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How to Become an Entrepreneur in the 21st Century - Coursework Example

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Generally, the paper "How to Become an Entrepreneur in the 21st Century" is a great example of business coursework. The term entrepreneurship was first coined during the 1700s and its meaning has continued to evolve since then. As a result, there is no one definite definition of the term entrepreneurship…
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Name: Tutor: Title: How to Become an Entrepreneur in the 21st Century Course: Date Contents Summary 3 What is Entrepreneurship? 4 Definition 4 Nature of Entrepreneurship 4 Where is entrepreneurship? 5 Economic Freedom 5 Favorable Economic Conditions 5 Who can become an entrepreneur? 6 Creativity 6 Self-confidence 6 Leadership 6 Motivation 6 Determination and Passion 7 Smart 7 Why Entrepreneurship 7 Job creation and economic growth 7 Freedom from Control 8 Being One’s Own Boss 8 Make an impact to the society 9 Challenges of Entrepreneurship 9 State Uncertainty 9 Effect Uncertainty 10 Response Uncertainty 10 Overcoming challenges of entrepreneurship 11 A good Strategy 11 Realistic Vision 12 Right Motivation 12 Collaborating with other entrepreneurs 12 Developing a business plan 13 Conclusion 14 References 14 Summary The term entrepreneurship was first coined during the 1700s and its meaning has continued to evolve since then. As a result, there is no one definite definition of the term entrepreneurship. Basically, it means creatively and innovatively starting a new business using new resources and up-to-date technology to create and take advantage of new markets. Entrepreneurship flourishes in countries where there is economic freedom and conducive economic conditions. Anyone can become an entrepreneur regardless of age, gender, and race and income level because the characteristics linked to successful entrepreneurship are not inborn rather they can be learnt. They include creativity, motivation, self-confidence, passion, flexibility, determination, smart and leadership. There are several reasons why people should venture into entrepreneurship including job creation, economic growth, freedom from control, becoming one’s own boss and contributing to the welfare of the society in general. The main challenges of entrepreneurship include risk and uncertainty. Basically, entrepreneurship entails taking risks. Uncertainty is of three types: state uncertainty; effect uncertainty and response uncertainty. These uncertainties are obstacles to entrepreneurship as they extremely increase anxiety as regard the future. However, entrepreneurs can overcome and manage this uncertainty and the concurrent risks through having a good strategy, a realistic vision, the right motivation and a business plan. There is no particular reason to join entrepreneurship that can be said to guarantee success. Success in entrepreneurship depends upon a strong desire to open a business, accompanied by a good idea, thorough planning and creativity and innovation. What is Entrepreneurship? Definition There is no precise or a generally agreed upon definition of entrepreneurship. Many people come up with different definition of entrepreneurship which are all deemed right. Most people equate with opening one’s own business. But to an economist an entrepreneur is a person who is ready to risk capital and time to venture into a business with the aim of making profit. Some see an entrepreneur as an innovator and risk-taker. Others have defined an entrepreneurship as a person who develop new product or services which are not at present being supplied to the market and which the market greatly demand (Morris and Schindehutte, 2005). Schumpeter defines entrepreneurship as an impetus for creative destruction as when an entrepreneur creatively invent new products, he renders old businesses obsolete. Ducker sees an entrepreneur as someone who look for change, react to it and exploit it as an opportunity (Borch, Huse, & Senneseth, 1999). Entrepreneurship can be defined as the control and utilization of resources to build an innovative economic business to make profit under conditions of uncertainty and risk (Sharma & Chrisman, 1999). Creation means an origin and a founding and hence, the concept of entrepreneurship is not applicable when one purchase an existing firm. It means creating a new business from scratch. Being innovative means coming up with a new product or service to offer to the people, using latest technology or method, targeting and opening new markets, using new resources or raw materials and creating a new type of industrial organization (Covin & Kuratko, 2008). Nature of Entrepreneurship The nature of entrepreneurship can be said to be ubiquitous because it include various economic organizations including firms, business units in a firm, nonprofit organizations, social networks and a networks of independent organizations. Thus, this has contributed to the vagueness of the term entrepreneurship and hence the lack of precise definitions. From the many definitions put forward by different people, there are some common features and elements which can be derived including creativity, innovation, economic organization, opportunity for making profit under uncertainty and risk and resource identification, procurement and organizing. Where is entrepreneurship? Economic Freedom There are two conditions which must be present for entrepreneurship to thrive. Frist, there should be freedom to develop a new business as well as be creative with that business. Entrepreneurship is an international phenomenon and hence it is important that potential entrepreneur understands the association between the country where the venture is situated and the environment for business success (Phan, 2004). Economic freedom is very important to the success of entrepreneurship. An entrepreneur should analyze the trade policies, government regulation and intervention, monetary policies and taxation levels of the country he intend to start-up the business. Countries which have free economies include Hong Kong, Australia, United Kingdom, Canada, Singapore, United States, China, New Zealand, Switzerland, Ireland and Luxembourg. Countries which have repressed economies include Cuba, Turkmenistan, Libya, Burma and North Korea (Minniti and Bygrave, 2004). Favorable Economic Conditions Second, there should be conducive economic conditions which provide the firm with the opportunity to grow and gain. Research studies have found a positive association between economic freedom and good standard of living. Longitudinal studies have established that as wealthy nations become richer, they normally enforce fiscal restrictions which decrease economic freedom, including high taxation as well as social welfare programs (Morris Kuratko and Covin, 2008). Lack of economic freedom in poor countries has contributed to them being poorer. Moreover, entrepreneurship flourishes where the process of starting up a business is not complicated; where it is easy to get a license, register property and get the required labor. Who can become an entrepreneur? Research have shown that many successful entrepreneurs have specific characteristics such as creativity, self-confidence, leadership, motivation, passion, flexibility, determination and smarts. Everyone can become an entrepreneur since these characteristics are not inherent rather they can be learnt. Creativity An entrepreneur must be creative so as to invent new products or new ways of doing the business. He must have the drive for improvement and innovation. Creativity refers to continuous learning, inquiring and thinking outside the box. Self-confidence To have self-confidence, an entrepreneur must be able to do thorough planning so as to reduce uncertainty and risks that engrave his business. Moreover, he must have good expertise and great experience in the field (Covin and Slevin, 1991). Leadership An entrepreneur must be a leader; someone who have the ability to make rules and set objectives for his business. Being a leader also involves the ability to make sure that people adhere to the rules and objectives are achieved. Motivation An entrepreneur should have the motivation to work hard for more than 12 hours every day for even the whole week, particularly at the initial stages so as to get the project off the ground. If planning and ideas are not accompanied by hard work, then failure is inevitable. Motivation and dedication ensure success of the new business. Determination and Passion Determination is key to the success of the entrepreneur. An entrepreneurs must have tremendously strong desire to attain success. He must be persistent and have the capacity to bounce back in case of rough times. An entrepreneur success is the motivation and not money; money should be seen as the reward for hard work. Passion is what drives entrepreneurs to start the business and carry on as well as gives them the ability to persuade others to trust in their vision. Passion helps entrepreneurs stay focused and have others consider their plans. Smart Being smart means an entrepreneur must be able to use his common sense, knowledge and life experiences to achieve success in his business. An entrepreneurs should be flexible so as to quickly respond to changing market needs. (Hanan, 1976). Why Entrepreneurship Job creation and economic growth Entrepreneurship is an essential ingredient for stimulating employment opportunities and economic growth in today’s fast changing world. Successful entrepreneurs are seen as the drive for income growth, job creation and poverty reduction. The current high rate of employment and retrenchment is pushing many people to entrepreneurship (Shane and Venkataraman, 2000). The other advantage of entrepreneurship is that it offers a greater opportunity for attaining substantial financial rewards compared to formal employment (Sathe, 1989). Moreover, many people venture into entrepreneurship as the salary they get from their current job is not enough to cater for all their needs. Unfair promotion may also push a person to entrepreneurship when he is denied a promotion which he deserve and instead the position is given to another person. Still, when a person sees no prospects for his career, he might venture into entrepreneurship. In today’s world, the cost of living has become very high; everything has become quite expensive making people to look for additional ventures to make money (Zahra, 1991). Freedom from Control Basically, some individuals are repulsed by the thought of working for somebody else; they are objected to a system that rewards people based on seniority instead of accomplishment or else that requires people to adhere to a corporate culture. Some people become entrepreneurs since they are disappointed with the bureaucracy or else politics entailed in moving ahead with an established business or career. Others are exhausted of trying to advertise goods and services or ways of carrying out a business which are outside the normal operations of a big firm (Lichtenstein, Dooley and Lumpkin, 2006). Being One’s Own Boss The greatest advantage of becoming an entrepreneur is being one’s own boss. An entrepreneur makes his own decisions, chooses who to engage into business with and which work he will engage in, decides working hours as well as salary and whether to go for holiday. Moreover, it provides the capacity to be involved in the entire operation of the organization, from idea to plan and creation, from transactions to business processes and client response. It gives one the status of being the individual in charge of everything. Make an impact to the society Entrepreneurship generates an opportunity for an individual to make a positive impact to the society. Many new entrepreneurs supports the local economy. For example, Steve Jobs who is the co-founder of Apple has contributed greatly in the revolutionizing desktop computers Challenges of Entrepreneurship Entrepreneurship prevails under circumstances of risk and uncertainty. Here, uncertainty and risk are two different terms. Risk implies the unpredictability of outcomes. If there is no risk, then an organization would keep up expanding since a negative return would not occur. Hence, risk is an obstacle to ever-expanding entrepreneurship. Uncertainty denotes the entrepreneurs’ understanding of how the world operates. Uncertainty makes it impossible to know the future with precision. If it was possible to know the future, then everybody would know it, making it very difficult for entrepreneurship to thrive. Therefore, uncertainty is what defines the markets (Schollhammer, 1982). (Hamel, 2000). State Uncertainty State uncertainty refers to the lack of information as regards current conditions. The universe is a larger place and nobody can have knowledge of all its components. Entrepreneurs are uncertain of the demand for an innovative product and of which technology will exist in the near future. At times, there is simply no information about this. In China, for instance, there is presently a lack of statistical data as regards income, growth rates, employment, productivity gains and entrepreneurial start-ups. Entrepreneurs do not have access to this data because it has not been collected and even if it was collected the government would not release it (Ireland, Covin, & Kuratko, 2007). Effect Uncertainty Effect uncertainty refers to the lack of understanding as regards how the world works. Even if we could all the information as at our disposal about all the elements of the world, it is difficult to establish the cause and effect relationships. Just as it is difficult to determine which comes first between an egg and a chicken so is it almost impossible to find out whether a business has succeeded because it targeted expressively satisfied clients or else are the clients are satisfied since the business is fruitfully. Most of the time, we substitute correlation for causality and this is logically wrong. Causality can be accurately determined in a laboratory setting whereby experiments can be carried out, but these experiments may not carried out in the chaotic real world (Kets de Vries, 1985). Response Uncertainty Response uncertainty refers to the lack of knowledge of which response may be for certain actions. Entrepreneurs do not know what sort of responses they action may provoke. For instance, when an entrepreneur expand his product, his competitors may react by expanding theirs too or may think that the entire business is suffering and hence might just ignore the expansion as they might take it as desperate measures to save the corporate. Hence, response uncertainty makes it very difficult for entrepreneurs to predict customer and competitor reaction (Sarasvathy, 2004). Moreover, entrepreneurs are uncertain how regulators may view an organization. They wonder whether their products will pass regulatory inspection, whether licenses will be forthcoming or whether legal challenges will be encountered (Ireland, Kuratko, & Covin, 2003). Overcoming challenges of entrepreneurship To overcome the obstacles associated with entrepreneurship, an entrepreneur must be a person of action; someone who is not reluctant to seize an opportunity and is equipped for an opportunity through carrying out all necessary preparations to reduce the uncertainty and risk associated with a new venture (Akande, 1992). This involves having a good strategy, motivation, realistic vision and collaborating with other entrepreneurs. A good Strategy The key to success is having the right motivation, strategy and realistic vision. Having a good strategy is key to successful entrepreneurship. Though price is important, basically competition on the basis on price alone can be very risky for the business. Big companies which produce large quantities have the benefit of reducing costs. Preparatory works entails assessing the market opportunity, creating the product or service, coming up with a good plan for the business, finding out the resources needed to start the business and making the necessary arrangement to acquire those resources (Kuratko, Ireland & Hornsby, 2001). An entrepreneurship should be able to efficiently use resources in his disposal to fruitfully build his business. Competitor and industrial analysis alone is not sufficient to lead to successful entrepreneurship. Moreover, selecting the business to venture into is insufficient to ensure success. What can lead to long-term success is the type and feature of resources, competences and approaches the entrepreneur holds and can obtain. Indeed, the typical entrepreneurial behavior involves choosing the right resources for an organization, organizing those resources into a steady strategy and utilizing those resources. An entrepreneur should also be able to efficiently utilize scarce resources to attain profit and economic growth (Guth & Ginsberg, 1990). Realistic Vision An entrepreneur should have a realistic vision of his business potential. Many businesses collapses due to lack of sufficient operating funds. Often, entrepreneurs tend to underestimate start-up expenses and overestimate sales returns when drafting their business plans. It is advisable to add 50% to final budget estimates and reduce sales estimates in order to be able to examine cash flow estimate and find out if one is ready to start a new business (Kuratko & Hodgetts, 2007). Right Motivation If an entrepreneur is simply motivated by the desire to make much money, he is doomed to fail, especially during the initial stages of a new business as during this time money is virtually always tight. Patience is needed during this time and in fact most entrepreneurs do not pay themselves until when the firm is in a position to pay them and still leave it with a good amount of cash flow (Kuratko, Ireland, Covin &Hornsby, 2005). Collaborating with other entrepreneurs Working as a team or in collaboration with other entrepreneurs can generate creativity. Team members can get the best solution to a problem through brainstorming. Team members also shares management responsibilities and helps in making the right decisions. Moreover, they can support each other emotionally, hence helping reduce personal stress. A firm based on teamwork is unlikely to collapse as when one member is sick or unavailable, another team member can carry out his duties. As a result, many investor and banks prefer financing a new business based on teamwork. Teamwork has also the benefit of combining fiscal resources and expertise and tend to complement each other in terms of skills. Teamwork has high chances for success. For example, in 1994, Marc Andreessen and James Clark came together and formed the Netscape Navigator which has transformed personal computing (Hill & Hlavacek, 1972). Developing a business plan A detailed business plan is essential when starting up a business. It defines the vision of the entrepreneur and acts as the resume for the business. There are many benefits for creating a business plan including convincing yourself that the new business is worthwhile prior to making substantial financial as well as personal commitment, helps in goal-setting, attract investors, attract employees and help explain the project to other firms that are beneficial to create a coalition. A business plan might assist an entrepreneur to distribute resources appropriately, deal with unexpected problems as well as come up with sound business decisions. An efficient business plan is a crucial part of every loan application. It must indicate how the business intend to pay back any borrowed funds. The entrepreneur must also consider all startup costs and potential risks in order to avoid appearing naïve. A business plan should not primarily be taken for raising capital rather it should be perceived as a way of helping the entrepreneur gets a better understanding of the business he envision (Ireland & Webb, 2007). There are two types of business plan an entrepreneur can create: a plan for internal use and a marketing plan for attracting external investment. Both plan contains almost the same information but the focus is somehow different. A most crucial feature of a marketing plan is the background and experience of management while as an internal plan does not need all these. Usually, a standard business plan contain around 40pages and must use good visual formatting including short paragraph and bulleted lists. The language used should be simple and easy to understand. The tone must be enthusiastic and business-like. Moreover, it must be strong on facts so as to persuade people to invest time and money in the new business. A standard business plan must contain these basic elements, cover page, table of contents, executive summary, company description, product/service, market and competition, management, financing and deal structure (Kuratko, 2002). Conclusion There is a promising future for entrepreneurship in today’s world. Entrepreneurship is leading to job creation, income increase and poverty reduction and hence improving the living standards of the majority of people in the world. Not everybody will excel as an entrepreneur and at times, the people who thrives do so only following several painful trials. Prior educational accomplishment is not a prerequisite for successful entrepreneurship. Most of the students who do well in finance, accounting and marketing end up working for entrepreneurs-the students who never took classroom examinations very seriously but were good at seizing opportunity. The potential for entrepreneurship can only be tested in the marketplace rather than the classroom. Hence, students with the mindset of an entrepreneur should not worry a lot as regard their grades. References Akande, A. (1992). Coping with Entrepreneurial Stress, Leadership & Organization Development Journal 13(2): 27–32. Borch, O.J., Huse, M., & Senneseth, K. (1999). Resource configuration, competitive strategies, and corporate entrepreneurship: An empirical examination of small firms. Entrepreneurship Theory & Practice, 24(1), 49-70 Covin, J.G. & Kuratko, D.F. (2008). “Corporate Entrepreneurship” in The Encyclopedia of Strategic Management (Blackwell Publishers, forthcoming). Covin, J.G. and Slevin, D.P. (1991). A conceptual model of entrepreneurship as firm behavior. Entrepreneurship Theory & Practice, 16(1), 7-25. Guth, W. D. & Ginsberg A. (1990). Corporate entrepreneurship. Strategic Management Journal, (Special Issue 11): 5-15 Hamel, G. (2000). Leading the Revolution (Harvard Business School Press: Boston,MA) Hanan, M. (1976). Venturing corporations—Think small to stay strong. Harvard Business Review, 139-148. Hill, R. M. & Hlavacek, J. D. (1972). The venture team: A new concept in marketing organizations. Journal of Marketing, 36:44-50. Ireland, R.D., Covin, J.G., & Kuratko, D.F. (2007). A Model of Corporate Entrepreneurship Strategy. Best Papers: Special Conference on Strategic Entrepreneurship, Max Planck Institute, Germany Ireland, R.D. & Webb, J.W. (2007). Strategic Entrepreneurship: Creating Competitive Advantage through Streams of Innovation. Business Horizons, 50: 49-59 Ireland, R.D., Kuratko, D.F., & Covin, J.G. (2003). Antecedents, Elements, and Consequences of Corporate Entrepreneurship Strategy. Best Paper Proceedings: Academy of Management, Annual Meeting, Seattle Washington. Kets de Vries, M.F.R. (1985). The Dark Side of Entrepreneurship, Harvard Business Review November/December: 160–167 Kuratko, D. F. (2002). “Entrepreneurship,” International Encyclopedia of Business and Management, 2nd ed. (London: Routledge Publishers), 168–176. Kuratko, D. F. & Hodgetts, R. M. (2007). Entrepreneurship: Theory, Process, Practice 7th ed. (Mason, OH: Thomson/SouthWestern Publishing) Kuratko, D.F, Ireland, R.D. & Hornsby, J.S. (2001). Improving firm performance through entrepreneurial actions: Acordia’s corporate entrepreneurship strategy. Academy of Management Executive, 15(4): 60-71. Kuratko, D.F., Ireland, R.D., Covin, J.G., &Hornsby, J.S. (2005). A model of middle level managers’ entrepreneurial behavior. Entrepreneurship Theory & Practice, 29 (6), 699-716. Lichtenstein, B. B., Dooley, K. J. and Lumpkin, G.T. (2006). Measuring Emergence in the Dynamics of New Venture Creation, Journal of Business Venturing, 21 (2):153-176 Minniti, M. and Bygrave, W. D. (2004). Global Entrepreneurship Monitor (Kauffman Center for Entrepreneurial Leadership) Morris, M.H., Kuratko, D.F., and Covin, J.G. (2008). Corporate Entrepreneurship and Innovation (Mason, OH:Thomson/SouthWestern Publishers). Morris, M. H. and Schindehutte, M. (2005). Entrepreneurial Values and the Ethnic Enterprise: An Examination of Six Subcultures, Journal of Small Business Management, 43 (4): 453-497. Peterson, R. & Berger D. (1971). Entrepreneurship in organizations. Administrative Science Quarterly, 16 (1): 97-106. Phan, P. H. (2004). Entrepreneurship Theory: Possibilities and Future Directions, Journal of Business Venturing 19(5): 617–620. Sarasvathy, S.D. (2004). The Questions We Ask and the Questions We Care About: Reformulating Some Problems in Entrepreneurship Research, Journal of Business Venturing 19(5): 707–717. Sathe, V. (1989). Fostering entrepreneurship in large diversified firm. Organizational Dynamics, 18(1), 20-32. Schollhammer, H. (1982). Internal corporate entrepreneurship. In C. Kent, D. Sexton & K.Vesper (eds.), Encyclopedia of Entrepreneurship. Prentice Hall: Englewood Cliffs, NJ. Shane, S. and Venkataraman, S. (2000). The Promise of Entrepreneurship as a Field of Research, Academy of Management Review, 25 (1):217–226. Sharma, P. & Chrisman, J.J. (1999). Toward a reconciliation of the definitional issues in the field of corporate entrepreneurship. Entrepreneurship Theory & Practice, 23(3), 11-28. Zahra, S. A. (1991). Predictors and financial outcomes of corporate entrepreneurship: An exploratory study. Journal of Business Venturing, 6: 259-286 Read More
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