Who Is a Successful Entrepreneur - Research Paper Example

Contents Contents 1 Introduction 1 The business planning process – a critical appraisal 1 Part B: Characteristics of an entrepreneur 6 Introduction 6 Characteristics of an entrepreneur 7 The Trait Approach 7 Attitude theory 8 Desirable characteristics of entrepreneurs 8 Psychological traits and individual characteristics of entrepreneurs 10 Conclusion: 12 References: 13 Part A: Critical appraisal of the business planning process Introduction A business plan is a written document which contains the goals and mission of the enterprise and discusses the possible strategies and operations to be taken to attain the final goal. The business plan is needed as it helps top executives working in the organization to think about the way the business should be run and accordingly develop objectives. Moreover, formulating a business plan helps the management to convey the objectives to the employees and accordingly operate to fulfill goals. The business planning process – a critical appraisal The typical business planning process may be actually helpful as it aims to convey objectives and missions of the organization to its employees. But, there are several researchers who argue that the entrepreneur should rely on his experience and intuitions rather than waste time on the business planning process. This is because researchers argue that planning may not be successful in the uncertain conditions surrounding the formation of business (Delmar & Shane 2003). Moreover, each component of the business planning process has its own setbacks. Let us analyze each component and find out in what way a business plan can pose as a hindrance. Generating an idea The basic step of a business planning process is to generate an idea. A new venture has to first ascertain the product or the service which it will provide. Most organizations come out with new ideas for a product or a service depending on the data collected from potential and current customers. This kind of customer focused process is solely dependent on the information given by customers. However the response given by these people has limitation with reference to the environment and current experience. Hence there may be a discrepancy in the idea generated (Lilien et al. 2002). This may pose as a severe hindrance for the business plan. Moreover, there are other constraints like generation of funds for the new venture. Many business plans may never be formulated due to limitations in the form of competition, technology, lack of funds etc. Strategic goals and objectives The second step in a business plan is to formulate the strategies or tactics which are to be used in order to attain goals and objectives. Strategies may be short term and long term. These are plans which must be followed in order to attain final objectives. However, the very purpose of strategic planning is defeated in today’s changing environment. Due to the uncertainties in market conditions, entrepreneurs may be more successful if they go by their intuitions and experience, rather than going by previously formulated strategic objectives (Mintzberg 1994). Another problem which is ensued in setting objectives is that most plans are formulated outside the business planning process. Also entrepreneurs need to set realistic and achievable goals. It may be very easy to set strategic objectives but very difficult to implement these objectives to the middle and lower management. Most entrepreneurs do not give attention to the fact that the pre determined goals they are setting may be rigid, extremely rational, bureaucratic and dysfunctional at times. Hence, the formulation of potential strategic objectives may not hold true during the implementation process (Shrader, Taylor & Dalton 1984). This is one reason why the strategic objectives should be flexible and top executives need to change it depending on the changing market situations. Market research and analysis The third step in a business plan is to formulate a market plan which takes into account the market promotion and advertisement activities that has to be undertaken in order to promote a certain product or service. However, most firms face major problems due to the paucity of data with relation to a particular product or service. Such information and data is relevant to the formulation of such plans. Many firms are not able to carry out extensive quantitative and qualitative market analysis thereby not being able to obtain rational results. Moreover the market performance needs to be constantly monitored. Also firms need to find out the amount of marketing promotion activities to be conducted in each area (King, 1965). Most businesses nowadays want to internationalize their products and services. The main constraint faced in this regard is that they may not be able to effectively determine the international location and usage of the global product or service. Moreover the global consumer has access to diverse market promotion activities and hence the market analysis conducted needs to take into account the lifestyle, average age of the population in that country, income levels and culture of the people in the particular global location. Marketing plans formulated must be in accordance with the above three demographic factors in order to be successful (Yakhou & Dorweiler 2006). Competition The business plan formulated must conduct a thorough research of the competitors. In fact, a SWOT analysis must be conducted which can actually gauge the position of the firm and accordingly work out competitive strategies to remain in market. The global environment has become extremely competitive and hence the numbers of rival firms, both direct and indirect, have increased. Most organizations do not make an exhaustive research of the competitors and hence the information collected may contain a lot of factual errors. There may be a considerably lack of expertise on the part of the business analyst to collect relevant data of the competitor’s strategies. This can severely hinder the formulation of competitive strategies. Professionalism conflict and ego problems may also come in the way to properly formulate a competitive strategy (Harris 2001). Cash flow A business plan must take into account the financial constraints and the most important is to determine the amount of cash which will flow in and out of the business. The top management needs to determine the amount of cash to be borrowed over a certain period of time. Most organizations do not include the effect of the overall amount of cash required for the next year. This is a major flaw in planning the cash flow in business. If there is a lot of fluctuation in the cash flow predicted and the actual amount required, then it can lead to severe problems and the plan may never get implemented. Despite forecasting the cash flow in advance, there may be several external factors like war, recession, etc., which may adversely impact the financial plan. Profit and loss forecast The profit and loss forecast is an integral part of the financial business plan. In fact, the financial manager needs to make an analysis of the costs and the possible returns in order to forecast the profit and loss. The finance manager must determine whether the organization will have enough cash to attain its missions and make future plans. It he finds out that the company will not have adequate cash; he must formulate a plan in order to acquire additional cash (Frankston 1981). This is based on pure speculation and depends on the market conditions over a period of time. Again there are both internal and external forces which may hinder these financial forecasts. Hence, the finance manager must take into account the risk elements and make flexible strategies. Balance sheet projections The balance sheet of an organization weighs the net worth of the firm by determining a list of assets and liabilities of the firm. It is very necessary that the balance sheet projects a positive growth of the firm. The finance manager has to make certain assumptions and projections about the future operations which may affect the firm’s balance sheet. All these financial forecasts are made on a certain amount of assumptions and speculations and hence the risk element is considerably high. In case of any wrong forecasts, the company may have a negative balance of payments which translates to negative growth of the organization. Competitive strategy and scenario analysis Most firms make a thorough analysis of the competitors by focusing on the explanation of the current strategies of the competitors to the avoidance of the possible future alternative strategies. An analysis of a competitor’s scenario helps a firm to understand the competitor’s potential capabilities, actions and strategies. However, most business planners may end up committing mistakes like construction, organizational and assessment errors while formulating a scenario analysis and competitive planning strategy. Hence the scenario analysis may be haphazardly developing having a narrow focus and poor articulation. Organizations which do not take into consideration the organizational processes in scenario analysis may often spend considerable energy, resources and enthusiasm and realize that the competitive strategy and scenario analysis is not of much use in the decision making process (Fahey 1999). The business plan formulated must be able to clearly convey the firm’s final goals and objectives and the way in which to proceed in order to attain these missions. If firms are ambiguous in conveying this vital information, then the entire plan has to be reformulated. Part B: Characteristics of an entrepreneur Introduction An entrepreneur is a person who is not only an economic opportunist but also an imitator, creator of opportunities within certain constraints and a role model (Evans 2011). Joseph Schumpeter is a renowned Australian economist who defines entrepreneur as an individual who focuses on innovation. By innovation, Schumpeter implies the development of new products, methods to develop new products, formation of new organizational processes and developing new markets. According to the Webster’s New World Dictionary, an entrepreneur is an individual who manages and organizes a business and undertakes risks in order to garner profits. Characteristics of an entrepreneur The main differences between an entrepreneur and a non – entrepreneur is that an entrepreneur creates organizations whereas a non – entrepreneur does not have the traits or skills to create an organization. There are mainly two approaches to this. The behavioral approach takes into account the set of actions which an entrepreneur does in order to create an organization. The other approach is the trait approach. Here one closely looks at the personality characteristics and traits an entrepreneur should have in order to successfully run an organization (Gartner, 1989). We will discuss the trait approach in details since this solely looks into the characteristics of a desirable species of human beings who can be entrepreneurs. The Trait Approach The trait approach taken into consideration the motivational traits and personality tendencies that entrepreneurs display and possess. It started by identifying and exploring the need for achievement, and other needs like affiliation and power in an individual. Other researchers started to explore the personality attributes of an entrepreneur by exploring areas like control locus, style of problem solving, motive for achievement, taking risks, values and innovation. However the trait approach has been criticized on the grounds that personality has an influence on marriage, education, and career. In fact, the personality of an individual is governed by the overall experience he gets from life (Carland, Hoy & Carland 1988). Attitude theory The predisposition to retort to a generally unfavorable or favorable manner with reference to the attitude object is known as attitude. There are mainly four subscales of attitudes. These are as follows: a) Business achievement – this refers to the positive results which are associated with the start and growth of a business organization. b) Innovation – this can be termed as acting and perceiving business tasks in a unique and new way. c) Perceived control of the outcomes of business – this refers to the perception and influence and control of the entrepreneur over his or her business. d) Perceived self confidence in business – this refers to the individual’s competency and self esteem in managing day to day business affairs (Robinson et al. 1991). Desirable characteristics of entrepreneurs We have considered two theories relating to the characteristics of entrepreneur. Let us now, discuss in detail the desirable characteristics an entrepreneur should possess. One can identify, eleven common features, which includes realism, higher conceptual ability, good health, self confidence, readiness to take challenges, need to direct or control adequate emotional stability, self control, control and balance, enterprise and initiative. One can deem a person to be enterprising if he or she has an attitude to be self reliant and is confident to take risks. However some main characteristics which all entrepreneurs must have are the creative ability, willingness to take risks and flexibility. Most successful entrepreneurs take certain steps like adaptability, hard work, flexibility, determination and financial analytical capacity. Some other characteristics identified in an entrepreneur are the ability to learn from mistakes, commitment and failures, ability to set realistic and attainable objectives and high level of energy (Montagno, Kukratko & Scarcella 1986). Most psychologists maintain that the nature of an individual is an important determinant as to whether he can become an entrepreneur or not. Recent research conducted maintains that the ability to take accurate decisions and the tolerance of ambiguity are important attributes which successful entrepreneurs must possess. Further research conducted found that individuals who have a special capacity to learn general skills and then apply to their own business establishments become successful entrepreneurs. An alternate view to this emphasizes on nurture. There are some sociological aspects which shapes the character of an entrepreneur. According to this view, the social network and values that a person has in an important determinant to discourage or encourage entrepreneurial activities. The social network maintained by an entrepreneur may be through diverse channels like family, friends, relatives or in general social bodies or groups. In fact, culture of an individual also plays an important role in determining the features or personality traits that an entrepreneur possesses. Most successful entrepreneurs are smart, strive for more profits and like to take risks. Moreover, people who have a family business are more likely to become an entrepreneur and carry on the tradition of the family. Psychological traits and individual characteristics of entrepreneurs There are certain personality traits which top executives or entrepreneurs have and these traits make them different from any ordinary individual. According to McClelland, there are at least forty two different personality features which an entrepreneur has. Most male entrepreneurs display some typical traits such as active, competitive, trusting, independent and confidence. There are some characteristics which are akin to female entrepreneurs only. These attributes are consideration, empathy or emotion for other individuals. Most chief executives and entrepreneurs have a host of special traits like aggressiveness, self – control, need to fulfill goals and missions and ambition. The characteristics of entrepreneurs are built on the values, cultures, traditions and norms that they have imbibed and believe in. Ideals and personal values are an important determinant of the character of an entrepreneur. Personal values and opinions of an individual are an important part of the personality of an individual as these beliefs and values influence all other personality traits like ability to judge circumstances and situations, attitude, general commitment and the decision making capacities. The readiness of a person to face hurdles and obstacles and succeed in attaining missions and objectives to attain a particular level of excellence is known as the need for fulfillment. Entrepreneurs are individuals, who must be willing to take risks in business ventures. These individuals may take up a difficult task, readily face the uncertain future and take risks and at the same time accept responsibilities for success as well as for failures. Another trait which an entrepreneur must display is the ability to maintain direct contact with the employees working in the organization and also maintaining successful relationships with both internal and external customers. The above two attributes are stepping stones to attain the growth of an organization. The organizational behavior is shaped by the skills and talents of the entrepreneur. However, various researches have been conducted in order to find out the probable personality traits of an entrepreneur. According to Moran, the research conducted must display a stronger commitment while asking questions to the interviewee. In fact, in order to get a better insight of the personality of entrepreneurs, interviewers should genuinely discuss situations and get feedback and suggestions from each and every respondent. Most entrepreneurs, who are also the owners of business establishments, display a strong inclination towards the growth of the organization. These are the ones who display superior leadership skills and qualities in order to guide the way to growth. Such executives prefer to take quick decisions and prefer going for strategic decisions rather than go into minor details. However the inclination towards growth depends on the cultural beliefs and values of an individual and is a strong determinant of the character of a person. Research conducted has found out that the personality of an entrepreneur influences the decision making ability and behavior. According to Polykarpou, the professional skills and personality traits of an entrepreneur influences the ability to take decisions, manage the overall organization and analyze data and information. In fact, scholars have successfully established a relationship between the personal values and beliefs of chief executives, entrepreneurs and the plans and strategies taken and the overall performance of a company or firm. There may be two segments of individuals in this respect. First, there are creative managers. They are the ones who have personality attributes such as motivation, ambition, responsibility, self – confidence, unrelenting ethics towards work, optimism, talents and skills, aggressiveness, innovation, creativity, social status and honesty. The second group of individuals is the chief executives of organizations and they stand out due to their need for affection, equality, social protection and compassion (Legoherel et al. 2004). Conclusion: To conclude, a successful entrepreneur is one who is able to take quick and accurate decisions, undertake risks and go for innovation. Successful entrepreneurs must be able to adequately plan for new ventures and businesses and must have the intuition and experience to skillfully and accurately run a business venture. Moreover, successful entrepreneurs must have the drive to attain success without violating ethics and be path breakers and leaders who can successfully trigger the growth of an organization. The need for achievement and fulfillment of goals must be optimum and such individuals should not get deterred by failures. In fact, they should not be afraid of the uncertain future and take risks and at the same time accept responsibilities for success and failures. References: Carland, J.W., Hoy, F. & Carland, J.A.C., 1988, ‘“Who is an entrepreneur?” Is a question worth asking’, American Journal of Small Business, 33 – 39. 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