Entrepreneurial Action, Innovation, and Business Performance - Assignment Example

In this essay, the qualities or characteristics needed to be a successful entrepreneur with relation to a chosen entrepreneur are examined using previously published literature and a questionnaire. The literature reviewed includes the common myths regarding entrepreneurship, common characteristics associated with entrepreneurs, how entrepreneurial behaviour affects business, and Anita Roddick's (of The Body Shop) view on entrepreneurial qualities. The next step is the presentation of a guideline for the research process for candidate selection. Then, the findings from published literature and questionnaire are then used to analyse the entrepreneur's business and background. Introduction This essay examines the qualities or characteristics needed to be a successful entrepreneur with relation to a chosen entrepreneur and to analyze his/ her comments in the context of previously published literature and a questionnaire. The literature reviewed includes the common myths regarding entrepreneurship, common characteristics associated with entrepreneurs, how entrepreneurial behaviour affects business, and Anita Roddick's (of The Body Shop) view on entrepreneurial qualities. Next, a guideline for the research process for candidate selection is presented. The findings from published literature and questionnaire are then used to analyse the entrepreneur's business and background. Literature Review There is much literature and beliefs about what makes a successful entrepreneur. In order to deconstruct this process, this essay will examine the common myths regarding entrepreneurship and the common characteristics associated with entrepreneurs. In addition, a study done in Central London examining how entrepreneurial behaviour affects business cements the earlier two literature reviews. Lastly, the essay will look into the beliefs of an established entrepreneur, Anita Roddick of The Body Shop and understand what she thinks are important entrepreneurial qualities. Common Myths Regarding Entrepreneurship (Morris, 1998, pp.21-32) (1) It is about starting and running a small business: Entrepreneurship represents a growth-oriented outlook, and implies an innovative and proactive approach to challenges. (2) It is a discreet event that just 'happens': There is a dynamic process involved and this process has identifiable stages which takes time to unfold. (3) It is an "either/or" thing: Entrepreneurship is not a fixed concept and the key is to recognize that it is a variable phenomenon. (4) It is about taking wild risks: Risks are assumed and taken, but they are calculated risks where the underlying risk factors are identified. (5) Entrepreneurs are born: Environment plays a big part in the development and realization of potential where the accumulation of activities, skills, and knowledge over time is crucial. (6) It is about greed: The real motivator behind entrepreneurial behaviour is not money, power or position but the desire to achieve and make a difference. (7) It is about individuals: The existence and quality of a team is critical as no one individual has the ability, time or talent to bring a concept to reality. (8) There is only one type of entrepreneur: Entrepreneurs come from all walks of life and represent a diverse mix of age groups, races, religions, cultures, genders, and occupational backgrounds. (9) It requires a lot of money: Entrepreneurial individuals are opportunity, not resource driven and do not limit the scope of their vision by their resources owned but by leveraging their resources. (10) It is about luck: It is about hard work, creative insight, in-depth analysis, adaptability, and openness to an opportunity. (11) It starts with a new product or service: It is about determining whether a need exists, how extensive that need is, how satisfied customers are with their current products, what the switching costs will be, and whether there is meaningful advantages in the product or service. (12) It is unstructured and chaotic: When dealing with the unknown, it is important to be well-organized and maintain priorities. Common Characteristics Associated with Entrepreneurs (Morris, 1998, 78) (1) Achievement motivation (2) Internal locus of control (3) Calculated risk-taking (4) Tolerance of ambiguity (5) Persistence/perseverance/tenacity (6) Independence (7) Self-confidence (8) Dedication/strong work ethic (9) Organizational skills (10) Opportunistic (11) Adaptability/versatility (12) Initiative/energetic (13) Resourcefulness (14) Creativity (15) Perceptiveness (16) Assertiveness (17) Persuasiveness. How Entrepreneurial Behaviour Affects Business (Georgellis, Joyce & Woods, 1999) In this study, the writers used a sample of 300 small independent businesses drawn from Central London, and examined how entrepreneurial behaviour affects business performance. There has been much argument that innovation is crucial for small businesses motivated by a desire to grow in terms of sales and/or employees. However, the extent of successful innovation does depend on the capacity plan ahead, the capacity to innovate, and the willingness to take risks. The findings of this study show, however, that not all small businesses are equipped with the capacity to plan ahead, the capacity to innovate, and the willingness to take risks due to individual strengths and weaknesses arising from the diversity in motives and aspirations. The following is an excerpt from the definitions and frequencies of responses of variables used in the study: Variable Description Categories Frequency % 1 Does the organization have a clear strategy Yes No Missing 236 69 27 71.1 20.8 8.1 2 How far ahead do you plan A few months 1-2 years 3-4 years 4-5 years 177 93 7 4 46 53.3 28.0 2.1 2.7 13.9 3 How innovative are you in terms of products or services (last three years) Highly innovative Moderately innovative Not innovative Missing 57 139 103 33 17.2 41.9 31.0 9.9 4 How innovative are you in terms of production or service delivery processes (last three years) Highly innovative Moderately innovative Not innovative Missing 35 93 127 77 10.5 28.0 38.3 23.2 5 How would you describe your organization's current state Rapidly growing Healthy and growing Stable Declining Missing 4 106 186 27 9 1.2 31.9 56.0 8.1 2.7 6 How entrepreneurial is your organization Very A little Not at all Missing 68 152 84 28 20.5 45.8 25.3 8.4 7 Does the organization have a strong desire to grow in terms of sales revenue Very A little Not at all Missing 151 74 84 23 45.5 22.3 25.3 6.9 8 Is the organization willing to take risks Very A little Not at all Missing 39 127 139 27 11.7 38.3 41.9 8.1 9 Does the organization have a strong desire to have more employees Very A little Not at all Missing 65 104 141 22 19.6 31.3 42.5 6.6 The response from the above analysis suggests that very few small businesses plan ahead for more than two years. Also, more than 50% of small businesses plan a few months ahead and about 81% plan up to two years ahead. Almost 60% of businesses have been moderately or highly innovative in new products or services in the last three years, while only 38.5% have been moderately or highly innovative in production and or service delivery processes in the same period. In terms of taking risks, about 50% are somewhat or very willing to take risks with the same percentage having a desire to grow in terms of employment. For sales revenue growth, about 68% agree it is important. Regarding performance, 33% of the sample reported that they were healthy and growing or rapidly growing, whilst 56% reported being stable Anita Roddick (The Body Shop): Entrepreneurial Qualities (Roddick, 2000, pp. 38-39) (1) Vision: The ability to see something new and a belief in it that's so strong that it becomes a reality. (2) Instincts: The ability to stand out from the crowd because entrepreneurs act instinctively on what they see, think, and feel. (3) Ideas: The ability to have ideas constantly bubbling and pushing up inside until they are forced out by the pressure of creative tension. (4) Optimism: The belief that everything is possible for an entrepreneur and bears no relationship to any degree of planning. (5) How to do something: An understanding that it is not necessary to know how to do something. Skill or money is not the answer, but knowledge: from books, observing or asking. (6) Streetwise Skills: An innate desire for social change where there is an understanding that profit is not the sole arbitrator, but it is just as much about taking part in political and social activism and using products as conduits for social change. (7) Creativity: (8) Mixing the Elements: The ability to mix all these qualities together and to learn by experience. (9) Storyteller: It is storytelling that defines differences. Research Process The process this writer used in selecting the candidate was based on a number of pre-requisites that the entrepreneur had to fulfil. Firstly, the business in question had to be started from the ground up in order to understand the entrepreneur's aspirations and motivations for starting the business. Secondly, the business had to be in operation and making profit for at least eight years so there would be a clear line of growth and continuity that would provide positive and negative experiences. Although this methodology still casts a wide net in terms of candidate selection and does not limit itself to a certain age group and background, the disadvantage is that it would also be difficult to fully ascertain the characteristics that make a successful entrepreneur without those limitations. For example, age might be a crucial factor as it might determine the maturity of the entrepreneur in terms of life experiences. Findings and Analysis The entrepreneur selected for this essay is male, aged thirty-eight and started a financial mortgage business twelve years ago in Atlanta where he saw an opportunity in the residential mortgage market. Originally from Missouri, the entrepreneur comes from a family of four siblings and his parents run a small caf business in their hometown. In college, the entrepreneur studied finance in college and lived away from home for the first time. While in college, he started his first business doing laundry for college students. The idea originated from the fact that he hated doing his own laundry and surmised that there were other college students who felt that way. Initially, he hired a few fellow students at wages a little over the minimum rate (and charged his customers $300 per semester) and later when the business grew, he contracted two vehicles which widened his geographical reach within the campus. Through word of word, the business grew quickly and when he left college, he sold the business for $50,000. After graduating from college, the entrepreneur got his first offer to work for a bank in New York as a Management Trainee. After two years there, he decided that he did not like the corporate structure and spent the next year looking for a new business venture. Because he was exposed to the commercial real estate business while working at the bank, the entrepreneur decided to conquer the competitive world of the mortgage business. He chose Atlanta as his location because of the growing real estate market, and learned the real estate business by asking questions, calling friends, and reading. To learn the business, he partnered with a friend (who concentrated on commercial real estate mortgage brokering) to start a new mortgage business. After three years, the entrepreneur bought out his business partner. In Atlanta at the time, the real estate mortgage business was very competitive and the entrepreneur's unique selling point was the no-closing-cost mortgages scheme. This means that instead of getting a small originating fee from the lenders, the entrepreneur asked for more from the lenders, out of which he would use a portion of to pay the borrower's closing fee. While it was crucial to have a unique selling point that worked, the entrepreneur's other success was in having a pool of loyal employees. Not wanting the overhead of high salaries, he provided a commission-only compensation that attracted an elite team. Today, the entrepreneur's company is valued at $50 million and he is still coming up with new ideas. Comparing the characteristics of the entrepreneur with the qualities reviewed earlier in the essay, the entrepreneur demonstrated the ability to plan ahead in terms of growth when he used all his profits to buy-out his partner in the early years. Any subsequent profits made in the following years were also put back into the business to encourage growth. In terms of innovation, he took a normal business in financial mortgage and used a creative twist in the form of the no-closing-cost mortgages scheme which set him apart from his competitors. Also, he took a risk when he left his secure job at the bank to venture into a relatively new field. However, it was also a calculated risk as he was exposed to the commercial real estate market at the bank. Through the years, innovation was the entrepreneur's driving force, not greed for money or position. Describing himself as a self-starter, he never saw the business as small but as a process that would take time to develop. As with his laundry services business, one of his main priorities was to attract and retain quality employees that would grow with the business. His first business venture in providing laundry services also demonstrated that it's not about the money, but about being open to opportunities. Conclusion Essentially, the main qualities or characteristics that define an entrepreneur according to the research process are the ability to plan ahead (in terms of growth outlook), the ability to innovate, and in taking calculated risks. This entrepreneur demonstrated a strategic intent to grow his business from day one, he had the vision which would set the business apart from its competitors, and he took numerous calculated risks before, during, and after the start of the business. According to the evidence presented, this person under study meets the requirements of a successful entrepreneur. REFERENCES Georgellis, Y., Joyce, P., & Woods, A. (1999). Entrepreneurial action, innovation and business performance: The small independent business. Journal of Small Business and Enterprise Development, Vol 7, Num 1, pp.11. Morris, M. (1998). Entrepreneurial Advantages for Individuals, Organizations & Societies. Cardiff: Greenwood. Roddick, A. (2000). Business as Unusual: The Triumph of Anita Roddick. London: Griffin. You complete this questionnaire and submit with the essay. QUESTIONS FOR ENTREPRENEURIAL INTERVIEW 1. Gender Male 2. Age 38 3. How would you describe yourself Self-starter 4. How long have you run this business 12 years 5. What is the purpose of this business Financial mortgage business 6. What is the business's unique selling point The no-closing-cost mortgage. 7. How did you develop this idea In the mortgage business, profits lie in collecting interest, and lenders collect the interest and keep most of it and provide a fee to the mortgage broker. However, the business' USP lies in the fact that the company pays the closing cost instead of the borrowers and it makes more money on the huge volume. 8. Have you run any other businesses previously Started first business in college 9. If so, what were these types of business College laundry service for students 10. Who was the biggest influence in your family and why Parents who owned a family caf who taught me the value of hard work. 11. What was your family's attitude towards you starting your own business Encouraging, although a little concern that I was giving up a lucrative and secure corporate position at the bank to venture into an unknown field. 12. What positive and/or negative experiences at school, college, university or on training courses influenced you to start your own business In college, I made better grades studying the assigned textbooks during class time than if I listened to the lectures. This taught me that it is not what others think and know, but what I think and know that will be the defining success factor. 13. What positive and/or negative experiences in your previous employment influenced you to start your own business The stringent and hierarchal work structure where business transactions were discussed like case studies where risks were frowned upon rather than potential opportunities. 14. What skills and knowledge did you acquire from these working experiences I learned valuable negotiation skills and the importance of creating a business network. 15. Which employer, manager or workmate was the biggest influence in your working life And why My manager at the bank who followed every rule in the company rulebook and did not have any vision for the department. He influenced me not to be stagnant in business and that looking ahead is essential. 16. What experience of working within a small business did you have before setting up your own business None. 17. How have these experiences influenced you N/A 18. What political events/laws have helped or hindered you in starting and/or operating your own business N/A 19. How easy did you find it to access funding at start up and to expand or restructure your business I used all my savings from the job at the bank as seed money, and later invested all my profits back into the business for expansion. Read More