Theories And Practice Of Entrepreneurship Commerce Essay

Entrepreneurship covers three main concepts, which are people, organization and environment. These concepts are closely linked to the each other. There are literally lots of different definitions of entrepreneur and the explanation of entrepreneurship. According to (Kuratoko, 2009), Entrepreneur can be defined as “an innovator or developer who recognizes and seizes opportunities into workable/marketable ideas; add value through time, effort, money or skills; assume the risks of the competitive marketplace to implement these ideas; and realizes the rewards from these efforts.” However, an entrepreneur should be recognised on what they do but not who they are. Garner (1989) pointed out that “focuses on the traits and personality characteristic of entrepreneurs” to figure out who, how, why and when an entrepreneur start a new venture. In this essay, i will describe two entrepreneurs by using psychological, sociological and economic theories to discuss and includes the case studies to explain an entrepreneur.

Entrepreneurs Background – Amancio Ortega Gaona

“[We seek] to democratize fashion, in contrast to the idea of fashion as privilege.”- Amancio Ortega Gaona (Davidson, 2009)

Amancio Ortega Gaona is the richest Spaniard in the world. He is the president of the textile group Inditex and is also the founder of the well-known fashion boutique- ZARA. He even appeared on the annual Forbes list as a very successful businessman but he never appeared in any media channel or interview. (Hansen, 2012) He doesn’t like to be noticed, he goes to Finance Club for breakfast and work out everyday before he goes to headquarter company. Ortega is quite different from other entrepreneurs as there are not much information about his past and background. Badia (2009) explained the main reason it’s due to both Ortega and his people whom rarely reveals their information to others. However, there’s some basic information that are still “available”. Ortega was born in Busdongo de Arbas, a Leon province. His father was a railway worker and his mother served as a housemaid. He moved to La Coruna with his family in 1944. However, Ortega did not finish his education as he dropped out after elementary school and started to work at shirt store when he was 14. After working with different stores, he bean to learn and understand the textile industry such as manufacturing and trading. From his working experience, he had an idea to produce and sell directly to customers. (Menon, 2011) In 1960s, he owned his first business named Confecciones Goa. He realized that not only wealthy people can own expensive, well-design clothes but everyone in the world. So, he came up with all the ideas and combined them to use cheaper materials to produce products with friendly price that everyone can afford He also wants to directly sell it to the customers to reduce the prime costs. As a result, in the mid-1970s, the first ZARA store was opened. (Badia, 2009) (Davidson, 2009)

Entrepreneurs Background – Pierre Omidyar

“I never had it in mind that I would start a company one day and it would really be successful. I have just been motivated by working on interesting technology.”-Pierre Omidyar (Entrepreneur, 2008)

Pierre Omidyar, the founder and chairman of the EBay auction website was born in Paris in 1967. When he was young, his Iranian parents migrated to the U.S when his father obtained the residency at John Hopkins University, Maryland. Therefore, Omidyar received his American education where his interests towards computing grew. As a young computer enthusiast, Omidyar would rather skipped class to play computer and learn programming while other students were playing balls with their friends. Moreover, Omidyar’s first job was working in his high school’s library where he writes program by using his skills and knowledge. (Cohen, A 2003), (Wisdom)

In 1988, Omidyar graduated from Tufts University with a Bachelor of Degree in Computer Science. Later, he worked for several companies, including Apple where he invested a lot of his work and probe into Apple products since he was in his eighth-grade in 1980. (Omidyar, P 2011) While he was working at software-maker company- General Magic, he missed an opportunity to invest in a market share. However, he observed and noticed an issue. He wants a free market that public can also trade fairly and freely instead of being operated by dominant buyers who can all pay in one price. From there, he thought about an online auction and an online marketplace where people could sell or purchase items freely. So, Omidyar started writing the program for the online auction during his spare time of the job.

In 1995, on Labor Day of America, a newborn auction website was created and launched called “AuctionWeb”. And later Omidyar formed the AuctionWeb into his sole proprietorship – Echo Bay Technology Group, but the name couldn’t be registered since it was occupied by a Canadian company already. Therefore, he registered with a more preferable name: eBay.com.

Omidyar advertised his business on “Usenet” newsgroup and “What’s New” page on Labor Day. However, it didn’t attract even a single visitor as both the listings were delayed due to the network traffic, heavy backlog, public holiday and etc. But it didn’t discouraged him as he kept posting announcements, described the items, and also lists the history record of sale on Usenet. Nevertheless, AuctionWeb started to attract some visitors. Throughout the word-of-mouth publicity, AuctionWeb had successful helped to trade over thousands of auctions. With the increasing customers using the website, problems arises such as heavily network traffic trust between the buyer and seller, uncountable questions, complaints has landed in his email, and also dispute during the trading came up. (Cohen, A 2003)

Psychological

The solutions that Omidyar had made up for those problems appeared in his website showed several psychological entrepreneurs’ characteristics. Many of entrepreneurs are moderate risk takers. They would persist at any opportunity that will lead to success. (McClelland, 1961) First, AuctionWeb was totally for free users, but due to heavily network traffic, the administrator increased the monthly payment. Omidyar started charging users and it became an uncertain decision. Once the users refused to pay, the website lost its users and with the following problem of reduce listing items. On the other hand, if this strategy succeeded, the website will start gaining profit. As what Omidyar did, he would never know whether the users would be willing to pay for the site. (Cohen, A 2003)

Omidyar’s website enabled people all over the world to participate and trade business. He knew the “connection” between people is extremely important. It was influence by his father who was a physician. His father taught him the value of connection through the time when he had connected with the patients. (BusinessWeek, 2004) Moreover, Omidyar is also empowering influenced by his mother’s success. His talent of linguistics was inherited from his mother Elahe Mir-Djalali Omidar who is also known as the founder and president of the non-profit organization: Roshan Cultural Heritage Institute. The book of Pierre Omidyar has mentioned that “her mother’s work and academic achievements must have exerted an enormous influence on him.” (Viegas, J 2006) Precisely, his well understanding about the structure of all language especially in computer language is exactly innate and acquired from his mother. “One individual can make a difference; that belief comes from my parents” said Pierre Omidyar. (Bloomberg BusinessWeek,2004) According to The Deviancy Hypothesis- early childhood experiences, it is one of main factors to development of the personality. (Mitra, class). (Cohen, A 2003) (McClelland, 1961)

With large amounts of complaints’ email, questions and disputation between the users, he created the “Feedback forum” and “Bulletin Board”. Creativity is regarded to be the Core and desirable entrepreneurial attributes. (Mitra, class) indeed, Timmons et al.(1977) identified 14 characteristics, and “admitted that only few entrepreneurs would possess all traits and some appear to be linked.” “Think different” by Steve Job, to be creative and innovative, can break through something that exists. (Omidyar, 2011) In Jay Mitra’s class, a slide showed that the deviancy hypothesis contain one of the premises that a person who was caused by a force in most of behaviors. Omidyar let the people resolved their own problem. He also did not hire more staffs to manage the website. These two strategies were very successful and it exceeded his expectation. His creativity and innovative is not only from internal but also external influenced by someone or something. “Think differently” is the one of the main factors that affected him to establish AuctionWeb. When he missed an opportunity to invest in a market share, he wasn’t just thinking of lack of experience or bad luck but to create a new market place. “I wanted to give the power of the market back to individuals,” Omidyar said. (Bloomberg BusinessWeek, 2004) The idea of creating a new market place also covers in the theory of Tolerance for Ambiguity. Budner (1962) (Okhomina) has defined it as “tendency to perceive ambiguous situation as desirable”. They believed the entrepreneur have innate abilities to solve the problems.

In internal locus of control, Rotter (1996) defined it as an” individual’s perception about the underlying main causes of events in his/her life”. From the mind of entrepreneur, they do believe that they can control or change something in their life by their personal efforts or activities. (Okhomina) Ortega’s family diminutive wage of 300 pesetas per month was not enough to support them. Due to his child-hood background, Ortega can totally understand to the “diminutive-wealth” of people’s life. He believes everyone can have their own fashion and wear it without paying a lot of money. In order to cost less on the prime cost, Ortega has to find out the cheapest, similar resources and directly sell it to the customers to reduce the prime cost. This action could also be cover at “Commitment, determination, and perseverance” (Kuratko, 2009) as an entrepreneur, they would try their best to overcome setbacks and obstacles with perseverance. Moreover, Ortega might have a “vision” of his company when his idea comes up and he has enough “self-confident and optimism” to deal with the problems that he face so far due to his profound understanding in textile field. (Kuratko, 2009) For example: Steve Job of Apple Computer(1955-2011) “always had a vision of what he wanted apple to accomplish”. (Fitzgerald, 2012) His speech on 1983 had pointed out that he wants to create a microcomputer that can be carried around and easy to use. (Fitzgerald, 2012)

Sociological

Although an entrepreneur could be clarify into variety psychological aspects but scholars have also discovered that “entrepreneurship also need to considerably exploration into the development. “(Mitra, 2012) “The entrepreneurship is innate, but needed some resources to turn this innate drive into a business and maximize their chance of building.” (Gannett, 2012) Omidyar has the talent in computer skills and knowledge since he was young; “as the software is pure “thought stuff” all you need is imagination and programming talent”. (Naugton, 2012)Naughton also mentioned that the founder of FaceBook-Mark Zuckerberg also did the same. (Naughton, 2012) Moreover, In Weber’s theory (Weber, 1864-1920), he claimed that a charismatic entrepreneur is always linked to the ideas. The relationship between society and entrepreneurship is important as it might cause the death of entrepreneurship and the economy. According to the research of Hofstead(1980), there are not only one kind of theory or managing method existed and even managing a basic issue need to be dependable on each countries society and culture root. Hofstead has defined four cultural value dimensions- Individualism/collectivism, power distance, uncertainty avoidance and masculinity/femininity. Most of people would base on their empirical experience to thinking, feel and action. For example: Ortega was born in a normal family to father who worked for railway and mother as a housemaid. So after he worked for variety stores, he saw the commercial potential of the market. He came up with an idea of “look similar, cost less”. He thinks everyone deserved to wear well design clothes.

The aspect of social capital generally is to represent and invested the value resources turns to individuals and collective groups in society. Investigator could gain the profits through the process of investment and well performing it via social network. (Mitra, 2009) Both the entrepreneurs, Omidyar and Ortega are classic examples of social capital. They utilized the existing condition to make a maximum profit. Perhaps to gain the profit is not the goal that they set up initially. But their strategies and their mind are suitable to the market properly. “Social capital is also linked to the idea of reputation-building and legitimacy”. (Litch and Seigel ,2005) (Aldrich and Fiol, 1991) The better reputation of a firm, the better opportunity to access goals such as resources, employees or distributors and etc. Nevertheless, “Trust” is an important assessment of building a reputation. In Omidyar’s belief, people are generally good and they should learn to trust each other and treat them as the way they wish to be treated. From Licht and Siegel (2008) there were four sources of social capital namely value introjection, reciprocity exchange, bounded solidarity and enforceable trust. Omidyar appropriate uses all of the sources of social capital when he was struggling with the dispute problem between the users. He taught users to “put themselves into other’s place” and generous help each other and share ideas together. Therefore, he created the “Feedback forum” and “Bulletin Board”. Users could leave whether any good or bad feedbacks on the seller’s forum. It’s not only to encourage the sellers but also could enforceable the users to be “honest”. Users can also discuss any problems that they faced when trading. These two methods actually save the labors problem and also reduced the burden of the founder. On the other side, Ortega’s strategy of “cost less” increased his reputation in the market. “Zara has a reputation of disrupting the market wherever it goes. A clear brand proposition has been crucial in the brand’s success “(Hughes, 2011)

Economic

Marshall (1842-1924) had pointed out that knowledge is one of the key points and experience is a very important element in business. Abundant experience could helped improve the growth and critical from past experiences. Also, trust and choice of people are also indispensable. To choose or trust the right person to work with not only encourages the enterprise but also improve the creativity and learning thought out the brainstorm from group. (Mitra 2012) Both Omidyar and Ortega have the wealth knowledge in their specific area. Omidyar had been involved with computer since he was in the eight-grade. He kept learning and working with the related knowledge. When AuctionWeb was growing faster than he thought, he needed a partner to help him to put together a business idea and that partner was Jeff Skoll. As Omidyar said” Jeff Skoll and I are the perfect balance and “it’s like a yang to his yin. With Skoll’s assistance, AuctionWeb smoothly grow and became stronger. (Cohen, 2003) On the other side, Ortega did not learned about the related-textile knowledge during his education. But he gained all the knowledge from his work experiences. His profound experience of textile field is the main factor that leads to his success. In addition, there is a scholar who was against this theory. “For every ignorant person there is one who probably sees things more clear than others, and this “someone” is entrepreneur” says Israel Kirzner(1973,1985). He claimed that entrepreneurs don’t need to contain much knowledge and experiences in a field that they were involved. (Mitra, 2012) However, in this paper, the two successful entrepreneurs have overthrown the theory of Kirzner. It was observed that the knowledge and experience are indispensable while running a business.

Schumpeter’s creativity entrepreneur refers to create something that does not exist before, some new visions of the world and also create the opportunity to the society. (Mitra, 2012) Omidyar is exactly an example of Schumpeter’s theory where his business, eBay: an online auction website, have opened up the new market place to the society. This new trading form hasn’t been used before and people can trade anything they want through the website whether it’s new or used product. At the same time, more and more people were involved in this and start up their business in the new market place. It created incalculable opportunities invisibly. Additionally, Schumpeter’s entrepreneurship and innovation has defined it as “a new product, process, or method of production; a new market or source of supply” (Mitra, 2012) ZARA as known as a fashion boutique increases the wealth of company through a continuous variety of innovations. For example, it only took under 3 weeks to develop a new product and have it available to customers at a variety of locations. This is a huge number compared to other companies within the same industry. The irreplaceable sense of fashion, friendly price and the rapid produce speed gives them a competitive advantage over other companies. This is due to Ortega performance of new process and methods to produce the products. He found the cheapest and affordable resources to produce the fashion. His system of selling products to customers directly from factories indicates a new source of supply.

In conclusion, entrepreneurs have their own traits. Generally, their culture and family background plays a key role in developing their traits. In my opinion, I believe if one has to be a very successful entrepreneur, one has to definitely face problem his/her work in order gain valuable experience. Omidyar and Ortega are proven entrepreneurs as both developed and demonstrated what they’re capable of in their business. Some argued entrepreneurs are born naturally. However, both Omidyar and Ortega are not only born naturally as an entrepreneur but because of their experience and hardwork eventually led them to become an accomplished entrepreneur.

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