Entrepreneurship and Business Management: An Analysis of UK SMEs

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ENTREPRENEURSHIP
AND BUSINESS
MANAGEMENT
1

Table of Contents
INTRODUCTION............................................................................................................................. 3
Task 1............................................................................................................................................. 4
LO1.............................................................................................................................................4
P1 TYPES OF ENTREPRENEURSHIP VENTURES AND THEIR RELATION TO THE TYPOLOGY OF
ENTREPRENEURSHIP..............................................................................................................4
P2 DIFFERENCE AND SIMILARITIES BETWEEN ENTREPRENEURSHIP VENTURES....................6
M3 PUBLIC SECTOR AND CORPORATE SECTOR ENTERPRISES................................................8
L02............................................................................................................................................. 9
P3 ASSESSMENT OF STATISTICS TO ILLUSTRATE THE IMPACT OF SMALL BUSINESS ON THE
UK ECONOMY........................................................................................................................ 9
P4 IMPORTANCE OF SMALL BUSINESS IN GROWTH OF SOCIAL ECONOMY.........................11
M2 DIFFERENCE BETWEEN SMALL, MEDIUM AND LARGE BUSINESS......................................12
Task 2........................................................................................................................................... 14
LO3 AND LO4........................................................................................................................... 14
CONCLUSION............................................................................................................................... 24
REFERENCES.................................................................................................................................25
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INTRODUCTION
This assignment is based on entrepreneurship; entrepreneurs are the innovators that make the
new and creative ideas turn to reality. The entrepreneurs are of different types and are into
different kinds of start-ups that may be small or medium or maybe large enterprises. The
economy is flourished with these entrepreneurs who make a new market for their innovative
products; there are various factors that affect the enterprises including internal and external
factors. The entrepreneurs have some qualities and characteristics that help them to become
successful and make the aim of profitability come true. There are various types of enterprises
that are categorised on the basis of growth and risk taking levels and the differences between
them is also to be discussed. Entrepreneurship and small business management is the key piece
of any organization. Every business in its early days considers as a small business which grows
day by day and for the success and effective management entrepreneurship process backs the
business. Entrepreneurship is the activity of risk-taking decisions for the success of the
business. The activity which is initiated for making a business successful is conducted by the
entrepreneur. Entrepreneur and entrepreneurship are complementary to each other as the
entrepreneur is the person who conducts entrepreneurship activities in the business. The world
is growing at a rapid pace in which entrepreneurship is required for the business.
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Task 1
LO1
P1 TYPES OF ENTREPRENEURSHIP VENTURES AND THEIR RELATION TO THE
TYPOLOGY OF ENTREPRENEURSHIP
Entrepreneurship
Entrepreneurship is the willingness to start, organise and manage a new business venture with
the aim to earn the profit. The entrepreneur is the person who has the innovative idea and he
transforms this idea into a new business model that will yield in profit. Entrepreneur bears all
the risk that is involved with the new venture.
Characteristics of entrepreneurship are Risk taking ability, Innovation and Visionary approach
towards the achievement of the goal. As in every business there is a risk and the risk cannot be
made zero even if the business is highly profitable, the risk can only be minimised and the
entrepreneur is the one who bears the risk of starting a new business and he will be bearing the
loss and profits. The entrepreneur is one who has the idea that is unique and hasn’t been
worked on by others so his idea should be creative and innovative so that his business has its
own competitive edge over others, lastly the entrepreneur has to be visionary, he needs to scan
the business environment and try to identify the opportunities and threats.
Enterprise is the new venture that the entrepreneur starts and works on. There are various
types of enterprises like a company, partnership, sole proprietorship etc.
Types of entrepreneurship ventures
1. Survival–These businesses are mostly unregistered small businesses which manage to
run their business and are only capable of earning money for their family. The business
runs with very fewer assets and mostly the work is done in cash form. Although the
business is small the competition it faces is very tough and intense.
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2. Lifestyle – This type of business is more profitable than survival business and here the
profit is earned that can be reinvested into the business so that the business remains in
the competition and grows with time. The business infrastructure is only limited to one
premise and there are limited employees that are mostly constant.
3. Managed growth- These types of entrepreneurship have a steady growth rate and has
very fewer chances of new entrants also the competition is high, the infrastructure is
good enough but can rarely launch its new product in the market. The future vision is to
build its own brand.
4. Aggressive Growth business –These businesses have high growth and high risk
associated with them and because there is high risk there is the possibility of high profits
and high growth, these businesses attract a high range of new entrants because of high
growth.
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P2 DIFFERENCE AND SIMILARITIES BETWEEN ENTREPRENEURSHIP VENTURES
Survival lifestyle Managed Growth Aggressive
Growth
Annual growth
rate
Minimal growth
rate as there is no
reinvestment in
the business.
Here the growth
rate maximum is
5% as there is
reinvestment in
business but not
that much which
will yield yearly
growth more than
5%.
Here the growth
rate ranges from
10 to 15 %, this is
because there is
steady growth.
Here the growth
rate is so high that
it goes beyond 20
%. These
businesses are
very much
profitable.
Time Day to day
business activities
Weekly or
monthly
operational
activities.
1-2 years planning
is done
2-5 years.
Management style Reactive, no
analysing and
future
assessments are
done in advance.
Tactical, the
problems to the
situation are
solved with on the
spot solutions.
Strategic, planning
and future
forecasting is
done but only for
the near future.
Proactive and
strategic, the
approach here is
to find the
opportunities of
the future that no
other competitor
has thought of.
Technological
Investment
No investment in
technology.
Limited
investment in
technology.
Moderate
investment more
than lifestyle and
investment is
mostly into
production
machines.
High investment
in technology and
some investment
may also be done
in R&D.
Source of finance Self- financing as a
lower investment
is required.
Self-finance,
family funding
and may even
take bank help.
Self-financing,
family, private
investors and a
bank loan.
Bank loan,
venture capital
firms, capital
firms, or through
public finances.
Entrepreneurship
orientation
Very low as the
risk and
innovation is less
As compare to
survival the
orientation is
Moderate, the risk
has increased as
there is
Very high, there is
a lot more than
just competition,
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more but is still
low as the risk
here is a bit
increased and the
growth rate is
measurable.
competition and
to survive the
entrepreneur
Skills are required.
innovation and
other
entrepreneur
orientation is
required to
predict the future.
Exit approach Shutting down the
business is the
only option.
Shutting down or
selling is the
option and also
the business can
be transferred to
another person.
Selling, merging or
transferring the
business are the
options available.
Management
focus
Selling the
product that is
available with the
owner.
Maintaining the
business model
Expansion
through strategic
growth.
Scalability.
Economic Motives Sustaining one
and earning for
the family.
Income
substitution and
profit
maximisation
Wealth creation Wealth creation
and profit
maximization.
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M3 PUBLIC SECTOR AND CORPORATE SECTOR ENTERPRISES
There are two types of organisation on the basis of ownership, private or corporate sector
enterprise and public sector enterprise.
Public sector enterprises- these are the enterprises that are owned by the government, the
government has its share of 51% or more in the capital of the enterprise. The government is not
the only the owner the other part of finance may be through debt, loan or through private
owners. These enterprises are made to generate employment and sever the society with the no
aggressive approach to earn the profit. These enterprises are managed growth or lifestyle
enterprises. These public sector enterprises are not very much competitive their aim is to
survive in the market, and as they are not very competitive in nature they are less innovative,
have a less creative approach towards their working approach. These enterprises do not have
high growth aims so they don’t have high profitability and the employees have no motivation or
enthusiasm towards their work.
Corporate sector enterprise- the corporate sector enterprises are also known as private sector
enterprise and here the 51% stake or more is with the private investors or public funding
through share or other companies who have invested in these companies as their subsidiary.
The aim of these enterprises is to earn the profit and aimed at high growth in future. These
enterprises follow a more creative and innovative approach to capture a large part of market
share with a huge customer base. The corporate sector enterprises have more productive and
efficient employees and re-given motivation by the superiors to perform better. Here the risk
and competition is always high and to sustain in the market there are unique strategies that are
planned by the management to fight with competitors. These enterprises try to Ancash each
and every opportunity of the current and future market.
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L02
P3 ASSESSMENT OF STATISTICS TO ILLUSTRATE THE IMPACT OF SMALL BUSINESS
ON THE UK ECONOMY
Small business organisations are those who have 250 employees or less. These organisations
are privately owned organisations and are mostly not listed in the stock market as they don’t
have that much share capital as medium and large companies. The small business organisations
compete on a local basis, their competition is with the local and large multinational companies
but their aim is to survive in the local market. These companies have been covering huge
customer market in the UK. There are now 4500 more newly opened start-ups in the UK.
Impact of small business companies on the UK economy-
These small business ventures have been largely contributing to the economy of the UK, the
contribution is more than 99.3% in the private sector at the start of 2018. These industries
promote innovation and creativity by enabling technological advancement in the country. The
small business contributes to the economy of the UK by generating employment of 16.3 million
which is 60% of the total private sector employment in the UK. These small enterprises
contribute about £2 trillion which is 56% of the total turnover of the private sector in UK
Industry.
The SMEs contribute to 99.5% in every main industry. The main SMEs are into construction
business of about one-fifth of the total SMEs. Small scale Mining companies are less than 1% of
the total SMEs in the UK.
9

Figure – The contribution of small business in the UK economy.
Source- sage.co.uk
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P4 IMPORTANCE OF SMALL BUSINESS IN GROWTH OF SOCIAL ECONOMY
There is a tremendous growth in employment and job opportunities from 2012 as there is an
increase o 100000 jobs employment in the UK. In 2017 there are 796000 employees working in
small sector enterprises.
Figure- SME's impact on the UK economy
Source- Small and Medium Enterprises, 2019
According to the GLA forecast, job opportunities will increase by 104000 from 2017 to 2030.
The UK economy comparatively is underperforming than other economic competitors, and for
its development and growth, the UK needs to encourage and support SMEs with their business
ventures and capital requirement, through various schemes for new start-ups, rebates on taxes
for first few years so that the small enterprises need not to worry about tax etc.
SMEs are growing very fast with increasing employment rate 50% of the small scale
entrepreneurs have expected to grow more in their operations in the upcoming years. The
small scale manufacturers are more promising about the growth and success of about 32%
which is the highest among all other industries. The SMEs are actively into the health care
industry, beauty and wellness industries and are also have a presence in the financial and
consulting services.
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M2 DIFFERENCE BETWEEN SMALL, MEDIUM AND LARGE BUSINESS
There are various differences in small scale industries, medium and large scale industries that
can be on the basis of risk-taking ability, decision-making process, allocation of resources,
innovation technique, business models and structures which are explained below-
Figure- The contribution of enterprises in the UK Economy
Source- market-inspector.co.uk, 2019.
 Decision-making process- Decision-making process in small scale industries is very much
faster and quicker as there are fewer people involved, this helps them to take fast
decisions and grow more rapidly, whereas the medium size and the large size industries
due to high level of hierarchy system the decision making process is delayed and time-
consuming as permission of board members and shareholders is to be taken which
requires time.
 Attitude towards risk- Large enterprises have high risk taking ability because they have
huge capital that they can absorb the future possible losses and failures, but the small
scale industries don’t have the money to invest into a new business idea and if the
business doesn’t yield profit than the burden will be visible on their daily operations,
and huge losses cannot be absorbed by small scale industries. The medium-sized
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