Management and Entrepreneurship - Essay Example

Enterprise and Entrepreneurship Table of Contents Enterprise and Entrepreneurship Table of Contents 2 Introduction 3 Entrepreneur 3 Main Discussion 6 Management and Entrepreneurship 6 Entrepreneurship Models and Schools of Thought 7 Conclusion 10 References 12 Introduction An entrepreneur is an individual who floats an enterprise. He is the one who constantly looks out for any changes in the surrounding business environment and incorporates the same in his venture. Entrepreneur has been defined differently by economists and sociologists. In the view of the economist an entrepreneur is one of the four factors of production. According to sociologists entrepreneurship is an integral part of some cultures and communities. There are others who regard entrepreneurs to be risk bearers with the ability to churn out new ideas. In a business an entrepreneur behaves like its manager and is expected to use the methodical discipline practiced by the managers. One thing that must be borne in mind is that the managers handle the business affairs on the behalf of actual owner. Their level of authority is defined by statutes and they cannot surpass the same. This often comes in the way of effective decision-making. The managers may view some of the projects to be lucrative but the disapproval of the shareholders who are the owners in the case of public companies may become an impediment. The inability to take up risky ventures affects business profitability. Compared with managers an entrepreneur enjoys more authority. The role of an entrepreneur goes beyond an investor or capitalist or employer. If an entrepreneur considers a business opportunity to be lucrative he may take the challenge. He does not have to seek for any approval as in the case of managers. The managers cannot afford such risks as in the event of a failure it can also result in a loss of job. The entrepreneur does not have to face such constraints. Entrepreneur The word entrepreneur comes from the French term “entrependre” that means an individual who undertakes the business proposition. In the words of Peter Drucker, an entrepreneur looks out for changes, responds to them and taps the opportunities. Innovation is an important tool in the hands of the entrepreneur by way of which he transforms “a source into a resource”. According to Schumpeter, an entrepreneur goes beyond the existing lines of production to launch new products and services (Sethi, n.d.). IO (individual/opportunity) nexus regard entrepreneurs to be risk-bearers. An entrepreneur has to assess the industrial attributes in order to gauge the available opportunities. For instance the fragmented industries present the opportunity of exploiting the economies of scale that helps in the consolidation of the available businesses. The mature industries offer the opportunity to refine the existing products and bring about innovation in terms of low cost and improved quality. Entrepreneurs have to remain ‘alert’ to any possible opportunities. This form of alertness does not require forceful search rather it refers to the continuous scanning of the business environment in order to identify ant market imperfections. They are always in the search of mis-priced resources that the others fail to identify. Their ability to recognize the opportunity before others gives them the opportunity to enjoy the associated benefits. The Discover theory assumes risk-bearing to be an integral part of an entrepreneurship process. At the time an opportunity is identified it is difficult to predict its success with certainty. For this reason the process of entrepreneurship is associated with risk. The opportunities arise based on a string of decisions relating to their exploitation. As per Creation theory the changes in industry attributes are difficult to predict. In such situations the opportunities cannot be anticipated based on the knowledge of industry structure. It has been observed that analysis of market and relevant industry structures enables the discovery of ‘opportunities’. Through the process of hypothesis testing new opportunities are identified. This means that the opportunities do not have an independent existence rather they are created by the actions of the entrepreneurs (Alvarez, 2005). Bill Gates is heralded as the “entrepreneur of the millennium”. His company Microsoft is a leading software company in the world. At the age of 44 he is the richest man in history with business fortune of trillions of dollars. He is one person who has made computers a part of our daily life. He draws admiration as well as animosity for his business tactics. At the age of 25 Gates had persuaded IBM to retain the rights of the DOS operating system that was developed by him. In anticipation of quick replacement IBM paid for its license and did not purchase the same. Today Microsoft operates nearly 90 percent of the desktops computers in the world. Over the years Microsoft has been successful in increasing the net profits by 40 percent annually. Gates and Paul Aalen his business partner had realised much earlier that software is not merely a hardware adjunct and in fact it is much more valuable. This reflects the ability of the entrepreneur to ‘discover’ things much in advance. This has enabled the Microsoft owner to standardize the technology. Despite the huge success of the company Microsoft till date is the only major company that is still operated like a business start-up having simple authority levels. The employees of the company are grouped into small teams with limited budgets. The reason for this lies in the belief of its owner highlighting the entrepreneurship approach of Bill Gates. For all these reasons Bill Gates is seen as a visionary which is one of the pre-requisites of an entrepreneurship quality. His achievement vests in his ability to adapt the existing technology as per the specific market needs. Main Discussion Management and Entrepreneurship The aspect of management is largely linked with aspect of entrepreneurship as an entrepreneur has to also manage the business apart from being the brainchild behind a particular business organization. Thus an entrepreneur serves a dual role of being a manager and an owner of an organization. This is stark contrast with managers whose main function is to ensure proper running of a business. The task of a manager calls for lesser innovation and greater managing skills which is just the opposite in case of an entrepreneur. The main task of an entrepreneur revolves around developing new ideas not only for setting up a new venture abut also for the expansion of an existing venture. In other words a manager normally performs and handles routine tasks but an entrepreneur has to undertake out of the box thinking and move beyond routine tasks and activities so as to generate new ideas for the business to grow and expand. In addition to the aspect of innovation an entrepreneur also has to take care of aspects like handling uncertainties in the business environment as well as the trends in industry and market. Building an organization also serves to be a prominent role for the entrepreneur. Planning along with control and coordination are also handled by an entrepreneur. The thinking process and working style of an entrepreneur differs with that of a manager as primarily the manager is responsible for successful operation of a business in the long term period whereas an entrepreneur takes care of the initiation of ideas necessary to start a new venture. A manager also has to undertake fewer risks as his/her job calls for more of routine based activities which have comparatively fewer risks than the task of an entrepreneur whose function is associated with high risks. The difference in the thought process and way of functioning also differs from a manager to an entrepreneur as the entrepreneur is largely driven by innovation and the perception and is responsible for initiating and managing change, moreover the entrepreneur also has to handle larger volumes of risk. The role of a manager is quite opposite as the manager handles fewer risks and works according to a set of pre defined regulation which requires less innovation and lays greater emphasis on the adherence to a particular set of terms and conditions that are predefined in nature. The difference between an entrepreneur and a manager can be best described by the words of the great management leader Peter Drucker who has stated that “the process of entrepreneurship involves directing the use of resources towards progressive activities rather than for administrative efficiencies” (Sethi, n.d., p.7-12). It has to be understood that the role of an entrepreneur largely calls for twin responsibilities of innovating as well as managing an organization whereas the role of a manager involves handling just routine functions based on pre determined tasks. Entrepreneurship Models and Schools of Thought The aspect of entrepreneurship is governed by three major schools of thought namely the religious school of thought, economic school of thought and psychological school of thought. The religious school of thought was conceived by Max Weber and focused on religious aspects. This school of thought equated an entrepreneur with a protestant Christian who was highly devoted to God and had overcome the anxieties of life by resorting to hard work. This school of thought has no relevance as entrepreneurs come from all religions. The economic school of thought proposed by Schumpeter states that entrepreneurs are by nature innovative and their primary task is to enhance the profit margins of the organization while their secondary task revolves around building business empires. The psychological school of thought was first proposed by McClelland who stated that entrepreneurship is a diverse function which is comprised of different psychological functions. The school of thought also emphasises upon individual traits like innovation, adaptability and ability to handle ambiguity in the environment as the principal factors that define an entrepreneur. In general also have a high appetite for achievement in their tasks. This calls upon the need for entrepreneurs to have greater innovation and skills in the individual aspiring to be a successful entrepreneur (Kumar, 2006, p.15-16). The schools of thought provide a clear basis for differentiating the thought process of an entrepreneur with a manager. It is quite clear that the role of an entrepreneur calls for greater innovative and out of the box thinking which are not required by a manager who handles routine tasks. The difference in the basic roles of an entrepreneur and a manager reveals the difference in the attitudes and mindset of the individuals. The entrepreneur serves the role of a leader who performs dual role of a manager and an innovator whereas the manager only performs routine tasks which are normally predefined in nature. Figure 1: Entrepreneurship Model (Source: Krueger, 2002, p.9) The figure above shows a conceptual framework of a model that defines entrepreneurship. This model is based upon the general precedents and consequences of entrepreneurial behaviour along with different variables that help in moderating the interrelationship between a firm and entrepreneur. The model is also based upon nine different variables and also defines the interrelationship between these variables. These variables are grouped together under internal, external and strategic variables. The model states that the combined effect of these variables defines the thought process of the entrepreneurs. It also shows how a difference in the task and factors affects the thought process of an entrepreneur and a manager (Krueger, 2002, p.9). The difference of behaviour between managers and entrepreneurs assumes greater aspects in large multinational organizations. In these organizations the role of entrepreneur becomes even more diverse and challenging as the organization operates across different nations. The role of an entrepreneur in such organizations becomes even more challenging as he/she has to handle managerial as well as innovative aspects of the organizations. Managers and entrepreneurs differ significantly in their behaviour and responsibilities. The difference in behaviour can largely be attributed towards the difference in tasks which are being performed by entrepreneurs and managers in organizations. The present day market competition has generated greater challenges for entrepreneurs to innovate their thought process so as to attain long term profitability and sustainability. A manager is largely concerned with maintenance related aspects whereas entrepreneurs serve to have dual roles of management and innovation which calls for a greater for greater responsibilities of an entrepreneur towards an organization. Conclusion The role of an entrepreneur extends beyond the management function. The manager operates within a defined framework and has to operate within the same. Unlike the manager the authority of an entrepreneur is not restricted. He has the independence to discover new business opportunities and carry them forward. Any new opportunity is also uncertain as well as risky. It is the entrepreneur who can bypass these uncertainties and develop new products and services. In short he plays the role of an innovator who provides the market with new products and services. He is able to identify the opportunities that others fail to identify and capitalise on it. Therefore, it is the entrepreneur who makes use of market imperfections to identify the avenues that he can turn into lucrative business opportunities. In the prevalent stiff market competition the entrepreneur plays an important role in managing and innovating business practices. In large businesses the managers must be given extra discretion so that they can act with more efficiency. References Alvarez, S.A. 2005. Theories of entrepreneurship: alternative assumptions and the study of entrepreneurial action. Now Publishers Inc. Krueger, N.F. 2002. Entrepreneurship: critical perspectives on business and management, Volume 3. Taylor & Francis. Kumar, A. 2006. Corporate entrepreneurship: strategic imperative for growth. ICFAI Books. Sethi, J. No date. LESSON- 1 ENTREPRENEUR AND ENTREPRENEURSHIP. [Pdf]. Available at: http://www.du.ac.in/fileadmin/DU/Academics/course_material/EP_01.pdf [Accessed on January 15, 2011]. Read More