Morris et al. (2012) identify five main categories of entrepreneurship ventures that facilitate classifying different business ventures.
Survival ventures
Such ventures are usually operated by a single employee who generates enough revenue to cater for daily bills thereby facilitating financial existence. The nature of the business is usually small, with a small number of employees for instance, a small restaurant or an agricultural based outlet.
Lifestyle ventures
Such a venture is operated for profit basis and is motivated by the skills of its founders and their passions. In such businesses, the owner seeks to develop a stable business model in order to facilitate the generation of revenue through self-directed business.
Managed-growth ventures
Unlike the lifestyle ventures that are limited in their scope, managed growth ventures seek steady growth by consistently adding new markets, products, and locations. As a result, they are operated by a group of individuals, each undertaking a specific role.
Aggressive-growth ventures
Similar to managed-growth ventures, these firms expand rapidly and seek to dominate given industries or create industries of their own. As such, competition plays a significant part in ensuring the business grows.
Speculative ventures
Such ventures are created in an attempt to demonstrate whether a business model can work, after which, they are sold.
b) Similarities and differences between the different entrepreneurial ventures
Upon evaluating the different entrepreneurial ventures, several similarities and differences are observed. The first similarity between the ventures is that they all focus on generating profit. For example, a small restaurant seeks to generate enough revenue to cater for the daily operations and pay the employees involved in running the business. In a similar manner, a freelance running a lifestyle venture or a large firm seeking to take over the mobile phone industry all seek to generate profit.
A second similarity is that running the different types of ventures requires the owners to share similar traits. For instance, whether running a small restaurant, agricultural business, or a speculative venture, all entrepreneurs require to be hard workers, innovative and willing to take risks in undertaking the different activities involved in the business.
A third similarity is that in all the businesses, entrepreneurs combine different resources in order to create a product of value that generates value. For instance, in a small restaurant, the entrepreneur brings together the culinary skills of a chef, the accounting ability of a cashier, and the hospitability skills of a waiter in order to create a pleasant dining service that attracts different customers. Without such resources, the business would not survive. Similarly, in an aggressive growth venture, skills of managers, marketers, product developers and other members of staff are combined in order to develop a product that is capable of growing significantly over time.
Despite the similarities, there however exists several differences between the ventures. First, each venture has a specific work focus that guides the business. For instance, a small business aims to generate enough revenue to cater for daily operations and pay the workers. On the other hand, a speculative venture focuses not only on generating profit after selling the business, but also testing out different models in order to verify their workability.
A second difference arises in the fact that they all generate different levels of financial revenues. For instance, a small business may only generate income tending towards several thousand dollars per year while an aggressive growth business might generate revenue of up-to several million dollars per year. In all cases, each business generates levels of revenue commensurate with the business.
A third difference arises in the nature of operations and the number of employees required to run the business efficiently. While few employees might suffice in the case of small businesses, large enterprises such as aggressive growth ventures require to be operated by a large number of employees due to the large size of operations.
c) Evaluation of entrepreneurial ventures
According to Diefenbach (2011, p.1) the conventional definition of entrepreneurship as private entities has over the years been challenged by the increased trend towards public sector entrepreneurship. Link (2016, p.355) notes that the motivation with public sector entrepreneurship arises from the need to create wealth and seize opportunities of value rather than creating new independent ventures.
As such, a major difference between private and public entrepreneurship arises in the nature of the ventures. In the former’s case, the entrepreneur emphasizes on the establishment of a new venture which is then privately managed while in the latter’s case, value creation is emphasized with the entrepreneur works in a public organization such as the government. Consequently, intrapreneurship is associated with the public sector where individuals working in the government seize opportunities to create value without creating new ventures such as in the case of private businesses (Kearney, Hisrich and Roche, 2009 p.26).
In order to extrapolate the differences further, examples of entrepreneurship ventures are assessed in both instances. With public sector entrepreneurship, examples include a consultant providing professional services whilst working for the government while with the private sector, an example includes the creation of a new business to supply solar panels in a region. Despite the creation of wealth in both instances, in the former’s case, the entrepreneur does not necessarily create a new venture while in the latter’s case, the creation of a new venture is unavoidable.
d) Scope, development and growth of entrepreneurial ventures
In essence, an entrepreneurship venture is initiated when an individual develops an idea in order to seize an existing opportunity or solve an existing problem in society. As such, the scope of such ventures is limited to the different activities that facilitate the provision of the solution. Such activities may be directly related to the skillset of the owner or on the possession of a unique combination of resources.
Consequently, entrepreneurs require to hone traits such as risk taking, persistence and initiative thinking in order to facilitate the development of the new idea. Additionally, financial revenue is required to enable the transformation of the idea into reality and market it to create awareness of its existence. Over time, the idea grows significantly leading to the development of an entrepreneurial venture.
In order to illustrate the scope, development and growth of entrepreneurial ventures, the examples of Apple’s growth is relevant. In Apple’s case, Steve Jobs and Steve Wozniak were interested in creating a personal computer that users could work with at home unlike the existent mainframes supplied by IBM at the time. As such, their scope was focused on developing personal computers (O'Grady 2009, p.2). Additionally, both entrepreneurs had the necessary skills to develop their idea.
O’Grady (2009, p.2) notes that as the company released new product versions, need arose to outsource financial assistance from investors and the general public. Over the years, the company grew as they continued to sell more variations of the product. As at 2017, the company has increased its product lines to include consumer electronics, software and hardware components thereby making it to be ranked as the top ranked technology company globally (Badenhausen, 2017).
Task 2
a) Impact of micro and small businesses on the economy
According to Kirby (2017), micro and small businesses impact the economy in three main ways. First, is through the creation of diverse employment opportunities for the country’s population. Rhodes (2017) notes that as at 2017, there were 5.7 million SMEs in the U.K. which accounted for over 99.9% of all businesses. As such, the SMEs accounted for 33% of the country’s employment and 22% of its turnover. Figure 1.1 below illustrates the impact of the businesses on the economy.
Fig 1.1: share of enterprises in the U.K. private sector 2017 (Rhodes, 2017)
The figure illustrates that the small and medium sized businesses contributed to over 60% of the employment force in the economy.
Secondly, Kirby (2017) notes that the small businesses encourage innovation efforts in the country as business owners innovate new solutions to existent problems in the economy. As a result, the small businesses are spread out across different sectors. The figure 1.2 below reveals the distribution of small and medium enterprises in the U.K. as of 2016.
Fig 1.2: SMEs in the U.K. by sector 2016 (Statista, 2016)
The figure reveals that in 2016, 27% of the SMEs resulted from business activities, renting and real estate. Further, 19% of them were a direct result of construction while transport and communication contributed 12%. On average, the figure showed that small businesses emerged from the diversity of innovative solutions initiated by the customers.
Thirdly, SMEs contribute to the economy’s GDP through the revenue generated from the different activities. Kirby (2017) notes that through the exportation of different products, revenue is generated in the economy. Figure 1.3 illustrates the turnover of the SME sector at the start of 2015 in the U.K.
Fig 1.3: Contribution of SMEs in the U.K. year 2015 (Rhodes, 2017)
The figure reveals that in 2015, the SME sector contributed turnover of over £1.8 trillion, an equivalent of 47% of the total turnover by the business sector. As such, it revealed the positive impact of such businesses in generating revenue for businesses.
b) Importance of small businesses and start-ups in the growth of the social economy
According to Amin (2013, p.1) the economy can be categorized into three main aspects based on the function targeted by each sector. First, is the private sector economy which aims at ensuring efficiency of business activities. As such, businesses such as sole proprietorships, partnerships and joint ventures emphasize on running their processes efficiently in order to generate profit. Second, is the public sector economy operated by the government. The author notes that activities in the economy are operated through state-owned businesses with a focus on providing equality for all citizens.
The final economic sector is the social economy where unlike the private and public sectors, its focus is on reprocity. Examples of such businesses include cooperatives, credit unions and community associations where capital is controlled socially in order mutually benefit all individuals in the given organization.
Different arguments are advanced regarding how small businesses and startups contribute to the growth of the social economy. First, as the businesses create employment opportunities, they facilitate the growth of the social economy since employed individuals proceed to channel their incomes to the different cooperative and credit unions. As such, the argument posits that small businesses result in the growth of the activities in a ripple effect.
A second school of thought considers the innovativeness of small businesses in generating diverse types of businesses. As a result, there occurs growth across different sectors leading to the development of cooperatives across sectors. For instance, in the U.K., SMEs exist in sectors ranging from business and construction to transport and manufacturing. As a result, different credit unions emerge across the different sectors in order to cater for the needs of employees contained in them.
c) Impact of small, medium and large businesses in the economy
Business of different sizes, small, medium and large contribute to the U.K.s economy through different ways. First, they create employment opportunities in the country thereby facilitating productivity of the population. Figure 1.1 in section (a) above reveals that in the United Kingdom, small businesses contributed 48% of the employment opportunities while medium businesses contributed an additional 12%. Large businesses on the other hand, contributed 40% of the employment activities. As such, based on the evidence, it is apparent that businesses contribute to the economy through employment creation.
Secondly, the businesses contribute to the generation of government revenue and GDP through taxation and the sale of high value products to other economies respectively. As a result, the government earns a significant share of the revenue through taxation thereby contributing to the GDP of the country. Figure 1.3 in section (a) above revealed that in 2015, all businesses in the U.K. contributed a net turnover of over £3.71 trillion. From the given value, a significant amount was contributed to the government through taxation.
Thirdly, the different businesses facilitate the provision of solutions to the general population by encouraging an innovative spirit. Figure 1.2 in section (a) above revealed that small and medium businesses were distributed across diverse sectors in the U.K. thereby enabling the provision of solutions to citizens and in effect, improving the quality of life in the country.
d) Impact of small businesses on different levels of the economy
Statistics highlighted in section (a) above reveal the impact of small business in a local, regional and national context through two main ways. First, is through the contribution to the economy’s growth by contributing to the GDP and second, is through lowering unemployment levels in the country through facilitating an innovative spirit. However, the different businesses are also argued to have an impact on an international scale.
One school of thought considers the contribution of the small businesses to international trade through the exports they sell to countries in other regions. Littlefield (2011) notes that in the United States, small businesses form a significant fraction of the entire exports produced by the country. A second argument considers the growth of talent and innovative capacity where it is noted that small businesses enhance the development of talent that is later exported to other regions leading significant impact.
Scenario 2
Task 3
a) Traits of successful entrepreneurs and the differences from managers
According to Havinal (2011, p.12), there is a distinct difference between a manager and an entrepreneur. The author notes that while the latter describes an individual capable of combining all necessary inputs such as capital and labour in order to create a new venture, the former, on the other hand, describes an individual who is able to harness the potential of his subordinates to get things done both effectively and efficiently. As such, a difference arises between the two individuals based on the nature of activities they both undertake.
Krueger (2002, p.304) further argues that as a result of the differences in the activities the two undertake, different traits are required to perform each activity. In most instances, skills required for the entrepreneurship role differ from those in management except in instances where the manager serves as the entrepreneur. Krueger (2002, p.304) identifies five major traits of successful entrepreneurs that are seemingly different from those of successful managers. These are further elaborated below:
Work focus
Successful entrepreneurs focus on creating new ventures through the combination of different resources such as capital and labour. Managers, on the other hand, emphasize on sustainability aspects and as such, are concerned with adhering to the already established framework that generates success in the business.
Risk taking
Successful
Entrepreneurs are risk takers and as such, are not afraid to invest their time and money in engaging with new ideas. Managers on the other hand, are seen to be more conservative since they act as custodians of other people’s businesses. Consequently, they are more risk averse in the interest of ensuring continuity in the business over time.
Innovative approach to tasks
Given their risk taking capabilities, most entrepreneurs are adept to taking more unconventional approaches to tasks in their search for success. Managers on the other hand, approach work activities in a more formal and conservative manner since their focus is on ensuring continuity in operations. As a result, they shun away from work practices that they are unsure of and prefer to stick to already established approaches.
Growth focus
Successful entrepreneurs focus on the growth of ventures and the evolution of ideas beyond the initial inception phase. Managers on the other hand, focus on growing their subordinates while maintaining focus on daily operations of the business. As such, their focus of growth is on increasing efficiency and the effectiveness of their subordinates while entrepreneurs focus on growing their ideas to fruition. Consequently, while the managers receive their reward in form of salaries, entrepreneurs receive theirs in form of profit.
b) Influence of entrepreneurial personality on entrepreneurial motivation and mind-set
Patel (2017) posits that five personalities are common among successful entrepreneurs. First, they are passionate about what they do thereby translating to perseverance during difficult periods. Second, they are highly motivated and are able to inspire their subordinates towards achieving success. Third, successful entrepreneurs are optimistic towards the future and constantly look towards achieving success despite discouraging circumstances.
Fourth, they are highly creative and come up with unique and impactful solutions. Finally, they are risk takers and as such, perceive challenges as opportunities rather than hurdles. Turner (2015) on the other hand, notes that the different personalities fostered by entrepreneurs have a significant impact on their motivation and mindset thereby influencing their success.
An example of how personality directly influences mindset is observed with the risk taking personality. An entrepreneur who is willing to take risks despite the odds against the endeavor fosters a mindset of fearlessness. As a result, the entrepreneur pools resources towards achieving a given endeavor without worrying about failure. Similarly, the entrepreneur is keen on taking action instead of overanalyzing issues.
On the other hand, an entrepreneur with a risk averse personality fosters a conservative mindset and as a result, is adamant on investing in risky business opportunities. In most instances, such entrepreneurs take action only after meticulous cost benefit analysis.
A similar example is observed with the passionate personality where highly passionate entrepreneurs harbor a mindset of perseverance while individuals who lack passion are likely to give up when faced with challenges. As such, it can be argued that personality has a direct influence on the mindset controlling entrepreneurial actions and motivations.
c) Arguments of entrepreneurial characteristics
Daley (2013) notes that two main arguments are advanced regarding the development of entrepreneurial characteristics. First, is the notion that entrepreneurs are born and as such, their genetic composition influences their disposition as entrepreneurs. Second, is the aspect that entrepreneurs are made, that is, their disposition towards entrepreneurship results from conditioning by the external environment and external influences such as education.
Daley (2013) highlights that the first argument, entrepreneurs are born, is motivated by scientific findings which correlate different genetic types to different personalities. As a result, individuals who turn out to be successful entrepreneurs do so because of the influence of their genetic makeup on their personality and in effect, their mind-set towards entrepreneurship. The author further notes that over the years, different studies have revealed that some personality traits favouring entrepreneurship are inherent and cannot be developed through education initiatives, for instance, risk taking.
However, the author notes that the second argument, entrepreneurs are made, has as well received attention from different scientists and researchers who argue that education has an impact of enhancing existent abilities among entrepreneurs. For instance, Daley (2013) highlights the impact of education on identifying business opportunities through analysis of the environment. The author notes that an individual who has been taught how to assess the environment and identify potential business opportunities is likely to succeed as an entrepreneur as compare to one with the genetic makeup that favours entrepreneurship without such skill.
Over the years, however, different arguments have been advanced regarding the two aspects. On the one hand, the notion that entrepreneurs are born is supported by scientific evidence relating personality types to genetic makeup while on the other, the notion that they are made is supported by the evidence of entrepreneurs emerging after successfully going through entrepreneur programs.
d) Traits, skills and drivers of successful entrepreneurs
Patel (2017) argues that successful entrepreneurs have similar traits regardless of the different sectors they are engaged in. The author notes that a major trait common with successful entrepreneurs is passion towards their business idea. Review of different case studies reiterates the finding by revealing passion among different entrepreneurs. For instance, Bill Gates, Microsoft’s founder, was a passionate computer programmer before turning his passion into business. Similarly, Walt Disney was a passionate artist before launching Mickey Mouse that grew into a profitable business.
Secondly, successful entrepreneurs are driven by hard work and perseverance in their endeavours. Nisen (2012) highlights numerous examples of hard working entrepreneurs. For instance, the author notes that Mark Cuban, owner of Mavericks team, worked for up-to seven years without taking a vacation while Howard Schultz, Starbucks’ owner works up-to 13 hours a day. Additionally, the author notes diverse examples of entrepreneurs who worked countless hours to turn their dreams into reality.
Thirdly, entrepreneurs are observed to be risk takers. Finn (2016) cites that despite the 2008 economic crisis, Elon Musk invested all the money he earned from previous businesses into Tesla motors and SpaceX, a huge financial risk. However, the efforts paid off as the businesses are currently a success. Similarly, the author cites the case of Bill Gates who decided to drop out of Harvard in order to pursue his dream as a computer programmer.
Finally, the review of different entrepreneur success stories reveals that in all instances, they are highly skilled in what they do. For instance, Bill Gates was a successful programmer before starting Microsoft while Steve Jobs had honed skills in design, computing and programming before starting Apple. In both instances, each entrepreneur had the necessary intellectual skill to turn their dreams into reality.
Task 4
a) Influence of background on entrepreneurship
One of the main arguments explaining the development of entrepreneurship, posits that entrepreneurs are made. As such, it highlights that external influences such as education and background have an impact on fostering entrepreneurship (Daley, 2013). A study by Kinias (2013) on importance of entrepreneurial background in the detection and utilization of information revealed that a link existed between entrepreneurial past and their ability to detect business opportunities.
Rawlinson (2017) notes that the motivation for creating Apple company was the desire to make computers user friendly. The author notes that in the early 1970s when the company was being founded, large mainframe computers were the only computing devices available. However, before Jobs and Wozniak founded the company, both had been working in intensive computing environments with Jobs at Atari while Wozniak at HP.
As such, the argument advanced is that, the business opportunity leading to the foundation of Apple computers was identified because the founders had previous knowledge in the field and could easily recognize a market gap. A similar illustration is also observed with the foundation of Microsoft by Bill Gates and Paul Allen.
Bellis (2018) notes that Gates and Allen were avid computer programmers before they founded the company. Further, the author cites that the two had previously programmed for different companies such as Altair before they launched their own software company. Additionally, Gates and Allen had previously programmed computers and sold them to the state to facilitate traffic control. As such, their background helped facilitate the development of their business.
b) Link between entrepreneurial characteristics and personal background
Krueger (2002, p.304) identified important entrepreneurial characteristics such as risk takers, hard workers, innovative and ability to persevere in order to achieve their goals. Further, a study by Kinias (2013) revealed that the background story of an entrepreneur has a direct influence on their entrepreneurial traits and in effect, their success in the endeavor.
The review of different entrepreneur stories reveals a positive influence of their individual backgrounds in the development of different entrepreneur characteristics. For instance, in Steve Jobs case, previous background working for a computer company facilitated the development of traits such as hard work, innovativeness and passion which enabled him to succeed with Apple.
A similar illustration is observed in Bill Gates case where previous background working as a programmer enabled the entrepreneur to develop innovative traits in developing computer software. Similarly, the employment opportunity enabled Gates to develop passion for the work he was engaged in and in effect, influencing the success of Microsoft.
Similar illustrations are observed with successful entrepreneurs such as Elon Musk, Walt Disney and Mark Zuckerberg. As such, it can be concluded that an entrepreneur’s personal background has a direct influence on the traits and personalities they develop and in effect, their success at different entrepreneurial ventures.
c) Influence of background and experience on entrepreneurship
Despite the previous section highlighting a positive influence of entrepreneurial background on positive traits and personalities, a different school of thought illustrates that negative backgrounds similarly have a detrimental impact on the success of businesses.
Kingsbery and Brain (2013) highlight the failure of ArsDigita company, a technology based company that was unable to maintain its processes following a poor leadership backgrounds of its owners. As a result, money was invested in building new products without taking time to reach out to current users. The end result was that the business model would not survive and the business failed. The authors also cite Brica Box, a startup that failed owing to the lack of business acumen among its owners as they were unable to pool required resources to make the business succeed.
On the other hand, entrepreneurs such as Steve Jobs and Bill Gates were argued to be successful as a result of the positive backgrounds which fostered their entrepreneurial activities. Their stories serve as illustrations of how positive backgrounds enhance entrepreneurship in contrast to negative backgrounds.
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