Enterprise and Entrepreneurial Management - Research Paper Example

 Enterprise and Entrepreneurial Management Critical appraisal of the business planning process Introduction The importance of a business plan can never be overstated, even though one might have the most brilliant idea it would eventually be of no use unless one knows how to implement the idea practically. It is true that thinking of an idea is the first step but the more difficult and important part follows in the form of a business plan. Simply put a business plan is a document that depicts an idea and how it will be carried out. Elements: Idea generation: Idea generation is defined as the process of creating, developing and communicating ideas in a concrete manner. The idea is abstract in the beginning but it has to be constructed and turned into reality. Idea generation is the fulcrum of a solid business plan. An idea is what makes a business go forward and that idea has to be brilliant and functional. This is the starting point; it can be because someone spotted a gap in the market or saw a flaw in the products already being sold. The development of this idea into a viable product or service is the key to a successful business. Including this part in the business plan is important as it shows where you got the idea from, it will also help other people judge how powerful the idea is and how far it can go. Strategic objectives: Strategic objectives are specific and well defined objectives over a time frame; they tell you when and where the business’s condition is supposed to be. Some examples of these objectives can be: Increase revenues by 10% annually or Decrease expenses by 15% over the next 3 months. These objectives are essential as they provide guidance to the business. They also provide a picture to investors and other professionals on where the business will be after a certain time period. They are basically goals that will help the business move forward and they will always be a guideline to measure your results and performance against. Every start-up business will have objectives but it is also necessary to prioritize them, perhaps for a new business it will be essential at first to be financially stable so the financial objectives come first. When the business is established the objective focus can be shifted to getting more customers in. It is always good to quantify your objectives as this way you will have data to measure against. The objectives should be balanced they should not be far fetched, be attainable but at the same time be challenging enough to make the business move forward. Market analysis and research: Market analysis is a description of the business’s potential customers, target markets, customer’s characteristics and behaviour and growth prospects. Market analysis has to be done before actually writing a formal business plan. In the business plan you have to show the research and give exact figures about the description of the market. This includes everything from the current size to potential growth prospects. This section is related to the idea generation as well because the idea will come out of the market analysis that is done. A sufficient market gap or need has to exist for the business idea to work. Through market analysis and research the characteristics of the target population can also be narrowed down and this is what will help in the marketing plan. The whole advertising concept, consumer’s behavioural aspects and marketing channels can be analyzed and then the product can be correctly marketed to them. Understanding the competition: This section will help analyze the existing competition, the threats they pose and how they can be overcome. At the time of writing the business plan an entrepreneur has to find out how many competitors exist in the area, what is each and everyone’s market share. Once you have these figures you can set your strategic objectives also for example to gain the market share of another company. Benchmarks can also be set as far as competition is concerned. Basically in the end the better you understand the competition the better you will know how to overcome them and compete against them. You can accurately figure out what your business’s profit opportunities are. Every entrepreneur should also have a differentiation strategy to go up against these competitors. It is important that this section contains the correct information about the competitors, both direct and indirect ones. Potential competitors should also be monitored by networking, information can be sought out from vendors other customers and suppliers. With the help of this section the business can know where it stands, what are the set standards in the market and how to move ahead of the existing competitors. Understanding of financial numbers and projections: This section tells about the monetary resources and cash flows that will be required to carry out the business. This section also contains initial amount invested, breakeven analysis, and different financial ratios. All these figures show how the business will be carried out what are the entrepreneur’s plans and commitments, what the relative interest of stakeholders is and whether or not the business has a chance of being a success. This section is what will attract readers of the business plan the most as here they can estimate how the business will progress. Financial statements are a must in this section, as this will be a start-up venture the statements will be projected to show the future of the business. Other than that budgeting, cash flow analysis, ratios, breakeven analysis, income statement and balance sheets should be included. This section allows the entrepreneur to calculate the business costs and expenses and see if the project is viable or not. Competitive strategy: Competitive strategy refers to how a company competes in a particular business and is concerned with how a company can gain a competitive advantage through a distinctive way of competing. The competitive advantage your business idea has is crucial. This is how the business will be able to survive in the market. If there is no competitive advantage then there is no way that the customers will come. The background of formulating this strategy will be the competition analysis that was done before in the plan. You have to tell the reader exactly what edge your product/service has over the others, in some case it can be a totally new product or it will be different from the others based on cost, packaging etc. One way of figuring out the competitive advantage can be through SWOT analysis where under the opportunities section you can find and fill the gaps in the market, that opportunity can become the advantage you have. Scenario analysis: Scenario analysis is a process that helps in predicting various possible future outcomes. Alternate future developments are projected; this can be especially in the case of financial analysis. For financial scenario analysis different software are available that can calculate and present the situation at any time with the given variables. This will help in foreseeing any potential trouble that may arise. Posing what-if questions allow the business to be strengthened, the entrepreneur will be more prepared for any new trouble that may come and can prepare for it accordingly. It will also give business plan readers some idea of how well prepared the owner is and what steps is he going to take to mitigate any risk that will come. Investors will place more confidence in the fact that the owner knows all the possible scenarios and is ready to face them. Idea generation and setting objectives can be related to psychological skill, as it depends on a person’s personality how creative he is and how willing he is to take risks. Other elements of the business plan are purely analytical. Summary: A business plan is a decisive document that can shape a business’s future. Specially for an entrepreneur the business plan holds immense importance as through this he will be able to secure investors and will this will constantly be a guideline on how to carryout the business. Various elements that are present in the business plan format help in making the plan more concrete, specific and detailed. Idea generation is the start of the business which overlaps with the market research and analysis as this is where you identify a gap and realize that your business idea can fulfil a need. Strategic objectives provide you with the guidelines and measures of what you want to achieve within a specific time frame. Understanding the competition and competitive strategy helps you to define your differentiation advantage and how to cope with the existing and future competitors while financial analysis helps in allocating all the monetary resources and projecting future income and expenses. All the sections are equally important and will guide the business throughout its continuing operations. Some people argue that entrepreneurs are born not made, there are certain characteristics that are inborn and no matter how hard one trains they cannot acquire the skills. However there are a great number of skills that can be attained through practical experience. Studies have shown that inherent traits are not required but rather a set of acquired skills is more important (W.Lee, 2001). Research has shown that there is no ideal personality for an entrepreneur, it all depends on the type of business, the individual person and the situations faced. Each and every entrepreneur is different and runs their business accordingly. However a few characteristics do turn out be common and they are discussed below: Leadership: As from the start the business has to be conceptualized and more team members have to be included the entrepreneur should be a great leader. She/He should have confidence to be a self starter and then eventually build a team. The business idea is new and in some cases might be something totally innovative which people might not trust fully, so the entrepreneur should also have the ability to inspire others and make them believe in the idea. An element of respect is also very important as all the members of the team should be respected regardless of their position, others should be treated as you want them to treat you. As the entrepreneur will be heading the project and telling others about the tasks to be performed, he should also be a patient teacher and at the same time have the capacity to learn from his/her mistakes. Leaders also have a vision of what the business can become this helps them in focusing on the bigger picture, being patient and resilient. Dr. A.J.Grant developed the Entrepreneurial Leadership paradigm in 1992, in which three different areas of leadership were discovered: the lead entrepreneur, the venture team and the external environment influences. Commitment and courage: For every entrepreneur it is important to be patient and not be deterred. Considering that the business is new it will take a long time for it to become a success, during this time the entrepreneur should have courage. She/He should have the commitment to see the business through the rough times and make it a success. With commitment also comes the willingness to compete with others, any new business trying to make its position will have to face intense competition in achieving their goals. All entrepreneurs do have an intense desire to compete, they want to make sure that they remain ahead of their competitors which is why they constantly try to innovate and have the motivation to make their product/service the best. Also sometimes this success comes at the expense of your own personal commitment, which again is a risk the entrepreneur should be willing to take. The entrepreneur should have immense courage on taking everything on, there will be chance of failing and no one should be afraid of that. Total commitment is required in all ventures, entrepreneurs have to live under a lot of pressure to survive and grow. The commitment is both personal and monetary as both resources have to be sacrificed. An entrepreneur has to preserve through all the hard times and not be intimidated by difficult situations and other deterrents. Ability to recognize an opportunity: This is where the business idea will be generated from and is one of the most important characteristics that the entrepreneur should have. New opportunities should be constantly recognized to make the business move forward. It is easy to come up with an idea but to develop that idea into an opportunity is what makes an entrepreneur different from the others. The fact that they have the vision to see a simple idea as a viable business is what makes them successful. Intimate knowledge of the customer is an added bonus; the entrepreneur should know the gap in market and his customer’s needs, desires, behaviour. Once you know the customers wants and behaviour the marketing plan will be figured out. Other than recognizing the opportunity in the beginning the entrepreneur should also be on the lookout for chances of growth. Everything changes so fast nowadays it is important to keep up to date with the new technological innovations and keep on incorporating them into the business. Motivation: As mentioned above the road to establishing a business will be extremely tough, the leader should constantly be motivated. Motivation to achieve goals carries great importance as this is how the business will progress and there should be no compromise in this aspect. Realistic goals have to be set in this stage, so the entrepreneur should be results and goal-oriented. Here it is necessary to quantify the goals so that the performance can be measured. Only the business matters in the beginning so personal desires should take a backseat and usually research has showed that entrepreneurs have a low need for status and power. Entrepreneurs derive personal motivation from the challenge of building a business and they have the inherent desire to succeed. Creativity, self-reliance and adaptability: Creativity has to be an inherent quality without this a person cannot even come up with a new idea to start a business. And even after starting the business the idea should be constantly monitored, changed and made more effective in relation to the needs of the market. The entrepreneur should be open minded and non conventional as this will enable him to move forward and think out of the box. She/he should be able to adapt to change and know their weaknesses and strengths. The weaknesses should be kept in mind while building a team so that people who are experts in every category should be hired, alone the entrepreneur cannot be the master of everything. Self-reliance can also be related to the theory of self efficacy, which is defined as a person’s belief in themselves to perform a task. It is suggested that this concept does play an important role in the entrepreneur’s intentions and actions (Nancy G.Boyd, George S. Vozkis, 1994). Without having confidence in their skills, an entrepreneur cannot move forward and take risks. Resource management: Monetary, human and physical resources are all required to build a business. For an entrepreneur it is doubly important to manage them adequately, in the beginning there will be scarce resources so they have to be employed in the best possible manner. Bootstrapping your start-up business is an important aspect as you have to make most out of the limited resources you have. The team hired has to be brilliant at what they do, they have to be allocated according to their capabilities, and they should be motivated, led and rewarded by the entrepreneur. Risk taker: An entrepreneur has to be willing to take risks; the start-up of business is the biggest adventure that he/she will embark upon. Which is why being scared of failure is not an option as it is a possibility. The entrepreneur should be a calculated risk taker, should know all the possibilities, conditions of the market and do scenario analysis in the beginning. The pros and cons should be weighed and analyzed with maturity. With being a risk taker, she/he should also be a risk minimiser and constantly come up with new ideas for problem solving. There will be a great deal of uncertainty while establishing a business and the entrepreneur should take that into account as well and be tolerant of it. With uncertainty conflicts also arise which should be solved amicably and this is where the team leader qualities come in. Within my own skill set, I believe majority of these quantities are present. I know how to lead without being an authoritarian but listening to other’s opinions requires an effort from me. I would love the opportunity of starting my own business as I am open to risks and have the thirst to succeed. When one has a great idea that he/she believes in, the motivation comes itself. Once you know that your idea is going to be successful as there is a need for it, you become committed to making that dream come true. Conflict resolving is one problem that I would face as I am not comfortable in dealing with others when they have different opinions; seminars have however taught conflict resolving to a certain extent. Various mock situations were used in which I played the part of a mediator and brought everyone on the same page; diplomacy is a skill that was added to my skill set. Confidence building exercises were also an important feature of the seminars and they greatly helped me into realizing that I do have the ability to do everything and start my own business venture. I however believe that a lot of qualities come with experience and will gradually be acquired by running my own business. References: PORTER, M. E. (2008). The Five Competitive Forces That Shape Strategy - Perhaps no framework has been as extensively field-tested as the "five forces" analysis of the factors that determine the long-run profitability of all industries, introduced in these pages in 1979. Now, with the benefit of almost 30 years of research and application, its author returns to reaffirm -- And extend -- His classic work. Harvard Business Review. 78. TURBAN, E. (2004). Electronic commerce 2004: a managerial perspective. Upper Saddle River, N.J., Pearson/Prentice Hall. TIMMONS, J. A., & SPINELLI, S. (2009). New venture creation: entrepreneurship for the 21st century. Boston, McGraw-Hill/Irwin. BOYD, N. G., & VOZIKIS, G. S. (1994). The influence of self-efficacy on the development of entrepreneurial intentions and actions. Entrepreneurship Theory and Practice. 1994. [S.l.], [s.n.]. FORD, B. R., BORNSTEIN, J., PRUITT, P. T., & SIEGEL, E. S. (2007). The Ernst & Young business plan guide. Hoboken, N.J., J. Wiley & Sons. PINSON, L. (2008). Anatomy of a business plan: the step-by-step guide to building your business and securing your company's future. Tustin, CA, Out of Your Mind ... and into the Marketplace Introduction to the e-Business Plan Tutorial. 2004. e-Business Plan: Financial Statements. [ONLINE] Available at: http://myphliputil.pearsoncmg.com/student/bp_turban_introec_1/FinStmts.html [Accessed 11 November 11] e-Business Plan: Financial Statements [online]. (2004) [Accessed 11 November 2011]. Available from: e-Business Plan: Competitor Analysis [online]. (2004) [Accessed 11 November 2011]. Available from: . Read More