Substance of Entrepreneurship - Essay Example

Introduction To many people entrepreneurship seems just an activity of launching a new product or service. But to others, it means much more. From the excitement of innovating and developing a bizarre solution to the rewards and recognition of success, entrepreneurship has a lot to offer. In essence, entrepreneurship is a process whereby a person initiates a new business venture or within an existing business venture launches a new product or service which does not exists before and is needed by the society. This innovation is based on an opportunity that the entrepreneur seeks to gain success in the form of monetary rewards and recognition. According to Joseph Schumpeter (Schumpeter), an entrepreneur may innovate in the form of new products, new production methods, new markets or new forms of organization. However, entrepreneurship does not just involve owning a small business. Firstly, there has to be some innovation. Secondly, entrepreneurs take much bigger risk and the gains are much higher. However, not all entrepreneurial ventures may be successful. The success of the business or idea depends on a number of factors. A lot of people have researched on different entrepreneurial setups and have looked into what makes an entrepreneur successful. In this research paper we shall analyze the process of entrepreneurship from different angles and identify the key factors which relate to the success or failure of the entrepreneurial venture. The organization that we have selected for this project is Sony (SCEI). This is because Sony is quite famous for its innovative products and technologies. Over the years Sony has releases some of the breathtaking inventions of today and is considered to be a pioneer in developing new ideas. Sony is also famous for its entrepreneurial culture and environment which supports innovation within the organization. Further, the product that we have selected is their PSP Go, which is a unique handheld gaming console for kids and adults. Sony’s Game business venture is made up of game software and consoles offered by the Sony Computer Entertainment Incorporation (SCEI).The current global digital lifestyle has lead to the innovation and evolution of portable digital games to match. Based on Sony’s Corporation five year strategy, (Sony’s Annual Report 2009, p.23), Sony Computer Entertainment unveiled PSP- GO (Play Station Portable go) in Tokyo on June 3rd 2009 which was made available in stores as from 1st October 2009.PSP go is a new evolution of handheld digital entertainment system, uniquely designed to suit the digital lifestyle of customers who enjoy downloadable material while on the move - go, (Sony’s Annual Report 2009, p.25). With both the initially existing PSP – 3000 and the latest PSP go, Sony Corporation seeks to enhance the ultimate gaming and entertainment experiences of consumers on the go while providing customers with the superior opportunity to choose the PSP system tailor made to suit their respective unique needs. These targets are achievable through substantial investment in technology entrepreneurship. PSP go is founded on the concept of technology entrepreneurship. According to Professor Tom Byers of Stanford University, technology entrepreneurship is a model business leadership grounded on the diligent process of identifying technology – intensive, high – potential entrepreneurial opportunities, amass essential resources such as talent and capital, and be able to manage rapid growth by use of principled, real-time decision making capabilities,(Byers,Dorf & Nelson 2010).This paper seeks to study the factors for entrepreneurial success by considering the development process of PSP go within Sony. Key Stages involved in developing entrepreneurial venture Developing a unique innovative product is one of the most challenging tasks. There is never the assurance that the product will be a success. Hence, in order to maximize the chances of success, the innovator needs follow certain guidelines and make his/her product go through key stages of product development. There are a number of product development models which have been proposed by different researchers by studying successful entrepreneurial ventures. According to the model proposed by (Ulrich), the innovator should follow the following guidelines as stages for development of his new product: Idea Generation This is the basic stage of the product development within an entrepreneurial venture. The innovator or the entrepreneur generates the ideas for the new product or service which can be launched in the market. The ideas can be based on a number of factors. The ideas could come up with a proper process which includes doing a SWOT analysis of the market and identifying where the opportunities that the organization can capture on are. These could also be a result of brainstorming towards new ideas or solutions. In many cases, ideas come up with inspiration from any external source. Because of its nature, this stage is called the “fuzzy front end” of the overall process. In the case of Sony’s PSP, the company was already a leader in gaming systems with its Playstation 1, 2 and 3. These products have been a huge success and were dominating the entertainment markets. However, having carried out a SWOT analysis, the team may have identified that they had an opportunity in the portable gaming consoles market. This is because no other competitor had targeted that area that successfully. Idea Screening While the previous stage just comes up with ideas for new products, this stage is essentially the process where those ideas are screened to study their feasibility and worth. There are a number of questions that are asked in this stage. Firstly, whether the customers in the target market will benefit from the product, the size and growth forecasts of the market segment, and the pressure from other competitors. Moreover, the technical feasibility and profitability of the product are also discussed in detail. In the context of Sony, apart from other aspects, the team must have analyzed, firstly, whether it is technically feasible to develop a powerful gaming console that can be portable and yet have the same features as normal gaming systems. Secondly, the team must have also analyzed whether the people in the target market will be willing to pay the high price for these devices. Concept Development and Testing In this stage, the entrepreneurial venture, particularly a new product, gets divided into stages: commercial and engineering. In the engineering side, the team works to develop the plan for developing the product and other related aspects to it. In the commercial side, the team seeks to identify the consumer side of the product including the target market and how they will be affected by the product. Issues such as trademarks, patents or copyrights are also discussed in this stage. Business Analysis (4 P’s) This is the core marketing stage. In this stage, the team decides to apply the marketing concept of 4 P’s to the product or service that is to be launched. The four P’s are product, price, promotion and place. In terms of the product, the team attempts to define what the product is all about which includes the features of the product and its impact on the target market. Secondly, they attempt to determine the price of the product in terms of the right price that the customers will be able to pay. In addition to that, they also determine the volume of sales, and based on that they compute the profitability. Finding the right price and estimating the correct volume is very crucial to the success of the venture. In Sony’s case, since there was no competition to guide them with the pricing, the team had to carry out surveys to identify the price people would be willing to pay. Promotion refers to the techniques that will be used for promoting the product amongst the consumers. This refers to the advertisement campaign of Sony for PSP. Their promotional strategy comprised mainly of media advertising as well as allowing people to test the product in displays. Place refers to the market that the team will be targeting. This means which countries or cities Sony will be selling the product in. Initially, they launched it for Japan and then expanded it to other markets. Beta Testing and Market Testing In this stage, a mock-up or a prototype of the actual product is prepared. The product is then tested amongst a selected group of people known as focus groups. Their feedback and suggestions are noted and these are incorporated to refine the product or service. In Sony’s case, they developed trial versions of the gaming consoles and collected different children to make them play with these. They noted down the reactions of the users and the feedback they received. Technical Implementation This phase solely deals with the technical implementation of the product or service. The stage covers the aspects of production planning, resource planning, logistical planning, quality control and technical communication. Commercialization This is the stage where the product or service is ready for launch in the market. The stage seeks to launch the product, launch the advertisement campaign for the product and other promotional strategies. Sony had initially promoted their product by allowing people to play games on trial devices in shopping malls and other public places. This allowed users to interact with the product and itself created a demand for it. Impact of external business environment on success or failure of entrepreneurial venture External business environment is very critical to the success of an entrepreneurial venture. The environment consists of a number of factors which impact the organization in any ways. According to (The Time 100), the following are some of the external business factors which have an impact on the entrepreneurial venture: Competitors Competitors affect the company directly and their impact is the most amongst all the other factors. Firstly, the business needs to study its competitors and compare with them to identify the strengths or the weaknesses of the organization. Based on that, the company can determine where it has the competitive edge. In the case of Sony, the competition was not directly present since no other company was involved in producing portable gaming consoles. Economic System This is related to the conditions of the economy and the current situation along with future growth prospects. It is important to consider the economic system to determine whether the people would be able to afford the product or service. Social System Social system is related to existing norms and regulations in the society. Although this does not impact in all products or services, in some cases the impact can be very strong and can lead to an end of the product or service. For instance, in certain societies, extreme violent games may be prohibited. Hence, Sony needs to consider this factor before launching PSP games in these markets. Political/Legal System This is related to the laws and legislature regarding the launch of products or services in the country. In some cases, political laws and policies may highly favor the development of a product, such as developing eco-friendly products. In other cases, the laws may ban the product from being launched in the country. Environmental System Environmental System impacts products or services which are related to, or may have any effect on the ecological environment within the country. Similar to political regulations, environmental regulations may also ban the product or service being launched in the country if it is considered a threat to the environment. Hence, Sony needs to be careful in their choice of materials to use only eco-friendly items while producing the devices or their accessories. Influence of the key people involved in decision making on the success or failure of the entrepreneurial venture The most important factor for the success or failure of an entrepreneurial venture is decision making. It lies at the heart of the entrepreneurial process and correct decisions can lead to an instant success of the venture while incorrect ones’ can lead to the death of the entrepreneurial venture. There are different decisions that are required to be made by entrepreneurs for example, refining the business idea, identifying a target segment or niche, providing a solution to that target market to fulfill a need, acquiring or relieving resources, personnel recruitment etc (Ashford, 2008). Some of the key people involved in the development of Sony’s PSP were: Chris Cao – Game Director Wes Yanagi – Sr. Producer Mark Anderson – Art Director Jens Andersen – Creative Director The entrepreneurial decision making process and success of the venture because of these decisions can be explained using the following business dimensions (Diamanto, 2006). Strategic Orientation The strategic orientation is dependent upon the perception of the opportunity by the entrepreneur. The opportunity might have risk involved in it, will offer challenges and there will be no contemporary process to take decisions. Therefore, the success or failure of the venture depends upon the risk taking ability of the entrepreneur and the motivation to stick to the initial idea rather than formulating newer ones’ everyday. Thus, the strategy must be devised from day one and the entrepreneur should know exactly what he wants to achieve with his venture. Usually an entrepreneur is overwhelmed by the business idea and forgets to perform an in depth feasibility analysis before starting the actual work. While this approach may pose significantly higher risks it is not the correct way to do things. The entrepreneur must not let his gut feelings to overpower rationality. Commitment to Opportunity The level of commitment towards the opportunity is another key factor in the success of the venture (Shepherd, 2005). The entrepreneur needs to be focused and committed to the venture. It is the top level commitment that will make the venture a success, hence the entrepreneur will have to remain focused on the business idea and motivate others to perform so that the final outcome results in success. Thus, an entrepreneur will be faced by situations where there is prompt action required, will have to take risks and all this will have to be done in a short span of time. So if the entrepreneur is committed to his task then the odds are that it will pay off in the long run. Commitment of Resources An entrepreneur always has resources that are committed at certain time intervals which are based on certain tasks or objectives being accomplished. These resources are often acquired from others and are difficult to obtain. Hence, the entrepreneur will try to maximize the output of the resources that are being used. However, an entrepreneur rarely has the sufficient budget to go through all the phases of the entrepreneurial process by self support. He will have to rely on venture capitalists or private investors at a point in time. This decision has to be taken carefully and will impact the success or failure of the venture. Identify and explain why you might have responded in the same, or different ways, to the decision makers in the entrepreneurial venture Sony has had the strategic orientation for a very long time and it has been to be innovative. Sony has relied on providing breakthrough products to the consumer electronic market. And this orientation has been paying off for the company. If I were to make decisions for Sony regarding the PSP Go, I would have stuck with the current strategy of focusing on innovation. With a though competition from other electronics manufacturers Sony can gain a competitive edge by providing consumers with more technologically savvy products that show innovation in all aspects. Hence, my strategy will be focused on gaining a higher market share as compared to the Nintendo handheld devices. It will also be easier to implement by highlighting the innovation behind the PSP rather than other features. The sleek design, power and the functionality of the PSP are not easy to get into a single handheld gaming device (Sony. 2009). Therefore, after performing an initial comparison of the market I will stick to the initial idea of providing people with a gaming console that will not only cater to their gaming needs but also to their music, internet and file sharing needs. Since Sony manufacturers an array of consumer electronic items the focus on a specific consumer product is not as high as in other companies which only focus on fewer consumer electronic items and try to make the most in their own category. Therefore, the level of commitment to the opportunity must be increased and should be focused on particular products. Since, the company currently works using Home Division, Personnel Imaging and Audio division, networked technology and services division and the Business solutions etc. Sony should introduce a new division for the gaming devices and consoles and this division should only focus on the trends and the needs in the gaming markets and should respond to those needs by breakthrough technological products. Hence, if I was to take decisions for Sony I would make a new division that will be responsible for catering to the gaming needs of the world. As Sony does not have an independent division for the production of the PSP I would ensure that commitment of resources is well maintained. Until dedicated resources are obtained and an independent division is made I will ensure that the resources are committed to the design and development of the Sony PSP. For this to happen the people will have to motivated, they will have to believe in the product and then work accordingly to make the product a success. It is possible that when same group of people try to do multiple work innovation may be compromised. This will lead to the failure of the product as Sony differentiates itself from the market on basis on its innovation. Therefore, in order to make sure that the innovation is not compromised I will ensure that a separate division is created which will be responsible for all the activities regarding gaming consoles, i.e. from determining consumer needs to fulfilling them by manufacturing a product. Conclusion The success or failure of an entrepreneurial venture depends upon a lot of critical factors which range from the refinement of the business idea to the method of implementing the idea. A sound business plan is often required for the initial stages of the business venture. Once a plan is formulated and the necessary requirements are made a firm or an entrepreneur can go ahead with the implementation of the venture. Other important aspects for the success of the venture are the risk taking characteristics of the people who are involved in the decision making process. The decision making process itself is a key element for the success of the venture. If decisions are made based on a good understanding of the problem domain then they might help in the long run. Thus, the strategic orientation of the entrepreneur and the strategic decision making plays a vital role in the success of the entrepreneurial venture. Similarly, for the venture to succeed one needs a high level of commitment not only from the entrepreneur himself but also from the entire team. The team will have to work as a single unit and follows the strategic orientations in order to make the venture successful. Similarly, the entrepreneur needs to differentiate his offerings from the others so that consumers can easily differentiate between products and relate to them. Hence, at Sony they rely on innovation to be their differentiating factor from competition. Appendix Sony Computer Entertainment Japan president displays new PlayStation Portable in Tokyo, Japan Public gather at the launch of Sony’s PSP References Ashford, C, 2008. Entrepreneurial Venture Creation: The Application of Pattern Identification Theory to the Entrepreneurial Opportunity-Identification Process. International Journal of Business and Management, [Online]. February,2008, 4-5. Available at:http://www.ccsenet.org/journal/index.php/ijbm/article/viewFile/1666/1575 [Accessed 15 May 2010]. BusinesDictionary.com. 2010. external environment. [ONLINE] Available at: http://www.businessdictionary.com/definition/external-environment.html. 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