ENTREPRENEURSHIP SKILLS All.docx

CHAPTER ONE =========== ATTRIBUTES OF ENTREPRENEURS AND ENTREPRENEURIALCAREERS ====================================================== General objectives ================== 1. Define and explain the basic terminologies used inentrepreneurship. 2. Explain the concept of entrepreneurship andinnov...

CHAPTER ONE =========== ATTRIBUTES OF ENTREPRENEURS AND ENTREPRENEURIALCAREERS ====================================================== General objectives ================== 1. Define and explain the basic terminologies used inentrepreneurship. 2. Explain the concept of entrepreneurship andinnovation 3. Explain the evolution of entrepreneurship inKenya 4. Explain the concept of entrepreneurshipculture 5. Discuss the entrepreneurial cultural practices inKenya 6. Explain various theories ofentrepreneurship 7. Discuss role of entrepreneurship in economicdevelopment 2. Introduction ============ 1. **Definition of Entrepreneurship andEntrepreneurs** - An entrepreneur is basically a person who identifies a business opportunity, harshness and obtains the resources necessary to initiate a successful basis activity. - The entrepreneur implements theidea - Undertakes to operate thebusiness - An entrepreneur is therefore a central key individual in the society who makes things happens for economicdevelopment. - In the broader sense entrepreneurship refers to the means of stimulating innovative and creative undertakings for a better business community orworld. - Entrepreneurship if French world meaning to undertake and focuses on a businessenterprise - Entrepreneurship can exist in any situation -- therefore it is the creation of values through establishing a businessenterprise. - Entrepreneurship means having an idea of ones own and trying to implement the idea to create values onit. - Entrepreneurship is a term which encompasses what entrepreneurs doi.e - Identifying a business opportunity of a particulardemand - Look at the opportunity as a process of creating, something that did not exist. - Constantly searching/ harnessing ones environment and resources to implement theactivities. - Creating a totally new product and using it in asnew. - Entrepreneurship there is the practice at starting of a new business or revitalizing existing businesses in response to identifyingopportunities. 2. Types of Entrepreneurs ====================== a. **Craftentrepreneurs** - Exploits and utilizes personal skills to start a business without thinking of its growth or the expansion objectives - Often times than in this type ofentrepreneurship i. There is no expanding even after alongtime ii. It is not business expansionoriented. iii. The skills can be technical skills, professional skille.t.c b. Opportunistic entrepreneurs =========================== - This is a person who starts a business, acts as a manager and with a view to expand the business tomaximum. - He might not have the sill to profession but he has the opportunity to start and directothers. - He sees beyond and has abilities to initiate and venture into business that will expand andgrow. - He is innovative I,e somebody able to delegate activities to others , ready and able to see, scan theenvironment. 3. Entrepreneurship ================ i. Entrepreneurship looks at particular individuals in a business set-up. It operates in large business or organization which is business minded to makeprofit. ii. Entrapreneurs operate autonomously for the welfare of theorganization. iii. The term Intra -- refers to within -- therefore Entrapreneurship is a process whereby an individual or group within a large organization creates something new or different to maximize on the available opportunities to thatorganization. iv. Intra can therefore be equated to entra within the context of a large organization where the workers are a leeway to be creative or innovative on theirown. v. They become competitive, socially and economically the idea is to allow individuals within the organization to act and thinkindependently. 4. Entrepreneurial Behavior ======================== - Several theories have been developed to explain why entrepreneurs behave the way they do. - There has been debate on whether entrepreneurs are born or made - Born-hereditary, entrepreneurs are environmental influenced by where they are born. - These are; i. Economic ======== - The theory explains entrepreneurial behavior as influenced by economic factors through which. a. It is possible to introduce new methods b. It is possible to find new sources of materials c. It is possible to open new markets - The economic prospective is important since they createenabling environment for the entrepreneur to combine the factors ofproduction. ii. Psychological factors ===================== - The theory states that entrepreneurs have unique values, attitudes and needs within which drive them. - It is mostly concerned with personality traits as the main determinants of entrepreneurial behavior - People are likely to become entrepreneurs because of high liking of say. a. Independence b. Attitude c. Need to satisfy certain needs. iii. Sociological factors ==================== - Maintains that environmental factors such as beliefs, culture, social structures determine entrepreneurial behavior. iv. Management factors ================== - Emphasizes on the organization of resources in a specific way to attain profits - Leadership impacts on behavior and facilitates pioneership, achieving of goals and provides vision. 5. The Functions of an Entrepreneur ================================ i. The bearing of uncertainty is the primary function of the entrepreneur i.e losses or profits. ii. The management of the business enterprise candelegate iii. Provision of risk, capital and invention. iv. Identifying gaps in the market and turning such gaps to business opportunities i.e to initiate a business. v. Financing the businesses, through raising and mobilizing the necessary resources to exploit opportunity. vi. Searching for business opportunities through environmentalscans. vii. Mobilization of resources needed to start and run a business e.g.from a. Personalsavings b. Friends &relatives c. Financial institutionse.t.c viii. Evaluation of business opportunities to assess viability and any other benefits that might accrue to the business. ix. Provide the necessary leadership for the business and those working in it. 6. The Characteristic of a Potential Entrepreneur. =============================================== c. **Initiative and risks taken by;** - Doing things before being asked or forced by events - Acts to extend business in to new area, roducts, etc - Sees and acts on opportunities - Looks for and takes action on opportunities. - Sees and acts on new businessopportunities Persistence and patience through ================================ - Taking repeated action to overcome obstacles - Taking action to overcomeobstacles - Taking action in the face of significant obstacles. Information and property seeking ================================ - Takes action on his own to get information to help reach business objectives - Does personal research on how to provide a product or service - Consultation of experts on business and technicaladvice - Asks questions to clarifyinformation - Undertakes market research analysis andinvestigation. Concern for high quality work by ================================ - Acting to do things that meet or beat existing standards - A desire to produce and sell top- and better-quality products or services - Compares own work favorable to other. Commitment to work contract by ============================== - Placing the highest priority on getting the jobcompleted. - Accepts full responsibility for problems that may arise in getting the job done - Expresses concern on customers satisfaction. Efficiency orientation by; ========================== - Finding ways of doing things faster and costeffectively - Uses information to improveefficiently. - Express concern on costs improvements changeetc. Systematic planning =================== - by developing and using logical plans to meetgoals - breaking tasks down tosub-tasks - developing plans which anticipateobstacles - evaluates alternatives - takes logical and systematic approach toactivities - identifies new and potential unique ideas to reachgoals - Switches to alternative strategies to reachgoals. Self--confidence ================ - has a strong belief in self and ownabilities - expresses confidence in own ability to complete task or meetchallenges - sticks with own judgment in the face of opposition or early lack ofsuccess - confronts problems and issuesdirectly - Tells others what they have todo. Persuasion ========== - convinces people to buy the products orservice - convinces people on providingfunds - Asserts own competence reliability and the companyproduct. Uses strategic influence andnetworking ====================================== - To develop businesscontact - Uses influential people as agent to accomplishobjectives 7. Advantages ofEntrepreneurship ============================= i. Financialgains ii. Self-employment which leads to job satisfaction andflexibility iii. Provide job opportunities to the unemployed or those seeking betterjobs. iv. A means of opening up new industries especially in the rural areas- facilitatingglobalization v. A source of generating income and increased economicgrowth. vi. facilitates competition encouraging high qualityproducts vii. facilitates production of more goods andservices viii. Leads to the development of newermarkets ix. Promotes use of modern technology in especially small- scale manufacturing to enhance higherproductivity 18. Drawbacks ofentrepreneurship ============================ a. **Challenges of a biddingentrepreneur** - long workinghours - poorpay - unclearfuture - fear of loosing all that has beeninvested - bankruptcies andclosure b. Other challenges ================ - Fear ofdelegating - the problem do it your self and know itall - competition by establishedbusiness - lack of funds especially before breakeven - Mis- management by employees 9. Promotion of Entrepreneurship ============================= - Integrating entrepreneurship into the education system - Registration to encourage risktaking - National companies to promote entrepreneurship - Support of entrepreneurs through friendly loans at the appropriate time. 2. ***Entrepreneurship and Innovation*** 1. Definition ========== - Innovation or creativity or novetty refers to the process of devising a new idea, or thing or improving an existing idea orthing. - Innovation like all human activities has a cost as well asbenefits - Innovation turns new concepts into realities, creating wealth andpower. - Innovation can also disrupt the status quo. E.g computerization i.e **Creative destruction.** - Creative destruction occurs when innovations make long-standing arrangement obsolute and frees resources to be employed else where leading to greater economicefficiency. 2. Reasons for OpposingInnovation ============================== i. The entrepreneurs tend to have a practical concern that unforeseen innovation may cause a disaster e.g side effects e.g of adrug. ii. Fear of loosing profits in the event innovation does not translate to the expectations. iii. Where the entrepreneur held a monopoly position in the market, there is fear of losing authority andcontrol. iv. Fear of upsetting the moral and social value of demand for theproduct. v. Desire to preserve the existing marketconfidence. vi. Fear of upsetting tradition in production management and marketscope. vii. Fear of opening a loophole to competition hence lose of businessgrip. 3. Reasons forInnovation ===================== - Innovation is essential for the entrepreneur in solving the inefficiency problems. - As a means of cost reduction and imposing significance social and market grip. - Profit improvements are looked at from the innovation point of view though newer technology in management andproduction. - To encounter competition by already establishedbusinesses. - To facilitate opening up of new markets both locally andinternationally. - To facilitate diversification of products risks andlosses. - To protect current position of monopoly orsuccess. 4. Requirements of Innovation ========================== i. Economic demand - People engage in innovation out of belief that the economic returns will be greater than itscosts. ii. Surplus capital - Provides the necessary time and startup costs for implementing a newidea. iii. Ability to assemble and investcapital. iv. Mobile capital which is stable. - Capital cannot serve unless it can move to potential innovator unless it can move to allow the various types of wealth to be created e.g title deeds -- stability is provided by a rule oflaw. v. Availability of growth- fostering social institutions which facilitate the speed of technologicaladvancement. vi. Ability and willingness to think and act creativity (Entrepreneurs) I,e the philosophical and psychologicalrequirements. vii. Geographical and other circumstantial causes such as ethicalissues. - Societies in which innovation is seen as a sinful or people are punished or are shunned to think differently than others are unlikely to experience innovation. viii. The size of thefirm. - Large firms have the advantage of introducing innovation since they can affordit. - They tend to attract more talents employees to advice on newideas. 3. The Evolution of Entrepreneurship inKenya ========================================= - Interest in the development of entrepreneurship and small enterprise in Kenya gained momentum as a possible remedy to the stagnation ofeconomic development and the escalating unemployment problem between the early 1960 and1970s - Although there were attempts by the government to develop entrepreneurship, the main impetus came form the international labour organization (ILO)report. - The report centered on the potential of the informal sector and suggested that the bulk of Kenya's urban workers were self --employed in smallenterprises. - The report proposed that the development of this sectorcould; i. promoteemployment ii. facilitatedevelopment iii. facilitate equitable distribution of resources. - Based on this report the government responded with a seasonal paper in 1973 -- which recognized the role of entrepreneurship in employment creation not just in the formal sector but also in the formalsector. - Subsequent development plans have devoted time to the development of strategies and to promote small-scale enterprises and entrepreneurs which include. - The industrial estateprogramme - Establishment of development agents e.g ICDC andKIE - Policy and institutional framework to promoteentrepreneurs. - Promoting indigenous Kenyanenterprises. 1. How the government planned to promote entrepreneurship ====================================================== - The development plan laid down proposed to i. implement small scale industrial policy ii. Review the central and local government regulations that a hindrance to entrepreneurial development. iii. Provision of direct assistance to the small-scale businesses all over Kenya. iv. Establishment of an organization that would give extension services to the small scale enterprises. v. Creating and strengthening institutions and schemes for the assistance of the small enterprise sector vi. Establishment of credit guarantee schemes for loans given by commercial banks vii. Establish procedures to improve small scale training through the ministry of technical training and Applied Technology. viii. Overhaul the education system i.e introduction of the 8.4.4system. ix. Establish a full fledged small industrial division in the ministry of commerce and industry -- which gave rise to the District focus for ruraldevelopment. x. Introduction of entrepreneurship education is all levels oftraining. 2. **Economic, Social and Political Factors Affecting Entrepreneurial Development High taxation levels**. For business and personalincomes - Which in effect reduce profits earned making it un attractive to engage in business - Taxation of raw materials and other inputs raise productioncosts. a. Corruption and official harassment ================================== - Occurs where entrepreneurs are forced to bribe officials in various government departments to allow operation or startup. - Raids under one pretext or another which tends to be veryharassing. b. Unregulated competition from the outside world due. =================================================== - Liberalization which opened importation competing locally producedgoods. c. Declining personal incomes of people due to =========================================== - Over-increasing cost ofliving - Arise inunemployment d. The high cost of finance ======================== - The cost of borrowing is high - Business collapses because they lack ability to repayloans. e. Lack of necessary skills and knowledge due to ============================================= - lack of training opportunities - high education costs f. Poor transport and communication network ======================================== - making businessdifficult - Inconveniencingconsumers - High energycosts - Lack of entrepreneurial culture 4. The EntrepreneurshipCulture =========================== 1. **CultureDefinition** - Culture is defined as asset of values, perceptions wants and behaviour learned by a member of a society from family and otherinstitutions - Culture is a tool of leaned behavior patterns of living. It is a powerful human tool for survival constantly changing and easily lost. - **Weber** argues that "Protestantism encourages a culture which emphasizes individualism, achievement motivation, legislation of entrepreneurial vocations, rationality and self --reliance. - **Hosted --** defines culture as a collective programming of the mind which distinguishes the member of one group or category of people fromanother. 2. EntrepreneurialCulture ====================== - Many governments around the world want to promote entrepreneurship because they have recognized the importance ofentrepreneurship. - In other words entrepreneurial culture is away of people embarrassing life by participating in activities that enable then create new businessenterprises. - A country can develop the entrepreneurial culture by forming policies that constitute the following; - Integration of entrepreneurship training in the overall education sys tem to tap onyouths - Exposure of entrepreneurship those look potential to actual business practices and activities through the networks and business contacts of rule models. - Creation of a conducive and enabling that permits new business to immerge and flourish. - It should be created in away that it welcomes entrepreneurship and respects the investor and also reflecting the corevalues 3. What Constitutes Entrepreneurial Culture? ========================================= - Growth in concentration of firm's networks and linkages - Growth in intermediary organizations to which some tasks are delegated and it different form of entrepreneurship - High levels of education skills and learning. 4. Importance of Entrepreneurship Culture ====================================== - Enhances economic growth and building of social capital. - Enhances job creation - Acts as a primary source of innovation - Helps in the devolution of government power for policy implementation. - Direct influence development in tech. H/R capital formatione.t.c. 5. The cultural habits that promote entrepreneurial development ============================================================ a. **Money orientation** - Money oriented people know the value of money and has the intention of makingit. - The money oriented people use the need of money as a motivating factor pushing then to beingentrepreneurs. b. Future orientation ================== - A society that has foresight to know about the future business environment is likely to have moreentrepreneurs. - This is because they are likely to visualize key changes that are likely to create opportunity. c. Time consciousness ================== - Knowledge that time exists and itsimportance - Knowing the right time to start an entrepreneurialactivity. - Utilization oftime - The correct timing of the marketconditions d. Trust and honesty ================= - Through trust consumer demand is gained on the products and services available. - Entrepreneurs should reciprocate this by ensuring honesty by providing the expectedstandards. e. Hard worki.e ============ - Willingness to work hard distinguishes between successful and unsuccessful persons. 6. The cultural factors inhibiting entrepreneurialdevelopment. =========================================================== a. Religion -- religious believes may deter entrepreneurial investments in items such as night clubs andpubs. b. Language -- establishing businesses in areas where language barrier may allow poor communication or fear ofinvation. c. Personal relationship -- Married people may avoid getting involved in business activities since no time is spared for thefamily. d. Attitude towardsinnovation - Especially in cultures which oppose innovation due to fear ofchange e. Networks -- poor networking and ability to meet people limitnew i. Opportunities ii. Newknowledge iii. Newinformation. f. Technology -- lack of technical skills and knowledge may slow growth and development of entrepreneurial o Lock one out of being competitive. Ways of managing Factors which Inhibits Development of Entrepreneurial Culture. =============================================================================== 1. Working in related business to gather the necessary skills required before one starts his ownbusiness. 2. Setting policies that ensure that entrepreneurship training is established in the schoolsyllabus. 3. Your people to be encouraged to read articles from newspaper, watch television and business contacts to enable them choose products in demand with a brightfuture. 4. Young youths as wll as aspiring adults entrepreneurs should be encouraged to get better and faster accessto a. Knowledge b. Information orbusiness c. Competition d. Internet e.t.c 5. Aspiring entrepreneurs to seek guidance in selection of machines and other facilities. 5. Entrepreneurial Cultural Practices in Kenya =========================================== - The cultural practices of entrepreneurs vary from country depending on the - The material resources - The industrial climate - The social & political systems - The undeveloped regions especially Kenya due to the policing of fundslacks - Skilled labour - Existence of minimum social and economic overheads to curb emergencies of innovative entrepreneurs. - Entrepreneurship does not emerge out of industrial background with developed institutions to support and encourageit. - Kenya has imitators entrepreneurs lacking enough innovators unlike other countries like South Africa. - However Kenya has established institutions that provide assistance to aspiring entrepreneurs in termsof - Establishing a fund to disburse loans to especially youths in the hope of promotingentrepreneurship - Some of the entrepreneurial activities that have emerged in our country include. 1. Steps towards Promoting Entrepreneurship by the Government. =========================================================== i. Increase small scale industrialsector. a. These are small tiny cottage industries e,.g the Tabaka soapstones b. They have increased and the governments in developing schemes to help entrepreneurs ii. Increase investments in the service sectorby c. Increased investments in quality services especially inthe i. Transport sector ii. Repairsservices iii. Entertainmentsector iv. Hospitality sectors iii. Increased in rural entrepreneurshipdev. d. Promoting rural entrepreneurshipby v. Promoting Agro exports e.g eggs , meate.tc vi. Development of brickmaking iv. Promoting women entrepreneursin; i. Encoring women to a variety ofventures ii. Education programmes. 2. Other Steps =========== - Through educational development in institutions, government participation would greatly promoteentrepreneurship - Introduction of the study of entrepreneurships as a core subject in not only universities curriculum but also tertiaryinstitutions. - Tax holidays for initial periods of 5 to 10 years of a newventure - Help by government organizations which have facilitated building new infrastructure e.g roads, loans, training institutionse.t.c. - Collaborations and joint ventures between the government and private sector e.g in technology. 6. The Theories ofEntrepreneurship =============================== a. **RichardCantilon** JohnBaptise =========== Carl Menger,(1950) and the AustrianSchool ========================================= Joseph Schumpeter(Innovation) ============================= MC Cleland (a function of HighAchievement) ========================================== - Individuals with high achievements orientation are not influenced by considerations of money or any other external incentives. He argues that profit and incentives are merely yardsticks of measurement of success of entrepreneurs with high achievement orientation. The achievement orientation can be taught and increased by deliberateefforts. - He finally observed that the individual with high achievement orientation take calculated risks and can make decisions where there are incomplete information or have tolerance for ambiguity Psychologists call this behavior a type --A- behaviour. 7. Role of Entrepreneurship in EconomicDevelopment =============================================== - Economic development is the process of structural transformation of an economy towards a modern technologically advanced economy based on services andmanufacturing. - This process involves not only qualitative changes but also accompanied by quantitative changes to improvewelfare. - Entrepreneurship contribute greatly to economic developmentboth; f. positively g. Negatively. 1. The Positive Role ofEntrepreneurship ==================================== i. Entrepreneurship facilitates structural transformation, innovation -- driven growthby a. Facilitating transformation from traditional agricultural based economy to modern industrialeconomy. b. And production for themarket. ii. Entrepreneurs are seen as capitalists with more to save than salaried people and therefore facilitate increased savings through which capital accumulation is stimulated forinvestment - Entrepreneurs save to start upbusinesses - Entrepreneurs save to expand theirbusinesses - Entrepreneurs to reduce need for expensiveborrowings - Entrepreneurs save for precautionaryreasons. iii. Entrepreneurs provide an environment where human capital is accumulated in the formof; a. workers specialized andnon-specialized b. Managers of alllevels. iv. The entrepreneurial ability determines the sizes of firms and the general growth of an economyby; - The limitative role and ability to takerisks - Ability to triggerinvestments. v. Entrepreneurship facilitates re-allocation of production factors from less productive areas to productiveareas. - They cause an increase in the demand for education oflabour - Facilitates adoption of improvedtechnology. vi. Through entrepreneurship creation of new firms through,which c. Increasedproduction d. Production for expert market e. Employments are achievable. vii. Through entrepreneurship need to knowledge accumulation generalization and commercialization has had to cooperation between researchers and institutions, private firms (sector) and thegovernment. viii. Through entrepreneurship development and productionof; i. variety of consumergoods ii. producersgoodsorintermediategoodshasgreatlyincreasedhence - new products are bought to themarket - Application of new technology and profitmultiplication. ix. Through entrepreneurship information if provided on what an economy can be good at producing which in the context of LDCS information islacking. x. Thorough entrepreneurship a vast growth of the private sectors tends to automatically check the large government sector facilitating to development a greater free marketeconomy. 2. The Negative Impact of Entrepreneurship to EconomicDevelopment. =============================================================== 1. Perverse allocation towards activities which are for private profitability and socially destructive or un productive dueto; i. absence of goodinstitutions ii. Slow economic growth which will result to unemployment hence low levels of entrepreneurshipability. iii. Production for the few rich or exploitative activities during hardships. 2. Misallocation of entrepreneurial talents during low development levels affecting iv. Resource utilizations especially humancapital. 3. Entrepreneur Contribution to EconomicDevelopment. ================================================= i. Producers, warehousing, transport, insurancee.t.c - Which are basically levels ofemployment ii. Facilitates use of local resources throughwhich i. local and international transactions areestablished ii. production of more goods andservices iii. Rural development which ineffect. - Promotes change to the formal sector from informalsector - Equitable development - Reduced rural-urbanmigrations. iv. Development of technologythrough i. establishment of researchinstitutions ii. education systems v. governmentrevenue iii. throughtaxes iv. from domestic borrowing(TBs) vi. Facilitating community developmentthrough v. Establishment of smallbusinesses vi. Participation in community dev.Projects vii. Providing a positive role model andfacilitating. - Competition between domestic entrepreneurship andimported - Stimulating dev. Ofentrepreneurship. viii. Reducing dependence on imported goods andservices. ix. Stimulates competitionthrough - Quality production methods areadopted - Quality products areproduced - Variety goods and services areproduced. x. Facilitated development of the financial sector throughwhich; vii. Capital accumulation is possible throughsavings viii. Loaning isfacilitated ix. Development of the capitalmarket. 8. Model Review Sample Examination Questions Question 1 ==================================================== a. Define thetermentrepreneurship 2 marks b. State and explain four ways of identifying a businessopportunities 8 marks c. What is market? 2 marks d. How do markets determine the successofenterprise? 8 marks e. Describe 5 function of the entrepreneur inasociety. 10 marks Question 2 ========== a. Discuss any five cultural values that would encourage the development of entrepreneurs practice 10 marks b. According to peter Schumpeter creativity is a key to determining aspectsof entrepreneurships" briefly explain the qualities of a creative person. 10marks Question 3 ========== a. Most small scale enterprises carry out the trading activities at a central location. Outline the measures an entrepreneur would take to gain a competitive edge over her competitors 10 marks b. Explain the steps the Kenya government has taken in order to promote entrepreneurship. 10 marks Question 4 ========== a. Explain 5 internal factors that motivate a person to become anentrepreneur b. The entrepreneur has been recognized as a major contribution in the achievement of nationaldevelopment.Discuss. 10 marks Question 5 ========== a. Explain any 5 **c**haracteristics of an entrepreneur must have in answering the question, explain whether an entrepreneur is born with the traits or they can be leaned. 10 marks b. Describe 5 entry requirementuntoself-employment 10 marks EVALUATING ENTREPRENEURIALOPPORTUNITIES ======================================= General objectives ================== i. Explain the procedure of starting abusiness. ii. Explain how business ideas can begenerated iii. Identify the various sources of businessideas iv. Explain the concept of businessincubation v. Discuss the ways of protections of business ideas & maintainingsecrecy 2. Procedures of Starting aBusiness ================================ - Identification of a businessidea - Development of a businessplan - Location of a business demandevaluation - Registration of thebusiness - Choice of the businessorganization - Business name - Trading licences /permit - Start-up and management of thebusiness. - All entrepreneurs are business people -- though not all business people are entrepreneurs. - Entrepreneurs tend to be more innovative than ordinary business people and end up developing a businessplans. 1. Means of Generating a BusinessIdea ================================== a. identifying a need b. brainstorming c. building on ones skill, hobbies orinterests d. spotting a market niche e. listening to what people say f. attribute listening g. gaining from waste h. look to see and listen tohear i. research j. importing an idea k. daydreaming l. Spin off from employment. 2. Identifying aNeed ================= - A need can be an opportunity and indeed a consumer buys to satisfy need. Abraham Maslow in his humanistic hierarchy of needs, physical needs to very high personalizedneeds. - Therefore identifying an unidentified or unserved need is a sure way of generating businessideas. The Maslows Hierarchy of needs ============================== i. Basic or physiologicalneeds =========================== - The first and the most basic need such as thirst hunger and sleep -- in the process of satisfying these needs, entrepreneurs can generate a lot of business ideas- such as cloth stores, food stores, building materialsetc. ii. Safety and security needs ========================= - Human beings require these and entrepreneurs can generate ideas in the process of satisfying them e.g security, watchmene.t.c. iii. Social needs ============ - Generally speaking to need should be accepted in the society e.g membership clubs, beauty clinicset..c iv. Self esteem orego ================= - the need only needs recognition e.g need for luxury cars cellular phones e.t.c v. Self -- actualization ===================== - The need to prove the ability in one's self i.e self fulfillment -- research institutions opportunity to do something in one'sability. 3. Brain Storming ============== - This is a process of detaching analysis of an idea from the actualideas. - The idea may or may not be related to a given product. In brainstorming even silly and stupid ideas may begenerated. 4. Building on One's Skill, Hobbies orInterests ============================================ - business ideas can be generatedthrough i. personal interests andhobbies ii. Copying or improving somebody's ideas. (skills) 5. Sporting a Market Niche ======================= - Entrepreneurs usually look for gaps in the growing markets, identifying market sections which are not beingutilized. 6. Listening to what Peoplesay. ============================ - These are people who simply say or speak their needs e.g if these good busservices 7. Attributelistening ================== - This method of generating business ideas is based on changing the way one looks at something in order to fins a new use forit. - It attempts to answer the question -- what do we do with thisproduct. 8. Gaining fromWaste ================= - What would appear waste can be used- say recycles to create a new opportunity. 9. Others ====== 2. The Process of Screening a BusinessIdea. ======================================== - After generating business ideas- it is important that some evaluation through a screening process bemade. - The screening process is a systematic evaluation ideas in order to select the best idea which would suitone. - The screening process must be done carefully, objectively, soberly and without anyemotions. - The business idea screening is required even when there is only one idea to consider. This is because this is a stage of starting a business that may be not be profitable or may be difficult torun - The screening process must therefore evaluate thefollowing Personal Evaluation =================== i. the objective for going tobusiness ii. personalinterests iii. The degree of commitment to the business or others e.gfamily. i. Personal Skills =============== b. The self SWOT analysis -- this aims at analyzingones a. Strengths b. Weaknesses c. Opportunities d. Treats - This will help achieve the desired goals-the 1. The Importance of this Screening Stageinclude; ============================================== - In order to develop a strategicprofile. - To provide a framework to assess the current and futureplans - To act as a control technique when conductedperiodically - To get realization ( reality) on theactivities - The SWOT components - Strengths -- these are positive internal conditions suchas - Distinctive competence - Adequatefinances. 2. Components of the SWOT Analysis (importance of self evaluation) The screening process or evaluation helpsidentify; ================================================================================================================== a. Strength i) Distinctive competence ii. Adequatefinances iii. Access to economies ofscale iv. Good innovationability v. Proven management b. Weakness i. Lack of keyskill ii. Internal operations problems iii. Low morale iv. Poor trackrecords v. Weak internal image c. Opportunities vi. Potentialcustomers vii. Potentialgoodwill viii. Health ix. A favourable social d. Threats i) strongcompetitions ii. Adverse governmentpolicies iii. Politicalinstability iv. A designed economy mismanagedeconomy v. Unfavorablelegislation a. Market evaluations - The aim is to create assurance of adequatemarket - The main components include i. Consumer demandanalysis ii. Product price andplacements iii. No. of competitors inmarkets. b. An analysis of availability of raw materials in termsof i. Adequacy ii. Reliability iii. Price c. Analysis of providing technology in termsof i. Appropriateness ii. Affordability d. An analysis of skills available e. Analysis of the governmentpolicies. 3. Characteristics of a Good Businessidea. ======================================= i. Easy to manage and involve minimal risk. ii. Does not require excessive capitalinvestments iii. Offers a good return on capital iv. The idea has scope for growth, expansion and diversification v. Comparative with owner's goal and interest vi. Not against expectation of the society v. Has a short gestationperiod vi. Has a readily available market vii. Easy to exit when necessary. 3. The Generation and Sources of Businessideas =========================================== a. **Generalization of businessideas** - Entrepreneurs have the ability to see opportunities in whatever environment they happen tobe - They are sensitive to people'sneeds - They use people's problems as opportunities of abusiness - The entrepreneurs can use several methods to help generate and test new ideas. 1. Methods of Generating ideas or BusinessOpportunities ==================================================== a. **Focus groups** -- i.e where a moderator leads a group of peoples through an open, in --depth discussion through which new ideas are shared. - Apart from generating new ideas, the focus group is an excellent method of screeningideas. b. Brainstorming ============= - The brainstorming method allows people to be stimulating to greater creativity by meeting with others and participating in organized group experience. - When using brain storming the following rules must beobeyed. i. No criticism nor negativecomments ii. The wilder the idea the better (freewheeling) iii. Quality of ideas isdesired iv. Combinations and improvements of ideas areencouraged. c. Problem inventory analysis ========================== - This method used individuals in a manner that it forcus groups to generate new ideas e.g consumers given a list of problems in a general product category and discuss the various problems in each product category normally used to test newproducts. d. **Creative problem solving --** is a method of obtaining new ideas by focusing on the parameters suchas - Brainstorming -- group method of obtaining spontaneousideas - Reserve brainstorming -- a group method of obtaining new ideas but by focusing on the negative i.e by findingfault. - Brain writing -- is a form of brainstorming which gives participants more time to think than brainstorming which dwells on spontaneous ideas the participants write their ideas on a specialform. - The Gordon method- is the method of developing new ideas when the individual are unaware of theproblem. - It ensures that the solution is not clouded by pre-conceived ideas or behavioralpattern - Checklist method.- is a method of developing new ideas through a list of related issues - Free associationmethod - Forced relationship it is a technique that asks questions about an object or idea in an effort to develop a new idea it follows the following fivesteps i. Isolate the element of theproblem ii. Find the relationships between theseelements iii. Record the relationship in an orderlyway iv. Analyze the resulting relationships to find ideaspattern v. Develop new ideas from thepattern. - Collective notebookmethod - Attributelisting - Big-dream approach i. Developing a new idea by looking without constraints i.e think of the problem and its solutions I, thinkingbig. ii. Every possibility should be recorded and investigated without regard to all thenegatives. - Parameter-analysis i. Developing a new idea by focusing on parameter identification and creative synthesis ii. Parameter identification involves analysis variables in the situation to determine theirimportance. 2. OpportunityRecognition ====================== - Some entrepreneurs have the ability to recognize a business opportunity which is fundamental to the entrepreneurial process as well as growingbusiness. - A business opportunity represents a possibility for the entrepreneur to meet a large enough unsatisfied need that isworthwhile. - The key to recognition of an opportunity lies in the knowledge ( education) and experience gained either personal or through work byboth - The prior knowledge is as a result of the combination of education and experience. - The entrepreneurship needs to be aware of this knowledge and experience and have the desire to understand and make use ofit. - The other important factors in this processinclude - Entrepreneurshipalertness - Entrepreneurialnetworks - Those entrepreneurs who have the ability to recognize meaningful business opportunities are in strategic position to successfully complete the planning and development process and successfully launch a newventure. 3. Add OpportunityIdentification The sources of newideas ===================================================== - Some of the more frequently used sources of business ideas for entrepreneursinclude. i. Consumers - Potential entrepreneurs not only pay attention to potential customers but also monitor their potential needs through allowing the customers to express theiropinions. ii. Existing products andservices - Through monitoring and evaluating competitive products andservices. iii. Distributionchannels - Contact with members of the distribution channels since they are familiar with the needs of the market and give suggestions of new products and consumerneeds. iv. Federalgovernment - Can be a source of a business ideathrough 1. The patent office which contains numerous product possibilities. 2. Official governmentmagazines 3. Government regulatory bodies e.gKBS 4. Government shows andexhibitions v. Research anddevelopment vi. Education -- i.e picking a given line of study e.gconstruction vii. Vocational training programmes andexperience. viii. Personal hobbies especially for craftentrepreneurs. ix. Personal contacts and observationsthrough. a. Interactions b. Newspapers andmagazines. x. Conducting surveys and interviews of the peoplearound. xi. Other ways of generating businessideas 4. Definition of a BusinessOpportunity =================================== - A business opportunity may be defined as an attractive project idea with an entrepreneur accepts for investment on the basis of what is known about the possible success for theproject - A real business opportunity can by distinguish from a mere possibility through the following twoingredients. i. A good marketscope ii. An attractive return on investment (profit) 5. Qualities (Characteristics) of a Good BusinessOpportunity ========================================================= 1. Demand -- there should exist a good marketscope 2. Returns on investment -- i.e the business should be sufficientlyprofitable. 3. availability of raw materials 4. Enough skilled people. 6. Evaluation of Business Opportunities (objectives of a pre-feasibilitystudy) =========================================================================== - Once a business opportunity has been identified one needs to confirm that it is viable through a pre-feasibilitystudy. - The main objective of a feasibility study is to determinewhether. 1. the investment opportunity is promisingenough 2. The project is viable from the marketing manufacturing and other points of view. 3. Any aspect of the project that may be crucial to call for in- depthanalysis. 7. The Purpose of Pre-feasibility Study (MarketResearch) ===================================================== i. To verify that the investment opportunity is promising enough to make a firmdecision. ii. To confirm that the project is viable fromthe a. Marketing b. Manufacturingand c. Other points ofview iii. To identify any aspects of the project that is critical or crucial enough to call for in depthanalysis iv. To acquire comprehensive technical, economic and commercial data for the final investmentdecision. v. To enable an in-depth study of aspects suchas d. Marketpotential e. Technicalrequirements f. Managerialability g. Financial projections andanalysis h. Risksevaluation i. Business environmentalanalysis. j. Authorizedpublications k. Consultantsopenings. vi. To establish the final outcome of whether or not to proceed with the business. 4. Business Incubation =================== - Business incubation is the process of nurturing small and start -- up initiatives or business to relative maturity to become self-sustaining business, healthy and wealth-generatingentities. - The failure rate of any start-up business stands at 90%globally. - The main causes ofbusiness failure at an early age; i. Insufficient capital forstart-up. ii. Insufficient knowledge of business and industry. iii. Lack of Entrepreneurial and businesss kills. iv. Lack of Managerial skills. v. InadequateTraining. vi. Lack of credit facilities. vii. Lack of markets. viii. Insufficient knowledge of markets. ix. Inadequate infrastructure. x. Non-Empowering politicalenvironment. - For these reasons, many businesses which are ill-equipped do not survive. A business incubator is important for precisely those reasons above to provide these supportservices. - Statistics show that the success rate for incubated businesses initiatives is very high (over 80%) are bound tosucceed. 1. The Incubation Process ====================== - Help with businessbasics. - Networkingactivities. - Marketing assistance. - Help with accounting and other financialmanagement. - Access to bank loans and otherfunds. - Link to resource centers such as traininginstitutions. - Link to strategicpartners. - Help in the identification of a managementteam. - Commercializingassistance. - The business incubation programmes are designed to accelerate successful development of entrepreneurial companies through an avvary of support resources andservices. - Incubators vary in the way they deliver their services in their organizational structure and in the types of clients theyserve. - Business incubators differ from research and technology in their dedication to start-up and early stagebusinesses. - Research and Technology institutes tend to be large scale projects that house everything from corporate government or university labs to verysmall companies. - The research institutions do not offer business assistance services which are the main objective of businessincubation. - Unlike many business assistance programmes business incubators do not serve any and all companies. - Entrepreneurs who may wish to enter a business incubation program must apply foradmission. - Acceptance criteria vary from program to program but in general only those with feasible business ideas and workable business plan areadmitted. - The time a company spends in an incubation programme vary widely depending on a number of factors, including the type of business and the Entrepreneur's level of businessExpertise. 2. The Benefits of Incubation. =========================== - Creating jobs and wealth - Fosters a community's Entrepreneurialclimate - Technology commercialization. - Diversification of Local Resource. - Acceleration of local development. - Facilitation of Business creation and growth. - Encouraging entrepreneurship especially women. - Revitalization of the community as awhole. - Growth of Private SectorInvestment. - Increased Tax Revenue. - Equitable development. 3. Government Roles in Promoting Incubation ======================================== i. Creation of an enabling environment through; i. Purchasing consumer products. ii. Support programmes financially of the incubation process. ii. Government policy to buy from incubators. iii. Give small scale businesses loans and grants. iv. Launch campaign to sensitize the private sector to work with business incubation initiative. v. Take a lead role in the in cubationprocess. vi. Assist in the coordination, encouraging and streamling the efforts of incubation at National level. vii. Lobby and Rally with Kenyans in Diaspora together with developing partners to support businessIncubation. viii. To encourage coordination of independent efforts country-wide for better synergy and a more effective Naturalimpact ix. To rally universities and other research institutions behind the concept to facilitate research and development in order to enrich business incubation x. To provide support to business incubation initiative by providing morale support through MediaInitiatives. 4. Protections of Business ideas & maintainingSecrecy ================================================== - Most entrepreneurs will not be inventors, at least not in the classic sense but all entrepreneurs are concerned with protecting their business ideas, especially when those ideas are relatedto; - Un usualproduction - Unique designset.c - And for this to be done understand the " patent law" becomes but simply paramount - When entrepreneurs want to protect unusual brand name, products business ideas or simply establishing ownership, then understanding trade marks and copyrights if vital as a way of protecting a businessidea. - The government law pertaining to; - Patents - Trademarks - Copyrights -- are notcomplicated - Many entrepreneurs file their own patent claims or prepare documentation for trademark or copyright protection without professional help from the Attorney or patentagents. - However it is always wise to have professional assistance though the laws are simple. 5. Ways of Protecting Business ideas ================================= a. **A patent** - A patent is a grant of property right by the government to an inventor. It is issued thought the commissioner of patent rights, and the most common type of patent is called a utility patent. All patent however, have the distinction of being assets with a commercial value because they provide exclusive rights of ownership the patentholders. - Patents are exclusive property rights that can be sold, transferred, or used as collateral much alike other valueableassets. - The patent law stipulates broad categories of what can and cannot be patented and in the words of the statute any person who " invents or discovers any new and useful process, machine manufacture, or composition of matter, or ay new and useful improvements thereof may obtain apatent" - Anything that is patentable must be new and useful ( must have some demonstratedfunction) 6. The Nature of Patentable Inventions =================================== 1. **Process** -- The word process as used in patents refers to new methods of manufacturing or new technological procedures that can be validated asunique. 2. **Machine --** In patent law means that the patent application if for a specific physicalitem. 3. **Manufacture**- refers to physical items that have fabricated through new combinations of materials or technicalapplications. 4. **Composition of Matter**- this category is patent law relates to the chemical compounds such as synthetic materials, medicine, cosmetics etc 7. Types of Patents ================ i. Utilitypatent ii. Designpatent iii. Plantpatent. 1. The utilitypatent - utility patent is granted for new products processes, machines, methods of manufacturing and composition ofmatter - This category excludes, most botanical creations related to plant and agricultural use. 2. The designpatents - Are granted for any new or original ornamental design for an article of manufacture - A design patent protects the appearance of an article and not the articleitself. 3. The plantpatents - In botanical terms any, new variety of plant that have been sexually reproduced can be granted a plantpatent. - Thenewplantmustnotexistin nature or in an un cultivated state. Therefore new plants hybrids and seedlings may bepatented. 4. Disclosures - The patent office provides an important service of limited protection through the invention disclosureprogramme - As a first step in seeking protection form the disclosure statement -- the aim is to register an idea with thegovernment. - The investor explains what the items is, that it is new and useful and how it is to be used copy is given orphotograph. - This gives the investors protection as evidence of any legal tassel, or conflicting claims giving the investorpriority. 8. The Patent Procedures ===================== i. **The disclosure** - When an idea is first reduced to sketches on paper or when it is mocked up, a disclosure should befiled. - This is a measure of insurance that precedes the actual patent and provides legal recognition for all aspiringinventors. - If someone took the sketches or steals the idea, evidence is onrecord. ii. The patent sketch ================= - A patent sketch is required to determine whether an inventor's creation already exists and remains actively protected under thelaw. iii. The preliminary section ======================= - The preliminary search scans the patent summaries for prior claims orinvention - Records are accessed to make judgments and diligent decisions aremade. iv. Collecting searchdocuments ========================== - The application can the collect the approved documents for furtherprocessing. v. Making the patentapplication ============================ - A formal application is now made at the search and is sent to the commissioner of patents and trademarket - The application contains threeparts - A description of theitem - A set of drawings - A formal oath ordeclaration - Payment of patent filingideas 9. Trademarks ========== - Trademarks include any word, name, symbol or distinguishing device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured or sold by others. - Trade-marks can be names used in commerce such as KCA it can be a symbol or any distinguishing device artistic innature. - An important qualification for a trademark is that mark, name etc. must be used commercially. 10. **Service mark** Is similar to at trademark and can be registered in the same way with the sale protection A service market can be a name, wording used in advertising symbols or artistic figures that create a distinctive serviceconcept. 11. Copyrights ========== - Are similar to patents in establishing ownership and protection for creative ideas but they pertain to the intellectualproperty. - The copyright is distinct from patents and trademarks in that intellectual property is protected for the life of the originator plus a further 50years. - This protection affords an extraordinary property right and substantial estates. It extends protection to author, composers andartists. 12. Trade Secrets ============= - Are proprietary information used in the course of business to gain an advantage in manufacturing or commercialization of products orservices. - Tradesecrets i. formulas ii. patterns iii. list of customers iv. databases v. chemical compounds vi. combinations of ingredients for commercialproducts vii. process ofmanufacturing viii. Compliedinformation. - Every organization must keep their secretsbecause - Modern communications systems contain so much information which if not guarded, the business maycollapse. - Employees leaving may disseminate information tocompetitors. - In any business to maintain a market Niche, then desire to protect their product. 13. Trade Secrets ============= - The trade secret will have a life as long as the idea or process remainssecret. - A trade secret in not covered by any law but is recognized under a governing body. - Employees involved in working with an idea or process may be asked to first sign a confidential information agreement that will protect against their giving out the trade secret either while as employees or when leaving the organization -- this is called trade secret non -disclosureagreement. - Most entrepreneurs have limited resources so they choose not to find means of protecting their ideas or products orservices. 14. Steps to be taken in order to maintain Secrecy in anOrganization. ================================================================= a. Train employees to refer sensitive questions to designatedpersonnel b. Provide proper security measures such as escorts to allvisitors c. Avoid discussing business ideas in publicplaces d. Keep important travel planssecret. e. Control information that might be presented by employees at conferences or publishedjournals f. Use simple security measures such as locked file cabinets, passwords or computers, shedderse.t.c. g. Have employees and consultants sign non-disclosureagreements. h. Debrief departing employees on any confidentialinformation. i. Avoid faxing any sensitiveinformation j. Mark documents confidential whenneeded. - Unfortunately protection against the leaking to trade secrets is difficult to enforce. 15. Licensing ========= - Licensing may be defined as an agreement between two parties, where one party has proprietary rights over some information, process or technology protected by a patent, trademark orcopyright. - This arrangement specified in a contract requires the licence to pay royalty or some other specified sum to the holder of the proprietary rights in return for permission to copy the patent trade mark orcopyright. - Licensing has significance as a marketing strategy to holders of patents, trademarks or copyrights to grow their business in a new market when they lack resources or experiences in suchmarkets. - It is also an important marketing strategy for entrepreneurs who wish to start a new venture but need permission to a copy or incorporate the patent trademark or copyright with theideas. 5. Product Safety and Liability ============================ - It is very important for the entrepreneur to assess whether any product that is to be marketed in the new venture is subject to any regulations under the consumer product. - In addition to setting standards for products the commission also has a great deal of responsibility and power to identify what to consider being a substantial hazard and barring any products that may be consideredunsafe. - Any products introduced by entrepreneurs must obtain clearance from the Kenya bureau of standards under the consumers protectionAct. 6. Model Review Sample ExaminationQuestions ======================================== a. What is a public utility b. Discuss the merits and demerits of government participation inbusiness. c. " Traders should have a free hand in dealing with consumer "discuss d. Explain the reasons why the government issueslicenses. e. Explain reasons why the entrepreneur may find marketing boardsuseful. f. What are the functions of the Kenya chamber ofcommerce g. Explain the term consumerprotection h. Explain the various methods of consumerprotection. CHAPTER THREE ============= 3.0 MARKETING REQUIREMENTS ASSESSING AND SELECTING A SUITABLEMARKET =================================================================== General Objectives ================== i. Explain marketing functions andstrategies ii. Discuss the various methods of productpromotion iii. Explain the 4 Ps ofmarketing iv. Describe factors which may influence an entrepreneur in choosing a promotionalmethod 1. Marketing Functions and strategies ================================== - Marketing consists of a multitude activities that include decisions about the company's - Products or services - Pricingpolicies - Promotionsand - Distribution methods. - The ultimate equal is to facilitate exchange between an enterprise and itscustomers. - This exchange relationship exists as one party becomes willing to give something of value in order to receive something ofvalue. - Marketing is the process of conceiving than exchange and then accomplishing the tasks necessary to deliver t he goods or services in a manner that satisfies customer and meets the businessobjective. 1. MarketingFunctions ================== - Is the combination, designing and integrating all elements of marketing into various functions which on the basis of an appraisal of the market forces would achieve the objectives of an enterprise at a giventime. i. **The product** -- involves the planning, designing and developing the right type of the product in order to meet the customer's satisfaction. Itincludes. i. The packing of theproduct ii. The image iii. The brand name andlabel iv. The product v. The productquality vi. The productrange vii. The productoutput viii. The product warrantees and after saleservices ii. **The price**- involves giving value which is charged by the suppliers. This is an important element of markingbecause; ix. It relates directly to the generation ofrevenue x. Measures the profit cost and revenueelements. xi. Affects the product quality andquantity xii. Has a psychological impact onconsumers. iii. **The placement** -- also known as distribution is concerned with linking the seller and buyer through the product and involves elementsof xiii. Inform potential customers xiv. To convince and persuade existing customers to continuer choosing the product xv. To establish a business image or goodwill xvi. To canter competition from other businessdealings xvii. To increase sales andrevenue. 2. The marketingstrategy ===================== - This is a consciously formulated plan that describes how the new venture will compete. - It focuses the business enterprise on a target market to fill the gap or create anitche. - A well calculated marketing strategy provides guidelines for the entrepreneur concerning-: - The expectedresults - Allocation ofresources - Responsibilities formarketing - Ways of controlling theenterprise. 3.2 The marketing Plan ====================== - It synthesizes market research and the entrepreneurs strategy into a blueprint for action - The plan is implemented through a marketing programme, which addresses the marketing activities decisions regarding product, the pricing, the promotional activities and the placementactivities. 2. The Marketing Mix ================= - The term marketing mix refers to the apportionment of effort, combinations, designing and intergration of all elements of marketing into a single programme aimed at achieving the objective of a businessenterprise. - It is a detailed strategy, tasks, operations policies programmes, techniques and activities to which resources may be allocated to achieve marketingobjectives. - The term is used to describe the combination of the four inputs which constitute a marketing system ( 4p's)i.e - Theproduct - The price - Theplacement - Thepromotions 3. The 4 Ps (the fourPs) ===================== The Product =========== - The product element of the marketing mix involves the planning, designing and developing the right type of the product or service to meet the customer satisfaction. The main decisions involve;- i. The productinvolved ii. The productsize iii. The productquality iv. The productdesign v. The productrange vi. The productvolume vii. The productpackaging viii. The brand name andlabel. ix. The product warranties and after saleservice. - The product element of the marketing mix strives toestablish. - A productpolicy - The productstrategies - The productmix A product Policy ================ - The product policy is a principal of operation on the production process of a given product adopted by the management to guide those who carry out theaction. - A product policy sets out the objectives to be achieved and also the limits within which the management has tooperate. - The main functions of a product policy are to guide the activities of the firm towards its common goals whichinclude. a. Considerations of the productmix b. Considerations of the rate nature and direction in changes indemand c. Product elimination and new productdev. - The product policies engage in product planning development ,production marketing , volume of production , timinge.t.c Product Mix =========== - A product mix lists all products offered for sale by a company which details three diminutions of a product -- namely; - The productbreadth - The product depthand - Consistency - The product breadth- is measured by the number of variety of products manufactures by a single firm e.g -- the Panasonic company -- making TVs fridges radios DVDs e.t.c - The product consistency -- refers to the close relationship of different product line either to their end distribution channel e.t.c e.g. the Toyota Company -- produces those goods which fall under motor vehicles -- consistency is seen- unlikeunilever. - The product depth- refers to the assortment of size, colour and models with each line e.g the Toyotacar. 2. The Price ========= - Pricing the product is an important element of the marketingmix. - Price is the value or sum of money which is charged by the supplier of a product or service from thebuyer. - The financial price is the measurement of value and has the followingimportance. x. economic value- because it relates to the generation of productrevenue. xi. Profits -- through price profit cost and revenue elements aremeasurable. xii. Product quality -- price gives indication of the productquality. xiii. The psychological element- price has a psychological influence in the market i.e high prices co-relate tosuperiority. xiv. Co-oporate goals- are achievable through pricing decisions especially in formulating markingstrategies xv. Meeting consumer expectations is measurable throughprice. 3. Placement ========= - Also known as distribution of goodsphysically - This component of the marketing mix is concerned with linking the seller and the buyer. - It involves the elementsof - The channels ofdistribution - The transportmeans - Thewarehousing - The routing of theproduct. 4. Promotions ========== - A product promotion is the act of providing information about a product to its prospective users in order to persuade them to buy , enjoy or choose theproduct - Any product promotional message usually includes information whichshows; - That the productexists - That the product has ability to satisfy a particularwant - The physical location where the product can be obtained orenjoyed - The qualities that the product can be obtained orenjoyed. - The quantities that the product can beobtained - The times when the product can beobtained - The price of theproduct. - Exam quest, briefly explain what entails a promotionalmessage. Factors that influence a product promotion. =========================================== 1. The nature of themarket 2. The nature of theconsumers - The level of information the consumers are accessible to createsawareness. - Any gaps left are filled with productpromotion 3. The effect of moderntechnology. The importance of product promotion =================================== 1. To inform potential customers about the existence qualities and other important details regarding aproduct. 2. To convince or persuade existing customers to continue buying the product and potential customers to chooseit. 3. To establish a business image or goodwill among the existing and prospective customers 4. To facilitate more salesrevenue. Methods of Product Promotion ============================ - There are five main ways of promoting productsnamely i. Advertising ii. Personalselling iii. Salespromotion iv. Publicity v. Publicrelations. a. Advertising =========== - Refers to drawing attention to or describing a product in a public medium e.g newspapers , radio, televisione.t.c - Any advert in order to give value for its purpose should contain the following aspects. i. a mediapresentation ii. payments for theadvert iii. Identifiable sponsor who pays for theadvert. - Any communication without costs to the sponsor is publicity and not advertisement. Reasons for Advertising ======================= 1. To introduce newproducts 2. To stimulate desire for more quantities of theproduct 3. To persuade the public to buy theproduct 4. To explain new uses of aproduct 5. To remind customers of the existingproduct 6. To explain new used of aproduct 7. To create recognition of a particular brand ofproducts 8. To maintain the products name or slogan inpublic 9. To prepare way for sales persons in selling' 10. To remove any bias that customers may have developed about theproduct. 11. To inform customers of new prices, packaging changes or any otherchanges 12. To supplement the efforts ofsalesmen 13. To reach out for fewmarkets. Types of Advertising ==================== - Any advert may be classified on the basisof - What isemphasized - The nature of the messageadvertised - The geographicalcoverage - But the main typesinclude. 1. product advertising -- which basically promotes the sale of a particular brand of aproduct a. no mention of the manufacturer and emphasis is on the product e.g Accountancyprofession" 2. Institutional advertising -- tends to focus on creating a positive attitude on the business producing or providing the product / service emphasis in on the institution. 3. Primary demand advertising -- targets demand stimulation for a range of products without mentioning a specific brand or manufacturer e.g Adidas products or GNLD products. 4. Celebrity advertising -- the advert uses a famous personality to enclose the use of a given product -- The aim is to use these people to attractattention. 5. Corrective advertisement -- seeks to correct errors or misleading claims made in an earlieradvertisement. Advertising Media ================= - An advertising media is the means through which an advertised message is conveyed to the members of the public who areconsumers. - The following are some of types of media available toadvertisement. - The press e.gnewspapers - Posters - Billboards - Brochures - Shoppingnews - Radio - Television - Neon signse,t.c Factors which determine choice of an advertising medium ======================================================= a. The intended targetgroup - The nature of the target group interms of habits customers age, e,t.c will determine choice of the rightmedium. b. the physicalcharacteristics - The mediums physical characteristics i.e visual aspects, colour, movement'se.t.c. c. Mediacirculation - Where an advertiser aims to reach countrywide cliental, choice of a nationwide media is necessary. d. Cost ofadvertising - Should be affordable and that they should be reasonable compared to the returns. e. urgency of theadvertisement - Urgent and quick adverts may require mediums such as Radio , TV e.t.c Advantages of advertising ========================= I. **To the advertiser ( or businessenterprise)** i. It provides a business enterprise with opportunity to inform the public on what theyoffer. ii. It stimulates demand for a product thereby increasing sales and the sellers profits. iii. Acts as a reminder to customers of the existingproducts. iv. Helps sustain brandloyalty v. It quickens brandrecognition vi. Enables quick access and purchasing of the product after knowledge of placement andquantities. II. To the customer =============== i. It increases customers awareness of a newproduct ii. Helps indicate the variety of products available in the market facilitatingchoice iii. Leads to better quality products due tocompetition iv. Leads to increased qualities beingproduced. Disadvantages ============= I. **To the advertiser** i. A costly method of promotingproducts ii. Where offensive or erroneous may benegative iii. One can be sued where advert ismisleading. iv. Competitive advertising may cause a seller t o be pushed out of business. v. Difficulty due to existence of severalmedia. II. To the customer =============== vi. Advertising costs are normally borne by theconsumer vii. Misleading especially where there is consumerignorance viii. Encourage impulse or irrationalbuying ix. Some adverts are irritating, anti-cultural andoffensive. b. Sales Promotion =============== - Sales promotion refers to the strategies and incentives which are aimed at promoting the purchase of a givenproduct. - The sales promotion strategies are divided into twonamely. a. the strategies aimed at the customer directly theseinclude i. direct main i.e cards, postcardse.t.c ii. gifts and other premiums e,g soap,toothbrushes iii. discounts iv. displays e,gsupermarket v. creditfacilities vi. Use of loss leaders -- one good is sold cheap to attractcustomers. vii. Use of freesamples viii. After sale services. b. the strategies aimed at the salesforce ====================================== ix. commissions -- money given todealers x. commissions -- money given todealers xi. demonstrations models xii. push money- to facilitate movement of thesalesmen xiii. training xiv. Provision of point of saledisplays. Advantages of Sales Promotion ============================= - promotion activities persuade and convince potentialcustomers - expand the marketscope - discounts reduce prices for consumers and credits stimulate a greater turnover - attracts customers through use of priceleaders - Good will is built by after sales services and samplegiving. - Training and demonstrations remove fear of using aproduct Disadvantages of Sales Promotion ================================ - The sales promotional incentives are expensive i.e freesample - Bad debts may arise from creditfacilities - Time and money consuming for sales servicesespecially - After sale services ties customers to oneseller. Personal Selling ================ i. availability of adequate resources for the salesforce ii. easy accessible and concentratedmarkets iii. high unit value for theproduct iv. products whose use needsdemonstration v. Suitability of a product to individual need as opposed to generaluse. vi. Introduction of new products in themarket. Forms of personal Selling ========================= i. Fieldsales ii. Showroomselling iii. Shows, trade fairs andexhibitions. Advantages of Personal Selling ============================== i. presents an opportunity to show the existing and potential customers what is available ii. it offers the prospective buyers an opportunity to see, examine taste and ask questions about a product -- and chance ofcomparing iii. the questions from prospective buyers are immediatelyanswered iv. immediate contacts are made between sellers and buyers for followup v. complementary adverts from other mediums e.gadvertising vi. Seller has opportunity to obtain information about the competing products and promotionalstrategies. Disadvantages ============= i.) it is an expensive promotional method -- especially where a wide coverage and oversees exhibitions are involved. d. Publicity ========= - Refers to the free advertising whereby the desire for a product is created or boasted by unpaid -- for features or presentation in the mass-media ( e.g a feature inpress) - These features may be solicited for or unsolicited for but remain entirely unpaid for by the busiess. -- or a news release sent tostudio. Advantages ========== i. It involves no costs on the side of theseller ii. Has a large and widespread reach since it conveyed throughmedia. iii. Has a high creditability as it is reportedindependently. Disadvantages ============= - Information released is to the discretion of the mediahouse - It is irregular and short -- lived hence my not beeffective. Public Relations ================ - This is done with the view of creating awareness and a positive attitude towards the organization and theproduct. - It could also be done to correct mis-information or rehabilitate a spoilt image in order to get a satisfiedclient. - It aims at creating a favorable attitude towards the organization in order to promote acceptance. Strategies of Public Relations ============================== a. **Market researchi.e** Consumerresearch ================ Market segmentation =================== d. Product difference ================== e. **Branding** f. **Packaging.** 1. Effective in presenting information about the product and policies of an organization 2. addresses the desired targetaudience 3. effective in correcting anymis-information Disadvantages ============= 1. expansive and therefore requires careful planning in both time andfunds 2. Impact takes time- hence is a longterm. 3. Its impact is difficult togauge. 4. Factors which may influence an entrepreneur in choosing a promotional method. ============================================================================= 1. cost element of each method of promotion should be analyzed in order to suit financialabilities 2. Targeted audience is important in order to address an appropriate combinationmethod. 3. the nature of the product to be promoted i.e those that may require demonstrations and traininget.c 4. Urgency of the promotionalmessage. 5. Availability of resources especially the mechanical physical and human resources to implement a promotionalmix. 6. level of demand for theproduct a. where demand is high fewer promotional methods arerequired 7. the competitors promotionalstrategies 8. availability of media that is most accessible to itscustomers 5. Model Review Sample Examination Questions Question 1 ==================================================== a. What is abusinessidea? 2 marks b. Definebusinessopportunity 2 marks c. Discuss the self --evaluation methods that an entrepreneur can adopt to analyze his competitiveness inthemarket 10 marks d. Briefly explain 4 types of risk that are faced by an entrepreneur 8marks e. Explain 4 characteristics of a good businessopportunity. Question 2 ========== a. What is amarketing plan? 2 marks b. State and briefly explain the contents includes in a marketing plan. 10marks c. Name and explain 4 sources of business ideas available to anentrepreneur 8 marks Question 3 ========== a. For one to start and be successful in operating small scale enterprise there should be a good environment for the smooth operations of thebusiness. b. Resistance to change has ordinary been associated with change are accepted a major element of a change process. Give a brief account of ways that a business organization can adopt to reduce resistant to change byemployees. Question 5 ========== a. Explain the benefit that would accrue to a business that implements production control initsoperation. (12marks) b. Discuss five methods that an entrepreneur could adopt to protect her intellectual propertyrights. (10 marks) CHAPTER FOUR ============ ORGANIZATIONAL FORMS ==================== General Objectives ================== i. Explain the various forms of businessorganizations ii. Discuss the advantages and disadvantages of soleproprietorship iii. Explain the procedure of formation ofpartnership iv. Explain the various forms ofpartnership v. Discuss the merits and demerits ofpartnership vi. Explain the formation ofcompanies vii. Discuss the advantages and disadvantages ofcompanies. viii. Identify types ofco-operatives ix. Discuss the advantages and disadvantages ofco-operatives 2. Unincorporated Business ======================= - These are business which do not have separate entity ( existence from that of their owners) - According to law such organizations are one and same in the existence of theowner. - They do not have separate rights and obligations from those of theirowners - Theyinclude i. soleproprietors ii. partnership 1. SoleProprietorship ================== - Sole means single while proprietorship refers to the owner of a business owned by one person who takes responsibility on risks of thebusiness. - He either enjoys the profits or servers the losses of the businessalone. Formation of Sole Proprietorship ================================ - It is simple and easy to form since legally only licensed from the government is required - If the name of the business is different from that of the owner the business name should be registered with theregistrar. Management of Sole Proprietor ============================= - He makes decisions operating the day to day activities thebusiness. - He may employ people to work in the business or be assisted by familymembers. Sources of Capital ================== - The term capital is used her to refer to the resource required to start and operate thebusiness - He may obtain capitalfrom; i. his ownsavings ii. borrowing from friends andrelatives iii. banks and other financialinstitutions iv. credit suppliers v. borrowing from government institutions i.e. KIE,ICDC vi. funding from non-governmentorganizations vii. hire purchasefunds viii. The business itself from retainedprofits. Liability ========= - A sole proprietorship is viewed as being one and the same with the owner hence does not have separate rights andobligation. - Where a sole proprietorship business can not pay its liabilities all its assets and the business properties are sold in order to clear the businessdebts. - The responsibility of the owner of the sole proprietorship business is thus unlimited. - The sole proprietor is therefore said to have unlimitedliability. - This means that the liability of the owner is no just restricted to capital contributed but extends to include its personalproperty. Features of a Sole Proprietorship ================================= 1. Is a business owned by oneperson 2. It had no separate legal existence from itsowner 3. It has a limited legal life since its existence depends on the life of theowner. 4. The owner has unlimited liability in thebusiness. Advantages of a Sole Proprietorship =================================== 1. It is easy to start since only a license isrequired 2. Quick decisionmaking 3. Freedom of action at anytime 4. Flexibility in adopting quickly to changes in customersneeds 5. Profits are entirely on the owner'shands 6. There is control over businesssecrets 7. Easy to use family laborcheaply. Disadvantages of Sole Proprietorship ==================================== 1. Limited life in case of death of theowner 2. Unlimited liability may cause the owner to loosing personalproperty. 3. The sole proprietor serves loses entirely byhimself 4. Limited capital may delayexpansion. 5. working for longer hours may result tofatigue 6. Lack of essential skills may causemis-management. Circumstances under which the Sole Proprietorship ideal ======================================================= 1. When customers show preference to specializedservices 2. Where small capital is required to start up abusiness 3. Where returns are low and may not warrantee existence of a large business. 4. Where the market experiences frequent demandchanges 5. Where locations are remote and the population may besmall. Dissolution of a Sole Proprietorship ==================================== - Dissolution refers to the termination of the legal existence of thebusiness. This may be caused by; ====================== i. The death of theowner ii. The transfer of the business to anotherperson. Problems the Sole Proprietorship may face. ========================================== 1. Lack of continuity in case ofdeath. 2. Lack of skills may lead tomis-management 3. Working for longer hours may lead tofatigue 4. Loses are served by theowner 5. Limited capital to facilitate expansionfunctions. 6. Lack of consultancy may lead to poor decisionmaking 7. Unlimited liability may cause lose ofproperty. 2. Partnership =========== - According to the partnership Act. A partnership is referred to as a relationship which subsists between persons carrying on a business in common with view of makingprofits. - A partnership is thus an extension of sole proprietorship and is in fact necessitated by the fact that a sole trader may for several reasons fail to carry out his business efficiently andprofitability. - Partners pull the financial and managerial skills together in order to makeprofit. Formation ========= - According to the partnership Act (934) a partnership business may come into existence through any of the followingways. ix. Orally x. By actions of personsconcerned xi. By a simple put inwritten xii. By a partnershipdeed Circumstances under which the Partnership is illegal ==================================================== - If the partnership has been formed for an illegal purpose e.g.theft. - If is formed and the partners do not meet the minimum qualifications e.g. auditing - Where the partnership contains more than 20members - Where the partnership wants to run their business with the name which does not disclose the true names of all the partners or the name had not been registered under the registration of the business Act under which it is deemedillegal. Requirements for the Registration of a Business Name. ===================================================== - Under the partnership Act , the partners must furnish the registrar of business names for thefollowing a. The businessname b. The general nature of thebusiness c. The principle place of location of thebusiness d. The present Christian and sir names together with their usual residential address. e. The nationality of eachpartners f. Any other occupation of thepartners g. The date of commencement of theirbusiness. Types of Partners ================= a. **Generalpartners** - These are the real partners in new sense of the partners which refers to those partners who are the most active partners in thepartnership - In most cases the general partner is a reliable of the debts of thepartnership. b. Limited partners ================ - This is a partner whose liabilities are limited to the amount of capital contributed to the partnershipbusiness - This type of partners do not usually participate in the management of the partnership becus4 if thy do they loose their limited liability in respect to the transaction and decisions participatedin. c. Active partner ============== - This is the type of partner who takes the active part in the running of the business. - In most cases such a partner may be employed somewhere or may be in another business alltogether - The partner contributes capital to the partnership business and the profits or losses at lowerproportions. Articles of Partnership/ Partnership Deed. ========================================== - Although it is not a statutory requirement the partnership can be formed by a written agreement, it is usual for the partnership business in particular those involved in huge commitments to write articles of a partnership also known as a partnershipdeed. - The aim of this document is to safeguard the interest of each partner and it constitutes a legal contract among thepartners. Contents of a Partnership Deed ============================== 1. The nature of the business to be carriedout 2. The capital and property of the firm together with the respective capital contributions of eachpartner. 3. The sharing of profits or loses bypartners. 4. The rules as to the case of interest on capital and drawings bypartners. 5. Provision for proper accounts and theiraudit 6. The power of eachpartner. 7. The drowns for the resolution of thepartnership 8. The method of determining the value of good will on retirement of drafting in of a newpartner. 9. The method of determining the amount payable to a deceasedpartner. 10. No partners may should carry on a competingbusiness 11. Any changes in partnership composition must be agreed upon by allpartners. Management of Partnership ========================= - Members of a partnership are correctively responsible for the management of the business. - The members may share responsibilities and duties according to their respective skills and availability in order to ensure effectiveness in management of the partnership. - The partners may decide to hire skilled or non-skilled labour to assist the management of thepartners. Features/ characteristics of a Partnership ========================================== 1. **Mutual agency** -- each partner is an agent of the partnership and therefore any action by one partner with transacting the business binds the rest of the partners provided his actions are within the partners express or impliedauthority. 2. **Limited life-** since the partnership is a relationship originating from an agreement between two or more member