As every economy continues to integrate economic operations due to globalization pressures and as many closed economies like China and India are marching towards the total liberalization, it is observed that entrepreneurship or entrepreneurial activity is on the increase. A close examination of highly developed and industrialized economies points out to a common denominator, entrepreneurship, which stands-out amongst all of these prosperous economies. The most important role, in these developed nations, is played by entrepreneurship or entrepreneurial activity.
This rising phenomenon has confirmed that if any economy wishes to develop fully, entrepreneurship should always be allowed to operate and flourish in a given business environment. Therefore, this paper has been written with a prime objective to perform a critical evaluation of the impact or effect of entrepreneurship in today’s marketplaces. In this paper, many benefits afforded to a marketplace through entrepreneurship will be identified where some of the negative effects which entrepreneurship has on the marketplace will be discussed. A conclusion will also be drawn on the overall influence of the entrepreneurship on marketplaces of today.
Many reputable organizations start their operations after one person perceives a profitable business idea. The entrepreneur is any person who is able to spot a gap which prevails in the existing market or identifies any commercial opportunity. Such an entrepreneur turns the perceived business idea into a profitable as well as marketable product and service .
Basically, there are four major kinds of business entrepreneurship: manufacturing activity, wholesale, retail and service. To operate within these four business entrepreneurship boundaries, entrepreneurs display some common characteristics which are found in every successful entrepreneur. They participate actively in today’s marketplace because they are prepared to take calculated risks, driven by long-term achievement due to self motivation and are highly determined to stay ahead of the existing competition. In today’s world of global economies and integrated markets, entrepreneurship survives or prospers for numerous reasons stated as follows:
- Development of personal and business relationship - entrepreneurship actually helps to build strong relationships with employees, customers, vendors and other stakeholders in the market. Entrepreneurship helps to facilitate person-to-person interaction which is as important in building strong and long-term relationships .
- Flexible Response to challenges and problems due to little organizational hierarchy and chain of command. Many large businesses have standard ways of operating and establishing procedures which are hard to influence for change. Entrepreneurship is often far more flexible which helps in reaching a quick business decision in the market on whether or not an entity can achieve its required corporate objective.
- Introduction of latest inventions and innovation – entrepreneurship is well-positioned to introduce and develop new as well as productive ideas in the marketplace. This tendency to generate new ideas and products facilitates a healthy competition in the market.
- Lower burden to cover overheads – because of operating at a small scale, entrepreneurship derives the benefit to have lower overhead costs. Small businesses usually operate with low lighting and heating costs as well as limited rent rates to pay. Lower costs lead to lower prices charged to consumers. This is one of the major effects which entrepreneurship has on today’s marketplaces because it has resulted in introduction of wide range of innovation products and services to the benefit of the society and economy as a whole.
- Serving limited or niche markets -large organizations with high overhead costs are bound to produce higher levels of output to cover their operating expenses and spread costs. In contrast, entrepreneurship of small firms generates a profit on much lower sales revenue figures. Entrepreneurial activity can, therefore, sell into much smaller markets due to which customers in the market have a wide variety of products and services to choose from.
Innovation and Creativity
Apart from the effects of entrepreneurship mentioned above, it is imperative to note that many individuals resort to entrepreneurship because they find a niche in the existing market and have productive solutions to generate profits from such niches. While many individuals are unable to find suitable employment opportunities or some sort of suitable sources of personal income, therefore, these individuals have resorted to entrepreneurial activity for utilizing their creative faculties to generate personal income for themselves.
In today’s marketplace, when individuals enter the world entrepreneurship and have the financial resources as well as the technological know-how necessary to generate income, such an activity enables them to satisfy a specific range of consumer needs in the market. Therefore one may say that entrepreneurship helps individuals in the market, who are unable to find any suitable job, are not only able to generate personal income but satisfy the consumer demand. Due to this activity, the market economy flourishes and consumers have variety of products that will satisfy their different needs.
This way, entrepreneurship increases the number of products and services in the market to increase followed by an intense increase in the market competition. Irrespective of what factors motivated an individual to start an entrepreneurial activity, it is quite clear that creativity and innovation seem to be the underlying driving forces. Therefore, one may say that the biggest influence or effect of entrepreneurship on a today’s market economy is the creativity and innovative contribution that its makes.
Creation of Multiple Employment Opportunities
As stated in one of the previous sections of this research paper, a prime reason for which individuals become motivated to start entrepreneurial activity is because they are unable to find suitable job opportunities. As a result, by becoming an entrepreneur, and finding a market niche to utilize their creativity, they are not only able to generate personal income for themselves but also can employ other jobless individuals in business operations. Therefore, one of the most positive influences that entrepreneurship has on today’s labor market is creation of employment opportunities and the resultant decline of unemployment level within an economy.
In most of the developed countries, it is consistently observed that almost forty to fifty percent of the existing workforce is employed in small and medium business enterprises started by very creative and innovative individuals. Likewise, in many economies like India, millions of people are able to pull their families out of poverty through entrepreneurship and self-employment made possible by different Non-Governmental Organizations (NGOs) and due to the unlimited availability of financial as well as non-financial resources through numerous facilities like micro finance etc .
Africa is one good example of where the entrepreneurship or entrepreneurial activity is helping the market economy to reduce poverty as well unemployment level and helping many families to avoid destitution. Therefore, based on the discussion mentioned above, it is noticeable that entrepreneurship has a greater degree of influence or effect on a market economy through employment creation and generation of personal income.
Increased level of Competitive Forces
Another main positive effect of entrepreneurship on today’s market is an increase in the level of competitive forces as new entrepreneurs tend to join the fray in existing local markets. While one may say that entrepreneurship will result in saturation of existing market, the possible upside of such a widely accepted phenomenon is that it also motivates all the competitive players in the market to re-evaluate their financial as well as operational capabilities, improve value addition activities, reduce costs and become more effective as well as efficient . Thus, it could be mentioned that competition tends to reduce the likelihood of oligopolies and monopolies in today’s marketplace which is beneficial not only to the customer but for the whole economy as well.
Increase in Productivity
One of the advantages of entrepreneurship in today’s marketplace is that it increases the level of competition within an economy. Firms and individuals continue to source methods of advanced production that can better improve business operations, use financial as well as non-financial resources more efficiently and reduce underlying costs while creating value for all stakeholders. All this often leads to a dramatic increase in productivity within the market economy and in the Gross Domestic Product (GDP) which is considered to be beneficial for the economic growth.
Opponents of entrepreneurship state that an increase in productivity brings about a subsequent rise in unemployment which reduces the positive effects of entrepreneurship on today’s marketplace due to increased demand for specialized talent. However, it should be realized that increased productivity normally leads to increased unemployment which will, in turn, causes more individuals to find niche markets, be creative, start entrepreneurial activity in the market and generate more employment opportunities in existing marketplace. Thus, the entrepreneurial activity in the existing marketplace re-invents the wheel and drives the economy forward.
Development of New Marketplaces
As discussed in previous sections that increase in the level of competition in the marketplace causes saturation and, as a result, many individuals become motivated to seek developed and new markets to market their products and services for adapting market penetration tactics . Such a phenomenon of increased competitive forces ultimately causes entrepreneurs to look for new markets which can be considered as a positive effect of entrepreneurship on today’s marketplace.
Therefore, entrepreneurs play a very important role in the market economy. As economic integration continues to increase due to globalization, individuals often look for markets which are outside their local sphere for generation of foreign income and increase the economic prosperity as a whole.
Overall, the generation of employment opportunities, increase in level of competition, market penetration, market expansion and development of new markets all these factors lead to a revenue generation help the market economy to become prosperous, drawing millions of citizens out of poverty and making more funds available for social welfare activities uplifting the living standard of every citizen.
Negative Effects of Entrepreneurship on the Market
The largest negative effect of entrepreneurship on today’s market economy is the plundering of production resources having a disastrous impact on the social and economic environment. Such a negative effect can be mitigated or avoided to certain extent in developed countries due to enforcement of environmental protection regulations and standards which is not the case prevailing in emerging or developing markets. Furthermore, entrepreneurship requires a certain degree of business knowledge and technological know-how in absence of which entrepreneurial activity often fails and can cause many financial setbacks/losses leading to destitution.
Today, the realm of social entrepreneurship has been growing at an exponential rate which is a very positive sign helping to draw millions of people out of poverty, reduce unemployment, decrease the number of people who are dependent on social welfare and uplift the quality of life of millions of citizens. Furthermore, social entrepreneurship activities are often considered as green initiatives which take into consideration the possible effect on the social as well as natural environment and strive hard to keep this to an optimal level.
As entrepreneurship continues to grow at a rapid rate, increased awareness about such business issues helps to avoid the plundering of financial as well as natural resources and conserves the environment wherever possible. Therefore, one may observe that the negative effects of entrepreneurship on a market economy can be avoided or mitigated to a certain extent through the initiatives related to social entrepreneurship.
After a thorough and careful discussion mentioned above, it is apparently clear that the positive effects of entrepreneurship on a market economy outweighs the negative influence on today’s marketplace. Creation of employment opportunities, decline in unemployment, rise in intense competition, opening as well as development of new markets, increase in productivity, generation of overseas (foreign) income and easing poverty level are some of the positive effects which entrepreneurship or entrepreneurial activity has on today’s market economy.
However, one must accept entrepreneurship certainly has negative influence on marketplace which includes the plundering and wastage of financial and non-financial resources.
Despite such negativity, it is obviously magnified that the entrepreneurial activity positively influences not only today’s marketplace but the economy as well. Entrepreneurship plays a critically important role in economic development of any market as key contributor in the form of technological advancement and innovation and new job creation.
In addition to this, entrepreneurship helps build numerous communities by providing jobs, conducting business domestically, creation and participation in entrepreneurial networks, increased investment in community projects and providing financial support to local charities.
Realizing both the economic and social effects of entrepreneurship on today’s marketplaces, many states, economies and domestic communities are now eager to implement aggressive strategies that are aimed at cultivation, encouragement and development of entrepreneurship to build local and foreign markets.
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