Home ยป Barriers to corporate entreneurship

Barriers to corporate entreneurship

Corporate entrepreneurship(CE) is the process where an individual or a group of individuals, in association with an existing organization, create a new organization or instigate renewal or innovation within that organization (Sahara / Chairman 1999). Corporate entrepreneurship involves a wide range of activities, which include the birth of new activities, renewal or reevaluating of existing operations in the business. Corporate venture capital, which predominantly pursues financial investments in external companies. POOR MANAGEMENT AND LEADERSHIP Leadership styles include democracy, laissez fairer and autocracy.

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Some management styles can be too strict or inflexible to allow entrepreneurial operations to take place in a business organization. Limited managerial autonomy with high degree of interference may discourage innovation and creativity. Lack of support from top management may also be a barrier to corporate entrepreneurship. According to Cornwall and Perlman’s (1990) short-term goal orientation may discourage bigger, longer term, high capital return entrepreneurial initiatives. The COPY management was short sighted when it purchased buses from China. Right now most of these uses are no longer running and yet they are expensive to repair.

Solution Management should increase the extent of autonomy and the degree of specialization within the organization. They should choose an appropriate leadership style that gives employees the will and capacity to carry out entrepreneurial activities. After all, the management must include people who are skilled, experienced and have vast knowledge regarding the running of such businesses. Some critics are suggesting that the current board of COPY has overstayed hence there is need to rotate the members in order to have a dynamic vision and dervish.

SIZE The size of an organization plays a significant role in its ability to take up CE activities. Small business organizations tend to be good drivers of CE than larger organizations. This is because small firms are more flexible. Jennings (1994) suggested that large organizations generally use inflexible rules and procedures to administer the routine tasks of the organization. Thus large bureaucratic organizations are barriers to CE because they have red tape which slows decision making. The COPY became so large at some time and started to suffer from discomposes of scale.

In 1993 it had 1200 buses operating in 426 routes. Thus it became too inflexible to encourage or sustain CE. Management must continuously analyses the business and change its the direction before disaster becomes inevitable. In the case of COPY it should have set sights on regional routes when it became too big to be efficient and sustainable. DISCRIMINATION Unfair treatment of people regarding race, ethnicity, gender and age may be a barrier to CE. Some may even treat people with disabilities differently to people without disabilities.

Discrimination based in misguided stereotypes about the abilities of people with disabilities greatly affects the ability of a business to undertake CE. In a business set up experienced employees may look down upon young and fresh from university employees as people who are keen to apply text book staffs which are not applicable in the real world of business. Such kinds of discrimination immensely affect the ability of an organization to carryout CE. In the case of COPY there has been great discrimination towards its retired and elderly workers.

Over the years it has failed to pay severance packages to its former workers who have dedicated most of their lives to the company. This may negatively affect the current crop of workers who may fear that the same may happen to them. As a result they end not willing to take part in entrepreneurial activities. The first option that is currently available to COPY is to pay its retrenchment and severance packages to its former workers. Organizations need to come up with policies to fight all kinds of discriminations, be it gender, race or age.

SYSTEM BARRIERS Bureaucratic reporting is one main system which limits CE activities. In a large organization, a document may need to be signed by six people. People usually pay ore attention to procedures and form than to the contents and detail on the document. The reward system in an organization may discourage innovation within the employees. This also includes lack of incentives to creativity. Hierarchical levels in an organization may slow down upward flow of information. Sometimes good ideas get stuck somewhere within the hierarchy thus blocking access to CE.

The traditions of higher penalties for failed innovations also discourage CE. In order for a significant initiative to take place within COPY it has to be approved by the minister of transport. This may take years before it finally reaches the minister. Hence a tall reporting system may discourage entrepreneurial initiatives among employees. The organization must call for flexible reporting and communication relationships among different divisions and employees. Top down and bottom up communication must be quick to allow efficient decision making. The company must also adapt to flat organizational structures.

CULTURE Legged and Handle (1997) suggested that the effective management of corporate entrepreneurship involves managing a culture which includes all staff as self- perceived entrepreneurs, praising failures as well as successes and the allowance of seasoned that frequent communications across departmental lines and among people with dissimilar views facilitate the appropriate organizational context for CE. Cohesive work groups that allow for open conflict resolution procedures also encourage CE. However in other organizations conflict is not tolerated at all and is viewed as bad.

The traditional view to conflict that it is raised by trouble makers. Some of the solutions include the education of employees through workshops to enlighten workers on the need to tolerate conflict as a way of finding new ideas from different people because employees may have various perspectives. The company just create a culture of rewarding innovation rather than compliance. It may also invite suggestions from customers through placing suggestion boxes in buses. CORRUPTION Corruption in an organization is like a cancer in a human beings body.

It spreads quickly and destroys the organization to its ground. Corruption may become embedded into the organization and quickly become a social norm in an organization. It also discourages innovation by lower level managers because it may expose existing corruption practices. Former COPY chairman Charles Nearer was arrested in 2006 for corruption in relation to bus procurement and faced a Jail entente. Corruption discourages potential entrepreneurs who are unwilling to engage in corrupt behavior from taking part in corporate entrepreneurship. There should be transparency in the running of the business.

Sometimes there might be need to carry out a complete overhaul of the organization and expose all corruption activities. If it is possible the whole management may need to be removed in order for the organization to start on a fresh page. In the case of COPY the government must create a commission to crack down corruption in the company in order to restore it as the alpha and omega of the transport sector in Zanzibar. STRATEGIC BARRIERS These are barriers that result from unclear objectives within a company. An organization needs to the SOOT analysis.

The SOOT analysis refers to strengths, weaknesses, opportunities and threats in the environment in which the business operates. An organization also needs to understand its position in the market or industry and where it aims to be in the future. Lack of clear vision of allowing employees to take part in CE is a great barrier to entrepreneurship. In COPY there is no specific policy to regarding CE. The strategy of an organization must be dynamic and not static. It must quickly spend to changes in the micro and macro environments. It must choose strategies that give it a competitive advantage over others in the business.

COPY must take advantage of the agriculture based economy in Zanzibar and operate a haulage trucks that transport inputs and outputs from farmers. POLITICAL The involvement of politics in public sector bodies is a vital constraint to the pursuit of entrepreneurship. Want et al. (1992) suggested that public sector management has to be sensitive to political considerations. Inconsistence in the appointment of management by government is also a barrier to CE. Thus political influences affect innovation and CE. Boring (1998) discovered that public sector managers tend to organize their new programs in a way that does not raise eye brows.

This kind of political fear stifles CE. In June 2012, parliament called for the removal of COPY management amid accusations of massive looting of property. At one time a certain high ranking government official was accused of taking fuel from COPY without objection. This kind of political interference and influence discourage CE. Solution There should be less government interventions to small brawls within the organizations. The government must allow some breathing space for managers to make decisions on their own. In other words increased autonomy should be given to management in order to foster innovation.

ECONOMIC BARRIERS. Harsh external environment and stiff competition can act as a barrier to CE. These include high inflation rates, high taxation and high import costs. The ever rising fuel prices led to the significant decrease in Soupçon’s profitability to run its operations. As a company in the public sector sometimes it operated at a loss Just to provide a service to the public. High import duties limited the company’s ability to refurbish existing buses. COPY cited a depleted fleet, poor revenue inflows and ballooning debt for its problems.

It’s operating profit margins declined from 26 per cent to 4 per cent as of March 2010. Stiff competition from commuter omnibus also led to decline in profitability of the company. All these economic barriers reduce profit and cash flow hence the organization may fail to fund CE activities. Solution At the moment about 34 per cent of Soupçon’s total expenditure are wage expenses. So the company may lay-off some workers in the name of trying to fight survival. This action can be seen as unethical but there is need to understand that survival of the entire company is at stack.

Another option is to slowly come back into business by charging very low fares to fight competition from private transport companies and commuter omnibuses. They may also try to operate in routes where there is less competition. All these options can be used to increase the profitability of the firm in order to sustain CE. LACK OF CAPITAL Lack of capital is one of the main barrier of entrepreneurship among members of the society. According to a study carried out by F Maps four out of ten business man died lack of capital as a barrier to entrepreneurship.

Sometimes there is need for capital to fund CE, especially when referring to corporate venturing. COPY has about $ 6. 4 million dollars in debts. Hence it cannot sustain any form of CE at the moment. And operating expenses. Other financial resources may be needed in order to buy buses so as to revivalist the business. CONCLUSION The writer understands that there are so many barriers to CE. Some other barriers which affect other organizations include unwillingness to take risks, centralization of decision making and lack of entrepreneurial skills.

Reference Cornwall, JAR & B Perlman’s 1990 Organizational Entrepreneurship, Irwin, Homeroom, Ill. Jennings, UDF 1994 Multiple Perspectives of Entrepreneurship, South Western Publishing, Ohio. Angle, HAL & AH Van De Even 1989 ‘Suggestions for Managing the Innovation Journey Nina Van De Even et. Al. Des. Research on the Management of Innovation, Harper & Rowe, New York. Legged, JAM & K Handle 1997 Entrepreneurship: How Innovators Create the Future, Education Australia, Melbourne. Want, J, C Overachieving & P Weller 1992 Publications Management in Australia, Macmillan, Melbourne.

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