Entrepreneurship Origin

Various scholars have written extensively on the origin of entrepreneurship. What is interesting is that
most of the scholars who wrote about the origin of entrepreneurship are either economists or historians.
Basically, the concept entrepreneur is derived from the French concept “entreprendre” which literarily is
equivalent to the English concept “to undertake”. From the business point of view, to undertake simply
means to start a business (QuickMBA, 2010). From the historical point of view, Schumpeter (1951)
opined that the French economist Richard Cantillon was the first to introduce the concept "entrepreneur"
in his work in 1755
.
He viewed the entrepreneur as a risk taker (Burnett, 2000).
However, some scholars contend that it was an economist, Jean -Baptiste Say, who analysed the
concept in an advanced way in his work in 1821 where he identified entrepreneur as new economic
phenomenon (Wikipedia, 2010). Given the foregoing, we can infer that the concept “entrepreneur” is
almost as old as the formal discipline of economics itself (Schumpeter, 1951) especially given the fact
that it was economists such as Adam Smith, David Ricardo, and John Stuart Mill who have written
extensively on it, albeit referring to it as "business management”. However, unlike Smith
Mill stressed the significance of entrepreneurship for economic growth. Another renowned economist,
Alfred Marshall buttressed Mill’s view by formally recognizing entrepreneurship as an important factor
of production in 1890; he viewed entrepreneurship as organization creation and believed that
entrepreneurship is the driving element behind organization (Schumpeter, 1951; Burnett, 2000).

Schumpeter (1951) contends with this view and opined that though many economics scholars agree that
entrepreneurship is necessary for economic growth, they do not agree on the actual role that
entrepreneurs play in generating economic growth. These debates, notwithstanding, entrepreneurship
theory has kept on evolving over the years and throughout its evolution different scholars have put
forward different characteristics that they believe are common among most entrepreneurs.
Entrepreneurship theoretical foundations extend from economics to other disciplines such as history,
politics, education, ecology, culture, experience, and networking and
so on.
To this effect, Schumpeter (1951) concludes that by combining the various disparate theories, a
generalized set of entrepreneurship qualities can be developed. He then listed the characteristics of
entrepreneurs as: risk bearers, coordinators and organizers, gap -fillers, leaders, and innovators or
creative imitators. He submits that though not exhaustive, this can help explain why some people become
entrepreneurs while others do not (Burnett, 2000).
 Why is entrepreneurship important according to the various scholars?
 It is generally agree that entrepreneurship is important because of it create utility, increase
society’s welfare, promote economic growh and development.

Definitions of Entrepreneurship and Entrepreneur

Entrepreneurship
There are many definitions of the concept ‘entrepreneurship’ For instance, Putari (2006) observes that
scholars had not been in agreement in their definitions of entrepreneurship and chronicled the definitions
of entrepreneurship by various scholars (Brockhaus & Horwitz, 1986, Sexton & Smilor, Wortman, 1987;
Gartner, 1988). Cantillon (circa 1730) views entrepreneurship as: “self employment of any sort”. In 1934,
Joseph Schumpeter equated entrepreneurship with the concept of innovation and applied it to a business
context, while emphasizing the combination of resources. Penrose (1963) views entrepreneurship as the
activity that involves identifying opportunities within the economic system. While Leibenstein (1968,
1979) perceives entrepreneurship as involving "activities necessary to create or carry on an enterprise
where not all markets are well established or clearly defined and/or in which relevant parts of the
production function are not completely known”.
Gartner (1988) conceives entrepreneurship as the creation of new organizations.
Okpara (2000) defines entrepreneurship as the willingness and ability of an individual to seek out
investment opportunities in an environment and be able to establish and run an enterprise successfully
based on the identifiable opportunities. In addition, Nwachukwu (1990) regards entrepreneurship as a
process of seeing and evaluating business opportunities, gathering the necessary resources to take
advantage of them and initiate appropriate action to ensure success.
After critically studying the above definitions, we can summarize by concluding that entrepreneurship is
a function which involves the exploitation of opportunities which exist within a market

Thus, from the definitions above we can see that while defining the concept ‘entrepreneurship’, laid
emphasis on a wide spectrum of activities such as:
 Self employment of any sort.
 Creation of organizations.
 Innovation applied to a business context.
 The combination of resources.
 Identification and exploitation of opportunities within the economic system or market.
 The bringing together of factors of production under uncertainty.

Entrepreneur
Scholars have also given several definitions of the concept ‘entrepreneur’. For instance in 1816, Putari
(2006) quoted Say who asserts that the entrepreneur is the agent "who unites all means of production and
who finds in the value of the products...the reestablishment of the entire capital he employs, and the value
of the wages, the interest, and rent which he pays, as well as profits belonging to himself." He views
entrepreneurs as change agents (Say, 1816).Knight (1921) views entrepreneurs as individuals who
attempt to predict and act upon change within markets. Schumpeter (1934) conceives the entrepreneur as
the innovator who implements change within markets through the carrying out of new combinations such
as introduction of new techniques of production, reorganization of an industry and innovation. He further
argues that the entrepreneur is an innovator, one that introduces new technologies into the workplace or
market, increasing efficiency, productivity or generating new products or services (Deakins and Freel,
2009). Cantillon (circa 1730) conceptualized the entrepreneur as: the "agent who buys means of
production at certain prices in order to combine them" into a new product (Schumpeter, 1951).In Quick
MBA (2010), the entrepreneur is defined as one who combines various input factors in an innovative
manner to generate value to the customer with the hope that this value will exceed the cost of the input
factors, thus generating superior returns that result in the creation of wealth.The entrepreneur is the
person who perceives the market opportunity and then has the motivation, drive and ability to mobilize
resources to meet it (DiMasi, 2010).
An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes
significant accountability for the inherent risks and the outcome (Wikipedia, 2010).
The entrepreneur is anyone who has the capacity and willingness to undertake conception, organization ,
and management of a productive venture with all attendant risks , while seeking profit as a reward
(Business Dictionary, 2010). Interestingly, small business experts also have their definitions of the
concept ‘entrepreneur’ (Thinking like, 2010) for instance: Reiss (2010), views the entrepreneur as the
person that recognizes and pursues opportunities without regard to the resources he/she is currently
controlling, with confidence that he/she can succeed, with the flexibility to change course as necessary,
and with the will to rebound from setbacks.

Pinson (2010) visualized the entrepreneur as a person who starts a business to follow a vision, to make
money, to be the master of his/her own soul (both financially and spiritually) and is an "educated" risk
taker.
Murphy (2010)conceives an entrepreneur as a person who is dynamic and continues to seek opportunities
and/or different methods of operation and will do whatever it takes to be successful in business.
Given the above wide range of factors and behavior which are used to define the concept ‘entrepreneur’,
we can see the difficulty and impossibility of finding a unified definition of the ‘entrepreneur’. Hence, to
Di-Masi (2010), the concept ‘entrepreneur’ can be best used in the past tense to describe a successful
business person. Thus, entrepreneurs are business persons who identify the existence of business
opportunities and based on this they create businesses thereby creating new products, new production
methods, new markets and new forms of organization to satisfy human needs and wants mostly at a
profit.

It should also be noted that though most entrepreneurial businesses start small, entrepreneurs are not only
small business owners; they can also be big business owners. This is because successful entrepreneurs,
unlike small business owners, are innovative and, when operating in an enabling business environment,
can rapidly create a large amount of wealth while bearing very high risk. In fact, innovation is considered
to be the strategic tool of entrepreneurs; this I s one of the tools that enable them gain strategic advantage
over competitors (QuickMBA, 2010)
.
Entrepreneurs are individuals or groups of individuals who carryout entrepreneurship activities to build
business empires.

Entrepreneur Entrepreneurship Enterprise

Person Process or Philosophy Object

Intrapreneurs
There are given situations where an entrepreneur is not able to establish his or her own business and as
such has to work in an organization. In this case they are referred to as ‘Intrepreneurs’ i.e. entrepreneurs
within an organization. These individuals are entrepreneur s in their own right because they pursue the
exploitation of business opportunities as they emerge and are also visionaries within a given organization.
Thus, once identified, these individuals should be encouraged to manifest their entrepreneurial abilities to
the benefit of the organization otherwise they will be frustrated and may leave the organization or start
their own businesses.
Intrapreneurship is defined as entrepreneurship within an existing business set– up. That is to say
Intrapreneurship is corporate entrepreneur ship. When a corporation indulges in entrepreneurial activities,
like diversification in to new businesses, it is called intrapreneurship.
Intrapreneur is a manager who focuses on innovation and creativity; who brainstorms, dreams and puts
ideas into profitable venture by operating within the organizational environment.
It is a tool for capitalizing the entrepreneurial spirit of employees in the organization. It gives managers
the freedom to try new ideas by employing firm’s resources in a unique way.

How is entrepreneur differ from intrapreneur

An entrepreneur is a person who create a venture or startup a business and nature it, takes risks of
bringing together the factors Intrapreneurship is defined as entrepreneurship within an existing business
set– up. That is to say – Intrapreneurship is corporate entrepreneurship. When a corporation indulges in
entrepreneurial activities, like diversification into new businesses, it is called intrapreneurship.
Intrapreneur is a manager who focuses on innovation and creativity; who brainstorms, dreams and puts
ideas into profitable venture by operating within the organizational environment. It is a tool for
capitalizing the entrepreneurial spirit of employees in the organization. It gives managers the freedom to
try new ideas by employing firm’s resources in a unique way.

Characteristics of an Intrapreneur.
An intrapreneur is not far removed from an entrepreneur. The major difference being that an entrepreneur
risks his own money where as an intrapreneur works with his employer’s money. Thus, the risk level of
an intrapreneur is considerably reduced. Secondly, the desire for independence and material success is
not as strong in case of intrapreneurs. For most other characteristics, the two match perfectly.
 Vision– It is the basis for successful venture. An Intrapreneur has ability to visualise from idea to
implementation.
 Motivation – Intrapreneur is generally self motivated, but expect corporation reward and
recognition.
 Orientation – Intrapreneur is achievement oriented.
 Risk Appetite – Intrapreneurs are moderate risk takers since risk acceptance depends on their
skills. Wild risk takers are not affordable to corporates.
 Locus of status – Intrapreneurs want to do the work on their own rather than delegate like
managers
 Failure and Mistakes – Intrapreneur hide risky projects and ideas to ensure learning without
political cost and public failure. They develop multi disciplinary team in the organization and may
go beyond organization boundaries for results.
 Goal set up – Intrapreneurs are determined to do things not even asked for. They set goals and
quality standards.

Types of entrepreneur
Based on the interaction with the business environment, various types of entrepreneurs can emerge. To
this effect, Rockstar (2008) identifies the four types of entrepreneurs as Innovative, Imitating, Fabian and
Drone.
Innovative; This type of entrepreneur is preoccupied with introducing something new into the market,
organization or nation. They are interested in innovations and invest substantially in research and
development.
Imitating; These are also referred to as ‘copy cats’. They observe an existing system and replicate it in a
better manner. They could improve on an existing product, production process, technology and through
their vision create something similar but better. This is the case of the student becoming better than the
master!
Fabian; These are entrepreneurs that are very careful and cautious in adopting any changes. Apart from
this, they are lazy and shy away from innovations
Drone; These are entrepreneurs that are resistant to change. They are considered as ‘old school’. They
prefer to stick to their traditional or orthodox methods of production and systems.

Characteristics of Entrepreneurship and Entrepreneurs

Scholars do not agree on the characteristics possessed by entrepreneurs. Hence, several scholars through
various studies identified several characteristics or traits possessed by entrepreneurs some of which are
discussed as follows. For instance, Rockstar (2008) recognized the characteristics of entrepreneurship as:
Creative Activity: Entrepreneurship entails innovations. It deals with product innovation, production
techniques innovation while bearing in mind the market;
Dynamic Process: Entrepreneurship is a dynamic process that has to bear in mind the dynamic business
environment.
Purposeful Activity: Entrepreneurship is an activity embarked upon for a specific purpose. This could
be for profit making purposes, for humanitarian purposes or to bring a difference to the market.
Involves Risk: Entrepreneurship is a very risky venture; entrepreneurial decisions can have far
reaching impact on the organization, people in the organization and even the economy. These decisions
are critical, enormous and cannot be easily reverted.
Risk Bearing Ability: The entrepreneur must have the capacity to bear risk. This is because the new
venture is created in an uncertain and risky environment. Di-Masi (2010, however, noted that although
risk bearing is an important element of entrepreneurial behavior, many entrepreneurs have succeeded by
avoiding risk where possible and seeking others to bear the risk. Basically, what he is saying here is that
entrepreneurs bear calculated risks and are more than glad to let others bear their risk when it is
convenient for them.
Technical Knowledge: Depending on the kind of venture created, the entrepreneur must have technical
expertise about production techniques and marketing.
Ability to Gather Financial and Motivational Resources: Financial and motivational resources are
needed for the creation of the new business. Sometimes the entrepreneur, as an individual may not have
these resources but he /she/they should have the ability to gather it from those who have it.
Self Confidence and Multi-Skilled : The entrepreneur must have self confidence and believe in
him/herself. Self - confidence is an important characteristic that enables individuals to handle any
situation without having inferiority or any other type of complex. The entrepreneur also has to be a jack
of all trade and master of all. He/she must possess different skills unlike other individuals. For instance,
assuming an entrepreneur is a marketer, the entrepreneur should d not only possess marketing skills and
interpersonal skills but also language skills i.e. ability to speak more than one language. This definitely
will be an added advantage!
Confidence in the Face of Difficulties and Discouraging Circumstances: The entrepreneur must be
steadfast and resolute and be ready to move on even in the face of adversity. He/she should be a ‘never
say never’ kind of person; everything is possible for the entrepreneur.
Innovative skills: The entrepreneur may not necessarily be an 'inventor' but the one that can make a
difference; he /she should be able to see what others cannot see and be able to carve out a new niche in
the market place.
Results - Orientated: The entrepreneur is one who knows how to get results under any circumstances
either with others or through others. The entrepreneur does this by setting goals and ensuring that such
goals are doggedly pursued by all concerned willingly and with joy.
Risk-Taker: The business environment is dynamic and filled with uncertainties and risk. In order to
succeed the entrepreneur has to take risk. Successful entrepreneurs take calculated risks and in some
cases shift the risks to others.
Total Commitment : Starting /creating a new business is a serious exercise that requires a lot of
commitment and hard work. It is like bringing a child into the world and nurturing the child to adulthood.
This requires commitment, dedication, hard work, energy and single -mindedness otherwise the ‘child’
(i.e. business) may die prematurely (Di-Masi, 2010).
Calm: Entrepreneurs need to be cool, calm and collected. They have to remain calm even when exposed
to stress, emergency or crisis situations.
Focused: In getting things done and starting and maintaining a business attention has to be paid to a lot
of details. Small things when not handled properly or noticed on time may lead to disastrous outcomes.
Tolerance: The entrepreneur has to relate with people. People vary in terms of their perceptions,
personality, motivations and attitudes amongst other things. The entrepreneur needs to be tolerant while
not being weak, in order to get things done.
Balance: Though, the entrepreneur is a human being, he /she has to be like a super human being in order
for him to succeed. To this effect, he /she has to be able to balance all emotions and characteristics and
remain focused and objective while having emotional or mental strength and resilience. Balance is
important because too much of everything is bad.
Versatility: The entrepreneur has to be versatile and be ready to learn and use information technology
and other technology to the best advantage.
Seriousness: The entrepreneur has to believe in him/her self and the business and get things done with
total seriousness. As mentioned earlier, starting a new business is like giving birth to a child; it is indeed
a very serious business.
Planning Ability: The entrepreneur must be a planner; he /she must formulate goals and develop action
plans to achieve them. Planning is important for he /she who fails to plan, plans to fail! Prudence: The
entrepreneur must be versatile in financial management. This is because finance is the life-wire of the
business. Also, to achieve the profit objective, the entrepreneur must engage in efficient and effective
financial management, and have sound financial policies and practices.
Customer -Centric: Businesses are created to satisfy unmet needs. A successful entrepreneur must be
able to anticipate customers’ needs and satisfy them through his/her product offerings.
Team Player: Creating a successful business is a one man business but maintaining and sustaining the
business cannot be done by one person. The entrepreneur needs others to work with him hence he has to
have a formidable or winning team. To this effect, the entrepreneur has to be an effective team manager
and recruit the right team members but the entrepreneur’s most important team members are the
customers for without customer s a business cannot survive (LifeHack, 2008; Rockstar, 2008; Di-Masi,
2010; Driessen & Zwart, 2010; Hadzima & Pilla, 2010 Stephenson, 2010).
Roles of Entrepreneurs
In order to perform their functions effectively and operate a successful business, entrepreneurs have to
perform certain roles. These roles are the same as the basic managerial roles which are identified by
Henry Mintzberg in 1973. They are as follows:
Figure Head Role: The entrepreneur has to act as figure head in the organization, as such; he /she has to
perform ceremonial duties. This is done by representing the organization in formal and informal
functions.
Leader Role: The entrepreneur has to act as a leader because the entrepreneur is the one who brings
other people together in order to create the business. Thus, he/she has to lead the people in the
organization by hiring, firing, training and motivating them.
Liaison Role: The entrepreneur has to act as the link between the business and the parties outside the
business.
Monitor Role: The entrepreneur acts as a monitor; he monitors both the internal and the external
environment of the business constantly.
Information Disseminator Role: The entrepreneur has to act as the organizational representative and
transmit information both within and outside the business.
Spokesman Role: The manager has to act as the spokesman of the business; he /she is the person for the
business both inside and outside.
Entrepreneurial Role: This is the basic role of the entrepreneur; he /she launch new ideas for the
business and bears the risk.
Disturbance Handler:
The entrepreneur also acts as arbitrator in situations of conflict so as to maintain organizational harmony.
Resource Allocator: The entrepreneur decides on how the scarce resources of the business are allocated
among its competing ends so as to achieve organizational goals and objectives.

Negotiator Role: The entrepreneur has to negotiate on behalf of the business both with the other
categories of labour and other outside sources.
The specific entrepreneurial roles noted earlier on have a number of activities in each role.
They are specified below:

Social Roles of Entrepreneur

Transformation of traditional indigenous industry into a modern enterprise.
Stimulation of indigenous entrepreneurship.
Job or employment creation in the community.
Provision of social welfare service of redistributing wealth and income.

Economic Roles of Entrepreneur

Bearing the ultimate risk of uncertainty.
Mobilizing savings necessary for the enterprise.
Providing channel for the disposal of economic activities.
Utilizing local raw materials and human resources.

Technological Roles of Entrepreneur

Stimulation of indigenous technology in the production process.
Adapting traditional technology to modern system.
Adapting imported technology to local environment.
Developing technological competence in self and the workforce through innovation
(Ogundele, 2007).

Advantages of Entrepreneurship
To an Individual
(a) Provides Self Employment for the entrepreneur
(b) Entrepreneur can provide employment for near & dear one as well
(c) Entrepreneurship often provides an employment and livelihood for next generations as well.
(d) Freedom to use own ideas – Innovation and creativity
(e) Unlimited income / higher retained income – Bill Gates has risen to become richest in the world
in a single life time through entrepreneurship
(f) Independence
(g) Satisfaction
To the nation
(a) Provides larger employment – Entrepreneurs provide employment for self as well as other people
and is source of employment creation.
(b) Results in wider distribution of wealth – This is a logical sequel of above issue. Higher the
employment, greater the distribution of wealth
(c) Mobilizes local resources, skills and savings
(d) Accelerates the pace of economic development – Entrepreneurship is the govt’s one of the most
trusted vehicles for economic development
(e) Stimulates innovation & efficiency

Factors Favoring Entrepreneurship

1. Developed Infrastructure Facilities – Availability of infrastructure reduces the cost & efforts and
improves viability of projects through higher profit margins.
2. Financial Assistance – Easy availability of cheap funds is vital for promoting entrepreneurship.
3. Protective and Promotional Policies – Most of the entrepreneurship projects start very small and
have no resilience. They are extremely vulnerable to competitors, market, money markets, etc, for
considerable time. Favorable Govt policies shelter them from such vagaries.
4. Growth of Education – Science, Technology & Management – Growth of education is believed
to be promoting entrepreneurship. However, there a re enough examples to suggest otherwise. A
very large proportion of first generation entrepreneurs are low educated. Take the case of
Microsoft Chairman Mr Bill Gates or Reliance Founder Mr Dhirubhai Ambani. (We also have Mr
Narayan Murthy and Mr Ajim Premji to balance this scale). On a wider spectrum, Kerala, the
most literate state and West Bengal, another state high on literacy front, are least entrepreneurial
states where as Punjab, with 5 rank from bottom was top on entrepreneurial charts.
5. Risk Taking Abilities – Risk taking ability is one of the pillars of entrepreneurial spirits.
6. Hunger for Success (Capitalistic View) – Fire in the belly and dreams of riches is what drives
most entrepreneurs on this risky path. Any person content with what he has would take the easier
route of salaries job.
7. Environment/Culture Impact – Entrepreneurship is contagious. Communities like Punjabies and
Marwaries are historically entrepreneurial. They are known for seeking and exploiting business
opportunities in most remote areas. It is a culture that propels them. (Go to Pull_Factors)
 8. Social Security – Social security acts as a safety net against failure of enterprise. Social security
guarantees basic ‘roti, kapada aur makan’ in case of failure. Entrepreneurial spirit of United States
is born partly out of this security.
9. Technical/Industrial Training Facilities – Industrial Training facilities on one hand generate
skilled manpower so vitally required for setting up enterprises while on the other hand they are
also nursery for future entrepreneurs. Among the educated entrepreneurs, a majority is product of
technical institutes from IIT to ITI (Tier I to Tier III institutes).
10. Globalization – Globalization has provided another avenue for business. Many dare devils have
taken a head– along plunge into this uncharted water and have written new success stories. (Think
of numerous other factors)

What makes a Successful Entrepreneur ?

1. The urge for achievement (most often monetary ambitions) – Most Important
2. Willingness to take moderate risks – (High risk takers are not entrepreneurs but gamblers).
3. Determination to win
4. Win– Win Personality
5. Ability to identify & explore opportunities
6. Analytical ability to take strategic decisions
7. Perseverance
8. Flexibility
9. Capacity to plan and organize
10. Preparedness to undergo physical and emotional stress
11. Positive self concept/Self Belief
12. Future orientation – Vision
13. Ethics and Values – Mission

Who can be an Entrepreneur?

1. Who feels the need for achievement
2. Who can take moderate risks
3. Who possess skills in organizing
4. Who can capitalize on opportunities
5. Who has some financial strength – On his own or borrowed
6. Who has ability to work hard
7. Who has desire for responsibility
8. Who has a clear perception of probability of success
9. Who gets stimulation by feedback
10. Anyone – He can be male, female or even a Eunuch
11. Who does not have previous experience

Myths about entrepreneurs

- They are doers but not thinkers
- They are born but not made
- They are always inventors (people who make new things)
- They are academic misfits
 - They have special characteristics
- They desperately need money
- They thieve on luck
- They suffer from over planning which lead them into problems
- They are success seekers who fail miserably
- They are seen as extreme risk takers

Why do business fail

- Management incompetence, failure to make decision, incapability, lack of capacity to operate,
lack of leadership ability, lack of necessary knowledge.
- Lack of experience. An experienced entrepreneur knows what to do while or less experienced
entrepreneur lacks some knowledge.
- Poor financial control. No control system in business, lack of income statements.
- Lack of strategic management. This is where making a business plan comes in.
- Uncontrolled growth. As you open the business, you will see more opportunities for business and
finally the business will fail.
- Inappropriate location. Availability of space may not mean appropriate business location
- Lack of inventory. Having too much Inventory or too low inventory will chase out customers.
- Failure to make a transition. The business is supposed to fail within three years
- Lack of specialization. Depending on people outside the businesses
- Risk of funds. If you borrow and you fail to pay back
- High levels of stress e.g. if customers fail to pay, loss of security, uncommitted and too
demanding children. Also uncompromising spouses are source of stress
- Improper use of time. Do your work in appropriate time.
- Poor health i.e. poor nutrition ,laziness
- Involvement in other numerous things outside the business. you have to limit your involvement
- Natural calamities. Any natural disasters will wipe out the business and you will go back to zero.
As an entrepreneur plan for natural calamities.

Avoiding failure in business

- Know your business in depth
- Prepare business plan
- Manage the resource
- Have good understanding of financial statements
- Learn to manage people effectively
- Set your business apart from competition
- Keep in tune with your self. Have self knowledge, physical health, and energy giving relationship.
- Have passion for the business
- Manage the risks
- Consistently persistent despite of several times of failure
- Self-determination
- Changes are opportunities
 - Initiative and need for achievement
- Detail orientation and perfectionism
- Creativity
Factors that determine the emergency of an entrepreneur
These factors are put into six categories.
1. Personality factors
2. Upbringing factors
3. Employment history
4. Environmental factors
5. Migration factors
6. Growth of the service sector.

Personality factors
 Desire to achieve; an internal drive to achieve, an internal desire to excel. It is a person who will
peruse and attain challenging goals. Determining what one wants and then takes moderate risks in order
to achieve it. There is also taking full responsibility and having unknowledgeable results as well as being
responsible.
 Desire for independence; desire to do things on his own ways, making a difference
 Nurturing quality; this is reflected in the mothers attendance or taking care of the child. The
relationship between an entrepreneur and the business is equal to the relationship between a
mother and a child
 Hardworking; total commitment and perseverance as well as determination. Have to be
committed as he has to work for long hours.
 Reward oriented; Entrepreneurs want to be personally rewarded either items of money or respect.
 Optimistic; Being confident and courageous against all the challenges. These are the best times
and anything is possible. a business or an entrepreneur that is not being threatened has the basis to
hope for the better. Giving up is no solution to anything.
 Excellent oriented; this is a desire to achieve something which is outstanding that you can be
proud of. This is what we know as first class mentality. It means that what ever you put your
hands on is the very best that you can do. What good thing will people remember you for?
 Being organizer. This means being good at bringing together all the competent of the venture to
make valve or to achieve goals. This is presented in three ways; personal, physical presentation
and daily expression.
Wherever an entrepreneur is, whatever he does, lf he is happy, let every one see he happy. Be
careful with your expression. The expression should much with the situation. Unfinished work is
not accepted because you are organized. Being organized can be learnt, it is not something that we
are born with. A disorganized entrepreneur will hardly become efficient and effective.

 Money oriented; the desire to get money and seeing profit as an indicator of achievement and
performance. Money oriented is associated with seeking opportunity. Money lover will
always be creative and look for all they ways possible to get money.
 Human relations ability; this is a ability to persevere. To able to adjust to different situations,
sociability and feeling good about each person you see.
  Consideration for others; don’t be selfish. do share with everyone ,don’t do things to annoy
people. meet people in a manner that does not defect them
 Dealing the employees; employees are human beings like you and need to be treated just like
they way you would wish to be treated
 Being aware of the needs and motives of customers. These are your treasures unless you have
customers, your business will not service.
 Communication ability; Ability to communicate effectively using written, oral and non verb
and being away to physical values (use language which is understandable).Grape vine which
is a mixture of truth and false, so don’t dismiss it know the type of media to use. e.g.
telephone, letter etc. This helps to guide and easy communication
 Creativity; Generation of ideas that are desired to improve efficiency and effectiveness of the
system. Also it is recognizing that people are resources that can determine a situation that is
goal oriented.
 Technical ability; to provide the quality of service and product that can be acceptable by
customers. It also means familiarizing oneself before engaging in it personally.

Up bringing factors (social factors)

 Social status; the level at which an individual is viewed by society. It is said that the first
borns can make good entrepreneurs.
 Home Education; home education play, a major role in the entrepreneur’s life. Such education
it manifested in the entrepreneur’s life
 Personal values; the entrepreneurs values are not always differentiated from those of other
human beings. The values seem to be marked by the nature of the environment and the
opportunism.
 Individuality; doing thing alone. Personal values of an entrepreneur include wining the image
and creation of personal contacts, adaption of change in the market, high caliber
management.
 Honesty and ethics in business; practice discipline. An entrepreneur should not do wrong
things to make himself look a fool in the eyes of the people.
 Age; there is a difference between entrepreneurial age and the age of the i.e. from 25 to 30, 35
& 40. Females tend to start businesses after 30yrs.

Employment History factors

- The conditions of work can force a person to start his own businesses. These conditions are
due to lack of challenge, denied promotional opportunities etc.
- It could be frustration and boredom
- It could Intentional torture and undermining
- Frequent conflicts with the boss. These conflicts normally arise from competition with a boss.
- Hatred from colleagues; This may be due to poor assessment of yourself
- Failure to fit in a group; when you fail to fit in a certain society
- Work experience; once you have achieved certain technical know how it is easy for you to
leave the employment and start your own business
 Enviroment factors
 This is a network of family and friend which you know as a cheering scode .a chearing scodo can
help you to start the business. These are the people who will help you to stand in difficult times.
They play a big role in the business. Friends are important because they provide honest advice,
encouragement, assistance and are avaliable when needed.
 Professional support net; this also provides council and advice throughout the establishment of
the venture. It comprises of business associates, other entrepreneur trade association and person
affiliation
 Establishment of the service; lf you start a business ,you conditionally provide other services to
the community
 Illiterates of the society; They also start the business survive. They are pushed by push factors
however there people can be seen is business people eg people working in owino, kiyembe,
kikubo etc
 Part time entrepreneurs; these are people who have jobs and want to do side businesses, may be in
evening
 Home based entrepreneur .these is people who locate their business at home because there is an
opportunity.
 Infrastructure: Goods road and other mean of communication can encourage people to become
entrepreneur.
 General service like security and facilities; establishment of government headquarters will also
encourage people to become entrepreneurs

 Migration factors
When people come from one place to another, they come with a different need to satisfy

 Growth of the service sector

 Age – There are people who start as early as probably 10 and some others after their retirement.
Harland David Sanders, better known as Colonel Sanders (not a Army Colonel but an honorary
one) started his famous Kentucky Fried Chicken business quite late in his varied career. But
commonly, men are often in the age group of 25 – 35 and women in the age group of 30– 45.

Entrepreneurial Decision Process

A person decides to do something either because something in that activity lures him or he takes it as
option in lieu of something else, i.e., he is forced to do it by people or circumstances. The factors which
lure a person to become entrepreneur are called Pull factors and the factors that compel him are called
Push factors.
Pull Factors
(a) Perception of Advantages – If a person feels that he can earn better or overall gains in terms of
money. Status, security, future, etc as an entrepreneur are better than working as an employee , he
tends to turn an entrepreneur.
(b) Spotting an Opportunity – Many employees spot a business opportunity in the course of their
work and decide to exploit that opportunity rather than pass it on to their employer. Many
employees buy unsuccessful businesses at throw away prices from their former employers an d
turn them around.
 (c) Government Policies – Govts very often formulate policies to promote certain business activity or
backward areas which offer tax concessions/holidays, cash subsidies, cheap land, etc, which
improve success and profit prospects.
(d) Motivation from biographies or success stories.
(e) Influenced by Culture, Community, Family Background, Teachers , Peers,

Push Factors
(a) Job Dissatisfaction– Many people start their own venture because they feel dissatisfied with their
existing jobs/boss/work environment.
(b) Relocation – Repeated or especially unhappy relocation sometimes prompts some people
to entrepreneurship.
(c) Joblessness– This is the biggest source of micro level entrepreneurships. Many parents
help their academically poor children, who fail to find a job, to start their own micro ventures. But
success rate in such ventures is poor. The very traits responsible for their academic fail ure lead to
business failure.

(d) Lay off – Layoffs often lower the market value of an employee to half. Thus, if a person is
laid off and he is unable to find a suitable job for him, he might think of starting his own
business.
(e) Retirement – Many retired, but physically and mentally fit, people start their own business
either to supplement their pension/savings or just to keep themselves gainfully occupied.
(f) Boredom – This is applicable to many ladies from well to do families. With their army of
servants to take care of home, they find an avenue to keep the boredom away and start
ventures like boutiques, fashion designing, etc.

RISKS OF THE ENTREPRENEUR

Financial risk; usually entrepreneurs use personal savings or borrowed money & the business fails, the
entrepreneur collapses.
Career risk; This is specifically for those who leave their jobs to start the business. They leave their
jobs because they have seen the opportunity. This deprives them the chance to retain their career plans.
Retard risk; Family obligation & commitment suffers when one becomes an entrepreneur. when you
become an entrepreneur, you spend most of the time in the business and you tend to neglect family and
other related staff.
Physical Risk; this is failure to recover from defeat. Physiologically when the business fails, you
remember some many things you have done had you not involved yourself in the business.
Relatives Risks; Relatives see the business as their own. Therefore there is a risk of making the business
a social entertainment. This will consist frequent visits, chatting with them, when actually customers are
suffering and you can not attend to them.
Environment Risks: for example Neema, the Kavera is not wanted and the government can follow up
and eliminate it. So the owner of kavera business will loose the business
Natural calamities; like hunger floods rains
WHAT CAUSES STRESS TO AN ENTERPRENEUR
o Loneliness; They work long hours which prevents them from comfort. They don’t have time to
spend with friends.
o Immersion with the business (being occupied with the business) every time you are thinking
about the business.
o People problem; entrepreneurs get frustration from on compromising customers, uncommitted
supplier etc. They can also engage in conflict because of desire to be perfect.
o Desire to achieve; tendency to achieve so much within the shortest possible time. Entrepreneur
tends to achieve more than they can manage. Un satisfaction derived from the work done even
when the work is even good.

How can we manage the stress.

o Networking e.g. having a telephone, you call or they call you. you can after work visit friends,
work mates or visit nearby trading centre.

o Communicating with employees and others. Make stories with your employees chat and visit
each other.

o Find satisfaction outside the business. Exchange views with otherwise if you stay in the business
you may cause problems to it. But, don’t remain out of the business.

o Delegate some of the routine job. Do not do all the work alone share it with friends.

o Budget for relatives to avoid being an ostrich that has never benefited from anything. Relatives
can leave you without business.

Entrepreneurship and Economic Development

Entrepreneurial spirit of people is greatly responsible for economic development of any country. There is
no resource including diamond mines as valuable as human resource. South Africa and a few other
African countries despite their fertile gold and diamond mines have remained poor/relatively poor, where
as Japan with literally no natural resources and having suffered devastation during WW–II became a
developed country in just three decades. Therefore, if a country allows its human resources to be
unutilized/underutilized (unemployment/disguised unemployment), its economic development would be
severely hampered. Failure of communism worldwide and our own harrowing experience with socialism
has shown that “Govt has no business to be in Business”. Govt should only govern. Business activity
should be left to people.
And this is where entrepreneurs enter the picture.
 Entrepreneurs set up enterprises which provide employment not only to themselves but to many
others directly and indirectly and thereby put into utilization Human Resource of the country.
 Entrepreneurs combine resources, put their time and efforts and produce goods or services. The
Value Addition that they do to the resources brings prosperity to the country.
 What they contribute – productivity, output, value addition, income and employment
 Entrepreneurship is a “Low Cost Strategy”. An entrepreneur works with maximum financial
efficiency in order to maximize his profits.
  Entrepreneurs rarely indulge themselves in luxury of Business Class travel and 5 Star Hotel
comforts which the managers avail without fail. Thus, many such costs are either avoided or kept
in check. Entrepreneurs perform the crucial role themselves.
 The spirit of Entrepreneurship – Drive, achieving higher goals, creativity, innovative attitude.
 A dynamic society emerges and the spirit spreads like a chain reaction –Many entrepreneurs have
proved to be catalyst for growth of a bevy of smaller entrepreneurs. Jamshedpur was a small town
before Tata Steel Plant was set up. Once the plant came up in the place, many people set up their
small enterprises to cater to the needs of the growing population.

BUSINESS PLAN
Is the description of future direction of the business. A good business plan must be developed in order to
exploit the opportunity defined. This is perhaps the most difficult phase the entrepreneurial process.

An entrepreneur usually has not prepared business plan before and does not have resources available to
do a good job.

A good business plan is not only important in developing the opportunity but also essential in
determining the resources required, obtaining those resources and successfully managing the resulting
venture.

Reasons /purpose/ importance of business plan

 It gives a sense of what we have to expect before we enter on the journey – to prepare ourselves
as much as we can
 It guides the owner in running the business and to be more focused
 It is a way of selling yourself and your business to possible partners
 It shows that the business owner is organized and knows his or her business
 It provides information about the business and the market one is to operate in
 A well prepared business plan will increase your chances, of obtaining financial assistance from
financial institutions e.g. Banks
 To reassess every part of the venture
 To identify and conform the product or service or ideas as a peace of reality
 To develop an understanding of, and solution to numerous problems that will
be encountered.
 To test the assumptions that uncover a lot of things that would have been ignored.
 To discover more a lot about what is not known and what is known about the venture.
 It helps the entrepreneur to predict expected conditions in the industry in relation to current
industry.
 To fore see whether there is up trend or down trend, market saturation, product margin continuous
supply of materials, extreme price cutting due to shift competition, excessive government
regulations, labor problems, level of sales or trends of cash flow, current and failure needs of
funds, favorableness of product or service
 To craft an effective strategy through which he or she can avoid failure.
 To view this venture critically and objectives through research.
 To get funding since the plan shows the procedures through which operate and use well its
finances
 To communicate with external environment for financial sources
  To enjoy the opportunity to express his or her planning and managerial ability
 To use as a powerful funding tool
 To get quantifiable objectives and measurable bench marks for company and actual results
 To get information pertaining activities to be carried out that require finance to develop the new
venture

Important questions to remember

 Does the business venture has chance to grow into a successful company?
 Is the product or service going to sale?
 Are there committed customers? Will the possible price be profitable? Is there a good venture
team put in place that will help the venture share well
 Will the venture bring in more profits to attract venture capitalists, bankers and other expertise
 Have you accessed risk, rewards, commitments or tasks lying ahead with related stakeholders?

Guidelines
 keep the plan respectably short
 Organize and package the plan appropriately
 Orient the plan towards the future, don’t write it in past.
 Avoid exaggeration, do research and get fact
 Highlight important risk and see how you can overcome them
 Given an evidence of an effective entrepreneur team
 Don’t over diversify
 Identify the target market clearly because this is where the business heart is
 Capture the leader interest. People who read the business.

Who reads the Business Plan?

1. Bankers
2. Suppliers
3. Customers
4. Investors
5. Employee

Sources for information /guidance when writing a business plan

- Publication: Provide a frame work to prepare a business plan
- Bankers offer advice and cancel
- lawyers provide competed legal advice and critical aspects of the venture
- accountants interpret the language of business, provide guidance on financial statement
- Customers provide wealth of information e.g. pries upon which the product should be sold,
competition etc.
- Suppliers: supplies industry forecasts, lists of the available material, price cuts and delivery
schedule but at the same time some suppliers will require you to pay a little fee to get information.
- Advertizing agencies: these will provide complete overview of the business venture, product and
services description of the target market.
How to write a business plan.
Writing a business plan requires a write to be substance (material) in an appealing style.
A writer will have to search for right words which are the same like the search vision. The writer must
choose and use proper words that can make a difference between something clear and obscure. The writer
must communicate effectively explain concepts, technologies and complexities developed in business.
The writer must write well in an understandable fashion because there is no chance for immediate
feedback. There is no body language for both the reader and the writer. The entrepreneur should not hire
someone else to write because the capitalist want to know the writer in person, you mind what you
venture is all about and your future plans, your explanation and how you can defend it. Writing a
business plan is a skill that has to be learnt

Rules to follow when writing a business plan

 Honesty rules: Reveal what you actually think and feel. At least it may be significant and relevant
to the business plan you have to tell the truth to get in touch with your thought and feeling.
Protect your credibility and make sure that your words follow.
 Use words economically: There are words that you should not and should use.eg use identical
other than exactly identical. Exactly has no role to play. use full rather than completely full, at the
present other than now. Be kind enough i.e. please, in view of the fact that, use a word though not
exact as longer as it satisfies the need.
 Use words that give a clear picture –here the writer should be clear to show exactly e.g.
termination of the rental contract will effective on 13th June this year. Also, instead many out lets
have examined our products, you can say, 75% have examined other products.
 Choose the right nouns and verbs. Use the third person to avoid bias
 Avoid redundancies; avoid words that are irrelevant though have got the meaning e.g. a distance
of 10 yards, future prospects.
 Use transitional words. These are words that string together statements and provide clarity e.g. in
fact ,in addition, assuredly importantly, never the less, because etc
 Avoid using big words when small ones can do the work better e.g. accompany can use go with,
desirably or desired but wanted is better.
 Avoid out dated expression, e.g. as a matter of fact ,at an early date, due to the fact that, in
accordance, as yet we have not heard from her
 Use positive expressions e.g. we close at 6.00. This negative expression. To be positive, say we
are opening until six. Do not hesitate to call us, instead use please call us. Am not available until,
why not use I will be available on Monday.

Guidelines to remember
Use good board quality paper or use any paper which is white that will allow characters to stand
out. if you are to make copies, use a good photocopier
Incase of binding leaves two inches of left and right margin
Also avoid legible too destructive scripts and fancy lines
Get your readers attentions by using italic bold and different colours without rubbing
After binding, make sure that you leave one inch all around the paper
Organize appropriately

Parts of the business plan

Business plans can vary in length, depending on the specific purposes for writing the plan or specific
audience to whom the plan is directed. In general, summary business plan, for about 10 pages is good
enough. And this summary business plan includes the following sections.

 Cover page
 Table of contents.
 Executive summary/ Abstract.
 Company
 Product/service.
 Market
 Marketing plan
 Key issues
 Financial statement.
 Annexer/ Appendix.

1 Cover page

This is simply a page that includes a company’s name, address, and phone/fax numbers. The cover page
may also include the name, the person to contact with question and his or her direct number. The cover
page is a good place to include message regarding the confidential nature of a document and to establish
any role for sharing or reproduction of information contained there in.

2 Table of contents.

This page should be detailed as possible providing section titles and accompanying page numbers.

3 Executive summary

This page should include concise summary of information on the company, product, target market,
strategy for phasing the market, time table and action step want whoever is leading the business plan to
take. Executive summary page should be broken down into paragraphs wherever possible and should
never exceed two pages.

4 Company

This section should provide information on the company’s management team including biographical
information as well as experience and role within the new company. It should also provide detailed and
easy to follow account, the company’s overall business strategy and philosophy. This can be
accomplished by providing the history of the company giving a report on its current status and describing
the company future goals plus the process by which these goals will be reached. This is also a place to
include a company mission statement.
5 Product

This should include the discussion on what the product or service it does, its main feature, benefits and
how it will appeal to target the market. Discussion on price can be included in this section as well as any
pictures, diagrams and other helpful visual aids.

6 Market

Section should define target and audience market as specifically as possible. Section can also include
detailed discussion on existing market niche that [product/service......

Other products or services that can be viewed as competitors or substitutes and how the new product or
service is superior to this potential competitor or substitute.

7 Marketing plan

This section should describe how the entrepreneur plans to introduce, promote and sell the given
product/service. This section should also be specific as possible providing detailed descriptions of all
elements of marketing mix their expected degrees of efficiency.

8 Key

This section will identify and address any key problems or difficulties the business may encounter. It
should also propose solutions/strategies for dealing with these problems. Any potential problem an
investor may recognise should be mentioned and explained in this section to the greatest degree possible.

9 Financial statement

This section should include the balance sheet, income statement and cash flow statement for any
historical period of operation as well as for the period of projected operation. If the business plan is
directed at specific investor, the entrepreneur should include supplementary analysis that the investing
party request or traditionally wants to see.

Note: typically an entrepreneur will discover weak spots in business structure or feel the need to revise
parts of his/her business strategy after completing a business plan. In fact this is one direct benefit to the
entrepreneur by completing this document. It is better to fix problems before presenting an idea to a third
party than have the third party point them out to you.

Conclusion

The entrepreneurial opportunity is everywhere. If someone can recognize an opportunity, has the right
skills and resources available to capitalise on that opportunity and his completely committed to turning
the concept into a reality then start a new venture is a risk worth taking.
Letter of transmittal
It officially represents the business plan to the reader. in the letter, explain your reasons for the business
plan. Refer to the title and explain major feature. In your closing remarks, show your willingness to
provide extra information if necessary

How to write the letter of transmittal

Before you write the letter,
- Know what you want to write and note it down before you start
- Explain the reason for the business plan. Spell the name or the names of investors correctly,
others you can loose you chances
- Tell what your letter is all about in the first paragraph
- Do not keep you reader guessing
- Write the letter from the readers point of view
- Be honesty and keep it short, Be specific, make it neat and pleasing on a white clean paper
- Topographical letters are not allowed, repetitions are out of questions and also sports of some ink
are not allowed.
- Make sure the last paragraph tells the reader what you want e.g. may I have an appointment with
you.
- Table of contents; you have to list the headings & sub headings of the business plan neatly to help
the reader meet the locations easily.
- After typing fold it nicely before you put it in an envelop.
Few tips for an entrepreneur
 Realistic plan is one of the best way to avoid mistakes – costly mistakes
 Try to be critical toward your own plan – realistic and professional
 Mention the risk and problems – and how you are going to solve them
 Then revalue, re-estimate, find new ways and keep on going!
 BUSINESS ENVIRONMENT
Introduction
This can be defined as the surrounding of a business. It includes all those things that lie outside the
business but which can greatly affect its operations. For example, the consumers of your product lie
outside your business but greatly affect your business. In agricultural sector, changes in whether
conditions can affect the final product. For instance, if it rained continually for a given period, we would
expect cotton farmers to get poor yields

Imagine for a second if you were living in this world alone without having to talk to anybody! This
would present a very difficult situation for you. Am sure there would be times when you would long to
speak to someone about your plans or to get advice in one way or another but this would not be possible.
Our being surrounded by other people creates opportunities for us to become better individuals because
we learn from others. However it is also possible that we can get into contact with certain people who
pull us down and therefore create challenges for us. So we should try to look out for those people who
will improve us and avoid those want to drug us down.

Just like people, a business can not operate alone. It is always surrounded by various factors that lie
outside it and affect its operations. For instance, competitors will always be there as long as you continue
operating your business, national governments will continue setting new rules and regulations governing
the way the business is done etc. So it would be unwise for businessman not to try and understand the
environment in which she/he is operating because it keeps presenting opportunities and challenges, which
can either boost the business or make its operations difficult.
COMPONENTS OF BUSINESS ENVIRONMENT

Legal Environment
These are rules and regulations that govern doing business in a particular country. Most of them are set
by the national government. These rules may favorably or unfavorably influence businesses within that
country.

Issues to consider under legal environment

1. The law of ownership, for example who owns what type of a business in a given country? This
affects the type of business you will set up.
2. In developing countries especially, there may be rules requiring the local people to own a certain
percentage of a foreign business or its subsidiary.
3. Taxation laws may be used to encourage or discourage particular imports/ exports activities, for
example, if the amount of tax to be paid on agricultural exports is reduced, you may be
encouraged to sell your products in other countries.
4. Use of trade marks. A trademark is defined as the legal protection given to a product. For
example, you may want to prevent competitors from copying your product and so it becomes
important to know how trademarks are used so that you can legally protect your product.
5. Determination of minimum technical standard, which the goods must meet, for example, in
agricultural, flowers should be fresh before the European countries where they are exported can
accept them.

Social Cultural Environment

This is the death rate, birth rate, age structures of the population, the different groups within communities
and the behavior of these groups. This type of environment affects business operations because it
influences demand for a given product.

The following issues can be considered under the social cultural environment;

A country’s population; it is important to study a country’s population because it creates demand for
goods and services. Besides, is a source of labour. This means that if the population is big, you expect to
get more people to buy your product. Also you can expect to have a larger number available to work in
your business.

Age structure and distribution; in most developing countries, a higher proportion of the population is
below the age of 30. This means that a smaller fraction of the population has purchasing power. This in
turn affects the number of people who will buy your product.

Geographical distribution; where does the country’s population leave? Some parts of the country may
be over populated. For example, in developing countries, most people migrate from rural areas to urban
areas in search of better quality of life. This may reduce the numbers available to till the land in the rural
areas.

Background; people of different backgrounds will prefer to buy different products partially due to their
cultural exposure. For example, in Uganda, it would be a good idea to put up a business dealing in milk
in Mbarara or karamoja because people in this area have a background of drinking large amount of milk.
This may not be the case with other areas in Uganda.

Sex; man and women have different buying roles in many societies, for example, men usually pay school
fees while women usually buy food and kitchen requirement. For your business, it becomes necessary to
identify who buys food in the house so that you can speak to them directly, hoping to make a sale.

Extended families; in many developing countries, there is no welfare state and therefore the head of the
family usually assumes the burden of looking after the elderly. This may reduce the amount of money
available to spend on basic items.

Culture; the importance we attach to ownership of goods and use of services is determined by the
learning process we acquire through cultural and social education. We learn to be consumers by
interacting with others and observing their reactions. Religion is a strong cultural element that influences
human behavior, for example, because of religion, the role of women varies from one culture to another,
that ie,s, women may be restricted as employees and as consumers. You may therefore have to think
twice about employing women in your business in some culture.

Political Environment
This is the nature of the political situation in the country where you are doing business or where you
intend to do business. It is important to understand the political environment in which you are operating
because it can present political risk to your business. This is the possibility of civil wars and changes in
government policy in the political environment.
Issues to consider under the political environment

Stability of the government: It is important to know how stable the national government is. Rapid changes
or political unrest make it difficult to do business, for example, a rapid change in political regime may
prompt a coup d’etat which may make businessmen lose their property. If you are operating business in
such a country, you may restrict the amount of investment until the situation clears so that you don’t
expose your business to too much risk.
International relations: Does the home government maintain good relations with other foreign
governments? For farmers, this becomes particularly important because it can determine the ease with
which they can export to other countries.
Government beauracracy: The government may be slow to facilitate the marketing of your product. Long
processes may be required for exporters, for example, the requirement to fill in so many forms. This may
actually discourage some of the potential exporter.

National policies
These are the policies that are in place in the country where you are operating your business. It is good
practice to operate within the national policies because failure to do so can attract a penalty from the
relevant national authorities, for example, failure to pay tax on time or failure to pay the full amount can
attract a surcharge.

Issues to consider under the National Policies

Fiscal policies
These policies affect the amount of tax that a producer has to pay, either on the sale of his or her goods or
on the importation of machines to be used in the business. When the tax to be paid increases, it has the
direct effect of increasing the costs of production. You may then increase the price of your produce with
the aim of recovering the additional costs. In the end, consumers may see your produce as much more
expensive than that of competitors and they will therefore buy less of it. This will affect you earnings in
the end. The opposite of this situation is also true.

Monetary Policies
These policies affect the amount of money available in the economy. You should ask yourself the
following questions:
1. How easy is it going to be to borrow money?
2. How much interest is charged on borrowed money?
3. How much money do people have to spend? This is important as it will influence their desire to
buy a given product and will also determine how much of that money is spent on a given product?

Agricultural Policies
These policies affect ease with which one can practice agriculture in a given country. In most developing
countries, national governments try to put in place favorable agricultural policies to promote agricultural
produce because agriculture is the backbone of the majority of these countries. For example, they can
advise farmers to use certain pesticides to destroy pests on their crops. They can also discourage them
from using certain types of pesticides because of the danger they pose to animals and people.

There are different agricultural policies for each product, for example, the vanilla crop has been fetching
high prices on the global market. To take advantage of this, national governments in developing countries
were availing farmers with high quality vanilla seeds to control the quality of output so that it can be
acceptable on the world market. They were also helping them to market their produce on the international
market which motivated many more farmers to grow vanilla because of the anticipation of good proceeds
from the sale
.
Physical environment
This is the availability of resources that are required to run the business efficiently. Resources may
include such inputs as materials and services, land labour force, physical plants and facilities. Every
business uses these resources to get its work done. Sometimes, money has to be borrowed from banks,
microfinance institutions or other lenders to be able to acquire these resources so that the business can
continue with its operations. Sometimes these resources become scarce in the environment making it hard
for businessmen to continue with their business operations normally.
In agriculture, land and labour are very important resources. Land is more easily available in the rural
areas then in the urban areas. So is cheap labour that is usually required especially at the time of
harvesting the crop. The physical environment affects the efficiency and success of any business.

Competition
It is difficult to be in a business alone. Competitors will always be there to keep you on your toes with
better price, better quality products, more accessible premises etc. They will always try to do their
business better so that they can win over your customers. Competitors should be looked at positively
because they give every business man a chance to continuously think of new ways of doing business
better than yesterday .There is also always something new to learn from competitors. It could the latest
production technique etc.

Economic environment
The nature of the economy of a given country affects the demand and ability to acquire goods and
services. Most developing countries have small economies which means that the majority of the
population may not have enough money to spend on luxuries, or even spend on food which is the basic
necessity.

Issues to consider under the Economic Environment.

The interest rate: If banks charge high interest rates, it discourages people from borrowing. Besides in
most developing countries, commercial banks do not want to lend to farmers because they think they
operate high risk business. This is partly because agriculture is greatly affected by the weather conditions.
In a very dry season, for example, farmers realize poor yields and so those who would have borrowed
from the banks find it difficult to pay back the borrowed amounts.

Per Capita Income: Per Capita Income is defined as the average amount of money or income that each
person in a given country has available for spending every year. Uganda’s per capita income is estimated
at about US$1400(World Fact book, 2004). This means that on average, each Ugandan has about
US$1400to spend every year.
Under per capita income, it is important for farmers to know how much of this income the population is
willing to spend on food. In most developing countries, the majority do not have enough money to spend
on basics like food. They instead rely on handouts from the government and the public.
Infrastructure availability: This encompasses variables like the availability of good road networks,
communication system, schools and hospitals to mention but a few.
Agriculture, for example, relies heavily on good road networks because of the nature of the product. It
has to get to the market as soon as possible before it perishes. However many farmers in developing
countries face excessive delays in transport because of the poor road networks. As a result, some of the
produce perishes before it gets to the market. This is therefore means planning in advance to avoid any
unforeseen consequences.

In summary, it is important to always be mindful of the environment since it always presents

opportunities and threats which can affect the smooth running of your business operations.

FORMS OF BUSINESS
The entrepreneur has choice when it comes to deciding the type of the business organization he will
operate his or her business.

Sole proprietorship
This is a business owned and controlled by one person. The individual may borrow money and employ
assistants but he or she alone is responsible for the results of the business. When the business succeeds he
or she receives all the profits and in case of failure, he or she bears all the losses.

A sole proprietor is formed, financed, owned and managed by a single individual who bears all the risks
and receives all the gains. In summary, a sole proprietor has the following indicators:
 Single ownership
 One man control
 Undivided risk
 The debts of the business become the debts of the owner without any limit
 The business and the owner are the same, they are not separate.

Sole proprietor as a form of business organization has the following advantages:

 It is easy to form
 The benefits are direct to the owner. This increases the morale of the owner
 Quick decision making
 The can easily change the business(it is very flexible)
 There is personal touch. Owner is in direct control and operation of the business
 Because of one man control, the owner enjoys a high level of business secrecy

Partnership
A partnership is an agreement among two or more persons to do business together and to share profits
from the business.
In summary, a partnership has the following key indicators:
 Two or more persons (maximum of 10 in a banking business and 20 in other businesses)
 There must be an agreement. This agreement may be written or oral
 Sharing of business
 Business is carried by all or by one on behalf of all.
 The debts of the business become the debts of the owners without any limit.
 The business and the owner are the same, they are not separate
Joint stock company
These are limited companies.
A joint stock companies may be a private company or a public company.

Private company (Limited and Limited by shares)

A private company has some of the following indicators:
 The minimum number required to form a private company is 2
 It limits the number of its numbers to 50 (employees are not part of this number)

Public company
A public company has some of the following indicators:
 The minimum number required to form a public company is 7
 There is no maximum number of its numbers.

Cooperative societies
A cooperative society is an association of persons who join together on a voluntary basis to promote their
economic interests. In cooperative societies, profit is not the main guiding force. They are mainly formed
to achieve the following:
To safe guard them selves against abuse from profit maximizing operators
To promote cooperation not competition among members
Self help and unity

In summary, a cooperative society has the following guiding principles:

1. Voluntary association. Any person can join or leave
2. Capital of a cooperative society is raised from members
3. Control and management is by democracy. Members vote managers into office.
4. They have a “service motto”. A cooperative society is formed to give services to its members
5. Surplus arising from a year working is given to members as a bonus
6. To register, a society must have a minimum of 10 members of sound mind
7. Members must have a common interest e.g. Locality, occupation, etc.
Common types of cooperatives
Type
Cooperative farming societies
Marketing cooperatives
Producers cooperatives
Consumer cooperatives
Credit cooperatives
Dairy cooperative, etc
Detail of business
 To achieve the benefits of large
scale farming
 Common where land is fragmented
 Where small holding do not benefit
owners.
 Independent producers come
together to arrange for the sale of
their out put
 They are useful to agriculture and
small producers.
 Formed by small producers.
 The society supplies its members
with low materials, tools
equipments in order to compete
with the large ones.
 Formed by ordinary people to
obtain day to day consumer goods.
 Members enjoy the benefits of
buying in bulk
 The society sells to members at
slightly lower prices.
 Extending short term finance to
members is moderate means
 Develops a habit of savings among
members.
 For milk producers.