Factors affecting SME success

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The entrepreneurship process

Following the discussion in Chapter 1, entrepreneurship is described as the pursuit of market opportunities to create future innovative goods and services discovered, evaluated and exploited to extract social and economic value from the environment, leading ultimately to new independent business / venture creation (Shane & Venkataraman, 2000:218; Kirzner, 1973; Fox, 2004:1; Dess et al, 1999:94). The highlycomplex process of new venture creation is embodied in entrepreneurship (Hisrich et al, 2005:39; Baron, 2004a:169).
At start-up, the entrepreneurship process is a course of action that involves all functions, activities and actions associated with identifying and evaluating perceived opportunities and the bringing together of resources necessary for the successful formation of a new firm to pursue and seize the said opportunities (Bygrave, 1997:2; Cornwall & Naughton, 2003:62). Once set up, the process of entrepreneurship becomes effectively a cyclical progression of opportunity targeting and making strategic decisions regarding the allocation of scarce resources in pursuit of value adding opportunities (Glancey, 1998:18; Kodithuwakhu & Rosa, 2002:443).
Although theoretical models of the new venture creation process differ in the assumptions and variables encompassed, they do include common elements (Mueller & Thomas, 2001:53). Different authors have identified between two and five distinct stages in the entrepreneurship process as briefly discussed below: Pretorius et al (2005a:57) say that the literature cites two broad dimensions of the entrepreneurial process, namely opportunity recognition and resource acquisition.
Gruber (2002:193) identifies three distinct stages, namely the pre-founding stage (opportunity identification and evaluation); a founding stage (business plan, resource gathering, incorporation and market entry); and an early development stage (building the company and market penetration). Baron (2004a:170) names the three stages of the entrepreneurship process as screening ideas for feasibility; assembling needed resources; and actually developing a new business.
Bhave (1995:223) identifies four stages namely opportunity identification, technology set up, organization creation and the exchange stages.

Getting the idea

Robertson et al (2003:313) argue that there is a strong link between getting the initial idea and the starting of the new enterprise. Rwigema & Venter (2004:159) define an idea as simply the conception of a possibility and a reflective method of evading, circumventing or surmounting obstacles and challenges. The Oxford Dictionary defines an idea as 1. A thought or suggestion about a possible course of action. Synonymous with “idea” are the terms thought, intention, scheme, suggestion, proposal, initiative, spur, impulse, brainwave, insight, concept and connotation (Oxford, 2005). Since ideas are many, developing the idea into a market opportunity, implementing it and building a successful business around it are the important aspects of entrepreneurship (Bygrave, 1997:6; Lumsdaine & Lumsdaine, 1995:167). A market opportunity is a gap left in a market by those who currently serve it, giving a chance to others to add unrealized value by performing differently from and better than competitors in order to create new possibilities (Wickham, 2001:38). The Oxford Dictionary (2005) defines opportunity as a favourable time or set of circumstances for doing something. Synonymous with opportunity are chance, opening and prospect. Timmons (1999:38) cautions that while business opportunities are detected from ideas, an idea is not synonymous with opportunity. The difference between an idea and an opportunity is that an opportunity is the possibility of occupying the market with a specific innovative product that will satisfy a real need and for which customers are willing to pay (GEM, 2003a:12). McCline et al (2000:83) conclude that successful venturing may well rest upon the ability to recognize or distinguish an opportunity from an idea.

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Opportunity identification

Kirzner (1973) advocated a theory of entrepreneurial alertness, describing it as the entrepreneur’s ability to see, to discover and exploit opportunities that others miss. Hisrich & Peters (2002:40) noted that this is a very difficult task, as most opportunities do not just appear but rather result from an entrepreneur’s alertness to possibilities. Markman & Baron (2003:289) lists steps involved in opportunity identification to include scanning the informational environment, being able to capture, recognize and make effective use of abstract, implicit and changing information from the changing external environments. Man et al (2002:127) adds that opportunity identification is basically seeking out better ways of competing.

Gathering resources

Hellman (2007:81) declares that once the entrepreneur has carefully assessed all the required resources and strategies into a business plan, the next thing is to gather the resources needed for addressing the opportunity. Gartner et al (1999:216) considers the acquiring of resources to be as important as opportunities discovered, because in the absence of the key resources the entrepreneurial process is likely to result in failure. Hisrich & Peters (2002:42) pronounce that it is the entrepreneurs’ responsibility to attract resources that are sufficiently strategic, valuable or rare.
Company resources can be divided into six key ingredients:
• Technical know-how, which assists in the production of a quality product or offering of a service (Rwigema & Venter, 2004:180).
• Finance including equity, cash and borrowing power (Ayotte, 2007:161).
• Physical assets including buildings, equipment, machinery and vehicles (McMahon, 2001:10; Vesper 1982:327).
• Human resources including motivated employees with skills, training, experience, emotional and intellectual abilities (Kodithuwakhu & Rosa, 2002:435).
• Intangible resources including information, networks, protected patents, unique technology and brand reputation (Morris & Zahra, 2000:93).

Chapter 1: Introduction
1.1 Introduction
1.2 Background
1.3 The situation in South Africa
1.4 Research problem
1.5 Study purpose
1.6 The textile and clothing industry in Johannesburg, South Africa
1.7 Defining constructs
1.8 Research questions
1.9 Research aims and objectives
1.10 Propositions
1.11 Research method
1.12 Benefits of the study
1.13 Outline of the study
1.14 Reference technique
1.15 Conclusion
Chapter 2: Factors affecting SME success
2.1 Introduction
2.2 The external/exogenous factors
2.3 The internal/endogenous factors
2.4 The entrepreneurship performance model
2.5 Integrated model and propositions
2.6 Conclusion
Chapter 3: The entrepreneurship process
3.1 Introduction
3.2 The entrepreneurship process
3.3 Skills required in the entrepreneurship process
3.4 Summary and propositions
3.5 Conclusion
Chapter 4: Acquiring skills
4.1 Introduction
4.2 Acquiring of skills
4.3 Entrepreneurship education
4.4 Entrepreneurship training
4.5 Training models
4.6 Summary and propositions
4.7 Conclusion
Chapter 5: Research Methodology
5.1 Introduction
5.2 Research problem
5.3 Objectives of the study
5.4 Research design
5.5 Propositions
5.6 Sampling design
5.7 Instrument and questions
5.8 Data collection methods
5.9 Analysis methods
5.10 Research findings reporting
5.11 Conclusion
Chapter 6: Research findings
6.1 Introduction
6.2 Response rate
6.3 Personal demographics
6.4 Business demographics
6.5 Descriptive statistical structure
6.6 Validity and reliability
6.7 Conclusion
Chapter 7: Conclusion
7.1 Introduction
7.2 Overview of the literature study
7.3 Research objectives revisited
7.4 Results revisited
7.5 Contribution of the study
7.6 Limitations of the study
7.7 Recommendations
7.8 Conclusion
References
Annexures

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