The Entrepreneurs Challenges In Taking Risks Commerce Essay

Published:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

The entrepreneur is in a business of taking risks. Any mistake or initiative of taking these risks would undermine the prospect of running a successful business. The entrepreneur has to assume the outcome arising from his/her risk taking activities in terms of profit or loss while operating the business. The risk of running of business despite both personal and financial loss is the basic underlying theme that segregates entrepreneurs from non-entrepreneurs. It is also important in terms of our understanding of the entrepreneurial process that every entrepreneur has to go through.

One of the important functions of an entrepreneur is to gather productive resources in an attempt to provide products or services so that in return they will get a reasonable income. These resources include manpower, equipment and tools, money, time and basic raw materials which may entail some risks during the process of transforming them into products or services. Some examples of risk associated to the transformation process include the risk for not getting the basic raw materials needed to produce the product or perhaps damage to the equipment and tools which could translate into losses to the entrepreneur. These resources, along with its associated risk, must be recognized and managed accordingly in order to minimize losses and to increase profits.

In the present study, the researcher is keen to examine the risk-taking propensity among the micro and small business owners [1] in Malaysia. It is in the interest of the researcher to shed some insights on the behaviour of these micro entrepreneurs in terms of their awareness and perception about risk, their propensity to risk taking as well as their overall understanding on risk management or mitigation. Propensity to risk taking is generally defined as the tendency of the individual entrepreneur to assume a certain level of risk associated with their business operations particularly when making business decisions. The assumption is that different individuals might have different risk taking propensities; some may be high risk takers while some may be risk averse. It is envisaged that the research will be able to enhance our body of knowledge in terms of our understanding on the micro and small business owners' risk-taking propensity especially within the context of different cultures of Malaysia.

Micro, Small Medium Enterprises (MSMEs [2] ) in Malaysia accounted for 99.2% of about 518,996 businesses that were registered in 2005 where almost 80% are categorised as micro-enterprises (Baseline Census of Establishments and Enterprises, 2005). Gray & Gray (1989) noted that about 70% of the adult population aspire to be an entrepreneur but did not pursue their dreams due to a fear of failure, risk or uncertainty. The findings from the present study would be able to substantiate the result of the above study.

According to Knowles & White (1995), entrepreneurs who started the businesses not only create new jobs, generate wealth and provide satisfying careers for themselves but they also have to undertake risks most of the time and it has become part of their entrepreneurial life.

1.2 Problem Statement

The development of MSMEs has been high on the government agenda since 1970 beginning with First Malaysia Plan until today. The New Economic Policy introduced in 1971 showed the seriousness of the government to mend the imbalances of economic wealth among races in Malaysia along with to eradicate poverty level to the minimum. Government commitment towards the development of MSMEs also can be seen in the implementation of Second Industrial Plan (IMP2) and followed by IMP3 which will end by 2020. All of these plans are government policies to increase the contribution of sectors under MSMEs especially manufacturing (in the 8th Malaysia Plan) and agriculture (in the 9th Malaysian Plan) alongside with other sectors, such the services sector. Census conducted in 2005, found that Malaysia's MSMEs dominated by micro and small establishments represent 79.4% (412,000 company) and 18.4% respectively. A medium-sized establishment constitutes only 2.2 percent. Currently, MSMEs made up 99.2 percent of business in Malaysia compared to only 88.3% in the year 2000. The statistics showed that not many MSMEs in the country graduated into becoming large corporations despite the increasing number of MSMEs established each year. What could be the reasons? This phenomenon is probably due to the low risk taking propensity among MSME owners whereby they are afraid to expand their business due to the risks and uncertainties they might face if they become a larger corporation. Despite, the increasing numbers of MSMEs from year to year, its contribution to the national economy in terms of output, added value and new net jobs is presumed to be stagnant if not diminishing.

In the United States, Small Business Association (1995) estimated that only one in three businesses survive to their fifth anniversary and only one in five make it to their tenth. The failure of the business is thought to be related to the entrepreneurs' failure to assume the right level of risks in operating the business. According to MacCrimmon and Wehrung (1990), an entrepreneurial venture success has been connected to the risk taking propensity of the entrepreneur. The truth is that that small business all over the world has a success rate of less than 65% (Gray & Gray, 1989) makes it all the vital to understand reasons behind this statement; in particular those associated with risk-taking propensity and how it influences entrepreneurs' decision making. Therefore, it is of interest to the researcher to determine the level of risk-taking propensity among micro, small and medium enterprises (MSMEs) entrepreneurs in Malaysia.

1.3 Research Questions

This study attempts to answer the following questions:

Are there any differences in the risk taking propensity among MSMEs owners'?

Are there any differences in the risk taking propensity among MSMEs owners' relating to their age?

Are there any differences in the risk taking propensity among MSMEs owners' relating to their education level?

Are there any differences in the risk taking propensity among MSMEs owners' relating to their business experience?

Is size of business of MSMEs related to their risk taking propensity?

Is length of business operation of MSMEs related to their risk taking propensity?

Is the type of business of MSMEs related to their risk taking propensity?

Is the amount of start-up financing of MSMEs related to their risk taking propensity?

Is the source of start-up financing of MSMEs related to their risk taking propensity?

Is the business location of MSMEs related to their risk taking propensity?

Is the number of employees of MSMEs related to their risk taking propensity?

1.4 Research Objectives

This study aims to contribute to the understanding of risk taking propensity among Malaysian MSMEs. Based on this aim, the objectives of this study are described as follows:

To determine the level of risk taking propensity among the Malaysian MSMEs owners.

To investigate the differences between demographic characteristics and level of risk taking propensity of Malaysian MSMEs owners

To analyze the relationship between demographic characteristics and level of risk taking propensity of Malaysian MSMEs owners.

To analyze the relationship between business characteristics and risk taking propensity of Malaysian MSMEs owners.

To provide recommendation to various institutions ton how risk taking propensity could enhance the success of the business.

1.6 Significance of the study

This study was significant for a number of reasons. First, risk taking propensity is significant in the entrepreneur's field because this factor will help the industry to expand as the entrepreneurs' success. The findings of this research will help entrepreneurs to access more information or guidelines on how to act and react on the risk taking propensity in running their business. This information also will be able to establish the influence of risk taking propensity profile of MSMEs entrepreneurs in determining the entrepreneurial success, thereby advancing our knowledge of entrepreneurship from the perspective of a developing country like Malaysia.

Secondly, the study attempts to contribute to the body of knowledge; both in the fields of risk management and entrepreneurship by exploring the relationship between business owners demographic, business characteristics with risk taking propensity among micro and small business entrepreneurs. This information is important because more people are interested to become business owners and entrepreneurs in response to the government's intention to give more facilities to the entrepreneurs including grants, loan, training and many more incentives to encourage people to become entrepreneurs. A number of studies have focused on examining risk taking propensities among entrepreneurs in the Western world. However, not many studies have been done in this context in Malaysia. The findings from this study would shed some insights on the profile of risk taking propensity of the micro and small business owners in terms of its demographic factors.

Finally, to ensure continuous growth and development of micro, small and medium enterprises is essential for the economics development of the nation. , entrepreneurial success will be the focus issues by government. Awareness of the risks involved in an entrepreneurial venture, together with the ability to access their risk taking propensity might help the entrepreneurs achieve success in their business. Additionally, awareness of the business and personal characteristics affecting risk taking propensity of successful entrepreneurs may enable the potential entrepreneur to analyse and strength their success potential. Ultimately, the findings of this research may help the planners of the country to encourage the MSMEs entrepreneurs to increase their level of attitudes which will influence the organizational effectiveness to fit the need of the industry.

1.7 Scope and Limitations of Study

The study was done in two states of east coast of Malaysia i.e Kelantan and Terengganu. Even though the study was done in Kelantan and Terengganu the findings and conclusions can be applied to the MSMEs industry because of the likenesses of the rules, regulations and business environment.

The study was limited to:

Micro to medium enterprises per the classification of National Small and Medium Enterprise Development Council, Malaysia.

The enterprises registered with SMIDEC in Kelantan and Terengganu.

The enterprises those are still active in the business.

1.8 Research Organization

This study is organized into five chapters including this introduction chapter. The next chapter which is Chapter Two will review the theoretical premise and empirical evidence from the previous studies pertaining to risk taking propensity and entrepreneur, especially those investing possible relationship between business owners demographic and business characteristics as related to risk taking propensity. Next, Chapter Three describes the variables selected for this study as well as justifying why certain variables were included in the study. This chapter also includes the discussion of research theoretical framework and the research methodology employed in this study which include the research design, description of sample, questionnaire design and field work implementation. Chapter Four presented data analysis and discussion on research findings. Finally, Chapter Five summarized the conclusions of the empirical findings of the study. This final chapter also outlined some suggestions on the direction for further research in the perspective of risk taking propensity among entrepreneurs.

Writing Services

Essay Writing
Service

Find out how the very best essay writing service can help you accomplish more and achieve higher marks today.

Assignment Writing Service

From complicated assignments to tricky tasks, our experts can tackle virtually any question thrown at them.

Dissertation Writing Service

A dissertation (also known as a thesis or research project) is probably the most important piece of work for any student! From full dissertations to individual chapters, we’re on hand to support you.

Coursework Writing Service

Our expert qualified writers can help you get your coursework right first time, every time.

Dissertation Proposal Service

The first step to completing a dissertation is to create a proposal that talks about what you wish to do. Our experts can design suitable methodologies - perfect to help you get started with a dissertation.

Report Writing
Service

Reports for any audience. Perfectly structured, professionally written, and tailored to suit your exact requirements.

Essay Skeleton Answer Service

If you’re just looking for some help to get started on an essay, our outline service provides you with a perfect essay plan.

Marking & Proofreading Service

Not sure if your work is hitting the mark? Struggling to get feedback from your lecturer? Our premium marking service was created just for you - get the feedback you deserve now.

Exam Revision
Service

Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.