Barriers to Entrepreneur

1st Barrier: The true meaning of innovation

To begin with, there is a great lack of knowledge of what innovation really is.

In our case, we simplify the issue using a definition inspired by the generally
recommended Peter Ducker: to innovate is to create something newin your
industrythat adds value for the user (in this presentation made by us, you can
see a more developed explanation of the definition and the difference with other
terms like invention, investigation or development).

This means that when we help our clients to innovate, we push to achieve real
novelties in their industry. This doesnt stop new improvements from emerging,
which will certainly be taken advantage of. But we think that keeping this level of
demand allows us to obtain more and better results of innovation.

It is also common to confuse innovation with buying innovation (we are

innovating because we invested in machinery of the latest technology) or limit the
possibility of innovation to just technological innovation, which is not right at all.

Many of the considered technological innovations are actually new ways of using
the existing technology, like the famous case of Tesco in South Korea (explained
in this great video). The key to Tescos innovation is not developing a Smartphone
app to buy products by taking photos of the items QR code. The real innovation is
to take the store where the client is (in this case the subway). Once there, they take
advantage of available technologies such as smart phones or QR codes.

In our case, besides actively seeking something new with the clients, we suggest
searching innovations in a wider area, rather than limited only to the product: in
fact, they can be product or service innovations, but also organizational, of the
business model or of the processes themselves. Everything will depend on the
strategic needs and demands that the top management of the company will set
down.
2nd Barrier: Diffuse allocation of responsibilities
We solve this issue with a simple but permanent structure: the creation of an
Innovation Committee (IC). A committee of 6 to 8 persons that is multidisciplinary
in order to provide different visions of the same thing (purchase vision, sales,
financial, etc.). It is also multilayered or multilevel in order to have, again, different
points of view, but this time vertically throughout the organization: from reception
to management, going through marketing or production.

Of course, every member of the IC has to contribute and not be just a spectator.

This basic structure, whose members rotate over time, is reinforced with another
detachable structure created according to the specific needs:

The creativity workshops, to solve strategic issues that require innovation.

The project teams, organized to plan, execute and launch the innovation
projects.

3rd Barrier: Confusion between creativity and innovation

Creativity is an ability that everybody has more or less developed, that allows us to
make connections that generate new ideas. But these ideas dont, necessarily, need
to have commercial or business validity.

Innovation is processed creativity transformed into business success.

We solve this confusion between creativity and innovation clearly separating their
different stages of work in the projects: creativity always comes before innovation.
Without creativity there is no innovation, although creativity is not a synonym of
innovation: it is a necessary condition, but not sufficient.

We carry out a creativity stage to solve the strategic issues. This one comes before
the stage of development of innovative concepts: these concepts in turn, result of
the best ideas that arose from the creativity stage.
Subsequently, follows the management of the innovation projects -for the best
concepts- and the commercial launching or implementation of those projects. To
sum up, the management of innovation always comes after creativity (although, of
course, we can always consider creativity a stage of the same innovation process,
understanding it in a broad sense).

4th Barrier: The absence of a unified theory

There is no unified theory or a clear framework for action as it happens in
marketing with the famous 4 PS (product, price, place, and promotion) and the
complete theory developed around it by the same Philip Kotler and others.

In our case, we work with a robust methodology that actually is a systematic of

innovation management as it consists in the iterative (continuous) implementation
of a sequence of stages:

Strategic reflection: provides the guidelines or the strategic issues.

-Creativity: provides good innovative ideas.

-Project selection: provides the best projects for the company, taking into
consideration a balanced portfolio of projects (regarding profitability, execution
deadline, risks, etc).

-Project management: provides an orderly and effective management of the

innovative projects.

-Continuous advance towards a culture of innovation: allows the extension of

this culture through all the organization (to achieve an ideal everyone is an
innovator, all the time).

Many times the simile we use to describe this systematic is the one of the wheel that
starts to roll (the radius can be the different stages), that gets bigger (the method is
developed, it adapts to every company and improves) and rolls faster, generating
more and more speed and movement (the results of the company).
5th Barrier: Lack of control
It is common for innovative companies not to have a clear responsibility for their
innovation activity: this is dropped to the marketing or product development staff,
design or technical office department, quality managers

In our case, these responsibilities are perfectly assigned by means of the

responsibility structure mentioned previously: the innovation committee (IC) and
the innovation teams.

Indeed, once the specific responsibilities are assigned, we can control the activity.
As we see that happens in any production plant, where we can establish indicators,
objectives, people responsible for each objective, etc.

6th Barrier: Absence of coordination

Once again, the coordination between departments is solved by the IC, among other
things, due to the presence of representatives of almost all the departments of the
company in it, that are in charge to extend and disseminate its decisions between
the colleagues of their department.

The necessary presence of the top executives and other different hierarchical levels
in the IC will also facilitate extending, vertically, the decisions and activities of the
IC through the entire organization.

The more information and participation of the different profiles of the organization
in the decisions taken, the greater is the involvement and the coordination of the
team.

7th Barrier: Lack of focus on the client

This problem refers to one of the erroneous beliefs that Levitt identified in the
declining industries in his famous article Marketing Myopia. This belief consists
in the obsession for R+D and referred to the danger of converting companies into
efficient producers of excellent objects, before converting them into useful
organizations for the client. In other words, falling in the dangerous situation of
engineers innovating for their peers. Launching novelties made by and for- the
enjoyment of- the engineers rather than for the end user. This is guarantee of an
assured failure.

In our case, we solve this barrier in the initial stage of strategic reflection: focusing
very well in which businesses we want to work on, with what clients,
acknowledging which are their main needs and problems. All this will establish
different business strategies that require, to be implemented, a number of key
assignments that need to be solved through, either, improvement or innovation.

The key assignments that require specifically innovation, are the ones we will take
to the creativity workshops to produce innovative ideas to solve them.

Reasonable expectations
In conclusion, I must say that I felt reasonably comfortable reviewing all the
barriers to innovation proposed by Fernando Tras de Bes and Philip Kotler.
Because, if it is obvious enough we cannot guarantee success in all the innovations
that our clients develop and launch, however, we can state, almost certainly, that we
are going to overcome the barriers that prevent us from producing these
innovations.

https://entinsi.de/7-barriers-to-innovation-b74382ec57b5
http://www.bbamantra.com/introduction-to-entrepreneurship/
Article on barriers to entrepreneur

In general, the limiting factors of independent entrepreneurship can be divided into

three categories: I. Individual entrepreneurship: these barriers include the
following varieties: (Jodyanne, 2009) 1- Family and Entrepreneurship: in
traditional society where men work outside the home to earn money and women
play an important role in doing housework and bringing up the children, men are
more likely than women to transmit business idea. The modern structure of family
in todays society and consequently the womens role outside the home may result
in the emergence of new manifestation of creativity and innovation in both males
and females. Following this change in attitude, manner of production, lifestyle,
parental roles within the family were also affected by these changes so that parents
can play an important role in developing confidence, creating new ideas in the
family and determining childrens career path. 2- Education and Entrepreneurship:
one topic of interest to researchers is whether individuals are born entrepreneur or
will become entrepreneur through academic education. This strongly points out to
the importance of education in entrepreneurship. Regarding the concept of
education, Wesper believes that failure is more likely to happen in entrepreneurs
who have experience but no degree. The second group of entrepreneurs whose
failure is more likely to happen than the first group includes those who are trained
but not experienced. In complete contrast, experienced and well-trained
entrepreneurs are believed to lead the most lucrative business. II. Organizational
barriers: these barriers include the following varieties: 1- Financing: one of the
keys to success and progress in launching a business is to attract and provide
sufficient funds to start up a small business. There are many sources for raising
capital. It is noteworthy that we should examine all possible resources prior to
making any decisions. 2- Physical resources: physical resources are defined as
organizations tangible assets using in producing goods and services as well as
managing organization. These resources consist of equipments, machineries, land
and facilities. Some organizations possess natural resources such as minerals,
energy resources and land. These natural resources may affect the quality of raw
materials and physical outputs. 3- Marketing: today, the problem faced by
companies is not the shortage of goods, but lack of customers. Most companies are
unable to sell their goods and consequently go bankrupt. The findings of a study
revealed that the causes of bankruptcy in these occupations are as follow: (Analoui,
Moghimi and Khanifar, 2009) a- Lack of enough customers (80%) b- Lack of
appropriate customers (10%) c-Lack of suitable goods and products (10%) III.
Environmental barriers: these types of barriers include the following varieties: 1.
Socio-cultural factors: the beliefs, attitudes and values of a society towards the
subject of entrepreneurship are known as the entrepreneurial culture of that society.
Type of attitudes, values and norms determines the culture of the society and
consequently this culture causes the development, progress and innovations. In a
survey conducted on 21 women entrepreneurs in the US, they faced many
problems including getting credit and overcoming this social belief that women are
not serious in their work as much as men. According to some researchers, lenders,
customers, employees and spouses do not believe in women as much the men. In a
research conducted on 129 women entrepreneurs in the US, some of them
suggested that they are not able to enter social circles due to being woman. With
respect to establishing communication and contact networks, it seems that men
enjoy more privileges and facilities than women. 2. Rules and regulations: some
tenors of Labor law and current state regulations may create a couple of constraints
on the development of entrepreneurship (Jodyanne, 2009).
Entrepreneurship Barriers
Difficulties of access to new technologies or the inability to adapt to local
conditions
Inability to access private and public procurement opportunities
Non-availability of affordable technical and managerial consultancy
Educational levels including computer competency
Inability to conduct Market research

Other Barriers
1. Finance: National experts considered problems with finance to be one of the
principal factors hindering entrepreneurship in their country and the
relationship between finance and levels of entrepreneurship activity was
confirmed in the data. The availability of early-stage finance, either from
informal sources such as individuals or formal sources such as venture
capital funds, is greater among countries that have higher levels of
entrepreneurial activity.
2. Education: Education plays a vital role in entrepreneurship. The study
identified that if the level of participation in post-secondary were the only
factor used to predict entrepreneurial activity, it would account for 40
percent of the difference between the study countries. Providing individuals
with quality entrepreneurship education was one of the top priorities
identified by national experts.
3. Fundamentals: The study also argued that policies geared toward boosting
entrepreneurial activity should not be confined to the entrepreneurship sector
per se but also extended to the macro-economic fundamentals of the country
like markets, competition and regulation. In particular, the most
entrepreneurially active countries had a greater ease of doing business with
the government, more flexible labor markets and lower levels of non-wage
labor costs.
4. Social Legitimacy: The perceived social legitimacy of entrepreneurship was
also argued to make a difference. It was found that measures such as (a) the
extent to which fear of failure acts as a deterrent to starting a new firm and
(b) respect for those starting new businesses were associated with
 differences in levels of entrepreneurial activity. Caring too much for the
product than the customers A startup is a baby of an entrepreneur and it is
his duty to ensure that the product has great quality to satisfy the needs of
the consumers. In India, entrepreneurs are very attached to their business
which makes them focus too much on the startup and the product avoiding
the most important factor - 'consumers'. Indian entrepreneurs must have a
balanced chart to ensure that their focus is on the startup and the customers
because customers and consumers determine the future of an entrepreneur
and his startup. Indian entrepreneurs fear failure It might be a bold statement
that Indian entrepreneurs fear failure but the fact never changes.
Entrepreneurs around the world have a fear on guiding their startup to the
right direction but in India the scenario changes quite a bit making it more
difficult for these men as they are not let to take up risk bearing
responsibilities. Indian families do not encourage their youth to run their
own business as it might bring in loss and such thoughts are induced into
these men at a very early stage. Too much interference in everything. An
entrepreneur is an all rounder but that does not mean he gets into every
activity of the business with too much concern. It would in fact be his own
company but an entrepreneur must be smart enough to choose his
responsibilities and priorities within an organization. Decisions must be bold
while most entrepreneurs have the ability to make and take quick decisions
Indian entrepreneurs find it a little difficult to master this skill due to various
external reasons.
5. Family Liabilities
6. Lack of respect in society
7. Fear of failures
8. Knowledge
9. Credibility
10. Trust
11. Market Condition changes
12. Yourself First and foremost
13. Funding and Legal Matters
14.Confidence
15.Lack of vision
16.Time management
https://www.entrepreneur.com/article/254721
1. Abandoning another career

If youre going to dedicate yourself to starting and nurturing a business to success,

its going to be nearly impossible to simultaneously manage another career. You
might be able to manage the infancy of your business on the side, during
weeknights and weekends, but if you want a chance of growing significantly,
invariably youll have to quit your day job.

Walking away from a promising, steady long-term opportunity for something

unpredictable is scary -- especially if youve never run a business before.
Unfortunately, theres no easy way to address this. Just think through your decision
logically, and dont ignore your instincts.

2. Financing

Experienced entrepreneurs dont have it easy when it comes to funding a new

business, but they do have a few advantages over newcomers. They might have a
pool of capital from a business they previously sold or a steady stream of revenue
they can use to fund a new businesss cash flow.

Even if their first business went under, theyve likely made investment contacts
and client connections necessary to give them a leg up in a new enterprise. As a
new entrepreneur, youll be starting from scratch, which means youll need to start
networking like crazy and thinking through all your possible funding
options before landing on one.

3. Teambuilding

This is especially hard if youve never run or managed a team before, but even if
you have management experience, picking the right team for a startup is stressful
and difficult. Its not enough to find candidates who fill certain roles -- you also
need to consider their cost to the business, their culture fit and how theyll work as
part of your overall team. Such considerations are exceptionally hard when youre
under the pressure of filling those positions as soon as possible.

Related: Finding the Right Second-in-Command Is the Biggest Decision An

Entrepreneur Will Make
4. Being the visionary

As the founder of your startup, youll be expected to come up with the ideas. When
a competitor emerges, it will be your responsibility to come up with a response
plan. When your team hits an impenetrable obstacle, your job will be to come up
with an alternative plan to move forward.

This demands on-the-spot creative thinking -- which should be an oxymoron, but

entrepreneurs rarely have the luxury of time. The less experience you have, the
more pressure youll feel from this, and the harder time youll have coming up
with acceptable plans.

5. Dealing with the unknown

How long will your business exist? How profitable will your business be? Will
customers like your product? Will you be able to give yourself a steady paycheck?
None of these questions has a solid, reliable answer, even in startups based on
great ideas with all the resources theyd theoretically need.

That unknown factor means your job stability is going to plummet, and many of
your long-term plans will remain in flux as new developments emerge. Dealing
with this volatility is one of the hardest parts of emerging as a new entrepreneur.

6. Loneliness

Its a rarely mentioned problem of entrepreneurship, and many new business

owners arent prepared for it until it happens. Being an entrepreneur is lonely. Its
a singular position, so you wont have teammates to rely on (completely). Youll
be working lots of hours, so you wont see your family as often. And your
employees will be forced to remain at a bit of a distance.

7. Rule-making

Its fun to be the boss until you have to enforce something. Sooner or later, youll
have to come up with the rules your business follows, from how many vacation
days your workers get to what the proper protocol is when filing a complaint about
a coworker. These details arent fun to create, and they arent fun to think about,
but they are necessary for every business.
8. Decision-making

Believe it or not, this is probably the most stressful challenge on this list. New
entrepreneurs are forced to make hundreds of decisions a day, from big, company-
impacting decisions, to tiny, hour-affecting ones. Decision fatigue is a real
phenomenon, and most new entrepreneurs will experience it if they arent prepared
for the new level of stress.

If you can work your way past these major obstacles, youll be well on your way to
establishing yourself as an entrepreneur. That isnt to say they wont continue to
nag at you as the years go on, or that new and varied challenges wont arise to take
their place, but youll be prepared to handle yourself in those most volatile and
impactful first few months -- and that puts you far ahead of the competition.
Problems Faced by Entrepreneurs While Starting Business in India are 1.
Bureaucracy, 2. Corruption, 3. Labour, 4. Regional Sentiments, 5. Grey
Market and Counterfeit Goods and 6. Social Capitals!
Not everybody will call the factors discussed here problems, but these can lead to
problems if not managed properly.

These are the factors you have to take into account if you are operating in India. If
managed correctly, these can be advantages; otherwise these can lead to serious
problems for the enterprise.

Bureaucracy:
The word bureaucracy comes from the French word bureau, which refers to an
office and the Greek suffix kratos, which means power or rule. So,
bureaucracy refers to the rule of the office.

Max Weber is one of the most influential social thinkers to have studied
bureaucracy in detail. According to Weber, some of the main characteristics of
bureaucracy are as follows:

1. Official business is conducted on a continuous basis.

2. Official business is conducted according to written rules.

3. Roles and responsibilities are defined within a hierarchy, with rights of super-
vision and appeal.

4. Official and private business and income is strictly separate.

Public offices are set up for the good of the people and the officials manning the
posts are referred to as public servants. But, if left unchecked, these public officials
can become self-serving and corrupt.

Firstly, there are a large number of procedures to be followed and clearances to be

obtained to start and operate a business. Secondly, each of these procedures can
take an inordinately large amount of time.

Procedures are established to safeguard the interest of the common man. But,
sometimes, the rules and regulations stop serving the purpose they were designed
for. Rules become tyrannical in nature and an enormous wasted effort is directed
towards compliance with rules and regulations.

Lack of resources is one of the major problems faced by entrepreneurial firms. In

this situation, new ventures find it extremely taxing to divert time and attention to
time-taking procedural issues.

Corruption:
While under no circumstances, corruption can be justified, it is a bitter truth that it
is rampant in many government departments. Even private sector is not spared by
it. We have to make a collective effort to curb this social evil. As it hampers
growth of the business, it is a challenge for budding entrepreneurs.

Sometimes, people pay money to just hasten processes and do not ask for any
undue favours. According to Kauffman and Wei (1999), in an environment in
which bureaucratic burden and delay are exogenous, an individual firm may find
bribes helpful to reduce the effective red tape it faces.
For example, the bank is not releasing money even though it has sanctioned release
of funds. There might be some official who has raised an unwarranted objection. In
such cases, some people are tempted to grease the palms to get things flowing.

Some people also pay bribes to get something beyond the scope of what is fairly
due to them, for example paying bribe to get money released from bank even
though the paperwork is not in order. Sometimes, this is carried to a ridiculous
extent such as paying money to ensure that the competitors funds are not released
from the bank.

Many entrepreneurs have experienced a higher degree of corruption among

employees of large private-sector companies than in the government. How you
prefer to deal with corruption is your personal choice. There are some
entrepreneurs who have taken the difficult path and have played it by the book.

Many entrepreneurs have chosen the middle path and have given in to corruption
in some instances but later have fought vehemently against it and succeeded. There
are also some dangerous entrepreneurs who use their access to corrupt officials as a
competitive edge. But, such practice does not give them success in the long run.

Corruption has also spawned a business of consultants whose only activity is to

mediate between the corrupt officials and those seeking favours from them. Some
entrepreneurs use them to secure funding from banks, get approvals for
constructions, and for periodic submissions relating to labour laws, taxes, and
industrial approvals.

The situation is now changing rapidly and there is hope that corruption will come
down in the near future. The factors likely to lead to a lesser degree of corruption
are as follows:
1. There is greater transparency in procedures to be seen across government
departments. A number of departments have initiated e-governance initiatives,
which decrease public interface with officials by enabling registration, filing,
payments, and registering complaints through the Internet.

2. The right to information (RTI) Act has significantly changed the situation by
giving greater access of government records to interested or affected members of
the general public.

3. The media too has played an active and visible role by conducting sting op-
erations to expose corruption at many levels. The public humiliation suffered by
officials caught in these operations has served as a deterrent to corruption.
Labour:
Lack of manufacturing capability in India has been attributed to red tapism and
corruption, but the low productivity of labour is also a big factor. In the early days
of offshoring, firms from the US and Western Europe preferred to set up
manufacturing facilities in Thailand, Mexico, and China, rather than in India.
Though these countries too had an equally bad record of red tapism and corruption,
the labour in these countries was found to be more productive.

In spite of our huge population and high economic growth, it was only in 2006 that
the economy of India overtook that of Mexico in terms of GDP.

An active workers union is not bad, but sometimes, in India, there may be more
than one union (e.g., one affiliated to CITU and the other to AITUC), with
differing agendas, claiming to represent the workers interests.

Since India is a secular country, religious beliefs of every religion are respected.
So, it has holidays on occasions such as Christmas, Good Friday, Holi, Diwali,
Muharram, Id-ul-Zuha, Guru Nanaks Birthday, Buddha Jayanti, and Mahavir
Jayanti. There are also holidays on occasions of national importance.

As a result, the number of working days in a year is reduced. Furthermore, long

breaks in work brought about by bandhs, regional unrest, and breakdown of
supporting infrastructure in times of floods, earthquakes, and other natural
calamities also disrupt the work.

Welfare measures that restrict long hours of work, protect women workers, and
prohibit underage employees are desirable; but, misuse of these clauses to halt
legitimate business practices is harmful for the growth of industry.

The Indian labour is cheap because of a comparatively low wage structure. But, the
productivity of the cheap labour is not always satisfactory. Employers often need
to keep a regular check on their employees.

The manufacturing sector is now beginning to take off, and there has been a
spectacular growth in the services sector. There is a tremendous shortage of skilled
and semi-skilled manpower. There are not enough institutions in India geared to
train employable youth on skills that are in demand in the job market.

The manufacturing sector is facing a dearth of fitters, welders, draftsmen, and

machine operators. The lack of elementary skills in many call centre and BPO
employees has been very well documented by NASSCOM and other industry
watchers.

Finally, stringent laws governing lay-off of employees make it very difficult to fire
workers in case of non-performance or during times of financial distress when it
becomes imperative to lay-off workers to maintain the financial viability of the
business operations.

Regional Sentiments:
Many businesses have failed because they failed to take into account the
sentiments of the local population. Many successful businesses have managed to
identify and respond to local sentiments. Many outlets of international fast food
chains such as Pizza Hut and McDonalds do not serve beef or pork as a sign of
respect for local mores. On the other hand, scores of businesses suffer because of
anti-social elements trying to score political points by going on a rampage.

The local community expects to gain from every business being set up in its
vicinity. This is especially true when businesses come up in economically
backward areas with very little industrialization. The local community expects
employment in the firm and does not react favourably to employment of migrant
workers.

In case the business is also planning on marketing its end products in that area,
some local businesses will be adversely affected. It is important to address the
concerns of those who fear for their businesses. Otherwise, they are likely to try
their best to drum up for an organized opposition to your business.

For example, if you are setting up a large biscuit factory, some local bakery owner
will fear that his/her unit will have to close down. The local biscuit factory owner
has to be reassured that the biscuits from your factory are aimed at a different
market and are going to compete with Britannia and Parle and not with him/her.
You have to be truthful; lying at this stage will not be of much use in the long run.
Sometimes, setting up an industrial unit will put pressure on the availability of
scarce resources or might adversely affect the quality of the resources. For
example, pollution can affect the quality of the ground water, or if it is a power-
intensive unit, it might affect the availability of power in the area.

In case such adverse reactions from the local population are foreseen, it is usually
desirable to spread the word about the advantages of having the business in the
vicinity. Some of the advantages that can be presented to the local community are
growth in employment, possibility of generating business for service providers
such as small transporters and welding shops, long-term possibility of small
ancillary units, and improvement of some local infrastructure such as roads.

Sometimes, entrepreneurs make goodwill gestures such as donating money to the

local puja committee, buying a computer for the school, or something similar.
Overdoing this can backfire as it can raise the expectation of the local community.

Grey Market and Counterfeit Goods:

The grey market refers to the flow of goods through a distribution channel not
authorized or intended by the manufacturer. Usually, this happens when the price
of a product in the domestic market is much higher than in other nearby markets.

Sometimes, this may be because of high local taxation. In India, the goods that are
usually smuggled in are cell-phones, electronic goods, jewellery, and alcohol.
Chen (2002) even suggests that grey marketing activities can develop a situation of
fair competition in which social welfare increases. In India, the prices of cell-
phones used to be very high but rampant smuggling has prompted a change in
taxes and prices, greatly reducing the differential between India and Singapore or
Dubai.
Another problem is that of counterfeit goods. Even though, strictly speaking
counterfeit goods are not part of the grey market, increasingly people are clubbing
the two together and including counterfeit goods in the definition of grey
products.

The existence of a well-entrenched grey market is a truth in the Indian business

scene. The problem of grey markets can be visualized as existing at various
levels. Let us look at the following situations to have a clearer perception.

Suppose a customer is interested in buying a DVD player. She goes to an

authorized dealer and the authorized dealer tries to sell her a spurious product. This
is common in the case of branded electronic items, clothes, perfumes, and
accessories. It is very easy for unscrupulous manufacturers to make imitation of the
actual product and try to sell it as the real thing.

Sometimes, in the case of pirated products, the buyers know that they are buying
fake items. They are willing to buy a product that gives them the same utility as the
real product at a much lower cost. In many parts of India, people make a living by
selling pirated copies of software, movies, and video games to customers who
know that they are buying a pirated copy for a fraction of the cost of a legally
procured copy.

Now, a range of proactive measures are taken by companies to stamp out

counterfeit and grey goods. Some of these are outlined here:

1. Manufacturers are drastically reducing prices to narrow the gap in prices in local
and overseas markets.
2. Warranties may not be extended to products not purchased through the regular
channels. So, a Nokia service centre will not honour a manufacturers warranty on
a Nokia product that has not been bought from a bona-fide dealer paying all taxes.

3. Some high-tech solutions have also been devised such as the use of DVD
regional codes to protect movies and other digital content.

A new enterprise desirous of building a brand or an image of a manufacturer of

high-quality goods needs to think about a strategy to tackle the problems posed by
the grey market.

Fake products are an industry by themselves. There are many shady enterprises
manufacturing fake labels, packaging, etc. There are many products that carry a
name similar to that of the successful product. HUL has identified dozens of
manufacturer of washing powder who sell using a brand name very similar to Surf.
This is a direct contravention of the intellectual property rights of HUL.

Social Capital:
It is also loosely defined as Pehchaan in India or Guanxi in China. Social capital
has been defined as the aggregate of the actual or potential resources that are
linked to relationships of mutual acquaintance and recognition (Bourdieu 1983). It
can also be referred to as connections or relationships. Unlike other forms of
capital, social capital is not depleted by its use; rather, it is depleted by its non-use.

People like to do business with people they know. Conversely, it becomes easier to
do business if you know the right people. They may be the people either in the
industry or in the bureaucracy. When relationships take precedence over the
principles of fair play and rules, it leads to cronyism and nepotism. Sometimes,
these relationships extend to doing special favours to others in your social group or
caste and those connected by kinship.

Portes (1998) has identified the following negative consequences of misuse of

social capital:

i. Exclusion of meritorious outsiders

ii. Excessive claims on group members

iii. Restrictions on individual freedom

iv. Norms aimed at downward levelling

Measuring social capital can prove to be tricky, but it depends on how many
people you know, how powerful are those people, and what they are willing to do
for you. There are a number of cases of entrepreneurs who have benefited by
knowing the right people and using it to their advantage.

Similarly, there will be a lot of cases of business failure that can be attributed to
not having a close relationship with some significant individuals. Whether use of
social capital for business purpose is right or wrong, can be argued for long, but its
existence is a reality that every entrepreneur has to deal with.

http://www.yourarticlelibrary.com/entrepreneur/problems-faced-by-entrepreneurs-
while-starting-business-in-india/22822