Entrepreneurship: a microenterprise perspective.
Ahmad, Moid U.
[ILLUSTRATION OMITTED]
Introduction
Self-employment in general and microenterprise in particular is
evolving as a prospective option for income generation and the reduction
of poverty in developing economies such as India (Bharti, 2014).
As per eleventh five year plan 2007-2012, unemployment has been
targeted at 4.83 percent by 2012. Considering the size of Indian
population, this number is huge. These Very Small Businesses or
microenterprises can help in creating employment. According to a report
of task force on MSMEs in India, about 94 percent of the types of MSMEs
operate on sole proprietary basis. This point has been validated by
findings of the current research also.
"The role of micro, small and medium enterprises (MSMEs) in
the economic and social development of the country is well established.
The MSME sector is a nursery of entrepreneurship, often driven by
individual creativity and innovation. This sector contributes 8 per cent
of the country's GDP, 45 per cent of the manufactured output and 40
per cent of its exports. The MSMEs provide employment to about 60
million persons through 26 million enterprises. The labour to capital
ratio in MSMEs and the overall growth in the MSME sector is much higher
than in the large industries. The geographic distribution of the MSMEs
is also more even. Thus, MSMEs are important for the national objectives
of growth with equity and inclusion..." (source: Report of Prime
Minister's Task Force on MSME, 2010).
Barczyk, Husain and Green (2007) define a 'Very Small
Enterprise' as an organization engaged in the creation of products
or the provision of services for profit that employs 10 or fewer
employees. For the purpose of this research, Microenterprise or Very
Small Business (VSB) has been defined as an organization with number
employees/partners as five or less.
Financial criteria are usually considered to be the most
appropriate measure of business success, yet many small business owners
are motivated to start a business on the basis of lifestyle or personal
factors. Non-financial goals could lead to alternative measures of
success, particularly In the small business sector. To explore the
significance of these two dimensions of success, 290 small business
owner-managers in Western Australia were surveyed by Elizabeth and Alan
(2004). In the survey respondents rated the importance of items relating
to lifestyle and financial measures, which they used to judge their
business success. Findings suggest that both financial and non-financial
lifestyle criteria are used to judge business success, with the latter
being more important. Personal satisfaction and achievement, pride in
the job and a flexible lifestyle are generally valued higher than wealth
creation. Personal factors such as age and also business characteristics
influenced perceptions on the importance of these factors.
Literature Review
Kantor (2002) demonstrated weaknesses in the ability of orthodox
microenterprise development theory to represent issues relevant to
women's success in the sector. Researchers tend to use gender
simply as a variable to explain success without understanding gender as
a social construct. Such work disregards how culturally specific power
relations influence women's opportunities for success. Dunn et al.
(2011) studied the pricing policies and practices by small business
managers/owners in northeast Louisiana. In particular, the question
whether small businesses follow the same well-established economic
principles and marketing practices as large businesses was examined.
Five hypotheses were developed and analyzed. First, prices are set to
maximize profits. There was no support for this hypothesis in the data.
Second, prices are strongly influenced by competitors' pricing.
There was very limited support found for this hypothesis. Third, prices
are strongly influenced by cost factors. Fourth, prices are changed in
response to changes in cost or market conditions. Fifth, other options
besides price changes are used to impact sales. There was strong support
found for the third, fourth and fifth hypothesis. Thus, there is very
strong evidence that small business managers and owners behave as
economic theory would suggest when making pricing decisions except when
it comes to trying to profit maximize. Managers are more concerned with
making a "satisfactory" profit, than with making the maximum
profit. We can conclude from this study that very small businesses in
north eastern Louisiana generally follow the basic principles of
economic theory in setting and maintaining prices for their products and
services. Four of the five sub-hypothesis have been supported in this
study. In setting prices, small businesses appear to be strongly
influenced by competitors pricing and costs factors. In changing prices
they continue to be strongly influenced by changes in costs or market
conditions. And an overwhelming majority of the small businesses try to
compete in ways other than pricing. Ibrahim (2012) indicate that the
planning practices of smaller businesses may be more sophisticated than
generally perceived. Almost 86 percent of the responding companies
reported that they do prepare some type of written plan, and
approximately one-half prepare formal plans with long-term
time-horizons.
A contrasting study was with Hurst (2011) showed that most small
business owners are very different from the entrepreneurs that economic
models and policymakers often have in mind. Using new data that sample
entrepreneurs just before they start their businesses, the researcher
showed that few small businesses intend to bring a new idea to market or
to enter an non served market. Instead, most intend to provide an
existing service to an existing market. Aktas (2011) finds out that Very
Small Businesses (VSB) experience financing constraints unlike those
encountered by larger companies; however, they are rarely studied. Their
unique characteristics, including the important information asymmetry
they suffer and the predominant role of their shareholder-manager, may
be well suited to a pecking order theory framework as a means to analyze
their capital structure decisions. Specifically, VSB financing choices
appear to follow a hierarchical order, such that they prefer internal to
external financing and debt to stock issuance. Rwigema and Karungu
(1999) bolster the case of Small, Medium and Micro Enterprises (SMMEs)
and hold the following view:
1. Small enterprises have shown remarkable capacity to absorb
labour.
2. Assistance to microenterprises display sensitivity to poverty
mitigation.
3. SMMEs are locally owned and controlled and thus strengthen the
social system and culture.
4. The products of SMMEs tend to originate from indigenous craft
traditions and are more likely to satisfy the need of the poor.
5. Local differences in taste are more pronounced.
6. SMMEs provide a nursery and proving ground for entrepreneurship
and innovation.
The first observation made by Rwigema and Karungu (1999) has been
validated in the present research as it was found that the entrepreneurs
increase hiring as the business grew. The respondents were also
confident of poverty mitigation and most of them were of the opinion
that their economic status has improved since they started the business.
Gunu (2010) states that the problem of Nigeria's mass poverty
cannot be solved by any specific top down one size fits all solution
conceived by an elite experts no matter how well conceived and how
experienced the experts. He states that there exists millions of micro
solutions which can only be discovered and implemented by the mass poor
themselves from the grassroots level. To mobilize the mass poor to
increase their individual productivity requires the development of
entrepreneurship in micro enterprises. The assumption, according to him,
is that if emphasis is placed on the promotion of micro enterprises,
they will encourage and nurture self employment. Ssewamala et al. (2006)
examined whether there is a role for microenterprise development as an
anti-poverty strategy in the United States. This question is important
because sceptical views exist regarding whether, generally, poor
Americans would have the enthusiasm to undertake the risk of dealing
with small businesses, especially given that the United States has a
public welfare system to take care of the poor and "abundant
jobs" for those with the skills. Using data from 14 community-based
programs promoting small-business investment through Individual
Development Accounts (IDAs), this study finds that, overall, there is a
considerable level of interest in saving for and investing in
small-businesses among poor Americans, including those who are less
advantaged in terms of income poverty and employment. Policy makers
should thus consider promoting IDAs/subsidized savings for
small-businesses development as a potentially viable strategy to address
income poverty and inequality in the United States.
Given the uncertainty surrounding the role and meaning of
sustainability in business practice, it is important to explore the
legitimacy drivers that newcomers (entrepreneurs) to a field derived
from balancing sustainability and profitability. Drawing on the
institutional logics literature, this article by Dirk and Maxim (2011)
theorizes the characteristics of the field, as well as entrepreneur
characteristics and actions, influence the legitimacy derived from
adhering to the field-prescribed balance between sustainability and
profitability. First, regarding the role of field-level factors, they
discussed how the impact of field-imposed expectations on entrepreneur
legitimacy may be amplified for dominant and mature fields. Second,
regarding the role of micro-level factors, they highlighted that whilst
previous experience of the field-prescribed balance between
sustainability and profitability may amplify the impact of field-imposed
expectations on legitimacy, strategic actions can suppress this impact.
Scholars who study entrepreneurship have lent great value by exploring
the factors that explain how entrepreneurs create new businesses and
thus, how societies and economies grow and prosper. Although there has
considerable research based on psychological and economic approaches to
entrepreneurship, the influence of socio-cultural factors on enterprise
development remains under studied. Patricia et. al.(2011) tried to
integrate, from a theoretical perspective, the socio-cultural factors
and entrepreneurial activity. In this sense, the article points out that
the institutional approach could be an apt framework to develop future
research analyzing the socio-cultural factors that influence the
decisions to create new businesses. According to Chakraborty and Borman
(2012), the development of rural microenterprises on a planned basis can
play an effective role in increasing production, productivity and
economic wealth, and can give a broader and stronger base to the rural
economy in general. They also concluded that a combined effort of the
government, family members and total involvement of the people at the
grassroots level will go a long way in bringing about planned
development of rural microenterprises. Kantor (2002) conclude that women
empowerment outcome should include issues such as control over benefits
from business , involvement in market transactions for women would
improve her decisions in house hold. The author also states that
empowerment outcomes are not only relevant in developing countries but
also for marginalized groups in developed countries also.
Nag and Das in their paper emphasize the importance of
microenterprises that they play a critical role in the economic
development of any country, particularly in a developing country. They
further state that the role played by these microenterprises in India is
immense as they are effective tools for sustainable livelihood,
employment generation and empowerment of women, thus contributing to the
country's GDP and social upliftment of the society. Their paper
tries to develop a framework for the development and success of
microenterprises in India by considering two broad categories,
individual and business factors. One of the important conclusion from
their research is that there exists a negative relationship between firm
size and growth, especially for firms with less than 400 employees.
Ardichvili et al. (2003) found that personality traits are
identified as indicator of entrepreneurial alertness to business
opportunities. They identified optimism and creativity as two important
personal qualities. Epstein and Rogers (2002) outlined the competencies
of a skilled manager which are, communicates effectively, manages
rewards, recognizes achievement, presents a clear view, manages teams
effectively, manages the environment, matches people's skills with
tasks, provides the training, allocates resources generously and fairly,
and demonstrates high motivation and devotion to their work. Some of
these traits like 'devotion to work', 'manages the
environment' and 'matches people's skill with tasks'
were found present in the 'unskilled' entrepreneurs/manager of
microenterprises of the current research. According to Ladzani and Van
Vuuren (2002), training plays a crucial role in supporting small
businesses. They also recommended that entrepreneurship training should
be recognized as one of the basic requirements of starting and managing
a business. Solomon (2004) highlights the need for entrepreneurial
skills and business skills for the maintenance of the business. Business
and entrepreneurial skills are important for the sustainability and
profitability of businesses (Smith and Perks, 2006). Kunene (2008)
argued that the entrepreneur's initiative and skill are significant
determinants of success.
The sample used in this current research was mostly untrained and
in a developing economy like India, it is very difficult for the
microenterprises/small businesses to bear the training cost. Similarly
few authors have highlighted the need of initiatives and skills and thus
a paradox is created. Probably an India specific study on skills sets
found and required for microenterprises is very much required and should
be a prolific area of research.
According to Baum et al. (2001), personal qualities of
entrepreneurs serve to influence skills such as opportunity recognition
skills, which in turn affect the performance. Webb et. al (2013) examine
the role of resources in yielding competitive advantage for
microenterprises. They consider access to formal infrastructure, assets
that provide stability and business skills as potential sources of
competitive advantage thus pointing towards the involvement of
government in supporting microenterprises. Lalunthara and Jyoti Kumar
(2014) studied a sample of 406 microenterprises in Aizawl District of
Mizoram and examined the different dimensions of financial problems
faced by them. High rate of interest is rated as the most serious
problem, followed by low assistance from government agencies and slow
processes in banks and government agencies.
De Mel et al. (2008) used randomized grants to generate shocks to
capital stock for a set of Sri Lankan microenterprises and found that
average real return to capital in these enterprises is 4.6 percent-5.3
percent per year, substantially higher than market interest rates. On
examining the heterogeneity of treatment effects, returns are found to
vary with entrepreneurial ability and with household wealth, but not to
vary with measures of risk aversion or uncertainty. Bhatt (1997) argued
that microenterprise development can make significant contributions to
improving the living conditions of the disadvantaged by addressing the
economic needs of the poor on the one hand and focusing on social and
political dimensions of development on the other. Mckenzie and Woodruff
(2006) examine the interplay between entry cost and wealth distribution
in Mexico and conclude that Low-wealth entrepreneurs are unable to
finance profitable ventures. Servon et al.(2010) argue that businesses
with fewer than twenty employees are less likely to conform to the
traditional theories of small business. Considering the stages of start
up, early growth and expansion in a microenterprises allows to
understand the continuum of capital based not on firm size or age, but
rather on the stage in which the firm exists accounting for not only
those firms seeking to grow and expand or following a traditional linear
cycle of financial growth but also those businesses who by choice remain
small firms. Tanmbunan (2007) tried to present the current reality of
entrepreneurship development in Indonesia by examining the current
developments of SMEs in the country. It concluded that SMEs are of
overwhelming importance in Indonesia, as they account for more than 90
percent of all firms outside the agricultural sector, and thus are the
biggest source of employment. Although the representation of women
entrepreneurs is low, the growth of MIEs and SEs is very important as a
starting point for development of women's talent as entrepreneurs.
Third, women entrepreneurs are less educated than their men
counterparts, and this, together with other factors, may have been the
reason that women entrepreneurs in Indonesia are still scarce and are
concentrated in smaller sized/informal enterprises. Also, that the main
problem for SMEs is working capital and marketing.
Eversole (2003) states that labour availability encourage
alternative businesses in microenterprises because they sense a market
opportunity. Also, those microenterprises are flexible in their business
plan and take benefits from seasonal demand and may change the product
if they sense opportunity. Mattare et al. (2011) argue that with new
technologies, it is easier and, thus, more likely that individuals will
be able to launch new businesses away from urban centres. They found out
that all for all micro entrepreneurs, quality of life, a seeking of a
quieter, less stressful lifestyle, was a big factor in leaving the
traditional corporate world to start new businesses. In the research
they state that these micro-businesses can grow, thereby hiring more
people and profoundly impacting the jobless rate as well as reviving any
regional economic outlook if proper incentives and policies are enacted.
Bhensdadia and Dana (2004) in their research on globalization and
poverty indicate that there are benefits of globalization in terms of
more productive resources, improved access to technology, and related
policy improvements and there is an apprehension that the poor may be
left behind in the emerging competitive environment.
Research Methodology
The research was conducted in two phases. In the first phase a
pilot survey was conducted and in the second phase, the final survey was
conducted. The study was decided to be based on primary data collected
through questionnaires from respondents who run very small businesses
(1-5 employees) in towns and small cities. A questionnaire was framed in
line with the objectives of the study and was tested by conducting a
pilot survey in January, 2012.
Some significant inputs were received from the pilot survey which
was incorporated to develop a final questionnaire. The revised
questionnaire includes 30 questions. A private organization, based in
Barabanki was given the job to conduct the final survey in the districts
of Barabanki and Lucknow as it was a local organization and well versed
with the area. The final survey was conducted during the months of March
and April, 2012. The sampling type used was convenience sampling. A
total of 110 filled and correct questionnaires were received.
The mean present age of respondents fall in the age group of 30-40
years and most of them are Intermediate pass. The type of the business
is spread across manufacturing, trading and services with a bit of
accumulation towards manufacturing and the mean age of business is 3 to
5 years. All the respondents are located in the district of Barabanki
and Lucknow from the state of Uttar Pradesh in Northern India.
Research Objectives
The primary objective of the present study is to study various
aspects of microenterprises operating in towns in India. Some of the
focus areas, as decided, were financing policy, marketing polices,
business models, poverty alleviation, loyalty etc.
The objectives can be listed as:
* To study the various traits of entrepreneurs operating very small
businesses and microenterprises.
* To study the different aspects of marketing policies of these
micro enterprises. According to Gunu (2010), 50.70 percent of the
entrepreneurs in microenterprises use personal selling as market
practice in their business.
* To study the different aspects of functional management areas in
microenterprises.
Hypothesis: Three hypotheses were formulated and are as follows:
Null Hypothesis 1(H 0 1): The profit of a microenterprise is not
dependent on the age of the owner.
Null Hypothesis 2 (H 0 2): Profit is not dependent on number of
owners/partners increases.
Null Hypothesis 3 (H 0 3): Profit is not dependent on number of
employees.
Reliability Statistics: The Cronbach's Alpha for the
questionnaire of 24 variables came out to be 0.616.
Out of 30 questions from the questionnaire, the responses for 24
questions were coded in SPSS file for analysis. The variables and their
codes are given in Table 1. Each variable corresponds to respective
question number in the questionnaire.
Summary of Basic Statistics for Each Variable
This section includes analysis based on the basic summaries and
measures of some important parameters for 24 variables for all the 110
respondents.
Standard Deviation was found to be on the lower side for
'Initial age' of respondent and on the higher side for
'Type of Business'. This indicates that for entrepreneurs who
start their microenterprises, the age to start business does not vary
much but is spread equally over the three types of business i.e.
trading, manufacturing and services.
Standard Deviation was found to be on the lower side for
'Number of owners/partners as of now' and on the higher side
for 'Number of employees now'. This means that usually these
microenterprises have one owner/partner but the number of employees
varies a lot.
Standard Deviation was found to be on the lower side for
'Regular customers' and on the higher side for 'Total
amount of capital invested till date'. The regular customers are
actually 'regular' but the amount of capital varies over
respondents.
Standard Deviation was found to be on the lower side for 'Rate
of interest of money borrowed' and on the higher side for
'Unit price of a product/service'. Half of the respondents
borrow money and the rate of interest on borrowed money does not vary
much. High variation was found amongst the unit price of all 110
businesses.
Standard Deviation was found to be on the lower side for
'Contribution of business to improvement in economic status'
and highest for 'Foresight'. One common conclusion emerged
that all the respondents feel that their business has contributed to
improvement in their economic status.
Amongst all the 24 variables the Standard Deviation is lowest for
'Contribution of business to improvement in economic status'
where the mean choice is 1.10. This maybe because that the respondents
had just two choices with themselves. It also signifies that, in
general, most of the respondents agree that doing business has improved
their quality of life. The highest Standard Deviation is for 'Unit
price of a product/service' where the mean choice is 2.52. This
means that the price of one unit of product varied widely amongst
respondents.
Frequency Distribution
This segment includes the analysis for the frequency distribution
for the 24 questions/variables for all the 110 respondents. Regarding
the highest educational qualifications, it was found that 72 percent of
the respondents are High School passed, only 12 percent are Intermediate
passed and surprisingly 11 percent are graduates.
Approximately 50 percent of the respondents are from family
business and 50 percent are not. About 52 percent of the respondents are
between 30-40 years of age and only 1 percent is below 20 years. Also 25
percent are above 40 years of age. This implies that about 77 percent
(52+25) of the respondents are more than 30 years of age. About 79
percent of the respondents were of the age between 20-30 years when they
started the business. Corresponding to 'Present age of
respondent/promoter', it means, that people start business and
leave. Attrition rate was also found in micro enterprises, around 5
percent for people below 20 years and 30 percent for people between
20-30 years.
Thus, it can be concluded that these microenterprises are operated
by mostly middle aged people and the young usually avoid such type of
business. The probable reason can be the Indian social system. If
someone is less educated and in late twenties of age, the acceptability
of such person as 'successful' is usually less in the society.
It becomes obvious that such a person has to take up business as a
source of income as in India it is very easy to start a microenterprise
in the form of sole proprietorship in comparison to starting a private
limited company. The entry barrier is negligible. Sustaining a business
and growing it becomes a big challenge for microenterprises.
Out of the sample, 33 percent respondents were into trading
business, 31 percent were into manufacturing and 38 percent were
offering some type of services. It is more or less evenly distributed.
Also, 51 percent of the business had operated for 5-10 years and 31
percent for more than 10 years.
Almost 87 percent of the respondents were operating alone as a sole
proprietorship, a typical characteristic of microenterprises. The
remaining 11 percent were operating with two partners.
About 51 out of 61 respondents answered that they started alone.
Out of 67percent valid answers, about 54 percent(28+26) answered
that the employees if hired, stay with them for more than 3 years. Also,
83 percent respondents answered that 30 percent to 75 percent customers
are regular customers. Thus, customer loyalty is present. About 45
percent respondents borrow money and 54 percent do not borrow money.
Also, out of 49 respondents who borrow money, 37 borrow money on monthly
basis and none borrowed on weekly basis.
It was found that 59 percent respondent are of the opinion that
they used less than 5000 rupees to start the venture and 25 percent say
that they used an amount between Rs. 5000-Rs. 10000. Thus capital
expenditure was found to be low. The capital expenditure has grown to
more than Rs. 50000 for 30 percent and more than Rs. 10000 for 62
percent respondents. This indicates that even for microenterprises,
capital is required continuously. For 40 percent respondents monthly
sales is more than Rs. 25000 and for 57percent, it is between Rs. 5000
to Rs. 25000. It was found that for 81 percent, the monthly profit is
between Rs. 1000 to Rs. 10000. It was observed that 76 percent of the
respondents are not willing to sell their business even at a good price.
Out of 100 respondents, about 44 respondents do not spend money on
promoting their business. Out of remaining 66 respondents, 64 spend only
less than Rs. 1000 per month on promotion. The economic status of 90
percent of the respondents has increased after they started their
business. About 94 percent of the respondents, the economic status of
their customer is similar to them or better.
Most of the businesses which the respondents are doing are not long
lasting, according to the response of 90 percent respondents. The
probable reason is that they start a business to earn a livelihood
without any proper guidance or training. Also they do what they
'think' they can do. Thus, they lack confidence and are not
very sure of what they are doing or what their business model is.
Analysis of Cross Tabulations amongst Related Variables
This analysis was done to study the relationship of two relevant
and related variables amongst themselves. Analyzing the cross
relationship between 'Present age of respondent/promoter' and
' Monthly profit', it was found that the largest set is of 26
respondents who are between 30-40 years of age and earn between Rs.
1000-Rs. 5000 as profits. The correlation between the age of the owner
and the profit of the microenterprise comes out to be 0.217. This
rejects the null hypothesis number 1. The R-squared of profit over age
is also just 0.047. Also as the age of the respondent increase from
(20-30 years) bracket to (30-40 years) bracket, the number of
respondents also increases.
Analyzing the cross relationship between 'age when started
business' and 'Monthly profit', it was found that five
respondents earn a profit of Rs. 10000 and above are the one who started
their business at the age of less than 20 years. There are 14
respondents who are more aged and still earn a profit of more than Rs.
10000. This indicates that in terms of profitability of a business, age
does not matter. Analyzing the cross relationship between 'Number
of owners/partners as of now' and 'Monthly profit', it
was validated that businesses with one owner do better. About 65
respondents, who work alone, earn between Rs.1000 Rs.10000 as monthly
profits and 16 respondents earn more than Rs. 10000 profit per month.
Correlation between 'Number of owners/partners as of now' and
'Monthly profit' is 0.09. Thus, the Null Hypothesis 2 can be
rejected as the correlation figure is very low.
Analyzing the cross relationship between 'Number of employees
now' and 'Monthly profit', it was found that correlation
between the two variables is 0.132. The Null Hypothesis 3 can be
rejected, but the correlation is very low. The R-Squared of regression
run of 'Number of employees' for 'Monthly Profit' is
0.017 which is very low. For 9 out of 74 respondents, the employee
loyalty is highest and profit is also highest. Loyalty was found to be
low only with one respondent where the profit is also lowest. For 17
respondents, the loyalty is medium and profits are also medium and this
is the largest set of respondents.
Analyzing the cross relationship between 'Amount of capital
invested initially' and 'Monthly profit', it was observed
that for one respondent initial capital was highest and profit was
highest and for one respondent, initial capital was lowest and profit
also lowest. For 57 respondents, the capital invested is lowest but they
earn profit between Rs.1000-Rs.10000 per month.
Analyzing the cross relationship between 'total amount of
capital invested till date' and 'Monthly profit', it was
found that capital invested has also increased and profits also, as
indicated by the increased number of respondents. The R-Squared of
regression run of amount of capital invested for monthly profit comes
out to be 0.21. There are no respondents with highest profit and highest
percentage of regular customers. Similarly there are zero respondents
with highest profit and lowest percentage of regular customer. There are
4 (2+2) respondents who answered that their business has more than 75
percent regular customer and who earn monthly profit between Rs.
1000-Rs. 10000. For majority of the respondents, the percentage of
regular customer is between 35 percent-75 percent.
Analyzing the cross relationship for 'Unit price of a
product/service' and 'Monthly profit', the correlation
was found to be 0.327 and the R-Squared for regression with
'Monthly profits' as output variables comes out to be 0.107.
Both of these measures do indicate that unit price is not much related
with profits in microenterprises. This finding is a deviation from
traditional marketing practices where the pricing policies affect the
sales figures a lot.
The cross relationship for 'Expenses on promotion' and
'Monthly profit', highlights a very significant finding. It
indicates less spending on promotion, more profits for microenterprises.
This is validated from a negative correlation of -0.124 between
promotion expenses and profits. The R squared for regression of profit
over expenses is 0.015 which is very low to explain the relationship.
Comparing the 'Present age of respondent/promoter' with
'Type of business', it was found that 30-40 years is the most
common age group for all the three types of business and the second
highest group is of more than 40 years of age.
Comparing the 'Number of owners/partners as of now' with
'Type of business', it is found that sole proprietorship is
the preferred business mode of business.
For seven organizations offering services, there is more than one
owner/partner. For all the respondents 15 indicated that they run
services business and hire just one employee, ten indicated that they
hire two employees and 7 indicated that they hire three employees and
two respondents hire four or more employees. Similarly for manufacturing
17 respondents has hired just one employee. The numbers of employees
hired are more for services business. Second highest is for
manufacturing and lowest is for trading business.
Conclusion
The finding of the survey and the subsequent analysis was very
prolific in understanding various aspects of small businesses and
microenterprises in Indian context. The economic status of 90 percent of
the respondents has increased after they started their business. This is
a very significant finding as this bolsters the belief and logic that
entrepreneurship helps in alleviation of poverty. Most of the businesses
that the respondents are doing are not long lasting, according to the
response of 90 percent respondents. Some of the common reason given for
this response are technology, preference for job, poor health etc. The
probable reason is that they start a business to earn a livelihood and
to be busy without any proper guidance or training. Also they do what
they think 'think' they can do. The method adopted is trial
and error and thus they lack confidence. Majority of the respondents are
not willing to sell their business even at a good price. This may be
because they are emotionally attached to the business or are not risk
taking. Most of the respondents were between 30-40 years of age and just
High School pass. Another significant observation is that these
entrepreneurs are aware about the USP of their business model. Some of
the common response and related management concept to the question about
USP/attraction of the business was low cost (pricing), better quality
(quality assurance), way to talk, soft spoken (customer interaction),
necessity product (need recognition), full service (umbrella service),
fashionable (trend recognition), round the clock service (24 x 7), only
machine (completion dominance) etc.
On the marketing front, these microenterprises very sparingly and
miserly spend on advertisement and promotion. Their target market is the
customer base which is similar or better than them in economic status.
Majority of them operate on the sole proprietorship form of organization
and the type of business was found to be spread equally amongst trading,
manufacturing and services business. No pattern was found for price of
the product. Customer loyalty was also found to be present.
Almost half of the respondents were found to be using borrowed
money to run their business which means that they understand the
significance of working capital in business. They also understand the
significance of Capital investment and for most of the microenterprises
the capital expenditure was found to be increasing. These small
businesses hired when they grew and employee attrition was also low as
most of them answered that the employees stay with them for more than
three years.
It can be concluded that the business models used by these very
small businesses and microenterprises is very much similar to business
models of medium sized or large organizations. These organizations also
understand the significance of various functional areas and fundamentals
of management, though they may not be aware of the technical terms and
concepts.
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Moid U. Ahmad
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Table I
Description of Variables Used in the Study
Sl.
No. Question/Variable
1 Highest qualification of the respondent
2 Business family or not
3 Present age of respondent/promoter
4 Age of respondent/promoter when started the business
5 Type of business
6 Age of Business
7 Number of owners/partners as of now
8 Number of employees when the business was started
9 Number of employees now
10 Association of employees with business
11 Amount of capital invested initially
12 Total amount of capital invested till date
13 Monthly sales
14 Monthly profit
15 Regular customers
16 Unit price of a product/service
17 Whether borrow money or not?
18 Frequency of money borrowed
19 Rate of interest of money borrowed
20 Willingness to sell business
21 Expenses on promotion
22 Economic status of customers
23 Contribution of business to improvement in economic status
24 Foresight for business
