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BTEC HND ASSESSMENT

UNIT 9: ENTREPRENEURSHIP AND SMALL BUSINESS

MANAGEMENT
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Table of Contents

Task 2 3
Defining the Concept of SME 3
Evaluation of the Growth and Financial Contribution of SMEs to the UK Economy 3

Task 3 8
Difference Between and Entrepreneur and a Manager 8
Necessary Entrepreneurial Characteristics and Skills 9
Analysis of Croft-Simon’s Entrepreneurial Personality 9
Analysing the Correlation between Entrepreneurial Characteristics and Entrepreneurial
Success 10
Factors that can Foster or Hinder Entrepreneurial Success 12
Evaluation of the Influence of Background and Experience on Entrepreneurs 12

References 14
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Task 2

Defining the Concept of SME

The term “SME” stands for Small to Medium Enterprises. SMEs are independent, non-subsidiary
organisations that employ only a few given number of workers. In addition to that low number of
workers, SMEs can be defined on the basis of the financial conditions such as yearly turnover and
balance sheets. According to how the European Union defines SMEs, there are three types of
businesses that fall into the category of SMEs. These are, namely, medium, small and micro firms.

According to the European Union definition, for medium-sized firms, the number of employees
must be somewhere between 50 to 249, the number of employees for small-sized firms must be
somewhere between 10 to 49 and the number of employees for micro-sized firms must be
somewhere between 1-9 (Berisha and Shiroka Pula, 2015). In addition to that, the European Union
also defined that the turnover of the medium-sized firms must not exceed 50 million Euros, the
turnover of small-sized firms must not exceed 10 million Euros whereas, the turnover of micro-
sized enterprises must not exceed 2 million Euros.

Evaluation of the Growth and Financial Contribution of SMEs to the UK Economy

The presence of SMEs benefit the national, as well as, the global economies significantly. There
are a number of reasons behind the immense benefits that can be provided by SMEs to the
economies. These include the huge number of SMEs which contribute to the growth of the GDP
of nations, the massive opportunities of employment which increase employment rates within
nations, the self-dependent income levels which is endorsed by many governments throughout the
world and the taxation that is provided by these businesses to the nations. In this context, it has
been argued by many scholars that the presence of SMEs is the very backbone of the economy of
the United Kingdom (Nabitz et al. 2016). As per the UK government statistics, there are a total of
5.7 million businesses that run their operations within the private sector of the nation. Among the
total of 5.7 million businesses, almost 99.9% of businesses fall into the category of small, medium
and micro-sized enterprises.
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According to the EU statistics, about 2 trillion Euros are generated by these businesses as combined
turnover each year which contributes massively to the growth of the GDP and economic condition
of the nation. The statistics provided by the Europen Union represents that the combined turnover
of all of the SMEs within the UK account for almost 51% of the total turnover that is generated by
the entirety of the private sector businesses that operate within the nation. SMEs contribute
massively to the increment of employment within the UK. SMEs are situated throughout almost
every corner of the country including both rural and urban areas which contribute to the
development of employment opportunities in every region. Statistics provided by the EU depict
that over 60% of the total population of the United Kingdom relies on private sector jobs which
accounts for almost 16.3 million citizens (Love and Roper, 2015). Furthermore, it has been
represented by EU statistics that both the national, as well as, the local economy of the different
regions within the UK are massively supported by the presence of SMEs within the nation. There
are almost 5.5 million private sector businesses within the UK of which almost 2.6 million
businesses pay regular taxes to the United Kingdom government. Additionally, due to the range
and size of these businesses, any loss that occurs in an individual business does not affect the
overall economy of the nation and due to the small scale of loss, it is easily recoverable by the
SMEs (Loader, 2015). It has been statistically shown that in FY 2016, the SMEs within the UK,
combined, generated almost 91% of the products that were produced in the nation. Finally, the
corporate social responsibilities that are undertaken by the SMEs also contribute to the overall
development of the economic condition of the nation. According to surveys carried out by the EU,
almost one out of four private sector businesses within the UK have contributed almost 55 billion
Euros for the betterment of the society which significantly endorses the social economy of the
nation.
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According to Business statistics by regions and countries of the UK, 2018, there were a total of
1,062,285 businesses in London which accounts for roughly a third of all businesses that are
established in the UK combined with the number of businesses in the South West region of the
UK. In London, this is a 3% change on year. According to the statistics, there were a total of 239
employers in the UK and the number of businesses in London accounted for 1563 for every 10000
resident adults. This is significantly above the national average and the highest ratio of SMEs is
boasted by London (Elmagrhi et al. 2017). The London-based SMEs, in from 2000 to 2018, have
generated a combined revenue of 1,034,851 million Euros. According to statistics, about 78.2% of
the entire London population has been employed within the SMEs that have been established in
the region. The North-East region of the UK as a total of 142,495 businesses which does not exceed
the national average. The SMEs in the North-East region of the UK have generated a total of
74,663 million Euros as a turnover from FY 2000-2018. About 72.1% of the total population of
the North-Eastern region of the UK is employed within small to medium enterprises.
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There are multiple industries within the UK under which the SMEs operate. These sectors include
retail, manufacturing, construction, education and many others. According to the percentage of
total UK employment, as well as, the percentage of turnover generated, the retail sector is the
biggest contributor to the UK economy. According to statistics, the retail sector businesses account
for almost 10% of all the private sector businesses within the UK. The employment opportunities
that are provided by the retail sector within the UK accounts for almost 19% of the total
employment opportunities in the private sector small to medium enterprises within the UK.
Furthermore, in terms of the combined turnover that is generated by the entirety of the small to
medium-sized enterprises within the UK, the retail sector generates about 34% of that revenue.
The manufacturing industry is the second most important contributor to the economic
development, GDP growth and increased employment within the United Kingdom (Brown et al.
2019). Among the total number of employees that have been employed by the SMEs within the
private sector businesses in the nation, the manufacturing sector has employed almost 10% of all
employees. In addition to that, it has been represented by the research of Department for Business,
Energy and Industrial Strategy that the manufacturing industry within the UK generates about 14%
of the total combined turnover that is generated by the 5.7 million SMEs that have been established
within the nation.
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There are a total of 3.7 million small to medium-sized enterprises within Germany. In this context,
it may be said that almost all enterprises within the Germany fall into the SME category and the
SME businesses act as the spine of the economic condition of Germany. It has been shown by
statistics that about the combined number of SMEs within the nation account for almost 99.6% of
all the enterprises that are established within the private sector of Germany. Within the nation, the
combined number of SMEs are key drivers in terms of the increasing employment rate in the
country. Over 15 million workers have been provided with employment opportunities within
SMEs in the private sector which accounts for about 59.4% of all the employees that are employed
within the private sector businesses of Germany. Furthermore, the combined number of employees
also accounts for almost 84% of all trainees. In terms of total net added value, the combined
number of SMEs in Germany contribute significantly to the economic development of the nation
(accounting for roughly 56.5%). On the other hand, there are a total of 5.7 million private sector
businesses within the United Kingdom among which, about 99.9% are SMEs. In the context of the
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UK, the combined number of SMEs have provided about 60% of the total employment
opportunities within the private sector businesses of the UK whereas, a total of 16.3 million people
are employed within the private business sector. The combined turnover that is generated by the
SMEs within the UK exceeded 2 trillion Euros in Q3 2018 which accounts for almost 51% of the
total combined turnover that is generated by the combined private sector businesses of the United
Kingdom. Therefore, it may be stated that the existence of SMEs is significantly beneficial for the
economic prosperity and growth of GDP of the nations. In addition to that, the presence of SMEs
significantly increase the rate of employment within nations and increase the rates of self-
employment as well.

Task 3

Difference Between and Entrepreneur and a Manager

The first key difference that can be addressed is the fact that entrepreneurs own the firms whereas,
managers are employed by the entrepreneurs. Another key difference that can be addressed is the
standing of the two within a company. It may be said that entrepreneurs are visionary individuals
that basically take an idea and transform into a real business. The risks including financial and
others are all beared by the entrepreneur. On the other hand, managers are merely employees that
are paid with salary and they do not bear the financial or any other risks. The main focal point of
entrepreneurs is starting a business and finding ways to expand the business further whereas, the
main focal point of managers is to ensure efficient and effective functioning of the different
components within the business (Shehata et al. 2017). The key point of inspiration for
entrepreneurs is the achievements they obtain whereas, the power of the managerial position drives
the managers.

Managers and entrepreneurs are also rewarded differently. As the owner of businesses, the
entrepreneurs are rewarded with the profit that is generated from the business whereas as a worker,
the remuneration of managers is the salary that is paid to the individual by the firm. It may also be
said in this context that although it is possible for entrepreneurs to be casual and informal in their
roles, the approach of managers to issues needs to be formal at all times. Finally, it may be said
that by nature, entrepreneurs can be defined as risk takers. In order to drive the growth of their
businesses, it is necessary for entrepreneurs to take calculated risks, whereas the managers, by
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nature, can be defined as risk-averse individuals. The main function of managers within businesses
is to sustain the businesses’ status quo which is why any risks cannot be afforded by the managers.

Necessary Entrepreneurial Characteristics and Skills

To achieve success in any professional field, it is necessary for individuals to have specific
characteristics and skills. There are a certain number of characteristics and skills that enhance the
chances of obtaining success for entrepreneurs. The foremost important characteristics for
entrepreneurs is having an absolute clarity of purpose. Entrepreneurs must know the objective that
they are trying to obtain. The second characteristics is self-confidence which is needed for
progressing in entrepreneurial ventures as entrepreneurs are presented with many calculated risks.
The third characteristics should be openness to change. It is necessary for entrepreneurs to identify
the changing patterns and requirements within their target markets to effectively provide relevant
services. The fourth characteristic is the ability to build big networks. This is important because to
successfully unlock the full potential of the ventures, they need to have proper networks in order
to achieve further progress in their business (Rey-Martí et al. 2016). The sixth aspect is self-
learning and development which enables entrepreneurs to turn their weaknesses into strengths.
Additionally, it is needed of entrepreneurs to be motivated at all times to keep the workforce
motivated for striving towards common goals. Entrepreneurs must also be creative and inventive
as they need to be successfully able to identify potential opportunities in the market and apply
relevant strategies to exploit the opportunities. Assertiveness is another important attribute which
enables entrepreneurs to assert their beliefs and opinions which they perceive to be for the better
good of their entrepreneurial ventures. Entrepreneurs must also have perseverance. They need to
be able to learn from their mistakes and make appropriate decisions to not repeat the same
mistakes. Finally, entrepreneurs need to be courageous in order to take risks. It is of paramount
importance for entrepreneurs to have the courage to act on their plans and ideas (Belas and
Ključnikov, 2016). All of these characteristics and skills enable entrepreneurs to achieve success
in their entrepreneurial ventures.

Analysis of Croft-Simon’s Entrepreneurial Personality

The Big-5 model can basically be referred to as a taxonomy for determining the personality traits
of individuals. From the given scenario, it can be analysed that Croft-Simon’s entrepreneurial
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personality reflects higher openness to experience. The scenario describes that the individual
recognised the existence of a simple and free from artificial flavours popcorn market. The
individual also recognised that the market was not covered with refined sugar which displays
inventiveness and curiosity (Seibert and DeGeest, 2017). It can also be analysed that the
entrepreneurial personality of the individual reflects higher conscientiousness.

The given scenario reflects the step-by-step activities that were involved in the exploitation of the
market by the individual which represents efficiency and organisation. It can be analysed that the
entrepreneurial personality of the individual reflects higher extraversion. The scenario reflects that
as soon as a market opportunity was identified the individual, the individual opted to strive towards
exploiting the opportunity which represents the outgoing and energetic nature of the individual
(Seibert and DeGeest, 2017).

The given scenario describes Nom Popcorn to be the first organic popcorn brand in the UK which
represents the high analytical and competitive abilities of the individual and thereby, reflects a
lower agreeableness. The initiative taken by the individual was challenging and the potential of
the opportunity was successfully exploited by the individual. The given scenario describes that
although the individual recognised the hardships and challenges that would come with the venture,
the individual drove forward to exploit the opportunity fully which reflects lower neuroticism
(Seibert and DeGeest, 2017). Thereby, it can be analysed that the personality trait of Croft-Simons
represented confidence and a sense of security.

Analysing the Correlation between Entrepreneurial Characteristics and Entrepreneurial

Success

According to the hierarchy of needs theory by Maslow, self-actualisation, which resides at the very
top of Maslow's pyramid is not sought after by individuals unless the basic needs such as
psychological needs including food, sleep, water and other needs including esteem, love and safety
are met. The entrepreneurial characteristics and entrepreneurial success are correlated profoundly
which can be analysed using the hierarchy of needs theory. According to Maslow, the hierarchy
of needs is a theory that facilitates the comprehension of what factors or conditions influence or
motivate individuals to drive forward to achieve self-actualisation.
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The first factor which determines an entrepreneurial mindset is getting paid for something that an
individual has created which can be attributed to the psychological needs of the individuals. The
first step of entrepreneurship is creating a business that offers any kind of value to the users that
getting paid in exchange of providing the service. Getting paid in exchange for the service fulfills
the first criteria of the pyramid which is the psychological needs of individuals and after
successfully meeting the first criteria, the second phase of the pyramid can be achieved
(Carayannis and Harvard, 2016). The phase two of Maslow’s pyramid is safety. Whereas the first
phase associates with getting paid in exchange of the provided services, the second phase is
associated with developing business processes that support the business and the income that is
generated from the business. In order to achieve a sense of safety, it is necessary for individuals to
achieve a sustainable income which can be generated from a sustainable business.

Once the sense of safety has been fulfilled, the third phase can be achieved which associates with
love and belonging. In this phase, entrepreneurs create sustainable and great business relationships
with people that have shared convictions and values. Being surrounded by people with similar
mindsets can facilitate the achievement of a sense of belonging within the enterprise. The fourth
phase is esteem or achieving excellence in business. Once individuals have achieved the sense of
belonging, individuals tend to look at their businesses from an extrinsic perspective (Nkurunziza,
2016). In this phase, entrepreneurs seek external validation which may come in a number of forms
including recognition by peers, achieved awards and acknowledgement that one has established
something special. This phase enables individuals to achieve a sense of recognition and develops
confidence.

Once all of these phases have been successfully met, entrepreneurs are led towards the final stage
which is purpose and legacy, or, in other words, self-actualisation. In this phase, the purpose of
the entrepreneurial ventures is questioned by the individuals themselves. The entrepreneurs strive
to find further purposes and seek for ways to enhance the impact of their business. Thereby, it may
be said that the entrepreneurial attributes which are represented by the basic phases of needs within
Maslow’s pyramid are significantly correlated with achieving entrepreneurial success as it
successfully allows people to be motivated and conduct critical analyses to achieve further
progress.
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Factors that can Foster or Hinder Entrepreneurial Success

There are a number of internal and external factors that may either foster or hinder entrepreneurial
success. These include education, financial status and demographic factors among others. A
number of empirical studies that have been conducted over the years have shown that the provision
of entrepreneurial education to students did not only increase their entrepreneurial intention, but
also increased the likelihood of individuals attaining success as entrepreneurs. There Are
multifaceted advantages to entrepreneurial learning. Through the provision of entrepreneurial
education, individuals are able to develop a positive attitude towards becoming self-independent
(Henley et al. 2017), develop the courage to be able to take risks and learn from their failures. On
the other hand, the absence of a fostering educational environment that endorses the
entrepreneurial intention of students and puts more emphasis on the development of professional
skills to work for organisations, the attitude of the students towards entrepreneurship can be
significantly hampered. The financial status of the individuals or the financial endorsement that is
provided by the nation’s infrastructure to the individuals may also affect entrepreneurial intention.
The availability of proper financial support can motivate individuals to drive forward with their
initiatives, whereas the absence of such support can demotivate individuals and diminish their
entrepreneurial intention. The demographic factors, on the other hand, relates with the attitude of
the society towards entrepreneurship. Innovations, as well as, novelties are encouraged by specific
societies which immediately relates with the approval of entrepreneurial actions along with
rewards such as recognition by peers or profitability (Richter et al. 2016). On the other hand, there
are societies that do not encourage transitions which significantly affects the entrepreneurial
mindsets of individuals. Additionally, there are also societies that take an immediate disliking
towards activities that are designed to generate money. While encouragement and
acknowledgement from the society can inspire the entrepreneurs to achieve success in their
entrepreneurial ventures, the absence of such environments can significantly hinder
entrepreneurial progress and development.

Evaluation of the Influence of Background and Experience on Entrepreneurs

There are a number of factors which may either foster or hinder entrepreneurship. The decline, as
well as, the growth of entrepreneurial individuals rely on several elements including their family,
educational and financial background, religion, caste, race and creed among others. The conditions
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in which the individuals are brought up and the experiences that they obtain in their life can
significantly affect their entrepreneurial mindsets either positively or negatively. The national
culture is significantly influential in this case. The national culture should reflect endorsing
conditions which would enable entrepreneurs to be engaged and celebrated. In the absence of such
a culture, entrepreneurs can be significantly deprived of motivation and inspiration (Morales-
Alonso et al. 2016). The education system also plays an important role in this context. To enable
people to understand the value and potential of entrepreneurship, the existence of a good education
system is needed. In the absence of such a system, it would be critically hard for individuals to
build up the necessary skills and characteristics which suit the entrepreneurial mindset.

It has been previously discussed that people must have specific characteristics and skills to achieve
success in their entrepreneurial venture. Past experiences can be especially valuable as they teach
lessons to the individuals and help them to improve their skills and attributes. On the other hand,
if past experiences reflect significant failures, it may deprive an individual of his motivation to
succeed in their entrepreneurial ventures. Finally, the economic condition of the nation in which
the individuals are looking forward to engage in entrepreneurial ventures is also important (Olowa
and Olowa, 2015). The entrepreneurial mindset can be positively or negatively influenced on the
basis of the efficiency of the nation in terms of providing accessible labour, raw materials, capital,
as well as, infrastructure, all of which are fairly important for the success of entrepreneurial
ventures.
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References

Berisha, G. and Shiroka Pula, J., 2015. Defining Small and Medium Enterprises: a critical review.

Nabitz, L., Hirzel, S., Rohde, C., Wohlfarth, K., Behling, I. and Turner, R., 2016. How can energy
audits and energy management be promoted amongst SMEs? A review of policy instruments in
the EU-28 and beyond. Proceedings of the ECEEE Industrial Summer Study, pp.401-415.

Love, J.H. and Roper, S., 2015. SME innovation, exporting and growth: A review of existing
evidence. International small business journal, 33(1), pp.28-48.

Loader, K., 2015. SME suppliers and the challenge of public procurement: Evidence revealed by
a UK government online feedback facility. Journal of Purchasing and Supply Management, 21(2),
pp.103-112.

Elmagrhi, M.H., Ntim, C.G., Crossley, R.M., Malagila, J.K., Fosu, S. and Vu, T.V., 2017.
Corporate governance and dividend pay-out policy in UK listed SMEs: The effects of corporate
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Brown, R., Liñares-Zegarra, J. and Wilson, J.O., 2019. The (potential) impact of Brexit on UK
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Shehata, N., Salhin, A. and El-Helaly, M., 2017. Board diversity and firm performance: evidence
from the UK SMEs. Applied Economics, 49(48), pp.4817-4832.

Rey-Martí, A., Ribeiro-Soriano, D. and Palacios-Marqués, D., 2016. A bibliometric analysis of

social entrepreneurship. Journal of Business Research, 69(5), pp.1651-1655.

Belas, J. and Ključnikov, A., 2016. The Most Important Attributes of Entrepreneurs. Case Study
of the Environment of Czech SMEs. International journal of entrepreneurial knowledge, 4(1),
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Henley, A., Contreras, F., Espinosa, J.C. and Barbosa, D., 2017. Entrepreneurial intentions of
Colombian business students: Planned behaviour, leadership skills and social capital. International
Journal of Entrepreneurial Behavior & Research, 23(6), pp.1017-1032.
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Richter, N., Volquartz, L., Schildhauer, T. and Neumann, K., 2016. Fostering and Hindering
Factors—Success of Early Stage Internet-Enabled Startups.

Morales-Alonso, G., Pablo-Lerchundi, I. and Vargas-Perez, A.M., 2016. An empirical study on

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Carayannis, E. and Harvard, P., 2016. A minimalist model for measuring entrepreneurial creativity
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