Entrepreneurship and Business Management Essentials

Posted on Feb 13, 2025 in Business Administration and Management (BAM)

What is Entrepreneurship?

Entrepreneurship is accepting the risk of starting and running a business. It is the capacity and willingness to develop, organize, and manage a business, along with any of its risks, in order to make a profit.

In economics, entrepreneurs utilize labor, land, and capital. From an economic point of view, an entrepreneur is one who brings resources, labor, materials, and other assets into combinations that make their value greater than before. They also introduce changes, innovations, and new orders. From a psychological point of view, an entrepreneur is a person typically driven by certain forces: the need to obtain or attain something, to experiment, to accomplish, or perhaps to escape from the authority of others.

Common Causes of Small Business Failure

  • Underpricing or overpricing goods or services
  • Underestimating how much time it will take
  • Starting with too little capital
  • Starting with too much capital and being careless in its use
  • Going into business with little or no experience and without first learning something about the industry or market
  • Borrowing money without planning how and when to pay it back
  • Buying too much on credit
  • Extending credit too freely or rapidly
  • Not understanding business cycles
  • Forgetting about taxes, insurance, and other costs of doing business

What are Economies of Scale?

Economies of scale refer to the situation in which companies can reduce their production costs if they purchase raw materials in bulk. Average costs go down as production levels increase.

Describing the PEST Analysis

A PEST analysis is used to analyze and predict the future development of environmental factors. Scientific methods, e.g., comparative analyses, trend analyses, extrapolation, etc., are utilized during the prediction of individual factors of the environment. The purpose of the PESTLE analysis is to answer three basic questions:

  1. Which of the external factors influence the organization or its parts?
  2. What are the possible effects of these factors?
  3. Which of them are the most important in the near future?

By analyzing these factors, organizations can gain insight into the external influences which may impact their strategy and business decisions. It allows HR and senior managers to assess any risks specific to their industry and organization and use that knowledge to inform their decisions.

Key Characteristics of a Successful Entrepreneur

  • Curiosity: Successful entrepreneurs have a sense of curiosity that allows them to continuously seek new opportunities.
  • Structured Experimentation: Along with curiosity comes the need for structured experimentation. With each new opportunity, an entrepreneur must run tests to determine if it’s worthwhile to pursue.
  • Adaptability: The nature of business is ever-changing. Entrepreneurship is an iterative process, and new challenges and opportunities present themselves at every turn.
  • Decisiveness: To be successful, an entrepreneur has to make difficult decisions and stand by them.
  • Team Building: A great entrepreneur is aware of their strengths and weaknesses. Rather than letting shortcomings hold them back, they build well-rounded teams that complement their abilities.
  • Risk Tolerance: Entrepreneurship is often associated with risk. While it’s true that launching a venture requires an entrepreneur to take risks, they also need to take steps to minimize it.
  • Comfortable with Failure: Entrepreneurship requires a certain level of comfort with failure.
  • Persistence: While many successful entrepreneurs are comfortable with the possibility of failing, it doesn’t mean they give up easily. Rather, they see failures as opportunities to learn and grow.
  • Innovation: Some of the most successful startups have taken existing products or services and drastically improved them to meet the changing needs of the market.
  • Long-Term Focus: The process doesn’t end once the business is operational.

Advantages of Outsourcing

There are many reasons why a business may choose to outsource a particular task, job, or process. Some of the recognized benefits of outsourcing include:

  • Improved focus on core business activities
  • Increased efficiency
  • Controlled costs
  • Increased reach
  • Greater competitive advantage

Outsourcing can also help to make your business more flexible and agile, able to adapt to changing market conditions and challenges while providing cost savings and service level improvements.

Disadvantages of Outsourcing

Outsourcing involves handing over direct control over a business function or process to a third party. As such, it comes with certain risks. For example, when outsourcing, you may experience problems with:

  • Service delivery
  • Confidentiality and security
  • Lack of flexibility
  • Management difficulties
  • Instability

Offshore outsourcing, although potentially more cost-effective, may present additional challenges such as hidden costs of provider selection or handover, severance, and costs related to layoffs of local employees who will not be relocated internationally, etc. Even simply managing the offshore relationship can prove challenging due to time zones, different languages, or cultural preferences.