Enterprise and Entrepreneurial Management - Essay Example

?Enterprise and Entrepreneurial Management Introduction The most crucial step in starting up a successful business is the formal planning. It is truein the case of a successful business venture as well. In the case of a successful enterprise, a detailed and comprehensive Business Plan is the primary step which ensures the overall course of action of the business. It is the detailed report of how, when, where, who and why of a business. “In most cases, a business plan is created to explain and illustrate the vision you have for your business, and to persuade others to help you achieve that vision.” (Bellissim, 2003) Topfer (2011) states that starting a business without enough planning is like setting a journey without deciding on the destination. In most cases, small businesses simply ignore the process of business planning. There are various different reasons which actually become hurdle in the formulation of the Business Plan including time constraints, resource constraints and more importantly expertise constraints. But irrespective of the size of the business, it is always beneficial to have a clearly charted out plan. Business plans are required not only for planning the future of the business but also for the availing financing options. All financial institutions assist with the capital requirement of the company only after a carefulstudy of the prospects of the business. Such an analysis is possible only with the help of a detailed and comprehensive business plan. This paper critically analyses the steps involved in a business plan. Each stage of the Business Plan is critically examined in terms of what should be included in each step. Also, the contribution of each step to the overall plan is dealt in extended detail. The intention of the assignment is to develop a clear understanding and framework of the requirements for setting up and operating a successful business. Elements Idea Generation: Idea generation is the basic and fundamental step in a business plan. Idea generation can be defined as “the process of creating, developing, and communicating ideas which are abstract, concrete, or visual. The process includes the process of constructing through the idea, innovating the concept, developing the process, and bringing the concept to reality.” (Business Dictionary, 2011) Idea generation is in fact a raw process. The process involves generation of multiple ideas in the minds of the respective entrepreneur. The person may screen and reach at a various different ideas with each one having its unique pros and cons. Such ideas are generally in a raw format without much technical analysis being done on them. Idea generation is extremely significant because idea is the stone that is polished at the various stages of a business plan. An idea arises mostly from the personal interests and perception of the entrepreneur. It is something that is related to the behavioural nature and professional mindset of the entrepreneur. For instance a medical professional might develop an idea for surgical equipment retailing, a good cook might think of opening a restaurant and the like. It is always better to work out on those areas which relates to the interest of entrepreneur. It is as good as a business firm diversifying into a related product line. If the entrepreneur is familiar with the idea, it would be convenient for him/her to manage it. Therefore, the first question an aspiring entrepreneur should ask is what interests them the most and is there an opportunity lying in the market for the same. This thought can give rise to more specific ideas. Strategic Objectives: Strategic objectives or just business objectives refer to the actual purposes of the business for which the business actually exists. It is considered as the focal point of all the major activities of the business. The strategic objectives of a business are usually encompassed in the terms Vision and Mission. Vision is the future outlook of the business and Mission is the actual purpose as well as course of action to be taken to achieve the objectives of the business. “Most of strategic objectives are directed towards generating greater profits and maximizing the wealth of the owners of the business, others are directed at customers or society at large.” (SBANC, 2011) Formation of a strategic objective is of utmost importance for the success of a business organization. Without strategic objectives, the leadership of the management team will not be able to guide, lead and direct the business. All successful businesses in the world have well figured out and framed the Vision and Mission statements. Vision statement is a short sentence that describes as where the business would be in future and what shape the business wants to be in the near future. Some businesses have separate vision for the company, people, society and all other stakeholders. Some others encapsulate everything into one statement. It is not about how long or short the vision is, it is about whether they meet the required criteria. An entrepreneur should develop a mission that is specific and achievable. It the vision is right, everything else will follow. Market Analysis & Research: Market analysis is extremely important for the successful operations of a business. “The goal of a market analysis is to determine the attractiveness of a market and to understand its evolving opportunities and threats as they relate to the strengths and weaknesses of the firm.” (NetMBA.com 2011) Market analysis is important because it is the basis on which the business strategies are formulated. Market analysis assists in understanding the potential of a business idea in the existing market situation. It aids as a feasibility study for the new business. If the market trend does not seem to be receptive of the idea being generated, it has to be altered or changed as per the market demands and conditions. This is where polishing of the idea comes into picture. The idea was initially in a raw format. Even if an idea is good, an entrepreneur cannot run the business successfully without the help of market analysis. The management should always have up-to-date knowledge of the current market conditions. This knowledge is important to have a foresight about the future of the business. A business can design a product only on the basis of the taste and preference of the customers. For instance, a business plan may be to start a packaged tourism company. But designing package is possible only after the study of market trends related to the industry. This is where the importance of market analysis rests. Understanding the Competition: This is the step where the entrepreneur has to think strategically. Competition is the factor that keeps the business environment happening. “Competitive analysis, as the name implies, is an exploration of the companies in a given industry sector or market niche that are competing with your company’s products or services for market share. The analysis may be an in-depth exploration of the top five competitors, or a larger number of competitors could be examined (typically with less depth in the analysis).” (Withrow, 2006) To perform well, entrepreneurs have to know what the competitors are offering. Once the underlying offerings and strategies of the competitors are clearly understood, they can decide on their offerings and strategies. It is not only important that entrepreneurs understand the existing situation of the competitors but also should keep an eye on the day to day changes in their strategies. Understanding the competition is of great significance for developing a comprehensive business plan. Imagine a situation where a new company introduces a product and later comes to know that another company is offering a better product at comparatively low price. The whole effort from developing the product in introducing it in the market would go in vain. Ignorance of the competitors’ action and activities will definitely lead to such embarrassing situation. Competitive analysis should be aimed at understanding who, when, what, why, where, when and how aspects regarding the competitors. Understanding of Financial Numbers & Projections: This is the stage where the entrepreneur needs to employ some number crunching. This is the analysis that states whether a business plan can really be put into action. “A short- and medium-term financial projection is a required part of your business plan if you want serious investors’ attention.” (Richards, 2011) This step can also be called as financial feasibility analysis. This consists of the required initial investment, the expected cash flows, the breakeven point, projected cash flows and profits etc. Financial projections as the name signifies are just projections. The projections are always affected by any uncertain market anomalies. An entrepreneur should have a clear understanding about the financial projections of the business. This part of the Business Plan is highly important to persuade the financial institutions to arrange different sorts of financing to establish a business. It may not always be possible for the entrepreneur to make exact financial projections for the venture. Therefore, it is always advisable to acquire the services of a business consultancy firms for assisting the entrepreneurs regarding the financial projections of the business. Financial projections require thorough understanding of the prevailing and future market and industry conditions. Such an in depth analysis is possible only with the assistance of a financial expert. Competitive Strategy & Scenario Analysis:This is the final step in the business plan process. This is in fact the step that deals with the real action for the business to be taken. There are two components involved in this namely Scenario Analysis and forming Competitive Strategy. Scenario analysis is a very systematic process performed by deploying various tools developed by strategic experts. “Scenario analysis is a process of analysing possible future events by considering alternative possible outcomes (scenarios). The analysis is designed to allow improved decision-making by allowing more complete consideration of outcomes and their implications.” (Investor Dictionary, 2011) Competitive strategy is formed after the scenario analysis. As mentioned in the financial projections section, future is uncertain. The scenario analysis helps in predicting the future to a certain extent. It is just an analysis performed to formulate strategies for the occurrence of such events. Competitive strategy is also an advanced tool that will help a company take the decision on the market strategy to be adopted. For a start-up business, this strategy contributes a lot. It is of vital importance for a business to adopt an appropriate competitive strategy formulation tool. Summary The previous discussions have given a clear insight into the various steps in a business plan and the importance of properly performing each step. Not all steps in the process are analytical. Some steps in the process require social and psychological skills while some of them are behavioural in nature. The first step of idea generation can be defined as behaviour based element. Idea generation is an element that is highly related to the thoughts and perception of the entrepreneur. Market analysis and research, understanding the competition, understanding of financial numbers and projections and scenario analysis and competitive strategy are usually analytical skills. Strategic objectives are the element where the entrepreneur requires social and psychological skills. A company’s strategic objective should be beneficial for all the stakeholders of the company including the environment where the business operates. Therefore, the importance of social skills cannot be denied by any means as an integral part of business planning. Entrepreneurial Characteristics This section of the paper highlights the entrepreneurial characteristics. There are several literatures that discuss the qualities and skills required for becoming a successful entrepreneur. Most of such literatures discuss almost the same characteristics. “Regardless of your definition of success, there are, oddly enough, a great number of common characteristics that are shared by successful businesspeople.” (Stephenson, 2011) Stephenson discusses 25 characteristics for becoming a successful entrepreneur. Kuip & Verhuel (2003) provides another list of characteristics that are required for success in entrepreneurship. As mentioned earlier, most of the qualities are common. Some of the common qualities required for successful entrepreneurship are Achievement Orientation, Self Confidence, Autonomy, Creativity, Initiative, Risk Taking, Goal Oriented, Persistence, Foresight, Determination, Passion, People Skills and Competitive. These are not the only characteristics but are the most common characteristics. Achievement Orientation: As the name signifies, achievement orientation refers to the strong desire to achieve or win. It is an inner drive that motivates all the successful entrepreneurs. Commitment to the activity comes as a result of achievement orientation. Self Confidence:Self-confidence is extremely important. Self-confidence helps an individual to believe in oneself and drive an activity with full commitment. It is different from achievement orientation. A person with self-confidence will venture into an activity without fear. Such people drive with the thought that they will taste success. Autonomy:Autonomy refers to the need of having power and individuality. An entrepreneur should have autonomy so that they can exercise their policies and thoughts with limited external influence. Such people will have the desire to lead a team. Creativity:Creativity refers to the out of the box thinking of an entrepreneur. Creativity and innovation goes hand in hand. Innovation is the back bone of any successful business. Innovation is not only applicable in case of products but also in the case of production process. Creativity means doing things in the way that is different from the conventional or standard procedures. A creative individual can operate the business better by applying new ways and techniques of doing things. Thus creativity is one of the most important qualities required for a successful entrepreneur. Initiative: Initiation is the ability of a person to begin something independently. Initiative action makes a person implement an idea. They do not require the support of another person to carry forward the idea. It is related to creativity in the sense that initiative involves going forward with a new plan before anyone could do that. Initiative also requires a courageous approach. Risk Taking: Risk is a term that is always used with any kind of business activity. Every business involves some kind of risk. The intensity of the risk differs from industry to industry and markets to markets. A self-confident person will definitely possess the risk taking ability. A successful entrepreneur should be ready to face risks associated with the business without fear of failure. In business, more profits come only by exposing the business to more risks. Therefore, risk taking mentality is a very essential quality that every aspiring entrepreneur should develop. Goal Oriented: All successful entrepreneurs do have a clear goal in mind with regard to their business venture. It can be said as the vision they have for the business enterprise. Vision is important because, it acts as a driving force for an entrepreneur which shows future direction of the business. All the activities of the entrepreneurs should be aimed at the goal they have in mind for the business. The goal should be SMART (Specific, Measureable, Attainable, Relevant and Time Bounded). It should be clearly charted and followed regularly. Persistence: Persistence means the ability of an individual to stay along with a task until the time of its competition. Often an individual begins a task with self-confidence. But he/she might lose interest in between. This is an indication of the absence of persistence. An entrepreneur has to stay along fully with the task until the desired result is achieved. This is the quality that complements the self-confidence of the entrepreneur. “It may be argued that the persistence with which an individual pursues a certain goal is largely dependent upon motivation, energy and commitment.” (Kuip & Verhuel, 2003) Foresight:Foresight is the ability to look forward while taking day to day decisions. The business environment does not remain stagnant over a longer period of time. It changes on day to day. Awareness of this dynamic environment is the first step for a foresight. An entrepreneur with foresight takes better decisions than an entrepreneur without foresight. An entrepreneur cannot predict the actual business environment awaiting the enterprise. But he/she should at least be able to make a most favourable judgment. Market knowledge is very much essential for making a good judgment. Determination: “Entrepreneurs are not thwarted by their defeats. They look at defeat as an opportunity for success.” (Under30CEO, 2010) A determined entrepreneur definitely succeeds in the highly competitive and dynamic business world. They are not turned off by the failures. Frequent attempts to achieve the desired results might be their only concern. Passion: Passion relates to the enjoyment that individuals feel in their everyday life. Often, self-confidence, commitment and perseverance come as a result of immense passion. An entrepreneur with passion can go to any extent to make the venture successful. An entrepreneur with passion will always be keen on the changes of the business environment. People Skills:People skills are important because motivating and driving the employees towards success is extremely important for a successful business. Unlike other resources, managing human resource is difficult. The nature and behaviour of individuals differ from one another. Effective management of the human resources is essential for the long term success of an organization. Competitive: Being competitive will enable an entrepreneur to sustain and develop the business based on the competitive environment. A person without a competitive spirit does not want to be in the first position. He/she does not bother even if they are pushed to the last position. Being competitive will help an entrepreneur to challenge even the leading players in the market. Characteristics in own skills This section of the paper encompasses with the entrepreneurial characteristics possessed by me. Based on the above discussed qualities, the characteristics that I possess are achievement orientation, self-confidence, goal oriented, persistence, determination, passion, people skills and competition. Most of these skills are more or less of similar kind in nature. In a way, persistence, determination and passion arise as a result of belief in oneself or self-confidence. I need to work on developing the skills of creativity, risk taking and foresight. As mentioned in the previous section, creativity, risk taking and foresight are three inevitable qualities for becoming a successful entrepreneur. Creativity is something that comes as a result of unorthodox thinking. It can be developed by continuously practicing to think better or different ways of doing things. The next skill that needs to be developed is risk taking. The first step towards risk taking is to get rid of fear of losing or failure. It is often the fear of failure and loss that stops a person from risk taking. Foresight is a quality that requires deep knowledge about the current happenings and the expected future happenings. Continuous reading and research on the markets is the action to be taken for developing the skill of foresight. A better foresight is possible only with the help of good market knowledge. References Bellissimo, 2003. The Importance of a Business Plan. [Online] Available at: [Accessed 13 November 2011] Topfer, S., 2011. The importance of Business Planning. [Online] Available at: [Accessed 13 November 2011] Business Dictionary, 2011. Idea Generation. [Online] Available at: [Accessed 14 November 2011] SBANC, 2011. Strategic Objectives. [Online] Available at: [Accessed 14 November 2011] NetMBA, 2011. Market Analysis. [Online] Available at: [Accessed 14 November 2011] Withrow, J., 2006. Competitive Analysis: Understanding the Market Context. [Online] Available at: [Accessed 15 November 2011] Richards, D., 2011. Writing a Business Plan – Financial Projections. [Online] Available at: [Accessed 15 November 2011] Investor Dictionary, 2011. Scenario Analysis. [Online] Available at: [Accessed 15 November 2011] Stephenson, J., 2011. 25 Common Characteristics of Successful Entrepreneurs. [Online] Available at: [Accessed 16 November 2011] Kuip, I., Verhuel, I., 2003. Early Development of Entrepreneurial Qualities: The role of Initial Education. [Online] Available at: [Accessed 16 November 2011] Under30CEO, 2011. 10 Qualities of a Successful Entrepreneur. [Online] Available at: [Accessed 16 November 2011] Read More