Module 2

• Entrepreneur refers to someone who starts, organizes, and manages his/her own business.
• Aspiring entrepreneurs need to start or expand a business.
• Capital refers to money that can be used to start and maintain a business.
• Wealth refers to money or goods that can be used to produce more wealth.
• Ways entrepreneurs can get the capital needed include getting a loan (also known as credit) and borrowing from informal and formal financial institutions.
• United States of America has PTAs, FTAs, CUs, CMs, EUs, FIs to lower barriers, eliminate barriers, and create a common external barrier.
• These agreements aim to free the flow of resources, establish uniform economic policies, and make entities behave as one unit.
• A loan of additional capital would enable a local entrepreneur (small-scale borrowers) to expand his/her business.
• The additional capital can be used to buy more inventory, invest in equipment or tools, rent or buy a storefront, buy livestock, hire staff, and more.
• Banks want to be sure of before lending money include creditworthy applicants and financially sound borrowers.
• Factors included in creditworthiness assessment (5C’s) include character, capacity, capital, collateral, conditions, and conditions.
• Entrepreneurs can access credit through microfinance and micro-credit.
• The birth of ‘modern’ microfinance occurred in 1976 in rural Bangladesh.
• Instead of collateral, loans are secured using honor of a peer group.
• If one person fails to make payments, the others in the lending circle will be denied future credit.
• Collective action in production, processing, marketing & consumption includes undertaking collective action in selection of borrower, monitoring the utilization of loan, and ensuring timely repayment.
• The interest rate of MFIs is usually higher than banks due to operational costs, credit losses, and loaned funds.
• Economies of scale refer to the cost advantages from expanding quantity produced, improvement in long run production efficiency, and lower prices and higher profits.
• Types of economies of scales include technical economies of scale, specialization economies of scale, marketing economies of scale, purchasing economies of scale, managerial economies of scale, financial economies of scale, network economies of scale, and risk-bearing economies of scale.
• Technical economies of scale are in production and gain in productivity from scaling up production.
• The law of increased dimensions (container principle) states that doubling the height and width of a tanker or building leads to a more than proportionate increase in the cubic capacity.
• Economies of Scale (EoS) in Production can be achieved by being able to afford specialist workers and collective action groups can split the production processes into separate tasks to boost productivity.
• Backward Vertical Integration is when a supermarket may acquire control of farms to ensure supply of fresh vegetables.
• Vertical Integration is the purchase of companies at any level of the value chain, allowing a company to control one or more stages in the production or distribution of a product.
• Forward Vertical Integration is when a supermarket may buy vehicles to smoothen the distribution of its products.
• Market Integration is the relationship of a firm in a market and the expansion process of a firm to consolidate additional functions and activities under one single management.
• Cons of Vertical Integration include lack of competition may lead to poor quality of goods, flexibility to pursue different levels of output may be lost, and may lose focus on core competencies in favor of newly integrated units.
• Economies of Scale (EoS) in Risk-bearing can be achieved through diversification in different products spreading risks.
• Economies of Scale (EoS) in Network can be achieved through a positive effect that an additional user has on the value of the product to others (i.e. Facebook).
• Economies of Scale (EoS) in Finance can be achieved through larger groups being more "credit-worthy", getting better access to credit at favorable rates.
• Collective Action among firms can take advantage of Economies of Scale through activities involved in production, distribution, and consumption.
• Types of Market Integration include Vertical Integration, Horizontal Integration, and Conglomeration or Diversification.
• Economies of Scale (EoS) across the value chain can be achieved through increased investment in human resources, better management, and the use of specialist equipment.
• Pros of Vertical Integration include smoothening the supply chain, making distribution and after-sales more efficient, and absorbing upstream and downstream profit.
• Balanced Vertical Integration is a judicious mix of backward and forward integration strategies.
• Economies of Scale (EoS) in Consumption can be achieved through bulk buying or wholesaling.
• Economies of Scale (EoS) in Marketing can be achieved through monopsony power, which is the ability to purchase factor inputs in bulk at discounted prices due to monopsony (buying) power.
• Customs Union (CUs) involve the removal of trade barriers between members, plus the acceptance of a common (unified) policy of trade barriers on non-members.
• Trading Bloc is a group of countries that agrees to reduce/eliminate trade barriers among members, it is a form of political and/or economic integration.
• Free Trade Area (FTAs) are created when 2 or more countries agree to eliminate barriers to trade on all goods coming from other members, countries have independent policies with non-members.