The Challenges Associated with New Ventures - Assignment Example

New Venture Creation Contents Question 3 Reference 9 Bibliography 10 Question Discuss and critically analyze the process of creating (pre start-up) and managing a new venture (post start-up). Consider issues relating to the business idea, the entrepreneur, the opportunity and innovation. It is important to discuss the challenges associated with new ventures, their creation and management. The word entrepreneur has been derived from the French word Entreprendre which means a person who undertakes the prevailing risk o a new enterprise. Entrepreneur first appeared in the French language but it was only when Richard Cantilon used the term Entrepreneur to refer to the economic activities. Richard Cantilon defined Entrepreneur as a person who tends to buy services at a certain prescribed prices with a view to sell it at an uncertain price. Therefore according to Cantilon an entrepreneur is a bearer to risk and which is not insurable. Another renowned French economist has defined Entrepreneur as an agent who basically unites all the necessary factors of production and who finds value of the products which re-establishes the capital that the entrepreneur employs along with the interest, wages, rent which is paid by the entrepreneur and the profit earned belongs to the entrepreneur. He may not supply capital but should have the knowledge, judgement and perseverance towards the business and possess the art of administration and superintendence (Mohanty, 2005, p.1-2). Each of the definition views an entrepreneur from a different angle and perspective but contains similar notion such as risk taking, creating, organising, wealth and innovation. Therefore Entrepreneurship is defined as a process which aims to create something new with value and is created by devoting the accurate time as well as effort accompanying with financial, social risk and at the end receiving the desired result or reward of monetary and also of personal satisfaction as well as independence (Hisrich, 2003, p.8). In the process of making entrepreneurship there is a body of research who has been trying to identify the factors of what makes an entrepreneur actually an entrepreneur and most importantly what makes him successful. Is the in born quality of a person or whether the qualities can be natured? It has been founded that entrepreneur are particularly attuned to the universal and also the human trait which is the desire for freedom (TiE Organisation, 2003, p.17). Some of the characteristic and traits of an Entrepreneur includes factors such as risk taker where an entrepreneur usually bears all the uncertainty and defines and confines the risk; Economic agent as defined by J. B who unites all the necessary factors of production such as land, capital, labour and other important factors; A person having managing factors have the potential to become an entrepreneur who has the capacity to initiate, manage, organise and control the necessary affairs of the business ; A person who aims to carry out innovation continuously has the capacity of becoming an entrepreneurs and most important trait is that irrespective of size and operation an entrepreneur develops his own production and business unit (Gurusamy,2009, p.25). But much discussion has been held to decide whether the entrepreneurs are born with the qualities or whether they can be natured. Some of the authors have proved that entrepreneurs are born and not made as a myth. The idea that the trait of an entrepreneur cannot be taught and learned and they are born with qualities has been prevalent. The traits which includes initiative, willingness, drive, analytical ability and aggressiveness but today with the recognition of the profession of entrepreneurship had been introduced many models, processes and also case studies which helps the topic to be understood clearly and helps the budding entrepreneurs (Kuratko & Hodgetts, 2008, p.6). But some of the research has proved that the characteristic or the traits lies within the genes of the entrepreneurs and it comes from the DNA. Much of the debate has been raised on deciding whether entrepreneurs are born or made. Many people have assumed that entrepreneurs are born which means they had been born with certain inherent characteristic which ultimately leads to enterprising and if a person is not born with such characteristic which cannot be induced by upbringing training and experience (Bridge, O’Neill & Cromie, 2003, p.58). To start up a business there has always been critical issues which an entrepreneur needs to tackle and handle deliberately. There are certain major issues which are related to pre starting up the business and also managing new venture. Entrepreneurs engage into a number of activities in the process of creating a new venture. But there are no universal agreements on how to start the new venture. Research have found out that the process of launching new venture is non linear and non systematic and an entrepreneur can go into as many directions in the process of creating a new venture. The important steps before starting off a new venture which includes the decision of starting a new business, concept, researching on the topic, preparation required before the launch of the venture, attracting the customers and securing it first customers and also obtaining the business license and other activities. The process of new venture is characterised by four stages and three decision points. The first point occurs when an individual or an employee decided to start a business; the second is the start up process required to do before starting up a business which ultimately leads to the birth of the business. One the venture is set up it either does one of the following things, it might grow at a much higher rate than normal; it might survive and move to the fourth stage or get abandoned by the founders itself (Allen, 2011, p.12). But despite of the popularity of starting up of own business and new venture there are many pitfalls of a new venture. The top three reasons for the failure of new venture includes market entry, poor commercialization and corporate management. It has been suggested by the researchers that large scale of entry into a new industry puts an edge over the success of a new venture. A huge capital is required to support the large scale entry which makes it at a risk of major financial loss in case the business fails. But on the other side it has been suggested that a large investment eventually would result in the long run and would be profitable. A new venture with large scale on entrance can more easily realise the economies of scale, helps in brand building and also helps to gain access to the distribution channels which would ultimately gain awareness and popularity in the industry. On the other hand, a small scale enterprise may find it hard to stay ahead due to the high costs, lack of economies of scale and market presence which eventually limits them to build brands loyalty and gain access to distribution channel. It occurs especially when an enterprise tends to enter a more competitive industry. Commercialization is another issue that leads to the failure of the new venture. Most of the new venture fails because they do not tailor to the needs of the customers; they tend to ignore the needs and wants of the consumer in the market. The management becomes so focused on the technology that the main idea of creating the business is ignored which is to cater to the customers according to the needs and desires. Therefore a new venture mostly fails because it markets a product which is based on technology and the requirements of the customers are completely ignored. The next factor is poor implementation by the management of the new venture. Managing the new venture might create many difficult problems which need to be catered carefully by the management in order to success in the new venture. It leads to managerial as well as organisational problems (Hills & Jones, 2009, p.331). To success in the business it is very necessary to come up with something innovative which would attract the customers and keep the demand of the product alive in the market. Most of the business fail not because it did not have an effective management but because of the lack of innovative idea. Development of a successful business idea often requires recognition of the opportunity, feasibility, analysis of the industry and effective business model. If anything goes wrong with the steps the business tends to fail (Barringer, 2008, p.18). An effective idea usually leads to success but also ideas can lead to failures. Most of the ideas come from people who are experienced. Factors such as market factors, competitive advantage, economics, and managerial capabilities are some of the criteria to make sure whether the investment made is a good idea or not (Longenecker, 2008, p.29). The opportunity that comes on the way of the manger or the entrepreneur must be utilised properly. The Entrepreneurs should have a crystal clear idea about they want from the new venture (Harper, 2006, p.127). Innovation is another important factor in the process of starting a new venture. New ideas led to innovation and sometimes innovation perform well in the market and sometimes it result in failures. Let us take the example of Mr Abercomby who was an entrepreneur and dealt with folk music instruments in UK, USA and Canada. Mr. Abercomby made semi toned products. It was his interest in becoming luthier, musical instrument makers and he transferred his knowledge and skills from engineering components for a car and aerospace to musical instruments. It was his innovation that led him to start of a new venture. Following is another example of Arran Aromatics Ltd which also depicts feature of new venture. The Arran Aromatics Ltd was started by Russell which was based on the island of Arran and which made gifts soap and also toiletries. The company started with just a small amount of capital and the profit made in the first years of its business was 200,000 Pounds. After six years of hard word, the company annual profits has come up to about 2million Pounds and was receiving regular orders from companies such as Habitant and Heals. The Managing Director, Russell book of orders tend to grow day by day and it was recognised as a lifestyle business where the quality of life was paramount. The reason for such a lifestyle business was that even Russell had to face tough days before reaching the place where he is today. He gave up the work of police to become an entrepreneur. According to the Managing Director, the first few years of his business were pretty bleak; he mortgaged his house in order to start off the business. But fortunately the business took the desired shape and the turnover in the first year was 28000 Pounds and the company also declared profits of about 1300 Pounds. This interprets the desire to become an entrepreneur for Russell. Although he faced many challenges but he knew what was needed to open up the business and core ingredients that would make the business a success. The case of Russell however proves that a person born with certain abilities or traits of entrepreneur usually lead to entrepreneurship. Russell came from a police background and no formal training was taken by him to start up a business. Therefore it is proved that entrepreneurs are born and not made. Therefore it can be said that the pre start up process is much more hectic and risk taking as compared to managing the post start up of a venture. When a business is set the mangers know exactly what to do and what would lead to the success of the business. At the initial stage the business is always at a risk of failure but once the business has crossed the initial stage it can make changes and invent new products as with time the business gets to know well the customers and their demands. So the chances of risk are quite less. But it cannot be ruled out the fact that many of the successful business do fails in spite of serving for many years. This is due to the lack of innovation which is an important ingredient in today’s world for any business to success. The customer’s keeps on wanting something new and this want often leads to failure of business or the products. Thus it is important for entrepreneurs to cater to the needs of the customers and keep innovating and developing a demand in the market for the product. Reference Allen, K. R. (2011). Launching New Ventures: An Entrepreneurial Approach. Cengage Learning. Barringer, B. R. (2008). Entrepreneurship: Successfully Launching New Ventures. Pearson Education India. Bridge, S. O’Neill, K. & Cromie, S. (2003). Understanding enterprise, entrepreneurship, and small business. Palgrave Macmillan. Gurusamy, S. (2009). Fin Services & Systems, 2E. Tata McGraw-Hill Education. Harper, S. C. (2006). Extraordinary Entrepreneurship: The Professionals Guide to Starting an Exceptional Enterprise. John Wiley and Sons. Hills, C. & Jones, G. (2009). Strategic Management Theory: An Integrated Approach. Cengage Learning. Hisrich, R. D. (2003). Entrepreneurship. Tata McGraw-Hill Education. Kuratko, D. F. & Hodgetts, R. M. (2008). Entrepreneurship: Theory, Process, and Practice. Cengage Learning. Longenecker, J. G. (2008). Small Business Management: Launching and Managing New Ventures. Cengage Learning. Mohanty, S. K. (2005). Fundamentals of Entrepreneurship. PHI Learning Pvt. Ltd. Bibliography Bessant, J. & Tidd, J. (2011). Innovation and Entrepreneurship. John Wiley and Sons. Bradberry, J. & Slim, P. (2011). 6 Secrets to Start-up Success. AMACOM Div American Mgmt Assn. Bygrave, W. D. & Zacharakis, A. (2010). Entrepreneurship. John Wiley and Sons. Timmons, J. A. (2009). New Venture Creation 7E. Tata McGraw-Hill Education. Read More