The Fleet Sheet

The Fleet Sheet

Introduction

Transitional economy is considered as the economy that is going through the phase of growth, and in this innovative ideas that lead to the creation of new business activities is considered as the dominant point of transitional economy (Estrin, et al, 2005).

The introduction of the new firms has played a vital role in the transition economy especially after the unexpected transformation of the economic system from communism to capitalism, because during this transformation, certain resources were required to be re-allocated and for that, it has become imperative to start a new business and ventures.

This unexpected transformation of economic and institutions have created several opportunities for the small firms to invest their resources to increase their productivity level, and improve the market share in the new developing economy; further, the incentives and rewards in transitional economies are much more than previous economic systems (Estrin, et al, 2005). In spite of several opportunities, the transitional economy also contains several barriers that pose difficulties for the entrepreneur to start of new business, to take advantage of unlimited opportunities that are available in the economy

Discussion

Difficulties of Starting a Business in Transitional Economy

Transitional economies in spite of providing various benefits to the modern business also create barriers that affect the performance of the new organization. Normally in an economy a new business are affected by two ways, firstly an existing firm tries to lower the entrants of new firms by creating various obstacles; and secondly affecting their progress by raising unpredicted issues and scenario. The difficulties faced by the modern business discussed below.

Financial Difficulties

The essential requirement of the new firms for smooth running their operations is the availability of financial resources; new firms typically arrange financial resources from their particular source or try to get a loan from a financial institution in the market. These two options were not available in the beginning of transitional economics.

As being new, a firm cannot afford to invest completely from personal finance, and since the economy was in transformational stage, they were not able to receive loan from financial institutions. In addition to this, financial institutions in the transitional economies are limited and mostly comprises of banks that are generally known for maintaining economical efficiency in the market (Briesen, 2009).

Further, the current banking sector of the transitional economies is inexperienced in terms of providing financing to new business as they rather operate in private and government sectors. Therefore, it could be argued that financial resources are very important for the growth of small business.

Moreover, in case of new firms financial decision varies, as for the start of the firm individual entrepreneur's loan applications are rejected by the banks due to several factors. Hence based on these issues several young entrepreneurs consider the unavailability of financial resources as major obstacles in their plans

Institutional Environment

After facing financial hurdles, the second unforeseeable difficulties come from the overall institutional environment, which apparently means that new firms are a source of threat to the position of ...