Entrepreneurship and Its Impact on Business and Society - Essay Example

Entrepreneurship and its impact on business and society

Table of Contents

Entrepreneurial characteristics, Behaviour and Motivation3

Creativity, Innovation and Business Development5

Economic and Social Development7

Conclusion9

Reference List10

• Entrepreneurial characteristics, Behaviour and Motivation

There are various factors which drive the entrepreneurs to initiate a new business venture, such as, economical prospects, strategy formation and risk taking ability (Deakins and Freel, 2012). The contribution of an entrepreneur cannot be undermined while setting up a new venture. While setting up a new venture, adaptation of outcome oriented strategy may yield maximum productivity (Rae, 2007). In fact, it has been observed from the researches based on personality trait that it varies from entrepreneur to entrepreneur. The success of a new venture depends upon the entrepreneurial ability of the entrepreneur (Carraher and Paridon, 2015). Entrepreneurial ability depends upon various aspects, such as, skill of the entrepreneur and propensity of the applied skill (Carter and Jones-Evans, 2012). Creating opportunities for the society motivates an entrepreneur and separates them from the rest of the society. The psychology of an entrepreneur depends upon various factors, such as, perception, memory and thinking (Stokes, Wilson and Mador, 2010).

Cognitive psychology indicates the importance of all the processes which influence the sensory input of the brain and thereby measures the mental ability of an entrepreneur (Etemad, 2004). The sensory input passes through a lot of phases, such as, transformation, reduction and elaboration (Gurtoo and Williams, 2009). Then the revised input is stored and used while making a decision (Rae, 2007). Moreover, cognitive psychology also measures the mental processes which influence the interaction of an entrepreneur with the society. It also measures the perception of entrepreneur regarding the social environment (Ketchen et al., 2007).The decision making ability of an entrepreneur depends upon cognition and motivation. Moreover, the knowledge base of entrepreneurs which plays an important role while identifying opportunities for forming a new venture which accelerates social and economic development (Deakins and Freel, 2012).

The performance of the entrepreneurs and the behaviour is defined by the actions that are undertaken in order to reach the desired goals set by the managers within the organization. However, the performance is restricted to the tasks that are controlled by the entrepreneurs such as the decision making processes of the managers within the organization (Gurtoo and Williams, 2009). Moreover, the entrepreneurial performance is determined by the capacity of the individuals to deal with the environment. On the contrary it is difficult to measure the actual performance of the entrepreneur and is often compared with the business performance. Furthermore, the motivation is used to directly determine the performance of the employees within the organization (Gurtoo and Williams, 2009).

Higher the motivation better will be the performance and the employees are motivated by offering them rewards for their tasks. Motivation is considered as the combined effect of three of the choices such as the choice to direct the strain in some direction, the choice to increase the level of strain and also the choice of maintaining the strain at a level suitable for the employees to perform well. The model related to the Psychological Performance Theory indicates that the entrepreneurial performance arises only when there is an option left with the employees related to acting with certain intensity at a specific time (Ketchen et al., 2007). Motivation is considered as the determinant of performance and is not possible if the employees do not posses talent within them (Ketchen et al., 2007). The greater is the talent within the employees the greater would be their ability to perform within the organization and their talent in turn contributes to the welfare of the organizations in the international market. Researchers who have worked in the field of entrepreneurship have indicated that the importance of the interactive models related to the concept of entrepreneurship. The model suggests that the achievement motivation of the entrepreneurs helps them to take risks within the organizations so as to enhance the overall performance (Ketchen et al., 2007).

The risk taking propensity among the individuals is defined as attitude of the individuals towards the challenges faced by the organizations in the international market (Smit and Watkins, 2012). On the other hand the motivation theory suggested by McClelland proposed that the achievement of the entrepreneurs towards setting up new businesses would indicate the propensity of the entrepreneurs to avoid risk in the face of uncertainty (Ketchen et al., 2007). However, the interest in entrepreneurship has risen considerably and a number of people have gathered positive attitude towards the entrepreneurship. The entrepreneurs are expected to overcome the difficulties faced by the organization by hiring efficient employees who are able to deal with the challenges in the global market. There are several Cognitive Models of the entrepreneurial behaviour that are linked to the psychological approach of the entrepreneurship such as the Attitude based models are concerned with the growth of the firms. It is the confidence of the individuals in possessing enough skills to establish a new firm in the international market (Smit and Watkins, 2012).

• Creativity, Innovation and Business Development

Entrepreneurs have the unique ability to identity unused resources and adding value to those resources in order to create value for the society (Smit and Watkins, 2012). Development of a new business strategy is influenced by the risk taking ability of the entrepreneur (Deakins and Freel, 2012). By adopting innovative approach, entrepreneurs have been successful in launching new business ventures. For example, Jason Atherton who spent his childhood in a caravan turned into celebrity chef by adopting innovation (Rae, 2007). The restaurant formed by Atherton in London, generates revenue of GBP 70 million per year. Moreover, Mr. Atherton has developed 15 up-market restaurants in UK and Asia (Walker and Brown, 2004).

In fact, the case of Mark Pearson can be discussed in order to describe innovation in entrepreneurship. At the age of 18, he started his career as a chef. Moreover, he has started his own floristry business (Benneworth, 2004). Driven by motivation to become an entrepreneur, he has developed a website showing the list of discounts vouchers of retail outlets as well as family restaurants (Rae, 2007). At the age of 27, he named the business as “My Voucher Codes”. This business idea has generated revenue of GBP 3, 00,000 in the first year. In the subsequent years, the revenue has increased to GBP 3 million, GBP 5 million and GBP 10 million which depicted a profit margin of more than 50% (National Enterprise Network, 2016). The present value of the company is estimated to be GBP 60 million (Carraher and Paridon, 2015). The company receives a certain amount on the usage of each discount coupon (Carter and Jones-Evans, 2012). This idea has accelerated the growth of business.

Creativity as well as innovation is considered as the two most important factors necessary for the success of the organization in the global market. The employees are provided with the opportunity to think out of the box and provide them with the time and the resources to provide new ideas and cost-effective business solutions (Deakins and Freel, 2012). Creativity also enables the process of resolving the issues that takes place within the organizations and they can earn competitive advantage in the global market. Innovation management is a part of the general field of management that implies planning, creating as well as supervising the organizational trends.

The companies who have performed well in the long haul are considered as creative as well as innovative in the international market (Rae, 2007). Innovation requires significant input and commitment from the employees working in the organization. According to the study, the organizations need proper structure in order to bring in innovations and the end-to-end innovation process begins with the identification of the issues that take place within the organization (Stokes, Wilson and Mador, 2010). One of the major problems is the process followed by the organization so as to evaluate the ideas. The ideas are often presented in the form of business plans but these are effective only if these plans are able to predict the future [Author]. Moreover, the innovations also depend on the team leaders who guide the teams in dealing with various challenges. It is the efficiency of the team leaders that enables the employees to improve their performance and accustom with the new ideas within the organization (Deakins and Freel, 2012).

Edwina Dunn and her husband Clive Humby have also adopted innovative approach which resulted in a successful entrepreneurship. The couple has started the business venture four years ago in their house located in Chiswick, West London (Rae, 2007). They named the new business as Dunnhumby. It is one of the first companies in UK, which started to predict the consumption pattern of consumers by analyzing the data (Etemad, 2004). Moreover, the prediction has changed the operational structures of many US retail shops which resulted in higher productivity (Gurtoo and Williams, 2009). Consequently, the couple turned into millionaires. The first client of Dunnhumby was one of the largest UK food retailers, Booker. Dunnhumby conducted an in depth analysis of the sales data provided by Booker (Stokes, Wilson and Mador, 2010). After conducting the analysis, Dunnhumby provided an overview of the combination of items purchased by the consumers (Ketchen et al., 2007). As a result, Booker changed its marketing and operational strategy, resulted in increase in revenue (Rae, 2007).

Moreover, one of the major retail giants, Tesco PLC approached Dunnhumby, after launching its first loyalty card. The loyal card used to provide offers and discount coupons to customers (Smit and Watkins, 2012). On the other hand, Tesco PLC encountered a lot of difficulty while dealing with the data. Based on the study of 10% of the total sample, Dunnhumby predicted such a result whose accuracy ranged from 95% to 99% (National Enterprise Network, 2016). After that, Tesco PLC has maintained a 16 year long business relationship with Dunnhumby [Author].

• Economic and Social Development

Sustainable development within an organization involves balancing the needs of present as well as the future generation in the global market. There are three important factors that are considered to be affecting the development of a nation such as the ecological, social and the economic factors (Carter and Jones-Evans, 2012). Among all the three factors, the social sustainability is the most critical aspect of achieving the long term development. Governance problems such as corruption as well as the lack of the citizen’s voice within the nation have affected the growth of the nation (Carter and Jones-Evans, 2012). The work carried out by the World Bank in the field of social development supports the measures undertaken to help the poor and the needy to overcome the challenges of poverty. It has also tried to improve the condition of the women in the society by empowering them and providing them with the job opportunities. Further, socio-economic development emphasizes on the factors within a geographic unit (Carraher and Paridon, 2015). Economic development is considered as the process of raising the prosperity within the society and the production levels in order to meet the rise in demand for goods and services in the global market. On the other hand social development is linked to the complexity of the social dynamics and it focuses on the social concerns of the people having objectives for development (Carraher and Paridon, 2015). Social development also involves the social justice and provides comparative information related to poverty, income inequality, employment security, health, education as well as civic participation. On the other hand the purpose of economic development is linked to the improvement in social as well as material well being (Carraher and Paridon, 2015). Therefore, the socio-economic development involves the integration of social as well as economic development within the nation.

Apart from playing a significant role in setting up a new business venture, entrepreneurs play a major role in promoting economic and social development (Walker and Brown, 2004). For example, Tom Szaky, founder of TerraCycle, has created wealth from utilizing the waste materials in the society (Benneworth, 2004). The business model of the organization is based on the objective of empowering the society by offering value added products by using the waste materials (Deakins and Freel, 2012). The first product of TerraCycle was made from “warm poop” (Rae, 2007). Since its inception in 2002 in US, the company has grown across 21 countries and last year it generated revenue worth of $ 20 million dollars (Carraher and Paridon, 2015). It uses those waste materials which are difficult to recycle, such as, cigarette stubs, coffee capsules and wrappers of biscuits (Carter and Jones-Evans, 2012). These wastes are transformed into useful materials and sold to the manufacturers (Burns, 2011). After that, these waste materials are converted into various products, such as, bags, benches and dustbins (Etemad, 2004). Till now, it has used more than 2.5 billion wastes and transformed them into usable materials (Gurtoo and Williams, 2009). The company has also donated $ 6 million dollars into charity and schools (Stokes, Wilson and Mador, 2010).

Doing business for own profitability might not be an ethical approach towards sustainable business development. Entrepreneurs are responsible for taking care of the environment and society they operate. As a matter of fact, depending on the level of CSR activities, the effectiveness of the branding initiatives is often judged. Deakins and Freel (2012) on the other hand, believe CSR activities with an aim for community development can be a source of competitive advantage and business sustainability. The initiatives towards economic and social development taken by Tom Szaky, a 19 year old entrepreneur can be considered exemplary in this context. Making money from rubbish is the philosophy of his business. Not only does waste minimisation itself is an ethical business approach, but generating revenue and contributing to the community makes sure there is a steady community development agenda.

One of the major challenges for entrepreneurs is the financial constraint during conducting CSR activities. CSR activities or community development programs incur a significant amount of capital investment, which is why, leading enterprises can concentrate more on the ethical business operations (Rae, 2007). However, the smaller economies of scale and the business risks might not be favourable for the entrepreneurs to spend heavily social development activities. Despite the fact smaller CSR initiatives can also be a appreciated in the society. According to (Burns, 2011) its the socially responsible business philosophy rather than just investment that determines the effectiveness of the CSR activities.

• Conclusion

Based on the report, it can be observed that entrepreneurs play a significant role in re-shaping the society by forming new business ventures which in turn accelerates growth in the economy. It also provides an overview of the overall business sector and the importance of promoting small business sector to ensure economic growth in the society. Moreover, it has been revealed that to measure the decision making ability of the entrepreneurs, cognitive theory has been discussed. The practical examples illustrated in the report shows innovative approach can lead to successful business venture. Moreover, various growth opportunities in the small scale sector have been discussed. On the contrary, various threats prevailing in the small scale industry result in closure of huge number of small firms in recent years. Therefore it can be recommended that, for a successful business setup, various factors, such as, motivation, determination, idea about market, resources and decision making ability play a significant role. Moreover, the first step for a business setup is to identify such resources which are very difficult to recycle into usable materials. The next step is to identify such an area which can be developed by the application of latest technology in future. In fact, this area should be accessible from the market place. Moreover, such a product has to be designed which can fulfill the inherent needs of the society. Most importantly, to ensure smooth functioning of business, uninterrupted flow of capital has to be ensured. Lastly, an effective supply chain strategy will enhance the probability of success of new business setup.

• Reference List

Benneworth, P., 2004. In what sense ‘regional development? entrepreneurship, underdevelopment and strong tradition in the periphery. Entrepreneurship & Regional Development, 16(6), pp.439-458.

Blundel, R. and Lockett N., 2011 Exploring Entrepreneurship Practices and Perspectives, Oxford: Oxford Publication

Burns, P., 2011 Entrepreneurship and Small Business Start Up, Growth and Maturity, 3rd edition, Basingstoke: Palgrave Macmillan

Carraher, S.M. and Paridon, T.J., 2015. Entrepreneurship journal rankings across the discipline. Journal of Small Business Strategy, 19(2), pp.89-98.

Carter, S. and Jones-Evans, D., 2012 Enterprise and small business Principles, Practice and Policy, 3rd edition, London: Pearson 

Deakins, D. and Freel, M., 2012 Entrepreneurship and Small Firms, 6th edition, NY: McGraw-Hill

Etemad, H., 2004. International entrepreneurship as a dynamic adaptive system: towards a grounded theory. Journal of international entrepreneurship, 2(1-2), pp.5-59.

Gurtoo, A. and Williams, C.C., 2009. Entrepreneurship and the informal sector: some lessons from India. International Journal of Entrepreneurship and Innovation, 10(1), pp.55-62.

Ketchen, D.J., Ireland, R.D. and Snow, C.C., 2007. Strategic entrepreneurship, collaborative innovation, and wealth creation. Strategic Entrepreneurship Journal, 1(3‐4), pp.371-385.

Rae, D., 2007 Entrepreneurship from opportunity to action, Basingstoke: Palgrave Macmillan

Smit, Y. and Watkins, J.A., 2012. A literature review of small and medium enterprises (SME) risk management practices in South Africa. African Journal of Business Management, 6(21), pp. 6324.

Stokes, D, Wilson, N and Mador, M., 2010. Entrepreneurship, Boston: South Western CENGAGE Learning

Walker, E. and Brown, A., 2004. What success factors are important to small business owners? International small business journal, 22(6), pp.577-594.

British Chambers of Commerce, 2016. Rewarding Excellence in British Business. [online] Available at: <http://www.britishchambers.org.uk> [Accessed 19 April 2016].

National Enterprise Network, 2016. – Representing the Enterprise Support Sector In England. [online] Available at: <http://www.nationalenterprisenetwork.org> [Accessed 19 April 2016].

NCEE, 2016. NCEE – National Centre for Entrepreneurship in Education. [online] Available at: <http://ncee.org.uk> [Accessed 19 April 2016].

Prince’s Trust, 2016. The Prince's Trust | Inspiring Young Lives. [online] Princes-trust.org.uk. Available at: <https://www.princes-trust.org.uk> [Accessed 19 April 2016].