TOPIC 1: Introduction to entrepreneurship

Definition of terms

Entrepreneur: It is a person who creates initially small business and strives to maximize

potential of their venture while simultaneously minimizing risk.

Entrepreneurship: This is a process of designing, launching and running a new business

which often initially a small business along with its financial risks.

Self-employment: This is where an individual is in control of his/her own business, makes

decisions affecting and enjoys all the profits of that business and incurring all the losses.

Business environment: Are those factors that affect the operations of a business. They

may be internal or external environment.

Small scale enterprises: It is a type of an enterprise marked by a limited number of

employees and limited flow of materials and finances.

Distinguish between entrepreneurs and business Persons

Entrepreneur Business person

An entrepreneur is an investor and the first A business person can make a business out of
creator of a product. He invests time, energy an unoriginal business or product idea. He
and money on his own idea. He doesn’t start enters into existing business, such as
business from an unoriginal idea. franchising and retailing. He chooses a hot
and profitable business idea regardless of
whether it is original or a borrowed idea.
Entrepreneurs are more concerned on Most business persons are doing business for
changing the world. They want to pursue their profit, livelihood, for reaching their own boss
passion and achieve an ultimate goal. l.
Entrepreneurs takes crazy risks, and don’t Businesspersons take calculated and managed
care of losing time and money just to pursue risks. They cannot afford to lose money or
their passion. suffer from bankruptcy.
An entrepreneur is a friend and a leader. He A businessman is an employer and a manager.
finds peers and people whom he will never He hires to help his business grow.
treat as machines.
An entrepreneur sees customers as his source Businessperson sees customers as his source
of duty and fulfillment. of sales and revenues.
Entrepreneurs try hard to beat his worst A businessperson tries harder to beat his
competition. competitors and win the competition
Entrepreneur sees the world as duty rather Businessmen sees the world as an
than an opportunity. Works as an artist his opportunity. Businessmen doesn’t waste any
product is a masterpiece. time

Types of entrepreneurs

a) Craft entrepreneurs

Exploits and utilizes personal skills to start a business without thinking of its growth or
the expansion objectives

Often times than not in this type of entrepreneurship;

i.There is no expanding even after a long time ii.It is not business expansion oriented. iii.The
skills can be technical skills, professional skill e.t.c

b) Opportunistic entrepreneurs

This is a person who starts a business, acts as a manager and with a view to expand the
business to maximum.

He might not have the skill or profession but he has the opportunity to start and direct
others.
 He sees beyond and has abilities to initiate and venture into business that will expand and
grow.

He is innovative i.e. somebody able to delegate activities to others, ready and able to see,
scan the environment.

c) Social entrepreneur

Recognizes a social problem and uses entrepreneurial principles to organize, create and
manage a venture to achieve social change.

d) Political entrepreneur

Is a business person who utilizes political systems or bodies in order to promote, expand
and profit from their own commercial ventures.

Apolitical player who seeks to gain certain political and social benefits in return for
providing the common goods that can be shared by an organized general public.

e)High Tech:

New technological developments have created opportunities for those with the right
technical expertise

f) Concept Multipliers

Someone who identifies a successful concept that can be duplicated by others eg

g) Acquirer :

Those who take over a business started by others and use their own ideas to make it
successful

h) Buy/Sell artists: those who buy a company for the purpose of improving it before selling
it for a profit.

i) Economy of Scale exploiters: Those who benefit from large volume of sales by offering
discount prices and operating with low overheads.
j) Inventors: Those with particular inventive abilities who design a better product and then
create companies to develop, produce and sell the item.

k) Self-employed: individuals who perform all the work and keep all the profit.

l) Speculator/Value: Those individuals who buy property at a low price with the anticipation
that prices will go up and sell at a higher price.

m) Conglomerate: an entrepreneur who builds up a portfolio of ownership in small

businesses, sometimes using shares or assets of one company to provide the financial base to
acquire another.

n) Matriarch or patriarch: The head of family owned business who often employs several
members of the family.

Importance’s of entrepreneurship

• Create jobs: As much as entrepreneurs create job themselves. They also create a number of
jobs opportunities with their business venture and as their businesses grow so the opportunities
available increases.

• Creates change: When entrepreneurs make a product or explores ideas, it brings in change and
improvement in the world.

• Entrepreneur give to the society: The more the money they make the more in taxes they pay
which in turn funds public services. E.g. Bill Gates the founder of Microsoft is the biggest donor
in charities and non-profit organization. • Entrepreneurship have independence: They are their
own boss this enables to work to their capacity and towards achieving the specific goal.

• Freedom of ideas: They are free to implement and make any change in the operation of the
business.

Facilitates competition encouraging high quality products

Promotes use of modern technology in especially small- scale manufacturing to enhance higher
productivity
Disadvantages/Drawbacks of entrepreneurship.

• Risk of business failure - There is no certainty of success.

• Long working hours especially in early stages of implementation.

• Income is varied and uncertain - It is difficult to estimate the income that you will be able to
get in particular day or month.

competition by established business

Fear of delegating

Identify ways of becoming an entrepreneur

• Be a risk taker: Humans are generally risk averse, but part of being an entrepreneur is
recognizing the risk that you should take. Successful entrepreneurs know which risk to take and
which they shouldn’t.

• Exercise: That is put the idea into action

• Learning: Getting new ideas from established entrepreneurs.

• Networking: Analysing gaps in the market where you can invest in and working together with
entrepreneurs of your area of specialization.

• Trust yourself: Being determined to achieve your goals.

• Challenge yourself: Compare yourself with the already established entrepreneurs.

• Visualize goals: Determine the needs and requirements of your goals.

Characteristics of Entrepreneurs

• Self-motivated: when you want to succeed you need to be able to push yourself. You aren’t
answerable to anyone else as an entrepreneur and that means that it’s hard to get moving without
anyone to make you.

• Risk taker: successful entrepreneurs know that sometimes it’s important to take risks. Playing it
safe sometimes never lead to success as a business owner.
• Flexible: Have the ability to be able to change as needed. Staying on top of your industry and
be ready to adopt changes in the process and product as they are needed.

• Passion: Successful entrepreneurs are passionate. They feel deeply about their product or
service or mission.

• Basic money management skills and knowledge: Understand how money works so that you
know where you stand and so that you run your business on sound principles.

• Network: Being able to connect with others and recognize partnership opportunities can take
you a long way as a business owner.

Factors affecting entrepreneurship development

Entrepreneurship is influenced by various factors:

• Economic development.

• Culture.

• Technological development.

• Education.

• Political factor

• Legal factor

• Capital

These conditions may have both positive and negative influences on the emergence of
entrepreneurship.

a) Economic factors:

Economic environment exercise the most direct and immediate influence on entrepreneurship.

These factors include:

• Capital-These include money saved by the entrepreneur and money that may be borrowed from
individuals and institutions like banks, building societies, cooperatives, etc to start and run a business
• Labor-The availability and suitability of labour should be assessed

• Raw materials-These are items that are to be converted to states that can be readily used by
consumers. These include timber if one is furniture business, clothe materials if in dress making business

• Market-A market for the product or services is very important to the

entrepreneur.
One has to assess whether there’s a steady market

• Infrastructure-Infrastructure: Availability of roads, power, water and telephone services are very
important in some types of business.

b) Social factors:

These can go a long way in encouraging entrepreneurship. In fact it was the highly helpful
society that made the industrial revolution a glorious success in Europe. Main components of
social environment include:

• Family background-Small businesses and family are inseparable, one affects the other.
Youneed to consider possible effects of the business on the family and how the family could
affect the business

• Attitude of the society.

✓ • Education-A society that has foresight to know about the future business
environment is likely to havemore entrepreneurs.
This is because they are likely to visualize key changes that are likely to create opportunity

• Cultural values-Muslims cannot operate any business dealing with porkproducts

c) Technological factors: Technology has influenced entrepreneurship development through

innovations and use of internet to gather new and existing information.

d) Education: Many entrepreneurial theorists have propounded theories of entrepreneurship that

concentrate especially upon psychological factors. They may include:

• Need achievement.

• Withdrawal of status respect.

• Motives.

e) Political and government changes in government policy can have a very huge effect on the
business in question. Example the tobacco industries have been on forced to put warning labels
on their product and lost the right to advertise on the television

Entrepreneurship and Self employment

Definition of key terms

Entrepreneurial traits: These refer to characteristics of entrepreneurship and are always

possessed by the entrepreneurs. All the entrepreneurs possess these characteristics and they
distinguish them from the other persons.

Entrepreneurship culture: It is the behavior that is possessed by most of the individuals. Are
also the attributes, values, beliefs, and behavior in which an individual learns from one
generation to another i.e. behaviors of carrying out entrepreneurship activities e.g. starting up a
business.

Self-employment: This is where one is his/her own boss, is in full control of the business, makes
all decisions affecting the business and enjoys all the profits of the business or incurs all the
losses of the business.an individual can even hire employees to work for him or her.

National Development: This explains the benefits accrued from entrepreneurship to the nation.
It may include benefits like revenues, employment, cohesion, infrastructure [lights roads,
electricity] increased imports and exports among others.

Distinguish between entrepreneurship and self-employment

Entrepreneurship Self-employment.
Doesn’t have to physically be at the The individual is very hardworking and
workplace, they have partners and employees should be at the workplace for them to make
who run the entire business for them hence money hence rigid.
flexible.
Emphasizes on creating opportunity even Emphasizes on maintaining a secure income
though there may be no actual work or no and remain working – not tolerant of great
income. Hopes for growth and expansion, is financial risk.
tolerant of great risk i.e. he is concerned about
risk and reward
Has invested in different businesses. Normally have one business
Not everyone can be an entrepreneur, it is a Anyone can be self-employed because anyone
title bestowed upon you. To becomes an can have a business idea, register a company
entrepreneur when people see you as creative, and try to make the business work.
inspired and overcome challenges
One cannot start a business as entrepreneur One can starts as self-employed and not as an
i.e. I am self-employees, but one day I strive entrepreneur.
to be an entrepreneur.
You can have people go are working with you You can have people working for you i.e.
and not just under you i.e. partners. employees.
The business outruns the existence of the If one decides to retire, the business dies as
owner because, workers are working with him well because workers are working for him,
hence understand vision, mission and value of hence just run the business of the owner, they
the business. do not understand the mind of the owner.

The importance of self-employment

To analyze means to interpret and explain in detail the importance of self-employment based on
business procedures and strategies. The importance includes:
i. Being your own boss One is control of all key decisions affecting his business because it is
your business you have started. You work for your clients. Clients state what results they expect
from you, but they do not direct your work. You are your own boss therefore you decide when
and where and how to work to get the job done.

ii. Flexibility To decide hours of operation, working conditions, business location. You do not
have to go where your employer forces you to do work.

iii. Harmony with your life If you are working for yourself, chances are you will be doing ok that
you enjoy hence selffulfillment.

iv. Income generating If all goes well and you are making money, chances are you will make
more money than you did while working for someone else.

v. Profitable You get to enjoy all the business profits. If your business is doing well, you may not
have to share proceeds with anyone else. The fruits of your labor will all be yours because you
own the vineyard.

Requirements for entry into self-employment

i. Identify business structure: Determine whether your business will operate as a sole
proprietorship or partnership. You can also set your business up as a limited liability company or
as a corporation.

ii. Register your business: Apply to receive employer identification number. Also register your
business with state and local tax offices.

iii. Licenses and permits: Seek for licenses and permits required to operate a business.

iv. Record keeping: Create and maintain accurate records. Items to list in your records are details
of customers, dates sales or purchases, amount of sales, taxes collected on sold items and unsold.

v. Taxes – be aware of the taxes that apply to the business to ensure you are fully compliant. vi.
Will you enjoy your work? – You can only run a business you are passionate about because it
brings happiness that satisfies your life goals. You will have to run a business that fill the sense
of your purpose
The role of an Entrepreneur in business

• Initiator: One who initiates the process of creating a business by coming up with the idea for
the business and planning out how to turn that idea into a reality.

• Risk taker:He is the biggest risk taker in business because he is the one who invests capital and
accountable in the face of failure. Identifying gaps in the market and turning such gaps to
business opportunities i.e to initiate a business.

• Allocator: He allocates various resources in the organization. These resources include;

manpower, machines, funds, etc.

• Forecasting: He should be prepared on how to deal with various forecast changes such as
strikes, machine breakdowns, budget cuts, legal policies, political or social unrest, technological
advancement etc.

• Adhering to legal norms: To ensure the enterprise adheres to legal norms and policies. Not
pertaining to this can mean serious legal consequences.

• Reduces risk: Best achieved by bringing people that can help the organization grow. These
people can be stakeholders or investors that have stake in the company.

The contributions of entrepreneurs to national development

• Entrepreneurs spur economic growth. New products or services created by entrepreneurs can
produce a cascading effect, where it stimulates relate businesses or sectors that need support the
new venture, furthering economic development.

• Boosts national income. Entrepreneurial ventures help generate new wealth, additionally
increased employment and higher earnings contribute to better national income in the form of
higher tax, revenue and higher government spending.

• Entrepreneurs create social change. Through offering unique goods and services, entrepreneurs
break away from tradition and reduce dependence on obsolete systems and technologies.
• Community development. Entrepreneurs regularly nurture venture by other likeminded
individuals. They also invest in community projects and provide financial support to local
charities.

• Conservation of foreign exchange – You are able to produce goods hence no need to import
therefore contributing to conservation of foreign exchange.

• Promotion of entrepreneurial culture – They encourage individuals to set up and manage their
business and this reduces importation of goods.

Entrepreneurship culture in Kenya

✓ Culture is defined as a set of values, perceptions wants and behavior learned

by a member of asociety from family and other institutions
Entrepreneurial Culture
Refers to the way of embracing the concept of finding new opportunities in business
and gatheringthe necessary resources to fill the opportunity.

The cultural habits that promote entrepreneurial development

a) Money orientation
✓ Money oriented people know the value of money and has the intention of making it.
✓ The money oriented people use the need of money as a motivating factor
pushing then to beingentrepreneurs.
b) Future orientation
✓ A society that has foresight to know about the future business environment
is likely to havemore entrepreneurs.
✓ This is because they are likely to visualize key changes that are likely to create
opportunity.
c) Time consciousness
✓ Knowledge that time exists and its importance
✓ Knowing the right time to start an entrepreneurial activity.
✓ Utilization of time
✓ The correct timing of the market conditions
d) Trust and honesty
✓ Through trust consumer demand is gained on the products and services available.
✓ Entrepreneurs should reciprocate this by ensuring honesty by providing the
expectedstandards.
e) Hard work i.e
✓ Willingness to work hard distinguishes between successful and unsuccessful
 persons.
The cultural factors inhibiting entrepreneurial development.
a) Religion – religious believes may deter entrepreneurial investments in
items such asnight clubs and pubs.
b) Language – establishing businesses in areas where language barrier
may allow poorcommunication or fear of invasion.
c) Personal relationship – Married people may avoid getting involved in
business activitiessince no time is spared for the family.
d) Attitude towards innovation
✓ Especially in cultures which oppose innovation due to fear of change
e) Networks – poor networking and ability to meet people limit new
✓ Opportunities
✓ New knowledge
✓ New information.
f) Technology – lack of technical skills and knowledge may slow
growth and dev. Ofentrepreneurial
Lock one out of being competitive.

Economic, Social and Political Factors Affecting Entrepreneurial Development

a) High taxation levels. For business and personal incomes
✓ Which in effect reduce profits earned making it un-attractive to engage in
business
✓ Taxation of raw materials and other inputs raise production costs.
b) Corruption and official harassment
✓ Occurs where entrepreneurs are forced to bribe officials in various
government departmentsto allow operation or start up.
✓ Raids under one pretext or another which tends to be very harassing.
c) Unregulated competition from the outside world due.
✓ Liberalization which opened importation competing locally produced goods.
d) Declining personal incomes of people due to
✓ Over-increasing cost of living
✓ Arise in unemployment
e) The high cost of finance
✓ The cost of borrowing is high
✓ Business collapses because they lack ability to repay loans.
f) Lack of necessary skills and knowledge due to
✓ lack of training opportunities
✓ high education costs
g) Poor transport and communication network
 ✓ making business difficult
✓ Inconveniencing consumers
✓ High energy costs
✓ Lack of entrepreneurial culture

Born or made Entrepreneurs traits

Born entrepreneurs dream big, take what they want and never stop trying to achieve their goals.
They have the following traits:

• Believe in themselves

• Have some security

• Takes charge

• Crafty and innovative

• Outspoken

• Observed with making money

• Fearless and thrive on challenges

• Take huge financial risks

• They can have a business idea that doesn’t have to bring income instantly when it is
implemented.

Made entrepreneurs are those that are self-made successful individuals. They may have different
traits from those who were successful before. They have the following characteristics.

• Determined.

• Enjoy what they do.

• Serious.

• Risk taker.

• Can manage money.

• High level of confidence.

• Recognizes failure.

• Plan everything.

Topic 2: Entrepreneurship Opportunities

Definition of key terms

Sources of business: These are the origins of business idea that can be used for financial gain that
is centered on a product that can be offered money.

Product demand: A customer’s willingness to purchase a product or services at a given price.

Business life cycle: They are phases that a business idea passes through from the time it is
formed in the entrepreneur’s mind to the time business rolls and expands or declines.

Business legal aspects: They are legal frameworks through which a business operates.

Sources of business ideas

include:

• Customer surveys: Customer needs and wants to justify for the service or product that you can
offer them.

• Interests and hobbies: Most people have founded great successful businesses while pursuing
their interests and hobbies i.e. by doing what they love doing in their leisure times.

• Brainstorming and dreams: This starts with identifying a problem statement or question.
Designing solution to these problems lead to business ideas.

• Franchising: It is a situation where sole traders mark distributor of a product gives exclusive
rights to independent retailers for local distribution.
• Mass media: Include T.V. newspapers, internet, radio, and magazines. They are also a great
source of ideas, information and opportunities.

• Personal experience and talents: Most of the ideas are also as a result of experience in a
workplace.

• Trade fairs and exhibitions: Attending such events regularly makes one discover new services
and products.

• Personal contacts and observations through.

Interactions, Newspapers and magazines.

Generate business ideas and opportunities

To generate more business ideas and opportunities, one must be able to do the following:

• Meet new people

• Tap into your interests

• Keep “pain point” journal

• Travel

• Explore new ways of thinking

• Do your market research

• Go online

• Attending educational events

Business life cycle

Business life cycle refers to the phases that a business passes through from time the idea is
formed in the entrepreneur’s mind to the time business rolls and expands or even declines. Many
businesses go through six stages in their life as shown below;

a) Idea generation: This is the preliminary stage for the business. Here, the entrepreneur does a
lot of groundwork to access the viability of the venture he is about to get into.

b) Start – up stage: Activities may involve preparation of a formal business plan, registration of
the business, sourcing capital, recruiting and designing the product. During this phase, sales are
low but slowly increasing its sales as the time passes by. At this phase entrepreneurship
concentrates with marketing their product and services to their target customers business are
prone to incur losses in this phase.

c) Growth stage: at this stage of business common experiences may include:

• Increased sales and profit

• Wider market coverage in terms of geographical region

• A growing number of employees

• Variety of products and services

• Increased competition

• Need for additional expenditures

d) Stabilization stage: At this stage, business sales and profits stagnate. The business may also
experience intensified competition. Sales may go down due to the presence of competitors in the
market, profit margin starts to go down.

e) Innovation stage: Organizations that fail to innovate at stabilization stage are likely to decline.
To ensure come back to growth, the entrepreneur is required to re-look at the way’s businesses
have been conducted. The cash generation is higher than the profit on the income statement.

Among innovative attempts include:

• Change of management
• Repackage the product/service

• Change the technology

• New distribution methods

• Advertise and promote differently

f) Decline stage: This stage is not in normal plan of business. The entrepreneur does not foresee
business declining at the start-up stage. Sales and cash flow all decline. Companies accept to
extend their business venture by adapting to the changing environment. Firms loses their
competitive advantages and finally exits the market.

Business Legal aspects

Businesses operate within a legal framework that for the most part, works.

The legal aspects include:

• Legal entity: All businesses are categorized as some sort of legal entity that governs the way
they are treated under the law. Some business structures are considered free standing entities that
have special rights and the owners have limited liability. Others like sole proprietorship, the
owner assumes all the liability and rewards.

• Compliance: Compliance to local (city and county), state and federal laws will be something
that all businesses will need to deal with.

• Contracts: Most businesses will enter into a contract with a person or another business at some
point in their existence. These contracts are what define how the working relationship will be
carried out and who will be responsible for deliverables and payments.

• Resolving disputes: The legal system is set up to solve disputes. These disputes usually revolve
around some sort of breach of contracts, violation of intellectual property or breaking the law.

• A necessity that’s not the evil: Having good corporate counsel will make your business better.

Product demand Assessment

This involves determining how many units of products will be sold over the course of a year.
Factors to include:

• Go over past sale records

• Use marketing projections to help estimate demand

• Use a competitor’s sales data

• Pay attention to the local and global economy

• Estimate sales on recent performance

Types of business environment

Are factors that affect the function of the organization and how organization works directly or
indirectly? They include internal environment which affects operations of a company are within
the control of management and external environment which are beyond the control of the
organization.

Internal business environment

• Financial: Finances determine whether your company survives or dies. When money is limited
it affects the operations of the business.

• Employees and managers: Employees are the major part of your company internal
environment. They should be good at their jobs. On other hand managers should be good at
handling lower-level employees and overseeing other parts of internal environment.

• Resources: Availability of resources can also determine how the business performs. Scarce
resources will affect the number of sales made, quality of products or services produced and even
the period which the business will last.

• Company culture: This consist of values, attitude and priorities that your employees live by.
Your staff will infer your values based on the type of people you hire, fire and promote.

External factors:
• Competition: Unless a company has unique features, competition will always be there. When
you start a company, you will compete against more establishes and experienced businesses.
Competition can either make or break your business.

• Political: Changes in government policy can have a very huge effect on the business in
question. Example the tobacco industries have been on forced to put warning labels on their
product and lost the right to advertise on the television.

• Customers and suppliers: Next to the employees, customers and suppliers are the second most
important in your business. Suppliers have a huge impact on the cost and customers depend on
how good your products are and whether you’re advertising makes customers want to buy from
you among others.

• Economical factor: In a bad economy, even a well-run business may not survive. High interest
rates on banks and credit cards will discourage / limit the entrepreneur and customers spending
on your products or services.

Factors to consider when evaluating business environment

• Ability to manage cash: You need to look at the ability to manage cash flow. Is there a start-up
funding for your business? What about ways to keep funding your business each month. Figure
out how cash flows will be managed and take a look at your business plan.

• Passion and persistence: Are you working with people who will get their jobs done? Do you
trust they have passion for the work assigned to them? How will they approach difficulties in
case they face them in the future? You need to ensure that you have the passion to be in that
business and the desire to come out of challenges.

• Market size: It’s one of the most important factors when evaluating a business opportunity.
Researching the market and figuring out whether there we market for your products and how big
it is.

• Relationships: What is your relationship with the potential investors or customers? When you
have more relationships the chances for your business to run smoothly is high.
• Management skill sets: What are the skills of those involved in your business? When looking
for the business opportunity to invest in or expand into, look at the management. What skills do
they have? Are they appropriate?

Incorporation of technology in business

• Provides for communication with customer: technology affects a firm’s ability to communicate
with customers. This is best achieved by use of internet.

• Efficiency of operations: Technology also helps a business understand its cash flow needs and
preserve precious resources such as time and physical space.

• Security: Most businesses of the modern era are subject to security threats and vandalism.
Technology can be used to protect financial data, confidential execution decisions and other
proprietary information.

• Business culture and relations: Technology creates a team dynamic within a business because
employees of different locations have better interactions.

• Research capacity: A business that has the technological capacity to research new opportunities
will stay a step ahead of its competition. For a business to survive, it must grow and acquire new
opportunities.

Business Ideas

Open barber shop Infront of a car wash

Open car wash Infront of the shopping mall

Open toy shop Infront of children hospital

Open egg shop Infront of gym shop

Reasons for business failure

- lack of market demand for the product or service

- product not offering solution to satisfy customer

- incompetent employees. Workers in a pharmacy if they don't know types of drugs to offer.

- Unfair competition, unfair deals eg magendo

- lack to response to technological changes.

- environmental factors corruption, calamities eg COVID, political instability- poor management

- poor pricing policies.

Role of an entrepreneur in business

- combining resources into proper propositions for maximum performance

get capital

plan your business

put policies to guide your business.

Pay laborers

Marketing in Entrepreneurship

- Market- collection of people who wish to buy a specific product or service.

- sum total of all the buyers and sellers in the area or region

Marketing - creating/ communicating awareness about product/ service to the potential

consumer.

Set of processes by an organization

Brings out key features of a product

Promises to solve consumer problems

Benefits of Marketing

- informs

- competes
- sways the decision

- communicates value

E.g safaricom and Airtel -Kencell, Celtel Zain,

Marketing strategies

- must understand their own business first, small business, large business, social media,
Facebook

Market segmentation

- dividing a market of potential customers into groups or regions, age, income, education level,
gender, lifestyle etc e.g if your product targets old people you can't use social media they can't
see it.

E g Thika school, are we targeting the parents or students who have finished form 4.

The business canvas model-

helps us understand our markets

Constitutes 9 blocks

1. Customer segmentation

2. Key partners: i.e suppliers

3. Key activities to do for products to reach the consumers

4. Value proposition - I'm just not buying the product eg js shoe, I'm buying the color, size,
quality , shape

5. Customer relationship eg hit and run customer, returning customer. E.g during valentine e.g
selling flowers to customers, whether or is spoilt or not, tomorrow the customer won't get you.

6. Resources

7distribution channel( logistics, physical location, borrowed shelves) which channel works best.

8.cost structure
- are costs affordable

- what are available costs.

9. Revenue stream

Does revenue 80% from low income group or high group

The marketing mix.

Combination of items that create success to the target market.

Putting right product, at the right place at the right time at at the right price.

The 4ps

• Product
• Price
• Place
• Promotion

The 7ps

• Process of creating the product

• People
• Physical environment

Factors influencing entrepreneur in choosing promotional methods

• target market
• cost involved
• type of product
• state of technology
• business environment
• available resources.
Entrepreneurial awareness

Definition of key terms

Forms of Business: They are different business structures like sole proprietorship, partnerships,
limited companies, corporations among others.

Governing policies: These are written regulations and laws laid by the government that
businesses must comply with.

Small Scale Enterprises: This is a privately owned and operated business characterized by a
small number of employees, require small capital to start etc. A business is regarded as small
depending on the regulations of a country.

Forms of businesses

1. Sole proprietorship eg small saloon, grocery saler, smocha, shopkeeper etc

This is a form of business that is owned by one person.

- owned by one person

- Capital/ equity by the owner

- Managed by the owner

- Decisions made by the owner.

Advantages

• It needs no charter to establish it.

• There are few casts that are related to its establishment.

• All the profits go to the owner of the business without sharing with anyone.

• Easier to raise startup capital that is from the owner’s savings.

• You are your own boss.

• Flexible to start your business at any location, anytime of the day.

• Motivation because you get all the profits.

• One has a personal contact with customers hence can be able to respond to their requests.
Disadvantages
• In case of loses, the sole proprietor bears all the loses by himself/herself.

• The sole proprietor will have to work very hard to sustain the business hence leaving less time
for leisure/recreation.

• A sole proprietor has unlimited liability that is a creditor with a claim against a sole proprietor
would normally have a right against all of his/her assets whether business or personal.

• Poor and uninformed decisions made by the owner of the business may lead to the collapse of
business completely.

• One has nobody to discuss the business problems with.

• One has limited finance or capital hence the business will remain small.

2. Partnership

It is a relationship that exists between two or more persons carrying on a business common with
a view to making profit. It is an agreement when two or more persons combine their resources in
a business with a view of making profit.

When two or more persons wish to form a partnership, then it is recommended that they agree on
the terms upon which to form a partnership. This is done in writing signed off as agreed by all
the partners and therefore it becomes a partnership deed or agreement.

Contents of partnership agreement

• Name and address (s) of the firm and the partners.

• Capital to be contributed by each partner.

• The profit-sharing ratios expressed as a fraction or percentage.

• Salaries to be paid to the partners.

• Any interest to be charged on drawings by the partners.

• Interests to be given on partners on their capital balances.

• Procedures to be taken on retirement or admission of a new partner.

Membership

It has a minimum membership of two (2) and a maximum of fifty (50) except for professions
firms, e.g. lawyers, doctors whose maximum membership is twenty (20).

Two forms partnerships can be formed

A. Gentleman's agreement (oral) - no formal agreement. They must agree to be guided by

partnerships act of parliament which states

- every partner must contribute equal amount of Capital.

- equal profit and losses sharing ratio

- no salary, commission payable to any partner.

B.With partnerships deed, partners

- don't have to contribute equal amounts of Capital.

- profit and losses sharing ratio is agreed upon.

- Partners are entitled to salaries/commissions

Types of partnerships

• General partnership: in this, all the members share the management of the business and each is
personally liable for all the debts and obligations of the business. Each partner is responsible for
and must assume the consequences of the actions of the partner.

• Limited partnership: some members are general member who control and manage the business
and may be entitled to a greater share of profits. A legal document setting out specific
requirements must be drawn up for a limited partnership.

Advantages

• Additional capital can be raised in case a sole trader is not able to raise sufficient capital.
• There is increased expertise in certain areas of business because of existence of many partners
who are skilled differently.

• Informed decisions and judgments can be made since the partners are involved in the decision-
making process.

• It is a tax pass through entity.

Disadvantages

• Wastage of time in decision making since all the partners must be consulted which takes time.

• All partners are liable to payment of all the losses that accrue in the business.

• Some members have limited liability while others have unlimited liability.

• Can be dissolved at any time either due to the exit or death of a partner.

• If one partner is inefficient or dishonest, everybody loses.

Dissolution of partnerships

Reasons

- if any of the partners is dissatisfied and asks for dissolution in writing

- insanity or bankruptcy

- government order, e.g Illegal business.

3. Joint stock companies (public limited companies)

It is a type of business structure that has been incorporated at company’s house as a legal
‘person’. It is completely separate from its owners. It can enter into contracts using its own name
and it’s responsible for its own actions, finances and liabilities.

Formed by min of 2 pple and no max number

- many shareholders are owning stocks in this company

- members shares are transferable

- ownership is owning shares.

- directors must prepare a number of documents

1. Memorandum of Association

- tell the world mission and vision of the company

- tells the purpose of existence of the company e.g banking, telling mandate.

2. Articles of Association

- guides internal operations of the company

- when meetings to be held, notices

- rules guiding elections

- decision making

- timelines

3. Declaration by the directors which they sign by agreeing to be directors.

4. Statement by directors saying that they also own shares in the company

Having all these documents together, they must file those docs to the registrar of companies who
may approve or disapprove. If they approved, he issues the

5 certiticate of incorporation which entails

-gives company right to exist

-Recognizes that company as a legal / fictitious person/ independent person from the
shareholders. So shareholders have limited liability. In case the company is held liable the
shareholders personal properties cannot be taken to meet the obligations of the liability because
these are two different entities.

-The company can own it's properties

-The company can sue or be sued.

-The company can start operating

- managed by board of directors

Having received certificate of incorporation, the company, directors prepare a

6. A prospectus

- an application form that invites members of the public to buy shares from the company.

Characteristics of a limited company

• Separate legal existence- It is its own separate legal person from the owners of the business.

• Limited liability- Shareholders are legally responsible for the debts of the company only to the
extent of the nominal value of their shares.

• Flexibility in taxation- Members of the corporation have the ability to choose the form of
taxation that makes the most sense for the business i.e. can choose to be taxed as Subchapter
corporation or Subchapter corporation.

• Simplicity in operation- Does not require to have shareholder’s meetings, appoint the board of
directors to run the company i.e. Simplicity in operation while the corporation with no
shareholder’s meetings, therefore there is no attendant preparation of filing of minutes of the
meetings i.e. simplicity in documentation.

Advantages

• Protection of the company’s name- It is an entity separate from its owners, and its own rights,
responsibilities and liabilities, can file a lawsuit or can be sued in its own name.

• A limited company is tax efficient i.e. tax flexibility

• Personal liability is limited. - Debts are only to the extent of the nominal value of their shares.

• Perpetual existence – Owners of the entity can change without triggering the dissolution of the
company unless stated otherwise in the articles of the organization. A member’s death,
retirement, withdrawal etc. doesn’t mean that the company must cease to operate.
• Less paperwork – Having limited company operating agreement to create rules that govern
your business hence less paperwork for compliance of rules of your state.

• High status of the company will attract investors and customers.

• wide pool of Capital. Shareholders can keep on buying shares from the company.
• Benefits from the pool of expertise.
• It is sustainable.
• Rapid growth due to capital availability
• members enjoy returns without having to work in the company e g through receiving
dividends at the end of the year.

Disadvantages

• Required to pay a registration fee to company’s house to incorporate i.e. legal formalities.

• Company name is subject to certain restrictions.

• More complex and time-consuming accounting requirements.

• Strict procedures for withholding money from the business.

• Owners lose control when the original owners hold less than 51% of shares.

• Selling of shares is expensive because of the commission paid to banks to aid in selling shares
and costs of printing the prospectus.

• Conflicts
• embezzlement of funds
• shareholders have limited participation in decision making.

Cooperatives

It is a group of individuals who have specific common needs. Its purpose is to improve the
economic status of the members.

Advantages
• Tax advantage: Exempted from income tax and surcharge on its earnings up to a certain limit.it
is also exempted from stamp duty and registration fee.

• Democratic management: Managing committee elected by members on the basis of one

member one vote irrespective of the numbers of shares held.

• State assistance: This is done by the government as they see cooperatives as an effective socio-
economic instrument of change therefore offered grants, loans, financial assistance to make their
work more effective.

• Open membership: Anyone can join irrespective of their color, age, religion, economic status
and there is no limit on maximum members.

• Limited liability: The liability is reduced to the extent of their capital in the cooperative
societies.

• Social service: The basic philosophy of cooperatives is self-help and mutual help. Thus,
cooperative foster fellow feeling among their members and inculcate moral values in them for a
better living.

Disadvantages

• Lack of mutual interest: All members are not imbued with a spirit of cooperation and such
absence breeds mutual rivalries among its members.

• Corruption: In a way, lack of profit motive breeds fraud and corruption in management. This is
reflected in misappropriation of funds by the officials for their personal gains.

• There is slow decision making since all members of the managing committee have to be
consulted.

• Less capital incentives which does not appeal to long term investors.

What differentiates one form of business organization from the other is the kind of registration
they do.
4. Statutory organizations/ parastatal

- formed by government

- the govt provides initial capital after which the parastatal offers services or products to the
citizens and must meet their cost and run the businesses on their own e.g kplc ,kr, ntsa,
immigration

Advantages

-available capital from govt

-offer essential services at subsidized price.

Services or products are accessible to majority of the citizens.

Disadvantages

- lacks proper supervision hence frequently mismanaged

- poor services or products

Sources of business finance

are identified as per business procedures and strategies

• Owner’s capital: It is the only source of capital for the sole trader starting business. This type of
capital through when invested is often quickly turned into long term fixed assets which cannot be
readily converted into cash.

• Ploughed back profit: It is the most basic source of funds for a company. Firms profit by selling
a product for more than it cost to produce.

• Borrowings: like individuals, companies can borrow money. This is done privately through
bank loans or publicly through a debt issue.
• Overdraft: Is a form of a loan from a bank. A business becomes overdrawn when it withdraws
more money than is available in the account. This leaves a negative balance on the account. It is
often a cheaper way of raising capital.

• Leasing: A business has the use of an asset but pays a monthly fee for its use and will never
own it. A business looking to purchase equipment may decide to lease if it wishes to improve its
immediate cash flow.

• Issue of shares: A company can generate money by selling part of itself in the form of shares to
investors which is known as equity funding.

Factors to consider in selecting source of finance of the business.

• Cost of capital: Every source of capital comes with a cost. The cost of getting capital should
not be extremely high. Most businesspeople prefer debt to equity because its cost is low due to
interest tax shield they are not taxed, which lowers the cost of capital.

• Risk of the business: When choosing a source of finance, one should consider how much risk
the business will face when they acquire that source of capital. That source of capital should not
put the business at a very high risk.

• Control of the business: Owners of the business who do not want to lose the control of the
business would rather finance the business using debt rather than equity which will dilute the
ownership of the business.

• Purpose of the borrowing: If the reason for acquiring the source of finance is to purchase
noncurrent assets, the business would rather use long term sources of finance to fund acquisition
of non-current asset.

• The size, status and ability of the business to borrow: If the business has assets which it can use
as collateral, it can consider borrowing loans from financial institution.
Governing policies on Small Scale Enterprises (SSEs)

are determined as per business procedures and strategies All the state governments provide
technical and other support services to businesses through their directorates of industries. The
government accords the highest preference to development of the small scale enterprises by
forming and implementing suitable policies and promotional schemes. Thus, government play
supportive role in developing entrepreneurs. The following are common areas of support:

• Development and management of industrial estates.

• Suspension/deferment of sales tax.

• Power subsidies.

• Capital investment subsidies for new units set up in a particular area.

• Seed capital/margin money assistance scheme.

• Priority in allotment of power connection, water connection.

• Consultancy and technical support.

Problems of starting and operating SSEs

are explored as per business procedures and strategies

• Financial constraints: Finance has made it difficult to progress and provide quality services.
Financial institutions find it hard to consider lending loans to them as they have little assets that
could be used as collateral.

• Competition: The low comparative advantage in production of certain goods as compared to

our trading partners. This has restricted entry to the businesses as production costs may be higher
relative to the cheap imported goods.

• Lack of advanced technology: Technology is fundamental and a prerequisite to higher output

levels and reduced production costs. This has made them not to flourish and participate in
regional trading due to low quality output because of the use of obsolete technology.
• Insecurity: Security poses a great challenge to small scale business owners in Kenya. Many of
the businesses suffer loss due to theft or thug’s invasion who steal from them which lead to loss
in terms of destruction.

• Hawkers: Pose a challenge to small scale businesses because they sell cheaper and their goods
are of high quality. Competing with hawkers on prices is debatable since hawkers move from one
place to another bargaining on price. Since most of them don’t consider a lot of profit but sale of
goods.

Topic 3: Entrepreneurial Motivation

Definition of key terms

Internal motivation Factors: These are factors that aim to motivate the behavior of an individual
arising from within the individual because it’s naturally satisfying them.

External Motivation factors: These are those factors that aim to motivate the behavior of
individual in order to receive an external reward or outcome.

Motivation theories: These are the forces acting on or within a person that causes the arousal,
direction and persistence of reaching a goal.

Communication Principles: These are the proven guidelines that are followed in giving and
receiving a message to another person with an intention to evoke a response.

Entrepreneurial Motivation: It is the process that activates and motivates the entrepreneur to
exert higher level of efforts for the achievement of his/her entrepreneurial goals.

Factors for internal and external entrepreneurial Motivation

Most researchers have classified all the factors motivating entrepreneurs into internal and
external factors as follows:

Internal factors Examples;

• Participating in a sport because its fun and you enjoy it rather than doing it to win an award.
• Spending time with someone because you enjoy their company not because they can further
your social standing.

• Volunteering because you feel content and fulfillment rather than needing it to meet a school or
work requirement.

Factors for internal motivation

• Curiosity: The desire to know pushes us to explore and learn the sole pleasure of learning and
mastering.

• Challenges: These makes us to work at a continuous pace and work hard towards achieving our
meaningful goals.

• Recognition: We all have a need to be appreciated and recognized when we do something

good.

• Cooperation: Cooperation with others satisfies our need of belonging and achieving our shared
goal.

• Fantasy: This involves using our mental and visual image to stimulate your behavior.

External factors Examples;

• Competing in sports for trophies.

• Completing a task for money.

• Buy one get one free sale.

• Doing things in public for fame etc.

Factors affecting external motivation factors

• Financial rewards: Commission, bonuses, stock options and employees stock plans are
compensatory rewards that motivates individual to working even more harder to receive more of
it.
• Praise and recognition: Some people aim to be praised and recognized when they do their
assigned task properly. This is also a motivating factor as they will do more for them to be
recognized.

• Social groups: The need to belong somewhere and to be accepted will trigger some actions
making people to work or try things in order to keep them up with the team.

• Consequences: People will opt to do or not to do things as a result of the consequences arising
for their actions.

• Promises: This is a commitment by someone to do or not to do something. It’s an external

motivating factor for some reason’s individuals will choose to do or not to certain things in
accordance to the promise in question.

Motivation Theories

Theory - explanation of mysterious events.

Are divided into content theories that focus on what while the motivation theories focus on how.
The main content theories are; Maslow’s needs hierarchy, Alderfer’s ERG theory, Mc Cleland’s
achievement motivation and Herzberg’s two factor theory. Process theories are; skinners
reinforcement, Victor Vroom’s expectancy, lockers goal setting theory.

a) Maslow – hierarchy of needs Earliest and mostly widely known. It was developed by
Abraham Maslow. It is often showed in the shape of a pyramid.

i.Physiological needs: Includes most basic needs for humans to survive and are the most
dominant of all needs. They include; food, water and shelter. Maslow emphasized that our
body and mind cannot function well if these requirements are not fulfilled.

ii. Safety and security: Refer to a person’s desire for protection or security. They include;
personal security, financial security, health and well-being.

iii. Belongingness and love: Love involves giving and receiving affection. Maslow claimed
people need to belong and accepted among their social groups.
iv. Esteem needs: It is respect for a person as a useful, honorable human being. Humans need
to be valued and self-respected.

v. Self-actualization: Reflects on an individual’s desire to grow and develop to his/her fullest

potential.

NOTE: According to Maslow, “what humans can be then they must be”.

b) Alderfer –ERG THEORY: Existence needs, relatedness needs and growth needs. ERG
theory says, if the manager concentrates only on one need at a time, he/she won’t be able to
motivate the employee effectively. He therefore divided the needs into;

i. Existence needs: it includes needs for basic material necessities.

ii. Growth needs: is the need for self-development, personal growth and advancement form.
This class contains Maslow’s social needs and external component of esteem needs.

iii. Relatedness needs: these are individual need significant relationships. It contains
Maslow’s social needs and external component of esteem needs.

c) McClelland theory: Need for achievement affiliation and power. This theory differs from
Maslow’s and Alderfer’s theory. This dominant motivator depends on our culture and life
experiences.

The motivators are:

i. Achievement motivation: It’s influenced by internal drivers for action and pressure used by
the prospects of others. Individuals with high need of achievement like to receive regular
feedback on their progress and achievements and often like high degree of independence.

ii. Affiliation motivation: It is a need for love, belongingness and relatedness. They have a
strong need for friendships and want to belong within a social group, need to be liked and
held in popular regard.

iii. Authority/power motivation is a need to control over one’s own work or work for others.
These persons are authority motivated. There is a strong need to lead and succeed in their
ideas.
d.psychological theory- emotional and mental aspects of individuals that drive their
entrepreneurial activities

Entrepreneurs are born, justified by Intelligence IQ inborn, creativity, attract customers,

communication skills, ability to convince.

Rotter's locus of control entrepreneurs like being in control, reason they don't go for
employment.

Action regulation theory - their performance depends on their actions (what they do every day,
it's a process, you grow a seed and see it blossom.)

e. Resource based entrepreneurial theory - firms have resources that are potentially valuable
and contribute to their competitive advantage.

PROFIT resources

Physical resources, Reputation, Organization, Financial, Intelligence and Technology.

f. Sociological theory of entrepreneurship -an entrepreneur who is able to sought

sociological problem is able to grow.

g) Herzberg-two factor theory. Also known as motivation-hygiene theory. This theory says
that there are some factors that cause job satisfaction and motivation and some separated
factors (hygiene factors).

Hertzberg’s five factors of job dissatisfaction

• Company policy and administration

• Supervision

• Salary

• Interpersonal relations

• Working conditions

Hertzberg’s five factors of job satisfaction

• Achievement
• Recognition

• Work itself

• Responsibility

• Advancement

Process theories

a) Skinner’s reinforcement theory It says that behavior can be formed by its consequences. In
it is stated that reward must meet someone’s needs, expectations, must be applied equitably
and must be consistent. The desired behavior must be clear and realistic.

b) Vroom’s expectancy theory Emphasizes on the process and content of motivation. It aims
to explain how people choose from the available actions. The motivation to engage in an
activity is determined by appraising three factors. They are;

i. Expectancy: A person’s belief that more effort will result in success.

ii. Instrumentality: The person’s belief that there is a connection between activity and goal. If
you perform well, you will get a reward.

iii. Valence: It is the degree to which a person’s values the reward; The result is success.

c) Locker’s goal setting theory It is an integrative model of motivation. It emphasizes that

setting specific, challenging performance goals and the commitment to these goals are key
determinants of motivation. Goals describe a desired future and these established goals can
drive the behavior. Achieving the goals, the goal accomplished further motivates individuals
to perform. It is a useful theory which can be applied in various fields.

Assessment for entrepreneurial Orientation

The first dimensions of entrepreneurial orientation to be consistently identified by

organizational research were innovativeness, risk taking and pro-activeness. Innovativeness
refers to the propensity towards creativity and experimentation through the introduction of
new products and services. Risk taking is the degree to which firms, or managers are willing
 to consider investing in resources. The relationship between proactiveness and personal
initiative is congruent with studies conducted in organizational settings.

Entrepreneurial Communication Principles

• Completeness: The message must be complete and geared to the receiver perception of the
world.

• Concreteness: The clearness of the message

• Courtesy: Approaching the audience in a friendly manner

• Correctness: Message should be grammatically correct and avoid wrong use of verbs.

• Clarity: Clear language is characterized by short and concrete words.

Application of Entrepreneurial motivation theories

• In the case where there is need for achievement, affiliation and need for power as stipulated
by McClelland.

• Where there is need to establish entrepreneurial personality.

• If there is need for high achievement in a particular form of business.

Topic 4: Business Innovative Strategies

According to Joseph Shumpeter, entrepreneur create new demand through innovations.

"Are creative destroyers"

They hate the status quo.

Definition of key terms

Innovation: development of new products, design or ideas. Turn ideas into solutions, which will
create efficiency, effective product.

Business innovative strategies: A plan used by a company to encourage advancements in

technology or services usually by investing money in research and development activities.
Business growth: This is a stage where the business reaches a point of expansion and seeks
additional options to generate more profit.

Business Development: Is the creation of long-term value for an organization from customer,
markets and relationships normally focuses in achieving long term goals.

Business strategies: Are plans put in place by an entrepreneur to undertake business

operations and ensure that the strategies are implemented to achieve business goals and
objectives.

Types of business innovation strategies

They can be classified as active, pro-active and reactive.

a) Proactive: Companies with proactive innovative strategies tend to have strong research
orientation and first-mover advantage and be a technological market leader. They access
knowledge from a broad range of sources and take big bets/high risks.

Types of innovative technologies used in proactive strategy are:

• Incremental: The constant technological process changes that lead to improved

performance of products and services.

• Radial: Breakthroughs that change the nature of products and services.

b) Active: It involves defending existing technologies and markets while being prepared to
respond quickly on markets and technologies are proven. Companies using this approach also
have broad sources of knowledge and medium to low-risk exposure. They tend to hedge their
bets. They mainly use incremental strategies.

c) Reactive: It is by companies:

• Which are followers?

• Have a focus on operations.

• Take a wait and see approach.

 • Look for low risk opportunities. They copy proven innovation and use entirely incremental
innovations like Ryan air, a budget airline which has successfully copied the no-frills service
model of Southwest Airlines.

c) Passive: Companies with passive innovative strategies wait until their customers demand a
change in their products or services.

Importance of innovation in business

Innovation refers to creating more effective processes, products and ideas.

Their benefits include:

• It helps to solve problems easily in business.

• It increases the productivity of the business.

• Innovation makes it easier to market your business hence gaining market share.

• Have a competitive advantage thus making it easier to beat your competitors. • Enables the
business to sustain in any particular environment.

• A business is able to maximize on its return on investment.

• It brings about a positive impact on the company’s culture.

• Helps in communication and educational accessibility, coming up with effective innovative

communication strategies that ensures that communication flows all around the organization.

Creativity in business development

Business development: it is the creation of long-term value for an organization from

customers, markets and relationships.

The two important aspects:

• Process

• People
The process is goal oriented and designed to attain a solution to a problem. The people are
the active resources that determine the solution. They will sometimes adapt a solution and at
other times they will formulate a highly innovative solution. This innovator approaches tasks
from unusual angels, discover problems and avenues of solution, questions basic assumptions
related to current practices, is more interested in ends, has little tolerance for routine work,
little or no need for con-census and often insensitive to others.

Developing innovative business strategies

The five steps for developing the strategy are:

• Determine objectives strategic approach to innovation.

• Know your market i.e. customers and competitors.

• Define your value proposition.

• Access and develop your core capabilities.

• Establish your innovation techniques and systems.

Ways of developing linkages with other entrepreneurs.

• Identify the competitive advantage of a given region and resident enterprises for certain
products and services.

• Developing a joint strategy with participation of local stakeholders.

• Linking the local PSD measures to the strategy. Fostering business linkages between
entrepreneurs of this sub-sector and related sub-sectors.

• Developing capacity of public and private business service providers.

ICT in business growth and development

ICT: Includes any communication device or application encompassing radio, television,
cellular phones, computers, hardware and software.

ICT can be used in expanding, growing and developing the business in the following ways:

i. Social media: Refers to a wide range of internet based and mobile services that allow users
to participate in online purchases, sales, advertising hence the business is able to expand the
number of audiences that can be able to see and purchase their products.

ii. Blogs: These are online journals hosted on platforms that help advertise the different
products of business hence a high probability of increasing market share.

iii. Wikis: A collective website where any participant can modify any page or create any new
page using a browser, hence people can see images, prices of the products of your business
and they can order online hence increased flexibility of the business.

iv. Media sharing sites: Allows users to post videos or photographs.

Topic 5: Business plan

Definition of key terms

Marketing plan: involves identifying target customers, how to reach them and the retention
process. Organizational/Management plan: describes how an organization or business is run.

Financial Plan: it is a comprehensive evaluation of an individual’s current pay and future

financial state.

Business plan: a written description of your business future, a document that tells what you
plan to do and how you plan to do it.

Types of Business

There are three major businesses:

1. Service business: is a type of business that provides intangible products. They offer
professional skills, expertise advice and other products.

2. Merchandising business: this type of business buys products at wholesale price and sells
the same at retail price. They make profit by selling the products at prices higher than their
purchase cost.

3. Manufacturing business: it buys products with the intention of using them as materials in
making new products. It combines raw materials, labor and factory overhead in its
production process.

Develop marketing plan in accordance with business plan format

To grow your business, you need a marketing plan. The right marketing plan identifies
everything from:

• Target customers.

• How to reach them.

• The retention process. Sectors to include in this plan:

a) Executive summary: it gives an overview of your plan.

b) Target customers: describes customers targeted. Describes their geographical profile (e.g.
gender, age), their wants and needs.

c) Unique selling proposition: having a unique selling proposition is very critical since it
distinguishes your company from its competitors.

d) Pricing and positioning strategy: it must be aligned. You should detail the positioning you
desire and how you’re pricing will support it.

e) Distribution channels: the advertising can be primarily done online via a search engine. We
should choose best marketing network for your products.

f) Keys to success: there are several benefits of using social media to market our small
business. Each of the postings on social media sites will include a traceable link. We need to
know how many people click to each link.
Prepare organizational/Management plan in accordance with business plan format

It describes how an organization or business is run. It allows you to formalize your

management structure and operations.

It entails:

1. Determine the need for management plan.

2. Outline your plan.

3. Describe your management structure.

4. List the different aspects of your organization being managed under the plan.

In the description of management, you should:

1. Name your board members.

2. Introduce the key management members.

3. Present the strengths of each individual I the management team.

4. Describe hiring process.

5. Name any outside consultants or advisors you will be hiring.

6. Summarize your management team abilities.

7. Describe relationships between management, ownership and employees.

Prepare production/operation plan in accordance with business plan format

Is a highly detailed plan that provides a clear picture of how a team, section or department
will contribute to the achievement of the organizations goals? It is a manual for operating
your organization. It is designed to ensure you accomplish your goals. It is a key piece of the
puzzle for any goal oriented team.

The steps you can take to develop a strong operations plan. That is:

1. Start with your strategic plan.

2. Focus on your most important goals.

3. Use leading not lagging indicators.

4. Do not develop your plan in a vacuum.

5. Communication is paramount.

Prepare financial plan in accordance with the business plan format

It is a comprehensive evaluation of an individual’s current pay and future financial state by

using current known variables to plan. It often includes a budget which organizes an
individual’s finances and sometimes includes a series of steps or specific goals for spending
or saving.

It can refer to the three primary financial statements, that is:

1. Balance sheet.

2. Income statement.

3. Cash-flow statement.

Financial plans are the overall/entire financial accounting overview of a company.

Prepare an executive summary in accordance with business plan format

Is a short document or section of a document produced for business purposes? It summarizes

a longer report or proposal or a group or related reports in such a way that readers can rapidly
become acquainted with a large body of material without having to read it all. It is intended
as an aid to decision making by managers and has been described as the most important part
of a business plan.

Typically, an example will:

• Be approximately 5 – 10% of the length of the main report.

• Be written in language appropriate for the target audience.

• Consist of short concise paragraphs.

• Begin with a summary.

• Be written in the same order as the report.

• Only include material present in the main report.

• Make recommendations.

• Provide a justification.

• Have a conclusion.

• Be readable separately from the main report.

• Sometimes summarize more than one document.

Present business plan as per best practice

It is a written description of your business’s future, a document that tells what you plan to do
and how you plan to do it. It should contain:

1. The executive summary.

2. Company description.

3. Market analysis.

4. Competitive analysis.

5. Description of management and organization.

6. Breakdown of your products and services.

7. Marketing plan.

8. Sales strategy.

9. Request for funding.

10. Financial projections.

Benefits of a business plan

1. It helps in management of cash.

2. Enables business owners to develop accountability.

3. Useful in strategic focus.

4. Priorities can be easily set.

5. Easier monitoring of the whole business.

6. Helps in strategic alignment.

7. Realistic regular reminders to keep on track.

Disadvantages of a business plan

1. Is only a plan and does not guarantee success.

2. If the plan is too rigid, some problems may arise, it must be flexible to adapt to market
changes.

3. High sales expectations may cause overspending in other areas such as stocking and
stuffing.