Definition of Entrepreneurial Environment

Introduction

“Suitable Environment and intuition in grasping the essential facts promotes entrepreneurship”

—Schumpter

Entrepreneurial venture of any sort/nature is being influenced by complex and varying mixture of financial, institutional, cultural and personality factors. Economic system and other conditions in the environment determine the success of commercial venture. Environment refers to the totality of all factors which are external and beyond the control of the business enterprise. It determines how entrepreneurship control and manage the unit. The entrepreneurial performance of an enterprise is influenced by the value system of the society, the rules and regulations made by the government, the monetary policies of the capital market, foreign investments etc. If environment changes there will be a change in the entrepreneurial performance also. Thus, the healthy environment promotes the entrepreneurship in a larger scale by facilitating the business operations thereby contributing to the growth of the unit.

Classification of Environment

Environmental factors are mostly dynamic in nature except few factors which are of static nature. Mostly these factors can be conceptualized and quantified. Sometimes they could be mentioned only in qualitative terms.

On the basis of it’s variability character with reference to point of time, environment may be past, present and future.

On the basis of decision making situation it may be classified into Market and Non-Market environment. If the business decisions of a business unit are influenced by the market factors such as, demand, supply, competition, price etc. the environment is said to be market environment. On the other hand, when the Government, Law and Social customs and Conventions dominate entrepreneurial decisions it is said to be Non-market environment.

Environment may be grouped in to two, viz, Eco-nomic and Non-Economic environment. Environment formed by the economic fac-tors like fiscal policy, indus-trial policy, physical control of price-income, the eco-nomic system that operates, the stage of economic devel-opment refers to economic environment.

Then the non-eco-nomic environment refers to social, political, legal, edu-cational and cultural factors pertaining to business oper-ations.

Thus, the different facets of entrepreneurial en-vironment on the basis of factors which form that situ-ation is depicted in the fol-lowing telescopic view of the Facets of Entrepreneurial Environment.

Environmental Factors

It is true that the entrepreneurs must have come from diverse economic, social and geographical backgrounds which interlace influence entrepreneurial spirits. This will enhance the entrepreneurial performance. The various factors which influences the entrepreneurship may be categorized into two, viz, Internal and External environment factors.

Internal Factors

The internal environmental factors are mainly the environment in which entrepreneurs are born and brought up and work. Internal factors are those which will stimulate the entrepreneurs from within to take up entrepreneurial venture. Some of them are:

Strong desire of entrepreneurs to do something independently in life.

Technical know-how or manufacturing experiences acquired by them.

Business experience in the same or related line.

Family background including size, type and economic status of family.

Occupational origins of the entrepreneurs. Factors are the main springs of action in entrepreneurs. In order to satisfy their strong desire to do something independently in life, highly motivated persons take a plunge in to industrial activity’ regardless of any other considerations. But, many a time it is the: compulsion rather than the ambition that leads the man to success. The reasons that might have compelled the entrepreneurs in putting them on the road to industry are: The internal

Various other internal environmental factors that facilitate the emergence of entrepreneurship are:

Success stories of entrepreneurs

Previous experience in manufacturing

Previous employment in industry

Property inherited

Property acquired

Encouragement of family members

Encouragement of friends and relatives

Acquire or inherited technical and professional skill

External Environment

The success of entrepreneurship in a region at any point of time depends on the very many external environmental factors. These factors influence the entrepreneurial operations and ultimately determine the effectiveness of entrepreneurial performance also. These environmental factors can be grouped into:

Economic Environment

The different economic environmental factors which influence/ inhibit the entrepreneurship are: Structure of the economy, Industrial Policy, Agricultural” Policy, Growth pattern of National income, G.D.P., Savings and capital formation in the country. Besides that, Balance of trade and balance of payments, trade and tariff policy etc.

Legal Environment

Entrepreneur should know what the prevailing legal environment is by knowing the latest position in legal enactments relating to various aspects of entrepreneurial venture. Such as formation of the unit, collaboration, foreign exchange, industrial dispute, labour management, social security benefits, consumer protection etc.

Political Environment

The working political system in a country influences the entrepreneurial growth by designing and implementing various policy matters pertaining to promotion of entrepreneurship. Hence entrepreneurs and industrialists should have representatives on various government bodies at all levels of policy formulation and planning.

Socio-Cultural Environment

In the modem days a suitable entrepreneurial culture must be created by developing healthy work environment and modem attitudes towards work giving social recognition etc. These factors will give psychological stimulus which in turn promotes innovation, inspiration, ethics and values which are very essential for a successful entrepreneurs.

The external environmental factors are:

Financial assistance from institutional sources.

Accommodation in industrial estates.

Provision of consultancy to services on technical

Market and financial aspects.

Provision of subsides of different kinds.

Arranging the institutional support for marketing the products/ services.

Attitude of the Government to help new units.

Encouraging the co-ordination between larger and smaller firms.

Providing necessary infrastructural facilities continuously.

External environment determine the entrepreneurship in many occasions. Hence presence of conducive business environmental climate is imperative for entrepreneurship growth. External environment facilitates various functional areas of business enterprise thereby promote entrepreneurship.

The various factors that impede the growth entrepreneurship arose mainly due to external environment. Some of them are:

Changes in governmental policy

Political instability or hostile government attitude

Improper co-ordination among different government agencies. Undue delay and corruption in giving concurrences for various purposes

Poor-infrastructural facilities such as supply of power, materials, finance etc.

Rise in cost of inputs.

Unfavourable market fluctuations etc.

Summary

Understanding the business environment and its components are very much essential for an entrepreneur. Environmental aspects are not of static in nature and hence watching the changes in the environment is immensely essential especially for the budding entrepreneurs. Thus, developing a healthy environment is a pre-requisite for growth of entrepreneurship.