This week we asked the question: What kind of challenges are entrepreneurs faced with in today’s global climate?
This week’s blog is written by EF Academy Oxford student Magdalena Lapa, who thoughtfully examines the challenges facing entrepreneurs in developing regions today:
Union of Entrepreneurs
Entrepreneurship today is a rather large concept. The first thing that comes into our mind is the capitalist-coined terms of designing, launching and running a business. But if we want to fully grasp the core of it we have to also consider the global circumstances to which it is tightly connected. In current times we cannot carry out any activity on our own, therefore focusing on the international environment is vital to understanding the mechanisms that are the driving forces of entrepreneurship.
When we think about challenges, our mind simultaneously shifts to thinking about something tedious, problematic and puzzling. In terms of economic growth, it is the developing areas – which face great challenges – which have the most potential. A primary target for economic development is Africa. Last month I attended an Oxford Business Forum: “Unreasonable Africa”. The summit’s main objective was to raise awareness of the vast amount of business opportunities that Africa has to offer. Alongside that, many of the continent’s prime leaders like Trevor Manuel, the former South African Cabinet Minister and Colin Coleman, the Head of Investment Banking for Sub-Saharan Africa of Goldman Sachs raised many issues which can occur while investing in an underdeveloped continent. In many cases, they are just more severe versions of what entrepreneurs have to face in Western countries, but these factors greatly impact our willingness to choose one country over another.
As Daniel Isenberg mentioned in his article “The Global Entrepreneur”: Today’s entrepreneurs cross borders for two reasons. One is defensive: To be competitive […] The other reason is to take the offence. Many new ventures are discovering that a new business opportunity spans more than one country or that they can use distance to create new products or services.” That means that entrepreneurs nowadays are more concerned with international trade as I mentioned previously. They constantly seek new countries to base their activity in. As a result of this, a country must possess a certain amount of attractiveness for entrepreneurs. What that means is that it has to characterise itself by having governmental stability, and a fairly low amount of competitors. International trade cannot be obstructed by high import duties and simultaneously they have to have a high labour potential and a plethora of resources.
These requirements are tightly connected to the challenges that entrepreneur face. As many people at the Oxford Summit pointed out, the main objective in settling a company in a new, developing country is to make sure that it serves not only as a machine for making money but that it also employs a social value to the community within which it’s working. For example integrating schooling systems in the area or setting up social enterprises. It is not always about making money anymore. Today, if an enterprise wants to make an impact and assert dominance on the market, it has to actively par-take in the dynamics of the area from a social perspective. While education should be the primary concern of a government, sometimes companies must take initiative in advancing the skill of their own workers. That can present a great challenge especially if the amount of unskilled workers is greater than of the skilled ones.
Another important challenge is the overcoming of border regulations between countries. In general, the less border regulations the better: for example the free trade between countries of the European Union makes the flow of trade almost effortless – ominous relationships between countries are not an incentive for entrepreneurs. That’s why countries’ main objective should be to relieve business people from that burden.
What is also important to mention is the corporate tax rate. Although it can be tricky for developing countries to have a low tax rate because the amount of tax revenue cannot be invested in infrastructure and social commodities in the long run it is a benefit because low tax rates attract potential entrepreneurs.
While writing this article I focused on developing countries, and I believe that the biggest objective for the upcoming years is to focus on them, especially Africa. African countries possess a lot of potential and if entrepreneurs all over the world notice it, there is a lot to be done but also a lot of progress can be made. Entrepreneurship in today’s world is tightly connected to politics, so as my last point I would like to address the issue of political stability within countries. As we had a chance to find out during World War I and World War II, conflicts affect the economy in a highly unfavorable way. The shift of production from social to military disrupts the free market, therefore the risk involved in setting up businesses is high, which can cause a lack of business activity, therefore slowing down the economy. That it is important for entrepreneurs to take political conflicts into account.
EF Academy students specialize in thinking outside of the box.