In the art of business, entrepreneurs should understand vividly the various dimensions of strategic posture represented by a firm’s risk-taking propensity, the tendency to act in competitively aggressive, proactive manners, and reliance on frequent and extensive product innovation.
This proposed model delineates the antecedents and consequences of an entrepreneurial posture as well as the variables that moderate the relationship between entrepreneurial posture and firm performance.
Understanding various technical terms use to build this model is very important. Let’s start from who is an entrepreneur ?
This framework illustrates that, an entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures.
Human capital is an intangible asset or quality not listed on a company’s balance sheet.
In an entrepreneurial setting, the employer and employees should both understand the uniqueness and unstable nature of the global business scene, business orientation and general business environmental perception.
An organizational structure determines how information flows between levels within the company. Organizational structure can also be a system that outlines how certain activities are directed in order to achieve the goals of an organization. These activities can include rules, roles, and responsibilities.
Business Environment Characteristics
Business Environment is made up of both specific and general forces. Specific forces refer to the customers, competitors, investors etc. which have a direct effect on the day to day working of the business while the general forces refers to social, political, legal, technological and other forces which indirectly affect the operations of a business.
Various elements of business environment are very closely related to each other, so business environmental analysis is important. For example, at present there has been an increase in demand for products like diet colas, fat free cooking oil, sugar free products etc. due to increase in awareness for good health among the consumers.
Internationalization of Business
In economics the mother of entrepreneurship, the term internationalisation is viewed as a process of increasing a firm’s involvement in global market operations. Globalization is often presented as the strategic effort to treat the world, or a significant part of it, as a single market in which to do business.Through the internationalisation strategy, a firm generally aims to achieve a wide range of objectives. It is also, the process of planning and implementing products and services so that they can easily be adapted to specific local languages and cultures, a process called localization . The internationalization process is sometimes called translation or localization enablement . Enablement can include:
- Allowing space in user interfaces (for example, hardware labels, help pages, and online menus) for translation into languages that require more characters.
- Developing with products (such as Web editors or authoring tools) that can support international character sets (Unicode )
- Creating print or Web site graphic images so that their text labels can be translated inexpensively.
- Using written examples that have global meaning.
- For software, ensuring data space so that messages can be translated from languages with single-byte character codes (such as English) into languages requiring multiple-byte character codes (such as Japanese Kanji).
Essay illustrating “Internalization of Business”
Presently, the company employs 100 staff to deal with its manufacturing of products such as DVD players and MP3 players. Although the company is supplying products to the Japanese market, it has failed to expand its business over the last two years. A number of reasons are attributable to the company’s stunted growth including higher wages it has been paying and lack of research and development staff.
Furthermore, the company is struggling to address highly competitive market environment in terms of technology development and innovation. Hence, it is necessary to critically analyse the present situation of the company and to anticipate the key trends for Elecdyne over the next five years. The 2008 global crisis and recession raised potential challenges to the global economy and it impeded the economic growth worldwide.
Many economists are of the view that the global financial crisis 2008-09 is the worst financial crisis since the Great Depression in 1930s. The world economic crisis led to the collapse of a series of large financial institutions, the bailout of major banks by national governments, and downward movements in stock markets around the world. This crisis might have contributed to the growth decline of the Elecdyne.
In modern days, market competition is very intense and therefore manufactures tend to design innovative models that would effectively dominate the market. Due to this stiff competition, customers get the extensive exposure to choose the best quality and affordable products. Since the Elecdyne lacks an effective R&D team, the company is really striving to develop innovative product models; and this worse condition keeps them away from the main stream of the international market.
Business experts believe that, innovation and continued R&D is very important for an enterprise to survive the intense market competition because the modern customers always ask for the best products. However, it seems that the process of urbanisation though networks and partnerships offer ranges of opportunities to organisations. It is observed that Elecdyne is currently near to sources of information and hence it can certainly become stronger by preparing itself to face international competition.
Nowadays social networking sites such as facebook and Twitter have attained worldwide popularity and these social channels will enable the Elecdyne to understand customer tastes and specifications and thereby to maintain profitable market segments by realizing potential business territories. As at 2009, EU union expansion has created potential opportunities for organisations. In addition, Eastern European countries like Romania have cheaper salary margins as compared to UK .
Hence, the Elecdyne can effectively offshore its manufacturing activities to such countries where favourable business conditions are prevailing. In addition, the company may obtain beneficial market environment in rapidly developing economies like India and China where the Elecdyne would get cheaper business inputs. The term STEEP is the acronym for Socio-cultural, Technological, Economic, Environmental, and Political Factors. While analysing the socio-cultural factors, it seems that the company possesses a range of potential challenges. To illustrate; Japan, the company’s home country, is one of the world’s most famous countries for its electronics industry. Therefore cheap and close substitutes to Elecdyne’.
Financial performance is a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. A firm is a business organization such as a corporation, limited liability company (LLC), or partnership that sells goods or services to make a profit. Performance of a firm is significantly impacted by corporate governance and if the functions are appropriately established for the corporate governance system, it attracts investment and helps in maximizing the company’s funds, reinforcing the company’s pillars and this will result in the expected increase in firm performance.The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market.
In microeconomics, the theory of the firm attempts to explain why firms exist, why they operate and produce as they do, and how they are structured. The theory of the firm asserts that firms exist to maximize profits; however, this theory changes as the economic marketplace changes. More modern theories would distinguish between firms that work toward long-term sustainability and those that aim to produce high levels of profit in a short time.
A firm’s business activities are typically conducted under the firm’s name, but the degree of legal protection for employees or owners depends on the type of ownership structure under which the firm was created. Some organization types, such as corporations, provide more legal protection than others. There exists the concept of the mature firm that has been firmly established.
In a corporation, the businesses’ financials are separate from the owners’ personal financials. Owners of a corporation are not liable for any costs, lawsuits, or other obligations of the business. A corporation may be owned by individuals or by a government. Though business entities, corporations can function similarly to individuals. For example, they may take out loans, enter into contract agreements, and pay taxes. A firm that is owned by multiple people is often called a company.
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The Impact of Capital Structure on Firm Performance