Role of an Entrepreneur (Edexcel A Level Business): Revision Note

Entrepreneurs create and set up businesses

• Businesses are usually started by an entrepreneur

• An entrepreneur is a person who is willing and able to create a new business idea or invention and takes risks in pursuing success

  • Successful entrepreneurs can identify and pursue opportunities, create value for customers and build thriving businesses

What do entrepreneurs do?

Organise resources

• An entrepreneur must be able to gather and coordinate the resources necessary to start and operate a business

  • E.g. When Michael Dell started his computer company from his garage, he had to organise resources, such as space, computers, software tools and employees, and manage the finances

Make business decisions

• Entrepreneurs must be able to make decisions that will determine the success or failure of their business

  • E.g. A restaurant owner may need to decide what type of food to serve, where to locate the restaurant and what prices to charge

• These decisions require a combination of market research, creativity and business skill

• Making the wrong decisions can lead to wasted resources, lost opportunities and ultimately business failure

Take risks

• Entrepreneurship involves taking risks - financial, personal or professional

  • E.g. an entrepreneur may invest their life savings into a new venture or quit a secure job to start their own business

  • They may also take risks by introducing new products or entering new markets

• These risks can pay off with great rewards, but they can also lead to failure and financial loss

Entrepreneurs run and develop existing businesses

• There are many examples of successful entrepreneurs who have been brought in to run or expand an existing business

• These individuals bring a unique entrepreneurial spirit into the business, which helps to drive it forward and expand

Examples of entrepreneurial CEOs

Starbucks

• In 1982, Schultz was hired by Starbucks as Director of Retail Operations and Marketing

• He later left to start his own coffee company but returned to Starbucks in 1987 as CEO

• Under his leadership, Starbucks expanded globally and became one of the most recognised brands in the world

Yahoo

• Marissa Mayer was brought in to lead Yahoo! in 2012 as CEO

  • She implemented several initiatives to revitalise the struggling company, including acquisitions, product improvements and a renewed focus on mobile applications

  • Yahoo was, itself, sold to Verizon in 2017

Employees demonstrate entrepreneurship within a business

• Intrapreneurship refers to the practice of promoting entrepreneurial thinking and behaviour within an existing business

  • It involves empowering employees to think and act like entrepreneurs

  • The business encourages them to take risks, innovate and develop new ideas and projects that may benefit the business

• Intrapreneurship allows businesses to tap into the creative potential of their employees and generate new products, services or processes that can drive growth and competitive advantage

• This helps to create a culture that generates a sense of ownership and engagement among employees, which increases motivation and helps to retain top talent

• To promote intrapreneurship, businesses may provide resources to employees or offer incentives/rewards for successful projects

Examples of intrapreneurship

Google

• In 2004, Google introduced Gmail, a free email service that quickly gained popularity due to its large storage capacity and intuitive interface

• Gmail was developed by a team of Google employees as part of the company's '20% time' initiative (now a more informal practice)

• This policy allows employees to spend 20% of their work time on personal projects

• Gmail became a huge success and is now one of the most widely used email services in the world

Sony

• In the early 1990s, a group of engineers at Sony proposed the idea of creating a video game console to compete with Nintendo and Sega

• Senior management initially rejected the proposal

• Sony engineers persisted, and a senior executive eventually supported them

• Sony PlayStation was launched in 1994 and quickly became one of the most popular gaming consoles of all time

3M

• 3M's "15% rule" is a policy that allows employees to spend up to 15% of their work time pursuing projects outside of their normal job

• Post-It Notes were developed by two employees, Spencer Silver and Art Fry

• Post-It Notes were initially marketed as a solution for bookmarking pages in books, but they quickly became popular for all sorts of purposes

• Today, they generate billions of dollars in annual revenue for 3M

Barriers to entrepreneurship

• Entrepreneurship can be a challenging journey, and many barriers can prevent individuals from starting or growing a successful business

Significant barriers to entrepreneurship

Entrepreneurial capacity

• Entrepreneurial capacity is an individual's ability to think creatively, take risks and identify and seize business opportunities

• A lack of entrepreneurial capacity can prevent someone from turning a good idea into a viable business, even where finance and training are available

  • Spotting and acting on an opportunity requires confidence and judgement that cannot simply be taught

• Two people with equal access to finance and training may have very different levels of success

  • One may be naturally more willing to take calculated risks and act decisively when an opportunity arises

Access to finance

• Many aspiring entrepreneurs struggle to secure the funding necessary to start or grow their businesses

• Lack of access to finance (opens in a new tab) is a major barrier to entrepreneurship, especially for those from disadvantaged backgrounds

Lack of training/know-how

• Starting and growing a successful business requires a range of skills, including marketing, finance, management and leadership

• Aspiring entrepreneurs may struggle to develop a viable business plan, attract customers or manage their finances effectively

Fear of failure / lack of confidence

• Entrepreneurship is inherently risky

• Entrepreneurs may hold back for fear of failure or a lack of confidence

• They may worry about the financial risks involved in starting a business or fear the stigma of failure

Entrepreneurs anticipate risk and uncertainty

• Risk is something an entrepreneur can plan for

  • The probabilities of outcomes are known or at least understood and considered

  • Risk-taking is a conscious decision, and often in business, the greater the risk, the greater the reward

Risk vs. uncertainty

• Uncertainty is caused by factors outside of the entrepreneur’s control

• Factors that typically cause uncertainty include:

  • Environmental factors, such as the Japanese Tsunami in March 2011

  • Economic changes, such as Covid lockdowns, Brexit or collapses in the banking system

  • The entry of new competitors

  • Changes in local and national legislation (laws)

  • Changes in the political party governing the country

• Successful entrepreneurs can manage risk and quickly respond to uncertainty in the business environment