Business

organizationand
enviroment
1.1 Introduction to
business
management
The role of entrepreneurship and intrapreneurship
An entrepreneur Entrepreneurship
…is an individual who plans, organizes and …describes the trait of business
Successful entrepreneurs
manages a business, tend
taking on financial risks
in leaders who tend to be distinctive in
todoing so.
be creative, innovative and their temperament, attitude and
…as an individual who combines the other
passionate. They search
three factors of production for and
to produce a outlook who drive the business.
good
exploitor service. By selling
business the good or
opportunities
service produced, the entrepreneur pays
by forecasting
rent for land, wages and/or
to labour and interest
on capital - what remains is then the profit
responding
for risk taking. to changes in the
marketplace.
…have the skills needed to oversee the
whole production process, whilst having the
ability and willingness to take potentially
high risks
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https://www.investopedia.com/terms/e/entrepreneur.asp
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 An intrapreneur Intrapreneurship
…as an employee who thinks and acts as an …is the act of being an entrepreneur
entrepreneur within a section of the
Companies
organization. such as 3M and but as an employee within a large
…is independent, proactive, creative, and organization.
Google
generates are welland
new ideas known for to the
innovations
organization. intrapreneurship.
promoting
Hence, the intrapreneur takes direct
These companies
responsibility and risks forencourage
turning a project or
idea into a profitable finished product for the
and fund intrapreneurs to
organization.
create and
…thinks like oversee projects
an entrepreneur looking for
business opportunities to increase profits, it is
of their
in the bestown
interestchoice.
of an organization to
encourage intrapreneurship.
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Steps in the process of starting up a business
The steps in the process of starting up a business or an enterprise will vary from one country to another. Nevertheless,
the common steps in the process of starting up a business include:

Write a business Obtain start-up Obtain business Open a business

Marketing
plan capital registration bank account

• Once the • Starting a • Before a • To facilitate the • Potential customers • Starting a new
entrepreneur business financial need to know business is highly
business can about the business
has a feasible requires money. operations of the risky because
trade or hire new business, the and its products.
business idea, Quite often, This is done the owners and
this is officially small business
workers, it owner(s) need to investors are
through the
formulated in a owners will use must satisfy set up a business
marketing activities taking a step into
registration bank account. of the new
business plan. their own This allows the
the unknown,
This document savings and/or and licensing business, such as even if risks are
business to pay advertising and
will include the obtain loans to requirements. for its costs of calculated. Most
other promotional
goals and finance their The owner(s) operation and to materials. For many new business
objectives for start-up. The must also receive payments businesses, this will ideas fail, mainly
the new loan process can from customers also include due to
business with an take several
register the (whether through establishing a mismanagement
outline plan of months to legal status of bank deposits of presence on the .
the business. cash, bank internet. Having an
how these complete, with
account transfers effective website is
targets are to be the lender essential to capture
accomplished. usually or credit card
business
requesting a payments). opportunities with
completed Almost all new customers and
business bank to establish
business plan accounts will have credibility.
before any funds online banking
are approved facilities too. 21
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Problems that a new business may face
Results from around the world consistently show that around 20 to 25 per cent of new businesses fail in their first year.
A new business is likely to face problems that must be dealt with immediately to prevent them from escalating and
threatening its survival. Such problems include

All businesses need finance Financing working capital is also a Marketing problems arise
Lack of finance

Cash flow problems

Marketing problems
for the purchase of fixed major problem for many new when businesses fail to meet
businesses. A business might have
assets, such as premises, a lot of stock, such as raw materials customer needs, thereby
buildings, machinery and or semi finished output, which resulting in poor sales.
equipment. cannot be easily turned into cash. Supplying the right products
Customers might demand a lengthy at the right price is especially
Hence, new business owners credit period
often have to remortgage crucial for new businesses.
Businesses need to pay for their However, small and new
their own homes to raise the on-going costs such as wages, rent,
finance needed, thereby businesses might lack the
utility bills, taxes and interest
offering the lender more. payments on bank loans. A lack of know-how to do this. Quite
working capital is the single largest often, the key to small
cause of business failure. business success is to identify
Hence, it is common for a new a niche(or gap) in the market
business to produce a cash flow and then fill it.
forecast in the business plan so
that provisions can be taken to
cover any shortfalls.

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 A major problem facing New businesses may lack It is necessary for businesses

problems
People management

Legalities
Unestablished customer base

new businesses is experience in hiring the to comply with all necessary

attracting customer. right staff" with all the legislation. The paperwork
necessary skills. This can and legal requirements of
The problem is intensified setting up a new business
when there are well lead to poor levels of can be tedious, confusing,
established rivals that customer service and the time consuming and
already operate in the need to retrain staff or to expensive. Any oversight
market. Customer loyalty rehire people, all of which could result in the business
is built over a long period can be very expensive. having to pay compensation
Moreover, new businesses or penalty fees. This would
of time, which may obviously damage the
require marketing know- might not know the ideal
organizational structure already vulnerable cash flow
how and large amounts of position of new businesses.
money. that best suits their needs.

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 It can be difficult for New businesses are likely to Businesses face a All businesses,

Poor location

External influences
High production costs
Production problems
experience high production
new businesses to costs due to the large dilemma in the irrespective of size or
accurately forecast amount of money needed location decision: how long they have
levels of demand so to pay for the cost of
busy areas offer the been in operation,
they are more likely equipment, machinery, are prone to
to either over
stocks (inventory), rent, highest potential exogenous shocks
advertising, insurance and
produce or under so forth. number of that create a difficult
produce. Smaller businesses will also customers, but the trading environment,
Overproduction tends be at a cost disadvantage as premises in these such as an oil crisis or
they cannot benefit from
to lead to stockpiling, economies of scale. By
areas will also cost economic recession.
wastage and contrast, economies of scale the most. Fixed However, more
increased costs. By allow larger and more costs, such as rent established firms
contrast, established businesses to
benefit from lower average or mortgage tend to be better
underproduction costs of production due to payments, form a resourced to handle
leads to dissatisfied their scale of operations, these external
customers and a loss such as being able to get large percentage of
discounts from their total costs for many influences. Hence,
of potential sales suppliers for bulk purchases new businesses are
or being able to borrow
businesses.
more vulnerable to
money at a lower interest
rate because of their larger external shocks so the
size. potential for business
failure is greater.

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The elements of a business plan
A business plan is a report detailing how a business sets out to achieve its goals and objectives. It is a useful
planning tool as it requires the owner(s) to consider the marketing, financial and human resources of the
business.

The business plan also helps to reassure financial

lenders, such as banks and venture capitalists, that the
entrepreneur has comprehensively researched the
business idea and has given reasons to support the
venture. Investors will assess both opportunities and
risks that may be reflected in a business plan before
making any decisions. They will also look for potential
problems with the venture, even if these are not
outlined in the business plan. The business plan can
also be used by other stakeholders such as
shareholders to assess the potential gains from their
investment in the business

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Thankyou!
Mishell Aguilar

kaguilar@ism.edu.ec