Entrepreneur's Handbook
OTHER CONCEPTS ABOUT ENTREPRENEURSHIP
There are many concepts closely related to the concept of entrepreneurship. Many of these concepts are explored in the following sections. Only the concepts of business, venture, management and SME are discussed here.
3.1. Business and Venture
A business is an economic unit that meets people's demands and needs by producing and marketing products and services for specific purposes. There are three basic elements that should be emphasized in this short description. These can be expressed as purpose, product, wish / need. These three elements constitute the cornerstones of the business. It was explained in detail above that the internal objectives of the business consist of profit, growth and sustainability. In addition to businesses established for commercial purposes, there are also economic businesses that do not have commercial expectations at the end of their activities. For example; although the bread factories, garbage facilities established by the municipalities to serve the public carry out economic activities, these activities are covered by the taxes paid and therefore the main purpose of such businesses is not to make profit but to provide social benefit. Although economic activities are carried out in such businesses, there are differences according to commercial businesses in terms of purposes. Therefore, an busines should clearly state its pre-establishment goals and form a unity of purpose with its stakeholders (partners, employees, managers, etc.).
Secondly, businesses should have a purpose related to producing or marketing a product and / or service. There are many alternatives for this purpose. Businesses can operate in any subject that is not prohibited by law, from mobile phones to pen, from software service to banking services. These activities can be an industrial business focused on producing a product according to the type of business, or may be focused on marketing products such as retailing, logistics or e-commerce.
Finally, businesses are economic units established to meet demands and needs. In fact, this is the key point in the definition of the business and, of course, in its success. Businesses that cannot adequately meet the wants and needs of people or do so better than their competitors will disappear over time. Therefore, a business should determine the wants and needs that it wants to satisfy starting from the establishment phase and should have the ability to produce products and services suitable for it.
The concepts of business and venture (enterprise) are often used in the same sense. With both concepts, activities that create value to achieve a set of goals are expressed. Indeed, there is no difference between the two concepts in terms of small businesses where activities are carried out from a single center. Some authors and thinkers argue that as businesses grow, the difference between venture and business becomes clear. According to this view, for example, although Turkey Ziraat Bank is a venture, its branches in cities are businesses affiliated to venture. This example can be seen in different business types, for example, although Arçelik A.Ş. is a venture, the dishwasher factory in Ankara or the refrigerator factory in Pakistan are the businesses affiliated to this venture. As can be seen from the examples, this distinction becomes important for ventures whose activities such as production and marketing are managed independently. Therefore, it is suggested that the venture is a broader concept that includes the concept of business. (Alpugan, 1998). This distinction does not make a significant difference for small businesses, as the business begins to grow and expand into different areas. For this reason, the concepts of venture and business will be used in the same sense.
3.2. Management
In the explanations about entrepreneurship, it was mentioned that the main emphasis was on bringing together production factors for a specific purpose, taking risks and making innovations. Here, one of the main responsibilities of the entrepreneur is to bring together the other factors of production, capital, labor and nature, in accordance with the purpose and ensure that they work in harmony. In other words, the entrepreneur has to find a sufficient level of capital for the business idea he develops or to meet it himself, bring together suitable qualified employees and find a space for business. The most important issue that comes to the fore when the business starts to operate with these resources will be the harmonious management of these human and non-human resources owned by the business. In other words, the harmony of the financial assets, machinery and production processes and human resources of the business is one of the most important issues in business success. Therefore, in order to be successful, it is necessary to manage the resources that come together for a specific purpose. For this reason, the management of resources, in short, their conduct has a critical importance in the success of Entrepreneurship.
When it comes to the management of resources in a venture, the decisions made by the business regarding all living and non-living things that are brought together to produce products and services come to mind. When the business is established, it is necessary to decide on hundreds of issues such as who will be recruited, what kind of job description these people will have, how many products will be produced, what organization will be established, in which market to operate, and how products and services will be distributed to the user. Making these decisions in a timely and effective manner falls within the scope of the management function. The ability of a manager to manage business resources effectively depends on his ability to plan, organize, coordinate and control these resources. These four activities, called management functions, summarize what a manager's duties are.
Indeed, an effective manager must first be a good planner. In accordance with the goals that the business wants to achieve in the future, the manager should clearly reveal how these goals can be achieved, in other words, plan. In the planning phase, answers are sought to the questions of "What, when will it be done, who will do it with which resources, for what purpose?". All employees in the business will take action in line with this plan and help the business achieve its purpose in the most effective way.
The second function of management is organizing or organizing. In order to carry out dozens of different activities within the business according to a certain plan, it is necessary to determine an organizational structure and which works and by whom within this structure. During the organizing phase, the manager will determine what works should be done to achieve the goals specified in the plan, then decide who should do these tasks and reveal their powers and responsibilities. While determining what needs to be done in the planning phase, the structure and what the works will be performed are determined during the organizing phase. At the end of this stage, the organizational chart of the business, indicating which tasks are, and the distribution of powers and responsibilities that determine how these tasks are to be performed will emerge.
At the end of the planning and organization stages, a business asset is created. After this stage, it is necessary to ensure that employees act in line with a specific purpose. Through this function called directing or executing, it becomes easier to reach the determined target by establishing a unity of purpose among the employees. In order for the manager to achieve unity of purpose among the employees, it is necessary to keep the motivation of the employees high, to lead them effectively and to design the communication channels well. For this, it is necessary to create a team spirit among employees, to set meaningful goals for employees, to establish a good reward and punishment system, and to act as an example for the employees of the manager, to be fair and impartial.
After these three functions are formed, it is necessary to check whether the initially targeted results have been achieved, if there is a deviation, the reason for this should be determined and transferred to a new planning process as feedback. In this respect, the control function includes activities in which comparison and corrective measures are determined. Through this function, the manager can make important determinations and make decisions about whether the results are obtained in accordance with the initial targets, if the results are lower than expected, what the possible reasons are, what corrective measures should be taken to be more successful in the future, what innovations should be made.
The person working as a manager in the business should successfully fulfill these four functions given above. Therefore, these four functions also give clues about what subjects a manager should work on in business. When viewed from the entrepreneurship window, it is seen that the entrepreneur and the manager are separated in some businesses. Indeed, when businesses are first established, capital owner, entrepreneur, manager express the same person, and when a certain size is reached, these tasks will begin to define different people as the work to be done increases and differentiates. For example, suppose a person opens a small grocery store with his own capital and KOSGEB's support for new entrepreneurs. At this stage, the entrepreneur, capitalist and manager will be himself. Let's assume that as the works of this business went well over time, our entrepreneur found new partners and opened a few more branches with these partners by increasing the capital of the business and became a medium-sized retail chain. In this case, the total capital of the company increased, but the entrepreneur's share of the company in the company decreased, and as the business grew, the entrepreneur hired professional managers. In this case, the entrepreneur, capitalist and manager have started to define the roles of different people. In this case, management and Entrepreneurship have begun to become different concepts. The main task of the professional manager is to effectively manage all the resources of the business established on behalf of the entrepreneur. The manager will receive a salary as an employee of the business in return for performing these activities, but will not bear the risk of profit or loss for the business. So here is the main difference between entrepreneur and manager. The manager will efficiently manage the resources delivered to him in line with the purpose set by the entrepreneur and report the results of the activities to the entrepreneur. In this context, the manager can be defined as the person who manages business resources in line with the purpose determined by the entrepreneur.
3.3. Entrepreneurship and SME
Entrepreneurship is often thought of as a synonym for small business ownership. Indeed, at the end of most Entrepreneurship activities, a "small" business structure emerges with general criteria. Considering that the majority (99.5%) of the ventures in our country are small and medium-sized ventures, it is obvious that such an opinion would not be wrong ¹. Small and medium sized businesses, in other words, some of the SMEs that emerge as a result of the entrepreneurship activity will enter the large business class over time.
Since the size of the business is a relative concept, the definition of the concept of SME (Small and Medium Sized Enterprise) may differ according to time, country, technology or sector. For example, a business considered large according to the criteria used 20 years ago may be medium-sized in today's size. In addition, a business operating in the field of agriculture and employing 100 people can achieve much lower financial results than a business operating in the field of high technology and employing 10 people. As can be seen from the examples, business size is a relative concept. In order to eliminate this confusion, countries develop SME definitions by making legal regulations. These definitions are mostly based on independence, capital, turnover and number of employees.
The valid definition of SME in our country, includes micro, small and medium sized businesses. According to this;
- a) Micro business: It is a business that employs less than 10 employees per year and whose annual net sales revenue or financial balance does not exceed 3,000,000 TL.
- b) Small business: It is a business that employs less than 50 employees per year and whose annual net sales revenue or financial balance does not exceed 25,000,000 TL.
- c) Middle Size business: These are businesses that employ less than 250 employees annually and whose annual net sales revenue or financial balance do not exceed 125,000,000 TL.
In addition to these limits, a business must meet the independence requirement in order to become an SME. Accordingly, if there is a large business with more than 25% share among the partners of the SME-scale business, the business SME will not be available, since the independence requirement is not met. In summary, it is accepted that the business has the characteristics of SME if it meets the independence requirement and has less than 250 employees and a turnover or balance sheet value less than 125 million TL.
3.3.1. Importance of SMEs
SMEs gain importance in our country as well as all over the world due to their numerical amount, employment and production volume, their contribution to the formation of free competition and social development, and their effects on the spread of Entrepreneurship culture.
First of all, SMEs represent the important economic units of the countries numerically. SMEs gain importance in our country as well as all over the world due to their numerical amount, employment and production volume, their contribution to the formation of free competition and social development, and their effects on the spread of Entrepreneurship culture. SMEs with a total number of more than 3.5 million realize 62% of the total turnover, 53.5% of the total added value, 55% of the total exports and 73.5% of the total employment. (TÜİK Bülten, 2016). Therefore, SMEs constitute the most important part of a country's economy.
SMEs With Numbers
In addition to its numerical importance, SMEs stand out in terms of revitalizing the market economy based on free competition. The fact that SMEs are mostly composed of small-scale units makes it possible to produce products / services in areas where large businesses have difficulty operating. In addition, many SMEs produce the products needed by large businesses and enable the growth and development of the Entrepreneurship ecosystem. In addition, the increase in the level of participation of these businesses in economic activities results in the deletion of some businesses from the market and the growth of the activities of others who do their jobs well. Therefore, the existence of SMEs in the economic system ensures that a natural elimination process works well and that their business qualities constantly increase.
Perhaps one of the most important aspects of SMEs is that it is an important indicator of the Entrepreneurship capacity of the society. Anyone who develops a business idea with potential can put that idea into an Entrepreneurship adventure and reveal value for the community. In this way, the entrepreneur can obtain some important financial and non-financial gains, while the society can obtain the products and services it needs for a good life. SMEs, which emerged as a result of the entrepreneurship process, take their place in the society as large and small units that provide social and economic development.
In addition to the economic importance of SMEs, which have the opportunity to spread to the smallest units of the society, SMEs also play important roles in the education of the society. (Doğan, 2016). In this type of business, the majority of which are family enterprises, many activities such as production, marketing, financing and accounting are carried out and the people responsible for carrying out these are employed in these functions by taking the necessary training. Thanks to its high employment capacity, it can be stated that large segments of the society are trained in professional and technical terms through SMEs. Therefore, from a macro perspective, SMEs have significant contributions to the country's economy and social development.
3.3.2. Advantages of SMEs
Although small businesses have low budgets in terms of financial and marketing power, they can turn this into an advantage. For example, a small business owner can use the advantages of getting to know both his customers and employees better than big business. In addition, due to its smaller scale, it can respond faster to market changes and thus increase its innovation capability.
Contrary to popular belief, SMEs are not small copies of large businesses, but businesses that have far different business models, products, markets and market dynamics. Therefore, it will not bring positive results for an SME to think like a big business or to imitate their behavior by accepting it as correct. Especially large numbers of small entrepreneurs are people who know the characteristics of the local market better, can see the consumer demands and needs in the market better, and establish closer relationships with buyers and sellers in the market. Because of these features, they can reveal the competitive advantages that large businesses do not have and can achieve a healthy growth rate.
In addition, the small scale ensures that the amount of investment risked in case of failure decreases. In this way, the entrepreneur will be able to test the market performance of his product with real data and reduce the risk he will take at the higher production scale without making large investments, as in the lean Entrepreneurship philosophy (Ries, 2012). The advantages of SMEs are explained below. (Alpuan, 1998; İraz, 2010):
- Procurement, production and marketing systems are more flexible according to consumer preferences.
- They can operate in low-potential markets.
- They are closer to the market and customers.
- They can better identify and evaluate innovation opportunities.
- They are more efficient at technological innovations.
- They can increase the motivation of employees by establishing close and sincere relationships.
- They can quickly fill the gaps left by large businesses in the market.
- There is less bureaucracy.
- They can be established with small savings and show the Entrepreneurship potential of the community.
- They can benefit more from subsidized funds.
- They are complementary to large businesses.
3.3.3. Disadvantages of SMEs
In addition to their advantages, SMEs also have some disadvantages stemming from their scales and the entrepreneur himself. The disadvantages stemming from entrepreneurs can be listed as lack of knowledge and experience arising from being new in the sector, inadequacy in management. (Alpugan, 1998). These disadvantages can be largely overcome over time with training and effort. In addition to these disadvantages, SMEs have many drawbacks due to size. The most important of these drawbacks are;
- Lack of knowledgeable and experienced staff,
- High production costs due to low supply,
- Insensitivity to price competition of large businesses,
- Sales fluctuations are high,
- Dependence on a single manager in decision making.