Small Business and Entrepreneurship Development PDF

BUS1010F - WEEK 3 SMALL BUSINESS AND ENTREPRENEURSHIP DEVELOPMENT  DEFINITION OF A SMALL BUSINESS Small Businesses constitute the backbone of Kenya’s economic life. They include a one person business managed by himself assisted by family members. Typically, one would l...

BUS1010F - WEEK 3 SMALL BUSINESS AND ENTREPRENEURSHIP DEVELOPMENT  DEFINITION OF A SMALL BUSINESS Small Businesses constitute the backbone of Kenya’s economic life. They include a one person business managed by himself assisted by family members. Typically, one would like to refer to small business when talking about the one man business managed by the owner, utilizing mainly family labor and maybe one or two employees.  DEFINITION OF A SMALL BUSINESS CONTI.. In many countries of the developing world, these businesses fall under the category of informal sector and could be unregistered. In some countries, this category comprises mainly small corner shops and service facilities employing one to five or ten employees Small Businesses employ over 80% of Kenya’s population. That is why the government came up with “Rural Development focus” to engage them. People and animals were not born “grown-up” but progress through growth to be adults.  DEFINITION OF A SMALL BUSINESS CONTI.. Even many big firms we see today began “small and expanded into big business e.g. Coca Cola Jua Kali enterprises: start small- then expand into big business. In Kenya – small business enterprises employ more Kenyans than big ones. E.g. about 72% as of 2018 of Kenya’s population is in rural area subsisting on small scale farming. These are small businesses. Entrepreneurs do not start big-but grow their ideas into big business thereafter.  DEFINITION OF A SMALL BUSINESS CONTI.. Over 80% of “retail trade” is small business (shopkeepers, petty traders: saloon, grocers, tailoring, cobblers, second hand clothes (mitumbas), carpentry, crafts, matatu transport, farming, poultry, bee-keeping, livestock rearing, home/office cleaning, cyber cafes, all these are examples of small businesses.  COMMON YARDSTICKS The definitions of small businesses are varied and use various measures of size depending on the purpose and are given as follows: Total Number of Employees – by far the most commonly used yardstick especially with regard to the manufacturing sector and the service sector where output is directly linked to number of employees. It has been argued that this measure is inflation proof, transparent, comparable, and available in terms of information.  COMMON YARDSTICKS CONTI.. Total Investment – this includes the total equity input by investors. For example, in a corporation, the equity holders are the shareholders. Sales Turnover- This measure relates to the business activity of a firm.  THE ROLE OF SMALL BUSINESSES IN DEVELOPMENT The small firm has been associated with entrepreneurship for several reasons: i) Most businesses start small, usually exploiting those markets which large firms may not be able to exploit profitably because of higher overheads. ii) The small firm is a stepping stone in organic business growth in the sense that small firms act as a training ground for entrepreneurs as they experiment with ideas and techniques  THE ROLE OF SMALL BUSINESSES IN DEVELOPMENT CONTI.. iii) The small firm offers the entrepreneur the opportunity to take moderate risk while getting to know and understand the product and factor markets. iv)Small firms are associated with increased competition in the economy first by the intensity of their activity, thus contributing to entrepreneurial activity. v) Small firms have been documented in Japan to contribute to national output through linkages with high volume large firms in subcontracting activities.  PROBLEMS FACING SMALL BUSINESSES Increasing competition from medium and large enterprises in the markets for raw materials and finished products. The small enterprises also tend to be technologically backward. The cost of production in small enterprises is higher especially where they have to import raw materials. The high cost of production and poor quality of products undermine the competitiveness of small enterprises in both domestic and foreign markets.  PROBLEMS FACING SMALL BUSINESSES CONT.. The reason for expecting survival and growth of these enterprises is based on the government’s commitment to create technical progress and greater efficiency through market competition. Most advanced countries (Japan, USA, Europe and China) did not become advanced on account of big industry. Many of their to-day’s global multinationals grew up from SME status.  PROBLEMS FACING SMALL BUSINESSES CONT.. They became giant industries because of the support they received from their governments in the form of subsidies in funding of technological advances, R&D and favored in terms of duty on importation of technology. Less developed countries and Kenya government in particular should borrow from their approach and experience. This is particularly relevant to Kenya because the government has planned to attain the Newly Industrializing Country (NIC) status by the year 2030 under its industrial transformation strategy.  ENTREPRENEURSHIP Definitions – It is the ability to create and build an enterprise from nothing. It is initiating, doing, achieving, building an enterprise or organization. – Harwood (1982) an entrepreneur is a person who takes initiative in management of resources, shares in asset risk and innovates in more than a marginal way.  CHARACTERISTICS OF ENTREPRENEURS High need for achievement Goal oriented Internal locus of control Need for feedback Experience in similar business Innovative and creative Hard working Educated Disciplined Risk taker  ANALYZING ENTREPRENEURIAL CHARACTERISTICS 1. Locus of control A sense of control that a person has Internal and external control Enable the entrepreneur sustain the drive  INDEPENDENCE AND NEED FOR ACHIEVEMENT Need for being one’s own boss Need for recognition by others Individual responsibility to solve problems  RISK TAKING Risks include financial, psychological, social Calculated risk taking Relationship between risk and return Risk may not be proportional to success  CREATIVITY Entrepreneurs think about unconventional ways to challenge existing assumptions Creativity is important for competitive advantage  THE CREATIVE PROCESS 1. Setting your mind ready for creative thinking Realize that education is never ending Read variety of knowledge sources, like articles Create a file of interesting articles Discuss with others Learn from other cultures  THE CREATIVE PROCESS CONT.. 2. When faced with a problem, study the problem and understand its components 3. Identify similarities and differences 4. Incubation of the information 5. Illuminations (create break through) 6.Verifications (experiments, tests) 7. Implementation  INNOVATION It is the creative regeneration and application of the new ideas Emphasis is on the application of new ideas Activity Process Application of new idea Significant change or improvements  ENTREPRENEURIAL PROCESS 1. Identify potential business opportunities 2. Select business opportunities suitable to you and feasible in your market area 3. Assess the selected market opportunity Preparation of business plan 4. Mobilization of necessary resources 5. Complete legal formalities  ENTREPRENEURIAL PROCESS CONTD. 7. Acquisition of equipment/material/ manpower 8. Preparation of marketing plan 9. Launch of enterprise 10. Manage all the functions of the enterprise  IMPORTANCE OF ENTREPRENEURSHIP Creation of employment Reduction of poverty Equitable distribution of resources Economic growth and development Gives solutions to social economic and political problems Balanced economic growth  TASK Are entrepreneurs made or born?  END THANK YOU Q &A