Entrepreneurship Theory & Practice

This document discusses the theory and practice of entrepreneurship. It explores the characteristics, strengths, and weaknesses of entrepreneurship and provides specific examples of challenges faced by well-known entrepreneurs like Elon Musk and Howard Schultz. The document also discusses the strategies they used to overcome these challenges and achieve success.

Entrepreneurship Theory & Practice
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Contents
Introduction................................................................................................................................3
Body...........................................................................................................................................4
Part A - Can you make omelets without breaking eggs?...........................................................4
A) Entrepreneurship is said to have the following characteristics -.....................................4
B) Strengths and Weakness of an Entrepreneur...................................................................5
Part B - Make specific reference to the activities of two well-known entrepreneurs to help
illustrate......................................................................................................................................7
C) Elon Musk, SpaceX, and Tesla decisions while facing challenges.................................7
D) Howard Schultz and Starbucks challenges and decisions...............................................8
E) Relation...........................................................................................................................9
The Conclusion........................................................................................................................10
References................................................................................................................................11
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Introduction
Entrepreneurship is the process of setting up a business and taking the responsibilities of the
risks involved in the business venture. Entrepreneurship allows the invention, innovation, and
the creation of new products or services or even making the existing product or service better,
then serving it to the people. Anyone who has great thinking and has creative skills can
become an entrepreneur, given that they are able to provide value to others, making them
want to use an entrepreneur’s idea or invention to solve their daily problems (Business
Dictionary, 2019). The report includes analysis of the entrepreneurship regarding their
strengths, weakness, and challenges apart from the two selected entrepreneurs, whose
complete skills are examined.
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Body
Part A - Can you make omelets without breaking eggs?
It’s a well – known in the business organization that without pain, it’s difficult to achieve
anything. Basically, hard work is the key to success and it must for an entrepreneur. An
entrepreneur is a person who takes the responsibility and accountability of founding a
business venture and operating it.
A) Entrepreneurship is said to have the following characteristics -
 Economic Activity - There is no doubt that entrepreneurship is an economic activity
as it involves the exchange of goods and services for money. It also involves
production as well as full resource utilization (Jagwan, 2019).
 Innovation - As mentioned in the introduction, there is a requirement of innovation
and new ideas to constantly provide value to people. If an organisation does not
innovate, it can no longer remain in the marketplace (Glavas, Mathews, 2014).
 Vision and goals - An organisation is established to fulfill a purpose or vision that the
founder(s) of the organisation foresaw, due to which, they decided to take action to
start the company.
 Value creation - One of the most important aspects of entrepreneurship is that it is
based to create value for people. The more value is created, the better it is for the
organisation to stay and serve customers to their full potential (Shrikova, Osiyvskyy,
2016).
 Risk-taking - Entrepreneurship is about risk-taking every now and then. An
entrepreneur has to take credit risks, risks related to applying new and raw ideas and
concepts, financial risks, political risks, and many other types of risks (Smith,
Chimucheka, 2014). When starting a business, an entrepreneur might take funds from
various investors, which also adds to risk-taking because if the business fails,
someone else's finances will also be lost along with the business. Political risks are
those risks that might crop up due to political instability, war-like situations in a
country where an entrepreneur is running his business. The huge risk is present of
business shut down because of the turmoil going on in that country (Lehkonen,
Heimonen, 2015).
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 Leadership and Management - An important part of entrepreneurship is that it is about
leading people from the front. It is the duty and responsibility of an entrepreneur to be
a leader and inspire others to work hard and use their full potential to develop
themselves as well as the organisation that they are working for. Managing the
operations of a company is also an important task that entrepreneurs have to look
after. It is related to planning, controlling & organising the company (Kirzner, 2015).
B) Strengths and Weakness of an Entrepreneur
Strengths
Innovative is one of the key strengths of an entrepreneur. While starting a business,
most entrepreneurs have belief in their ideas and innovations due to which they
undertake this huge task of starting an organisation (Jacques, 2019). The long-term
growth of their business is dependent on how innovative and creative they are to
constantly change as per trends, it is vital for an entrepreneur to change with the
dynamic business world where outdated products and services cannot help a company
grow. A risk-taking entrepreneur is not afraid to take risks. They know the only way
to succeed is by taking risks. The risks are calculated and not just a blind aim to
succeed. This puts all the major responsibilities of the organisation on their shoulders
(Mason, Brown, 2014). An entrepreneur is well aware of their goals and vision and to
make them come true, they work harder than any other person around them. They
outwork everyone. They believe that in order to scale their business, they need to
work on business regularly and more than anyone else involved in their business
(Terjesen, Hessels, et al., 2016).
They good at managing people and finance. Most successful entrepreneurs know
how to take care of their finances and people working for them. They know how
much amount to spend on which activity which will generate their profits and would
not let the company suffer. They also know when to hire, what kind of employees to
hire and how much to pay them for their work as compensation (Valdez, Richardson,
2013). Their Passionate nature is the reason of, that why most entrepreneurs are
willing to and actually outwork everyone else around them is because they are
passionate about what they do. Their passion and conviction towards their work
enable them to work hard so that they could achieve their dreams (Blenker, et al.,
2014).
Weakness
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Time management is a problem, as entrepreneurs work 14 to 18 hours a day, and
most of them work more than 80 hours a week. This disrupts their private lives as
there is no work-life balance. Working for those many hours every day and every
week can have negative health effects and can drain body energy, if not taken care of
properly (Parhankangas, 2014). Entrepreneurs like to work on their own, and delegate
as little as possible, especially small business entrepreneurs. Without a delegation, the
company cannot scale or grow in the long run (Alosoini, 2016). Implementing
everything they believe is one of the drawbacks of entrepreneurs that most of them
want to implement as much as they can if they can come up with multiple solutions
for a problem. This can lead to taking bad decisions as not every idea or thought
works successfully for anyone, let alone entrepreneurs (Acs, Szerb, 2016).
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Part B - Make specific reference to the activities of two well-known entrepreneurs to
help illustrate
C) Elon Musk, SpaceX, and Tesla decisions while facing challenges
Elon Musk founded SpaceX in the year 2002 with a vision to reduce transportation costs to
space and colonise Mars in reality.
Musk sold his previous business venture PayPal which he co-founded with Peter. He did so
because merged X com with Confinity. If didn’t do that then, he would lose all the powers of
being CEO in the company. PayPal becomes more public at that time and acquired by eBay.
Then, he invested the money he got from the sale of PayPal into SpaceX, Tesla, and Solar
City. Elon Musk probably has the highest appetite for risk-taking, this is true from the fact
that when he sold PayPal, he put every single penny to his new ventures, Tesla and SpaceX.
At that time from the sales proceeds, he made enough money to live the rest of his life in
comfort, but still chose to build companies and shape the lives of millions of people
(Seedhouse, 2013).
Coming on to the challenges that Musk has faced where he is right now is quite successful,
his failures have been huge, but he never gave up that made him even more successful. After
he founded SpaceX, he also founded Tesla Motors in 2003 (Davies, 2013). The goal of this
company was to manufacture cost-efficient cars running on electricity. Tesla launched its first
car Roadster which was a high-performance car but did not cost efficient. The company was
facing financial issues and due to this, the launch of the car was delayed. The launch of
Tesla’s first car was delayed for more than 4 years. People and new agencies wrote reports
mentioning that Elon Musk would never be able to launch his electric car into the automobile
market. Some journalists even claimed that Elon Musk was just trying to accomplish his
childish dreams and that he was gambling on investors’ money. Most people believed Elon
would fail because of the simple fact that in the last 5 decades, there was not a single car
company that was developed. Moreover, there was no electric car company that was even
created (Kishen, 2018).
When Tesla Company needed fund for model S, Elon Musk invested all his PayPal money to
this model. It was a very step in his life. For this, he had to bankrupt himself and faced many
challenges. With the continuous three successful landing of SpaceX, fourth one landed with
the flames. this disturbs the Elon Musk and crew members to analyse the situation.
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The company was almost on the verge of shutting down in 2008, and it was the worst year
for Musk. The cost of Roadster was almost twice as much as the predicted price, this led to
insufficient finances for the company. He gave everything he had and put all his savings in
the company. This turned out to be a great decision as the company received appreciation for
its car’s performance (Milosheska, 2013). It can be analysed that Elon was very keen and
dedicated in safeguards of his company. He confesses that the company was lacking in
software execution and use.
Things turned out to be good for both Musk and Tesla as Musk received his trips’
reimbursements and also was awarded around 6.7 million stock options (Shah, 2016). As of
2018, Tesla has sold thousands of cars and the list includes celebrities like Leonardo
DiCaprio. He proved every critic wrong and rose above all the negativities around him. All
those who said he could not do it did not believe in him or thought he was just a child were
responded perfectly with the work Elon did with Tesla and even SpaceX.
D) Howard Schultz and Starbucks challenges and decisions.
Starbucks was founded in 1971 has become a multi-billion-dollar brand. The pricing of its
coffees is higher than that of the competitors due to which the company was hit hard by the
2008 crisis (Susanty and Kenny, 2015).
People started opting for rivals as they sold coffees at a cheaper rate. Starbucks, the famous
global coffee retailer had to face a lot of difficulties. Due to its low sales, Starbucks had to
shut down 600 loss-making stores (Mason, et. al., 2017). The profits reduced by 28 percent as
of March 2008 as compared to the profits earned in 2007. Furthermore, it had to close 300
more stores and had to lay off 6700 employees. Howard Schultz had to return to save the
company from bankruptcy, after eight long years (Johansson, Dimofte, et al., 2012).
As he came back, he found out that it was not just the economic crisis due to which the
company’s sales reduced, it was also because of the rapid scaling up of Starbucks that
deviated the company from making it an inviting store with brand new products. Also, during
this time, McDonald’s started selling expresso at its outlets and gave Starbucks a tough
competition. On the very first day of his return, he sent a letter to the employees of the
company stating that the company needs to get back on track and serve its customers. The
earlier leaders blamed the economic crisis for the downfall of the company as well as the
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higher prices of raw materials like dairy products for the reduction in sales of the company
(Perera, Lenk, et al., 2012).
But Schultz was not ready to accept that reason as an excuse and told everyone to not blame
the economy for the downfall of Starbucks. He came up with a strategy known as “My
Starbucks Idea” strategy allowing customers to share their ideas and views with each
other as well as with the company. As a result, the customers were able to give their views on
services, products, advertising, layouts, corporate social responsibility and a lot of other
aspects. The company received more than 93,000 ideas from more than 1.3 million users via
the social media platform.
After the 2008 economic crisis, Starbucks began to rebuild its relationship with its
customers and proved it to them that the company cared for them, cared for the quality as
well as for the consistency (Hussain, 2014). Howard Schultz proved everyone that his
conviction to serve the customers well and connect with the customers on an emotional level
would make way for Starbucks in the long run, and it certainly is right. His relations with his
customers made him and the company heroes of people.
E) Relation
The new strategy with the change in time helps the company to regain its customers and
provide with a platform to interact with each other. The strategies adopted by Starbucks and
SpaceX has been quite beneficial for the growth and development of their business. Due to
their hard work and patience of their owners only, the companies have risen to the top. It
simply proves out the fact that one cannot make an omelette without breaking the eggs.
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The Conclusion
To conclude, the assignment aimed to discuss the definition of entrepreneurship wherein it
was made to understand that entrepreneurship is more about creativity, innovation and
providing value to humans than about earning profits. The first entrepreneur mentioned in the
assignment is Elon Musk, and the discussion highlights the difficulties and challenges that he
had to face along with his companies SpaceX and Tesla. The second entrepreneur talked
about in the assignment is Howard Shultz and his company Starbucks. The overall aim of this
assignment was to discuss the strengths and weaknesses that entrepreneurs have and the
hardships that entrepreneurship is about. Examples illustrated in the above report showing
this result.
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