INSTITUTE OF SURVEY AND LAND MANAGEMENT ENTEBBE

BUSINESS MANAGEMENT (SLM2203) GUIDANCE NOTES

Course Content
1. Introduction; Types of business organizations, Organizational management, leadership
and motivation.

2. Entrepreneurship: Marketing and Production Functions

3. Business accounting.

4. Developing Project Proposals

Notes Prepared by;

Mr. John Nsamba
0773456422/0701456433
[email protected]

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INTRODUCTION

Business organization- A business is an organization that is involved in making, buying, selling

or supplying goods and services for monetary returns

Businesses are generally categorized according to their ownership, and this includes;

1. Sole Proprietorship
2. Partnership
3. Company

1. Sole Proprietorship
This is a business which is owned by one person. He/She manages the business personally or
with the family members. He or She may hire assistants and pays them wages. His/her major
sources of capital are his or her earnings and borrowing. This person enjoys all the profits and
suffers all the losses alone

Advantages of a Sole Proprietorship

1. It is easy to start once one has secured capital.
2. The owner has full control of the business and the decision process is quick.
3. The owner can easily develop direct personal contacts with the customers.
4. It encourages hard work since the owner enjoys all the profits and none is shared.
5. There’s high level of confidentiality about the affairs of the business.
6. In case of death of the owner, it can easily be transferred to the next of kin unlike
partnerships.
Disadvantages of a Sole Proprietorship
1. The owner has unlimited liability. I.e. when the business collapses, the owner is
responsible for all debts of the business which can lead to the sale of his or her personal
property since there’s no distinction between the owner and the business.
2. The owner is limited by capital since he or she has to raise all the necessary capital alone.
3. The business will collapse in case of death of the owner.
4. The owner is controlled by the business. He/she cannot get time to relax.

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 5. It may be hard to secure loans since financial institutions don’t trust individuals.
2. Partnership
Here two or more people share ownership of a single business. Capital is jointly owned and the
profits are shared on agreed proportions. They must have a partnership deed which spells outs
the share of capital contributed, how profits will be distributed and how the business will run.

Here each of the people involved is called a partner and the business is referred to as a firm
Types of Partnerships
1. General Partnership
Partners divide responsibility for management and liability as well as the sharing of profit and
loss according to their internal agreement.
2. Limited partnership and partnership with limited liability
Limited means that most of the partners have limited liability (to the extent of their investment)
as well as limited input regarding management decisions which generally encourages investors
for short term projects or for investing in capital assets.
3. Joint venture
Acts like a general partnership, but is clearly for a limited period of time or a single project. If
the partners in a joint stock venture repeat the activity, they will be recognized as an ongoing
partnership.
A partnership can have a minimum of 2 and a maximum of 20-50 members.
In Uganda partnerships are governed by the Partnership Act Cap 86
Terms of a Partnership deed
 The name and purpose of business.
 Location of business and commencing date
 Name, Address and occupation of each partner.
 Capital to be contributed and in what ratios.
 Remuneration of partners
 The sharing of profits and losses
 Duties and rights of each partner
 Admission, withdrawal and expulsion of partners.

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Types of Partners
1. General partner – has unlimited liability for the firm’s debts
2. Limited partner – has limited liability in the partnership
3. Quasi Partner – he is presented public as a partner/ the firm uses his name although he
contributes no capital and does not participate in the management of the firm.
4. Minor partner – a person serving as a partner while under the age of 18 years. His
liability is only limited to his capital and upon attaining 18 years he will rank as an active
partner with unlimited liability.

Advantages of a Partnership
1. It is easy to form compared to companies which require a lot of formalities
2. It is easy to raise additional capital since it comprises of more than one person
3. There’s a broader management base as partners have different levels of expertise hence
increased performance and profitability.
4. Losses and liabilities are shared equally amongst and between partners,so,no burden is
placed on one person. The spreading of risk encourages other persons to join the
partnership.
5. Prospective employees will be attracted to the business if given the incentive to become
partner.
Disadvantages of a Partnership
1. The liability of partners is unlimited so their personal properties can be attached if assets
cannot cover the debts.
2. There’s difficulty in reaching decisions since all the partners have to be consulted. The
firm may loose many opportunities.
3. All the partners are affected by the mistake of one in decision making.
4. The fact that profits are shared reduces the amount received by each partner.
5. The partnership may have a limited lifetime; it may end upon death or withdraw of one of
the partners.

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 3. Company
Types of companies
a) Statutory companies
These are created by an Act of Parliament. The powers and functions are defined by the
Act that creates them and are not required to have an AOA and MOA.
b) Government companies
A company of which not less than 51% of the paid up capital is held by the central
government
c) Foreign Company
A company incorporated outside the country but with a place of work in that country.
d) Registered companies
They are those that are formed, registered and operate under the Company’s Act of
Uganda Cap 85 and their AOA and MOA.
They can further be classified as
 Public
 Private
 Limited andUnlimited companies

 Public companies
 They have a minimum membership of 7 and the maximum is infinite
 They can offer shares to the public
 The shares are full and freely transferable
 Presentation of audited books is compulsory.
 The minimum number of directors is 2
 They may have limited or unlimited liability.
 Private Limited Companies
 The minimum membership is 2 while the maximum is 50
 Their shares are not freely transferable
 They cannot offer shares to the public
 They must have at least one director

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  Presentation of prospectus and audited books is not compulsory for private
companies.
 Limited and Unlimited Companies
 In a limited company, the liability of members is limited to a stated amount
usually the face value of the shares a member holds in the company.
 In unlimited companies, the liability of members is unlimited like those of sole
traders and general partners.
 Limited by guarantee
They have no share capital and so the liability of the members is limited to the sum
guaranteed by them.

Advantages of Companies
1. Limited liability
2. Shares are freely transferable
3. Continuous existence
4. Great ease of raising capital
5. Specialized management
6. Economies of scale

Disadvantages of Companies
1. So many legal restrictions
2. Costly and time consuming in formation
3. Lack of secrecy
4. Slow and expensive decision making
5. Direct control by owners is not possible- shareholder (owners) do not control the
company directly as effective control rests with the board.
6. Many taxes.

Class Work; Distinguish between a company and a partnership

Before deciding what type of business to start, you should consider the following aspects.
1. Protection of family assets and investments

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 2. Management control
3. Avoiding family disputes
4. Flexibility of decision making
5. Succession of children and other family members to management
6. The nature of the business to be operated
7. The nature of the asset to be held
8. The number of owners involved
9. Estate planning and gifting of assets
10. Who may legally obligate the business?
11. Effect upon an owner’s death or departure
12. The need for start-up funding
13. Taxation
14. Privacy of ownership
15. Consolidation of assets and investments

Leadership, Management and Motivation in Business

Leadership
This is the skill of inspiring people with a meaningful vision of the organization and of providing
the necessary support to make that vision a reality.
Simply Leadership is the ability to influence others to carry out what you want
Management
Gulick in 1937 defined management as an art or science of planning, organizing, directing
staffing and coordination.
Management can also be defined as the skill of creating an environment that allows the
individual to reach their full potential in pursuit of organizational objectives
Or the process by which scarce resources are combine to achieve given ends. Management is
practice and not philosophy

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The four classic functions of management include; Planning, Organizing, Leading, and
Controlling.

1. Planning
Running an organization is kind of like steering a ship on the ocean; to get where you want to go,
you’ve got to have a plan, a map that tells you where you’re headed. It’s the job of managers to
develop the plans that determine the goals an organization will pursue, the products and services
it will provide, how it will manufacture and deliver them, to whom, and at what price. These
plans include creating an organizational vision and mission and specific tactics for achieving the
organization’s goals.
2. Organizing
After managers develop their plans, they have to build an organization that can put these plans
into effect. Managers do this by designing organizational structures to execute their plans (often
building elaborate organizational charts that divide an organization into divisions, departments,
and other parts and designate the people who reside in each position) and by developing systems
and processes to direct the allocation of human, financial, and other resources.
3. Leading
Managers are expected to lead their employees, that is, to motivate them to achieve the
organization’s goals quickly and efficiently.
Leadership is considered by many to be the most important ingredient for a manager’s success.
Great leaders can make great things happen, inspiring their employees to do extraordinary things
and accomplish extraordinary goals
4. Controlling
To accomplish their goals and the goals of the organization, managers must establish
performance standards based on the organization’s goals and objectives, measure and report
actual performance, compare the two, and take corrective or preventive action as necessary.

The new functions of management that tap into the potential of all employees are:
• Energize
Today’s managers are masters of making things happen.
The best managers create far more energy than they consume. Successful managers create
compelling visions; visions that inspire employees to bring out their very best performance and
they encourage their employees to act on these visions.

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 • Empower
Empowering employees doesn’t mean that you stop managing. Empowering employee’s means
giving them the tools and the authority to do great work. Effective management is the leveraging
of the efforts of your team to a common purpose. When you let your employees do their jobs,
you unleash their creativity and commitment.
• Support
Today’s managers need to be coaches, counselors, and colleagues instead of watchdogs or
executioners. The key to developing supportive environment is the establishment of a climate of
open communication throughout the organization. Employees must be able to express their
concerns - truthfully and completely- without fear of retribution. Similarly, employees must be
able to make honest mistakes and be encouraged to learn from those mistakes.
• Communicate
Communication is the lifeblood of every organization.
Information is power, and, as the speed of business continues to accelerate, information the right
information must be communicated to employees faster than ever. Constant change and
increasing turbulence in the business environment necessitate more communication, not less
information that helps employees better do their jobs, information on changes that can impact
their jobs, and information on opportunities and needs within the organization.

Differences between a Manager and a Leader

MANAGER LEADER
1. Administers Innovates
2. Focuses on systems and structures Focuses on people
3. Manages resources Leads people
4. Has a short range view Has a long range perspective
5. Has his eye on the bottom line Has his eye on the horizon
6. Imitates Originates
7. Accepts the status quo Challenges it

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Motivation
The most important things managers can do to develop and maintain motivated, energized
employees have no cost, but rather are function of how employees are treated on a daily basis.
The following items are ranked in priority order and are some of the things today’s employees
indicate are most important to them:
• Praise; personal, written, electronic, and public
Although you can thank someone in 10 to 15 seconds, most employees report that they’re never
thanked for the job they do especially not by their manager. Systematically start to thank your
employees when they do good work, whether one-on-one in person, in the hallway, in group
meeting, on voice mail, in a written thank-you note, on email, or at the end of each day at work.
Better yet, go out of your way to act on, share, and amplify good news when it occursevenif it
means interrupting to thank them for a great job they’ve done.
By taking the time to say you noticed and appreciate their efforts, those efforts and results will
continue.
• Support and involvement
How well you provide information employees need to do their jobs, how well you support your
employees when they make mistakes, how well you involve employees when making decisions,
and whether you ask your employees for their opinions and ideas create the foundation for this
item. Employees want more than ever to know how they are doing in their jobs and how the
company is doing in its business. Involving employees is both respectful and practical: You
increase their commitment and ease in completing the work and implementing changes and new
ideas.
• Autonomy and authority
Employees value being given room to do their work as they best see fit. Allow employees to
decide how best to do their work, give them increased job autonomy and authority, allow them to
pursue their ideas, or give them choice of assignments whenever possible. These elements all
allow autonomy and authority to flourish and provide a powerful motivation to employees. The
ultimate form of recognition for many employees is to have increased autonomy and authority to
get their job done, including the ability to spend or allocate resources, make decisions, or manage
others. Greater autonomy and authority means, “I trust you to act in the best interests of the
company, to dose independently, and without the approval of me or others.” Increased autonomy

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and authority should be awarded to employees as a form of recognition itself for the past results
they have achieved.
Autonomy and authority are privileges, not rights, which should be granted to those employees
who have most earned them based on past performance and not based on tenure or seniority.
• Flexible working hours
Time is the new currency for today’s employees, who expect work to be an integrated part of
their lives not their entire lives. With technology today, work is increasingly becoming a state of
mind rather than palace to be. Consider allowing top performers to leave work early when
necessary, have flexible working hours, earn time off formwork, and have comp time for extra
hours worked. Today’s employees value their time and their time off. Be sensitive to their off-
schedule needs, whether they involve family or friends, charity or church, education, or hobbies,
and provide flexibility whenever you can so they can meet those obligations. Time off may range
from an occasional afternoon off to attend a child’s play at school or the ability to start the
workday an hour early so they can leave an hour early. By allowing work to fit best with
employees ‘life schedule, you increase the chances that they’ll be motivated to work harder
while they are at work and to do their best to make their schedule work. As long as the job gets
done, what difference does it matter what hours they work?
• Learning and development
Today’s employees highly value learning opportunities in which they can gain skills that can
enhance their worth and marketability in their current job as well as future positions. Find out
what your employees want to find out, how they want to grow and develop, and where they want
to be in five years. Give those opportunities as they arise and the ability to choose work
assignments whenever possible. When you give employees choices, more often than not they’ll
rise to meet or exceed expectations.
Do you support and encourage employees to learn new skills, discuss career options with them,
allow them to participate in learning activities, and discuss what they’ve learned after completed
projects and assignments?
• Manager availability and time
In today’s fast-paced world of working which everyone is expected to get more done faster, an
employee’s personal time with his or her manager is in itself also form of recognition. As
managers are busier, taking time with employees is even more important. The action says: “Of

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all the things I have to do, one of the most important is to take time to bewitch you, the person or
persons I most depend on for us to be successful.”Especially for younger employees, time spent
with their manager is a valued form of validation and inspiration, as well asserting a practical
purpose of learning and communication, answering questions, discussing possibilities, or just
listening to an employee’s ideas, concerns, and opinions.

ENTREPRENEURSHIP

Entrepreneurship is an economic term describing the process of bearing the risk of buying at
certain prices and selling at uncertain prices.
 It’s the concept of bringing together the factors of production.
 It also involves the creation of new enterprises and the entrepreneur is the founder.

An entrepreneur is a person who perceives the market opportunity and then has the motivation,
drive and ability to mobilize resources to meet it.
 Comes up with a new idea or product.
 Devises better ways of doing the same thing.

The 10 Personal Entrepreneurial characteristics of an entrepreneur

1. They are goal oriented.
2. They are committed to their business and work really hard to get the business up and
running.
3. They thrive on uncertainty.
4. They continuously look for opportunities to improve.
5. They are willing to take risks.
6. They are willing to listen and learn.
7. They have good people skills.
8. They are creative and innovative.
9. They have a positive attitude and approach.
10. They never give up.

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Starting a business; Points to consider
Step 1:Research about the timeliness and salability of the business you want to start
It’s not enough that you do not have a competitor to ensure success. In fact the lack of
competition may just be a sign that the business you want to start is not ripe for the
market yet. May be you can start with a time tested and proven business activity
Step 2:Check your financial capabilities
A business can be expensive to start in terms of infrastructure and man power. You have
to prepare for the leaner period especially during the early months because most
businesses start out with losses before making profits.
Step 3:Surround yourself with the right people
You need to get the right people to compliment you where you fall short in certain skill
sets such as marketing, production or investment skills. Surrounding yourself with the
right people is the key to success in any business.
Step 4:Pick a location for your start up.
There’s a difference between starting your business in Kampala and Entebbe. Finding the
right location is critical.
Step 5: Create a brand
Branding your business should be one of your top priorities. A brand is what people will
remember of you and your business and a well known brand is free advertising power in
business.
Step 6:Formulate goals
No business will last long if goals are not set from the start. Your goal should follow the
fundamentals of a marketing plan; and it could change as you achieve one goal at a time.
Never stop setting short and long term goals to achieve as you operate your business

Challenges of doing business in Uganda

1. High levels of government corruption
2. Poor infrastructure
3. Lack of skilled human resource
4. Strict terms for obtaining loan financing and very high interest rates.
5. Lack of electricity in rural areas does not allow value addition to agricultural products

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 6. High taxes.
Class work: Research more on the challenges of doing business in Uganda.

THE PRODUCTION FUNCTION

Production
This is the creation of goods and services to satisfy the wants of man.
Types of Production
1. Direct production
It involves producing commodities for one’s own use in the family, for example teaching your
own children, making your own knife.
2. Indirect production
It involves producing goods or services for exchange in the market. This is when one produces
goods that he needs in excess or goods that he does not need himself but is needed by others.

Levels of Production
Commodities are produced at different levels/stages. Sometimes they are used immediately after
the first level without going to the next level/stage.
1. Primary Production
This refers to the extraction of raw materials from nature e.g. farming, hunting, lumbering,
mining, etc.
The material is used as it is got from nature
2. Secondary Production
This refers to transforming the raw materials into commodities ready for use. This is the creation
of utility/value addition to the raw material. It includes processing, manufacturing, construction
which involves change of form.
3. Tertiary Production
This is the production of services, which may be personal (direct) or commercial services. Direct
services include services of a doctor, teacher, lawyer, musician etc while those that are to
facilitate trade e.g. transportation, insurance, banking and advertising.

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Factors of Production

These are resources used to produce goods and services. They are also called inputs in
production.
1. Land (Natural resources)
Land is anything that exists naturally on, under or over the surface of the earth. It includes soils,
minerals, natural forests, air, and water and land surface.
The reward for using land is rent.
2. Capital

Physical resources that assist the human labor in the production process for example money,
equipment, vehicles, and machines. It also refers to the stock of goods that exists at a given time.

3. Labor (Human resources)

Any human effort (mental or physical) directed towards the production of goods and services
 It may be acquired through training or inherited
 Labor can be skilled, semi skilled and unskilled.
 Labor is rewarded with wages/salaries.

4. Entrepreneur
This is one (individual or organization) who under takes the risks and tasks.
 He is a coordinator, risk taker, innovator and a high decision maker.
 He is rewarded positively or negatively with profit or loses

Invention – Is the discovery of new methods of production

Innovation – Is the use of new methods of production

Pre- production decisions

There are three main designs that need to be undertaken:
i. Product design
This involves determining whether the product to be produced will be needed by the customers.
The product characteristics are examined like: size, shape, color, texture and weight. Costs
involved should also be considered.
ii. Plant location

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This decision is about where the plant should be located. A number of issues may be considered
like:
 Raw materials
 Market
 Transport and communication facilities
 Fuel and power
 Labor supply(cost, skills needed and attitudes of workers)

The above five factors are primary. Secondary factors include

 Industrial atmosphere
 Soil and climate
 Personal factors
 Historical factors
 Political stability
 Zoning regulations

iii. Plant layout

This deals with the physical positioning of the facilities including machines, people and materials
in the most efficient manner in the building or the site.

Plant layout is influenced by the following factors;

 Type of production process
 Production procedure or sequence
 Quantity and quality of the final product
 Staff safety
 Storage and service area facilities.

Production planning and control

Production planning refers to determining the future levels or limits of manufacturing operations
in an organization.
It involves the following activities;

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  Setting plant and equipment capacities
 Setting possible production targets depending on the available capacity
 Deciding on the size of the labor force
 Setting desired levels of inventory

Importance of production planning

 Facilitates carrying out of production in the best manner and the right quality of goods at
the proper time
 Establishes the firm’s ability to produce the product and meet the consumer needs.
 Setting inventory level, policies involving determining how much money will be held up
in the inventory
Production control
This refers to keeping the operation within established standards and taking corrective action
where the actual activities are deviating significantly from the established targets.
Plant maintenance
This is the keeping of the building and the equipment in a satisfactory condition according to
plant operational requirements and standards set by management.
Methods of plant maintenance
 Corrective maintenance (when the plant has broken down)
 Preventative maintenance (regular serving)
 Perfective maintenance (improving the plant capacity)

Product Development

Product
Anything of value that can be offered to a target audience or market segment's needs and wants
for purpose of creating attention, for sale or acquisition, for use or consumption.

Product Forms:
i. Physical object – that can be touched, seen or felt
ii. Person – political candidate
iii. Places- vacation resorts

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 iv. Organizations – rotary, lions
v. Services – hotels, insurance
vi. Ideas – family planning

What is the buyer really buying?

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The Product Life Cycle
This is a model which suggests that sales of a product grow and mature and then decline as the
product becomes obsolete and customer demands change. It is the pattern of demand for a
product over time.
It is a framework of what may happen. It is not a law prescribing what may happen.
It involves the following stages:
i. Introduction
ii. Growth
iii. Maturity
iv. Decline

Introduction Stage
This is the period the product is being formally introduced into the market. This is the period of
very low sales performance during the first few months to one year.
Many companies normally pursue an investment- spending strategy in creatively promoting and
distributing the new product to market. An accepted industry practice for new products is
consignment or initial up to target outlets at liberal credit terms or through an inventory
financing scheme of paying only actual units consumed, and stock replenishments, based on
what has been sold or moved out.

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Growth Stage
This is the period of increasing sales and profits performance because the new product has
entered the growth stage. It has also tremendously gained wide acceptance, patronage, and repeat
sales in bigger volumes from either the present or new markets being served.
Maturity Stage
This is a period characterized by the slowing down of the product’s sales volume, reaching a
plateau or remaining at constant volumes, which may be attributed to many similar products
competing in the same market segment or significant competitors' activities pouring in heavy
investments, searching to gain control of the desired market segment at all costs.

4 strategies for products in the maturity stage:

• Roll-back of prices by way of additional discount, offering of product deals in the form of
free goods, additional allowance or subsidies.
• Increased advertising and other promotional support for the product.
• Increase Research and Development (R&D) budgets
• Periodically modifying the market, the product and the over-all marketing mix, to closely
keep up with fast changing trends in the marketplace

Decline Stage
This is a period characterized by continuous drops in sales volume of most, if not, all product
formats and brands, at a low level for many years.
The sales decline may be attributed to several factors such as:
• Rapid technological advances
• Changing consumer preferences for tastes, flavors and colors
• Adherence to safety and efficacy, strong preference for tamperproof and tamper-resistant
packaging.
• Price consciousness due to inflation and deteriorating purchasing power.

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MARKETING FUNCTION

Marketing
This is a social and managerial process by which individuals and groups obtain what they need
and want through creating and exchanging products and value with others. (Kilter &Armstrong
1987) Or;
This is a management process which identifies, anticipates and supplies customer requirements
efficiently and profitably.
• It is a means of trying to ensure beforehand that goods produced or services offered
conform to what potential customers want and will buy.
• Marketing deals with customer’s needs and how to satisfy them.

A market is an arrangement where buyers and sellers meet to exchange goods or services.
Markets consist of all actual and potential buyers of a product or service sharing a particular
need or want, which might be willing and able to engage in exchange to satisfy that need or
want.

Marketing activities may include the following;

• Selling – usually concerned with those activities aimed at making a sale to the customer
like product delivery, order taking, building up goodwill etc
• Gathering market information (market research)
• Distribution of the product to the customers

Class work; Does marketing and selling mean the same thing?

The marketing Department

This is the part of the organization that deals with the marketing function. It oversees all the
marketing activities. It is headed by the marketing manager.

The marketing manager may have the following function;

1. Advising on the marketing policy
2. Creating and maintaining demand
3. Planning the marketing activities of the organization

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 4. Reviewing the organization’s market through market research
5. Sales promotion activities like advertising, pricing policy, discounts and credit terms
6. Preparing the sales budget in liaison with other officers
7. Control of distribution, like selecting channels of distribution, warehousing and transport
facilities.
8. Control of personnel in the sales and marketing department

Market Segmentation
This is the process whereby the market is divided into groups or segments according to one or
more characteristics (factors) that affect the ability and willingness to buy a product.
The purpose is to single out from the total market a group of persons who appear to have
relatively similar tastes in order to create a marketing mix that meets their wants.

Factors/characteristics to consider for marketing segmentation

• Geographical area • Level of education
• End use • Occupation
• Age • Religion
• Sex (gender) • Ethnic background
• Family size • Lifestyle
• Level of income • Social class
Class work; What are the benefits of Market segmentation

Marketing Research
This can be defined as the objective of gathering, recording and analyzing of all facts about
problems relating to the transfer and sales of goods and services from the producer to consumer
or user.
Marketing research is concerned specifically about marketing processes while market research
is concerned specifically with markets
Marketing research is often partitioned into two sets of categorical pairs, either by target market:
i. Consumer marketing research and
ii. Business to business marketing research

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Or, alternatively, by methodological approach
i. Qualitative marketing research.
ii. Quantitative marketing research.

Consumer marketing research

This is a form of applied sociology that concentrates on understanding the preferences, attitudes
and behaviors of consumers in a market based economy, and it aims to understand the effects
and comparative success of marketing campaigns.

Qualitative marketing research

This is generally used for exploratory purposes; small number of respondents is selected to
represent the whole population e.g. focus groups, in-depth interviews and projective techniques

Quantitative marketing research

This is generally used to draw conclusions such as testing a specific hypothesis using random
sampling techniques so as to infer from the sample to the population. It involves a large number
of respondents. E.g. surveys and questionnaires.

The task of marketing research is to provide management with relevant, accurate, reliable, valid,
and current information. The role marketing research in managerial decision making is explained
using the framework “DECIDE” model:
D – Define the marketing problem
E – Enumerate the controllable and uncontrollable decisions
C – Collect relevant information
I – Identify the best alternative
D – Develop and implement a marketing plan
E – Evaluate the decision and the decision process

The model conceptualizes managerial decision making as a series of six steps. The decision
process begins by precisely defining the problem or opportunity, along with the objectives and
constraints. Next the decision factors that make up the alternative courses of action (controllable

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factors) and uncertainties (uncontrollable factors) are enumerated. Then relevant information on
the alternatives and possible outcomes is collected. The next step is to select the best alternative
based on chosen criteria or measures of success. Then a detailed plan to implement the
alternative selected is developed and put into effect. Last, the outcome of the decision and the
decision process itself are evaluated.

Marketing research characteristics

1. Systematic
Systematic planning is required at all stages of the marketing research process. The procedures
followed at each stage are methodologically sound, well documented and as much as possible
planned in advance.

2. Objective
It attempts to provide accurate information that reflects a true state of affairs. It should be
conducted impartially. It should be free from the personal or political biases of the researcher or
management. Ethical considerations are critical.
3. Identification, collection, analysis and dissemination of information
Each phase of this process is important. We identify or define the marketing research problem or
opportunity and then determine what information is needed to investigate it, and inferences are
drawn. Finally the findings, implications and recommendations are provided in a format that
allows the information to be used for management decision making and to be acted upon
directly.

The marketing mix

This is a set of controllable variables and their levels that the firm uses to influence the target
markets. The mix comprises of four key elements namely the products, the place, the price and
the promotion (4Ps)
In the service industry, besides the 4Ps, we add three more Ps, namely people, processes and
physical evidence.
The marketing mix is a framework in which the customer and the business deal with each other

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 Product Place
Organization
Customer sales
Buys product
Satisfaction Price Promotion

i. Product
This looks at what is being sold. In a physical product, the following may be looked at:
 Design of the product, e.g. shape, size.
 Features of the product
 Quality and reliability
 After sales service, if necessary.
 Packaging.
Products may be distinguished in the following:
 Product class (e.g. cars and electronics)
 Product form (e.g. domestic or industrial)
 Band/make (e.g. Dell,Sony,Toshiba)
ii. Price
Cost related issues to the customer or revenue to the seller issues to look at may include
the following;
 Competitors prices
 Discounts
 Payment terms
 Response to the customer e.g. high price means high quality.
iii. Place
This deals with how the product is distributed, how it reaches its customers. It may look
at the following:
 Where it is sold
 Location of warehouse.

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 iv. Promotion
This includes all communication with the customer and includes activities like
advertising, publicity, public relations and sales promotion. The major intention of the
organization is to have their products more liked by the customers.
The aims include the following:
 Arousing attention
 Generating interest
 Inspiring desire
 Initiating action i.e. buy the product

Branding

A Brand; This is a name, sign, symbol, design or combination of these, intended to identify the
goods or services of one seller or group of sellers and to differentiate them from those of
competitors.

Brand Name; is the part of a brand that can be vocalized, is utter able. E.g.: Colgate, Shell,
Nissan etc.
Brand Mark– is the part of a brand which can be recognized but is not utterable such as its
symbol, design, or distinctive coloring or lettering. Example: Windows

Branding– is the process of giving identity to a product. It simplifies buying decisions,

eliminates confusion in choice of products, helps in the recall forty-media advertisements,
enhances product positioning, and speeds up ordering, invoicing and delivery.

Qualities for a Brand Name

1. It should closely suggest something about the product’s benefits and qualities that the
product’s benefits and qualities that the intended markets could associate with easily.
2. It should be easy to pronounce, recognize and remember.
3. It should be distinctive to readily arrest attestation.

Branding is done for the following reasons;

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 1. Form of product differentiation to create customer loyalty.
2. Create separate product identity.
3. Ready acceptance of a manufacturers goods by middlemen
4. Facilitates self selection of products
5. Reduces the importance of price differentiations between goods
6. Gives manufacturer more control over marketing strategy and choices of channel of
distribution
7. Eases the task of personal selling.

Marketing Philosophies or orientations or concepts

The firm must decide on the philosophy (ideology or way of thinking) that should guide the
firm’s marketing efforts. There are five alternative concepts:
1. Production concept
2. Product concept
3. Selling concept
4. Marketing concept
5. Societal marketing concept.
1. The Production concept
This states that consumers will favor products that are available and highly
affordable; therefore, management should focus on improving production and
distribution efficiency.
This philosophy is useful when the demand for the product exceeds the supply,
management should look for ways to increase production and when the product’s cost
is too high, improved productivity is needed to bring it down.

2. The Product concept

This states that consumers will favor products that offer the most quality,
performance and innovative features. Therefore an organization should devote energy
to making continuous product improvements.

3. The selling concept

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 This states that consumers will not buy enough of the organization’s product unless it
carries out a large- scale selling and promotion effort. This is typically practiced with
unsought goods or those that buyers do not normally think of buying such as
dictionaries, insurance etc.

4. The Marketing concept

This states that achieving organizational goals depends on determining the needs and
wants of the target markets and providing the desired satisfactions more efficiently
and effectively than the competitor’s e.g. telecom companies.
The selling concept and the marketing concept are sometimes confusing. The selling concept
takes an inside-out approach. It starts with the factory, focuses on the company’s existing
products, and calls for heavy selling and promotion to obtain profitable sales. It focuses heavily
on winning customers in order to get short term sales with little concern about who buys or why.

The marketing concept takes an outside-in approach. It starts with a well-defined market, focuses
on customer needs, coordinates all the marketing activities affecting customers, and makes
profits by creating long – term customer relationships based on customer value and satisfaction.
5. The Societal marketing concept
This states that the organization should determine the needs, wants and interests of
the target market. The organization should then deliver high value to customers in a
way that maintains or improves the customer’s and society’s well being.

Pricing Strategies
i. Premium pricing
Here you use a high price where there is uniqueness about the product or service. This
approach is used when a substantial competitive advantage exists.
ii. Penetration pricing
The price set for products and services is set artificially low in order to gain market share.
Once this is achieved, the price is increased. E.g. telephone companies entering a new
market.
iii. Economy pricing

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 The cost of marketing and manufacture are kept at a minimum. Supermarkets often have
economy brands for soaps, spaghetti.
iv. Price Skimming
Charge a high price because you have a substantial competitive advantage. However the
advantage is not sustainable.
v. Psychological pricing
This approach is used when the marketer wants the consumer to respond on an emotional,
rather than rational basis. E.g. a phone of Shed 39,900/= instead of Shed 40,000/=.
vi. Product line pricing
Where there is a range of product or service the pricing reflects the benefits of parts of
the range. E.g. car washes; basic wash could be shs.10, 000/=, wash and wax 20,000/=
and the whole package at Shed 28,000/=
vii. Optional product pricing
Companies will attempt to increase the amount a customer spends once they start buying.
Optional extras increase the overall price of the product or service. E.g. airlines will
charge for optional extras such as guaranteeing a window seat or reserving a row of seats
next to each other.
viii. Captive product pricing
Where products have compliments, companies will charge a premium price where the
consumer is captured. E.g. a razor manufacturer will charge a low price for and recoup its
margin and more from the sale of the only design of blades which fit the razor.
ix. Product bundle pricing
Here sellers combine several products in the same package. This also serves to move old
stock. E.g. CDs and DVDs.
x. Promotional pricing
Pricing to promote a product such as buy one get one free.
xi. Geographical pricing
This is evident where there are variations in price in different parts of the world. E.g.
rarity value, or where shipping costs increase price.

xii. Value pricing

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 This approach is used where external factors such as recession or increased competition
force companies to provide value products and services to retain sales e.g. value meals at
Café Java’s.

BUSINESS ACCOUNTING
Introduction
Accounting is the process of recording, reporting and interpreting financial information
pertaining to an organization.
It involves identifying, measuring and communicating financial information to facilitate
informed decisions by users of the information.
The users of the financial information can either be internal or external to the organization.
External users include investors, creditors (lenders and suppliers), and government. Internal users
are mainly managers of the business organizations.

The Accounting process can be summarized as follows;

Records

Report
Transaction

Interpretation of financial
Decision making (external statements
and internal users

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Basic concepts( accounting principles that govern the preparation or presentation of
finicial)
1. Transaction
A transaction refers to any economic activity or event that affects the financial condition of a
business and must be entered into the accounting records.
There are two types of transactions;
 Cash transactions – All transactions for which immediate payment is made.
 Credit transactions – All transactions for which payment is postponed to a future date.
2. Book keeping
This refers to the accurate and systematic recording of transactions of a business.
3. Accounting entity
A business is a separate entity from its owner. As such a business is an accounting entity. This
means that all financial information relating to the business is recorded and reported separately
from the owner’s personal financial information. The only time personal resources interface with
business accounting records is when the owner brings in personal property or money as new
capital into the business or when he withdraws cash from the business as expenses.
4. Going concern
This is the principle of continuity of a business entity. In accounting, it is always assumed that a
business entity will continue to operate indefinitely.
5. Money measurement
Money is used as the basic measuring unit for financial reporting. Economic events are identified
and measured in financial terms. An event that cannot be measured in monetary terms is not
considered part of accounting data. Such events may include motivational levels of staff,
inefficient management, poor working conditions, etc. They are usually measured in qualitative
terms and are also important in making business decisions.
6. Historical cost
All transactions of a business entity are recorded at the original cost to the enterprise. This is
because such a cost can be verified objectively through documentary evidence. This means a
piece of land purchased years ago is still recorded at its original cost even though its value is
considerably higher now. This practice is based on the assumption that business is an ongoing
concern and is not likely to be liquidated, so the market value is not relevant.

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 7. Accounting period
For purposes of preparing financial reports, the life of a business is divided into specified
periods of time. Such a period is referred to as the accounting period. It may be a month,
half a year, a year or any length depending on the volume and nature of business. The
accounting period is useful for instance in determining profit or loss for that period. Only
those transactions during that period that affect the profit and loss of the business are
taken into account.
8. Objectivity
The evidence that a business transaction has taken place and the details pertaining the transaction
are contained in a source document. There must always be objective verifiable evidence for
reporting any accounting information. Source documents are examples of objective evidence of
transactions that have taken place. These documents include receipts, cheques and vouchers.
Each source document initiates the process of recording a transaction in all accounting entries are
supported by these source documents.
9. Consistency
It is important that once a particular accounting method is adopted, it must not be changed from
period to period. The same accounting method should be applied in cash accounting period when
preparing financial reports. Consistency in accounting methods is observed to prevent missing
profits arising from different accounting methods, from being reported.
10. Prudence
Prudence must be observed when reporting all accounting information. Cautious accounting
practices are observed so that neither assets are overstated nor liabilities are understated. Usually
for that reason, closing stock is always valued at a lower cost or market value so that profits are
not overstated during the current period.
11. Accrual concept
Revenue is recognized when it is earned and expenses when they are incurred. Revenue is earned
when goods are sold or whenever services are offered, and whether payment has been received
or not, the earned revenue must be accounted for under the accrual concept of accounting.
Similarly, the costs that are incurred to produce the revenue are recognized even though payment

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has not been made yet. Expenses owed are referred to as accrued expenses and are added to
expenses that have been paid to give the total expenses incurred for the accounting period.
12. Matching principle
Revenue earned during an accounting period has to be matched with expenses associated with
earning that revenue. This is based on the accrual concept of accounting. This is necessary to
arrive at the true profit for the specific period. Thus the accrued revenue and expenses are
recorded in the matching process, while revenue received and not yet earned, and expenses paid
not yet incurred should be left out of the matching process. An example of revenue received not
yet earned is advance payment. An example of expenses paid not yet incurred is rent paid a
period beyond the accounting period.

The Accounting cycles

The accounting cycle goes through several stages of systematic recording, starting from the
documentation of transactions and ending with the preparation of financial statements.
Steps include;
i. Document – Transactions are analyzed by examining source documents such as invoices,
receipts and vouchers.
ii. Journal – Details of various source documents are entered into various journals (books
of original entry).
iii. Ledger – Journal entries are posted to the various accounts in the ledger.
iv. Trial balance – Trial balance is prepared to check the accuracy of entries made in the
ledger
v. Adjustments – These are made to the accounts to comply with accounting concepts.
vi. Closing Accounts – Ledger accounts are closed and the closing stock valued.
vii. Preparation of financial statements – financial statements are prepared, analyzed and
interpreted. The main ones include trading profit and loss accounts, and the balance sheet.

Note: Source documents are documents that provide evidence that a business transaction has
taken place and also the details pertaining to that transaction

The Accounting Equation

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The accounting equation originates from the concept of the accounting entity, which regards a
business as a separate and distinct from the owner and other parties. If one invests say
UGX1Million in a business, he will have created a new entity, the business entity, with assets
worth UGX1Million. At the same time, the business entity will have incurred a liability or debt
of UGX1Million to the owner. This follows from the assumption that the business and the owner
are two separate and distinct entities. The capital or funds provided by the owner represents the
owner’s equity, his financial interest or claim upon the assets of the business. At this stage the
relationship of the assets and the owner’s equity can be expressed as;

Assets = Owner’s Equity

In reality, other people apart from the owner usually also supply some of the startup funds for the
business. When contributions are considered, the accounting equation can be completed thus;

Assets = Liabilities + Owner’s Equity

Assets –These are items of value owned by the business. They consist of property of all kinds
like buildings, machinery, vehicles, stock, debtors (amount owed by customers), cash at bank
and cash in hand.
Liabilities – These are debts owed by the business to external parties. A business incurs
liabilities when it purchases items on credit or when services previously rendered to the business
have not been paid for by the business (accrued expenses). Liabilities are also incurred when the
business borrows money in form of loans, overdraft (a facility where an account holder is
allowed to withdraw money which is not on his bank account) etc.
Owner’s Equity – The funds of a business provided for by the owners. It is the amount of the
owner’s interest in the business

The Balance Sheet

This is a financial statement that lists all the assets and owner’s equity and liabilities at a given
time. It is a detailed expression of the accounting equation. It generally shows the financial
position of a business with respect to its assets, owner’s equity and liabilities.

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For instance, suppose for a business where the owner invested UGX1Million, and borrows an
extra UGX200, 000/=. At the time the balance sheet will appear thus;

Balance sheet as at March 11th, 2013

(Ugx) (Ugx)
Assets Owner’s Equity
Cash 1,200,000 Capital 1,000,000

Liabilities
Loan 200,000

1,200,000 1,200,000

The balance sheet totals must balance because assets will always be equal to owner’s equity plus
liabilities as given in the accounting equation.

Business Transaction Records

Accounts
An account is part of the accounting system used to classify and summarize the increases,
decreases and balances of each asset, liability and owner’s equity. An account is kept for each
item to keep account of changes to that item. All accounts are kept in a book called a ledger.

Class work: Research about the different account formats we have ie. The T format and
columnar formats

Conventions of records in accounts

On the T-account format, increases are recorded on one side while decreases are recorded on the
other side of the account. The recording is guided by the format of the balance sheet, with assets
on the left hand side, and liabilities and owner’s equity on the right hand side.

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When liabilities are paid off and or profits are given out to the owner, the account is debited in
effect. Such a transaction is entered as a debit and has an effect of decreasing liabilities and or
owner’s equity. When liabilities and owner’s equity are recorded on the debit side the assets are
recorded on the credit side and vice versa in order to keep the accounting equation in balance.
Because the decrease in liabilities and or owner’s equity leads to a decrease in assets according
to the accounting equation, it therefore follows that the decrease in assets is entered on the credit
side of the account in summary;
i. Increases for assets accounts are recorded as debit entries while decreases are recorded as
credit entries. As such, opening balances are recorded as debit entries on asset accounts,
such as in a cash account.
ii. Increases in liability accounts are credit entries while decreases are debit entries. Opening
balances on liability accounts are recorded as credit entries, such as in a bank loan
account.
iii. Entries for the owner’s equity accounts are the same as for liability accounts, for instance
the capital accounts. The capital invested by the owner in the business is a liability to the
business.
All individual asset,liability and owner’s equity accounts make up the ledger.

Double entry recording

The recording of accounting entries requires each transaction to be recorded by an entry that has
equal debits and equal credits, and as such is referred to as double entry.
The concept has the following rules;
 Every transaction affects at least two accounts
 There must be at least one debit and one credit entry
 The total debits must equal the total credits
 The particulars in the account refer to the name of the account where the other entry in
the double entry is recorded.
Consider a proprietor who invests UGX1Million in a business. This transaction is recorded in a
cash account on the debit side as capital and in the capital account on the credit side as cash. The
entry of records in a double entry system involves the following steps;

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 i. Determination of the ledger accounts involved (asset, owner’s equity and liability
accounts)
ii. Deciding whether the effect is an increase or decrease for each account, and translating
these increases as credits or debits of the accounts involved.
iii. Ensuring that the total debits are equal to total credits
Examples 1:
Consider the purchase of office equipment worth Shs.500, 000/= on March 13, 2013.
Account Effect Entry
Office Equipment Asset Increase Debit
Cash Asset Decrease Credit

The posting of the two accounts follows thus;

Dr Office Equipment Account Cr

2013 Ushs Ushs
March 13 Cash 500,000

Dr Cash Account Cr
Ushs 2013 Ushs
March 13 Office equipment 500,000

Example 2: A vehicle for company use is purchased on credit from spear motors at
50Million on March 06 2013
Account Effect Entry
Vehicle Asset Increase Debit
Spear Motors Liability Decrease Credit

The posting of the two accounts follows thus;

Dr Vehicle Account Cr
2013 Ushs Ushs

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March 6 Spear motors 50,000,000

Dr Spear Motors Account Cr

Ushs 2013 Ushs
March 6Vehicle 50,000,000
Example 3: A cheque of 10Million is paid to general suppliers on March 10 2013 for the
amount owing
Account Effect Entry
General Suppliers Liabilitydecrease Debit
Bank Asset Decrease Credit

The posting of the two accounts follows thus;

Dr General Supplier Account Cr

2013 Ushs Ushs
March 10 General Supplier 10,000,000

Dr Bank Account Cr
Ushs 2013 Ushs
March 10 General Supplier 10,000,000

Class work; Demonstrate account entries for the Proprietor who brings in his private car
valued at 20Million for use in the business

Example 4: A building property purchased on January 12 2013 at 80Million.Half of the funds are
paid from company reserves while the balance is financed by a loan from the bank.
Account Effect Entry
Building AssetIncrease Debit
Bank Asset Decrease Credit
Bank loan LiabilityIncrease Credit

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The posting of the three accounts follows thus;

Dr Building Account Cr
2013 Ushs Ushs
January 12 Bank 40,000,000
Bank Loan 40,000,000

Dr Bank Account Cr
Ushs 2013 Ushs
January 12 Building 40,000,000

Dr Bank Loan Account Cr

Ushs 2013 Ushs
January 12 Building40,000,000

Research more on; Ledgers, Journals, Trading and Profit and Loss Accounts.

DEVELOPING A PROJECT PROPOSAL /BUSINESS PLAN

Contents of a Business Plan
CHAPTER ONE
 Background and purpose
 Justification
 Business objectives
 Business partners
 Name qualification training & experience
 Product strategy

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 Product concept
 Company location

CHAPTER TWO
 Market analysis
 The overall market
 The specific market
 Competitors
 Product strategy
 Sales forecast

CHAPTER THREE
 Production plan
 Location of the business
 Raw materials to be used
 Equipment:
 Cost of labor
 The production process

CHAPTER FOUR

 Management plan and organization structure

 Duties and responsibilities of staff

CHAPTER FIVE

 The financial plan

 The cash flow projections for the company;
 Projected cash flow statement
 Projected profit and loss statement
 Projected balance sheet

END

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