entrepreneurship and external environement

Understanding the External Environment

External Environment: Comprises all factors outside the organization that could impact its operations and performance. Understanding these factors is crucial for managing organizational changes and uncertainties.

Types of External Environment:

General Environment: Encompasses broad factors affecting all organizations, including:

Technological Advances: Changes that can transform industries and render products obsolete (e.g., the rise of digital technology).

Natural Environment: Environmental considerations about resource use and sustainability (e.g., climate change impact on operations).

Socio-Cultural Factors: Demographic shifts and changing consumer behaviors which influence market trends.

Economic Factors: Elements like purchasing power, unemployment rates, and interest rates that affect operational conditions.

Legal/Political Factors: Laws and regulations that govern operations, impacting organizational compliance requirements.

International Factors: Global events, treaties, and economic trends that can affect domestic markets and strategies.

Task Environment: Involves specific external entities that directly impact the organization, such as

•  customers -use of internet makes customers powerful - able to get more information

• Competitors

• suppliers

•  the labor market (which represents available workforce). - labor market an be impacted by technology, age, workers leaving country

The 4-Step Model of Control

• Helps mangers meet strategic goals by monitoring and regulating an organizations activities using feedback to determine whether performance meets established standards

1. Establish Performance Standards: Defined benchmarks that determine what constitutes good performance, focusing on measurable output metrics (e.g., error rates, production levels).

1. Measure Actual Performance: Involves evaluating how well the set standards are being met; can involve both quantitative (e.g., financial metrics) or qualitative (e.g., customer satisfaction surveys) measurements.

1. Compare Performance to Standards: Involves reviewing the actual results against the established benchmarks to evaluate success and identify areas needing improvement.

1. Take Corrective Action: If performance does not meet established standards, managers need to identify causes and make necessary adjustments to rectify shortcomings.

• Feedback - this is a big part of the model. constructive feedback helps to point out areas of improvement in a way that is both helpful and positive, rather than critical.

•  Constructive feedback will always target behaviours rather than a specific person and their character.

• Management by Exception Principle: A focus on significant deviations from standards, thereby allowing managers to concentrate on outlier situations rather than every performance metric.

• Recognizing control as a dynamic process is essential, as continuous evaluations and adjustments of standards are vital to maintain relevance and effectiveness.

Conclusion

• Control is fundamental for organizational success, involving the defining of roles, understanding barriers, recognizing environmental influences, and utilizing a systematic model to regulate performance.

• A comprehensive understanding of both the task and general external environments is essential for effective management and strategic planning.

Entrepreneur 5 key roles in an economy

1. Disruptor - they seek opportunities to disrupt the market equilibrium through introducing new products, processes and marketing techniques

2. Opportunity identification - they possess the alertness to identify gaps in the market and commercial opportunities and then take on the challenge of bringing to market

3. Risk taker - they assume a willingness to launch new ventures and engage in the commercialization of innovations which are risky

4. Resource shifter - enhance the productivity of the economy by using resources to achieve superior growth and wealth creation

5. Breakthrough innovator - entrepreneurs who engage in market disruptive innovation can lead a process of achieving new breakthrough's in technology, business or marketing approaches

Methods used to measure impact of entrepreneurial activity on economy

• Number of startup efforts

• Incorporation of firms

• Changes in net tax returns filed

• Amount of self employed

In general, entrepreneurs are more fulfilled by their work than people who work for others

Countries classification

• Factor driven

• -agriculture

•  idolise entrepreneurs

• entrepreneurship is often a necessity due to less stable employment conditions and welfare support systems.

• Efficiency driven - industrial - slightly less admired than factor driven

• Innovation driven - service and knowledge intensive business (high R&D costs - richer countries)

• The richer countries have higher success with startup company's, however less people attempt them

• Entrepreneurs require management skills and also need skills for opportunity identification, take risks and create product and services

Why do people become entrepreneurs?

Pull entrepreneurship motivation

• Pursue own ideas

• Pursue financial and social rewards

• Be their own boss

Push entrepreneurial motivation

• Out of necessity (normally poorer countries)

Entrepreneur attributes

1. Excessive desire to take personal responsibility for problem solving (need for high achievement)

2. Moderate, calculated risk takers and comfortable with uncertainty

3. Strongly believe their life is in their control

They need quality team with relevant and complementary skills and motivation

• Need to have strong managerial skill in order to manage team dynamics

• Money is not the only reason to start a business

• Solving problems - social, cultural, sustainable, economic,

• Finding social needs in the market

Core principles of Māori entrepreneurship

• Communalism rather than individualism - contributing to whanau and iwi

• Reciprocity - giving back to what people have given

• Social gain rather than profit

Small businesses

• No universal definition

• Nz def = businesses with fewer than 20 employees

The Bolton report - 1971

• The business is owner managed - no formal management structure

• Independent entity (not a subsidiary of a larger business) - still being a franchise

• Relatively small market share

Contributions of small businesses

• Generate 42% of all jobs

• Keep large firms competitive

• Provide employees with comprehensive learning

Three r's of entrepreneurial recovery

• Respite - interrupting work for mental relief

• Reappraisal - cognitive exercises to reduce stress

• Regimen - sleep hygiene and regular exercise

Reasons small businesses fail

• Lack of experinece

• Expertise

• Strategy

• Poor financial control

• Growing too fast

• Lack of commitment