Introduction to Entrepreneurship - Organization Management for Business Start-ups (PDF)

 1 Organization Management for Business Start-ups 4  Synopsis This chapter introduces students to the basics of organization management for small business start-ups, involving the process of organizing, planning, leading and controlling resources...

 1 Organization Management for Business Start-ups 4  Synopsis This chapter introduces students to the basics of organization management for small business start-ups, involving the process of organizing, planning, leading and controlling resources and activities of an organization to achieve its objectives. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 3  Objectives The objectives of this chapter are: To introduce students to the management and organization of start up businesses and small business enterprises. To discuss basic critical questions that all entrepreneurs must address with regard to their business mission, vision, objectives and strategies. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 4  Learning Outcomes At the end of this chapter, students should be able to: Discuss the importance of mission, vision, objectives, strategies and organization structure to a business organization. Discuss issues regarding planning, leading, organizing and controlling. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 5  List of Topics  Organization Mission and Vision  Organization Objectives  Organization Structure  Planning  Leading  Controlling  Business Start-up Risk Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 6  Introduction  An organization’s objectives are worked out based on the organization’s mission, vision and strategies developed to take advantage of the external opportunities available and to suit the resources that can be mobilized by the organization.  Organization management involves the process of organizing, planning, leading and controlling resources and activities of an organization to achieve the set objectives. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 7  Organization Mission and Vision  The organization mission is an attempt to provide meaning or answer to “why you do, what you are doing and where you are headed”.  In October 2015, Mark Zuckerberg, the Facebook CEO, talked about the importance of having a “strong sense of mission” to effect meaningful change in the world. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 8  Organization Mission and Vision (cont.)  The themes of believing in your mission, caring more deeply than anyone else and always looking ahead is relevant to anything you might build.  Collins and Porras (1994) list the following as mission statements or “whys”. These “whys” are big “whys” that motivate entrepreneurs and those who work for them and with them. (a) To preserve and improve human life (Merck) (b) To make people happy (Walt Disney) (c) To make technical contributions for the advancement and welfare of humanity (HP) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 9  Organization Mission and Vision (cont.)  The next questions that an entrepreneur must ask are: (a) “What to do?” (b) “How to do?” (c) “When to do?” (d) “Where to do?” The answer to these questions will explain the basic strategies of a particular company. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 10  “What” of Strategy  This refers to the vision or change agenda that the entrepreneur wants to achieve within a time frame.  Organizations normally express their vision statement in a crisp and precise form and it acts as a shared aspiration that provides long-term directions and targets of the organization.  Vision statements always refer to the aspired performance or quality goal in providing products or services within a targeted geographical area of operation and may include the long-term company’s aspirations. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 11  “What” of Strategy (cont.)  Visions must clearly indicate the gap—preferably a quantifiable value gap—between what the firm is today and where it expects to be, say in three years from now.  Based on the example earlier, Facebook started with a vision of having 100 million users. Upon achieving this, the challenge was raised to 1 billion users. The “how” of strategy will be the integrated choices translated into programmes and projects that the organization implements to close the value gap. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 12  “What” of Strategy (cont.)  The company’s business strategies refer to the methods by which the organization choose to achieve its stated objectives. This may include the choice of business sector, products, customers, capabilities, operational areas, technologies, methods of execution or working, investments, borrowings, etc.  For small businesses, this will include the choice of business an entrepreneur would like for a new venture. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 13  “What” of Strategy (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 14  “What” of Strategy (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 15  “What” of Strategy (cont.) An entrepreneur may have to do a basic strengths, weaknesses, opportunities, threats (SWOT) analysis to analyze his strengths and weaknesses (internal), and opportunities and threats, (external) to identify suitable business opportunities and strategies. Figure 4.3 illustrates SWOT analysis. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 16  “What” of Strategy (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 17  “What” of Strategy (cont.) Matching internal strengths with external opportunities Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 18  Organization Objectives  The organization objectives refer to the short- term goals of the organization (for example, one to three years), which will normally include sales targets, profit targets, geographical area of operation, etc. Ideally, objectives should have the following characteristics (SMART): (a) Specific (b) Measurable (c) Achievable (d) Realistic (e) Time frame (schedule implementation) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 19  Organization Structure  The organization will have to undertake certain specific tasks and these tasks can be divided into smaller tasks which can be assigned to specific personnel. This division of labour can be represented in the form of an organization structure.  Tasks on the organization chart can be divided based on functionality, such as marketing, administration, operations and finance; or geographically, such as zone A, zone B and zone C; or on products sales responsibility, such as product A, product B and product C. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 20  Organization Structure (cont.) When students organize groups to undertake group entrepreneurial projects, they will have to identify key tasks that must be done and divide the tasks among group members. Figure 4.5 is an example of an organization chart. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 21  Planning  An entrepreneur will have to make a long-term strategic plan, especially in choosing which business sector is suitable and offers the best opportunity for him. It is recommended for him to use the Business Model Canvas to work out his business strategies as explained in Chapter 11.  For a business start-up, an entrepreneur may need to do a simple project planning for main activities in the form of a Gantt chart. The Gantt chart will outline for each activity the start-up date, duration and its completion date. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 22  Planning (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 23  Leading  Whenever there is a group of people working together, especially in an organization, they will need a leader to lead, motivate, direct, guide, control and correct them so that the team will be motivated, coordinated and can work effectively and harmoniously together as a team to achieve group objectives.  The leader will be responsible and accountable for the performance of the whole team and he may have to delegate some of these tasks to his subordinates. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 24  Controlling  Controlling refers to the act of controlling and guiding the enterprise’s work, executing and monitoring work progress involving work schedules, resources, manpower, machines and space, etc. and where required activities may have to be speeded up, corrected or even stopped.  Controlling can be improved if an enterprise develops controlling documentations including outlining its mission, vision, objectives, strategies, work schedules, methodologies, manual and operating procedures, quality procedures, auditing procedures, etc. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 25  Business Start-up Risk The first risk evaluation that an entrepreneur has to undertake is to evaluate the risk of starting up a new business. To reduce these risks, an entrepreneur may take the following steps: An entrepreneur should make sure that he has adequate management knowledge, financial knowledge, marketing knowledge and relevant business experience. Ideally, an entrepreneur ought to have adequate industrial, supplier and potential customer contacts and links. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 26  Business Start-up Risk (cont.)  An entrepreneur ought to exhibit or possess personal characteristics and attributes that are considered suitable with the chosen entrepreneurial fields, e.g. a restaurant owner should be willing, diligent and happy to serve his customers.  An entrepreneur should work out effective strategies for the proposed business and perhaps use a business model canvas and prepare a good business plan for project implementation. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 27  Business Start-up Risk (cont.)  An entrepreneur ought to calculate the break-even sales volume analysis on his capital investment. For instance, for a restaurant business that has about 50% contribution margin (i.e. gross profit of 50%), if the monthly fixed cost is RM10,000 (i.e. salary + rental + overhead costs), the entrepreneur needs to achieve RM10,000/0.5 = RM20,000 sales per month to break even. If his forecasted sales volume is higher than RM20,000, there is a safety margin.  If his forecasted sales volume is lower than RM20,000, then there is a high risk of loss. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 28  Business Start-up Risk (cont.) Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 29  Summary  An entrepreneur must work out a viable business plan for his start-up business and then set up effective organization to take care of all the important tasks that need to be done in order to achieve organization objectives. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 4– 30