small business management mgmt5601 topic 2: entrepreneurs ... · entrepreneur • creates &...

©Mazzarol 2017 all rights reserved

Small Business Management MGMT5601

Topic 2: Entrepreneurs versus Owner-ManagersProfessor Tim Mazzarol – UWA Business School

UWA Business School MBA Program [email protected] MGMT5601



• 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

Learning outcomes


In this topic you should learn how to:


Small Business Case Bread Euphoria



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?


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 self-sufficiency and self-fulfillment.

• Entrepreneurial Process:1) opportunity recognition2) marshalling of resources3) developing capability


Characteristics of an Entrepreneur

• Extremes of competitiveness• Striving for achievement• Aggressiveness• Haste• Impatience• Restlessness• Hyper-alertness• Explosiveness of speech• Feeling of being under

pressure of time

People having this behavioural pattern were so deeply and closely involved with their work that other aspects of their lives were relatively neglected.


Myths about Entrepreneurs

Issue The Myth The RealityRisk Taking Most successful entrepreneurs take

wild, uncalculated risks in starting theircompanies.

Most successful entrepreneurs assess risk and take calculated, measured risks, often getting others to take on the risk.

High-Tech Most successful entrepreneurs start their companies with a break-through invention, usually technological in nature.

Most successful entrepreneurs develop innovative products or services and successfully market these to match customer needs. Technology is just a tool.

Expertise Most successful entrepreneurs have strong track records and years of experience in their industries.

Many successful entrepreneurs have limited past experience in their chosen industries or even limited work experience.

Strategic Vision

Most successful entrepreneurs have a well-considered business plan and have researched and developed their ideas before taking action.

Most successful entrepreneurs have a clear vision for their future, but are mostly informal in their planning during their formative years.

Venture Capital

Most successful entrepreneurs start their companies with millions in venture capital to develop their idea, buy supplies, and hire employees.

Most successful entrepreneurs start up with only modest investment from personal assets and the support of family and friends.

Source: Bhide (2000) NOCE (2001)


Entrepreneurs versus Owner-Managers

Entrepreneur

• 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

Owner-Manager

• 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


Types of small business owner

Source: Hornday (1990)

BusinessOwnership

Promoter

Craft

ProfessionalManager

Practising a trade, craft or occupation

Pursuing personal wealth

Building and organisation

Exploitation of innovation &

growth

Desire for independence &

control

Loyalty to the firm & career


Enterprise Environment



Key factors associated with culture

©Mazzarol 2017 all rights reservedSource: Morrison (2000)

CultureNationalRegionalBusinessIndividual

Societal Constructs

Evidenced byInputs

EconomicsPolicyInstitutionsStructuresClassesContexts

IdeologiesAttitudesAttributesBehavioursValues &Aspirations

ReligionEducationPoliticsFamilyHistoryRole modelsOther culturesPersonal characteristics

Who I am…

Individual level• traits, tastes, abilities

Firm level• physical resources

Economy level• demographics

What I know…

Individual level• knowledge corridors

Firm level• human resources

Economy level• technology regimes

Whom I know…

Individual level• social networks

Firm level• organization resources

Economy level• socio-political institutes

The Effectuator’s(Given set of means)

Imagination

Effect Human aspirations

Effect

Effect

Effect

Effect

Effect

Effect

Contingencies

AffordableLoss

AcceptableRisk

Strategicpartnerships

The logic ofcontrol

The Effectuator’s(Contingent aspirations)

Human aspirations

Human aspirations

Human aspirations

Human aspirations

Theory of Effectuation

Source: Sarasvathy 2001


Factors influencing new venture creation


Organization

• Competitive positioning strategy

• New product or service• Customer value proposition• Business structure• Financial & human resources• Ownership & Control

Process

• Opportunity recognition• Accumulation of resources• Marketing of product & service• Production of product & service• Development of the venture• Responses to environment

Individuals

• Need for achievement• Locus of control• Risk taking ability• Job satisfaction• Family & career background• Age & Education


The stages of start-up


Iterative Process

Start Up

Negotiate &Acquire Resources

Identify Resources

Valid Idea

Raw Idea

Acquire Motivation

Fail Succeed

• in relation to a market need• at an appropriate scale


Factor influencing the start-up process

©Mazzarol 2017 all rights reservedSource: Gibb & Ritchie (1990)

The start-up success

ingredients

The idea & market

The proposer’s ability & experience

The motivation & determination

The organisation

The plan

The resources needed & available


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


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.


Triggers and barriers to new venture creation


Source: Volery, Mazzarol, Doss & Thein, 1997

Barriers to New

Venture Creation

Hard Reality

Lack of resources

Compliance Cost

Triggers for New Venture Creation

Creativity Autonomy Money Market opportunity Invest Status


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.”


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.


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.


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.


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.


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.


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.

End of Presentation

small business management mgmt5601 topic 2: entrepreneurs ... · entrepreneur • creates &...

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