1.

Explain the process of innovation as described by

Schumpeter. What are the relevancies of innovation
to entrepreneurial business?

Schumpeter introduced the term ‘creative destruction ’. He

said that the innovation and technological change of a nation
comes from the entrepreneurs. In other words, he believed that
these individuals are the ones who make things work in the
economy of the country.
According to Schumpeter there are 4 phases of innovation
which are:
• Invention: is a new creation or a new product.
• Creativity: is the generation and expression of new
ideas. Use something in a different way to attract the
costumer with differential. (Creativity is not the same as
innovation)
• Innovation is how new idea will be accepted in a
marketplace with success. How to make this new product
or service to be commercial. (invention is not the same
as innovation)
• Diffusion: when become successful
In addition some examples can be described:
Google is an innovator for new type of industrial organisation
which transformed the concept of search engine. It is in the
market over 10 years and it has been accepted worldwide and
followed as reference for the competitor.
Easyjet is big in promoting their brand and running advertising
promotion to attract more customers. They need high seat
occupancy to be economic, they are inventing with pricing
encouraging costumers to search for very low prices (a bargain
hunters). They have been growing with the internet in order to
avoid queue and to facilitatecostumers’ life.

According to Schumpeter the five types of innovation are:

- New product
- New process
- New market
- New source of supply of raw material
- New type of industrial organisation
Innovation needs to be systematic by analyzing opportunities,
starting small, keeping it simple and focussed, identifying
niches and aiming for leadership. And it is also define new
markets.
To summarize a successful innovation requires high
concentration of the entrepreneur’s strengths and must have a
real economic or social impact.
As known the three main pillars of entrepreneurial business are
growth, innovation and strategic management. Therefore shows
that to be a successful entrepreneur the innovation model need
to be applied.

2. HOW MIGHT TRAIT THEORY TO BE USED TO ASSESS

AN INDIVIDUALS PROPENSITY (tendency) TO BE AN
ENTREPRENEUR? DESCRIBE SOCIAL THEORY AND
HOW IT MIGHT INFLUENCE POTENTIAL
ENTRPRENEURS.
As known trait theory is regarding to the personality of the
entrepreneurs.

So an individual can be assessed according to the

importance of his personality characteristics such as:
- Need for achievement (build or achieve something significant)
- Independence (the ability to process on their own)
- Internal locus of control (the achievement is a consequence of
their own hard work)
- Energy and motivation (the capacity in work long hours for the
success of the business.)
- Resilience (it is the capacity not to give-up when facing
obstacles.)
- Flexibility ( to be able to adapt the unexpected)
- Willingness to take calculated risks (never make decision
without working out properly)
- Ambiguity (not knowing what will impact the business.)

Social Theory
It is linked with the outside influences on the entrepreneur and
the business. E.g. family background, education, age,..) the
level of education is important to establish a successful
business.
Another influence is the family background which can be
exemplified with the case of Hilary Andrews owner of Mankind,
a man cosmetic website. She faced various obstacles for the
development of her entrepreneurial business but she was
resilient, self motivated, flexible and had need for achievement.

3. Describe the different parts that a business plan is

written for?
What are the principles components of the plan?
Describe some of the benefits that arise from the
planning process and the mistake that company
may make when preparing a plan ?

Business plan is a document that captures the effort by the

founder to gather information about the business to create new
organization and exploit opportunities. It is written for the
founder know where the business is ( nature and details of the
business), where intend to be (strategic analysis including
SWOT) and how to get the opportunity ( resources, marketing
plan and money) to grow successfully which will be assessed by
investors and lenders.
It has two needs internal (management, finance and marketing
decision) and external (influenced by pestel and competitors).

The business plan has the following components:

- Executive summary
- The product or service
- The management team
- Business operation
- Financial projections
- Funding ( how much is needed for the start up and how to be
obtained)
- Feasibility study: preliminary study of the possibility of the
new venture’s success.
- Target customer and market
- Resources: Recruitment of skilled staff, source of suppliers
- Business model: how the company makes money and
managed
After planning a business some benefits will be added such as:
- setting objectives and budgets
- calculating cash flow
- finding new information
- building a team
A business plan needs to be written accurately to avoid some
mistakes such as illogical assumptions, underestimating
competition and optimistic financial projections

4 –Discuss the role of marketing within a small business?

How might a small business go about marketing its
products whilst taking account of the constraints
(limitations) it suffers from?

The marketing in a small business is focused on:

- Innovation
- Develop product first then find the market
-Test product while searching for the market
- Has a little format market research which can result in a major
or minor change for the business
A small business has a lack of formal planning, restricted
activity, product and price orientation and close entrepreneurial
involvement.
Products are market in the word of mouth or reputation rather
than considering the wider range of promotional tactics.
There is an application of the 4 I’s (innovation of
products/services, identification of target markets, interactive
marketing methods and informal information is gathered
through customers/ network) range of interactive activities
used to build relationship, predominantly word of mouth and
personal selling.