ENVIRONMENTAL SUITABILITY FOR DEVELOPING ENTREPRENEURSHIP WITH THE APPLICATION OF PEST

ANALYSIS IN BANGLADESH

A RESEARCH PROPOSAL ON

Environmental Suitability for Developing Entrepreneurship with the application of PEST Analysis in Bangladesh

Submitted To:

Md. Reaz Uddin

Assistant Professor

Submitted By:

Fatema Khatun : 090349

Business Administration Discipline

BBA program

Khulna University

Course Name: Course: Sessional of Business Research Methodology

Course Code: BA-4202

30 May, 2013

Abstract

Bangladesh became independent in the year 1971 after bloody war against Pakistanis. When the

country was independent, entrepreneurship among the local people was limited only two percent

of the total population. It was irony that the at that time non-Bangles largely controlled

entrepreneurship. But Bangladesh has a magnificent model of entrepreneurial activities from

ancient time period to till seventeenth century. At that time it had small and cottage industries,

shipping industries, gold and silver smithy, milk products, making of combs and buttons from

animal bones, treatment of raw hides, papermaking, sugar, salt industries etc. After seventeen

century this entrepreneurial activities turned to become darkness of shadow. Local people of the

country were inclined to work as entrepreneurial activities due to political and historical reason.

In Bangladesh lack of political commitments and absence of creation of healthy environment

required for entrepreneurial growth are the limiting factors in the process of adequate supply of

reasonable number of entrepreneurs. Small and Medium enterprises are the lifeblood of any

economy and are at the forefront of Govt. efforts to promote entrepreneurial activities,

innovation and increased productivity. The SMEs in Bangladesh face significant problems in

access to finance for their business activities. This relates to getting the right amount of fund at

the right time at reasonable rates with suitable repayment. The garments sector and micro-credit

scheme transformed the face of economy in the country especially for women. Over the several

years, the mobility of women, especially in urban sectors, has improved. As women became

more involved in business, they also changed the standard of living of their families. Women

have successfully played dual roles in both professional and personal lives. Women

entrepreneurs understand the way of doing business and have even diversified their business into

different sectors. In terms of MDGs, although Bangladesh has so far made considerable progress

in social issues, its achievement in economic issues is relatively not bad. (Ali, 2011)

Keywords: Political and historical reason, MDG, Mobility of women, Small and Medium

enterprises

Introduction

It is widely said that some society/culture is more favorable to entrepreneurship than others.

Entrepreneurs are creations of the environment. If favorable environment prevails

entrepreneurship will emerge and vice versa. The non emergence of entrepreneurship in

Bangladesh at a desired level might be attributed to the unfavorable environmental factors.

However, the study of environment for entrepreneurship faces the perpetual question of what

constitutes the environment. In fact, there is no consent among the researchers in this regard. A

number of researchers have approached this topic by identifying a set of elements to be the

constituents of the business environment of entrepreneurship development. It is included

political, economical, legal, and socio-cultural aspects as well as the role of state as the major

elements of entrepreneurial environment. Capital, labor, raw materials, technology, market size

and composition are considered as the opportunity conditions for the entrepreneurs. It is assumed

that the economic opportunity condition in Bangladesh is reasonably favorable. But

entrepreneurship has not treaded forward to take advantage of such favorable conditions. In this

aspect he recognized the adverse non-economic factors, like political, economical, legal and

socio-cultural factors that hinder the growth of entrepreneurship in the country. A business

student should also look it as a great opportunity. (Azim, 2009)

Scope of the study

Scope means the area of action. The scope has been clearly specified. The target is to find out

political, economical, social and technological problems and opportunities for developing

entrepreneurship in Bangladesh. So to make a good research proposal survey will be to

entrepreneurs, bankers, economists, University teachers and policy makers.

2.0 Literature Review

Entrepreneurship can be defined as the process of using private initiative to transform a business

concept into a new venture or to grow and diversify an existing venture or enterprise with high

growth potential. Entrepreneurs identify an innovation to seize an opportunity, mobilize money

and management skills, and take calculated risks to open markets for new products, processes

and services. For the development of our country in Economic sector, the importance and

necessary of the entrepreneurship development is a must. But the sorrowful matter is that a very

few research work is done on over it. So the growth the process of the development in the sector

is very sluggish. Researcher both in the sector of Government and the Public both need to

provide more attention in this important sector.

2.1 Definition of entrepreneurship

Entrepreneurship is more than simply “starting a business.” The definition of entrepreneurship is

a process through which individuals recognize opportunities, allot resources, and generate value.

This creation of value is often through the recognition of unmet needs or through the

identification of opportunities for change. (sirpoils, 1998)

So we can say that entrepreneurial success is simply a function of the ability of an entrepreneur

to see these opportunities in the marketplace, initiate change and create value through solutions.

2.2 Factors require for developing entrepreneurship

The emergence and development of entrepreneurship is not a spontaneous one but a dependent

phenomenon of economic, social, political, psychological factors often nomenclature as

supporting conditions to entrepreneurship development. For analytical proposes, these conditions

are grouped and discussed under tow categories, this are-

Economic Factors

Form a strictly economic viewpoint, it can be said that there are some factors which promote

economic development through emergence of entrepreneurship. Some of these factors are

discussed in below-

Capital

Capital is one of the most important prerequisites to establish an enterprise. Availability of

capital facilities the entrepreneur to bring together the land of one, machine of another and raw

material of yet another to combine them to produce goods. Capital is, therefore, regarded as

lubricant to the process of production.

Labor

The quality rather quality of labor is another factor which influences the emergence of

entrepreneurship. It appears that labor problems can be solved more easily than capital can be

created.

Raw-material

The necessary of raw materials hardly needs any emphasis for establishing any industrial activity

and, therefore, its influence in the emergence of entrepreneurship. In absence of raw materials,

neither any enterprise cab be established nor an entrepreneur can be emerged.

Market

The fact remains that the potential of the market constitutes the major determination of probable

rewards form entrepreneurial function. Thus, it appears that weather or not the market is

expending and the rate at which it is expanding is the most significant characteristics of the

market for entrepreneurial emergence.

Non-Economic Factors

Sociologists and psychologists advocate that economic factors may be necessary conditions, but

they are not sufficient condition for the appearance of entrepreneurship. Some major non-

economic factors alleged to influence the emergence of entrepreneurship can be described below:

Legitimacy of Entrepreneurship

The proponents of non-economic factors give emphasis to the relevance of a system of norms

and values within a socio-cultural setting for the emergence of entrepreneurship.

Social Mobility

Social mobility involves the degree of mobility, both social and geographical, and the nature of

mobility channels within a system. The opinion that the social mobility is crucial for

entrepreneurial emergence is not unanimous.

Marginality

A group of scholars hold a strong view that social marginality also promotes entrepreneurship.

The two preceding factors - the legitimacy of entrepreneurship and social mobility-largely

determine the influence of marginality on entrepreneurship.

Security

We also regard security to be a significant factor for entrepreneurship development. This is

reasonable too because if individuals are fearful of losing their economic assets or of being

subjected to various negative sanctions, they will not be inclined to increase their insecurity by

behaving entrepreneurially.

Physical Need

Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate

specifically upon psychological factors. We consider these theories separately for that reason-

Need Achievement

To the best of our knowledge, the best known of primarily psychological theories is David

McClelland’s theory of need achievement.

Withdrawal of Status Respects

Hagen attributed the withdrawal of status respect of a group to the genesis of entrepreneurship.

This very fact led them to the technological progress entrepreneurial roles. (Kamruzzaman et al.,

2008)

2.3 Social and economic background of Bangladesh

The economic development of Bangladesh in the last three decades is the resultant effect of

structural change in the economy leading towards considerable growth of the manufacturing and

service sectors, various reforms of domestic economic policies, changes in international policies,

and in this process the emergence of a group of entrepreneurs. During this period, GDP growth

doubled from a mere 3.7% in the 1980s to more than 6% after 2000, with Bangladesh now

ranked 33rd out of 191 countries (in terms of GDP). However, because of its huge population

(150,448,340), Bangladesh is ranked 8th out of 191 countries (in terms of population), and is

consequently regarded as one of the poorer countries (150th out of 191 countries in terms of per

capita GDP). (Moazzem, 2008)

2.5 Entrepreneurship in Bangladesh

In our country, the term for an entrepreneur is a 'businessman,' which carries with it a set of

negative connotations. The assumption is that one goes into business if one cannot be a banker,

doctor, engineer, lawyer, professor or a corporate worker. In movies, businessmen are portrayed

as crude, immoral people. In day-to-day life, a businessman is only considered successful if he

can achieve conspicuous display of wealth.

Despite our negative views of 'business', the private sector has a crucial role to play in growing

the economy and providing employment opportunities. The private sector is the engine of

innovation in all sectors of the economy. Entrepreneurship in Bangladesh currently thrives in two

sectors of the economy -- among the poorest of the poor (14 million households) and among the

well-off (about 2.5 million households). The reason for this is that both of these sectors have

access to institutional financing.

The change in mindset can perhaps be attributed to the realization that notwithstanding advances

in scientific, social, political and economic systems, the gap between rich and poor is widening.

With many social problems continuing to plague societies and some even worsening, concern

regarding the effectiveness and sustainability of governmental and welfare-based approaches to

social problems has increased. This in turn has directed greater attention to the work of

entrepreneurs. (Shams, 2009)

2.6 Entrepreneurship friendly environment across the globe

While the notion of entrepreneurship applies to both those who create new startups and those in

larger firms who bring new ideas, innovations, and businesses to market, the challenges are very

different. If we look at the world, we can see that most of the successful people in the world are

entrepreneurs. Mary Kay Ash, Richard Branson, Michael dell, Bill gates, Henry ford’s all are

popular as a successful entrepreneur. Bill Gates ranked as the world richest person from 1995-

2006. (Amabile, 2008). According to GEM report "most entrepreneurial activity is carried out by

25 to 34 years old, regardless of the level of income in their countries (GEM Executive Report,

2004). Empirical research supports links between entrepreneurial activity and economic growth

(Van Praag and Verssloot, 2007).

Bill Gates was a college drop out. He started the largest computer software company, Microsoft

Corporation. Today Microsoft is one of the most popular companies in the world.

2.7 Effectiveness of PEST analysis for evaluating environmental conduction in an economy,

PEST analysis is concerned with the key external environmental influences on a business.

The acronym stands for the Political, Economic, Social and Technological issues that could

affect the strategic development of a business.

Identifying PEST influences is a useful way of summarizing the external environment in which a

business operates. However, it must be followed up by consideration of how a business should

respond to these influences.

The table below lists some possible factors that could indicate important environmental

influences for a business under the PEST headings:

Political / Legal Economic Social Technological

Environmental regulation and protection

Economic growth (overall; by industry sector)

Income distribution (change in distribution of disposable income;

Government spending on research

Taxation (corporate; consumer)

Monetary policy (interest rates)

Demographics (age structure of the population; gender; family size and composition; changing nature of occupations)

Government and industry focus on technological effort

International trade regulation

Government spending (overall level; specific spending priorities)

Labor / social mobility New discoveries and development

Consumer protection Policy towards unemployment (minimum wage, unemployment benefits, grants)

Lifestyle changes (e.g. Home working, single households)

Speed of technology transfer

Employment law Taxation (impact on consumer disposable income, incentives to invest in capital equipment, corporation tax rates)

Attitudes to work and leisure

Rates of technological obsolescence

Government organization / attitude

Exchange rates (effects on demand by overseas customers; effect on cost of imported components)

Education Energy use and costs

Competition regulation

Inflation (effect on costs and selling prices)

Fashions and fads Changes in material sciences

Stage of the business cycle (effect on short-term business performance)

Health & welfare Impact of changes in Information technology

Economic "mood" - consumer confidence

Living conditions (housing, amenities, pollution)

Internet!

(Riley, 2012)

2.8 Condition of women entrepreneurs in Bangladesh

Ten years ago, a majority of the women workers in Bangladesh worked in the informal sector.

They were mostly unpaid and did not contribute directly to formal economic activities. However,

the demographic structure of the labor participation in Bangladesh is witnessing a remarkable

change. An increasing number of women are working in the formal sector as entrepreneurs and

paid workers, a situation that was not seen in the past. This gradual transformation of women’s

participation from the informal to the formal sectors has resulted in an upward mobility in the

social and economic status of women, especially that of poor women in the country.

In order to gain an understanding of the current situation, it becomes important to trace the

factors that are contributing towards a progressive transformation in the status of women in the

country. Since the early 1990s, the growth of manufacturing industries provided women an

opportunity to enter the formal labour market. A large number of rural women migrated to cities

at a very young age, thereby reducing women labour in agriculture in rural areas. A new

generation of women workers emerged in the country that was financially independent and lived

alone in urban areas without male supervision. (Suryanarayanan, 2011).

The types of enterprises operated by women are

(1) Traditional;

(2) Non-tradition;

(3) Household or Family Trade;

(4) Labor intensive;

(5) Export oriented;

(6) Industries with modem technology. (Hossain, 2007)

2.9 Entrepreneurship Development Process

Major assistance requirements of the new entrepreneurs are worth mentioning while discussing

the entrepreneurial development as a tool of economic growth of a nation. They need multiple

assistance which may be offered in a package form. To set up an enterprise and run it

successfully an entrepreneur need these types of assistance. These three groups of assistance

form an Entrepreneurship Development Cycle. The groups of assistance are-

Stimulatory

The stimulatory activities comprise entrepreneurial education, provision of entrepreneurial

opportunities and guidance in selecting industries are needed to help emergence of

entrepreneurship in the Society. This support ensures a good supply of entrepreneurs to start a

new venture and develop potentiality to succeed in a venture.

Supportive

The support activities refer to those which enable the entrepreneurs in setting up and running the

enterprises successfully. They help in mobilizing resources and assistance.

Sustaining

The sustaining activities include efforts which help the entrepreneurs sustain themselves against

the challenges of actual operation. (Kamuuzzaman, 2008)

2.10 Earlier researches on using PEST analysis for evaluating environmental condition

Earlier research was conducted on using PEST analysis for evaluating environmental condition

by the students of faculty of Business Administration and Management of potuakhali science and

Technology University. They prospected and suggested that contribution by an entrepreneur can

certainly made by the environment that is conducive to his taking and innovation.

Proper planning and government intervention is needed to come out from political

environment.

Bangladesh still needs goods export oriented strategies.

Sound fiscal and monetary policies are vital to the sustained growth of the private sector.

For rural entrepreneurship development government should take new decision for

agriculture and marketing program and should be operated strongly.

An efficient transport and communication network aids production and market

expansion. (Khan, 2010)

2.11 Problems associated with entrepreneurship development

As against the favorable factors, entrepreneurship development is faced with many problems. By

discussing with the entrepreneur of Bangladesh we find some problems which are needed to

reduce. The problems are discussed below-

The absence of clear cut policy decisions, particularly for the new entrepreneur.

Lack of adequate financial support to set up or proper maintenance o the business,

particularly the new one.

Lack of short term credit to maintain the business properly as well as fulfill the needs of

necessary.

Poor judgment about the market condition as well as the demand of the customers.

Identification of suitable location is another problem to establishment of a new business.

Political problem is another problem for making the business smooth. (Kamruzzaman,

2008)

Objectives

There are two types of objectives.

Main objective:

To find out political, economical, social and technological problems and opportunities for

developing entrepreneurship in Bangladesh.

Sub objectives:

Entrepreneurship development policy of Bangladesh

Entrepreneurship development process

Factors influencing entrepreneurship development

Importance of training to develop the entrepreneur

Research Questions

What types of political activity are to face our entrepreneurs?

Is our economic environment suitable enough for our entrepreneurs?

How can socio economic activity affect to make a good environment?

Are technical facilities available for our entrepreneurs?

Methodology

It is the heart of the proposal. It includes

Research Design

The research design will be exploratory. Focus group and personal interview will be used here to

collect correct interview.

Sampling Design

Convenience sampling will be used here. Because survey can be conducted to any banker,

politician, university professor whom can be found very easily. Entrepreneur is a common topic

and most of the people know about it. So convenience sampling must be used here.

Instrument Development

The most important thing of research proposal is questionnaire. There are only four variables and

those are simply four components of PEST analysis in the form of Political, legal, sociological

and technological environmental factors. The questionnaire has to be prepared which will

comprise these four variables and it will be open ended questions in total under those four

variables so that they can express their opinion easily.

Questionnaire

These four variables and the relevant questions have to be asked to entrepreneurs, bankers,

economists, University teachers, policy makers. The questions will be asked for getting the data

necessary for qualitative analysis.

Data collection

Collection of data is an important part for preparing any report. This study is also required

various data and information that will be collected from two sources. They are stated below:-

Primary Sources:

Questionnaire survey through focus group

Personal Interview

Secondary Sources:

News papers

Web Site

Brochure

Monthly Magazine

Data analysis

In terms of exploratory research the sphere of data analysis is limited. Decision has to be taken

based on discussion of focus group and personal interview.

Rationale of the study

Lack of entrepreneurship growth is one of the main reasons for not raising the economy.

Entrepreneurship is the main way to develop the country. One -half of the total population is

women. But they are yet to get the equal opportunity and social empowerment regardless of for

last forty-one years there is some development. So this proposal is being undertaken and it will

be useful for study. In this study the problems and opportunities will be found out behind

entrepreneurship development.

Limitations

Generally, limitation includes anything that creates hindrance in investigation and hardly can

control. To make the proposal few limitations have to be faced. These limitations are as follows:-

Unwillingness of the economists to give internal information.

In some cases, many people do not know the right information regarding this topic.

The bankers are too busy with their work and they do not have sufficient time to discuss

about my topic.

Since the policy makers are unwilling to give the right information, it will create

problems.

Delimitations

Every research proposal has some delimitation. In this study the delimitations are

In this study data are not being analyzed as it is exploratory study and it possesses open ended

questions

Population is not mandatory here. Because Sample is not representing population.

Resources and Budgeting

Much money has to be spent for resources and budgeting. I have to also budget my time,

schedule e.t.c. I have to select my schedule where I will go and where I will not go for survey.

Conclusions

What should be the approach? The potential excellence and open scopes have to be kicked off to

investigate for people of all classes across the country. The government also needs to ensure that

people of small means should have access to facilities to undertake economic activities at

appropriate scales throughout the country. Once the overall framework is in place, mobilization

of more resources and more effective utilization of the available resources will be facilitated. If

all these factors work together under one umbrella, only then economic progress and

development, along with poverty alleviation target, can be achieved.