Uncertainty and Risks in Entrepreneurship - Essay Example

? Uncertainty and Risks in Entrepreneurship UNCERTAINTY AND RISKS IN ENTREPRENEURSHIP Businesses, large or small, attribute their success to both the internal and external environments. Firstly, the internal environment comprises of factors that are beneath the direct control of the business enterprise. Some good examples of internal factors are staff, facilities, business strategy and management. While, on the other hand, the external environment entails various external forces that are not under the direct control of the business enterprise. Some examples of external factors are government policies, competitors, customers, political, social and cultural organizations. When operating a small business enterprise it is imperative to reflect on the factors that influence both the internal and external environments of the business. The failure to observe the internal and external environments will render the functioning of a business system useless. This is because the small business enterprise will occasionally face obstacles in the daily operations and management. This paper discusses how the ability to cope with uncertainty and to take risks affects the operating environment of a small business enterprise. Small business enterprises nowadays are on the rise. Individuals have developed the urge of operating businesses that will bring them extra cash to cater for their ever-increasing needs. However, operation and management of any small business enterprise is not an easy task, as it requires an individual with skills, attributes, determination and disciple. It is imperative for an individual operating a business enterprise, to have the above elements since they will help when the time of facing the internal and external environment comes. In essence, taking risks and coping with uncertainty are matters that are associated with the internal and external environment of a small business enterprise. The impacts of either the internal or the external operating environments can be either advantageous or disadvantageous on the small business enterprise (Griffin 2011: 67). Uncertainty and the operating environment Any uncertainty that is experienced by a business enterprise comes from the external environment. The numerous external factors or forces are indeed uncertainties to a business enterprise. Managers cope with uncertainty in a reactive manner by developing adaptive strategies to counter the effect. This is so since they are beyond the immediate control of the business enterprise. As much as uncertainty is beyond the control of an individual, business enterprise, it still influences the daily operations and management of a business enterprise. Examples of uncertainties are external factors such as the economy, government policies and demographics. In most occasions, uncertainty affects a business enterprise negatively. Individuals who have taken the management role in any small business enterprise should apply a positive management attitude when coping with uncertainties. Uncertainty is unpredictable and unexpected, and that is why only the individuals with management skills and positive attitudes can have the ability to cope with uncertainty. A manager may think that he, or she has everything pertaining to a business enterprise in control, but uncertainties in the form of government policies, competition, economical shifts and demographical changes can prove wrong a manager’s initial judgment (Gigerenzer 2008: 34). The first factor that can be a great uncertainty is government policy. It is likely that at times, the government can come up with an unexpected policy that will ultimately affect the operations of a business enterprise. A skillful manager is expected to develop coping strategies that will end up minimizing the disadvantages while maximizing the advantages, which are part the uncertainty that has been brought by the government policy. For example, government policy can entail increasing or decreasing taxes on a commodity that the business enterprise in question is selling. Depending on whether the taxes have been increased or decreased, the operating environment can have either an advantage or a disadvantage respectively (Niewwenhuizen 2009: 171). The second uncertainty that can face a business enterprise is economical shifts. Economical shifts can present the operating environment of a small business enterprise with advantages or disadvantages. For instance, if the economy of a country performs well and the inflation rate goes down, then consumers will have a strong buyer power, making them purchase more since prices of commodities will go down. This will be a positive impact on the operating environment of the business enterprise. On the other hand, an economical shift such as an increase in the inflation rate decreases the buyer power and makes the prices of commodities go up and, it is a disadvantage. This will be a negative impact on the operating environment of the business enterprise (Morris et al 2010: 98). Taking a risk and the operating environment Any risks that a business enterprise faces will come from the internal environment. In other words, risks are influenced by internal factors and they are beneath the direct control of the business enterprise. A risk originates from a manager’s decision, which is associated with the daily operations of a business enterprise. A manager can take a risk by developing a new strategy, which is very unfamiliar in that particular business enterprise. A managerial decision qualifies, as a risk, when its outcome is not for sure. In essence, a decision that is of trial and error qualifies as a risk. The above is true since a strategy of trial and error has the possibilities of either being a success or failure (Niewwenhuizen 2009: 201). When a business manager takes risks, this ensures that he or she is able to seize any little opportunity of making profits that arise. Moreover, if the risk is taken and a great opportunity arises then it means that the manager will make huge profits and establish a successful business enterprise. In essence, the ability to take risks, in most circumstances, creates a positive or an advantageous operating environment to a small business enterprise. Risks can be taken through developing a new business strategy or opening a new line of business, which deals with different commodities or serves new clientele. However, at other times, a manager can commit a careless or a detrimental act by taking risks. A risk can be detrimental when a manager blindly executes a course of action without any considering important facts. At this point, the risky detrimental act results in a disadvantaged operating environment to the small business enterprise (Morris et al 2010: 318). It is important to note that some of the risks taken, which impact negatively on the operating environment are mostly associated with advances in technology. A manager may decide to try a new technology that has never been used before to conduct market analysis. Since this manager is not sure of the odds, which are coupled with the technology in question he or she is likely to direct all staff to work towards ensuring that the new strategy and technology brings success to the business enterprise. However, some business enterprise managers usually fall victims after taking risks because of miscalculating their strategies. Miscalculation of strategy comes in the form of allocating inadequate resources to a particular venture, and instead directs resources to other ventures that are not integral to the operating environment of the business enterprise (Morris et al 2010: 284). Conclusion The success or failure of a business enterprise is centered on the operating environment, which comprises of internal and external factors. Coping with uncertainty or taking risks depends on the external and internal environments respectively. Uncertainty or risks can be either advantageous or disadvantageous to a business’ operating environment. A business enterprise manager should have the ability to cope with uncertainty and take risks at the appropriate time and in the appropriate operating environment. References Gigerenzer, Gerd. (2008) Rationality for Mortals: How People Cope with Uncertainty. London: Oxford University Press. Griffin, Ricky W. (2011) Fundamentals of Management. Sydney: Cengage Learning. Morris Michael, Kuratko Donald F, Covin Jeffrey G. (2010) Corporate Entrepreneurship & Innovation. Sydney: Cengage Learning. Niewwenhuizen, Cecile. (2009) Business Management for Entrepreneurs. New York: Juta and Company Ltd. Read More