Entrepreneurial Stressor

8/9/2019 Entrepreneurial Stressor

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Coping With

Entrepreneurial

StressorONLINE CONFERENCE PAPER

MANAGEMENT ORGANIZATIONAL

BEHAVIOR GAB / GBB 1033

SYNERGY

NUR ISWADI BIN ZAINUDDIN 12142

MOHD SYAFIQ BIN SAIFULAH 12032

LILIK ANITA BINTI KAMBYAH 11966

NUR FARHANA BINTI ABDUL AZIZ 12136

2009

SYNERGY

4/15/2009


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SYNERGY ONLINE CONFERENCE PAPER

MANAGEMENT ORGANIZATIONAL BEHAVIOR

ABSTRACT

This study evaluates the entrepreneurial stressor or in the other words, problems

that are facing by the entrepreneur. All of the chapters covered on how entrepreneurs

cope with all these stressor by deriving from the problems facing by themselves. As

entrepreneurs closely related to the factors of production; land, labor, capital and

entrepreneurship, they need to really understand on these factors to come out with a

solution.

LITERATURE REVIEW

Today, world has gone a lot of changes and until now, world are still changing.

Entrepreneurs are facing with different type of problems and factors of production are

the stereotype of problems facing by most of the companies around the globe. To be

more detail, entrepreneur is perceived as a business manager or an innovator who

plays an important role in technological progresses and economic growth, brave

enough to take risk and a kind of special human capital. Stressor is defined as an

unseen force behind subjects that lead to the unstable of emotion and quality of life.

This paper focusing on factors of production as it is the best way to express

stress that are facing by entrepreneurs most of the time in business prospect. The

theory on factors of production refers to the resources that can be defined as the

inputs used in the production of those things that we desire. From big problems to the

small problems, they are totally disturbed the business process and the economic

activities. Economists believe that the factors of production including land, labor and

capital but some of the economists conclude that there is one more factor which is

entrepreneurship. Entrepreneurship is a special factor that symbolizes special kind of

human capital and not all of the companies have it. In simple way, these four factorsreally influencing the company and entrepreneur should take a correct action to cope

with the entrepreneurial stressor from these factors.


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Entrepreneurship

To complete the factors of production, some economics may include and

sometimes may not include the last factor; entrepreneurship. Instead of land, labor

and capital, to have a business and start moving to the entrepreneurial world,

entrepreneur is as important as the other factors too. But, what is entrepreneurship in

term of factors of production?

Entrepreneurship is the activities of profit-seeking decision makers who determine

which economics activities to undertake and how they should be implemented. [1] It is

also cover on how to use the resources to produce something. For example, when

William Procter and James Gamble started making candles and soap, they were

provided with resources that were easier to handle. But, today, Procter and Gamble,

P&G, really stressed on creating new products to market them around the world.[2]

Thus, to fulfill the customer needs and to fully complete the factors of production,

those who make decision to start a new product should be expert on how to allocate

resources, how to choose the applicable economic activities and the process in

implementation of the economic activities.

The most problematic stage for entrepreneur in term of entrepreneurship is how

to choose the dazzling but still the applicable economic activities. To have more

understanding on the first entrepreneurial stressor, economic activities can be

describe as the activities which are involved in the production or distribution of goods

and services for economic motive. Any activity undertaken for personal consumption

or are exchanged free, fell outside the scope of business.[3] Most of the

entrepreneurs are getting headache as they may

taken wrong ways or they do not know how to begin.


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Coping with this stressor, entrepreneurs are advised to implement the strategic

initiatives to have the competitive advantages.[4] The problems before are

entrepreneur are always not very expert on these strategic initiatives that lead them

used traditional systems that are not efficient and effective. Thus, by implementing

Customer Relationship Management (CRM), Supply Chain Management (SCM),

Enterprise Resource Planning (ERP) and Business Process Reengineering (BPR)

help entrepreneurs to well organize the production and distribution of products.

Implementing ERP help the companies to integrate their systems to avoid redundancy

while the implementing of BPR really helpful on the improvement for the future plans.

By using CRM and SCM, entrepreneurs can reduce the problems to get the raw

materials for the production processes and to well distribute the products worldwide.

For example, again about P&G, the implementation of SCM enable the company

to dynamically manage its global supply chain, giving it visibility into the entire process

and helping it to optimize inventory and react quickly to any changes compared to

their systems before which facing with delay supply of products, not up-to-date

products and so on.[5] Other companies like Charles Schwab and Kaiser Permanente

are also successfully implement the strategic initiatives.

Besides, to deal with this problem, entrepreneurs that still have not so much

experience are encourage to do specialization on their production and distribution

process. Specialization allows you to define new kinds of information (new structural

types or new domains of information), while reusing as much of existing design and

code as possible, and minimizing or eliminating the costs of interchange, migration,

and maintenance.[6] Specialization help entrepreneurs to be very expert on his/her

respective field. Thus, companies are now reducing their weakness on certain

departments of the company. Instead of specialization, companies can doingoutsourcing to several departments that they are not specializing for particular

departments. Most of the big companies tend to outsource expertise from other

companies. For example, Microsoft outsources a company from India that is InfoSys

Technologies and Satyam Computer Services for software architecture and

development instead of doing by their own and having lagging on the processes. [7].


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Next, the increase in the raw material prices leads a big problem for entrepreneur

to allocate resources. Then, from the problem, many of the entrepreneurs tend to

have duo mission and vision. In the end of the day, the companies are going ruin

down and facing bankruptcy.

Thus, to be prepared in dealing with the problem, entrepreneurs need to derive to

allocate the resources from the customers demand. Economists refer to this concept

as derived demand. It simply means that resources are demanded or valued only if

they can be used to produce desired goods and services. [4] To allocate resources,

entrepreneurs need to deeply study on the law of demand based on it determinants;

income, taste and preferences, substitutes, complementary goods and the others.

These determinants help entrepreneurs to allocate the resources by the current prices

of the substitute products, the income of the customers, the prices and quantities for

the complementary goods and the current taste and preferences of customers. It is a

reverse process. From the law of demand, entrepreneurs come out with an analysis

and lastly for the next stage which is to allocate their resources.

As conclusion, both of the entrepreneurial stressor can be solved by knowledge

and skills of the entrepreneur. To deal with economic activities in production and

distribution processes, strategic initiatives are the best practice for the entrepreneurs

as important as specialization and outsourcing. Next, derived demand is the best

way for entrepreneurs to have bright guide on how to allocate resources to cope with

entrepreneurial stressor.


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Capital

According to Irvin B. Tucker in his book Essentials of Economics the sixth edition,

capital refers to physical plants, machinery, and equipment used to produce other

goods. In economics, capital can be divided into few categories include human capital

and financial capitals [8]. Human capital consists of employees, while financial capital

refers to stocks, bonds, and value of money. Stated simply, capital means factor of

production in a business. In this section, we will be discussing on financial capital that

entrepreneurs have to deal with.

Financial capital is considered as liquid in nature that can be used to buy any

goods and services that the business needs for production. This capital will help the

business to secure the resources needed to operate and supply products or services

to their customers [9]. Entrepreneurs have to be reminded that equipments and

buildings do not qualify to be categorized as financial capital because this financial is

something that is considered as tangible assets.

There are few sources of capital that being applied in today business for example,

long term, medium term, and short term capital. Long term capital includes share

capital, mortgage, venture capital, and debenture while medium term capital consists

of term loans, leasing, and hire purchase. Short term capitals usually are bank

overdraft, deferred expenses, and trade credit. Traditionally, before an entrepreneur

start the business, the entrepreneur has to determine the type of capital that will be

imposed for the company. But, with unexpected world economy, many entrepreneurs

will change their sources of capital when they are facing problems with capital. For

example, a Japanese venture capitalist named Mizuho Venture Capital just

announced the investment of a $10 million in a Japanese advertising network, Glam

Media so that the company can expand it branches in Germany [10].Nowadays, with the global economic downturn that being plunged by the

sub-prime borrowing issue, entrepreneurs are facing the biggest problem to start new

business or even to survive their productions. Current economic scenario has pushed

the prices of raw materials to the top causing many unfortunate entrepreneurs to shut

their productions while others minimize it. Entrepreneurs are struggling to make profits


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forcing them to reduce wages, cut cost of productions in order to sustain their

businesses[11]. That shows how important financial capital is for entrepreneurs to

continue existing operations or to expand the business in some manners.

Towards the end of 2008, the world was being stunned by the bankruptcy of

Lehman Brothers due to sub-prime mortgage crisis. It is believed that Lehmans loss

is the effect of holding to huge position in sub-prime and other lower-rated mortgage.

Throughout the second fiscal quarter in 2008, Lehman reported losses of $2.8 billion

and was forced to sell $6 bil lion in assets[12]. Among that period, Lehman also have

to reduce their resources by eliminating thousands positions in most of their branches,

cuts the loan for public, sells most of their stocks and assets. In simple understanding,

Lehman is facing the worse financial capital crisis in US history.

The impact of this financial problem, Lehman Brothers finally filed for Chapter 11

bankruptcy protection on September 15 2008 [13]. The bankruptcy has hailed many

companies including Barclays, and Nomura Holdings to acquire Lehman Brothers

business during the breakup process. Barclays take over core business of Lehman

Brothers mainly involved $960 million of Lehmans Midtown Manhattan while Nomura

Holdings owns all Lehman Brothers franchise in the Asia Pacific region including

Japan, Hong Kong and Australia [14]. From this situation, we can conclude that

without well financial preparation, the company is unsecure when a crisis takes place

in the company. Because of no money flows within Lehman Brothers, finally the

company collapse.

Based on the crisis facing by Lehman Brothers, there are several ways to cope

with this problem. Economically, it is encouraged for entrepreneur to create Venture

Capital in their businesses. Venture capital is a common term used when investor buy

part of the company. The investors or normally being called as venture capitalist putmoney or investment in a company that they believe have high growth within the

period that both sides (company and venture capitalists) have agreed. After the period,

venture capitalists will expect a valuable return on their money either by sale of the

company or by offering to sell shares in the company to public [15].


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Nowadays, ventures have been divided into three categories of capital investment;

(i) early stage financing, (ii) start up financing, (iii) expansion financing. In early stage

financing, a small amount of capital is being given to an entrepreneur to start the

business. Most entrepreneurs seek for seed financial or first stage financing from

family members, relations, or wealthy investors that also referred to as business

angel whose are willing to take the risk [16]. The financial capital can be used to

construct a new well - built team, market research, grow a business plan or even buy

raw materials for early production.

After that, entrepreneur need to seek for start up financing that is a venture capital

when a business has been operating for less than a year and usually their products

have not being sold widely yet. Instead, the start up financing is the capital will be

used to commercialize their products.

The last stage of venture capital is expansion financing that includes second and

third stage financing, and bridge financing. Second stage of financing refers to

investment that entrepreneur uses to expand a company that is already established

on its feet. At this point, profit is not the main concern as long as the company keeps

growing accounts and inventories. Meanwhile, third stage of financing is an

investment to company that becoming profitable and the capital will be used to

expand the business. Finally, bridge financing usually being used when restructuring

is taking place within the company. The capital can also being used if a pioneer

capitalist want to sell the stocks.

For entrepreneurs, capital is very important for them to build a strong business.

But, not all entrepreneurs are equipped with enough amount of capital when they

started their businesses because the start up needs a large amount of financial

investment. In order to cope with this matter, venture capital is the best solution forentrepreneur to move the first step of the company.


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Labor

Nowadays, entrepreneurs are competing with each other to ensure the company

is successful. They need to face a lot stress to ensure that they are success in their

own business. One of the entrepreneur stressor is labor force. Handling the labor

force is a very difficult task to accomplish by a manager. Human are unpredictable and

there are variety of problem can be created by them. If you are facing with labor force

thats means you are more on how to cope with them and how to handle them. The

ways you handle the labor force determine the successful of a company.

Firstly, I have seen that the entrepreneurs are difficult to maintain good

relationship with their employee. Some of the manager is only thinking about their

profit without thinking the welfare of their workers. This would make the employee feel

unsatisfied and tend to leave the organization. Besides that, employee would tend not

doing a good works because they are losing of interest with that organization. This

problem can be overcome when a manager taking a good role in managing people.

They should be able to take care of their workers feeling and welfare. Manager should

be aware the needs of the employee not only use their skill to optimize the productivity

of a company. Besides that, good relationship would ensure that employee are

satisfied and feel good with their works. When they are feeling good with the works

environment, they would give high commitment in their works. For example, Tony

Fernandez the chief executive manager of Air Asia are really good example.[17]He

has high level of agreeableness, he easily tolerance with others and he always ensure

the welfare of students. Consequently, a lot of workers like him. This would encourage

the employee to feel comfortable with their work environment and also they would

give a full commitment in their work. As a result, the quality of works produce is good

and now Air Asia become one of the most important airplane services in Malaysia.Besides that, Tony Fernandez is one of the successful managers in Malaysia and

become a role model for the other manager.


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Tony Fernandez

The other stress faces by the entrepreneurs is the way they are balancing up the

use of labor force and amount of money they spend on labor forces. Manager is

difficult to make decision to ensure that they are really optimizing the use of labor they

hire with the amount of money they use. The correct strategies are important to

ensure that the number unemployment does not increase. Failure in managing their

labor force causes a lot of problem on ensuring the productivity of the company. For

example, a lot of peoples loss their workers when first time technology are invented.

This is a waste because neglected the use of this workers that have their own skills.

Manager should have a good planner in managing their labor force. They need to

ensure that the planner that they had set should be beneficial for the both parties. For

example, Cadbury Company had optimized their labor for by hire all the labor force.

[18]They control the cost of labor by reducing the number of works hour and optimize

the use of technology. This strategy would increase the profitability of a company.


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The other stress they need to cope is the communication breakdown between the

labor forces. A lot of company are having problem in ensuring the information flow

smoothly from one department to another department. This problem would mostly

occur in tall organization rather than in short organization. There is a lot of process

need to be go through by the employee to pass through their information. Sometimes,

the information they pass through does not pass smoothly from top level management

to the low level of management. This miscommunication would cause a lot of problem

in a company and also would cause loss. As a solution, a manager should be able to

downsize the size of organization so that the information flow would be passing

smoothly from one department to another department. For example, KFC have a

short organization structure. Their information is passing through within the

organization. This is essential because they need to response faster with the

customer demands.

Manager also has a lot problem in believing their labor force. Some of them do

not know how to allocate and find the suitable employee for their company. This stage

is very important to ensure a manager would select appropriate employee. As a

solution, a manager can find appropriate workers by selection and recruitment

process.[19] During the selection stages, workers are selected through their

achievement. Manager would select the people with appropriate skill. Then, they will

go through recruitment stage. During this stage, employees are needed to go through

for the interview and test. After the employee is success to go through this process.

This employee would be recruiting to be the part of the company. From here, a

manager should be able to ensure that the employee is capable to cope with the new

environment. For example, labor force for a university is students. Before they

entering the university, they need to send their application form that contain theirresult. From this, some number of candidates is selected. Then, they go through into

recruitment stages. Other than that, a manager could show theirs believe on manager

by empowerment. Empowerment is a way when employee gets the power to make

decision. From this, they employee would feel more appreciated by an organization.


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As a conclusion, labor force is one of the big stressor for the entrepreneurs. They

need to handle their labor force wisely and be able to maintain their loyalty in a

company. When labor forces are feel good with their working environment. They will

do their work more productively without been pushed frequently. When they can

handle this stress, they would be successful on handling their workers.


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Land

In doing business, there are four factors of productions that they rely on that

are land, capital, labor and entrepreneurship. In terms of land, it does not mean only

the land and estate where the business builds its buildings and its plant. In economic

terms, land is all the natural resources used in an enterprise, so this includes the ores

and minerals mined from the ground and the native plants and animals [20]. some

business may not depends much on the natural resources but the other companies

where they getting its products in order to used it to produce our products might using

natural resources. If they are not using natural resources, they cannot produce the

products. For example, fuels. Businesses need fuels in order to operate their machine

to produce the finish products and the finish products are sold to other companies as

input to produce their output.

Nowadays, companies are facing problems that there are not enough land to

build their plants and premises. The earth is providing less and less space for the

entrepreneur to build their premises as the population of the world keep increasing

and increasing. There is some land but it is forest and preserved by the government.

Hence, the entrepreneurs have to find the other way in order to solve this problem.

One way to solve this problem is by doing business online. By doing business online,

the company can minimize the use of land. The company can only build the

warehouse and do not have to build the premise as the customers can do the

business with them via internet. For example, Amazon.com. Amazon.com undergoes

multinational-electronic commerce business and they are doing their business via

online. Thus, all the buying and selling is done via internet so they do not have to build

a premise in order to do the selling and buying process. They only have to buildwarehouse to store all the products before they are sent to the customer. Therefore,

the used of land can be minimize and they company do not have to burden their mind

on thinking where to find perfect land to build their plant and premises.


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In economic terms, land also covers all the natural resources available for

production[21]. In these world, fuels have become an important natural resources that

is needed by almost all industries in the world. The factories need fuels to operate

their machine in order to produce products and vehicles also need fuels in order to

transport the products to the store. However, nowadays, fossil fuels are replenishing

and become less and less. This is a great problem for business as most companies

rely on fuels to produce their products. Without fuels, they cannot produce anything

unless there is an alternative or substitutes for fuels that they can use. For examples,

Toyota Corporation. Toyota is a company that produces cars. Cars need to have fuels

in order to operate. If there is no fuel, then there is no good for Toyota to produce cars

as the cars they produce do not have fuels to make the car move. Hence, Toyota has

to find another alternative to stay in the market.

As for now, to overcome the problem of replenishing natural resources, the

scientists are doing researches on what are the substitutes for fuels. Scientists have

been developing technologies that enable cars to move without fuel. For instance,there is electric car that utilize electric motors and motor controller instead of an

internal combustion engine [22]. This electric car that firstly developed by a Scottish

businessman Robert Anderson used electric in order to move [23]. Hence, it does not

use fuel and the problem of fuels are replenishing will not bother it.


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CONCLUSION

Nowadays, there are a lot stressor should be overcome by our entrepreneur. The

world of globalization is full of challenges and there are a lot problem should be solved.

This stressor would encourage an entrepreneur to become more innovative and

creative in solving the problems occur.

The entrepreneur stressors are divide into capital, land, labor and

entrepreneurship. Each this stressor are affecting the performance of a manager.

Capital is one of the most stressor for an entrepreneur. The financial capital is the

most dangerous for the entrepreneur, lacking of financial would cause an

entrepreneur to continue their plans. This became one of a stressor that should be

overcome. Then, land capital is a problematic because an entrepreneur would have

some difficulty in managing their resources. Besides that, labor also contributes to this

stressor. The difficulty can be seen when we are managing people in a company. This

would lead to big stress for a manager. Finally, the entrepreneurship stressors also

cause problem. Early stage, entrepreneurs are deciding the market that they should

enter. This would need a full of attention to ensure that they are doing the right

decision-making.

As a conclusion, there are a lot of stressor should be face by an entrepreneur and

there are a lot of ways to overcome this problem. The ways of solving the problems

show how creative a manager in handling problem. The production also might be

better than before. There are a lot of success story that become a guidelines for

others peoples.


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REFERENCES

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test : Factors of Production. Ohio, Canada : Producing Ohio.

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4. Malloy, A.D. (2007) Strategic initiatives for implementing competitive

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Glam Media, VC Gate, 2009

http://www.vcgate.com/Japanese-VC-Firm-Mizuho-Venture-Capital-Leads-a-$


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10-Million-In-Round-5-for-Glam-Media.asp

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http://economics101.suite101.com/article.cfm/what_is_economic_depression

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&refer=home

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http://www.wisegeek.com/what-is-venture-capital.htm

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e+Search&meta=&aq=f&oq=s


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