Enterprise Small Business Management - Assignment Example

Introduction Entrepreneurship is a multidimensional process. This aspect indeed requires an in-depth analysis. To research upon Entrepreneurship is a hectic task which is multidimensional in nature and of course unbelievably a difficult task to achieve upon. There are two distinct schools of researchers in the field of entrepreneurial psychology. The more traditional group of researchers have focused on the personality characteristics of the individual such as: locus of control, risk taking, achievement motivation, problem solving style and innovativeness, perception, and work values. The second group of researchers has taken a social cognitive approach, looking at the relationship between an individual and his or her environment. The external factors include culture, role models, work experience, education, and environment. It is important to look at all of these factors and their influence on entrepreneurial behaviour. The relationship between the entrepreneur, personality characteristics, values, and other dimensions helps explain why some become entrepreneurs and others do not. The following are some of the characteristics of Entrepreneurship: The entrepreneur has an enthusiastic vision, the driving force of an enterprise. The entrepreneur's vision is usually supported by an interlocked collection of specific ideas not available to the marketplace. The overall blueprint to realize the vision is clear; however details may be incomplete, flexible, and evolving. The entrepreneur promotes the vision with enthusiastic passion. With persistence and determination, the entrepreneur develops strategies to change the vision into reality. The entrepreneur takes the initial responsibility to cause a vision to become a success. Risks: Entrepreneurs take prudent risks. They assess costs, market/customer needs and persuade others to join and help. An entrepreneur is usually a positive thinker and a decision maker. Entrepreneurship is often difficult and tricky, as many new ventures fail. In the context of the creation of for-profit enterprises, entrepreneur is often synonymous with founder. Most commonly, the term entrepreneur applies to someone who creates value by offering a product or service in order to obtain certain profit. While there is social entrepreneurship in most markets, business entrepreneurs often have strong beliefs about a market opportunity and are willing to accept a high level of personal, professional or financial risk to pursue that opportunity. Business entrepreneurs are viewed as fundamentally important in the capitalistic society. Some distinguish business entrepreneurs as either "political entrepreneurs" or "market entrepreneurs." There is also the concept of social entrepreneurship. Traits of Effective Entrepreneurs Since the beginning of the history, people have been interested in studying the nature of entrepreneurship. They wanted to find the 'traits' that distinguished entrepreneurs from non-entrepreneurs and successful entrepreneurs from unsuccessful entrepreneurs. Some researchers believed that cognitive and psychological factors like intelligence, ambition and aggressiveness are the traits commonly found in entrepreneurs. However, there were also another set of researchers who believed that physical characteristics like height (especially more than average), large body structure and personal attractiveness are important traits of entrepreneurs. Most research studies on entrepreneurship suggest that there are certain factors that differentiate entrepreneurs from non - entrepreneurs. Some of these include initiative, desire to lead, integrity, self-confidence, analytical ability, and knowledge of the specific company, industry or technology. If in case the above mentioned factors are supplemented with traits such as charisma, creativity and flexibility, an individual is likely to be an effective leader. The presence of these characteristics in an individual does not guarantee that he will be an effective leader. Even if a person possesses these traits, he may not get and opportunity to use them, or when given an opportunity, choose not to use them. Leadership vs. Traits A more generally held theory is that entrepreneurs emerge from the population on demand, from the combination of opportunities and people well-positioned to take advantage of them. The entrepreneur may perceive that they are among the few to recognize or be able to solve a problem. In this view, one study on one side the distribution of information available to would-be entrepreneurs and on the other, how environmental factors (access to capital, competition, etc.) change the rate of a society's production of entrepreneurs. The type of leadership behaviour exhibited by successful entrepreneurs was another area of interest for researchers. According to one school of thought, successful leadership depends more on appropriate behaviour and actions, and less on personality traits. They believe that though a person may have the traits required to be a leader, unless he learns to use them effectively to serve a specific purpose, he cannot be a successful leader. Behaviour can be learned and changed whereas traits remain more or less fixed. Thus, this school of thought suggests that leaders are not born but they have to be developed. Skills required in becoming a successful entrepreneur Organizations are increasingly focusing on improving the knowledge and skills of employees because of the continuous advancement in the technology and changes in the business environment. Three skills that are primarily used by leaders have been identified, namely, Technical skills - A person's knowledge and ability to make effective use of any process or technique constitutes the technical skills. The employees at operational and professional levels are required to have certain technical skills. Human skills - An individual's ability to co-operate with other members of the organization and work effectively in teams is referred to as human skills. Human skills also involve developing positive interpersonal relationships, solving people's problems and gaining acceptance of other employees. Effective human skills are an essential requirement at all levels of the organizational hierarchy and especially for people in leadership positions. Conceptual skills - Conceptual skills refer to the ability of an individual to analyze complex situations and to rationally process and interpret available information. It also encompasses an ability to foresee the future consequences of his present-day actions from the organizational point of view. Further, managers have to define proper organizational structure and establish long-term plans and goals. It is very clear that entrepreneurs and leaders are different. To start with they have different dictionary definitions: Entrepreneur: "the owner of a business who attempts to make money by risk and initiative" (Collins, 1995) Leader: "a person who rules, guides or inspires others" (Collins, 1995) Yet when the terms entrepreneurship and leadership are applied to the business context there appears to be an overlap and the potential for confusion. After all at a common-sense level one can consider an entrepreneur offering leadership. Though all entrepreneurs need not be leaders and also necessarily need not have all the qualities of leadership, t is all the more certain that some of the leadership qualities are definitely necessary for entrepreneurs. Entrepreneurship has traditionally been defined as the "creation of new enterprises," and the entrepreneur as "an organizer of an economic venture, especially one who organizes, owns, manages, and assumes the risk of a business. Entrepreneurship and leadership are similar notions and there are conceptual overlaps, but there are clearly still conceptual differences. Leadership tends to be more associated with conceptual building blocks that relate to people (e.g. communication and social skills). Entrepreneurship on the other hand tends to be associated with the personal search for independence and identification of market opportunities. As the trait theories failed to establish the relationship between traits and effective leadership, researchers turned their attention to the behavioral aspects of successful leaders. They attempted to identify the behaviors that were unique to leaders, and which them from non-leaders. Many researches which followed revealed that leaders who are high on the production-oriented dimension are more concerned with tasks and goals. They consider employees to be means to achieve goals and pay little or no attention to any problems the employees may face. Leadership Theories There are many theories that have attempted to explain the characteristics required by individuals to be effective leaders. There are three important theories that attempt to explain leadership - personality traits theories, behavior theories and contingency theories. According to trait theories, leaders possess some personality traits that non-leaders do not possess at all, or possess only to a small extent. The behavioral theories explain the behavioral characteristics of leaders. Though both the trait and behaviour theories attempted to explain leadership in simple terms, they were severely criticized for their unsupported and oversimplified assumptions regarding the concept of leadership. The Trait Theory Trait theories were the ones on which initial research into leadership concentrated upon. It was believed that there was something unique about an individual that enabled him to emerge as leader. The researches related to the trait theory concluded that a leader is not made instead he is born as a leader. Application of the trait theory to organizational leadership yielded even more confusing results. It was not possible to support the theory with the traits observed in successful leaders. However, the trait approaches only provide a description of leaders; they have little analytical or predictive value. The Cognitive Theories Another internal factor that is likely to bear upon an individual's behaviour is cognition. Behaviourists believe that the past and present environmental events give rise to non-instinctive behaviour. An individual's behaviour can be understood in a better wary by keeping a record of the ways in which he responded to certain stimulus in the past and the consequences of those responses. If the response to a particular stimulus in a particular way had been rewarding, he is likely to respond in similar way again to a similar stimulus in the future also. He might change his response if the consequence was negative. In entrepreneurship, this approach was probably pioneered by Kirzner (1973, 1979), who advocated a theory of entrepreneurial alertness, which examines entrepreneurs = unique ability to discover and exploit opportunities that others fail to see. The cognitive approach attempts to understand how perceptions (Cooper, Woo, & Dunkelberg, 1988), cognitive and decision-making styles, heuristics, biases, and intentions of entrepreneurs affect their behaviour (Shaver & Scott, 1991), including entrepreneurial risk behaviour. Additionally, it is also held by the cognitive theory that cognitive interpretations of the environment, such as a person's evaluations, memories and expectations, also influence his behaviour. The traditional theory of trait analysis assumes that no amount of training will make an entrepreneur. Rather, it is important to identify those with entrepreneurial potential and create an atmosphere where entrepreneurship can thrive. The programmatic focus would be on lobbying to create pro-entrepreneurial laws, making financial resources available to invest in entrepreneurial ventures, and creating networks for greater exchange of information. The social cognitive approach focuses on the novice entrepreneur and supporting him or her from intention to creating a business. To do this, the entrepreneur needs help in developing self-efficacy, role models, and a support system from the community to help in planning, self-regulation, and turning ideas into a viable business enterprise. In order to be successful entrepreneurs certain dynamic attitudes are necessary. The following are some such dynamic attitudes as required by the entrepreneurs to be successful: 1. The entrepreneur must be watchful to spot the opportunities needed to start an entrepreneurial activity, 2. Must be persuasive in seeking cooperation or investment, 3. Must take time for reflection (a unique finding in terms of prior research) in order to learn from own experiences, 4. Must be goal oriented in order to work efficiently, 5. Must be decisive and 6. Must be pragmatic to decrease the uncertainty and flexibility in the environment and 7. Finally have self confidence in order to face success but also failures. The dynamic sentiments that are needed are: (1) Creativity, (2) Courage, (3) Trustworthy and (4) Ambitious. The temperaments needed are: (1) Capacity for empathy (2) Resolute (3) Perseverance (4) Locus of control (5) Determined. In the trait approach the focus lies on personal disposition of individuals and their traits, whereas the cognitive theories and cultural approaches focus on psychological needs like strong need for recognition, acceptance, social status, dignity etc. When it comes to supporting the ethnic entrepreneurs in UK, cultural and cognitive approaches have a crucial role. But the trait theories do not support as they focus on individual traits like height, weight, appearance etc. Ethnic entrepreneurs have a strong cause to get accepted among the general populace which has its roots in the factors like extremely strong need for social status. This drives the ethnic groups to start practising high levels of soft skills like interpersonal skills, strong intra and inter communication etc. Along with this, drawing from the theory of Darwinism of survival of the fittest, is the driving force pushing the ethnic groups to exhibit the contemporary customer oriented skills and focus on creating customer WOW factors. This is leading to the growing number of successful ethnic entrepreneurs in the United Kingdom. References 1. http://www.thefreelibrary.com/A+psychological+model+of+entrepreneurial+behavior-a0113563670 2. http://www.managementandleadershipcouncil.org.uk/downloads/r6.pdf 3. Introduction to Organizational Behaviour published by ICFAI Centre for Management Research in the year2003. (www.icmrindia.org) 4. http://findarticles.com/p/articles/mi_m0OGT/is_2_2/ai_113563670/pg_9 5. http://www.entrepreneur.com/tradejournals/article/53590484.html 6. Marketing Management published by ICFAI Centre for Management Research in the year2003. (www.icmrindia.org) 7. Human Relations in Business: Developing Interpersonal and Leadership Skills, written by Michael G. Aamodt & Raynes L. Bobbiel in 2001. 8. http://www.entrepreneur.com/tradejournals/article/148007132_3.html 9. Frederiksen, L. W. (1982). Handbook of Organizational Behavioural Management. New York: Interscience - Wiley. 10. Professor Neha Srivastav, Department of Management, ICFAI National College, New Delhi. Read More