CHAPTER 1

THE NATURE OF ENTREPRENEURSHIP

1.1 INTRODUCTION
• The word ‘entrepreneur’ origin from a French word,
entreprendre, where an entrepreneur was an individual
commissioned to undertake a particular commercial
project.
• A number of concepts have been derived from the idea of
the entrepreneur such as entrepreneurial,
entrepreneurship and entrepreneurial process.
• Entrepreneurship is then what the entrepreneur does.
• Entrepreneurial is an adjective describing how the
entrepreneur undertakes what he or she does.
Cont…
• The entrepreneurial process in which the entrepreneur
engages is the means through which new value is created
as a result of the project.
1.2 Historical Origin of Entrepreneurship
• During the ancient period the word entrepreneur was used
to refer to a person managing large commercial projects
through the resources provided to him.
• In the 17th Century a person who has signed a contractual
agreement with the government to provide stipulated
products or to perform service was considered as
entrepreneur.
• In the 18th Century the first theory of entrepreneur has been
developed by Richard Cantillon. He said that an
entrepreneur is a risk taker.
Cont…
• In the late 19th and early 20th Century an entrepreneur was
viewed from economic perspectives. The entrepreneur
organizes and operates an enterprise for personal gain.
• In the middle of the 20th Century the notion of an
entrepreneur as an inventor as established.
• “The function of the entrepreneur is to reform or
revolutionize the pattern of production by exploiting an
invention or more generally untried technological
possibility for producing new commodities or producing
an old one in a new way or opening a new outlet for
products by reorganizing a new industry.”
 1.3 Definitions of Entrepreneurship and Entrepreneur
• It is know that entrepreneurship is the process and
entrepreneur is the person undertaking entrepreneurial activity
such as undertaking own business.
• Entrepreneurship is the process of identifying opportunities in
the market place, arranging the resources required to pursue
these opportunities and investing the resources to exploit the
opportunities for long term gains.
• Entrepreneurship is the processes through which individuals
become aware of business ownership then develop ideas for,
and initiate a business.
• Entrepreneurship can also be defined as the process of creating
something different and better with value by devoting the
necessary time and effort by assuming the accompanying
financial, physical and social risks and receiving the resulting
monetary reward and personal satisfaction.
Cont…
In general, the process of entrepreneurship includes five
critical elements. These are:
• The ability to perceive an opportunity.
• The ability to commercialize the perceived opportunity i.e.
innovation
• The ability to pursue it on a sustainable basis.
• The ability to pursue it through systematic means.
• The acceptance of risk or failure.
 An entrepreneur is a person who: create the job not a
job-seeker; has a dream, has a vision; willing to take the risk
and makes something out of nothing.
 1.4 Types of Entrepreneurs
1. The individual entrepreneur: An individual entrepreneur
is someone who started; acquired or franchised his/her own
independent organization.
2. Intrapreneur: An Intrapreneur is a person who does
entrepreneurial work within large organization.
• There are two facts about intrapreneurship
 The Intrapreneur’s context is often large and bureaucratic
organization whereas the individual entrepreneur operates
in the broader, more flexible economic market place
 Intrapreneurs are individuals who often engage in the
entrepreneurial actions in large organizations without the
blessing of their organizations.
Cont…
3. The Entrepreneurial Organization: An organization can
create an environment in which all of its members can
contribute in some function to the entrepreneurial function.

1.5 Role of Entrepreneurs in Economic Development

• The objectives of industrial development, balanced regional
growth, and generation of employment opportunities are
achievable through entrepreneurial development.
• thereby rejuvenating economy and sustaining the process of
economic development in the following ways:
Cont…

1. Improvement in per capita Income/Wealth Generation:

Entrepreneurs play a vital in the economic development of
a region.
2. Generation of Employment Opportunities: By creating
a new business enterprise, entrepreneurs generate
employment opportunities for others.
3. Inspire others Towards Entrepreneurship: The team
created by an entrepreneur for his new undertaking often
provides the opportunity for the employees to have a first-
hand experience of getting involved in an entrepreneurial
Venture.
Cont…
4. Balanced Regional Development: Entrepreneurs help to
remove regional disparities in economic development.
5. Enhance the Number of Enterprise: When new firms are
created by entrepreneurs, the number of enterprises based
upon new ideas/ concepts/ products in a region increases.
6. Provide Diversity in Firms: Entrepreneurial activity often
results into creation of a variety of firms in a region.
7. Economic Independence: Entrepreneurship is essential for
self-reliance for a country.
8. Combine Economic factors: All the products bought and
sold in an economy are a mix of three primary economic
factors (the raw materials, nature offers up, the physical and
mental labor people provide and capital (money).
Cont…
9. Provide Market efficiency: Efficient means resources are
distributed in an optimal way that is the satisfaction that
people can gain from them is maximized.
10. Accepting Risk
11. Maximize Investor’s Return

1.6 Entrepreneurial Competence and Environment

1.6.1. Entrepreneurial Mindset
1.6.1.1 Who Becomes an Entrepreneur?
Cont…
Anyone with the following characteristics can be an
entrepreneur.
• The Young Professional
• The Inventor
• The Excluded: Some people turn to an entrepreneurial
career because nothing is open to them.
1.6.1.2 Qualities of an Entrepreneur
In order to be successful, an entrepreneur should have the
following qualities:
Cont…
• Opportunity-seeking
• Persevering
• Risk Taking
• Demanding for efficiency and quality
• Information-seeking
• Goal Setting
• Planning
• Persuasion and networking
• Building self-confidence
• Listening to others
• Demonstrating leadership
Cont…
1. Opportunity-seeking: An opportunity is a favorable set
of circumstances that creates a need for a new product,
service or business.
– It includes access to credit, working premises, education,
trainings etc.
2. preserving: An entrepreneur perseveres and is undeterred
by uncertainties, risks, obstacles, or difficulties which could
challenge the achievement of the ultimate goal.
3. Risk Taking: Set their own objectives where there is
moderate risk of failure and take calculated risks
• Gain satisfaction from completing a job well
• Not be afraid of public opinion, skepticism
• Take responsibility for their own actions
Cont…
4. Demanding for Efficiency and Quality:
Quality refers to:
• The ongoing process
• A characteristic of the product or service that makes it fit to use.
• The ability of a product or service to meet a customer’s expectations.
Benefits of quality:
• Reduction of waste: defective products will be reduced.
• Cost-effectiveness
• An increase in market share: Customers prefer to buy the same
product again and again & recommend it to their friends.
• Better profitability
• Social responsibility
Cont…
5. Information-seeking: they spend time collecting
information about their customers, competitors, suppliers,
relevant technology and markets.
6. Goal Setting
• A Goal - is a general direction, or long-term aim that you
want to accomplish.
• Objectives - are specific and measurable.
7. Planning: Planning is making a decision about the future in
terms of what to do, when to do, where to do, how to do, by
whom to do and using what resources.
8. Persuasion and Networking: is a way of convincing
someone to get something or make a decision in your favor.
Cont…
Networking is an extended group of people with similar interests or
concerns who interact and remain in informal contact for mutual
assistance or support.
9. Building Self-confidence: Confidence can be described as a
subjective, emotional state of mind, but is also represented statistically
as a confidence level within which one may be certain that a hypothesis
will either be rejected or deemed plausible.
Characteristics of a Self-confident Person
• Risk-taking
• Independent
• Able to learn to live with failure
• Ability to find happiness and contentment in work.
• Doing what you believe to be right, even if others mock or criticize
you for it.
cont…
10. Listening to Others:
11. Demonstrating Leadership: Entrepreneurs inspire,
encourage and lead others to undertake the given duties in
time.
 1.6.1.3 Entrepreneurial Skills
• It is an ability to perform in a certain way.
• An entrepreneur is someone who has a good business idea
and can turn that idea into reality.
I. General management skills and
II. People management skills
1. General Management Skills: These are skills required to
organize the physical and financial resources needed to run the
venture.
 Strategy Skills – An ability to consider the business as a
whole.
 Planning Skills – An ability to consider what the future
might offer
Cont…

 Marketing Skills
 Financial Skills – An ability to manage money;
 Project Management Skills – An ability to organize
projects, to set specific objectives.
 Time Management Skills – An ability to use time
productively,
2. People Management Skills: A business can only be
successful if the peoples who make it up are properly directed
and are committed to make an effort on its behalf.
 Communication Skills – An ability to use spoken and
written language to express ideas and inform others.
 Leadership Skills – An ability to inspire people to work
in a specific way and to undertake the tasks that are
Cont…
 Delegation Skills – An ability to allocate tasks to different
people.
 Negotiation Skills – An ability to understand what is
wanted from a siturations,
 1.6.1.4 The Entrepreneurial Tasks
1. Owning Organizations: Ownership lies with those who
invest in the business and own its stock – the principals, while
the actual running is delegated to professional agents or
managers.
• Business owners undertaking two roles at the same time
that of an investor and that of a manager.
2. Founding New Organizations: The entrepreneur is
recognized as the person who undertakes the task of bringing
together the different elements of the organization (people,
property, productive resource, etc.) and giving them a
separate legal entity.
Cont…
3. Bringing Innovations to Market: The idea of innovation
encompasses any new way of doing something so that value is
created.
• include a new way of delivering an existing product or
service, new methods of informing the consumer about the
product or new ways of organizing the company.
4. Application of Expertise: A slight more technical notion is
that they have a special ability in deciding how to allocate
scarce resources in situations where information is limited.
5. Provision of leadership:
6. The entrepreneur as manager: At the end of the day the
entrepreneur is a manager.
Entrepreneur Manager
-Is involved with the start up process -Is running the business over
long period of time
-Assumes risks - Does not have to bear risks
-Is driven by perception of opportunity -Is driven by the resources
he/she currently possess
-Initiates changes - Follow rules and procedures
-Is his/her own boss - A manager is hired employee
-He/she gets uncertain rewards - Gets fixed rewards and salary
 1.6.1.5 Wealth of the Entrepreneur
• Wealth is money and anything that money can buy. It
includes money, knowledge and assets of the entrepreneur.
Who Benefits from the entrepreneur’s Wealth?
1. Employees: They contribute physical and mental labor to
the business. Success of the entrepreneurial venture
depends on their effort and motivation.
 Money – their wage or salary
 The possibility of owning a part of the firm through share
schemes.
 A stage of which they can develop social relationships.
 The possibility of personal development.
Cont…
2. Investors: These are the peoples who provide the
entrepreneur with the necessary money to start the venture and
keep it running.
• two main sorts of investors: stockholders and lenders.
• Stockholders are those who buy the stock of the company
and are true owners of the firm.
• Lenders, on the other hand, are people who offer money to
the venture on the basis of it being a loan.
 They also take priority for payment over shareholders and
face lower level of risk than the stockholders.
3. Supplier: They are the individuals and organizations who
provide the business with the materials, productive assets and
information it needs to produce its output.
Cont…
4. Customers: Customers may need to make an investment in
using a particular supplier. Changing supplier may involve
switching costs and supplier, risk of quality and expenses
incurred in changing over to new inputs.
5. The local community: Business has physical locations.
• Not polluting their shared environment
• Contributing and sponsoring local development activities
• Contribution for political and cultural stabilities and
economic improvements
• Acting in an ethical way.
Cont…
6. Government: The responsibility of government is to ensure that
businesses can operate in an environment which has political and economic
stability.
1.6.2 Entrepreneurship and Environment
• Business environ­ment may be healthy or unhealthy. Healthy business
environment means the conditions are favorable to the growth of
business whereas unhealthy environ­ment implies conditions hostile or
unfavorable to business operations.
1.6.2.1 Phases of Business Environment
• Business environment may be classified into two broad categories;
namely external; and internal environment
A. External Environment
Cont…
1. Economic Environment
• Economic environment is of multidimensional nature. It
consists of the structure of the economy, the industrial,
agricultural, trade and transport policies of the country, the
growth and pattern of national income and its distribution,
the conditions prevailing in industrial, agricultural and
other sectors,…
2. Legal Environment
• Business must function within the framework of legal
structure. Therefore, an adequate knowledge of laws and
rules is necessary for efficient managerial performance.
Cont…
• Management should try to understand what should be the
right laws and strictly obey them when so made.
3. Political Environment
• In a democratic country, politics cannot be ignored.
Managers and entrepreneurs should understand the working
of the political system.
4. Socio-Cultural Environment
• It consist the social and cultural norms of a society in a
given period of time. The variables that are appraised are
values, beliefs, norms, and fashions of a particular society.
• It can help in understanding the level of rigidity/flexibility
of a given society towards a new product/service/concept.
Cont…
5. Demographic Environment
• It assesses the overall population pattern of a given
geographical region. It includes variables like age profile,
distribution, sex, education profile, income distribution etc.
B. Internal Environment
is the environment which is under the control of a given
organization.
 Raw Material
 Production/Operation: various machineries, equipment,
tools and techniques
 Finance
 Human Resource
 1.7 Creativity, Innovation and Entrepreneurship
1.7.1 Creativity
• Creativity is defined as the tendency to generate or
recognize ideas, alternatives, or possibilities that may be
useful in solving problems, communicating with others,
and entertaining ourselves and others.
• is the ability to come up with new idea and to identify new
and different ways of looking at a problem and
opportunities.
 1.7. 2 Innovation

• It is the implementation of new idea at the individual,

group or organizational level.
There are four distinct types of innovation, these are as
follows:
• Invention - described as the creation of a new product,
service or process
• Extension - the expansion of a product, service or
process
• Duplication - defined as replication of an already
existing product, service or process
• Synthesis - the combination of existing concepts and
factors into a new formulation
Cont…
F. New Ways of Managing Relationships between
Organizations: Organizations sit in a complex web of
relationships to each other.

Entrepreneurship = creativity + innovation.

 CHAPTER 2
BUSINESS PLANNING
2.2 Opportunity Identification and Evaluation
• Most authors agree that the initial stage in the
entrepreneurial process is the identification and refinement
of a viable economic opportunity that exists in the market.
• The opportunity identification and evaluation stage can be
divided into five main steps
1. Scanning the Environment/ Getting the Idea
• Idea is a thought or suggestion about a possible course of
action.
• Synonymous with “idea” are the terms thought, intention,
scheme, suggestion, proposal, initiative, spur, impulse,
brainwave, insight, concept and connotation.
Cont…
• opportunity is a favorable time or set of circumstances for
doing something. Synonymous with opportunity are
chance, opening and prospect.
2. Opportunity Identification
• Opportunity identification is ability to see, to discover and
exploit opportunities that others miss.
• It is the process of seeking out better ways of competing.
• It is important for the entrepreneur to understand the cause
of the opportunity. Is it technological change, market shift,
government regulation, or competition? These factors and
the resulting opportunity have a different market size
and time dimension.
3. Opportunity Development
• Opportunity development is the process of combining
resources to pursue a market opportunity identified.
4. Opportunity Evaluation
• Opportunity screening and evaluation is a critical element of
the entrepreneurial process.
5. Assessment of the Entrepreneurial Team
• once the opportunity has been evaluated, the next step is to
ask pertinent questions about the people who would run the
company.
 2.3 Business Idea Development
A business idea is a short and precise description of the basic
operation of an intended business. There are three types of
business ideas. They are:
• Old Idea – Here an individual copies an existing business
idea from someone.
• Old Idea with Modification – In this case the person
accepts an old idea from someone and then modifies it in
some way to fit a potential customer’s demand.
• A New Idea – This one involves the invention of
something new for the first time
 2.5 Methods for Generating Business Ideas
1. Learn from successful business owners
You should try to get the following information from them:
• What kind of idea did these businesses start with?
• Where did the ideas come from?
• How did they develop their ideas into successful
businesses?
• How does the business profit and fit into the local
environment?
• Where did they get the money to start their business?
2. Draw From Experience
• Your own Experience
• Other People’s Experience
3. Survey Your Local Business Area
• Find out what type of businesses are already operating in
your area and see if you can identify any gaps in the
market.
4. Scanning Your Environment
 Natural resources: Think of what is abundantly available
in your area that could be made into useful products
without harming the environment.
 Characteristics and Skills of People in the Local
Community
• Consider whether the people in your area have some special
characteristics or skills that could be useful for a business:
Cont…
 Waste Products: using materials that have been previously
used by both homeowners and businesses.
 Import Substitution
• Can you think of anything that is imported that might be
made locally?
 Publications
• Publications from the internet and other printed material
may help you find ideas.
 Trade Fairs and Exhibitions
5. Brainstorming
• Brainstorming means opening up your mind and thinking
about many different ideas.
6. Structured Brainstorming
• This is different from thinking about random items related
to a particular business field and type.
7. Focus Group
• Focus group is a group of individuals providing
information on a structured format which is led by
moderators.
• It is characterized by an open and in depth discussion:
rather than simply asking questions to solicit student
response.
8. Problem Inventory Analysis
• The difference from focus group is rather than generating
new idea themselves, consumers are provided with a list of
problems in general product category. It is a method of
obtaining “New Idea” and solutions by focusing on
problems.
 2.6 Business Idea Screening
• Idea screening is the process to spot good ideas and
eliminate poor one. three approaches are discussed as
follow:
1. Macro screening: is aimed screening down ideas to 10.
And the common criteria are:
• Are my own competencies (see strength detector)
sufficient?
• Can I finance it to a large extent with my own equity?
• Will people buy my product/service (i.e. is it needed and
can people afford it)?
Cont…
2. Micro Screening: is aimed screening down ideas into 3.
The common criteria used for screening are:
• Solvent demand
• Availability of raw materials
• Availability of personal skills
• Availability of financial resources
3. Scoring the Suitability of Business Idea:
• This approach is most appropriate when deciding on
starting a business.
• When there are more than one possible business ideas and
one needs to decide which one to follow, we use score
business ideas (e.g., BI1, BI2, BI3) by assigning a rating
from 1 to 3 for each question,
 2.7 Concept of Business Plan
• Planning is the first and the most crucial step for starting a
business.
• A business plan is a road map for starting and running a
business.
• A well-crafted business plan identifies opportunities, scans
the external and internal environment to assess the
feasibility of business and allocates resources in the best
possible way, which finally leads to the success of the plan.
• It provides information to all concerned peoples.
• A business plan is the blueprint of the step-by-step
procedure that would be followed to convert a business idea
into a successful business venture.
 2.8 Developing a Business Plan
2.8.1 Business Planning Process
• documenting the business plan is one of the early steps that
an entrepreneur should take.
• The various steps involved in business planning process are
discussed here below:
1. Preliminary Investigation
 Review available business plans (if any).
 Draw key business assumptions on which the plans will be
based (e.g. inflation, exchange rates, market growth,
competitive pressures, etc.).
 Scan the environment
 Seek professional advice
The objectives of a business plan are to:
• evaluate the prospects of business
• Monitor the progress after implementing the plan
• Seek loans from financial institutions.
• Visualize the concept in terms of market availability,
organizational, operational and financial feasibility.
• Identify the SWOT of the plan.
• Identify the resources
• Document ownership arrangements, future prospects and
projected growths of the business venture.
Cont…
2. Opportunity Identification and Idea Generation
• the first stage of business planning process. It involves
generation of new concepts, ideas, products or services to
satisfy demand.
3. Environmental Scanning
• carried out to analyze the prospective strengths, weakness,
opportunities and threats of the business enterprise.
4. Feasibility Analysis
• done to find whether the proposed project (considering the
above environmental scanning) would be feasible or not.
• feasibility study is carried out to assess the feasibility of the
project itself in a particular environment in greater detail.
Cont…
5. Report Preparation
• It is a written document that describes step-by- step, the
strategies involved in starting and running a business.
 CHAPTER 3
BUSINESS FORMATION
3.4 Definition and Role/Importance of SMEs in Developing
Countries
3.4.1 Definition of SMEs
There is a difference between small business owners and
entrepreneurial ventures as well. An entrepreneurial venture often is a
growth-oriented innovative company with product or service offerings
that are new to the market.
Small businesses could be entrepreneurial ventures. Most
entrepreneurial ventures start as a small business.
Most small businesses’ owners work with known products and
services aimed at incremental growth, and their innovation is focused
on sales, marketing, and market expansion.
Entrepreneurial ventures work with new offerings, and they face a lot
more uncertainties; hence, their strategy calls for continuous work on
mitigating uncertainty and risk reduction.
Cont…
There are two approaches to define small business.
1. Size Criteria
• some of the criteria used to measure size are: number of
employees; volume, and value of sales turnover, asset size,
and volume of deposits, total capital investment,
volume/value of production, and a combination of the stated
factors.
2. Economic/Control Criteria
Size does not always reflect the true nature of an enterprise.
The economic/control definition covers:
A. Market Share
B. Independence: - Independence means that the owner has
control of the business himself/herself.
Cont…
C. Personalized Management:-It implies that the owner
actively participates in all aspects of the management of the
business, and in all major decision-making process.
D. Technology: - Small business is generally labor intensive
and only few are technology intensive.
E. Geographical Area of Operation: - The area of operation
of a small firm is often local.
Generally All four of these characteristics must be satisfied if
the business is to rank as a small business.
 3.4.2 Role/Importance of MSEs in Developing Countries
 Large Employment Opportunities
 Economical Use of Capital
 Balanced Regional Development/ Removing Regional
Imbalance
 Equitable Distribution of Wealth and Decentralization
of Economic Power: It removes the drawbacks of
capitalism, abnormal profiteering, concentration of wealth
and economic power in the hands of few etc.
 Dispersal over Wide Areas
 Higher Standard of Living
 Mobilization of Locals Resources/Symbols of National
Identity
Cont…
 Innovative and Productive /Simple Technology
 Less Dependence on Foreign Capital/ Export Promotion
 Protection of Environment
 Facilitate Development of Large Scale Enterprises
 Individual Tastes, Fashions, and Personalized Services
 Environmental Analysis
a) Macro Environment: consists of the political,
technological, social, legal and economic environments.
b) Sectoral/industrial Analysis: For such analysis one
should study the history of the industry, the future trends,
new products developed in the industry, forecasts made by
the government or the industry.
Cont…
c) SWOT Analysis
D) Product or service
3.6 Small Business Failure and Success Factors
3.6.1 Small Business Failure Factors
What Is Business Failure?
a business failure as a business that closes as a result of either
(1) actions such as bankruptcy, foreclosure, or voluntary
withdrawal from the business with a financial loss to a
creditor; or (2) a court action such as receivership (taken over
involuntarily) or reorganization (receiving protection from
creditors).
 Causes of Business Failure
• Inadequate Management: - these factors are the cause of
89 percent of such failures. Internal problems are those
more directly under the control of the manager, such as
adequate capital, cash flow, facilities/equipment inventory
control, human resources, leadership, organizational
structure, and accounting systems.
• The manager of a small business must be a leader, a planner,
and a worker.
• Inadequate Financing: - can be caused by improper
managerial control as well as shortage of capital.
• Neglect: occurs whenever an owner does not pay a due
attention to the enterprise.
 3.6.2 Small Business Success Factors
• These success factors are categorized as:-
1. Conducive Environment
• Political, economic, technological and socio-cultural
factors
2. Adequate Credit Assistance
3. Markets and Marketing Support
 priority Sectors and Sub-Sectors for MSEs Engagement
In Ethiopia
• Manufacturing Sector- comprises textile and garment;
leather and leather products; food processing and beverage;
metal works and engineering wood works including
furniture and ornaments service; and agro-processing.

• Construction Sectors- comprises sub-contracting; building

materials; traditional mining works; cobble stone;
infrastructure sub-contract; and prestigious goods

• Trade Sectors- This comprises whole sale of domestic

products; retail sale of domestic products and raw materials
supply.
Cont…
• Service Sectors- This is the one which comprises small and
rural transport service; café and restaurants; store service;
tourism service; canning/packing service; management
service; municipality service; project engineering service;
product design & development service;…
• Agriculture Sector (Urban Agriculture) - This is the one
which comprises modern livestock raring; bee production;
poultry; modern forest development; vegetables and fruits;
modern irrigation; and animal food processing.
 CHAPTER 4
PRODUCT/SERVICE DEVELOPMENT
The Concept of Product/Service Technology
• Organization's success is dependent on customer
satisfaction and delight.
• Customer satisfaction is achieved through the development
of product and service, which have all attributes required by
the customer.
• product design must be practical enough for production and
powerful enough to provide a competitive advantage.
• A success product or services do not only have an attractive
package design but should be also able to provide robust
performance.
 Product/Service Development Process
• Product development is the process through which
companies:
 react to market signals,
 respond to changes in customer demand,
 adopt new technologies,
 foray into new areas, and
 Ensure continuous growth.
Product/service development process is part of the overall
new-venture creation process.
• The various stages of new product development process are
explained next:
Cont…
1. New Idea Generation
• The new product development process starts with search for
ideas.
• Some of the more fruitful sources of ideas for
entrepreneurs include consumers, existing products and
services, distribution channels, the federal government,
and research and development.
2. Idea Screening
• the purpose is to lessen the number of ideas to few
vital/valuable ideas.
Cont…

3. Concept Development and Testing

• Attractive ideas must be refined into fast able product concepts

• Concept Testing: - the concepts can be in words or picture

description
4. Marketing Strategy Development
• The marketing strategy plan consists of three parts:

• Market size, structure, behavior

• Planned price, distribution strategy, and marketing budget of the

1st year
• Long run sales and profit goals, marketing mix strategy.
Cont…
5. Business Analysis: Management needs to prepare sales, cost
and profit projections to determine whether they satisfy the
company's objective or not.
• Estimated Total Sales: - Management needs to estimate
whether sales will be high enough to yield satisfactory profit.
• Estimating Cost and Profits: - After sales forecast the
management should estimate the expected cost and profit at
various levels of sales volume.
 The company can use other financial measure to evaluate the
merit of a new product proposal. The simplest is breakeven
Cont …
6. Product Development
• Its goal is to find a proto type that the consumers/customers see as
embodying the key attribute described in the product concept
7. Market Testing
• After management is satisfied with the products’ functional and
psychological performance, the product is ready to be dressed up with
the brand name.
• Market Testing can yield valuable information about buyers, dealers,
marketing program effectiveness, market potential & other matters.
• Test Marketing yields several benefits include more reliable forecast of
Cont…

8. Commercialization
When (Timing):- In commercializing, market entry timing is critical.
 first mover advantage" of locking up key distributors & gaining
reputation.
 Late Entry Strategy
 Parallel Entry
• Where (Geographical Strategy):- The company must decide whether to
launch the new product in a single locality, a region/several regions, in
the national/international market
• To Whom (Target-Market-Prospect):- Within the rollout markets, the
company must target its distribution and promotion to the best prospect
group
• How (Introductory Markets Strategy):- To sequence and coordinate
many actives involved in launching a new product may/can use network-
 Legal and Regulatory Frameworks for Entrepreneurs

• What is Intellectual Property?

 Intellectual Property which includes patents, trademarks,
copyrights, and trade secrets assets to the entrepreneur and
should be understood even before engaging the services of an
attorney
• Patents: A patent is a contract between an inventor and the
government.
• the government, in exchange for disclosure of the invention,
grants the inventor the exclusive right to enjoy the benefits
Cont…
 Utility Patent: protects any new invention or functional
improvements on existing inventions

 Design Patent: protects the appearance of an object and covers

new, original, ornamental, and unobvious designs for articles of
manufacture

 A patent provides the owner with exclusive rights to hold,

transfer, and license the production and sale of a
product/process.

 It is issued by government to the inventor.

 Patents are property rights that can be sold and transferred,

Cont…
What Can Be Patented Then?
• Processes: Methods of production, research, testing,
analysis, technologies with new applications.
• Machines: Products, instruments, physical objects.
• Manufactures: Combinations of physical matter not
naturally found.
• Composition of matter: Chemical compounds,
medicines, etc.
Cont…

• Trademarks: may be a word, symbol, design, or some combination

of such, that identified with a company’s product or service and
registered by government offices.
• Trademarks unlike patents are periodically renewed unless
invalidated by cancellations, abandonment, or other technical
registration/renewal issues
• Benefits of a Registered Trademark
 It provides notice to everyone that you have exclusive rights to the use of the
mark

 It entitles you to sue in federal court for trademark infringement

 It provides a basis for filing trademark application in foreign countries.

Cont…

• Copyrights: is a right given to prevent others from

printing, copying, or publishing any original works
of authorship.
•
• Copyrights provide exclusive rights to creative
individuals for the protection of literary or artistic
productions

 It protects original works of authorship

 CHAPTER 5: MARKETING
• The foundation of marketing is exchange. In which one
party provides to another party something of value in return
for something else of value.
5.2 Meaning and Definitions of Marketing
• Marketing is a social and managerial process by which an
individual or group obtain what they need and want through
creating, offering and exchanging of product of values with
others (Philip Kotler,2012).
• Marketing management is the process of planning and
executing, the conception, pricing, promoting and
distributing of ideas, goods and services to create an
exchange that satisfy individual or group objectives.
 Marketing answers the following questions:
• Who are your customers?
 People who are buying from you now.
 People you hope will buy from you in the future.
 People who stopped buying from you but you hope to get
them back.
• What are my customer’s needs and wants?
• How can I satisfy my customers’?
 You need to find out;
• Products/services your customers want.
• Price your customers are willing to pay.
• Location of your business in-order to reach your customers
• Promotion to use to inform your customers
 5.3 Core Concepts of Marketing
5.3.1 Needs, Wants and Demand
• Need: - People require food, clothing, shelter, safety and
belonging and esteem.
• Wants: - Wants are desires for specific satisfiers of needs.
• Demand :- are wants backed by ability and willingness to
buy them.
• Product: - is anything that can be offered to satisfy a need
or want. (classify as tangibility and intangibility features)
• Value: - is the consumer’s estimate of the products overall
capacity to satisfy his or her needs.
• Cost: - is the amount of money that are going to be
expended or already incurred to acquire a product.
Cont…
• Exchange: - is the act of obtaining a desired product from
someone by offering something in return.
• Transaction: - is the trade of values between two parties.
5.4 Importance of Marketing
• A customer purchases a product because it provides
satisfaction. That something that makes a product capable
of satisfying want is its utility.
• The kinds of utility that marketing provides in the process
are as follows:
1. Form Utility: is associated primarily with production- the
physical or chemical changes that make a product more
valuable.
• Utility regarding product design, color, quantities produced,
Cont…
2. Place Utility: exists when a product is readily accessible to
potential customers.
3. Time Utility: means having a product available when you
want it.
4. Information Utility: is created by informing prospective
buyers that a product exists.
5. Possession Utility: is created when a customer buys the
product-that is, ownership is transferred to the buyer.
 5.5 Marketing Philosophies
• There are five competing concepts:
1. The Production Concept
• holds that consumers will favor products that are widely
available and low in cost.
• The assumption that consumers are primarily interested in
product availability and low price holds in at least two
situations.
The first is where the demand for a product exceeds supply, as
in many developing countries.
The second situation is where the product’s cost is high
2. The Product Concept
• holds that consumers will favor those products that offer the
most quality, performance or innovative features.
3. The Selling Concept/Sales Concept
• concept holds that consumers, if left alone, will ordinarily
not buy enough of the organization product.
• The organization must therefore undertake an aggressive
selling and promotion effort.
• This concept assumes that consumers typically show buying
inertia or resistance and must be coaxed into buying.
• is practiced more aggressively with unsought goods, those
goods that buyers normally do not think of buying, such as
insurance, encyclopedia, and funeral plots.
4. The Marketing Concept
• holds that the key to achieving organizational goals consists
of being more effective than competitors in integrating
marketing activities toward determining and satisfying the
needs and wants of target markets.
“Meeting needs profitably”
“Find wants and fills them”
“Love the customers, not the product etc.”
5. The Societal Marketing Concept
• holds that the organization should determine the needs,
wants and interests of target markets.
• It should then deliver the desired satisfactions more
effectively and efficiently than competitors
6. Relationship Marketing
• is the practice of building long term satisfying relations
with key parties-customers, suppliers, distributors- in order
to retain their long term preferences and business.
5.6 Marketing Information Systems
• The marketing managers to carry-out their analysis,
planning, implementation, and control responsibilities, they
need information about development in the marketing
environment.
• The needed information is developed through internal
company records, marketing intelligence activities,
marketing research, and marketing decision support
analysis.
 5.6.1 Marketing Research
• Marketing research is the systematic and objective
identification, collection, analysis, and dissemination of
information for the purpose of decision making related to
marketing.
5.6.1.1 The Role Of Marketing Research In Decision
Making
• Descriptive Function - the gathering and presentation of
statements of fact.
• Diagnostic (analytical) Function - The explanation of data.
• Predictive Function - Specification of how to use the
descriptive and diagnostic research
 5.6.1.2 Marketing Research Components
• Market size: this deals with the number or value of units
sold to a market in a given period.
• Market Share: this one is about a specific corporation’s
share of the market size
• Brand equity research – this research is conducted to
know how favorably consumers view the brand.
• Buyer decision processes research
5.6.1.3 Customer Satisfaction Research
• Distribution channel audits - to assess distributors’ and
retailers’ attitudes toward a product, brand, or company.
• Marketing effectiveness and analytics - Building
models and measuring results to determine the
effectiveness of individual marketing activities.
Cont…
• Mystery Consumer or Mystery shopping – here the
researcher acts as a shopper.
• Positioning research – this research is mostly conducted to
answer questions like
 How does the target market see the brand relative to
competitors?
 What does the brand stand for?
• Sales forecasting - to determine the expected level of sales
• Segmentation research
• Test marketing
 5.6.1.4 Marketing Research Process
• Step 1: Define the research purpose or objectives
 Where potential customers buy the product?
 What is the size of the market
 How does your business compare with competitors
 Marketing mix?
Step 2: Research Design Formulation
• is a blueprint for conducting the marketing research.
• Qualitative data collection methods.
• Methods of collecting quantitative data (survey,
observation, and experimentation).
• Measurement and scaling procedures.
• Sampling process and sample size and Plan of data analysis.
Step 3: Gather at this stage secondary data,
 Is less expensive.
 Can be acquired within or outside the venture.
 But, may be out-dated and less valid.
Step 4.Gather Primary Data
• Observational techniques-do not involve contact with
respondents.
• Focus groups, Experimentation and Survey techniques.
Step 5: Data Processing and Analysis
• includes the editing, coding, transcription, and verification
of data.
Step 6: Report Preparations and Presentation
 5.6.2 Marketing Intelligence

• is the systematic process of gathering, analyzing,

supplying and applying information (both qualitative and
quantitative) about the external market environment.
5.6.2.1 The Importance of Marketing Intelligence
• Market and customer orientation – promote external
focus.
• Identification of new opportunities.
• Smart segmentation.
• Early warning of competitor moves.
• Minimizing investment risks.
 5.6.2.2 Ways to Undertake Marketing Intelligence
i. Unfocused scanning: Any information that may be useful
is gathered without any specific purpose in mind.
ii. Semi-focused scanning: no specific purpose. The
manager is not in search of particular pieces of
information that he/she is actively searching but does
narrow the range of media that is scanned.
iii. Informal search: - limited and unstructured attempt to
obtain information for a specific purpose.
iv. Formal search: - this is a purposeful search for
information in some systematic way.
 5.6.3 Competitive Analysis
• Competitive analysis refers to determining the strengths and
weaknesses of competitors and designing ways to take
opportunities or tackle threats posed by competitors.
5.6.3.1 Uses of Competitive Analysis
• It should answer the following questions:
• Who are your competitors?
• What customer needs and preferences are you competing to
meet?
• What are the similarities and differences between their
products/services and yours?
• How do their prices compared to yours? How are they
doing overall?
 5.6.3.3 Steps of Competitive Analysis
• Competition is defined as any business that provides a
similar service or product in the same market, region or
industry.
1) Identify your competitors: Determine both local and
international competitors.
2) Gather information about competitors
3) Gathering Information on Competitors
• promotion strategies by visiting their business site; prices;
your competitors’ customers; vendors or suppliers, and their
employees; trade shows; and publicly available information
- from Newspapers, magazines,….
5) Analysing the Competition
• How are you going to compete with that company?
• Is there a particular segment of the market that your
competitor has overlooked?
• Is there a service that customers or clients want that your
competitors do not supply?
6) Develop a pricing
 5.7 The Marketing Mix Strategy
5.7.1 The 4 P’s Of Marketing/The Marketing Mix
1. Product: refers to goods/services produced for sale, the
product /service should relate to the needs and wants of the
customers.
 Always listen to what your customers like and don’t like.
 Do more market research
 If your product is not selling well, think of new ideas like
finding new customers.
2. Pricing: refers to the process of setting a price for a
product/service.
• Know your costs.
• Know how much customers are willing to pay.
• Know your competitors price.
cont…
3. Place: means the different ways of getting your products or
services to your customers.
• Selling directly to the consumers of the products.
• Retail distribution and wholesale distribution.
4. Promotion: Refers informing your customers of your
products and services and attracting them to buy them.
• Promotion includes advertising, sales promotion, publicity
(non-paid promotion) and personal selling.
 5.7.2 What Is Marketing Strategy?
• is a process that can allow an organization to concentrate its
limited resources on the greatest opportunities to increase
sales and achieve a sustainable competitive advantage.
• A marketing strategy combines product development,
promotion, distribution, pricing, relationship management
and other elements.
• determines the choice of target market segments,
positioning, marketing mix, and allocation of resources.
1. Pricing Strategy
• Price is the value placed on what is exchanged.
• Price is often the only element the marketer can change
quickly in response to demand shifts.
Cont…
• It relates directly to total revenue TR = Price * Quantity
Profit = TR – TC
• pricing structure changes through time as products pass
through their life cycles.
• some of pricing strategies
A. Price Skimming: firms use by charging the highest
possible price that buyers who most desire the product will
pay.
• It attracts a market segment that is more interested in
quality, status, uniqueness etc.
B. Penetration Pricing: In this strategy, prices of products are
reduced compared to competitors’ price.
• to penetrate into markets and to increase sales.
Cont…
C. Odd-even pricing: This is Psychological
pricing method based on the belief that certain prices or price
ranges are more appealing to buyers.
D. Cost-plus pricing: Any amount that is above unit cost
may be considered.
E. Mark-up pricing: A certain percentage of the selling price
is added to unit cost.
2. Promotion Strategies
• is the communication of the company and its products to
customers.
A. Advertising: It is any paid form of non-personal, one-
way, mass communication
B. Personal selling: This is the two-way flow of
Cont…
C. Public relations: Public relation is a form of
communication that seeks to change the perceptions of
customers, shareholders, suppliers, employees and other
publics about a company and its products.
D. Sales promotion: This promotion type involves short term
incentives of value such as discounts, free samples, and prizes
to be offered to arouse interest of customers in buying the
good/service.
3. Distribution Strategies
• It is divided into Direct and Indirect channels
• Direct channels: In this type of channel, producers and end
users directly interact.
Cont…
• Indirect channels: In this type of channel intermediaries
are inserted between seller and buyer. Intermediaries
include Merchant Wholesalers, retailers, dealers, agents,
brokers; and manufacturer’s branches and offices.
The following factors should be considered to select the best
channel
• Company Factors: financial, human and technological
capabilities
• Market Characteristics: Geography, market density, market
size, target market
• Product Attributes: perishability, value and sophistication
of the product
• Environmental Forces:
 5.8 Selling and of Customer Service
• Customer service is what happens between the customer
determining his/her needs and receiving the desired
benefits.
5.8.1 The Concept of Service
• Service refers to any activity undertaken to fulfil customer’s
needs.
5.8.2 The Concept of Customer
• Customer is a person or organization that buys a product or
service either for use or for resale. Customers can be
internal (e.g. member of the organization) or external
(customers coming from outside).
5.8.4 Customer Handling and Satisfaction
Cont…
• Retaining existing customers, however, requires systematic
handling.
• In addition to retaining existing customers, originations
should also strive to increase the number of customers.
Organizations could possibly increase their market share by
getting new customers.
major reasons to lose customers are:
• Poor service,
• Poor quality and
• Rude behaviour.
5.8.4.1 Considering Customers as an Invaluable Asset
• The value of one customer is infinite, and you cannot
possibly calculate it.
Cont…
5.8.4.2 Reducing Customer Complaints
• Every single complaint should be treated as an opportunity
to improve the quality of your products and services.
5.8.4.3 Place Yourself in The Customer’s Shoes
• ‘Do unto your customer as you would have done unto you’.