Entrepreneurship as defined by Stevenson and Jarillo-Mossi (1986) focuses on opportunity and is therefore particularly relevant to the marketing interface; it is the process of creating value by combining resources to exploit an opportunity (Hills 1994, p.7). Entrepreneurs perform the function in society of identifying opportunities and converting them into economic value. Churchill and Muzyka’s (1994) characterization of entrepreneurship is “ a process that takes place in different environments and settings that causes changes in the economic system through innovations brought about by individuals who generate or respond to economic opportunities that create value for both these individuals and society” (p.16). Entrepreneurship is critical to enhancing the innovativeness and responsiveness of businesses, to boosting productivity and improving cost structures and trade performance (Harper 2003, p.1).
Components of the Entrepreneurial Process
1. Environments
Entrepreneurship can occur in different economic, social, and political environments. These can be Western market-based economies, Eastern and Central European countries coming out from under central economic planning, or emerging and Third-World economies. the Western model of entrepreneurship is not totally applicable to developing economies where the problems faced by the entrepreneur and the solutions required for successful innovation can be considerably different. Economic innovation can, and does, occur in all of these environments; the fundamental entrepreneurial process can be seen at work, but in different ways and in greater or lesser degrees (Hills 1994, p. 17).
2. Settings
Within a given economic, social, or political environment, entrepreneurship can take place in a number of different settings: new ventures; existing small or medium-sized enterprises (SMEs); large-scale businesses; not for profit enterprises or, as Osborne (1992) has so vividly described, governmental organizations. The exact nature of the entrepreneurial process may vary in these different settings, as will the problems faced and the solutions required, but economically innovative acts that create value for individuals and society can still take place. It is the act and its outcome, not the environment nor the setting that is the essence of entrepreneurship (Hills 1994, p. 17).
3. Innovations, Individuals, opportunities and Value
Innovations, by definition, create something new. If this creation does not involve economic well-being, no matter how important the creation may be in a physical, social, or cultural sense, the innovation is not entrepreneurial. If, however, either the creating individual or someone else sees an opportunity toapply this creation in a way that adds economic value to society and then implements this vision, then this individual is an entrepreneur (Hills 1994, pp. 17-18).
The Entrepreneur
Entrepreneurs are gap-fillers who take steps in correcting market difficiencies using their skills. Entrepreneurship involves determination, drive, motivation and perseverance. The entrepreneur must be willing to take individual responsibility to set goals, to solve problems and to reach goals by their striving. The entrepreneur assumes accountability for the inherent risks of a new enterprise or venture. Entrepreneurs are considered as people create system of offering products and services in order to gain profit.
According to Schumpeter, (1966), the function of entrepreneurs is to reform or revolutionize the pattern of production by exploiting an invention or more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way by opening up a new source of supply of materials or a new outlet for products, by reorganizing and industry (p.132). Entrepreneurs stimulate the economy by introducing innovations with a view to making money. They assume risk, manage activities and efforts of people besides themselves, receive profits or cover losses, discover new ways of doing things, and find new products and markets (Roberts 1991, p.48).
Business Environment Analysis
Firms operate in changing and at times hostile business environments. The environment does not always accommodate the interests of the firm. An organization in its environment might be likened to a ship at sea. Sometimes the sea is rough and the ship has difficulty in making progress on its journey, sometimes it is calm and the weather is clear so that the ship can make steady progress. Sometimes the weather is malevolent: there are thick fogs and icebergs which create risk for the very survival of the ship. Organizational environments present the same kinds of opportunities and threats for the organization as the sea does for the ship (Proctor 2000, p. 121).
The business environment is the setting within which a business operates, formulates policies and makes decisions. The internal environment comprises the various assets and resources possessed by the organization. That is its workforce, plant and machinery, know-how, financial resources, etc. The external environment refers to people, institutions, developments, etc., which exert an external influence on how the organization performs. Firms need to know all about the business environment in which they operate. It is essential that they can anticipate the changes that are likely to take place in the marketing environment in the foreseeable future. Organizations can also exercise their own influence on the environment. Among the ways that this can be achieved is the development and commercialization of new technological ideas. These new technologies then become part of the business environment and in their turn have an impact upon what other organizations can do (Proctor 2000). Business environment analysis is important in identifying opportunities for future success. It includes an industry or market investigation, and a focus on customers, competitors, suppliers, substitutes, the changes in the society’s politics and economy, social tendencies and developments in technology.
Business Plan
An organization or a business creates a business plan as a part of its strategic decision making process. It is a written statement of an organization’s expectations together with the resources and actions that are needed to achieve it. The business plan is being used by fast-growing firms to analyze and properly manage the external and internal environments (Baker et al., 1993).
Components of Business Plans
1. Executive Summary
The executive Summary is a concise coverage of the business plan’s major points. It is crucial in convincing the reader of the worth of the business plan.
2. Business Description
This will include a description of the business and its current and proposed future legal status (for example, a franchise, or independent producer and whether it is a private corporation, partnership, proprietorship/sole traders and so on), the management team and any strategic alliances (proposed or existing) with other businesses (details and letters of agreement are likely to be attached in an appendix). Also included may be a company mission review, short- and long-term goals, objectives, strategy, and identification of the key personnel involved in implementing the strategy (Glancey and McQuaid 2000, p. 218).
3. Markets and Competition
There should be a thorough analysis of the existing as well as proposed markets for the business. The market must be carefully defined in terms of size, trends, segments, demand elasticity, macroeconomic influence, and social and demographic changes. The competition must also be analyzed in terms of the general market and the specific market niche involved. The information gathered from competitors such as their strengths, weaknesses, products, and operation are helpful in dealing with potential competitors in the future.
4. Products and Services offered
The characteristics of the product or service need to be specified and the product differentiated from competitors. This may cover the full service or product including, for instance, whether the product is to be sold through direct sales or mail order and how after sales service will be provided. Any further design or development work required has to be identified. The product may be differentiated from competitors in a number of ways, such as technology, product or service quality, speed of delivery, location and so on and use of e-commerce (Glancey and McQuaid 2000, p. 220).
5. Marketing
After analysing the market a marketing strategy will need to be developed. This may include the product characteristics and product support services, as well as pricing, promotion/selling and distribution plans. These and the market analysis are used to estimate sales forecasts or projectionsMarketing is a crucial part of the plan, because if estimated sales are not achieved then the entire financial viability of the project is affected.
6. Operation and Production
The operation and production part of the plan presents information about the manufacturing process of the products. It also presents expected problems regarding the technology. Also described in the plan may be the systems needed to maintain product quality, ensure environmental compliance and reduce environmental impacts, the use of sub-contractors and the lead times for getting up and running, and changing product levels. The way in which the business operates and how operations are controlled may also be considered (Glancey and McQuaid 2000, pp. 221-222).
7. Financial Data
This part of the business plan presents financial forecasts. Each of these must be consistent with the rest of the plan and with each other, and should show present and future financial needs (Glancey and McQuaid 2000, p.222).
8. Company Structure
The structure of the company and responsibilities of key managers must be identified. In addition, the current ownership of the business and changes in the ownership due to implementing the plan need to be shown.
Franchising
Franchising is a method of organization that combines large and small business into a single administrative unit. A franchise is usually permission or a license granted by the franchiser to the franchisee to sell a product or service in an agreed upon territory. Franchising is typically a continuing relationship in which the franchiser provides assistance in organizing, training, merchandising, systems, and management in return for payments from the franchisee. There are two general types of franchise organizations.
1. Product franchising, the first to develop, remains the most important in terms of the value of total sales. Under this system, a manufacturer markets its output almost entirely through highly specialized retailers, who, in turn, rely on the manufacturer for most of the products they sell. This system first appeared in the mid-nineteenth century, when the makers of costly and complex goods such as farm equipment and sewing machines reached a size where their increased output and expanded markets forced them to modify their agency systems to better coordinate and control the flow of goods from factory to consumer. Today, the automobile dealership is probably the most common example of this type of franchise.
2. Business-format franchising, the second type to develop, is where the outlet itself — together with a comprehensive package of services to support it — is the product. Business-format franchising emerged in the early twentieth century, when the spread of big business led to the creation of a wide variety of specialized services and managerial tools such as professional advertising and sophisticated accounting systems. These services form the core of the package that business-format franchisers market to the would-be small business owner. By the late 1950s perceptive entrepreneurs realized that, to use a popular example, there was more money to be made selling hamburger stands than in selling hamburgers. Once business-format franchisers understood this and began producing small businesses, they found their success depended on applying the principles of mass production to the bundle of services they provided to their franchisees. When this happened, the franchise industry was born (Dicke 1992, pp.2-3).
Advantages of a Franchisee
1. Lower risk of failure
2. Established product/service
3. Franchisor experience
4. Group purchasing power
5. Instant name recognition
6. Uniformity and efficiency due to operational standards
7. Start-up assistance
8. Financing arrangements aid
9. Regional and national marketing power
Franchising is helpful to some entrepreneurs who are planning to start a business, but lack vision, creativity, resources, or skill to start a completely new venture (Kallianpur et al 2001, p.106).
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