Creation and Management of a New Venture

Creation and Management of a New Venture Introduction For many years, entrepreneurs have played an important role in the global economy. They develop new business enterprises which create job opportunities, increase economic activities and steer innovation forward. Unfortunately, entrepreneurs remain an often ignored segment of the business context despite their positive influence on economic prosperity. In spite of decades of research into the segment, researchers have not come into consensus about the universal definition of entrepreneur.Advertising We will write a custom essay sample on Creation and Management of a New Venture specifically for you for only $16.05 $11/page Learn More Moreover, there is no common agreement about the exact characteristics and behaviors that describe entrepreneurs. Even though they operate across different sectors and environments, they still share important traits and behaviors. This paper investigates the wider context of the entrepreneur as the founder of busines s ventures. There is a discussion of the founder including the traits and motivation to entrepreneurship. The factors that determine the success of a start-up business are investigated. The research is not complete without analyzing the transition from start-up to growing business and the two different situations. The entrepreneur An entrepreneur can be defined as an innovator who establishes a new business enterprise offering new or existing goods and services in order to gain profit. A different definition is given by Mohanty (2005) as an individual who brings resources, materials, labor and other assets into an arrangement that increases their value and also introduces innovations, changes and new order (pp.1-2). Other definitions consider an entrepreneur as the person typically driven by some forces, the desires to achieve something, experiment, accomplish or escape the authority of others. On a business perspective, he may either appear as an aggressive competitor or an ally wh o creates wealth for others and finds better ways of employing resource and generates jobs others are delighted to get (Wong et al., 2005). In almost all definitions, there is a general agreement that the behavior of an entrepreneur includes; initiative taking, resource planning and risk taking (Hisrich, Peters Shepherd, 2005). Entrepreneurs are made rather than born, though a large number of the most successful founders established their first business venture at a young age (Ernst Young, 2011). Despite this age, most of them did not launch directly into their business from higher education. Many surveys describe them as transitioned or had some experience elsewhere before establishing their ventures. Other factors such as the background also influence entrepreneurs. Pitje, the founder of New Gx Capital, a telecommunication company based in Johannesburg acknowledges that his entrepreneurship motive was highly influenced by being brought up in an entrepreneurial family (Ernst You ng. 2011, p.8). Indeed, there are no entrepreneurship genes, but are characteristics and experience that increase the chances of an individual choosing this path and eventually succeeding in the long run.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More A true entrepreneur must have confidence in order to gain a sense of self-esteem and faith in his ability to meet challenges by acting and then gaining self-belief by seeing results. He should feel a sense of ownership and take responsibility for getting things done rather than viewing problems as someone else’s. He works to sharpen up communication skills by taking advantage of the available resources. An entrepreneur should be passionate about learning and seeks out information. He should be a good team player and system-oriented in order to connect the human resources to organization goals. He should be a leader by example and appreciate, support, motivate and reward others. He should not be afraid of risk but be ready to take chances. Getting into business Business ideas and opportunities are relevant to entrepreneurs as innovators and risk takers. Business ideas relate to the facts that influence the success of a venture while business opportunity is about understanding the means to exploit the ideas. Sarasvathy (2001) is of the opinion that causal reasoning is the very source of business ideas. On the other hand, effectual reasoning leads to the realization of business opportunities. The fact that effectual reasoning demands imagination, risk-taking, spontaneity and salesmanship enables entrepreneurs to imagine and execute positive effects that can be created with true self-esteem. The opportunity to generate wealth and become own bosses is the key attracting factor to entrepreneurship. Evidently, this has intensified the researches on SME growth and more significantly the formal and informal attr ibutes of entrepreneurs who have driven their ventures successfully to growth-stage (Rose, Kumar Yen, 2006). Literature suggests that the important areas for start-up entrepreneurs are leadership, management skills, entrepreneurial orientation, human capital, competencies, personality attributes and circle of network (Rose, Kumar Yen, 2006). The qualities related to the high desire to achieve contribute greatly to the success of new business. Indeed, the entrepreneurs score higher than managers in desire to achieve, tolerance of ambiguity and risk-taking predisposition. The desire to achieve, risk-taking predisposition and internal locus of control are key factors contributing to the success of start-up businesses.Advertising We will write a custom essay sample on Creation and Management of a New Venture specifically for you for only $16.05 $11/page Learn More It is also suggested that risk-taking is a major attribute in differentiating between managers a nd entrepreneurs. It is a fact that entrepreneurs are risk takers especially in fields where they have competencies or control in attaining profits. They are required to embark on the unknown and vague situations. Therefore, they are supposed to demonstrate more tolerance of uncertainty than others. In regard to innovativeness, it is the focus of entrepreneurship and an important characteristic of an entrepreneur. In essence, entrepreneurs should be more innovative than other business stakeholders. Another important aspect is to select the most appropriate market entry strategy. According to Allen (2011), entrepreneurs are required to assess the market environment critically before making the final entry decisions. There are two strategies that founders can use to enter the new market. The first entry strategy is the strike force approach which is non-aggressive and focused. It is an entry strategy to a narrowly defined market that uses very few resources. It is most appropriate for hostile and sparse markets where a venture can enter quietly and establish its business, arranging the groundwork for expansion. The other entry strategy is guerrilla tactics which is characterized by the employment of few resources to strike on the most effective areas of the market. This strategy is appropriate in bountiful but hostile markets. The wider market supports a broad entry, though the presence of competitors demands a less-aggressive approach. Success factors for new ventures The success of a new business venture is determined by a number of factors including personality traits, personal initiative, human capital and competency (Verheul, 2010). Personality traits of an entrepreneur impact on business performance directly and the business process indirectly. However, the factor is more relevant to the success of start-up business if the entrepreneur takes action and initiative. A study conducted by Frese and Fay (2001) revealed that employee with higher personal initiat ives portrayed better performance in the workplace. Likewise, entrepreneurs with high personal initiatives are capable of staying ahead of competition and are role models to their employees. Personal initiative is action-oriented and goal-directed and thus closely associated with an active strategy. When used to determine success of a new venture or to lead the firm to growth-stage, initiative plays a significant role in overcoming barriers.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Human capital is another important factor which is considered passively or where people react to the environment (Rose, Kumar Yen, 2006). It entails knowledge and capacity including education and experience. Human capital contributes greatly to new ventures and their growth. Elements of human capital of an entrepreneur such as family, environment, work history, education, role models, regulatory bodies, age and support networks impact on the success of the business venture. Likewise, competency is an important factor in ensuring the success of start-ups. An entrepreneur faces greater challenges when the business moves to growth-stage as it experiences what is referred to as strategic reflection point (Allen, 2011). Those with right competencies are in a better position to overcome the emerging challenges. Survival and growth of small business A calculated reflection point corresponds to a time in the lifecycle of the new venture when the basic operations have extremely changed. Bus inesses progress through steady, predictable stages of development called lifecycle phases. In the start-up phase, the venture is concerned with inventions of products or services, setting up market segment, attracting new customers and production as well as marketing of the product. As the firm starts to grow fast, it will require a formal organization and coordination in response to the increased functional activities (Allen, 2011, p.364). During growth phase, the entrepreneur is compelled to emphasize on long-term strength while keeping up the innovative spirit that led to success in the first phase. As the founder of the business, the entrepreneur has an important role to play in long-term success of the business. He supports the vision of the firm and inspires employees to champion the vision. Nevertheless, the firm will continue to grow and at some point the entrepreneur must emphasize and focus on various areas of talents and competencies in order to steer the business toward s long-term success. In the struggle to create momentum and grow their ventures, entrepreneurs encounter three key challenges: people, funding and know-how (Ernst Young, 2011). Finance is the biggest problem faced by entrepreneurs as noted by many researchers on SME (Rose, Kumar Yen, 2006). It is very hard for these businesses to get funds since the banks are not ready to lend small amounts of money. The challenge of getting the right people to implement the entrepreneur’s strategic vision is a permanent one. All business entities struggle with attracting and retaining employees that help the business to grow. Once in the business, the entrepreneur faces a big problem of finding people with the necessary skills to join the business. In addition to the right people, entrepreneurs need the right knowledge in order to take their business forward. They must have knowledge regarding different areas such as marketing, sales, finance, operations, logistics and leadership. Some arg uments have been put forward that the entrepreneur should be replaced by professional mangers due to their poor competencies as the firm begins to move from start-up phase to growth phase (Hisrich, Peters Shepherd, 2005). However, several researches have proved this claim to be invalid (Wong et al, 2005). There is no evidence that managers perform better in growing firms, but entrepreneurs can learn to manage effectively. With a social network support, founders have the ability to organize and synchronize networks between organizations and individuals. Informal network support such as from relatives, friends, acquaintances and previous workmates can benefit the firm. As the venture grows, entrepreneurs should be attuned to promoting the business and its products, understand the needs of the market and customer feedbacks. Understanding the trends and future expectations as precisely as possible will allow long-term continuation of the venture. Additionally, entrepreneurs naturally f ocus on the quality of goods and services, competitive planning and strategies as well as the improvement of products. They must also be included in strategic planning regarding to competition, because it guarantees the future and survival of the business. As they move away from routine accounting t roles, the entrepreneurs need to have a bigger picture of the firm’s finance. It will be important to assign the routine accounting tasks to relevant personnel and pay attention to the higher levels of finance management. Conclusion Entrepreneurship can be summarized as a process of utilizing business ideas to identify opportunities and using creativity to establish a business venture that fully exploits the opportunities. Such a conception requires an individual with specific traits and competence. These attributes when used effectively lead to the success of a new venture and eventual transition to a growing business firm. An ultimate vision is the driver of all initiatives put in place while an entrepreneur champions the vision to all organization members. References Allen, K 2011, Launching new ventures: An entrepreneurial. Cengage Learning, Florence. Ernst Young 2011, â€Å"Nature or nurture? Decoding the DNA of the entrepreneur†. Web. Frese, M Fay, D 2001, â€Å"Personal Initiative: An active performance concept for work in the 21st century†, Research in Organizational Behavior, vol.23 no.2, pp.133-187. Hisrich, R, Peters, M Shepherd, D 2005, Entrepreneurship. McGraw-Hill Irwin, New York. Mohanty, S 2005, Fundamentals of Entrepreneurship. PHI Learning Pvt. Ltd, New Delhi. Rose, R, Kumar, N Yen, L 2006, â€Å"Dynamics of entrepreneurs’ success factors in influencing venture growth†, Journal of Asia Entrepreneurship and Sustainability, vol.2 no.2, pp.1-23. Sarasvathy, S 2001, â€Å"What makes entrepreneurs entrepreneurial†, Harvard Business Review, pp.1-8. Verheul, I, Thurik, R, Hessels, J van der Zwan, P 2010, â⠂¬Å"Factors influencing the entrepreneurial engagement of opportunity and necessity entrepreneurs†, EIM Research Reports, H201011, p. 1-24. Wong, P, Ho, Y Autio, E 2005, â€Å"Entrepreneurship, innovation and economic growth: Evidence from GEM data†, Small Business Economics, vol.24 no.5, pp.335-350.