- What must an entrepreneur do to earn a profit?
Entrepreneur provides a differentiated product or service in a market. Therefore entrepreneur launch a new product or service based on the big idea. The profitability of entrepreneur is rooted in their persistence and determination to keep going.
The foremost reason is that since the entrepreneur is in competition with established products in the market, profitability may not come along instantly. In order to earn profits, an entrepreneur needs to have a clear idea about the market it wants to target.
Risk taking is at the heart of every new venture and entrepreneurs are more willing to venture into markets where the chances of failure are more likely to take place (Burns, 2010).
For that reason, the profits would only be earned when the market accepts the new product or service. The demand that the new product or service will create will instantly help in earning profits.
Even though profits earning is central to every entrepreneurial venture, the overall value that the new product or service can offer establish the future of the product.
Facebook serves as an excellent example where a selected target market of college going students was ascertained and the socializing was given a new meaning through the aid of technology.
- How do the actions of firms earning profits influence the value of resources?
For the entrepreneur the resources are scarce and have to be used efficiently. Therefore the capacity is limited and the skilful use of the available supply of resources can increase the profits. Like every other venture, the life cycle of the new business is dependent on different factors for a sustainable future.
For instance, the up-start technological innovation businesses grow in a cyclical order. When the idea is immensely creative it has a favorable impact on the business to attain the competitive advantage.
Furthermore, the value of the resource is reliant on the decision-making capacity of entrepreneur and the timing of the decision becomes extremely critical.
The value of the resources will increase as the business expands, however the unique selling proposition that the business associates with the product or service will eventually ascertain the future value of the venture and how the resources can be diversified for better results (Burns, 2010).
- What happens to the value of resources when losses are present?
When the new venture will incur losses, the value of the resources would start to get depleted which is a natural phenomenon. However, it is up to the entrepreneur to decide how to use these resources; for instance if the desired profits is not achieved the venture may be sold entirely to a new party.
Losses in general occur when the revenue derived from sales is insufficient to cover the opportunity cost of the resources used to produce a good or service (James Gwartne et al, 2009).
- If a firm making losses goes out of business, is this bad? Why or why not?
Since entrepreneurship is extremely risky, the chances of failure are high. There can be different reasons that a new business could not succeed (Sami, 2013).
As earlier mentioned, the idea may be brilliant but the execution may go all wrong and even worse the timing of launching the new product or service may be inappropriate.
In addition, the market forces can also ascertain if the new product would be consumed by the customer segments or not.
For instance, in times of recession a new launch may fail to attract customers, but of the same product is launched at a cheaper price during a festive occasion like Christmas the customers may be attracted towards it.
It should be recognized that every failure is based on a series of bad decisions, hence when a new business fails the competition gets limited which is not good for the customers as it limit the available options.
References
Burns, P. (2010). Entrepreneurship and small business: start-up, growth and maturity, Palgrave Macmillan
James. G, Richard. S, Russel. S & David. M (2009). Macroeconomics: Public and Private Choice. South-Western, a part of Cengage Learning
Sami, S. (2013). The Book on Entrepreneurship and Property: The Guide to Successful Entrepreneurship and Property Investment, Author House
