Enterprise and Entrepreneurial Management - Assignment Example

Critically appraise the business planning process: The business planning process is to draw out an elaborate plan which clearly outlines the nature of the business venture, marketing, sales and financial strategies and finally projecting a profit and loss statement. In this essay, we try to find out whether the business plan made is actually viable. While planning, most managers may come across certain constraints and obstacles which may hinder the planning process. In a broad sense, business planning may pose to be risky as planners are exposed to an element of risk. This is due to the fact that external forces may positively or negatively impact the market (Jenster 1987). Generating an idea – One of the prime requisites for formulating a business plan is to generate an idea. Based on the idea, certain guidelines are formulated. Sometimes, the idea generation itself may be flawed. Before we venture to critically evaluate this concept, let us find out the difference between creativity and innovation. The capacity to produce work which is appropriate and new is known as creativity. On the other hand, innovation is used to explain the implementation and acceptance of a new idea, product, processes or services into use. However, in reality most ideas may never be implemented. In order to transform an idea into a business plan, a lot of obstacles have to be cleared. First of all, one must recognize whether the idea is potentially viable to transform into a successful business plan. Secondly, such an idea should receive the adequate funding required to transform into a business plan and overcome other challenges which may be in the form of technological hurdles, competitive environments and other pressures (McLean 2005). Strategic objectives – One of the important parts of a business planning process is to draw out strategic plans based on which strategic objectives need to be determined. It is very important that linkages between strategic planning and performance are addressed. The business planning process should take into account the organizational performance. Also planning should not be rigid and formal. The business planning process should not be idealistically rational, rigid, bureaucratic and a dysfunctional exercise. The planning process should be drawn in such a way that management are actively involved in the actual decision making process. The strategic plans and objectives formulated should be flexible. Hence, there is an element of intuition in the business planning process. In order to attain strategic competence, it is very necessary that the intuitive judgment taken in the plan is successful (Hodgkinson et al. 2009). They may change in the course of time in order to meet the final goal. An ideal business plan consists of long term and short term goals which needs to be attained. These strategic objectives should be flexible and accordingly the strategic plans may change to meet requirements (Shrader et al. 1984). Market analysis and research – Most organizations draw up a marketing plan in order to attain the formal goal. Unfortunately, only few strive to develop a comprehensive plan which entails to research and analyze the product and service market before implementing it. Most organizations shy away from developing a comprehensive marketing plan as they may face a lot of hurdles which may be in the form of procedural, cognitive, research, cultural, informational, environmental and organizational aspects (Wilson & McDonald 1994). One of the procedural benefits of planning is that it helps in attaining realistic and attainable goals. However, in practice, it has been found that not always the objectives determined are realistic. This is because most organizations avoid interdepartmental interactions. Most firms tend to isolate the operations department from the marketing department. This is a cultural and organizational barrier. The marketing and operation managers may not want to interact with each other while formulating the market plan. Hence, the plan formulated may have severe obstacles in the implementation phase. Secondly, most firms may not carry out a comprehensive market analysis. The market analysis should be in accordance to the product or service which is yet to be launched. It is always advisable that a proper mix of qualitative and quantitative market research is performed. Gathering of data is another hindrance. If the data gathered is too outdated, then the business plan may have serious flaws. This makes the entire market research process a failure and thereby rendering the market plan to be a failure. Most marketing plans are developed by discussion with the marketing manager only. This is a flawed approach to formulating a market plan. The market plan should involve the marketing manager, operations manager and the finance manager. This is because while formulating the market plan, various aspects need to be considered. The finance manager will need to chalk out a predetermined budget within which the market plan needs to be formulated. The operations manager has to weigh the feasibility of the market plan. Lastly, the marketing manager should keep in mind the suggestions given by the operations and finance manager before drawing out the final market plan. Understanding the competition – The business plan should make a thorough analysis of the competitors. Most firms in practice may have very limited or outdated information about the rival firms and products. This considerably hampers the business plan formulated. Accurate gathering of data is extremely important as a plan has to be developed only after sufficient research is conducted. The persons involved in making a business plan have to accurately determine the rival products and firms. If there are any flaws in this, then the entire business plan may fail. Hence, they need to analyze the competitor’s market before making a business plan. Cash flow – Cash flow is an integral part of business planning process. In general terms, it means an estimate of how much cash is expected to flow in and out of the business. Cash flow forecasting helps to predict how much cash needs to be borrowed over a period of time. Hence forecasting cash flow need a lot of precision. If there are mistakes in the prediction, then this can lead to a failure in the financial business plan. The forecast has to be done in advance – be it monthly, quarterly, half yearly or yearly. However, there are certain external forces like recession which may adversely hit a business plan and thereby lead to failure in the financial planning process. Profit and loss forecasts – The profit and loss forecasts is another aspect of the business plan which can go horribly wrong. The financial manager has to speculate the profit and loss involved while making the business plan. This is purely based on speculation as to how the market will evolve within a period of time. However, the market is governed by a lot of external and internal events which may lead to a lot of changes. After a certain period of time, if a nation declares war, then it will spell doom for the firm and the profit and loss forecast may change. Balance sheet projections – The balance sheet weights the net worth of the firm in terms of assets and liabilities. The business plan should be made in such a way that the balance sheet displays positive growth. It translates to the fact that the assets of a firm should be more than its liabilities. However in reality, it may so happens that the assets are less than the liabilities due to various constraints. This will lead to a negative balance sheet of a firm. But, the financial manager has to find out a way in which the assets are more than the liabilities. Hence, the balance sheet forecasting should include a certain amount of speculation. Moreover, such forecasts should be made flexible so that they can be changed when there is a change in the external and internal factors affecting the market. Competitive strategy and scenario analysis – In order to address the competition in the market, a firm needs to come out with a sound competitive strategy. There may be good and bad competitors. Good competitors are those who strive to maximize the equity return to the shareholders. On the other hand, a bad competitor tries to garner maximum market share. This firm can go to the extent of dropping prices below the cost price in order to gain maximum share in the market. Pricing strategies help in determining the competitors and fighting cut throat competition. By all means, pricing strategies should be made keeping in mind that the price should not be less than the cost price of the product. Conclusion: All in all the business plan should have a strategy which takes into account the following aspects: The consumers should get the best package at the best price The firm should enter the market at a quick pace in order to capture maximum market share The firm should ensure that there are repeat and loyal customers. The pricing strategy should be made in such a way so that customers can avail of a discount in price. This helps the firm to compete successfully with rivals Make a thorough analysis of the competitor’s market scenario before launching the product or the service. (McGarty 2006). Characteristics of an entrepreneur: Introduction: An entrepreneur is not a salaried individual or a daily labourer who earns wages. He is someone who earns profits or loss which is an uncertain amount as opposed to salaried personnel and daily labourers. Alfred Marshall, a neo – classical economist was among the first ones to introduce a concept of innovation to an entrepreneur. He first acknowledged that an entrepreneur is a person who is in constant search for new opportunities in order to minimise costs.   Recent economists like Joseph Schumpeter and Knight stressed on innovation as an important factor in the development of a business. Schumpeter did not agree to the earlier views that an entrepreneur is a person who takes risks and is acts as a manager of a company. He further Joseph Schumpeter emphasised that an entrepreneur is one, who develops new products and new production methods, establishes new organizational forms, creates new supply sources and develops new markets for selling his products. View of an entrepreneur is stressed on the fact that an entrepreneur is an innovator. According to Schumpeter, an entrepreneur acts as a leader in trying to finding out new combinations and garnering profits from them. It necessarily does not imply that he is the one who invents new combinations but the one who tries to analyse them and make use of these combinations to earn profits. (Entrepreneur 2008). Prevailing views of the personality and characteristics of entrepreneurs: Most economics have stressed on socio economic factors to be responsible for the emergence of entrepreneurs. According to some economists like Alexander, Carrol and Sayigh, entrepreneurs are more educated than the masses. According to another economist, Kunkel, entrepreneurial qualities can be found among displaced, ethnic, immigrant and religious minorities. Many other researchers have stressed on the personality and character traits of entrepreneurs. According to Schumpeter, the distinguishing character in a person which helps him or her to be an entrepreneur is innovation. According to Rotter, there are two categories of people. The first category of people forms those who believe in chance, good fortune or certain factors which are not in the control of the people. They are the ones who primarily believe in the outer locus of control. The second category of people is those who believe that they have to control the future by making efforts. This category of people believes that they can internally control the situation (Nair & Pandey 2006). Individual characteristics and psychological traits of entrepreneurs: According to McClelland, entrepreneurs have 42 characteristics which make them leaders. Most male entrepreneurs have certain personality traits and characteristics like competitive, trusting, active, confident and independent. However, female entrepreneurs have characteristics like consideration, displaying empathy and emotion. Most successful entrepreneurs have diverse scope of behaviors and attitudes like aggressiveness, self control, need to fulfill goals and ambition. All behaviors and characteristics displayed by entrepreneurs are governed by their personal values. The most important part of any personality is the personal value and all other characteristics of an entrepreneur such as decision making skills, attitudes, ability to judge a situation or people and commitments in a general sense. In small and medium organizations, chief executives play both operational and strategic roles. They like to control power themselves and go for a centralized structure. In such organizations, chief executives act as decision making authorities and for all major and minor issues, the sole decision making power rests with them. Such executives are technically skilled and their skills are a pre determination of the organization’s performance. Also the growth and direction of the company depends on their ability to maintain relationships with the staffs and their talent in developing new relationships. Hence, the beliefs, insights and values of chief executives shapes the way the person looks at the environment and the organization and also affects the overall performance of the firm. According to famous economist, McClelland and Atkinson, there is a link between a person’s eagerness to accept challenges in order to fulfill goals and attain excellence. This is the need for fulfillment. This need may be illustrated if the person accepts his or her personal responsibilities or takes up a difficult task or the way he or she displays the ability to face uncertainty and risk. Another personality trait of entrepreneurs who are themselves the owners and operators of a firm is that they display strong propensity of growth towards their organizations. They tend to oversee their firm, shows and lead the way. Such entrepreneurs display a skill to make quick strategic decisions rather than going into managing the details. Hence, propensity to grow is an inherent trait of an entrepreneur and depends on the values and character of a person. In order to gain a general approach to analyzing personality of chief executives one needs to study the influential traits like motivation and values of such individuals. According to Polykarpou, the professional skills and personality of managers influence the decision making, analysis of data and the general organization of the firm. Especially in a small or medium size firm, the personality of the chief executive is of primary consideration. This is because the chief executive holds a central and pivotal position, enjoys sole managerial power and is strongly involved in the organization. Hence, the personal goals and motivation of the chief executive merges with professional goals. Also this vagueness together with pivotal personality traits of the individual influences the behavior of the organization (Legoherel et al. 2004). Characteristics of successful entrepreneurs: In a start up venture, the entrepreneur needs to display two important traits. These are the wish to act and innovate. By innovation, we mean that the manager must be capable to produce solutions in new settings. This is linked with the skills and knowhow of the entrepreneur which is probably gained through experience and training. Typical characteristics of a successful entrepreneur are innovation, capacity to take and handle risks, market functional knowledge, skills pertaining to business management and marketing, skills related to manufacturing and the capacity to cooperate. According to Caird, the ability to identify new business opportunities, will to take risks, a good acumen for business, ability to rectify errors accurately and efficiently and the ability to grab professional openings are some traits displayed by successful entrepreneurs. According to Bird, there are five types of risks. A successful entrepreneur is one who takes economic risks, risks in maintaining social relations, health risks, psychological risks and risks in developing his or her career. The study of entrepreneurship differentiates between two schools of thought. One is based on the contingency thinking and the other is based on trait model. The basic question entailing the trait model is why some individuals start new ventures and become successful entrepreneurs. In trait model, the characteristics of successful entrepreneurs are not judged depending on the prevailing situation. However the contingency model determines the traits of entrepreneurs depending on the current situation and the environment of the organization. Hence, experiences and changes play a pivotal role in such situations. Hence, the contingency model states that becoming an entrepreneur changes the life of the individual and effect the personality traits of a person (Littunen 2000). Modern researchers assert that sole emphasis on entrepreneurial characteristics does not completely attribute to entrepreneurial success. Researchers are more interested in evaluating and researching on the thinking doing nexus of entrepreneurial behavior. Managers interact with the environment and make decisions with reference to success factors. Most of the times, entrepreneurs have to take decisions with limited or ambiguous data. Hence they have to possess the knowledge to assess, judge and decide depending on the creation of ventures, opportunities and growth. Hence, action and thought are important components of the behavior of an entrepreneur and plays an important role in determining successful decision making (Tipu & Arain 2011). All in all, a successful entrepreneur have a diverse set of qualities which includes personality traits like creativity, motivation to achieve, entrepreneurial drive, imagination and innovation, excellent communication skills like persuasion and negotiation; analytical skills such as data presentation and numeracy skills; managerial traits like decision making, problem solving, monitoring and organizing; career skills like assessment and self awareness, self directed learning and techniques to plan career; attitudes including flexibility, perception and sensitivity to consequences and needs and knowledge both business related and computer literacy (Kuip & Verheul 2003). Conclusion: According to me, an entrepreneur needs to manage certain important areas like risk management, planning for new ventures, networking, learning, financial management and human resource management. In order to handle all these aspects in a successful manager, the entrepreneur must take the right decision at the right time. Hence, in order to be a successful manager, an individual needs to have the skills, experience and personality traits to manage a venture successfully. This includes problem solving and decision making skills, strategic thinking, capacity to close deals successfully, time and project management, selling, negotiation, persuasion and motivation. References: Entrepreneur, 2008, January, 2 Defining entrepreneurship. (Defining and measuring entrepreneurship), viewed 07 November, 2011 from http://www.entrepreneur.com/tradejournals/article/171539783.html Hodgkinson, G. P., Sadler-Smith, E., Burke, L.A., Claxton, G. & Sparrow, P.R. 2009. Intuition in organizations: implications for strategic management. Long Range Planning, vol. 42, pp. 277 – 297. Jenster, V., 1987, ‘Using critical success factors in planning’. Long Range Planning, 20 (4), 102 – 109. Kuip, I. & Verheul, I., 2003, ‘Early development of entrepreneurial qualities: the role of initial education’. Scientific Analysis of Entrepreneurship and SMEs., viewed 7 November, 2011, from http://www.entrepreneurship-sme.eu/pdf-ez/N200311.pdf. Legoherel, P., Callot, P., Gallopel, K. & Peters, M., 2004, ‘Personality characteristics, attitude towards risk and decisional orientation of the small business entrepreneur: a study of hospitality managers’. Journal of Hospitality & Tourism Research, 28 (1), 109 – 120. Littunen, H., 2000, ‘Entrepreneurship and the characteristics of the entrepreneurial personality’. International Journal of Entrepreneurial Behavior and Research, 6 (6), 295 – 309. McGarty, M.C., 2006, Business Plans, New Hampshire. McLean, L.D., 2005, ‘Organizational culture’s influence on creativity and innovation: A review of the literature and implications for human resource development’. Advances in Developing Human Resources, 7 (2), 226 – 246. Nair, K.R. G. & Pandey, A., 2006, ‘Characteristics of entrepreneurs: An empirical analysis’. The Journal of Entrepreneurship, 15 (1), 47 – 61. Shrader, C.B., Taylor, L. & Dalton, D.R., 1984, ‘Strategic planning and organizational performance: A critical appraisal’. Journal of Management, 10 (2), 149 – 171. Tipu, S.A.A. & Arain, F.M., 2011, ‘Managing success factors in entrepreneurial ventures: a behavioral approach’. International Journal of Entrepreneurial Behavior and Research, 17 (5), 534 – 560. Wilson, H. & McDonald, M., 1994, ‘Critical problems in marketing planning: the potential of decision support systems’. Journal of Strategic Marketing, 2, 249 – 269. Read More