Entrepreneurship and Venture Capital ManagementAssignment

Pratik SharmaB051Q1. Why is strategy not a popular tool amongst small business owners and entrepreneurs?

Answer:When we communicate with small business owners and entrepreneur around us, We dont usually find words like strategy formulationa and implementation in their parlance. Instead, they seem to plan and do things on the go. When I dig deeper into the phenomenon, I observed the following:

Large companies believe they should set strategies, plan carefully, adopt an annual planning routine, regulary survey their environments, and monitor results. But for small companies, it seems that the approach may be precisely the opposite.

Human Resources: As these companies are run by a few personnels, There is usually no separate department for strategic planning, which can actively look for long term market opportunites. No time: Most of the times, small businesses dont have the management time to invest in days of planning. Taking decisions on the spot, for shorter time period seems to work for lean and startup organisations. Cost:Sales efforts are usually led by senior management or the entrpreneur himself. So taking them off the road has an immediate negative impact on revenues. Small payoff:The payoff of strategic planning is often measured in millions of dollars rather than hundreds of millions, so it makes no financial sense to overinvest in the effort. Short-lived:Long-term planning seem to slow small businesses down and kill the advantage of agility. As they must continually adjust their strategy, the strategies they develop during planning sessions are very short-lived. They win because they are more nimble, quicker to seize unexpected opportunities, than their larger competitors. So, they dont find much value in strategy sessions, output of which is short lived. No intent to achieve large size or diversification: Most business owners seem to be content with the direction and revenue model of their business and see no need to do otherwise. Either they dont have the intent to go large or feel that this is the optimum business size they can manage themselves. Also, they find it difficult to hand over the key business areas to professional managers, in case strategy implementation demands it.

Q2. Explain the challenges in mergers and acquisition?

Answer:

We are in an age of consolidation, where mergers and acquisitions seem to rule the roost. Inorganic expansion is seen as the favorable option to ensure economies of scale and geographic expansion. However, when two companies of different background, culture, scale and kind merge, there are quite a few challenges that await them. Some of them are:

A significant challenge is to ensure that ongoing business is not adversely affected by M&A activity.As top management is busy in restructuring and changing strategic direction, middle level manager need to work more to ensure business continuity. Many mergers and acquisitions today involve companies headquartered in two different countries. This can complicate the transfer of best practices, since managers generally assume that their knowledge bases apply universally. They do not always take into consideration that performance drivers vary from culture to culture. Identifying andcommunicatingthe reasons for the M&A to employees.Often employees see change as dislocating and upsetting. Specifically, HR must communicate with employees about the necessity for the change, explain how the change will benefit them, and manage the stresses that accompany change. Difference in corporatecultures.One company may be driven by a sales mentality while another may be focused on innovation. Or decisions in one company may be top down while the other may be used to more participative decision making. Difference in languages is also to be countered. Pink slips and attrition: HR faces the challenge to determine the new organizational structure, let go extra staff, retain and motivatekey talent. Comparing benefits, compensation and union contracts and deciding onHR policiesand practices.Q3. Why should an entrepreneur require a different mindset?

Answer:

Fortunately, I am bestowed with experiences of both mindsets, first working as an employee at Infosys and then running a business with my friends. I believe that an entrepreneur requires a different mindset because: An employee is easlity accepted in social circles as one of us. Whereas an entrepreneur is judged more acutely by his peers, his image dependent on initial success of failure of his venture. An entrepreneur needs to be more patient and have perseverance of being a social outcast at beginning of his venture, when he seems to be lagging behind his employee peers. You need to be a better listener and observer than most of the employees. There is a strategic vision team to take care of opprotunites in markets local and abroad, and an empoyee just need to perform the action determined by them. Whereas, an entreprenuer must spot public needs and take action himself. Youre responsible for all decisions - good and bad. There is no fat balance sheet of a MNC to absorb your mistakes and no promotion for your good decisions. Thus an entrepreneur has an acute awareness about ownership of his/her decisions and their outcomes. He/she needs to take the possibility into factor that a bad decision may end up affecting his/her chance of survival, which might not be the case of an employee. They are more action oriented than employees, as they have an incredible opportunity to create something from nothing, in a way thats not possible working for someone else. This means making big decisions about what must be done, when and how. An entrepreneur cant wait for things to happen, or for someone to tell you what to do. Entrepreneur need to hold both short and long-term visions simultaneously.Short term for cash flows, whereas long term to fend off competitors and manage brand name. After some time an employee gets used to the routine work, but feeling uncomfortable is entrepreneurs comfort zone.As an employee, youre used to thinking inside the box rather than outside it. As an entrepreneur, there is no box at all. Entreprenuers are obsessed about cash flow. They dont have the luxury of becoming loss leaders in some categories for exapansion (assuming they dont have external funding). As each day requires cash for business to continue, they cant delay recievables as much as a MNC can. Employees resist change, whethar it comes from organisational restructuring, government regulations or M&A. On the other hand, Entreprenuers welcome change as it presents opportunites to identify market gaps and create something new.