ENTREPRENEURSHIP EDUCATION

INTRODUCTION TO ENTREPRENEURSHIP
1.1 Definitions of terms:
An entrepreneur is therefore defined as a person who is able to identify business opportunities
and obtain the necessary resources to initiate a successful business activity. Entrepreneurs are
made not born.
Entrepreneurship is the process of identifying a business opportunity in the market, organizing
and getting the necessary resources, combining factors of production and starting up a business
towards maximization of profits with a view of becoming a successful business person.
Entrepreneurship therefore involves choosing a practical business idea, investing resources to put
the business idea into action and managing the business to success.
Business
It is an economic activity which is primarily organized and directed to manufacture or produce
goods and services with a sole intention of making a profit.
1.2 Importance of entrepreneurship to a country
Entrepreneurship is a very important thing in an economy. Below are some importance of
entrepreneurship in a country's economy:
1. Employment.
Entrepreneurship leads to creation of jobs or employment opportunities. Many job opportunities
have been created through entrepreneurship and even to the entrepreneurs themselves.
2. Creation of wealth.
Through entrepreneurship, wealth is created for the country's economy. Formation of capital is
one of the advantages that come with entrepreneurship. The country’s economy is boosted when
there are many entrepreneurs in the country.
3. Exploitation of market.
With entrepreneurs in the market providing different goods and services, the market is exploited
so that almost if not all needs of consumers are met.
4. Utilization of resources.
The available resources are kept in effective and efficient use when entrepreneurs find what to do
to exploit the resources economically.
5. Increased competition.
With increase in entrepreneurs in the market, fair competition is encouraged in this ensures that
nobody practices monopoly in the market.
6. Increases purchasing power.
1
Customers are able to choose from among different options and available substitutes to
commodities since each and every entrepreneur will try to provide unique good and/or services.
7. Increases innovation.
Entrepreneurship encourages coming up with new ideas and options of improving the available
products in the market. People are able to innovate new things through entrepreneurship.
8. Reduces imports.
With entrepreneurs providing missing products in the country or in the market, imports are
reduced hence the funds which could have been used in imports are directed to some other useful
projects of the country.
9. Improves infrastructure.
Through entrepreneurship, infrastructure is developed and improved. For instance, a business
man will bring in electricity, good roads and so on in an area where he or she has started a
business.
10. Raises standards of living.
With entrepreneurship creating and providing employment opportunities, people are able to
improve economically and therefore are able to improve their living standards.
11. Reducing rural to urban migration.
Many new businesses are preferably started in the rural areas of Kenya with considerations that
the rural areas still have the potential market and suitable space for expansion. Job opportunities
are therefore provided by such businesses started in the rural areas and this has created
employment to the local people thereby discouraging their migration to the urban centres.
12. Reducing foreign dominance of the economy.
Foreign countries have been known to dominate some sectors of the economy. With new
businesses targeted to creating competition to such foreign businesses, the foreign dominance of
the economy is reduced.
13. Promotion of technology.
Entrepreneurship also comes with improvement and promotion of technology in the sense that
new businesses will always try to incorporate new ways of doing or performing their business
deals.
14. Promotion of entrepreneurial culture.
Entrepreneurship also helps to culminate entrepreneurial culture in the society. It is very easy for
others to copy or follow the trends that others have set or gone through with the view that they
might also succeed as their fellows.
1.3 Self-Employment versus Salaried-Employment
Self-employment:- This is situation where an individual invest his own capital, uses his own
skills and intelligence in management of a business with an aim of getting income from it.
(Profit)
Salaried Employment: - This is a situation where an individual seeks to work or offer his
services to an organization or an individual with the aim of getting payment (salary) at the end of
every month. This person is referred to as an employee of that organization or that individual
(employer)

2
Differences between Self-Employment and Salaried-Employment

Self-Employment Salaried-Employment
 Owner determines the number  Employee has to work within a given period
of working hours
 Owner earns less benefits  Employee has several benefits(house
allowance, medical,
 Fatigue as the owner does all  Employees work for the owner
the work alone

 Owner earns more money  Owner pays the employee salaries and wages

 Choice of job is affordable  Employee has to work for a certain job

1.4 Merits /Advantages of Self-Employment

1. The individuals is his/her own boss, hence he or she is independent
2. Unlimited earning:- there is no agreement on the amount one can earn but it depends on
the activities of the business
3. Self-employment creates job opportunities.
4. Self-employment helps one to fully exploit his /her potential.
5. Self-employment provides goods and services to society.
6. Self-employment leads to improved living standards of the individual and the people who
depend on him/her.
7. There is job satisfaction because one engages in form of business that suits him./her
8. It is a form of direct motivation and incentive to work.
Disadvantages of Self-Employment
1. One may not have enough capital to start the business.
2. One may have limited skills in terms of management.
3. When the business suffers losses, the entrepreneur bears it all alone.
4. There is no assurance of income.
5. Self-employment leads to specialization which at times leads to boredom.
6. Self – employed people are accorded low social status considered to salaried employed
people, who are accorded higher social status.
Advantages of Salaried-Employment
1. There is an assurance of income (being paid monthly)
2. One enjoys certain allowances that come with salaried employment e.g. medical and
house allowances.
3. Salaried employed people are accorded high social status compared to self-employed
people.
4. Salaried employment provides room for socialization among the employees.
5. There is room for growth especially through the promotions.
6. It creates a sense of belonging to an individual because a person will feel he/she belongs
to a certain organization.
7. Some organizations provide training facilities to their workers, through seminars and
workshops organized by the companies.

3
 8. Some organizations also provide sponsorship opportunities for their employees who wish
to further their studies.
Disadvantages of Salaried-Employment
1. One has to adhere to the rules and regulation set by the organization he or she works for.
2. There is no opportunity to make more money to supplement your current earnings.
3. The organization may not adequately recognize ones abilities.
4. There is no independence (you have to follow orders and bossed around.
5. One may not be accorded adequate and challenging responsibilities that add up to their
qualifications.
6. One’s idea may not easily or readily be implemented by the employer.
7. There is no job security (the employer can demote one of his duties at will.
8. One may not get the opportunity to involve in leisure activities.

1.5 Contribution of Entrepreneurship Towards National Development

There are many contributions of entrepreneurship towards national development they include
1) Employment creation.
One reason why people establish business is to create employment for themselves and for others.
As the business grows, they would also employ other people outside this circle of friends and
relatives. If there are many such businesses, the employment opportunities created will be
significant.
2) Utilization of natural resources
By establishing businesses, the entrepreneurs enhance the utilization of the natural resources
which would otherwise have remained idle. This contributes to the creation of more wealth for
the country.
3) Improvement Of Standards Of Living
The entrepreneur together with those he/she has employed can earn regular income. Therefore,
they can use these incomes to cater for the welfare of those who depend on them. In this way, the
standards of living of this people are raised.
4) Increase in consumer choice.
The entrepreneurs tend to add to the range of goods and services available to the consumers in a
country. The consumers therefore can be able to choose between different commodities in
satisfying their needs.
5) Development of infrastructure.
The government authorities find it more reasonable to develop and improve facilities where there
are many productive businesses. Therefore, the establishment of business enterprises, either
directly or indirectly, leads to the development of improved infrastructure such as roads,
communication, water and security.
6) Foreign exchange earners.
Foreign exchange is simple terms in the foreign currency that a country requires in order to pay
for its international financial obligations such as imports. We can earn such foreign exchange
through our exports to other countries. Some entrepreneurs are engaged in export businesses
which therefore earn the country foreign exchange.
7) Conservation of foreign exchange.
When we produce goods and services locally that we would otherwise have imported, we also
save the foreign exchange we would have spent to get the commodities. The local entrepreneurs,
4
by providing such goods and services therefore help the country to save foreign exchange. This
may be used to pay for other essential goods and services that we have to get from outside the
country.

8) Stabilizing prices.
One of the factors that contributes to the rising price is a situation where the available amount of
goods and services (supply) is less than the amount such goods and services required by
customer (demand). The entrepreneur by providing more of these goods and services help to
keep the price of the commodities in check.
9) Reduced domination of certain sectors by foreigners.
Our economy welcomes investments by foreigners. However, it is important that such foreigners
do not own all or the majority of businesses in any one sector. This forms the basis for us to be
self-sufficient and to be in control of the destiny of our economy. The local entrepreneurs by
establishing businesses in many sectors help to ensure that the foreigners do not dominate any
sector.
10) Increased efficiency in business operations.
Increased competition in any sector tends to increase efficiency in the business enterprises
involved. This is because the less efficient firms will either produce at higher costs or will
produce goods and services of lesser quality. Such forms will therefore be forced out of business.
To survive, the form operating under such condition will therefore have to become more
efficient.
11) Generation of government revenue
Any business, enterprise has to pay taxes to the government. The entrepreneurial enterprise will
therefore generate more revenue to the government through payment of taxes and duties.

2 EVOLUTION OF ENTREPRENEURSHIP

History of Entrepreneurship In Kenya

Interest in development of entrepreneurship and small enterprise in Kenya gained momentum as
a possible remedy to the stagnation of economic development and the escalating unemployment
problem since the late 1960’s and early 1970’s. Although there were attempts by the government
to develop entrepreneurship soon after independence, the main impetus came from the
international labour organization (ILO) mission to Kenya in the early 1970s (report on
employment mission to Kenya 1970). The report centered on the potential of the informal sector
and it suggested that, the bulk of Kenya’s urban workers were self-employed in small
enterprises. The mission therefore proposed that the development of this sector could promote
employment, development and equity.
Based on this report, the Kenya government responded with a sessional paper in 1973 (sessional
paper on employment) which recognized the role of entrepreneurship in employment creation,
not just in the informal sector but also in the formal sector. Subsequent development plans have
devoted time to development of strategies and plans to promote small scale enterprise and
entrepreneurs. This has been; the industrial estate programmed set up in 1967; establishment of
development agents such as ICDC, KIE and more recently policy and institutional frameworks to
promote entrepreneurship and small enterprises. All these programs were aimed to promoting the
indigenous Kenyan enterprises.
The 1974 – 79 Development plan laid down proposal of the implementation of small scale
industries policy, mainly to review central and local government regulation that were inimical to
5
the small scale enterprises; provision of direct assistance to small scale businesses all over
Kenya; and the establishment of an organization that would give extension services to small
enterprises.
The 1979 – 83 Development plan built on this plan by creating and strengthening institutions and
schemes for the assistance of the small enterprise sector. This led to the establishment of credit
guarantee schemes for loans given by commercial banks to small scale enterprises; procedures to
improve small scale training (Ministry of Technical Training and Applied Technology) and the
overhaul of the education system based on the report of the presidential working party on the
second University in 1981, which culminated in the 8.4.4 system of education.
The 1984 – 88 Development plan envisaged a full pledge small industries division in the
ministry of commerce and industry. This plan also saw the rise of District focus for rural
development strategy – DDC. This strategy helped in transferring a lot of activity into the rural
areas as it gave priority to small scale industries in district development plans.
In addition, the 1988 report of the presidential working party on education and manpower.
Training for the next decade and beyond. Recommended the introduction of entrepreneurship
education in all levels of training programs to promote self-employment in the small scale
enterprises and the jua-kali sector. To add to the 1984 -88 plan, the sessional paper No. 1 of 1986
on Economic management for renewed growth was developed as a blue/print for the renewal of
economic growth.
The ILO report of 1972 highlighted the absence of an enterprise culture in Kenya’s indigenous
inhabitants. It was noted that most of the businesses were owned by non-Kenyans of Asian or
European origin, with only a few African businessmen, most of whom could be found in the
informal or petty trade sector. An attempt by the government to correct this saw the introduction
of the move towards Africanisation of businesses and training of existing small traders and
industrialist. This was in spite of the fact that there are no comparative studies which analyze the
entrepreneurial tendencies of the various groups i.e. Asian, European and African. Neither is
there studies yet which document or explain the gradual entry of Kenyans into the business
sector, and especially the large business sector, to guide policy and programmed on who the
most likely successful entrepreneurs are.
Entrepreneurship in Kenya has been promoted together with that of small enterprise, mainly
because historically indigenous entrepreneurs started small and tended to remain small because
of various reasons. However as the indigenous Kenyans have continued to accumulate resources,
information and business experience, there are suggestions that entrepreneurship development
programs will have to prepare people for medium or big business rather than just small
businesses. However, positive changes have taken place since 1972.
2.1 Myths Associated With Entrepreneurship
There are several myths /misconceptions associated with entrepreneurship. This include:-
a) Luck is for gamblers
There are individuals who seem to have an uncaring ability to be able to spot and to exploit
opportunities, and luck (both good and bad) play a role in the outcome of many ventures. More
often a person who breaks through in his Endeavour’s has been nourishing a concept for some
time or working on closely related projects when a breakthrough occurs.
It is important to note that persistence and determination plays a major role to an individual’s
success than just luck.
6
 b) Make or break on the first venture
Another popular myth is that entrepreneur strike it rich with the first great “ flash of his” they
become rich by the first try of business) or conversely, the fail miserably in the first venture.
Entrepreneurship is not a “boom” or “bust” process, even though any new firms success
brilliantly and other do not survive for long. The point is that so much distortion exists on both
issues.
c) Entrepreneurs are Mavericks and Misfits
Evident suggests that entrepreneurs are not always among the best students, and they tend to be
restless in structured jobs. Consequently they are likely to be unsettled wanderers. It is true that
entrepreneurs prefer independence and can be rather rebellious and both conditions can affect
their performance in schools and at work. Most successful entrepreneurs. However are from the
ranks of above average students and they are relatively unlikely to have drug or alcohol problems
or to run afoul of the law. Entrepreneurs are maverick in the sense that they instigate change and
challenge the status quo, but they are not misfits.
d) Are entrepreneurs born not made
A persistent notion is that most entrepreneurs are born with innate characteristics that prepare
them for the difficult life of new venture creation. Clearly entrepreneurs have personal
characteristics that lead to a more venturesome destiny. Successful entrepreneurs tend to be
optimistic, have a keen sense of determination, energetic and often have an entrepreneurial
parent. However there is substantial evidence that entrepreneurial characteristics can be
environment based. E.g. First born children are often experienced to take over parental
businesses of heirs to established enterprises.
Those who believe entrepreneurs are born conclude that entrepreneurship cannot be taught. This
will mean that studying how new ventures are formed or how innovation takes place is of little
value. If environmental theme has credence, then learning as much as possible about the
entrepreneurial process will better prepare students to succeed in business.
e) All you need is money to be an entrepreneur.
Even those with sufficient money to launch an enterprise find the entrepreneurship requires
skills in marketing, manufacturing, planning and managing human resources to name a few.
Money does not assure success and in some instances it may be problem because with excess
capital unnecessary assets and inefficient organizations. Too little capital is of course a more
serious problem to overcome
f) All entrepreneurs need is money
g) It takes a lot of money to start a business
h) Those who make it are those with rich back ups
Theories of Entrepreneurship
The classical economists ignore the entrepreneur altogether. But, the distinctive feature or
characteristics or dimensions of entrepreneurship are summarized by these classical economists
and thinkers.
Theories of Entrepreneurship
1. Psychological theory
2. Motivational theory
3. Sociological theory
4. Economic theory
5. The Resource Base theory
6. Competence based theory
7
 7. Transaction cost theory
Importance of these theories- Assignment
REVIEW QUESTION
1. Discuss the theories of entrepreneurship.
TOPIC 3. THE ENTREPRENEUR
An entrepreneur finds new opportunities in business or more opportunities in an existing
business. He perceives a need and gathers all the necessary resources to satisfy that need.
An entrepreneur is therefore an originator and organizer of new business ventures or a person
who brings innovative changes in an existing business.
3.1 Types of Entrepreneurs
Entrepreneurs are classified in six major categories. These are:-
1. Innovators
Innovators are the types of entrepreneurs who come up with completely new ideas and turn them
into viable businesses.

In most cases, these entrepreneurs change the way people think about and do things. Such
entrepreneurs tend to be extremely passionate and obsessive, deriving their motivation from the
unique nature of their business idea.

Innovative entrepreneurs also find new ways to market their products by choosing product
differentiation strategies that make their company stand out from the crowd. And sometimes it is
not just standing out from the crowd but actually creating a new crowd.

To say that innovators like Steve Jobs, Larry Page of Google and Microsoft founder Bill Gates
were obsessed with their business would be an understatement.

Advantages of Being An Innovate Entrepreneur:

 Get all the glory for the success of the business (and take all the arrows)
 Create the rules
 Face minimal competition during the initial days
Disadvantages of Being An Innovate Entrepreneur:
 You will need a lot of capital to bring a new idea to life
 Often face resistance from shareholders
 The timeframe for success is longer
 The ability of an innovative entrepreneur to envision a new way of thinking makes them
stand out from the crowd and wildly successful in many cases however it takes
significant capital, patience and commitment to bring true innovation to life.

2. Imitators
Imitators are the types of entrepreneurs who copy certain business ideas and improve upon them.
They are always looking for ways to make a particular product better so as to gain an upper hand
in the market.

Imitators are part innovators and part hustlers who don’t stick to the terms set by other people
8
and have a lot of self-confidence.

Advantages of Imitators
 Refining a business idea is easier and less stressful
 You can easily benchmark your performance with the original idea
 Can learn and avoid mistakes that were made by the originator
Disadvantages of Imitators
 Their ideas are always compared to the original idea
 Always have to play catch-up
 Taking an existing idea and refining and improving it can be a great way to develop a
business. It certainly does not have as much risk as the innovator but it might just not be
as sexy.

3. Researcher
Even after having an idea, researchers will take their time to gather all the relevant information
about it. To them, failure is not an option because they have analyzed the idea from all angles.

Researcher entrepreneurs usually believe in starting a business that has high chances of
succeeding because they have put in detailed work to understand all aspects.

As a result, these types of entrepreneurs usually take a lot of time to launch products to make
decisions because they need the foundation of deep understanding. These entrepreneurs rely
much more on data and facts than instincts and intuition.

For a researcher, there should be no room for making mistakes.

Advantages of Being a Researcher Entrepreneur

 Plan for as many contingencies as possible
 Write detailed, well-thought-out business and financial plans
 Focus on data and information rather than gut feeling
 Won’t start unless they feel like they know the market
 Will minimize the chances of failing in the business
Disadvantages of Being a Researcher Entrepreneur
 Typically moves slow
 Doesn’t like risk and that can hamper progress in a new venture
 Even though these types of entrepreneurs spend a lot of time researching and digging into
the data to ensure the success of their business, they can fall into the habit of obsessing
over the numbers and focusing less on the running of the business.

4. Buyers
One thing that defines buyers is their wealth. These types of entrepreneurs have the money and
specialize in buying promising businesses.

Buyer entrepreneurs will identify a business and assess its viability, proceed to acquire it and
find the most suitable person to run and grow it.

Advantages of being a Buyer

9
  Buying an already established venture is less risky
 Doesn’t have to worry so much about innovation
 Can focus on building on something that has already gone through building a foundation
 Already has a market for your products
Disadvantages of being a Buyer
 Usually pays a high price for good businesses
 Will face the risk of buying businesses that have problems that you think you can turn
around
5. Fabian entrepreneur.
They are characterized by very great caution and skepticism in experimenting any change in their
enterprises. By nature, the Fabian entrepreneurs are shy and lazy. They follow set procedures,
customs, traditions and regions. They do not venture to take risks. They imitate only when it
becomes perfectly clear that failure to do so would result in a loss of the relative position of the
enterprise.
6. Drone entrepreneur.
These are characterized by refusal to adopt or use opportunities that come on their way, to make
changes in production formulae even at the cost of severally reduced returns relative to other like
producers. They are conventional in their approach an stick to their set practices, products,
production methods and ideas. Such entrepreneurs may even suffer from losses but they are not
ready to make changes in their existing production methods.
3.2 Characteristics/Traits of an Entrepreneur
To be a successful entrepreneur, there are certain characteristics one should have. These
characteristics could either be personal attributes i.e. inborn natural qualities, or be acquired. The
personal attributes are referred to as traits while the acquired ones are referred to as
competencies
The necessary traits would include:-
a. Self-confidence:- self-confidence is important for an entrepreneur because it helps him/her
project a positive image about him/ her-self and the business, and this helps gain the
confidence of others.
b. Persistence and determination. This helps an entrepreneur not to easily get discouraged or
give up. They therefore consider problems as challenges. Highly optimistic:- The successful
entrepreneur are not disturbed by the present problems faced by them. They look at the
brighter side of things and always hope for the best.
c. Hard work: - A successful entrepreneur knows that nothing comes easy and we have to
labour for what we reap. In this way, they can also encourage their workers to work hard.
d. Innovative and creativity:- it is important for entrepreneurs to adopt new ways and introduce
ideas in order to improve their business.
e. Flexibility: - An entrepreneur should be open to change. They should adapt easily to
changing situations and circumstances.
f. Goal oriented: - The entrepreneur has a strong desire to achieve his /her goals in business.
He or she, channels his /her energies to achieve these goals he has set for himself or herself
i.e. high profits or market leadership.
g. Independence: - One of the common characteristics of the successful entrepreneurs has been
that they do not like to be guided by others and follow their routine. The resist to be pigeon
holder. They like to be independent in matters of their business.
h. Fore sight: The entrepreneurs have a good foresight to know future business environment. In
other words, they well visualize the likely changes to take place in market, consumer attitude,
10
 technological developments, etc. and take timely actions accordingly.
i. Good communication:- As a leader an entrepreneur should communicate effectively with all
concerned such as financiers, employees, customers, suppliers and all who are concerned
with the new enterprise.
j. Good Human Relations: Tactful and warm human relation is an important factor which
brings success to an entrepreneur. He will be able to be emotionally stable and keep himself
as a model to others. He will also be able to motivate the employees to put their best
performance at all levels in the organization.
In addition to the traits above, it is also necessary that an entrepreneur possesses certain
competencies in order to be successful. These competencies are in terms of knowledge and skills
acquired through education, training, observation and experience. The competencies would be in
areas such as:-
a) Knowledge of the business opportunities available:
Should be able to generate good business ideas, scan the business environment, specify and
assess the viability of business opportunities within the environment
b) Knowledge of the nature of the market in which he or she intends to operate:- needs to needs
to understand the nature to the products he or she intends to deal in, extent of the
geographical market, the particular segment i.e. his customers in terms gender, age, income
level and geographical location
c) Knowledge of the nature of customers:- this is in terms of customer behavior i.e. needs and
tastes, their buying habits and their likes and dislikes.
d) Knowledge of the nature of competencies:- this is in terms of competitors ( who they are,
where they are located and their strengths and weaknesses)
e) Knowledge and skills in the technology used in the production and marketing of the
particular product.
f) Skills in business management techniques necessary to enhance efficiency in the operation of
the business enterprise.
g) Knowledge about the sources from which one could get the necessary assistance in running
the business. This is assistance could be in the form of finance, new business and
management ideas and even training.
h) Skills in the technical aspect necessary in conduction business in the industry e.g.
engineering, marketing and accounting.

3.3.Roles of an Entrepreneur in an Enterprise

An entrepreneur does perform all the roles necessary right from the genesis of an idea up to the
establishment of an enterprise. Their roles include the following:-
1) Innovator
As an innovator the entrepreneur institutes new combination of factors of production. Innovation
can take place in five forms according to Joseph A. Schumpeter
2) The role of the organizer:
The entrepreneur organize because he determines how resources used in the enterprise are to be
combined and utilized in order to maximize their output.
3) The role of a risk taker:-
An entrepreneur plays the role of a risk taker since he or she is one who will be responsible for
the fortunes and misfortunes of the business in terms of profit and losses.
4) The role of the director
11
He does this by contributing ideas to advance the business objectives.
5) The role of the financier
He or she is the one who contributes the capital or finance necessary to undertake the business.
6) The role of the controller or leader.
Since he or she makes the final decisions and controls all aspects of the business, he is the
business controller.
7) The role of the coordinator
He is responsible for seeing that all aspect s of the business run smoothly.
8) The role of recruitment of staff.
NB:
Challenges of entrepreneurs
 Competition-face competition from existing players and new entrance in the market
fighting for the same customers and suppliers
 Uncertainty-blurred future as business is engulfed by unexpected happenings
 Capital-different businesses compete for limited capital supply provided by financial
institutions
 Staff issues-employees are often poached by other enterprises and the entrepreneur has to
fight to keep them
 Technological dynamism-every day technology is changing and the entrepreneur will be
faced by the challenge of keeping abreast technology wise to maintain a competitive edge
 Unfair trade practices-the business environment is sometimes infested by rogue
businessmen who are willing to do immoral things to stay in business.
 Natural catastrophes and human evils- the entrepreneur will always be wary of what
acts of God such as floods and draught will adversely affect the business22

4 ENTERPRISE DEVELOPMENT
 Process of creativity and innovation
 Barriers to creativity and innovation
 Factors inhibiting entrepreneurial development
 Business life cycle

4.1 Creativity and innovation

Creativity
It is defined as the ability to bring something into existence. It is a way in which a person can
conceive something new and envision how it will be useful and take the necessary action to
make it a reality.
Innovation
An innovation is something new. It can be a new device, process or idea. Cellular telephones
combined with computer technology may be considered innovative device. Using satellite to
help navigate automobiles is an innovative process. Making ICT tools smaller and portable is an
innovative idea
4.2 Process of Creativity and Innovation
 Idea generation
 Research and development
 Product development
12
  Production-use of models and finally product refinement
 Distribution- distribution strategies for taking products to customers
4.3 Barriers to Creativity and Innovation
 Searching for right answer(not diversifying)
 Focusing on being logical or systematic
 Blindly following the rules- not thinking beyond them
 Fearing to appear foolish
 Fearing to fail or make mistakes for example going to university
 Believing that you are not creative
 Education-is it not be theoretical
 Organizational factors
 Constantly being practical
4.4 Economic, Social and Political Factors Affecting Entrepreneurial Development
i. High taxation levels (for business and personal incomes):- such taxation reduces the profits
earned from enterprises thereby making it unattractive to engage in businesses. The taxation on
raw materials and other inputs required by the entrepreneurs further tends to raise the cost of
production and hence erode on the profits that would be earned.
ii. Corruption and official harassment:
in some countries, prospective entrepreneurs are forced to bribe officials in various government
offices to be allowed to start and operate their enterprise. Additionally, the small business
enterprises are routinely raided under one pretext or another which tends to be very harassing.
All these tend to discourage people from venturing into business.
iii. Unregulated competition from outside the country.
In early 1990’s, the Kenyan government liberalized the economy to a very large extent. This
means that all manner of goods could be imported from other countries to compete with the
locally produced goods. As a result, a lot of imported products have flooded the local market and
this has discouraged many people from venturing into business. Some have even been driven out
of business.
iv. Declining personal incomes of the people
Due to over increasing cost of living, the real earning of most employed people has been
declining. The number of unemployed people has also been rising for various reasons. As a
result, the shrinking progressively tending to hinder entrepreneurial development.
v. The high cost of finance:-
The cost of borrowing money had become very high due to the high interest rates charged on
such loans. Very few businesses would be able to generate enough revenue to enable them repay
the loans as well as make profits. This factor limits the development of entrepreneurship.
vi. Lack of necessary skills and knowledge:-
This arises mainly due to lack of training opportunities. Where training is available, the cost is
usually too high for most people to afford.
vii. Poor Transport and Communication network.
For a business enterprise to succeed, it needs to transport its products to the market efficiently
i.e. at low cost and in good time. It also needs to communicate to other businesses and other
13
people e.g. consumers conveniently and efficiently. However in some countries, transport and
communication network is poor making it very difficult for business enterprise to strive.
Viii. High cost of energy:-
Energy is one of the most important components of the production process for most enterprises.
The most common sources of energy for our business enterprises are hydroelectric power,
geothermal power and petroleum. However, the cost of such energy is too high and electricity
supply is unreliable and unevenly distributed. This tends to make many business enterprises
uneconomical to operate.
ix. Operating premises.
This Is usually very difficult to get. Where available, the rent is usually high. This is a major
draw-back to the development of entrepreneurship.
x. Lack of entrepreneurial culture
This is because many people still seek for formal employment where they may be assured of a
regular income. They fear the risks associated with self-employment.

4.5 Business Life Cycle

The life cycles of a business are the stages that a business enterprise goes through in its life. It is
also called enterprise life cycle. Enterprise/business life cycle is broadly classified into five
stages; Start up, Growth, Expansion, Maturity and Decline. Each stage has distinct
characteristics. The strategies required to effectively cope with each stage also vary. This calls
for prosper understanding of each stage for growth. The stages are briefly described below.
1. Startup stage:-this refers to birth or emergence of a business enterprise in the economy.
The production takes place in limited scale. This is also limited to a small area. The
enterprise is also not faced with stiff competition at this stage. Profit may not be earned at
the start up stage.
2. Growth stage: - during this stage, the business enterprise is known to and accepted by the
market. Production and sales increase yet the supply falls short of the demand for the
products produced by the enterprise, profits increase. The competitors begin to emerge. The
enterprise at this stage tries to change its strategy from “buy my product to my product”.
3. Expansion stage: - this is a stage in which the business enterprise expands by way of
opening its branches and introducing new product lines. Business activities at this stage are
diversified to reap the best benefits from the available business opportunity
4. Maturity stage: - During this stage, due to keen competition, sales increase but at a
decreasing rate. As a result, profits tend to decline. In such situations, marginal enterprises
start leaving the scene/market. Some enterprises adopt methods such as “trading in” to
survive for more time in the market.
5. Decline stage: - this is the final/last stage of the business enterprise. At this stage the
enterprises find it difficult to survive either due to the gradual replacement of enterprise
product due to some new innovations or on account of change in customer behavior. Sales
drop abruptly. Enterprise starts incurring losses at an increasing rate. In such situation
enterprises prefer to close their shutters.
It is important to mention that the time of period of which an enterprise remains in each of the
stages, varies widely from enterprise to enterprise. Some enterprises take years together to pass
14
through the startup stage while, others may pass through or be accepted in a few weeks only.

Stages of small business growt Mh (business life cycle)

Maturity Decline
Start up Growth Expansion

15
Topic5. ENTREPRENEURIAL ENVIRONMENT
 Factors that promote entrepreneurial culture
 factors inhibiting entrepreneurial culture
 Ways of managing factors inhibiting entrepreneurial culture

5.1 Entrepreneurial culture

Culture is defined as a set of values, perceptions, wants and behaviors learned by a member of
society from family and other institutions.
It is a tool of leaned behavior patterns of living. It is a powerful human tool for survival. It is
constantly changing and easily list. All man made things are products of culture. It is constantly
changing and easily lost. All man made things are products of culture. Weber argues that
Protestantism encourage a culture that emphasize individualism, achievement, motivation,
legislation of entrepreneurial vocations, rationality and self-reliance.
Hoftsted (1991 p5) defines culture as a collective programming of the mind which distinguishes
the member of one group or category of people from another.
Entrepreneurial Culture:- The attitude , values, skills and power of a group of individuals
working in an organization to generate income
What constitutes entrepreneurial culture?
An entrepreneurial culture can be seen in terms of
1. Growth in concentration of firm, networks and linkages.
2. Growth in intermediary organization to which some tasks are delegated and different
form of entrepreneurship.
3. Higher levels of education, skills and learning concerning entrepreneurship.
Why an entrepreneurial culture?
1. Entrepreneurial culture enhances economic growth and building of social capital.
2. It enhances job creation.
3. It acts as a primary source of innovation.
4. Entrepreneurial culture helps in the devolution of government powers for policy
implementation at local level.
5. It is a direct influence on internalization in terms of technology, human resource, capital
and information flow.
5.2 Cultural habits that promote Entrepreneurial development
1) Money orientation:- A person who is money oriented is one who knows the value of
money and has an intention of making it. A person who is money oriented can use the
need for money as a motivating factors. He knows where to get money to provide for his
capital if he gets involved in entrepreneurship activity he will make more money.
16
 2) Future orientation: a society that has foresight to know about future business environment
is likely to have more entrepreneurs. This is because the entrepreneur will learn to
visualize the likely changes to take place in market, consumer attitude, technological
developments etc. and take actions accordingly.
3) Time consciousness:- this is the knowledge that time exists and its importance. Knowing
the right time start an entrepreneurial activity is very important. Time is a resource and
should be utilized well. An aspiring entrepreneur should group the market conditions and
wait for the correct time to establish her /his enterprise.
4) Trust / honesty: to trust something or somebody is to have confidence in that person. Trust
and honesty is very important in entrepreneurship. Consumers will buy an entrepreneur’s
products or services because they believe the entrepreneur should reciprocate this trust by
ensuring that he maintains honesty to his/her consumers thought maintaining the standards
of his products at all times. Trust and honesty helps, establish a stronger relationship
between consumers and the entrepreneur.
5) Hard work:- willingness to work hard distinguishes a successful person from unsuccessful
one. Hard work enables one to engage in entrepreneurial activities even when other people
do not think they can achieve much. Through hard work the entrepreneur will establish his
enterprise maintain it and even revive it on verge of business lives.
5.3 Cultural factors inhibiting entrepreneurial culture
 Religion:-Religion plays a major role in limiting the entrepreneurial development.
Religious beliefs are regarded by others and the society as control of behavior. For
example, strong Christian believers will not engage in an entrepreneurial activity that is
against their Christian beliefs e.g. setting up a night club or a bar. This limits
entrepreneurship development because even if an opportunity arises and they have the
resources to establish the business, they will not dare do so because of their Christian
beliefs. Again in Kenya, the society has made it that it is difficult to find a Indian of
Hindu religion engaged in very small business activities e.g. hawking.
 Language: - Language also inhibits entrepreneurial development. A person may want to
establish a business enterprise in an area where he sees an opportunity to do so but he/she
may not have the knowledge of the language of the people in that particular area.
Communication will therefore be a barrier. People also tend to appreciate or to identify
with people who speak their language and this therefore will deny the entrepreneur the
opportunity to establish a relationship with his or her customers.
Entrepreneurial language is also full of economic terms and a person willing to establish
an enterprise may not be able to grasp this terms and will need an economist to explain to
him or her in a lay man’s language.
 Personal Relationships: Personal relationships also play a major role in limiting the
development of entrepreneurship. Married people for example, will not want to get
involved in business activities that will not spare them time to be with their families, even
if an opportunity arises. How a person relates to others may also be of importance
because a poor relationship may even deny one an opportunity to get a contribution of
capital. A person who has effective interpersonal as well as interpersonal relationship
skills is likely to be a successful entrepreneur.
 Attitude towards innovation:- innovation are necessary for entrepreneurial growth.
17
 Many cultural practices are opposed to innovations. People are not aware of the
importance of innovations towards development. People will always resist innovations
because they are afraid of change. People will always resist change because it is new and
they fear that new things will interfere with their beliefs and customs.. when people have
poor attitudes innovation, then development of entrepreneurship becomes difficult.
 Networks: This is a way through which a person is able to meet people and get
information concerning the available business opportunities. Establishing good networks
(people who can give information_ is very important for an entrepreneur. Without proper
information one cannot establish a business enterprise.
When one has not established networks, getting information can be very limited and
therefore acquiring skills and knowledge for entrepreneurial development because
difficult networks can also be linkages with media houses or organization. Poor network
limits entrepreneurship development.
 Technology:- The advances that have taken in technology can be directly related to the
high rate of changes that have taken place not only in organizations but also in societies.
Technology does not merely refer to the hardware and machinery used in the production
systems, but rather to the entire skill and technique used, known as the technical process.
Technology limits entrepreneurship development because many people have not acquired
the technical skills and knowledge required. Many enterprises have now gone hi-tech and
an aspiring entrepreneur has to gain these technical skills before engaging in a business
enterprise.
5.4 Ways of managing factors that inhibits the development of entrepreneurial culture
a) Working in a related business to gather the necessary skills required before one starts his
own business
b) Setting policies that ensure that entrepreneurship training is established in the school
syllabus.
c) Young people to be encouraged to read articles from newspapers, watch television
documentaries and also get various business contacts to enable them select products which
are demand and which have bright future.
d) Youth as well as aspiring adult entrepreneurs should be encouraged to get better and faster
access to knowledge, information relation to business, competition and internet and other
information providing gadgets.
e) The government should develop various common facilities and services nature.
f) Aspiring entrepreneurs should seek guidance in selection of machines and facilities from
those already in business .

REVIEW QUESTIONS
1. Discuss the cultural habits which promote entrepreneurial development?
2. Identify the cultural habits which inhibits entrepreneurial development?
3. How can you manage the factors that inhibit the development of entrepreneurial culture?

TOPIC 6 ENTREPRENERIAL OPPORTUNITIES

A business opportunity can be defined as a sound business idea which forms the basis upon which an

18
entrepreneur makes a firm investment decision.
6.1 Meaning of entrepreneurial opportunities
Entrepreneurial opportunities are gaps in “need” and the likelihood that if a product were to be
developed to fill that need, it would also be “wanted” (there would be effective consumer
demand)
Identification Of Business Opportunity
A Business opportunity is a gap or a need that an entrepreneur feels that if he were to develop a
certain product then it would fill that gap.
An entrepreneur is not an entrepreneur unless she or he demonstrates that she /he recognizes the
needs of potential customers rather than being simply infatuated with an innovative idea. An
entrepreneur must establish the consumer needs and the possibility that his products will be in
demand.
The search for a suitable product should be suiting to the entrepreneur, market and viability of
the project. Success of a product is very important for sustenance and growth of an enterprise.
An entrepreneur should start thinking on several product ideas to begin with. Peter Drucker has
identified three possible types of business opportunities. These are:-

a. Addictive opportunities:- here better and intense utilization of existing resources is called for
from the decision maker. This also means changes in production and marketing strategies.
b. Complementary opportunities:- This is bringing new ideas in existing products or business so
as to bring in value addition or changes desired in the market.
c. Breakthrough opportunities:- This is where fundamental ideas of new products, new areas
and new technologies are started. Breakthrough changes structure, strategies and business
character.
A search for a suitable business opportunity is the first step an entrepreneur takes.
6.2 Evaluation of Business Opportunities
The process of evaluating a business opportunity should be sober, objective and reflective. Initial
business selection, if done properly could contribute as much as 50% towards success. Similarly
if it is done hastily and thoughtlessly, it could lead to certain failure. A business idea should not
be based on emotional obsession and unrealistic or wishful dreams. All the important facts
relating to the proposed business must be established. This need not take long if the person doing
it knows how and where to find the fact.
It normally takes the form of a feasibility study or market study. A very elaborate study needs
time and money to conduct, compile and analyze. If much capital is to be committed to the
venture it becomes worthwhile to have an elaborate study made with some helps from experts. A
useful study needs to take into account the idea the environment and the person. Many studies
tend to dwell on the idea and The environment without focusing on the entrepreneur whose input
is an important variable in the success of any business.
Evaluating a business opportunity
This means assessing whether the identified opportunity is viable or not. This helps in arriving at
the best decision concerning the business idea to implement Evaluation should be done carefully,
systematically and without emotions.
Evaluation is necessary even where there is only one business idea. This will help in avoiding

19
starting a business that cannot succeed.
Factors to consider when evaluating a business opportunity
The following are the factors to consider when evaluating a business opportunity.
a. Personal consideration
These are the abilities and expectations of an entrepreneur. They include the following;
• Objectives
The entrepreneur should evaluate the business idea to find out whether it is in line with his/her
objectives.
• Skills
Where a business requires certain specialized skills and those skills are lacking the idea may be
dropped.
• Commitments
Where the business is likely to interfere with the entrepreneurs other commitments it may fail.
• Interest
It is necessary to check whether the intended business will interest the entrepreneur or not.
If the entrepreneur will not enjoy running the business, the idea should be dropped.
b. Business consideration
These are external factors that are likely to affect the operations of the business and they include;
i. Availability of market for the product
An entrepreneur should assess the availability of customers before starting a business. Customers
exist where there is a gap/nich in the market.
ii. Technology
The business should be evaluated in terms of whether there is an appropriate technology that can
be used in production. Factors to be looked into include;
a. -Appropriateness of the technology
b. -The cost of the technology
c. -The possibility of the business suffering in case the technology becomes
outdated/obsolete.
iii. Availability of raw materials and other resources
The raw materials and resources required should be within the reach and affordable to the
entrepreneur.
iv. Government policy
An entrepreneur should consider the requirements of the government before starting a business
e.g. the government may require certain businesses to be located in certain areas only.
v. Amount of capital required
The capital required to run and maintain the business should be considered i.e the source of
capital.
20
vi. Profitability of the business
Within a certain duration of time.
vii. The break-even period
How long the business can take to support itself.
viii. Possibility of expansion i.e. the potential for growth of the business.
ix. Impact of the business operations on the environments; some businesses operations on the
environments; some businesses lead to environmental degradation and should be located in
appropriate
x. Security
Availability of security should be considered.
xi. Level of competition
This will help determine whether the business will survive or not.
xii. The risks that the business will face
Evaluating the Idea
a) How much capital is required to plan and implement the business idea?
b) Are other resources need to implement the idea readily available besides the capital.
c) What are the returns on the unit sum of the capital invested?
d) How long will it take to recover the basic costs associated with the business?
e) What other benefits direct or indirect should the owner expect from the business?
f) Is there a ready market for the product or service?
g) What level of technology is needed in order to survive? Is it available? At what cost?
Evaluating the Environment
What are the general obstacles associated with entry into the particular type of business?
How much competition is expected and how much strategy to be used in coping with it?
What are the regulations to be complied with in establishing and operating the particular type of
business?
a) How large is the current and potential market?
b) What fraction of the market do you expect to secure;
In the short run?
In the Long run?
c) What are the laws and regulations governing the establishment and operation of the particular
type of business?
d) What are the taxes that are applicable to the particular type of business?
e) What kind of technology is being used by the competitors? Can you match their level of
technology and product quality?
f) Who are your customers?
g) Where are they?
h) How are you going to reach them?
i) Do you know their values and expectations with respect to the product?
j) How stable is the market in terms of numbers and the changes in values or expectations of
the target clients?

21
k) What is the survival rate in the particular line of business? Do you know the reasons why
people fail?
l) Which other individuals or institutions do you expect to cooperate with in order to achieve
business success? Are you ready to work with them?
m) If you expect to borrow part of your capital, do you know the prevailing lending terms and
conditions? Are you able to meet them?
Evaluating the Person
a) What are your goals for embarking on the particular business?
b) How do you define success in any type of business ? is your definition compatible-
c) Do you have enduring goals for embarking on a business idea?
d) Have you got relevant training or experience for the business you expect to start?
e) Do you enjoy working long hours?
f) Do you enjoy working with other people?
g) Are you able to sacrifice short – term interest for long term goals?
h) Is the business you propose to start compatible with your interests and lifestyles?
i) What other people do you intend to involve in the running and success of your business?
Have you consulted the concerning the particular roles you expect to give them?
j) Do you have adequate capital to finance the business? If not how, do you expect to make up
for the balance?
FACTORS TO CONSIDER WHEN EVALUATING VIABLE BUSINESS OPPORTUNITIES
An entrepreneur needs to determine whether the business idea they have in mind is viable or not.
When evaluating the viability of the business opportunity, the following factors need to be taken
into consideration:
• Potential for growth:
An opportunity is said to be viable, when it has the ability to grow and expand.
• Infrastructure:
Easy access to infrastructure such as roads, water, electricity, telephone and postal services
among others enables business enterprises easily make orders for goods and deliver them hence
reducing operating expenses. With low operating expenses, profits can be maximized.
• Market for the goods and services:
An entrepreneur has to access potential and actual market for the goods and services he would
like to sell. There must be a clearly defined market if the opportunity is to be considered.
• Rewarding to the investor:
The opportunity should be rewarding to the investor (cost-benefit consideration). He should
consider the expected returns against the expected cost to ensure that the benefits outweigh the
cost.
• Price structure:
One has to put into consideration the price-structure of the goods and services he would like to
offer. Goods and services, which are subjected to constant inflation, are likely to change in terms
of price.
• Competition and Competitive advantage:
Competition is regarded as a threat to business of similar kinds operating in a similar location.
22
Although competition is a threat, it is healthy in the sense that it goes along the way in
controlling price of goods offered. It is crucial for entrepreneurs to consider opportunities where
competition is not high as this will enable them to get reasonable market share. They should
venture where competitive advantage is.
• Incentives:
Offered by the government and Non-Governmental Organizations, incentives are legitimate
business opportunities to exploit as they save on costs. E.g. duty free importation of sugar and
maize, tax waivers, e.t.c.
• Legal Consideration:
The new idea should be in line with the legal regulatory framework e.g. an idea to sell drugs may
not be viable because it is illegal.
• Financial viability:
The assessment of financial viability is of significant importance when looking at the viability of
the business. Capital investment requirements, break even analysis, cash flow projections,
profitability of the business have to be analyzed. This is because they determine the sustenance
of the business in the market-mix.
• Personnel, Training and Management:
Before starting a business, it is necessary to make an assessment of the required personnel
training and management. Look at the ability, cost of hiring and training human resource.
Management efficiency will enable the business to succeed.
6.3 Ways of generating business ideas
Generating Business Ideas
Before starting a business, it is important that an entrepreneur comes up with a good idea if he or
she is to be successful, and be ahead of the competition.
Reasons for Generating Business Ideas
There are many reasons why it is necessary to generate a good business idea before starting a
business. Some of these reasons are:-
1. To come up with the right product or service that closely meet the needs of your customer
(market)
2. To conduct your business in the best way possible by using the right technology.
3. One will be in a much better position to stay ahead of the competitors.
4. To be able to come up with many different products or services to meet different customer
needs such that if one falls, the enterprise does not lose everything. This is called spreading
of risks.
5. To be able to diversify your business as the need arise especially if what the business is
already dealing in becomes unattractive to customers.
Sources of Business Ideas
Newspaper and magazines:- The commercial advertisement pages may contain advertisement
for sale of some business and other business opportunities.
The radio, television and the internet:- Radio and television talk show about business matters
can give useful information e.g. enterprise Kenya in KTN. one can also get ideas on the changing
trends.

23
Trade shows and exhibitions: here, one can discover new products and services and also meet
with dealers from other places or countries who can give valuable information for business
creation.
Research findings:- One can carry out research so as to discover the needs that are not being
satisfied fully by the existing goods and services. Such research can be conducted simply by
talking to people, by observing the behaviors of customers in a particular area or by talking to
existing business persons.
Individual personal skills and knowledge:- The background of the entrepreneur plays a major
role in determining the type of business to go into.
Complaints from customers about different products or services: such complaints are a sign
of dissatisfaction and frustration. By listening to such complaints one could easily set up a rival
business.
Brainstorming exercises:- In such exercises, people come with their own different ideas. The
ideas no matter how far-fetched they may appear to be should be recorded down. People then try
to improve on them progressively and logically so that the very best is maintained. One can carry
out such brainstorming exercises with either family members or with colleagues with similar
interests.
Methods in Generating Business Ideas
Focus Group
In this method, a group of individuals discuss and provide information in a structure format to
arrive at new business ideas. A leader or a moderator sits with group of people and discussions
are held in a free and frank manner regarding new ideas for industries or services. In this case,
the leader does not ask question or solicit answers. He acts as a moderator of creative thinking of
focus groups. The group generally consist of 10-14 participants and all members take part in the
discussion.
The new ideas are direct towards market needs of today and needs of tomorrow. The group
consisting of end users generally give ideas for new products. The group also give ideas on how
the product should be marketed and how it should be packaged and advertises. The data received
from various groups may be analyzed on realistic basis or quantitatively short list the new ideas.
This method is generally used for choosing apparel design, jewellery designs, cosmetics, health
care products and the like.
Brainstorming
This is a group method of obtaining new ideas and business solutions. This method is extensively
used for generating ides for new product packaging and distribution. The group are organized for
sitting together and participating in the discussions. The method of conducting a brainstorming
session are:-
1. The group should be informed of the areas of discussion.
2. The group should consist of people drawn from different streams of knowledge.
3. The brainstorming sessions should be held in a good place with ambience so that the
group comes up with their ideas.
4. The member should have no inhibition about their status in the organization or
department where they serve.
5. Day dreaming or wide ideas to be encouraged.
24
 6. There should not be any negative criticism against any particular individual or groups or
department.
7. The ideas of one can be improved by others but no repetition in ideas. Each individual
may be given a chance to three ideas and these ideas recorded on a flip chart or
blackboard.
Based on the above broad ideas a general format can be evolved where the brainstorming session
could bring greater numbers of ideas and hence chances of emergence of more useful ideas.
Checklist.
The new ideas for the business are developed on discussion on list of related issues. A specific
area of discussion is listed by entrepreneur and a list of questions, suggestions and statements are
developed for in – depth, discussions and arrive at a business idea. The type of questions for a
particular product may include;
a. Who uses the product? How it is used?
b. Why at all the item is used?
c. What are the new ways of usage of a product?
d. Can the product be modified for better value to the customer.
e. What are the substitutes available in the market?
f. How they are competitive? Can we combine the features to develop a new product?
g. Can copied and improved products add value?

REVIEW QUESTIONS
1. Define a business opportunity
2. Explain the reason for generating business ideas.
3. What are the sources of business ideas?
4. How can an entrepreneur generate business ideas?
5. Identify factors to consider when evaluating business opportunity.
6. How do you evaluate business opportunity?

7 ENTREPRENEURIAL MOTIVATION AND COMPETENCIES

Definition of terms:
Motivation is a reason or reasons for acting or behaving in a particular way
Motivation for English Language Learners: The act or process of giving someone a reason for
doing something
: the act or process of motivating someone.
: the condition of being eager to act or work
: the condition of being motivated.
: a force or influence that causes someone to do something.
entrepreneurial motivation refers to the forces or drive within an entrepreneur that affect the
direction, intensity, and persistence of his / her voluntary behaviour as entrepreneur
25
Internal motivations
While some researchers have classified the factors motivating entrepreneurs into ‘push’
(compulsion) and ‘pull’ (choice) factors, most of the researchers have classified all the factors
motivating entrepreneurs into internal and external factors as follows:
1. Desire to do something new.
2. Become independent.
3. Achieve what one wants to have in life.
4. Be recognized for one’s contribution.
5. One’s educational background.
6. One’s occupational background and experience in the relevant field
External Factors:
These include:
1. Government assistance and support.
2. Availability of labour and raw material.
3. Encouragement from big business houses.
4. Promising demand for the product.
Entrepreneurial Competencies
Definition
the ability to do something successfully or efficiently.

Key Entrepreneurial Competencies

 Strategy skills
An ability to consider the business as a whole, to understand how it fits within its marketplace,
how it can organize itself to deliver value to its customers, and the ways in which it does this
better than its competitors
 Planning skills
An ability to consider what the future might offer, how it will impact on the business and what
needs to be done to prepare for it now
 Marketing skills
An ability to see past the firm’s offerings and their features, to be able to see how they satisfy the
customer’s needs and why the customer finds them attractive
 Financial skills
An ability to manage money
 Project management skills
An ability to organize projects, to set specific objectives, to set schedules and to ensure that the
necessary resources are in the right place at the right time
 Time management skills

26
An ability to use time productively, to be able not only to prioritize important jobs and to get
things done to schedule
 Leadership skills
An ability to inspire people to work in a specific way and to undertake the tasks that are for the
success of the venture
 Motivation skills
An ability to enthuse people and get them to give their full commitment to the tasks in hand
 Communication skills
Ability to use spoken and written language to express ideas and inform others
 Negotiation skills
An ability to understand what is wanted from a situation, what is motivating others in that
situation and recognizes the possibilities

8 STARTING A SMALL BUSINESS

What is a business?
A business entity is variously referred to as a venture, an enterprise, a firm, an organization or a
business enterprise.
Small business has constituted the backbone of some economies and has remained the vital link
between various levels of economic activity in some. Many of the flourishing and growing
businesses started in a small way.
Small businesses defy definition as a concrete concept. Typically one would refer to a small
business when talking about one man business managed by the owners utilizing mainly family
labour and one or two employees. In many countries of the developing world, these fall under the
category of informal sector where most of the businesses are registered. In some countries, this
category although consisting of registered businesses, comprises mainly small corner shops and
services, facilities employing one to or ten employees.
Procedure of Starting a Small Enterprise
Having an idea, even an innovative one, does not mean a business has created, nor does it mean
that an entrepreneurial event is about to happen. It is the recognition of potential customer, their
needs and ability to take up the idea and translate it into business. This brief discussion of a
business plan will give the indication of the process or procedure of going into business although
it is by means exhaustive; it introduces the concept of preparation process. More importantly it
stresses the fact that it is not a simple process of having an innovative idea. The business process
or procedure therefore involves;
a) History and position of the business (what is the business idea). This is an attempt by the
entrepreneur to state the business idea and the context within which it will be developed. It
will involve describing the intended business objective and its environment.
b) Market research: - This is an attempt to find out whether the idea has a potential clientele. It
allows the proposer to modify the business idea according to the potential market .Many
busies people ignore this procedure assuming that having a good innovative idea is enough
for the business success. Many times they find out that the potential market is not as large as
27
 first though, or their interpretation of customer’s needs is a little family.
c) Competitive business strategy: - In this stage business plan of action is developed to reach
the larger clients for optimum satisfaction. The entrepreneur therefore has to understand the
nature of the environment he/she is dealing with, including competition in order to device
more effective ways of reaching the customer.
The competitive business strategy includes a statement of the business mission and objectives; a
description of the marketing mix to be used; the nature of the market place (demands, trends and
pattern); competition; the political, social, economic, legal and technical environment; specific
business objectives.
d) The operation plan: - Operation refers to all activities required to implement a strategy.
This usually involves the day to day process of administration of the different components of
the plan. This will include sourcing, production, selling, contacting, recruitment and
monitoring and evaluation of various activities.
e) Forecasting results: - Projected results are both a guide and incentive in business
management. It has been said that, if we do not know where we are going, we will never
know how to get there and indeed when to get there. Many small businesses do not forecasts
most commonly required are sales, revenue forecast, and also a statement of expected cash
flows.
f) Business control: - This involves the periodic internal monitoring and evaluation of the
business performance. Based on the objectives and forecast as targets, the strategy is
evaluated according to its ability to deliver results. Again the various components of the
strategy should also be evaluated separately although the overall performance measures like
revenue increase in market share cost saving, customers satisfaction, increase in assets or
increase in employment are most useful to the entrepreneur.
Factors to Consider When Starting a Business
1. Capital: - Entrepreneurs have to invest in certain amount of personal money for the start of
their business. He should know the sources of his capital.
2. Business opportunity: - an entrepreneur should not start a business similar to existing ones
without determining whether the market can accommodate all of them.
3. Entrepreneurial skills and knowledge: - An entrepreneur should know his competencies,
attitudes and skills that will benefit his business. Managerial skills are important since they
will enable him to:-
a. Implement the business policies
b. Identify and deal with problems that can interfere with business
c. Conduct business appraisal and compile the necessary report
d. Ensure and control quality and quantity in performance for productivity in business
4. The competitors: - a person wishing to start a small business should know his/her
competitors and the quality of products, so that he can make his products even better.
5. Economic environment: / when the economy is declining progressively then the demand for
goods and services also tends to decline. The entrepreneur needs to study the economic
environment before venturing into business.
6. Legal requirements: - an entrepreneur should know the legal requirements of starting his
enterprise. The legal requirement may prohibit or restrict the consumption of a certain
commodity. The entrepreneur has therefore to choose wisely the business to engage in.
7. Political environment: - the political environment scene changes. An entrepreneur should
28
 consider whether his business will be able to operate within the changing political
environment. E.g. increased corruption and official harassment may force his business
enterprise to close down once established.
8. Machinery and equipment: - this will be determined with the nature of the business
activity. If the entrepreneur engage in a production business the knowledge on how to use the
equipment is necessary.
9. Business premises: - The location of the business is a key factor to consider. The following
are the factors one should bear in mind when selecting a business site.
a) Transport facilities
b) Availability of energy or power
c) Nearness to raw materials
d) Expansion ability in future
e) Availability of auxiliary services i.e. banking

Challenges Faced When Starting a Small Enterprise

a. Too many competitors out prices in the market and the new entrepreneur finds it difficult to
establish.
b. Raw materials and other inputs are expensive
c. In a male dominated society, women entrepreneurs finds it difficult to cope up with pressure
and tensions of managing an enterprise
d. Financial challenges:- entrepreneurs suffer from finance shortage may be because their
access to external sources of funds are limited
e. Deficiency in managerial and technical skills needed for the operation of the enterprise
f. Poor infrastructure facilities including power is also a challenge
g. Lack of planning:- an entrepreneur should have a well- developed plan with clear objectives
prior to starting any venture
h. Government limitations:- the government tend to back the larger business enterprises making
the small enterprise entrepreneurs less attractive especially when it comes to bank lending’s
i. Environmental changes:- the economic, political, social and technical environmental are a
challenge to the entrepreneur
The Role of Small Business in Development
The small business has been associated with entrepreneurship for several reasons.
1. Most businesses start small. Small firms provide an opportunity for larger businesses to rise
up.
2. Small firm is a stepping stone in organic business growth in that, small firms act as a
training ground for entrepreneurs as they experiment with ideas and techniques.
3. The small business offers the entrepreneur the opportunity to take moderate risk while
getting to know the product and factor market.
4. Small firms contribute to entrepreneurial activity due to the fact that they are associated
with increased competition first by their numbers in a given market and also by the intensity
of their activity.
5. Small firms contribute to national output through linkages with high volume large 3 firms
in subcontracting activities.
6. Small businesses contribute to employment creation.
7. In developing countries, the shortage of capital and labour surplus have meant that small
businesses are more feasible since they require lower levels of capital input.
29
 8. Small businesses act as incubators for innovative ideas and the widespread diffusion of
technology within a society.
9. Small businesses reduces the dependency of developing countries on aid from the
developed countries

9 LEGAL FORMS OF BUSINESS ENTERPRISES

An entrepreneur needs to give serious thinking about what legal forms to choose for his / her
new enterprise. The form of ownership to be chosen depends upon the factors like one’s personal
capacity to take decisions, bear risks, economic soundness, education attainment etc. there are
various forms of business ownership. They include:-
Sole Proprietor/ Sole Trader
In a proprietorship, the enterprise is owned and controlled by one person. He is the master of his
show. He sows, reaps and harvests the output of this effort. He manages the business on his own.
If necessary, he may take the help of family members, relatives and employ some employees.
It is the simplest and easier to form. It does not require legal recognition and attendant
formalities.
Main features of a sole trader.
a) One man ownership:- only the man is the owner of the enterprise.
b) No separate business entity:- the business and the proprietor are one and the same
c) No separation between ownership and management:- the proprietor is the owner and the
manager.
d) Unlimited liabilities:- This means that the proprietor incurs all the liabilities on his own and
in case the business suffers a loss that it cannot pay its debts, then the proprietor will have
to pay from his private sources.
e) Less formalities:- A sole proprietor can be started without completing all the legal
formalities.
f) All the profits or losses to the proprietor:- being the sole owner, the proprietor enjoys all the
profits and suffers all the losses.
Advantages of a Sole Proprietor
1. They are easier and simpler to start and to dissolve
2. Decision making is fast because the sole trader makes the decision alone.
3. The sole trader enjoys all the profits own its his own.
4. The sole trader is in a better position to keep and secrets related to his business than any
other form of business.
5. The sole trader is in a direct contact with customers and employees leading to better
relationship.
Disadvantages
1. I n case the business is in a loss and the assets of the business cannot pay the business debts
the sole trader pay from his own private means. This is called unlimited liability.
2. He bears all the losses on his own.
3. Sole traders are always unable to raise sufficient capital funds:- they have to rely on their
own ability to raise money for their business.
4. Limited ability:- A sole trader may be an expert in one area or two areas but not in all areas
30
 like production, finance, marketing etc.
5. Limited life of enterprise:- the life of the sole proprietor enterprise depends on the sole
trader and in case the sole trader dies, then the enterprise also collapses.

Partnership
A partnership is a relationship between two or more people jointly carrying out a business with
the objective of making profit. Each of the persons is called a partner and the business is referred
to as a firm. A partnership is a relationship and does not therefore mean the firm. In a partnership
a number of people work together and there is no separate identity of the partnership from the
individual partners.
Main features
a) More persons:- there should be at least two person subject to a maximum of ten persons for
banking business and twenty for non – banking business to form a partnership firm.
b) Profit and loss sharing:- the partners share all the profits earned and losses incurred in
partnership business.
c) Contractual relationship:- partnership is formed by a partnership agreement oral or written
among the partners.
d) Existence of lawful business:- partnership is formed to carry on some lawful business and
share its profits or losses. If the purpose is to carry some charitable work, for example, it is
not regarded as partnership.
e) Utmost good faith and honesty:- a partnership business solely rests on utmost good faith and
trust among the partners.
f) Unlimited liability:- this means that if the assets of the partnership firm fall short to meet the
firm’s obligations then, the partner’s private assets will also be used for the purpose.
g) Restriction on transfer of share:- no partner can transfer his share to any outside person
without seeking the consent of all other partners.
Types of Partners
a) General partner:- the general partner has unlimited liability for the firms debts.
b) Limited partner:- a limited partner has limited liability in the partnership.
c) Active partner:- this is a partner in normal partnership practice, sharing in every way the
capital contribution, management and profit and liabilities of the business. The may be given
a fixed area of responsibility e.g. sales. He is disclosed to the public as being a partner.
d) Silent partner:- this refers to a limited partner who does not participate actively in the
management of the organization. He is disclosed to the public as being a partner.
e) Nominal partner:- he is not one of the owners or actual partner of the firm but allows his
name to be identified with the business. He does not contribute any capital nor take any part
in the management of the firm. He however, becomes liable for the firm’s obligations in an
unlimited basis. The nominal partner lends his name to be used by the business for a fee. The
business benefits because it uses the partner’s name for the promotional purpose. Such a
partner must, therefore be a well-known person who can enhance the firm’s prestige and
reputation.
f) Quasi partner:- this is one who is presented to the public as a partner although he contributes
no capital and does not participate in the management of the firm. He may share the profit
and liabilities of the firm.
31
g) Minor partner:-this is a person serving as a partner while he is under the statutory majority
age of eighteen years. Since he is a minor, his liability is limited to his capital but the
moment he reaches the statutory majority age, he will rank as an active partner with
unlimited liabilities.

The Partnership Deed

The partnership deed is a written agreement between partners which indicates their agreement to
form a partnership. The partnership agreement/deed must be duly signed by all the partners,
stamped and registered. Any alteration in the partnership deed can be made with the initial
consent of all the partners. The partnership deed generally contains the following;
1. Name and address of the business
2. Nature of the business
3. Names of partner; their addresses ad occupation
4. Location of the business, and commencing date.
5. Amount of capital to be contributed by each partner.
6. Profit sharing ratio between the partners.
7. Drawing allowable each year.
8. Loans and advances from the partners and the rate of interest there on.
9. Amount of salary and commission if any, payable to the partners.
10. Duties, powers and obligations of partners.
11. Maintenance of accounts and arrangement for audit
12. Admission, withdrawal and expulsion of partners.
13. Settlement of accounts in the ease of dissolution of the firm.
14. Arbitration in case of disputes among the partners.
15. Arrangements in case a partner becomes insolvent.
Advantages of Partnership
1. Easy formation:- a partnership is free from complicated legal requirements essentially what is
needed is the partnership agreement between the partners.
2. More capital available: partner can sometimes raise more capital than a sole trader, since
ownership rests in a group of two or more people who can contribute capital.
3. Broader management base:- each partner may have expertise in different functions of the
firm such as finance and sales. The partners can therefore, be called upon to be responsible
for those functions in which they are specialized. They may lead to increased performance
and profitability.
4. Ease of expansion:- expansion can be done very easily by increasing the size of the
partnership, including addition of specialist’s skills.
5. Sharing of losses and liabilities:- are better spread to a number of persons thus reducing the
burden on any one person.
6. Duration: partnerships have longer duration than sole partnerships because death or
retirement of one partner cannot interrupt the operation of the firm.
Disadvantages
1. Unlimited liability:- the liability of general partners is unlimited. This means that if the asset
32
 of the partnership are not sufficient to pay its debts the partners are obliged to pay the debts
from their own personal resources.
2. Difficulty in making decisions:- delays may occur when reaching decisions because all the
partners have to be consulted.
3. Lack of continuity:- a partnership has a limited and uncertain life. A partnership can be
terminated very easily especially if the partners disagree or if one partner dies of is
incapacitated.
4. Frozen investments: it is often difficult for a partner to withdraw his investment. The buying
out of a partner may be difficult unless specifically arranged for in the written agreement.
5. Limited access to capital:- partner’s have3 difficulties in obtaining large sums of capital
especially long term financing. This is serious problem especially if the firm intends to
finance major development projects.
Dissolutions of a Firm and Dissolution of the Partnership
There is a difference between the dissolution of partnership and dissolution of a firm. Dissolution
of partnerships occurs when a partner ceases to be associated with the business. Whereas
dissolution of firm in the winding up of the business in other words, in case of dissolution of
partnership, the business of the firm does not come to an end, but there is a new agreement
between the remaining partners. But in case of dissolution of firm, the business of the firm is
closed up. This means, dissolution of partnership does not imply the dissolution of the firm. But ,
dissolution of the firm implies dissolution of partnership also.
The following are ways in which a firm may be dissolved:
a) Dissolution by Agreement: the partnership firm may be dissolved in accordance with a
contract already made between partners.
b) Compulsory dissolution:- a company stand compulsory dissolved under the following
circumstances.
a. By the adjudication of all the partners of all the partners but one as insolvent.
b. By the happening of any such event that makes the business unlawful
c) Dissolution due to contingencies:- a firm stands dissolved on the happening of the any of
the following contingencies:-
a. On expiry of partnership period, if constituted for a fixed period.
b. On completion of the firms venture for which the firm was formed.
c. On the death of a partner.
d. On the adjudication of a partner as an insolvent
Dissolution by court:- under any of the following a court may order the dissolution of a firm:-
a. Any partner has become of unsound mind
b. Any partner has become permanently incapable of performing his duties as a partner.
c. A partner’s misconduct is likely to affect prejudicially the business of the firm.
d. A partner willfully braches the partnership agreement.
e. A partner transfers his interest in the firm, but unauthorized, to a third party.
f. The business of the firm can be carried on at a loss only.
g. It is just and equitable, on the basis of any other reasonable ground, that the firm should be
dissolved.
Companies
A joint stock company is defined as a corporate associated of a number of people in some
common objective (s). the member of a joint stock company contribute capital is form a common
33
stock to carry on a business usually for profit.
A joint stock company, usually is a corporate body that is created under the law and has an entity
of its own, quite separate from its owners.
Main Features
1. Artificial legal person:- A company is an artificial person created by law through it has no
body, no conscience, still it exists as a person. It can enter in contracts in its own name and
likewise may sue or be sued in its own name.
2. Separate legal entity: - A company has a distinct entity separate from its members or
shareholders. Therefore a shareholder of the company can enter into contract with the
company. He / she can sue by the company.
3. Common seal: - Being an artificial person, a company cannot sign the documents. Hence is
uses a common seal on which its name is engraved.
4. Perpetual existence:- unlike partnership, the existence of a company is not affected by the
death, lunacy, insolvency or retirement of its members or directors. This is because the
company, enjoys a separate legal existence from that of its members.
5. Limited liability:- the liability of the members of a company is normally limited to the
amount of shares held of guarantee given by them.
6. Transferability of shares:- The member of a public limited company can sell his shares to
others without the consent of other shareholders, although he has to follow laid down
procedures in the companies Act for transferring shares.
7. Separation of ownership from management:- The shareholders i.e. owner being scattered
all over country give right to the directors to manage the affairs of the company. The
directors are the representatives of the shareholders. Thus ownership is separate from
management.
8. Number of members:- in case of a public limited company the minimum number is seven
and there is no maximum limit. But for a private company, the minimum of members is two
and the maximum is fifty.
Types of Companies
Companies can be grouped into two categories;
1. Statutory companies: - They are created by an Act of parliament. The powers and functions
of these companies are defined by the Act that create them. In Kenya most companies owned
by the Kenya government (commonly referred to as parastatal organizations) fall in this
category. For example (Agricultural Finance Corporation – AFC), Kenya National Trading
Corporation Ltd (KNTC).
2. Registered companies:- These are those that are formed, registered and operate under the
companies Act in Kenya, they operate under the companies Act, 1962, CAP 486; Laws of
Kenya.
Registered companies may further be classified into public, private, limited or unlimited
companies.
1. Limited and Unlimited Companies
In a limited company, the liability of the members is limited to a stated amount, usually to the
face value of shares a member holds in the company. The liability of unlimited company is
unlimited like those of sole traders and general partners. There are however no unlimited
companies in Kenya.
2. Public Companies.
These companies must have a minimum membership of seven but there is no maximum number.

34
Their shares are freely transferable usually through the Nairobi stock Exchange shares and
debentures are open for public subscription. Certificate of trading and annual audit of accounts
are compulsory. The minimum number of directors is two. They may have limited or unlimited
liability.

3. Private Companies
The minimum membership is two and the maximum is fifty excluding past and present
employees. Their shares are not freely transferable. They cannot offer shares and debentures to
the public for subscription. They must at least have one director. They commence business on
receipt of certificate of incorporation from the registrar of companies. Presentation of prospectus
and audited accounts is not compulsory for private companies.
Advantages of a Company
1. Limited liability:- This means that even if the company is unable to pay its debt, the
shareholders cannot in accordance with the law lose more than the value of their investment
in the company.
2. Transferability of shares:- Ownership in a company can be transferred very easily.
3. Continuous existence:- The legal existence of any company is not affected by the death of
any shareholder unlike the sole proprietorship and partnership.
4. Greater ease of raising capital:- companies can raise more capital by inviting the public to
buy shares or by borrowing large sums of money at low interest rates
5. Specialized management:- Because of its size and scope of operation, a company can afford
to hire well qualified employees who can manage the company efficiently.
6. Board of director’s management:- The board of directors consists of persons of different
expertise. Decisions of these experts are normally better than one person’s decision.
7. Economies of scale:- large sums of capital enable large scale operations which result in
reduced costs per unit produced and consequently higher profit.
Disadvantages of Companies
1. Legal restrictions :- a company can only operate in accordance with its memorandum and
articles of association. This claims considerable time and effort.
2. Complications of formation :- forming a company is more costly, complicated and time
consuming.
3. Impersonality and lack of security:- Unlike the sole proprietor and partnership, the dispersed
ownership of the company leads to impersonality and consequent avoidance of personal
interest and responsibility.
4. Slow and expensive decision making:- in companies all decision making are normally taken
by the directors and the more important decisions by the shareholders. This process is slow
and expensive.
5. Direct control by owners is not possible:- The owners (shareholders) do not control the
company directly. Their control is of very indirect character because direct control is vested
in the board of directors.
6. Taxation:- The company is a taxable entity for income tax purpose. It pays taxes separately
from their owners.
7. Legal requirements:- legal requirement such as having licenses to operate certain business is
also a challenge
8. Lack of the necessary entrepreneurial skills, knowledge and traits

35
REVIEW QUESTIONS
1. Briefly discuss the different ownership forms available to entrepreneurs
2. Briefly discuss the advantages and the disadvantages of these different forms of business
organizations
3. Define a small business and discuss the role of small business in development
4. “A partnership may have different forms partners, “Discuss
5. Outline the contents of a partnership deed
6. What is the difference between dissolution of a partnership and dissolution of a firm?
7. Discuss ways in which a firm may be dissolved?
8. What are the important distinctions between a private and a public limited company?
9. How does a cooperative form of organization differ from a company?
10. You plan to start a business, what factors would you consider before establishing the
business?
11. Outline the business procedure?
12. Describe the business life cycle explaining each stage in details
13. What are the challenges you are likely to face when starting a small business enterprise?

36
 10 BUSINESS ENTREPRISE MANAGEMENT
Definitions.
Enterprise: this is a business organization that concerns itself with buying and selling of goods,
manufacturing goods or providing services in order to earn profit.
Management:- management unlike other subjects such as economics, philosophy or political
science is of a recent origin and hence a relatively new subject. There is no unified vies on what
management is precisely. Different scholars define management differently.
Henry Fayol says that to manage is “to forecast, to plan, to organize, to command, to coordinate
and to control.
Fredrick Taylor defines management as “knowing exactly what men want to do and then seeing
that they do it in the best and cheapest way. Mary parker defines management as the art of
getting things done through people.
Having gone through the above definitions, we can therefore define management as the art of
utilizing resources both human and material in order to achieve a desired objective. We could
also define it more comprehensively as the process which enables an organization to achieve its
objectives by planning, organizing, directing, coordinating and controlling or resources.
Enterprise Management: This is the art of utilizing the resources, both human and material in a
business organization in order to achieve the desired business objectives.
Characteristic of Management
1. Management is a purposeful activity.
2. It is getting things done in a desired way.
3. It concerns with the effort of people working in the enterprise
4. It relates to decision making
5. It is a process. It consists of various functions like planning, organizing, controlling and
leading
6. It is both a science and an art. It is a science because it has developed certain principles and
laws .It is an art because it is concerned with the application of knowledge for the
organization problems.
7. It is a fast developing profession
8. It deals with direction and control of the business
9. It is a dynamic concept which adapts itself to changing business conditions
A Manager :- A manager is the person who achieves the objectives of the business by directing
the efforts of the workers. The task of the manager is to establish a working atmosphere which
enables the people working under him or her to perform efficiently and effectively. To do this, a
manager needs the following qualities:-
i. Ability to think logically and clearly.
ii. Ability to express oneself clearly:- this is the art of communication. A manager should know
how to express him or herself clearly to avoid misunderstandings.
iii. Technical competence:- this is the knowledge in area of specialization. This increase his
credibility and acceptability by those under him.
37
 iv. Ability to perceive the broader issues:- A manager should be able to see the overall picture
of issues so that he or she can understand them and know the effect of each one of them on
his actions.
v. Salesmanship:- This is the art of making the workers agree with his ideas. It aims at making
the others not only know but also accept and agree with the idea.
vi. Moral integrity:- as a manager your actions, conduct and pronouncements should be beyond
reproach. This is in order for the subordinates to have confidence in the manager
vii. Emotional stability:- a manager should be able to keep his or her personal feelings out of the
business problems, so that he/ she can be able to look at issues objectively.
viii. Skill in human relations:- This is the ability to understand human nature and behavior. This
enables the manager to develop a good and cordial relationship with the worker and other
people that he may get in touch with.

10.1 Functions of Management

As you remember we said in the characteristics of management that it is a process consisting of
various function such as planning, organizing, staffing, directing and controlling. We would
briefly look at these functions.
1) Planning
Planning is the determination of which path among many an organization intends to follow in
order to achieve its goals effectively and efficiently. It is the process of determining what to do
it. Every function starts with planning.
A plan therefore is a pre-determined course of actions to take. The plans provide a basis of
reference for decision by individuals in an organization.
The planning process
i. Planning viewed as a process comprise the following steps:-
ii. Setting of goals:- here a manager sets goals of the organization or department
iii. Search for opportunities(forecasting- the purpose of this is to discover in the environment
any opportunity for the activities of the organization . In this case the manager is involved in
forecasting probable events in the future so as to come up with appropriate course of action
iv. Making of plans:- at this stage, the opportunities that are discovered through the search are
translated or converted into strategies and policies aimed towards the achievements of goals.
v. Target setting:-here the specific details for the plans are made. This involves determining the
qualities and time guidelines required
vi. Follow-up plan:-this involves carrying out continual checks to determine whether the plan
actually results in performance that is consistent with the original previous thinking.
2) Organizing
After having planned for the activities of the enterprise, a manager then decides on how best the
resources available for the achievement of the planned goals and objectives can be utilized. This
is what is called organizing. It involves; dividing works into different parts, grouping this
activities in the form of positions, grouping of various positions into departments, assigning such
positions to the manager and delegating the authority to each manager to accomplish the tasks in
a planned manner. The manager also needs to ensure the resources are not wasted or
underutilized.
Principles of organizing
In deciding how best to utilize the available resources, there are certain principles which could
guide the manager;
38
 i. The span of control: - this refers to the number of workers an individual manager or
supervisor can supervise effectively. If the workers are too few, the time of the supervisor
will not be utilized effectively. If they are too many, he will not be able to supervise all of
them effectively.
However there is no fixed rule as to the number of workers. It all depends on the type of work
being performed, the type of training that the workers have. Whether the work is repetitive in
nature and the amount of supervision necessary.
ii. Unity of command;- this is the principle which maintains that each worker should be
responsible to, and receive direction and instructions from one boss. This helps to reduce
confusion and conflict among workers. It also help to minimize incidences of lack of
action.
iii. Scalar principle:- which maintains that authority in an organization flows in a clearly
defined and identifiable line top to bottom. This helps to define who has the authority
over whom in an organization.
iv. Delegation of authority:- this is the process through the manager assigns part of his duties
to subordinates. This is done by first assigning responsibility to the subordinates to do
something. Second, the manager must also grant the authority necessary to carry out the
task. Third, the manager creates accountability in the part of the subordinate. Delegation
helps in fostering vertical coordination within the organization.
v. Specialization:-this is concentration of a workers effort in a particular job or area of
work. The more one concentrates on the performance of a particular job, the better he/she
becomes in performing the job. This is also referred to as division of labour.
3. Staffing
Staffing involves manpower planning and man power management, staff functions include:
preparing inventory of personnel available, recruiting of personnel, selection of personnel,
remuneration, training and development personnel and periodic appraisal of the personnel
working in the enterprise. Of course personnel department facilitates managers in the staffing
function by providing for example appraisal forms.
4. Directing
In directing the manager is expected to lead guide, motivate and supervise the workers. The
functions like planning, organizing and staffing are merely preparation for doing the work, the
directing function actually starts the work. It therefore refers to the interpersonal function or
aspect of management, whereby workers are made to understand and contribute effectively to the
achievements of the goals of the enterprise.
5. Controlling
Controlling as a management function can be defined as the process of checking or following up
performance of activities conform to the required standards or certain targets. Monitoring of a
business enterprise is a continuous process.
The control mechanisms established in business can assist a manager to detect deviations from
the set standards or targets. In case the performance of certain business activities or do not meet
the required standards or target, then corrective measures need to be taken.

10.2 Management of the Enterprise Resources

Resource management is the process by which businesses manage their various resources effectively.
39
Those resources can be intangible – people and time – and tangible – equipment, materials, and
finances. It involves planning so that the right resources are assigned to the right tasks.
1. Materials
To be effective in its operations an enterprise needs a lot of different types of materials and
items. This is the work of purchasing and supplies department in an organization. An enterprise
requires office stationery and equipment and raw materials for the production of goods. Effective
management of materials can contribute significantly to the success of most modern
organizations.
2. Premises
This is an establishment of an organization for production goods and services. The following
factors have to be taken into account when establishing a suitable business premise.
a) Location of the business premise.
b) Capacity of the business premise.
c) Manufacturing method.
d) Flow of materials.
e) Handling methods.
3. Time
Time is one of the precious things a manager has to manage. It can neither be stored nor hired
nor purchased. It is a perishable and irreplaceable commodity to be given extra-ordinary care. A
manager has to allot and to spread his time and activities as per priorities and importance. If
possible he must delegate the work to others to conserve time for important activities if the firm
4. Human Resource
Human Resource Management includes conducting job analyses, planning personnel needs,
recruiting the right people for the job, orienting and training, managing wages and salaries,
providing benefits and incentives, evaluating performance, resolving disputes, and
communicating with all employees at all levels.
5. Capital resource
An accounting strategy that strives to maintain sufficient and equal levels of working capital,
current assets, and current liabilities. This helps a company to meet its expense obligations while
also maintaining sufficient cash flow and is primarily related to short term financial decisions.
TOPIC 11 Financial management
11.1 Importance of budgeting
Budgeting is the process of preparing detailed projections of future amounts.

The benefits of budgeting should never be underestimated when running a business:

 Budgeting estimates revenue, plans expenditure and restricts any spending that is not part of
the plan
 Budgeting ensures that money is allocated to those things that support the strategic objectives
of the business
 A well communicated budget helps everyone understand the priorities of the business

40
 the process of creating a budget provides opportunities to involve staff, resulting in them
sharing the organisation’s vision
 Engaging the team in reviewing and comparing the budget with actuals can provide
information that highlights the strengths and weaknesses of the business.

1. Budgeting forces the management to study about the problems relating to the timely
implementation. It generates a sense of caution and care among the line managers.
2. It guides the management relating to the planning and formulation of policies.
3. Budgeting provides a means of controlling income and expenditure of a business. It gives a
plan for spending.
4. It defines the objectives of an organization in numerical terms for a specific period.
5. Budgeting is used to evaluate the policies and goals of an organization. Moreover, such
policies and goals are tested with the help of budgetary control.
6. It involves the management at all levels to participate in the goals setting.
7. Budgeting helps in directing both capital and revenue resources in a profitable way.
8. It helps the management to understand and co-ordinate various functional activities.
9. Budgeting empowers the management to decentralize obligations without losing business
control.
11.2 Sources of business finance
1. Equity Finance
For small companies, this is personal savings (contribution of owners to the company).
For large companies equity finance is made of ordinary share capital and reserves; (both
revenue and capital reserves).
2. Debt Finance
Debt finance is a fixed return finance as the cost (interest) is fixed on the par value (face
value of debt). It is ideal to use if there’s a strong equity base. It is raised from external
sources to qualifying companies and is available in limited quantities
3. Bills of Exchange
Bills of Exchange are a source of finance in particular in the export trade. A Bill of
Exchange is an unconditional order in writing addressed by one person to another
requiring the person to whom it is addressed to pay to him as his order a specific sum of
money. The commonest types of bills of exchange used in financing are accommodation
bills of exchange.
4. Lease Finance
Leasing is a contract between one party called lessor (owner of asset) and another called
lessee where the lessee is given the right to use the asset (without legal ownership) and
undertakes to pay the lessor periodic lease rental charges due to generation of economic
benefits from use of the assets. Leases can be short term (operating leases) in which case
the lessor incurs the operating and maintenance costs of the assets or long term (finance
leases) in which the lessee maintains and insure the assets.
5. Overdraft Finance
This finance is ideal to use as bridging finance in sense that it should be used to solve the
company’s short term liquidity problems in particular those of financing working capital
(w.c.). It is usually a secured finance unless otherwise mentioned. Overdraft finance is an
41
 expensive source of finance and the over-reliance on it is a sign of financial imprudence
as it indicates the inability to plan or forecast financial needs.
6. Plastic Money (Credit Card Finance)
This is finance of a kind whereby a company will make arrangements for the use of the
services of a credit card organisations (through the purchase of credit cards) in return for
prompt settlement of bills on the card and a commission payable on all credit
transactions. This is used to finance goods and services of working capital in nature such
as the payment of fuel, spare-
parts, medical and other general provisions and it is rare for it to finance raw materials or
capital items.
7. Debenture Finance
A form of long term debt raised after a company sells debenture certificates to the holder
and raises finance in return. The term debenture has its origin from ‘DEBOE’ which
means ‘I owe’ and is thus a certificate or document that evidences debt of long term
nature whereby the person named therein will have given the issuing company the
amount usually less than the total par value of the debenture. These debentures usually
mature between 10 to 15 years but may be endorsed, negotiated, discounted or given as
securities for loans in which case they will have been liquidated before their maturity
date. The current interest rate is payable twice a year and it is a legal obligation.
8. Venture Capital
Venture capital is a form of investment in new small risky enterprises required to get
them started by specialists called venture capitalists. Venture capitalists are therefore
investment specialists who raise pools of capital to fund new ventures which are likely to
become public corporations in return for an ownership interest. They buy part of the
stock of the company at a low price in anticipation that when the company goes public,
they would sell the shares at a higher price and therefore make a considerably high profit.
9. Youth Enterprise Fund:
This is managed by the Ministry of Youth and Sports. It mainly funds youth projects. A
youth in this case is regarded as a person between the ages of 18 and 32 years.
10. Kenya Women Finance Trust (KWFT):
This is a women’s enterprise fund managed by the Ministry of Gender, Children and
Social Development. Currently, it also serves men.
11. Micro finance institutions:
Examples of these are:
• K-Rep micro finance institution.
• Faulu micro finance institution.

11.2 Types of business records

1. Accounting records
Accounting records document your business’s transactions. These records include information
about your income, expenses, and equity. You can compile the figures from your accounting
records into financial statements and small business ratios.
You must track accounting records for several purposes. Accounting records help you see your
business’s financial health. You can measure your company’s profitability over time, look at
patterns in your records to help make decisions, and see if you have enough capital to cover your
expenses.
42
The government requires you to keep financial documents that show income and expenses. You
use accounting records to file your income tax return.
Once you file your tax return, be sure to keep tax records. The IRS can penalize you for up to six
years after you don’t report income. For this reason, you should keep tax records of your small
business finances for seven years.
2. Bank statements
Bank statements are records of all your accounts with the bank. These accounts might include
records of your checking, savings, investments, and credit cards.
You can reconcile bank statements with your accounting records. Comparing bank records to
your financial records helps you see mistakes in your books. If your bank statements do not
match your accounting records, there might be an error.
Like accounting records, bank statements help you track your business’s progress. You will also
use this information to file taxes.
3. Legal documents
Depending on your type of business structure, you have different legal documents. For example,
if you own an incorporated company, you should keep track of your articles of incorporation.
You have legal documentation if you operate under different business structures. Usually, a
partnership has a partnership agreement. Sole proprietors and LLCs also have legal documents.
Keep legal documents in your business records as proof that you own your company.
4. Permits and Licenses
Your location and industry may require you to have a permit or license. For example, you may
need a permit from your city to assure that your parking area meets specific codes. Or, if your
city restricts the size of your business sign, you may need a sign permit.
Keep up-to-date records of all your permits and licenses. You need documentation of permits
and licenses to show you follow regulations.
5. Insurance documents
As a small business owner, you may need insurance for different aspects of your company.
General business liability insurance protects your business from losses. You may also need other
policies, like auto or renters insurance.
To use your insurance, you need proof that you are covered. For example, you may need to prove
your coverage if your business is damaged by fire. Or, insurance can protect you during legal
disputes. Your insurance documents include information needed to report incidents, such as your
policy number.

43
12 MARKETING
12.1 Definition of marketing
Marketing refers to activities undertaken by a company to promote the buying or selling of a
product or service. Marketing includes advertising, selling, and delivering products to consumers
or other businesses.
12.2 Components of marketing

1. Product
A product is an item that is built or produced to satisfy the needs of a certain group of people.
The product can be intangible or tangible as it can be in the form of services or goods.
You must ensure to have the right type of product that is in demand for your market. So during
the product development phase, the marketer must do an extensive research on the life cycle of
the product that they are creating.
A product has a certain life cycle that includes the growth phase, the maturity phase, and the
sales decline phase. It is important for marketers to reinvent their products to stimulate more
demand once it reaches the sales decline phase.
2. Price
The price of the product is basically the amount that a customer pays for to enjoy it. Price is a
very important component of the marketing mix definition.
It is also a very important component of a marketing plan as it determines your firm’s profit and
survival. Adjusting the price of the product has a big impact on the entire marketing strategy as
well as greatly affecting the sales and demand of the product.
This is inherently a touchy area though. If a company is new to the market and has not made a
name for themselves yet, it is unlikely that your target market will be willing to pay a high price.
Although they may be willing in the future to hand over large sums of money, it is inevitably
harder to get them to do so during the birth of a business.
Pricing always help shape the perception of your product in consumers eyes. Always remember
44
that a low price usually means an inferior good in the consumers eyes as they compare your good
to a competitor.
Consequently, prices too high will make the costs outweigh the benefits in customers eyes, and
they will therefore value their money over your product. Be sure to examine competitors pricing
and price accordingly.
3. Place
Placement or distribution is a very important part of the product mix definition. You have to
position and distribute the product in a place that is accessible to potential buyers.
This comes with a deep understanding of your target market. Understand them inside out and
you will discover the most efficient positioning and distribution channels that directly speak with
your market.
There are many distribution strategies, including:
• Intensive distribution
• Exclusive distribution
• Selective distribution
• Franchising
4. Promotion
Promotion is a very important component of marketing as it can boost brand recognition and
sales. Promotion is comprised of various elements like:
• Sales Organization
• Public Relations
• Advertising
• Sales Promotion
Advertising typically covers communication methods that are paid for like television
advertisements, radio commercials, print media, and internet advertisements. In contemporary
times, there seems to be a shift in focus offline to the online world.
Public relations, on the other hand, are communications that are typically not paid for. This
includes press releases, exhibitions, sponsorship deals, seminars, conferences, and events.
Word of mouth is also a type of product promotion. Word of mouth is an informal
communication about the benefits of the product by satisfied customers and ordinary individuals.
The sales staff plays a very important role in public relations and word of mouth.
It is important to not take this literally. Word of mouth can also circulate on the internet.
Harnessed effectively and it has the potential to be one of the most valuable assets you have in
boosting your profits online. An extremely good example of this is online social media and
managing a firm’s online social media presence.
5. People
Of both target market and people directly related to the business.
Thorough research is important to discover whether there are enough people in your target
market that is in demand for certain types of products and services.

45
The company’s employees are important in marketing because they are the ones who deliver the
service. It is important to hire and train the right people to deliver superior service to the clients,
whether they run a support desk, customer service, copywriters, programmers…etc.
When a business finds people who genuinely believe in the products or services that the
particular business creates, it’s is highly likely that the employees will perform the best they can.
Additionally, they’ll be more open to honest feedback about the business and input their own
thoughts and passions which can scale and grow the business.
This is a secret, “internal” competitive advantage a business can have over other competitors
which can inherently affect a business’s position in the marketplace.
6. Process
The systems and processes of the organization affect the execution of the service.
So, you have to make sure that you have a well-tailored process in place to minimize costs.
It could be your entire sales funnel, a pay system, distribution system and other systematic
procedures and steps to ensure a working business that is running effectively.
Tweaking and enhancements can come later to “tighten up” a business to minimize costs and
maximise profits.
7. Physical Evidence
In the service industries, there should be physical evidence that the service was delivered.
Additionally, physical evidence pertains also to how a business and it’s products are perceived in
the marketplace.
It is the physical evidence of a business’ presence and establishment. A concept of this is
branding. For example, when you think of “fast food”, you think of McDonalds.
When you think of sports, the names Nike and Adidas come to mind.
You immediately know exactly what their presence is in the marketplace, as they are generally
market leaders and have established a physical evidence as well as psychological evidence in
their marketing.
They have manipulated their consumer perception so well to the point where their brands appear
first in line when an individual is asked to broadly “name a brand” in their niche or industry.
12.3 The marketing process
A marketing process is: “A series of steps that allow organizations to identify customer
problems, analyze market opportunities, and create marketing materials to reach the desired
audience.”
The Marketing Process Steps
1. Analysis of the opportunities in the market.
2. Selection of the target market.
3. Development of marketing mix.
4. Management of marketing efforts.
1. Analysis of the Opportunities in the Market
The first component of the Marketing Process is to analyze the market in order to find the
opportunities that should be availed. These opportunities are related to the needs and wants of the
customers that are not properly satisfied by the competitors in the market. A company that is
46
initiating the marketing process focuses the opportunities that would be beneficial in the long run
success so that its performance would be effectively improved. For this purpose, the company
gets help from the marketing information system (MIS), which plays a significant role in
providing useful information about the market.
2. Selection of the Target Market
This is the most important step of the marketing process in which the target customers are
selected. For this purpose, the company conducts a careful analysis of the target markets in order
to choose the final customers. As it is obvious that the company do not satisfy the needs and
wants of the whole market therefore it must divide the whole market into different segments and
choose the segment that will best meet its strengths and opportunities. In this regards, there are
certain step you need to follow.

Market Segmentation:
The process in which the whole market is split into different units of consumers, each unit
having similar wants, characteristics and behavior of consumers which need different marketing
mixes and strategies.
Market Targeting
In this process the targeted segments of the total market are evaluated to ascertain the
attractiveness of each segment so that the one or two most suitable and potential segments should
be selected and entered. The simple rule of selecting the target unit or segment is that it must
provide the opportunity to the company to create potential customer value in the long run.
Another important rule is that a certain company has the option to satisfy the needs and wants of
one or two segments. In this case the company focuses on that relevant segments and develops
its products and strategies for them only. Such small segments are called “niches”. The company
has also another option to split the whole market into different segments and offers different
products and marketing mixes to each segment of the market. But the most effective method is to
focus on one or two segments and after succeeding in those segments, further new segments
should be targeted.
Market Positioning:
This concept relates to the positioning of the product of a company in the minds of the customers
as compared to the products of competitors. In other words the company tries to maintain a clear
and specific perception in customers about its products. When a company wants to position its
product, it first specifies the competitive edge for which it offers competitive advantages to its
target customers. The whole marketing program of the company should concentrate its identified
positioning strategy. The positioning is effective when the company truly provides the efficient,
competitive offering to its customers in order to give them maximum value as compared to the
offering of competitors.
3. Development of Marketing Mix
After setting of a complete marketing strategy of a company, then it is ready to initiate the
planning of its marketing mix.
Marketing Mix
Marketing Mix is composed of certain variables of markets that are mixed by the company in
order to generate certain desired response in the targeted segments.
47
In fact the demand of the product is influenced by the use of certain activities of the marketing
mix. The marketing mix is composed of the following four P’s.
01- Product: means any offering (goods or services) to the market by the company.
02- Price: means the money paid by the customers to obtain the product.
03- Place: means the efforts which ensure the availability of the product in the market to
customers.
04- Promotion: means all the efforts by the company that ensure the sale of products to
customers through better provision of information about the advantages of the product.
A company develops an effective marketing program in which a suitable combination of
marketing mix is blended so that they are efficiently coordinated into a useful program to
provide the greater customer value in order to accomplish the company’s objectives.
4P’s of marketing mix are from the seller perspective. In certain cases the 4C’s are replaced by
the 4P’s which are
Product means Customer Solution
Price means Customer Cost
Place means Convenience
Promotion means Communication
4. Management of Marketing Efforts
This is actually the action phase of the development marketing program in which a suitable
marketing mix is set for a target market. For the management of marketing efforts four functions
are adopted which are as follow.
01- Analysis of the Market in which the company identifies the internal strengths and
weaknesses along with the external opportunities and threats.
02- Marketing Planning in which certain marketing plans or strategies are developed so that the
overall objective of the marketing should be accomplished.
03- Marketing Implementation in which the developed plans and strategies are practically
implemented in order to achieve the marketing objectives.
04- Marketing Control in which the performance results of the marketing plans and strategies are
evaluated and necessary steps are taken to ensure the accomplishment of overall marketing
objectives of the company. For more Business Studies Notes, keep visiting and get ready for
your exams.

REVIEW QUESTIONS
 What is enterprise Management?
 What are the different functions of Management?
 Explain in details?
 Explain ways by which various resources in an enterprise could be managed?
 Identify ways of managing business finance?

48
13 ENTERPRISE SOCIAL RESPONSIBILITY
Social responsibility is an ethical framework and suggests that an entity, be it an organization or
individual, has an obligation to act for the benefit of society at large. Social responsibility is a duty every
individual has to perform so as to maintain a balance between the economy and the ecosystems.
The obligation of an organization's management towards the welfare and interests of the society in
which it operates.
13.1 Importance of social responsibility in business
Social responsibility is an ethical framework and suggests that an entity, be it an organization or
individual, has an obligation to act for the benefit of society at large.[citation needed] Social
responsibility is a duty every individual has to perform so as to maintain a balance between the
economy and the ecosystems. A trade-off may exist between economic development, in the
material sense, and the welfare of the society and environment,

Importance of Enterprise Social Responsibility

1. Enhance business relations with the society. Just as a society depends on business
organizations for goods and services, so business depends on society. When business
participate in social responsibility, it creates acceptance by the society as a whole and as
such, it will create a good working conditions that will enable them to work for the benefits
of their organizations
2. Recognition of the society’s goodwill. By engaging in social responsibility the business
organization is appreciating the fact that it is the society as a whole that has enabled their
continual existence
3. Supplement government’s effort in developing at the local, state and federal levels. By
participating in socially responsible activities that relates to national development such as
building of schools or providing training activities to members of a society, the business
organizations are helping in the government’s efforts in development
4. Means of waste management. Business organizations also act as means of waste management
because they ensure that they participate in a clean environment
5. They ensure that they keep the environment safe for all in the society hence they act as a
means of waste management. They also help in waste management by recycling waste
products.
1. Improved public image. This is crucial, as consumers assess your public image when
deciding whether to buy from you. Something simple, like staff members volunteering an
hour a week at a charity, shows that you’re a brand committed to helping others. As a result,
you’ll appear much more favourable to consumers.
2. Increased brand awareness and recognition. If you’re committed to ethical practices, this
news will spread. More people will therefore hear about your brand, which creates an
increased brand awareness.
3. Cost savings. Many simple changes in favour of sustainability, such as using less packaging,
will help to decrease your production costs.
4. An advantage over competitors. By embracing CSR, you stand out from competitors in your
industry. You establish yourself as a company committed to going one step further by
considering social and environmental factors.
5. Increased customer engagement. If you’re using sustainable systems, you should shout it
49
 from the rooftops. Post it on your social media channels and create a story out of your efforts.
Furthermore, you should show your efforts to local media outlets in the hope they’ll give it
some coverage. Customers will follow this and engage with your brand and operations.
6. Greater employee engagement. Similar to customer engagement, you also need to ensure that
your employees know your CSR strategies. It’s proven that employees enjoy working more
for a company that has a good public image than one that doesn’t. Furthermore, by showing
that you’re committed to things like human rights, you’re much more likely to attract and
retain the top candidate
13.2 Ethical business practices:-
Business ethics (also known as corporate ethics) is a form of applied ethics or professional
ethics, that examines ethical principles and moral or ethical problems that can arise in a business
environment. ... These norms, values, ethical, and unethical practices are the principles that guide
a business.
Need for business ethics
Ethics concern an individual's moral judgements about right and wrong. Decisions taken within
an organisation may be made by individuals or groups, but whoever makes them will be
influenced by the culture of the company. The decision to behave ethically is a moral one;
employees must decide what they think is the right course of action. This may involve rejecting
the route that would lead to the biggest short-term profit.

Ethical behaviour and corporate social responsibility can bring significant benefits to a business.
For example, they may:

 attract customers to the firm's products, thereby boosting sales and profits
 make employees want to stay with the business, reduce labour turnover and therefore
increase productivity
 attract more employees wanting to work for the business, reduce recruitment costs and enable
the company to get the most talented employees
 attract investors and keep the company's share price high, thereby protecting the business
from takeover
In general, the issues considered in such code of ethics consist of respect for and compliance
with the law:- this is because laws are concerned ideally to govern our mode of conduct for the
good and benefits of all.
a. Honesty: - in this respect, it is necessary that facts are presented fairly and accurately.
Claims made about products or services, even in the advertisement should be accurate, true and
accord the due respect to the dignity of the human person.
b. Fairness: - every one whom you deal with should be given appropriate consideration.
This includes workers, customers, suppliers and others with whom the organization interacts.
c. Loyalty: - this is in terms of loyalty to other stakeholder’s i.e. customers, works,
supplier’s etc.
d. Confidentiality: - this is especially important for services industries such as banks. It is
important that transactions with customers are respected and protected so that they are not
disclosed to third parties.
50
e. Trust: - there should be a mutual trust where the owners of a business should have proper
trust in their customers, while the customers should also have enough trust in the organization.
Without trust, no meaningful and lasting relationship can develop.
f. Courage: this refers to the need to treat others with respect, be incorruptible in business
operations, even when it means losing the business.
• Unethical business practices
Unethical behavior in business refers to actions that fail to rise to acceptable standards of
business practices
o Dumping pollutants into the water supply rather than cleaning up the pollution properly.
o Releasing toxins into the air in levels above what is permitted by the Environmental
Protection Agency.
o Coercing an injured worker not to report a work injury to workers' compensation by
threatening him with the loss of a job or benefits.
o Refusing to give an employee a final paycheck for hours worked after the employee
leaves the company.
o Not paying an employee for all of the hours worked.
o Incorrectly classifying an employee as an independent contractor and not as an employee
in order to reduce payroll taxes and avoid purchasing unemployment and workers'
compensation insurance.
o Engaging in price fixing to force smaller competitors out of business.
o Using bait and switch or false advertising tactics to lure customers in or convince them to
buy a product.
o Rolling back the odometer on a vehicle that is for sale.
o Refusing to honor a warranty claim on a defective product.
13.3 Unethical business practices
Unethical behavior in business refers to actions that fail to rise to acceptable standards of
business practices. ... Consumers would be very wise to be on the lookout for unethical business
practices to protect ourselves, our families, and our wallets
Reasons for unethical practices
• Psychology of business(of profit making) has not changed
• some consumers are poor
• some consumers are illiterate and submissive
• absence of well organized consumer movement at the national level
• ineffective laws for consumer protection in some countries
• lack of consumer education and guidance
• limited interest of political parties in consumer protection
• inadequate support from the government to consumer movement for its rapid growth
REVIEW QUESTIONS
i. What is meant by enterprise social responsibility?
ii. Explain the major arguments for and against business social responsibility that have often
been expressed in the social responsibility debates.
iii. Explain what is meant by business ethics.
iv. Explain the major school of thoughts in moral philosophy that offer different approaches
to solving ethical dilemmas.
51
 v. What is the importance of business social responsibility?
vi. Which are the importance of business social responsibility?
vii. Which are the areas of social concern to business enterprises?
viii. Explain how an enterprise can be socially responsible to the following
ix. Community, Government, Suppliers, Consumers, Employees and shareholders.

14 BUSINESS PLAN
• Components of a business plan
• Uses of a business plan
• Users of a business plan
Meaning of business plan
Business is defined as generally written document giving in detail all relevant internal and
external elements that affect business and strategies for starting new ways. A business plan is an
important document which deals with all aspects of proposed new business. Planning is an
ongoing process in any industry or business or business enterprise. It is more important for a
new business. The business plan concretes the functional plans of different segments of the
organization, such as finance, marketing, production and human resources. The business plan is
also referred to as “road map or game plan of the organization”. In preparing a business plan, an
entrepreneur takes help of experts in different fields such as finance, legal, marketing,
consultants etc. for necessary inputs.
Business plan is prepared by the entrepreneur and is written document showing where the firm
is, where it is going and how it proposes to get there. The plan also shows if the proposed
business is worthwhile. The business plan should be made known and available as concerned.
14.1 Components of a Business Plan
Business plan include details under the following main sections;
a) Purpose
b) Executive summary
c) Business description
d) Marketing plan
e) Management plan
f) Production/ operation plan
52
 g) Financial plan
h) Expected performance
i) Action plan
j) Appendices
a) Purpose
This is a short 2-3 paragraph section explaining why the plan is being written. For a plan to be
used in application for funds, it should clearly be stated:-
a) The type of funds being sought
b) Whether loan or grant
c) The reason for the funds
For loans funds it should be indicated:-
a) Amount required.
b) How the funds are to be used.
c) For how long the loan is required
d) Proposed repayment pattern
e) Security available.
This section helps to understand the rest of the business plan.
b) Executive Summary
This is a short section summarizing the key points about the plan. It explains in brief the
whole plan and it should obviously be written after the writing of the whole plan is
completed.
c) Business Description
For an already existing business, the details would include;
a) Business form and ownership
b) When started .
c) Past performance, success and failures.
d) Reason for the required assistance.
For a new startup businesses it will include;
a)
The mission of the new venture.
b)
Your reasons for going into business.
c)
Why you think you will be successful in this venture?
d)
What development work has been completed to date?
e)
What are your products or services? Describe them including patent, copyright, or
trademarks status.
f) What is the location of the business and your reason for choosing the location.
g) Is your building new? If it needs renovations sates the costs of the renovation.
h) Is the building leased or owned? (state the term)
i) What office equipment will be needed?
j) Will the equipment be purchased or leased?
k) What experience do you have to help you successfully implement the business plan?
d) Marketing Plan
The marketing plan is based on the market data received in the market research activities. The

53
marketing plan describes the market conditions, and strategies proposed for positioning the
product and services. It also gives description of pricing distribution and promotion policies. It
will include;
a) A description of the goods and services being produced or to be produced their uses.
b) Present market situation for the products.
c) Target market and the expected market share.
d) Advantages of your product against competing goods or services; proposed price and
distribution channels
e) Expected future market growth.
e) Management Plan
It gives details on;
a) The owner/ manager and other key people in the business.
b) Their qualifications, skills and past experience.
c) Their role ability to successfully carry out the proposed business or any training required.
d) Their salaries and benefits
f) Production/ Operation Plan
It gives details of the manufacturing processes and operations of the proposed venture. It
indicates what items to be sub contracted, the cost and the time frame. It also provides the
production details such as the physical plant layout, the technology, the requirements of the
equipment, raw- materials and the cost of manufacturing.
If the proposed new venture is not manufacturing type but service oriented, in the case, the
operational plans are made. The operational plans describe in details the chronological steps
involves in the business operations.
Question for production plan include:
a) While the new ventures be responsible for all or part of the manufacturing operation.
b) If some manufacturing is subcontracted, who will be the subcontractor? (give names and
address)
c) On what basis will the subcontractors be selected?
d) What will be layout of the production process?
e) What raw materials will be needed for the production? And which are the critical?
f) Who are the new suppliers of the new materials and what are the appropriate costs?
g) What are costs of manufacturing the products?
h) What are the future capital equipment needs of the venture? And why?
i) Will the equipment be purchased or leased?
j) What experience do you have to help you successfully implement the business plan?
g) Marketing Plan
The marketing plan is based on the market data received in the market research activities. The
marketing plan describes the market conditions, and strategies proposed for positioning the
product and services. It also gives description of pricing distribution and promotion policies. It
will includes;
a) a description of the goods and services being produced or to be produced and their uses.
b) Present market situation for the products.
c) Target market and the expected market share.
54
 d) Advantages of your product against competing goods or services; proposed price and
distribution channels.
e) Expected future market growth.
h) Management Plan
It gives details on;
a) The owner/ manager and other key people in the business.
b) Their qualifications, skills and past experience.
c) Their role ability to successfully carry out the proposed business or any training required.
d) Their salaries and benefits.
i) Production/ Operation Plan
It gives details of the manufacturing processes and operations of the proposed venture. It
indicates what items to be sub contracted, the cost and the time frame. It also provides the
production details such as the physical plant Layout, the technology, the requirements of the
equipment, raw-materials and the cost of manufacturing.
If the proposed new venture is not manufacturing type but service oriented, in that case, the
operational plans are made. The operational plans describe in details the chronological steps
involves in the business operations.
Questions for production plan include:
a) While the new venture be watch responsible for all or part of the manufacturing operation
b) If some manufacturing is subcontracted, who will be the subcontractor? (give name and
address)
c) On what basis will sub-contractors be selected?
d) What will be the layout of the production process?
e) Which raw materials will be needed for production? And which are critical?
f) Who are the suppliers
(J) Financial Plan
The financial plan gives the projections of important financial data that determines the possibility
of the venture and financial investment required for the venture. The financial figures are drawn
by the entrepreneurs from the forecast sales and production figures. It also indicate the projected
balance sheet giving the financial conditions of the business, giving the details of assets and
liabilities investment by entrepreneurs and earning. What is included here are:
a) Estimated cost of the proposed business.
b) Purchase of fixed assets including any building and machinery
c) Working capital including purchase of stocks, raw materials; running costs, wages, power,
transport etc.
d) Proposed sources of required funds
e) Amount to be contributed by the owners
f) Required loan/ grant
Expected Performance
This section should show the expected future performance of the business in profits and increase
and decrease in the business assets.
This section should be prepared with the help of an accountant or consultant.

55
Action Plan
This section gives details of the actions to be taken in implementing the business proposal
following:-
a) What is to be done
b) When
c) By whom
d) How long will it take
k) Appendices
This is attachment of the necessary documents in support of information contained in the
business plan. This may include:-
a) Projectile income statements, cash flow statement and balance sheets.
b) Copies of past performance records.
c) Copies of plot maps, title deeds allocation letters, building plans etc.
d) Copies of co.’s certificates etc.
Why Some Business Plans Fail
A business plan by an entrepreneur fails it is not prepared properly and does not analyze or
address the issue involved in the new venture. This calls for a good knowledge based.
a) Unreasonable goals set by the entrepreneur
b) The organization, products are not defined. This calls for a good knowledge based
c) Goals are vague and not measurable
d) Lack of commitment to the new enterprise by the entrepreneur and his team
e) Inexperience and going by the trial and error method
f) No proper SWOT analysis of the business by the entrepreneur
g) No customer orientation for the proposed product or service
h) Poor handling of finance matters.
i) Unreasonable time schedule
j) No proper controls for the business plan to ensure effective implementation
importance of a business plan
• Tests ideas on paper
• Is a blueprint or guidelines
• Is a financial tool that provides information if one wants to obtain a loan
• Potential entrepreneurs to assess the viability of their business opportunities
• It forces entrepreneurs to establish written goals and objectives
• It indicates the owners’ ability and commitment

14.2 Use of a Business Plan

A business plan serves two main purposes;
A. As a useful aid to management it:
• Allows the future objectives of the business
• Serves a framework for decision making
• Provides a yardstick against which actual future performance of the business can be
insured
B. The plan also helps explain the business to outsider; especially banks and other lending
organizations when a business needs to raise funds.

56
There is no single correct format for business plans for all businesses. The plans vary depending
on the nature and purpose of each business.
14.3 Users of a Business Plan
• Active venture capitalists.
• Bankers. ...
• Angel investors. ...
• Potential partners. ...
• Customers. ...
• Suppliers. ...
• Strategic allies. ...
• Managers
REVIEW QUESTIONS
1. What is a business plan? Why is it important?
2. Why do some business plans fail?
3. What are the components of a business plan?

15 TECHNOLOGY IN ENTERPRISE MANAGEMENT

• Technology in enterprise management
• Benefits of technology in a business enterprise
• Importance of e-commerce to an entrepreneur
• Advantages of e-commerce to an entrepreneur
• Disadvantages of e-commerce to an entrepreneur
Technology:- this is the generation of knowledge and processes to develop systems that solve
problems and extend human capabilities. In other words, people create technology to solve
problems and to make it possible to new things. E.g. people needed a way to keep food cold
during hot weather so, they invented the refrigerators.

Benefits of Technology To A Small Business Enterprise

Some of the benefits of technology to a small business include;
 Improved accuracy, internally and externally.
 Services to customers are more comprehensive than before.
 Faster processing, leading to prompter responses to customers.
 Information for management, not previously available, or available too late to be useful;
and tighter financial control.
 New customer services previously not possible.
 New sources of information to allow improved product design and marketing.
 Reduced costs arising from the greater productivity of staff that are supposed and assisted
by appropriate computer services.
 A more attractive, cleaner working environment in some cases, helping recruiting and
retention of staff.
i. Most organizations adopting the technologies are now able to carry out their operations
much faster than before.
ii. Overall productivity of such businesses have also increased significantly from the
adoption of the technologies.
57
 iii. Technology have also reduced significantly the production and operation costs of most
enterprise
iv. The degree of accuracy both in terms of the decision made, and production standards
levels have improved.
v. The quality of goods and services has also greatly improved as quality control is now
more efficiently carried out.
vi. Technologies have enabled the enterprise to communicate much more effectively and
efficiently with their various stakeholders.
vii. Technology has made marketing more efficient and more focused as the enterprises can
now design marketing strategies that specifically address the needs of finely defined
target groups.
Limitations
i. Usually the cost of acquiring and maintaining new techniques is quite prohibited for many
small enterprises.
ii. The speed at which technology changes is proving to be a major drawback as enterprise
find themselves holding obsolete equipment in a very short time. Changing such obsolete
equipment may be too expensive for most enterprises.
iii. The adoption of the new technologies usually leads to lay-offs of certain categories of
worker in an enterprise. This tends to worsen the problem of an employment in the country
iv. For many enterprises, the technology once acquired is not fully utilized. This may be
because the employees who are supposed to use it do not have the relevant skills or that the
market is too small. This then lead to a situation where most of the equipment or machinery
lies idle at great cost to the enterprise.
v. At times, some of the equipment have been found to be a risk to the health of the workers,
after long exposure to them. This is especially where the equipment emits radioactive
materials or rays during their operations.
vi. The use of some technologies leads to environmental degradation. Mass production using
plastic technology in packaging is one such area which has posed great environmental
problems in the disposal of plastic waste products in Kenya and other countries.
E-BUSINESS
E-business is the use of the internet and other networks and information technology to support
electronic commerce, enterprise communication and collaboration. E-business can also be
defined as web-enabled business process both within an internetworked enterprise and with its
customers and business partners.
Benefits of E-business
1. Consumers have a much wider choice available on the cyber market.
2. Consumers can compare products, features, prices and even look up reviews before they
select what they want.
3. Consumers also have the convenience of having their orders delivered right to the door step.
4. Consumers are driven to e-shopping in hordes as even branded goods costs less on the net.
5. It minimizes inventory costs to the organization. They do this by adopting just-in-time
system enhancing the firm’s ability to forecast demand more accurately.
6. It improves customer’s costs.
7. It reduces distribution costs.
8. It helps business globalize. This is done through the interest by making information about
certain products available on the net
9. It helps market products move quickly
58
Because of the significance of small enterprise worldwide, it is increasingly being realized that if
small sector gets behind in the information, then the whole economy gets left behind. With
strong realization, small enterprise worldwide are turning to the use of modern technology to
compete with their big brother.
The information revolution has opened up a great deal of potential for small enterprise in the
marketing field. The excellent opportunities E-business offers to small enterprises are to;
a) Access new market
b) Improve customization
c) Lower various kind of costs.
d) Reduce the size of the enterprise.
e) Sell products/ goods into global market.
The fact remains that E- business has empowered small enterprise like nothing else had done so
in the past. E-business has emerged as an opportunity for small enterprises. Not making use of a
will turn into a threat to their very survival.
Advantages
Advantages to Organizations
 Using e-commerce, organizations can expand their market to national and international
markets with minimum capital investment. An organization can easily locate more
customers, best suppliers, and suitable business partners across the globe.
 E-commerce helps organizations to reduce the cost to create process, distribute, retrieve
and manage the paper based information by digitizing the information.
 E-commerce improves the brand image of the company.
 E-commerce helps organization to provide better customer services.
 E-commerce helps to simplify the business processes and makes them faster and
efficient.
 E-commerce reduces the paper work.
 E-commerce increases the productivity of organizations. It supports "pull" type supply
management. In "pull" type supply management, a business process starts when a request
comes from a customer and it uses just-in-time manufacturing way.

Advantages to Customers
 It provides 24x7 support. Customers can enquire about a product or service and place
orders anytime, anywhere from any location.
 E-commerce application provides users with more options and quicker delivery of
products.
 E-commerce application provides users with more options to compare and select the
cheaper and better options.
 A customer can put review comments about a product and can see what others are
buying, or see the review comments of other customers before making a final purchase.
 E-commerce provides options of virtual auctions.
 It provides readily available information. A customer can see the relevant detailed
information within seconds, rather than waiting for days or weeks.
 E-Commerce increases the competition among organizations and as a result,
organizations provides substantial discounts to customers.

Advantages to Society
59
Customers need not travel to shop a product, thus less traffic on road and low air pollution.
E-commerce helps in reducing the cost of products, so less affluent people can also afford the
products.
E-commerce has enabled rural areas to access services and products, which are otherwise no
available to them.
E-commerce helps the government to deliver public services such as healthcare, education, social
services at a reduced cost and in an improved manner.

Disadvantages of e- commerce
 The consumer experiences the convenience of having goods home-delivered, but the logistics
involved with delivering each individual item adds substantial strain to the e-commerce
business operation
 online business has evolved which has led to lowered prices online
 Security issue
 Unsure about the quality
One of the biggest problems with buying things online is that you will have no guarantee of a
products’ quality. Reviews are not always helpful and though all the researches will never
assure you about the quality of a product.
 Lack of personal touch
It is kind of consumer feeling that consumer can’t feel and touch the product. Sometimes no
matter how good a product is explained and expressed you will not be able to sense the touch,
smell, taste, and sound, through the dimensionality of a screen. This is what makes eCommerce
sometime in a situation where customer faces bit trust issues over products.
 Late Delivery
When someone plans to order a product online they are never assured to get delivered as per time
and there are plenty of issues which make such situation very delicate for customers.
REVIEW QUESTIONS
Describe the effect of communication to small business enterprise?
What are the benefits of technology to a small business enterprise?
What are the benefits of E- business in small enterprises.

16 EMERGING TRENDS IN ENTEEPRENEURSHIP

Technological trends
Technology is simply that which enables us perform activities e.g. knowledge, skills, techniques,
tools, equipment, machinery and production processes. Business operation such as production,
marketing, research and development and communication, among others are affected by the level
and type of technology available in the business environment. The companies of today are
spending large amount on research and development activities in order to find out the correct
technology to bring better process for manufacture of the goods, faster and quality products at
60
competitive cost. The companies are also registered patents for the innovations to restrict or
control the use of technological inventions. Technology level differences are seen quite obvious
between developed nations and developing countries. The new products and services created by
the entrepreneur are now being judged on the basis of the new enterprise, the following
technological aspects need close study and examination by the aspiring entrepreneurs.
a) Existing technologies:- the industry norms of the technology in a country be studied
specifically regarding productivity and cost of manufacture. Adopting state of the
technologies will give the new enterprise a head start in the market place.
b) Cost of acquiring new technology: the new technologies that are emerging will be costly
as compared to the outdated technologies. A balance has to be achieved between the stage
of technology and the capital cost.
c) Capacity to absorb new technology:- the human side of technology namely, the capacity
of the employees to accept, adopt and learn the new technologies selected is very essential
to selecting a technology. Without willingness or non-absorption of the new technology will
create more problems than providing solutions.
d) Standardization :- the selection of the technology by the entrepreneur should help in
standardizing the end products for the market acceptance and uniformity in the industry.
e) Availability of technical support service and maintenance: - a selection of a new
technology should be supported by proper maintenance and other technical services that are
required to keep the equipment in order and give necessary productivity.
f) Education :- the concerned people in the organization should be educated by the
entrepreneur in new technologies that have been selected for the project.
g) Product quality requirement: - the technology selected should consistently give a uniform
product quickly that is demanded by the customer segment.
h) Technology that gives overall cost and market acceptance:- the selection of technology
should aim at giving products and services of consistent quality that market is looking for.
The technology is selected based on long range requirements of the organization and that
gives consistent product differentiation in the market place.
Globalization Trends
Globalization is an international phenomenon which is sweeping across all continents and every
sector of business. The political barriers to business are being eliminated. The electronic media
and communication have reduced the distances putting the customer at the center of business.
Business is going global due to the reasons of globalization and development of state of art
technologies, infrastructural facilities and reducing time and energy for transaction.
Entrepreneurs are taking up new ventures in their quest from global size organizations, profit and
large markets beyond the national boundaries of the entrepreneur, with the result,
entrepreneurship is also going global thus making manufacturing, marketing and management
that are represented by different nationalities. The situation calls for different strategies in
countries not as diverse as South East Asia countries, USA, Kazakhstan, Uzbek or Kenya.
The globalization process started worldwide in 80’s. The entrepreneurs are moving to different
countries and starting new ventures. Many organizations are founded, organized and operated
one the principle that the globe is their field of operation. Modern communication and transport
systems are helping to go global;. Initially small business ventures were based on local domestic
markets. International business was consideration domain of large organizations. This perception
is fast changing. Trade has been conducted on international scale for many years; establishment
61
of manufacturing organizations, and development of business by licensing, arrangements,
management contracts, joint ventures, mergers, acquisitions, subsidiaries and strategic
partnerships.
The availability of cheaper inputs for the production such as raw materials, infrastructure, trained
labour force are taking entrepreneurs to different countries to give global competitive advantage
to their proposed ventures. Large markets outside the national boundaries help an entrepreneur to
access large and growing markets.
Going global can generate greater revenue and greater operating margins. With large funds, it is
possible to purchase sophisticate equipment, update designs and adopt global manufacturing
qualities. An international entrepreneur would like to go to the countries where there are
economic developments and where the scale of economics can be attained.
Restraining Force and Entrepreneur to go Global
1. Government controls and barriers.
To protect the local industries, existing industries and employment, every country tries to protect
them. This is done by two ways.
One, by fiscal regulatory measures like, high taxation, inspection, monitoring controls,
quantitative restrictions and foreign exchange controls. Second through non – monitoring
barriers like introduction of controllers and inspectors, large documentation, legal insecurity,
social and cultural barriers and treatment to outsiders in a different way as compared to insiders.
2. Entrepreneurial culture.
An entrepreneur should be open to consider dispassionately the business opportunities that are
coming in other countries. The entrepreneur should have a wide vision to expand geographically.
Advantages of an entrepreneur going global
 Large markets beyond home country borders.
 Greater motivation in new opportunities.
 Improvements in technologies, quality and operations.
 Extending life of product cycle.
 Challenges in doing business in a competitive environment
 Earning foreign exchange for the organization and home country.
Social cultural trends
The social cultural environment of a business consists of class structure, social mobility, nature
of social organization, social institutions, customs and taboos, people’s basic beliefs, values, and
norms are largely shaped by the society.
The social setting consists of among other things, people and their characteristics, their real or
apparent roles and their interpersonal relationships. Culture has been defined as “ that complex
whole which includes, knowledge, beliefs, art, law, morals, customs and any other capabilities
and habits acquired by people as members of a society. Thus culture consists of common habits
like peoples behaviors in their daily live, and common interest in entertainment, sports, new,
advertising etc.
Culture serves the needs of people within a society. For instance, culture provides standards and
rules regarding when to eat and what is appropriate to eat for breakfast, lunch and supper, what
to serve at dinner parties, a picnic or at a wedding. Cultural words and symbols may have
different meanings in different societies. An entrepreneur should know which product will suit
people of a particular culture and should know his marketing strategies, advertisement etc.
people’s behavior, particularly their consumption patterns and life styles are influence to a great
extent, by the social classes to which they belong. The most commonly used measures of social
62
status are income , education, occupation and area of residence. Entrepreneurs should consider
their consumers social status before introducing a product in the market. For example a perfume
that costs Kshs. 4000 automatically sell in the Kenyan slum area of Kibera.
Another dimension to social and cultural life is the manner in which social relationships manifest
themselves in business, operations. Obligations to immediate and extended family members ,
kinsmen, friends and acquaintances are carried over to reach of business. More often than not
this family tries override economic and professional considerations in most business dealings
such as those involving recruitment of personnel and credit sales.
The social – cultural dimensions has been identified as one of the factors contributing to the
failure of small African business in most African countries.
Economic Trends
Some of the economic factors which promote and hinder entrepreneurship include;
1. Capital : capital is the most important perquisite to establish an enterprise. Availability of
capital facilities the entrepreneur to bring together the land of one, machine of another to
create his business enterprise.
The stage of economic development in a country plays an important role while considering
establishment of new venture. To some people capital refers to funds available for investment; to
others it refers to equipment and machinery used by entrepreneurship and managers to produce
goods and services; and to others still, it refers to postponed consumption. All these refers to the
term capital.
2. Land: according to economics the term land refers to all farm land and all natural resources
provided by nature. Therefore agricultural land, forests, rivers, lakes, seas, and all natural
resources are according to economists, land. It should be realized that the amount of land is
finite and can, therefore, not be appreciably increased. Land as a factor of economic
production explains the existence of a variety of businesses including furniture businesses
band food businesses.
3. Labour : this refers to all the physical and mental effort exerted in the production of goods
and services. Unlike land, labour can be substantially expanded by increasing both its
quantity and /or improving its quality. Quantity of labour can be increased by higher
birthrates and / or from inflow of people from other countries. The quality on the other hand
can be improved through better health of labourers, better education and vocational training
of people or combining labour with more and better quantities or qualities of other factors of
production.
4. Entrepreneurship:- the process of combining land, labour and capital in some way in order
to produce pertinent goods and services is called entrepreneurship. One factor that bothers
many potential business owners is how to determine in advance whether one has the qualities
of a successful entrepreneur. Although it is difficult to predict whether a particular individual
will succeed or not if he ventures into business.
Consumer trends

A consumer is the end user of a product offered by an organization. Understanding consumer

behavior is of paramount importance because an entrepreneur first have to identify consumer
needs and then develop a product that will satisfy those needs if the firm is to succeed in the long
63
– term. There are certain factors that influence consumer behavior that the present and future
entrepreneurs have to consider. These factors are divided into:-

a) Internal influences
b) External influences
Internal Influences

Needs and motives:- a need is simply a deprivation of something of value. When a need is
sufficiently aroused it becomes a motive. That is, a motive is an inner state that directs an
individual towards the goals of satisfying a felt need.

Perception:- perception refers to the way an individual view the world around him. An
individual’s perception of an object will determine how he or she will react towards that object
or event. Entrepreneurs are interested in perception because it involves what consumers believe
and because what they believe and because what they believe affects their buying behavior.

Learning:- learning is a change in an individual’s response or behavior resulting from

experience, practice or mental association. Consumer learning can be viewed as the process
through which individuals acquire the purchase and consumption experience they apply to the
future related behavior.

Attitudes:- an attitude is a learned tendency to respond to a product, brand or company in a way

that is consistently favorable or unfavorable. The more favorable a consumer’s attitude towards a
product, the higher the usage rate and vice –versa.

Personality:- personality refers to rather enduring traits or factors that affect the manner in which
an individual deals with his immediate environment. Entrepreneurs are interested in personality
because they believe it affects consumer behaviors.

External Factors

1) Culture :- culture is a learned behavior and results of behavior whose component elements
are shared and transmitted by members of a particular society. The entrepreneurs who hope
to avoid costly mistakes should familiarize themselves with the culture and sub- cultures of
people they plan to market their products to.
2) Social class:- a social class is defined as an open aggregate of people with similar social
ranking. Class differences are important to entrepreneurs because certain products are more
likely to appeal to one class than another.
3) Family:- the family has an important influence on the consumption behavior of an
individual. Quite often each consumption family member has specific role in the buying
process.
4) Purchasing power:- this is people’s ability to buy goods and services. According to
economists whether people busy a product or not largely depends on their incomes. Price of
the present product and prices of substitute products and complimentary goods among

64
 others.
Unionism Trends

A trade union is an organization of employees who have joined together so as to try to improve
their working conditions and protect their interests. Trade unions in general are concerned with
their members’ welfare and organization policies. They are promoted by persons and groups.
Trade unions in every country have been as a result of economic, political and social strife’s.

Trade unions in Africa is as old as the struggle for independence because of two reasons;

1. The workers were oppressed – the working conditions and the wages were very poor.
2. The employees and the governments were more or less the same and were foreigners.
Trade Union Objectives

1. To secure for their members fairer wages in the light of the cost of living and the
prevailing standards of living.
2. To improve their member’s working conditions by securing shorter working hour, better
working facilities, adequate social security benefits, appropriate educational facilities and
other welfare benefits.
3. To assure the worker a share in the increased profitability of an industrial unit by
providing him with better terms or by payment of adequate bonus.
4. To protect workers interest and more specifically to avoid their exploitations.
5. To ensure the workers security of employment by resisting retrenchments and
victimization likely to harm them.
6. To achieve the above objectives or any other, the trade unions must be aware of the needs
of the economy and the instruments or stability to the workers and the nation at large.
Challenges Posed By Emerging Trends

1. There is a challenge in changing the type of business activity to engage in.

2. It is also difficult to attract additional capital especially for those who want to venture in
small businesses due to the preference accorded to large enterprise owners by the loaning
institutions.
3. Entrepreneurs also have the challenge of sustaining and maintaining their businesses.
4. Human resources are the one who can make best use of other resource to convert raw
materials into finished products. If not properly managed, the enterprise may not be able
to raise its objectives.
5. Marketing is also a challenge because if no proper marketing strategy is not formulated,
then the business enterprise may collapse. Marketing is the lifeline of any firm.
6. Developing an entrepreneurship culture is also very difficult due to difficult of many
cultural activities that inhibit entrepreneurship.
7. Technology has also created several problems and there is a need to train in the technical
skills.
8. Global competition is also another area that needs full attention.

65
Management of the Challenges

1) One should identify a business opportunity and develop a business idea and do several
evaluation of the business idea before engaging into business.
2) To sustain the business avoid excessive optimism, prepare good marketing plan, make
good cash projection, keep familiar with the market and be sensitive to stress points in the
business.
3) To attract an additional capital ensure you have a proper business plan that can enable the
lenders to lend you money.
4) An entrepreneur should ensure that there are effective measures to develop, maintain and
motivate his employees in order to manage his human resource effective.
5) The entrepreneur should find it necessary to update the technology, processes and
product as per the need of that time.
6) An entrepreneur should ensure he/she considers all the factors that affect consumer
consumption before establishing which marketing strategy to use.
REVIEW QUESTIONS.

1. What are the trends in enterprise management?

2. Establish the challenges posed by the trends and ways of managing the trends.
REFERENCES

Badi R.V and Badi N.Y, 2005, entrepreneurship, Vrinda publication Ltd, New Delhi, India

Butt S.A Essentials of commerce in East Africa, 4 th Edition, The Chaucer press Ltd, Great
Britain.

Holt David, 2004, Entrepreneurship New Venture Creation, prentice Hall of India Private Ltd,
New Delhi, India.

Haag Stephen et al, 2002, Management Information System, 3rd Edition, McGraw Hill, New
York.

Khanka S.S, 1999, Entrepreneurial Development, S. Chand and company Ltd, New Delhi, India.

Kibera F.N 1996, introduction to Business, A Kenyan Perspective, Kenya Literature Bureau,
Nairobi, Kenya

Lobley Derk, 993, Success in Commerce, 4th edition, Biddles Ltd, Great Britain.

Mburugu J.B and Thiong’o J.M, 1993, Entrepreneurship Education (A profile of Entrepreneurial
Opportunities), Nairobi University Press, Nairobi, Kenya.

Mwalo O. Joash et al, 2003, Focus on Business studies, A student book for form I, Focus
publication Ltd, Nairobi, Kenya.

O’ Brien-a. James, 2001, Introduction to Information system, essential for the Internet worked, e-
66
business enterprise, 10th edition, McGraw Hill Ltd, New York.

Woheren- E. Evans, 1993, Information Technology in Africa, challenges and opportunities,

Maastricht, Netherlands.

67