Question

Entrepreneurship does not emerge and grow spontaneously. Rather it is dependent upon several various environmental factors. Explain them.

Answer 1

Yes,it is correct to say that “Entrepreneurship does not emerge and grow spontaneously.” It is dependent upon several factors , like economic, social, political, legal and other factors.
The basic PESTEL analysis includes four factors:
Political factors are basically to what degree the government intervenes in
the economy. Various political factors include areas are:
(i)Taxation Policy, Trade Regulations, Tariffs policy, Policy regarding export and import.
(ii) Government Affairs: Government in power, attitude of government towards different groups of the societies, Government Stability, Policy changes implemented by changed government, Labour laws, Unemployment policy.
(iii)Goods and services which the government wants to produce and how much quantity to be produced.
(iv)It also influences the health, education, and infrastructure of a nation.
Economic factors:
(i)Gross domestic product, Income level at national level and per capita income, economic growth.
(ii)Profit earning rate, interest rate, exchange rate, inflation rate, fiscal and monetary policy of the government. For example, interest rates will affect the cost of debt and, potentially, the cost of equity, e.g. when interest rates increase the cost of debt increases, which increases the firms cost of capital to what extent a business grows and expands.
(iii)Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy.
(iv)It includes the close study of important variables like supply and demand. Details of consumer trends, economic preference, costing, discounting, etc. are all economic decisions.
(v)Economic details will also help the entrepreneur in determining the size of the project and the reasons of finance and have major impacts on how businesses operate and make decisions.
Social factors:
(i) Social factors include the cultural aspects and include health conscious¬ness, population growth rate, age distribution, career attitudes and emphasis on safety.
(ii)Trends in social factors affect the demand for a company’s products and how that company operates.
(iii)For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labour).
(iv)Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers).
Technological factors:
(i)An entrepreneur must be aware of importance of technological development for the firm and how it is to be resolved.
(ii)He should show complete knowledge of technology required to produce the product?
(iii)Availability of training at a local area or can outsource it.
(iv)What would be the position of supply of plant and machinery for such a technology?
(v)It also includes technological aspects such as resources and development activity, automation, technology incentives and the rate of technological change.
(vi)Influence various decision for better and latest technology, costs, quality, and lead to innovation.
Environmental factors:
(i)It includes ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.
(ii)Growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones.
Legal factors:
(i)It includes discrimination law, consumer law, antitrust law, employment law, and health and safety law.
(ii)These factors can affect how a company operates, its costs, and the demand for its products.