the essentials of enterprise development: why and how?
DESCRIPTION
The Essentials of Enterprise Development: Why and How?. Dr John Walsh, Shinawatra International University, August 2010. Topics. different levels and dimensions of various types of enterprises the different categories of stakeholders - PowerPoint PPT PresentationTRANSCRIPT
The Mekong Institute, Khon Kaen 1
The Essentials of Enterprise
Development: Why and How?
Dr John Walsh, Shinawatra International University, August 2010
The Mekong Institute, Khon Kaen 2
Topics different levels and dimensions of various
types of enterprises the different categories of stakeholders the frameworks employed by governments
in creating favourable environments for enterprise development
approaches and tools to develop the enterprise sector
The Mekong Institute, Khon Kaen 3
Competencies Describe the different levels and dimensions of the
contexts in which enterprises operate, categories and roles of various stakeholders in the enterprise sector;
Explain the meaning of a “developed” enterprise in terms of enterprise viability, productivity, competitiveness, innovation, self-renewal and sustainability;
Explain the importance of promoting and developing enterprises and national private sectors;
Identify the main frameworks employed by national governments to achieve an improved environment for enterprise and private sector development;
Identify and explain the approaches, tools and methodologies to develop the enterprise sector.
The Mekong Institute, Khon Kaen 4
ScheduleTuesday Wednesday Thursday Friday
9:00-10:15
Introduction Being Entrepreneurial
What Governments Do to Promote ED
Field Visit
10:45-12:00
Preparation for Group Country Presentations
Case Study Group Exercise
Capacity Development
Field Visit
13:30-15:00
Group Country Presentations
Problems Facing MSMEs
Case Study Preparation for Group Presentations on Field Visit
15:30-17:00
Group Country Presentations
Case Study Group Exercise
Preparation for Field Visit
Group Presentations and Wrap Up
The Mekong Institute, Khon Kaen 5
Part I: What Are MSMEs?
The Mekong Institute, Khon Kaen 6
What Are MSMEs? Micro and small business enterprises Micro-firm: four or fewer workers Small firm: 5-19 workers Medium firm: 20-199 employees. In Laos, according to the Decree on the Promotion and Development of
Small and Medium Sized Enterprises (No. 42/PM), SMEs are defined as dependent enterprises that legally register and are operating in accordance with the prevailing laws of Laos (Prime Minister’s Office of Lao People’s Democratic Republic [PMO. Lao PDR], 2004.a). Small enterprises normally have an annual average number of employees not more than 19 persons, with total assets not exceeding US$25,000 or an annual turnover not exceeding US$40,000. Medium sized enterprises have an annual average number of employees not exceeding 99 persons, with total assets not exceeding US$210,000, or an annual turnover not exceeding US$100,000
The Mekong Institute, Khon Kaen 7
How Many MSMEs Are There? Malaysia: 900,000 “Today, there are five recognized SME sectors in China –
industrial, construction, retail, transportation and hospitality. The classification system defines SMEs as companies with sales between RMB30 million and RMB400 million with a workforce ranging from 400-3,000 employees.
Companies that fit this profile in China are vital to China’s economy as generators of employment, revenue and innovation. By 2007, China had 42 million SMEs, which accounted for 99.7% of the total number of enterprises in the country. SMEs also accounted for more than 68% of China’s exports and 75% of the new jobs created nationwide each year, while registering more than 65% of China’s patents.”
The Mekong Institute, Khon Kaen 8
What Do MSMEs Do? Mostly in service or retail sectors Street vendors, market stall holders,
scavengers, masseurs, mobile food sellers, handymen, electricians and carpenters,
Business model: sole proprietorship, partnerships, limited liability and franchising
The Mekong Institute, Khon Kaen 9
The Mekong Institute, Khon Kaen 10
What Is the Importance of MSMEs?
Create employment Generate income Spot market gaps Adapt new technology Flexible and quick to change Transfer skills and technology to local
economy
The Mekong Institute, Khon Kaen 11
Advanced Industrial Planning Sub-contractors Industrial parks/export zones Positive and negative externalities of
international and domestic investment Not all benefits can be retained within the
country
The Mekong Institute, Khon Kaen 12
Business Cluster “A group of small firms from similar industries that
team up and act as one body. Creating a business cluster enables firms to enjoy economies of scale usually only available to bigger competitors. Marketing costs can be shared and goods can be bought more cheaply. There are also networking advantages, which small firms can share experiences and discuss business strategies.”
The Mekong Institute, Khon Kaen 13
Features of Clusters Each firm concentrates on its speciality Efficient and swift-moving Networks replace hierarchies and long-term
commitment Geography can in some cases be ignored
The Mekong Institute, Khon Kaen 14
Part II: Being Entrepreneurial
The Mekong Institute, Khon Kaen 15
Being Entrepreneurial Approximately 8-900,000 businesses in
Thailand. Most are single-person businesses.
Thai people are entrepreneurial Entrepreneur: a French word meaning
‘between things’
The Mekong Institute, Khon Kaen 16
What Is an Entrepreneur? Schumpeter: “a person who destroys the
existing economic order by introducing new products and services, by creating new forms of organisation or by exploiting new raw materials.”
E.g. Google, Microsoft, Air Asia But most are much smaller scale
The Mekong Institute, Khon Kaen 17
An entrepreneur is someone who perceives an opportunity and creates an organisation to pursue it.
The entrepreneurial process involves all the functions, activities and actions associated with perceiving opportunities and creating organisations to pursue them.
The Mekong Institute, Khon Kaen 18
Stages of the Entrepreneurial Process Innovation Triggering event Implementation Growth
Most new ideas come from existing work place or similar activity.
The Mekong Institute, Khon Kaen 19
Entrepreneurial Traits Personal attributes and environmental
factors influence entrepreneurial ability.
Both of these can be influenced externally – or be taught. But luck is the most important thing.
The Mekong Institute, Khon Kaen 20
Personal Attributes Higher need for achievement Higher locus of control
10 Ds: dream; decisiveness; doers; determination; dedication; devotion; details; destiny; dollars; distribute (delegate)
The Mekong Institute, Khon Kaen 21
Environmental Factors Role models Clustering of activities Family responsibility Experience, optimism and energy Ability to deal with uncertainty
The Mekong Institute, Khon Kaen 22
Fail to Prepare; Prepare to Fail The crucial ingredients for entrepreneurial
success are a superb entrepreneur with a first-rate management team and an excellent market opportunity.
In entrepreneurship, as in any other profession, luck is where preparation and opportunity meet.
The Mekong Institute, Khon Kaen 23
Important Factors Idea – which need not be unique or new Customer need – which is crucial Timing Management experience Resources: low overheads; high
productivity; minimal ownership of capital assets
The Mekong Institute, Khon Kaen 24
Opportunity Recognition Determining fit Balancing risk and reward
The business sheet may be obsolete once printed (i.e., no plan survives first contact with the enemy)
The Mekong Institute, Khon Kaen 25
The Role of Ideas The great mousetrap fallacy Technology myopia Getting to market first
The Mekong Institute, Khon Kaen 26
Pattern Recognition Experience Transferring ideas to new applications Transferring knowledge from one domain or
market to another Recognising and understanding human
(customer) bevaviour
The Mekong Institute, Khon Kaen 27
Enhancing Creative Thinking The efficiency of a person’s creative process can
be markedly increased if he or she understands the psychological process by which the process operates
The emotional component in the creative process is more important than the intellectual and the irrational more important than the rational
The emotional, irrational elements need to be understood to increase the probability of success in a problem-solving situation
The Mekong Institute, Khon Kaen 28
Ideas and Opportunities “An opportunity has the qualities of being
attractive, durable and timely and is anchored in a product or service, which creates or adds value for its buyer or end user.”
Most frequently comes from work activity (i.e. invisible to customers)
The Mekong Institute, Khon Kaen 29
Environmental Issues Changes in the environment provide
opportunities They change in space and time They must be married to business goals
The Mekong Institute, Khon Kaen 30
Real Time Windows of opportunity in product or
service markets Life cycle concept Length of the product cycle
The Mekong Institute, Khon Kaen 31
Part III: Problems Facing MSMEs
The Mekong Institute, Khon Kaen 32
Main Causes of Small Business Failure
Lack of capital Lack of management skill Lack of marketing skill Inability to adapt to change Cash flow problems External shocks
The Mekong Institute, Khon Kaen 33
Purposes of Capital Create initial business opportunity Operating costs Purchasing stock Research and development (R&D)
The Mekong Institute, Khon Kaen 34
Sources of Capital Self savings Self borrowing (e.g. credit card) Family and friends savings and borrowing External sources: banks, co-operatives,
venture capitalists, micro-finance schemes
The Mekong Institute, Khon Kaen 35
ED during a Time of Crisis Reducing expenditure Reducing inventory Relationships reduce transaction costs Greater variety and flexibility of
goods/services assortment Reducing capital asset expenditure Flexibility of employment for micro-SMEs
The Mekong Institute, Khon Kaen 36
Management Skills Motivation and human resource
management Research and development Accountancy (and bookkeeping) Planning Innovation
The Mekong Institute, Khon Kaen 37
Stakeholder Issues All those individuals, organisations and
institutions materially affected by the actions of a firm
Includes: employees, shareholders, government, neighbours, suppliers, customers etc
The Mekong Institute, Khon Kaen 38
Part IV: What Governments Do to Promote ED
The Mekong Institute, Khon Kaen 39
Labour Market Types: Anglo-American
Small state with little regulation Weak trade unions = flexibility State focuses on enhancing job creation Responsibility for training and mobility is on
the individual
The Mekong Institute, Khon Kaen 40
Labour Market Types: European Public and private sector partnership Enterprise unions Firms take long-term view and maintain
employment Responsibility for training and skill
development with the state
The Mekong Institute, Khon Kaen 41
Labour Market Types: East Asian State sets developmental targets and asks
private sector to meet them Labour rights very limited but firms are
paternalistic Firms are given resources to conduct such
training as they require
The Mekong Institute, Khon Kaen 42
Labour Market Types: Autocratic/Communist
Government agencies make all decisions based on national priorities
Labour is allocated to specific tasks Public sector is responsible for all
improvements to labour market
The Mekong Institute, Khon Kaen 43
Types of Public-Private Partnership
Joint training schemes (e.g. apprenticeships provided in Japan)
University-private sector R&D BOT (build-operate-transfer) schemes Concessions Contracting out public services
The Mekong Institute, Khon Kaen 44
What Governments Do to Support ED at the Macro Level
Set overall strategy (macro-level) Provide detailed statistics to support
decisions Identify national priorities Acts as consensus-maker
The Mekong Institute, Khon Kaen 45
Example: Government of Sri Lanka The Government of Sri Lanka is strongly committed to PSD
and fostering SMEs, as shown in its most recent budget. While the budget is not specific on desired PSD outcomes, the impact is flagged in the economic growth targets.
Sri Lanka has a well-established Department of Census and Statistics, which acts as a key agency for advice and collection of data on behalf of all other government agencies. It provides a considerable number of analyses of the economy, including information on establishments of businesses and aggregate private sector information.
The Mekong Institute, Khon Kaen 46
This is available in hard and CD format. In addition, it conducts special studies commissioned by other ministries, such as Employment and Unemployment in Sri Lanka—Trends, Issues and Options. Further, it carries out analyses that can feed into policy decisions and are reflected in the budget strategy. However, a specific analysis of PSD has not been conducted. The Department of Census and Statistics cooperates with agencies such as ADB and World Bank in seeking to compile such information.
The Mekong Institute, Khon Kaen 47
Choosing IndicatorsSpecific Clear
Measurable Relevant
Achievable Economic
Relevant Adequate
Timely Monitorable
The Mekong Institute, Khon Kaen 48
Benefits of Indicators (i) Lower risk of subjectivity, because they rely
on a uniform indicator and methodology for their computation.
(ii) Comparative data, providing a powerful motivator for reform (e.g., country B decides it must initiate reforms to score better than country A next time). This is possible because of indicators being prepared on the same basis.
(iii) Reliability and consistency in measuring the impact of reform processes over time.
The Mekong Institute, Khon Kaen 49
Some Problems Governments Face Lack of capacity Capture of resources by some government
agencies (e.g. military, regions) Empire-building by Ministries and
replication of activities
The Mekong Institute, Khon Kaen 50
What Aid Agencies Do to Support PSD/ED
Grants for policy development Improvement of government services and
systems loans to boost the banking sector and
provide for essential transport and energy infrastructure
The Mekong Institute, Khon Kaen 51
Bulgarian SME Promotion Agency The Bulgarian Small and Medium Enterprises Promotion Agency
(BSMEPA) is a government body under the Minister of Economy. It was established with the amendments of the Law for SMEs in 2004 as a successor of the Bulgarian Trade Promotion Agency (BTPA) and the Agency for Small and Medium-sized Enterprises (ASME). BSMEPA has four specialised operational Departments:
Information Services and Regional Coordination General Department Technological Development and Innovations Department Pre-accession Projects and Programmes Implementation Department Competitiveness and Entrepreneurial Skills Department.
Each of these departments has its own area of expertise and set of activities and together they elaborate and implement the major functions of the Agency, namely:
information and consulting services, support to innovative projects and new technologies, assistance of Bulgarian companies in growing and entering into the foreign markets, managers training and transfer of experience through the implementation of
international projects.
The Mekong Institute, Khon Kaen 52
Micro-Level Government Activities
Provide networking opportunities Training and consultancy services Small business financing (e.g. export bank) OTOP (One Tambon One Product)
The Mekong Institute, Khon Kaen 53
Part V: Capacity Development
The Mekong Institute, Khon Kaen 54
Capacity Development
“Capacity is the ability of people, organisations and society as a whole to manage their affairs successfully.”
The Mekong Institute, Khon Kaen 55
When Is Capacity Development Change Likely to Happen? Dissatisfaction with the current situation A credible change process to get from the present
situation to a future state A shared vision about the future The sum of these factors will make up the
pressure to change These three basic elements are dependent on
each other The elements are not static
The Mekong Institute, Khon Kaen 56
The Mekong Institute, Khon Kaen 57
Organizations operate in a context Performance leads to outputs Output leads to outcomes and impact Capacity resides and develops internally—
but whether and how capacity develops may largely be determined by the “demand-side” or external factors
The Mekong Institute, Khon Kaen 58
The Mekong Institute, Khon Kaen 59
The Mekong Institute, Khon Kaen 60
The End