UNIVERSITY OF PRETORIA

EPN824: Individual Assignment Entrepreneurs in the Wilderness

STUDENT NAME: Innocent Pereira STUDENT No.: 11171236

19/04/2011

Question 1 Barton & Joe, (1991), notes that the entrepreneurial process involves recognizing opportunity, acting and managing, reassessing the need for change, and finally evaluating self. Wickham (2006) looks at the process as being identification of opportunity, attraction and management of resources, and leadership and directing of the organization. An aligned view on the entrepreneurial model process asserts that it starts with innovation, followed by a triggering event, implementation of the idea, and the growing of the venture (Van Vuuren, 2011). In his model he has also identified the elements that will have impact on the model, these are; personal element, sociological elements, organizational elements, and environmental elements. The role players in the case have been identified as: Entrepreneurs and small business owners Business associations The State Job Seekers

Business Associations: provides an organized voice for small business. It enables, and helps to realize and manage the growth of entrepreneurial firms. The enabling function consists in increasing reputation, attracting complementary resources that facilitate the exploitation of new opportunities, overcoming over-embeddedness, and dealing with coo petition (concurrent cooperative and competitive relationships with another company). (Christian & Christophe, 2009). To be effective, such associations must drive in greater autonomy and political influence in order to guide the debate over how much state control, rather than whether control should exist at all exist (Pearson, 1994). Therefore, the key objective of the Small Business Development Work Group with regards to enabling the model; is to speak to the issues, opportunities and related programs that particularly affect/target the emerging and minority/women-owned segments of small business community.

State intervention: The state has a role to provide for a framework and policies that enables and facilitate for the creation of supporting Institutions, enabling access to infrastructure, and providing macroeconomic stability. The state forms part of the environment, which according to the model, the environment will affect all the steps within the model.

Entrepreneurs:

The Attitudes (perceived opportunity and perceived capacity),

Activity, and aspirations of the individual are also important. Wickham (2006) notes that the individuals ability to focus resources and on opportunity, whilst driving fit of the opportunity into an organization, and as well as configuring the resources for organizational fit; if successfully pulled together by the entrepreneur, these will enhance the chances of success of the entrepreneurial venture. As noted in the case, there is an ability to identify opportunity, but however the entrepreneurs are unable to get around some of the challenges they face, and organizing themselves and their resources for success. Crime, notably, the biggest barrier. Labor market: Skills availability (Higher education and training), and the

perspective of the job seeker towards employment are also very important factors. As alluded to in the case, most entrepreneurs battle to find skilled committed hardworking employees.

Question 2 The case states that; After 12 years of good intentions, the results of state-driven delivery approach to entrepreneurial support has not been impressive. In order to speak about entrepreneurial venture and small business, we should look behind the two phrases entrepreneurial venture and small business. Entrepreneurs have been defined by differently by differing schools of thought; Great person, & psychological models (focusing on startup), Classic school, & Management School models (focus on start up, growth, and maturity), Leadership school, & Intraprenuership school (Focus on growth, maturity & change), ( Barton & Joe, 1991). The University of Pretoria has adopted a definition of entrepreneur, and

states; it is someone who sees an opportunity that can bring value about and then takes the risk of finding the necessary resources to create value for potential customers. Now he creates and grows a venture to profit from the opportunity (Pretorius, 2011). Entrepreneurial Venture: An entrepreneurial venture can be described as one that is driven by an entrepreneurial mind-set, as a growth-oriented perspective that promotes flexibility, creativity, and renewal (Cunningham & Lischeron; 1991, Covin & Selvin, 2002; Alvarez & Barney, 2002). Morris (1998) notes that such opportunities are created by changing demographics, social changes, the emergence of new market segments and changes in governmental regulations, (Hit & Ireland, 2000) and those with the ability to identify when new goods and services become feasible or valuable to consumers are said to posses entrepreneurial alertness, (Mcgrath & Macmillan, 2000) and such people tend to be habitual entrepreneurs who are continuously involved in opportunity-seeking behavior that is supported by such actions as goal setting, establishing an opportunity register, and determining the timing associated with exploiting the opportunity. Small Business Ventures: Carland, James, Hoy, and Boulton. 1984 defines a

small business as any business that is independently owned and operated, not dominating in its field, does not engage in any new markets, and does not take part in major innovation practices. The person behind a small business has been described as one who has Creativity and innovation (experimentation), Autonomy (independence), opportunities) _ Risk taking_ Pro-activeness (taking initiative, Pursuing Competitive aggressiveness (achievement oriented) (Nieman &

Niewenhuizen, 2010). Wickham (2006) notes that small business requires entrepreneurial function for startup, but over time once in existence, rarely cares about growth, its objectives seldom go beyond survival, sales and profit targets.

The question asked is it correct to use the word entrepreneurs for both entrepreneurial ventures and small business ventures. Based on the observations above; that to start-up a venture an entrepreneurial action is required (Covin & Selvin, 2002; Mcgrath & Macmillan, 2000; Wickham, 2006), I find that there are

similarities in the beginning and perhaps correct to refer to them as entrepreneurial ventures. However, as noted by Wickham (2006) over time, there are clear distinguishing characteristics between the two; Ability to thrive on innovation Having a potential for growth Having strategic objective

Therefore I find that it can be misleading to use the word entrepreneur to in talking about the two phrases; Entrepreneurial venture and Small business venture. Hence, even though the case notes that, these business people were in fact risk-takers, enterprise builders, there still should be a clear distinction that the 25 business people identified in Soweto, how many of those were actually entrepreneurial ventures and how many were actually small business ventures. Question 3 The repost states that the state-driven approach to entrepreneurial support has not been impressive in South Africa. To begin with lets start by looking at how far we have come, and if things are working or not. The state has designed and put in place interventions that purport to assist business start-ups and business growth. The state driven approach targets to enhance; the regulatory environment, Education and training, Access to financial services, access to infrastructure, protection against crime. The regulatory environment: In 1995, the Businesses Act was devolved to a provincial level, and provinces can amend the Businesses Act. As a result, the approaches of different cities now vary In South Africa; the procedures to secure a licence to trade with the local authority are complex and costly. For an example, the Health Act now requires that the City Health Department issue a certificate of acceptability to a person trading in foodstuffs, so a triple system of registration operates. The process of registering a company or sole proprietorship with the Department of Trade and Industry is also a lengthy and complex procedure particularly for those who do not have easy access to the internet or a telephone.

Different forms have to be filled in at different stages in the process, and these need to be copied and accompanied by revenue stamps, as well as by letters from accounting officers. Education and Training: Formal education in South Africa has been wholly inadequate in terms of addressing critical problem-solving and entrepreneurial skills. The National Department of Labour is the primary source of government funding for training business service providers. The Skills Development Act of 1998 established a system of Sector Education and Training Authorities (SETAs). Emphasis is thus placed on including small business representatives in all SETA structures a welcome sentiment, but one which assumes a degree of organisation among small businesses. As far as the content of training is concerned, different groups have different requirements. Some need basic literacy and numeracy skills, whilst some require advanced business skills. For the self-employed, time away from the business is money lost; few are in a position to take consecutive days off to attend training. Training should be part time. However, the Department of Labour does not fund part-time training. Access to Financial Services: Financial services and insurance are critical to business growth and security in both the formal and informal economies. To address the financing needs of poorer South Africans, the new government established Khula Enterprise Finance Limited in 1996. Khula is a wholesale finance institution, and entrepreneurs thus access assistance thorough Khula-supported intermediaries. Once Khula was established many new, very small retail finance intermediaries were established countrywide. These institutions have had very little success in achieving sustainable growth and a significant proportion have closed Access to infrastructure: The infrastructural needs of both formal and informal enterprises are similar. They both need secure space, with transparent contracts for access to it, and which comes with a known and reliably delivered set of services (lighting, water, toilets, garbage removal, security, storage). A key difference between formal and informal operators is that the latter often cannot afford to pay market-related prices.

Protection against crime: The high crime rate in South Africa is generally considered to be one of the primary constraints to economic growth and to investment, as all need to work in a safe environment, confirming worldwide evidence (World Bank 2005: 89-92) of the relationship between crime and the investment climate. I find in favor of the statement that the state-driven delivery approach to entrepreneurial support has not been impressive in South Africa.

Question 4 Government has designed programmes to promote small business development, and these programmes have been noted in the case as making very little impact. The question is; how is this related to entrepreneurship or small business policy? First is to define, what entrepreneurship policy is. Entrepreneurship policy is an emerging area of economic policy development that is concerned with increasing a countries entrepreneurial vitality (Stevenson & Lundstrom, 2001) An important question to answear is waht is the importance of entrepreneurship in economic development and growth (Acs, Carlsson and Karlsson, 1999; Audretsch and Thurik, 2001a, 2001b) and to prescribe what needs to be done to increase the level of entrepreneurial activity in a country (Verheul Sanders, Audretsch, & Thurik., 2001; OECD, 2001). Stevenson & Lundstrom, (2001), note that a governments approach to entreprenuership policy will depend on the assumptions it makes about what drives economic growth processes. Reynolds, (2000) concede that governments are focused on ensuring that national firm champions are productive as possible. So if these firms were entrepreneurial firms, what is then the entrepreneurial policy going to look like? He also adds that these will be influenced by a countrys approach and its views about the role of government in economic growth. Evidence exists that new firms and a small number of rapidly growing young firms are responsible for a significant proportion of gross and net new jobs. Accompanied

by the growing body of literature on the links between entrepreneurship (defined in terms of new entries) and economic growth and development (Reynolds 2000), governments have therefore adopted a policy stance, which gives birth and guides government programmes to promote small business. To improve the programs impact focusing on the number of people who have the motivation, the financial means and the skills to launch a new business. From the findings of their international benchmarking study of entrepreneurial activity, Reynolds et al. (1999) recommend that governments should focus their effort on creating a culture that validates and promotes entrepreneurship throughout society and develops a capacity within the population to recognize and pursue opportunity. They should target policies and programs specifically at the entrepreneurial sector (rather than at aiming to improve the overall national business context), and to increase the overall education level of the population, specifically ensuring that entrepreneurship training is readily accessible to develop the skills and capabilities to start a business. To facilitate a steady stream of new businesses one has to start by influencing the supply of potential entrepreneurs.

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