Enhancing and Improving the Stock of Factor Services - Dissertation Example

?Malaysia Entrepreneurship Table of Contents Entrepreneurship and Economic Growth 3 Operational Management Strategies for Entrepreneurship 5 Internaland External Factors 9 Risks 9 Location Planning 10 Globalization 10 Reference List 11 Entrepreneurship and Economic Growth Enhancing and improving the stock of factor services have always been one of the pivotal task necessary for the economic development of any nation. The economists have segregated four major categories of factor services, land, labor, capital and entrepreneurship. Like all the factor services generate income or economic surplus, the returns of entrepreneurship is in the form of profit. Entrepreneurial growth in any economy helps to achieve overall economic progress in a nation. Human beings are the super animals; all of them possess the power to innovate new things that would enhance the quality of living. Thus, identifying the new methodologies encompasses the most important characteristics of entrepreneurship. In short an entrepreneur is the one, who becomes a risk lover and accepts any upcoming risk, provided it associates the scope of achieving profit. In the modern world of globalization, business and trading activities are at its zenith. It is almost impossible to achieve economic growth in a nation without the expansion of entrepreneurial capabilities. Entrepreneurs in a nation give rise to small and medium scale enterprises that generate more employment opportunities in the country. A rise in the level of employment ultimately stimulates the growth of Gross Domestic Product (GDP) in a country. Small scale industry growth is the primary aspect that helps in reducing poverty in an economy. Almost all the developed and developing countries in the world are now opting for rise in the level of entrepreneurial activities. The government of any nation should actively support the entrepreneurial activities in the economy, as this is the only key that would help in attaining economic development. The Organization for Economic Corporation and Development has emphasized that “Policies to foster entrepreneurship is essential for job creation and economic growth” (USINFO, n.d). It is estimated in 2013 that entrepreneurs are the underlying cause that helps to facilitate the growth of the U.S. economy. Most of the jobs and inventions in U.S. result from the current entrepreneurial activities. In early 2002, it was estimated by the U.S. Census Bureau that almost three forth of the U.S. businesses were tackled by entrepreneurs (DOL, 2013). Figure 1: U.S. Growing Entrepreneurship 2006-2011 (Source: Forbes, 2012) Malaysia is a nation, whose income is categorized in the group of middle income nations. Since 1970’s the country has shown rapid growth and progress, transforming itself as a multi-sector economic system. It is estimated that small scale industries contribution in the economy is higher by almost 2 %, than the large scale business firms in Malaysia (CIA, 2013). The enormous number financing, infrastructural and business advisory policies framed regarding the entrepreneurship in Malaysia shows high prevalence of the same in the country. The Ministry of Entrepreneurial Development was established in Malaysia long ago in 1995 (USINFO, n.d). This state body ensured that the nation enjoys economic development with the help of capitalist class growth. In the recent times most of the economies are stimulating their economic growth with the virtues of entrepreneurship. Figure 2: Growing Popularity of Entrepreneurship (Source: MSU, 2013) Operational Management Strategies for Entrepreneurship The business environment of medium and small scale industries is highly competitive. The method and strategies used in the operational activities successfully helps a firm to generate competitive advantage among the rivals in the market. Operations involve managing business resources and modifying the procedure of production of goods or services. Figure 3: Operational Strategy (Source: Slack and Nigel, 2005) The above diagram shows that operations management involves four perspectives that look into both resource and market requirements of a business. Figure 4: Task of the Four Perspectives (Source: Slack and Nigel, 2005) The above diagram shows the main four tasks to be encountered by an entrepreneur to successfully manage its business operations. The management structure for a small or medium scale entrepreneurial firm must be very efficient. Today’s business would only succeed if the promoter is able to mitigate the right information to the right people, in perfect time. The entrepreneur must create customer value by proving them products with low cost and good quality. The company must generate value by focusing in its competences and capabilities. The entrepreneur must always try to accumulate only those resources that are scarce, rare and in demand in the market. This would help the business to be unique in the industry. (Source: Slack and Nigel, 2005) The above Venn diagram shows how a company that is newly formed may focus on the core competent resources. The company must concentrate in its industry value chain. This chain would involve the following steps:- (Source: Author’s Creation) Once the entrepreneur has decided over the core resources, over which the business firm will have competitive advantage, he should consider the steps associated in different operational activities. The core operational strategies have to be formulized on the basis of the creation, development and packaging of the product. The entrepreneur should always try to expand its business operations in new markets. This can be done by the entrepreneur by applying Blue Ocean strategies. Producing higher output for a larger customer base will help the entrepreneur to enjoy the benefits of economies of scale in production. By economies of scale in production process, the business firm would be able to reduce it’s per up cost of production. If the entrepreneur is successful in incorporating economies of scale in manufacturing process, then it would be able to enjoy Natural Monopoly power in the market. This is because though the potential entrants would like to enter the market but still they would not do so, as they would be unable to lower the average cost in production process. The entrepreneur must try to adopt modern techniques of production. This will help to reduce the cost of manufacturing, at the end the primary concern of the firm would be to maximize output subject to the given resource or minimize cost subject to the given prices of the factors of production. When packaging is concerned, the entrepreneur should pack its products with eco-friendly packages. Consumers are now becoming aware about the factors relating to environmental protection. They are now more indented towards sustainable consumption methods. After all this is the era of consumerism, what comes first is mitigating the exact tastes and preferences of the buyers (Henry, 2008). Internal and External Factors The business of an entrepreneur is affected by many external factors. The acronym PESTLE is often used to describe these factors. Political changes introduced by the government may be favorable or unfavorable for a business firm. The economic factors like the fluctuations of currency and exchange rates affect the operations of a business firm. Social changes and the technological up gradations also influence the activities of a business organization. Legal and environmental changes are also not ignorable in the modern business day to day activities. When the business entrepreneur will consider the matters of internal factors, emphasis should be given in the firm’s major opportunities and strengths. On the other hand, the business should consider several threats and weaknesses inherent in the scale of operations. The analysis of internal factors effecting firm’s decisions is often termed under the acronym SWOT (Henry, 2008). Risks The current market is highly volatile, thus it becomes crucial for a business to make its state of affairs risk proof. Different statistical and mathematical tools may be used by the business firm to predict the upcoming risks in the business. Value at Risk (VAR) modeling is a method that helps to measure the risk associated with an economic transaction. Different forecasting models may also be utilized to predict the precise nature of volatility of the time series data of prices, exchange rates etc. The company must have certain risk management set ups in the business operations. Sufficient number of insurances should be kept to protect the tangible and non tangible resources of the business firm (Henry, 2008). Location Planning The location planned for a business is one of the most crucial tasks to be adopted while starting up a new firm. The business should always locate its manufacturing division in the outskirt of the major cities. By doing so, the entrepreneur would abide by the rules of environmental protection. Moreover, the factory should be settled in a position where the transportation facilities are excellent. This would help the company to efficiently transport its manufactured materials to the different retail destinations. Other facilities like electricity, water should be adequately available in the manufacturing outlet of the firm. The general office should be located in such a place from where it will be easy to communicate other important entities concerning the general business activities (Henry, 2008). Globalization Business entrepreneurs must always utilize the advantages catered by globalization and liberalization prevailing in the world economy. The scale and scope of a business organization should no longer be confined in its domestic border’s. The entrepreneur should always outsource all those resources, over which the business firm does not have competitive advantage. Expanding the operations in the foreign markets will augment the competitive strength of a business and will help it experience the fruits of wide buyer base. At the end it should be remembered that the business that successfully operates both in national and foreign markets would flourish in the long run (SBA, 2013). Reference List CIA, 2013. World Fact Book. [online] Available at [Accessed 4 September 2013]. DOL, 2013. Encouraging Future Innovation: Youth Entrepreneurship Education. [online] Available at [Accessed 4 September 2013]. Forbes, 2012. Looking for a new job? Entrepreneurial Companies Show the Way. [online] Available at [Accessed 4 September 2013]. Henry, A., 2008. Understanding strategic management. Oxford: Oxford University Press. MSU, 2013. Global EDGE Blog: GE Blog Series: Global Entrepreneurship Part 2 - Cultural Impacts. [ONLINE] Available at [Accessed 4 September 2013]. SBA, 2013. Small Scale Business Administration. [online] Available at [Accessed 4 September 2013]. Slack, N. and Nigel, S., 2005. Operations strategy. New Jersey: Pearson Education. USINFO, n.d. Principles of Entrepreneurship. [pdf] Available at < http://usinfo.org/zhcn/DOCS/enterp.pdf > [Accessed 4 September 2013]. Read More