Charles Dunstone and His CarPhone Warehouse - Case Study Example

MG2070: ENTERPRISE CULTURE & ENTREPRENEURSHIP A case study on Charles Dunstone Registration Number: Word Count: 2757 words Entrepreneurship is important for any country as it has significant economic and social contributions. For instance, the creation of new enterprise is associated with job creation and the creation of other smaller businesses to supply the business. Despite the benefits of entrepreneurship, many new ventures still fail and this led to research on the factors that make some entrepreneurial ventures successful. This case study on Charles Dunstone and his venture, the CarPhone Warehouse has provided some insight into the origins of his entrepreneurship motivations. The research has demonstrated that Charles Dunstone was in possession of certain characteristics that put him in a favourable environment, and that enabled him to take advantage of certain opportunities. The enterprise culture in the UK has also not played a major part in Charles Dunstone’s success, as he relied more on himself and close associates to make his business a success. Introduction Entrepreneurship is the creation of new enterprise (Low and MacMillan 1988) and it is also often focussed on profit making. Examples of famous entrepreneurial ventures include Gerber baby foods, Barbie dolls and Heinz ketchup. Entrepreneurship is important for any country as it has significant economic and social contributions (Bartol and Martin 1998). For instance, the creation of new enterprise is associated with job creation and the creation of other smaller businesses to supply the business. The economic impact of small business job growth is likely to be greatest during times of economic slowdown, when larger companies are cutting back (Case 1989). During such reductions many individuals whose jobs are eliminated find employment with small businesses. According to one estimate, as many as 20% of managers who have lost their jobs as a result of downsizing in recent years have become entrepreneurs (Zimmerer and Scarborough 1996). New jobs and new business increase a government’s tax base and improve the general standard of living. Notable examples of changes in the standard of living include the motor car following Henry Ford’s invention of the automobile. Despite the benefits of entrepreneurship, many new ventures still fail and this has led to research on the factors that make some entrepreneurial ventures successful, as it is also reported that as many as 50 -70% of new businesses fail or merge with other larger organisations within their first five years (GPO 1990). In the United Kingdom, there are examples of successful entrepreneurs which include but are not limited to Sir Richard Branson with his Virgin empire, Sir Alan Sugar with Amstrad and Anita Roddick with The Body Shop. These individuals all started with little idea and they maximised the opportunities available to create internationally successful organisations. This case study will focus on Charles Dunstone of The Carphone Warehouse and look at the motivations and reasons behind his venture, the activities involved and an analysis with enterprise culture. Charles Dunstone has been selected for this case study because he managed to set up a business venture in a relatively short period of time, with significant success. He has also gone on to diversify his business and managed to create a stir in the broadband internet market with a huge risk of offering free broadband. At the age of 25, Charles Dunstone was turning over £1.5 million in his first of year of operation, and his employee numbers were growing (The CarPhone Warehouse 2006). The CarPhone Warehouse is now considered Europe’s largest independent retailer of mobile communications, with over 450 stores in the UK and over 1000 in Europe and between them he now employs over 4000 employees (The CarPhone Warehouse 2006). Origins of Charles Dunstone’s entrepreneurship There are a number of factors that influence entrepreneurial activity, which include personal characteristics, life-path circumstances, favourable environmental conditions and perceptions of desirability and feasibility (Bartol and Martin 1998). Personal characteristics include a high need for achievement where constant and immediate feedback on results is required by the entrepreneur (Low and MacMillan 1988, Bartol and Martin 1998). This high need for achievement is often coupled with other personal traits such as the presence of an internal locus of control which gives entrepreneurs the desire to control their fate using their own efforts (Low and MacMillan 1988, Bartol and Martin 1998). Another personal characteristic is one where the entrepreneur has a high tolerance level for ambiguity which enables them to continue to function even when the situation is uncertain (Low and MacMillan 1988, Bartol and Martin 1998). Sometimes these personality characteristics are complimented by background characteristics where the entrepreneur’s family environment has a strong entrepreneurial background, and high levels of education attainment (Low and MacMillan 1988, Bartol and Martin 1998). Life path circumstances are those that increase the probability of entrepreneurship such as an unsatisfactory work environment, a negative disruptions such as death or redundancy, career transition and positive pull influencers such as mentors (Low and MacMillan 1988, Bartol and Martin 1998). Entrepreneurs also benefit from moral support networks from family members and friends who often provide encouragement, understanding and sometimes assistance in the form of finance and/or home and family matters to enable the entrepreneur to devote more time to the business. They also benefit from professional support networks where they form relationships with experts who can provide advice and counselling support that can help entrepreneurs function effectively, and these professional networks can be developed through linkages with business associates or professional associations (Low and MacMillan 1988, Bartol and Martin 1998). These conditions influence the potential entrepreneur’s perception of feasibility of the business due to the presence of their background, successful role models, financial support and advice from those who are knowledgeable. Charles Dunstone started off like many school leavers, with intentions of proceeding to university to obtain a degree. However, during his year off a job as a salesman with NEC (Fluendy 2006) which manufactures computers and mobile phones changed his destiny. Charles Dunstone became entrepreneurial when he realised that the mobile telecommunications industry was not catering for the needs of small and medium sized businesses or individuals (Fluendy 2006). This is origin is consistent with that of favourable environmental conditions, which in this case study is the accessibility of new markets and customers. As the current market in terms of mobile phone providers concentrated on corporate clients, Charles Dunstone realised that small and medium sized businesses, as well as private individuals were forced to rely on sub-standard service and advice regarding mobile phones (Fluendy 2006). Most of these mobile phone vendors, in Charles Dunstone’s opinion were not providing impartial advice and this was the gap in the market. His venture was also aided by the fact that NEC indirectly served as an incubator organisation which provided the knowledge and experience required that would enable Charles Dunstone to start his new venture. However, there were other factors that prompted his entrepreneurial activity such as background characteristics, as he came from a family with a successful business background. His father managed the Danish side of BP and his grandfather was well known for being a whiz kid (Fluendy 2006, The CarPhone Warehouse 2006). Research has shown that entrepreneurs tend to come from families with a strong business ownership background as this provides a role model for the individual. Entrepreneurs also tend to be better educated and are likely to be aged between 25 and 34 when they attempt to set up their first venture (Low and MacMillan 1988, Bartol and Martin 1998). Charles Dunstone recorded record profits when he was 25 and he had a privileged upbringing in Cambridge and attended the prestigious Uppingham School (The CarPhone Warehouse 2006). Even Charles Dunstone himself recognised the value of attending a public school, which he praises for making him independent and tenacious. Nature of Charles Dunstone’s entrepreneurship The CarPhone Warehouse Group is the UK’s largest retailer of mobile phones and has recently diversified into the fixed-line and broadband market. Their fixed-line service, TalkTalk, has signed up over 1.8 million phone customers and 2006’s broadband offer resulted in just over half a million customers signing up in just under six months (Fluendy 2006, The CarPhone Warehouse 2006). Charles Dunstone has built this business on the principles of great customer service and the ability to deliver simple and impartial advice for mobile phone purchasing (Fluendy 2006, The CarPhone Warehouse 2006). The adherence to these principles has obviously benefited The CarPhone Warehouse as they managed to expand into nine countries in Europe. Charles Dunstone has also persisted with his opportunistic streak in November 2002 when he acquired Opal Telecom which is a corporate fixed line, voice telecommunications network provider (Fluendy 2006, The CarPhone Warehouse 2006). This acquisition was in anticipation of the launch of The CarPhone Warehouse’s landline service, TalkTalk in 2003. Charles Dunstone took more risks and pushed boundaries further by offering free phone calls between TalkTalk subscribers. Entrepreneurs are said to use innovation as a tool to take advantage of an opportunity and this involves three main factors: risks, evaluation ad profit potential (Bartol and Martin 1998). Charles Dunstone took a risk of the venture failing when he started however, this risk was minimised by the fact that his venture was a new innovation in the market. This was aided by an evaluation during his time as a salesman at NEC. This work experience allowed him to assess the market from a vantage position. The kind of entrepreneurship demonstrated by Charles Dunstone is one which is characteristic of entrepreneurs finding themselves in situations that tend to maximise the potential impact of various heuristics (Baron 1998). This means that entrepreneurs often find themselves having to make decision with little or no historical trends, or previous levels of performance or specific market information. Charles Dunstone exhibited these perspectives when he started his business. He had very little specific market information when he decided to start his venture, and this was demonstrated again when he launched the broadband internet service. This way of thinking enables entrepreneurs to make decisions that exploit brief windows of opportunities, which may not be entirely obvious to others. Once again, Charles Dunstone exhibited these qualities when he launched the broadband service and managed to sign up more customers than BT had over several years. The CarPhone Warehouse managed to dominate the market at a time when other larger corporations such as Dixons could have capitalised on. When CarPhone Warehouse was founded, Charles Dunstone was a novice entrepreneur; however he did not fit the typical characteristics of this group. Studies by Reynolds (1997) demonstrated that entrepreneurs were heterogeneous when it came to the age and previous employment status. However, this group was more likely to gather information before making sure that their idea was tangible which not the case with Charles Dunstone was. He has also buckled the trend presented by Alsos and Kolvereid (1998) which found that entrepreneurs who were portfolio founders had a higher probability of venture implementation than novice founders. Charles Dunstone did not have a portfolio to go by, and this may have worked to his advantage, as there was no benchmark to measure his success, and any risk he took was less likely to affect non-existent investments. Research by Robbie and Wright (1996) divided entrepreneurs into two types: craftsmen or opportunists. Whilst this is too narrow a view, it still does point to the direction of opportunist for Charles Dunstone. Even the nature of his business is opportunist. Charles Dunstone has surrounded himself with individuals with diversified skills and competence, which is characteristic of entrepreneurs. Studies by Low and MacMillan (1988) have pointed towards networking as means of increasing knowledge of opportunities which are important for dealing with business obstacles. Businesses owned by teams of partners are said to have a wider social and business network. Studies by Venkataraman (1997) have focussed on why entrepreneurs such as Charles Dunstone seem to exploit opportunities, and three main areas were highlighted which were knowledge and information differences, cognitive difference and behavioural differences. Venkataraman (1997) also argues that this ability to make the connection between specific knowledge, such as the lack of mobile phone retailers for small and medium businesses and individuals; and a commercial opportunity such as an independent retailer to serve this market; requires skills, aptitudes, insights and circumstances that are not widely distributed. This process of identifying opportunities is said to be influenced by cognitive behaviour, which is not enhanced by experience. Entrepreneurship and the enterprise culture The enterprise culture in the UK still lags behind that of the US, with 13% of adults in England being self-employed or owning a business in 2003 (HM Treasury 2004). The level of entrepreneurial activity also varies by age, gender, ethnicity and levels of education, with male entrepreneurship being two and a half times of female entrepreneurship. However attitudes towards entrepreneurs in this country tend to be negative (HM Treasury 2004). For instance, entrepreneurs in the North East are accorded more status than those in the South East; and a significant proportion of the UK population believes that those successful in business have low morals or ethics (HM Treasury 2004). This belief can be attributed to the fact that most of the time, the entrepreneurs other activities are not fully reported or recognised. For instance, Charles Dunstone supports a charity called Red which channels cash to African Aids charities and he is also involved in finding solutions towards reducing climate change, however, these other activities are rarely reported in the media (The CarPhone Warehouse 2006). Most individuals are also influenced to become entrepreneurs through the presence of realistic role models and media images that portray a holistic view of what it means to be entrepreneurial (HM Treasury 2004). However, when Charles Dunstone started his venture, the number of role models and the level of media images were low. Charles Dunstone’s venture was primarily the result of spotting an opportunity in the market, otherwise had this opportunity not existed; Charles Dunstone would probably have continued his intended career path of attending and graduating from the University of Liverpool. This demonstrates a lack of entrepreneurial resources and information, as other European countries give lessons to primary and secondary pupils on entrepreneurship (European Commission 2004). For instance on the European continent, entrepreneurship is taught in primary and secondary schools, teachers are trained on the subject of entrepreneurship, there are entrepreneurship chairs and activities at university level and cooperation between schools, universities and business are encouraged and promoted (European Commission 2004). This does happen in the UK, but on a smaller scale. The need for a positive enterprise culture is even more important as the operating environment has changed significantly in that individuals are more likely to change jobs more often and individuals no longer need to be based in one geographical area. When individuals change jobs they are more likely to identify entrepreneurial opportunities, however the ability to carry them through is related to their personal characteristics and other factors mentioned previously. For instance, the main obstacle is obtaining finance to carry this idea through, which is some consider as not readily available. Even if it is, the ability to calculate risks is one which some are not comfortable with taking. When Charles Dunstone started the CarPhone Warehouse, his main drive was turning his idea into practice so that the rest of the population could enjoy the benefits of mobile phone ownership. This is almost akin to social entrepreneurship, and it seems that profitability was a secondary objective in Charles Dunstone’s case. As Charles Dunstone has come from a privileged background, he was able to utilise some these resources, and was able to use his partner’s expertise in other areas. His business associates are also skilled in other areas and this ensures that all aspects of the business are taken care of. This is characteristic of an opportunistic entrepreneur, as some opportunities could be lost if all his effort was diverted into sourcing additional information. Charles Dunstone has not had any negative relationships with governmental and public agencies as his business has been mainly directed towards meeting the needs of the private individual. If anything, enhanced communication will further benefit small and medium sized business. Conclusion Charles Dunstone is certainly one of the UK’s most remarkable entrepreneurs, in that he was able to identify a gap in the market and turn this into one the greatest entrepreneurial ventures. This was largely driven by his desire to cater for those who were being ignored and left out of the mobile phone race, and the need to make sure all individuals had equal access to simple and impartial advice. Charles Dunstone was also not driven by the need to make profit, as he was troubled by the fact that businesses only wanted to cater for corporations. Charles Dunstone also possessed traits that would be favourable for a success in a new venture, as he attended a public school, his parents and grandparents had a successful record of managing business and the environmental conditions were favourable for his business venture. Had the environmental conditions not been favourable, Charles Dunstone would probably not have experienced the level of success he has. However, in Charles Dunstone’s case, a career move within the same organisation provided him with the favourable environment? Had he not moved from computers to mobile phones, it probably would have been unlikely that CarPhone Warehouse would have been established. This opportunistic streak sets the strategy for the CarPhone Warehouse, as Charles Dunstone introduces fixed line services and broadband internet packages which rival his competitors. However, despite this success the attitude towards entrepreneurship in the UK is relatively negative. Most individuals believe entrepreneurs have no moral or social ethics, which is incorrect because most entrepreneurs, including Charles Dunstone are actively involved in charitable causes. The media is largely responsible for this view of the enterprise culture, and this could stop would-be entrepreneurs from forming ventures. So whilst entrepreneurship in theory is largely attainable for most individuals, there is no doubt that successful ventures are largely dependent on the ability to identify opportunities, and the ability to follow these through is then dependent on certain characteristics such as background, personality and environmental conditions. Fortunately for Charles Dunstone, he had a presence of all these characteristics and he has been able to follow this through with additional innovations. References Alsos, G. A., and Kolvereid, L. (1998). The Gestation Process of Novice, Serial and Parallel Business Founders. Entrepreneurship Theory and Practice, 22, 101-114 Bartol, KM and Martin, DC (1998) “Management” 3rd Edition, Irwin McGraw-Hill, New York Baron, R. A. (1998). Cognitive Mechanisms in Entrepreneurship: Why and When Entrepreneurs Think Differently Than Other People. Journal of Business Venturing, 13, 275-294. Case, J (1989) “The Disciples of David Birch” INC, January 1989, pp. 39-45 European Commission (2004) “Helping to create an entrepreneurial culture: a guide on good practices in promoting entrepreneurial attitudes and skills through education” Office for Official Publications of the European Communities. European Commission - Luxembourg Fluendy, S (2006) “The Sunday Interview: Charles Dunstone (the TalkTalk man)” Companies and Markets, Mail on Sunday; 5 November 2006. HM Treasury (2004) “Creating an Enterprise Culture: Discussion paper” Advancing Enterprise: Britain in a Global Economy. Confederation of British Industry. GPO (1990) “The State of Small Business – 1990: A Report to the President” Washington DC Low, MB and MacMillan, IC (1988) “Entrepreneurship: Past Research and Future Challenges” Journal of Management, Vol 14, pp. 139-161 Reynolds, P. D. (1997). Who Starts New Firms? - Preliminary Explorations of Firms-in-Gestation. Small Business Economics, 9, 449-462. Robbie, K., and Wright, M. (1996). Management Buy-Ins: Active Investors and Corporate Restructuring. Manchester: Manchester University Press. The CarPhone Warehouse (2006) “Charles Dunstone, Chief Executive” The Carphone Warehouse Group PLC Venkataraman, S. (1997). The Distinctive Domain of Entrepreneurship Research. In J. A. Katz (Ed.), Advances in Entrepreneurship, Firm Emergence and Growth. Connecticut: JAI Press, 3, 139–202. Zimmerer, TW and Scarborough, NM (1996) “Entrepreneurship and New Venture Formation” Prentice-Hall, Upper Saddle River, New Jersey. Read More