DEBREMARKOS UNIVERSITY

INSTITUTE OF TECHNOLOGY
SCHOOL OF MECHANICAL AND INDUSTRIAL ENGINEERING

Entrepreneurship for Engineers

Individual Assignment

Name Id No.

Shiferaw Belete TER/1064/08

Submitted to: Dr. Sisay

1. Decide your own best business idea that you need to start in the future and develop business
plan for the selected business.

NB: Follow the correct format of business plan including its components.

ANSWER

WHAT IS BASIC BUSINESS IDEA?

It is logical to think of a goal for the unit in long run rather than to look for the immediate
tomorrow. This long-term thinking is called basic business idea. The basic business idea and the
product through hierarchy can be represented as follows.

Basic business idea

Product line

Product range

Product

Business persons should think of long-term goal and profit when they start a business. The basic
business idea, which is at the top of the hierarchy, is to meet the broadest needs of the customers,
and has the long life perhaps from 5-50 years. The basic business idea facilitates choice of
product under an overall plan. Thus, entrepreneur may think of being in the entertainment firm,
in automobiles, in medicines, in services, in industries, etc.
The product line is relatively narrow and has a shorter life. The product line consists of different
families of product. A unit with a basic business idea for example packaging can metal packages,
aluminum packages, paper or wood packages.
The product range includes different size of the product with in the product line in the examples
given above different size of glass bottles can be manufactured for varied applications.
The product is one item of the product range having different specifications like size, material
used and weight, etc.
The basic business idea, which facilitates a choice of the product at different stages of the
product, allows for diversification and expansion. But the basic idea is not always the same.
In a dynamic business scheme, one has to carefully watch is one of the basic ideas degenerating
as regards.
A. Its ability to generate quick returns
B. Its ability to permit quick changes in the products
C. The general business atmosphere guides the choice of basic business idea. A basic
business idea results from the identification of business opportunities in the market.
D. To be successful in business, consistently watch the opportunities to spot where the
entrepreneur has to be sensitive to the market changes, watch demand and supply,
study consumer behavior, and grasp the business idea.

HOW TO SET THIS BASIC BUSINESS IDEA?

The first key to success in any manufacturing activity is to select the right product. These
must be examined with a view to assess:

a. The marketing aspects

b. Technical aspects
c. Financial aspects
Having selected a product, a detailed project report to be prepared. This will cover the
following aspects.

a. A detailed estimate of demand is to be made.

b. Technical specifications of the process should be carefully studied.
c. The equipment required and their sources are to be specified Requirement of
space.
Implementation of the detailed project report. Includes:

a. Deciding on form of ownership and registration

b. Obtaining finance ,Obtaining license
c. Establishing necessary infrastructures

Once all the required authorizations and sanctions have been obtained, simultaneous
action is to be taken for the following. Pre-commissioning requirement

a. Ordering machinery from suppliers

b. Obtaining utilities like power and water connections after constructions of shed, if
necessary.
c. Recruitment of staff
 d. Arranging supplies of materials
e. Arranging for distribution of the products.
Once these are complete, the plant is ready for commissioning trial run may be made.
Commissioning of plant, Includes:

a. Trial run of machineries

b. Promotional activity for the product
c. Introduce the product to the market and obtain feedback.
The unit is then ready for commercial production.

a. Commercial production

This is all about the feasibility study +pre & after implementation.

A business idea is a short and precise description of the basic operation of an intended business.
Before you start a business, you need to have a clear idea of the sort of business you want to run.

Your business idea will tell you:

• Which need will your business fulfill for the customers and what kind of customers will you
attract?

• What good or service will your business sell?

• Who will your business sell to?

• How is your business going to sell its goods or services?

• How much will your business depend upon and impact the environment? A good business idea
will be compatible with the sustainable use of natural resources and will respect the social and
natural environment on which it depends.

1 Which need will your business fulfill for the customers?

Your business idea should always have customers and their needs in mind.

2 What good or service will your business sell?

Depending on your skills and the needs of the customers, you should decide which good or
service your business will sell. Also, keep in mind that they must be goods or services that
people are willing to pay for and at a price that will allow you to make a profit.

A good is an item that people pay for and use. It may be something you make yourself or it may
be something you buy to resell. Tools, baked goods, clothes and retail items are all products
3 Who will your business sell to?

Any business cannot succeed without customers. Therefore, it is essential that you know who
your customers will be. Will you sell to a specific type of customer or to everyone in an area?
There must be enough people who are able and willing to pay for your goods and services or the
business will not survive.

4 How is your business going to sell its goods or services?

How are you going to sell your goods or services? If you plan to open a shop, you know how you
will sell your product, but manufacturers or service operators can sell their products in many
different ways. A manufacturer, for example, can sell either directly to customers, to retailers or
to wholesalers.

5. How much will your business depend on and impact the environment?

Your business can only be sustainable in the long run if it works in harmony with the social and
natural environment. How much does your business depend on the environment? Does it rely on
the weather, soil or other natural resources? Does it need any specific type of labour from the
local community? Does it need the local community to support it? What should you do to make
sure that your business nurtures the natural environment and helps the local community? Will
your business nurture the natural environment or will it have a detrimental impact? How would
you minimize or reverse any negative effect that your business might have?

My business idea: Home to home serving of all vegetables, roots and inputs for food by
online contact

A business plan is simply a written document that describes the future path of a
business. A good business plan explains the business concept, summarizes the
objectives of the business, identifies the resources (both in terms of money and people)
that will be needed by the business, describes how those resources will be obtained, and
tells the reader why the business will succeed.
• Which need will my business fulfill?

Everyone I talk to agree that moving from house to house, or office to office is very difficult and
time-consuming. There is no company in the area that provides packaging and moving services.
Therefore, if I provide these needed services, my business will have a steady demand.

• What good/service will I provide?

I intend to offer complete packaging and moving services for homes and offices. Although I
have no experience running this type of business, I can ask my brother who is very good at
process management to plan the operation. In addition, I can use a reliable transportation
provider who often works for my aunt’s shop.

• To whom will I sell?

I intend to start by offering my services to all my relatives, friends, friends of friends and my
aunt’s customer base. I will then expand my business and advertise around the whole town.

• How will I sell my service?

I can sell my service directly to the customers. Initially, I will introduce the service to all of my
friends, relatives and my aunt’s customer base. After I have done some moving for family and
friends, I will expand my market and hang posters around areas where there are a lot of shops,
offices, apartments and houses for rent.

• How much will my business depend upon and impact the environment?

My business will reuse the cartons and packaging several times so as to prevent waste.

2. Online marketing is one of the ways of entrepreneur to simplify work of one’s organization.
What is the impact and advantages of online marketing on the performance of small and medium
scale enterprise in Ethiopia?

In Ethiopian context government has historically supported the growth of micro, small and
medium enterprises (MSMEs), especially growth-oriented businesses, through various policy
interventions.
For instance, the government formulated a national micro and small enterprises development and
promotion strategy in 1997 (revised in 2011) to create an enabling environment for the sector.
The Government of Ethiopia identified growth-oriented MSMEs based on their potential for job
creation, poverty reduction, local raw material utilization and ease of transformation to medium
and large scale businesses in a short period of time.
Furthermore, MSMEs were placed at the heart of the first industrial policy strategy in 2002.
Similarly, within the framework of the government’s five year economic development plans,
including growth and transformation plan (GTP) I and II, the expansion and development of
small and medium enterprises have systematically been a key strategic priority.
It has also identified the development of micro, small and medium enterprises as a key industrial
policy direction for creating employment opportunities for millions of Ethiopians. The World
Bank Group (2015) supports these Ethiopian government’s efforts to create jobs through
analytical studies and investment operations. However, all this is not sufficient and much more
remains to be done to unleash the full potential of these sectors (World Bank Group, 2015).
According to Central Statically Agency (2006) small and medium enterprises (SMEs) in Ethiopia
3.4% and 90%have contribution country GDP and employment opportunity respectively. Based
on the agency survey in Ethiopia majority of citizens getting job depend on SME’s and its
contrition to GDP is too low, meaning there is ineffectiveness of the sector to national economy
growth. Unless otherwise these enterprises develop contextualized marketing strategies,
government intervention alone cannot increase the contribution of SMEs to the economy.
3. What is marketing mix and from most organizations the marketing manager has to combine 4
P’s principles, that the combination provides satisfaction to the customer and profit to the
manufacturer. So what is 4 P’s represent? Briefly describe each with an example?

Marketing mix is the term used to describe the combination of the four inputs which constitute
the core of a company's marketing system.

A marketing organization has to concentrate on four important aspects known as the 4P’s of
marketing. The marketing manager has to combine these 4 P’s (PRODUCT, PRICE,
PROMOTION and PLACE.) in such a way that the combination provides satisfaction to the
customer and profit to the manufacturer. When these elements (4 P’s) are combined together
they are called as “The Marketing Mix”.

They are the four P’s of marketing.

1. Product: The right product to satisfy the needs of your target customer.

Product “Product” refers to the goods and services you offer to your customers.many basic
products must be positioned for price conscious consumers. Other important aspects of
product may include an appropriate product range, design, warranties, or a brand name.
Customer research is a key element in building an effective marketing mix.
The product mix: Includes:
 Product planning and development
 Branding, Packaging , Labeling
“Price” refers to how much you charge for your product or service.

The price mix: Includes;

 Price polices
 Skimming pricing (Pricing above the market)
 Penetration pricing (Pricing below the market)
 Premium pricing (Pricing with the market)
 Discounts
 Quantity discount Seasonal discount
 Trade discount Cash discount
 Credits
As a manager, you can follow a number of alternative pricing strategies. These includes; Cost-
plus, Value-based, Competitive, Going-rate, Skimming, Discount, Loss-leader and
Psychological.
3. Place: “Place” refers to the distribution channels used to get your product to your customers.

 Place mix (Physical distribution mix):

 Channels of distribution
 Transportation
 Warehousing
4. Promotion: “Promotion” refers to the advertising and selling part of marketing. It is how
you let people know what you’ve got for sale. The purpose of promotion is to get people to
understand what your product is, what they can use it for, and why they should want it. You want
the customers who are looking for a product to know that your product satisfies their needs. To
be effective, your promotional efforts should contain a clear message targeted to a specific
audience reached via an appropriate channel.

Advertising methods to promote your product or service including

o Radio
o Television
o Print Electronics
o Word of mouth and
o Generic.

Additional sources of promotion may be attending or participating in trade shows, setting up

displays at public events, and networking socially at civic and business organizations.

Promotion mix: Includes

 Advertising
 Personal selling
 Sales promotion
 Publicity
NB. Price is the one “P” that generates revenue, while the other three “P’s” incur costs.

4. After graduation you may plan to start a business. What types of business are you interested
starting? Where would it be located (which part of city in Ethiopia)? And why? As an
entrepreneur, what factors will you consider to start your business?

After I Graduate I want to open a small enterprise that produces different types of dry foods
(DRY FOOD PRODUTION) like biscuit, kollo and kiokis for the consumption of the residents
living around this small enterprise. The place is located around Harar Administration city. I have
decided to start this Because of some number of people are eating vegetables and fruits like
mango, lemon, avocado, papaya and as well as chewing chatt. They do not use other foods like
Enjera, bread, biscut, kollo and kiokis usually.

Moreover people living around there has a habit of chewing chatt and drinking coffee(three
times a day) because they grow chatt and coffee in large amount as other regions grow teff and
other cereals like West Gojjam.

Factors that are considered to start a business:

1. The availability of raw materials or inputs i.e oil, flour and cooking machine
2. The absence of enough food production and supplier.
3. The usage of the residents to that product will be increased surely (i.e the people uses
these foods rather than chewing chatt as a choice or commonly.
4. The comfort of the city for living and for growing the enterprise from small scale to
medium scale.
5. The presence of large number customer to use this product.
6. The availability of enough electricity energy, water and transportation services.

5. What is the main important of finance and what is source of finance? Briefly explain internal
and external source of finance?
Every business requires finance at every stage of its operations. Right from startup stage at day
to day operations to funding expansions, finances are required at each stage. Businesses have
several sources from which these finance can be generated. The source of finance has to be
decided taking in to consideration several factors including quantum of finance, cost of finance,
time frame for payback etc. Thus, it is necessary to understand the feature of different source of
finance.

Source of Finance
One of the most difficult problems in the new venture creation process is obtaining finance for
the entrepreneur. To get financing for a new business, entrepreneurs must explore every option
available. That means first and foremost knowing where to look. Some of the sources,
institutions like banks and finance companies are obvious. Others may be less familiar to you.
Finance is needed throughout a company’s life. The type and amount of finance required for a
business depends on many factor: type of business, success of the firm and the state of the
company. Broadly speaking there are two main sources of finance debt and equity, i.e.,
ownership capital (equity) and borrowed capital (debt).

Internal source of finance

These are funds that are generated internally from within the business organization. Typical
examples of internal sources of finance include;

Funds generated from business operations I.e. profit from sales, utilization of
accumulated reserves and funds raised from sale of business assets. The cost of raising
these funds is generally cost of earning profits by investing those funds.
Cash profit generated by a business if alternatively deposited in the bank can earn
interest which would be foregone for being used as a source of finance. As such they
rarely require an actual outflow of cash.

Internal sources of finances are generally sought out by profit making entities that are generating
enough surpluses from their business operations. Internal source are typically used for funding
day to day operations of the business.

External source of finance

There are funds that are raised through external means i.e. outside entities.

External source of funds can be either raised through debt or equity.

Debt essentially means any kind of loan or borrowing. This can include loans from banks,
financial institutions, public deposits, letter of credit etc.
Equity means raising of capital by issue of shares to existing or new shareholders. These
can be ordinary shares or preference shares.
External source of finance involve incurring a cost of raising the funds. As these are raised from
outside entities, they need to be compensated for providing funds. Debt funds carry interest as
compensation. Equity funds on the other hands carry dividend as compensation.

External source of funds are preferred when large sums of money have to be raised especially for
funding expansion plants. Loss making companies may also have to rely on external sources of
finance to fund their day to day operation.