Business Start ups - the advantages and the issues

This is 30 minutes of business studies gold dust. Evan Davis brings together three superb speakers for this edition of The Bottom Line to discuss the nature of startups in the UK and also the related topic of innovation and adaptability. Some terrific insights here for all A* students and I would highly recommend that you download the podcast for your own enjoyment too.


Click here for a link to the podcast

Matt Brittin - MD Google UK

Lara Morgan - Founder Pacific Direct (made a fortune in hotel toiletries)

Luke Johnson - serial entrepreneur (Pizza Express, The Ivy, Prada, best-selling author & FT columnist)

Some key points made (in broad order of discussion) [my points of emphasis in square brackets]

Starting a Business

Only 10% of people will ever start their business

Entrepreneurs need a “desire for gain”, not a fear of loss

Starting a business provides great freedom and creativity [than working for someone else] - links to motives for being an entrepreneur

But starting a business can be lonely - requires great self-motivation and persistence [qualities of an entrepreneur]

Most entrepreneurs who “make it” - have taken 10-15 years to build a success [rarely such a thing as an overnight success]

It is not really about the “idea” - it is about the execution of the idea [how important is the business idea?]

Business angels are under-rated - they are key to getting good businesses off the ground [sources of finance]

Friends and family finances - can cause emotional problems [a potential downside of raising finance from relatives!]

Retained profit was key to the growth of Pacific Direct - the main source of finance [a hugely important point - profits reinvested in a business for growth]

Bank funding is much easier to get when the business has a track record of profitable trading [banks see startups as high risk and are very unlikely to lend to them]

Setting up online enables a startup to check the viability of an idea much quicker, but a website alone is not enough

Do startups create jobs? Many online startups are run by just one or a few people [the govt is probably unwise relying on encouraging business startups as a way of reducing unemployment!]

Barriers to entry - are they lower for startups? [depends on which market a startup is trying to enter]

Startups have almost no chance in many markets - e.g. Google, Apple and Amazon dominate their markets [startups are better targeting a niche]

Online advertising - creates huge opportunities for startups because it allows targetted, measurable advertising [but online advertising just one part of a promotional mix]

A dramatic cultural shift in attitudes to entrepreneurship in the UK - many people turning to the idea of starting up - more advice, more role models [more competition for startups, but perhaps less risk]

Locations for startups - entrepreneurs benefit from working together / alongside each other [location benefits of collaboration]

Leadership & The Golden Circle

Y12 BUS- great video on the impact different leadership can have on a business. Watch this week in preparation for Thu.

China - Helping or Hindering Economic Development in Africa

Y13 Business- following on from the video and discussion last week:

If Africa was a physical battleground between east & west during the cold war of the 20th Century, it can arguably be seen today as the ideological 21st Century battleground between the difference approaches to promoting economic development: the western aid model versus the Chinese trade model. Is the Sino-Africa relationship mutually beneficial? I certainly don’t claim to have a comprehensive answer to this but it has been interesting talking to Africans on my journey so far about their perception of this, particularly in Zambia…
China’s relationship with Zambia dates back to the building of the ‘Tanzam’ (Zambia to Tanzania) Railway in the 1970s. However, it is in the last 10 years that Sino-Zambian trade has really taken off, growing from just $100m (£63m) in 2000 to $2.8bn last year, according to the BBC. Last year China invested more than $400m (£250m) in Zambia’s mining industry, which is one of the major employers in the private sector.
Proponents of China’s approach rely on David Ricardo’s 19th Century theory of Comparative Advantage. Reformulated in modern trade theory as the Heckscher-Ohlin theorem, it states that a country has a comparative advantage in the production of a product if the country is relatively well-endowed with inputs that are used intensively in producing the product. Zambia’s comparative advantage lies in the resource sector, China’s in manufacturing and infrastructure construction. Copper in return for cheap toys, bicycles & new roads. The new infrastructure in particular should enable Zambia to more efficiently boost economic growth through trade both international & local.
A good deal for Zambia? In theory yes but it of course depends upon the terms of trade (the ratio of import to export prices) and over what time horizon we try to judge the relationship. In the short term, economic growth statistics (the World Bank estimates 6.4% real GDP growth in 2009-10 compared 1.7% for sub-saharan Africa) suggest a positive outcome. Over the longer term, sustainable economic development surely requires local employment & skill creation, in turn helping to boost the local economy through the multiplier effect.
As well as a question mark over the quality of Chinese imports (I commonly heard complaints of bicycles falling apart, for example!), the main criticism of Chinese investment in Zambia is that the benefits are not shared equally. The Zambian elite, with control over the valuable mining contracts, are enriched while the benefits to the poor are less obvious. In theory it should mean more jobs & income but the propensity of the Chinese managers to employ their compatriots rather than local labour, especially for construction projects, dilutes this benefit.
I’ve struggled to find any reliable statistic on employment creation, not helped by the fact that the ministry of finance official that I spoke to (fresh with a Masters from Birmingham University) was drunk! Evidence is therefore more anecdotal. The copperbelt region, host to the community schools that I’m supporting, has seen improved roads and a massive new football stadium. The latter, due to be opened ahead of last year’s world cup, has been built primarily using Chinese labour and is still incomplete.
As such, support for the Chinese at grassroots level amongst the people I spoke to is limited. It is no surprise that this is where Michal Sata, the Patriotic Front’s newly elected president, enjoys popular support.
Whilst Zambians have arguably answered the question with their ballot papers, the debate about China’s involvement will nevertheless continue. As Dambisa Moyo has eloquently argued, the Western aid model supported by the Washington Consensus has failed Africa, weighed down by burdensome conditionality and self-interest amongst the ruling elite. Whilst the conditionality is no longer, it seems that self-interest amongst the politicians remains. It is this that arguably remains the major constrain on development in sub-saharan Africa. Let’s hope Mr Sata is different. I’m now in Malawi for the next few
weeks. It enjoyed a similar per capita GDP to singapore in 1960. Today, the east Asian tiger is some 20 times richer than its African cousin, with the latter currently having to re-negotiate another IMF aid package. During my Journey around this ‘warm heart of Africa’, I’ll be trying to understand why.

Entrepreneurs Must Have A Dream

Indian entrepreneur Lord Gulam Noon believes that there is money for people to start their own business in the uncertain financial climate, but warns "you must have a dream".

Speaking to the BBC's Justin Rowlatt, the self-made food magnate offered his advice to entrepreneurs in Britain who may be nervous about starting a business, warning "if you don't take risk, you risk even more".

Click Here to hear the interview.