Enterprise and Entrepreneurial Management - Essay Example

?#593947 Part I: The Essentiality of Enterprise Planning Introduction There has not been so much attention and interest accorded these buzzwords “entrepreneurship or entrepreneurial management” than the present globalized milieu where the world has become a free market for all. Globalization has placed even the smallest firms on equal footing with large multinational companies insofar as access to customers, suppliers and collaborators is concerned. Economic growth, both domestic and international, is fueled by these entrepreneurial enterprises (Etemad and Wrighty, 2003). Every year, there are about 100 million new businesses being opened worldwide (Mason, 2011). As of end of 2004, some 25.4 million businesses in the US have been registered (US Census Bureau, 2004) and certainly there are more presently. In the UK, some 4.8 million businesses and more are added to that number as the recession pulls back (Moules, 2010). Everywhere else, business multiplies in varying degrees of development. It is almost definite that where business is doing well in a country, that country is achieving progress (Viemose, 2007). Entrepreneurship has in fact occupied the human consciousness with such speed and pervasiveness that its rise and spread may have even outpaced the flow of knowledge and information about it. A budding entrepreneur looking for established patterns of success to serve as his guide for his enterprise would be met with more than enough volume of information about entrepreneurship and would find difficulty adopting which pattern or patterns have truly been proven successful (Etemad and Wright, 2003). The objective of this paper is two-fold. First, recognizing that success in enterprise management could only emanate from proper planning, the paper would take a critical look at the business planning process and attempt to drive home the essentiality of such a process. Many a failed business has paid lip service to this step and has been found guilty of subversion. Second, having critically examined the business planning process, the paper shall attempt to establish the key entrepreneurial characteristics that are necessary for such enterprise to succeed, with the view of drawing up a list that can be “adoptable” by any entrepreneur. As a matter of reflection, the characteristics shall be tested for their suitability against this writer’s own personal attributes. The Business Plan The business plan is the enterprise on paper. It is an attempt to capture in so many words and graphs what the business would be or look like when it is eventually implemented. It is an attempt to depict on paper the idea brewing in the mind of a would-be entrepreneur that he feels very strongly would transform into a successful venture. The business plan is the idea initially taking textual and graphic form. Literature is abundant with what makes a good business plan. Many authors would establish business plan formats containing the elements that would make a sound plan composition together with the elements’ sequencing. This paper however shall not dwell on the creation and development of these elements but shall focus on the process of planning, providing weight to the issue of the why and the how of the planning process. Business Plan Elements and the Planning Process Kuratko and Hodgetts (2009) offer the following elements in a business plan: executive summary, the business opportunity, market potential, market analysis, competition analysis, technical data of product or service, commercial strategy, methodology of operation, vision-mission and financial projections. These elements however are outputs of an enterprise planning process that proceeds with the idea generation, setting up of strategic objectives, analysis and research of market, understanding competition, understanding the financials and formulating the competitive strategies (Kuratko and Hodgetts, 2009). Critical Analysis Seeding the Idea: It s simple logic that there is always a purpose or reason for business, and if one pursues the economic theory that business is meant to generate profits for its owners (Shah and Shah, 2004), it follows that the business must be attractive to its intended customers to generate a green bottom line. An enterprise begins with an idea, whether it is a product or service, and that idea must answer a need of the market. This process of idea generation is otherwise known as the creative process or simply, creativity (Harper, 2005). Of course, it is now known, courtesy of brilliant thinkers such as Harper and Drucker, that creativity is the seed of innovation, where innovation is the finished product or service that benefits the market. It was Drucker (2007:27) who said that “innovation is the specific instrument of entrepreneurship – the act that endows resources with a new capacity to create wealth.” The great idea being present, it becomes the seed for an opportunity, a business opportunity, for its creator to benefit from it. Hence, the element called business opportunity (Zacharakis et al, 2011). Of course, the opportunity is seen as beneficial to both its creator and his intended audience, for neither one could exist without the other in a successful enterprise. For the creator, it will be the benefit of profits for his investment; for the customers, it will be the usefulness or utility of the product or service. Of course, the whole process from idea generation to finished product is complete with testing and retesting of the alternative ideas until the final idea is decided and adopted (Harper, 2005). Strategic Objectives: Having decided to adopt an idea to promote into a venture, the next step in the process is to define the strategic objectives of the business as a commercial venture (Stutely, 2002). Certainly, any business would have as strategic objectives the viability of the project, and therefore the issue of capital recovery or break-even point becomes a necessary parameter that should be identified right from the start. Aside from the financial aspect of the venture, as a matter of strategy, an entrepreneur should develop a statement of his vision-mission-goals for the enterprise to serve as his rallying point and those of his team. The answers to the questions “Who are we?” and “Who do we want to be?” are highly motivating and inspiring and should serve to keep everyone focused on the goals of the enterprise. These strategic directions are important as they will be the bases for the strategies that the organization will formulate later in the process. In essence, the strategic objectives should inspire the formulation of the how of the business (Stutely, 2002). Of course, in the setting of these objectives, inputs would already initially appear as to what form of business the venture will take, or if the idea is original, as to what form of protection or promotion is needed to safeguard the intellectual property. Most marketing practitioners would actually put market research ahead of the formulation of strategic objectives. There is some logic in doing the research first before the objectives are set in order to satisfy the conviction that the idea to be adopted is truly suitable and viable. But whether it is second or third, research is the step that would validate the purpose of the venture (Hester, 1996). Market Analysis: Market potential is the extent of the opportunity the market for the proposed idea would take the entrepreneur. It can be expressed in terms of number of customers or in terms of expected value from the target market. Knowing the market potential, an entrepreneur would be able to establish how easy or difficult it would be for him to reach his strategic goals. Market analysis is a detailed study of the market being targeted, its characteristics, its location, its demographics, its financial strength, its weakness. It also includes marketing trends. Familiarity with his market will equip an entrepreneur with the tools by which to hit his market at its most responsive state. Of course, market analysis in incomplete without competitor analysis, who they are, where they are, where they are strongest and weakest and the extent of their market reach (Pinson, 2008). Competitive Strategy: The next step is the step that will put the enterprise ahead of them all: competitive strategy. It is not enough to do business and make profits. Business is a competitive activity and if a business does not have competition and is making good money, it is almost certain that tomorrow there will be competitors at the other side of the road. The key to competitive strategy is to listen to Michael Porter when he said that competitive advantage can only be achieved using three methods: pricing, differentiation or focus (Porter, 1998). With planning, one can have a hold on the future, and there is no other better portrayer of the future viability of the business than the financial projections: the cash flow, the profit and loss statement, the balance sheet, any and all information about where all the seed capital would come from, whether from directors’ contributions or loans from financial institutions with their accompanying servicing arrangements. Financial Projections: Financial Statements contain the formal record of the financial activities of the business (IASB, 2007). Cash flow shows the actual movement of cash in the business during a certain period. Profit and loss statements show the company’s income, expenses and profits over a period of time. Balance sheet shows the breakdown of assets, liabilities and owners’ equity. An aspiring entrepreneur has to know his financial information. Covello and Hazelgren (2005) label it a big mistake to ignore the importance of financial projections which they refer to as the heart and soul of the business plan. Usually, business projections cover a period of five years, just enough to see how the financials would behave. These projections also usually show a low and a high assumption of business, which comparison is important if the venture would seek outside investors or loans from financial institution. Naturally, the picture would only be complete with a profile inclusion of the enterprise’s management team or board of directors showing their experiences, qualifications and relevance to the business. Conclusion In all, the elements in the business plan and the steps that accompany the planning process should be able to clearly present the blueprint of the enterprise even before it literally and figuratively rises up the ground. When the elements and their reasons for inclusion in the process are incorporated with such seriousness and meticulousness, one can only predict that such an enterprise can truly see itself rising up in full view according to the blueprint. Part II: Attributes of Successful Entrepreneurs Introduction Simultaneous with the rise and spread of entrepreneurship due to globalization, it would be natural for literature to also grow in abundance to serve as documents to the events and the unfolding developments in the area. At the same time that the volume of knowledge increases, there would naturally be filters that will identify the information, methodology and the attributes that would make for effective and therefore successful entrepreneurship. This part of the paper shall deal with the attributes that have been identified over the years to be peculiar among successful entrepreneurs and therefore may serve to contribute in the enrichment of this area of knowledge. It is this writer’s thinking that if a budding entrepreneur could gain some insights from Part I relating to the rationale for enterprise planning, it would be a tremendous advantage to him if he would know the attributes that are essential for successful enterprise management. What Is an Entrepreneur? It would be necessary as an approach to this analysis to first define what an entrepreneur is before proceeding to create the attribute silhouette of the successful enterprise owner. As literature has an abundance of such a definition, this paper shall adopt the version of Drucker (2007) in his famous book Entrepreneurship and Innovation. An entrepreneur, according to Drucker, is one who always searches for change, responds to it and explores to the maximum its potential as an opportunity (Drucker, 2007). Self-Efficacy Many authors and researchers have ventured into identifying the attributes that successful entrepreneurs possess. This paper would single out the theory of self-efficacy as proposed by Bandura in Haller (2008) that would pertain to an individual’s belief that he can successfully accomplish the specific tasks that he undertakes. For entrepreneurs, this would be seen in the person’s interest and intention towards being entrepreneurial. Analysis: A person’s self-efficacy promotes the likelihood of entrepreneurial behavior and predicts entrepreneurial performance (Chandler and Jansen in Haller, 2008). Haller (2008) cites Bandura as identifying risk-taking as an element of high-efficacy individuals that influence their entrepreneurial success, indicating that successful entrepreneurs are risk-takers. Self-efficacy being a person’s belief in his ability to organize and execute actions to manage different situations (Bandura, 1994), it can have an impact on everything that a person does from his psychological state to his behavior to his motivation. In fact, self-efficacy at the high extreme could lead to overconfidence (Haller, 2008). Five Factor Model The personality traits approach to identifying successful entrepreneurship as proposed by Costa and McCrae in Wiklund (2006) is another very useful theory that has been widely used in locating entrepreneurial attributes. These five personality traits, or otherwise known as the Five Factor Model (Neubert in Howell, 2004), are extraversion, openness to experience, agreeableness, conscientiousness and emotional stability (Costa and McCrae in Wiklund, 2006). McCrae and Costa (1987) take effort to define these traits. Extraversion is the characteristic of sociability, assertiveness, expressiveness and ambitiousness. Openness to experience is a readiness to try something novel or new. It is a creative trait. Agreeableness refers to a trait of being cooperative, tolerant, soft-hearted, swayable, and forgiving. Conscientiousness is dependability and seriousness at work. It also is synonymous to persistence. Emotional stability is indicative of high tolerance to stress, risks or pressure. It is being cool under heavy fire. Analysis: Researches on these traits however were directed more at sales people whose jobs require them to be truly extraverted, to embrace face-to-face experience, be agreeable, be conscientious to produce more and have high emotional stability in the face of many rejections. Not all of them therefore can be applicable to entrepreneurs. For example, successful entrepreneurs are known to be less agreeable and self-directed. They pursue their agenda resolutely, and therefore do not agree easily. The other four are more reflective of a successful entrepreneur. More recent models however which are entrepreneur-specific tend to round the attributes towards those that relate only directly to business outcomes (Wiklund, 2006). Thus the traits that have been found to be specifically related to entrepreneurs are need for achievement, risk-taking propensity and innovativeness (Wiklund 2997). Kaplan’s List By the diversity of studies and researches on the subject of attributes peculiar to successful entrepreneurs, it is highly likely that too many attributes would comprise the list. What is needed is a list of characteristics that have been proven useful by successful entrepreneurs and which by themselves are duplicatable or acquirable. One of such lists is the list that Stanford lecturer Jimmy Kaplan shows in his professional lectures. Kaplan (2011) cites the following as the best attributes of successful entrepreneurs. 1. Entrepreneurs are exceptional leaders; they make things happen; they initiate. 2. They innovate; they look for change; they create change. 3. They take risks; they have high tolerance for uncertainty. 4. They are resolutely optimistic. 5. They are genuinely concerned for others. A few attributes therefore would seem to stand out for the entrepreneur. From the collection of traits sifted from the volume accessed from these secondary sources, and anchoring the attribute descriptions on the definition offered by Drucker of an entrepreneur, it would seem that the list of Kaplan (2011) would fit the profile of the successful entrepreneur being modeled, plus a few additions at the sides. In fact, if the attributes were forced to be compressed into two words, these two words would be leadership and innovation, because the person of the entrepreneur is a leader who takes the risk in his business in an environment that is characterized by constant change. This summarization is not without basis, for a recent study of the largest known sample involving 1500 corporate leaders across 60 nations and 33 industries on the issue of what pushes leaders most in managing their companies, the most important leadership quality that emerged was creativity, and this quality is expected to top the leadership qualities over the next five years (Carr, 2010). Reflections on the Attributes From my range of skills, I am being asked to reflect on these selected attributes of successful entrepreneurs as a requirement of this paper. I consider this part really very challenging and engaging as I am pitting myself against the very characteristics or qualities I have found I should possess as an entrepreneur to succeed in my business. At the same time, I would have a view of my potential for success as a business person based on my own knowledge and appreciation of what would make such success possible. Looking at Kaplan’s list, I may not be an exceptional leader, but I know I have a propensity for getting things done, whether at home, on my person, or at school. I have a high level of initiative; I want to start things and I want to be involved. I do not want to wait for things to happen. Sometimes, I want to do it my own way, which may not really be the ideal situation. I am also impatient for change. I want change. I may not probably create it yet but I find the idea of creating change such a highly motivating idea. I am also a risk-taker, although my decisions and actions on risks are always based on some analysis and calculations of the implications of the risks. I have a high level of enthusiasm but I can also be de-motivated sometimes. Caring for others is a natural quality for me. I carry this attribute and live it out. I am a very lovable, sociable person. I believed this world would be a better place to live in if we would only think of what we can do for others than the other way around. I probably exhibit a part of the other attributes. I am open to gaining new experience; I am not easily put down by rejections or failures. I am not necessarily agreeable; I weigh things down before making decisions. Do I believe I will make a successful entrepreneur? I am hungry for learning; if there is anything I have not learned that will bring me closer to the goal of entrepreneurial success, I will yearn for it. I believe anything is possible for him who believes he can. Filling Up my Limitations In summary, I would be humble to accept my limitations. I may not possess all the attributes of successful entrepreneurs identified in this paper – extraversion, openness to experience, conscientiousness, emotional stability, strong leadership, innovativeness, risk-taking, exceptional optimism, genuine concern for others and self-efficacy – but I am willing to take whatever is necessary to prepare me for success. References: Bandura, A. (1977). Self-Efficacy, Encyclopedia of Human Behavior. New York: Academic Press Carr, A. (2010). The Most Important Leadership Quality among CEOs? Creativity. Fast Company. Accessed November 13, 2011: http://www.fastcompany.com/1648943/creativity-the-most-important-leadership-quality-for-ceos-study Covello, J. and Hazelgren, B. (2005). Your First Business Plan. Illinois: Sourcebooks Drucker, P. (2007). Innovation and Entrepreneurship. Massachusetts: Butterworth-Heinemann Etemad, H. and Wright, R. (2003). Globalization and Entrepreneurship. Massachusetts: Edward Elgar Publishing Haller, M. (2008). Rethinking Collaborative Entrepreneurship. Missourri: Proquest LLC Hester, E.. (1996). Successful Marketing Research. Canada: John Wiley and Sons Howell, T. (2004). The Five Factor Model and Job Performance, Accessed November 13, 2011: http://www.personalityresearch.org/papers/neubert.html IASB (2007). The Framework for the Preparation and Presentation of Financial Statements, International Accounting Standards Board. Accessed November 13, 2010: http://www.iasplus.com/standard/framewk.htm Kaplan, J. (2011). Characteristics of Successful Entrepreneurs, Accessed November 13, 2011: http://academicearth.org/courses/characteristics-of-successful-entrepreneurs Kuratko, D. and Hodgetts, R. (2009). Entrepreneurship: Theory, Process and Practice. Ohio: Southwestern Cengage McCrae, R. and Costa, P. (1987). Validation of the Five-Factor Model of Personality across Instruments and Observers, Journal of Personality and Social Psychology, 52, 81-90 Mason, M. (2011). Worldwide Business Startups. Accessed November 13, 2011: http://www.moyak.com/papers/business-startups-entrepreneurs.html Moules, J. (2010). Number of Businesses in UK Reaches Record, 2011 November 13, Financial Times: http://www.ft.com/cms/s/0/02e74fdc-d6eb-11df-aaab-00144feabdc0,s01=1.html#axzz1EyVAn13y Pinson, L. (2008). Anatomy of a Business Plan, 7th Edition. California: Out of your Mind Porter, M. (1998). Competitive Advantage. New York: The Free Press Shah, P. and Shah, P. (2004). Morality of Markets. New Delhi: Academic Foundation Stutely, R. (2002). The Definitive Business Plan. Great Britain: Bell and Bain Zacharakis, A., Spinelli, S. and Timmons, J. (2011). Business Plans that Work. United States: McGrawHill US Census Bureau (2004). Statistics About Business Size. Accessed November 13, 2011: http://www.census.gov/epcd/www/smallbus.html Viemose, K. (2007). Best Countries for Global Business, Time Magazine, 2007 November 17. Accessed November 13, 2011: http://www.time.com/time/magazine/article/0,9171,1684526,00.html Wilund, J. (2006). Entrepreneurship 9. California: JAI Press Read More