Becoming an Entrepreneur in the 21st Century: Where, What, Who & Why - Literature review Example

Becoming an Entrepreneur in the 21st Century: Where, What, Who & Why Name: Tutor: Course: Date: Introduction Entrepreneurship involves the capacity and willingness to start an organization or business along with any of its risks. To make a profit, an entrepreneur combines factors of production such as capital, natural resources, labor and land. However, the most important element is the entrepreneurial spirit that is characterized by risk-taking, communication, teamwork and innovation (Kelley, et al. 2010). They are required to succeed in the increasingly and ever changing competitive global marketplace. Great entrepreneurs develop an idea and work consistently to make it successful. Business plans are important documents and road map on how to start and grow globally competitive businesses (Desrochers & Sautet, 2008). However, there are many challenges and obstacles that require patient and determined entrepreneurs. Despite these shortcomings, the benefits of entrepreneurship outweigh their costs. What you need to become a successful entrepreneur Schumpeter (1976) defined an entrepreneur as somebody who is able and willing to convert an invention or a new idea into a successful innovation. According to the author, the entrepreneur must be ahead of others in getting new information on optimum resource allocation so as to obtain entrepreneurial profit. Later, Knight (2005) suggested that entrepreneurship is about risk taking. The author noted that an entrepreneur is willing to risk financial security and career to spend time on capital and idea with some high degree of uncertainty. Entrepreneurship is a process that is dynamic and incremental in wealth creation (Desrochers & Sautet, 2008). It involves creativity, devotion of necessary effort and time and assuming necessary risks. The rewards of entrepreneurship such as monetary reward, personal satisfaction and independence are precious. Under institutional theory, the need to make decisions reduces with the Stability of human necessity leading to more free energy (Berger & Luckmann, 1985, p.78). This energy opens the way to innovations, orients people to other tasks, and division of work among individuals is made possible with higher attention levels (ibid). This implies that the degree of efficiency and innovation can be at risk despite the advantage of narrowing the number of options. What have many people aspiring to be great entrepreneurs lacked? The immediate response is that people start their business with high failure rate because of lack of managerial ability, lack of capital, intense competition and poor sales. Earlier entrepreneurs in the 19th and 20th centuries were viewed in an economic perspective (Davidsson, et al. 2006). Assuming the chance of gain and loss, they contributed their own skill, ingenuity and initiative in administering, planning and organizing an enterprise. Andrew Carnegie built the American steel industry not on creativity but competitiveness (ibid). Later, Edward Harriman and JP Morgan re-organized the northern pacific trust railroad and financing of the nation’s industries respectively (ibid). They were regarded as innovators. Today, great and successful entrepreneurs such as Richard Branson of Virgin Airlines, Karren Brady, and Women’s entrepreneur network of Dell among others have some things in common; risk taking, innovativeness, effective communication and teamwork. It can be agreed that entrepreneurial behavior is about acceptance of failure or risk, initiative taking and organization or reorganization of economic /social mechanisms to turn situations and resources into practical account (Ardichvilli, et al. 2003). Potential entrepreneurs have certain forces within them that drive the desire to accomplish, experiment, obtain something, and escape the authority of others (ibid). Entrepreneurship brings business to new levels because of the inner drive and creativity of their leaders (Beckert, 1999). If you want to be a successful entrepreneur, then originate solutions based on risk, maximize your abilities, become motivated, learn the best of management, and embrace teamwork and creativity, and innovation. Where to get information on entrepreneurship Primary and secondary sources of information are vital in providing potential and present entrepreneurs with industry performance, patterns and trends, strategic expansion issues, profitability, human resources, leadership, technology and inventions (Kutzhanova, et al. 2009). As mentioned earlier, great entrepreneurs are those who obtain crucial and credible information to deliver competitive advantage before others (Ferreira, 2001). To succeed, you need to be aggressive and keen on any new information or ideas. Primary sources of information are observation, focus groups, interviews and administering questionnaires (Harper, 2005). Here, one can get new and vital information first hand. They can also reorganize to fit the situation or solve the problem in a department or an organization. For example, Dell used the idea of enterprise social networks to increase the level of employee engagement and productivity which has sustained its competitive advantage. Secondary sources include books, journals, magazines and articles (Kutzhanova, et al. 2009). Common magazines such as Forbes and Australian Weekly can provide adequate information on the progress of current entrepreneurs. The importance of getting information is to be enlightened on areas or industries that offer higher level or risks as well as returns (Harper, 2005). A potential entrepreneur should also visit launches, events, workshops and seminars on entrepreneurship (Kutzhanova, et al. 2009). These sessions are useful eye openers and provide useful background on how to become successful entrepreneurs. For example, more rewarding source is taking a degree or a diploma in entrepreneurship which offers a broad and lengthy coursework on why entrepreneurs fail or succeed. Significant entrepreneurial events over the last fifty years Schumpeter (1947) argued that creation of ‘new combinations’ is the essence of entrepreneurial activity because it disrupts the competitive equilibrium of existing organizations, processes, products and markets. When the new combinations are created, constant source of change is experienced within national economies, industries and markets (Ferreira, 2001). In the 1960s, business and economic historians made a distinctive shift away from ‘entrepreneurial history’ and its eclecticism. Pioneered by Chandler (1962), younger business historians were getting drawn to managerial and organizational studies. In molding the trajectory of business development, the author was ambivalent on the autonomous role of entrepreneurs. A clear shift had taken place in the 1970s as business history research drifted towards ‘organizational syntheses’ and the emergence of the multi-divisional and modern corporation (Galambos, 1970). At the same time, many economic historians adopted quantitative methods in their research and orthodox neoclassical economic theory by rejecting the ‘entrepreneurial history’ eclecticism (ibid). As a concept, they adopted the traditional skepticism of neoclassicism in entrepreneurship. In the 80’s, historical studies illuminated more closely on the law of business organizations and the influence of patent rights on entrepreneurial activities. Khan (2005) argues that US courts supported inventors’ patent rights more consistently by holding the premise that the patent system had the capacity to promote economic growth. In the 90’s the Chandlerian shift of the research agenda on the corporation became marginal to the main business history research agenda since it barely displaced the entrepreneurial history research. Innovation and entrepreneurship continue to gain limited research which puts theoretical conceptualizations of entrepreneurship at a weak point (Beckert, 1999). Today, entrepreneurship is rarely taken as a single coherent field, but handled in parts of many varying sub-topics (ibid). In 2010s, companies are more robust and potentially more successful taking as they take proactive approaches to internationaliz­ation. They advance entrepreneurship in a broadening client base and e­xpanding scope. With limited resources smallest companies can exploit innovation and creativity in a foreign market to claim a market share (Barringer, et al. 2005). For example, Fosun Group conglomerate of China following a vibrant year of overseas investment is getting into the small-and micro-sized enterprises (SMEs) and financial services sector. By being innovative in setting up an online small loan provider for personal borrowers and SMEs, the idea is winning in the international market. The state-entrepreneur interactions as historical record suggests have been extensive and diverse (Wiklund & Shepherd, 2003). Entrepreneurial opportunity structures have been exploited at the level of industries, firms, individuals and regions and rarely materialized as truly national constructs. However, imperfections identified by entrepreneurs are varying buyer-seller relationship interpretations and the imbalances in information distribution. Jones and Butler (2003) agree that in the presences of these imperfections, opportunities appear for entrepreneurs to gain financial advantages and solve these imbalances in the process. Based on the agency theory, Jones and Butler (2003, p.736) argue that opportunism and risk preferences are a function of chances estimation of success for an entrepreneur to achieve a desired goal in the uncertainty context. Therefore, entrepreneurs have a different propensity of assuming risks because they can control and manageable uncertainty better than other parties with different levels of confidence. How to manage growth and overcome obstacles in entrepreneurial environment Entrepreneurship is not only a business start-up but also growing business development skills as well as personal competencies to make it a success (Harper, 2005). According to Gibb (2010) the acquisition of entrepreneurial role can be both experimental and cultural and thus consistently shaped by training and education. The traditional approach that emphasizes on business start-up to entrepreneurship needs to change and integrate entrepreneurship training and education. Rapid growth in companies arises from quick boost on volume, sales, costs, people and the company within a relatively short time period (Ferreira, 2001). Risk to the future and profitability of the company is on the offing when these features suddenly take place. The atmosphere and solidity of the company is reflected by rapid growth (Wickham, 1998). However, for a firm to achieve sustained expansion, it has to be broadly agreed that it must expand its management team, extend its knowledge base, have access to additional resources and increase its sales (Harper, 2005). Managing rapid growth of a business usually involves organizational-wide operation, reinforcement of the objectives and thorough planning (Harper, 2005). As an entrepreneur in this period of time you should hone both managing and decision-making skills since they are essential when the growth becomes fast. Through effective management skill, an entrepreneur is able to commence the medication immediately after recognizing the indications (Rae, 2012). Davidsson, et al, (2006) acknowledges that the relevance of entrepreneurship is not only in economic development but also in training and education opportunities that develops the abilities of existing entrepreneurs to grow and plays a key role in cultivating future entrepreneurs. However, Henry, et al. (2003) observes that external and internal obstacles come in the way of a firm in its initial stages. External barriers include lack of skilled labor, unfavorable economic and climate government policy, lack of competition, stringent legislation, and lack of access to markets. Internal obstacles include managerial capability, psychological factors, funding, poor product or service, low marketing capacity and shortage of orders. These obstacles affect the decisions of entrepreneur intending to grow their business (ibid). However, Ewing Marion Kauffman Foundation in a 2009 report at least half of the companies were launched during a bear market or recession as captured in the 2009 Fortune 500 list. Some of these companies that drew on managerial abilities at the time of recession are MTV, Microsoft, CNN, HP, Fed Ex and Burger King (Kauffman Foundation, 2009). This finding shows that with creativity and innovation required for entrepreneurs negative economic environment assists in the way of achieving high growth in the business despite reduced growth opportunity. Entrepreneurs are required move towards an experiential learning methodology from traditional ‘instruction’ (Ferreira, 2001). Here, you need to utilize group-work, mentoring action and oriented approach for greater learning effectiveness. Innovation and creativity are driven by problem and solving critical thinking skills. This should also apply to risk-taking and collaboration based on budgetary and project management skills. Therefore, overcoming obstacles in the entrepreneurial environment is by recognizing that entrepreneurship skills’ teaching should be interactive and may involve hands-on activities, internships, case studies, real-life actions, simulations, projects and games. Mitchell, et al. (2002) in cognitive theory links entrepreneurial behaviors with specific mental processes and argues that people use entrepreneurial cognitions as knowledge structures to make decisions involving opportunity evaluation, judgments, venture creation and assessments. The entrepreneur is termed as a ‘motivated tactician’ with multiple cognitive strategies and the characteristics of ‘fully engaged thinker’ (Haynie, et al. 2010, p.18). This implies that entrepreneurs have the ability to rapidly choose and shift from among the strategies based on circumstances, needs, motives and specific goals. McMullen and Shepherd (2006) agree that entrepreneurs can act on their abilities in response to entrepreneurial opportunities perceived. To manage rapid growth and become successful, you need to; keep up with the market, plan ahead, become astute in financial and cash flow management, problem solving, adopt the right systems, get the right entrepreneurial skills and attitudes and always welcome change. Where to start: A business plan Whether you are starting up a new business or undertaking a new project in an existing business, a business plan is mandatory (Wiklund & Shepherd, 2003). A business plan can be formulated, evaluated and implemented depending on the availability and fulfillment of its facets. To start with, you need to register a business, define its structure, location and owners. For example, if you are in Australia, you many need to register under Australian Business Number (ABN) if a business or Australian Company Number (CAN) if a company. You need to have relevant experience on the industry you are entering or product you are developing (Chambers, 2008). Have the right target market with appropriate marketing strategies. You must be able to see the future of your company by formulating a vision statement as well as goals or objectives. These will be supported by a business purpose and operating history. You should then obtain a tax registration, licenses and permits from relevant government departments and local authorities (Rogoff, 2007). Location of the business is important and what should be determined is the state of purchase whether buy or lease. Draft an organizational chart showing details of management and ownership as well as the experience of the top management. Provide the key personnel especially current and required staff table and recruitment options (Chambers, 2008). You should also include training programs and skill retention strategies on how to maintain staff. As an entrepreneur, develop your service or product table, market position as well as a unique selling position. Identify the anticipated demand and evaluate the value customers will get from your services or products. Establish your growth potential now and in future. Invest and implement innovation through research and development or innovation activities (Harper, 2005). Also adopt an intellectual property rights strategy. You need to provide and have broad knowledge of insurance such as workers compensation, public liability insurance, professional indemnity, risk-management, product liability, business assets and business revenue. Legal consideration also abounds and it includes specific legislation, business law or consumer law (Chambers, 2008). If you have or planning a production or processing plant, you need to have a stock of production activities, suppliers, plant and equipment table as well as an inventory table. Other requirements are technology or software, trading hours, quality control, membership and affiliations, communication channels, accepted payment types, credit policy, and warranties and refunds (Rogoff, 2007). Finally, develop a sustainability plan that covers aspects of environmental or resource impacts, community impact and engagement, constraints/risks, strategies, and an action table (Harper, 2005). Conclusion To become a great entrepreneur you need an inner discipline, risk taking abilities, innovativeness, persistence and change oriented mind. There are various sources of information where you can obtain information on entrepreneurship such as observation, magazines, events and workshops or even getting a degree or diploma in entrepreneurship. You need to become an entrepreneur because if offers some element of self-fulfillment, financial stability and exploitation of your creative abilities. 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Wiklund, J & Shepherd, D 2003, Knowledge-based resources, entrepreneurial orientation, and the performance of small and medium-sized businesses. Strategic Management Journal, v. 24, n. 13, p. 1307-1314. Read More