Butchers, brewers and bakers: The rise of micro-entrepreneurs - SmartBrief

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Butchers, brewers and bakers: The rise of micro-entrepreneurs

3 min read

Management

This guest post is by Rajesh Chandy, a professor of marketing at London Business School, and Om Narasimhan, a professor of marketing at the University of Minnesota’s Carlson School of Management.

Entrepreneurs have always been heroes; fearless leaders who build something from nothing, often turning their ideas and passions into multimillion-dollar enterprises. We immediately think of the quintessential success stories; the “rock stars” of the business and entrepreneurial world who have skyrocketed their companies — Richard Branson, Bill Gates, Mark Zuckerberg and Ralph Lauren.

But beyond these well-known entrepreneurs and business pioneers, there is a much larger world of entrepreneurship to be found in emerging markets. Walk into any food market in a developing country and amid the noise, crowds and energetic activity (and apparent chaos), and you’ll get a glimpse of capitalism in its most unvarnished form.

These companies may in fact be a major factor in the return of the robust global economy. How so? Just look at the sheer numbers of micro-entrepreneurs around the world. Among other things, they are distributors for firms large and small; they ensure that others’ goods and services reach otherwise hard-to-reach markets. But they face key obstacles that are holding them back and preventing advancement on a larger level:

  • Lack of business skills. The management practices of most micro-entrepreneurs are a world away from those taught at leading business schools. They continue to use the set of practices they have seen and used for generations, even though demonstrably better options exist.
  • Lack of adequate information. Despite the remarkable progress that the mobile phone revolution has brought to the world, basic information about buyers, sellers and the larger marketplace around them remains elusive to most businesses. Too often, micro-entrepreneurs end up selling to the wrong people, at the wrong time and at the wrong price.
  • Lack of access to money. The need for access to savings mechanisms is so intense that many micro-entrepreneurs are willing to pay substantial fees to so-called “deposit collectors” who go door to door and collect savings deposits from them. Effectively, they are willing to accept negative interest on their savings, just so they can save conveniently and (somewhat) securely.

While overcoming many of these barriers lies in the hands of these micro-entrepreneurs, there are also other parties involved. As they grow, micro-entrepreneurs may employ others from the community who prefer steady jobs to the uncertainty of owning one’s own business.

Customers of micro-enterprises — whether in the local community or in lands far away — might become the beneficiaries of improved goods and services. Banks might find that businesses they previously ignored are now quite attractive as customers. Suppliers might find not only their sales volumes going up, but also the likelihood that they get paid for what they sell. And as micro-entrepreneurs grow and throw off the “micro” qualifier, they are more likely to join the formal economy and contribute more actively to their nation’s tax base.

So the next time you walk into a market in a developing economy, look past the noise, the crowds and the seemingly timeless activities that accost your senses. What you might see is a world in transition. And if initiatives to remove the biggest impediments confronted by micro-entrepreneurs are successful, you could be looking at the wheels of progress accelerating before your eyes.