Henry Ford and Entrepreneurship - Term Paper Example

Henry Ford and Entrepreneurship at a Glance Introduction Since the inception of time, the word entrepreneurship has become a word triggering a lot of debate from the public. This word has been used without a clearly cut out definition. However, people use it in different contexts hence the variations in its definition. The purpose of this paper is to evaluate and justify the key entrepreneurial theories available with regard to Henry Ford as an entrepreneur. It also focuses on the forces which moulded him to be a mogul giving him an edge in the motor car industry. The paper further articulates theorists over periods tackling different issues. It highlights Ford’s life with regard to the available entrepreneurial processes and theories which best encapsulate his entrepreneurial expertise. In this regard, it is undoubted that he had his shortcomings which if he could have capitalised on then he could have performed way better than he did. The paper therefore identifies this giving recommendations and justifications as to why the recommendations ought to be adopted. Henry Ford Early Life The world’s most famous automobile character saw the light of the day on July 30, 1863, on his family’s ancestral farm in Wayne County, Dearborn Michigan. Ford’s ability of innovation was realised when he was 13. His father gifted him with a watch which he disassembled later assembling it to the astonishment of many. Word spread around his neighbourhood like born-fire and this meant that requests to fix their timepieces came knocking. With a burning desire of innovation accentuated with a loath for farm work, Ford left home at 16 for Detroit where he took a machinist apprenticeship job where he skilfully leaned how to service and operate steam engines. Career In 1891, Ford was hired by the Edison Illuminating Company as an engineer from where he polished his skills later becoming a chief engineer in 1893. 1896 saw the birth of the Ford Quadricycle, a horseless carriage he had in mind. In 1898, he made his second car and it was more technologically advanced than the first one. At this point, he managed to share his initially blurred vision with the masses bringing them on board. This was despite the failures he encountered as it was a big risk trying to convince the business moguls of that time to pump capital into a business that had fallen not once but twice. However, the success of the racing cars baited more financial bankers who now wanted to be party to Ford’s success. The eve of June 16, 1903 marked a breakthrough for Ford with the incorporation of Ford Motor Company. This therefore marked and footnoted him as a force to reckon with. Over the years, scholars have come up with different entrepreneurship theories that entrepreneurs can be categorised. As much as the words entrepreneur and entrepreneurship are used interchangeably, what are there meanings? Van Praag (1999), Essai sur du commerce en general (fisrt published in 1755: Cantillon, 1959) admits to Richard Cantillon being the first economic scholar to bring to light an entrepreneur as a pivotal in economics. Say (2001) describes an entrepreneur as the main agent of production in any economy. He further illustrates an entrepreneur as an input in the process of production hence a manager of the firm. Marshall (1964) depicts an entrepreneur as one that endlessly seeks opportunities that would cut down on costs. Joseph Schumpter and Israel Kirzner are 20th century economist with a vast interest and knowledge on entrepreneurship. Schumpter lays stress on the sole role of an entrepreneur as one who innovates and implements the much desired change in any economy by pumping in fresh and new ideas that would have a paradigm shift in the cost of production. He termed it as “creative destruction” as the introduction of new and better products which would phase out the obsolete ones. Kirzner instead was of a different school of thought as he differs from Schumpeter’s “creative destruction” to seeing “opportunities”. According to Kirzner, an entrepreneur is that who notices any profit opportunity lying untapped. From the above definitions, an entrepreneur therefore is he who takes the risks of an enterprise by managing and organizing the business. On the other hand, entrepreneurship is the process by which an entrepreneur combines different resources hence making new discoveries. Entrepreneurial theories and frameworks There are several theories in place that explain the whole concept of entrepreneurs plunging themselves into markets/ opportunities unseen to others. 1. Economic Entrepreneurship Theory This theory traces its roots back to classical, neoclassical theories and the Australian market process (AMP). i. Classical Theory Ricardo Smith (1776) says this is characterised by free trade, a firm specializing hence competing for a slot in the market. This theory came as a result of Britain’s (1700-1830) industrial revolution. However, Murphy, Liao & Welsch (2006) state that this theory had its shortcoming as it could not explain the generation of dynamic upheaval by entrepreneurs in the ages of industrialisation. ii. Neo-classical Theory This was as a result of the shortcomings of the classical theory and showed that the phenomena of economics can be relegated to points where the exchange is pure, reflecting a standard ratio hence resulting to a system of economy that is closed. In this economic system, factors like those participating in the exchange, the number of occurrences of exchange as well as other market factors were not an exception. However, this theory did not fall short of criticism from its shortcomings. Amongst other shortcomings, its major shortcoming was the advocating of perfect competition forgetting that it inhibits innovation and entrepreneurship. iii. Australian Market Process (AMP) In an attempt to shed light on the unanswered questions of the above-two theories, AMPlaid stress on how human activities affect the economy. Schumpeter (1934) describes entrepreneurship as that force that propels the market systems. This would encourage innovation so as to get an edge over all the other market competitors. 2. Psychological Entrepreneurship Theories Landstrom (1998) explains this as the individual’s psychology in terms of his/ her personal characteristics. There are fivefactors that determine the locus of achievement and entrepreneurship and they are namely: i. The ability to take risks ii. Innovativeness iii. Tolerance for ambiguity iv. Need for achievement v. Good personal traits 3. Sociological Entrepreneurship Theory Landstrom (1998) says that this is the third most important aspect and dwells on the society’s role of analysing. Reynolds (1991) further illustrates the need to invest in building strong and lasting social relationships. He clarifies that success is as a result of the undeterred faith you have in people. He termed the second as the people you draw inspiration from and studying other successful entrepreneurs who walked the road before. He further illustrates the effects of one’s social background as well as ethnicity. A person from marginalizes communities can draw inspiration and strive for success despite one’s background. 4. Anthropological Entrepreneurship Theory Anthropology is the study of culture. This theory states that for one to start-up a venture successfully, he/ she has to first study the culture of the community; their origin, traditions, beliefs and development. Baskerville (2003) illustrates that one’s ethnicity has adverse effects on his/ her attitude and behaviour hence the differences in attitude as well as difference in behaviour (North, 1990; Shane 1994). 5. Opportunity-based Entrepreneurship Theory This depicts that it is not the entrepreneurs that cause change instead they take advantage of the opportunities that arise. Stevenson (1990) notes that entrepreneurs see beyond the problems arising from change, instead they use the problems as stepping stones so as to get to the available opportunities. 6. Resource-based Entrepreneurship Theories Alvarez & Busenitz (2001) tells the importance of an entrepreneur’s ability to get access to the necessary resources as it is core in projecting his future success. Aldrich (1999) lays emphasis on the value of human, social and financial resources. The above-mentionedtheories leave a lot to be pondered on. Which of the above theories really helped Henry Ford? The first, Economic entrepreneurship theory played a big role in shaping Ford, with much stressed laid on neo-classical theories. Psychological entrepreneurship theory was one of the propelling factors to his marvellous achievement. Just by Ford leaving his family’s farm at the tender age of sixteen for an unknown venture clearly shows how much of a risk-taker he was. How many kids 13 year old kids nowadays spare their time for innovation leave alone tolerance to ambiguous things? Henry had a desire to make the best out of him from a tender age hence slowly rising through the ranks to a chief engineer. In his later life, he opted to reward his employees who were disciplined in their work and not plunging themselves into excessive consumption of alcohol and gambling. This depicted the good personal traits he had and his desire impact this on others. Not to mention, Ford’s sociological background had an aspect on his success. He drew inspiration from the fact that he was not born in a wealthy family. In 1896, Ford was privileged to sit in an executive meeting of Edison Illuminating Company and happened to meet Thomas Edison who encouraged him to make better models than the ones he initially had. Scholars have come up with an array of theories on entrepreneurship. But which would apply for Henry Ford? Between the Discovery and Creative theories, which would best befit this great man? Discovery Theory Kirzner (1973), Shane & Venkataraman (2000) and Shane (2003) say that opportunities are objective; the entrepreneurs have the ability to take risks and are very unique. These are the assumptions made in this theory. Creative Theory Venkataraman (2003); Shumpeter (1934); Loasby (2002); Casson (1982); Langlois & Cosgel (1993) lay emphasis on the entrepreneur and his venture with three major assumptions i. Available opportunities are very subjective ii. The individuals are ordinary iii. The entrepreneurs bear the burden of uncertainty Therefore, the Discovery Theory would best fit Henry Ford. Nevertheless, there still were contextual issues that played a role in his quest for greatness. Because Henry Ford was innovative enough to come with a new idea not in the market, he created his own supply and demand in the market leading to hi making a fortune. Conclusion Despite of the achievements made by Henry Ford in the motor industry, there still was room for improvement that was later capitalised on by other car companies that later emerged. One of mistakes that Henry Ford made was running his company all by himself and any attempt of merger was received with hostility and intimidation. This was evident when United Auto Workers Union pushed for its merger with Ford Motor Company and Henry said he didn’t want any “interference” of how he runs his company. This was contrary to what we see today as the founders of big companies we know of today only have few shares and royalties. Lack of innovation in the company meant that sales became less hence the profit margin became smaller leading to laying-off of some workers. Ford had a dream of being a politician but this was short-lived as he lost the United States senate race in 1918. Moreover, the newspaper, The Dearborn Independent, owned by Ford stirred controversy as most of its articles were racist and anti-Jewish. This dragged his image to the mud as he was losing touch with the market. Therefore, when other companies sprout people most people stopped buying Ford’s Model T chain of cars. He also turned a deaf ear to plea from his son, Edsel and other Ford board executives to come up with a new brand as there was already stiff competition in the market from other companies e.g. Chevrolet, who produced more expensive cars but offering more comfort and style. In addition, Ford was against formation of workers union and successfully fought it in 1930. All this could have been avoided by Ford taking a neutral ground on politics and changing the content of the newspaper he owns. He as the founder of Ford Motors should have been more receptive to change hence giving the market a variety to choose from. Henry Ford later died on April 7, 1947 aged 83 at his Dearborn estate, Fair Lane. He succumbed to death after suffering from cerebral haemorrhage. Reference list: Alvaro, C. Doingo, R. & Salvador, R. (2007). Entrepreneurship: Concepts, Theory and Perspective. New York NY: Springer Berlin Heidelberg Chris, B. Stephen, C. (2010). Creative Strategy: Reconnecting Business and Innovation. United Kingdom UK: Antony Rowe Ltd. David, B. Isabel, G. & Roy, T. (2007). Handbook of Research on Entrepreneurship Policy. United Kingdom UK: Edward Elgar Publishing Limited. Henry, F. (2007). My life and Works. New York NY: Cosimo, Inc. Jens, I. Rasmus, J. & Nikolaj, M. (2008). Defining ad Measuring Entrepreneurship. United States of America USA: now Publishers Ic. Jesus, H. (2009). The Theory of Dynamic Efficiency. New York NY: Routledge. Kim, K. Suna, L. & Torben, B. (2012). Entrepreneurship in Theory and Practices: Paradoxes in Play. United Kingdom UK: Edward Elgar Publishing Limited. Robert, N. 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