Political and Social Aspects of Business Start-Ups - Essay Example

Economical, Political and Social aspects of Business start-ups Business development or industrial development is one of the main parameters which determine the economic growth of a country. Most of the countries encourage business activities along with agricultural sectors to boost the economy. Industry alone may not be good for the development of a country. A country needs to develop and exploit all its indigenous resources to accomplish sustained economic growth. In a globalized business environment, business start ups are easier nowadays. Many countries are welcoming foreign direct investments to their countries in order to exploit the possibilities opened up by Globalization, Liberalization and Privatization. The tough rules and regulations for starting a business have been liberalized by many countries in order to boost the domestic business as well as for attracting foreign direct investment. Business start ups have positive impacts on economical, political and social aspects and hence the business start ups are normally encouraged by many governments. Economical aspects of business start-ups Without the development of industry no country can able to develop. The yield from agriculture alone may not be sufficient enough for strengthening the economy. Moreover the agricultural yields depend on so many natural parameters and hence nobody can ensure a fixed income from agricultural yields. On the other hand industrial development or business development may help a nation in achieving economic targets and thereby a nation can stabilize the economic growth. “According to an EU study, benchmarking the then EU 15 Member States, in 2001 the average time to start-up a company in the EU 15 was 22 days and the cost € 827. At the base of this process lays the fact that countries with lesser administrative burdens in the procedures required to create a company (cheaper and faster start-ups) have greater numbers of business start-ups.” (Start-up procedures - An overview, n.d) An average business can be set up within short time span if the rules and regulations of the country are liberalized. Most of the countries who previously administered strict rules for starting a business have liberalized their norms, realizing the importance of business in the development of economy. Through business, whatever the available resources in a country can be utilized effectively. The economy of a country develops only when all the resources of the country utilized in a positive manner. For example, India is a country having over a billion populations. Most of the youths in India are unemployed though they have good education. These manpower resources are not utilized well by the Indian government and hence most of the well educated youths from India are going abroad like US and UK for better prospects. This is not good for Indian economy if their educated people migrated to other countries and settled there. India needs to encourage more and more business start-ups and industrialization to utilize the huge manpower resources effectively. On the other hand countries like US, experiencing shortage of manpower in every sector and hence they are utilizing the possibilities of outsourcing to counter the manpower shortage and also to tackle the huge labor costs in their country. Indians are utilizing this opportunity well by establishing small firms or IT related businesses across the country to exploit the opportunities offered by other countries which experiencing manpower shortage. Thus the Indians are getting substantial foreign money through these business start-ups and we can now safely say that Indian economy has benefitted immensely from this sort of outsourcing jobs from other countries. President Obama has realized the dangers in outsourcing jobs and hence he has already started to counter the dangers caused by outsourcing and offshoring businesses from America. "An example of a good way the current economy will affect new businesses is state of mind -- going into business with the understanding that it is hard work” ( Dobson, 2009) The current economic crisis has developed suspicion in the minds of new entrepreneurs. Since the crisis has come unexpectedly many people has lost their jobs and also many investors lost their money which were deposited in share markets and mutual funds. Most of the entrepreneurs are waiting for the economy to stabilize in order to re assess and restart their business functions. The entrepreneur must understand that the current business atmosphere is hard and he should not keep aspirations about the prospects of business at present. But most of the economists believe that the world economy will build up again within a couple of years and the new business start-ups must be optimistic about this view and they should take these times as the preparatory period for the future business endeavors. “Take the time to thoroughly investigate your market and target customers, the competition and other basics, with a sound business model. Focus on answering one deceptively simple question: How will you make money?” (Krotz, 2009) Business start ups must have a vision and they should have a well defined business plan and strategies as well. Advance planning is an important phase of every business start-ups. Resources like, man power, materials, machineries and money must be planned well in advance. More over the market must be evaluated using proper market researches through primary or secondary sources. Entrepreneurs tend to be big-picture types — visionaries, risk-takers, thrill seekers. The longer they must sweat the details, the jumpier they get. So they often engineer a crisis, just to get back in the game and feel the rush of adventure “(Krotz, 2009) Some of the new business startups fail in their attempt to establish because of the lack of home works they did before. Some entrepreneurs consider business like a sports activity. They want to defeat their competitors at any cost. In order to compete with others they often forget the basics of business management and will finally get into deep troubles. I know a person who has started an advertising agency in order to compete with another one in Dubai. This fellow was previously employed in another ad agency and because of some internal conflicts he has resigned and started his own agency to compete with his parent organization. He has taken lot of money as loans from banks and collected money from other financial resources as well. His only motivation was to compete with his parent organization rather than managing his business in an efficient manner. He has sent his sales persons to all the existing clients of his parent company and started take jobs from them at an extremely low cost in order to take revenge upon the other company. Finally he has to close down his business because of his lack of management efficiencies and also lack of philosophy about business. Political aspects of business start-ups The theory of political business cycle was first put forward by William Nordhaus who observed the relationship between the presidential election and the business cycle in the United States. Thus the ruling party implements expansionary macroeconomic policies to stimulate the economy for their reelection, contributing to the boom phase of the business cycle in the election year. However, such a macroeconomic policy is basically unsustainable, and the bust comes after the election as the government reverses gear. However, the next boom comes just prior to the next election due to the implementation of another round of expansionary policies to boost the economy. In fact, data since 1976 show that the U.S. economy has followed a four-year business cycle, in which the economic growth rate is highest in the election year and lowest two years after the election (KWAN, 2004) Politics also play a major role in every business start-ups. This can be internal as well as external. For domestic business activities internal politics will play a definite role. For example in democratic countries like India, the governments want to take advantage from the business developments in the country. For that purpose, sometimes they will deliberately create problems for business activities started by the previous government. For example, Dubai Internet City has given a proposal for starting a “smart city” (IT related business) project at Cochin, Kerala (an Indian state) to the previous right wing government. The opposition left parties has opposed that project severely since they were afraid that the smart city project will definitely boost the prospects of right coming in power once again and hence the proposal has delayed. In the next elections the left parties has gained victory and they started the paper works for the same smart city project in order to take advantage from that. But this time the right has started to raise questions about the implementation of the project. At present that project is almost given up by the Dubai Internet City because of high political interferences. Politics have huge impact internationally as well in business startups. For example the entry of Chinese products and businesses in American market is watched suspiciously by the American government. Same way the entry of American companies in the Chinese market watched suspiciously by China also. The international companies are always motivated by profit making alone rather than doing any social services. They will definitely have their eyes stationed at the resources of a country when they establish a business in that country. China is producing bulk of cheap quality products and they are selling it at a cheap rate in international markets. Even the quality products from other countries found it extremely difficult to compete with the Chinese products even though everybody knows that Chinese products are of cheaper quality. Such unregulated entry of goods from other countries in the name of Globalization or whatever it may be will destroy the domestic industries and businesses. Even though the consumers may benefit from such foreign intervention, the economy of the country will be destroyed because of the destruction of small scale industries. Politics has lot to do with the new business startups internally and externally. Both internal and external politics are equally prevalent in deciding the future of a business startup. Social aspects of business start-ups In the last three decades, a large number of citizen sector organizations (CSOs) have emerged to create positive social change. Social entrepreneurs have been at the forefront of developing practical innovations to empower low-income populations as consumers, producers and wealth creators. While the citizen sector is becoming increasingly competitive, pioneering companies have also understood that being socially and environmentally conscious can make business sense. This changing landscape is an opportunity to instill a critical mind-shift within businesses and CSOs to foster business-social convergence and create value for all. (Hybrid Value Chain, n.d) Business startups have social importance also since every business has to interact with the society. Society decides the success and failures of a business. The entrepreneur must establish a healthy relationship with the society in order to run his business smoothly. Coca cola has recently established a bottling plant in one of the Indian states Kerala. The people around the bottling plant have started to raise slogans against the exploitation of underwater resources by Coca cola which finally forced to close down their operations in that region. This incident clearly shows the importance of society in the startup and sustainment of a business. A business start- up, irrespective of small or big can give employment to some unemployed people and hence it can raise the living standards of the society. Unemployment is a big problem most of the countries are facing. Only through industrialization, governments can solve the unemployment problem. Most of the societies welcome a business startup if it can offer employment opportunities to the locals. Unemployed people often like to work in their native place and if they get such an opportunity, they will definitely accept it with both hands. A business setup can improve the infrastructure facilities around the business unit and hence in that way also it is useful to the society. Infrastructure development will definitely improve the living standards of the society. For example, the arrival of a new business often results in the improvements of facilities like road, rail, communication and power which will improve the living standards around the business unit. Moreover associated industries also can develop around a business startup. A big manufacturing unit at a location can bring small business activities like hotel and restaurant facilities around it. Twenty percent of small business founders are women. The typical woman entrepreneur is in early middle age and has children who are either grown or in school. Most of the women do not have degrees, but have attended one or more small business management courses. Thirteen percent of the women said that they had always wanted to have their own business. Most of the businesses founded by women are in the service sector. Women tend to do more research than men before starting a business, and are less likely than men to enter into partnerships. Women tend to have less start-up capital than men, with an average of 5,500 pounds sterling for women compared to 13,800 for men.(Lewis et al, 1987) Women are mostly hesitant in starting big businesses because of so many factors. Most of the women like to have their own business independently. They will often aware of their limitations and hence will select only those businesses which were easy to mange by them. A big business startup can thus raise the living standards of socially backward people by encouraging them to start associated businesses. Business startups only at a particular region may not be good for the society since it creates two types of citizens, poor and rich among society. If all the businesses concentrate on a particular region, only that region will be developed economically compared to other regions. Hence business startups must be scattered all over the country in order to ensure social justice to all people. Conclusions Business start-ups are equally related to economical, political and social aspects. We cannot conclude that which one is more dominant over others. A business will function smoothly only if all these three things combine well. Even socially and economically assisted businesses can fail if the political support is not there. Same way politically and economically assisted business startups can fail if it does not have the social support. Business startups are encouraged by almost all the countries because of its importance in the sustained development of economy in the country. No country can keep a blind eye towards business setups because of the immense utility of such things to the society. References 1. Start-up procedures - An overview,(n,d) Retrieved on April 7, 2009 from 2. Dobson Jason, (2009), Weathering the economic storm: Start-ups speak out, Retrieved on April 7, 2009 from 3. Krotz Joanna L., (2009) C corporations: Benefits are a big (deductible) benefit, Retrieved on April 7, 2009 from 4. Lewis, Richard, Trotman-Dickenson, Danusia, Griffith, Nigel, (1987), Start-ups Retrieved on April 7, 2009 from 5. Hybrid Value Chain, (n.d) Retrieved on April 7, 2009 from 6. KWAN Chi Hung, (2004), ) Retrieved on April 7, 2009 from The Political Aspect of Chinas Business Cycle - Synchronization with the Communist Party Congress Retrieved on April 7, 2009 from Read More