Small Business Management MGMT5601 Topic 2: Entrepreneurs versus Owner-Managers

Transcription

1 Small Business Management MGMT5601 Topic 2: Entrepreneurs versus Owner-Managers Professor Tim Mazzarol UWA Business School SBM MGMT5601 UWA Business School MBA Program

2 Learning outcomes In this topic you should learn how to: Define the terms enterprise, entrepreneur and small business Understand the difference between entrepreneurs and owner-managers Review models of new venture creation Understand the barriers and triggers to new venture creation Examine the process required to assist start-up Mazzarol all rights reserved

3 Small Business Case Bread Euphoria

4 Discussion Bread Euphoria Case What triggers or barriers did Mark and Geri Pollard face when starting their business? Identify the major challenges Mark and Geri had to overcome as they grew their business through the early years. What made Mark and Geri s business a success? Would Mark be viewed as a typical entrepreneur? - if not why not? What does this case suggest about the nature of small business ownership versus the nature of entrepreneurship?

5 Definition of key terms Entrepreneurship: The entrepreneur and the various forces that create, motivate and sustain their behaviour. Small Business Management: The technical skills associated with business planning, financial, marketing and human resource management. Enterprise: The ability to identify opportunities and pursue personal goals to achieve selfsufficiency and self-fulfillment. Entrepreneurial Process: 1) opportunity recognition 2) marshalling of resources 3) developing capability

6 Characteristics of an Entrepreneur People having this behavioural pattern were so deeply and closely involved with their work that other aspects of their lives were relatively neglected. Extremes of competitiveness Striving for achievement Aggressiveness Haste Impatience Restlessness Hyper-alertness Explosiveness of speech Feeling of being under pressure of time

7 Myths about Entrepreneurs Issue The Myth The Reality Risk Taking High-Tech Expertise Strategic Vision Venture Capital Most successful entrepreneurs take wild, uncalculated risks in starting their companies. Most successful entrepreneurs start their companies with a break-through invention, usually technological in nature. Most successful entrepreneurs have strong track records and years of experience in their industries. Most successful entrepreneurs have a well-considered business plan and have researched and developed their ideas before taking action. Most successful entrepreneurs start their companies with millions in venture capital to develop their idea, buy supplies, and hire employees. Most successful entrepreneurs assess risk and take calculated, measured risks, often getting others to take on the risk. Most successful entrepreneurs develop innovative products or services and successfully market these to match customer needs. Technology is just a tool. Many successful entrepreneurs have limited past experience in their chosen industries or even limited work experience. Most successful entrepreneurs have a clear vision for their future, but are mostly informal in their planning during their formative years. Most successful entrepreneurs start up with only modest investment from personal assets and the support of family and friends. Source: Bhide (2000) NOCE (2001)

8 Entrepreneurs versus Owner-Managers Entrepreneur Owner-Manager Creates & manages a business primarily for profit & growth Involves act of New Entry New venture creation Strategic management & vision Innovation for new markets/products Can involve both large and small firms Creates & manages a business primarily for personal goals Must own & manage the business Ownership suggests carrying all the risk Manager suggests carrying all the responsibility Focused on stability not growth

9 Types of small business owner Craft Practising a trade, craft or occupation Loyalty to the firm & career Desire for independence & control Professional Manager Building and organisation Business Ownership Exploitation of innovation & growth Promoter Pursuing personal wealth Source: Hornday (1990)

10 Enterprise Environment

11 Key factors associated with culture Inputs Evidenced by Religion Education Politics Family History Role models Other cultures Personal characteristics Societal Constructs Economics Policy Institutions Structures Classes Contexts Ideologies Attitudes Attributes Behaviours Values & Aspirations Culture National Regional Business Individual Source: Morrison (2000)

12 The Effectuator s (Given set of means) Theory of Effectuation Who I am Individual level traits, tastes, abilities Firm level physical resources Economy level demographics Effect Effect The Effectuator s (Contingent aspirations) Human aspirations What I know Individual level knowledge corridors Firm level human resources Economy level technology regimes Imagination Affordable Loss Acceptable Risk Effect Effect Effect Strategic partnerships The logic of control Contingencies Human aspirations Human aspirations Human aspirations Whom I know Individual level social networks Effect Human aspirations Firm level organization resources Economy level socio-political institutes Effect Source: Sarasvathy 2001

13 Factors influencing new venture creation Individuals Need for achievement Locus of control Risk taking ability Job satisfaction Family & career background Age & Education Process Opportunity recognition Accumulation of resources Marketing of product & service Production of product & service Development of the venture Responses to environment Organization Competitive positioning strategy New product or service Customer value proposition Business structure Financial & human resources Ownership & Control

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15 The stages of start-up Acquire Motivation Raw Idea Iterative Process Valid Idea in relation to a market need at an appropriate scale Identify Resources Negotiate & Acquire Resources Fail Start Up Succeed

16 Factor influencing the start-up process The idea & market The resources needed & available The proposer s ability & experience The start-up success ingredients The plan The motivation & determination The organisation Source: Gibb & Ritchie (1990)

17 The main causes of failure in start-ups underestimation of the start up time under capitalisation overestimation of the market size lack of expertise by management lack of working capital confusion of cash flow over profit wrong location of the business no Unique Selling Point recruitment of the wrong people to staff it failure to monitor the business performance failure to retain profits in the business to fund growth

18 Success factors for new start-ups Start a business in which you have industry knowledge. Work long hours being persistent and don t give up. Get professional advice early. Research the market. Keep good records. Get adequate start-up capital. Develop a business strategy or plan. Set goals and vision. Hire good employees. Watch overheads and fixed costs.

19 Triggers and barriers to new venture creation Barriers to New Venture Creation Triggers for New Venture Creation Hard Reality Lack of resources Compliance Cost Creativity Autonomy Money Market opportunity Invest Status Source: Volery, Mazzarol, Doss & Thein, 1997

20 Starter case study 1: Ian - Graphic Designer NEIS scheme participant Driven by desire to be creative and do something enjoyable. Overcame barriers of no past experience by using his imagination. I have always loved creating things, I have always loved art, I was always drawing at school, and when I was made redundant I thought about starting my own business.

21 Case study 2: Luke Educational Software Consultant Got business idea while working in a local college. Discussed his idea with friends but found small business advisers too formal. The main reason he started the business was to make more money, but he had the idea for this original business for a period of time.

22 Starter case 3: Geoff Sports equipment manufacturer After initial business failure launched second business without bank support. Good orders but lacked capital Banks would not lend Marketing problems Business eventually abandoned.

23 Non-starter case study 1: Helen Marketing Officer Insurance Got idea for business and undertook market research and became excited about it. Her pregnancy stopped her from following through with her idea.

24 Non-starter case study 2: Michael Specialist Health Care Services Driven by desire to be his own boss and believe in something. Did not start as he could not find the right partner. Was too scared to start his business alone.

25 Desire to create Starters are characterised by: a strong desire to create something and a concern over finding suitable labour. Non-starters are likely to be characterised by: a desire to work at a location of choice (often home). The view that the risks they face as greater than expected. the feeling that no one is available to help them.

26 Case study Telarni and Nairi Telarni Nairi What are the main problems faced by these two people launching their own business ideas? What key actions do they have to take to get their business off the ground? Prepare an assessment of their business prospects.

27 End of Presentation