Entrepreneurship and Small Business Management in the Hospitality Industry The Hospitality, Leisure and Tourism Series Butterworth-Heinemann’s Hospitality, Leisure and Tourism series of books is aimed at both academic courses and management development programmes. The series represents a planned and targeted approach to the subject and the portfolio of titles provide texts that match management development needs through various stages from introductory to advanced. The series gives priority to the publication of practical and stimulating books that are recognised as being of consistent high quality. The Series Editor Professor Conrad Lashley is Professor of Leisure Retailing, Centre for Leisure Retailing at Nottingham Business School, UK.
His research interests have largely been concerned with service quality management, and specifically employee empowerment in service delivery. He works closely with several major industry organisations including the British Institute of Innkeeping, J D Wetherspoon Scottish and Newcastle Retail and McDonald’s Restaurants Limited. Entrepreneurship and Small Business Management in the Hospitality Industry Darren Lee-Ross School of Business, James Cook University, Australia Conrad Lashley Nottingham Business School, United Kingdom AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD • PARIS • SAN DIEGO • SAN FRANCISCO • SYDNEY • TOKYO Butterworth-Heinemann is an imprint of Elsevier Butterworth-Heinemann is an imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP, UK 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA Copyright © 2009, Elsevier Ltd. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone (+44) (0) 1865 843830; fax (+44) (0) 1865 853333; email: permissions@elsevier.
Alternatively you can submit your request online by visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. Because of rapid advances in the medical sciences, in particular, independent verification of diagnoses and drug dosages should be made British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress ISBN: 978-0-7506-8448-4 For information on all Butterworth–Heinemann publications visit our web site at www.com Printed and bound in Hungary 09 10 11 12 10 9 8 7 6 5 4 3 2 1 Contents CHAPTER 1 Context, Theoretical Perspectives and Definitions. 1 CHAPTER 2 Indigenous and Ethnic Entrepreneurship: A Cultural Perspective. 21 CHAPTER 3 Entrepreneurs and Small Firm Ownership.
49 CHAPTER 4 Creativity and the Entrepreneurship. 67 CHAPTER 5 Innovation, Opportunity and Protection. 93 CHAPTER 6 The Feasibility Analysis. 121 CHAPTER 7 The Family Business: Who’s to Bless and Who’s to Blame? .143 CHAPTER 8 Hospitality, Commercial Homes and Entrepreneurship.
169 CHAPTER 9 Preparing a Business Plan. 191 CHAPTER 10 Leadership and the Entrepreneur: “I’m Right Behind You Leading the Way”. 213 CHAPTER 11 Growth: the Harder I Work the Luckier I Get. 289 v Preface Entrepreneurship is a fascinating practical and academic area of study.
As a phenomenon it is has been around in one form or another since the earliest civilizations including the Mayans, Ancient Greeks and Romans up to relatively more recent times of the Renaissance (15th and 17th centuries), Industrial Revolution (18th and 19th centuries) throughout the 20th century up to the present day. Interestingly, the number of entrepreneurs and establishment of small firms has dramatically and uniformly increased globally over the most recent 10 years. Reasons for this include globalization, liberalization of labour markets and enactment of entrepreneur-friendly government policies such as removal of barriers to competition and other trade restrictions. The prospect of starting one’s own business is not as daunting as it used to be.
Free advice and start-up grants are now available from a variety of sources including government agencies and non-profit organizations. These initiatives have helped a booming small to medium-sized sector create more wealth than firms at any other time. This phenomenon can also be said of new and emerging economies, ethnic groups within larger host nation states and indigenous entrepreneurship. The latter developments are particularly pertinent to the tourism and hospitality industry as many nascent nations are recognising the role entrepreneurism plays in economic development and the alleviation of poverty and dependence on public subsidy for citizens.
However, environmental enablers of entrepreneurship are only one side of the story and this is where the more academically oriented perspective of the phenomenon begins. Essentially, it is argued that entrepreneurs have certain characteristics and which predispose them to behave in a particular way. ‘Risk-taking’ and a ‘desire for achievement’ are often quoted as being key necessary traits. In reality, the picture is rather more complicated, for example, some individuals may have been ‘pushed’ into self-employment by virtue of redundancy.
Many of them could hardly be described as being risk- takers yet there are many examples of resounding business success. Equally, there are those spectacular failures who not only possess the appropriate internal characteristics of entrepreneurs but have been ‘pulled’ into the field because of its perceived intrinsic benefits. Beyond this question is the fundamental role entrepreneurs play in the economy in terms of employment and wealth generation. Indeed, small businesses are the backbone of the tourism and hospitality industry and, depending on which statistics one uses, represent somewhere between 75 to 95 percent of all firms globally in this sector.
It would be reasonable vi to assert that the incumbent entrepreneurs are industrious, multi-talented, Preface vii creative and innovative. They work hard, weather significant hardships during business start-up and bear all of the risks involved in making such a personal sacrifice. The aims of this book are: • To explore both the complexity of entrepreneurial theory and practice applied to the tourism and hospitality industry. It does this by exploring some key theoretical concepts and grounds them in a number of practical real-life scenarios; • To move back and forth between strategy and operations in order to illustrate the linkage between the two areas and explain how both perspectives are necessary for entrepreneurial success; • To engender a sense of enthusiasm about the field by not only discussing some of the major challenges and opportunities but by providing the knowledge and skills required to start a small business and drastically improve the chances of sustaining it successfully.
The chapters of this book invite readers to ponder their reading through a series of reflective activities. This allows them to both think actively about themes, concepts and issues and then apply them to a number of suggested scenarios. Authors have deliberately designed the book to actively engage readers as reflective practitioners. Reflective practitioners are required by modern hospitality and tourism organizations.
The term describes managers who are able to complete physical tasks as well as reflect and think about their actions. Reading this book, therefore is intended to be an active process whereby readers think about the practical implications of what is being communicated. The authors are informed by the work of Kolb who suggests learning needs to engage actions as well as theorising and thinking. Kolb (1983) states the most effective learning as involving all aspects of the learning styles.
They must reflect on actions undertaken – see how these reflections fit with theories – consider how they might need to alter future actions, and then act. For the purposes of this book, and for future activities, we suggest that the process of learning needs to move through the stages outline on Kolb’s model. Active experience needs to be followed by reflection including the critical evaluation of the experience; and consideration of how these experiences inform or adapt theoretical understanding; and how this might inform future actions. Traditionally this is shown as a cycle, however, it is more accurately a series of spirals where the process of acting, reflecting, theorising and deciding of future actions leads to new learning situations leading on from the past.
Chapter 1 discusses issues of historical and contemporary context of entrepreneurship concluding that the global field is vast and continuing. viii Preface Some definitions are explored concluding that entrepreneurs are difficult to classify given their diverse backgrounds. Some key attributes of entrepreneurs are explored including the ability to spot the opportunity and develop it into a sound business proposal. Issues of personality and environment are discussed.
The quaint notion of running small hospitality firms ‘risk-free’ is also introduced. Chapter 2 scrutinizes entrepreneurship through a cultural lens discussing and defining indigenous and ethnic dimensions and how they impact upon small firms. The key developmental role of entrepreneurship amongst indigenous societies is discussed together with an outline of the main differences between indigenous and ethnic entrepreneurship. Chapter 3 evaluates the meanings of the term entrepreneur, comparing and contrasting ‘growth’ and lifestyle entrepreneurs in terms of their origins and motives.
The overriding pattern of small business ownership and its impact on hospitality and tourism provision is then considered. Chapter 4 considers the notion of creativity in an entrepreneurial context and its relationship with innovation and how it impacts on the entrepreneurial process. Emphasis is placed on the lifelong commitment to idea generation in small hospitality firms along with some important techniques to develop and enhance creativity within the individual. Ultimately, the relationship between creativity and ‘mystery’ is debunked and the ability is advanced as one that can be learned.
Chapter 5 defines innovation as a systematic logical exercise designed to harness creative ideas and bring them to a successful entrepreneurial conclusion in the marketplace. The chapter then discusses its role in the entrepreneurial process and identifies its relationship with creativity. Opportunity spotting and the subsequent development of business ideas is then introduced and the importance of a methodical systematic process of environmental scanning and strategic and tactical planning is emphasized in this context. Chapter 6 explores the term ‘feasibility analysis’ and how it applies in maximizing the chance of entrepreneurial success.
Porter’s Five Forces is identified and applied as a suitable model. The prevalence of intuition and gut reaction are discussed and their weaknesses identified when planning to launch new hospitality ventures. The chapter proceeds by outlining the role and importance of research in entrepreneurial success. Chapter 7 identifies the inherent advantages family firms have over non- family firms whilst recognising the roles of key individuals in the family firm.
Some of these include commitment, resilience and long-term stability. The impact of conflict on small family businesses in the hospitality industry is outlined. The process of business transferral is discussed along with the many accompanying challenges faced by entrepreneurs and second- generation successors. Chapter 8 discusses hospitality and hospitableness in the context of small firms.
It also introduces the notion of attractiveness of commercial Preface ix hospitality to owners/managers. The linkages between commercial homes and hospitality businesses are evaluated. Tensions and dilemmas inherent in commercial homes are also outlined. Chapter 9 addresses the need for producing and working to a business plan described as a working document designed to assist planning with sense and realism, and through which to monitor performance against desired objectives.
The key activity of writing and presenting an effective business plan is discussed together with the role of feedback and iteration during the process. Chapter 10 deals with the entrepreneur as leader and identifies the behavioural attributes of entrepreneurial leadership style. The changing role of the leader/entrepreneur as hospitality firms developer is explored. The assumption that successful entrepreneurs and sound leadership naturally go together is discussed and challenged.
Major theories of leadership are explored as a basis for effective leadership.