Entrepreneur study guide

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Entrepreneur study guide

  1. 1. Tourism & Hospitality Management MNG00427 Entrepreneurship in Tourism and Hospitality Written by: Nerilee Hing Revised by: Roberta Querin Study Guide Fourth edition
  2. 2. © 2011 Southern Cross UniversitySouthern Cross UniversityMilitary RoadEast Lismore NSW 2480No part of this publication may be reproduced, stored in a retrieval system ortransmitted in any form or by means electronic, mechanical, photocopying, recordingor otherwise without the prior written permission of the publisher.Copyright material indicated in this work has been copied under Part VB of theCopyright Act 1968.Fourth edition 2011
  3. 3. ContentsIntroduction ................................................................................................................................... 5Topic 1 Perspectives on entrepreneurship...................................................................... 7 Introduction .................................................................................................................... 7 Beyond the literal meaning of entrepreneurship ............................................................ 8 An economic perspective on entrepreneurship .............................................................. 9 A psychological perspective on entrepreneurship ........................................................ 12 A sociological perspective on entrepreneurship ........................................................... 14 A management perspective on entrepreneurship .......................................................... 15 Schools of thought on entrepreneurship ....................................................................... 18 A process approach to entrepreneurship....................................................................... 18 Conclusion .................................................................................................................... 21Topic 2 Personal and sociological influences on entrepreneurship .................. 23 Introduction .................................................................................................................. 23 Psychological and personal influences on entrepreneurship ........................................ 24 Sociological influences on entrepreneurship ................................................................ 32 Female entrepreneurs ................................................................................................... 33 Ethnic entrepreneurs ..................................................................................................... 38 Typologies of entrepreneurs ......................................................................................... 42 Conclusion .................................................................................................................... 46Topic 3 Environmental influences on entrepreneurship.......................................... 47 Introduction .................................................................................................................. 47 Types of environmental influences on new venture creation ....................................... 48 Government influences on new venture creation in Australia...................................... 50 Socio-economic influences on new venture creation in Australia................................ 52 The influence of entrepreneurial and business skills on new venture creation in Australia ................................................................................................................... 54 The influence of financial assistance on new venture creation in Australia ................. 54 The influence of non-financial assistance on new venture creation in Australia.......... 55 Environmental influences on new venture creation in tourism and hospitality industries ...................................................................................................................... 56 Conclusion .................................................................................................................... 58 i
  4. 4. ii MNG00427 – Entrepreneurship in Tourism and Hospitality Topic 4 Opportunity recognition and evaluation......................................................... 61 Introduction .................................................................................................................. 61 Towards innovation ...................................................................................................... 62 From ideas to opportunities .......................................................................................... 63 Generating ideas ........................................................................................................... 64 Evaluating ideas and opportunities .............................................................................. 73 Screening opportunities ................................................................................................ 81 Conclusion .................................................................................................................... 81 Topic 5 Planning the new venture..................................................................................... 83 Introduction .................................................................................................................. 83 Use a business plan ...................................................................................................... 84 Outline of a business plan ............................................................................................ 85 Introductory page ......................................................................................................... 86 Executive summary ...................................................................................................... 87 Overview of the venture ............................................................................................... 87 Industry and market analysis ........................................................................................ 89 The production plan ..................................................................................................... 93 The marketing plan....................................................................................................... 94 The organisational plan ................................................................................................ 97 Schedule of operations ................................................................................................. 98 Critical risks and problems ........................................................................................... 99 The financial plan ......................................................................................................... 99 Appendices ................................................................................................................. 101 Conclusion .................................................................................................................. 102 Topic 6 Legal and financial issues during start-up .................................................. 103 Introduction ................................................................................................................ 103 Business structures ..................................................................................................... 104 Protecting your ideas .................................................................................................. 105 Insurance issues .......................................................................................................... 107 Planning issues ........................................................................................................... 108 Business premises leases ............................................................................................ 108 Employee issues at start-up ........................................................................................ 110 Other business relationships ....................................................................................... 112 Taxation ...................................................................................................................... 113 Financial issues .......................................................................................................... 113 Conclusion .................................................................................................................. 117
  5. 5. MNG00427 – Contents iiiTopic 7 Entry strategies for the new venture ............................................................. 119 Introduction ................................................................................................................ 119 Use of different business entry strategies ................................................................... 120 Establishing a new venture ......................................................................................... 121 Buying an existing business ....................................................................................... 124 Franchising a business ................................................................................................ 140 Conclusion .................................................................................................................. 143Topic 8 General management in the entrepreneurial venture........................... 145 Introduction ................................................................................................................ 145 The nature of management ......................................................................................... 146 The study of management .......................................................................................... 146 The management of different size organisations ........................................................ 147 The process of management ....................................................................................... 148 What makes an effective manager? ............................................................................ 149 The nature of managerial work .................................................................................. 149 The manager’s role ..................................................................................................... 150 The relationship between entrepreneurship, management and the organisational lifecycle ...................................................................................................................... 150 Success and failure of small business ........................................................................ 155 Conclusion .................................................................................................................. 159References ................................................................................................................................ 161
  6. 6. iv MNG00427 – Entrepreneurship in Tourism and Hospitality
  7. 7. IntroductionWelcome to MNG00427 Entrepreneurship in Tourism and Hospitality. In the unit,you will find eight topics. While not separated formally into separate modules, thesetopics can be grouped according to the stage of entrepreneurship they relate to – inputsto the entrepreneurial process, the process of new venture creation, and managing theentrepreneurial venture. A brief overview of each topic follows.Inputs to the entrepreneurial process:Antecedents to the entrepreneurial processAfter an introductory topic that provides some different perspectives onentrepreneurship, Topics 2 and 3 focus on antecedents to the entrepreneurialprocess. Topic 2 discusses personal and sociological influences on entrepreneurship,including common personality traits and social factors that appear to underpinthe entrepreneurial drive. In this topic, we also examine female and ethnicentrepreneurship to illustrate how contextual factors can contribute to a desire toestablish a new venture.Topic 3 then examines environmental influences on new venture creation by reviewinggovernment policies and procedures, socio-economic factors, entrepreneurial businessskills, and financial and non-financial assistance that influence entrepreneurship in theAustralian context. We also look at the industry context for tourism and hospitality toillustrate that, in addition to the general environment for business, opportunities forentrepreneurship depend to a large extent on the competitive attractiveness of differentindustries.The entrepreneurial process:Business planning and creationFour topics focus on creating a new venture. Topic 4 is concerned with opportunityrecognition and evaluation, in recognition that every successful entrepreneurialventure is underpinned by an attractive and well-defined opportunity that leads toinnovation. We tap into your creative potential here with many exercises designed togenerate and evaluate entrepreneurial ideas.Topic 5 gets down to the ‘nuts and bolts’ of business planning. We provide a step-by-step guide to developing a business plan, a requirement for any new businesswhich requires financing in the beginning. Also too, the business plan assists theentrepreneur to know why, where and how their business will proceed. Legal andfinancial issues of concern during the pre-start-up phase of venture creation are thefocus of Topic 6, while Topic 7 examines alternative entry strategies for entrepreneurs– starting a business ‘from scratch’, buying an existing business, and purchasing afranchised outlet.Outputs of the entrepreneurial process:Managing the entrepreneurial ventureTopic 8 completes the unit and focuses on the time period after new venture start-up. This topic examines general management in the entrepreneurial venture and itsaccompanying challenges and opportunities.So, without further ado, let’s get started! 5
  8. 8. 6 MNG00427 – Entrepreneurship in Tourism and Hospitality
  9. 9. Topic 1 Perspectives on entrepreneurshipIntroduction The purpose of this introductory topic is to provide some answers to the questions ‘who are entrepreneurs’ and ‘what is entrepreneurship’? While these questions may seem fairly straightforward, you will soon discover that there are nearly as many answers to them as there are practising entrepreneurs and scholars who write on the topic. To some, entrepreneurs are people who found a new enterprise. Others restrict use of the term to creative innovators who seek and apply new ways of doing things. Still others view entrepreneurship as identification and exploitation of an opportunity, or the process of developing a strategy to capitalise on some niche in the market. Some definitions equate entrepreneurs to small business owner-managers, while others argue that entrepreneurship also can occur in large corporations. One reason for this diversity of definitions is that scholars have approached the study of entrepreneurship from different disciplinary perspectives, including economics, psychology, sociology and management. Thus, the economist might view entrepreneurship as the process of creating and distributing wealth; the psychologist sees the entrepreneur as distinguished by certain personal qualities like high need for achievement and creativity; the sociologist is interested in contextual factors that might encourage entrepreneurship such as its social value and acceptance, or the presence of appropriate role models; meanwhile, management theorists usually are most interested in how entrepreneurs establish, organise and manage a business and its resources, and assume risks for the sake of profit. One way of coming to terms with the many and varied views on entrepreneurship is to group them into a smaller number of categories reflecting the various disciplinary perspectives from which they emanate. While the disciplinary perspectives reviewed in this topic are not exhaustive, they do draw on the most influential ones in the field and their leading thinkers. An alternative, although complementary, categorisation is offered by reviewing various ‘schools of thought’ on entrepreneurship. In this topic, we look at one such categorisation. Finally in this topic, we offer a framework of the entrepreneurial process on which the remainder of this unit is structured. It follows a logical progression from focusing on antecedents to entrepreneurship, through opportunity recognition, business planning and creation, to managing the entrepreneurial venture at start-up and through growth. It is hoped through our discussion in this topic that you gain both an historical appreciation of the role of entrepreneurship over the last few centuries, and a firm basis for understanding the entrepreneurial process in contemporary times. 7
  10. 10. 8 MNG00427 – Entrepreneurship in Tourism and Hospitality Objectives After completing this topic, you should be able to: • explain the key focus of economic, psychological, sociological and management perspectives on entrepreneurship • compare how prominent scholars have defined entrepreneurs and entrepreneurship • apply different schools of thought in entrepreneurship to case studies on the entrepreneurial process in tourism and hospitality • identify the key inputs, process and outputs of entrepreneurship. Textbook Schaper, M, Volery, T, Weber, P & Lewis, K 2011, Entrepreneurship and Small Business, 3rd Asia-Pacific edn, John Wiley and Sons, Australia. • Chapter 1, pp. 3–23. Readings 1.1 Filion, J 1998, ‘From Entrepreneurship to Entreprenology: The Emergence of a New Discipline’, Journal of Enterprising Culture, Vol. 6, No. 1, March, pp. 1–23. 1.2 Cunningham, JB & Lischeron, J 1991, ‘Defining Entrepreneurship’, Journal of Small Business Management, Vol. 29, No. 1, January, pp. 45–61. 1.3 Sasser, WE & Klug, J 1988, ‘Benihana of Tokyo’ in CH Lovelock (ed.), Managing Services: Marketing, Operations and Human Resources, 1st edn, Prentice-Hall International Inc., New Jersey, pp. 44–57. Beyond the literal meaning of entrepreneurship The words entrepreneurship and entrepreneur are derived from the French entreprendre, which literally means ‘to undertake’. When the word was first used in 17th century France, the term entrepreneur applied specifically to people who undertook to lead military expeditions (Cunningham & Lischeron, 1991, p. 50). However, contemporary usage of the terms entrepreneurship and entrepreneur differs substantially from their early derivation. Thus, some of this first topic is devoted to reviewing how the meanings of entrepreneurship and entrepreneur have evolved since then. This review has three broad purposes. First, defining these key terms is important to clarify the main phenomena we are going to study in this unit. If we are interested in who entrepreneurs are, why they become entrepreneurs and their distinguishing characteristics, and if we are to succeed in clarifying what the entrepreneurial process involves and how to do it well, then we need first to distinguish entrepreneurs from non-entrepreneurs, and entrepreneurship from other non-entrepreneurial activities. The second broad reason for reviewing how these terms have evolved is to provide an historical perspective on the role of entrepreneurs and entrepreneurship so we might better understand their place in modern society and in contemporary tourism and hospitality industries. A third rationale for reviewing how the concepts of entrepreneur and entrepreneurship have evolved is to draw your attention to the different disciplinary perspectives that have influenced the field. Recall the fable of the blind men and the elephant, where one man felt its trunk and described the elephant as a snake; another felt its knee and thought it resembled a tree; yet another felt its side and compared it to a wall; while another felt its tusk and described the elephant as a spear. The point is that usually
  11. 11. MNG00427 Topic 1 – Perspectives on entrepreneurship 9 we can only gain a complete understanding of a certain phenomena by understanding the whole. And in our quest to understand the whole ‘elephant’ of entrepreneurship, we need to understand its parts. That is, an elephant is more than a trunk, but we can hardly attempt to understand an elephant without some reference to its trunk. So it is in entrepreneurship. Various scholars have advanced theories and ideas that explain various parts of the ‘elephant’ of entrepreneurship, yet an overarching theory of its entirety does not exist. Still, we can learn from examining these parts in our attempt to explain the whole. Towards this end, we’ll be examining entrepreneurs and entrepreneurship from economic, psychological, sociological and management perspectives. Each of these perspectives can contribute to our understanding of entrepreneurship and of the key players in this process, the entrepreneurs. Before we proceed however, try the first activity to help you focus your thoughts.a Activity How would you define an entrepreneur and entrepreneurship?f Feedback If we could all compare our answers, I’m sure there would be a great deal of variation. For now, let’s proceed to see how economists, psychologists, sociologists and management scholars have defined entrepreneurs and entrepreneurship. At the end of our discussion, you will find it useful to revise your definitions.An economic perspective on entrepreneurship Much early interest in entrepreneurship stemmed from the field of economics. Economic theory is concerned with two major questions about society – how does a society create new wealth and how does a society distribute wealth (Kirchhoff 1997, p. 445)? Economists have thus viewed entrepreneurship as a major mechanism for ensuring both wealth creation and its distribution. The French economist Richard Cantillon is generally credited with giving the concept of entrepreneurship a central role in economics (Holt 1992, p. 3). He described an entrepreneur as a person who pays a certain price for a product to then resell it at an uncertain price, thereby making decisions about obtaining and using resources and so assuming the risk of enterprise (Cantillon 1755, in Higgs 1931). A critical point in Cantillon’s conception of entrepreneurs is that they consciously make decisions about resource allocations, and so seek the best opportunities for using these resources to yield the highest commercial benefit (Holt 1992, p. 3). Marco Polo can be considered an example of Cantillon’s interpretation. In establishing trade routes to the Far East, Marco Polo bought goods at a known price, to then resell them on his return in the hope of making a profit. Thus, Marco Polo clearly identified a commercial opportunity, obtained resources from financiers, allocated these and other resources to his journeys, and bore the associated risks of these ventures (Hisrich & Peters 1989, pp. 6–7). Cantillon’s view of the entrepreneur is illustrated by Thomas Cook’s development of packaged tours from the mid-1800s. Identifying a commercial opportunity arising from an expanding railway network and peoples’ growing desire to travel away for holidays, Thomas Cook organised the various components or resources for each tour, and then resold them as a package with the intention of making profits. Modern day tour operators perform a similar function. Some ten years after Cantillon’s writings and in a book credited with founding classical capitalist economic theory, The Wealth of Nations (1776), Adam Smith referred to the ‘enterpriser’ as an individual who undertook the formation of an
  12. 12. 10 MNG00427 – Entrepreneurship in Tourism and Hospitality organisation for commercial purposes. He ascribed to the entrepreneur the role of industrialist, but also viewed entrepreneurs as people with unusual foresight who could recognise potential demand for goods and services. Thus, entrepreneurs transformed market demand for goods and services into the supply of those goods and services (Holt 1992, p. 3). Thomas Cook clearly possessed the foresight to recognise latent demand for packaged tours, and so created a commercial enterprise to cater for this demand. e Think … About Smith’s interpretation of an entrepreneur as reacting to market demand. Is this the whole story? Might entrepreneurs also play a more proactive role by creating market demand where none existed before? You might consider the Thomas Cook example in this light. Jean Baptiste Say was another early economist with an interest in entrepreneurship. Writing in the early 1800s, he regarded economic development as the result of venture creation (Filion 1998, p. 2). While he agreed with Cantillon that entrepreneurs are influenced by societal forces to recognise needs and to meet those needs though astute management of resources, Say also recognised that entrepreneurs ‘unite all means of production’ (1816, p. 28) and so influence society by creating new ventures (Holt 1992, p. 4). He observed that an entrepreneur must possess: … judgement, perseverance, and a knowledge of the world as well as of business. He is called upon to estimate, with tolerable accuracy, the importance of the specific product, the probable amount of the demand, and the means of its production: … he must possess the art of superintendence and administration. (Say 1803, p. 104) Thus, Say’s entrepreneur was a manager-entrepreneur (O’Neile 1989, p. 39). However, in identifying his entrepreneur, Say drew the important distinction between the entrepreneur and the capitalist, and between their profits, viewing entrepreneurs as innovators and agents of change (Filion 1998, p. 3). Bob Ansett’s establishment of Budget Rent-a-Car in Australia in the late 1970s and early 1980s was influenced by market demand for cheaper car rentals, but it also played a central role in shaping the car rental industry through breaking Avis’ monopoly for car rentals at Australian airports and through influencing the pricing structure of the car rental industry. Thus, Ansett’s actions could be considered entrepreneurial, being an agent of change driven by market opportunity. As hinted in the previous ‘think’ box, you might have considered Thomas Cook’s actions in this light as well. In 1848, John Stuart Mill elaborated on the necessity of entrepreneurship in private enterprise, and the term entrepreneur subsequently became a common descriptor for business founders (Holt 1992, p. 4). However, Mill’s view has been criticised as failing to distinguish between entrepreneurs and business managers (Schumpeter 1949, p. 48), although Mill did stress the risk-bearing role of business founders. However, under his definition, all founders of businesses in tourism and hospitality industries bear certain risks and so could be considered entrepreneurs, from Richard Branson who established Virgin Airlines (along with many other ventures) to the person owning and operating a hotdog stand in your local shopping centre. The rise of neoclassical economics at the turn of the century gave little attention to the entrepreneur. It was assumed that capitalism equitably distributes income within society through the operation of market forces, and it ignored the role of entrepreneurs in creating ‘new demand’ (Kirchhoff 1997, pp. 448–449). However, Joseph Schumpeter disagreed with neoclassical theory that the mechanism of wealth distribution was driven by competitive markets functioning to achieve equilibrium between supply and demand. Instead, he observed ‘chaotic markets’ driven by the
  13. 13. MNG00427 Topic 1 – Perspectives on entrepreneurship 11 regular appearance of entrepreneurs who enter the market bringing innovations that challenge established suppliers. He called this process ‘creative destruction’, because entrepreneurs create new wealth through the process of destroying existing market structures (Kirchhoff 1997, p. 450). Thus, Schumpeter viewed innovation as central to the role of entrepreneurs, and the essence of entrepreneurship as ‘the perception and exploitation of new opportunities in the realm of business’, using ‘new combinations’ of resources (in Filion 1998, p. 3). Because these innovations create new demand when entrepreneurs bring new innovations to the market, entrepreneurs are central to wealth creation and distribution (Kirchhoff 1997, p. 451). Thus, more is required of Schumpeter’s entrepreneur than previous perspectives of the entrepreneur as business founder or business manager. A well-known example that illustrates Schumpeter’s view of the entrepreneur was the McDonald brothers who revolutionised the hamburger industry, creating additional demand for hamburgers through using a new combination of resources to produce standardised, ready-to-eat, takeaway products. Capitalising on growing car ownership and demand for fast and convenience foods, the McDonald brothers took an innovative, productionline approach to hamburger preparation, and forever changed the market and industry structures for fast food. And the rest, as they say, is history. Later in the 20th century, a group of economists at Harvard University, under the leadership of Arthur Cole, retained Schumpeter’s focus on innovation in entrepreneurship, but extended this interpretation to include routine management functions as a component of the entrepreneurial role, along with adjustments to external circumstances (O’Neile 1989, pp. 15–16). Cole identified six ‘phases of entrepreneurial activity’ where there is a ‘constant need for decisions’ and where there is ‘opportunity for innovation, management, and the adjustment of external conditions’ (in O’Neile 1989, pp. 15–16): 1. determination of business objectives 2. development and maintenance of an organisation 3. securing of adequate financial resources 4. acquisition of efficient technological equipment 5. development of a market for the product 6. maintenance of good relations with public authorities. Thus, Cole’s writings on entrepreneurship embodied some of the essential elements which were subsequently extended and developed by numerous researchers in the following decades (O’Neile 1989, p. 47). However, it was in the fields of psychology, sociology and management, rather than economics, that much of this progress was made, as we’ll proceed to review. While economists certainly retain an interest in entrepreneurship, it has been observed that ‘the economics profession is now in a state of theoretical turmoil as the dominant neoclassical theory is experiencing increasing pressure to accommodate entrepreneurship … Much work is required to build a new theory’ (Kirchhoff 1997, p. 456).a Activity For each of the economists discussed above (Adam Smith, Jean Baptiste Say, John Stuart Mill, Joseph Schumpeter, Arthur Cole) jot down a few words that seem to best encapsulate their views on the distinguishing functions of entrepreneurs. (One example is given below.) Richard Cantillon: opportunist, risk-taker, resource allocator.
  14. 14. 12 MNG00427 – Entrepreneurship in Tourism and Hospitality a Activity In the preceding discussion, we have identified five examples in tourism and hospitality industries – Thomas Cook, Bob Ansett, Richard Branson, the owner- operator of the hotdog stand and the McDonald brothers. Do you consider all these ventures to be entrepreneurial? Justify your answer in light of the distinguishing functions of entrepreneurs you identified in the preceding activity. f Feedback How did you go? I hope you thought about this before looking at the feedback! Remember that the value of activities are in the process of thinking through possible answers, rather than coming up with a ‘correct’ response. Probably the example above that gave you most concern was the owner-operator of the hotdog stand. While we might agree that the other examples indeed displayed innovation, risk-taking, opportunism, astute allocation of resources, superior management skills, adaptation to the external environment, and creation of new market demand, this is not so clear for the hotdog operator. Perhaps you thought his/ her actions completely non-entrepreneurial, or perhaps you are starting to think that there may be degrees of entrepreneurship. We take this up in a later topic when we look at different types of ventures commonly studied in entrepreneurship. a Activity The goal of economic activity is assumed by economists to be the pursuit of profits. Do you agree that entrepreneurs are driven primarily by profit? Justify your answer. f Feedback There is still debate in the literature over this question. Certainly many psychologists would disagree, arguing that profit is important to entrepreneurs as a measure or indicator of success, but that profit per se is not their primary motivation. For now, let’s read on and examine the types of motivations and personal qualities that psychologists have associated with entrepreneurs. a Activity The economic role of entrepreneurship is well illustrated in a history of the Gold Coast, entitled A Sunny Place for Shady People (Jones, 1986). Jones describes how entrepreneurs, Stanley Korman and Bruce Small, were largely responsible for sowing the seeds that transformed the area from ‘merely a place where Brisbane families could buy a cheap fibro or timber weekender’ in the 1950s to one of Australia’s premier tourist destinations. Korman’s pioneering developments included Lennon’s Broadbeach Hotel (opened in 1956), the Chevron Hotel (1957), and Chevron Island (1960) and he suggested changing the area’s name from the South Coast to Surfers Paradise. Small’s included numerous residential canal estates which attracted retirees from the south, and the introduction of the Gold Coast’s famous meter maids. Think about some other famous tourist destinations you are familiar with. What role have entrepreneurs played in their economic development? A psychological perspective on entrepreneurship From the 1960s, attention turned away from an economic interpretation of entrepreneurship to a psychological view that attempted to explain the personal characteristics of entrepreneurs. The major focus of psychology is the behaviour and mental processes of the individual. It is concerned with studying the actions, responses, thoughts and emotions of individuals in order to explain their behaviour,
  15. 15. MNG00427 Topic 1 – Perspectives on entrepreneurship 13so as to develop ways in which behaviour can be predicted, controlled or modifiedto improve the quality of life in everyday situations (Simons, Irwin & Drinnin 1987,p. 23).Thus, from the 1960s, psychologists considered that entrepreneurial success could beoptimised if they could describe, explain and predict the behaviour of entrepreneurs byidentifying the underlying needs, drives, attitudes, beliefs and values that are assumedto underpin behaviour. Psychologists assume that entrepreneurs project a particularpersonality type and researchers have attempted to extract those traits which might beconsidered uniquely entrepreneurial (Alizadeh 1999, p. 27).David McClelland was a pioneer in entrepreneurial research in his attempts todetermine whether entrepreneurs hold a certain psychological set (Brockhaus 1982,p. 41). He defined an entrepreneur as ‘someone who exercises control over productionthat is not just for his personal consumption’ (McClelland 1971). Thus, by his ownadmission, entrepreneurs could include not only business founders, but also ‘anexecutive in a steel-producing unit in the USSR’ (1971). What was important toMcClelland was not so much the type of venture an entrepreneur operated within, buthis or her psychological traits. In this context, entrepreneurial qualities may or maynot be a prerequisite to business ownership and indeed, some entrepreneurs couldconceivably find a non-business outlet for these traits. One psychological characteristicwhich McClelland contended is common amongst entrepreneurs is high need forachievement, that is a preference to be personally responsible for solving problems, forsetting goals and for reaching these goals through personal effort. From the results ofthree studies (1961, 1965, 1969), McClelland maintained that achievement motivationwas the single factor which drew an individual to the entrepreneurial role.Many other personality factors have been proposed as distinguishing entrepreneursfrom managers, small business owners and the general population. As well ashigh need for achievement, the factors most commonly considered to be typicallyentrepreneurial include beliefs about locus of control, a propensity to take calculatedrisks, a high tolerance of uncertainty and ambiguity, and a range of personal valuessuch as honesty, integrity, duty and responsibility (Alizadeh 1999, p. 28). Table 1.1provides some examples of research into personality traits that have been associatedwith entrepreneurs. We will be reviewing some of these more closely in a later topic.Table 1.1 Some personal characteristics of entrepreneurs• Recognise and take advantage of opportunities• Resourceful• Creative• Visionary• Independent thinker• Hard worker• Optimistic• Innovator• Risk taker• Leader Source: Kuratko & Hodgetts 2004Despite numerous efforts between about 1960 and 1980 to identify a set ofpsychological traits distinctive to entrepreneurs, a psychological model ofentrepreneurship has not been supported by research (Timmons 1990, p. 161). That
  16. 16. 14 MNG00427 – Entrepreneurship in Tourism and Hospitality is, there is no established profile that allows us to identify potential entrepreneurs with any certainty (Filion 1998, p. 7). While many entrepreneurs do seem to share common personality traits, numerous studies have found these traits are not restricted to entrepreneurs alone. However, while research has not uncovered a central definitive model of personal characteristics unique to entrepreneurs, the traits identified above do have some value in describing the ‘entrepreneurial mind’. e Think … … about an entrepreneur you have known for a reasonable period of time. Are the characteristics in Table 1.1 a fair description of his or her personality? a Activity In a preceding activity, you were asked to consider whether profit is the main goal of entrepreneurship. Has your answer changed now that you have read a little on the psychological approach to the study of entrepreneurship? f Feedback While profit may be the main driving force for many entrepreneurs, the psychological perspective suggests that other factors may be equally or even more important. It seems that some entrepreneurs might be more driven by a need to achieve, to be in control, to gain independence, or to meet a challenge. As noted earlier, we’ll examine more closely the personal motivations and characteristics of entrepreneurs in a later topic. A sociological perspective on entrepreneurship With the failure of psychologists to provide a complete explanation for entrepreneurship, the concept began to attract the attention of sociologists from the 1980s, attempting to answer the question – what contextual factors influence entrepreneurship? Sociological perspectives on entrepreneurship are concerned with the social context within which entrepreneurship occurs, particularly the social stimulants to entrepreneurial activity (Alizadeh 1999, p. 29). These can be viewed at two broad levels: (1) societal factors that affect the acceptance and value of entrepreneurship and which hinder or facilitate entrepreneurial activity; and (2) social factors that influence the decisions of individuals to pursue an entrepreneurial career. A brief overview of these two perspectives is given here, with a more detailed treatment provided in a later topic. The first group of societal factors referred to above is concerned with historical, regional and cultural factors that influence the emergence of entrepreneurship (Shapero & Sokol 1982, p .73), through prevailing cultural values, role expectations and social sanctions. Such a view helps to explain why some ethnic groups, such as Jews, Lebanese and Chinese, tend to engage in entrepreneurial activity, while for other groups, their social and cultural environments remain largely antipathetic to entrepreneurship. Shapero and Sokol (1982, pp. 73–74) provide the example of European Medieval society as one not conducive to entrepreneurship. Social relationships were fixed, everyone identified with a particular group or class that had established roles in society and relationships to other groups, advertising was forbidden, innovation was prescribed by the guilds and social mobility was outlawed. In such societies, entrepreneurial activity was, by default, left to groups that did not fit into any of the established classes, such as Jews. These ‘outsiders’ could only survive by performing new roles, those considered to be outside or beneath the domain of established groups (Shapero & Sokol 1982, p. 74).
  17. 17. MNG00427 Topic 1 – Perspectives on entrepreneurship 15 Numerous other factors have been considered in this first sociological perspective on entrepreneurship. While some will be explored in more detail in a later topic, these include aspects of government policies, socio-economic conditions, the extent of entrepreneurial and business skills, and the availability of financial and non-financial assistance (Gnyawali & Fogel 1994). For example, entrepreneurial activity is likely to be discouraged or impossible where most people are in a serf or slave type relationship to larger economic organisations. Alternatively, economic wellbeing in regions or countries has been associated with greater entrepreneurial activity or emphasis (Reynolds 1991, pp. 56–57). Well-focused government policies in Italy and Japan support and encourage the establishment of small firms (Reynolds 1991, p. 58), while these would be absent in Communist countries. In countries where there are major financial or legal impediments to establishing a new business, a significant black market economy my be present, providing further avenues for entrepreneurial activity (Reynolds 1991, p. 61). Communities of entrepreneurial firms, such as Silicon Valley in the US, attract venture capitalists and help nurture a regional culture which further encourages entrepreneurship. The second broad set of sociological factors that has attracted research attention in entrepreneurship relates to social influences on the career choices of individuals. Again, these will be discussed in more detail later. Such factors include the influence of negative displacements (such as migration or job retrenchment), job dissatisfaction (as might be experienced by women who meet the ‘glass ceiling’), lack of career alternatives (for example, where ethnic refugees or migrants find their skills are not recognised in their new country or when they face language difficulties), and role models provided by family, peers or mentors. Age, education and experience seem to play a role in influencing an individual’s propensity to undertake the entrepreneurial role. An obvious example of the role of social factors in entrepreneurship in hospitality industries can be found in the restaurant sector, where migrants from various ethnic backgrounds have established their own businesses, often because of language difficulties in their new country and lack of alternative employment prospects.a Activity Talk to some small business operators in your local area and find out what their main reasons were for establishing their business. Can you identify any sociological reasons amongst their answers?f Feedback Chances are that some of the small business operators you talked to mentioned some sociological reasons underpinning their decision to start their business. These sociological factors influencing the entrepreneurial career decision are often categorised as push or pull factors. Push or negative displacement factors mentioned by your respondents may have included sudden loss of a job and income, or growing job dissatisfaction in their former employment. Pull or positive displacement factors can comprise encouragement from family, friends or a mentor, or a financial windfall for financing the venture.A management perspective on entrepreneurship About the same time that sociologists became interested in entrepreneurship, so too did management scholars. They were concerned with what entrepreneurs do, or the activities performed in entrepreneurship, particularly those involved in the process of creating a new enterprise. In fact, Gartner (1989) argues that ‘who is an entrepreneur?’ is an unfruitful question, leading scholars to assume that entrepreneurs are some kind of ‘special’ people, thus fuelling a search for their distinctive personal qualities. He
  18. 18. 16 MNG00427 – Entrepreneurship in Tourism and Hospitality suggests a more productive approach is to examine ‘what individuals do to enable organizations to come into existence?’ (Gartner 1989, p. 63). Thus, some relevant questions that might be addressed from a management perspective on entrepreneurship are: • What is involved in perceiving opportunities effectively and efficiently? • What are the key tasks in successfully establishing new organisations? • How are these tasks different from those involved in successfully managing ongoing organisations? • What are the entrepreneur’s unique contributions to this process? (Bygrave & Hofer 1991, p. 16) Typical activities examined in management studies on entrepreneurship include recognising a business opportunity, establishing the feasibility of a potential venture, developing a business plan, gathering the necessary resources, and fulfilling legal and administrative requirements for venture creation. Once the venture is launched, management theorists might also be concerned with how the entrepreneur manages, markets, staffs and operates the new business and nurtures it through growth. Thus, a management perspective on entrepreneurship sees it as a process. For example, Hisrich, Peters and Shepherd (2008, p. 9) describe this process as finding, evaluating and developing opportunities by overcoming strong forces that resist the creation of something new. They depict the process as comprising four distinct phases with associated activities, as shown in Table 1.2. Table 1.2 Aspects of the entrepreneurial process Identify and evaluate Develop business Resources Manage the the opportunity plan required enterprise Creation & length of Characteristics & size Existing resources Management style opportunity of market segment of entrepreneur & structure Real & perceived Market plan Resource gaps & Key variables for value of opportunity Production available supplies success requirements Risks & returns of Financial plan & Access to needed Identify problems opportunity requirements resources & potential problems Opportunity vs Form of organisation Implement control personal skills & goals systems Competitive situation Positioning & strategy for entry Source: Hisrich, Peters & Shepherd 2008, p. 10 Similarly, Timmons (1990, p. 5) defines entrepreneurship as: the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled. Entrepreneurship involves the definition, creation, and distribution of value and benefits to individuals, groups, organizations, and society. Entrepreneurship is very rarely a get-rich-quick proposition; rather, it is one of building long-term value and durable cash flow streams. William Bygrave (1997, p. 2) also sees entrepreneurship from a management perspective in defining it as a process which ‘involves all the functions, activities, and actions associated with perceiving opportunities and creating organizations to pursue them’.
  19. 19. MNG00427 Topic 1 – Perspectives on entrepreneurship 17 Thus, management scholars view entrepreneurship as a purposeful activity, and one whose chances of success can be enhanced through developing entrepreneurial and management skills. For example, in order to identify entrepreneurial opportunities (as noted in the above definitions by Hisrich, Peters & Shepherd, Timmons and Bygrave), potential entrepreneurs should nurture contacts with appropriate individuals, organisations and customers (Bird 1989). Similarly, competence in feasibility analysis, business planning and resource identification and acquisition can be gained through learning and practising. In this way, the chances of entrepreneurial success can be enhanced. A management perspective on entrepreneurship also allows greater attention to entrepreneurial activities in existing firms. That is, many management theorists do not view entrepreneurial activities as restricted to starting and managing a new venture. A key focus is on the management of innovation and change, as reflected in Peter Drucker’s (1986) views. He defined entrepreneurship as the effort to create purposeful, focused change in a firm’s economic or social potential, plus the application of distinct entrepreneurial strategies and entrepreneurial management. Entrepreneurship thus involves being alert to opportunities that often arise under conditions of constant change, and then acting on those particular opportunities likely to yield value. As Casson (1982) has noted, entrepreneurs’ abilities to exploit opportunities and cope with change depend on their ability to make decisions and judge the value of these decisions (in Alizadeh 1999, p. 32). This view of entrepreneurship thus recognises that entrepreneurial activities can occur within larger organisations and that business ownership is not a prerequisite to entrepreneurship. The terms ‘intrapreneurship’ and ‘corporate entrepreneurship’ were coined to describe entrepreneurship outside the owner-operated business. Intrapreneurship then is concerned with ways to enhance opportunity recognition and innovation in existing firms by encouraging ‘bureaucratic creativity’(Cunningham & Lischeron 1991, p. 54). As we mentioned earlier, a management perspective on entrepreneurship sees it as a process. There is a diversity of opinions, however, on when this process ends. When viewed as a lifecycle, enterprises are created and may then proceed through stages such as growth, maturity or decline. For some management scholars, such as Gartner (1989), the entrepreneurial process is complete once the new enterprise is created. For others, such as Hisrich, Peters and Shepherd (2008), entrepreneurship also is involved in managing the new business and nurturing it through early growth. This is often the perspective taken by those who study small business management. For those who study intrapreneurship, their focus is usually on the mature organisation facing or embracing change and its attendant opportunities. We’ll return to the notion of an enterprise lifecycle later in this topic when we develop a framework on which the rest of this unit is structured. For now, turn to the first article in your Book of Readings. It provides a useful summary of some of the disciplinary perspectives on entrepreneurship that we have been discussing.r Reading 1.1 Filion, LJ 1998, ‘From Entrepreneurship to Entreprenology: The Emergence of a New Discipline’, Journal of Enterprising Culture, Vol. 6, No. 1, March, pp. 1–23.
  20. 20. 18 MNG00427 – Entrepreneurship in Tourism and Hospitality Schools of thought on entrepreneurship As noted in your first reading for this topic, the diverse perspectives on entrepreneurship have yielded various attempts to categorise these into different ‘schools of thought’. Your next reading provides one such categorisation. Reading this will help you fit together the various pieces in the ‘jigsaw’ of entrepreneurship. r Reading 1.2 Cunningham, JB & Lischeron, J 1991, ‘Defining Entrepreneurship’, Journal of Small Business Management, Vol. 29, No. 1, January, pp. 45–61. The previous article described six schools of thought in entrepreneurship. Let’s now examine another reading and complete an activity to show how each of these schools might be useful in understanding the entrepreneurial process. r Reading 1.3 Sasser, WE & Klug, J 1988, ‘Benihana of Tokyo’ in Lovelock, CH (ed.), Managing Services: Marketing, Operations and Human Resources, 1st edn, Prentice-Hall International Inc., New Jersey, pp. 44–57. a Activity Consider the Benihana case study in light of the six schools of thought in the Cunningham and Lischeron reading. Which of these schools helped you most in understanding the entrepreneurial success of Rocky Aoki in establishing and growing Benihana restaurants? f Feedback You have probably found that most of the schools of thought enhanced your understanding of contributors to Rocky’s success. He certainly had the intuition, vigour and persistence associated with the ‘great person’ school and appeared to have those qualities associated with the psychological school. The restaurant concept was also clearly innovative and creative (the classical school), and the article refers to Rocky’s attention to staffing and leading people (the leadership school). Perhaps the article pays most attention to those qualities associated with the management school in production planning, people organising, capitalisation and budgeting. A process approach to entrepreneurship Thus far in this topic we have presented numerous and often diverse perspectives on entrepreneurs and entrepreneurship. You are probably feeling somewhat confused and pondering how we might best make sense of this diversity. In this final section of this topic, we present a framework that incorporates many aspects of entrepreneurship that you have encountered so far. The purpose of this framework is both to help you fit the pieces of the entrepreneurial ‘jigsaw’ together, and to provide a basic structure around which the rest of this unit is organised. You should study this framework closely, and refer to it periodically throughout your studies. In developing this framework, we have taken into account some important characteristics of entrepreneurship identified by Bygrave and Hofer (1991, p. 17). These are that entrepreneurship: • is initiated by an act of human volition • occurs at the level of the individual firm • involves a change of state • involves discontinuity
  21. 21. MNG00427 Topic 1 – Perspectives on entrepreneurship 19 • is a holistic process • is a dynamic process • is unique • involves numerous antecedent variables • has outcomes that are extremely sensitive to the initial conditions of these variables. This list of characteristics recognises that entrepreneurship is a process with certain inputs and outputs. The inputs are the entrepreneur and other antecedents to the process of creating a new enterprise. This process then involves changing the external environment to one without the venture to another with the venture. It thus represents a basic discontinuity in the competitive structure of the industry involved. Sometimes, it even involves the creation of a new industry. In addition, it is holistic; that is, the creation of the venture and its probabilities of success can be described and evaluated only as part of the total industry structure. It is also dynamic, since both the venture and the industry evolve over time. It is also unique, since no other venture or competitive situation will be identical. Finally, the entire process is very sensitive to antecedents to the process, such as the number, strength and positioning of competitors, the qualities and capabilities of the entrepreneur, and the needs of current and future customers (Bygrave & Hofer 1991, p. 17). The output of the process is, of course, the organisation created. Thus, key variables in the process of entrepreneurship are: • the entrepreneur • the environment • the process • the organisation. We have also based our framework loosely on one developed by Carol Moore (1986), as shown in Figure 1.1. Moore’s model shows four phases comprising the entrepreneurial process – innovation, triggering event, implementation and growth – with numerous personal, environmental, sociological and organisational factors influencing each stage.Personal Personal Sociological Personal OrganisationalAchievement Risk taking Networks Entrepreneur TeamLocus of control Job dissatisfaction Teams Leader StrategyAmbiguity tolerance Job loss Parents Manager StructureRisk taking Education Family Commitment CulturePersonal values Age Role models Vision ProductsEducation CommitmentExperienceInnovation Triggering event Implementation Growth Environment Environment Environment Opportunities Competition Competitors Role models Resources Customers Creativity Incubator Suppliers Government policy Investors Bankers Lawyers Resources Government policy Figure 1.1 Moore’s model of the entrepreneurial process Source: Moore 1986, in Bygrave 1997, p. 3
  22. 22. 20 MNG00427 – Entrepreneurship in Tourism and Hospitality Figure 1.2 presents our framework of the entrepreneurial process and the elements each of the topics in this unit examines. The framework recognises that there is no one ‘best’ perspective on entrepreneurship, but that much can be learnt through considering multiple perspectives on the ‘elephant of entrepreneurship’ that we referred to in the introduction to this topic. Because this unit is part of a business degree, we focus a good deal on the process of creating a new enterprise. However, we first recognise that this process does not occur in isolation, but also has inputs and outputs. Thus, our framework is divided into three phases which reflect a lifecycle model of organisational evolution, from pre-startup, to venture creation, to growth and stability: • Inputs. This first phase is concerned with antecedents to entrepreneurship, comprising the personal characteristics of the individual entrepreneur, the social stimulants he or she encounters, and the environment in which this occurs. • Process. The second phase is the process of entrepreneurship itself. Here we focus on opportunity recognition and the need to establish the feasibility of the proposed venture, planning the new venture, legal and financial requirements, and the range of entry strategies available. • Outputs. The third phase in our framework is concerned with the time period after venture creation. We examine management skills and competencies required in a new small venture and strategies used to optimise its growth. Personal & Sociological In uences on Entrepreneurship (Topic 2) INPUTS Antecedents to Entrepreneurship Environmental In uences on Entrepreneurship (Topic 3) Opportunity Recognition and Evaluation (Topic 4) Planning the New Venture (Topic 5) PROCESS Business Planning and Creation Legal and Financial Issues for the New Venture (Topic 6) Entry Strategies for the New Venture (Topic 7) General Management in the OUTPUTS Managing the Entrepreneurial Venture Entrepreneurial Venture (Topic 8) Source: Primary, developed for this unit Figure 1.2 A framework for examining the entrepreneurial process
  23. 23. MNG00427 Topic 1 – Perspectives on entrepreneurship 21Conclusion In this first topic, we have provided an overview of economic, psychological, sociological and management perspectives on entrepreneurship. This has helped to define the terms ‘entrepreneur’ and ‘entrepreneurship’ and provided a brief introduction to some of the elements that might influence the entrepreneurial process. After reviewing these perspectives and some schools of thought on entrepreneurship, we have concluded that entrepreneurship is most usefully viewed as a process, with various inputs and outputs. The process was presented as a framework which structures the remainder of this unit. Our next topic focuses on the first element of this framework – personal and sociological influences on entrepreneurship.a Discussion questions At the end of Chapter 1 from your textbook, answer the five discussion questions. I will place feedback from these questions on MySCU under Unit Documents in Week 2 of the study period.
  24. 24. 22 MNG00427 – Entrepreneurship in Tourism and Hospitality
  25. 25. Topic 2 Personal and sociologicalinfluences on entrepreneurshipIntroduction Central to the entrepreneurial process is, of course, the entrepreneur. As we noted in Topic 1, the psychology of entrepreneurs and their personal characteristics dominated research in the field from the 1960s to the 1980s. While no predictive profile unique to entrepreneurs has been discovered, there do seem to be some psychological, personal and sociological factors commonly found amongst them. We can view these factors as antecedents to the entrepreneurial process, as depicted in Figure 1.2 in Topic 1. That is, to embark on entrepreneurial activity first requires a certain entrepreneurial drive or spirit. In this topic, we explore what might underpin this entrepreneurial bent, firstly in terms of psychological and personal factors, then sociological factors. We then devote some attention to female and ethnic entrepreneurs to illustrate how contextual factors can contribute to entrepreneurship. Finally, in recognition that entrepreneurs are not a homogenous group, this topic reviews some typologies of entrepreneurs. Objectives After completing this topic, you should be able to: • discuss the personal and psychological factors usually associated with entrepreneurs • discuss the range of sociological factors that are common antecedents to entrepreneurship • assess the role of sociological factors in female and ethnic entrepreneurship • identify some different typologies of entrepreneurs • provide examples of the above in tourism and hospitality industries. Textbook Schaper, M, Volery, T, Weber, P & Lewis, K 2011, Entrepreneurship and Small Business, 3rd Asia-Pacific edn, John Wiley and Sons, Australia. • Chapter 2, pp. 30–48. Readings 2.1 Brockhaus, RH & Horwitz, PS 1986, ‘The Psychology of the Entrepreneur’, in Sexton, DL & Smilor, RW (eds), The Art and Science of Entrepreneurship, Ballinger Publishing, Cambridge MA, pp. 25–47. 2.2 Morrison, A, Rimmington, M & Williams, C 1999, Entrepreneurship in the Hospitality, Tourism and Leisure Industries, Butterworth-Heinemann, Oxford, pp. 35–52. 23
  26. 26. 24 MNG00427 – Entrepreneurship in Tourism and Hospitality 2.3 Shapero, A & Sokol, L 1982, ‘The Social Dimensions of Entrepreneurship’, in Kent, C, Sexton, DL & Vesper, KH (eds), Encyclopedia of Entrepreneurship, Prentice-Hall Inc., Englewood Cliffs, New Jersey, pp. 72–90. 2.4 Sykes, T 1994, The Bold Riders: Behind Australia’s Corporate Collapses, Allen and Unwin, Sydney, pp. 186–210. 2.5 Greene, PG, Hart, MM, Gatewood, EJ, Brush CG & Carter, NM 2003, ‘Women Entrepreneurs: Moving Front and Center: An Overview of Research and Theory’, The Coleman White Paper Series, Coleman Foundation and US Association of Small Business and Entrepreneurship, pp. 1–46. 2.6 Aldrich, HE & Waldinger, R 1990, ‘Ethnicity and Entrepreneurship’, Annual Review of Sociology, Vol. 16, pp. 111–134. Psychological and personal influences on entrepreneurship Rather than provide extensive content in this section, we will refer to you two readings that summarise and provide some examples of the influence of psychological and personal factors on entrepreneurship. We’ll then complete some activities to help your comprehension of this material. But first, read the following prologue from Bob Ansett’s autobiography (Ansett & Pullan 1986, pp. 11–12). It gives us some preliminary insights into the entrepreneurial mind. The first time I visited my father in his office I read on a wall a framed quotation from Calvin Coolidge, President of the United States from 1923 to 1929: Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘press on’ has solved and always will solve the problems of the human race. Perhaps because I had just returned to Melbourne after 20 years in the United States I was particularly receptive to advice from an American President. I said to Reg Ansett: ‘That’s the best quotation I’ve ever seen.’ My father agreed, but he wasn’t interested in talking about it — in his early pioneering years the quotation had the essence of the way R. M. Ansett conducted his enterprises, but in the later years I think it had little meaning for him. In 1965 I thought it perfectly encapsulated my own philosophy, and 21 years later I still do. Persistence is the essence of success in business or anything else. I think I’m a good example of what Coolidge was talking about: I’m not an extraordinarily talented person, nor am I a genius. As for education, I have not gone beyond high school, and while there I wasn’t top of the class. My father wasn’t either — the only two pieces of paper he ever had proving he could do something were a knitting machine mechanic’s certificate and a pilot’s licence. At that meeting my father told me there was no place for Bob Ansett in his business empire, Ansett Transport Industries. The day I returned to Melbourne, No JOB FOR BOB was the page one headline in the Melbourne Herald. (The headline now adorns the stairwell in the Budget headquarters building in North Melbourne.) When I came back to Melbourne and started with Budget car rentals after my father’s rejection, I started with nothing. My job experience was limited to pumping petrol and driving a milk truck in Los Angeles and a bread truck in San Diego. I had three young children and a wife to support. But I had three things to offer. The first was the strong competitive sense I developed playing American football — in sport or in business I wanted to beat the hell out of the other guy. The second was my confidence in myself —
  27. 27. MNG00427 Topic 2 – Personal and sociological influences on entrepreneurship 25 I’ve always believed I have a charmed life and no matter what I do it will work out. The third was persistence, another lesson from football. I wasn’t a brilliant footballer — there were lots of fast bigger guys, guys with safer hands, but I discovered that I could start a game against a bigger, more talented opponent who was on top in the first plays, but if I kept at the task, just kept grinding away, I would get to him in the end. The Budget philosophy, which is the key to our success, evolved from my experience on gridiron fields in California and Japan, from my work on the gas pumps in Southern California, and from thousands of hours on bread and milk delivery runs. But I’m getting ahead myself … (Ansett & Pullan 1986, pp. 11–12) As the previous excerpt highlights, persistence seems to be a trademark characteristic of entrepreneurs. Consider the experiences of Walt Disney, who built his empire from cartoon production to films to theme parks. He had four failed businesses before success (Kuehl & Lambing 1990, pp. 633–637).r Reading 2.1 Brockhaus, RH & Horwitz, PS 1986, ‘The Psychology of the Entrepreneur’, in Sexton, DL & Smilor, RW (eds), The Art and Science of Entrepreneurship, Ballinger Publishing, Cambridge MA, pp. 25–47.r Reading 2.2 Morrison, A, Rimmington, M & Williams, C 1999, Entrepreneurship in the Hospitality, Tourism and Leisure Industries, Butterworth-Heinemann, Oxford, pp. 35–52.a Activity Refer back to Reading 1.3, where a case study on Benihana’s was presented. In light of Readings 2.1 and 2.2, what personal and psychological traits does Rocky Aoki appear to have that may have influenced his decision to establish Benihana’s?f Feedback Rocky appears to demonstrate many of those psychological traits identified by Brockhaus and Horwitz (1986). He moved to the United States because he felt there were better opportunities there for him to achieve success (high need for achievement). He clearly would not have put so much time and effort into his venture unless he felt he could influence its potential performance (internal locus of control). While he took risks in establishing his venture, his research and education were attempts to calculate and minimise the risks. Faced with problems at start-up and later with franchising, he sought to solve those problems.a Activity Do most small business founders you know in tourism and hospitality industries appear to have the personal qualities identified in the previous two readings?f Feedback Perhaps you found that the personal qualities identified in the previous two readings were more applicable to Rocky Aoki than to most small business owner-operators you know. In fact, in a review of the rather limited research into characteristics of owners of small tourism firms, Dewhurst and Horobin (1998) found that the majority are not motivated by a desire to maximise economic gain, but by social factors such as desire for semi-retirement and locational benefits. This suggests that pursuit of growth and business expansion are not high priorities. These findings led to the conclusion that the theoretical or conceptual qualities of entrepreneurship, including innovation, responding to uncertainty and adjusting to disequilibrium, are precisely the
  28. 28. 26 MNG00427 – Entrepreneurship in Tourism and Hospitality qualities that appear to be poorly developed among small tourism firms. From these two activities, you may be beginning to appreciate that business founders are not a homogenous group – an issue we’ll return to later in this topic. Now, examine the following two excerpts. The first relates to Christopher Skase, another ‘infamous’ Australian entrepreneur with interests in luxury tourism accommodation, most notably the Mirage hotels on the Gold Coast and at Port Douglas, north of Cairns. The second is about Len Ainsworth who founded Aristocrat Leisure Industries, the $900 million company that Ainsworth transformed from a tiny 1950s Australian medical equipment manufacturer into the second largest maker of gaming machines in the world (Guilliatt 1999). Both these excerpts provide some insight into the personality traits of these two entrepreneurs. Young man in a hurry Who was this young man who had built an enormous empire from next to nothing in little more than a decade? He was a phenomenally hard worker. He reckoned that if he put 100 hours work into a week he could get through twenty years work in ten. He was definitely a young man in a hurry. ‘You’ve got to give it a go’ he would tell interviewers. ‘You’re only here once’. He had few outside interests. His working day could be anything up to fourteen hours and in one way or another he worked seven days a week. His only relaxation was swimming, but sometimes he had to hit the pool as early as 4.30a.m. if he were flying interstate that day. The Skases were a striking and elegant couple. Christopher was slim, olive- skinned and dark-haired, while the blonde Pixie could be both relaxed and stylish. She was a rock of support to him in a marriage that would stand great external stresses. Pixie was his business partner as well. She worked as his secretary, discussed strategies and ideas with him and added many of the stylish touches to the Mirage resorts. Pixie and Christopher were a dedicated couple, travelling everywhere together and sometimes holding hands in public. He treated her daughters as his own. Pixie’s unquenchable vivacity must have been a tonic for the hard-working Christopher. Skase was constantly moving from planes to hotels to office to chauffeured limousines and back to planes. He read masses of material while in transit and typically conducted several meetings a day. He almost certainly took too much on board. His days tended to get out of hand. The later in the day he had an appointment the more likely it was that he would be late. (I was once MC at a Sydney lunch where Skase was to be the main speaker and present some awards. At the time we started the lunch the Skases were just taking off from Brisbane. They arrived about half an hour late, but the lunch nevertheless was a success. Skase could be an inspirational speaker and the drama of his late arrival added to the sense of occasion). Decisions that should have been made and implemented in a day or two could stretch into weeks or months before he finally had time for them. His top half-dozen executives worked almost equally hard. Skase insisted that all homework be done and decisions taken within the group. No work was ever farmed out to merchant bankers or corporate advisors, so security was tight and executives were well informed. They all hoped to get rich on Qintex shares and options. One of his most perceptive interviewers noted several characteristics that made Skase tick. One was total commitment, in that he had no outside interests unless barracking for the Bears could be counted. Others were: having clear and concise business objectives; emphasis on specialisation and pre-eminence in the chosen field; use of long-term strategy, which he called ‘the Japanese factor’; avoiding fad industries; and a devotion to demographics, which told him where people were moving and how they were going to be spending their money. It was demographics, broadly defined, that had persuaded him to move into resorts.
  29. 29. MNG00427 Topic 2 – Personal and sociological influences on entrepreneurship 27At the Los Angeles Olympics in 1984 it first struck him that there was a trendtowards a larger proportion of adults in the populations, who increasingly wantedinformation, entertainment, travel and leisure.The hard-driving young entrepreneur had great style. He wore a blue pinstripesuit well, usually with a pink shirt, white collar and a handkerchief spillingfrom the breast pocket. As he became successful he developed a penchant forbig fat cigars, although they probably did his asthma no good. In Brisbane hisheadquarters was a luxuriously decorated penthouse at the top of Comalco Housein Creek Street.The décor was ice-blue. The foyer was littered with antiquities including anEgyptian cartonage mask (circa 1300 BC), a Roman male torso and a Greek vase(circa 320 BC). The entire office was paved with vivid blue and white variegatedquartzite mined in Brazil, polished in Italy and imported especially for Qintex.A receptionist answered the phones at one of two solid quartzite desks whileat the other a tiny waterfall cascaded from the desktop in a soothing murmur.Skase’s trappings oozed opulence, including a company yacht name MirageIII. The yacht’s drawing room had a gilt-edged, 18th century Rapousse mirrorat one end and a blue banquet table and matching silk banquette with pewterlamps from New York at the other. In one corner was a bridge table with Hermescards and Hermes ashtrays. Christopher and Pixie flew the world in a Falcon jetformerly owned by King Hussein of Jordan. Yet beneath his exterior Skase wasa plain-living man whose idea of a good meal was a hamburger or Pixie’s homecooking. There was no question that he enjoyed living and working in opulentsurroundings, but at least part of their purpose was to impress the world withhow far he had come and to impress financiers. A sumptuous office was almost aprerequisite for borrowing in the 1980’s and none of the corporate cowboys hada better sense of style than Skase.Nearly all the cowboys knew how to enjoy themselves, but Skase must havebeen the best party-giver of all. His philosophy was that he and his staffworked hard all year (they were forbidden to indulge in lunches), so he wasjustified in throwing a big bash at Christmas. After he moved to Queensland theparties became lavish. For Christmas 1985 he pitched a marquee alongside theQueensland Arts Centre and invited several hundred staff, associates and friendsto an all-night revel with top food, wine and entertainers. In the 37-degreeheat the marquee turned into a Turkish bath, but everyone enjoyed themselvesenormously and only party poopers left before 2 a.m. Guests, including spouses,were flown in from Melbourne and Sydney on a chartered Boeing 727, equippedwith antimacassars adorned with the ‘Q’ of the Qintex logo. From BrisbaneAirport chauffeured limousines ferried guests to the Sheraton. Premier JohBjelke-Petersen—triumphant at Qintex’s move to Queensland—was the guest ofhonour.For the official opening of the Mirage Hotels in 1988 some 200 guests weretaken by chartered jet and limousine to both the Gold Coast and Port Douglashotels. The party lasted three day, featuring everything from a fireworks display,which came uncomfortably close to burning down the Gold Coast hotel, to scubadiving on the Low Isles off Port Douglas. Normie Rowe and Johnny Farnhamsang at the dinners as those present drank unlimited supplies of 1984 St Henri.Guests returned home stunned at Skase’s hospitality. His fortieth birthday partyat his Hamilton home was even more impressive. Guests were driven there inlimousines and offered Krug as they arrived. A marquee was pitched on thetennis court and party-goers danced on a reflective floor (gentlemen spent a lotof time looking downwards) until the early hours. The birthday toast to Skasewas proposed by Robert Holmes a Court. Guests included Sally Kellerman (theoriginal Hotlips Houlihan from M.A.S.H.) and George Hamilton (star of Love atFirst Bite).

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