1) Introduction: Entrepreneurship- thriving in chaos Flashcards
What characterizes the 21st century in terms of change and uncertainty?
The 21st century is marked by continuous, unpredictable, and often turbulent change. The pace of change has accelerated, making it increasingly difficult to predict and manage.
change in usa vs. china
How does this view of change contrast with historical perspectives?
Historically, Western thinking leaned towards creating stability and control in society and the economy, believing that change could be managed through careful planning.
However, ancient Chinese philosophy had a different take. It viewed change as a natural part of life. Instead of trying to control change, it emphasized adapting to it.
What are some notable economic and political shifts in the 21st century?
- The US economy has experienced stagnation, with a decline in start-up activities over the past 40 years indicating a lack of entrepreneurial momentum and economic vibrancy.
- Conversely, China has witnessed unprecedented growth in non-state-owned enterprises, shifting from dependency on foreign innovation to leading innovation itself.
- This shift has resulted in a significant redistribution of economic power from West to East.
What is Economic power?
Economic power refers to the ability of an entity—such as a nation, corporation, or individual—to influence or control economic resources and outcomes. This power can manifest in various ways, including the ability to set prices, control production, dictate market conditions, and influence the distribution of wealth and resources.
Impact of shift in economic power from the US to China
As economic power has shifted, tensions between global superpowers have intensified. Trade disputes, particularly between the US and China, have led to the escalation of trade wars.
What are trade wars?
Trade wars occur when countries impose tariffs or other restrictions on goods from one another in response to trade barriers or perceived unfair practices. This typically involves increasing tariffs (taxes on imports), implementing quotas, or creating regulations that disadvantage foreign companies.
The goal is often to protect domestic industries, reduce trade deficits, or retaliate against another country’s trade policies.
What are the supporting and critical views of trade wars?
- Advocates say trade wars protect national interests and provide advantages to domestic businesses.
- Critics of trade wars claim they ultimately hurt local companies, consumers, and the economy.
What are the advantages of a trade war?
- Protects domestic companies from unfair competition
- Increases demand for domestic goods
- Promotes local job growth
- Improves trade deficits (imports > exports)
- Punishes nation with unethical trade policies
What are the disadvantages of a trade war?
- Increases costs and induces inflation
- Causes marketplace shortages, reduces choice
- Discourages trade
- Slows economic growth
- Hurts diplomatic relations, cultural exchange
What is WTO?
- Created in 1995, the World Trade Organization (WTO) is an international institution that oversees the rules for global trade among nations.
- The World Trade Organization (WTO) oversees global trade rules among nations and mediates disputes.
- The WTO has been a force for globalization, with both positive and negative effects.
What issues have arisen from corporate scandals and the behavior of major internet companies?
Corporate scandals, such as those involving Enron, WorldCom, and Volkswagen, have raised significant ethical concerns. Additionally, major internet companies like Google, Apple, Facebook, and Amazon have been criticized for monopolistic practices, tax evasion, and political influence. The misuse of data by these companies, particularly for targeted advertising and political purposes, has become a major issue.
What are Cookies?
Cookies are text files containing small amounts of data, such as a username, a session identifier, or tracking information. They are created by the web server when you visit a website and stored on your device by your web browser (e.g., Chrome, Firefox).
How Are Cookies Created?
When you visit a website, the web server sends a cookie to your browser. The browser stores the cookie on your device and sends it back to the server each time you make a request to that website. This exchange allows the server to recognize your device and remember information about your session or preferences.
What are the commercial reasons for companies to use customer data?
- Targeted Advertising: Companies use customer data to deliver personalized ads based on user preferences, behavior, and demographics. This increases the effectiveness of marketing campaigns by ensuring that ads are relevant to the audience, thereby improving conversion rates.
- Customer Segmentation: Businesses analyze customer data to segment their audience into different groups based on behavior, interests, or demographic factors. This allows for more customized marketing strategies and product offerings, improving customer satisfaction and loyalty.
- Product Development: User data helps companies understand customer needs and preferences, guiding the development of new products or the improvement of existing ones. By analyzing data trends, companies can innovate and stay ahead of the competition.
- Pricing Strategies: Data on customer purchasing behavior allows businesses to implement dynamic pricing models, adjusting prices based on demand, customer profile, or competition. This maximizes revenue by aligning pricing with what customers are willing to pay.
- Customer Retention: By analyzing data on customer interactions and behaviors, companies can identify at-risk customers and implement strategies to retain them, such as personalized offers or loyalty programs.
What are the political reasons for using customer data/user data?
- Voter Targeting: Political campaigns use data to identify and target specific voter demographics with tailored messages. This helps in persuading undecided voters or reinforcing support among certain groups.
- Opinion Shaping: By analyzing user data, political entities can craft messages that resonate with specific segments of the population, influencing public opinion on key issues or candidates. This can be crucial in swing states or districts.
- Microtargeting: Similar to commercial segmentation, political campaigns use data to microtarget individuals with personalized messages, increasing the likelihood of engagement and voter turnout among specific groups.
- Fundraising: Political campaigns use data to identify potential donors based on past giving history, political affiliation, and online behavior. This enables targeted fundraising efforts, improving campaign finance outcomes.
- Influence on Policy: Governments and political entities may use data to understand public opinion on various issues, guiding policy decisions or legislative priorities. This data-driven approach ensures that policies align with voter preferences, enhancing political support.
What is a monopoly?
A monopoly refers to the exclusive possession or control of the supply or trade of a commodity or service by a single company or group of companies. In a monopoly, the monopolist has significant market power, allowing them to set prices and control the availability of products or services without facing competition.
This often leads to higher prices and reduced choices for consumers since the monopoly can operate without the pressure of competitors.
How has globalization and technological advancement impacted communication and competition?
Globalization and technological advancements have created a highly connected world where instant communication is possible across the globe. This connectivity amplifies small changes, leading to rapid and unforeseen global impacts, such as the 2008 financial crisis. The internet has disrupted traditional industries, creating new competitive pressures and requiring companies to innovate continually.
What structural changes are occurring in the global economy, and how are they affecting large companies?
Many industries face profound structural changes, such as the shift from fossil fuels to renewable energy in the oil and gas sector. Large companies are increasingly focused on short-term profit generation, often resorting to monopolistic behavior rather than innovation. The ability to create new sources of competitive advantage quickly is becoming the only sustainable strategy in this rapidly changing environment.
What challenges do large companies face in responding to market and societal needs?
Large companies struggle to adapt to the rapidly changing needs of the market and society. They often focus on increasing shareholder value, sometimes at the expense of broader societal needs. The rise of the gig economy and increasing automation are exacerbating issues like income inequality and job insecurity.
What is gig economy?
The gig economy refers to a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. In the gig economy, individuals work on a project-by-project basis, often with flexible hours, rather than being employed in traditional, long-term employment roles.
How does the entrepreneurial mindset differ from traditional corporate approaches, and why is it important?
The entrepreneurial mindset thrives in uncertainty and is essential for navigating the chaos of the modern world. Entrepreneurs are flexible, innovative, and able to make quick decisions, which are crucial traits in today’s fast-paced business environment. This mindset contrasts with traditional corporate approaches that may focus on stability and long-term planning.
What is an echo chamber?
An echo chamber is a situation where beliefs or opinions are amplified and reinforced by repeated communication within a closed group, with little exposure to differing views.
How do echo chambers reinforce beliefs?
Echo chambers reinforce beliefs by constantly exposing individuals to information that aligns with their existing views, making those views stronger and more entrenched.
What happens to opposing views in an echo chamber?
In an echo chamber, opposing views are often ignored, dismissed, or excluded, leading to a one-sided perspective.
How do echo chambers contribute to polarization?
Echo chambers contribute to polarization by isolating people from diverse perspectives, making them more resistant to considering different viewpoints and more divided from those who disagree.
Polarisation: division of a group into two sharply distinct opposites.
What role do social media and news consumption play in echo chambers?
Social media algorithms and selective news consumption can create echo chambers by only showing content that aligns with users’ interests or beliefs, reinforcing their existing views.
What are the risks of echo chambers?
Echo chambers can lead to increased polarization, the spread of misinformation, and a reduction in critical thinking, as individuals are less likely to encounter and consider different perspectives.
What is oligopoly?
An oligopoly is a market structure in which a small number of large firms dominate the industry. These firms have significant control over pricing and production, and their actions can greatly influence the market. In an oligopoly, competition is limited, and the firms may collaborate or engage in strategic behavior to maintain their market positions.
What is banruptcy?
Bankruptcy is a legal process that occurs when an individual or a business is unable to pay their debts. It allows them to either eliminate or repay some or all of their debts under the protection and oversight of a court. Bankruptcy can involve liquidating assets to pay creditors or reorganizing debts to create a manageable repayment plan.
What do most organisations do when faced with uncertainty?
Uncertainty makes companies risk-averse and can lead to investment paralysis. When companies face an unpredictable and unstable environment—whether due to economic conditions, market volatility, or regulatory changes—they become more cautious about making decisions.
What is investment paralysis?
Investment paralysis occurs when companies delay or halt investment decisions altogether due to fear of making the wrong move in an uncertain environment.
What are the consequences of investment paralysis?
Investment paralysis can lead to missed growth opportunities, reduced innovation, and, on a larger scale, a slowdown in economic growth.
What is competitive advantage?
Competitive advantage refers to the advantage a firm has over its competitors, allowing it to generate higher sales or profit margins and / or retain more customers than its competitors.
How can companies build competitve advantage (3 methods)?
- Cost: Provide offerings at the lowest price
- Differentiation: Provide offerings that are superior in quality, service, or features
- Specialization: Provide offerings narrowly tailored to a focused market
What is product life cycle (PLC)?
- Introduction: The product is launched, and marketing efforts are focused on building awareness and driving adoption. Sales growth is typically slow.
- Growth: The product gains traction, sales increase rapidly, and competition may begin to enter the market.
- Maturity: Sales growth slows as the product reaches peak market penetration. The market becomes saturated, and competition is high.
- Decline: Sales begin to decrease as the product becomes outdated or newer alternatives are introduced. Companies may reduce marketing efforts or discontinue the product.
What is Industry life cycle?
- Introduction: The industry is in its early stages with new technologies or innovations. Market demand is still being established, and the industry is not yet profitable.
- Growth: The industry experiences rapid expansion as demand increases, and new players enter the market. Investment and innovation are high.
- Maturity: Growth slows down as the industry becomes established and market saturation occurs. Companies focus on maintaining market share and improving efficiency.
- Decline: The industry faces challenges such as reduced demand, technological obsolescence, or increased competition. Companies may consolidate, exit the market, or pivot to new areas.
What is a gazelle in the context of business?
A gazelle is a rapidly growing company that experiences high rates of revenue growth, typically at least 20% annually over several years. These companies usually have revenues between $1 million and $100 million and are often seen as important contributors to job creation and economic development.
What are the characteristics of a gazelle?
Gazelles have fast growth in sales or revenues, an established market presence, and are often profitable. They demonstrate significant growth potential but have not necessarily achieved a billion-dollar valuation.
What is a unicorn in the context of business?
A unicorn is a privately-held startup company valued at over $1 billion. The term highlights the rarity of such companies reaching this valuation.
What are the characteristics of a unicorn?
Unicorns have a high market valuation, often achieved through venture capital investment. They are frequently in the tech sector but can be in other industries as well. Unicorns typically have innovative business models or technologies and may still be in the growth phase and not yet profitable.
What is venture capital?
Venture capital is funding provided by investors to startups and small businesses that are believed to have long-term growth potential. In exchange for their investment, venture capitalists typically seek equity (ownership shares) in the company.
What is sublinear scaling?
Sublinear scaling means that as something gets bigger, it doesn’t become as efficient or productive as you might expect. For example, if a company doubles in size, it might not double its output because it becomes harder to manage.
What is super-linear scaling?
Super-linear scaling means that as something gets bigger, it becomes more efficient or productive than expected. For example, when a city gets larger, it might produce even more wealth and innovation than a smaller city because more people and resources are working together.
Why are Scaling laws important for businesses?
For businesses, understanding these scaling effects is important because it helps them know what to expect as they grow. They need to be aware that growing larger could either slow them down (sublinear) or help them do even better (super-linear), depending on how they manage their growth.
What are the different stages of growth that a firm goes through as it increases in size and age? What are the associated crisis’?
- Growth through creativity- Crisis of leadership
- Growth through direction- Crisis of Autonomy
- Growth through delegation- Crisis of control
- Growth through coordination- Crisis of bureaucracy
What drives the early growth of a firm in the first stage?
Growth through creativity
Early growth is driven by creativity, innovation, and the founder’s direct involvement in operations.
What is the crisis of leadership?
Crisis associated with growth through creativity
As the firm grows, the initial creative energy that drove the company’s early success may no longer suffice. A Crisis of Leadership occurs when the firm outgrows the founder’s ability to manage all aspects, requiring more formal leadership and direction.
How does the firm continue to grow in the second stage?
Growth through direction
Growth continues through establishing direction, with a more structured approach to management and clear objectives.
What is the crisis of autonomy?
Crisis associated with growth through direction
A Crisis of Autonomy emerges as the firm expands, and employees need more decision-making power, leading to tension between centralized control and the need for independence.
What is the key to growth in the third stage?
Growth through delegation
The key to growth is delegation, where authority is distributed to middle managers, allowing the firm to scale operations.
What is the crisis of control?
Crisis associated to growth through delegation
A Crisis of Control arises when the founder or top management fears losing control over the organization, necessitating the implementation of systems to maintain oversight while empowering employees.
How does the firm manage growth in the fourth stage?
Growth through coordination
Growth is managed through increased coordination, integrating various functions and departments to ensure efficiency.
What is the crisis of bureaucracy?
Crisis associated with growth of coordination
A Crisis of Bureaucracy occurs when the firm becomes too rigid and bureaucratic, potentially stifling innovation and slowing decision-making.
How does organizational structure impact innovation?
As companies grow, they tend to become more bureaucratic, which can hinder creativity and innovation. However, companies that maintain flexible, adaptive structures can foster innovation even as they expand.
How can companies extend their life cycles?
Companies can extend their life cycles by continuously innovating and adapting to changing market conditions. Failure to innovate can lead to stagnation and decline, while successful innovation can rejuvenate the company.
What is surveillance capitalism
Surveillance capitalism is an economic system where companies collect, analyze, and monetize personal data generated by individuals’ online activities, often without their explicit consent, to predict and influence behavior for commercial gain.
What is behavioral data in the context of surveillance capitalism?
Behavioral data refers to the information collected from users’ online interactions, such as search history, social media activity, location data, and more. This data is used to understand and predict user behavior.
How does machine learning relate to surveillance capitalism?
Machine learning algorithms process and analyze the vast amounts of behavioral data collected in surveillance capitalism. These algorithms identify patterns and trends to predict future behavior and influence user actions.
How does surveillance capitalism use behavioral data and machine learning?
Surveillance capitalism uses behavioral data collected from users to feed machine learning algorithms, which then predict and influence future actions, such as what products users might buy or what content they might engage with.
What are the privacy concerns related to surveillance capitalism?
The practice of surveillance capitalism raises significant privacy issues because individuals often have little control over how their data is collected, stored, and used by companies.
Why is surveillance capitalism considered powerful?
Companies that control large amounts of behavioral data gain significant power over individuals, as they can shape and manipulate behavior on a large scale, often without users being fully aware.
What are the economic implications of surveillance capitalism?
Surveillance capitalism is highly profitable, with companies like Google, Facebook, and Amazon generating massive revenues by exploiting behavioral data for targeted advertising and other commercial purposes.
What does “flexibility increases shareholder value” mean?
It means that a company’s ability to adapt quickly to changes in the market can lead to better financial performance, benefiting its shareholders.
How does flexibility help a company respond to market changes?
A flexible company can adjust its strategies, operations, and products quickly, allowing it to seize new opportunities and avoid potential threats, which helps sustain profitability.
How does flexibility help in managing risks?
Flexible companies can pivot or change direction when faced with challenges, such as economic downturns or competitive pressures, minimizing potential losses and protecting shareholder value.
How does flexibility contribute to a company’s competitive advantage?
Flexibility allows a company to stay competitive by responding better to competitors’ actions, customer preferences, and technological advancements, ensuring long-term success.
How does flexibility ensure long-term sustainability and value creation?
A flexible company is more likely to sustain its performance over time, avoid stagnation, and continuously create value for its shareholders, ensuring relevance and profitability in the long run.
What are strategic options?
Strategic options are different courses of action that an organization can take to achieve its long-term goals and objectives.
What are some common growth strategies as strategic options?
- Market Penetration: Expanding market share within existing markets using current products.
- Market Development: Entering new markets with existing products.
- Product Development: Introducing new products to existing markets.
- Diversification: Expanding into new markets with new products, either related or unrelated.
Define market share
Market share is the percentage of total sales in a market that is owned by a particular company or product.
It represents a company’s proportion of sales relative to the total market size, indicating its competitiveness within the industry.
What are retrenchment strategies?
Retrenchment strategies are employed when a company needs to reduce its scale or scope to improve financial stability or reverse declining performance.
These strategies are often reactive, used when the company faces financial difficulties, market pressures, or operational inefficiencies.
What are retrenchment strategies in strategic options?
- Turnaround: This is when a company is in trouble and needs to make big changes, like cutting costs or restructuring, to improve its situation.
- Divestiture: Selling off parts of the business that are underperforming or no longer aligned with the company’s goals.
- Liquidation: This is the last resort, where a company decides to close down completely and sell all its assets because it can’t survive anymore.
What are global strategies?
Global strategies are how a company plans to operate in different countries.
What are global strategies as strategic options?
- Globalization: Standardizing products and services across international markets.
- Localization: Adapting products and services to meet specific regional needs.
- Transnational Strategy: This strategy mixes both globalization and localization. The company keeps some things the same everywhere but allows other things to change to meet local needs.
Why are high liquidity and cash flows needed to make the most of strategic options?
High liquidity and strong cash flows provide the financial flexibility necessary to pursue and implement strategic options effectively. They allow a company to seize opportunities, manage risks, and remain competitive.
What is liquidity, and why is it important for strategic options?
Liquidity refers to how easily a company can convert assets into cash without losing value. High liquidity is important because it ensures the company has readily available funds to quickly act on strategic opportunities, such as acquisitions or market expansions.
What is cash flow, and how does it impact strategic decisions?
Cash flow is the movement of money in and out of a business. Positive cash flow means the company generates more cash than it spends, allowing it to fund strategic initiatives without financial strain, thereby supporting growth and flexibility.
How does high liquidity and cash flow help in seizing opportunities?
They allow a company to act quickly on opportunities, such as entering new markets or investing in innovations, without needing to secure external financing, which can delay actions and increase costs.
How do liquidity and cash flow contribute to risk management?
Strong liquidity and cash flow provide a buffer against potential losses or unexpected expenses, enabling a company to manage risks associated with strategic decisions, such as launching a new product or entering a competitive market.
What is a sustainable competitive advantage?
It is a company’s ability to maintain its edge over competitors over the long term, ensuring ongoing success and profitability.
What key elements contribute to sustainable competitive advantage?
- Unique Resources or Capabilities: Hard-to-duplicate assets or skills.
- Innovation: Continuous development of new products or services.
- Cost Leadership: Ability to produce at lower costs.
- Customer Loyalty: Strong brand preference and trust.
- Strong Supply Chain: Reliable and efficient logistics.
- Barriers to Entry: Factors that prevent new competitors from entering the market.
What are economies of scope?
Economies of scope refer to the cost advantages that a business experiences by producing a range of products together rather than separately.
What is shareholder value?
Shareholder value refers to the financial worth that a company provides to its shareholders. It is typically measured by the company’s stock price and dividends paid to shareholders.
How does Corporate Social Responsibility (CSR) influence shareholder value?
CSR influences shareholder value by enhancing brand reputation, which can attract and retain customers, leading to increased sales and revenue. A positive brand image can also allow for premium pricing and higher profitability.
What role does environmental sustainability play in risk management for shareholder value?
Environmental sustainability helps in risk management by reducing the likelihood of regulatory fines, legal issues, and reputational damage. Proactive management of environmental risks minimizes potential costs and liabilities, leading to more stable financial performance.
How can CSR and environmental sustainability lead to cost savings and efficiency?
Implementing sustainable practices can improve operational efficiency by reducing energy consumption and waste. These cost savings enhance profitability and contribute to better financial performance, benefiting shareholder value.
What is CSR (Corporate Social Responsibility)?
CSR is when businesses take responsibility for their impact on society and the environment, incorporating social, ethical, and environmental concerns into their operations.
What are the key aspects of CSR?
- Environmental Sustainability: Reducing carbon footprint and promoting renewable resources.
- Ethical Business Practices: Ensuring fairness, transparency, and anti-corruption measures.
- Philanthropy: Donating to charities and supporting social causes.
- Fair Labor Practices: Promoting workers’ rights, diversity, and safe working conditions.
Why do companies engage in CSR?
To improve their public image, meet regulatory standards, reduce risks, and promote sustainable business growth by balancing profit with social good.
How does CSR benefit companies?
CSR enhances a company’s reputation, ensures compliance with regulations, manages risks, and supports long-term sustainability.
What does Grant (2010) observe about strategy formation?
Grant (2010) observes that strategy formation is not a linear process. Instead, it is often emergent, meaning strategies develop from both deliberate planning and unforeseen events.
What is meant by an “emergent” strategy?
An emergent strategy refers to one that develops organically over time, rather than strictly following a set plan. It evolves in response to changing circumstances.
Why is this adaptive approach important?
This approach is important because it allows organizations to stay flexible and respond quickly to market shifts and internal changes. Rigid adherence to pre-set strategies can limit an organization’s ability to deal with unexpected developments.
What is the role of entrepreneurial architecture in an organization?
Entrepreneurial architecture helps create an environment that fosters continuous learning. It allows the company to adapt, evolve, and innovate by encouraging the sharing and absorption of knowledge from both internal and external sources.
Define entrepreneurial architecture
Entrepreneurial architecture refers to the organizational structures, processes, and cultures that support and promote entrepreneurial behavior within a company.
How does entrepreneurial orientation affect learning?
A strong entrepreneurial orientation drives the learning process by encouraging the organization to be proactive, take risks, and pursue innovation. This mindset leads to a willingness to experiment and absorb new knowledge, promoting organizational growth.
Why are relationships important in entrepreneurial organizations?
Building strong relationships across departments, with external partners, and within leadership teams facilitates the flow of information and collaboration.
These relationships are crucial for creating a knowledge-sharing environment, which enhances the organization’s ability to innovate.
What is tacit knowledge, and how does corporate entrepreneurship unlock it?
Tacit knowledge refers to the hidden knowledge that exists in employees’ experiences and intuition. Corporate entrepreneurship unlocks this knowledge by promoting initiatives and activities that encourage employees to share and apply their insights across the organization.
What is Google Alphabet?
Google Alphabet refers to Alphabet Inc., the parent company of Google, created in 2015 as part of a corporate restructuring.
Why was Alphabet Inc. created?
Alphabet was created to manage Google’s diverse businesses, allowing Google to focus on core services like search and advertising, while other ventures could be handled separately.
What are some of Alphabet’s subsidiaries?
Some subsidiaries include:
* Google (search, ads, YouTube, Android)
* Waymo (self-driving cars)
* Verily (healthcare)
* GV (venture capital)
What is the entrepreneurial mindset?
The entrepreneurial mindset is a set of personal characteristics and attitudes that enable individuals to identify opportunities, take calculated risks, and drive innovation.
What are the key character traits of entrepreneurs?
- Autonomy and Independence: Entrepreneurs desire to work independently and make their own decisions without restrictive oversight.
- Need for Achievement: They are driven by challenging goals and find satisfaction in accomplishing them.
- Internal Locus of Control: Entrepreneurs believe they can influence outcomes through their actions rather than relying on external factors.
- Drive and Determination: They exhibit persistence and resilience, pushing through obstacles to achieve their objectives.
- Creativity and Innovation: The ability to generate new ideas and think creatively to solve problems is central to their approach.
- Acceptance of Risk and Uncertainty: Entrepreneurs are comfortable with ambiguity and willing to take calculated risks.
How do these entrepreneurial traits help navigate a volatile business environment?
These traits equip entrepreneurs to adapt quickly to changes, identify emerging opportunities, and respond effectively to challenges. In a rapidly changing environment, the ability to innovate, take risks, and remain resilient is critical for success.
Can the entrepreneurial mindset be cultivated, or is it innate?
While some individuals may naturally exhibit these traits, the entrepreneurial mindset can be developed through experience, education, and intentional practice. Organizations can foster this mindset by encouraging autonomy, creativity, and a culture that embraces calculated risk-taking.
What is organisational characteristic?
An organizational characteristic refers to the traits, attributes, or features that define the structure, culture, and processes of an organization. These characteristics shape how the organization functions, interacts with its environment, and achieves its goals.
What is creativity for entrepreneurs?
Creativity for entrepreneurs is about generating innovative ideas with a clear focus on identifying and exploiting commercial opportunities. This means entrepreneurs use creativity not just for the sake of invention, but to develop products, services, or business models that meet market needs, solve problems, and drive profitability. Their creativity is always aimed at achieving tangible business outcomes.
What is the Big Five Personality Model?
The Big Five Personality Model is a widely used framework to describe and structure general personality traits. It helps explain the traits commonly found in entrepreneurs.
What are the 5 core personality traits measured by the Big 5 model?
- Openness – Reflects creativity and willingness to embrace new experiences, change, and diversity. This trait is essential for entrepreneurship, as it encourages innovation and adaptability.
- Extraversion – Represents an energetic, outgoing style of social interaction, where people favor activities involving others and thrive in group settings.
- Conscientiousness – Demonstrates a self-disciplined, organized approach to tasks, showing a strong achievement orientation, which is crucial for managing business ventures.
- Agreeableness – Focuses on social harmony, altruism, and cooperation. While useful in teamwork, overly agreeable individuals may avoid competition, which can be a downside in high-stakes entrepreneurial environments.
- Neuroticism – This measures emotional stability versus instability. Higher levels of neuroticism indicate a tendency toward negative emotions like anxiety and stress, which can hinder entrepreneurial risk-taking and decision-making.
What are the common Big 5 personality traits among entrepreneurs?
Research indicates that individual entrepreneurs can be defined as high in Openness, Extraversion and Consciousness and low in Agreeableness and Neuroticism.
What is dominant logic?
Dominant logic is the set of business principles, assumptions, and practices that guide a company’s decision-making and strategy based on past experiences.
How does dominant logic help a company?
It provides consistency and efficiency by creating a reliable framework for making decisions and taking actions.
What is a downside of dominant logic?
It can lead to rigid thinking, making it harder for companies to adapt to new opportunities or changes in the market.
Why should companies rethink their dominant logic?
To stay competitive and innovative, companies must challenge their dominant logic and embrace new strategies or business models when needed.
How do entrepreneurs approach risk and strategy differently from traditional businesses?
Entrepreneurs tend to rely on intuition and adaptability rather than following formal models like discounted cash flow or detailed business plans. They make decisions based on gut feelings and real-time feedback because their ventures face greater risk and uncertainty compared to traditional businesses. This allows them to adapt more flexibly to unexpected challenges.
Do entrepreneurs follow formal strategic frameworks like business plans?
Many entrepreneurs do not follow formal strategic frameworks. While they may not always create business plans or use established strategy jargon, they often instinctively arrive at the right decisions through experience and intuition. Their approach may seem informal, but it’s grounded in logical decision-making suited to their uncertain environments.
Do entrepreneurs attribute their success to luck or strategy?
Many entrepreneurs credit their success to luck, but it’s more nuanced. Entrepreneurs often have a strong internal locus of control, meaning they believe they can shape their own destiny. They actively create opportunities, improving their chances of success and making their own luck by being open to chance and new possibilities.
What does the experiment by Wiseman (2003) tell us about luck and entrepreneurship?
Wiseman’s experiment showed that people who consider themselves “lucky” are better at spotting opportunities. In the study, lucky participants noticed a headline revealing the answer to a task, while unlucky participants overlooked it and spent more time counting. This illustrates that entrepreneurs create their own good fortune by recognizing and acting on opportunities quickly.
How is the leadership style of entrepreneurs different from traditional businesses?
Entrepreneurs typically lead through informal, personal relationships rather than strict lines of authority. Their management style is more organic and flexible, often resembling a spider’s web where the entrepreneur is at the center, gathering information and making decisions. This contrasts with the hierarchical structures found in traditional organizations.
Why is the “spider’s web” structure effective only for small businesses?
The spider’s web structure, where the entrepreneur is at the center of all decision-making, works well in small organizations because it allows for quick, informal communication. However, as the business grows, this structure becomes inefficient. Larger organizations require more formal processes and a clearer hierarchy to handle increased complexity.
What is strategic intent?
The term strategic intent refers to a company’s long-term vision or goal that defines what it aims to become in the future. It’s not just a specific target like increasing profits or expanding market share, but rather a broader, more ambitious aspiration that shapes the company’s overall direction and strategy.
What are core competences?
Core competencies refer to the unique skills, resources, and technologies that a company develops and integrates, which give it a competitive edge.
Fundamental strengths that allow the company to provide distinct benefits to its customers, setting it apart from competitors in the marketplace.
What is emergent strategy?
Emergent strategy refers to a type of strategy development that arises organically in response to real-world problems and unexpected situations, rather than being pre-planned or deliberately designed from the start.
What does Figure 1.5 (on page 21) represent in small firms?
Figure 1.5 represents the process of strategy formulation in small firms, specifically highlighting the cyclical nature of their strategic development. It shows how small firms alternate between deliberate and emergent strategies based on the firm’s growth stage and environmental challenges.
What is the difference between deliberate and emergent strategies?
- Deliberate strategies are planned and systematic. These are the formal, proactive strategies a firm formulates when it has clear objectives and goals.
- Emergent strategies, on the other hand, are reactive and adaptive. These strategies arise as the firm responds to unanticipated challenges or opportunities. Small firms often need to adjust their strategies based on real-time changes in the market or environment.
How do small firms move between these two strategies?
The movement between deliberate and emergent strategies is triggered by cycles of growth, consolidation, and crisis:
* Growth phase: As the firm grows, it follows a deliberate strategy to capitalize on planned opportunities and resources.
* Crisis phase: When the firm encounters unforeseen challenges, it must adopt an emergent strategy to survive. This reactive approach helps the firm adapt to its environment.
* Consolidation phase: After overcoming the crisis, the firm stabilizes and returns to a more deliberate strategy, ensuring sustainable growth.
What is the significance of this cyclical process?
This cyclical process underscores the flexibility small firms must maintain to succeed. Unlike larger firms that may rely more heavily on rigid, long-term planning, small firms need to balance between being proactive (deliberate) and reactive (emergent) to cope with their limited resources and constantly changing environments. This adaptability is key to their survival and growth.
How do growth, crisis, and consolidation interact in this framework?
- Growth leads to a need for structured strategies to manage expanding operations.
- Crisis forces the firm to reassess its strategies as external pressures or internal inefficiencies arise, necessitating an emergent approach.
- Consolidation allows the firm to stabilize after a period of crisis, at which point it can resume deliberate strategy-making to achieve further growth.
What do entrepreneurs do to maintain financial flexibility? Why?
Entrepreneurs tend to keep their fixed costs as low as possible to maintain financial flexibility. This approach minimizes the firm’s financial exposure in case of failure, reducing the stress of maintaining a high-cost structure when the business is in its early or volatile stages.
What are the 2 main ways by which entrpreneurs reduce fixed costs?
- Subcontracting activities: Instead of employing a large workforce, they may hire subcontractors or freelancers on a project basis, which allows them to only pay for services when needed.
- Entering into partnerships: Partnering with other businesses can share the cost and risk while gaining access to additional resources, networks, or expertise.
What is the “affordable loss” principle?
Entrepreneurs only commit the maximum amount they can afford to lose in case of failure, ensuring risks are manageable (Sarasvathy, 2001).
What risk comes with being too cautious in investment?
Entrepreneurs may lose the first-mover advantage in a new market, as being too conservative can let competitors catch up.
What is first-mover advantage?
First-mover advantage is the competitive edge gained by being the first to enter a new market. It allows a company to establish brand recognition, customer loyalty, and market share before competitors can enter.
How do entrepreneurs test their ideas without overcommitting?
They use a limited launch to experiment in the market, minimizing investment until the opportunity is proven viable, a concept central to lean start-ups (Ries, 2011).
What is lean start-up?
A lean start-up is a method of launching and growing a business by testing ideas quickly and cheaply through experimentation, gathering customer feedback, and making iterative improvements. It emphasizes minimizing waste and only investing significant resources once the idea has proven its viability.
How do entrepreneurs balance conflicting priorities?
They develop flexible strategies, avoiding overcommitment and adjusting investments based on commercial viability, while minimizing resource usage.
What factors influence entrepreneurs’ decision-making in uncertain environments?
Entrepreneurs rely on intuition, judgement, experience, insight, and a holistic understanding of their operations, driven by a strong vision.
What is an emergent strategy?
It’s a flexible, adaptive approach to strategy that evolves in response to changing circumstances, often taken incrementally and adjusted as new information emerges.
What is the complexity theory?
Complexity theory is a framework for understanding how systems with many interconnected parts, such as businesses or economies, behave in unpredictable and dynamic ways. It emphasizes that small changes can lead to significant outcomes, and that such systems evolve in non-linear, often chaotic patterns. In business, it helps explain how companies can thrive in uncertain and rapidly changing environments by being flexible and adaptive.
