Introduction
When becoming an entrepreneur, individuals may face numerous challenges that directly affect the success of a business initiative. To minimize this aspect, it is critically important to conduct a risk and uncertainty analysis to identify potential hindrances to activities. This is especially important for an industry such as hospitality, which is heavily dependent on external and internal factors. Therefore, studying management risks and uncertainties will provide an opportunity to gain a deeper understanding of the nuances of entrepreneurs’ activities in the hospitality industry.
Business Risks
First of all, at any stage of business development, from the initial to the final, various barriers and difficulties may arise. It is worth noting that at the moment there is a relatively large number of studies that provide evidence-based, reliable information on the topic under study, which can be helpful for many, both beginners and experienced entrepreneurs, across all areas of activity. Research stated that “entrepreneurs can rarely afford the premiums to cover identifiable risks and certainly cannot buy a blanket policy indemnifying them against business failure” (Sull, 2004, p. 71). Therefore, risk analysis is one of the most essential processes for these specialists. This step will provide an opportunity to understand better the industry they are interested in and to develop a strategy to address the fewest problems.
New Venture Risks
There are many risks an entrepreneur may face when opening a new venture. The main task in this context is to identify these potential threats and limit their future impact promptly. However, some risks imply uncertainties, to which many entrepreneurs, especially at the beginning of the journey, do not pay due attention. Gilbert and Eyring (2015) underlined that “that is because they often take the form of unwarranted or unexamined assumptions about the premises underpinning the venture” (p. 23). Timely identification of this kind of problem can allow companies to reduce the financial resources required to develop and strengthen a new venture in the market.
Path-Dependent Risks
Other risks are path-dependent, which are critically important for entrepreneurs. This kind of problem is directly related to aspects of business activity, such as strategy and policy for business promotion. With the wrong choice of direction for the venture, entrepreneurs may face significant losses of both financial and time resources. An example may be insufficient attention and concentration on technical, marketing, and distribution requirements for promoting a particular product (Gilbert & Eyring, 2015). In other words, companies, especially new entrants to the market, should focus on a specific product or service to succeed and minimize the risk of wasting valuable resources.
Financial Risks
A separate place, when considering the risks facing entrepreneurs in the hotel industry, becomes financial. Research showed that they arise “because of the scale of the innovation and associated investment (e.g., high technology costs, investment in a hotel asset, etc.)” (Williams et al., 2021, p. 300). This industry requires significant financial investment in building a hotel, running an advertising campaign, and hiring staff. Moreover, it is necessary to invest significantly in employee training to deliver the highest-quality services. With insufficient preparation and poor planning, the business risks insufficient funds to implement these aspects, which can lead to decreased productivity and the loss of a significant portion of capital.
Strategy for Risks and Uncertainties
Based on the information provided, it is essential to emphasize that for entrepreneurs, defining a strategy to address risk and uncertainty is of great value. This policy should begin at the stage of forming a business idea and preparing for its implementation. The first step is to determine the possible consequences and results of an action or decision. It is stated that “after establishing an appropriate valuation model for each possible outcome and determining how probable each is likely to be, a classic decision-analysis framework can be used to evaluate the risks and returns inherent in alternative strategies” (Courtney et al., 1997, p. 73). This stage will help to minimize possible losses of resources and business productivity when faced with risks and uncertainties.
Of particular importance in mitigating threats is the development of a business posture. This characteristic involves several critical steps that the entrepreneur must perform. The first is shaping the future by setting specific standards and creating demand that will ensure the initiative’s smoothest development.
The next step is to adapt to this future, which includes “speed, agility, and flexibility in recognizing and capturing opportunities in existing markets” (Courtney et al., 1997, p. 74). The third aspect is investing in a business after careful consideration of the opportunities and risks that may result from a particular decision. This approach to the organization’s activities in the hospitality industry will help to minimize threats and the strong influence of uncertainties.
Another strategy for addressing risk-related problems for entrepreneurs is to draw on experience. Scoblic (2020) emphasized that such “analogy facilitates strategic change by linking the past, present, and future” (p. 3). In other words, when potential threats or uncertain circumstances arise, entrepreneurs have valuable tools such as research and case studies of companies that have faced similar problems. This provides an opportunity to realize and learn a valuable lesson from such events (Blanding, 2023). A thorough study of the actions taken to resolve the issues that have arisen can provide a clearer understanding of the direction the entrepreneur needs to move in.
Conclusion
In conclusion, in the hospitality industry, as in many others, entrepreneurs may face various situations and risks. These issues may reduce business productivity and result in the loss of a significant number of crucial resources. To limit the possibility of these problems, it is critically important to have a well-developed action strategy that will allow the business to return to the right path as efficiently and successfully as possible.
In this regard, it is valuable to identify in advance the problems an entrepreneur may face when opening a new venture. This procedure will affect the long-term business strategy to minimize risks and uncertainties. In addition, an important role is played by posture construction, which implies a clear idea of the company’s future and how it will be implemented.
References
Blanding, M. (2023). Thriving after failing: How to turn your setbacks into triumphs. Harvard Business School.
Courtney, H., Kirkland, J., & Viguerie, P. (1997). Strategy under uncertainty. Harvard Business Review, 75(6), 67-79.
Gilbert, C., & Eyring, M. (2015). Beating the ODDs when you launch a new venture. IEEE Engineering Management Review, 1(43), 22-27.
Scoblic, P. J. (2020). Strategic foresight as dynamic capability: A new lens on Knightian uncertainty. Harvard Business School.
Sull, D. N. (2004). Disciplined entrepreneurship. MIT Sloan Management Review.
Williams, A. M., Rodriguez Sanchez, I., & Škokić, V. (2021). Innovation, risk, and uncertainty: A study of tourism entrepreneurs. Journal of Travel Research, 60(2), 293-311.