Course 2 entrepreneurial ventures

Written by: Cristiana, Jakarta Smart City Team

Private limited Enterprise
According to Borrington and Stimpson (2013), a private limited enterprise is defined as an incorporated
business that has to make legal agreements. The bank account of the company is separated from the
owner’s account. The directors are the main shareholders in private limited enterprise different from a
public limited enterprise.
Characteristics of this company may include having more than one or more shareholders but can only
sell shares to people known to existing shareholders. The main objectives and roles of a private
limited company are to maximize profit and provide transparency for all shareholders (Bradley, n.d.).
Examples may include Guardant Health Inc that makes a initial public offering to the public as a
privately held company (Investor Business Daily, n.d.).

Public limited Enterprise
Borrington and Stimpson (2013) explained that public limited enterprise is the most applicable for very large enterprises will
be able to increase capital and grow internationally. Public limited company (PLC) is owned by private individuals and is
often mistaken as government and public sector. Most large public limited enterprises have thousands or hundreds of
shareholders and not all are involved in the decision-making process but receives the dividend as a payment. Only board of
directors which are elected by shareholders could attend Annual General Meeting (AGM) to vote for major decisions
(Borrington and Stimpson, 2013).
The main characteristics of PLC may include the limited liabilities for shareholders as the business is considered
completely separated towards the owner. The company increase funds and capital from selling shares to any individuals.
There is continuity in all public limited company if one shareholder passed away. The main objectives and roles are to
maximize profit and shareholder value by increasing environmental goals such as CSR (Kokemuller, n.d.). Examples of PLC
may include Bank Bukopin Tbk that is registered in the Indonesia Stock Exchange Market (PT Bursa Efek Indonesia, n.d.).

Social enterprise
According to Ozturk (2013), social enterprise is the organization commercializing innovation by providing social
value through activities often done by non-profit, business and public sectors. It could be established by
identifying a social problem and the solution to increase social impact by creating and considering the
sustainability of the new business which could result in a different entity of the business such as non-profit or
for-profit organizations.
The main characteristics of a social enterprise may include the existence of social aims and ethical values in the
business. Entrepreneurs in this type of enterprise are more directly involved in producing goods and services.
The objectives for social establishments to create and sustain social value by discovering opportunities and
earn profit and reduce poverty. The roles of social enterprise are to provide new innovations through creativity,
adjustments, and knowledge to fulfill its given objectives (Ozturk, 2013). Examples of social enterprises include
Du’Anyam by advancing the standard of living of women by opening jobs, Du'Anyam even preserves the rich
traditions that Indonesia has (Dbs.com, n.d.).

Small business In Indonesia
Micro Small Medium Large
Net Asset < Rp.50,000,000.00
Rp.50,000,000.00-
Rp.500,000,000.00
Rp.500,000,000.00-
Rp.10,000,000,000.00
>Rp.10,000,000,000.00
Net sales < Rp.300,000,000.00
Rp.300,000,000.00-
Rp.2,500,000,000.00
Rp.2,500,000,000.00-
Rp.50,000,000,000.00
>Rp.50,000,000,000.00
Number of
Employees
1-5 employees 6-19 employees 20-29 employees > 100 employees
Table 3. Micro, small and medium, large businesses in Indonesia (UMKM)
Source: (LAW OF THE REPUBLIC OF INDONESIA NUMBER 20 YEAR 2008 REGARDING MICRO, SMALL, AND MEDIUM ENTERPRISES)

Micro enterprise
● According to Tambunan (2011), characteristics of micro business may
include all operating informal and does not pay any taxes because it is
unregistered. It is usually located in rural areas and has a poor
management of legal accounting systems. Micro business mainly uses
unpaid employment such as family members and uses low technology
process for production. It is usually targeted towards a market share in the
low-income sector. The owner is usually uneducated and came from a
poor family background.
● The main roles and objectives of Micro business are to survive in this
economy (Tambunan, 2011). One of the examples of micro business
includes Bakso Widodo stated and proven by the website
(Umkm.jogjakota.go.id, 2018, n.d. ).

Small enterprise
● Tambunan (2011) explained that characteristics of small business include
some business operating a formal sector and pays taxes. Most of the
establishments are located in urbanized areas, uses some hired workers
and machineries for the production process. Targeted market share may
include middle to high income through export nationwide. The owner
usually came from middle to up households which receive the education.
● The main roles and objectives of the small business are to earn profits
and expand the business nationally. The business has a good relationship
with the government, multinational companies and large enterprises
(Tambunan, 2011). Examples include Warung Pecel Lele Cak Hendrick 88
which include annual sales of 1 billion a year and 4 million a day
(Muhammad, 2018).

Medium enterprise
● Characteristics of medium business include all operating in a formal sector and
pays taxes regularly. It is located in urbanized areas and hires professional for
operations, management and accounting bookkeeping system (Tambunan, 2011).
The company has formal organizational structure and recruitment systems for
employees. Medium business uses high tech machineries to maintain production
quality and quantity. The company mainly sell goods and services to the middle to
high-income customers. The owner usually comes from a wealthy family and
receives a good education.
● The main roles and objectives of the company are to maximize profit and expand
the business internationally (Tambunan, 2011). Example of medium business may
include BLP beauty which has the sales of 1000 a day and average price of lipstick
of 100rb per piece and a total sales per year of 30 billion (Putra, 2018).

Large enterprise
● According to table 3, characteristics of a large business can be explained as
establishments that fulfill the criteria of net asset above 10 billion rupiahs and a
net sales of above 50 billion rupiahs. Large business is a productive economic
effort carried out by the business entity with a net amount of wealth or sales
proceeds annual is greater than medium-sized businesses, which include
businesses national state or private, joint ventures, and foreign businesses who
conduct economic activities in Indonesia (Maretha, 2016).
● The main roles and objectives of large firm with large production is to maximize
profit, sustain and possibly expand the current position of the company by
decreasing competitors and increase the value of the company that reflects from
the stock price (Money matters, n.d.). Examples include Sari Roti with a net sales
of 2.491 trillion in 2017 (Sari Roti Annual Report, 2017).

Public corporation
● Borrington and Stimpson (2013) described that public corporation is the business that is
fully owned by the government sector or regular business that is nationalized. The
government usually appoint the board of directors to control the establishments and set
the objectives and roles of the company. Characteristics of a public corporation may
include selling stock to the public through the initial public offering (Borrington and
Stimpson, 2013).
● Profit made by the company will be reinvested in improving public services or used by the
government to fund other public sector spendings. It is the role of Government for the
productive activities of these industries and setting the objectives (Borrington and
Stimpson, 2013). Roles and objectives of a public corporation may include encouraging
economic growth by providing jobs and reducing unemployment. Public corporation also
protects small business by controlling powerful monopolies in the market (Singh, n.d.).
Examples of PC may include Perum Perikanan Indonesia which is listed in BUMN (Badan
Usaha Milik Negara) which is translated to state owned enterprise (BUMN.go.id, n.d.).

Private corporation
● According to Moyniham and Titley (2012), private corporation is
defined as the separate legal body from the owners of the business.
Characteristics include shareholders having limited liability. The
business can take to court if it violates employee rights and the law.
The establishment needs to produce separate financial accounts
(Moyniham and Titley, 2012).
● Roles and objectives of the corporation include profit maximization
by increasing investments. Shareholder earnings must be maximised
through the increase of sales (Suttle, n.d). Example of private
corporation may include Aqua that decided to go private in 2010
(Detik, 2010.).

Corporate entrepreneurship
● According to Sakhdari (2016), corporate entrepreneurship is the process of creating new business or
products and services in the existing business by applying strategic renewal and innovation. It
includes actions and attitudes to enhance the abilities of the company to find new opportunities, take
the risk and be more innovative through the assessments in resources (McFadzean, O'Loughlin and
Shaw, 2005).
● The objective of corporate entrepreneurship is to create value and increase business growth,
innovation, productivity, and revenue. Roles of corporate entrepreneurship includes introducing new
products to the market, redefining the relationship between a company with market competitors and
lastly, the creation of a new product that is not discovered yet by other companies (Sakhdari, 2016).
● One example of corporate entrepreneurship was performed in Google as the company applied
entrepreneurship programs such as “20% time policy” that allows employees to use 20% of paid work
time to work on independent startups to encourage them to be more innovative and create new
ideas. Successful projects from this program may include Gmail and AdSense (Bhakhr, Ludena and
Silveri, 2015).

Technical entrepreneurship
● Marasco (n.d.) explained technical entrepreneurship concentrates on opportunities and
challenges in opening a technology venture. It involves the specialization of human resource
and developing their skills for exploitation of technological or technical components. Technical
entrepreneurship is not about the single invention that is produced but referring to joint
explorations as each individual has different responsibilities and roles to reach the same shared
goals (Bailetti, 2012).
● One example of technical entrepreneurship applied to Steve Jobs and Steve Wozniak in the
creation of the first small computer device also now mentioned as smartphone back in 1975
through the computer and software background of Steve Wozniak and incredible marketing
skills of Steve Jobs as iPhone is successfully launched as sold to dealers as the company
skyrocket throughout the years (Lemelson, n.d.).

Social entrepreneurship
● Braunerhjelm and Hamilton (2012) stated that social entrepreneurship is the process that exploits new opportunities to
create social value, mission, and organizational sustainability through innovation. It consists of managing activities that
pursue a common social goal by recognizing a social problem and try to create and initiate a social change. Social
entrepreneurship is about applying sustainable approaches to benefit society as they earn profits (Braunerhjelm and
Hamilton, 2012).
● According to Saifan (2012), the main objectives are not simply beyond just making money as it concentrates on social
wealth rather than generating economic wealth. The roles of social entrepreneurship include facing social problems
and creating solutions on improving well being of society includes making the world a better place (Saifan, 2012).
● One example of social entrepreneurship is performed in Smart Farmer Kids In Action & AgroEdu Jampang
Community. This social enterprise is opened by Heni Sri Sundanto that is concerned with agricultural education in
Indonesia. The purpose is to increase awareness of agricultural education because humans live in the midst of
abundant natural resources. For the future of agriculture in Indonesia, this company carries low cost educational
packages that could be enjoyed by any people (Dbs.com, n.d.).

Social enterprise and social enterprise
According to Norden (2015), both have targeted towards a social objective and mission. It is suitable for
social entrepreneurship to be performed in a social enterprise because both is driven by social result
through a sustainable business model so that establishment will be possible to carry on as innovations
are developed through the process of solving problems. With the same targeted market share for
social work, employees and other shareholders. Social entrepreneurs usually form social innovations
and developed social enterprises (Norden, 2015). Social entrepreneurs and social enterprise are key
elements for developing effective strategies towards an existing market.

Corporate entrepreneurship and large enterprise
According to Norden (2015), both have targeted towards a social objective and mission. It is suitable for
social entrepreneurship to be performed in a social enterprise because both is driven by social result
through a sustainable business model so that establishment will be possible to carry on as innovations
are developed through the process of solving problems. With the same targeted market share for
social work, employees and other shareholders. Social entrepreneurs usually form social innovations
and developed social enterprises (Norden, 2015). Social entrepreneurs and social enterprise are key
elements for developing effective strategies towards an existing market.

Similarities and differences between
entrepreneurial ventures
● The difference between public and private limited companies is that selling of shares. Public limited companies sell
shares to the public and the private limited company sells shares only to relatives and friends.
● In size of the business, the main similarity is that all business including micro, small, medium and large has the
objectives and roles to maximize profit earned. The main difference is that micro business has the objectives and
roles is to survive in the market because owners themselves are in a poor financial condition while small, medium
and large business expected huge growth through expansion.
● In terms of entrepreneurial ventures based on ownership, both objectives, roles and characteristics are different.
The main difference between public and private corporation, is that private corporation are individual business
owners that aimed for profit through increasing shareholder earnings as public corporation are government-owned
establishments that do not prioritize in profit but has the objectives of boosting development of a country through
helping economic growth by protecting start-up company and prevent monopolies to concentrate in one sector of
business that may lead to bankruptcy.

Critical evaluation for scope
As stated above, 99% of total business in Indonesia belongs to micro, small and medium enterprises.
The main problem in micro, small and medium businesses in developing countries is financing
(Nurhalim, 2014). It will be difficult for Indonesia’s economy to increase and grow further because of the
financing that is needed from SMEs to further expand to become large businesses. SMEs are not as
strong as large enterprises in terms of productivity and aspects such as business capital and
infrastructure (Tambunan, ). In the other hand large business has accounted for the 1% of indonesia’s
economy which place a critical role in helping the economy to flourish due to the high intensity level of
production and active engagements of international trade even though the number of large enterprise
is still relatively low.

Financing and loan programs for SMEs are actually available in banks for example, BRI (Bank Rakyat Indonesia). OECD (2018) explained
that 63% of external fundings borrowed by SMEs came from BRI newest financial loan program designed for SMEs. By introducing KUR
(Kredit Usaha Rakyat) program, it encourages more micro firms to borrow money and expand the business. Other banks may not provide
beneficial programs such as KUR BRI, if available, loans programs contains high level interest which is discouraging for SMEs as firms
rather borrow money from relatives or just choose to stay small. If SMEs try to increase borrowing and expand business, there will be a
positive impact to the economy because of higher employment and productivity level.
From table 4 shown below, it shows the changes of high interest rate of 22% and low loan size of 20 million for micro business in 2007
which is reduced up to 9% in 2015 and increased loan size up to 25 million. High collateral is still a problem in financing loans because
SMEs loans in Indonesia is very high ranging from ranging from 238.6% of the loan’s value for small firms and 253.1% for medium-sized
firms. Government try to introduce subsidies to encourage SMEs to grow further and boost economic growth (OECD, 2018).

Table 4. Amendments to KUR programme

Other than financing, legality is also a issue that is faced by the Indonesia’s SME and the economy. Enterprise legal identity
is divided into two business identity, legal identity and non legal identity. Firms will need to be responsible to pay form
firm’s own pocket if there is no seperations of ownership. Most of SME firms stays as non-legal identity and experiences
disadvantages such as unlimited liabilities and uncertainties in continuity. SME firms may not want to go legal due to extra
fee and lack of financing (Nurhalim, 2014).
Motivation behind of micro, small, medium enterprise firms often leads to the halt in economy growth and advancements .
Poor owners in SMEs often is motivated by poverty rather than entrepreneurial minds (Nurhalim 2014). To further explain
the scope, research shows that most owners of micro businesses comes from a poor educational background and by
selling simple and cheap products and services just earning enough to survive day-to-day basis. Imports and exports are
rarely seen on micro firms due to the lack in market connection and low productivity. The reason behind low productivity
may include the lack of capital and skilled workforce (Nurhalim, 2014). Most of the workers in SMEs are illegal workers. In
conclusion, the lack of finance, innovation, education and infrastructure contributed low productivity and the growth of
economy not being maximised due to the delay in expansion.

Critical evaluation for Development and Growth
Source: (Kementerian Koperasi dan UMKM, 2014,
Quoted by LPPI and Bank Indonesia, 2015)
Source: (BPS.go.id, quoted by Pamella, 2014)
Figure 5. Growth of micro, small, medium and
large business in Indonesia (2011-2012)
Table. 6 Development of Micro, small and
medium business in Indonesia (2008-2012)

Critical evaluation for Development and Growth
According to figure 5 and table 6 displayed above, the number of micro,small and medium business increases in 2008-2012 and
positively contributes to economy and developments in Indonesia by providing opportunities of employment (Pamella, 2014). However,
large business in the economy decreases which is not beneficial to the economy because large business contributes more the GDP,
economic and productivity growth compared to SMEs (LPPI and Bank Indonesia, 2015). The country need to encourage the growth of
large business to boost economic growth. Logically, medium businesses expands its size and become large firms but the data above
proves and indicates that there is a problem in the expansion of SMEs that causes large firms to decrease in number during 2011-2012.
The development of large business need to be improved to help the country’s growth.
Barriers the stops medium business to expand and grow that is mentioned in the scope may include legality, financing, policies,
employment and tax system. Tax system are poor in development of micro, small and medium enterprises due to high tax rate and often
charged same as corporations and other large companies as high tax evasion is resulted that will slow down economic growth due to
government receiving less money for public goods and investments. Trainings are often not provided for small medium business as
important informations could not be gathered through that leads to insufficiency of knowledge towards running a business properly
(Nurhalim, 2014).

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