Question

a. Define Entrepreneurship (Give three definitions and briefly explain them)(Max. 400 words)

b. Describe its roles (e.g., its economic and social contribution.(Max. 200 words)

c. SME Support Systems in Oman (The students should identify:

i. two SME support systems in the Sultanate of Oman, ii. the kind of ventures they support;

iii. The amount of finance/funding they provide; and iv. the qualifying criteria.)(Max. 350 words)

d. Briefly discuss the key issues in setting-up and running a small business (Briefly discuss five main issues)(Max. 150 words)

Answer 1

A) Entrepreneurship- can be defined as the ability and readiness to develop, organize and run a business enterprise along with any of its uncertainties( basically here I am referring to the risks involved) in order to make a profit. The most prominent example of entrepreneurship is the starting of new businesses.

In economics- entrepreneurship connected with land, labour, natural resources and capital can generate a profit. The entrepreneurial vision is defined by discovery and risk-taking and is an indispensable part of a nation’s capacity to succeed in an ever-changing and more competitive global marketplace.

Entrepreneurship- is the process of creating a new enterprise and bearing any of its risks, with the view of making the profit.It is an act of seeking investment and production opportunity, developing and managing a business venture, so as to undertake production function, arranging inputs like land, labour, material and capital, introducing new techniques and products, identifying new sources for the enterprise.

B)Roles of Entrepreneurship-

1. Helps in Capital generation:

Entrepreneurs mobilize the idle savings of the public through the issues of industrial securities. Investment of public savings in industry results in productive utilization of national resources. Rate of capital formation increases which is essential for rapid economic growth. Thus, an entrepreneur is the creator of wealth.

2.helps in Improving Per Capita Income in an economy:

Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources like land, labour and capital into national income and wealth in the form of goods and services. They help to increase net national product and per capita income in the country, which are important yardsticks for measuring economic growth.

3. Helps inGenerating Employment:

Entrepreneurs generate employment both directly and indirectly. Directly, self-employment as an entrepreneur offers the best way for independent and honorable life. Indirectly, by setting up large and small scale business units they offer jobs to millions. Thus, entrepreneurship helps to reduce the unemployment problem in the country.

4.Helps in balancing Regional Development:

Entrepreneurs in the public and private sectors help to remove regional disparities in economic development. They set up industries in backward areas to avail various concessions and subsidies offered by the central and state governments.

Public sector steel plants and private sector industries by Modis, Tatas, Birlas and others have put the hitherto unknown places on the international map.

5. Improves Living Standards:

Entrepreneurs set up industries which remove scarcity of essential commodities and introduce new products. Production of goods on mass scale and manufacture of handicrafts, etc., in the small scale sector help to improve the standards of life of a common man. These offer goods at lower costs and increase variety in consumption.

6. Economic Independence:

Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture indigenous substitutes of hitherto imported products thereby reducing dependence on foreign countries. Businessmen also export goods and services on a large scale and thereby earn the scarce foreign exchange for the country.

Such import substitution and export promotion help to ensure the economic independence of the country without which political independence has little meaning.

7. Backward and Forward Linkages:

An entrepreneur initiate a chain reaction. Setting up of an enterprise has several backward and forward linkages.

These are backward linkages. By increasing the supply of steel, the plant facilitates the growth of machine building, tube making, utensil manufacturing and such other units.

Entrepreneurs create an atmosphere of enthusiasm and convey a sense of purpose. They give an organization its momentum. Entrepreneurial behavior is critical to the long term vitality of every economy. The practice of entrepreneurship is as important to established firms as it is to new ones.

C) I) two SME support systems in the Sultanate of Oman-

AL RAFFD FUND-funding through Oman Development Bank (ODB) as well as other financial institutions, five per cent minimum lending target imposed on Banks by the Central Bank of Oman (CBO).

Oman Arab Bank-

Who is eligible ?
Any well managed, profit making business that has a valid commercial registration and business operation in the Sultanate is eligible to apply for SME finance.

D) key issues in setting-up and running a small business-

1. Client Dependence:
If a single client makes up more than half of your income, you are more of an independent contractor than a business owner. Diversifying your client base is vital to growing a business, but it can be difficult, especially when the client in question pays well and on time. For many small businesses, having a client willing to pay on time for a product or service is a godsend

Unfortunately, this can result in a longer-term handicap because, even if you have employees and so on, you may be still acting as a sub-contractor for a larger business. This arrangement allows the client to avoid the risks of adding payroll in an area where the work may dry up at any time. All of that risk is transferred from the larger company to you and your employees. This arrangement can work if your main client has a consistent need for your product or service. However, it is generally better for a business to have a diversified client base to pick up the slack when any single client quits paying.

2. Money Management:
Having enough cash to cover the bills is a must for any business, but it is also a must for every individual. Whether it is your business or your life, one will likely emerge as a capital drain that puts pressure on the other. To avoid this problem, small business owners must either be heavily capitalized or be able to pick up extra income to shore up cash reserves when needed. This is why many small businesses start out with the founders working a job and building a business simultaneously. While this split focus can make it difficult to grow a business, running out of cash makes growing a business impossible.

3. Fatigue:
The hours, the work, and the constant pressure to perform wears on even the most passionate individuals. Many business owners—even successful ones—get stuck working much longer hours than their employees. Moreover, they fear their business will stall in their absence, so they avoid taking any time away from work to recharge.

Fatigue can lead to rash decisions about the business, including the desire to abandon it completely. Finding a pace that keeps the business humming without grinding down the owner is a challenge that comes early (and often) in the evolution of a small business.

4. Founder Dependence:
If you get hit by a car, is your business still producing income the next day? A business that can't operate without its founder is a business with a deadline. Many businesses suffer from founder dependence, and this dependence is often caused by the founder being unable to let go of certain decisions and responsibilities as the business grows.

Meeting this challenge is easy, in theory—a business owner merely has to give over more control to their employees or partners. In practice, however, this is a big stumbling block for founders because it usually involves compromising (at least initially) on the quality of work being done until the person doing the work learns the ropes.

5. Balancing Quality and Growth:
Even when a business is not founder-dependent, there comes a time when the issues from growth seem to match or even outweigh the benefits. Whether a service or a product, at some point a business must sacrifice in order to scale. This may mean not being able to personally manage every client relationship or not inspecting every widget.

Unfortunately, it is usually that level of personal engagement and attention to detail that makes a business semi-successful. Therefore, many small business owners often find themselves tied to these habits to the detriment of the company's growth. There is a large middle ground between shoddy work and an unhealthy obsession with quality, so it is up to the business owner to navigate the company's processes towards a compromise that allows scale without hurting the brand.