This essay is a critical Appraisal of the business planning process based on the contribution of each element towards the creation of a successful entrepreneurial venture.
The entrepreneur planning a business or an extension of his current business concern is basically running many risks concurrently. The first and foremost risk remains of product failure and financial loss. It may be argued that a business is “too large” to fail. However this is not the case and in the light of the factors briefly mentioned below the author will evaluate the contribution of each of these elements in this section of the paper. It should be noted that sometimes these elements come together to and overlap in the formulation of a business plan.
The key elements of a business plan include the following main elements:
1- Technology, Licensing and Intellectual Property review
2- Review and Description of the business opportunities and challenges: followed by future commercial strategy and market potential
3- The potential nature of the management team (Directors, Managers, Consultants)
4- Corporate and Financial Operations in terms of future production or R&D plans and financial analysis.
Technology Licensing and Intellectual Property Review
Many a times an entrepreneur has to make the correct IP strategy in terms of the technology at hand being used. Whenever a new technology or a product is being used there is a danger that competitors will try to develop a cheaper alternative to it (Troth and Hoecht, 2004). This is precisely the reason Western companies like Apple find themselves in a quagmire when China produces iPhones for a quarter of the price with an Apple logo to add insult to injury. Ironically, not much can be done against such international competitors who have the protection of their domestic laws against any legal action (Heiser et al, 2005). Nonetheless, on a smaller scale it is always a good strategy, particularly if the intended form of business is to become a partnership, to decide before hand the relevant entitlements and rights of each party to commercially exploit the invention or product at hand. Furthermore, the clarification of the same will also help investors and financers are more clearly as to their standing in the future should a legal or business dispute arise (Jobber, 2004).
Secondly, the nature of the product being marketed will also have a significant impact upon this aspect of business planning. There are clearly different business conventions and methodologies for the procurement of a commercial license as opposed to the dynamics and mechanics of technological transfers (Hooley et al, 2004). One example of the latter would be the setting up have a software based consumer relationship management program or even an Enterprise Resource Planning system. Such a set up would need to ensure that the intellectual property rights and license permissions for the same have been acquired and paid for. Furthermore, if a new product or invention is being launched then this aspect will have to consider in advance from a commercial dimension the future parameters of IP asset licensing and sales, which can potentially form, are an additional form of income (Heiser et al, 2005).
A commercial venture banking for its future income upon the use and popularity of its product or innovation should have its marketing strategy reflected in decisions taken at this stage. Essentially, such intentions should reflect measures to actively and aggressively leverage the intellectual asset base which is essentially the starting point for a strategic management of direction in the future (discussed further ahead) (Jobber et al (1992). Many companies have their mission statement expressed in advance reflecting their intention to significantly increase the funds coming in from licensing revenues for profitable revenue growth.
These decisions will also have a significant impact upon the nature of management team and the operational measures, which must be taken in the future. For example, there will be a need to establish perhaps a separate unit dedicated to technology and intellectual property, which along with the help of active marketing professionals as well as legal support to enforce these licensing measures, will form an integral part of the business in the future (Ashill et al (2003). This stage helps the entrepreneur reflect upon the economic benefits of “ownership” in order to provide an overview of the financial aspects of the same for the future of the business at the operational level (Porter 1985, 1980).
Review and Description of the business opportunities and challenges: followed by future commercial strategy and market potential
According to El Ansary (2006) this stage in a business plan helps the entrepreneur to review the “present taxonomy of marketing strategy concepts and integrative frameworks that differentiate and integrate its formulation and implementation processes” (El Ansary, 2006:266). Such a reflection and research will allow the entrepreneur to gather and demarcate at the outset, “the formulation of segmentation, targeting, differentiation, and positioning strategies to create, communicate, and deliver the value to the customer resulting in gaining customer satisfaction and loyalty; i.e. marketing objectives” (El Ansary, 2006:266).
A number of issues arise here therefore. Firstly, whether and how this strategy will be formulated? Secondly, how can it be ensured that such a strategy remains realistic and does not only look good in the papers? In the author’s opinion there is a need by the entrepreneur to recognize that marketing and business approach may have non-profit motives sometimes especially when it comes to establishing the imaging and branding of the product. Many a time such strategies cannot be balanced through the notions of the marketing mix and there is a need to keep such costs and considerations away from the marketing audit model (Porter, 1980,1985). The extent to which the firm has to focus upon its credibility and marketing depends upon its previous history of operations (if the business plan is for a new product) and the comparative credibility and marketing image of its rivals (Prahalad and Hamel, 2004). Essentially, at this stage the entrepreneur’s visionary success depends largely upon the length and breadth of his holistic approach and the ability to bring together various business strategies.
It is at this stage indeed that there stems a greater needs to study and respond to the market conditions, as well as the rival strategies. These studies, at least in business theory can be undertaken via a number of managerial tools like the Boston Growth Matrix, the PESTEL analysis, the SWOT analysis, Marketing Mix Strategies (Jobber, 2004) and finally it may also be a good opportunity to reflect upon Porter’s (1985) three generic strategies, which are the differentiation strategy, cost leadership strategy and focus strategy to evaluate beforehand the road to enhancing competitive advantage in the future.
The potential nature of the management team (Directors, Managers, Consultants)
This is the stage of the business planning process where small legal and technical nuances may often dominate the larger picture of the organizational structure of the company. The structure needs to be well suited to the purposes and aims of a company. For example it would not make sense to have too many directors in a small company with a small shareholder base. Alternatively it is certainly not in the best interests of the company to let the directors have to too large a portion of the asset-base and shares, as this will distort neutral and transparent decision making for the future of the company (Deeks, 1993). The entrepreneur may also have to decide which decisions can be taken within the company and which one of these are more suited to business acumen of third parties or outside consultants. For example as mentioned above sometimes intellectual property matters are best dealt with a separate department with in a business composed of outside legal and marketing consultants (Deeks, 1993).
The choice of the correct business organization and the management decision-making framework becomes integral to the success and future survival of an organization especially where there is an apprehension that there will be power disputes in the future. This generally happens in organizations which later grow in size, and their structure becomes too complicated and politically driven for harmony with in the managerial decision-making for various departments. An example would be the conflicting views with in the IT and marketing departments. A good decision making framework will reflect itself with in the business planning process as decentralized, flexible and organized providing for many decisions to make unanimously with the employee base and at the grass-roots level.
Corporate and financial operations in terms of future production or R&D plans and financial analysis
Since the aim of business is the drive for profit, accounting for and planning profits and expenditures in advance becomes an exercise, which involves a large amount or risk and the slightest miscalculation, or over-optimistic forecast can sabotage the likelihood of success for the entrepreneur in the venture (Svensson, 2005). Important financial risks come from the choice of financial institutions, financers, mortgagers and even current business events like the state of the stock exchange and fluctuating currency rates. Sometimes financial commitments by financers do not come through. At other times projects whose compensation has been agreed for become difficult to perform in the event of market fluctuations (Deeks, 1993).
Many entrepreneurs will take financial risks and in the past they have been awarded abundantly. However, after a careful view of the recent business events and the fate of Enron and AIG, the author feels that it is always advisable to take a conservative approach with money figures and future financial forecasts. Furthermore in the light of new regulations post the subprime crisis a company must follow a number of rules in regulations in the reporting of its accounts and the financial information provided to shareholders and potential financers.
Conclusion and summary
This section has reflected upon the role of all the elements, which make up the business planning process and has examined briefly how and when each element is likely to become an ingredient of the commercial success of the entrepreneurial venture. It has been possible to gather from this reflection and appraisal above that writing a good business plan remains a psychological skill, as it requires the marketing of a vision to potential business partners and financers. This has to be, by all means however an honest vision, which does not bank solely for its success on a psychological exaggeration and inflation of factors and incentives which are not quite there.
This section discusses the entrepreneurial characteristics, which in the author’s perception match their own skill set through the lens of critical reflection on the market challenge element of the module.
The time spent in my performance at the market challenge element of the module, brought out for me a number of realizations and understanding of my own skill set and the way I can possibly apply it to my entrepreneurial skills. The first and foremost thing I learnt was that any group effort of learning or tasking playing with other keen and competitive individuals can be a an exercise which is taxing for the nerves and the emotional IQ of a person (Reilley and Tamkin, 2007). While teamwork and sharing can be a positive learning experience where many able minds set up for the execution if an ambitious marketing/business plan for the management and organization of a business concern, a lot of tension can emerge nonetheless when egos and power styles of many different persons collide (Box et al, 2003). While in my own role of a strategist and visionary I saw myself being as democratic as possible during the initial struggle of our own to be better able to decide key leadership roles, I realized that my skill set as an entrepreneur was more matched to the attributes of a transformational leader. I realized this as I tried to reach out to possible competitors, informational sources and third-party helpers though gainful approaches to cultural tolerance, group dynamics and over all people management. Yukl (1998, page 5) defines transformational leadership as,
“…The process wherein an individual member of a group or organization influences the interpretation of events, the choice of objectives and strategies, the organization of work activities, the motivation of people to achieve the objectives, the maintenance of cooperative relationships, the development of skills and confidence by members, and the enlistment of support and cooperation from people outside the group or organization” (1998: 5).
Therefore transformational leadership remains a very desirable attribute for an entrepreneur especially when the emphasis is upon dealing with and making the best of the main assets of an organization, which are the employees and management base of an organization (Harris and Foster, 2010). I learnt that financing and setting up the capital requirements for an organization or business are only half the battle to success. The entrepreneur has to lead a set of people to victory which his prudent financial and managerial decisions. Furthermore in reflection I am also able to see that my skill set of leadership and motivational attributes focuses more upon working with the decision making problems through the involvement of decentralized and grassroots mechanisms.
I understood very quickly the meaning motivating the team and keeping my own thoughts positive and motivated. While dealing with my founding team composed of the marketing, functional and technological dimensions of the enterprise I realized very quickly that while those people in the position of “equals” in the business require recognition and acknowledge as well as power sharing, those in subordinate positions have needs too! I noted that a more positive response could be elicited on behalf of those working in subordinate positions, during a project by ensuring that they remain motivated through financial incentives and appraisal (Harris and Foster, 2010). Even academic theory points out to the merits of frequent appraisal techniques to boost performance management during the project.
Therefore, I realized that a good entrepreneur will always focus upon adequate performance management which can be defined “…set of practices through which work is defined, reviewed and rewarded, and employee capabilities are developed” (Stephen and Rothimayer, 1998: 229). Furthermore, I found my entrepreneurial style to match more to that of an expresser and co-operator. Sometimes a team needs to be treated like a family and there is a need for empathic listening. Moreover, keeping in line Maslow’s hierarchy of needs, the team worker will almost always seek and value internal vs. extrinsic satisfaction. I realized that this could be achieved by encouraging a team environment, which does not only promote consideration and respect for all team members but also a more communicative and expressive discourse where the subordinates or employees can be involved in culture of frequent and polite communication of complaints and concerns internally. However the focal point of success for an entrepreneur remains his or her subscription to trusting, trusting himself and having confidence to his employee base. Writing academically Bevan and Thompson believe that trust in business matters and operations, “is almost universally built or destroyed on the basis of justice and integrity.” (1991:27)
The entrepreneur should also have an eye for analysis. However I did not find myself to be an overtly analytical person. I would consider myself more of a reflector in this case, as I tried to be a student, learning from my own mistakes and decisions (Blair et al, 1993). As the author I would of course acknowledge that the marketing challenge was in every way a learning process for me, revealing to me that every business decision and pathway reveals a different aspect of application of business theory onto practical life. The reason I would consider myself a mixture of an analyzer and a co-operator and an expresser is because I treated myself as a student of my own mistakes and tried my best to record and reflect upon these for the benefit of the rest of the team and my colleagues.
Building Relationships: the entrepreneur, employees and clients
The entrepreneur with my co-operative style of conducting business will almost always focus upon the fact that humans have to “grow” into each other by adopting to each other’s unique styles of action and responding to a challenge (Box et al, 2003)). I realised that the entrepreneur is running the risk of disrupting the harmony of the work environment when there is too much focus on a few employees or aspects and others are neglected. The best discourse as I saw here was to opt for a temporary division of labour where some of the decisions can be entrusted to each department to be take independently in order to ensure that managing conflict and the idea of effective communication and ultimately of the creation of high performance teams is interrelated with building basic effective.
In addition to this, when dealing with humans there is a need to be less formal while deeming them to be “business only” relationships. Each human relationship needs to be nourished through effective communication and the entrepreneur has to possess a number of people skills to be able to listen empathically to the problems of the team members, employees and clients. Furthermore, just as in real life we might endeavour not to keep a parent, relative or a loved one waiting too long or isolated without any excuse it is important to do the same for colleagues, clients and subordinates (Box et al, 2003). I feel that my empathic listening and effective face to face communication helped the workers feel less marginalized from the main decision making process .I realized that as an entrepreneur I had to learn effective psychology and would have to tap with care into the egos and comfort zones of the people I am working with. Sometimes writing a simple email or text message cannot do the needful in terms of effectively communicating our concerns and expectations. Many misunderstandings can be avoided if only we can make an effort to execute face or voice communication .The same can help the solid foundation of building relationships managing conflict and of encouraging the exchange of information and concerns felt during the operational process (Blair et al, 1993). Finally, I saw that the expressive entrepreneur thrives on his ability to “say” things and effectively communicate them in a non-personal yet concerned manner.
During my analysis of my own actions and reactions when I was performing as an entrepreneurial and trying to lead a team, I realized that a culture of accountability should be encouraged and the first person to volunteer should be the entrepreneur himself in his own position as a leader. It would be for example unfair to expect the team to account for petty expenses when the team leader himself involves in extravagant and undue expenditures (Yukl, 1998).
Last but not the least, I realized that I should be able to understand conflict from the other person’s perspective in a deeper manner and mode through a better understanding of their culture and lingual skills. In our society we have a melting pot of cultures and it is possible to encounter many different people with different perceptions in business dealings. A successful entrepreneur puts the ego and needs of the client and employee base before himself in order to successfully reap the rewards of such co-operation in the long run. Such mannerisms can only increase employee confidence and loyalty. And success business management is all about long and mutually beneficial business relationships, the entrepreneur must have all these skills, in his or her skill set for better future success.
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