Marketing & Entrepreneurship What makes entrepreneurs successful Is it skill or luck - Essay Example

? Marketing & Entrepreneurship Task What makes entrepreneurs successful? Is it skill or luck? -Knight (1921, part III, ch. IX, ¶ 10) The above question is not only one of the most conjecturally viewed topics in the field of entrepreneurship management, but also key essence of this essay. Readers of this essay might raise question over the selection of 92 years old reference to write up a topic like entrepreneurship. But, the fact is that that history of entrepreneurship is no less than 500 years of age hence one has to use important research works on the topic irrespective of its chronological order. In this paper, the researcher will use example of Sir Alan Sugar who is not only the founder of consumer electronics giant Amstrad but also the example for entrepreneurs across the world. Sir Alan Sugar established the company at the age of 21 when majority of his classmates were learning in the colleges in order to get job. Before retiring from the organization, Sir Alan Sugar transformed Amstrad from start up venture into electronics giant which is synonymous with innovation, value for money offering and customer loyalty. Was Sir Alan Sugar a magician who is blessed with sheer amount of luck or Sir Alan Sugar was a hardworking individual who used skill and intuition to build the Amstrad Empire? At this point, the essay is not mature enough to answer the question but it is expected that at the end of this essay, the answer will be revealed. One has to understand theoretical underpinning of entrepreneurship before answering the above question whether luck is important or not in making an entrepreneur successful. Hence, in the next section, the researcher will try to figure out pertinent variables that affect the success of an entrepreneur. Modern research scholars such as Coulter (2001) and Kirby (2004) defined entrepreneurship as the process with which a particular individual or set of individuals try to fulfil their objectives by creating value for people in the society. Nixon (2004) and Van Praag and Cramer (2001) argued that it is not necessary for entrepreneurs to create value for society rather it is more important for an individual to fulfil existing needs through innovation and unique offer in order to classify as entrepreneur. It is understandable, why management scholars tried to identify the role of luck for an entrepreneur, because giving importance on luck factor will probably disregard the importance of management skill in developing a successful enterprise. Research scholars such as Kaplan and Schoar (2005) and Hochberg, Ljungqvist, and Lu (2006) nullified the importance of luck in helping an entrepreneur to become successful. These research scholars have given examples of successful enterprises that are funded by more experienced venture capitalists in comparison to enterprises that failed due to inexperience of venture capitalists. Hochberg, Ljungqvist, and Lu (2006) strongly argued that a more experienced and skilled entrepreneur has more probability to succeed in comparison to a novice entrepreneur. Eesley and Roberts (2006) raised question over role of luck in helping an entrepreneur to succeed in a competitive environment. According to them, people often mistakenly identify the skill, experience and strategic intelligence of the entrepreneurs as the sheer amount of luck. Eesley and Roberts (2006a and 2006b) amusingly pointed out that there is no such thing as luck for an entrepreneur because an entrepreneur can move ahead in business by understanding the market need and fulfilling the need of customers by offering them value. Research scholars such as Eesley and Roberts (2006a) and Kaplan and Stromberg (2003) found that successful entrepreneurs are those who do not stop establishing new enterprises after failure in the previous start-ups. It is evident from the research works of previous research scholars that luck plays very little role in helping an entrepreneur to establish successful enterprises. In such context, Chatterji (2005) showed that experience in working in a particular industry can improves skill set of an individual and the individual can start new enterprise by using the skill set gained. Honig and Davidson (2000) and Bhide (2000) also found that previous experience increases the probability of success for entrepreneurs. Bengtsson (2005 and 2006) found that probability of accessing fund through venture capitalist is greater for first time entrepreneur than a serial entrepreneur whose previous enterprises constantly failed. Modern research scholars such as Miner (2000), Shane (2001 and 2007) and Van Praag and Cramer (2001) argued that certain personality traits can decide success of entrepreneurs. According to them, an entrepreneur must have characteristics such as ability to take risk, ability to take initiatives to break the mould, communication skill, ability to foresee future opportunities, ability to identify market opportunities prior to others etc. Shane (2007) pointed out that it is not justifiable expect that an entrepreneur might possess all the above mentioned characteristics but an entrepreneur must be able to use few of those characteristics to achieve success. Up to this point of the essay, the researcher has intentionally omitted the role of luck due to the fact that very few research scholars argued in support of luck for entrepreneurs. Hence, it can be assumed that an entrepreneur can be successful by using certain personality traits, skills and experiences rather than waiting for luck to shine. Now, the researcher will unfold the story of Sir Alan Sugar in order to understand whether luck or skill helped the person establish a successful enterprise. Sir Alan Sugar served as the leader for Amstrad enterprise for nearly four decades and in this long duration, the person has not only offered many value for money products to customers but has also become one of the most beloved household name in UK. In UK, Sir Alan Sugar is known as the entrepreneur who had thought about the need of the price conscious middle class segment and offered low cost appliances by bringing down the price of expensive items. In the initial phase, Sir Alan Sugar created a market where there were no markets (Spital, 2008). On 1st November 1968, Sir Alan registered his new enterprise in the name of A. M. S. Trading Co. and stated that his company would offer imported goods such as car accessories, intercoms and lighters at cheaper price to customers. Name of the A. M. S. Trading Co. had slowly contracted to Amstrad in order to help potential customers to spell the brand easily. During 1969-70s, Sir Alan Sugar identified the demand of hi-fi stereo among British customers and started offering Garrard SP25 turntable stereo system. Sir Alan had reduced the cost of the stereo by replacing the costly vacuum-forming of stereo system by injection moulding. Such technological invention helped Amstrad to offer quality stereo system at low price (Spital, 2008). Following tables can be used to understand market opportunities for Sir Alan Sugar. Table 1: Market Quality High-value opportunity Market growth The concept of hi-fi stereo system with integrated turntable, amplifier and speakers was completely new to customers during 70’s and there was huge demand for such kind of offering. Yes Customer base Middle and low income customers who do not have the money to buy expensive stereo items. Yes Customer reliance and convergence Customer reliance on Garrard SP25 stereo system of Amstrad increased over time. Yes Customer interaction Apart from TV commercial and print advertisement there were no other promotional methods known to marketers to promote the brand. Moderately Yes Partnering and networks Amstrad established partnership with its technological partners in order to get support in terms of injection moulding of stereos. Yes Competition Low cost hi-fi stereo offered by Amstrad was completely new hence competition was pretty less at that time. Yes (Source: Spital, 2008) It is evident from the above table that there were opportunities for Sir Alan Sugar to earn revenue by offering low price hi-fi stereo system but the entrepreneur understood the fact that market of hi-fi stereo would get saturated sooner or later so he had to find other means to generate revenue. During 1970’s, Amstrad consolidated its market position by diversifying its product portfolio into audio system, radio, electrical appliances. Throughout 1970s, Sir Alan Sugar diversified its hi-fi stereo system into two product lines such as IC2000 and model 8000 in order to cater to the growing demand of customers. Innovation was done in the field of headphones socket, treble controls and many other features in order to attract more customers. By the end of 1971, Sir Alan Sugar shifted its factory to London’s Great Sutton Street in order to manufacture stereos in larger space with better access to resources. Sir Alan Sugar was not ready to stop the innovation drive in his company. In 1973, Amstrad manufactured Quadrosound stereos such as IC2000 Mk II and Integra 4000 which was first of its class and the idea was grabbed by customers instantly after placing it in market. The company was also one of the pioneers in UK when it comes to using integrated communication channel such as in-store advertisements, press release, TV advertisement, hi-fi publications and hi-fi exhibitions such as Sonex, Harrogate and NEC etc to promote products. Products advertisement of the company can be depicted in the following manner; Figure 1: AMSTRAD Advertisement (Source: Spital, 2008) Following tables can be used to understand the entrepreneurship skill of Sir Alan Sugar in the following manner. Table 2: Innovation Quality High-value opportunity Innovation leadership Throughout the 1970’s Sir Alan Sugar led Amstrad consolidated low cost British hi-fi stereo system market through constant product innovation. Yes Innovation related to customer needs ‘Quadrosound’ model of stereo of Amstrad addressed the need of customers to have high quality stereo experience. Yes Technology differentiation Innovation in terms of injection moulding and system integration helped the company to reduce cost of manufacturing. Yes Intellectual property The concept of IP protection was not very clear in stereo market during 1970’s and there were possibilities of counterfeiting. No Speed to market Sir Alan Sugar was the first person to offer hi-fi stereo system at affordable price to customers. Yes Feasibility of implementation It was feasible for Amstrad to implement injection moulding and ‘Quadrosound’ technology in order to increase functionality of the sound application and decrease cost of manufacturing. Being a cost-leader was only feasible way for small start-up like Amstrad to make its presence. Yes (Source: Spital, 2008) Table 3: Strategy Quality High-value opportunity Business growth In the initial stage, cost leadership strategy was used by Sir Alan Sugar in stereo division but in later phases, same strategy used for other product divisions in successful manner. Yes Strategic options Low cost strategy and in some cases, focused differentiation strategy was used by the Amstrad for achieving business success. Yes Value creation Profit margin for Amstrad was more than 15% when it was offering hi-fi stereos and Sir Alan Sugar increased the profit margin further by diversifying product portfolio. Yes Innovative business model Amstrad never stopped offering new products or integrating new technologies to achieve innovation. Adopting such unique business model had helped Sir Alan Sugar to offer new products in order to cater to varied requirement of customers. Yes (Source: Spital, 2008) Throughout 1970’s, Amstrad dominated the British stereo industry through multiple innovation and state of the art offering. During early years of 1980’s, Sir Alan Sugar registered shares of Amstrad in London Stock Exchange and the shares were registered at nine times higher price (Spital, 2008). Amstrad had already become leader in the field of In-Car Entertainment such as car radios, sub-bass woofers and graphic equalizers. During 1980’s, Sir Alan Sugar decided to focus on establishing own manufacturing facilities in order to decrease its dependency on sub-contractors such as Web Electronics, N Szirtes etc. The entrepreneur took the steps in order to build capabilities of Amstrad. For example, the company built 133,000 sq ft factory in order to provide space to all of its manufacturing facilities. During this phase, Sir Alan Sugar took the initiative to enter assembling business for large-screen colour televisions. As a result of such initiatives, Amstrad launched CTV2200 in order to penetrate in television market. Table 4: Investment Quality Opportunity Investment-reward Sir Alan Sugar invested huge amount of money in building its own assembling and manufacturing facilities. Amstrad got significant amount of return due to its right investment decision. Investor attraction Listing of the shares of Amstrad in stock exchange was priced at nine times higher which shows the attractiveness of the company towards investors. Risk Due to lack of experience TV assembling business, there were possibilities of taking wrong investment decision for Sir Alan Sugar. Viability & cash flow Breakeven was achieved within few years of inception for majority of business operation that had started by Sir Alan Sugar. Timescale Sir Alan Sugar moved into personal computing business during mid 1980’s because he knew that computing business would be the future. In such way, the entrepreneur opened the road of sustainable profitability for his company. (Source: Spital, 2008) Research scholars such as Kuratko, 2005), Burns (2010), Audretsch (2002), Van Praag and Versloot (2007) and Shane and Venkataraman (2000) pointed out that ensuring sustainability of business operation by identifying future business opportunities makes an entrepreneur special. Same assumption can be used for Sir Alan Sugar when the entrepreneur introduced various version of home computer loaded with multiple benefits such as floppy disk, games and business software. The company was the first home computer seller which had started incorporating disk drive or floppy drive in the computer. The entrepreneur offered home computer at the price of just ?399 to British customers which was 4 times below than the market price of other home personal computer. Sir Alan Sugar was the first person to offer CPC or home computer having word processing facilities and it was the virtual death of type writing in UK. With the help of Locomotive Software and voila, Amstrad invented the first home word processor PCW8256. It was the biggest achievement for Sir Alan Sugar and he got the marketing excellence award for PCW8256. Figure 2: Home PC of Amstrad Table 5: People Quality Opportunity CEO leadership PCW8256 was the idea of Sir Alan Sugar and it was nothing short of technological revolution. Management team effectiveness Technological and management team were able to convert Sir Alan Sugar’s idea of home PC into reality. Contextual experience Sir Alan Sugar took support of Locomotive Software and voila in order to fulfil his knowledge gap in terms of software manufacturing and home PC industry. (Source: Spital, 2008) A brief SWOT analysis of the business opportunities of Sir Alan Sugar in field of personal computing can be summarized in the following manner. Table 6: SWOT Analysis Strength Weakness Strong brand presence in UK established through previous ventures such hi-fi stereo system, assembled TV and car entertainment etc. Success of previous ventures helped Amstrad enhance its resource capabilities. The business was very much UK centric and over emphasis on low cost leadership created distance between the brand and premier customers. Conjoint effort of the both the factor negatively affected upstream growth of the company. Opportunity Threat The company had the opportunity to develop new variants of CPC in order to consolidate the market share in UK home computing business. As of mid 1980’s, Amstrad did not have any long term third party software vendors. The company would face competitive threat from big computing players like IBM, Microsoft etc. (Source: Spital, 2008) After going through the case study of Sir Alan Sugar and his extraordinary achievement, those previous research scholars were right that there is no such thing like luck which can help an entrepreneur to become successful. On the basis of the discussion, it can be said that an entrepreneur has to use three qualities such as, 1- ability to take risk, 2- ability to identify market opportunities and 3- communication skills in order to establish successful business venture. Task 2 Giving the GET or General Enterprise Tendency through Entrepreneurship & Small Business (2013) website has significantly helped me to understand my entrepreneurship potential. Eminent research scholars such as Hannon (2006) and Hytti and O’Gorman (2004) stressed on the fact that entrepreneurship behaviour of a person can be developed through management education. Fiet (2001) also pointed out that self evaluation of personal competency in social and business context can help a student to identify his/her entrepreneurship potential. L. S. Shulman and J. H. Shulman (2004) pointed out that teachers play vital role in social, educational and personal growth of students. However, GET test and other evaluations have revealed the fact that I am moderately competent in order to become successful entrepreneur in future. For example, according to the evaluation, I have certain skills such as drive for innovative thinking, rational thinking, setting personal goals etc and these skills might help me significantly in future professional world. However, my personal incompetence such as fear of taking risk, lack of self confidence, lack of communication skill might negatively affect my entrepreneurship potential in future course of time. These weaknesses can be termed as personal demons for me and I must face these demons in order to make myself able to run a successful business ventures. My average score was in the range of 8 to 10 in the GET test which shows that I have average capability to become entrepreneur. In such context, I can enhance my risk taking ability by involving in activities which need extreme amount of assumptions, guessing and making decision in uncertain situation. For example, I can play management simulation games with friends in the college in order to improve my risk taking abilities or I can even start a small business in collaboration with friends which would significantly enhance my decision making skills. I can also improve self belief by engaging in critical tasks or taking the initiatives to do tasks. For example, working as team leader in college projects, business assignment or handling group of team members will definitely boost up my confidence level. Table 7: Enhancement of Profile Area What I am going to do. How I am going to do it Risk taking skills Improve my risk taking skill. Playing management simulation games, starting up a small business in collaboration with friends and participating fund raising events. Self Confidence Improve my self confidence and ability to stick to my decisions Taking initiatives to handle business projects in colleges, coordinating team members to accomplish the project or handling difficult task without taking anyone’s help. Reference List Audretsch, D. B., 2002. Entrepreneurship: A survey of the literature. Brussels: European Commission, Enterprise Directorate General. Bengtsson, O., 2005. Repeat relationships between Venture Capitalists and Entrepreneurs. Chicago: University of Chicago. Bengtsson, O., 2006. Investor attitudes and the supply of capital: Are venture capitalists in california more forgiving? Chicago: University of Chicago. Bhide, A., 2000. The origin and evolution of new businesses. 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