Changing trends in enterprises, entrepreneurship, and employment

Changes in the structure of trade and commerce suggest that knowing one’s individual competencies is essential for success in both entrepreneurship and employment. All individuals involved in entrepreneurship or seeking employment must understand their strengths and weaknesses so as to be able to take advantage of opportunities in marketplaces and to respond to threats accordingly. This article addresses industrial transformation, industry structure, and challenges for employment in the future.

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Industrial transformation…

Before the industrial revolution, families sustained themselves through farming and other trades and crafts including carpentry, cloth production, and metalwork based upon proximity to sources of materials and supplies. In this context, the term “trade” refers to an occupation. Because such activities could be performed at home, and often augmented farmwork, families flourished in cottage industries. In this system, the family was the enterprise – manufacturing products in a workshop at home. Merchants brought raw materials to homes and would take finished products to markets. Entrepreneurs and agents would “put out” work to these workshops, which were in effect their subcontractors.

Journeymen were craftsmen who had completed apprenticeships, such as in carpentry or metalwork. Journeymen traveled between local communities with the right to charge a fee for a day’s work accordingly. Apprentices were new practitioners who entered programs to receive training for their careers while working.

As the industrial revolution progressed, work was transferred from homes to factories when the required machinery became too large or expensive. Production moved from a decentralized to a centralized system, creating employment opportunities for laborers in factories.

Initially the “put in” system was used, where workers were treated as subcontractors within a factory and eventually became employees. Factory working conditions were often harsh. Labor movements were founded to fight for workers’ rights, from which today’s employment and labor laws have evolved.

As the economy shifted from family to commercial and industrial enterprises, employment opportunities grew. Entrepreneurs provided the innovation to start new enterprises in new or existing markets, with new products and/or services, from which new industries evolved.

Enterprises were established that had an identity in their own right separate from their individual founders and owners. An enterprise is an undertaking for prize or cause. Business entities such as partnerships and joint stock companies emerged over time, and eventually the concept of a corporation was developed – a legal entity that exists separately from its shareholder owners.

Trading took place in marketplaces. In this context, the term “trade” refers to buying and selling. A market is a set of potential buyers (prospects) and/or actual buyers (customers) and potential and/or actual sellers (suppliers) who are motivated to execute transactions. Motivated buyers have the desire, want or need, authority, and resources to demand and purchase a product and/or service. Motivated sellers have the desire, want or need, authority, and inventory to supply and sell a product and/or service. A marketplace is where buyers and sellers can meet to execute transactions. Street marketplaces were common in towns along sidewalks or as squares and covered buildings, and still are popular in many places around the world. Financial transactions were conducted in bourses or exchanges where contracts representing financial instruments were traded by dealers and brokers.

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Through improvements in manufacturing techniques, such as production lines and automation, the scale of units produced increased dramatically. Through improvements in energy, transportation, and telecommunications technologies, reach extended into new geographic markets for acquisition of materials and supplies, and delivery of end-products.

Chains of suppliers of raw materials, manufacturers and distributors, merchandisers (wholesalers and retailers), and end-consumer customers emerged over time. Some enterprises decided whether to make or buy materials and supplies on a case by case basis. Others became “vertically integrated” by owning and controlling most or all aspects of their supply and demand chains to make hand-offs between processes more efficient and effective. Tremendous wealth could be generated for entrepreneurs participating in chains that created value through both sales and production activities.

Governance, administrative, and operational disciplines emerged as enterprises became larger, creating the need for managers, supervisors, and staff. As a consequence, executive, administrative, professional, technical, vocational, and clerical jobs were created. As such enterprises became stable sources of employment. The word “firm” was used to describe them – suggesting the notion of steadfastness. This term is still common today, especially for professional services partnerships such as accounting, architectural, consulting, engineering, and law firms, where trust and integrity are important factors.

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Through acquisition or merger, enterprises can become “horizontally integrated” – offering the same products and/or services in different markets. Through horizontal integration, enterprises can gain economy of scale and become corporate “giants.” The world’s largest enterprises have gained scale by doing the same thing in multiple geographic markets around the world, although offerings may differ slightly through varying customer demographics and local practices.

In many industries, such as construction, energy, financial services, and manufacturing, there are a few very large global players that have grown mainly through acquisitions and mergers, and a large number of very small players that serve local markets almost exclusively. Joint ventures are also common that share risk, resources, and expertise.

Not only did the construction industry contribute to the growth of economies by building infrastructure, but it participated in globalization trends through the development of large enterprises, such as Bechtel, Halliburton, Black & Veatch, and CH2M Hill, that have worldwide reach.

Construction activity flourished with the development of residential, commercial, industrial, and corporate real estate. Through the use of prefabricated and modular buildings, the construction and manufacturing industries became interrelated.

Energy production and manufacturing activities globalized, driven by the aerospace and automotive industries, with such enterprises as Royal Dutch Shell, Honeywell, and Ford. The financial services industry has globalized with such enterprises as Barclays, HSBC, and JP Morgan Chase. Globalization was necessary not only to achieve scale, but also to serve global customer enterprises. Global financial services enterprises may be able to better manage risk than those only serving local geographies through their ability to move resources between and within multiple markets.

The food service and hospitality industries have partially globalized, primarily through franchising, but the merchandising industry is still primarily local, although products may be sourced internationally.

As a consequence, industrialized societies have stabilized through enterprises that create employment from jobs that provide steady income streams for food, housing, health, education, transportation, taxes, and disposable income for entertainment and recreation. In effect, these enterprises finance the lower levels of Maslow’s Hierarchy of Needs for many people.

The need for marketing and sales capabilities grew accordingly and media communications vehicles, such as magazines, newspapers, radio, and television, relied upon advertising revenue to cover their costs. Today, many websites rely upon advertising revenue to cover costs, and there is a gradual shift occurring from physical to electronic media of all forms as mobile devices become more popular.

 

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Industry structure…

Today’s economy is structured according to either market-driven or production-driven industries. An industry consists of a group of enterprises that share common activities, products and/or services and/or common methods of distribution.

In the market-driven approach, the economy comprises goods-producing and service-providing industries; in the production-driven approach, the economy comprises product-driven and service-driven industries. Goods-producing industries include: natural resources and mining, construction, and manufacturing; service-providing industries include: wholesale and retail trade, transportation (and warehousing), utilities, information, financial activities, professional and business services, education and health services, leisure and hospitality, and public administration. Product-driven industries comprise enterprises that manage inventories available for sale as primary activities (regardless of whether they transform them or not). Under this approach, the retail, wholesale, and food service industries are product-driven.

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“Commerce” is a more general term than “trade,” that refers to the buying and selling of commodities, merchandise, and services, and the associated warehousing, distribution, and transportation. Commodities are products that are indistinguishable and interchangeable with other products of the same type because there is little to no value added. Commodities include natural products such as produce, minerals, and oils. Merchandise consists of commodities and manufactured products for retail sale to consumers.

Consumers are users of products and/or services – both individuals and enterprises. Enterprise consumers are either entrepreneurial (in emerging or growth stages) or institutional (in growth or mature stages), and consist of sole proprietors, partnerships, limited liability companies, or corporations. Sole proprietors are natural persons, whereas partnerships, limited liability companies, and corporations are juristic persons, meaning that they are non-human (business) entities having the same status as a natural person for legal purposes. Juristic persons may be considered separate from their partners, members, or shareholders, for legal purposes, although the distinction is not necessarily absolute. Juristic persons may enter into contracts, own assets, incur liabilities, and sue and be sued.

Commercial enterprises are involved in light manufacturing, merchandising, retail, and professional services. They are small to medium sized enterprises, located on Main Street, in shopping centers and malls, and in office parks. Commercial enterprises are typically narrowly held.

Industrial enterprises are involved in heavy and high volume manufacturing and related industries, such as in chemicals and energy. They are medium to large sized enterprises located in dedicated facilities, such as factories and refineries and are typically more widely held.

Corporate enterprises are large service providers in finance, entertainment, health care, and transportation, and include the administrative activities of industrial concerns. Corporate enterprises are typically widely held.

Commercial enterprises are major sources of employment in local communities for entry to mid-level positions. Industrial and corporate enterprises employ both unskilled and skilled employees, and are providers of professional career opportunities.

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From a governmental policy perspective, employment provides stability in the economy. An activity that is repetitious provides an opportunity for steady employment, such as food processing and service, and manufacturing in growth industries. Entrepreneurial and sales activities are more prone to uncertainty; in order to promote stability, the compensation of salespeople is incentivised to encourage results on an ongoing basis.

Government policy has also encouraged home ownership, which strengthens stability. For most people, their job provides their largest source of income, and their house is their largest asset; their mortgage and related expenses are a significant component of their monthly compensation. Home value appreciation is a creator of wealth for many families. However, the home as an asset can become a liability if it prevents the owner from relocating to a different geography to pursue new opportunities. In down markets, home values can depreciate to a point lower than the mortgages that finance them – a stressful and sometimes irrecoverable situation.

Challenges for employment in the future…

As industries mature and reposition, restructure, and reengineer as a consequence of changing buyer trends or competition, employment opportunities may erode, and current positions may be eliminated. Reengineering initiatives can lead to a strategic repositioning of an enterprise by changing its activities, pursing different methods of performing the same activity, or streamlining current activities to reduce costs. The application of technology can play a major role by creating jobs in new areas and eliminating them in others. Globalization trends have changed the cost structure of certain activities by outsourcing to providers who offer economy of scale, or to low cost production markets such third-world countries.

The consequence is that job markets have changed dramatically, and that old assumptions for employment have become invalid. The notion of working for one employer for forty plus years is no longer possible because industries, enterprises, and types of employment change quickly.

Even the methods for finding a job have changed. It’s not what you know, or who you know, but who knows you that matters. Finding a job is an individual marketing initiative, and many people do not have experience in promoting products and/or services, let alone themselves. However, if individuals cannot promote themselves, how can they promote anything else? It is essential to launch an individual marketing campaign and to keep it refresh an alive in order to find a job in today’s economy.

A marketing campaign for an individual begins in the same way as for an enterprise: by developing a strategy that addresses opportunities, threats, strengths, and weaknesses, and by setting objectives, goals, and specific action-oriented initiatives.

The process starts by an individual understanding the power of their own knowledge and skills – the personal, professional, technical, entrepreneurial, leadership, and management competencies that others will want to know and benefit from.

Effective personal and professional competencies are essential for gaining entry level positions in enterprises, and the initial promotions thereafter. However, the enterpriship competencies in entrepreneurship, leadership, and management disciplines determine long-term success from transforming ideas into value, influencing others to follow direction through influence, and applying resources to activities to gain results in both entrepreneurial and employment activities.

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The notions of Individualpreneurship and enterpriship have been developed by The Business Leadership Development Corporation.
The notions are promoted by its affiliate, TechKnowPartners, LLC.

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