Environmental Factors Affecting Entrepreneurial Development 6c1v4g

Entrepreneurial development is an organised and on-going process. Its basic purpose is to motivate people for entrepreneurship career and to make them capable of perceiving and exploiting business opportunities.

Entrepreneurial development is not a spontaneous one but a dependant phenomenon fostered by the environmental factors.

The environmental factors which affect entrepreneurial development are :-

Economic

Social

Legal

Cultural

Technological

Political

Psychological

International

Economic environment exercises the most direct and immediate influence on entrepreneurial development. Capital, labour, market and raw materials, tariff policy and subsidies are the main

economic factors.

i.

Capital – Entrepreneurial development is capital oriented. Capital is the most important prerequisite to establish an enterprise.

ii. Labour – It is not the quantity of labour, but its quality which facilitates entrepreneurial development. iii. Market – The potential of the market constitutes the major determinant for the development of entrepreneurship.

iv. Raw Materials - The availability of raw materials and their proper exploitation has great significance in entrepreneurial development.

v. Tariff Policy – Efficacious tariff policy provides a base for entrepreneurs to have wider avenues for entrepreneurial activities. vi. Subsidies – Government provides economic assistance in the form of subsidies in the economic activities which the entrepreneurs have already undertaken.

Social factors can go a long way in encouraging entrepreneurship. Entrepreneurial development has much to do with social attitudes, social status,

social mobility , family background and education.

Social Attitudes – Social attitudes mould peoples

behaviour and influence their needs and wants they seek to fulfill. A society that is rational in decision making would be favourable for entrepreneurial

development. Social Status – Every human being wants to achieve a high status in life and his desires and aspirations keep on increasing.

Social Mobility – The degree of social mobility both social and geographical has a strategic role in entrepreneurial development.

Social Marginality – Social marginality is a great determinant by which entrepreneurial development is

influenced.

Family background

–

Family background forms the

most cardinal and crucial factor in entrepreneurial development.

Education – The level of education forms the strategic pillar on which the growth of entrepreneurship rests.

Education

can

create

entrepreneurial development.

new

vistas

for

Government generally tries to control the entry, working, selection of resources and their uses in business and thus, a legal environment is created

by the government.

Political forces generally define the business climate by the constraints they impose and by the

activities they permit.

The following constitutes the political environment:i.

Political philosophy of the party in power.

ii.

General political conditions.

iii.

Quality of leadership.

A psychological factor refers to a thing that can

influence the functions, attitude and characteristics of the human mind. These factors can in return affect the behavior and well being of a person.

These are:Need achievement Withdrawal of status respect Motive

Need achievement -Need achievement is a social motive to excel that tends to characterize

successful entrepreneurs

According to McClelland theory people with high need-achievement are distinctive in several ways. They like to take risks and these risks stimulate them to greater effort.

Withdrawal of status respect -Hagen attributed the withdrawal of status respect of a group to the genesis of entrepreneurship.

Withdrawal of status respect would give rise to four possible reactions and create four different personality types : Retreatist Ritualists Reformists

Innovators

Motives Cole

is of the opinion that besides wealth , entrepreneurs seek power, prestige, security and service to society.

 Stepanek

points particularly to non-monetary aspects such as independence, persons’ selfesteem, power and regard of the society

Various variables which are concerned and created from outside environment of

organization’s home country also effect an entrepreneur.

Important constituents are:

Globalization process



Role of multinational corporations



Trade restrictions



Innovative products

Globalization - Entrepreneurs are challenged by increasing number of global competitors and consumer market.

Role of multinational companiesEntrepreneurs who develop attractive new products for home market, sometimes also earned demand in foreign market are

motivated to develop more such production facility in foreign market which directly influence the entrepreneurial growth.

Trade restrictions - Government imposes tariffs or import quotas to protect domestic producers.

 Innovative products - Entrepreneurs get technical knowledge and ideas from foreign

countries .

 It

represents the application of scientific knowledge for practical purpose.

 Catalytic

agent in the promotion of entrepreneurial growth

It includes the expertise, procedures and systems adopted by entrepreneurs to ensure necessary changes in the transformation process and in goods and services.

Factors are :Research and developments. Information technology.

Benefits are :Enhance profit.

Improvement in competitive strengths. Improvement in productivity.

Entrepreneurship is a function of several factors. It can only survive where conditions

are ideal in of economic, social, political and international concerns. Even if one has capital or risk bearing capacity or political freedom or anything , entrepreneurship will not flourish unless the right environment is available.



The Dynamics of Entrepreneurial Development and Management by Vasant Desai.



Entrepreneurial Development by Dr. S.S. Khanka.



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