Entrepreneurship and Venture Capital

Management
Assignment

Pratik Sharma
B051

Q1. 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 and communicating the 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 corporate cultures. 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 motivate key talent.

Comparing benefits, compensation and union contracts and

deciding on HR policies and 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.