Uncertainty And Risk Taking Entrepreneurial Strategy Commerce Essay

Bygrave and Hofer define the characteristics of a successful entrepreneur and he explained that an entrepreneur should have the ability to perceive an opportunity and create an organization to fulfill his goals(Bygrave and Hofer). According to Vesper, an entrepreneur is one who creates independent business (Vesper, 1983). Joseph Schumpeter consider entrepreneur as a creator of new opportunities by exploring an invention and revolutionize the pattern of production by producing a previously existing product in a new way (Schumpeter, 1934). Motivations play an important role to create an entrepreneur and it can be categorized as either push or pull situational factors or personal characteristics. Situational pushes or pulls, such as; frustration with present life-style, childhood, family environment, education, age, work history, role models etc acts as a motive force to find out something that can change their whole life (Hisrich, 1990). There are many negative factors like dissatisfaction with existing employment, loss of employment or rejection from society can also play a significant role in creating successful entrepreneurs (Gilad, 1986). Personal characteristics, such as independence, need for control, self reliance, confidence, initiative, and resourcefulness are considered as essential personal characteristics of an entrepreneur and instrumental in motivating entrepreneurial behavior (McClelland, 1987).

Innovation of a unique and new idea or product or service is essential to start a business and considered as a primary motive for a new venture. Innovativeness is a complex process in which an invention becomes a market valuable product. Carland, Hoy et al differentiate the entrepreneurs from small independent business owners by describing the importance of innovative strategic plans to construct a new venture that can bring profit and growth. According to them, an entrepreneur is an individual who create and manage a business for the principal purpose of profit and success (Carland, J.W., Hoy, F., Boulton, W.R., and Carland, J.C, 1984). Basically an entrepreneur is an inventor who can successfully adopt and implement competitive strategies and has an ability to introduce his new products or services and new methods of production by opening new markets or recognizing an entirely new industry (Bird, 1989). Globalization and new technology advancement produced more business opportunities and many new ventures have started recently, resulted high competition (McMullan and Shepherd 2006). To overcome this situation, entrepreneurs should have creativity, innovation and imagination.

Uncertainty and risk taking: Entrepreneurial strategy

An entrepreneur should have the ability to take risks to survive in a competitive industry and to acquire high financial returns. If an entrepreneur is facing challenges from other firms, he may need to expand or advance his business by taking risky launching new products in new markets or buying new technological advancement. If a firm has aggressive and innovative strategies, these risky decisions will bring growth in their venture. Roberts &Mayer explained that the presence of uncertainty during the new venture process is an important barrier for success (Roberts E.B.,Mayer M.H., 1991). Basically an entrepreneur commonly faces three types of risks: business risk, financial risk and personal risk. According to Chen, the main reason of uncertainty in new venture is the unpredictable nature of the business industry as a result of industry dynamism or technological change. Industry has a very dynamic structure and market is changing day by day. Market uncertainty can be developed from the lack of proper knowledge about the changing industry and the inability to determine the demand for the new business. Technical support is the backbone of all businesses and technical uncertainty can develop inside the production unit that can affect the whole business structure (Chen J., Rillly R.R., Lynn G.S., 2005).

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An entrepreneur face conflicts inside the organization and the fact is that conflict is very common within a firm. Conflict is viewed as a situation in which two or more individuals operating within a unit appear to be incompatible. Handling organizational conflict is high costly and Thomas et al explains that it consumes 20 percent of a manager’s time (Thomas, A.S., Shenkar, O., and Clarke, L.D., 1994). Spector suggest that unsolved conflicts can develop anti social behavior, hidden revenges (Spector, 1982) and violence (Luckenbill & Doyle, 1989) within an organization.

After conflict is recognized, acknowledged and managed in a proper manner, personal and organizational benefits will accrue by the top level management. Effective entrepreneur uses this situation as an opportunity for growth for both the organization and individuals (Blome, 1983). Modern management theorists believe that the theory of avoiding conflict is not a better strategy within a firm but it should be replaced with the new concept of conflict management. An entrepreneur should have a vision to use all conflicts and create positive outputs that can bring great benefits (Nurmi, R.W and Darling. J.R, 1997).

Entrepreneur who creates new technological solutions consisting of new products and services is considered as an inventor and entrepreneurship is an innovative process. Van de Ven describes that entrepreneurship is a journey of uncertainty and entrepreneur can fail many times during their journey of new venture creation (Ven, 1986). New ventures must tackle various problems, like new product development, commercialization and new market policies (Kazanjian, 1988). From the beginning stages of their business journey entrepreneurs should be ready to face all unpredictable problems and they need the ability to solve these crisis. Xxx defines this journey of an entrepreneur as a series and combination of autonomous, innovative and unpredictable actions and interactions (Zong-Tae-Bae, 2010).

Successful entrepreneurs not only replicate positive values but also they transform these values into transformational strategies that help them to infuse their values into the foundation of the organizational culture (Cornesky, 1990). Success of an entrepreneur lays mainly on four strategies: attention through vision, meaning through communication, trust through positioning, and confidence through respect. Entrepreneurs who use these strategies can build successful organizations with a strong entrepreneurial culture characterized by committed people, stable innovations and great customer care (R. Peters, T and Waterman, R, 1982).

A vision that can change the world

A great vision is the father of a successful entrepreneur and the foundation of a successful firm. Entrepreneurs are aware that there are people in the marketplace for new innovative products and services. An enthusiastic entrepreneur creates new products and services by understanding the nature of markets or industry where they can sell their innovations in a better way. They need their organizational structure more dynamic and the functions of their organization must be done faster, better, accurate and at a lower cost. Dreams of an entrepreneur may not be very realistic but their vision about their venture should be realistic and practical. Microsoft founder Bill gates is one of the recent examples of a successful entrepreneur who has a great vision about the explosive market for home computers and made his mark in the industry. In the early stages of his career Bill Gates decided that the possibility of every household and business to hold a computer was both a realistic and desirable goal. His idea was not selling computers, but his idea was software which would run in all computers manufactured by different hardware companies. Bill Gates said that his vision has not changed since the day the company was founded. The foundation of Bill Gates business career was his strong visionary perspective and the true understanding of the industry.

Importance of Strategic Plans

Strategic planning is frequently linked with creativity, innovation, establishment of networks and such other factors which are expected to be practiced in a firm for success of the business. Strategic management and entrepreneurship can equally be carried out together for the competitiveness of the firm. Entrepreneurs constantly targets on finding explanations and solutions to Sustain competitive benefits through efficient strategic planning and proper management of the firm (Lewis, Goodman and Fandit, 2001). Strategic planning has transformed as an essential factor for entrepreneurs because of the current changes such as global competition, technological advancements and fluctuations in markets (Skrt. B and Antoncic, B, 2004).

According to Kuratko and Hodgetts (Howard H. Frederick, Donald F. Kuratko and Richard M. Hodgetts, 2006), strategic planning is the best method to differentiate a successful firm from an unsuccessful firm. Many researchers have confirmed that those firms which follow strategic planning will surpass firms which do not plan. Meyer and Happard (2000) note that, firms which practice entrepreneurial strategies are innovative and ready to take more risks in their business. Entrepreneurial strategies help firms to experience more and focus on building responsibilities and trust, moreover consequently improving business performance. Strategic planning along with levels of innovative, proactive and risk-taking behaviors allow the business to expand and maximize the overall performance.