Download
1 / 25
390 likes | 1k Views
SOCIO ECONOMIC ENVIRONMENT. Introduction.
E N D
Introduction Various social , economic , political , psychological , technological factors are responsible for the growth of entrepreneurship . Environmental forces includes both controllable and uncontrollable and these have positive and negative impacts on entrepreneurship . Environment includes everything that is external to the organisation and it goes on changing day by day and affects the business concerns to a large extent . No enterprise , can afford to take the risk of ignoring the threats of environment .
Economic Environment One of the most important factor affecting entrepreneurship is economic environment . • Capital : Capital is one the most important factor of production . Every enterprise needs adequate finances for hiring other factors of production . Experiences show that increase in capital investment tends to increase profits which ultimately leads to capital formation which in turn , boost the entrepreneurial activities . • Labour : Easy availability of right type of workers also effect entrepreneurship . The quality rather than quantity of labour influences the emergence & growth of entrepreneurship . • Raw Material : Another important factor is raw material which is required for production . No , industry can function effectively without the adequate supply of raw materials . Shortage of materials , high prices and quality of raw material are the common problems which are faced by entrepreneurs . Proper availability of raw material leads to growth of entrepreneur .
Market : Nature of market whether competitive or monopoly also plays an important role in the emergence and growth of entrepreneurship . In the modern competitive world no entrepreneur can think of surviving in the absence of latest knowledge about market and various marketing techniques .
Social Environment • Family background : Family background and environment of a family , greatly influence the entrepreneurship . A joint family has large resources to invest in comparison to nuclear family . That is why expansion is more easier in joint families . As the son of an entrepreneur of businessman used to enter into same line because of inherent advantages and qualities . • Impact of near and dear ones : Friends , relatives and teachers , all these persons have a great impact on entrepreneurship . They usually , aspires the entrepreneur for high social status . On attaining a particular level , these people motivate the concerned entrepreneur for higher and higher levels . Positive approach of the friends , relatives ,teachers contributes to entrepreneurial growth .
Social status : Social status also affect the entrepreneurship . Now a days every one wants to have a high social status and in order to attain a particular level they start aspiring for higher and higher levels . People have become responsible in development of their status . Chester I Bernard believes that the desire for improvement and protection of status forces people to behave responsibly . People work hard to maintain and improve their status , and it contributes to entrepreneurial growth .
Social mobility : Social mobility also plays an important role in growth of entrepreneurship . Some people are of the view that high degree of mobility is conducive for the emergence of entrepreneurship while others are of the view that lack of mobility would result in emergence of entrepreneurship . The system should be neither too much flexible nor too much rigid as the flexibility would pull the entrepreneurs from the role and rigidity would certainly restrict them . • Social marginality : Social marginality is the situation in which there is a discontinuity between the individuals personal attributes and roles which they play in the society . A person belonging to a social group traditionally constrained to enter economic activity and barred from any other activity by the society is expected to choose ownership role in society .
Psychological Factors McClelland developed theory of Achievement Motivation . Achievement motivation is a drive to overcome challenges . According to McClelland a constellation of personality characteristics which are indicative of high need achievement is the major determinant of entrepreneurial development . McClelland explains that people with low achievement motivation are prepared to work hard for money or other such incentives but the people with high achievement motivation work for status . He states that people with high need for achievement possess the following attributes : • Prefer personal responsibility for decisions , • Are moderate risk takers , & • Possess interest in complete knowledge of the results of decisions .
Attitude of Government Government all over the world can play a very important role in the emergence of entrepreneurship . Positive actions by the government can facilitate growth of entrepreneurship whereas negative actions can adversely influence entrepreneurial emergence and growth .
Education and Technical Know - How Education helps in the development of capabilities of individuals which facilitates the emergence and growth of entrepreneurship . For the growth of entrepreneurship , entrepreneurs have to keep the watch on new developments in technical sector .
Financial Assistance Availability of financial assistance on easy terms and conditions boosts the morale of entrepreneurs . They can thus , easily start up their new ventures . Government should provide easy loans and other types of financial assistance at concessional rates . Government should also provide subsidies and concessions to the entrepreneurs for making investments in backward areas .
Mobility of Entrepreneurs Mobility refers to the drive in the entrepreneurs to locate green postures for setting up their units . It is an urge to move to other places in search of better opportunities . In the initial phase the entrepreneurs set up their units at or near their places due to limited resources , absence of institutional support ,etc. but after tasting success and gaining experience he is ready to make investment anywhere . He is not tied to any place and is ready to move to any place wherever business opportunities exist .
Competitive Factors In this we include competing firms , their products range , features , prices , terms and conditions , channels of distribution etc. “Michael & Porter” defines the following four factors for the analysis of industry and competitors . • Existing And Potential Entrants : Under this we study aspects like capital requirement , channel of distribution , product differentiation etc. • Bargaining Power Of Buyer : This is the study of demand and supply position and bargaining capacity of buyer . • Bargaining Power Of Supplier : It links with bargaining power of supplier for raw material . • Availability Of Substitutes : Demand of a product is directly related to availability of substitutes .
Risk of Entry of Potential Competitors : Existing firms try to discourage potential entrants as their entry can adversely affect the market share of existing firms and can force them to resort to price cutting or offering additional services to consumers at the same price . Various barriers restricting entry of new competitors are : • Cost Advantage , • Brand Image , • Government Policies .
Rivalry Amongst Existing Companies : Competitive force refers to the extent of rivalry amongst existing firms within an industry .intense rivalry benefits consumers as they are able to get same goods at lower prices and channel of distribution too provide economical and efficient services . Extent of rivalry amongst established firms depend upon : • Demand Conditions , • Competitive Structure within Industry . • Bargaining strength of buyers : Buyers can be competitive threat when they demand better quality and additional services or when they force down prices . Whereas weak buyers provide opportunity to the firm to increase prices and earn better results .
Bargaining Power of Suppliers : It proves to be a threat when suppliers are able to force up the prices and the company has to pay or settle for inferior quality . Weak suppliers on the other hand provide the company an opportunity to force down price or demand higher quality resulting in the profitability of the company going up . • Threats of Close Substitute Products : The presence of close substitutes pose a strong competitive threat that limits the prices a company can charge and affects the profitability of the company & vise versa .
Techniques of Environmental Scanning • Information Gathering : A strategic manager can get the knowledge about business environment be collecting information from various sources available : • Business magazines ; • Newspapers like Economic Times , Business world ; • Publications of Directors ; • Annual report of various companies . The information can also be collected from various sources of information like television , radio , traders , competitors and consultants , etc.
Spying : The another technique employed for collecting and analysing the information required for business scanning is the spying . Under this technique expert persons are engaged for secret information about strength of suppliers , customers or competitors . • Forecasting : Peter Drucker is of the opinion that future managers will be more anticipators and proactive than problem solvers or reactive . Forecasting is the technique of estimating those events that may occur in future . Even though the future is uncertain and unexpected , yet it can be predicted by combining various parameters . Forecasting also helps in environmental scanning .
Opportunity Analysis According to Peter F. Drucker an entrepreneur must be capable of analysing the opportunities and exploit them successfully . The main motive of an entrepreneur is to earn profits by providing the customers right time . Thus an entrepreneur should be capable of analysing and exploiting opportunities in order to provide the customer the proper satisfaction .
According to Drucker the opportunities are of three kinds : • Additive Opportunities : Additive opportunities are those opportunities which enables the decision maker to utilise the existing resources in a effective resources in a effective way without making any change in character of business . • Complementary Opportunities : Complementary Opportunities involve introduction of new ideas in business which amount to certain change in the existing structure . • Break through Opportunities : These opportunities lead to fundamental changes in both structure and character of the business .
Exploiting the opportunities at global level offers the following benefits to the entrepreneur : • It leads to increase in production and productivity . • It helps in off setting domestic sales with increase in sales at international level . • It leads to lower cost of production . • It is more customer oriented . • It leads to improvement in the quality of produce . • It leads to creation of new products and new product life cycles .
Steps in Selection of new Business Ideas • New product ideas : It is the first step in the selection procedure is to recognise new product ideas . Various surveys are conducted continuously for finding new uses of existing products and designing new products . Then a detailed list of new ideas about the proposed product is prepared and an attempt is made to find out viable product which can be commercialised . • Ideas screening : The next step is investigation of ideas . Those ideas which seems to have not wider scope in the future are dropped in this stage .Detailed investigation is carried on only for those ideas which are promising . Only those promising ideas are carried to next stage .
Concept development and testing : Those ideas which are selected during screening are promoted in this stage . The concept of the proposed product is prepared . Minute study is carried on for the development of the product . After the idea is promoted and a concept of proposed product comes into existence , it is tested . Testing of the proposed product is undertaken keeping in mind the tastes and preference of the customers . Testing helps in selecting the best alternative amongst the various alternatives . • Business potential analysis : Business potential analysis includes demand analysis , cost volume profit analysis , competition , capital investment , expected rate of return , etc. So after the concept of proposed product is formed , the next step is to investigate the business potential for the proposed concept . • Product development : A practical shape is given to the proposed product is made after giving a view to the quality of materials , alternative size , design , plant capacity , etc. An attempt is made to develop the product . Product development also includes cost and production time .
Test marketing : Market testing includes testing of the final product in the few segments of the market , to know the response or commercial viability of the product . In some cases the producer may start production after seeing the response of prospective buyers on the basis of testing results . • Commercialisation : Commercialisation is to inform the customers about a new product ; customers are made aware of the comparative advantage of going for new product instead of existing ones . Arrangements are made for producing goods at large scale , contracts with the suppliers of raw material are finalised , sales people are hired , channels of distribution are selected . The product is made popular through advertisement and sales promotion and human action is influenced to buy a particular product through these techniques .
