Enterprise and Entrepreneurial Management - Assignment Example

Table of Contents Table of Contents 1 PART 1 2 1.Introduction 2 2.Idea generation 3 3.Strategic objectives 4 4.Market analysis and research 4 5.Understanding the competition 5 6.Cash flow 6 7.Profit and loss forecasts 6 8.Balance sheet projections 7 9.Competitive strategy and scenario analysis 7 PART 2 8 References 14 PART 1 1. Introduction Business plan is essential to the success of any business. It is a formal statement setting out the business goals, why they thing they are attainable, and the blueprint for achieving the goals. Most business plans have a cover page and table of contents; executive summary; business description showing information on the business entity and it staff; business environment analysis; industry background; competitor analysis; market analysis; marketing plan; operations plan; management summary; financial plan; and attachments and milestones. The format is not the same throughout the world since different business plans serve different purposes. For instance business plans may be used both internally and externally, but the content will be dictated by the target audience. For the business plans that are externally focused, tend to include what is relevant to the external stakeholders, especially financial stakeholders. The externally focused business plan will be more focused on the team driving the business plan and financial performance. Internally focused business plans are intended to focus the organization in meeting their intermediate goals. These plans may include plans to develop new products, introduction of new services, internal restructuring, partnerships etc. that is required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. Business plans can be used as decision making tools. Business plans in this case can help the organization stay focused in meeting its goals. During conflicts of investment directions, the business plan can be used to guide new investments, since the business plan is a representation of all the business aspects as it will show the marketing, operational, financial and human resourcing plan. The preparation of a business plan draws people from diverse fields as one field is not sufficient enough to achieve the objectives of any business. Disciplines involved in the development of a business plan include: marketing, operation management, finance, management, and human resource, supply chain management, etc. Therefore the development of any business plan should be inclusive so as to gain from the knowledge and expertise of other fields (Stevenson & Gumpert, 1985, pp.85-94). 2. Idea generation A business idea can be defined as a concept to be developed and used to start a commercial venture. The concept can be about a service or a product that can be transformed into revenue generation. The business idea is the seed for a business venture without it, there is no business. Not everyone is endowed with business idea generation capabilities, idea scan be generated by an individual or as a group. The idea has to be modelled to make it viable for a business venture. Before starting a business, an idea has to be developed and tested. Ideas can be tested by feasibility studies and piloting. If the tests prove viable then the business can start. Feasibility studies helps to sharpen business ideas as it brings the idea closer to reality from an idealistic position. At the same time, an idea can be good, tested and proved to be viable, however if the timing of implementation is bad, then the business will fail. Therefore the timing for business start should also be right (Stevenson & Gumpert, 1985, pp.85-94). 3. Strategic objectives The strategic objectives part of the business plan is focused on addressing how the company intends to get where they are going, defines the broad approach to the achievement of the goals set, provides a summary on how the objectives are going to be met, the tactics of achieving an objective etc. The strategic objective sets out the pace for all the activities in a business plan. 4. Market analysis and research Market analysis refers to the analysis of the attractiveness and the dynamics of a specified market in a specified industry. It is a focused in identifying opportunities, strengths, weaknesses and risks of a particular industry. Market analysis usually informs the business’ planning activities and to develop strategies of positioning the company strategically. The results of marketing analysis will inform how the company is going to organize its inventory, procurement strategy, work force enhancement, facility expansion, capital equipment, promotional strategies etc. The market analysis report will show details on the company’s customers, competitors, and size and growth rate of the market, market segmentation, and uniqueness of their offering, their competitive advantages, and marketing strategies to follow (Stevenson & Gumpert, 1985, pp.85-94). The prime objective of this part of a business plan is to determine the market’s attractiveness presently and in the future. By gaining an understanding of their market opportunities, strength, threats and weakness, then a company can develop a strong business plan. The findings of the market analysis will inform the company’s investment priorities. 5. Understanding the competition Understanding the competition involves conducting competitor analysis. Competitor analysis is used in marketing and strategic management fields as a way of establishing the strengths and weaknesses of current and future competitors. Strategies that arise from this process can be both defensive and offensive. The aim is to neutralize or kill competition. Competitor analysis is useful to an organization as it is argued that most firms do not conduct this analysis but rather spend their time in impressing the market. This process can be done by developing a competitor array. The process include defining a company’s business environment in terms of industry - scope and the description of the industry, profiling your competitors, profiling your customers, determining industry specific success factors, ranking and weighting the success factors, rating and weighting your competition’s success factors. The most common technique of profiling you competition is by establishing in depth information on his background, financial position, products strengths and weaknesses, their position in the market, their key facilities, their key personnel especially management, and the strategies they employ to gain competitive advantage. Knowledge about you competition gives your firm a competitive advantage. By knowing their advantages, you can develop strategies to counter theirs while at the same time improving on your offering. Profiling your competitors will reveal your competitors weaknesses thus enabling you to capitalize on this. Profiling also will help you anticipate your competitor moves; in this case you can always stay ahead of the competition. Lastly profiling will help your firm be agile in the market due to proactiveness (Pinson, 2004, P.20). 6. Cash flow This part usually shows how a firm’s cash is expected to flow in and out. Cash flow projections help a business to know expenditure and receivable projections. Such knowledge will enable you plan for your short term projects without hurting your long-term objectives. In this case cash flow projection can be used as a financial management tool. Cash flow analysis will give an investor an idea of how much capital is needed to be pumped to enhance business investments. Cash flow analysis also helps the banks in determining your financial position for the purposes of advancing loans to your business. If it found out that your business communicates good credit risk, then it means that your organization is likely to service the debt in good time as agreed with the bank. This will enable your company get both short term or long term loans. However it is good to differentiate between Cash Flow Projection with a Cash Flow Statement. The Cash Flow Statement is a statement on how cash has flowed in and out of your business; it is majorly concentrating on past activities. The Cash Flow Projection is anticipatory and shows the cash to be generated or expended over a time in future. The two reports are important for business decision-making (Pinson, 2004, P.20). 7. Profit and loss forecasts In day to day business, profit and loss forecast are contained in profit and lost report. This is an official document published either quarterly or annually showing expenses, earnings or net profit. Usually net income is determined by subtracting total expenses from total revenue. The P&L report can be extracted from the profit and loss statement and the balance sheet of a company’s financial statement report. The difference between P&L statement and the balance sheet deals is on the period that each covers. A P&L projection is done by factoring sales forecasts and expenditure forecast (Siegel, et al., 1993, pp.56-68). P&L forecasts are important as they indicate the trading status of a business, i.e. whether it is making a profit or a loss, or it expects to make a profit or loss. This tool enables the organization focus their revenue generating activities so as to increase sales and to reduce expenditure, or to make the revenues outweigh overheads in view of making profits. 8. Balance sheet projections Balance sheet is simply a summary showing financial balances of any business venture. A balance sheet provides a snapshot of a company’s trading or status for the past one year i.e. calendar year. A balance sheet projection usually is a projection of a company’s financial balance in the future. It can also be used as a tool to control the company’s financial activities to the desired levels. Balance sheet shows a firms performance in terms of assets, liabilities and equity (Pinson, 2004, P.20). 9. Competitive strategy and scenario analysis Scenario Analysis is an assessment of future drivers of uncertainty that will likely affect the business environment under which a business is operating. These drivers include government regulations, market alignment and other external forces that might affect the business environment. Scenario Analysis is usually used as a tool which helps a company in developing strategies against its competitors. It enables a company explore a number of outcomes for different anticipated scenarios. This enables a firm to be proactive in competing with other businesses in the market by enabling manager develop suitable strategies for future situations (Siegel, et al., 1993, pp.56-68). PART 2 1. Introduction The definition of who an entrepreneur is usually in singular. It represents a person who conceives and ventures into revenue making activities. An entrepreneur is a risk taker and usually goes where no one has gone. It is important to note that not all business people are entrepreneurs and not all entrepreneurs are equal. The difference lies in the mix of characteristics they possess. This paper tries to explore the various characteristics of a successful entrepreneur while at the same time providing a critique of the various theories around this topic (Jelineck & Litterer, 1995, pp.137-168). 2. Characteristics of a successful entrepreneur Most businesses are usually started by an individual and it is that individual who has the vision of where business is supposed to be in a distant future. However everyone has an innate potential of envisaging a business idea, however not everyone will be successful in developing and executing that business idea. The success of executing a business idea and sustaining it over a long period of time successfully is what most entrepreneurs are known for. It is also true that personal behaviours and attribute moulds a business. Most business entrepreneurs have the power to influence other people into buying into his dream and later motivating them towards the achievement of the business goals he has set. In this case a successful entrepreneur has to be visionary (Eliasson & Davidsson, 2003, pp.461-470). You cannot influence without a vision, you cannot lead without a vision. It is this vision that people are inspired to and what makes them follow you. At the same time you can have a vision and then lack people or the impetus to force that vision into reality. In this case a successful entrepreneur has to be convincing, he must possess all the attributes to make people follow their vision. Naturally you cannot compel people to follow your vision as human beings have the innate characteristic of being independent minded. Therefore a good entrepreneur has to have good communications skills to enable him convey his vision to the people he will work with in the future. Such communications skills include verbal and writing skills. A good entrepreneur must also be a leader (Jelineck & Litterer, 1995, pp.137-168). Leadership skills are essential in driving any agenda. Many management theorists have theorized on the importance of leadership in management. Leadership as a concept and a tool is also crucial for the success of any business. At the same time there are different forms of leadership models proposed by these management gurus, however collegial and empowerment arrangements seems to fit in the modern day businesses. In this case the entrepreneur has to lead in empowering his team to achieve his vision; totalitarian tendencies usually fail because the modern business environment is open. An entrepreneur also has to have management skills in addition to leadership qualities and traits. He should have skills of planning, resourcing, coordinating and supervision. These skills are usually not innate but rather acquired from the environment and experience (Eliasson & Davidsson, 2003, pp.461-470). Training sharpens entrepreneurs’ management skills. Therefore a good entrepreneur has to commit to continuous study or training to enable him run his business effectively. Since businesses are usually formed by an individual or individuals, one must have a strong will to be entrepreneur. This is so because the business environment will not always go according to your projections, since there are other factors in the environment that the entrepreneur has no control of, he will need a strong will to soldier and continue with his plan (Stevenson & Gumpert, 1985, pp.85-94). Therefore in this case entrepreneurs have a strong will thereby implying that business is also not for the “meek souls”. The business environment will not always remain constant as it is subject to continuous change. Some change factors can be anticipated while some are unpredictable. In this constant flux, a good business entrepreneur has to be adaptable to all the changes. He must be able to anticipate the changes and act quickly to remedy the situation. Therefore a good entrepreneur has to be intuitive of his environment. He should possess scanning characteristics that will enable him identify threats and opportunities presented in the market and act quickly either to diffuse the threats or exploit the opportunities. He must also be decisive (Bandura, 1994, pp.71-81). Not all people are decisive. However due to the continuous changes in the business environment, one must act quickly to adapt to the peculiar business environments. The changes demand an informed decision at the earliest possible time. If the entrepreneur is slow in decision making then he is in danger of being overtaken by events. In this case decisiveness is one trait of a good entrepreneur. The business has three important aspects that need to be addressed. First is the issue of managing the people. People management involves an array of skills, knowledge and abilities to make the buy into your vision and then work with you or for you to attain your goals. A good entrepreneur must have good sourcing skills to identify and recruit the best employees for specific jobs. The entrepreneur also needs to have skills set to make the employees work continuously without interrupting the business operations and lastly he must be able to plan for transition in case these employees leave employment. In this case he will have to use both human management principles and peoples skills to pull this through. Secondly most business involves processes, a good entrepreneur must be logical to enable him plan the various business processes to facilitate effectiveness and efficiency. This is especially so because he will be the one to set up the first systems and processes of his firm. Lastly, businesses involve systems. In this case a good entrepreneur has to have or develop systems thinking as this will enable him identify the right technology or application to a particular process (Bandura, 1992, pp.89-93). Several theorists have also identified different characteristics they think an entrepreneur should have to efficiently and effectively run a successful business. An entrepreneur should have knowledge and independence of thought to succeed in business. Gatner (1985) says that an entrepreneur’s ability to react to changes and his knowledge on the business environment contributes to an organizations success (Gartner, 1985, pp.696-706). Lutnnen (1997) emphasizes the importance of training in enhancing the entrepreneur’s characteristics, and is of the opinion that modern business will require the entrepreneur to have networking abilities, Cassidy & Lymm (1989) are of the opinion that work ethic, pursuit of excellence, mastery and dominance are essential traits of a successful entrepreneur (Cassidy & Lynn, 1989, pp.301-12; Littunen, 1997, pp.37-50). 3. Theory of self-efficacy and effectuation  The concept of self-efficacy is derived from Albert Bandura’s social cognitive theory in the field of psychology. His theory stresses the role of social experience, observational learning and reciprocal determinism in creating ones personality. A person’s character and skills comprise of the self-system. The system determines a person’s perception and his reaction to different situations. According to Bandura (1995), self-efficacy equals a persons’ belief to plan and implement action required in different situations. This belief is individual and enables one to succeed in a particular situation. The role of self-efficacy can be seen in how people set their goals and how they set to achieve them. For instance people with a higher self-efficacy usually view challenges as there to be conquered and mastered, recover quickly from setback, are committed to their interests and activities etc. Normally good entrepreneurs are people with a higher sense of self efficacy. According to (Bandura, 1992), the sources of self-efficacy can be traces as early as childhood, when children are dealing with the various childhood experiences (Bandura, 1992, pp.89-93). He is also of the opinion that it does not end in the youthful stage, but rather continues throughout a man’s life, since people are able to acquire new skills, knowledge and abilities from their environment. Bandura (1994) explained that when a person successfully performs a task he strengthens his sense of self efficacy. Failure destroys one’s self efficacy. Other methods of enhancing one’s self efficacy include social modelling, social persuasion and psychological responses (Bandura, 1994, pp.71-81). 4. Conclusion  Literature suggests that there are human characteristics unique to successful entrepreneurs. These characteristics are both innate and acquired in the environment under which an individual exists. Literature also suggests that there are particular characteristics which are peculiar to successful entrepreneurs. Confidence needs to be there for one to be a good entrepreneur. Inasmuch we are not born with it, it can be strengthened with situations. An entrepreneur needs to have a sense of ownership i.e. taking responsibility, he should be a good communicator, be passionate about learning, a team player, has to be system-oriented, dedicated to his activities, should be grateful and optimistic. A successful entrepreneur has to be socially outward, a leader by example and a risk taker. References Bandura, A. (1992) Exercise of personal agency through the self-efficacy mechanisms. In R. Schwarzer (Ed.), Self-efficacy: Thought control of action. Washington, DC: Hemisphere, 89-93 Bandura, A. (1994). Self-efficacy. In V. S. Ramachaudran (Ed.), Encyclopedia of human behaviour, 4. New York: Academic Press, pp. 71-81. Cassidy, T. and Lynn, R. (1989), “A multifactorial approach to achievement motivation, Journal of occupational Psychology, Vol 62, pp. 301-12 Eliasson E & Davidsson P (2003). Entrepreneurial management, corporate venturing, and finance performance. Frontiers Entrepr. Res., 461-470 Pinson, L. (2004). Anatomy of a Business Plan: A Step-by-Step Guide to Building a Business and Securing Your Company’s Future (6th Edition). Dearborn Trade: Chicago, USA, P.20 Gartner, W. (1985), “A framework for describing the phenomenon of new venture creation”, Academy of Management Review, Vol. 10pp. 696-706 Littunen, H. (1997), “The critical first years of firms”, International Journal of Entrepreneurship, Vol 1 No.1 pp. 37-50 Jelineck M & Litterer JA (1995). Toward entrepreneurial organizations: Meeting ambiguity with engagement. Entrepreneurship. Theory Pract. 19(3): 137-168 Siegel Eric S., Ford B. R., & Bornstein J. M. (1993), The Ernst & Young Business Plan Guide. New York: John Wiley and Sons, pp.56-68 Stevenson HH & Gumpert DE (1985). The heart of entrepreneurship. Harv. Bus. Rev., 63(2): 85-94 Read More