How recession would affect enterprise in Asia
Recession are often said to be cause by the natural variation in the business climate refereed as the “economic cycle”. There are some reasons that would cause the recession happen in a country such as customer loss interest in purchasing as the company have over production and increase the price of product, and happening that have large influence on the economy or will damage several company or industry( banking, credit and mortgage industries).
The other reason is that over consumption of the country, if the country have spend more than what they produced they would have to borrows from other country to solve their over consumption problem. Those factors were the main reason that affect the economic of US and cause the recession happened. The effect of recession is that it would make increase bankruptcies, foreclosures and unemployment rate, bank lending less money to the industry for trade, deflation, reduced sales, and stock market crash. (A.C. West, Oct 2008)
In 1930s, that has a similar scenario can compare with the current economic situation which we call as “Great Depression”. On that time, America government has used the protectionist policies such as tariff act to remedy its economic. However, this method had caused
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The role of NRA was to help up the government spending and provide work for the people; moreover, it was also setting the minimum price or wages and encouraging companies to raise the wages. Although those solution were successful solved the problem but it were just few year time only. In 1937, the recession had attacked on US again, and the unemployment rate was the higher between the years of 1929 to 1937. (Wikipedia, http://en.wikipedia.org/wiki/Great_Depression_in_the_United_States)
If we looking back to the history, we can see that normally the Asian economic was affect by the economic of America. In 1997, Asian Financial Crisis happened, it was start from the Thailand and spread to other Asian country. When the US economic start recovered back from the recession, US government has begun to raise the US interest rate to offset the inflation of the country. Because of that many of the Asian people go invest in US and the value of US dollar increased. However, the export of US would go down while the exchange rate of US goes up therefore the export of Asian country would increase. When country economic become stable, most of the people would choose having a steady rather than become an entrepreneurs.
An entrepreneur is someone who willing to take risk and pursue opportunity to produce new product and service into market. Entrepreneurs can be classifying in two perspectives active and inactive. An active perspective entrepreneur is who forceful on creation a new business which nobody had done before while inactive perspective entrepreneur is people who owner number of business. There are two different type of entrepreneurship, “necessity entrepreneurship” which the reason that become an entrepreneurs because of they do not have better option, which might mean that the unemployment rate is high or economic is unsteady.
The other type is “opportunity entrepreneurships” which the people believe that the new business, product or service will have a great market share exists in market. According to the GEM (Global Entrepreneur Monitor) survey, most of the reason for people become entrepreneurs is that they are trail the opportunity of the market rather than having an entrepreneur’s activity because they do not have other chooses for job. Moreover, in developing (lower income) country such as India and China, they have high level of opportunity entrepreneurship, while develop (high income) country such a Japan and U.S. are having low level of entrepreneurship.
A country’s economic evolution is depending on the prosperity of entrepreneurship which combines with compelling of established association. However, the profitable value of this process is different with the national income, as measured by GDO per capital. At the low income country, self-employment supply employment chance and range for establish for the markets. Therefore, the GDP per capital income will increase; increase of GDP will cause the new technologic occurs and expand the economic of scale and create firm to satisfy the demand of the market and to enlarge their relative role in the economic.
While the economic is stable, the numbers of people who start-up their owner business decline as a rising number of people finds steady work. As country income have increased, the function played by the entrepreneurial areas increases again, that is because more and more people have the capacity go into the business for themselves in a business environment that allows the creation of chance. In high-income economic, adopt lower costs and speed advance the technology evolution, entrepreneur can enjoy the new create of competitive advantage. Accordingly, entrepreneurs in various countries with several level of GDP per capital confront with different challenges. As this result, the same policies and beneficial specification to entrepreneurs in one nation might not have the same efficiency or advantage in other nation.
As we know that the relationship between entrepreneurs and economic is a negative relationship, while the economic unsteady the number of entrepreneurs will increase. This is because under recession the economic will deflation, and everything is “on sales”. Thereby, this is the good timing for entrepreneurs to start up their own as the salary of employee is lower and value of resource is cheaper in that time.While it is true that the worlds have become closely and interlace, it is impossible that a nation ignore economic event happening in other part of the world. However, the current economic turmoil which starts from Europe and US may not affect Malaysia or Asia economic to the extent of inflicting a recession. This is because the export of Malaysia to U.S. and Europe were occupying 20% only of the total export of Malaysia.
According to the table of GDP in Asian, we can see that Malaysia’s GDP is predict as slowly grow in 2009. As this result, we can predict that the entrepreneurship in Malaysia will get better, although, Malaysia GDP is not growing. Moreover, U.S economic in the future is predict that will become worse, therefore, some of the U.S. investor would cancel their investment in Asia and the unemployment rate will increase. That is an opportunity for the entrepreneur to start up their business. This is because small and entrepreneur firm are better able to cope the changer of the economic. They are more elastic and speed of response to changing market scenario and those can be evidence by the document.
Being an entrepreneur they have the ability to recognize an opportunity arising out of change or ever invent it and then putting all the resources on developing at what the market wants quickly to meet the requirement of consumer. During the current economic turmoil, entrepreneurs are willing to take risk to do some changing or innovation in their system or product while the larger firms are unwilling or unable to make any change in their firm. This is the reason why entrepreneur can survive and do better in an unruly world, and most of the companies are willing to do business with them rather than those larger company.
Entrepreneurs play an important role in the market economy and function as locomotives for economic development. Moreover, economic turmoil in one country might affect another country economic if they have the strong relate in trade. Entrepreneur is not a gambler although they are taking risk to get the opportunity in a recession. Moreover, entrepreneur is more flexibility and creation than larger firm in doing business; therefore, they are more attractive than larger firm. Entrepreneurship is important to the economic as they are providing job opportunity to employee during the recession. No matter in what scenario of economic environment, the entrepreneurship would always bring the advantage to the economic of the country.