CHAPTER-1

1.1 INTRODUCTION
Definition - The definition of entrepreneur is the person creates his own business,
bearing most of the risks and enjoying most of the rewards. The entrepreneur are seen
as an innovator, they are source of new ideas, goods, services, and business
Entrepreneur has been in used in English to refer to a kind of businessman since at
least the middle of the 18th century, when it appeared in translation of the King of
Prussia’s instructions for his generals. During the 19th century, it was also used of a
go-between or a person who undertakes any kind of activity. By the early 20th
century entrepreneur appears to have taken on the connotation of go-getter when
applied to an independent business owner, a quality that may also be found in the
phrase entrepreneurial spirit, which began being used at about the same time.
When it comes to Small businesses it can be a vehicle for both Schumpeterian
entrepreneurs introducing new products and processes that change the industry and for
people who simply run and own a business for a living (Wennekers and Thurik, 1999).
During the first decades of the last century, small businesses were both a vehicle for
entrepreneurship and a source of employment and income. This is the era in which
Schumpeter (1912) conceived his Theory of Economic Development. Here
Schumpeter emphasizes the role of the entrepreneur as prime cause of economic
development. Mehralizadeh (1999), Acs and Audretsch (1990) and Carlsson (1992)
provide evidence concerning manufacturing industries in countries in varying stages
of economic development. Mehralizadeh (1999) and Lauder and Brown (1996) in
their models advance three explanations and waves for the shift toward smallness and
flexibility. The first wave is related to Fordist production (Mass production) deals
with fundamental changes in the world economy from the 1940s on-wards. Second
wave is started since 1970 called neo-Fordist management system, which due to the
changes relate to the intensification of global competition, the increase in the degree
of uncertainty and the growth in market fragmentation. The third wave is Post-Fordist
system of management, which deals with changes in the character of technological
progress, system of work and human resource development. Study these waves shows
that flexible automation has various effects resulting in a shift from large to smaller
firms. Also Piore and Sable (1984) and Thurik, R, and Weneekers, S (2001) argues
that the instability of markets in the 1970s resulted in the demise of mass production
and promoted flexible specialization. This fundamental change in the path of
technological development led to the occurrence of vast diseconomies of scale. Post-
Fordist system of management is marked with entrperunres. Entrepreneurship and
therefore "the entrepreneur", is at the core of what makes an enterprise succeeds,
whether you call it an entrepreneurial firm, a small business, a family business, a
home-based business, or a new business
Over the past two decades there has been a mass of research which has attempt to
discover the difficulties of start-up planning and existing small business. Some of
them focused on problems of new entrepreneurs and other have concentrated on
exiting entrepreneurs (Mirry, 1998; Mintzberg, 1994; Schwenk & Sharder,
1993;;Covin, & Slevin,1991;Stanworth, 1991; Sexton & Bowman-Upton, 1991;
Ahmadpour, 1990; Sharder, Mulford & Blackburn, 1989;Bracker and Pearson,1986;
Miller,1983). Some of the researches have addressed successful entrepreneurs but
others looked at the failure small business managers. All these studies were addressing
if there are any clear characteristics, which distinguish small business barriers to find
out which one is more important for policy makers.
The process of entrepreneurship.
Process of Entrepreneurship can be seen in the following way:

Enterprises are as different and unique as the entrepreneurs who create them, most of
them appear to work through a process. The diagram given below describes the
process through which most of them create their enterprise:
 Self-discovery: Entrepreneur enjoys doing different things and learn out of it.
Examine their strengths and weaknesses. Understand his abilities, talent,
knowledge and feelings relating it to potential opportunities.
 Identifying opportunities: Entrepreneur see for needs, wants, problems,
challenges and craft opportunities that other people miss or that are not yet
being met and convert it into different forms effectively.
 Generating and evaluating ideas: He uses his creativity, conscious endeavour
and past experience to collect ideas from different sources and find out a
creative and innovative solution and ends as a creative venture.
  Planning: Making a written business plan including requirement of financial
resources, human resources, technical resources, material resources according
to size of business, prepares applicable marketing strategies and turn the idea
into a viable venture.
 Raising Start-up capital: Using the business plan to attract investors, venture
capitalists and partners. This stage can involve producing prototypes or test-
marketing services.
 Start-Up: Entrepreneurs launch the venture as per the reuirement, need, taste
and preferences of a customer, and keep a margin of flexibility in marketing
strategy and operational plans as required.
 Growth: Time to time scanning of environment, making sure of constant flow
of ideas, by adapting to new, different strategies, different economic policies,
changing technology, innovation diversification facilitate growth and
expansion.
 Harvest: Harvesting is the final phase in the entrepreneurial value creation ,
process were the owners can simply sell the business and reap the value of their
investment in the firm and harvesting the rewards.
Entrepreneur plays an important role in the nation’s development:

 Increase in the rate of growth in GDP (Total value of goods and services
produced in an economy in a year),
 Increasing productivity,
 Providing employment opportunities,
 Increasing economic diversification,
 Optimal use of available resources,
 Continued innovation in techno-managerial practices and finally international
competitiveness.

Functions of an entrepreneur.

1. Innovation:
o It is a process of entrepreneurship. It involves the conversion of a useful
idea into an application which has common value.
 o As an innovator, the entrepreneur has to discover new opportunities,
area of a new product, new methods of production, a new use for a
product or service or a new way of integrating several uses in one
product or service for optimum utilization of resources.
o An entrepreneur wants to experiment with new ideas, facing uncertainty
and therefore the process involves imagination, intuition and taking
calculated risks.
o He/she foresees a potentially profitable opportunity and tries to exploit
it.
o Example: I-Pod, Smart phones, Induction cook top, etc.

 Risk-taking/Risk bearing:
o Risk may be defined as the condition of not being able to predict the
outcome of an activity.
o It refers to taking responsibility for a loss that may occur due to
unforeseen contingencies in the future.
o  An entrepreneur reduces uncertainty in his/her plan of investment,
diversification of production and expansion of the enterprise.
o  He/she is a self-confident and highly optimistic person, willing to
assume the risks involved in innovations, new ventures and expansion of
an existing venture.
o An entrepreneur need to take calculated risk and he tries to minimise by
his initiative, skills and good judgement.

 Organisation Building:
o Organisation refers to the bringing together of the various factors of
production, ensures continuing management and risk-bearing function.
o  The purpose is to allocate the productive resources in order to minimise
losses and reduce costs in production.
o All decisions relating to an enterprise is taken by the entrepreneur.
According to J.B Say an entrepreneur is a person who combines land of
one, the labour of another and capital of yet another and thus produces a
product. By selling the product in the market, he pays interest on capital,
rent on land and wages to labourers and what remains he keeps as a
profit.
o He/she alone determines the lines of business to expand and capital to
employ. Thus, an entrepreneur is the final judge in the conduct of his/her
business.

The need of entrepreneurship in an economy

In recent decades the role of an entrepreneur has been considered of very great
significance in accelerating the pace of growth and economic development in both
developed and developing countries.
The need for entrepreneurship can be highlighted thus:

 Life-line of a nation: Country’s progress can only be possible with the

development of entrepreneurship. From long time every country is trying to
promote its trade so that it may able to share the benefits of development.
Therefore, entrepreneurship is considered as the yardstick to measure the level
of development of a country.
 Provides innovation: Entrepreneurship provides new ideas, imagination and
vision to the enterprise. An entrepreneur is an innovator as he tries to find new
technology, products and markets. He increases the productivity of various
resources. The entrepreneur stands at tho centre of the whole process of
economic development. He conceives business ideas and puts them into effect,
to enhance the process of economic development.
 Change of growth /Inclusive growth: An enterprise operates in a changing
environment. The entrepreneur moulds the enterprise in such a changing
environment. The latter moulds not only the enterprise, but also alters the
environment itself, to ensure the success of the enterprise. In order to meet the
challenge of automation and the complexities of advanced technology, there is
a need for the development of entrepreneurship.
 Increased profits: Profits can be increased in any enterprise, either by
increasing the sales revenue or reducing cost. To increase the sales revenue is
beyond the control of an enterprise. Entrepreneurship, by reducing costs,
increases its profits and provides opportunities for future growth and
development.
 Employment opportunities: Entrepreneurship and its activities provide the
maximum employment potential. Large numbers of persons are employed in
entrepreneurial activities in the country. The growth in these activities bring
more and more employment opportunities.
 Social benefits: It is not only beneficial to the business enterprise, but to the
society at large. It raises the standard of living by providing good quality
products and services at the lowest possible cost. It also makes the optimum
use of scarce resources and promotes peace and prosperity in the society.

List of the Pros of Entrepreneurship

1. You have an opportunity to grow in your career.
When you decide to take the plunge to become an entrepreneur, then you are giving
yourself the ability to fulfill your aspirations, goals, and passions as an individual.
You get to be the boss of your environment. There is no one who interferes with your
decisions, the place you wish to work, or how you want to approach situations. Your
life gets to be your own, which means you take the risks that fall into your comfort
zone. If there is a market demand for your services, then you have the chance to make
some money.
2. There is a lot more independence as an entrepreneur.
Because you get to be your own boss when working as an entrepreneur, there is no
one there to peer over your shoulder to tell you what to do. You are free to make
decisions in your professional or personal life based on the needs you have in that
moment. You can decide to work whatever hours you want, whenever you wish to
work them, and even change your office location if you wish. This independence
extends to any employees you have as you all work together to earn money.
3. You can have flexible working hours as an entrepreneur.
An entrepreneur will choose the working hours that suit their needs the best. Although
Gary Vaynerchuk suggests that you must put in 18-hour days when you first get
started, some entrepreneurs can get by with an 80-hour per week hustle. Some
opportunities may only require a handful of hours at first because there isn’t much
work coming in to complete. If you have access to resources and outsourcing, it is
possible to find a place where you can sit back and start working as little as possible
each day.
4. There is an immediate ability to earn as an entrepreneur.
Although you are taking more risks with your income as an entrepreneur, there are
more opportunities to build wealth when you pursue this lifestyle as well. Employees
are constrained by a specific salary or hourly rate. It doesn’t matter if they work
harder or not – they will still be paid the same. If you are an entrepreneur, then you
own the company outright (even if you’re working as a sole proprietor). That means
you should be receiving the largest share of the profits which start coming into the
company. You can earn as much as you want based on the demand that is available for
your products or services.
5. You have opportunities to change or explore.
You are not stuck in a job that you hate when you are working as an entrepreneur. If
you see a new opportunity that looks intriguing and there is the potential to earn more
money, then you can start to pursue it. Even if that means re-training yourself or your
employees or expanding your business, you hold the power to shift gears whenever
you wish. That means you are always the creator of your destiny. If you want to start
exploring a different horizon, then push forward and do it.
6. It is a chance to discover what makes you tick.
Instead of worrying about what is going on at the office, the world of the entrepreneur
looks at the quality of the idea that you’re pursuing. It is an opportunity to embrace
your creative center, following wherever your imagination might lead. Instead of
trying to build a reputation that can earn you a promotion one day, the focus of your
daily tasks is to improve your life by helping others to improve their own in some
way. The only obstacles that get in your way are the ones that you allow to be there. If
you’ve always wondered what kind of person you were, spending time as an
entrepreneur will show you everything you’ve ever wanted to know.
7. It is an opportunity to earn based on your full potential.
There are no limitations to your income when you’re working as an entrepreneur. You
will always earn based on the quality of your idea, your ability to market it, and how
effective your selling techniques happen to be. The only caps on your wealth are the
ones that you allow to be there in the first place. If you feel like you’re not earning
enough to make ends meet, then even a side hustle as an entrepreneur can help you to
find the supplemental cash that you need – and it could be enough to help you get free
of the 9-5 grind every day to do your own thing.
8. You have new opportunities to get involved in your community.
Because you can set your own hours as an entrepreneur, there can be more free time to
help you be active in beneficial ways in your community. Your new business can
become part of the chamber of commerce if you wish. There are places for you to
volunteer, like being a Little League coach or a leader in the Girl Scouts of Scouts
BSA. You will find food banks, non-profits, and others in your community who could
use a helping hand. One of the best reasons to become an entrepreneur is that you can
make a real difference in the lives of others, which allows you to do the same for your
own.
9. It is an opportunity to get your ideas out quickly.
If you are working for a traditional employer, then it can be a challenge to get your
ideas out first to the market. There are multiple layers of hierarchy that you must
navigate in the traditional employment environment. You may not even receive full
credit for the results that your creativity generates when you earn a regular paycheck.
When you operate as an entrepreneur, this issue goes away completely. You can start
solving problems for people proactively, which gives you an opportunity to create
products or services that can make you some extra cash.
List of the Cons of Entrepreneurship
1. The leave benefits of an entrepreneur are not the same.
When you work as an employee under a traditional employment contract, then there
are leave benefits and holidays for which you may qualify. These are specific times of
the year where you can enjoy being paid while not actually being at work. You might
receive discretionary sick time to use if you feel under the weather or need a mental
health day. Vacation times are paid as well, often taken when you want to get away.
Holidays are paid-time off. When you’re working as an entrepreneur, these options are
not always available.
2. You do not have a guaranteed income as an entrepreneur.
One of the biggest advantages that employees have when compared to those in the
pursuit of entrepreneurism is a guaranteed paycheck. Although there is the threat of
being fired or laid off, the income you receive for your work comes in on a regular
schedule. That means entrepreneurs are working with lower levels of financial
security for themselves and their families. The payment an employee receives often
includes a range of financial benefits for their family as well, including health and life
insurance.
3. There are no fixed working hours when you’re an entrepreneur.
When you work in a traditional employment setting, then you are given fixed working
hours with a guarantee of payment. It is a contract outlined between you and the
company that offers compensation at a specific level. If you exceed those hours, then
you can earn additional wages, benefits, or opportunities in the future. Some workers
receive “hours in lieu” that work like vacation time.
If you are an entrepreneur, then you are working whenever a task must be completed.
There are no holidays, vacations, or sick days unless you set your work aside for them
– and then it waits for your return. You’re not getting paid (unless you have passive
income) unless you work. Justin Zhu, CEO of Iterable, says he works from 11am to
5pm, and then 9pm to 3am, as a way to stay productive.
4. You are the one required to do all of your updates.
If you’re working as an entrepreneur, then there is an excellent chance that you are
using technology to make things happen. That’s a lovely tool to use when things are
up-to-date. When your firmware needs to update to a different version or the software
stops function, then you stop working until the process completes itself. You could
find yourself losing 2+ hours out of a day trying to fix your tech problems. Unless you
budget time for this on a regular basis, there will be times when you’ll struggle to
meet deadlines because something isn’t working right.
5. There are more responsibilities as an entrepreneur.
When you are active in the employment world, then you are given a specific role or
assignment to complete. You are only responsible to perform the tasks given to you,
which are usually related to the role in which you’ve been hired. There isn’t a need to
worry about the work that others are doing. You get paid for that limited scope or
tunnel vision. You even receive appraisals based on how well you perform in your
role which can often lead to promotions. If you’re an entrepreneur, then you’re
responsible for everything all of the time without exception.
6. You must have high levels of self-discipline as an entrepreneur.
Entrepreneurs succeed only when they can create standards for themselves that they
adhere to when fulfilling their roles and responsibilities. This trait must extend to their
direct reports as well. There must be some level of natural leadership present within
the atmosphere of the opportunity under pursuit for there to be any chance of success.
If you decide to slack off when there is work to be done, you have that choice – but it
could also limit the amount of progress you make on an idea.
7. There are higher levels of stress as an entrepreneur.
You don’t have a guaranteed income as an entrepreneur. There isn’t a boss around that
can offer you advice if you’re stuck on a problem. You might not have any colleagues
to rely on for support. There are plenty of people in this position who are working solo
every day, mired in their home office, struggling to make ends meet. Being your own
CEO, managing your marketing, legal work, and accounting leads to high levels of
stress. That’s why there are some people who like the idea of following this trend, but
then discover that it isn’t right for them.
8. You might need some cash to get started on a new idea.
There are some business opportunities that can be started for next to nothing. If you’re
a sole proprietor who offers a standard service that can be sold online, then all you
need to do is create a website or join a platform, put up your listing, and then start to
market yourself. If you want to start an LLC or corporation, however, then you may
need to have a few thousand dollars at-the-ready to begin the investment process.
Most entrepreneurs start in debt because they need to cover their start-up costs. If you
can’t turn a profit, then you could lose everything when pursuing a dream.
9. There are tax implications to consider.
If you earn money as an entrepreneur, then you become your own employer in the
eyes of the tax laws. That means you are responsible for the employer’s share of the
Social Security and Medicare withholding in addition to your own. The 2018 tax year
pegged this rate at 15.3%.
1.2 IMPORTANCE OF THE TOPIC

Every successful entrepreneur has experienced failure. Failures of all sizes provide a
valuable benefit -- they help to develop an entrepreneurial mindset that allows us to
keep pushing forward. It’s the equivalent of getting knocked down in the boxing ring
and bouncing back up and ready for more. It’s easy to look at a failure as a personal
shortcoming, but it's healthier to embrace failure as part of the entrepreneurial journey.
Here are some reasons why it can help you succeed in business.

You are going to fail at some point -- that’s the reality of entrepreneurship. If you go
through life thinking that you won’t fail, then it will only hit you twice as hard when
you do. If you know failure can be lurking around every corner, though, you
can respond more quickly when it happens and make adjustments to correct the
problem. 
If you think failure isn’t a possibility, it will take you much longer to respond and
adjust. This can lead to multiple negative issues piling up on your back, eventually
crippling your forward momentum.

Failure can teach as a lot. Everything leading up to failure is a lesson -- the choices
you made at the time, the reasoning behind your decisions and so on. If you have the
right mindset, you can dissect the failure and learn from it.

“There are two responses to failure,” says John Foy, attorney and founder of john foy
& associate . “You can get bogged down or you can grow. What distinguishes a good
entrepreneur from a mediocre one is which option they select. You can either get
discouraged and contemplate giving up or embrace the failure and learn from it.”

Seeing failure as a challenge rather than a personal shortcoming can be immensely

helpful to entrepreneurs during their journey. Every failure you encounter is an
obstacle to overcome, and successful entrepreneurs navigate around several until
finally “making it.”

When you are no longer scared of failure, you have less to hold you back when go
after your dreams and goals. We encounter scary situations daily, and the sooner you
eliminate fear from your thought process, the sooner you will be able to go after your
goals with 100 percent focus.

A good example of a company that nearly failed but came back stronger in the end is
Apple and its decision to oust steve jobs in 1985. There’s some debate whether
removing Jobs caused the stagnant sales for the next ten years, but nobody can deny
that when they brought him back twelve years later, sales improved.

Now, several years later, thanks to Jobs’ creativity and marketing charisma, Apple is a
household name and its brand has some of the most sought-after in the world.

“The only way you will know your limits is to explore them. Failures teach you what
you can and cannot do. Knowing this helps you accurately plan for the future, and
work toward your goals,” suggests Anton Ignatenko, CEO of lead network.

Personally, I have failed several times, and I would never be where I am today if I let
a single failure stop me or get in the way of my goals. Instead, I embrace them and use
them as a learning experience as well as motivation.

Theoretical framework of study

Although there are a huge amount of research in relation to entrepreneurs but review
the literature and most of the work done in this respect revealed that the authors
focused on the different aspects of entrepreneurs success and failure. Generally
speaking, all entrepreneurs are when developing a business are faces with three vital
stages: a)getting idea of business, b)start-up activity and c) activate the business. In
each stages they are struggle with different issues. To get a better idea of the
relationship among these issues we classified them as 6 main issues and a numbers of
variables.
Creating a new business is a process fraught with difficulty and failure and many
businesses fail in the first twelve months of trading (Reynolds & Miller, 1992,
Sullivan et al 1998; Lussier, Robert N. 1996). Previous research has identified a
number of possible influences on the success of new small businesses, including the
effects of opening size on growth, the entry process, customers and innovation. For
example, Johnson, Kattuman and Conway (1996) found that business size plays a key
role in the growth rate of very small businesses, with micro businesses experiencing
the highest rates of growth. Differences have also been found between those who set-
up from scratch and those who purchase existing businesses, those who rely on one
large customer as opposed to those who develop relationships with a variety of small
customers, and those who pursue a niche market (Reid, 1993; Sullivan et al 1998;
Johnson, Kattuman & Conway, 1996). It should be noted that whilst innovation can
provide new market opportunities, innovative businesses often face rapid growth,
which can be disastrous if not managed correctly.
While a listing of reasons for small business failures would at first seem lengthy,
according to Clark, S. (1997) of the Puget Sound Business Journal, the majority of the
causes can be condensed into the three critical issues, namely; Money, Management
and Marketing. But here we addressed issues, which are more frequently studied by
previous researchers in different economic section and countries.
1.3 STATEMENT QUESTIONS AND HYPOTHESIS
 How to extent the performance of successful and failure entrepreneurs in small
industrial business is related to their managerial skills?
 How to extent the performance of successful and failure entrepreneurs in small
industrial business is related to their human resource development indicators?
 How to identify how much the performance of successful and failure
entrepreneurs in small industrial business is related to their financial situations?
 How to identify how much the performance of successful and failure
entrepreneurs in small industrial business is related to their planning and
organizational issues?
 How to identify How much the performance of successful and failure
entrepreneurs in small industrial business is related to their economic &
infrastructure environment of business in AP region?
  How to how extent the performance of successful and failure entrepreneurs in
small industrial business is related to the informal issues?
 How to identify the barriers encountered by entrepreneurs at the different
stages of business?
1.4 GOALS AND HYPOTHESIS OF STUDY
The preliminary study about the subject revealed that although the entrepreneurs in
small industrial business in Ahvaz city are active in relatively similar environment but
some of them after a while are bankrupted. This is the question why some of the
entrepreneurs are successful but others are failed in continue their business. For the
purposes of this research, small business was defined as independently owned and
operated businesses employing fewer than 50 employees. For measuring entrepreneurs
successful in business there are a numbers of methods such as:, net profit after tax
reduce, amount of tax paid during the last three years, rate of productivity ( input-
output ratio), current assets ratio (ratio of current assets to current debt), keep working
since three years ago and active in the business, increase products, services and sale,
increase business capital. In this study due to the difficulty of access to all those
information and data, we use the last three indicators for measuring the performance
of small business.
 CHAPTER-2
2 RESEARCH METHODOLOGY
2.1 Objectives Of The Study
 The overall objective of the study is to analyse the reasons for success and
failure of small medium enterprises in AP Region.
 Given these various definitions of business failure, this study aims specifically
at:
 Comparing at least forty AP small medium enterprises; namely twenty that are
very successful and another twenty that are not so successful, in terms of
service operations, profit, job opportunities and growth.
 Furthermore, the study aims to address the critical factors leading to success in
small medium enterprises.
 The study also aims to address the critical factors that result in failure among
small medium enterprises.
 Searching for practical solutions from existing businesses to solve the problems
of less successful enterprises.
2.2 Methodology
The study is descriptive and comparative in nature. Most of the sources that have
been used in this study include books, academic journals, newspapers, the Internet,
Government Gazettes and official and also unofficial documents from at least forty
AP small medium enterprises. Questionnaires formed a major part of the measuring
instruments.
DATA AND SAMPLE DECISION.
 The universe
Defining the universe is the first step in the sampling process. The universe unit in this
study is the AP Region small medium enterprise business owners who are successful
in their business operations and also those who have failed. This study analyses the
relationship between successful businesses and those that fail, in other words the
factors that make some a success, while others fail.
 The sample frame
Having defined the universe, the next step is to obtain a frame from the population (Le
Roux, 2003). Sample frame is closely related to the population and entails a list of
elements from which the sample is drawn.
Forty questionnaires were distributed to small business in AP region (twenty for
successful businesses and twenty for unsuccessful businesses). The names of the
business owners were randomly selected from small business owners' directory of the
AP region.
  Sampling method and sample size of data
Because of the size and the distance and distribution of this population, it was decided
to use a questionnaire. Questionnaires were personally delivered to business owners
during the first week of August 2005..The owners were given a few weeks to
complete the questionnaires, which were collected by the researcher during the last
week of August 2005.
METHOD OF DATA COLLECTION
The method of data collection flows from the research design. Various methods may
be used for the collection of data, including questionnaires, personal interviews and
telephonic interviews. During personal interviews the researcher poses personally
questions to the interviewee. In telephonic interviews the process is similar, but the
parties are not physically present at the interview, but they are connected by the
telephone line.
Questionnaires were used for the purpose of this study because of the following
reasons
1. Questionnaires will be able to reach larger number of respondents in the AP
Region.
2. The size of the research population makes it impossible to conduct personal or
telephonic interviews, as most owners have a very busy working schedule.
3. Personal interviews also take a tremendous amount of time.
There is no simple answer to which of the available methods of data collection the
researcher should use when collecting primary data . It normally depends on the
nature and the purpose of its use.
For this study a short structured questionnaire was developed which would be
completed by respondents.
 Reliability of the questionnaire
According reliability of measuring instruments is the basis where the independent
administration of the same measuring instrument deliver the same results when a
comparison is made between two circumstances. Reliability can be measured in two
ways. Firstly it may be measured in the contexts of stability over time.
This basically means that when the same questionnaire is forwarded to the same
respondents under the same circumstances, but at a different time, it should still be
able to reach the same results.
Secondly reliability could be measured in the context of cooperating to reach a
common goal. All questions in the questionnaire should be coherent to determine the
factors that lead to the success and small and medium enterprises and how they are
applied.
This questionnaire that is used was evaluated by experts in the field of small medium
enterprises and complies with the above requirements. As regards this questionnaire it
was only possible to use the evaluation of the experts, as no pilot study could be done
because of the small size of the sample used for this research. Furthermore, no
statistical methods of data analysis could be used for this research because of the small
sample.
 Validity of the questionnaire
Validity refers to the extent to which a test measures what it intends to measure.
Content validity in this study was great, as the questionnaire was evaluated by experts
in the field of small and medium enterprises, because of the small sample of the study.
Thus it is believed that the instrument fulfils the purpose of its measure (De Voss et
al., 1998).
 Questionnaire design
The questionnaire have three main sections which relate to family history, gaining
more insight about the owner and the business and ascertaining the reasons why the
business is either a success or failure. Most of the questions are either on a two point
scale (Yes/No) or on a four point scale where respondents are given the opportunity to
select from a wide variety of choice. With the four point scale respondents are able to
choose the answer they regard as the most appropriate. Several questions related to the
literature are also used to guide this selection of questions.
 Rating Scale
A standard five point Likert scale was used in which five was regarded as a key
contributor and one being the least contributor or no key contributor at all.
 Pilot Study
A pilot study is normally used to test the implementation of the measuring instrument
amongst a small group of respondents, who have a similar profile as the respondents
of this particular study. A pilot study was conducted with small and medium
enterprise business owners in the Western Cape, not only for the discovery of errors,
but it was useful in familiarizing the researcher with the respondents and also to see
whether the respondents understand the different questions. No significant changes
were made to the original questionnaire, and, therefore, no post-test questionnaire was
compiled.
Sampling technique
Convenience Sampling was used to select the sample. Convenient sampling is a non-
probability sampling technique that attempts to obtain a sample of convenient
elements. In case of convenience sampling, the selection of sample depends upon the
direction of the interviewer. In this project, questions method was used for the
collecting the data. With the help of this method of collecting data, a sample survey
was conducted.
Data collection
Secondary data: secondary data are those which have already been collected by
someone else and which already had been passed through the statistical process. The
secondary data was collected through web sites, books and magazines etc.
Limitation of the study
 The study is based on secondary data collected from websites.
 Time constraints while collecting secondary data.
 The limitation of the data, if any, will also influence study.
 CHAPTER-3
3. STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)
An overview of the situation of the AP SME sector can be explained with the aid of a
SWOT-analysis. A number of studies have pointed out the present weaknesses and
emphasised the low level of development in this sector. However, this analysis will go
a step further to reveal that there is a bright future awaiting Andra Pradesh SMEs
(White, 1997).
The current situation of the AP SME sector
The small business sector is still relatively small, and has a very low level of
development. Currently the weaknesses outnumber the strengths, but the future
potential is great, as Andra Pradesh is in the phase of rapid transition.
Many of the current weaknesses are not absolute, but subject to the process of erosion
and change. The low level of development of industrial activity presents in itself an
opportunity for future development (White, 1997).
Strengths
The strong points of this sector are the abundance of labor and the provision for free
informal training. SMEs are regarded as the nucleus of creating business in any
flourishing economy. A survey conducted on the AP region showed that SMEs
account for a large share of the private sector economy, representing approximately
between 96 and 99 percent of the total number of enterprises in these economies.
SMEs enhance competition and entrepreneurship in AP, and hence the spill-over
effects of innovation, efficiency and productivity growth could translate into an
increase in value added output. The AP government also recognized the vital role
which SMEs play in the socio-economic development of the country as indicated in
the National Development Plan 2 and Vision 2030 that should aid in the eradication of
poverty and inequality.
Weaknesses
Firstly, the industrial labor force is for the better part under-trained. There are also a
number of deficiencies in the area of management know-how. It is common for
entrepreneurs not being able to make a clear distinction between income, profit or
turnover (White, 1997).
Secondly the general level of education is quite low, despite the high expenditure on
education. In respect of the level of skills, labour costs are relatively high. At the same
time, incomes in the formal sector are often higher compared to the income in most of
the other activities in which workers in the formal and the informal are engaged
(White, 1997).
Thirdly there is a lack of both management training institutions and vocational
training adapted to the needs of the vocational training enterprises. There are very few
vocational training institutions. Furthermore, the existing facilities do not meet the
appropriate needs of small businesses and product innovation.
Finally, apart from training, the most important constraint is the lack of credit. Small
enterprises simply do not have sufficient access to credit. The providers of credit for
Small and medium enterprises in Andra Pradesh are the Commercial Bank of Andra
Pradesh, First National Bank, Andra Pradesh Development Corporation, Development
Fund of Andra Pradesh, Bank Windhoek, Standard Bank of Andra Pradesh and Andra
Pradesh Post and Savings Bank (Tonin et al., 1998).
Opportunities and future outlook
There is still a very low level of development in the small enterprise sector. The
prospects for the future are, however, bright as Andra Pradesh is passing through a
process of rapid change.
In terms, the new trade agreements in connection with the WTO2 will lower
protection of industries, decrease the market power of the South African industry and
increase competition. Similarly the current SACU3 negotiations aim to compensate
the industries in the BLNS4 countries for the polarization effect in favor of industries,
in contrast to the position in the past (Tonin et al., 1998).
Andra Pradesh government policy increasingly recognizes the importance of small
business growth in order to overcome poverty and create employment. It is expected
that this policy will increasingly address this matter by creating an enabling
environment for small businesses. The attitudes of the people are changing and both
black and white entrepreneurs are positive about local business development (White,
1997).
Threats
There is a danger of an interventionist policy, with a well-meaning, but misguided
intent, of government that may regard the slow pace of development as a sign of the
private sector failing and hence a need for government to become more directly active
in the productive sphere.
Parastatals pose another danger to the efficient and effective development of the SME
sector. This is common amongst small enterprises in communal areas.
In most cases parastatals undermine the development of the private sector. However,
the government is in the process of reconsidering and probably limiting the role of
parastatals. Obstacles include institutional resistance to this policy, which may
jeopardize its success (White, 1997).
As small organizations play such a significant role in the Andra Pradesh economy as
described in the preceding section, the government developed a small business
promotion strategy directed towards the socio and economic development of the
country (White, 1997).
CHAPTER-4