven group is the range of international participation lev-els across these economies. For example, less than 12% of entrepreneurs in Brazil cite at least some in-ternational customers, while this figure is as high as 82% in Montenegro.

Perhaps nascent entrepreneurs are more likely to develop innovative o#erings, but factors such as competitive imitation or a lack of ongoing innova-tion e#orts could reduce the novelty of their products as they start to establish themselves in their market and industry environment. In addition, changing eco-nomic conditions may mean that entrepreneurs start-ing businesses in 2010 are pursuing a higher level of innovation that their predecessors.

Internationalization

!e third measure of entrepreneurial aspirations describes the international orientation of early-stage entrepreneurs. !is measure is based on the extent en-trepreneurs sell to customers outside their economies. !is includes exports, but could also include interna-tional customers buying online, or traveling to an econ-omy for tourism or business.

Figure 19 shows the percentage of entrepreneurs stating that at least some, and also more than 25%, of their customers are from outside their economies in

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Factor-Driven Economies Innovation-Driven Economies

Product is new to all/some customers or few/no businesses offer same product

Product is new to all/some customers and few/no businesses offer same product

Figure 18: Innovation for Early-Stage Entrepreneurship Activity, 2008–2010

Source: GEM Adult Population Survey (APS)

A Global Perspective on Entrepreneurship in 2010

91

Figure 10 – Profit and Growth Consequences of Blue Oceans As shown below, the profit impact alone of 61% is incentive enough for companies to take blue ocean strategy seriously.

Source: Blue Ocean Strategy. (Chan, 2005) Figure 11 – The Strategy Canvass of [yellow tail] The curve makes a clear deviation from those of budget wines and premium wines, the only two types of wine that people thought existed. [yellow tail] is able to do this due to cutting out aspects of their drink and making necessary trade-offs.

Source: Blue Ocean Strategy. (Chan, 2005)

time. To focus on the red ocean is therefore to accept the key constraining factors of war—limited terrain and the need to beatan enemy to succeed—and to deny the distinctive strength of thebusiness world: the capacity to create new market space that is un-contested.

The Impact of Creating Blue Oceans

We set out to quantify the impact of creating blue oceans on a com-pany’s growth in both revenues and profits in a study of the busi-ness launches of 108 companies (see figure 1-1). We found that 86percent of the launches were line extensions, that is, incrementalimprovements within the red ocean of existing market space. Yetthey accounted for only 62 percent of total revenues and a mere 39percent of total profits. The remaining 14 percent of the launcheswere aimed at creating blue oceans. They generated 38 percent oftotal revenues and 61 percent of total profits. Given that businesslaunches included the total investments made for creating red andblue oceans (regardless of their subsequent revenue and profit con-sequences, including failures), the performance benefits of creating

Creating Blue Oceans 7

FIGURE 1-1

The Profit and Growth Consequences of Creating Blue Oceans

Launches within red oceans Launches for creating blue oceans

Business Launch

Revenue Impact

Profit Impact

86% 14%

62% 38%

39% 61%

01-Kim.qxd 10/25/04 10:02 AM Page 7

select, and fun and adventure—and eliminated or reduced every-thing else. Casella Wines found that the mass of Americans rejectedwine because its complicated taste was difficult to appreciate.Beer and ready-to-drink cocktails, for example, were much sweeterand easier to drink. Accordingly, [yellow tail] was a completelynew combination of wine characteristics that produced an uncom-plicated wine structure that was instantly appealing to the mass ofalcohol drinkers. The wine was soft in taste and approachable likeready-to-drink cocktails and beer, and had up-front, primary fla-vors and pronounced fruit flavors. The sweet fruitiness of the winealso kept people’s palate fresher, allowing them to enjoy anotherglass of wine without thinking about it. The result was an easy-drinking wine that did not require years to develop an apprecia-tion for.

32 B L U E O C E A N S T R A T E G Y

FIGURE 2-3

The Strategy Canvas of [yellow tail]

Premium Wines

High

Low

Budget Wines

Price Above-the-line Vineyard prestige Wine Ease ofmarketing and legacy range selection

Use of enological Aging Wine Easy Fun andterminology and quality complexity drinking adventure

distinctions in winecommunication

[yellow tail]

02-Kim.qxd 10/25/04 10:01 AM Page 32

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Figure 12 Organization chart. The layout indicates more cooperation among the different departments. The business runs from the goals set forth by the First Business Commander (FBC) and each commander has access to another, running the company on correlation and teamwork, not internal rivalry. Each department is given its own freedom to act as it see fit in its own design, but in the end come together to make the company a benefit for its visitors, building a family environment, and eventually, making it profitable. Note the importance of setting the Customer Satisfaction Commander to sit in the center.

1. First Business Commander

7. Online Commander

The most important team of the company!

LES LES

LEA

LEA

LEA

LEA

AV Media Team

Learn Team

Book Team

App Team

3. Correction Service

Commander

5. Investment & Acquisition

Commander

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6. Customer Satisfaction

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2. Marketing and Sales

Commander

Website Maintenance

Team

House Team

Street Team C-

Team

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Equipment Gathering

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B-Team

R-Team

Correction ServicesMarketing and Sales Products Investment & Acquisition Customer Satisfaction

Online

Strategy and Leadership

93

Figure 13 – The Number of Tertiary Students The number of new entrants from 1980 – 2009. This represents a great opportunity for Lamarvelous English to acquire new customers every year. Notice the increase as the years go forward. This is an upward slope over the course of the next coming years.

source: Statistisches Bundesamt

122

Hochschule

F2

Studienanfänger-quote liegt

über 40%, ohne Bildungsausländer

aber deutlich darunter

Wieder mehr Bildungsausländer

Studienstruktur-reform an Fach-

hochschulen weit vorangeschritten

Anfängerquote folgt Deutschland einem internationalen Trend, wenn auch auf einem niedrigeren Niveau (Tab. F2-3A). Einen Einfl uss auf die Höhe der Studienanfängerquote hat auch das Berechnungsverfahren, das die zum Studium nach Deutschland kom-menden ausländischen Studienanfängerinnen und -anfänger, die nach bisheriger Migrationspolitik nicht dauerhaft dem deutschen Arbeitsmarkt zur Verfügung stehen werden, mit einbezieht. Bezogen auf diejenigen Studienanfänger, die das deutsche Schulsystem durchlaufen haben, lag die Studienanfängerquote 2008 bei 34%.

Nach einem 2004 einsetzenden Rückgang stieg 2008 die Zahl der Bildungsaus-länder unter den Studienanfängerinnen und -anfängern wieder an. Insgesamt nahmen über 58.000 Bildungsausländer ein Studium in Deutschland auf. Aufgrund der insgesamt stark gestiegenen Studienanfängerzahl sank ihr Anteil auf etwa 15% (Tab. F2-6web).

Verglichen mit dem Bildungsbericht 2006 haben sich die Fächerpräferenzen seit 2004 leicht verschoben. Während die Rechts- , Wirtschafts- und Sozialwissenschaften ebenso wie die Ingenieurwissenschaften wieder häufi ger gewählt wurden, haben die Sprach- und Kulturwissenschaften sowie die Fächergruppe Mathematik, Naturwis-senschaften Anteile verloren (Tab. F2-4A). Bei der Fachwahl der Studienberechtigten spielen die gewählten schulischen Schwerpunkte (Leistungskurse) eine wichtige Rolle (Tab. F2-7web).

Studienaufnahme in BachelorstudiengängenDie Studienstrukturreform sollte nach den 1999 in Bologna getro! enen Vereinbarun-gen bis zum Jahr 2010 umgesetzt werden. Es zeigt sich, dass die Umstellung an den deutschen Hochschulen bereits bis 2008 weit vorangeschritten war (Abb. F2-2, Tab. F2-8web). Während an den Fachhochschulen in fast allen Fächergruppen inzwischen mindestens 80% der Studienanfängerinnen und -anfänger in einem Bachelorstudi-engang beginnen, liegt dieser Anteil an den Universitäten durchschnittlich bei 55%. Die breite Umstellung auf die gestufte Struktur hat hier später begonnen. Außerdem bleibt das Studium in der Medizin und Rechtswissenschaft zurzeit überwiegend in traditioneller Form organisiert. Die Lehramtsstudiengänge sind in einigen Ländern

Abb. F2-1: Studienanfängerquote* 1980 bis 2009** nach Geschlecht und im internationalen Vergleich (in %)

* Für Deutschland Studienjahre in nationaler Abgrenzung (Sommer- und nachfolgendes Wintersemester) sowie einschließlich Verwaltungsfachhochschulen; für internationale Vergleichswerte Studienjahre in internationaler Abgrenzung (Sommer- und vorhergehendes Wintersemester)

** Für 2009 vorläufige WerteQuelle: Statistische Ämter des Bundes und der Länder, Hochschulstatistik; OECD, Bildung auf einen Blick

80

70

60

50

40

30

20

10

01980 1985 1990 1995 1998 1999 2003 20062005 2007 2008 200920022000 2001 2004

in %

InsgesamtStudienanfängerquote für Deutschland

Männer Frauen Studienanfängerquote OECD-Mittel Staaten 2007

Niederlande

ItalienJapan

Großbritannien

SchweizÖsterreich

FinnlandUSA

Schweden

!"#$%&'%()"*!!+++&,,!"#$%&'%()"*!!+++&,, -&)'.)&'+++&&/-0-&)'.)&'+++&&/-0

94

Figure 14 – Break Even Analysis This is just an estimate based on projected sales of the medium proofreading package – Size M. Actual numbers may vary considerably, but if all is well, this will be the result for the first year. *** Note that the chart and numbers are in dollars, but they are meant to be in Euros.

Source: Dinkytown.net - http://www.dinkytown.net/java/BreakEven.html

Sales Volume Breakeven Analysis

You will breakeven at 129 units.

Your breakeven point is where your profit equals zero. As long as your gross margin is greater than zero,every unit sold after you have reached your breakeven point will add to your profitability. If your grossmargin is less than zero, regardless of the units sold, there is no breakeven point.

Breakeven Analysis Summary

Variable Cost $3.86 per unit

Fixed Cost $2,076.25

Expected Sales 35,000 units

Price $19.99 per unit

Total Revenue $699,650.00

Total Variable Costs $135,100.00

Profit $562,473.75

Profit by Units Sold

Units Fixed Cost Total Cost Total Revenue Profit

Java Financial Calculators at Dinkytown.net http://www.dinkytown.net/java/BreakEven.html

1 of 2 8/3/11 5:39 PM

95

Figure 15 – Lamarvelous English Price Chart. These are the prices that Lamarvelous English will charge for its proofreading services. After a document is over 100 pages, the customer will then be charged and additional €0.03 per word.

96

Figure 16 – Germany’s Geographic Distribution

Total: 357,022 sq km (slightly smaller than the U.S. state of Montana) Country Comparison Rank to the world: 62 Land: 348,672 sq km Water: 8,350 sq km Geographic Location: Central Europe, bordering the Baltic Sea and the North Sea, between the Netherlands and Poland, south of Denmark

Source: CIA – The World Factbook. https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html Land boundaries: Total – 3,621 km. Border countries: Austria 784 km, Belgium 167 km, Czech Republic 646 km, Denmark 68 km, France 451 km, Luxembourg 138 km, Netherlands 577 km, Poland 456 km, Switzerland 334 km. Natural Resources: Coal, lignite, natural gas, iron ore, copper, nickel, uranium, potash, salt, construction materials, timber, arable land. Climate: Temperate and marine; cool, cloudy, wet winters and summers; occasional warm mountain (föhn) wind.

97

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