The Different Conceptions of Entrepreneurial Strategies - Case Study Example

? The Different Conceptions of Entrepreneurial Strategies The Different Conceptions of Entrepreneurial Strategies Introduction The basic purpose of entrepreneurship is to recognize and develop from available or meager resources, conditions which are favorable for the enterprise. This paper pragmatically studies the dissimilarity between Schumpeterian and Kirznerian opportunities by analyzing information received from high tech small business entrepreneurs engaged in utilization and development of available and meager resources. Initially a benchmark needs to be developed for the paper to asses which commercial opportunities are Schumpeterian, and which are Kirznerian. This appraisal is based on five different set of ideas which can be described as disequilibrating/ equilibrating, or new information or no new information, extremely innovative or not as much innovative, exceptionally conventional and originally imaginative innovation. The next step would be to assess the types of opportunities that can be commercially recognized and used beneficially (Beam, 2007) Perception The general perception is that individuals who are tough, resilient and progressive are most likely to favor Schumpeterian opportunities, and they persistently try to find inventive ways and means to expand their company. Besides their considered directions for their enterprises is to fulfill future requirements by developing practical and practical products, while individuals who concentrate on current demands have a tendency to pursue Kirznerian opportunities. This is the major inherent difference between the Schumpeterian and Kirznerian formulation of entrepreneurship; one takes the economic systems away from stability while the other proposes a system that will ensure equilibrium. Both theories are pertinent and applicable to entrepreneurship in different ways. Some entrepreneurs establish their businesses and work towards its expansion and growth; while there are entrepreneurs who seize opportunities as and when presented and capitalize on the presented opportunities. Case Study of Ed Bazinet Schumpeter contends that the main distinctiveness of entrepreneurship is to bring together existing resources using a new and innovative approach. This is not a regular process, but it results in the acquisition of the latest knowledge and creation of new goods, which needs a new supply sources for production of these goods. This form of entrepreneurship creates a monopoly position for that organization. A case study is given of Ed Bazinet who was an extremely successful businessman. He came from a working class background, and although he was interested in business he had no money to start one. He started working at a job as a purchaser to get the requisite experience, and travelled continuously to analyze markets. He began to buy up decorative pieces and found markets for the products. He called his enterprise Department 56, and its inception makes interesting reading. In 1971, Bazinet received a visit from potter who made his living by making ceramic items in his garage and selling them. The potter showed Bazinet as a ceramic Victorian house shaped like a cookie jar. Bazinet perceived a business opportunity where others had not. He asked the potter to modify the item by making a window in it, and place a light inside so that it would glow and can be used as a nightlight. The original 6 houses sold immediately, and there was an immediate demand for more. The potter did not have the resources to mass produce these miniature Victorian houses, so Bazinet had the houses made in Taiwan, and that formed his original snow village. The reason that made these villages a business success was the idea of the creation of entire snow villages with houses and components of every imaginable depiction. An outstanding feature of snow villages created by Department 56 was that they have Styrofoam and cardboard fitted sleeves which protect them from damage. The business further prospered with the addition of different themed series such as the Dickens Village, New England Village, Alpine Village, Snow-babies, and Christmas in the City, Little Town of Bethlehem, North Pole Village, Disney Parks Village and Seasons Bay. The total collection of Department 56 villages consists of several thousand different pieces. Collectors usually collect just one theme, such as churches or trains. This innovative idea of creating new products unfamiliar to consumers gave him substantial profits. Bazinet turned a simple idea of creating miniature villages with lights into a $250 million enterprise (Frank, 2007). Case Study of Tim Blixseth Tom Blixseth was an entrepreneur who perceived and grasped opportunities in which he saw profit making potential. Blixseth says that he came from a poor family and was brought up on welfare. After graduating, he worked in sawmill; hence his experience was of timber. He grew rich in selling timber property by taking speculative risks He came across an ad selling 360 acres for $90,000. He decided to take a risk, and made a down payment of $1.000/- with the promise of paying the balance within one week. He was confident that the property could be sold with a profit within the stipulated time. A timber company bought the property from him for $140,000 thereby giving him $50,000, which was pure profit. He took a calculated risk based on his capabilities to sell something at a profit within a stipulate period. Blixseth made his money and built up his business by dealing in federal timber contracts. With the money made from his timber contracts he established his other businesses, the most prominent being Yellowstone World Club in Montana. Taking into account his timber interests, development and other resources Blixseth grossed over $100 million from the initial investment of 27.5 million dollars of which he had put in less in the $3 million. Difference in concepts between Kirzner and Schumpeter Kirzner emphasized that an entrepreneur must remain prepared to take advantage of commonly unknown opportunities to make profit. The entrepreneurial component for instant decision making is what makes profits for him. Ownership or utilization of opportunities presented in the market are not defined solely as entrepreneurial traits, but the preparedness for taking positive action on the available information and making an opportunity which does not seem to exist for other people. For Kirzner, opportunity identification and exploitation is the mark of a good entrepreneur. Schumpeter emphasized that means of production by different methods is the essence of entrepreneurship. According to him, the entrepreneur creates new goods while improving the quality of existing goods. At the same time, he creates new methods of production, discovers new markets for his products, and finds new sources of supplies for production. This is the sort of person who is a leader and trendsetter, who uses his entrepreneurial skills by availing the opportunity to produce commodities. Although, attempts have been made to merge the two theories, it is agreed by most theorists that despite no perceived difference between the two types of entrepreneurship, their priorities are quite dissimilar. However, cultural and institutional aspects can influence the different types of entrepreneurship. Since both Schumpeter and Kirzner have produced their theories without any recourse to each other, the most prevalent view is that of cultural and institutional differences. This means that a hostile business environment would discourage and damage both Kirznerian Schumpeterian entrepreneurs. This could occur in a situation where access to capital or the securing of property rights is not easy, but enterprising persons still recognize and avail entrepreneurial opportunities even in such situations. Another possible scenario could be where entrepreneurs grab opportunities to make profits in illegal ways (Beam, 2007) Reconciling Schumpeter with Kirzner The progression of Creative Destruction is an essential aspect of entrepreneurship and free enterprise. Economists are realizing that there are many other factors besides price competition which are important for business. The introduction of quality and effective marketing and intensive salesmanship has reduced the importance of price from its dominating position. In free entrepreneurship the competition is the production of new commodities using new technologies and with fresh sources of supply. Competition is a decisive factor which affects cost, quality, profits and production of present enterprises, but their very existence depends on such factors. On the surface it seems that both Schumpeterian and Kirznerian broader understanding of entrepreneurship is in sharp contrast with each other. One supports the economic system that proposes equilibrium, and the other is in favor of a system that opposes it. The question here is: is it possible to merge both views in a manner that addresses both equilibrating and disequilibrating results? The thing is that markets originating outside an existing environment tend to tilt towards equilibrium because of the emergence of new markets. Since equilibrium is the desired equation, markets eventually lean towards a system that favors stability. Conclusion Putting all this together, strategic entrepreneurship can be defined as behavior that gives new directions to entrepreneurship by merging resources and the usual pattern of activities for the entrepreneur who does not himself possess the resources, but is capable of locating such resources, and is aware of opportunities and makes efforts to avail of these profit opportunities by mobilizing and activating these resources. The main motivation for this is to generate profits as per the Schumpeterian economic system. This conforms to the strategy about the way that an economy eventually progresses and also defines entrepreneurship adequately. This is the framework in which entrepreneurial performances create the disequilibria for strategizing firms to conduct their businesses. . List of References Beam, A., 2007. Book Review: Richistan. New York Times, 8 June. Frank, R. H. D., 2007. Richistan. Melbourne: Collins Bestsellers. Read More