Entrepreneurship development and Industrial Consultancy

Module 1. Entrepreneurial environment

Lesson 5
GLOBALIZATION AND THE EMERGING BUSINESS / ENTREPRENEURIAL ENVIRONMENT PART-II

5.1 Introduction

All kinds of enterprises are affected by external environmental factors. These factors are broadly categorized into political, economic social technological legal, and cultural. All these external environmental forces are generally met under the control of individual enterprise and are generally referred to as macro environmental factors. Uncertainty is associated with them. Despite the heavy cost of failure, private entrepreneurs take risks in the hope of earning high profit.

5.1.1 Importance entrepreneurial environment

Macro environmental factors are responsible for the growth of entrepreneurship. In globalized world, all kinds of business are considered as a social and economic organization which is influenced by political, economic and social forces. An enterprise operates in a specific frame work created by political environment, industrial and licensing policy, foreign exchange regulation, banking policy, technological development etc. Therefore it is necessary that any business plan formulated by an entrepreneur & it must be based upon above environmental factors.

A. Economic factors

1. Capital: This is perhaps the basic and most important requirement for establishing any enterprises. It is required for purchasing land, different type of machines and raw materials. Research studies have indicated that with an increase in capital investment, capital output ratio tend to increase. This increases profit which then further goes to capital formation. Thus, lack of capital and higher interest rate on borrowed capital hinders entrepreneurship activity in the country. One of the reasons for progress of rich western countries is availability of capital to entrepreneurs.

2. Labour: Quality of labour is more important than quantity for proper development of entrepreneurship. Since, they have to deliver quality products for the successful growth, quality of labour is very crucial.

3. Raw materials: Since raw material is one of the important components of production, without which production cannot be accomplished. Entrepreneurs need to ascertain continuous availability of requisite quantity and quality of different types of raw materials for survival of the enterprise.

4. Market: The size and the composition of market both influence the entrepreneurship in their own ways. Whether or not the market is expanding and the rate at which it is expanding are the most significant characteristics of the market for entrepreneurship development.

B. Government actions

Government plays an important role in the development of entrepreneurs. Government can support entrepreneurs through its clearly expressed industrial policy, by creating basic facilities, utilities and services through providing incentives and subsidies. A supportive conducive role by government reduces risk of entrepreneurs.

5.2 Globalization and India

Even after a long period after independence, India is not able to transform its economy into a modern industrial democracy even though it enjoys political democracy. This is evident from the large gap between have and have-nots. After liberalization probably this gap is increasing. In order to pursue economic policies as dictated by WTO/World bank and other financial institutions, India has been reducing space for state intervention and allow market forces to govern the market. On one hand this leads to increase in entrepreneurial opportunities but on the other hand have damaging effects on economically weaker sections of society. Thus although it is not possible to stop the process of globalization but whatever policy reforms are undertaken must be according to the socio economic conditions of our country and should be such which serve the interest of general masses.

5.2.1 Sector specific impact of globalization in India

The effects of globalization on India can be studied by analyzing some specific sectors of the Indian economy.

1. Telecom sector: The impact of globalization is directly visible in this sector. This sector was totally under the public domain. It is now privatized and slowly and gradually foreign investment upto 72 percent is now allowed. The positive effects are realized by the consumers in terms of easy availability of large number of service providers at cheaper rates.

2. Insurance sector: This sector used to be one of the most regulated sector. But now it is open for private players also. Insurance regulatory development authority has been established by the government to regulate the sector.

3. Banking and financial sector: India has adopted gradual liberalization approach for this sector. The reforms in the form of deregulation, liberalization of interest rates, pro market policies etc are introduced at a slow pace. With each successive budget announcements, India move towards full capital account convertibility. These measures along with strengthening of prudential norms and market discipline and the adoption of international benchmarks to suit specific needs of India helped to make the financial sector of India competitive, viable and resilient. All these moves are helpful for entrepreneurs to obtain necessary financial support.

4. Retail sector: Indian retail industry cannot be new considered in a nascent stage. Due to globalization large supermarkets are visible even in small towns and also throughout the country. Opening up of retail sector has provided opportunities to many entrepreneurs. Although it is seen as a threat to small street corner groceries but at the same time it can also act as growth engine which can help in filling the resource and technology gaps in the retail segment.

5. Agriculture sector: India is still regarded as agricultural country. Due to globalization, advantages in terms of technology transfer, improved productivity and newer markets etc. can be gained by Indian farmers. But if the Indian farming conditions and socio economic status of large number of Indian farmers is taken into consideration then it has been seen that due to globalization, Indian farmers have also faced many problems as against provision of providing subsidy to farmers in developed countries, monopoly of many biotechnological companies, threat to biodiversity and ecological stability due to biotechnology, pumping etc.

These are some of the sector specific examples to highlight the impact of globalization on Indian economy. In general globalized world leads to influx of new technology and income in economic opportunities and also leads to more entry of international companies in many sectors. But at the same time it can also lead to increase in unemployment, economic and social inequalities etc.