MASINDE MULIRO UNIVERSITY OF SCIENCE AND TECHNOLOGY

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF BUSINESS ADMINISTRATION AND MANAGEMENT
SCIENCES

BCB 305: ENTREPRENEURSHIP

COURSE OUTLINE

A. COURSE PURPOSE

This aim of this course is to introduce learners to skills and knowledge of Entrepreneurship, which
they will apply to the real business world.

B. EXPECTED LEARNING OUTCOMES

By the end of the semester, the learner should be able to apply acquired skills and knowledge of
Entrepreneurship, which will be relevant to the business world. Specifically, the learner should be
able to:
1. Describe the concept of Entrepreneurship;
2. Discuss the theoretical and conceptual base of Entrepreneurship;
3. Explain the process of innovation in Entrepreneurship;
4. Examine the profile of successful Entrepreneurs; and
5. Apply entrepreneurship skills and knowledge acquired in Enterprise management.

C. INSTRUCTOR: Ngoze, Moses L., PhD

D. MODE OF EVALUATION
CATS 20%
Assignments 10%
Final Exam 70%
Total 100%

E. TEACHING AND LEARNING METHODOLOGIES

Lectures (Class and Public);
Group/ Class discussions and Presentations;
Tutorials;
Questions/ Assignments;
Demonstrations;
Illustrations/ Examples;
Case Studies; and
Library research.

F. COURSE CONTENT/ TOPICAL OUTLINE

WEEK TOPIC NUMBER AND DETAILS REFERENCES

1. Nature and Meaning of Entrepreneurship Kuratko, D. F. (2016) Chapter 1;

i. Nature of Entrepreneurship Hisrich et al. (2014) Chapters 1- 4;
ii. Definition of major concepts Scarborough, M. N. (2015) Chapter 1.
2. Theories and Myths of Entrepreneurship Kuratko, D. F. (2016) Chapter 1;
i. Theories Hisrich et al. (2014) Chapters 1- 4;
ii. Myths Scarborough, M. N. (2015) Chapter 1.
iii. Views of scholars of entrepreneurship

3. Entrepreneurs Kuratko, D. F. (2016) Chapter 2;

i. Definition Hisrich et al. (2014) Chapters 1- 4;
ii. Characteristics Scarborough, M. N. (2015) Chapter 1.
iii. Classification
4. Entrepreneurs Kuratko, D. F. (2016) Chapter 2;
iv. Functions of Entrepreneur Hisrich et al. (2014) Chapters 1- 4;
v. Contributions to the economy Scarborough, M. N. (2015) Chapter 1.
vi. Advantages of entrepreneurs

5. Entrepreneurial Process Kuratko, D. F. (2016) Chapters 5-7;

i. Stages of Entrepreneurship Hisrich et al. (2014) Chapters 2, 5- 6,
ii. Starting the Enterprise: Factors 11- 12; Scarborough M. N (2015)
Chapter 1.
Course Work (CAT 1/ Assignment) Question Papers
Marking Scheme

6. Entrepreneurial Process Issues Kuratko, D. F. (2016) Chapters 5-7;

iii. Creativity and Innovation Hisrich et al. (2014) Chapters 2, 5- 6,
iv. Innovation and Entrepreneurship 11- 12; Scarborough M. N (2015)
v. Intrapreneurship (Corporate Chapter 1.
Entrepreneurship)

7. Profile of Successful Entrepreneurs Kuratko, D. F. (2016) Chapters 5-7;

i. Qualities Hisrich et al. (2014) Chapters 2, 5- 6,
ii. Role and Significance of 11- 12; Scarborough M. N (2015)
Entrepreneurial Management Chapter 1.
iii. Leadership Qualities of Entrepreneur

8. Profile of Successful Entrepreneurs Kuratko, D. F. (2016) Chapters 5-7;

iv. Necessity of Profit Orientation in Hisrich et al. (2014) Chapters 2, 5- 6,
Entrepreneurship 11- 12; Scarborough M. N (2015)
v. Need of Self-assessment of Chapter 1.
Entrepreneur and Firm
vi. Entrepreneurship and Management
9. Environment for Entrepreneurship Kuratko, D. F. (2016) Chapter 12;
i. Definition of Environment Hisrich et al. (2014) Chapters 2, 5,6,
ii. Types of Environment 11- 12; Scarborough, M. N. (2016)
iii. Internal Environment Chapter 5, 11-13.

10. Environment for Entrepreneurship Kuratko, D. F. (2016) Chapter 12;

iv. External Environment Hisrich et al. (2014) Chapters 2, 5,6,
v. Competitive Analysis 11- 12; Scarborough, M. N. (2016)
Chapter 5, 11-13.

Course Work (CAT 2/ Assignment) Question Papers

Marking Scheme

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 11. Contemporary Issues in Entrepreneurship Kuratko, D. F. (2016) Chapter 13;
i. Policy Issues Hisrich et al. (2014) Chapters 13- 14;
ii. Women Entrepreneurship Scarborough, M. N. (2016) Chapters
11-13.

12. Contemporary Issues in Entrepreneurship Kuratko, D. F. (2016) Chapter 13;

iii. Social Responsibility Hisrich et al. (2014) Chapters 13- 14;
iv. Business Ethics Scarborough, M. N. (2016) Chapters
11-13.

13. Strategies for Enterprise Growth Kuratko, D. F. (2016) Chapter 13;

i. Internal Hisrich et al. (2014) Chapters 13- 14;
ii. External Scarborough, M. N. (2016) Chapters
11-13.

14. Cases in Entrepreneurship Journals; Research Reports; Sessional

Papers

15 & Semester Exams Question Papers

16 Marking Scheme

G. REFERENCES

1. Main References
Core Texts
i. Hisrich, R.D., Peters, M.P. & Shepherd, D. A. (2019). Entrepreneurship, 11th Ed.
Boston: McGraw Hill Higher Education (ISBN10: 1260043738; ISBN13:
9781260043730).

ii. Kuratko, D. F. (2019). Entrepreneurship: Theory, Process and Practice, 11th Ed. Boston,
MA: Cengage Learning (ISBN10:0357033183; ISBN13: 978-0357033180).

iii. Zacharakis, A., Bygrave, W. D. & Corbett, A. C. (2016). Entrepreneurship, 4th Ed. New
York, USA: John Wiley & Sons (ISBN10: 1119298814; ISBN13: 9781119298816)

2. Recommended Texts
i. Abrams, R. (2017). Entrepreneurship: A Real- World Approach, Second Edition. Palo
Alto, CA: Planning Shop Publishers (ISBN10: 9781933895512; ISBN13:
9781933895512).

ii. Barringer, B. R. (2015). Preparing Effective Business Plans, 2nd Edition. Upper Saddle
River, NJ, USA: Pearson Education, Inc. (ISBN10: 1784348864; ISBN13:
9781784348861).

iii. Barringer, R.B., & Ireland D.R., (2018). Entrepreneurship: Successfully Launching New
Ventures, 5th Edition. New Jersey: Prentice Hall (ISBN10: 1292255331; ISBN13:
9781292255330).

iv. King, K. (1996). Jua Kali Kenya: Change and Development in an Informal Economy
1970-1995. Nairobi: East African Education Publication (ISBN10: 0821411578;
ISBN13: 9780821411575).

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 v. Kirby, D.A. (2012). Entrepreneurship. London: McGraw Hill Education (ISBN10:
0077108272; ISBN13: 9780077108274).

vi. Scarborough, M. N. (2015). Essentials of Entrepreneurship and small Business

management, 8th Edition. New York: Pearson Horizon (ISBN10: 0133849627; ISBN13:
9780133849622).

3. Core Journals
i. Academy of Entrepreneurship Journal (ISSN: 1087-9595, Print; ISSN: 1528-2686)
ii. Entrepreneurship Research Journal (ISSN: 2157-5665)
iii. Entrepreneurship Theory and Practice (ISSN: 1540-6520)

4. Recommended Journals
i. Experiential Entrepreneurship Exercises Journal (ISSN: 2374-4200, Print).
ii. International Journal of Entrepreneurship (ISSN: 1099-9264, Print; ISSN: 1939- 4675,
Online).
iii. International Entrepreneurship & Management Journal (ISSN: 1554-7191, Print; ISSN:
1555-1938, Online)

H. Additional Information

1. The course content presented in this course outline is the Lecturer’s estimate of how the course
will proceed. Other than estimated course content and exam, coverage will be appropriately
adjusted.

2. The Lecturer will present analytical material and students will be responsible for presenting the
descriptive and conceptual substance. Final grades will be determined according to the standard
University Scale.

3. Please note that in addition to your text, you will be responsible for all material covered in
Lectures, in class handouts and discussions, assigned articles and readings.

4. Make up Course Work will be arranged only under extraordinary circumstances and
administered at the Lecturer’s discretion only.

5. Feel free to ask questions about the material presented in class and/or readings or references.

6. Attendance in all Lectures is mandatory. You will lose marks for absenteeism.

7. The dates of each examination time and venues will be announced at least one week in advance.

8. E mail address: [email protected] Phone: +254722883878

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MODULE ONE: NATURE AND MEANING OF ENTREPRENEURSHIP

1.1 INTRODUCTION
Interest in Entrepreneurs and Entrepreneurship developed among scholars in the 1980s as a world-
wide movement spreading across countries regardless of level of development or even of their basic
mentality or value orientation towards business activities.

Since the middle of the (18th at least Scholars have deliberated on it and its role in economy and
society (Kirby 2007).

1.2 ENTREPRENEURSHIP DEFINED

§ There is no agreed definition of either what constitutes an entrepreneur or entrepreneurship.
§ Various scholars have been given the definition of entrepreneur, entrepreneurial venture, and
small Business owner.
§ An entrepreneur is an individual who establishes and manages a business for the principal
purpose of profit and growth. An entrepreneur is characterized principally by innovative
behaviour and will employ strategic management practices in the business.
§ An entrepreneurial venture is one that engages in the behaviour of profitability and growth goals
and is characterize by innovative strategic practices.
§ A small Business owner is an individual who establishes and manages a business for the
principal purpose of furthering personal goals.
§ The business must be a primary source of income and will consume the majority of one’s time
and resources. The owner perceives the business as an extension of his or her personality,
intricately bound with family needs and desires.
§ A small Business Venture is any business that is independently owned and operated no dominant
in its field and does not engage in any new marketing or innovative practices.
§ According to Han wood (1982) in Kirby (2003). An entrepreneur is as person who takes
initiative, assumes considerable autonomy in the organization and management of resources,
shares in the asset risk, shares in a uncertain monetary profit, and innovates monetary profit and
innovates in more that marginal way.
§ Meredith et al. (1982)- people who have the ability to see and evaluate business opportunities to
gather the necessary resources to take advantage of them, and to initiate appropriate action to
ensure success.
§ Entrepreneurship according to Wickham (1998) is and managing vision and communicating that
vision to other people. t is about demonstrating leadership motivating people and being effective
in getting people to accept change.
§ Thus, Entrepreneurship is a process of identifying new opportunities and taking risks in order to
make profit.
§ Entrepreneurship is also considered the fourth factor of production i.e. one who manages the
other factors of production.
§ Timmons (1989) in Kirby (2003) looks at entrepreneurship as the ability to create and build
something from practically nothing. It is initiating doing achieving and building an enterprise or
organization rather than just watching analysing on describing one. It’s the chance for sensing an
opportunity where others see Chaos, contradictions and confusion.

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MODULE TWO: THEORIES OF ENTREPRENEURSHIP

2.1 ECONOMIC CONTRIBUTION

a. Classical
b. Neo classical

2.1.1 Classical
Economic contribution made before the latter part of the nineteenth Century. It was referred to as
“Political economy, rather than straight economics.
Several approaches can be identified, and these can be categorized according to country of origin.

2.1.1.1 The American School

Work of Amasa Walker (1999-1875) Role of the Entrepreneurs – Creator of wealth His son
Francis A. Walker (1840-97) Successful entrepreneurs have foresight, a facility for organization
and administration, energy and leadership qualities. He identified 4 types of entrepreneur.
1. The rare, gifted person – has foresight, is firm and resolute and is able to motivate and lead
others.
2. High ordered talent –have a natural mastery, are wise, prompt and resolute.
3. Those that do reasonably well in business are diligent rather than people with genius and
flair.
4. The never do well – those who have misidentified their vocation.
Profit is the return to the entrepreneur for his/her skill, ability or talent.
Hawley (1843-1929) profit is reward to entrepreneur for assuming risks and as a result of his work,
the concepts of risk and uncertainty attracted considerable attention.
All business transitions are carried out in a condition of uncertainty and people who engage in
business, therefore, are entrepreneurs.

2.1.1.2 The Austrian School

Carl Menger (1840-1921) in his works suggested that entrepreneurial activity is about obtaining
information activity in order to make decisions that give rise to economic change. Entrepreneur
faces uncertainty with regard to the quantity and quality of the goods to be produced.
Risks’ bearing is not an essential function of the entrepreneur.

2.1.1.3 The British School

Adam Smith (1723 – 90) and David Ricardo (1972-1823) combined the function of the entrepreneur
with that of the capitalist.
Profits were regarded as the reward for risking capital not for anticipating the future and directing
the business accordingly.
Entrepreneurs invested in their own business according to the demand for their product and were for
their products, which were rewarded accordingly.
Jeremy Bentham (1748-1832) proposed the concept of laissez faire, arguing that there are three key
factors that impinge on production.
1. Inclination (the will to produce wealth).
2. Technical knowledge (the knowledge of how to produce wealth)
3. Capital power (the ability to produce wealth).
Argued that governments could do little through legislation to affect these 3 factors thereby
advocating the laissez-faire approach.

2.1.1.4 The French School

Derived the term “entrepreneur” which came from the word “Enterprendre” meaning” to undertake”
someone who undertakes to make things happen and does them.
Richard Cantillon suggested that the entrepreneur engages in exchange for profit and is someone
who exercises business judgment in the face of uncertainty.

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Distinguished between the capitalist and entrepreneur, Entrepreneur was a risk taker unable to
calculate the risks involved in making decisions but not an innovator in that he was expected to
estimate demand but not to create it.
Baudeau (1730-1792)- Entrepreneur is innovator i.e. he/she invests and applies new techniques in
order to reduce costs and raise profits to achieve this; he recognized that certain qualities – ability
and intelligence – are needed.
Jean Baptiste Say (1767-1832) Entrepreneur is a manager who is required to estimate or forecast
demand and manages factors of production takes risks (risk taker).

2.1.1.5 The German School

• Concentrated on how an entrepreneur is compensated. Thunen (1785-1850)- Distinguished
between the return to the entrepreneur and the return to the capitalists by emphasizing a residual,
which risk.
• Distinguished between a manager and entrepreneur. Entrepreneur takes the problems of the firm
home and is both a risk taker and innovator. His/her return is thus the reward for uninsurable
risks taking and entrepreneurial ingenuity as problem solver and innovator.
• Magoldt (1824 – 58) developed the issue of risk by distinguishing between producing goods to
order or for market. This enables an entrepreneur to focus on the nature of production and the
degree of risk. Where goods are produced to order clearly the risk entailed is reduced. He also
do suggested that the longer the time to sale the greater the uncertainty, implying that the
entrepreneurialism was enhanced.

2.1.2 Neo Classical economics

Glancey and McQuaid (2000:43)- Central principle of neo-classical economies is that the economy
can be modelled as a system in which equilibrium is attainable.
Relates to governments deciding in the resource allocation, free or mixed market economies where
market forces operate. Little scope for entrepreneurship prevails when the system is in equilibrium,
and in early equilibrium models. Entrepreneur was seen as a manager, coordination of three factors
of production (land, labour plus capital). He/she is a superintendent for determining the profit
minimizing level of output for a given set of consumer preferences.
Marshall (1242-1924) in his partial equilibrium model distinguishes those who develop new and
those who are unable to avoid taking risks and those who follow beaten trackers and those who
follow beaten trackers and are given “wages of superintendence”.
Business development also requires:
1. Knowledge of the trade.
2. Technical knowledge
3. Ability to forecast
4. Ability to identify opportunities
5. Cautious judgment
6. Leadership capability
7. Desire to improve performance.
He also said that the job of managing profitable enterprise comprises two important elements.
• Mental strain of organizing plus devising new methods plus anxiety and risk.
• Profits were payment for such services and not merely for the job of super intending the
business.
• Believed that new small firms survive and grow through the process of natural. Selection.
Those with the best ideas learn and improve, though there comes a point in time when a
firm’s ability to do this, declines.
• Knight (1921) advanced on the concept of risks. An entrepreneur played specific
entrepreneurial function in a general equilibrium system. He also distinguished between
insurable and unusable risks and proposed a theory of profit that related non-insurable
uncertainty to rapid economic change and differences in entrepreneurial ability.
• He argued that in situations of risks it was possible to estimate the likely probability of an
event, whereas in cares of uncertainty, this was not possible.
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 • The theory of uncertainty helps establish the bounder between the monger and the
entrepreneur Manager becomes an entrepreneur when the exercise of his/her.
• Judgment is liable to error and he/she assumes the responsibility for its correctness. Thus, he
suggests that an entrepreneur possess the ability to direct others in conditions of uncertainty
that needs:
i) Knowledge and judgment
ii) Foresight
iii) Superior managerial ability
iv) Confidence
According to this theory, entrepreneurial income comprises two parts; a) Wage / Rent for his/her
abilities; and b) Payment for uncertainty bearing.
According entrepreneurs con be found in city type of organization and large organizations are seen
as pools of entrepreneurs.
• Knight (1921) Suggests that one should get to the top of such organizations through ability
of active competition.
• Choice between self-employment to paid employment is determined by relative income that
can be earned from each activity. It’s assumed that individuals will choose self-employment
if they can earn more from it than from paid employment. Hence when attracted into self-
employment than when try are high.
• Von Mises (1881-1972) –Economic decisions involve making choice and coping with future
uncertainties Human action both influences to is influenced by the future. Entrepreneur is
decision taken whose behaviour both influences the future and is influenced by his vision of
it profitability is a consequences of such entrepreneurial behaviour (risks). To him making
decisions about innovative practices is the only one of the decision-making activities of the
entrepreneur.
• Schumpeter (1883-1950) – Deviated from general equilibrium model of neo- classical
economics.
• Quoted by Glancey was someone who implements new combinations of means of portion
(an innovation).
• His theory of economic development entrepreneur’s role is to disturb the status quo (the
general equilibrium) through innovation, innovation takes various forms:
i. Creation of new product.
ii. Development of a new process of production.
iii. Opening up new market
iv. Capturing a new source of supply.
v. Developing a new organization or industry.
• Entrepreneurship is the source of change innovation creates new activities markets. Profit is
a surplus of residual that arises due to an innovative act that result in lower costs on higher
prices.
• Size of surplus is directly attributable to the entrepreneur’s productivity to the surplus
(profit) is both the price and the payment for the servicer rendered by the entrepreneur’ it is
not the reward for risk.

2.1.3 Other Social Sciences Contributions

a) Anthropology
Barth (1963)- Entrepreneurship is a bout connecting two spheres in society between which there
exists a difference in value and transferring value between them.
Theory places emphasis an entrepreneurship as opportunity recognition and stresses that it may
involve challenging some of the basic values in a community.
The theory is used by the western world in stressing that entrepreneurship practices that exist in their
countries can be taught in less developed countries.
Within this school the pull and push factors have been credited with source of entrepreneurship
practice within some societies.

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b) Economic History
In the works of the Multi displaying Research Centre for Entrepreneurial History of Harvard
University in 1948 to 1958, the focus of much of Entrepreneurship was not entrepreneur but the
enterprise and the issues of relationship both within the enterprise, and between this enterprise is
environment. Chandlers (1990) history of industrial corporation relationship scant attention is paid
to the entrepreneurial founders.
The corporations are seen as the drivers of economic growth and entrepreneurship during the 20th
Century, the study of institutions charges and economic performance and the entrepreneur was only
mentioned in passing. Entrepreneur is seen as an agent of charge.

c) Psychology
Entrepreneur is seen as a risk taker, social deviant, internal locus of control and autonomy.
However, such approaches are now or somewhat discredited (Mc Cleland (1961) (n Ach Theory)
This cognitive approach to entrepreneurship suggests that individuals will activate their
entrepreneurial potential if they have a specific ability there and environmental possibilities to their
support.
Hence the suggests that entrepreneurship can be develop through training which is the basic vision
for the various support measures introduced to promote entrepreneurship and small business
development.

d) Sociology
§ Weber (1804-1920) comes up with two Schools i.e. charisma and Protestant (work) ethic.
Charismatic leader is constrained neither by tradition non law and that his/her appeal is the very
fact that he/she undertakes to break the constraints imposed by established customs and roles in
order to bring about change. Charismatic leader is therefore, seen as an innovator whom, others
want to follow. However, in the Capitalist exchange economies the influence of charismatic’
leadership is somewhat constrained as change is due to the activities of enterprise and their
pursuit of profit in the market.
§ In protestant (work) ethic he identified the positive change that took place in public attitudes
towards entrepreneurship after reformation in the western world proposed that Protestantism that
helped in bringing up diligence in working. Protestants were perceived to be more
entrepreneurial than other religions.
§ Calvinists became noted for their moralists’ dedication to work and their willingness to deny
immediate gratification in order to invest effort and wealth in the long-term improvement of
their worldly condition. These attitudes made protestant Europe the locus for the modern
capitalist economy and once such attitude had become accepted not only did it become
legitimate to make money, but society become imbued with a new, more disciplined and
methodical approach to world. For example, Europe Member of Parliament Sir Fredrick Cather
believed that it was the duty of the Christian to use his/her abilities to the limit of his/her
physical and mental ability. He/she cannot relax as soon as a duty to train and develop abilities.
When he/she has mastered one job he/she should not content to administer but should try to
improve and renovate what went wrong. He should not stop until it is quite clear he has reached
his ceiling.
§ Weber also addressed the concept of Bureaucracy as becoming more prevailing both within the
firm, the state as society. Because the entrepreneur is used to assuming responsibility and
making his own decisions, he is not prepared to obey orders or follow procedures. Hence he/she
is the only person who can check the progress of bureaucracy, which he considered as
considerable apprehension.
§ Lipset (2000) – cultural values affect entrepreneurship and economic development. Used North
and Latin American cultures– entrepreneurship is influenced by early Bevian culture that
downgraded manual labour commences and industry. Whereas North American is influenced
more by the protestant ethic of post-reformation Europe with its puritan values and emphasis on
work and money making as a vocation in God’s honour. Thus, a scholarly humanities education
+ landed property became the mark of success in Latin America.

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§ Prosperity for entrepreneurship in the different sectors of the society, Mertin (1968) is an event
that link between entrepreneurship and crime. It’s argued that in those societies where there is a
strong emphasis on economic success, and few means through which the average person can
achieve it there is often an increase in deviancy and crime.

2.2 MYTHS OF ENTREPRENEURSHIP

Myth 1: Entrepreneurs Are Doers, Not Thinkers
Myth 2: Entrepreneurs Are Born, Not Made
Myth 3: Entrepreneurs Are Always Inventors
Myth 4: Entrepreneurs Are Academic and Social Misfits
Myth 5: Entrepreneurs Must Fit the “Profile”
Myth 6: All Entrepreneurs Need Is Money
Myth 7: All Entrepreneurs Need Is Luck
Myth 8: Ignorance Is Bliss For Entrepreneurs
Myth 9: Entrepreneurs Seek Success But Experience High Failure Rates
Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers)

2.3 SCHOLARS VIEWS ON ENTREPRENEURSHIP

• Adam Smith (1776) – An entrepreneur is a person who acts as agent in transforming demand
into supply.
• Jean Baptiste Say (1803) – An entrepreneur is a person who shifts resources from an area of
low productivity to higher productivity.
• John Stuart Mill (1848) – An entrepreneur is a prime mover in the private enterprise. The
entrepreneur is the
fourth factor of production. Others include land, labor and capital.
• Carl Menger (1871) – The entrepreneur acts as an economic agent who transforms resources
into products and
services. These transformation processes gives added value to the output.
• Joseph Aloysius Schumpeter (1934) – The entrepreneur is an innovator. The economy moves
through leaps
and bounds because of the innovations. This process is known as “creative destruction”
• Alfred Marshall (1936) – The process of entrepreneurship development is evolutionary. The
entrepreneur is
responsible for the evolution of sole proprietorships into a public company.
• David C. McClelland (1961) – The entrepreneur is a person with a high need for achievement.
This need for
achievement is the foundation of the entrepreneurship process.

MODULE THREE: ENTREPRENEUR

3.1 INTRODUCTION
• An entrepreneur is one who creates a new business in the face of risk and uncertainty for the
purpose of achieving profit and growth by identifying significant opportunities and
assembling the necessary resources to capitalize them.
• Entrepreneurs have many of the same character traits as Leaders. Similarly to the early great
man theories of leadership; however trait-based theories of entrepreneurship are increasingly
being called into question.
• Entrepreneurs are often contrasted with managers and administrators who are said to be
more methodical and less prone to risk-taking. Such person-centric models of

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 entrepreneurship have shown to be of questionable validity, not least as many real-life
entrepreneurs operate in teams rather than as single individuals.
• Still, a vast but now clearly dated literature studying the entrepreneurial personality found that
certain traits seem to be associated with entrepreneurs:

• David McClelland (1961) described the entrepreneur as primarily motivated by an

overwhelming need for achievement and strong urge to build.
• Collins and Moore (1970) studied 150 entrepreneurs and concluded that they are tough,
pragmatic people driven by needs of independence and achievement. They seldom are
willing to submit to authority.
• Bird (1992) sees entrepreneurs as mercurial, that is, prone to insights, brainstorms,
deceptions, ingeniousness and resourcefulness. They are cunning, opportunistic,
creative, and unsentimental.
• Busenitz and Barney (1997) claim entrepreneurs are prone to overconfidence and over
generalisations.

Entrepreneurs cannotes the following aspects that describe their profile:

a) Desire for responsibility: Entrepreneurs feel a deep sense of personal responsibility for the
outcome of the business they start. They prefer to be in control of their resources, an they use
those resources to achive self determined goals.
b) Preference of moderate risk: Entrepreneurs take moderate risk to ensure that their businesses
succeede.
c) Confidence in their ability to succeede: Entrepreneurs typically have an abundance of
confidence in their ability to succeede and are confident that they choose the correct career path.
d) Desire for immediate feedback: Entrepreneurs enjoy the challenge of running a business and
they like to know how they are doing and are constantly looking for feedback.
e) High level of energy: Entrepreneurs are more energetic than the average person. That energy
may be a crirtical factor given that incredible effort required to launch a start up firm. They work
for long hours to ensure their businesses succeede.
f) Future orientation: Entrepreneurs have a well defined sense of searching for opportunities.
They look ahead and are less concerned with what they did yesterday than what they might do
tomorrow.
g) Skill at organizing: Entrepreneurs should know how to organize resources in their firms. These
resources include financial, human, physical etc.
h) Value of achievement over money: Entrepreneurs experience joy of creating, getting things
done, or exercising one’s energy and ingenuity and not only money.
i) High degree of commitment; Entrepreneurship is hard work, and launching a firm successfully
needs total commitment from entrepreneurs.
j) Tolerance of ambiguity: Entrepreneurs tend to have a high tolerance of ambiguous ever
changing situations, the environment in which they most operate. This ability to handle
uncertainty is critical because these business builders constantly make decesions using new,
sometimes conflicting information obtained from a variety of unfamiliar sources.
k) Flexibility: Entrepreneurs should respond to changing demands of their customers and their
businesses.
l) Tenacity: Obstacles, obstructions and defeat typically do not dissuade entrepreneurs from
doggedly pursuing their visions. They simply keep trying.

3.2 CLASSIFICATION OF ENTREPRENURS

3.2.1 Social Entrepreneurship

Origin – past history origin from the need for social and economic needs. Clancy and McQuiaid
(2000) changing causes + native of social problems requires much innovative thinking +
entrepreneurial action.
Bolton and Thompson (2000:122)
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Nation’s welfare system does not and cannot or will not meet such needs. Innovative solutions are
required that involve.
a) Generating and acting on new ideas.
b) Providing new services in different ways.
c) Creating new organization or ways of delivery services.
Social Entrepreneurship converts on social and not commercial outputs. It is characterized by non-
profit motive and wealth motive, long-term capacity building sunder utilization of the resources
(boss 1999)

3.2.2 Civil Entrepreneurship

§ Works of Drucker (1985, 2001) Public service institutions need to be entrepreneurial and
innovative fully as much as any business does.
§ Adopted by Mary governments have begun to recognize the need for change in the way public
services are resourced organized + managed.
§ Need to be innovative create new culture after charge in order to dismantle dysfunctional old
truths and to prepare people and organizations to deal with changes.
§ Lenders should develop a vision for organization and ensuring it is understood communicated
and shared and to ensure that all staff are involved and empowered to take initiatives aimed at
ensuring that services delivery best meets the needs of the consuming public

3.2.3 Other Classification

Other scholars have diversified entrepreneurship further as follows:
Lessem (1986) suggests various types of entrepreneur resulting from how the various personality
traits combine. He identifies 7 entrepreneurial types.

S/NO Entrepreneurship Type Personality Type Attributes

.
1 Innovator Imagination - Originality
(Sir Terance Convan) - Inspiration
- Love
- Transformation
2 New Designer/Enabler Intuition - Evaluation
(Mary Quant) - Development
- Symbiosis
- Connection
3 Leader Authority - Direction
(Sir John Harvey Jones) - Responsibility
- Structure
- Control
4 New Entrepreneur Will - Achievement
(Jack Danyoor) - Opportunity
- Risk taking
- Power
5 Animator Sociability - Informality
(Nell;Eichner) - Shared values
- Community
- Culture
6 Adventurer Energy - Movement
(Anita Roddick) - Work
- Health
- Activity
7 Change Agent Flexibility - Adaptability
(Stere Shirley) - Curiosity
- Intelligence
12
Clarence Danhof in his study classified entrepreneurs as follows:
1. Innovating entrepreneurs- introduces new goods, new methods of production, new markets, new
organizations and new channels of distribution 

2. Imitating entrepreneurs- adopt successful innovation by innovating entrepreneurs. 

3. Fabian entrepreneurs- entrepreneurs who imitate when it is necessary.
4. Drone entrepreneurs- entrepreneurs who refuse to adopt opportunities to make changes in
production techniques even with reduction of cost.
Developing countries have diversified entrepreneurs as follows:
a) Micro
b) Small
c) Medium
d) Large

By these entrepreneurial types

§ Smith (1967) – 3 types of entrepreneur – craftsmen, opportunities and inventors
§ Archetypal crafts person – a loner who values his/her independence and whose social and
commercial links are limited.
§ Opportunist possess considerable self-confidence has an outgoing cosmopolitan personality and
is concerned more with the market than with production.
§ Chell et al (1991) drawing on an analogy from the biological. Classification system has
suggested that within the family’ of business owners it’s possible to distinguish between the
entrepreneurial intentions of those members of the family + to identify for different species:
entrepreneur, quasi entrepreneur, administrators + caretakers.
§ Prototypical caretaker – has little strategic focus and little or no desire to grow or change the
business.
§ Business owned by prototypical entrepreneur is typified by growth and change.
§ These differences between those business owners who wish to grow their business possess
entrepreneurial intention) and those for whom self-employment is a way of life that enables them
to fulfil their own personal goals (or non-entrepreneurial intentions) appears to have acquired
quite widespread support. These form the basis for several of the various typologies that have
been developed over the years.
§ Young entrepreneurs (Millenial generation or generation Y) who are in their early 20’s
§ Women entrepreneurs
§ Minority entrerprises (Minority owned enterprises that include those owned by Asians, Arabs,
Somalis in Kenya)
§ Immigrant entrepreneurs
§ Parttime entrepreneurs
§ Home based entrepreneurs
§ Family businesses
§ Copreneurs
§ Intrapreneurs and Corporate entrepreneurs.

This literature gives us the main psychological characteristics of entrepreneurs would appear to be:
1. Risk taking ability
2. Need for achievement (n ache)
3. Locus of control
4. Desire for autonomy
5. Delicacy
6. Creativity + opportunism
7. Intuition

3.3 BENEFITS OF ENTREPRENEURSHIP

• Opportunity to create your destiny: Owning a business provides entrepreneurs the
independence and the opportunity to achieve what is important to them.

13
• Opportunity to make a difference: Increasingly, entrepreneurs are starting business because
they see an opportunity to make a difference in a cause that is vital to them. Social entrepreneurs
are business builders who seek innovative solutions to some of society’s most critical problems.
• Opportunity to reach your full potential: Those people who find their work boring,
unchallenging and unexciting, opt for entrepreneurship to do things on their own.
• Opportunity to reap impressive profits.
• Opportunity to contribute to the society and be recognized for your efforts.
• Opportunity to do what you enjoy and have fun at it.
• Self employment.
• Affording high quality goods as a result of competition.
• Use of modern technology.

3.4 DRAWBACKS OF ENTREPRENEURSHIP

• Uncertainty of income
• Risk of loosing your entire investment through losses
• Long hours and hard work
• Lower quality of life until the business gets established
• High levels of stress
• Complete responsibility
• Discouragement
• Lack of viable concept
• Lack of market
• Lack of skills
• Social stigma
• Legal constraints and regulations
• Inhibitions due to patents
• Infrastructure problems.

3.5 WHAT IS FEEDING THE ENTREPRENEURIAL FIRE

These refers to forces that are driving the entrepreneurial trend in the economy. Specifically these
are factors that have led to the age of entrepreneurship.
a) Entrepreneurs are heroes. Perseption or attitude people have towards entrepreneurs.
Normally entrepreneurs are raised to the level of the heroes, such as Bill Gates (Microsoft
Corporation), Oprah Winfrey (Harpo Productions and Oxygen Media), Jeff Bezos
(Amazon.com), Steve Jobs (Apple), Kenyatta (Brookeside Milk), Vimal Shah (Bidco).

b) Entrepreneurial education. Higher insitutions of learning have discovered that

entrepreneurship is an extremely popular course of study. Many students enroll in these
institutions knowing that they want to initiate their ventures rather than considering
entrepreneurship as posibility later in life.

c) Demographic and economic factors such population, age, gender etc. Nearly two thirds of
entrepreneurs start their business between the ages of 25 and 45 years, which is the largest in
many countries. In addition, the economic growth that spanned most of the last 25 years created
a significant amount of wealth among people of this age group and many business opportunities
on which they can capitalize.

d) Shift to a service economy. A sharp rise in the service based industries because of their
relatively low start up costs, they have become very popular among entrepreneurs. The booming
service sector continues to provide many business opportunities, from health care and computer
maintenance to Mpesa shops and mobile phone repairers.

14
e) Technology advancements. With the help of modern business machines such as lap top
computers, personal computers, copiers, colour printers, answering machines and voice mails,
even one person working at home can look like a big business.

f) Independent lifestyle. Many people want the freedom to choose where they live, hours to
work, and what they want to do.

g) E-Commerce and the world wide web. The proliferation of the world wide web (www), the
vast network that links computers around the globe via the Internet and opens up oceans of
information to its users, has spawned thousands of entrepreneurial ventures since its
commencement in 1993. Online retail sales have grown rapidly.

h) International opportunities. The shift to a global economy has opened the door to tremendous
business opportunities for entrepreneurs willing to reach across the globe. The emergence of
potential markets across the globe and crumbling barriers to international business because of
trade agreements have opened the world to entrepreneurs who are looking for new customers.

3.6 FUNCTIONS OF AN ENTREPRENEUR

An entrepreneur does perform all the functions important right from the genesis of an idea until the
establishment of an enterprise. These can be listed in the following sequential manner:
a) Idea generation and scanning of the best suitable idea
b) Determination of the enterprise objective
c) Commodity analysis and market research
d) Determination of the form of the ownership of business
e) Completion of promotional formalities
f) Raising necessary funds
g) Procuring raw materials and machines
h) Recruitment of staff
i) Undertaking the enterprise operations
j) Upgrading process and commodity quality
k) Introduction of new production techniques and commodities
l) Management of customer and supplier relations
m) Dealing with the public bureaucracy.

Modern scholars of entrepreneurship have categorised the above functions into three categories
a) Innovation
b) Risk taking and uncertainty bearing
c) Organization and management of enterprise so as to have leadership and control over it.

3.7 ROLE OF ENTREPRENEUR IN ECONOMIC DEVELOPMENT

Economic development of a country is the outcome of purposeful human activity. In most
developed counties, industrialization has been known to contribute to the high growth of the
economy. Most of these industries have emerged as a result of entrepreneurship. Entrepreneurship
contributes significantly to economic growth of any country in the following areas:
a) Employment Generation
b) Source of foreign exchange
c) Effective utilisation of domestic resources
d) Nurturing new entrepreneurs
e) Equitable distribution of income and wealth
f) Linkages and networking among industries
g) Competition
h) Development of new markets
i) Discover new sources of materials
j) Mobilize capital resources
k) Introduce new technologies, new industries and new commodities.
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MODULE FOUR: ENTREPRENEURSHIP PROCESS

4.0 INTRODUCTION

Process through which a new venture is created and established by an entrepreneur. An entrepreneur
should identify and evaluate a business opportunity to create a new venture. Business opportunity
must be translated into concrete terms by setting up and managing the business unit to achieve the
desired objectives. It is against this, that an enterprise has to undergo stages called entrepreneurial
process.

4.1 STAGES OF ENTREPRENEURIAL PROCESS

The stages of entrepreneurial process include the following:
a) Identification of business opportunity
b) Evaluation of opportunities
c) Selection of best opportunity
d) Decision on location
e) Develop a business plan
f) Determine the resources required
g) Manage the enterprise
h) Periodicreview

4.1.1 Identification of a Business Opportunity

4.2.1.1 Business Ideas/ Opportunities

• A business idea is the response of a person or persons, or an organization to solving an identified
problem or to meeting perceived needs in the environment (markets, community, etc.). Finding a
good idea is the first step in transforming the Entrepreneur’s desire and creativity into a business
opportunity. Two things should however be noted:
a. Although it is a prerequisite, a business idea is only a tool;
b. An idea by itself, however good, is not sufficient for success.
• In other words, notwithstanding its importance, an idea is only a tool that needs to be developed
and transformed into a viable business opportunity.
• A business opportunity may be defined simply as an attractive investment idea or proposition
that provides the possibility of a return for the person taking the risk. Such opportunities are
represented by customer requirements and lead to the provision of a product or service that
creates or adds value for its buyer or end-user.
• However, a good idea is not necessarily a good business opportunity. For example, you may
have invented a brilliant product from a technical point of view and yet the market may not be
ready for it (read Samantha). Or the idea may be sound, but the level of competition and the
resources required may be such that it is not worth pursuing.
• Sometimes there may even be a ready market for the idea, but the return on investment may not
be acceptable. To underscore the point further, consider the fact that over 80% of all new
products fail. Surely, to the inventors or backers the idea seemed a good one, yet clearly it could
not withstand the test of the market. It is therefore important for all ideas and opportunities to be
well screened and assessed. Identifying and assessing business opportunities is not an easy task.
Yet it is necessary to minimize the risk of failure. It involves, in essence, determining risks and
rewards/returns.
• So, what turns an idea into a business opportunity? A simplified answer is when income exceeds
costs = profit. In practice, to be comprehensive you need to examine the factors listed and
illustrated below

4.2.1.2 Why Should you Generate Business Ideas?

There are many reasons why entrepreneurs or would-be entrepreneurs need to generate business
ideas. Here are just a few:

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i. You need an idea – and a good one at that – for business. As indicated earlier, in looking at the
rationale for this topic, a good idea is essential for a successful business venture – both when
starting a business and to stay competitive afterwards.

ii. To respond to market needs. Markets are made up essentially of customers who have needs
and require their wants to be satisfied. Those people or firms that are able to satisfy these
requirements are rewarded.

iii. Changing fashions and requirements provide opportunities for entrepreneurs to respond to
demand with new ideas, products and services.

iv. To stay ahead of the competition. Remember, if you do not come up with new ideas, products
and services, a competitor will. The challenge is to be different or better than others.

v. To exploit technology – do things better. Technology has become a major competitive tool in
today’s markets, with the rate of change forcing many firms to innovate. There are several
companies in the world, operating in the electronics and home appliances industries, which come
up with dozens of new products every month. For these and many others in today’s global
markets, generation of business ideas is crucial.

vi. Because of product life cycle. All products have a finite life. As the product life cycle chart
shows, even new products eventually become obsolete or outmoded. Thus, there is a need to
plan for new products and the growth of these. The firm’s prosperity and growth depend on its
ability to introduce new products and to manage their growth.

vii. To spread risk and allow for failure. Linked to the product life cycle concept is the fact that
over 80 per cent of new products fails. It is therefore necessary for firms to try to spread their
risk and allow for failures that may occur from time to time by constantly generating new ideas.

4.2.1.3 Sources of Business Ideas

There are millions of entrepreneurs throughout the world and their testimonies suggest that there are
many potential sources of business ideas. Some of the more useful ones are outlined below.

a) Training, Personal Skills and experience

Over half of the ideas for successful businesses come from experiences in the workplace, e.g. a
mechanic with experience in working for a large garage who eventually sets up his/her own car
repair or used car business. Thus, the background of potential entrepreneurs plays a crucial role in
the decision to go into business as well as the type of venture to be created. Your skills and
experience are probably your most important resource, not only in generating ideas but also in
capitalizing on them.
i. What training and experience have you had?
ii. What businesses have been started in your area of training? Make a list of them
iii. What businesses could you start in your area of training? List as many as possible.
iv. Could you list ways in which you could improve some of the businesses you have listed in (b)?

b) Hobbies
A hobby is a favourite leisure-time activity or occupation. Many people, in pursuit of their hobbies
or interests, have founded businesses. If, for example, you enjoy playing with computers, cooking,
music, traveling, sport or performing, to name but a few, you may be able to develop it into a
business. To illustrate this, if you enjoy traveling, performing and/or hospitality, you may consider
going into tourism – which is one of the biggest industries in the world.
i) Do you have any hobbies or special interests? List them
ii) List as many businesses as possible that are based on your hobbies or interests. For example,
a gardener sells potted plants and flowers.

17
 c) Franchise
A franchise is an arrangement whereby the manufacturer or sole distributor of a trademark, product
or service gives exclusive rights for local distribution to independent retailers in return for their
payment of royalties and conformity to standardized operating procedures. Franchising may take
several forms, but the one of interest is the type that offers a name, image, method of doing business
and operating procedures e.g. “Kengeles” is a franchise name that was registered in Kenya by Bell,
the current CEO of Africa Franchise.

Apart from buying a franchise, one can also develop and sell a franchise concept. There are many
directories and handbooks as well as associations, including the International Franchise Association,
which can provide further information.
.
d) Exhibitions
Attending shows, exhibitions and any other fairs will expose you to innovative products and
services that you could easily turn into a business idea. By visiting such events regularly, you will
not only discover new products and services, but you will also meet sales representatives,
manufacturers, wholesalers, distributors and franchisers. These are often excellent sources of
business ideas and information that will help in getting started. Some of them may also be looking
for someone just like you.

e) Surveys
The focal point for a new business idea should be the customer. The needs and wants of the
customer, which provide the rationale for a product or service, can be ascertained through a survey.
Such a survey might be conducted informally or formally by talking to people

i) Informal Survey
Personal Contacts
• When you next meet a friend or an acquaintance or relative, try to find out what they have
observed about people’s needs and what sort of opportunities they have noticed. Try to keep note
of problems that they may mention. It is people’s needs and the problems they face that supply
you with opportunities.
• Make a note for every person you meet in a format such as the one below:
People’s needs mentioned ---------------------------------------------------------------------------
Business ideas mentioned ---------------------------------------------------------------------------
People’s problems mentioned ---------------------------------------------------------------------------

Can you find ways of converting needs into business opportunities?

Observation
• Besides talking to people, you could also get information through observation. For example, in
deciding whether to open a shop on a particular street, you can observe and count the number of
people going past on given days and compare these to other sites. Or, if you are interested in an
area frequented by tourists, you may be able to set up or market products from a craft business.
Or you may have noticed that there is no decent restaurant or hotel on a tourist route or in a
given town.
• Observing what goes on around you, the problems people face, their aspiration, their needs, and
thinking about ways of doing things better can offer a large number of ideas. Try to develop
sensitivity for people’s discomforts, needs and others many businesses are started to supply
comforts and satisfy needs
Go out into the community and;
a. Identify businesses operating there. Make a list of them;
b. Identify and list unmet needs
c. Identify ways in which these businesses could be improved.

18
ii) Formal Surveys
Questionnaire
• You may start by talking to your family and friends to find out what they think is needed or
wanted that is not available. Or, for example, whether they are dissatisfied with an existing
product or service and what improvements or changes they would like to see. You can then
move on and talk to people who are part of the distribution chain, which is manufacturers,
wholesalers, distributors, agents and retailers. It would be useful to prepare beforehand a set of
questions, which might be put on a questionnaire or used in an interview. Given their close
contact with customers, channel members have a good sense of what is required and what will
not sell.

Interviews
• Shortcomings in existing business can be identified through interviews. You should talk to as
many customers as possible – both existing and potential customers. The more information you
can get from them, the better.
• One way of ensuring that you are not negligent in this area is to be alert at all times to the needs
and opportunities to do business. One entrepreneur apparently went round at every cocktail party
asking if anyone was using a product that did not adequately fulfil its intended purpose. Another
monitored the toys of a relative’s children looking for ideas for a market niche.
• Surveys are very important to help you decide whether the idea is worthwhile. A survey is used
to answer questions like:
i. What do the people need?
ii. When do they need it?
iii. Why do they need it?
iv. Which people need it?
v. Who decides what is to be bought?

f) Complaints
• Complaints and frustrations on the part of customers have led to many a new product or service.
Whenever consumers or customers complain bitterly about a product or service, or when you
hear someone say, “I wish there was...” or “If only there were a product/service that could....”,
you have the potential for a business idea. The idea could be to set up a rival firm offering a
better product or service, or it might be a new product or service, which could be sold to the firm
in question and/or to others.

g) Brainstorming
• Brainstorming is a technique for creative problem solving as well as for generating ideas. The
object is to come up with as many ideas as possible. It usually starts with a question or problem
statement. For example, you may ask “What are the products and services needed in the home
today which are not available?” Each idea leads to one or more additional ideas, resulting in a
good number.

When using this method, you need to follow these four rules:
i. Don’t criticize or judge the ideas of others. Group members will tend to talk less if this
happens. This means fewer ideas will be expresses. The group leader should discourage
phrases such as: “that’s a dumb idea.”

ii. Freewheeling is encouraged – ideas that seem to be wild or crazy are welcome. The wider
the range of ideas, the better. It is easier to tame down a wild idea than it is to think up
another one.
iii. Quantity is desirable – the greater the number of ideas, the better the chance of getting
good ones. The axiom is, “quantity helps breed quality.”

19
 iv.Combine and improve upon the ideas of others. Group members should state their ideas.
They should also suggest how the ideas of others could be turned into better ideas.
Sometimes two or three ideas could be integrated to form another idea.
Furthermore, all ideas, no matter how seemingly illogical or crazy, must be recorded.

h) Mass Media
• The mass media is a great source of information, ideas and often opportunity. Newspapers,
magazines, television, and nowadays the Internet are all examples of mass media. Take a careful
look, for example, at the commercial advertisements in a newspaper or magazine and you may
well find businesses for sale. Well, one way to become an entrepreneur is to respond to such an
offer.
• Articles in the printed press or on the Internet or documentaries on television may report on
changes in fashions or consumer needs. For example, you may read or hear that people are now
increasingly interested in healthy eating or physical fitness.
• You may also find advertisements calling for the provision of certain services based on skills, for
example accounting, catering or security. Or you may discover a new concept for which
investors are required, such as a franchise
• Read stories or advertisements in several issues of newspapers, magazines and journals and
identify five different businesses that interest you. In the space below, list the five businesses
and tell why you selected each:

Types of business Why are you interested in it?

a) ------------------------------------- ---------------------------------------------
b) ------------------------------------ ---------------------------------------------

i) Resources
If you find the following resources and wastes, e.g. minerals, agricultural, marine and other natural
resources may signify the presence of a business opportunity.

j) Linkages
The presence of manufacturing concerns may indicate possibility of business opportunity in supply
of ingredients or distributing the products from those concerns.

k) Export oriented/import substitution products

In a given area there is a possibility of some items either being imported from other countries or of
items that would possibly be exported to other countries. Such items offer excellent opportunities to
promote enterprises based in exports and imports. Between the two, import substitution items make
more attractive enterprises. In such cases not only special incentives are available but the market is
already established.

l) Special products
You may see business opportunities existing in research and invention-based products and
skill/knowledge- based products.

m) Service Sector
This includes household repair and maintenance and service establishments cater to industrial and
household needs.

n) Research and Development

This is the largest source of new ideas through one own effort which can be formal endeavour
contacted with one’s current employment or an informal laboratory in the business.

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o) Focus Group
This is a group of individuals providing information in a structured format. A moderator leads a
group of people through an open, in depth discussion rather than simply asking questions to solicit
participant response. For a new product area, the moderator focuses discussion of the group in
either a directive or nondirective manner. The group of 8 to 14 participants is stimulated by
comments from other group members in creatively conceptualizing and developing a new product
idea to fill a market need.

p) Problem Inventory
This is a method for obtaining new ideas and solutions by focusing on the problems. Consumers are
provided with a list of problems in a general product category. They are then asked to identify and
discuss products in this category that have the particular problem. The method is highly preferred
because it is easier to relate known products to suggested problems and arrive at a new product idea
than to generate an entirely new product idea by itself.

4.2.1.4 Creative Problem Solving

Creativity is an important attribute of a successfully entrepreneur. Creativity can be un-locked and
creative ideas and innovations generated by using any of creative problem- solving techniques
discussed below.

a) Brainstorming
In this method, creative problem- solving method is applied which is a method for obtaining new
ideas focusing on parameters.

b) Reverse Brainstorming
This is a group method for obtaining new ideas focusing on the negative. Criticism is allowed in
when discussing an idea. The technique is based on finding fault by asking the question. The
process in this method involves finding out of everything wrong with an idea, followed by a
discussion of ways to overcome these problems.

c) Brainwriting
This is a form of written brainstorming in which participants are given more time to think than
brainstorming sessions, where ideas are expressed spontaneously. It is a silent, written generation of
ideas by a group of people. Participants write their ideas on special forms or cards that circulate
within the group, which usually consists of six members.

d) Gordon Method
This is a method for developing new ideas when the individuals are unaware of the problem.
Members are not aware of the problem to ensure that the solution is not clouded by preconceived
ideas and behavioural patterns. The entrepreneur starts by mentioning a general concept associated
with the problem. The group responds by expressing a number of ideas. Then a concept is
developed, followed by related concepts, through guidance by the entrepreneur. The actual problem
is then revealed, enabling the group to make suggestions for implementation or refinement of the
final solution.

e) Checklist Method
This is a method of developing a new idea through a list of related issues. The entrepreneur can use
the list of questions or statements to guide the direction of developing entirely new ideas or
concentrating on specific idea areas.

f) Free Association
In this method, an entrepreneur develops a new idea through a chain of word associations. This
technique is helpful in developing an entirely new slant to a problem. A word or phrase related to
the problem is written down, then another and another, with each new word attempting to add

21
something new to the ongoing through process, thereby creating a chain of ideas ending with a new
product emerging.

g) Forced Relationships
This is the method of developing a new idea by looking at product combinations. It is a technique
that asks questions about objects or ideas in an effort to develop a new idea. The new combination
and eventual concept is developed through five steps namely, 1) Isolate the elements of the problem;
2) Find the relationships between these elements; 3) Record the relationships in an orderly form; 4)
Analyse the resulting relationships to find ideas or patterns; 5) Develop new ideas from these
patterns.

h) Collective Notebook Method

In this method, group members develop new idea regularly through recording ideas in a small
notebook that easily fits in a pocket containing statement of the problem, blank pages and any
pertinent background data is distributed. Participants consider the problem and its solutions,
recording ideas at least once, but preferably three times, a day. At the end of the week, a list of the
best ideas is developed, along with any suggestions.

i) Attribute Listing
This is the method of developing a new idea by looking at the positives and negatives. It an idea
finding technique that needs the entrepreneurs to list the attributes of an item or problem and the
look at each from a variety of viewpoints. Through this process originally unrelated objects can be
purchased together to form a new combination and possible new uses that better satisfy a need.

j) Big Dream Approach

This method entails developing a new idea by thinking without constraint. In this approach an
entrepreneur is required to dream about the problem and its solution, in other words, think big.
Every possibility should be recorded and investigated without regard to all, the negative involved or
the resources required. Ideas should be conceptualized without any constraints until an idea is
developed into a workable form.

k) Parameter Analysis
This is the method of developing a new idea by focusing on parameter identification and creative
synthesis. Step one involves (parameter identification) involves analysing variables in the situation
to determine their relative importance. These variables become the focus of the investigation, with
other variables being set aside. After the primary issues have been identified, the relationships
between parameters that describe the underlying issues are examined. Through an evaluation of the
parameters and relationships, one or more solutions are developed; this solution developed is called
creative synthesis.

4.2.2 Screening and Evaluating a Business Idea

4.2.2.1 Screening a Business Idea

Ideas and opportunities need to be screened and assessed for viability once they have been identified
or generated. This is not an easy task, and yet at the same time it is so important. It can make the
difference between success and failure, between making a fortune and losing everything you had.
Whilst the exercise does not guarantee success – but then nothing in this world does, except Divine
intervention – it certainly helps in minimizing the risk and thus the odds for failure. Identifying and
assessing business opportunities involves, in essence, determining risks and rewards/returns
reflecting the following factors:
a) Industry and Market
Is there a market for the idea? Are there any customers – people with money who are able and
willing to buy the product or service? Can you provide what they need or want? How many are
there? The key question to be answered here is whether there is a market for the idea. A market in

22
this context consists of customers – potential or actual – with needs and wants, who have the ability
to purchase your intended product or service and who are willing or predisposed to exercising that
choice. Thus, there is also a need to consider whether what the customer wants can be provided at
the right price, in the right place, and in a timely manner.

Another important consideration here is the size of the market and the growth rate of the industry.
The ideal situation is a market that is large and growing – where getting even a small market share
can represent a significant and increasing volume of sales.

For this exercise, the would-be entrepreneur needs to gather information. If some potential
entrepreneurs are tempted to think that is too much hard work, they might take some comfort from
the saying that the data available about markets (size, characteristics, competitors etc.) is often
inversely related to the real potential of an opportunity. In other words, if market data is readily
available and if the data clearly shows significant potential, then it is likely that a large number of
competitors will enter the market and the opportunities will diminish. There are several sources of
published information (also called secondary information), including good libraries, chambers of
commerce, investment promotion centres, government ministries, universities, foreign embassies,
the Internet, newspapers, and so on.

In addition to the above, there is often the need to collect information at the source (also called
primary research) by interviewing people, for example customers and suppliers. In that case, you
will need to design the research methodology.

b) Length of the ‘Window of Opportunity’. Can you create or seize the opportunity whilst it
lasts? Opportunities are said to have a ‘window.’ That is, they do exist, but they do not remain open
forever. Markets grow at different rates over time, and as a market gets bigger and better
established, conditions are not as favourable. Timing is therefore important. The issue then is to
determine the length of time the window will be open, and whether the opportunity can be created or
seized before the window closes.

c) Personal Goals and Competencies of the Entrepreneur. Do you really want to venture
into the business? Do you have what it takes? Are you motivated enough? An important question
for anyone venturing into business is whether they want to undertake that particular venture.
Personal motivation is an essential attribute of successful entrepreneurship. Thus, unless a person
really wants to do that kind of business, he or she should not venture into it.

A related question is whether the potential entrepreneur has the necessary competencies (including
the knowledge, skills and abilities) for the requirements of the business and, if not, whether they
could be brought in. Many small business owners/managers have entered into business based on the
strengths of their skills.

When the above aspects are combined, the issue then becomes one of whether there is a good fit or
match between the requirements of the business and what the owner wants or desires. This is
important not only for success, but also for the entrepreneur’s happiness. As the saying goes,
“Success is getting what you want; happiness is wanting what you get.”

d) Management Team. Who else will be involved with you in the business? Do they have the
experience, know-how, contacts or other desirable attributes required? In many ventures,
particularly those involving a large amount of capital, high risk, sophisticated markets and/or high
competition, the management team is usually the most important dimension in determining
attractiveness. The experience and skills of the team in the same or a similar industry, technology
and market often determine success or failure. This explains why venture capitalists (or people who
provide finance for businesses) put so much emphasis on the management factor, and they often say

23
that they would rather have good management with an average idea/product/service than a brilliant
idea/product/service with bad management.

e) Competition. Who are your competitors? Do you have something customers want that your
competitors do not have? For example, can you produce or market at lower costs? To be attractive,
an opportunity must have certain competitive advantages. These could be lower costs in terms of
production and marketing, for example. Or better quality. In addition, the availability of entry
barriers – which could take the form of high amounts of capital required, protection such as patents
or regulatory action, contractual advantage such as exclusive rights to a market or with a supplier –
can make the crucial difference between a ‘go’ and ‘no go’ investment decision. In other words, if a
firm cannot keep most would-be competitors out of its market, or if it faces existing entry barriers,
then the opportunity will hardly be attractive.

f) Capital, Technology and Other Resource Requirements. How much capital, technology
or other resources are required? Do you already have capital? or could you get them? The
availability and access to capital, technology and other resources such as skills determine whether
certain opportunities can be pursued and to what extent. As a general rule, the more difficult the
requirements are in this area, the more attractive the proposition provided of course that there is a
market for the idea/product/ service. To give an example, whilst marketing a breakthrough product
based on a patented technology is no guarantee of success, it certainly creates a formidable
competitive advantage.

g) Environment: The surrounding of the business, a place occupied by the business and it has
an effect on the business activities. These are elements residing outside of a business boundary that
have the potential to affect some or all of the activities happening in the business. Are the political,
economic, physical, competitive, political, legal, and regulatory, technological and social cultural
environmental contexts favourable? The environment within which the business will operate has a
profound influence on the attractiveness of any opportunity. Political; legal and regulatory
environment, include laws and regulations passed by the government. Lack of proper institutions
may affect value chain related businesses, instability, for example, renders business opportunities
unattractive in many countries – especially for those ventures requiring high investment with a long
payback period. High taxation and long business registration procedures may encourage illegal
business practices. Economic environment has factors that are related to economic activities. These
are interest rates, inflation rates, and money supply. High inflation and exchange rate fluctuations or
a weak judiciary system do not augur well for investments, even if the returns are high or
devaluation of currency may affect import and export of the business. Physical environment
includes the infrastructure of the business. The lack of availability of infrastructure and services
(such as roads, electricity, water supply, telecommunications, transportation, and even schools and
hospitals) also affect the attractiveness of an opportunity in a given area. Similarly, poor
infrastructure may increase cost of production with its adverse outcomes. Competitive environment
has various market structures the business has to compete with. Unregulated competition may stifle
progress for the business. Technological environment comprises of hardware and software
technologies affecting the business. Inappropriate technologies may retard business development.
Finally, social cultural environment contains factors that are related to the demographics and cultural
aspects of people. Some social and cultural norms may negatively impact on the business. For
example, if Christianity may make profit look evil then Islam may discourage bank finance.
Similarly, cultures that do not recognize equality of gender and age may deter women and youth
from going into business.

The above questions are typical of the type of issues that need to be addressed. Responses to these
questions will determine the attractiveness of any business opportunity. However, seeing, seeking
and acting on opportunities is one of the characteristics of successful entrepreneurs everywhere. It is
also the basis for starting and maintaining successful ventures. It involves not only generating ideas
and recognizing opportunities, but also screening and evaluating them to determine the most viable,

24
attractive propositions to be pursued. The recognition of a business opportunity coupled with the
ability to respond effectively is the basis for starting and maintaining successful ventures. This
involves not only generating ideas or identifying opportunities, but also screening and evaluating
them to determine the most viable and attractive propositions to be pursued.

4.2.2.2 Evaluating a Business Opportunity

The above framework may simplify the task of identifying opportunities, but the kind of preparation
and effort required at this stage will have to be carefully developed. It is not the extent of
information, which is important. Understanding the expectations of the target group and the
background of the location are factors of equal importance in devising the business opportunity
strategy.

An entrepreneur needs conduct Cost- Benefit Analysis (CBA) for each and every idea. Cost can be
measured inform of resources required to implement the opportunity and benefits can be measured
in terms of sales, profits, goodwill etc. Entrepreneur must also find out if or not the new business
idea would fit his/ her personal skills and goals. In order to evaluate the opportunity, an entrepreneur
needs to answer the following questions:

a) Do consumers need such commodity?

b) Would the consumers understand the idea behind such a new commodity?
c) Can the existing set up handle the new product?
d) Will it require additional resources?, If so, what are the means of getting such resources?
e) When will it be possible to breakeven in sales? (breakeven is the level of business activity at
which a firm is making neither a profit or a loss, “just surviving”)
f) What are the substitutes or competing commodities available in the market?
g) What competition exist in the market?
h) What would be the reaction of the competition in the market?

Finally, the process of examining the factors discussed above is often referred to as a feasibility
study. In recent times, investors and lenders require these issues to be considered and set out in the
form of a business plan. The task of this evaluation is better understood if you divided it into the
following two stages: -
a) Pre-feasibility study; and
b) Feasibility study.

a) Pre-feasibility study
Once the entrepreneurial response begins, it becomes important to increase the entrepreneurial
interest. This can be achieved by the identification of opportunities and then confirmed by the pre-
feasibility study. The prime objectives of such a study is to determine whether:
i) The investment opportunity is promoting enough to make a firm decision.
ii) The project is viable from the marketing, manufacturing and other points of view
iii) Any aspect of the project is critical or crucial enough to call for in-depth analysis.

b) Feasibility Study
• Having established the viability of a business opportunity, it is necessary for you to acquire
comprehensive technical, economic and commercial data for the final investment decision.
• In most cases, you have to explore the suitability of the opportunity to your own specific skills
and expectations, e.g., an engineering workshop project identified as business opportunity, calls
for details of specific market survey at the pre-feasibility study stage. But, at the feasibility
stage, your technical skills and investment capabilities of an entrepreneur have to be assessed
before a final decision about the investment is taken.

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Criteria for final selection of a Business Opportunity
• The project selection process begins when you start weighing the pros and an opportunity with
other opportunities available. In this exercise, it is the favourable response at the very first sage
which leads you further to assess a given business opportunity.
• The process of business opportunity selection, however, is a continuous one, requiring
exploration from all angles like marketing, finance and infrastructural facilities until the first
decision is reached at.
• In order to facilitate and accelerate this process of decision-making, it is necessary that you are
provided with sources of information and right contact points at the right time. Meetings with
successful entrepreneurs, technical advises, or references to authoritative data will help you in
taking the final decision.
The other critical aspects of opportunity selection include:
a) Family member’s support
b) Encouragement by friends or relatives and
c) Faith in the entrepreneur’s own judgment.

Characteristics of Business Ideas

a) Real- demand, i.e. respond to unsatisfied needs or requirements of customers who have the
ability to purchase and who are willing to exercise that choice. This means that there is a good
market scope for the product or service. In other words, there is a gap between the present
supply and current or likely demand.

b) Return on investment, i.e. provide durable, timely and acceptable returns or rewards for the
risk and effort required. It is important to determine the level of investment required for the
business opportunity and then compare with the expected returns. If the return on your
investment in business is likely to be high, then such a business opportunity can be pursued
further.

c) Be competitive, i.e. be equal to or better – from the viewpoint of the customer – than other
available products or services.

d) Meet objectives, i.e. meet the goals and aspirations of the person or organization taking the risk.

e) Availability of resources and skills i.e. be within the reach of the entrepreneur in terms of
resources, competency, legal requirements, etc.
i. Availability of raw materials
Raw materials are a crucial element in production of any items for sale. You should,
therefore, assess and find out if there are raw materials required. If the raw materials are
available in plenty then there is a viable business opportunity, e.g. in an area of good supply
of timber, business opportunity exists for saw milling, furniture, etc.
ii. Skill requirements
Some businesses require certain specialized skills to start and run, e.g. a medical clinic, an
accountancy or law firm. If you have the skills, then a business opportunity exists that can
be exploited.

4.2.3 Selection of the best opportunity

An entrepreneur selects the best opportunity from the detailed analysis of shortlisted opportunities.
Entrepreneur may need to consult experts/ consultants in finalizing the best idea. The best idea is
the one that would provide maximum possible returns at a minimum possible costs, not only in the
short run but also from a long term point of view.

4.2.4 Decision on the location

It is one of the important decision for an entrepreneur to take so that production and distribution of
commodities can be efficient. Factors considered before locating business are:

26
 a) Law and order (security) situation
b) Labour
c) Infrastructure
d) Incentives from government
e) Raw materials
f) Market
g) Skilled workforce
h) Social amenities such as health, education facilities etc.

4.2.5 Develop Business Plan

4.2.5.1 Introduction
• Planning is a process than never ends for a business.
• It is extremely important in the early stages of any new venture when the entrepreneur will need
to prepare a preliminary business plan.
• As the venture grow up to mature business, planning will continue.
• Plan may be short term or long term, strategic or operational.

4.2.5.2 Business Plan, Meaning:

• The business plan is a written document prepared by the entrepreneur that describes all the
relevant internal and external elements and strategies for starting a new venture.
• It is an integration of functional plans such as marketing, finance, manufacturing, sales and
human resources.

4.2.5.3 Who Should Write a Business Plan

• It should be prepared by an entrepreneur.
• The entrepreneur may consult with many other sources in its preparation, such as lawyers,
accountants, marketing consultants, and engineers.

4.2.5.4 Value of the Business Plan

a) The business plan may be read by employees, investors, bankers, venture capitalists, suppliers,
customers, advisors, and consultants.
b) There are three perspectives should be considered in preparing the plan:
i) Perspective of the entrepreneur
ii) Marketing perspective
iii) Investor’s perspective
c) The business plan is valuable to the entrepreneur, potential investors, or even new personnel,
who are trying to familiarize themselves with the venture, it goals, and objectives.
i) It helps determine the viability of the venture in a designated market
ii) Draws a clear picture of the business mission, vision and goals
iii) Presents your plan and the financial data supporting it
iv) Shows potential strength and weaknesses of the business
v) Gives timelines of evnts and financial targets against which you can compare actual
results
vi) It provides guidance to the entrepreneur in organizing his or her planning activities
vii) It serves as an important tool in helping to obtain financing.
viii) Structure.

4.2.5.5 Evaluating a Business Plan

Four Cs of Credit:
a) Characters
b) Cash flow
c) Collateral
d) Equity of Contribution
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Another …
a) Marketable
b) Payback period
c) Risk
d) Feasibility, etc.

4.2.5.6 Presenting a Business Plan

a) It is often necessary for an entrepreneur to orally present the business plan before an
audience of potential investors.
b) In this typical forum the entrepreneur would be expected to provide a short (perhaps 20-
minutes or half-hour) presentation of the business plan.

4.2.5.7 Information Needs

a) Before committing time and energy to preparing a business plan, the entrepreneur should do
a quick feasibility study of the business concept to see whether there is any possible barriers
to success.
b) The information, obtainable from many sources should focus on marketing (segmenting,
targeting, and positioning), finance (list of all possible expenditures, demand forecast,
revenue), and production (location, manufacturing operations, raw materials, equipment,
labor skills, space, overhead) .
c) Internet can be a valuable resource.

4.2.5.8 Outline of Business Plan

a) Nature of business Introductory Page
b) Name and address of business
c) Name(s) and address(es) of principal(s)
d) Statement of financing needed
e) Statement of confidentiality of report
f) Executive Summary – Three to four pages summarizing the complete business plan
g) What is the business concept or model?
h) How is this business concept or model unique?
i) Who are the individuals starting this business?
j) How will they make money and how much?

a) Environmental and Industry Analysis

• Future outlook and trends
• Analysis of competitors
• Market segmentation
• Industry and market forecasts

b) Marketing Plan
• Pricing
• Distribution
• Promotion
• Product forecasts
• Controls

c) Description of Venture
• Product(s)
• Service(s)
• Size of business
• Office equipment and personnel
• Background of entrepreneurs
d) Production Plan
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• Manufacturing process (amount subcontracted)
• Physical plant
• Machinery and equipment
• Names of suppliers of raw materials
e) Operational Plan
• Description of company’s operations
• Flow of orders for goods and/or services
• Technology utilization

f) Organizational Plan
• Form of ownership
• Identification of partners or principal shareholders
• Authority of principals
• Management-team background
• Roles and responsibilities of members of organization
• Assessment of Risk
• Evaluate weakness of business
• New technologies

g) Financial Plan
• Pro forma income statement
• Cash flow projections
• Pro forma balance sheet
• Break-even analysis
• Sources and applications of funds

Record Keeping
A record is a written document for references or preserved for future use. Examples of business
records include:
a. Source documents- Invoices and receipts
b. Ledger Accounts
c. Balance sheet
d. Income statement or profit and loss account
e. Cash flow statements
f. Cash book
g. Trial balance account.

Importance
a. Provide past and future financial information position of the firm
b. Provide information required to make good business decision
c. Information on outstanding debts to be paid within given time
d. Sound running of the business
e. Win internal returns audit
f. Prepare financial statements
g. Prepare tax returns

Prerequisites of a Good Business Record

a. Holistic- reveal all information relating to transactions involved in the business
b. Precise- should communicate the important details that assist planning
c. Realistic- provide the estimates which can be understood by all stakeholders and in the
currency which they understand
d. Simple- it should be clear for everyone to understand
e. Accurate- should be completed, verifying the finer points such as accuracy of interest.
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Managing Cash Flows
a) Reduce the time between paying suppliers and getting money from customers
b) Hold less stock, so less cash is tied up in stock
c) Credit controllers keep debtors in control- set credit limits and remind debtors to pay up
d) Debt factoring gives instant cash to businesses whose customers have not paid their invoices
e) Encourage sale and leaseback, that is, business sell equipment to raise capital and lease (rent)
the equipment back.

h) Risk Analysis
The likelihood that the actual results will differ from expectations. It is also conceptualized as a
potential negative impact to an asset or something of value from some process or event.

Trying anything new involves risk due to, miscalculations and unknown factors. But doing nothing
also involves risk. Not responding to changing environment such as market change, technology
change can disadvantage complacent firm.

Types of Risk in Small Businesses

a) Financial: cash flow, budget requirements, and remuneration. Must close shop to make changes
leading to income loss.
b) Organizational: cultural, structural, people issues associate with effective operations. Outsider
providing ideas confuses employees’ sense of place or value
c) Legal: compliance w/ legal requirements, regulations, standards, codes. Planned changes do not
meet building code, leading to fines.
d) Operational: planning, operational activities, and resources including people, needed to deliver
a product or service. Overseeing project takes owner away from business operations
e) Commercial: market placement, business growth, diversification, commercial success, retention
and growth of customer base. Change in store image leads to loss of customers
f) Safety: individual, workplace, public safety and safety of products and services. Changes lead
to unstable building structures, such as shelving
g) Strategic: planning, scoping, and resources requirements for sustaining or growing business.
Project changes limits resources (e.g., time, money) for other business improvements
h) Equipment: general operation, maintenance, depreciation, safety of equipment used in the
business. Inexperienced users can damage equipment
i) Security: of business premises, assets and people, information, intellectual property, and
technology. Security of business information is breeched when shared w/ partners
j) Reputation: threat to reputation due to business practices, viability of product/service, or
conduct of associated individuals. Rude behavior of partners diminishes reputation of firm
k) Service delivery: quality and appropriateness of manner of delivery including customer
interactions and after-sales service. Poor display design limits self-service access of customers
l) Stakeholder management: identifying, establishing, and maintaining relationships with internal
(co-owners) and external (lenders, community development reps) stakeholders. Exterior
changes upset historic district commission and residents
m) Technology: implementation, management, maintenance, upgrade to technology, including
recognition of need and cost benefit. Proposed software cannot handle firm demands
n) Social: identifying, establishing, and maintaining relationships with family and friends.
Overseeing project limits time with family and friends

Mitigating the Risks

Refers to ways of managing the risks.
a) Assessing the likelihood of an event occurring. Consider significance and likelihood of
occurrence. Assessing the likelihood of an event occurring. Prioritize risks: rank order risks
using total of significance x likelihood with low=1, medium=2, high=3 for both measures.
b) Understanding how to mitigate or respond to these events includes. Proposing a business
continuity plan: a plan containing preventative measures or strategies for managing or mitigating

30
 (reduce) risk. Understanding how to mitigate or respond to these events. Use the following
table as a template for documenting the business continuity plan.
c) Preventative measures or strategies for managing or mitigating (reduce) risk in a business
continuity plan include. Reducing probability of risk example, proper training of workers to
enhance safety. Transferring risk such as buying insurance to cover loss. Spreading risk such as
finding partners to share cost. Eliminating risk such as changing methods or processes.
d) Putting in place systems to deal with the consequences such as select and implement
measures to modify risk and Identify risks that need attention by owners/managers.
e) Monitoring the effectiveness of the risk management approaches and controls.
Effectiveness is the degree to which the risk was eliminated or reduced due to measures.
Continuous monitoring and reviewing are crucial for success. Ensures that risks have been
correctly identified and assessed, and appropriate controls put in place. A way to learn from
experience and make improvements to your risk management approach.

i) Appendix (contains backup material)

• Letters
• Market research data
• Leases or contracts
• Price lists from suppliers.

• The business plan is designed to guide the entrepreneur through the first year of operations.
• Implementation of the strategy contain control point to ascertain progress and to initiate
contingency plan if necessary.
• Business plan not end up in a drawer somewhere once the financing has been attained and the
business launched.

4.2.6 Determine the Resources Required

An entrepreneur should determine the resources required to undertake the business venture. These
resources can be broadly divided into 3 groups:
a) Financial resources- funds required to undertake to run the venture.
b) Human resources- managers and non managers (skilled and unskilled employees).
c) Physical resources- plant, machinery, buildings and equipment.

Determine sources of resources, incase of financial resources an entrepreneur must find out the
sources of finance; both for working capital and for fixed capital. Acquire them at low cost.
• Give little control to outside parties Entrepreneurs should try to maintain a large ownership
control, particularly at the start up stage.
• S/he should give up the ownership position in the new venture only after every other alternative
has been explored.
• Incase of human resource, entrepreneur must be selective. Consider competent and capable
persons.
• Potential employees should not only have the right knowledge and skills but also positive
attitude towards the work and the organization
• There should be scientific (using an organized system) selection of employees.
• Compensation (pay) must be adequate in order to attract the right quality employees.

4.2.7 Manage the Enterprise

• After acquiring the resources, entrepreneur must employ them to implement the business plan.
On the part of human resource, entrepreneur may organize training programs and there should be
proper placement of employees
• Quite often, faulty placement of employees ruins the business venture. Entrepreneur or top
managers need to give effective directions to employees in all the functional areas so as to
accomplish the objectives. Appropriate control system must be adopted by the organization

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4.2.8 Periodic Review
• Enable monitoring of the venture. Periodic reports must be obtained from the employees to find
out the performance of new project.
• The actual performance must be compared against the planned targets to find out the progress of
the project.
• If there are any deviations, the causes of the same must be identified and adequate measures
must be undertaken to correct deviations.
Factors affecting the start of business
a) Availability of raw material
b) Availability of capital
c) Availability of market
d) Availability of power and water
e) Availability of security
f) Availability of infrastructure
g) Availability of skilled human resources.

MODULE FIVE: ENTREPRENEURIAL PROCESS ISSUES

5.1 CREATIVITY AND ENTREPRENEURSHIP

Creativity is the ability to design, form, make or do something in a new or different way. The ability
to come up with creative solutions to needs/problems and to market them often marks the difference
between success and failure in business. It also distinguishes high-growth or dynamic businesses
from ordinary, average firms. Real, successful entrepreneurs are creative in identifying a new
product, service or business opportunities.

5.1.1 Creativity and Innovation

Creativity is the ability to bring something new into existence. Thus, one can conceive something
new into existence but not take necessary action to make it a reality.

Innovation is a process of doing new things. Ideas have a little value until they are converted into
products, services or process. Innovation, therefore, is the process of transformation of creative
ideas into useful applications, but creativity is prerequisite to innovation.

Entrepreneurship can be partly described as a combination of creativity followed by innovation,

where creativity is the act of 'thinking' new things, coming up with ideas and innovation is 'doing'
new things or implementing the newly created ideas.

5.1.2 The Creativity Process

Ideas usually evolve through a creative process whereby imaginative people germinate the ideas,
nurture them and develop them successfully. Five stages in creative process include
1. Idea germination- A seeding stage of a new idea recognition. In case of an entrepreneur, ideas
begin with interest in the subject or curiosity about finding solution to a particular problem. It is
also known as unconscious scanning, where one is not aware of is searching for. The stage is
characterized by tolerance of ambiguity, where one does not possess full information on what is
happening.
2. Transformation of the problem to an idea.
3. Preparation- this is making an idea to practicable through seeking information about the problem
and how it has been solved before. If it is an idea for a new product then you should do a market
research. Inventors will set up lab experiments, designers will begin engineering new products
or ideas and markets will study consumer-buying habits. Some authorities refer to it as intuition
stage where one entertains contradictory ideas.

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4. Incubation- subconscious intellect assumes control of the creative process. A crucial aspect of
creativity because when we consciously focus on a problem, we behave rationally to attempt to
find systematic solution. It means joining together of different and often unrelated ideas.
5. Illumination (Insight)- occurs when idea surfaces as a realistic creation. A very crucial and
critical stage for entrepreneurs because the idea by themselves have a little meaning. On
reaching this stage, the daydreamers and serious thinkers are separated.
6. Verification (logical formulation)- entrepreneurial effort is essential in order to translate an
illuminated idea into a verified realistic and useful application. In this stage many ideas fall by
wayside as they prove to be impossible or have little value.
7. Implementation.

5.1.3 Elements of Innovation

• Analytical planning that consist of identifying product design, market strategy and financial
needs
• Organizing resources that deals in obtaining materials, technology, human resources and capital
• Implementation that consist of accomplishment of organization product design and
manufacturing services
• Commercial application, which means to prove value to the customers, rewards for employees,
revenues for investors and satisfaction to founder.

5.1.4 Importance of innovation

a) Reduced costs of production and distribution
b) Improvement in the quality and quantity
c) Customer satisfaction
d) Corporate image
e) Customer loyalty such as repeat purchase and favorable recommendations by satisfied customers
f) Competitive advantage
g) Motivation to employees
h) Expansion of business.

5.1.5 Innovation and Entrepreneurship

Innovation refers to
a) Doing something differently.
b) Process of improving what already exists.
c) In entrepreneurship it is regarded as one of the features of an entrepreneur. Thus, the most
successful entrepreneurs are innovators.
d) It gives an entrepreneur a competitive advantage.

Schumpeter (1934) identified the entrepreneur's challenge as discovering and implementing new
ideas. He asserts that innovation is a unique feature, which separates entrepreneurs from managers.
It's stated that this is achieved by:
a) Developing new products or services,
b) Developing new methods of production,
c) Identifying new markets,
d) Discovering new sources of supply, and
e) Developing new forms of organizations, carrying out of new form of organization of any
industry by creating of a monopoly position or the breaking up of it.
• Emphasizing the role of innovation, Schumpeter avers that the entrepreneur is someone who
carries out "new combinations" by such things as introducing new products or processes,
identifying new export markets or sources of supply, or creating new types of organization.
• Schumpeter presented a heroic vision of the entrepreneur as someone motivated by the "dream
and the will to find a private kingdom"; the "will to conquer: the impulse to fight, to prove
oneself superior to others"; and the "joy of creating."

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• In Schumpeter's view the entrepreneur leads the way in creating new industries, which, in turn,
precipitate major structural changes in the economy. Old industries are rendered obsolete by a
process of "creative destruction." As the new industries compete with established ones for
labour, materials, and investment goods, they drive up the price of these resources. The old
industries cannot pass on their higher costs because demand is switching to new products.
• As the old industries decline, the new ones expand because imitators, with optimistic profit
expectations based on the innovator's initial success, continue to invest. Eventually, overcapacity
depresses profits and halts investment. The economy goes into depression, and innovation stops.
Invention continues, however, and eventually there is a sufficient stock of unexploited
inventions to encourage courageous entrepreneurs to begin innovation again. In this way
Schumpeter used entrepreneurship to explain structural change, economic growth, and business
cycles, using a combination of economic and psychological ideas.
• Schumpeter was concerned with the "high-level" kind of entrepreneurship that, historically, has
led to the creation of railroads, the birth of the chemical industry, the commercial exploitation of
colonies, and the emergence of the multidivisional multinational firm. His analysis left little
room for the much more common, but no less important, "low-level" entrepreneurship carried on
by small firms.

Distinguished between innovation and invention.

a. Invention- occurs when new methods and new materials are discovered.
b. Innovation- occurs when the new methods and materials are utilized to form new combinations.

5.2 INTRAPRENEURSHIP AND CORPORATE ENTREPRENEURSHIP

Intrapreneurship is defined as entrepreneurship within an existing business set– up, provided with
organisational resources and accomplished by company employees. That is to say; Intrapreneurship
is corporate entrepreneurship. When a corporation indulges in entrepreneurial activities, like
diversification into new businesses, it is called intrapreneurship.

Intrapreneur is a manager who focuses on innovation and creativity; who brainstorms, dreams and
puts ideas into profitable venture by operating within the organisational environment. It is a tool for
capitalizing the entrepreneurial spirit of employees in the organisation. It gives managers the
freedom to try new ideas by employing firm’s resources in a unique way.

In the words of Pinchot “Intrapreneur, also termed as corporate entrepreneur, as someone who
violates policy, ignores the chain of command, defies established procedures, and perhaps, comes up
with a new product for the company in which he is employed.”

Employees of an organisation who have entrepreneurial talent and are motivated to use their abilities
and initiatives and do something on their own business.

Entrepreneurs who emerge from within the confines of the existing enterprise. An intrapreneur is an
entrepreneur who acts entrepreneurially in a large enterprise. Intraprenurs emerge because of the
following factors:
a) Emphasis on short term profits
b) Rigid organization structures
c) Need for innovative products
d) New ideas and ways of producing products
e) Need of having strategic business units.

5.2.1 Essentials
• Employees who give innovative ideas should be rewarded and they should not be punished if
they make some mistake.
• There should be team spirit, cooperation, knowledge, sharing and spirit of encouragement within
an organization.
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• Interaction between employees and employers must be free. It is most essential feature of
entrepreneurship.
• It is essential for entrepreneurship to identify skills of employees and give them proper training
to develop their skills and talents.
• Employees should be motivated by giving them rewards in the form of bonus, promotions etc.
• Fradette and Michaud(1998) describe four main elements essential for the success of
intraprenurship:
a) Right strategic and structural environment within the organisation.
b) Talents of employees are recognized and their key skills are trained. They should be
motivated and rewarded from time to time.
c) Support system, team working, information sharing and learning are essentials for invoking
the dormant talents of employees.
d) Successful employees should have be suitably rewarded while they should not be penalised
for their mistakes to such extent that they are dissuaded from further initiatives.
e) As intrapreneurial organisation should have a magnetic feeling in which style of
management is more coaching than infrastructure. Employees should fond of their
workplace. The enthusiasm and excitement will start spreading to others if the work culture
encompasses sharing and trust.

5.2.2 Characteristics of an Intrapreneur

An intrapreneur is not far removed from an entrepreneur. The major difference being that an
entrepreneur risks his own money where as an intrapreneur works with his employer’s money.
Thus, the risk level of an intrapreneur is considerably reduced. Secondly, the desire for
independence and material success is not as strong in case of intrapreneurs. For most other
characteristics, the two match perfectly.
a. Vision – It is the basis for successful venture. An Intrapreneur has ability to visualise from idea
to implementation.

b. Motivation – Intrapreneur is generally self motivated, but expect corporation reward and
recognition.

c. Orientation – Intrapreneur is achievement oriented.

d. Risk Appetite – Intrapreneurs are moderate risk takers since risk acceptance depends on their
skills. Wild risk takers are not affordable to corporates.

e. Locus of status – Intrapreneurs want to do the work on their own rather than delegate like
managers

f. Failure and Mistakes – Intrapreneur hide risky projects and ideas to ensure learning without
political cost and public failure. They develop multi disciplinary team in the organisation and
may go beyond organisation boundaries for results.

g. Goal set up – Intrapreneur are determined to do things not even asked for. They set goals and
quality standards.

5.2.3 Steps for setting Intrapreneurship in organisation

Following are the steps required to be taken to establish Intrapreneurship in an organisation.

a) Secure Commitment to Intrapreneurship from Top, Upper and Middle Management –

i. Cultural Changes. The cultural changes needed to development the spirit of
intrapreneurship in an organisation is not possible without whole hearted commitment of its
full line of higher management. It requires prolonged commitment and investment in
arranging to expose the spirit of intrapreneurship among the employees. Talk shows are
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 organised and bulletins published to expose people to this concept. Seminars and strategy
sessions are held to transform the organisation into an intrapreneurial organisation.

ii. Resource Requirement. Intrapreneurship demands commitment of lot of resources;

material as well as human. Without commitment of higher management, such resources will
not be available for any intrapreneurial venture.

iii. Confidence Building. While intrapreneurship leads to rich rewards for the company, there
is very little direct benefit to the employees. Most tend to work as intrapreneur to give
expression to their creative zeal. On top of that, there is always a fair amount of risk of
failure in such ventures. Therefore, unless the employees have full support of the higher
management, they will not stick their neck out in such a venture.

b) Create Framework for Intrapreneurship. Once cultural changes have been launched, which
is a long slow process lasting approximately 2–3 years, parallely, a framework needs to be
developed as to how the ideas will be processed and executed, how they will be funded, how
they will be monitored and how will the losses, whenever they occur will be accounted.

c) Identification of Intrapreneurial Leaders. Not every one has entrepreneurial spirit. Therefore,
people with entrepreneurial characteristic need to be identified, selected and trained. Along with
training, a mentor/sponsor system is also needed to be developed. These mentors from the top
management will give the needed guidance and support to the intrapreneurial leaders.

d) Identify the general areas of Intrapreneurial Thrust. Every company has a priority area
where it would like to move forward. Such areas need to be identified and notified to employees.
An Information Technology (IT) company would rarely want to invest into hardcore
manufacturing sector even if the prospects are quite promising.

e) Improve Responsiveness and Flexibility. Intrapreneurial spirit can not sustain the usual snail
paced and ultra cautious bureaucratic decision making process in case of capital investments that
is typical of ordinary organisations. Use of technology to speed– up decision making process
and induce flexibility in the process is required.

f) Modifying Organisational Structure. A fat hierarchical organisational structure is inherently

sluggish in decision making (many cooks spoil the broth). A flat organisational structure is more
suited to the Intrapreneurship. Therefore, certain modifications to the organisational structure
may be needed. However, It is easier said than done.

g) Publicity of Ideas. New ideas should be well publicised. While such publicity is a morale
booster for the author of the idea and therefore encourages more people to come forward with
ideas, published ideas get scrutinised and value added by other people.

h) Tapping Customers Base for New Ideas. Customers are the richest source of new ideas.

i) Create Strong Support Structure for Intrapreneurship. This is particularly important since
most people have short term focus on quarterly, half yearly and yearly numbers. Intrapreneurial
ventures are long term projects and therefore may get overlooked for funding and other support.
Similarly, appraisal of the intrapreneurs may get adversely affected since there is nothing
concrete to show quarter by quarter. Such a mishap is to be strongly guarded against because if
such a thing does happen, it would kill the initiative among the employees.

j) Create a Strong Reward System Linked to Performance of the Intrapreneurial Venture.

Notwithstanding all the Organizational Behaviour theories to the contrary, nothing works as fast

36
 and as effectively as tangible/material rewards system to motivate most people to put their best
feet forward.

k) Create an Evaluation System. Some Intrapreneurial venture are bound to fail for various
reasons including change in external environment. Also, some ventures are likely to astonish
with their success even the most optimistic supporters. Therefore, regular evaluation of the
ventures in hand is necessary. Promising ventures might need further thrust or scaling up in size
while unsuccessful need to be wound up.

5.2.4 Benefits of an Intrapreneurship

a) Creativity and Innovation within the firm
b) Corporate image improving among stakeholders
c) Competitive advantage in the market in form of increased quantity, improved quality and
reduction in cost
d) Motivation of employees
e) Expansion of the business.

MODULE SIX: PROFILE OF SUCCESSFUL ENTREPRENEURS

6.1 QUALITIES/ CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEURS

Various literature of entrepreneurship have cited successfully entrepreneurs such as Henry Ford, Bill
Gates, Ray Kroc, Warren Buffet, Ibrahim Ambwere and others, who have initiated their ventures
with small size and made good fortunes. Success or otherwise of a small venture is to a great extent,
attributed to the success or otherwise of the entrepreneur him/herself. Then, the question is, what
makes the entrepreneurs successful? Whether they had anything common in their personal
characteristics? The scanning of their personal characteristics indicates that there are certain
characteristics of entrepreneurs, which are found usually prominent in them. These characteristics
can either be developed or learned and they include:
a) Innovative. This involves coming up with new things using new techniques of creating them.
Innovation is the core aspect of entrepreneurship. Successful entrepreneurs try to create value
and make a contribution to commodities. Entrepreneurs create new and different values and new
and different satisfaction to convert material into resources or combine the existing resources in
a new and more productive configuration.

b) Risk Bearing. An average entrepreneur is a risk bearer. This may either be avoidable or
unavoidable risk. Without some elements of risk in the business, an entrepreneur may not be
challenged to work hard towards success. Some decisions s/he takes depend on the nature of the
risks inherent in the enterprise. The risk involved must be first evaluated to see if it can be
avoided, reduced or transferred. Before venturing in any enterprise, the outcome should first be
assessed to ensure that it is commensurate with the risk involved. In other words, high and
moderate risks should have high and moderate returns.

c) Internal Locus of Control. Locus of control occurs when an individual general expectancy of
the outcome of an event as being either within or beyond ones personal control or understanding.
An entrepreneur should believe strongly that the success of his/ her business depends on some
personal controllable factors and not on fate or luck. S/he should believe that in her/ him lies the
controlling factor for the change s/he is looking for and not on anyone else or on the
circumstance around her/ him.
d) Tolerance of Ambiguity and uncertainty. The term ambiguity refers to dealing with new or
complex situations. It is an uncertainty about an outcome or result due to insufficient
convictional data, information or knowledge. Because ambiguity and uncertainty exists, and
humans must cope with them; individuals display varying levels of tolerance or intolerance of

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 ambiguity or ambiguous situations. Ambiguous situations are conceptualised as lack of
sufficient information and this lack emerges in three contexts:
i) A completely new situation in which there are no familiar cues
ii) A complex situation in which there are a great number of cues to be taken into account
iii) A contradictory situation in which different elements or cues suggest different structures.

e) Need of Independence or Autonomy. This refers to taking actions without guidance from
others. Entrepreneurs have known to make their own decisions in running their enterprises and
follow their routine. In entrepreneurship process, autonomy implies to actions undertaken by
individuals or teams intended to establish a new business concept, idea, or vision or to do things
without regard to what others may think and to avoid responsibilities and obligations.

f) Confidence. Results from long experience and refers to a feeling or consciousness of one’s
powers or of reliance on one’s circumstances. This confidence stresses faith in an individual
acts in a right, proper, or effective way and be able to succeed. An entrepreneur with self-
confidence believes him or herself and his or he ability. The entrepreneur knows himself/
herself and his/ her capabilities better than any other person and should therefore rely more on
this towards achieving his target. An entrepreneur should believe that the power to effect
changes lies in his/ her hand and not on fate; that the circumstances around him/ her are subject
to change because s/he has the power to change them. His/ her self-confidence, however, is
usually built on the resources (material, human and financial) available for business.

g) Need for Achievement. This is the desire to accomplish something with one’s own efforts. The
urge to succeed or will to do well. Entrepreneurs have a high need for achievement and are
guided by their inner self, motivating the behaviour towards the accomplishment of goals. Most
of the successful entrepreneurs are attracted to this innovative career, because it is challenging
and demands a high degree of intelligence and involvement. Achievement motivate
entrepreneurs are the doers. They always accept any challenge and take calculated risk to do
something worthwhile.

h) Goal Setting. Human behaviour is goal oriented. Goal setting is necessary part of all the
activities of an entrepreneur. The goal should be clearly defined, attainable, and challenging.
Setting goals both for herself/ himself and for other employees’ serves as a driving force for the
accomplishment of the enterprise objective.

i) Initiative and Personal Responsibility. An entrepreneur, as an innovator and inventor, takes

responsibility towards accomplishing the defined goal. It is her/ his sole responsibilities to see
that the target s/he sets for herself/ himself is achieved. S/he takes initiative action and assumes
personal responsibility necessary for the success of her/ his business. S/he does this willingly
without coercion and compulsion from anywhere.

j) Commitment. An ideal entrepreneur is one who has a strong determination, with sound
thinking, strong willpower with a hundred per cent commitment and two hundred per cent
involvement. It is the determination that provides the entrepreneur energy to work for 14 to 18
hours a day, 7 days a week and 365 days in a year, till her/ his unit reaches a natural stage of take
off.

k) Ability to work for a longer period

l) Total involvement
m) Persistent Problem Solving
n) Competitiveness
o) Dealing with Failure
p) Seek Feedback on how business performs
q) Team Building

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r) Clear objective
s) Human Relations
t) Technical and Communication Knowledge

6.2 ROLE AND SIGNIFICANCE OF ENTREPRENEURIAL MANAGEMENT

Entrepreneurial management is a process of planning, organizing, directing, controlling,
performance and accomplishment of objectives in business enterprises.

a) Entrepreneur as a contributor to economic development

b) Entrepreneur supports social development- provision of funds for education, health,
environment etc
c) Entrepreneurs facilitate regional development- setting up industries across the country
d) Capital formation
e) Generate employment
f) Generate foreign exchange
g) Reduce income inequalities
h) Generate revenues to the government through taxation

6.3 LEADERSHIP QUALITIES OF AN ENTREPRENEUR

A leader is a person who takes charge of or guides a performance or activity. An entrepreneur needs
to be a good leader. The leadership qualities of an entrepreneur include:
a) Good personality- sum total of physical, mental and social qualities
b) Intelligent- good educational and technical knowledge
c) Taking initiative- doing the right thing at the right time without being told by others
d) Innovative
e) Self confidence
f) Communication skills
g) Coach and guide
h) Proper judgment
i) Human skills
j) Administrative skills
k) Discipline
l) Patience.

6.4 NECESSITY OF PROFIT ORIENTATION IN ENTREPRENEURSHIP

All business decisions are affected by economic considerations like return on capital or profit. Profit
is the main purpose of the business and is necessary for survival and growth.

Profit making is certainly beneficial to business enterprises in particular and society in general. The
role of the profit in an enterprise can be justified on the following grounds:
a) Indicator of efficiency
b) Reward for the risk and uncertainties
c) Industrial growth
d) Return on investment
e) Survival of enterprise
f) Helps to recover development cost
g) Social obligation- dividend to the shareholders
h) Basis for comparison
i) To cover future uncertainties
j) Means of control
k) Provides facilities to employees
l) Source of revenues to the government
m) Improves goodwill and prestige of the enterprise.

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6.5 NEED FOR SELF ASSESSMENT OF AN ENTREPRENEUR AND THE FIRM
There is need for continuous self analysis of an entrepreneur and the firm to identify their strengths
and weaknesses. This helps to consolidate the strengths and to overcome the weaknesses. The
weaknesses may include:
a) Problem relating to management styles
b) Problem of organization structures
c) Problem of communication
d) Problem of production in areas of product design, research and development, inventory control,
material planning, and production planning and control
e) Problem of marketing inform of defective product strategies, improper pricing policies, poor
distribution system, and improper promotion strategies.
f) Problem of personal policies inform of unscientific selection, lack of training and development,
and faulty placements.
g) Problem of finance inform of poor management of fixed capital, management of working
capital, improper sources of funds and misuse of funds.
h) Problem with external agencies such as customers, suppliers and government authorities. An
entrepreneurs can take corporate advertising, publicity, and public relations.

6.6 ENTREPRENEURS AND MANAGER

These two terms have been used interchangeably but in the real sense, they differ. In
entrepreneurship, these two terms differ based on motive, status, risk bearing, rewards, innovation,
and qualifications. These aspects can be used to show the distinction between an entrepreneur and a
manager as follows:

6.6.1 Entrepreneur
a) The major motive of an entrepreneur is to start a venture by setting up an enterprise. S/he
understands the venture for his personal gratification
b) In terms of status, an entrepreneur is the owner of an enterprise
c) An entrepreneur being the owner of the enterprise assumes all risks and uncertainty involved in
running the enterprise
d) The reward an entrepreneur obtains for bearing risks involved in the enterprise is profit which is
highly uncertain
e) Entrepreneur him/herself thinks over what and how to produce commodities to meet the
changing demands of the consumers. Hence, s/he acts as an innovator alias change agent
f) An entrepreneur needs to have qualities and qualifications like high achievement motive,
originality in thinking, foresight, risk taking ability and so on
g) Time orientation is 5 - 10 years
h) Who serves - Customers and self.

6.6.2 Manager
a) The main motive of a manager is to render his/ her services in an enterprise already set up by an
entrepreneur
b) A manager is the servant in the enterprise owned by the entrepreneur. It means that he does not
contribute to the initiation of the business or even bear the risks
c) A manager earns salary as a reward for the services rendered by him/ her in the enterprise. The
salary of the manager is certain and fixed
d) What a manager does is simply to execute the plans prepared by the entrepreneur. In this case,
the manager simply translates the entrepreneur’s ideas into practice
e) The manager needs to possess distinct qualifications in terms of sound knowledge in
management theory and practice.
f) Time orientation-Short- term.
g) Who serves - Others.

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From the above points of differences, it is clear that an entrepreneur can be a manager, but a
manager cannot be an entrepreneur. In nutshell, an entrepreneur is the owner of the enterprise and
the manager is the servant/ employee.

6.7 PRESENT POSITIONING AND PROSPECTS OF ENTREPRENEURS

In addressing the problems and challenges affecting entrepreneurs the following have been put in
place:
a) Government have set up many organizations to assist small entrepreneurs in the production and
distribution activities
b) Better awareness of the products through media
c) Increase in literacy levels- changes in consumption behavior and demand for branded goods
d) Growth of information and communication technology has helped many businesses to grow
e) Joint venture undertaking between local and international companies
f) Impact of globalization.

MODULE SEVEN: ENVIRONMENT FOR ENTREPRENEURSHIP

7.1 INTRODUCTION
Business is the organized efforts of enterprises to supply consumers with goods and services.
Businesses vary in size as measured by number of employees or by sales volume. All businesses
share the same purpose to earn profits. However, the purpose of business goes beyond earning
profits. It is an important institution in society and the role of business is crucial.
a) Be it for the supply of goods and services
b) Creation of job opportunities
c) Offer of better quality of life
d) Contributing to the economic growth of the country and putting it on the global map.

7.2 SCOPE OF BUSINESS

Business include all activities connected with production, trade, banking, insurance, finance, agency,
advertising, packaging and numerous other related activities. Businesses include all efforts to
comply with legal restrictions and government requirements and discharging obligations to
consumers, employees, owners and to other interest groups which have stakes in business directly or
indirectly.

7.3 ENVIRONMENT
Environment refers to all external forces which have a bearing on the functioning of business.
”Environment are largely if not totally external, and beyond the control of individual industrial
enterprises and their management. These are essentially the givers within which firms and their
managements must operate in a specific country and they vary, from country to country”.
However, the term business environment refers to the External Factors. The external environment
has two components, namely, business opportunities and threats to business. Simmilarly, the
organisational environment has two components ie. strengths and weaknesses of the organisation. A
Strengths, Weakness, Opportunity and Threats (SWOT) analysis is thus the first step in strategy
formulation.

Factors influencing Business Decision include internal environment, business decision, and external
environment. Thus, the Business Environment model contains the following environments.
a. Macro- Environment
i) Economic
ii) Technological
iii) Global
iv) Demographic
v) Socio- cultural

41
 vi) Political.

b. Micro- Environment
i) Financiers
ii) Suppliers
iii) Customers
iv) Competitors
v) Public
vi) Market Intermediaries.

c. Internal Environment
i) Internal factors
§ Vision
§ Mission/ Objectives
§ Management Structures
§ Internal Power Relationship
§ Physical Assets and Facilities.

ii) Business Decision

§ Company Image
§ Human Resources
§ Financial Capabilities
§ Technological Capabilities
§ Marketing Capabilities.

7.3.1 Internal Environment

Any business has certain vision, mission and objectives and a strategy to achieve them. Formulation
of strategy is defined as establishing a proper firm-environment fit. Indeed the objectives should be
based on an assessment of the external environment and the organizational factors (internal
environment).
a) Vision
b) Mission
c) Objectives
d) Management Structure
e) Human Resources
f) Financial Factors
g) Company Image and Brand Equity.

7.3.2 Micro- Environment

The Micro environment consists of different types of stakeholders - customers, employees,
suppliers, marketing intermediaries, competitors. It is also known as the Task Environment and
Operating Environment and has a direct bearing on the operations of the firm. Changes in the micro
environment will directly affect and impinge on the firm's activities.

7.3.3 Macro Environment

The macro environment consists of factors which are beyond the control of the business. There is a
symbiotic relationship between business and the environmental factors, environmental factors are
dynamic and a particular business firm, by itself, may not be in a position to change it’s
environment. Macro Environment includes:

a) Political Environment
Political Environment refers to the influence exerted by the three political institutions ie. legislature,
executive and judiciary in shaping, directing, developing and controlling business activities.
§ The constitution of a country

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 § Political Organisation
§ Political Stability
§ Image of the country and its leaders
§ Foreign Policy
§ Laws governing business
§ Flexibility and adaptability of laws
§ The Judicial System

b) Economic Environment
Economic Environment refers to all forces which have an economic impact on Business. The
economic environment consists of the demand dynamics, supply situation, pricing factors, degree of
competitiveness, and impact of profitability. It includes the fiscal policy, monetary policy and the
taxation policy, the Foreign and Direct Investment (FDI) norms, the investment criterion and
financing decisions. Economic environment includes:
§ Growth strategy
§ Industry
§ Agriculture
§ Infrastructure
§ Money and Capital Markets
§ Per capita and national income
§ Population
§ New Economic Policy.

c) Technological Environment
Technological is the systematic application of scientific or other organized knowledge to practical
tasks. Technological environment hold new technological innovation, new products, the state of
technology, the utilization of technology for maximum inputs and outputs, the obsolescence of
technology and the dynamic changes that frequently occur in technologies which enable firms to get
a competitive advantage
§ Technology reaches people through business
§ Helps in increased productivity
§ Business needs to spend on R & D and keep up with the technological advances around them
§ Technology leads to introduction of new products and older products becoming outdated and
redundant.
§ Technological advances leads to high expectations of consumers in terms of quality
§ Leads to system complexity
§ Demand for capital.
Techniques of production, science, research centers, automation, new materials etc. The fourth
industrial revolution in place that entails use Artificial Intelligence (AI), Internet of Things (IoT),
Robotics, Big Data, Machine Technologies, Block Chain etc.; these calls for the firms to find ways
of adopting such technologies.

d) Socio-cultural Environment
§ Culture creates people
§ Culture and globalization
§ Culture determines people’s attitude to business and work.
§ Spirit of collectivism
§ Education
§ Ethics in business
§ Social responsibility
§ Social audit
§ Corporate governance

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e) Global Environment
The global environment refers to those factors which are relevant to business, such as the World
Trade Organization (WTO) principles and agreements; other international conventions/ treaties/
agreements/ sentiments in other countries etc. For example hike in crude oil prices has a global
impact etc.
§ World is becoming one market
§ Improving quality
§ Competition from MNCs
§ Capital and technology transfers
§ Deciding which markets to enter and what products to manufacture
§ Adjusting the management process.

7.3.4 External Environmental Analysis

Environmental Analysis has three goals:
a) Provides an understanding of current and potential changes taking place
b) Environmental Analysis should provide input for strategic decision making.
c) Facilitate and lead to strategic decisions within an organization.
Environmental Analysis and diagnosis give strategists time to anticipate opportunities and to plan to
take optional responses to these opportunities. It also helps strategists to develop an early warning
system to prevent threats or to develop strategies which can turn a threat to a firm’s advantage”.
Firms which systematically analyse and diagnose the environment are more effective than those
which do not.

7.3.5 Process of Environmental Analysis:

The analysis consists of four steps:
a) Scanning: Detect early signals of possible environmental change and detect environmental
change already underway.
b) Monitoring: Purpose of monitoring is to assemble sufficient data to discern whether certain
trends are emerging, identification of the trends and identification of areas for further scanning.
c) Forecasting: It is concerned with developing projections of the direction, scope and intensity of
environmental change.
d) Assessment: To determine implications for the organisation’s current and potential strategy.

7.3.6 Environmental Analysis and Strategic Management:

a) Defining Business Vision, Mission and Objectives
b) SWOT Analysis- Environmental Analysis and Self Appraisal
c) Strategic Alternatives and Choice Strategy
d) Implementation of the Strategy
e) Evaluation and Control Strategy.

7.3.7 Competitive Structure of Industries

The competitive structure of industries is a very important business environment. Identification of
forces affecting the competitive dynamics of an industry is very useful in formulation of strategies.

As per Michael Porter’ well known model of structural analysis of industries, the state of
competitions depends on:
a) New Entrants- Threats to the new entrants
b) Suppliers- Bargaining power
c) Rivalry among firms
d) Buyers- Bargaining power
e) Substitutes- Threat of substitutes.

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Porter’s analysis determines the competitive intensity of the industry and the attractiveness of the
market. A highly competitive industry is one approaching “Perfect Competition” whereby
businesses are only able to earn normal profits.

7.3.7.1 Rivalry among Existing firms:

Firms in an industry are mutually dependent – competitive motives of a firm usually affects others
and may be retaliated. Factors influencing the intensity of rivalry are:
a) Number of firms and their relative market share
b) State of Growth of Industry: In stagnant, declining and slow growth industries, a firm is able to
increase its sales by increasing the market share.
c) Fixed or storage costs: In case of high fixed costs, strategy of firms is to increase sales which in
turn would improve on capacity utilization.
d) Indivisibility of capacity augmentation: Where there are economies of scale, capacity increases
would be in large blocks necessitating, efforts to increase sales to achieve capacity utilization
norms.
e) Product standardization, after sales service: In case of firms which have standardized products; it
is price, distribution and after sales service which become the distinguishing factors.
f) Strategic stake: Rivalry becomes more intensive if the firms have high stakes in achieving
success there.
g) Exit Barrier: If exit barriers are high, firms would keep competing in the same industry even
though it might not be very attractive.
h) Diverse Competition: Competitors with diverse strategies make the industry highly competitive.
i) Switching costs: One time costs that the buyer faces on switching from one supplier’s product to
that of another ie cost of new ancillary equipment etc.
j) Expected Retaliation.

7.3.7.2 Threat of Entry:

Potential competition tends to be high if the industry is profitable or critical and entry barriers are
low. Some of the common entry barriers are:
a) Government Policy
b) Cost Disadvantages: Cost advantages enjoyed by established firms may discourage entry of new
firms such as learning curve, favorable location etc.
c) Product Differentiation: Characterized by brand image, customer loyalty etc. may deter new
firms from entering the market.
d) Monopoly Elements
e) Capital Requirements: High capital intensive nature of the industry is an entry barrier to small
firms.

7.3.7.3 Threat of substitutes

a) An industry which has close substitutes available is highly competitive in nature. Existence of
close substitutes increases the propensity of consumers to switch to alternatives in response to
price increases.
b) Perceived level of product differentiation in the minds of the consumer is also a highly
influential factor.

7.3.7.4 Bargaining power of Buyers:

Buyers can in turn also be potential competitors as they may integrate backwards or bargain for
lower costs, better quality of the product etc.
a) The volume of purchase relative to the total sale of the seller
b) The importance of the product to the buyer in terms of the total cost
c) Extent of standardization or differentiation of the product
d) Switching costs
e) Extent of buyer’s information

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7.3.7.5 Bargaining power of sellers:
Important determinants of supplier power are the following:
a) Extent of concentration and domination in the supplier industry
b) Importance of the product to the buyer
c) Importance of the buyer to the supplier
d) Extent of substitutability of the product
e) Switching costs
f) Extent of standardization of the product
g) Potential for forward integration by suppliers.

7.3.8 SWOT Analysis

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Identification of the threats
and opportunities in the external environment and strengths and weaknesses in the internal
environment of the firms are the cornerstone of business policy formulation.
It is the SWOT analysis which determines the course of action to ensure the growth / survival of the
firm.

7.3.8.1 Strengths
Strengths—internal to the unit; are a unit’s resources and capabilities that can be used as a basis for
developing a competitive advantage; strength should be realistic and not modest. Your list of
strengths should be able to answer:
a) What are the unit’s advantages?
b) What does the unit do well?
c) What relevant resources do you have access to?
d) What do other people see as your strengths?
e) What would you want to boast about to someone who knows nothing about this organization and
its work?

Examples: good reputation among customers, resources, assets, people, : experience, knowledge,
data, capabilities.
Think in terms of: capabilities; competitive advantages; resources, assets, people (experience,
knowledge); marketing; quality; location; accreditations •qualifications, certifications;
processes/systems.

7.3.8.2 Weaknesses
Weaknesses—internal force that could serve as a barrier to maintain or achieve a competitive
advantage; a limitation, fault or defect of the unit. It should be truthful so that they may be
overcome as quickly as possible.

Your list of weaknesses should be able to answer:

a) What can be improved?
b) What is done poorly?
c) What should be avoided?
d) What are you doing as an organization that you feel could be done more effectively/ efficiently?
e) What is this organization NOT doing that you feel it should be doing?
f) If you could change one thing that would help this department function more effectively, what
would you change?
Examples: gaps in capabilities, financial, deadlines, morale and lack of competitive

7.3.8.3 Opportunities
Opportunities—any favorable situation present now or in the future in the external environment.

Examples: unfulfilled customer need, arrival of new technologies, loosening of regulations, global
influences, economic boom, demographic shift

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a) Where are the good opportunities facing you?
b) What are the interesting trends you are aware of?
c) Think of: market developments; competitor; vulnerabilities; industry/ lifestyle trends;
geographical; partnerships.

7.3.8.4 Threats
External force that could inhibit the maintenance or attainment of a competitive advantage; any
unfavorable situation in the external environment that is potentially damaging now or in the future.

Examples: shifts in consumer tastes, new regulations, political or legislative effects, environmental
effects, new technology, loss of key staff, economic downturn, demographic shifts, competitor
intent; market demands; sustaining internal capability; insurmountable weaknesses; financial
backing.
Your list of threats should be able to answer:
a) What obstacles do you face?
b) What is your competition doing?
c) Are the required specifications for your job/services changing?
d) Is changing technology threatening your position?
e) Do you have financial problems?
f) Could any of your weaknesses seriously threaten your unit?

MODULE EIGHT: CONTEMPORARY ISSUES IN

ENTREPRENEURSHIP

8.1 INTRODUCTION
Contemporary issues are the emerging issues in this case associated with entrepreneurship. The
contemporary issues to be looked at in this case are in the areas of policy, women entrepreneurship,
social responsibility and business ethics.

8.2 POLICY ISSUES

A policy is a principle or protocol to guide decisions and achieve rational outcomes. A policy is a
statement of intent and is implemented as a procedure or protocol.

In Kenya, a policy is viewed in the following ways:

§ Is a plan of action agreed upon by the government or an organisation.
§ Is a guideline for action.
§ Is a written statement that reflects a plans basic objectives and provides guidelines for selecting
actions to achieve objectives.
§ A policy establishes parameters for making decisions and channels a manager’s thinking in a
particular direction.

8.2.1 Micro and Small Enterprise Policy in Kenya

a) The Sessional Paper No. 10 of 1965, African Socialism and its Application to Planning in
Kenya, outlined the following strategies for development: preconstructed commercial sheds,
extension services that prepare feasibility studies and give advice on technology choices,
management and technical training, supplies of raw materials and subsidized credit. It was not
until the late 1970s and early 1980s that this approach was largely discredited as being too
expensive and inappropriate for developing entrepreneurship. By the middle of 1980s, the
government moved towards an open market economy and a more liberalized business
environment.

b) The Sessional Paper No. 1 of 1986 on Renewed Growth for Sustainable Development paid
tribute to the virtues of the informal sector, including its ability to conserve foreign exchange,
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 create jobs, develop skills and promote local entrepreneurship (Republic of Kenya, 1986). Issues
touched on in the Sessional Paper were incorporated in the Sixth Development Plan (Republic of
Kenya, 1989). During this period, the government in conjunction with the United Nations
Development Programme (UNDP) initiated a national strategy and an investment program for
Small Enterprise Development (SED). The joint project was known as the Creation of Enterprise
and Promotion of Entrepreneurship (CENTRE) Project (Malkamaki, Aleke-Dondo and
Muriithia, 1991).

c) The Sessional Paper Number 2 of 1992 Small Enterprise and Jua Kali Development in
Kenya recognized that in the interest of balanced industrial development, there is need to
increase the number of manufacturing firms employing 10-50 persons (missing – middle) in
Kenya ’s manufacturing and industrial sector. The sessional paper proposed to develop
entrepreneurship capability on a large scale so as to increase the “missing – middle” enterprises.

Strategies to develop the entrepreneur and improve his image focused on training, awarding
outside ideas and innovations, best use of local resources, optimizing labour intensive
technologies and developing the best product for either the local or export market. (Republic of
Kenya, 1992 p. 5).

d) The Sessional Paper Number 2 of 1996 on Industrial Transformation to the year 2020
recognized the fundamental restructuring of the economy to include: the achievement of macro-
economic balance, maximising the utilisation of natural and human resources, attracting long
term foreign investment, efficiency and flexibility in the utilisation of factors of production and
the development of a strong Industrial Research and Development capacity through increased
resource allocation to the National Research and Development Institutions ( Republic of Kenya,
1996).

e) The Sessional Paper Number 2 of 2005, Development of Micro and Small Enterprises for
Wealth and Employment Creation. For Poverty Reduction aimed to integrate entrepreneurial
training into the education system by exposing potential entrepreneurs to modern management
skills. The sessional paper noted the weaknesses in the vocational and technical training
entrepreneurship curricula that failed to appraise programmes at the start-up, survival and
growth stages. This was aimed at establishing the extent to which their programmes were
demand-driven and value adding; results of this could be used to address the specific needs of
the operators and beneficiaries. The sessional paper further noted the inadequacy in capacity of
the institutions that provided entrepreneurship training (Republic of Kenya, 2005, p 14).

The Sessional Paper Number 2 of 2005 (p.29) further sought to address the weak skills and
technological transfer of Micro and Small Enterprises through the strengthening of institutions
such as:
§ The Kenya Industrial Estates (KIE)
§ Kenya Industrial Research and Development Institute (KIRDI)
§ The National Council of Science and Technology (NCST)
§ Kenya Bureau of Standards (KEBS)
§ Productivity Centre of Kenya (PCK)
To promote skills acquisition and development within the MSE sector, the Sessional paper
proposed to develop collaboration between the private sector and the university –industrial,
technical and business attachments (Republic of Kenya, 2005, p 31). In addition, measures were
also to be put in place to enhance the capacity of Technical Training Institutions / polytechnics,
MSE Training and Development Centres, Youth Polytechnics and the National Youth Service
(NYS) skills development centres to offer appropriate skills to MSEs.

48
 Moreover, the paper contributed to the Legal and Regulatory Environment (MSE Act 2012),
Institutional Frameworks to facilitate Markets and Marketing, Business Linkages, Tax Regime,
Skills and Technology and Financial services

f) In 2006-2007, the United Nations Development Programme in collaboration with the Ministry
of Youth Affairs, the Ministry of Trade and Industry and other development partners, rolled out
a training programme that targeted MBA holders with a view to training them to be par excellent
Enterprise Development Agents. The training was a two- phase programme with phase one
covering Business and Entrepreneurship Development Skills while phase two entailed hands-on
experience in established enterprise support firms as well as profiling of business opportunities
across several regions in Kenya.

g) Kenya Vision 2030 – Economic Pillar -need to boost Science, Technology and Innovation (STI)
by increasing investment in Research and Development.

h) Sessional paper No. 9 of 2012 on The National Industrialization Policy Framework for Kenya
2012-2030 – 21 subsectors identified.

8.3 WOMEN ENTREPRENEURSHIP

8.3.1 Introduction
Women constitute about 60 percent of the world population. In traditional societies, they are
confined to performing household activities. Hence women are generally called home makers.

But today, in modern society, they have moved out of the house and are taking part in all areas of
life. Today, the entrepreneurial world is open to the womenfolk.

8.3.2 The Concept of Women Entrepreneurship

According to the general concept, women entrepreneur may be defined as a woman or a group of
women who initiate, organize and operate a business enterprise.

8.3.3 Reasons for Low Participation of Women in Entrepreneurship

In spite of the initiatives taken by the government, the growth of women entrepreneurship is very
slow in the state. The reasons are outlined as below:
a) Unfavourable family background.
b) Lack of business education
c) Dual role of women
d) Lack of aptitudes and training
e) Absence of individualistic spirit
f) Lack of freedom to choose a job according to ability, influence of sex, custom etc.
g) Inadequate infrastructure facilities
h) Shortage of capital and technical knowhow
i) Lack of adequate transport and communication facilities
j) Shortage of power
k) Lack of security
l) Absence of ideal market conditions; and
m) Corruption in administration.

8.3.4 Problems Faced by Women Entrepreneurs

The basic problem of a woman entrepreneur is that she is a woman. Women entrepreneurs face two
sets of problems specific to women entrepreneurs. These are summarized as follows.

a) Shortage of Finance: Women and small entrepreneurs always suffer from inadequate fixed and
working capital. Owing to lack of confidence in women’s ability, male members in the family do
49
 not like to risk their capital in ventures run by women. Banks have also taken negative attitude
while lending to women entrepreneurs. Thus women entrepreneurs rely often on personal saving
and loans from family and friends.

b) Shortage of Raw Material: Women entrepreneurs find it difficult to procure material and other
necessary inputs. The prices of many raw materials are quite high.

c) Inadequate Marketing Facilities: Most of the women entrepreneurs depend on intermediaries

for marketing their products. It is very difficult for the women entrepreneurs to explore the
market and to make their product popular.

d) Keen Competition: Women entrepreneurs face tough competition from male entrepreneurs and
also from organized industries. They cannot afford to spend large sums of advertisement.

e) High Cost of Production: High prices of material, low productivity. Under utilisation of
capacity etc. account for high cost of production. The government assistance and subsidies
would are not sufficient for the survival.

f) Family Responsibilities: Management of family may be more complicated than the

management of the business. Hence she cannot put her full involvement in the business
Occupational backgrounds of the family and education level of husband has a direct impact on
the development of women entrepreneurship.

g) Low Mobility: One of the biggest handicaps for women entrepreneur is her inability to travel
from one place to another for business purposes. A single women asking for room is looked
upon with suspicion. Sometimes licensing authorities, labour officials and sales tax officials
may harass them.

h) Lack of Education: A large number of women are still illiterate. There exists a belief that
investing in woman’s education is a liability, not an asset. Lack of knowledge and experience
creates further problems in the setting up and operation of business.

i) Low Capacity to Bear Risks: Women lead a protected life dominated by the family members.
She is not economically independent. She may not have confidence to bear the risk alone. If she
cannot bear risks, she can never be an entrepreneur.

j) Social Attitudes: Women do not get equal treatment in a male dominated society. Wherever she
goes, she faces discrimination. The male ego stands in the way of success of women
entrepreneurs. Thus, the rigid social attitudes prevent a woman from becoming a successful
entrepreneur.

k) Low Need for Achievement: Generally, a woman will not have strong need for achievement.
Every women suffers from the painful feeling that she is forced to depend on others in her life.
Her pre-conceived notions about her role in life inhibit achievement and independence.

l) Lack of Training: A women entrepreneur from middle class starts her first entrepreneurial
venture in her late thirties or early forties due to her commitments towards children. Her biggest
problem is the lack of sufficient business training.

m) Lack of Information: Women entrepreneurs sometimes are unaware of technological

developments and other information on subsidies and concessions available to them. They may
not know how to get loans, industrial estates, raw materials etc.

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8.3.5 Remedies to Solve the Problems of Women Entrepreneurs
The following measures may be taken to solve the problems faced by women entrepreneurs:
a) In banks and public financial institutions, special cells may be opened for providing easy finance
to women entrepreneurs. Finance may be provided at concessional rates of interest
b) Women entrepreneurs’ should be encouraged and assisted to set up co-operatives with a view to
eliminate middlemen
c) Scarce and imported raw materials may be made available to women entrepreneurs on priority
basis
d) Steps may be taken to make family members aware of the potential of girls and their due role in
society
e) Honest and sincere attempts should be undertaken by the government and social organizations to
increase literacy among females
f) In rural areas self employment opportunities should be developed for helping women
g) Marketing facilities for the purpose of buying and selling of both raw and finished goods should
be provided in easy reach
h) Facilities for training and development must be made available to women entrepreneurs. Family
members do not like women to go to distant place for training. Therefore, mobile training
centres should be arranged. Additional facilities like stipend, good hygienic, transport facilities
etc., should be offered to attract more women to training centres.

8.3.6 Measures Taken for the Development of Women Entrepreneurship in Kenya

Women empowerment should be one of the primary goals of a society. Women should be given
equality, right of decision-making and entitlements in terms of dignity. They should attain
economic independence.

The most important step to achieve women empowerment is to create awareness among women
themselves. Development of women can be achieved through health, education and economic
independence. Realizing the importance of women entrepreneurs, the Government of Kenya has
taken a number of measures to assist them. Some of the important measures are outlined as follows:

a) Formal financial: The Kenyan financial sector is diversified. Both formal and informal
financial markets exist. Formal financial support is provided by commercial Banks, NGOs,
MFIs and SACCOs, among others. They employ an integrated approach, disseminating
information and building capacity of women's groups in effective management of revolving
funds.

b) Microfinance mechanisms of mainstream commercial banks: Most commercial banks have

special products for the MSEs, in most cases offered along with other normal banking facilities.
Additionally, other MFIs have cropped up such Kenya Women Finance Trust.
c) Informal financial support: Informal financial support services include several variations on
Merry-Go-Rounds (MGRs) and Rotating Credit and Savings Associations (ROSCAS). Informal
financial support mechanisms have their roots in traditional mutual guarantee systems, making
them very popular. A typical ROSCA involves a group of 5 to10 members and operates on
simple principles, namely, regular meetings where each member contributes agreed amounts of
money and each member gets a turn as the recipient. Usually there is no interest charged on the
loan or earned on the savings, unless the ROSCA borrowed the money from MFIs for lending
on.

d) Accumulating Savings and Credit Associations (ASCAS): The most common version of
ASCAs involves regular savings, with an agreed minimum amount for every member, but
allowing higher amounts to be saved by those who wish to.

e) The role played by Non- Governmental Organizations (NGOs): The role played by NGOs
cannot be over-emphasized. Organizations such as Care International, World Vision, Plan
51
 International, are working in areas such as relief and welfare, technical innovation, national
development, public health, agriculture, advocacy, grassroots development agencies and other
networks.

f) Business Development Services (BDS): BDS comprise non-financial services that are aimed at
capacity building. They include training services, marketing, counseling and consultancy,
mentoring, and institutional support. Management training for MSEs focuses on building the
capacity of entrepreneurs, by transfer of the relevant knowledge and skills needed to successfully
run the enterprise. This includes skills in financial management, marketing, human resource
management, and entrepreneurship training. Mainstream MSE training institutions providing
such training, do so to complement particular occupational, technical, professional, trade or
artisanal skills their clients already possess.
g) Introduction of Appropriate technology through.
h) Accessing the infrastructure such as roads, telecommunication.

8.3.7 Assistance to Women Entrepreneurs

Entrepreneurship does not differentiate the sex. A number of facilities and assistance are offered to
the entrepreneurs. However, certain additional incentives or facilities offered to women
entrepreneurs are discussed as follows.

a) Creation of Gender Desks in Ministries: The Ministry of Public Service and Gender Affairs
has been the lead Ministry in addressing the social and welfare issues that affect women. It is
concerned with formation and registration of women's groups at the grass-roots level and the
appointment of social officers who would address gender issues. In recognition of the
importance of mainstreaming gender issues in Government activities, it is a requirement that
gender desks be established in every government ministry as soon as possible. This effort is
being coordinated by the above Ministry.
b) Establishment of the Gender Commission in the Ministry of Public Service and Gender
Affairs: The Kenyan Government has institutionalized its commitment to addressing gender
inequalities by creating a National Gender Commission mandated to establish gender desks in all
government ministries.

c) Gender and Equality Development (Persons with Disabilities): In order to incorporate special
interest groups in the development process, the Government, through the Ministry of Public
Service and Gender Affairs, prepared the National Disability Plan of Action as part of the
African Decade of Persons with Disabilities (1999-2009). This led to a national conference, in
2004, with the theme "African Decade 1999-2007 Kenya Reflection and Action".

d) Establishment of a Women's University of Science and Technology: The establishment of

Keriri Women's University of Science and Technology is one of the positive affirmative actions
taken to empower women in MSEs. This gives young women a chance to study science and
technology, the foundations for creativity and innovation and elements essential for the growth
of MSEs. This means more access to technical education for women and, hence, empowers
them to enter MSEs.

e) Reducing poverty level: The World Bank's Country Assistance Strategy recognizes that
"women are more likely to be poor and vulnerable to adverse shocks than men". By
implementing the recommendation to set up a Commission for Poverty Reduction, and
reviewing its operations to streamline its activities, the Government will focus on improving the
lives of women, including their participation in MSEs. It has embarked on strategic approaches
to alleviate abject poverty among its citizens by putting in place action plans aimed at improving
living standards, particularly for women.

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f) Increasing Agricultural Productivity and Exports: According to the MSE survey of 1999,
women in Kenya supply 70 per cent of labour in the agricultural sector. An increase in
productivity and exports should enhance women's incomes and their participation in off-farm
economic activities. The Government's efforts include, providing credit to farmers, looking for
markets by opening up the Eastern Africa market, signing International Trade Agreements, and
reducing trade import/export barriers. There are a number of other initiatives being carried out
by donors and NGOs to enhance the productivity of entrepreneurs. One such initiative is the
Kenya Business Development Services (BDS) funded by the USAID. The objective of BDS is
to increase growth and incomes among rural MSEs through access to markets and business
services enabling them to compete.

g) Women Enterprise Fund: This fund manages funds that are advanced to women groups to start
and sustain their businesses.

8.4 SOCIAL RESPONSIBILITY AND ENTREPRENEURSHIP

8.4.1 Introduction
Entrepreneurial Social Responsiveness denotes how an entrepreneur becomes aware of social
matters and his/her responses towards accomplishing his or her business aims. It reveals how an
entrepreneur responds to the issues of protecting the environment and assisting the community
where his or her enterprise is located.

8.4.2 Perspectives in Social Responsibility

The theory of social responsibility takes two approaches: firstly, it deals with how individual
organizations respond to social issues and lastly, the forces that determine the social issues to which
business should respond (Stoner, 1999). The ability of an entrepreneur to be socially responsible
depends on his or her business capacity and determinant factors of those social issues.

Entrepreneurial social responsiveness is a continuous process; it starts with the entrepreneur’s

recognition of the requirement to be socially responsible through studying the problem, the best way
to deal with such problem and the implementation of such decision (Ackerman, 1973).

The philosophy of social responsibility and social responsiveness can be combined into a single
theory called social performance which according to Archie (1979), usually involves three
perspectives, viz; social principle, social process and social policies

a) Social Principle. The social performance of the organization is shaped up by three main
principles- economical, legal and ethical. These according to (Archie, 1979) are put together to
form social contract between the business and the society that permits the enterprise to act as
moral agents- once an entrepreneur is transacting business in a particular environment, there are
social contracts that exist between the entrepreneur and community. It will thus amount to a
breach of contract if the entrepreneur fails to fulfil his or her part of the contract after benefitting
from the community.

b) Social Process and Policies

The principles of social contract between the entrepreneur and the society are implemented to
involve both the decision- making process and policies of the organization. The social process
and policies can take any of the following according to Wartick and Cochran quoted by
Chinonye (2002):
i) Reactive: The entrepreneur’s response to social issues is said to be reactive when occurs
only after the entrepreneur has been challenged.

53
 ii) Defensive: The entrepreneur’s response to social issues can be defensive when the
entrepreneur responds to social issues to ward off a challenge from his or her
competitors.

iii) Accommodative: It is said to be accommodative when the entrepreneur’s to social issues

is mainly to bring his or her business activities in line with government needs and public
opinion.
iv) Proactive: It is said to be proactive, when the entrepreneur responds to social issues to
meet up demands that have not yet been met.

8.4.3 Relevance of Social Responsibility to the Achievement of Enterprise Aims

Social Responsibility assist in an entrepreneur achieve his or her business aims in the following
ways:
a) Good financial performance to the enterprise. This helps the shareholders to have confidence in
the organization thereby maintaining their investment with the business.
b) By attracting more investors to the organization that can boosting the organization’s market
share value and increase its earning per share.
c) Boosts the entrepreneur’s public image and this can serve to motivate the employees.
d) Acts as a guide in the formulation of the organization’s competitive strategies, assisting the
entrepreneurs to have competitive advantages over other entrepreneurs.
e) Acts as a check or control on entrepreneur towards the achievement of his or her defined goals.
f) Assists the entrepreneur to start a strong relationship with his or her suppliers and this can
improve his or her credit worthiness.
g) Social responsiveness improves and creates customer’s satisfaction that in turn increases
organization’s profitability.

8.4.4 Reasons for Social Responsibility

The following are reasons why entrepreneurs should be socially responsible:
a) Entrepreneurs obtain their resources (physical, financial, and human) from the society; they
should thus, be involved in developing the same society.
b) The enterprise being a subsystem of the society, should be socially responsible to it, in order to
keep the economic production process intact.
c) Entrepreneurs should be socially responsible as a compensation for the social and economic
problems that their businesses constitute to the society, such as environmental pollution, through
oil and effluent spillage, noise etc.
d) Social responsibility is an investment that the entrepreneur will live to benefit from in the long
run.
e) Social responsibility enhances the entrepreneur’s public image and attracts the members of the
society to patronise his or her organization.
f) Social responsibility also enhances the employees’ efficiency.
g) Entrepreneur’s social responsibility should be channelled to the following interested groups:
i) Competitors: Entrepreneurs should engage in fair competition, especially in the area of
advertisement. Social responsibility demands that an entrepreneur should be honest in his or
her advertisements and should also avoid making statement that might ruin the image of his
competitors.

ii) Employees: Entrepreneurs should be fair and just to their employees in their remuneration,
conditions of service, job security, housing, hospital, training and development scheme etc.,
bearing in mind that their business objectives are their concerned.

iii) Suppliers: Entrepreneurs should also be fair to their suppliers by paying them promptly and
ensuring that there is good relationship between them and their suppliers.

54
 iv) Customers: Customers are the entrepreneurs’ “keys” to the achievement of their business
aims. Customer’s satisfaction is the very purpose for an entrepreneur’s existence in the
business. The customers are his or her backbones and should thus be treated with all due
respect and honesty. The entrepreneur’s social responsibility to customers centres on the
quality, branding, size, colour, price and channel of distribution of his or her products. He or
she should ensure that these variables are in line with customers’ specification.

v) Shareholders: The entrepreneurs should ensure that the shareholders’ interest are fairly
represented especially in the areas of payment of dividends and the growth of their
investments.

vi) Government: The entrepreneurs should be socially responsible to the government by

ensuring that their taxes are paid promptly, abiding by the rules, regulations and other
policies of the government that affect their businesses.

vii) Community: The community where the enterprise is situated deserves a fair treatment from
the entrepreneur, especially in the areas of provision of social amenities (good roads,
electricity installation, piped water, educational assistance, medical facilities etc.).

8.4.5 Barriers on Social Responsibility

The following are the barriers to social responsibility:
a) High government taxes can adversely influence entrepreneurs, making them to decrease their
social responsibility
b) Profit maximization concept- the greed of the entrepreneur to make profit at the expense of the
customers
c) Political instability
d) The shareholders’ constant demand for higher returns on their investment
e) Bribery and corruption as well as nepotism and favouritism. Sometimes, entrepreneurs are
forced to settle some indigenes of a specific community without the consent of the entire citizens
of the community.

8.5 BUSINESS ETHICS

Ethics is a set of principles prescribing a behavioural code that describes what is good and right or
bad and wrong (Kuratko, 2016).

Business ethics are sound business principles to be employed by entrepreneurs or businessmen as to

succeed in life, thereby creating impacts in the society. The essence of entrepreneurial ethics is to
build entrepreneurs; whose activities grow wealth in any society.

The principles of ethics include

a. Beneficence
b. Non-maleficence
c. Autonomy
d. Justice
e. Truth-telling
f. Promise-keeping.

An entrepreneurial firm builds its ethical bedrock by adopting the following elements:
a. Respect: As an entrepreneur building a business, you need to respect yourself and surround
yourself with people you can respect.
b. Honour
c. Integrity
d. Customer focus
e. Results-oriented

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f. Risk-taking
g. Passion
h. Persistence.

8.5.1 Relevance of Entrepreneurial Ethics

a) Integrity: Hand in hand with entrepreneurial ethics is integrity in business. It is important that
entrepreneurs today do not get caught up in moneymaking schemes and lose sight of the
importance of doing the right thing for the common good. Any entrepreneur who wilfully and
dishonestly engages in business activity with the motive of ripping people off or profiting at the
expense of others, creates a harmful business environment of distrust and antagonism. When
you build a business on integrity, and set off with an attitude of nobility, humility and service,
and the intention of making a living by providing your community with needed goods and
services, you contribute to, rather than detract from, the general good. An early and consistent
stand against questionable conflicts of interest is an important aspect of any entrepreneur’s ethics
effort.

b) Labour: How a company treats its workers is a good indication of its ethical practices. An
entrepreneur who sets out to cheat or underpay his employees will indefinitely cause his
organization to suffer and be subject to high staff turnover, low morale, and dishonesty among
other negative things that could cause the downfall of the business. It is important to treat all
employees well as they represent the business daily, but it will also benefit the entrepreneur
because most people are more likely to reciprocate what behaviours and attitudes they receive. It
goes without saying, that when good work habits are developed and practiced by all within an
organization, a special bond is formed and a loyalty to the company becomes apparent.
Entrepreneurs who manage to keep open lines of communication with their employees, grow to
understand their feelings about things taking place within the workplace, and they work together
to ensure that everyone is in alignment to benefit from their association with the organization.

c) Clientele: Your clients are your key stakeholders and it should be quite obvious as to how
dependent your business is on its customers. The entrepreneur today should seek out the
opportunity to personally treat all clients well, and express great and humble appreciation when
they support your business. The ideal way to do this is to always strive to provide goods and
services that are of the best quality and service, as good as you can make or get them, for your
clients. An entrepreneur with an honest motive and good ethical sense will realize that doing and
giving the best to clients every day is not only a good business decision, but a wise and ethical
choice as well.

d) Environment: It is difficult, and possibly unavoidable, to engage in business while having no

impact on the environment. Even if you’re in the craft business, your clients are looking on to
see how you utilize resources or recycle products. If you are truly invested in reducing your
business’s Eco-footprint, then you can have a much greater impact, not just in the business
world, but in the community and environment as a whole. The ethical entrepreneur today should
explore, welcome, and employ the many ways that a business can reduce its Eco-footprint on the
environment, including recycling, reducing energy waste, carpooling, minimizing paper
packaging and usage, and reducing wasteful business practices among other things. While all of
these activities have a practical basis, in that they protect the environment and the public
reputation of your business, they also have a great impact and influence on others. When
entrepreneurs model environmental ethics and encourage Eco-friendly practices, others are
likely to follow suit. Organizational Ethics should not only be practiced by larger businesses. In
fact, the entrepreneur today can consciously choose to make ethics a part of their business plan.
Start-Ups can create and effectively commit to sound ethical practices.

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8.5.2 Ethics Reality Check for the Entrepreneur Ethics
a) Entrepreneurs must first recognize that there are ethical dilemmas surrounding them within the
culture of entrepreneurship.
b) They must decide to make ethics a principle value of their business’s objectives and mission.
The entrepreneur today should embrace doing business ethically in order to improve their
standards. Good business ethics should be visible to all who come into contact with the
business. Ethical policies should be included in business plans, in the business’s mission
statements, and in all other business documents.
c) The ethical entrepreneur ought to seek out favourable opportunities to make his or her ethical
commitment bona fide. It is the business of an entrepreneur to communicate clearly to all, from
the initial stages of business, the ethical standards they employ. This entrepreneur will no doubt
enjoy both financial success and a superb reputation.
d) The ethically made entrepreneur should be un-naively aware of the inevitable and unavoidable
tensions in the business world, and anticipate these tensions not with fear, but with resilience,
and so be able to put in place, a reasonable action plan that helps the entire team to deal with
these tensions before the situations are actually encountered. This practice should be included in
the business’s plan and mission and become part of a more formal “ethics training” for all.
e) Not every situation can be anticipated, but the ethical entrepreneur must always keep an open-
door policy so that new and uncommon ethical issues can be worked out as they arise.
f) The ethical entrepreneur looks for opportunities to engage the business as a whole and align
them to the community and its needs. This aids in team building and strengthening interpersonal
relationships
g) The ethical entrepreneur thinks and talks about the ethical values that matter at any given
opportunity. The frantic and elaborate, rapid growth of start-ups makes it easy to submit to the
temptations of malpractices in order to stay alive in this highly competitive business world.
Always keep your objectives clear in front of you and visible for all to see and acknowledge.
h) The ethical entrepreneur challenges growth and renews the commitment to ethical practices.
Businesses change as they grow, and so to, do their objectives. As the entrepreneur and his/her
business grows, re-valuation is important and needed where ethics is concerned. Ethical values
and the commitment to continued ethical practices must be reworked and re-communicated
every time change occurs, thereby preparing all involved in the business to deal with the
changing and evolving ethical dilemmas.
i) The ethical entrepreneur looks for opportunities to engage the business as a whole and align
them to the community and its needs.

The rewards of being an ethical start-up are many. Personal and business success is accomplished,
and client and team satisfaction, is the most prominent benefit for all. Everyone feels better about
themselves and the butterfly effect happens magically as everyone freely and satisfyingly chose to
act ethically in their dealings with others.

For the individual entrepreneur, a reputation for much needed ethical practices can place your
business on the top lists of ethical businesses with which others will unhesitatingly choose to do
business with, increasing your opportunities for successful business partnerships. It is
imperative, that the entrepreneur today understand that the business they run has responsibilities to
everyone.

8.5.3 Ethical issues in business include:

a) Fraud
b) Scandals
c) Mistrusts among executives

8.5.4 Establishing a Strategy for Ethical Enterprise

a) Ethical Code of Conduct: A statement of ethical practices or guidelines to which an enterprise
adheres. These codes cover a multitude of subjects, ranging from misuse of corporate assets,

57
 conflict of interest, and use of inside information to equal employment practices, falsification of
books or records, and antitrust violations.

b) Ethical Responsibility: Entrepreneurs need to analyze the ethical consciousness of their

enterprises, the process and structure devised to enhance ethical activity, and their own
commitment to institutionalize ethical objectives within the enterprises. Keeping these points in
mind, entrepreneurs eventually can start to establish a strategy for ethical responsibility. This
strategy should encompass:
i) Ethical Consciousness: An entrepreneur creates ethical consciousness through his/her
vision and mission of creating the enterprise. An open exchange of issues and processes
within the enterprise, established codes of ethics for the enterprise, and the setting of
examples by the entrepreneur are all illustrations of how this is done.

ii) Ethical Process and Structure: These are procedures, position statements (codes), and
announced ethical goals designed to avoid ambiguity. Having all key personnel read the
enterprise’s specific ethical goals and sign affidavits affirming their willingness to follow
those policies is a good practice for enterprises.

iii) Institutionalization: A deliberate step to incorporate the entrepreneur’s ethical objectives

with the economic objectives of the enterprise. At times, an entrepreneur may have to
modify policies or operations that become too intense and infringe on the ethics of the
situation.

MODULE NINE: STRATEGIES FOR ENTERPRISE GROWTH

9.1 STRATEGIES FOR INTERNAL ENTERPRISE GROWTH

Small companies or businesses always look for ways to grow their business and increase sales and
profits. There are probable techniques that companies must use for executing a growth strategy.
The technique used by a company to expand business is highly dependent upon its financial
situation, the competition and even government regulations and policies. Some common growth
strategies marked in small scale business are:
a) Market penetration
b) Market expansion
c) Product evolution and expansion
d) Diversification
e) Acquisition.

9.1.1 Market Penetration

One of the growth strategies reported in business is market penetration. A small company uses a
market penetration strategy when it agrees to market existing products within the same market.
Increasing market share is the only way of growing through existing products and markets. Market
share is the share of unit and sales a company acquires within a certain market when compared to all
other competitors. The best way to increase the market share is by lowering the prices of the
commodities.

9.1.2 Market Expansion

Market expansion is another remarkable growth strategy, which is often referred to as market
development that involves selling current products in a new market. There are different reasons
explaining why a company needs to consider a market expansion strategy. Competition may be
such that there is no scope for growth within the current market. If an entrepreneur is unable to
search for new markets, then it is not possible to increase sales or profits. A small company
considers using market expansion strategy if it successfully finds use of its product in a new market.

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9.1.3 Product Evolution and Expansion
This is the process for developing and commercializing an innovation through entrepreneurial
activity that in turn stimulates economic growth.
The process is characterized by four stages:
a) Recognition of social needs. This is traditional symbol abundance that commences with
knowledge in the base technology and science such as thermodynamics, fluid mechanics, or
electronics.
b) Initiation of technological innovation
c) Iterative synthesis leading to invention (pressing toward invention). The intersection of
knowledge and social need that starts the product development process.
d) Development phase. Involves modeling, planning, financing, manufacturing and marketing.
e) Industrial phase.

A small- scale company can expand its line of products or add new features to increase sales and
profits. When small companies use a product expansion technique, it is also referred as product
development. The selling continues within the current market. A product expansion growth
strategy basically works well when there is a change in technology. Companies may also be
compelled to add new products as older ones become outdated.

9.1.4 Diversification
Growth strategies in business involve diversification. Diversification means a company selling new
products in new markets. This type of strategy is highly prone to risk and losses. A small company
acknowledges the plan carefully while utilizing a diversification growth strategy. Marketing
research is important to identify if consumers in the new market will potentially like as well as buy
the new products.

9.1.5 Acquisition
Growth strategies or method to expand business also engages acquisition of other businesses. In
acquisition, a company purchases another company to expand its functions. A small company uses
this type of strategy to bolster its product line and enter new markets. An acquisition growth
strategy is very risky, but not as risky as a diversification strategy, as in this case the products and
market are already authorized. A company must have complete knowledge of exactly what it wants
to achieve when using an acquisition strategy, mainly due to the significant investment required to
execute it.

9.2 STRATEGIES FOR EXTERNAL ENTERPRISE GROWTH

Is a situation characterised by an entrepreneur exploring the international or global market where he
or she identifies opportunities and takes risk to get profit. In this case a global entrepreneur is an
opportunity minded and open minded, able to see different points of view and fuse them into a
unified focus. Thus, a global entrepreneur should possess the following characteristics:
a) Global thinking and orientation
b) Build diaspora networks
c) Aware of global organizations, agreements and treaties that govern the trading activities
d) Venturing abroad
e) Researching foreign markets
f) Aware of international threats and risks.

9.2.1 Methods of Going Global

An entrepreneur can actively engage in the international market in a number of ways, such as;
importing, exporting, international alliances and joint ventures, direct foreign investment, and
licensing. Each of these methods involves increasing levels of risk.
a. Importing. Importing refers to purchasing and shipping foreign produced commodities for
domestic consumption. An entrepreneur can identify import opportunities through trade shows,
and fairs where firms gather to display their commodities.

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b. Exporting. Exporting is the shipping of domestic produced commodities to a foreign
destination for consumption. Exporting is crucial to the entrepreneur because it often means
increased market potential.

c. International alliances and joint ventures. There are three main types of these strategic
alliances, namely, informal international cooperative alliances, formal international cooperative
alliances, and international joint ventures.
i) Informal alliances are agreements between companies from two or more countries and they
are not legally binding.
ii) Formal international cooperative alliances usually require a formal contract with specifics
about what each company must contribute. The agreement then usually involves greater
commitment by each company with transfer of proprietary information. These forms have
become more popular in the high- tech industry because of the higher costs with internal
research and development.
iii) Joint venture. A more traditional self-standing legal entity that occurs when two or more
firms analyse the benefits of creating a relationship, pool their resources, and create a new
entity to undertake productive economic activity. A joint venture therefore involves the
sharing of assets, profits, risks, and venture ownership with more than one firm.

d. Direct foreign investment. A domestically controlled foreign production facility. A direct

foreign investment typically involves ownership of 10 to 25 percent of the voting stock in a
foreign enterprise. A firm can make a direct foreign investment by several methods.
i) Acquire an interest in an on-going foreign operation. This initially may be a minority
interest in the firm but enough to exert influence on the management of the operation.
ii) Obtain a majority interest in a foreign company. In such a case, the company becomes a
subsidiary of the acquiring firm.
iii) The acquiring firm may simply purchase part of the assets of a foreign concern in order to
establish a direct investment. An additional alternative is to build a facility in a foreign
country.

e. Licensing. An arrangement in which the manufacturer of a product (or a firm with proprietary
rights over certain technology or trademarks) grants permission to some other group or
individual to manufacture that product in return for specified royalties or other payments.
Foreign licensing covers myriad contractual arrangements in which the business (licensor)
provides patents, trademarks, manufacturing expertise, or technical services to a foreign business
(licensee). For developing an international licensing program, three basic types of programs are
available:
i) Patents. An intellectual property right granted to an inventor, giving him or her the
exclusive right to make, use, or sell an invention for a limited time period (usually 20 years).
ii) Trademarks. A distinctive name, mark, symbol, or motto identified with a company’s
products.
iii) Technical know-how.

9.2.2 Researching Foreign Markets

Before entering a foreign market, it is important to study the unique culture of the potential
customers. Different concepts of how the commodity is used, demographics, psychographics, and
legal and political norms are usually diverse from those in Kenya. Thus, it is important to carry out
market research to identify these necessary parameters.
a) Government regulations. Must you conform to import regulations or patent, copyrights or
trademark laws that would affect your commodity?
b) Political climate. Will the relationship between government and business or political events and
public attitudes in a given country affect foreign business transactions?
c) Infrastructure. How will the packaging, shipping, and distribution system of your export
commodity be affected by the local transportation system, for example, air, land or water?

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d) Distribution channels. What are the general accepted trade terms at both wholesale and retail
levels? What are the normal commissions and service agency charges? What laws pertain to
and distribution agreements?
e) Competition. How many competitors do you have and in what countries are located? On a
country by country basis, how much market share does each of your competitors have, and what
prices do they charge? How do they promote their commodities? What distribution systems do
they use?
f) Market size. How big is the market for your commodity? Is it stable? What is its size
individually, country by country? In what countries are markets opening, expanding, maturing,
or declining?
g) Local customs and cultures. Is your commodity in violation of cultural taboos? How can
entrepreneurial businesses learn about international cultures and therefore, know what is
acceptable and what is not? A number of approaches can be employed. One of the most helpful
is international business travel. This provides the individual with first-hand information
concerning cultural dos and don’ts. Other useful methods include training programs, formal
educational programs, and reading current literature.

9.2.3 Global Threats and Risks

Global markets may present dangers that must be monitored careful. The threats and risks affecting
entrepreneurs in global markets include:
a) Ignorance and uncertainty
b) Lack of experience in problem solving in foreign country
c) Lack of information about resources to assist solve problems
d) Restrictions imposed by the host country. Many host countries demand development of their
exports and insist on training and development of their nationals. They can also demand that
certain positions in management and technological areas be held by nationals. Many seek
technologically based industry rather than extractive industry. In other cases, the host country
may require that its own controlling interest and/ or limit the amount of profits or fees
entrepreneurs are allowed to take out of the country.
e) Political risks include unstable governments, disruptions caused by territorial conflicts, wars,
regionalism, illegal occupation, and political ideological differences.
f) Economic risks that require to be monitored include changes in tax laws, rapid rises in costs,
strikes, sudden increases in raw materials, and cyclical/ dramatic shifts in Gross Domestic
Product (GDP).
g) Social risks such as antagonism among classes, religious conflict, unequal income distribution,
civil wars, and riots.
h) Financial risks include fluctuating exchange rates, repatriation of profits and capital, and
seasonal cash flows.
i) Foreign government import regulations can affect a company’s ability to export successful.
These regulations represent an attempt by foreign nations to control their markets, to protect a
domestic industry from excessive foreign competition, to limit health and environmental
damage, or to restrict what they consider excessive or inappropriate cultural influence. Many
countries have import regulations that are potential barriers to exported commodities. Exporters
need to be aware of import tariffs and consider them when pricing their commodities. Nontariff
barriers such as prohibitions, restrictions, conditions, or specific requirements that can make
exporting commodities difficult and sometimes costly; also presents threats to venture in global
market.
j) Complication and bureaucratic red tapes that are associated with venturing in global markets.
k) Dependence on global market.
l) Foreign government instability that can cause problems for domestic companies.
m) Modification of the commodities before they are accepted to other countries.
n) Foreign cultures, customs, and languages.
o) Confiscation, expropriation, domestication and other government interference.

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MODULE TEN: CASES IN ENTREPRENEURSHIP

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