Entrepreneurship and Small Scale Business MGT

DEVELOPING THE ENTREPRENEURIAL MINDSET UNIT 1
SESSION 1
UNIT 1: DEVELOPING THE ENTREPRENEURIAL

MINDSET
You are welcome to this course. This course presents you with the
opportunity to acquire the basic knowledge you require to develop
business idea, turn it into opportunity; do feasibility study, write a
business plan and launch the business.
This unit covers six sessions as outlined below
Session 1: Introduction and Meaning of Entrepreneurship

Session 2: Theories of entrepreneurship
Session 3: Characteristics of Entrepreneurs
Session 4: Role of entrepreneurs
Session 5: Types of entrepreneurs
Session 6: Entrepreneurial versus small businesses
Unit objectives:
By the end of this unit you should be able to:
1) Explain entrepreneurship.
2) Develop entrepreneurial mindset.
3) Make the decision to establish their own business
4) Appreciate the qualities of entrepreneurs.
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UNIT 1 DEVELOPING THE ENTREPRENEURIAL MINDSET
SESSION 1
SESSION ONE: INTRODUCTION AND MEANING OF

ENTREPRENEURSHIP
You are welcome to this session. I hope you will enjoy reading through this
session. The search for solution to unemployment, poverty reduction,
economic growth and innovation have generated the interest in
entrepreneurship and small business management in recent time in several
developing countries. In Ghana, irrespective of ones programme of study,
Entrepreneurship is now a core subject.
Objectives
At the end of this session you will be able to:
(a) Define entrepreneurship.
(b) Explain the increased interest in entrepreneurship; and
(c) Expectations from the course.
Now read on...
1.1 Introduction
The term entrepreneurship can be traced back to as early as the Middle Ages, when
the entrepreneur was simply someone who carried out tasks, such as buildings and
construction projects by applying all the resources at his disposal. However, it was
during the 16th century when business was used as a common term, and the
entrepreneur came into focus as a person who is responsible for undertaking a
business venture. In the 18th century, early economists, for instance one known as
Richard Cantillon, added that an entrepreneur bears risk as part of his work definition
1.2 Definition of Entrepreneurship

The term entrepreneurship can be defined in several ways. Economists, psychologists,
sociologists, management scientists, have different ideas about what is
“entrepreneurship” and the “entrepreneur.” The word “entrepreneur” is derived from
the French root “entreprendre” meaning “to undertake” an expedition. Some of the
widely accepted definitions includes;
a. According to Fry (1993), entrepreneurship is the act of starting or growing

a business through innovative, risk – assuming management.
b. Hisrick and Peters (1995) also defined entrepreneurship as “the process of
creating something different with value by devoting the necessary time and
effort assuming the accompanying financial, psychic and social risks and
receiving the resulting rewards of monetary and personal satisfaction and
independence.
c. Vesper (1987) also has a rather simple definition. He defines
entrepreneurship as a process of new venture creation. His definition seems
quite restrictive since it does not talk about the growth, survival or failure
of the business
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SESSION 1
d. An innovative process where an individual (a prospective entrepreneur)

identifies and seizes opportunity (be it an idea or business); organizes
existing resources to convert those into workable/marketable products or
services; by adding value through time, efforts, money, or skills, for the
benefit of society (Buame, 2004)
Therefore, entrepreneurship is the process of creating something new out

of existing resources. That something new can be, a new product, a new
method of doing things, a new source of raw material or a new market.
1.3 Increased Interest in Entrepreneurship

We all notice that recent times the issue of entrepreneurship has become a
major issue of interest. Why this growing interest in entrepreneurship? Why are
countries turning to entrepreneurship? There is evidence that many developed
countries such as America including some developing countries are moving
toward an entrepreneurial society. This is because an ever increasing number of
individuals are accepting the challenge of entrepreneurship and new and
growing ventures make up an increasing percentage of business in these
countries. A number of changes occurring encourage entrepreneurship.
a. The growing recognition that large organizations do not fulfil basic
needs for autonomy and security.
b. The shift in women’s roles in economic life along with a parallel shift in
the belief that women can be entrepreneurs to the point that the current
growth rate of new ventures created by women is considerably higher
than the rate of new ventures created by men especially in the United
States.
c. A growing appreciation that the risks of venture failure have been
grossly overstated and that entrepreneurship is not just the province of a
few superstars or celebrity entrepreneurs.
d. An understanding that owning one’s own business still represents one
of the few pathways left for the middle and lower classes to build
wealth in an ever increasing tax conscious society that all too often
penalizes the achiever who works for someone else.
e. A computer and information revolution that is representing new venture
opportunities while often lowing entry costs and other start-up barriers
in many industries.
f. The development of programmes to study, teach, promote, and
accelerate entrepreneurship in many nations around the world, giving
credence to the belief that entrepreneurship is an international
phenomenon. Not just a national one.
1.3.1 Entrepreneurship as a generic activity

Many times we turn to think that entrepreneurship is a course or an activity for
people who have pursued business programs, however, the fact is that
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SESSION 1
irrespective of the programme one pursues or activity engaged in you can be

entrepreneurial ; whether science, arts, business, education. Therefore, the field
that you are in does not matter you can still be entrepreneurial.
1.3.2 Expectation from the course

This course seeks to ignite in you the interest and to equip you with the basic
knowledge you require to develop business idea, turn it into opportunity; do
feasibility study, write a business plan and launch the business.
It will enable you ddevelop essential entrepreneurial attitudes and skills. It

encourages you to consider entrepreneurship or self-employment as a career
possibility. As part of its delivery, students would work in teams to develop a
business concept and a business plan as already mentioned. Students are
encouraged to use internet and other sources to learn BUT they must not
COPY business plans from the internet for submission. They must NOT COPY
work done by other groups.
As a guideline for group work, students would be made to form groups of 8 to

10 students. Each group should have a leader and a secretary. They should have
a folder in which they put/file their reports for submission. They must have an
attendance register indicating meeting dates and attendance. There should be a
short report – between half a page to one page on what was done at each
meeting, responsibilities assigned to members, and what they turned in.
Self Assessment Questions
Exercise 5.1
1. What is entrepreneurship?
2. Why recent interest in entrepreneurship?
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SESSION 1
This is a blank sheet for your short notes on:

 issues that are not clear, and;
 difficult topics if any.
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UNIT 2 NT
SESSION 2
SESSION 2: THEORIES OF ENTREPRENEURSHIP

The study of a particular subject often hinges of some theories and models. These
theories seek to explain the dynamics of that particular subject matter and how it is
practiced or understood. As a discipline, entrepreneurship is under-pinned by some
important theories.
Objectives
(a) Explain some theories underlying entrepreneurship
(b) Explain some models of entrepreneurship.
(c) Describe the reasons behind the theories.
Now read on...
2.1 Theoretical foundations of Entrepreneurship

Entrepreneurship is an evolved thing. With the advancement of science and technology it has
undergone metamorphosis and emerged as a critical input for socio-economic development.
Various writers have developed various theories on entrepreneurship and popularized the
concept among the common people. Some of the theoretical foundations of entrepreneurship
provided in Agyapong and Adam (2013) include the economic, sociological and
psychological theories, entrepreneurship innovation theory, theory of achievement
motivation, motivation theory by McClelland (acquired need theory), Kakinada experiment
and motivating factors of entrepreneur (internal and external).
2.2 The Economic Theory

According to this theory, entrepreneur and economic grow take place when the economic
conditions are favourable. It states that economic incentives are the main motivators for
entrepreneurial activities. Economic incentives include taxation policy, industrial policy,
source of finance and raw material, infrastructure availability, investment and marketing
opportunities, access to information about market conditions, technology etc.
2.3 Sociological theory
The sociological theory of entrepreneurship looks at the social dimension of
entrepreneurship and how the social settings influence the setting up and operating a venture.
According to this theory, entrepreneurship is likely to get a boost in a social culture,
society’s value, religious beliefs, customs; taboos influence the behaviour of individuals in a
society. Here, the entrepreneur is a role performer according to the role expectations by the
society
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SESSION 2
2.4 Psychological theory

This theory of entrepreneurship assesses how an entrepreneur can assert his/her own control
with a sense of independence. Under this theory, psychologists have set out to identify a
single or collection of traits capable of successfully predicting entrepreneurial behaviour and
pattern of activities. The psychological characteristics include needs for high achievement, a
vision or foresight, ability to face opposition. These characteristics are formed during the
individual’s upbringing which stress on studies of excellence, self-reliance and low father
dominance.
2.5 Entrepreneurship innovative theory
This theory was proposed by Schumpeter (1934) who believes that entrepreneurship helps
the process of development in an economy. He noted that an entrepreneur is one who is
innovative, creative and has a foresight. Cultivation of innovative culture will mean the
creation of innovative climates in business establishments – public or private to make them
responsive and productive in the face of social, technological, economic and demographic
shifts (Buame, 2001)
According to Schumpeter (1934) innovation occurs when the entrepreneur introduces a new
product, introduces a new production method, opens up a new market, finds out a new
source of raw material sources and introduces new organization in an industry. The theory
emphasis on innovation, ignoring the risk and organizing abilities of an entrepreneur.
Schumpeter’s entrepreneur is a large scale business who is rarely found in developing
countries, where entrepreneurs are small scale business men who need to initiate rather than
innovate.
2.6 Theory of High Achievement / Theory of Achievement Motivation
This theory of entrepreneurship identifies people with high need for achievement and how it
affects the creation of a new venture. McClelland (1987) identifies two characteristics of
entrepreneurship: doing things in a new and better way and decision making under
uncertainty. He stressed that people with high achievement orientation (need to succeed)
were more likely to become entrepreneurs. Such people are not influenced by more or
external incentives. They also consider profit to be a measure of success and competency.
2.7 Motivation theory by McClelland (acquired needs theory)

According to McClelland (1987), a person has 3 types of needs at any time given time,
which are; need for achievement (get success with one’s own efforts), need for power (to
dominate, influence others); and need for affiliation (maintain friendly relations with others).
The need for achievement is the highest for entrepreneurs.
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UNIT 2 NT
SESSION 2
2.8 The Kakinada’s Experiment

The Kakinada experiment was conducted by McClelland (1987) in America, Mexico and
Mumbai. In this experiment, young adults were selected and put through a three months
training programme aimed at inducing the achievement motivation. The course contents
were:
a. trainees were asked to control their thinking and talk to themselves
positively;
b. they imagined themselves in a need of challenges and success for which
they had to set plans and achievable goals
c. they strived to get concrete and frequent feedback
d. they tried to imitate their role models/those who performed well
The conclusions of the experiments were that:
a. Traditional beliefs do not inhibit an entrepreneur
b. Suitable training can provide necessary motivation to an entrepreneur
c. The achievement had a true impact on the pest of participants
d. It was the Kakinda experiment that made people realize the importance of
EDP (entrepreneur development programme) to induce motivation and
competence in young prospective employees
This session have been to explain the theories in entrepreneurship. In all eight theories
were looked including the economic, sociological and psychological theories,
entrepreneurship innovation theory, theory of achievement motivation, motivation
theory by McClelland (acquired need theory), Kakinada experiment and motivating
factors of entrepreneur (internal and external).
Exercise 5.2
Assess yourself by answering the following questions

1. Discuss the theories underpinning the practice of entrepreneurship.
2. In each of the factors, identify the entrepreneurship quality that is observed.
3. Which of the theories is the best predictor of entrepreneurial traits?
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SESSION 2

REFERENCES
Agyapong, D. & Adam, M. A (2013). Venture Financing and Entrepreneurship
Module. Institute of Distance Learning, KNUST. Kumasi
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SESSION 3
SESSION THREE: CHARACTERISTICS OF ENTREPRENEURS
Hello! You are welcome to the third session. In the previous session we looked at some the
theories of entrepreneurship. Now let us talk about the characteristics that entrepreneurs
possess. I hope you will have a nice time reading this session.
Objectives
(a) Identify the characteristics of entrepreneurs.
(b) develop an entrepreneurial mindset.
Now read on...
3.1 Introduction
You might have already heard about something called "the entrepreneurial mindset." You know
it has something to do with entrepreneurs and starting your own business, but what is it, really?
What does it mean to be entrepreneurial? What are entrepreneurs like, and what do they do?
The entrepreneurial mindset is marked by imagination, initiative, and a readiness to undertake

new projects. It is perseverance and determination, risk-taking and daring, integrity and honesty.
Entrepreneurs change the world in concrete ways their inventions, their businesses, their social
and economic impacts. The term "entrepreneurial" can apply to individuals, teams, or entire
organizations.
Entrepreneurial mind-set is about seeking and taking advantage of opportunities responsible –

creating value, sharing wealth and value; seeking for positive outcomes, quality oriented and
being self-confident.
3.2 Developing the Entrepreneurial Mind-set

The ability and decision to start and operate a business is dependent upon several factors including
the personality and environmental factors. In all, having a vision and purpose, availability of
opportunities, level and propensity for risk are some of the ingredients for a successful business start-
up and launching. These issues are discussed in details below:
3.2.1 Having Vision and Purpose

The idea of dream in entrepreneurial orientation is the first step towards success in operating a venture.
To develop the entrepreneurial mindset, you would have to make time to think and reflect. You have
to keep ideas book to write down ideas that occur to you at a point in time. Furthermore, you have to
develop the habit and strength to say yes when others say no and always try to go the extra mile.
One strategy of cultivating the entrepreneurial mind set is to develop a perpetual learning habit to
enable you acquire more knowledge through learning. You would have to develop the habit of setting
goals and objectives and see that they are achieved.
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DEVELOPING THE ENTREPRENUEURIAL MINDSET UNIT 1
SESSION 3
3.2.2 Seeking opportunities

Entrepreneurs are opportunity driven. Opportunity comes from changes in the environment, and one
central characteristic of entrepreneurs is that they excel at seeing patterns of change. Also,
entrepreneurs are not resource-driven; while the manager asks, "Given the resources under my control,
what can I achieve?" the entrepreneur asks "Given what I want to achieve, what resources do I need to
acquire?" It is the entrepreneur's drive to acquire resources in order to exploit opportunities that creates
the high correlation between entrepreneurship and economic growth. Looking for chances to change
the present situation; pursue only the best opportunities and do not chase after every option
3.2.3 Cope with risks - Think positively and deeply; analyses causes and effects; supports good
course.
3.2.4 Be open to ideas

Give yourself the chance of being creative; see that all problems have in them opportunities that can be
pursued; Expect and tolerate failure: we don’t fail because we start, we fail because we quit; develop
yourself; Learn from situations.
3.3 Outcome of developing an entrepreneurial mindset

The following are some of the outcomes of individuals who develop an entrepreneurial mindset:
a. They create and innovate new things.
b. Start a new venture from the scratch or nature an existing one.
c. Buy existing venture
d. Form partnership
e. Bring change into existing organization
This session looked at the processes of developing entrepreneurial mindset, ways of

developing such mindset and the outcome of developing such mindset.
Exercise 5.3

1. What does it mean to develop entrepreneurial mindset?
2. Explain the processes of developing entrepreneurial mindset.
3. Discuss the outcome of having entrepreneurial mindset.

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UNIT 1 ROLE OF ENTREPRENEURS
SESSION 4
SESSION 4: ROLE OF ENTREPREURS

Hi! I hope you are enjoying the first unit of this course. You may be wondering by now “of
what benefit is entrepreneurship to the economy of Ghana?” or what role do entrepreneurs
play in the development of our economy? Well here are your answers. Entrepreneurs play a
very important role in the development of our economy. Most of the successes of every
economy are as a result of entrepreneurship.
Objectives

(a) Explain the role of entrepreneurs.
(b) Describe the link between entrepreneurship and small business.
Now read on...
4.1 Role of Entrepreneurs in the Ghanaian Economy

Although it cannot be said to have gain root in the Ghanaian society and among people,
entrepreneurs have and continue to play a major role in the development of the country.
First, entrepreneurship is the basis for the establishment of innovative and successful
businesses. Entrepreneurs are innovators and creative people who develop, start and
manage new businesses. Entrepreneurship is the cradle for new product and processes.
Second, they are the basis for new venture creation. One of the outcomes of having an
entrepreneurial mindset is new venture creation. As entrepreneurs set up new ventures,
it comes with its advantages such as job creation, increasing productivity and so forth.
Third, they are the cradle for Creation of jobs. Through their actions, jobs are created.
By setting up new ventures entrepreneurs provide employment to the populace.
With the conscientious application of discipline, entrepreneurs exploit resources

already at hand, or which can somehow be found to create successful ventures. They
make strategic investment in science, technology, and industry that bring about
economic development. In many cases, the resources they may use are not state-of-the-
art, but instead, through flexibility, they use ones that will perform satisfactorily.
Through their investments, they bring consistent growth in technology,
manufacturing, and service sectors of the economy.
In addition, they aid in raising productivity through new product innovation: by creating
new ventures, innovating new products or improving the existing ways of doing things
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ROLE OF ENTREPRENEURS UNIT 1
SESSION 4
entrepreneurs help to increase efficiency and productivity. They are the brain behind the
commercialization of new inventions. Entrepreneurs help to commercialize new
inventions.
They are often responsible for harnessing resources that were previously lying idle.
Entrepreneurs identify opportunities and exploit them to the benefit of the economy. By
so doing they put to use certain resource were lying idle or were regarded useless. They
are also responsible for redistribution of wealth – the poor getting richer. Furthermore,
entrepreneurs give back to the community by way of charity and employing people
within their communities. For instance, social entrepreneurs recognizes a problem and
use their entrepreneurial skills to solve such a problem and by so doing they help the
community.
Entrepreneurs are found to rejuvenate decaying economies. In course of the creation of

goods and services to satisfy consumer and markets, entrepreneurs add value through a
transformation process, since they understand market needs and satisfy them. Some
inventors fail to persuade the market to take up their idea, but visionaries as they are,
entrepreneurs know how to sell their new ideas and create demand for them. This is
where the inventor needs a partner, a commercial brain (in the person of the
entrepreneur) to successfully market value-added products and services. Thus, in order
to successfully rejuvenate the economy, governments need to be firmly committed to
working in partnership with the business and industry community to support and nurture
research and commercial activities in entrepreneurship.
Entrepreneurs are solvers of societal problems. They convert all problems into business
opportunities and organize resources to start the innovative process of designing a new
product or service for an identified need. They are able to see or craft opportunities that
others miss, synthesize the available information, and clarify patters which escape
others. Thus, create equilibrium in society by finding a clear and positive position in an
environment of chaos and turbulence.
Also, Entrepreneurs break through barriers and employ unorthodox means. They escape
the bureaucratic morass of formalized organizational life, and create conditions that
allow quick decision-making and pro-active response to the changing business
environment. They prefer to operate flat organizational structures, and with their
characteristic flexibility to get along with people, they achieve quick results.
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UNIT 1 ROLE OF ENTREPRENEURS
SESSION 4
Finally, entrepreneurs identify opportunities, not problem. They transform simple, ill-
defined idea into something which works – thus transform what is possible into reality.
They have their own ways of dealing with opportunities, setbacks, and uncertainties to
“creatively create” new products, new services, new organizations, and new ways of
satisfying customers, or doing business.
The session looked at the role of entrepreneurs including the link between the roles
of “small business” and entrepreneurship, new venture creation, Creation of jobs
through entrepreneurial action, raising productivity through new product
innovation, harnessing resources that were previously lying idle and entrepreneurs
giving back to the community
Exercise 5.3
1. Explain the role of entrepreneurs in the development of an

economy.
2. Which of these roles are more important?

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DEVELOPING ENTREPRENEURIAL MINDSET UNIT 2
SESSION 5
SESSION 5: TYPES OF ENTREPRENEURS
Welcome to the fifth session. In this session we will be discussing the various
types of entrepreneurs that we have and their characteristics. Kindly pay
attention as we discuss this topic and I hope you will enjoy it.
Objectives
a. List and explain the types of entrepreneurs
b. Explain the characteristics of each type of entrepreneur
5.1 Introduction
The practice of entrepreneurship by people have resulted in different forms of
entrepreneurship and entrepreneurs. Those of significant interest are
Intrapreneurship and Extrapreneurship. A popular term recently coined by business
writer Gifford Pinchot is intrapreneurship - entrepreneurship within an organization.
Intrapreneurship, organizational entrepreneurship and corporate entrepreneurship
are similar terms and often used interchangeably. Intrapreneurship or corporate
entrepreneurship is defined as the process in which innovative products or processes
are developed by creating an entrepreneurial culture within an existing organization.
Extrapreneurship is associated above all with starting up a business from an existing

(parent) company in the form of an independent spin-off (or sell-off, in the case of a
complete sale), possibly supported and prepared by a strategic investor and/or
incubator. These activities could be considered complementary to entrepreneurship
and intrapreneurship. Extrapreneurship is much more a question of market
opportunities waiting to be exploited creatively by (latently) entrepreneurial people,
or dynamic entrepreneurs, who are looking restlessly for interesting ideas and
inventions which they can market at a profit, or investors waiting for the creative
genius to show up.
In the case of entrepreneurs, there are many types of entrepreneurs who are usually
distinguished by their various characteristics. These are discussed below:
.
5.1.1 Opportunist Entrepreneurs:

Opportunist entrepreneurs have the following characteristics:
i. Have no grand vision
ii. Are interested in what can be exploited in their environment-
these are people who usually observe their environment with the
aim of identifying opportunities in order to provide solutions.
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UNIT 1 DEVELOPING ENTREPRENEURIAL MINDSET
SESSION 5
iii. Are resourceful- opportunist entrepreneurs have the ability to

overcome problems or to make do with what is available to create
a solution.
iv. Are quick thinkers when it comes to manipulating resources and
opportunities
v. Characterized by a level of restlessness – these type of

entrepreneurs are not usually comfortable staying with one
business to the end, rather, they move from one business to
another
vi. Tend to lose interest in business once established- once

opportunist entrepreneur have succeeded in establishing a
business their attention is drawn to identifying other opportunities
and making them into businesses.
vii. Have an appetite for challenges- opportunist entrepreneurs are

people who take delight in confronting challenges with the
objective of turning such challenges into opportunities. Instead
seeing problems in challenges they choose to see opportunities in
them.
5.1.2 Craft Entrepreneurs

Craft entrepreneurs have the following characteristics:
i. Have vocational qualifications required for the exercise of
their profession- just as the name implies the craft entrepreneurs
are usually craftsmen who have professional and vocational
qualification and expertise in a particular field
ii. Manage the enterprise- unlike opportunist entrepreneurs, craft

entrepreneurs stay with the business and manage the business.
They take special interest in the business and put in much more
personal effort to see the business survive.
iii. Train apprentices- these entrepreneurs in turn train others to

learn from their skill and set up their own businesses after the end
of their training.
iv. Direct skilled worker
v. Participate directly in daily work so that final product reflects

their competence- as already explained above the craft
entrepreneurs put in much personal effort so that the outcome
reflects their skill and competence in the business.
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SESSION 5
5.1.3 Nascent Entrepreneurs

A nascent entrepreneur is defined as a person who is now trying to start a
new business, who expects to be the owner or part owner of the new firm.
Referring to definition it can be deduced that nascent entrepreneurs
possess the following qualities:
i. They actively engage in creating a new venture either alone or
with someone
ii. They expect to be the owner or part owner of this start-up
5.1.4 Novice Entrepreneurs

These are entrepreneurs with the following characteristics
i. Own equity stake in an independent business
ii. The business could be new, purchased or inherited
iii. Have no prior minority or majority business ownership experience
5.1.5 Serial Entrepreneurs

The serial entrepreneur knows that failure is the bass-line beat of
entrepreneurship. They believe that the secret of success is to fail well
and fail often
i. May consider entrepreneurship as a profession
ii. A serial entrepreneur's expertise may be in creating new ventures
iii. Ventures can experience high rates of failure
5.1.6 Portfolio Entrepreneurs

The portfolio entrepreneur is more sophisticated and has multiple lines of
revenue at different stages of maturity, and spread attention across them.
The advantage is that a successful activity funds other start-ups, and new
ones come on line as others fade away. The danger of course is that you
spread yourself too thin and nothing gets the attention it deserves. They
are characterised by the following:
i. Own more than one business simultaneously
ii. May have minority or majority ownership stakes in two or more
independent businesses
iii. The businesses could be new, purchased and /or inherited
This session have been to explain the types of entrepreneurship including

intrapreneurship and intrapreneurship. Furthermore the types of entrepreneurs
are also explained.
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SESSION 5
Exercise 5.4
Assess yourself by answering the questions

1. Identify and explain some of the types of entrepreneurs.
2. Differentiate intrapreneurship and extrapreneurship.
3. State the features of craft entrepreneurs.

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SESSION 6
SESSION 6: TYPES OF ENTRENEURS CONTINUE
Welcome to the last session of unit one. We will end this unit by looking at
some more types of entrepreneurs, entrepreneurship and small businesses side
by side. “Starting and operating a small business is all that entrepreneurship is
about” Do you agree with the statement above? I believe after we have defined
and discussed small business and entrepreneurship side by side you will be in
the position to answer my question. Have a nice time reading.
Objectives
By the end of this session you should be able to:
 Identify the types of entrepreneurs.
 Explain the term small business
 Compare entrepreneurship and small scale business
 Defend the position that entrepreneurship is not all about starting
and operating a new business
6.1 Introduction
There are also other forms of entrepreneurs namely, political entrepreneurs,
economics entrepreneurs, moral entrepreneurs, educational entrepreneurs etc.
All these are entrepreneurs in their respective fields or disciplines. The other
two groups of entrepreneurs which should be discussed are family business
entrepreneurs and co-entrepreneurs.
6.2 Other Forms of Entrepreneurs

There are also other forms of entrepreneurs namely, political entrepreneurs,
economics entrepreneurs, moral entrepreneurs, educational entrepreneurs etc.
All these are entrepreneurs in their respective fields or disciplines. The other
two groups of entrepreneurs which should be discussed are family business
entrepreneurs and co-entrepreneurs.
Entrepreneurs are those who create an environment for (active support of)
knowledge exploitation, stimulation of entrepreneurial behaviour among all the
members of and institutional structures in the academic community. They may
sometimes emanate from a family line of academics e.g. of such entrepreneurs
in Ghana include the Aggreys, Euphrams Amus, Gbehos. They often carry out
academic research and develop theories, laws and Models.
Entrepreneurs are people who assume the risk in undertaking new political
project, group, or political party. They include a political actor (not necessarily
a politician) who seeks to further their own political career and popularity by
pursuing the creation of policy that pleases the populace. E.g. include
Nkrumah, Danquah, Gbedemah etc.
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SESSION 6
Entrepreneurs create and commercialize new goods, services and

business practices. Innovative entrepreneurship may cover what's been
tried and has failed in the past. Typical innovative entrepreneurs in Ghana
include the fitters, carpenters, tailors, artisans - who use their ingenuity to
mend and repair vehicles etc.
Corporate Entrepreneurs
Corporate entrepreneurs (intrapreneur or organisational champions) are
individuals inside existing organizations that build new businesses,
products and services and processes that create value and generate new
revenue growth. They are individuals inside organisations who pursue
opportunities and often bring about very important changes that lead to
corporate growth. Corporate entrepreneurs seek new ways of doing things
in organisation in order to create value out of already existing procedures.
Examples of such individuals include Stephen Addae of Gimpa,
Frimpong Boateng of Korle-bu, Andam of KNUST.
Social Entrepreneurs are people who recognize a social problem and

uses entrepreneurial principles to organize, create and manage a venture
to achieve social and environmental change (or economic change). They
pursue opportunities without regard to resources they currently control,
but they do not have profit as their primary aim. They emphasize social
responsibility of their venture before the need to maximise profit.
Trading Entrepreneurs develop new methods of carrying out their

trading activities, or build on the traditional ways of trading to arrive at
effective methods. They always seek new ways of selling their products.
They are often successful in merchandise trade. E.g. are the Kwahus,
Indians and Lebanese in Ghana
Theological Entrepreneurs identify opportunity under the religious

system, utilises religious beliefs and ideas to create value that benefits
society through the provision of social amenities such as provision of
missionary hospitals, missionary schools, improving agricultural yield,
and other ways for locals to make a living. Examples of such individuals
are the Mensa Otabils, Akwasi Sarpongs, Duncan Williams etc.
Strategic Entrepreneurs identify the best opportunities in the

environment and assume the risks of using them to their advantage. They
identify, evaluate and exploit new business opportunity in a highly
competitive business environment and always embrace and are willing to
learn, and absorb new information that is not familiar to them. Example
Prince Amoabeng of Unique Trust, Ken Ofori Atta of Data Bank etc.
Industrial Entrepreneur identifies advances in technology and an
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SESSION 6
increased demand for manufactured goods. They usually emphasize on

producing more goods at a faster rate at less production cost. They also
focus on benefits derived from deep, ongoing links with customers and
mass production by semiskilled workers, aided by machines. Examples
Supernormal Entrepreneurs are individuals who seek as much to

destroying the old orders of doing things and creating something new.
They are willing to take on exceedingly high risk with the intent of
reaping a higher profit. They are those who run their own business and
earn supernormal returns. They earn an economic profit which may
include an element in recognition of risk that the investor takes.
Family Business Entrepreneurs

A vast majority of new and small ventures are considered family
businesses. About 80 per cent of all small businesses could be considered
family businesses. The category of family business entrepreneurs is thus a
large one. The significance of the family business entrepreneurs is that
they face a set of constraints that the non-family venture does not.
i. Family business reflects the overlap between the demands of
the family and the demands of the venture.
ii. The success or failure of the family business directly affects
the livelihood of the family.
iii. Spouses and children of the entrepreneur become entwined in
the problems of the venture.
iv. If the business is launched by more than one person and each
have family responsibilities, then the business/family
relationship become even more complicated.
It should be noted however, that there are no personal differences

between family business entrepreneurs and non-family entrepreneurs
rather than family involvement. Yet, the problems and stresses faced by
the family business entrepreneur create concerns for both the individual’s
role as an entrepreneur often conflicts with the role as a parent or as a
spouse or other family member. Decisions made by family business
entrepreneurs must consider the inter-relationship between the family
system and the business system. This is especially true when the venture
involves both spouses as discussed below:
Co-Entrepreneurs
The term co-entrepreneur refers to ventures run by a husband/wife team.
It is also known as coupleneurship business with both spouses involved
has existed for years. Jointly owned ventures, however, have increased 63
percent between 1980 and 1986 in the United States. In addition to the
increasing rate, the role that each spouse plays has also changed. In earlier
years, the husband ran the venture and the wife played a lesser role of
22
SESSION 6
being either the company’s book keeper or perhaps being on the sales
floor of a retail firm. Increasingly, however, there are examples of
ventures that are truly jointly run by both spouses as partners.
In a co-entrepreneur situation, both spouses have typically had previous
managerial or professional experience before joining forces to launch the
venture. The spouses may work together on all tasks or more likely, they
will each have particular skills to offer the partnership.
Certain caveats exist for being successful co-entrepreneurs:

First, just as in any partnership, there should be a clear sense of direction
for the venture with a well-written Business Plan and partnership
agreement.
Second, the two spouses should have a clear understanding of the role
each will play. They should decide which types of decisions would
require a joint decision compared to those that will be made by one or the
other. They should establish if and when each has veto power over the
other’s ideas. They should also agree about the time each will spend with
the venture.
The third caveat is that the spouses should agree that they would not take
work home with them. In this way, the family and business concerns will
not overlap to the detriment of either. This will also allow them to spend
personal time with each other as husband and wife rather than as partners.
This agreement also formally allows time for children and other activities
rather than having to squeeze in time between business and discussions.
6.3 Small Business

A small business is the designation for firms of a certain size which falls
below certain criteria (that varies from country to country) in terms of
annual turnover, number of employees, total value of assets, etc. In
Ghana, small-scale enterprise as a firm with not more than 9 workers, and
has plant and machinery (excluding land, buildings and vehicles) not
exceeding 10 million Ghanaian cedis.
6.4 Small business owners and entrepreneurs

Carland et al 1984 provides the following distinctions between
entrepreneurship and small businesses:
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SESSION 6
Entrepreneur Small Business Venture

-Establishes and manages a -Establishes and manages a business
business for principal purpose of for principal purpose of furthering
profit and growth personal goals.
-Business primary source of income
- Characterized by innovative and consumes majority of one’s
behaviour time and resources.
-Business perceived as extension of
-Will employ strategic personality, family needs, desires
management practices in the
business - Independently owned and operated
-Engages in behaviour that is -Not dominant in its field.
aimed at profitability and -Doesn’t engage in any new
growth. marketing or innovative practices.
-Business characterized by
innovative strategic practices
Simply put, Small Business Owners operate life-style businesses and

prefer to keep their businesses small whilst entrepreneurs are innovative,
pro-active and aim at growing and harvesting their businesses.
6.5 Characteristics of Small business operations in Ghana

In Ghana, small scale businesses are usually characterized by the
following features
a. Small businesses in Ghana mainly trading / buying and selling.
b. Also, they are not usually organised and this impedes their growth
as well as access to funding.
c. Small businesses in Ghana are mostly unregistered.
d. They have high fold up rate.
e. They are mainly life style ventures.
This session looked at the types of entrepreneurs. They include political

entrepreneurs, economics entrepreneurs, moral entrepreneurs, educational
entrepreneurs etc.
Self-Assessment Questions
Exercise 5.4

1. Explain the different types of entrepreneurs.
2. Which one is more common in your area?
24
SESSION 6
MINI CASE ON QUALITIES OF ENTREPRENEURS

TITLE: Start Now or Later
Many students do not wait until they complete school before they try to
get their feet wet in small-business management. Quite a few go beyond
the planning stage and actually run their businesses while still in school.
For example, high school senior Jason Bernard runs his drawing firm,
called architectural rendering, from his bedroom. Other young people
look around, see thousands of students and try to develop small
businesses that would appeal to students. For example some students
assemble and sell “home emergency kits” for students returning in the
fall. The kits contain items like pens, chocolate chip cookies, aspirin and
other college “necessities “. The kits were sold to the parents and
distributed to students the first week of class as a start-the-year-right gift
from home.
Some students produce and sell calendars with pictures of beautiful
women or male “hunks” on campus. Others sell desk mats with
advertising messages on the sides. Some students become salespeople for
beer companies, cosmetic companies and other traditional firms. They,
too, feel as if they are in their own business on campus, because they have
exclusive sales rights but don’t have to assume as many risks.
One student earns more than his professors by selling ice cream from a
truck. Others try to learn the retail business by delivering pizza or other
fast foods. Some students have started moving services, moving students’
goods from home to school and back.
Dick Gilbertson considered a number of options when he was a student at
Indiana University. He felt students might enjoy having food other than
pizza and subs delivered to the dorms. His research showed that students
preferred McDonald’s hamburgers and taco bell burritos. Students said
they were willing to pay $ 1.00 for some delivery of a big Mac, fries and
a coke rather than ride the mile or so now serves 13, 000 students. Guess
who his partner is? A professor of entrepreneurship at the university.
Jimmy Enriquez was busy getting a degree in accounting at the
University of Texas when he started two companies. One is a
construction-site cleaning business run by his sister. It has 15 employees,
grosses about $ 4,000 a week, and has expanded to Dallas and Houston.
The other business is a vending company that leases foosball games.
Foosball was dead when Jimmy and his brother rocky set out. But they
started a prosperous business. Jimmy advice to potential entrepreneurs: if
you wait until you’re out of school and working for somebody else,
you’re going to get used to that big car- and you’re not going to want to
gamble with that stuff. It’s better to start a company when you’re a
25
SESSION 6
student, while you’re still used to driving a Junker and living like a dog.
“Jimmy started a university of Texas entrepreneur club that now has 260
members. It is one of more than 350 entrepreneurship clubs on college
campuses across the United States. The association of collegiate
entrepreneurs published a list of the top 100 businesses started by people
under 30. All are worth over $ 1million.
College campuses aren’t the only places to find guidance in
entrepreneurship. The national foundation for teaching entrepreneurship
to handicapped and disadvantaged youth in Newark, New Jersey, trains
former drug dealers, street toughs and special education students to sell
goods and services. Their businesses range from sneakers and lingerie
sales to manicures and car repair. Maybe you should consider getting
started now, too.
From such a humble beginning did Jay Goltz developed and grew his
business. Starting with $ 5,000 he saved from summer jobs and a
determination to succeed, Jay Goltz built his business the hard way-from
the ground up. Goltz was pursuing an accounting degree when he started
artists’ frame service in 1978. Artists’ frame service is now a $ 9 million
business employing 120 people at its main location a 35, 000-square-foot
showroom and production facility in Chicago. The custom picture-
framing facility is 30 times the size of the industry average, making it the
world’s largest.
People are willing to take the risks of starting a business for many
reasons, including profit, independence, challenge and opportunity. Goltz
recognized the opportunities in picture framing since most frame shops at
that time did not focus on new concepts , but rather are great executions
of old businesses. He uses Nike as an example. People have been making
gym shoes for 75 years; Nike just executed it better. Picture framing was
not a new concept, but Goltz started artists’ frame service with the theory
that pleasing customers, low prices through aggressive purchasing and
increased volume framing materials. He decided to give his customers a
one-week turnaround, whereas other shops took six to eight weeks.
Goltz actively shares his business acumen with other entrepreneurs

through his boss school seminars. Since he was out on his own from the
beginning of his career, Goltz can explain the emotional and intellectual
transition from a seat-of-the-paints start-up to the building of a well-run
organization.
Goltz believes that customer service and execution require fundamental

understanding of business principles such as leveraging your assets and
having the appropriate skills in marketing, management and finance.
These skills can be acquired through classes and experience. It is much
more difficult to develop the personality traits needed to be a successful
26
SESSION 6
entrepreneur: tolerance of uncertainty, self-destruction, self-nurturance,

high energy and action orientation.
Success has not gone unnoticed for Jay Goltz. He has received numerous
awards: the minority advocate of the year Award in 1989; named one of
the top 100 young entrepreneurs in the United States by the association of
collegiate entrepreneurs (ACE) in 1988; finalist in the Arthur Anderson
entrepreneur awards in 1989 and Arthur Anderson’s entrepreneur hall of
fame in 1992. Goltz attributes his success to taking care of customers:
“Services is the cheapest commodity you can provide, yet it’s the surest
way to success. Take care of customers and the rest will take care of
itself.”
Questions
1. What are the merits and latent problems of starting a business
while in school
2. What kind of entrepreneurs are Jay, Jimmy and Dick and why?
3. Identify in each case (for Jay, Jimmy and Dick) the opportunity
that was identified.
4. Using the three main theories discussed in class explain why the people
in the case became entrepreneurs.
5. What qualities must student entrepreneurs have to be successful in
both their education and business?
6. Why do you think entrepreneurs like Goltz succeed when so many
others fail?
7. How can a person develop the traits necessary to be a successful
entrepreneur?
8. How important is a business plan in getting started in a business
such as artists frame service? Explain.
9. What do you say is Goltz’s
a. Mission
b. Strategy
c. Core competence
10. Do you think it is good for artists’ frame services to be compared
with Nike?
11. Using inventive, creative and innovative as basis, describe the
people in the case.

27
UNIT 2 CREATIVITY, INNOVATION AND INVENTION
SESSION 1
UNIT 2: CREATIVITY, INNOVATION AND INVENTION

Well done for completing the first unit of this course. You are welcome to
unit two. This unit exposes you to the concept of innovation and
creativity. It comprises six sessions as enumerated below:
Session 1: Creative Behaviour

Session 2: Creative Process
Session 3: Creative enhancers, distracters/barriers to creativity
Session 4: Elements in the Innovation process
Session 5: Generating business ideas and how to protect them
Session 6: Types of innovations
Unit Objectives
By the end of this unit you should be able to:
1) Explain Innovation and invention.
2) Describe the creative behaviour.
3) Identify the barriers to creativity.
4) Understand the creativity process.
28
CREATIVITY, INNOVATION AND INVENTION UNIT 2
SESSION 1
SESSION ONE: CREATIVE BEHAVIOUR
I warmly welcome you to the first session of this unit. I hope you enjoyed
reading the first Unit. In this session, we will look at what creativity is,
some characteristics of creative people, the intersecting forces at which
creativity occurs as well as the types of creative behaviour. I hope to have
a good time with you in this session.
Objectives
By the end of this session, you should be able to:
a. Define creativity in your own words
b. Identify the characteristics of creative people
c. Explain the intersecting forces at which creativity occurs.
d. Explain the types of creative behaviour
Now read on...
1.1 Introduction
When you hear creativity what at all comes to your mind? Several authors have
tried to define the term creativity. Let’s look at some of these definitions.
According to Zimmerer & Scarborough (2005), Creativity is the ability to

develop new ideas and to discover new ways of looking at problems &
opportunities”
Matherly Goldsmith (1988) defines creativity as the generation of ideas that

result in improved efficiency or effectiveness of a system.
Creativity simply put, is the development of ideas about products, practices,

services, or procedures that are novel and potentially useful to the organization.
1.2 Characteristics of Creative People

In order for a person to be identified as creative, there are certain features that he or
she must possess. The characteristics of creative people are discussed below:
a. Persistence- persistence is very crucial in order to sail through difficult
and trying times and situations, and this is a quality that creative people
usually possess.
b. Self-confidence- creative people have a lot of confidence and belief in
their own capabilities and strengths. This quality enables them to trust
themselves and take bold steps in taking certain risks.
c. Independence- creative people do not rely so much on other people. They
try as much as possible to find solutions to their problems.
29
SESSION 1
d. An attraction to complexity- creative people are usually attracted to

complex situations because of their zeal to find solutions to problems.
e. Tolerance of ambiguity- unlike uncreative people, creative people have
the ability to tolerate ambiguous and unclear situations.
f. Intuitiveness-
g. Have broad interests- they have a wide range of interests and do not limit
themselves a lot.
h. They are energetic- they are very zealous and enthusiastic in pursuing
their goals.
i. Drive to achieve- creative people derive satisfaction from achieving their
goals. They, therefore, have a high urge and are intrinsically motivated to
achieve their set objectives.
j. Love their work- creative people attach a lot of passion to whatever they
set their minds at.
k. Take risks- creative people are not afraid to take risks as uncreative people
do. They are ready to take reasonable and calculated risks in order to
achieve their goals.
1.3 The Intersection Where Creativity Occurs

To ask, “What is creativity?” It is better to ask, “Where is creativity?” Creativity
occurs at three intersecting forces as discussed below.
Individual
A person with his or her intelligence, experience & dispositions initiate the
creative process & outcome.
Domain of knowledge
Extent of advancement in the domain of knowledge within which the individual
has chosen to work (e.g. humanities, science, business, etc.) also influences the
outcome of the creative effort to put up by a person.
That is, the more advanced the domain of knowledge & the better the
accessibility to that knowledge, the higher the probability that the creative
outcome of one’s effort will be good, all other things being equal.
Social context within which the merit of the creative work is judged
The field or social context within which the creative work or product is
evaluated or judged by critics, experts, organisation or market also affects
creativity of an individual. That is, the judgement may serve as a motivation or
constraint to one’s creative ability.
30
SESSION 1
1.4 Types of Creative Behaviour

Three types of creative behaviour have been identified:
Creation; the act of pure invention that is making something out of

nothing.
Synthesis; creative act of joining two previously unrelated things, e.g.

bringing the telephone and the computer.
Modification; this occurs when a thing or process is improved or gains

new application, e.g. a change in design, etc.
Exercise 5.1
1. What is creativity?
2. What are the three intersecting forces at which creativity
occurs?
Answers to activity
1. Creativity simply put, is the development of ideas about
products, practices, services, or procedures that are novel
and potentially useful to the organization.
2. The three intersecting forces at which creativity occurs are

Individual level, Domain of knowledge and Social context
within which the merit of the creative work is judged

 Issues that are not clear, and;
 Difficult topics if any.
31
SESSION 2
SESSION 2: CREATIVE PROCESS

Hello! Welcome to session two of unit two. We learnt about what creativity is and who creative
people are. Now let us move our attention to the process that creativity goes through.
Objectives
(a) Outline the creative process.
(b) Explain the creative process.
Now read on...
2.1 Creative Process

Ideas seldom materialize accidentally. They usually evolve through creative
process whereby imaginative person, germinate ideas, nurture them, and develop
them successfully. These stages are explained below. I hope you will enjoy this
session.
STEP 1: Idea Germination

This stage is the seeding stage of a new idea. It is the stage where the recognition
of a new idea takes place.
STEP 2: Preparation
This stage involves the conscious search for knowledge to rationalise the identified
idea. It is about gathering as much information as possible to understand the nature
of the idea.
STEP 3: Incubation
Is the subconscious assimilation of the information gathered at the preparation
stage (including outcome of on-going information search) to arrive at a creative
outcome? The outcome may be a creation, synthesis or modification. Incubation,
therefore, involves active judgment, fantasizing, try-and-error & flexibility to
arrive at a satisfying outcome.
STEP 4: Illumination
Is the recognition or realisation of an idea as being technically feasible? This is
attained through conscious analysis of empirical & factual data gathered through
research. E.g. a good may be designed & tested in the lab.
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SESSION 2
STEP 5: Verification
Verification is the application or test to prove that the idea has value. It is a form
of validation or confirmation of the idea is good or feasible. It involves a synthesis
of research data – primary & secondary data – to establish the viability of the idea.
This session has been able to explain the creative process. We have seen that the
creative process involve activities such as idea germination, preparation,
incubation, illumination and lastly verification.
Exercise 5.2
1. Identify and explain the steps in the creative process
Answers to exercise
1. Idea germination, preparation, incubation, illumination and verification.

REFERENCES
Agyapong, D. & Adam, M. A (2013). Venture Financing and Entrepreneurship
Module. Institute of Distance Learning, KNUST. Kumasi
33
UNIT 1 CREATIVITY, INNOVATIONS AND INVENTIONS
SESSION 3
SESSION 3: CREATIVE ENHANCERS AND DISTRACTERS
Now we all know what creativity is, and we also know some of the characteristics of creative
people as well as the creative process. It is very appropriate for you to know the various ways to
enhance and encourage creativity in your organisations as well as some of the things that can
distract or serve as barriers to creativity. What do you think are some things that can be done in
organizations to enhance creativity? Come with me and let’s find out!
Objectives

a. Identify five ways by which organisations can enhance creativity.
b. Explain five things that serve as barriers to creativity.
Now read on...
3.1 How to Enhance Creativity

The constant change in the environment of business requires organisations to be creative to help keep
pace with the persistent change. In addition, creative skill is what the entrepreneur requires to develop
new venture, product or process. The following are creative enhancers, especially for existing
organisations:
a. Elevating creativity importance throughout the organizations: the management of
organizations should project the importance of creativity throughout the organization and
encourage organizational members to be creative.
b. Offering tangible rewards to those generating ideas: organizations should offer handsome
rewards to members who bring forth innovative ideas as this will boost their morale to be
creative. Monetary rewards, praise, recognition and celebration can be powerful incentives.
c. Protecting people who make honest mistakes and are willing to learn from them: in trying
to be creative people can make mistakes. Therefore, organizations should put in place
measures to protect those who in trying to be creative to make genuine mistakes and are
willing to learn lessons from those mistakes.
d. Investing in resources that help employees to sharpen their creative skills: in order to boost
the creativity of employees, organizations should be ready to invest in resources and
training programs that will achieve such purpose. One must give employees the tools &
resources they need to be creative. One of the most valuable resources is time.
e. Listening attentively in order to acknowledge and provide early support to ideas:
management should learn to listen attentively to ideas and suggestions of employees in
order to identify and support their creative ideas.
3.2 Barriers to Creativity

What do you think are some of the things that serve as barriers to creativity?
a. Not attempting to hire creative people: organizations that do not make efforts to hire
creative people to serve as barriers to creativity in organizations.
34
CREATIVITY, INNOVATIONS AND INVENTIONS UNIT 2
SESSION 3
b. Being pessimistic, judgmental and critical: without optimism and confidence in yourself,
you cannot be creative. People who are pessimistic do not have confidence in their attempts
and fear to fail hence they do not dare to think of new ways of doing things.
c. Punishing mistakes or failed ideas: in organizations where people are punished when they
make mistakes in their attempts to be creative, employees will not be motivated to think of
creative ways of doing things. Rather, they will stick to the old ways of doing things in
order to avoid any punishment.
d. Maintaining a stiff organizational culture with no room for different behaviors: A stiff
organizational structure inhibits flexibility, without which it will be virtually impossible to
be creative.
e. Being inattentive, acting distant and remaining silent when employees want to discuss new
ideas: when the management act in this way it discourages employees from coming up with
new ideas.
In this session we have dealt with the factors that can enhance creativity and those that serve
as creativity detractors. I hope you will be able to apply these factors in your various
organisations as well as personal lives to improve creativity while minimising the factors that
deter people from being creative.
Exercise 5.3

1. How do you think your organisation can encourage creativity?
2. What are some of the things that impede creativity
Answers to activity
1. Elevating creativity importance throughout the organizations; Offering tangible rewards

to those generating ideas; Protecting people who make honest mistakes and are willing to
learn from them; Investing in resources that help employees to sharpen their creative
skills
2. Not attempting to hire creative people; Being pessimistic, judgmental and critical
Punishing mistakes or failed ideas; Maintaining a stiff organizational culture with no room for
different behaviors; Being inattentive, acting distant and remaining silent when employees want
to discuss new ideas
35
SESSION 4
SESSION 4: ELEMENTS IN THE INNOVATION PROCESS

Hello! Welcome to session four of this unit. I believe we all now know what is meant by
creativity, the characteristics of creative people, the creativity process as well as ways to
enhance creativity and things that serve as barriers to creativity in an organisation. In this
session, our attention shall be drawn to innovation and elements in the innovation process.
Objectives
By the end of this session, you should be able to
(a) Explain innovation
(b) Identify the elements in the innovation process
Now read on...
4.1 Innovation Defined
The question now is “what is innovation?”
Innovation is the implementation of new ideas at the individual, group or organizational

level. Simply put, innovation is the process of doing new things. It is therefore, the
transformation of creative ideas into useful applications, but creativity is a prerequisite
to innovation.
It is important to recognize that innovation implies action, not just conceiving new
ideas. When people have passed through the illumination and verification stages of
creativity, they may have become inventors, but they are not yet innovators.
The difference between invention and innovation is:
Invention is the creation of new products, processes, and technologies not previously
known to exist.
Innovation is the transformation of creative ideas into useful applications by combining

resources in new or unusual ways to provide value to society for or improved products,
technology, or services.
4.2 Innovation Process

The innovation process consists of four highly interrelated sequential stages of activities as
follows:
i. Analytical Planning
This stage involves identification of product design (including service delivery
strategy), production requirements, market strategy and financial requirements for the
36
SESSION 4
transformation of the outcome of the creative process into a good, service, product or
process technology.
ii. Organising Resources

The second-stage deals primarily with activities to obtain the needed capital, materials,
technology, premises & human resources identified under analytical planning in order to
transform the idea into a reality.
iii. Implementation
At the implementation stage, the focus is on how to accomplish activities. For instance,
Setting up of a new business venture or creation of a new department to take
responsibility for the production of the new good or offer of the new service or
delegating these activities to an existing department represent the implementation stage.
It also deals with developing product design (including service delivery strategy) and
producing the intended product in commercial quantities.
iv. Commercial Application

The final stage involves providing value to customers in the form of sale of goods,
technology or offer of service; Implementing a marketing strategy; Rewarding
employees; Making returns on investment for investors as well as satisfying founders in
terms of fulfillment of promises made during the initial stages of the entrepreneurial
process.
From the perspective of the entrepreneur, innovation involves the whole process from
opportunity identification, ideation or invention to development, prototyping,
production marketing and sales, while entrepreneurship only needs to involve
commercialization (Schumpeter).
Today it is said to involve the capacity to quickly adapt by adopting new

innovations (products, processes, strategies, organization, etc.). Furthermore,
traditionally, the focus has been on new products or processes, but recently new
business models have come into focus, i.e. the way a firm delivers value and
secures profits.
Schumpeter argued that innovation comes about through new combinations made
by an entrepreneur, resulting in
a. a new product,
b. a new process.
c. opening of new market.
d. new way of organizing the business
e. new sources of supply
37
SESSION 4
4.3 Drivers of Innovations

The following are the drivers of innovations today:
a. Financial pressures to reduce costs, increase efficiency, do more
with less.
b. Increased competition.
c. Shorter product life cycles.
d. Value migration.
e. Stricter regulation.
f. Industry and community needs for sustainable development.
g. Increased demand for accountability.
h. Demographic, social and market changes.
i. Rising customer expectations regarding service and quality.
j. Changing economy.
k. Greater availability of potentially useful technologies coupled with
a need to exceed the competition in these technologies.
In a nut shell we have discussed what is meant by innovation and also that
the innovation process include analytical planning; organising resources
implementation and commercial aplication. Lastly we also learnt some of
the factors that trigger innovation.
Exercise 5.3
1. Explain the term innovation

2. Outline the steps in the innovation process
3. Identify five factors that trigger innovation
Answers to activity
1. Innovation is the implementation of new ideas at the individual,
group or organizational level. Simply put, innovation is the process
of doing new things. It is therefore, the transformation of creative
ideas into useful applications
2. Analytical Planning
Organising Resources
Implementation
Commercial Application
38
SESSION 4
3. Financial pressures to reduce costs, increase efficiency

Increased competition
Shorter product life cycles
Value migration
Stricter regulation
39
SESSION 5
SESSION 5: METHODS FOR GENERATING BUSINESS IDEAS

AND HOW TO PROTECT THEM
Welcome to session five of unit two. Business ideas do not come
accidentally; they are generated by conscious efforts. This session aims to
discuss the methods that are used to generate business ideas and also to
brief us on how to protect our business ideas. I hope you will enjoy this
session.
Objectives
By the end of this session, you should be able to
(a) Outline and discuss the methods used to generate business ideas
(b) Identify ways to protect business ideas
5.1 Methods of generating business ideas

There are various methods for generating business ideas, including the
following:
a. Brainstorming
Brainstorming is a creativity technique used by groups to generate a large
number of ideas for solving a problem.
Some basic rules of brainstorming include the following:
 All members must contribute.
 There must be no form of criticism.
 All ideas are captured.
 There should be a facilitator who writes ideas in brief.
 No repetition of ideas
 No idea is discarded – all ideas are written down.
b. Focus groups
It involves an open and in-depth discussion of ideas led by a facilitator.
The group could have between 8 and 14 participants.
c. Surveys
d. Mind mapping
It is a diagram that is developed to show how ideas, words, tasks,
activities and objects are linked. Hence, it is used in generating ideas,
analysing problems, classifying objects, or stimulating thinking about
something.
40
SESSION 5
e. Customer advisory boards
Protecting your business idea

a. Patent
An exclusive right (grant) given to the inventor of a product to make, use,
or sell the invention for a specified number of years, usually 20 years.
b. Trademark
A trademark is a distinctive word, phrase, symbol, design, name, logo,
slogan, or trade dress that a company uses to identify the origin of a
product or to distinguish it from other goods on the market.
c. Copyright
A copyright is an exclusive right that protects the creators of original
works of authorship such as literary, dramatic, musical, and artistic works
(Zimmerer & Scarborough, 2005). A copyright lasts for the life of the
creator plus 50 years after their death. A copyright lasts 75 to 100 years if
the holder is a business
We have come to end of this session. We have discussed the various

methods to generate business ideas as well as how to protect your
business ideas once they are generated. I hope you now know how to
generate your own business idea and how you will protect it.
Exercise 5.4

1. Discuss five ways of generating business ideas
2. What are some of the ways by which you can protect your
business ideas?
Answers to activity
1. Brainstorming
Focus groups
Surveys
Mind mapping
Customer advisory boards
41
SESSION 5
3. Some of the ways by which a business idea can be protected

include:
Patent
Trade mark
Copyright
42
CREATIVITY, INNOVATIONS AND INVENTION UNIT 2
SESSION 6
SESSION 6: TYPES OF INNOVATIONS

Hi! Welcome to the last session of this unit. I hope you can remember all that
you have learnt in this unit about creativity and innovation. Take some
minutes to jot down the points you have learnt in this unit. Having done that,
let's conclude this unit by looking at the types of innovations.
Objectives
(a) Explain the types of innovations
(b) Describe the various types of innovations.
6.1 Introduction
It should be noted that innovation and Creativity work in tandem. In a simple
sense, creativity is the production of novel and useful ideas in any domain.
Innovation is regarded as the successful implementation of creative ideas in any
organisation. Creativity of individuals and teams is the starting point for
innovation for an organisation. Creativity and innovation are important today
because life is becoming increasingly complex, fast and changing at a faster pace.
This requires constant innovation of new things. Creativity and innovation allow
for adaptation, maintain flexibility and is part of decision making for today’s
economic units. Creativity requires originality and flexibility. The two activities
contribute to physical and psychological health and optimal functioning.
There are various types of innovations, including:

a. Disruptive innovation – takes a cheaper, low-end disruptive or a new-
market disruptive innovation to the market
b. Application innovation – takes existing technologies into new markets
to serve new purposes
c. Product innovation – takes established offers in established markets to
the next level (a type of sustaining innovation)
d. Process innovation – makes processes for established offers in
established markets more efficient or effective (also a type of
sustaining innovation)
e. Experiential innovation – makes cosmetic/surface modifications of
established products or processes that improve customers’ experience
f. Marketing innovation – improves customer touching processes, e.g.
by marketing communications or consumer transactions
g. Business Model innovation – reframes an established value
proposition to the customer or a company’s established role in the
value chain or both
h. Structural innovations – capitalizes on disruption to restructure
industry relationships.
43
UNIT 1 EMERGING ISSUES IN FINANCIAL MARKETS AND
SESSION 5
INSTITUTIONS
6.2 Entrepreneurship, Creativity and Innovation

Having an entrepreneurial mindset is about seeking and taking advantage of
opportunities responsibility, creating value, sharing wealth & value, seeking for
positive outcomes, quality oriented and being self-confident.
Entrepreneurs are people who exercise business judgment in the face of uncertainty.
They are motivated by the potential for profit generated from engaging in the
speculative activity. Furthermore, they bring together the factors of production and
play a central coordinating role. They create and build something of value from
practically nothing.
As part of their creative behaviour, they shift resources out of an area of lower and
into an area of higher productivity and greater yield. This is often described as the
creative destruction.
In addition, they search for change, responds to it, and exploits it as an opportunity.
Innovation is the specific tool of entrepreneurs, the means by which they exploit
change as an opportunity for a different business or a different service.
Creativity is at the heart of entrepreneurship, enabling entirely new ways of

thinking and working. Entrepreneurs identify opportunities, large or small, that no
one else has noticed. Good entrepreneurs also have the ability to apply that
creativity by effectively marshal resources to a single end.
They have drive; a fervent belief in their ability to change the way things are done,
and the force of will and the passion to achieve success. In addition, they have a
focus on creating value by doing better, faster, cheaper. Furthermore, they take
risks by breaking rules, cutting across accepted boundaries, and going against the
status quo.
Entrepreneurship drives innovation, competitiveness, job creation and economic

growth. It allows new/innovative ideas to turn into successful ventures in high-tech
sectors and/or can unlock the personal potential of disadvantaged people to create
jobs for themselves and find a better place in society.
Entrepreneurs have the passion for what they do. They possess the creativity and
ability to innovate. This is often found in their sense of independence and self-
reliance, coupled with the high level of self-confidence and willingness and
capability (though not necessarily capacity or preference) for taking risks.
6.3 Innovation and Entrepreneurial Mindset

Innovation is at the heart of developing the entrepreneurial mindset. Innovation and
creativity come through perpetual learning and knowledge acquisition. To be able
to create something new, you would have to seek for opportunities. That is, looking
for chances to change the present situation. However, you have to pursue only the
44
CREATIVITY, INNOVATIONS AND INVENTION UNIT 2
SESSION 6
best opportunities and do not chase after every option. Furthermore, you would
have to develop the character of coping with risks, thinking positively and deeply.
You would have to analysis causes and effects and be ready to support a good
course.
In developing the innovative mind, you have to be open to ideas. Give yourself the
chance of being creative and see that all problems have in them opportunities that
can be pursued. Expect and tolerate failure. You must note that we don’t fail
because we start, we fail because we quit.
This session looked at the types of innovations. It also looked at the

relationship between entrepreneurship, innovation and creativity. It was found
that innovation is the basis for developing the entrepreneurial mindset.
Exercise 5.4

1. What are the types of innovations?
2. Define innovation.
3. What is the basis for developing entrepreneurial mindset?
Answer to activities
1. The types of innovation include:
Disruptive innovation
Application innovation
Product innovation
Process innovation
Experiential innovation
Marketing innovation
Business Model innovation
Structural innovations
2. Innovation is regarded as the successful implementation of

creative ideas in any organisation.
3.
45
SESSION 1: THE ENTREPRENEURIAL PROCESS
The process of starting a new venture is embodied in the entrepreneurial process, which
involves more than just problem solving in a typical management position. An entrepreneur
must find, evaluate, and develop an opportunity by overcoming the forces that resist the
creation of something new. The process has four distinct phases, including identification and
evaluation of the opportunity; development of the business plan; determination of the
required resources; and management of the resulting enterprise. Although these phases
proceed progressively, no one stage is dealt with in isolation or is totally completed before
work on other phases occurs. For example, to successfully identify and evaluate an
opportunity (phase 1), an entrepreneur must have in mind the type of business desired (phase
4).
Objectives
1. identify the elements in the entrepreneurial process
2. identify the variables in the new venture creation
Now read on …………………….

1.1 Elements in the Entrepreneurial process
The entrepreneurial process consists of certain key elements. These elements include
identifying and evaluating the opportunity, developing a business plan, determining the
resources required and managing the resulting enterprise. These variables are discussed
below.
1. Identify and Evaluate the Opportunity
The first step in the Entrepreneurial process is opportunity identification and evaluation. Most
good business opportunities do not suddenly appear, but rather result from an entrepreneur’s
alertness to possibilities, or in some case, the establishment of mechanisms that identify
potential opportunities. Although most entrepreneurs do not have formal mechanisms or
identifying business opportunities, some sources are often fruitful: consumers and business
associates, members of the distribution system, and technical people. Often, consumers are
the best source of ideas for a new venture. Due to their close contact with the end user,
channel members in the distribution system also see product needs. Many other entrepreneurs
have identified business opportunities through a discussion with a retailer, wholesaler, or
manufacturer’s representative.
Whether the opportunity is identified by using input from consumers, business associates,
channel members, or technical people, each opportunity must be carefully screened and
evaluated. This evaluation of the opportunity is perhaps the most critical element of the
entrepreneurial process, as it allows the entrepreneur to assess whether the specific product or
service has the returns needed compared to the resources required.
2. Developing a Business Plan

A good business plan must be developed in order to exploit the defined opportunity. This is a
very time-consuming phase of the entrepreneurial process. An entrepreneur usually has not
prepared a business plan before and does not have the resources available to do a good job. A
good business plan is essential to developing the opportunity and determining the resources
required, obtaining those resources, and successfully managing the resulting venture.
47
3. Determine the Resources Required
The resources needed for addressing the opportunity must also be determined. This process
starts with an appraisal of the entrepreneur’s present resources. Any resources that are critical
need to be differentiated from those that are just helpful. The downside risks associated with
insufficient or inappropriate resources should also be assessed.
Acquiring the needed resources in a timely manner whiles giving up as little control as
possible is the next step in the entrepreneurial process. An entrepreneur should strive to
maintain as large an ownership position as possible, particularly in the start-up stage. As the
business develops, more funds will probably be needed to finance the growth of the venture,
requiring more ownership to be relinquished.
4. Manage the Enterprise

After resources are acquired, the entrepreneur must use them to implement the business plan.
The operational problems of the growing enterprise must also be examined. This involves
implementing a management style and structure, as well as determining the key variables for
success. A control system must be established, so that any problem areas can be quickly
identified and resolved. Some entrepreneurs have difficulty managing and growing the
venture they created.
1.2 Variables in the new venture creation

In creating a new venture a new venture, certain key variables need to be present. These
variables together constitute the creation of a new venture. These variables are the
entrepreneur, the organisation, the environment, the organisation and the process.
a. The Entrepreneur
The opportunity and the entrepreneur must be intertwined in a way that optimizes the
probability for success. People often become entrepreneurs when they see an opportunity.
They are compelled to start a venture to find out whether they can convert that opportunity
into an ongoing business. That means that, ideally, the entrepreneur’s life experience,
education, skills, work exposure, and network of contacts align well with the opportunity.
b. Environment
The birth, growth, contraction and death process of enterprises has become an important
research field in the so-called firm demographics. An entrepreneur is an opportunity seeker
but in so doing he/she needs to have an open eye on a rapidly changing external environment.
As a consequence, firm demography is a multidimensional research field in which
psychology, sociology, marketing, political science, economics, finance and management
come together.
This has prompted several studies on the firm’s life cycle, in particular, competitive
performance, product differentiation, spatial relocation, organizational restructuring etc.
There are various reasons why of all types of firm dynamics, new firm formation has been the
most attractive. Perhaps the most significant reason is that new firms provide new jobs, or
that new firms are often involved in the introduction of new products and processes in the
market.
48
c. Organisation
Most studies of new venture creation have neglected to comment on or even communicate
certain characteristics of organizations (Gartner, 1985). Behind this, there seems to be the
following assumptions: 1) All entrepreneurs are virtually alike and 2) If so, and if they all go
through the same process to create their ventures the organizations they create must not be of
any interest in them.
d. Process
The literature on entrepreneurship has begun to look beyond to what the entrepreneur does.
Specifically, what is done at start-up or even prior to start-up has been increasingly
considered important to the paths taken by new firms and their eventual success. This line of
thinking suggested that in order to understand venture success it may be important to know
some preliminaries as how thorough was the initial planning, why the business started,
whether or not it was a single effort, and what was the financial structure of the business.
Summary
In this session we looked at identifying and evaluating the opportunity, developing a business
plan, determining the resources required and managing the resulting enterprise as elements in
the entrepreneurial process and the variables of new venture creation, that is, the
entrepreneur, the environment, the organisation and the process.
Activity 4.1
1. Identify the elements in the entrepreneurial process?
2. As an entrepreneur, identify the variables you will consider in creating a new venture.
Suggested Answers to Activity 4.1

a. The elements in the entrepreneurial process are identify and evaluate the opportunity,
develop a business plan, determine the resources required, and manage the venture.
b. The variables to be considered in creating a new venture are the entrepreneur, the
environment, the organisation, and the process.
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SESSION 2: INCUBATORS AND THEIR CLASSIFICATION
To promote entrepreneurship and stimulate the development of new ventures, it is important

that these ventures can obtain the support they require. Several entrepreneurial service
providers exist, including business angels, venture capitalists, and institutional investors, but
also consultants, law firms, and real estate agents. The business incubator competes with
these, but is different from other forms of business support in that it provides a complete,
tailored, ‘hands-on’ business support environment. This is the business incubation process,
which is the product of an incubator.
Business incubators provide their incubatees with a supportive environment to help establish
and develop their projects. In its generic sense, the term ‘incubator’ may often be used to
describe a wide range of organisations that in one way or another help the starting
entrepreneur in a supportive environment.
Objectives
1. define incubation and incubator
2. identify the characteristics of an incubator
3. identify the various classes of incubators
Now read on ………………….
2.1 Business Incubation and Incubator

Business incubation is a business support process that accelerates the successful development
of start-up and fledgling companies by providing entrepreneurs with an array of targeted
resources and services. These services are usually developed or orchestrated by incubator
management and offered both in the business incubator and through its network of contacts.
A business incubator’s main goal is to produce successful firms that will leave the program
financially viable and freestanding. These incubator graduates have the potential to create
jobs, revitalize neighbourhoods, commercialize new technologies, and strengthen local and
national economies (NBIA, 2007).
Business Incubation is a unique and highly flexible combination of business development

processes, infrastructure and people, designed to nurture and grow new and small businesses
by supporting them through the early stages of development and change (UKBI, 2007).
A business incubator is an organisation that accelerates and systematises the process of

creating successful enterprises by providing them with a comprehensive and integrated range
of support, including: Incubator space, business support services, and clustering and
networking opportunities. By providing their clients with services on a 'one-stop-shop’ basis
and enabling overheads to be reduced by sharing costs, business incubators significantly
improve the survival and growth prospects of new start-ups. A successful business incubator
50
will generate a steady flow of new businesses with above average job and wealth creation
potential. Differences in stakeholder objectives for incubators, admission and exit criteria, the
knowledge intensity of projects, and the precise configuration of facilities and services, will
distinguish one type of business incubator from another (EC, 2002).
2.2 Characteristics of Incubators

Even though incubators, and the definitions of what constitutes an incubator, have changed
over time, there seem to be certain defining characteristics of incubation. In literature, it has
been revealed that incubators usually offer all or most of five services, listed below.
a. Access to physical resources: Office space, furniture, telecommunication networks,
security, and other physical infrastructure and real estate requirements.
b. Office support: Secretarial and reception services, mail handling, fax and copying
services, network support, book keeping and administration.
c. Access to financial resources: Venture capital, usually a combination of private funds
and investments by business angels, venture capitalists or local institutions and
companies.
d. Entrepreneurial start-up support: Accounting, legal advice for incorporation and
taxation issues, formulating ownership and employee option plan structures.
e. Access to networks: Incubators identify and leverage key individuals for start-up
success. This network takes years to create, but its importance is often
underestimated. It has been stated that this factor is the differentiating factor for
incubators to succeed.
f. The actual mix made of these five characteristics, depends on the focus of the
incubator as well as on the needs of the entrepreneur. Some offer all five services,
others offer four. The former are called incubators in the strong sense of the word, the
latter in the weak sense. An incubator should not offer less than four of these services,
then it would be missing too many elements to be called an incubator. An incubator
must be able to identify the unique value of each service it offers. If it is unable to do
so, it may be better to outsource the service.
2.3 Classification of Incubators

In literature, classification has been based on several distinguishing features, including
location (rural, urban), objectives (empowerment, for-profit), configuration (residential,
virtual), business model (property, venture capital), lead sponsors (university, corporate,
public), type of inhabitants (mixed, industrial, technology, the Internet),), and indeed,
combinations of these. Incubation structures are culturally dependent and in different
countries, different types of incubation have become important. However, classification is not
an end in itself, but provides a culturally relevant framework to discuss issues such as
evaluation, best practice, or the role of the public sector. The classification most often used is
based on the source of sponsoring and the objectives of the incubator. In that way, a division
is achieved in four classes, namely: the not for profit, public incubators either linked to a
university or other knowledge organisation, or independent; the company linked incubators;
51
and the independent, for profit (commercial incubators). Another classification can be the
existence of physical space, resulting in a fifth class: the virtual or new-economy incubator.
However, it can be argued that classification should not (solely) be based on the source of
finance or the objectives of the incubator. Classification may also be based on the type of
enterprises incubated in the incubator, since each type of enterprise requires a different set of
incubation tools and support, while the ‘core’ services offered may be very similar.
Summary
In this session we looked at the meaning of incubation and incubator, the characteristics of
business incubators and how incubators grouped under various classifications.
Activity 4.2
1. Define business incubation
2. Identify the characteristics of incubators
3. State the various classes of incubators
Suggested Answers to Activity 4.2

1. Business Incubation is a unique and highly flexible combination of business
development processes, infrastructure and people, designed to nurture and grow new
and small businesses by supporting them through the early stages of development and
change (UKBI, 2007).
2. Characteristics of Incubators are as follows:
a) Access to physical resources
b) Office support
c) Access to financial resources
d) Entrepreneurial start-up support
e) Access to networks
3. The various classifications of Incubators are as follows:
a) Location (rural, urban),
b) Objectives (empowerment, for-profit),
c) Configuration (residential, virtual),
d) Business model (property, venture capital),
e) Lead sponsors (university, corporate, public),
f) Type of inhabitants (mixed, industrial, technology, internet)
52
SESSION 3: DEVELOPING THE BUSINES PLAN
Information plays a pivotal role in the development of every business. Information is needed
from the development of the business plan of the business through to its establishment till the
time it collapses. It aids in decision making of the business and it also aids the business to be
aware of the environment in which it operates. The session looks at developing the business
and the source of information for the business.
Objectives
1. define business information sources
2. identify the sources of business information
3. identify the means of access to business information
Now read on ………………………..
3.1 Business Information Sources

Business information sources refer to the containers of information that are useful for
different business transactions (Kaye, 1995). Although they may be formal or informal, these
sources play a pivotal role in determining the input for an information system. Access to the
right business information, from the right place, at the right time, from the right source, and
at the right price and knowing how to use it is a major factor influencing trading efficiency
and competitiveness (Siriginidi, 1996, p. 22). In his study, Jorosi (2006) argues that the main
sources of business information for businesses include competitors, customers, business
associates, government officials, media, libraries, newspapers, periodicals, magazines,
government publications, trade, industry associations, and electronic sources. Kaye (1995, p.
16) notes that there are informal and formal sources that contain business information in
different forms.
Kaye (1995, p. 16) argues that informal sources, just like formal sources, are those that help
in the provision of information to individual business managers. Informal sources include
business colleagues, superiors and subordinates, external professionals, and other contacts.
Some are informal-external and others informal-internal. The informal -external sources
include trade contacts, personal advisers, professional associates, social and family contacts.
Informal-internal sources include superiors and subordinates, including staff from other
departments.
Formal sources may be defined as those that are constituted in some regularized or legal
manner in relation to the user (Kaye, 1995, p. 16). Formal internal sources include the
following: trade and development associations, professional and learned societies,
universities and colleges, chambers of commerce and trade, radios and television stations,
market research organizations, advertising agencies, stock exchanges, banks and insurance
companies, law firms, government departments and agencies, international sources,
53
business statistics offices, company registration offices, local authorities, suppliers,
customers, competitors, shareholders, and public and other libraries. Formal- internal
sources also include reports, memoranda, work instructions, budget statements, delivery
notes, invoices, codes and regulations, and analyses and test results.
All these sources are important for businesses to flourish. Riaga (1994. p. 1), however,
argues that good information comes from a source in which the user has confidence, which
raises the question of users’ trust in sources of business information. In 1977, Atherton (p.
7) controversially argued that the kind of information sources sought and used tend to be
those that are easy to access and that are known, personally, to the user, regardless of the
quality of the information.
Whatever the source of business information, its characteristics are important to the user.
Bowes (1995, p. 120) argues that the characteristics of the information source, including
credibility and performance, are important for community acceptance and credence. The
variables of such sources include credibility and the dimensions underlying it, such as
competence and trustworthiness; homophile with audience; opinion leadership; and centrality
to formal and informal communication networks. A business information source that is
trusted by its users creates confidence in decision-making in all aspects of commercial
activity and will be visited or used repeatedly. As Moore (2002, p. 301) observes, an
important determinant of the impact that is made by information providers and processors is
the trust that users place in the information provided. Authority is an important determinant
of trust. Information users take a number of things into account when assessing authority of
the information they receive. These include the “standing of the information provider; the
extent to which it can be seen to be objective; its motive in providing the information; and the
likelihood that it will get things right” (Moore, 2002, p. 301).
3.2 Means of Access to Business information

Means of access to business information refers to the ways, means, or methods used to access
or acquire the right business information from available sources. These include the telephone,
e-mails, faxes, visiting the library personally, reading public notice boards, listening to radio
broadcasts, etc. The means of access to information is a powerful procedural measure that
needs to be instituted for quality control in an information system. For instance, if the
information system institutes personal visits to the resource centre as the only means to
access information, this can have a detrimental effect on the quality of information accessed.
A business manager may decide to use a third party to access the information because of
distance, which may affect the quality of access because of misinterpretation by the third
party. If only the telephone is used, what measures are there to minimize noise? The type and
the quality of the means used to access information have a direct bearing on the quality of
information. For a business enterprise and any person, the issues of speed, distance of
location, noise, and costs incurred in the utilization of the means are crucial matters. Just as
users put trust in the sources of business information, the means used to access the business
information from those sources should be trusted. A trusted means or channel should
54
facilitate accurate, timely, and less costly access to business information.
Summary
In this session we looked at the formal and informal sources of business information and the
means through which this information is accessed.
Activity 4.3
1. Identify and explain the sources of business information
2. What are the means by which a business can access information?
Suggested Answer to Activity 4.3

1. a) Informal sources include business colleagues, superiors and subordinates, external
professionals, and other contacts
b) Formal sources include trade and development associations, professional and
learned societies, universities and colleges, chambers of commerce and trade, radios
and television stations, market research organizations, advertising agencies, stock
exchanges, banks and insurance companies, law firms, government departments and
agencies, international sources, business statistics offices, company registration
offices, local authorities, suppliers, customers, competitors, shareholders, and public
and other libraries.
2. The means of access to business information include the telephone, e-mails, faxes,
visiting the library personally, reading public notice boards, listening to radio
broadcasts, etc
55
SESSION 4: THE BUSINESS PLAN LAYOUT
A business plan is a prediction of the future based on current abstractions, assumptions and
estimates. This is unavoidable. In fact, if you could see into the future, there would be no
need for a business plan. When a business plan is implemented, the plan comes in contact
with reality. This could be a nasty shock for many business entrepreneurs causing a good deal
of doubt about their business plan. However, reality is the feedback necessary to reinforce or
adjust the business plan to achieve project completion. If a plan is not working, change items
in the plan. The plan itself will show what impacts a change will have on other areas of a
business. A business plan is never cast in stone. Use it as a management tool.
Objectives
1. explain a business plan
2. identify the contents of a business plan
Now read on ……………………

4.1 Meaning of Business plan
A business plan is a formal statement of a set of business goals, the reasons they are believed
to be attainable, and the plan for reaching those goals. It may also contain background
information about the organization or team attempting to reach those goals.
4.2 Format of a Business plan

When it comes to a business plan format, there are ten basic elements that must be covered
when writing a business plan. The standard content of a business plan includes:
a. executive summary
b. general company description
c. the opportunity
d. industry and market
e. your strategy
f. the team
g. a marketing plan
h. operational plan
i. financial plan
j. an appendix
While there are no hard and fast rules for the format of a business plan, this breakdown is
generally accepted as standard. While some people think you do not need a business plan to
start your own business, research has shown that having a business plan greatly contributes to
the success of your venture. A business plan will not automatically make you a success, but it
will help you avoid some common causes of business failure including under-capitalisation or
the lack of an adequate market.
56
1. Table of Contents (1 page)
Your contents page should be the very last thing you write to ensure that all the page numbers
are correct. Make sure that you number your pages correctly so that a person can quickly and
easily find the sections they are interested in.
2. Executive Summary (2 pages)

The executive summary is an abridged version of the whole business plan. Many business
plan readers will read the executive summary and then decide whether to proceed further or
discard the plan. The executive summary should be written last, once all the other sections
are complete. It should not exceed two pages and should eloquently summarise the most
important aspects of the plan. Key elements to include in the executive summary include
business concept, financial features, current business position. .
3. General Company Description (1 – 2 pages)

The general company description section usually follows the executive summary in the
started business plan format. It is used to give a high level overview of the company and the
business that it engages in. This introductory section of the plan section should include the
name of the company, mission statement of the business, company goals and objectives, the
main features of the industry in which you will operate and the most important company
strengths and core competencies.
4. The Opportunity, Industry & Market Description (2 – 3 pages)

This section of the standard business plan format requires that you communicate some of the
insight that you got into the industry, the market and the opportunity from the systematic
research you conducted before writing the business plan. Your research will determine your
market strategies. The market analysis you do should force you to become familiar with all
aspects of the market, so that the target market can be defined and your business can be
positioned to garner its share of sales. It also helps you establish pricing, distribution and
promotional strategies and gives you an indication of the growth potential within the industry.
5. Strategy (1-2 pages)

The strategy will describe to readers how the business will compete in the chosen markets.
Your positioning strategy will be affected by a number of variables related to the motivations
and requirements of your target market as well as what your primary competitors are doing.
Before you position your product or service, you will need to know how your competitors are
positioning themselves, the specific attributes your product has that your competitor’s do not
and the needs your product fills for your customers.
6. Business Model Explanation (1 page)

A business model is the profit-making engine of the business. It is central to a business’s
success. The business model you choose will be a strong determining point of the future
success of your business. Your business model must include information on what your
57
company offers in terms of products or services; what makes your offering unique; who you
sell them to; and how you make your money.
7. Team: Management & Organisation (2 pages)

In this section of the business plan format you should provide a description of the people
behind the business. It should include a list the founders including their qualifications and
experience, a description of who will manage the business on a day-to-day basis, an
organisational chart if you have more than 10 employees, showing the management hierarchy
and responsibility for key functions (including position descriptions for key employees).
8. Marketing Plan (2 – 3 pages)

The marketing plan defines all of the components of the marketing strategy. The marketing
plan should draw on market research. It should disclose the important marketing decisions
about the product (or service) and why it is valuable to customers, the focused and detailed
description of the target market, the positioning of the product or service – how it should be
perceived by customers, etc.
9. Operational Plan (2 pages)

Explain the daily operation of the business, its location, equipment, people, processes, and
surrounding environment. The operational plan in a standard business plan format describes
how the business functions on a continuing basis, as well as the capital and expense
requirements related to the operations of the business.
10. Financial Plan (3 – 5 pages)

The financial plan is a reasonable estimate of your company’s financial future. Include a few
paragraphs on the main features in the financial plan and back this up with financial
projections. Do not include too much financial detail in the body of the business plan. If you
have detailed projections and supporting calculations, place them in the appendix.
11. Appendix
The appendix includes additional documents that the reader of the business plan may want to
refer to. Documents that could be included in the appendix are brochures and advertising
materials, industry studies, blueprints and plans, market research studies, etc.
Summary
In this session we looked at the explanation of a business plan. We also looked at the format
for writing a business plan and the items to include in writing the business plan. These
include the table of content, the executive summary, the general description of the company,
the strategy, the business model, the team, the marketing plan, the operation plan, the
financial plan and the appendix. We also learned that there are no hard and fast rules on the
format of writing a business plan. The business plan should be written according to the
objective of the business.
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Activity 4.4
1. What is a business plan?
2. As a fresh graduate from the university, you have been employed as a consultant to help
established a new firm. Write a format to help in developing a business plan to enable the
new firm seek funding from potential investors?
1. A business plan is a formal statement of a set of business goals, the reasons they are
believed to be attainable, and the plan for reaching those goals. It may also contain
background information about the organization or team attempting to reach those
goals.
2. The standard format of a business plan is as follows: a) Table of Contents b)Executive
Summary c) General Company Description d) The Opportunity, Industry & Market e)
Strategy f) Business Model g) Team – Management & Organisation h) Marketing
Plan i) Operational Plan j) Financial Plan k) Appendix.
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SESSION 5: PROBLEMS ASSOCIATED WITH BUSINESS PLAN
A good business plan is critical to success in starting a new business. It should include
adequate funding, market information, competitive knowledge, a workable time line and
anticipation of contingencies. Businesses fail if the business plan is not well thought out. In
this session, we would be looking at why business plans fail and the business plan trade-off.
Objectives
1. understand some of the reasons why business plan fails;
2. problems in implementing a business plan
Now read on …………………
5.1 Why Business Plan Fails

Developing the business plan is only a step in business planning. Once the plan is written, it
would now have to be implemented. However, several business plan have failed. Mills
(2014), outline some of the reasons why business plan fails. The reasons include:
5.1.1 Inadequate Resources

The business plan will fail if you do not have enough money. At start, there must be
sufficient funds to operate the business until the venture begins to make profit. In addition,
unavailability of skill prescribed in the can render the plan useless.
5.1.2 Incomplete Plan

The plan is a recipe for disaster, if vital information is over looked or ignore during the
preparation. Care must be taken to think through every factor that can affect the future of the
venture business.
5.1.3Overestimation
Entrepreneurs are ambitious and risk takers. It is easy to think big. However, overestimating
how far the funds will go or how quickly the venture can show a profit is another trap to be
avoided. So if the plan is over ambitious, then it is not likely to work.
5.1.4 Overextending and Overspending

Plans that compels the venture to grow too fast is another business mistake. Steady measured
growth can prevent this kind of failure. Avoid spending too much in the early part of the life
of the venture. Do not overspend especially in fixed assets.
5.1.5 Insufficient Market Knowledge

The plan should reveal the market and its features. If the entrepreneurs do not know the
market, the plan cannot work. Misunderstanding or underestimating competition can lead to
failure.
5.1.6 Location
The plan should reveal locational advantages and demerits. The plan must consider location
carefully. More small businesses fail because of poor location than for any other reason.
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5.1.7 No Knowledge of the Plan
Most often, the plan is prepared by the entrepreneurs, which often makes it difficult to
implement by others in the venture. So of the people may not have any knowledge about the
plan and so becomes difficult for them to implement.
5.1.8 Too Technical To Understand

The business plan should not be written in technical language. The plans have failed because
implementers have found it difficult and often abstract in nature. Among the features, the
plan should be simple to follow and implement. This is most common where the entrepreneur
is not involved in the preparation of the plan.
5.1.9 Delays in Preparation

The preparation of the plan may often delay unduly to make it useless by the time the
entrepreneur might want to use it.
5.2 Business Plan trade-off

The preparation and implementation of a business plan helps to deal with most of the
challenges of starting and managing small businesses. However, there is other school of
thought that believes that the drawing up of a business plan should not be an impediment to
entrepreneurship. In their book, Bridge and Hegarty (2013), outlines ten principles for every
new venture explorer. The principles are discussed by Zwilling (2013) are as follows:
5.2.1 A new venture is a means, not an end.

A new venture is pursued to provide a better life for others, satisfy one’s passion or enjoy the
benefits of a technology invented. This means that it could be a social enterprise, or a hobby,
in which case a business plan may not be beneficial.
5.2.2. Overcommitting of Resources.

The entrepreneur should be careful not to commit more than he can afford to lose at
start. New ventures are usually exploratory and risky by nature, so do not let any business
plan process convince you to commit more than you can risk as a person, should your
exploration fail. Start with an effectual approach, which evaluates risk tolerance, and suggests
a more affordable means to an end.
5.3.3. Experience and Expertise

Pick a domain where you have some experience and expertise. It is advisable not to start
something for which you have to build or acquire knowledge, skills and connections from
scratch. A business plan cannot be an antidote to the challenge one encounters as a result of
undertaking a venture in which you are just picking ideas at random or copying others, just
because the story sounds attractive.
5.2.4. Validation and Reality Checks

The entrepreneur would have to carry out reality checks and make appropriate plans. Before a
business plan has any validity, some work is required to validate that the technology works, a
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real market exists and one’s assumptions for cost and price are reasonable. It is imperative
not to be driven by just the emotional enthusiasm of friends or even third-party research.
5.2.5. The Real Test

The only reliable test is a real one. Market research techniques for trying to predict the
market’s response to a new venture can be costly and often unreliable. It is like what
explorers do. They go and look, instead of trying to predict from a distance what they will
find.
5.2.6. Get started and build momentum

Too much hesitation will kill any new venture, as markets move quickly and difficulties
mount. Getting started helps generate momentum and creates a sense of accomplishment,
which can carry the startup through many obstacles. Early perseverance pays off.
5.2.7. Accept uncertainty as the norm

For a new or even existing venture, one can never remove all uncertainties. The entrepreneur
must accept them, and plan activities in an incremental fashion. Too often, a business plan is
seen as a mechanism for eliminating uncertainty, lulling the founder into complacency.
Eliminate major uncertainties before the plan and update any plan as you learn.
5.2.8. Look for new opportunities

Many useful opportunities are either created by what one do early, or are only revealed once
the venture is started. It is therefore, imperative that the entrepreneur, keep his/her eyes open
and respond to new customers, markets and partnerships. Proactiveness is the tool to
eliminating opportunities that are not favourable.
5.2.9. Build and use social capital

Social capital is people and connections. No entrepreneur can survive as an island. Social
capital is as important as financial capital for all ventures. As with all capital, you can use
only as much as you have acquired to-date. If you have no social capital, no business plan
will likely get you the financial capital you need.
5.2.10. Acquire the relevant skills

Three basic skill sets are required for successful delivery of almost every venture. These are
financial management, production capabilities and marketing and sales. If you do not have
the relevant skills and knowledge, take time to build them or find someone to partner with,
before you attempt any business plan.
Summary
The session looked at why business plans fail and the business plan trade-off. It was evident
from the discussion that drawing a business plan is only a means to an end. Furthermore,
entrepreneurs have started and run successful business without a business plan. However, if
one decide to continue building a conventional business after exploring these principles,
especially with investors and employees, then a business plan is a valuable exercise. The
caution is that one is deeply involved the drafting of the plan to make sure he/she understands
all the elements of the plan. In essence, building a complete and credible plan is the final test
of whether your venture has legs. The entrepreneur lifestyle is all about doing something you
enjoy without undue stress, uncertainty and risk.
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References
Zwilling, M. (2013). Ten reasons not to write a business plan. November Retrieved from
http://www.entrepreneur.com/article/229804
Mills, N. (2014). Why business plans fail. eHow Contributor. Reterived on July 20 form
http://www.ehow.com/facts_6774072_business-plans-fail.html
Bridge, S & Hegarty, C. (2013). Beyond the business plan, ten principles for new venture
explorers. New York, Palgrave Macmillan
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SESSION 6: MACROECONOMIC INDICATORS AND BUSINESS
Hello! You are welcome to this session. We will look at the economic environment in which
a business operates and how it affects the business. We will look specifically at the
macroeconomic indicators and their effect on a business decision making
Objectives
1. define macroeconomic indicators
2. identify and explain the types of macroeconomic indicators
3. identify and explain the macroeconomic indicators that affect business
Now read on ………………
6.1 Definition of Macroeconomic indicators

Macroeconomic indicators are statistical data showing general trends in the economy. Those
with predictive value are leading indicators; those occurring at the same time as the related
economic activity are coincident indicators; and those that only become apparent after the
activity are lagging indicators. Examples are unemployment, housing starts, Consumer Price
Index, industrial production, bankruptcies, GDP, stock market prices and money supply
changes.
6.2 Types of macroeconomic Indicators

Macroeconomic indicators can be classified according to the time they occur or change. They
can be leading, lagging or coincidental.
1. Leading indicators are indicators that usually change before the economy as a whole
changes. They are therefore useful as short-term predictors of the economy. Stock
market returns are a leading indicator: the stock market usually begins to decline
before the economy as a whole declines and usually begins to improve before the
general economy begins to recover from a slump. Other leading indicators include the
index of consumer expectations, building permits, and the money supply.
2. Lagging indicators are indicators that usually change after the economy as a whole
does. Typically the lag is a few quarters of a year. The unemployment rate is a lagging
indicator: employment tends to increase two or three quarters after an upturn in the
general economy. In a performance measuring system, profit earned by a business is a
lagging indicator as it reflects a historical performance; similarly, improved customer
satisfaction is the result of initiatives taken in the past.
3. Coincident indicators change at approximately the same time as the whole economy,
thereby providing information about the current state of the economy. There are many
coincident economic indicators, such as Gross Domestic Product, industrial
production, personal income and retail sales. A coincident index may be used to
identify, after the fact, the dates of peaks and troughs in the business cycle.
6.3 Macroeconomic Indicators that affect business

The factors that affect business are outlined below:
1. Interest Rates Announcement
Interest rates play the most important role in moving the prices of currencies in the
foreign exchange market. As the institutions that set interest rates, central banks are
therefore the most influential actors. Interest rates dictate flows of investment. Since
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currencies are the representations of a country’s economy, differences in interest rates
affect the relative worth of currencies in relation to one another. When central banks
change interest rates they cause the forex market to experience movement and
volatility. In the realm of Forex trading, accurate speculation of central banks’ actions
can enhance the trader's chances for a successful trade.
2. Gross Domestic Product (GDP)
The GDP is the broadest measure of a country's economy, and it represents the total
market value of all goods and services produced in a country during a given year.
Since the GDP figure itself is often considered a lagging indicator, most traders focus
on the two reports that are issued in the months before the final GDP figures: the
advance report and the preliminary report. Significant revisions between these reports
can cause considerable volatility.
3. Consumer Price Index
The Consumer Price Index (CPI) is probably the most crucial indicator of inflation. It
represents changes in the level of retail prices for the basic consumer basket. Inflation
is tied directly to the purchasing power of a currency within its borders and affects its
standing on the international markets. If the economy develops in normal conditions,
the increase in CPI can lead to an increase in basic interest rates. This, in turn, leads to
an increase in the attractiveness of a currency.
4. Employment Indicators
Employment indicators reflect the overall health of an economy or business cycle. In
order to understand how an economy is functioning, it is important to know how
many jobs are being created or destructed, what percentage of the work force is
actively working, and how many new people are claiming unemployment. For
inflation measurement, it is also important to monitor the speed at which wages are
growing.
5. Balance of Payments
The Balance of Payments represents the ratio between the amount of payments
received from abroad and the amount of payments going abroad. In other words, it
shows the total foreign trade operations, trade balance, and balance between export
and import, transfer payments. If coming payment exceeds payments to other
countries and international organizations the balance of payments is positive. The
surplus is a favorable factor for growth of the national currency.
6. Government Fiscal and Monetary policy
Stabilization of the economy (e.g., full employment, control of inflation, and an
equitable balance of payments) is one of the goals that governments attempt to
achieve through manipulation of fiscal and monetary policies. Fiscal policy relates to
taxes and expenditures, monetary policy to financial markets and the supply of credit,
money, and other financial assets.
7. Gross Domestic Product
Measured annually but updated quarterly, GDP represents the value of goods and
services produced in the country. Probably the broadest indicator of economic output,
GDP measures the pace at which the economy is growing or shrinking. If GDP
growth does not meet or beat market expectations, stocks could temporarily decline in
price.
8. Producer Price Index
Not as widely used as the CPI, but considered a good measure of inflation. The PPI is
a monthly report that looks at the costs producers pay for goods produced, such as
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manufacturing and agriculture. A PPI reading can sometimes predict what is to come
with the CPI.
9. Other Indicators
Increase in utility tariffs affect cost of production through increased input costs and
eventually affect final prices of the company’s product. Furthermore, exchange rate
fluctuations create uncertainty for the company and affect its ability to plan. It can
also affect input costs of cost of exporting. Interest rate affects cost of capital and
production cost depending on its degree of rise or fall. In addition, corporate tax
affects profit levels and eventual ability to expand. Similarly, income tax if high
affects the purchasing power of consumers and eventually the profit margins of
companies. Increased petroleum prices increases cost of production through increased
cost of energy. Also, increasing debt-to-GDP ratio affects investor confidence and
could influence the price levels in an economy. Meanwhile, falling direct investment
affect firm’s access to funds to operate and eventually reduction in output and limits
expansion. Additionally, change in minimum wage also influences how business
operates.
Summary
In this session we looked at the meaning of macroeconomic indicators; leading, lagging and
coincidental as types of macroeconomic indicators and how they affect the business.
Activity 4.6
1. What are macroeconomic indicators?
2. Identify and explain the three (3) types of macroeconomic indicators
3. Identify 5 macroeconomic indicators that affect business
1. Macroeconomic indicators are statistical data showing general trends in the economy.
2. Leading indicators are indicators that usually change before the economy as a whole
changes.
a) They are therefore useful as short-term predictors of the economy, example, and
money supply.
b) Lagging indicators are indicators that usually change after the economy as a whole
does, example, the unemployment rate.
c) Coincident indicators change at approximately the same time as the whole
economy, thereby providing information about the current state of the economy,
example, Gross Domestic Product.
3. a) Increase in utility tariffs affect cost of production through increased input costs and
eventually affect final prices of the company’s product.
b) Exchange rate fluctuations create uncertainty for the company and affect its ability
to plan.
c) It can also affect input costs of cost of exporting.
d) Interest rate affects cost of capital and production cost depending on its degree of
rise or fall. d) Corporate tax affects profit levels and eventual ability to expand.
e) Income tax if high affects the purchasing power of consumers and eventually the
profit margins of companies.
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UNIT 4: PLANNING THE BUSINESS
Hello! You are welcome to this unit. You now have a golden opportunity of being introduced
to the general principles of how a business in planned. You will learn about the
entrepreneurial process, the meaning of incubators and their role in business development,
guidelines to preparing a business plan and the problems associated with its implementation,
and how the macroeconomic indicators affect the business. We hope you will have the zeal to
become an entrepreneur after reading this unit
OUTLINE:
Session 1: The Entrepreneurial Process
Session 2: Incubators and Incubation
Session 3: Developing the Business
Session 4: The Business plan layout
Session 5: Problems in business plan
Session 6: Macroeconomic indicators and business
Objectives
By the end of the unit, you should be able to:
1. Explain the Entrepreneurial process
2. Explain the role of incubators and their classification
3. Identify the sources of information needed in developing a business
4. Identify the steps in the business plan layout
5. Identify the problems in implementing a business plan
6. Identify the macroeconomic indicators that affect business
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SESSION 1: LEGAL FORMS OF BUSINESS ORGANISATIONS
Before a business starts trading, a decision will have to be made about what legal form it will
take, as this affects taxation and the accounting records that need to be kept. There are
various types of business organisations and each of them is subject to different kinds of
control. This session attempts to explain the various types of business organisations and its
associated advantages and disadvantages.
Objectives
1. define sole proprietorship and explain its advantages and disadvantages
2. define partnership and explain its advantages and disadvantages
3. define company and explain the types of companies
1.1 Sole proprietorship

A sole proprietorship is a business owned and managed by a single individual. It is the most
common and simplest type of business entity. A sole proprietorship can have multiple people
operating the business, but it must have one sole owner.
It can also be defined as a business structure in which an individual and his/her business are
considered as a single entity for tax and liability purposes. A sole proprietorship is a business
which is not registered with the state as a limited liability company or corporation. The owner
does not pay income tax separately for the business, but he/she reports business income or
losses on his/her individual income tax return. The owner is inseparable from the sole
proprietorship and is responsible for every aspect of his or her business and is therefore liable
for any and all debts incurred by the organization. This ownership style gives full control to a
single person, allowing him to set the vision for the company and enjoy the significant tax
benefits associated with a sole-proprietorship. Unfortunately, the potential for severe liability
and the inability to find willing investors makes a single owner style of business less popular
and it can keep the business from growing.
Advantages
1. Full Control
By its definition, a sole-proprietorship is owned by a single individual who is responsible for
the long-term decisions and goals of the company. This gives the business two unique
advantages. First, a sole-proprietorship has a singular vision for the future of a company. This
cuts down on the confusion and disagreement that can occur when there are multiple owners.
In addition, having a single owner ensures that business decisions are addressed and
answered quickly, rather than waiting for a unified decision by a board or group of owners.
2. Taxes
A sole-proprietorship has significant tax advantages over a multi-owner business model. As
an example, in many states a sole-proprietor can claim her business taxes as part of her
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individual taxes each year, ensuring that the company is only taxed once. Multi-owner
business models are taxed on income coming into a business and again as income are paid to
employees throughout the company. The result is a significant decrease in the overall tax
burden that a sole-proprietor suffers each year.
Disadvantage
1. Liability
Under a sole-proprietorship, the owner of a business is personally responsible for all debts
and financial liability that the company takes on. This includes being personally responsible
in the event of a lawsuit or legal penalties. These legal liabilities constitute a significant risk
to a sole-proprietor and the potential for substantial debt in the event of an unfavorable legal
decision. In addition, a sole-proprietor can be held personally responsible for these debts,
placing his personal financial situation in jeopardy.
2. Investment
Investors are unlikely to look at sole-proprietorships as a form of investment. The inability to
have a say in the regular functions of a single owner business is a strong deterrent to an
investor. Additionally, if the owner decides to close the doors and stop doing business, the
company is dissolved. Investors have no protection against an owner who chooses to walk
away from a company and no legal recourse to keep the business going. Further, this
potential plays a negative role in a company's speculative performance.
1.2 Partnership
A partnership is an unincorporated business operated by two or more individuals with the
motive of making profit. Once two or more individuals agree to go into business, a
partnership is automatically formed. A partnership is the easiest and least expensive way to
form a business with more than one owner. It is a type of unincorporated business
organization in which multiple individuals, called general partners, manage the business and
are equally liable for its debts; other individuals called limited partners may invest but not be
directly involved in management and are liable only to the extent of their investments. Unlike
a limited liability company or a corporation, in a partnership each partner shares equal
responsibility for the company's profits and losses, and its debts and liabilities. The
partnership itself does not pay income taxes, but each partner has to report their share of
business profits or losses on their individual tax return. The Incorporated Private Partnership
Act, 1962, (Act 152) governs partnership in Ghana.
1.3 Types of partnership
1. General Partnership
A general partnership is a partnership with only general partners. Each general partner takes
part in the management of the business, and also takes responsibility for the liabilities of the
business. If one partner is sued, all partners are held liable. General partnerships are the least
desirable for this reason.
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2. Limited Partnership
A limited partnership includes both general partners and limited partners. A limited partner
does not participate in the day-to-day management of the partnership and his/her liability is
limited. In many cases, the limited partners are merely investors who do not want to
participate in the partnership other than to provide an investment and to receive a share of the
profits.
3. Limited Liability Partnership

A limited liability partnership (LLP) is different from a limited partnership or a general
partnership, but is closer to a limited liability company (LLC). In the LLP, all partners have
limited liability. An LLP combines characteristics of partnerships and corporations. As in a
corporation, all partners in an LLP have limited liability, from errors, omissions, negligence,
incompetence, or malpractice committed by other partners or by employees. Of course, any
partners involved in wrongful or negligent acts are still personally liable, but other partners
are protected from liability for those acts. In recent years, the limited liability company has
supplanted the general partnership and the limited partnership, because of the limits of
liability. But there are still cases in professional practices in which some partners want to be
limited in scope of duties and they just want to invest, having the liability protection.
1.4 The Partnership Agreement

A written partnership agreement is an internal document that specifies information such as
the nature of the business; capital contributed by each partner, and their rights and
responsibilities. A partnership does not have a separate legal existence like an incorporated
firm, and the partners are jointly and severally liable for the debts of the firm. Even on
withdrawing from the partnership they remain liable for already incurred debts, and for future
debts unless a proper notice of retirement is published. A valid partnership, however, can
exist without a written agreement in which case the provisions of the statutes governing
partnerships would apply.
Advantages
1. Easy to form
One of the advantages of a partnership is the simplicity of forming and operating the
business. A partnership business automatically begins when two or more people decide to
start a business. There is no need to file formation documents with the city or state where the
partnership business operates. With no formation documents to file, it costs very little to
establish a partnership business. Furthermore, partnerships are not required to pay annual fees
or franchise taxes to the state where the company operates.
2. The business is not taxed
A benefit of a partnership is that it is treated as a "pass-through" entity. The partners are
allowed to "pass," or file their share of company profits and losses directly on their personal
income tax return. Partnerships are not required to file taxes as a business entity with the
Internal Revenue Service. Partners can use losses from the business to offset income gained
from other sources.
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Disadvantages
1. Unlimited Liability
A major disadvantage of operating a partnership business is that the partners have unlimited
liability for business debts and obligations. This means that a partner could lose her home, car
and other personal assets if the company's assets cannot cover business-related debts and
liabilities. Business creditors may come after a partner's personal assets as compensation for
debts and other obligations. In addition, a partner is liable for another partner's decisions and
business obligations
2. Limited lifespan
A downside of operating a partnership is the longevity of the business. Partnerships have a
limited lifespan. A partnership automatically ends when a partner dies, retires or decides to
sell his ownership interest in the business. Ownership cannot be passed to another person
without the approval of the business' partners.
1.5 Companies
A Company is a legal entity, owned by its shareholders, whose assets and liabilities are
separate from its shareholders. That is, the company exists in law separately from its owners.
The company may form contracts, sue and be sued in its own name. The shareholders are not
liable for the company’s debt except for the value of their shareholdings (in the case of
limited companies). In Ghana, one person can form a company. However, in most countries,
there must be at least two shareholders. A company is different from other forms of business
organisations. All companies must be registered with the Registrar of Companies to whom
financial report must be sent each year. The accounts submitted are available for inspection
by any member of the public. In Ghana, companies are governed by the Companies Act,
1963, (Act 179). A company may fall in any one of these types; company limited by shares,
company limited by guarantee and unlimited company.
1. Company Limited by Shares

A company limited by shares is one in which the liability of its members is limited only to the
amount of shares respectively held by them in the event of the company winding up. A
company limited by shares, may be further divided into public companies and private
companies. Who may become a member of a private limited company is restricted by law and
by the company's rules. In contrast anyone may buy shares in a public limited company.
Limited companies can be found in most countries, although the detailed rules governing
them vary widely. It is also common for a distinction to be made between the publicly
tradable company of plc type and the "private" types of company. A private company limited
by shares has shareholders with limited liability and its shares may not be offered to the
general public. Shareholders of private companies limited by shares are often bound to offer
the shares to their fellow shareholders prior to selling them to a third party. A public limited
company (PLC) is also referred to as a publicly held company. A company that is publicly
held means that the company offers its stock to be purchased by the general public through a
stock exchange. A PLC is typically owned by several investors while a private company is
normally held by very few shareholders.
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2. Company Limited by Guarantee (CLG)
Any company is treated as an entity separate from the members that make up the company.
As a legal entity the company has rights and obligations like a natural person. A company
may sue and be sued in its own name, enter into contracts in its own right and own property
in its own name. A “company limited by guarantee” is formed on the principle of having the
liability of its members limited by the Memorandum of Association to the amount that the
members undertake to contribute to the assets of the company in the event of its winding up.
Therefore, upon liquidation of a CLG, a member’s maximum liability to creditors of the CLG
is that amount which he has agreed to guarantee. This amount will be stated in the CLG’s
Memorandum of Association. This guaranteed amount is usually nominal. A CLG cannot
have shares or share capital. A member of a CLG is not required to pay any capital while the
company is a going concern. A CLG is a public company. This is because only a company
having share capital can be formed as a private company. The Memorandum & Articles
(M&A) constitutes a contract between the company and each member and between the
members themselves as well. Although the form of the M&A of a CLG is not prescribed in
the Companies Act, unlike for a private limited company, it usually does not aim to make a
profit.
The objects of a CLG as set out in the Memorandum are usually charitable in nature or for the
fulfillment of some social need. The Companies Act requires the Memorandum to state that:
a) the liability of the members is limited; and

b) that each member undertakes to contribute a maximum specified amount to the assets
of the company, in the event of its being wound up while he is a member or within
one year after he ceased to be a member, for payment of the debts and liabilities of the
company.
It also requires the Articles to state the number of members to be registered with the CLG
proposed. A CLG is primarily used for non-profit groups that require corporate status.
Therefore, a CLG is typically used for trade associations, charitable bodies, professional and
learned societies, religious bodies, incorporated clubs or other charitable, educational or other
non-profit making ventures which want the advantages of limited liability. CLGs are rarely
used for commercial undertakings or trading companies.
In practice, the Memorandum usually provides that all the income of the CLG shall be
applied solely towards the promotion of the objects of the CLG, and that no portion shall be
paid or transferred directly or indirectly by way of dividends or bonus or by way of profit to
its members. In addition, the memorandum may also provide that on the winding up or
dissolution of the CLG, any property left after satisfaction of all debts will not be distributed
to the members of the CLG, but to some institutions having similar objects as the CLG or to a
registered charity. However, the Companies Act provides that any provision in the M&A or
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any resolution purporting to give any person a right to participate in the divisible profits of
the company, otherwise than as a member, shall be void.
3. Unlimited Company
An unlimited company or private unlimited company is a hybrid company (corporation)
incorporated either with or without a share capital (and similar to its limited company
counterpart) but where the legal liability of the members or shareholders is not limited - that
is, its members or shareholders have a joint, several and non-limited obligation to meet any
insufficiency in the assets of the company to enable settlement of any outstanding financial
liability in the event of the company's formal liquidation. The joint, several and non-limited
liability of the members or shareholders of the company to meet any insufficiency in the
assets of the company (to settle its outstanding liabilities if any exist) only applies upon the
formal liquidation of the company. Therefore, prior to any such formal liquidation of the
company, any creditors or security holders of the company may only have recourse to the
assets of the company and not to those of its members or shareholders. Until such event
occurs (formal liquidation) - an unlimited company is similar with its counterpart the limited
company where its members or shareholders have no direct liability to the creditors or
security holders of the company during its normal course of business or existence.
Summary
In summary, the issues raised in this session include the sole proprietorship and its associated
advantages and disadvantages, partnership, the various types of partnerships, the pros and
cons of partnership. We also looked at the definition of companies, the types of companies
and the advantages and disadvantages of forming a company.
Activity 5.1
1. a) Define a sole proprietorship?

b) Why is sole proprietorship preferred to other types of business ownership?
2. a) Define a partnership?
b) Identify and explain the different types of partnership
3. Explain what is meant by a company?
Suggested Answer to Activity

1. a) A sole proprietorship can be defined as a business structure in which an individual and
his/her business are considered as a single entity for tax and liability purposes.
b) A sole proprietorship is preferred to other types of business ownership because it is easy
to form, and the owner and the business are taxed as a single entity.
2. a) A partnership is a form of business organisation where two or more persons come together
to form a business with the aim of making profits.
b) The types of partnerships are:
i. General Partnership
A general partnership is a partnership with only general partners. Each general partner takes
part in the management of the business, and also takes responsibility for the liabilities of the
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business. If one partner is sued, all partners are held liable.
ii) Limited Partnership
A limited partnership includes both general partners and limited partners. A limited partner
does not participate in the day-to-day management of the partnership and his/her liability is
limited.
iii) Limited Liability Partnership (LLP)
In the LLP, all partners have limited liability. An LLP combines characteristics of
partnerships and corporations. As in a corporation, all partners in an LLP have limited
liability, from errors, omissions, negligence, incompetence, or malpractice committed by
other partners or by employees. Of course, any partners involved in wrongful or negligent
acts are still personally liable, but other partners are protected from liability for those act
3. A Company is a legal entity, owned by its shareholders, whose assets and liabilities are
separate from its shareholders. That is, the company exists in law separately from its
owners. The company may form contracts, sue and be sued in its own name.
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SESSION 2: ALTERNATIVES FOR STARTING FROM THE SCRATCH
An investor who wants to operate a business must not necessarily start it from the scratch.
There are various alternatives that are available in operating a business. An investor may
decide to acquire a franchise, a license, or to buy an existing business. Each of these
alternatives has its own advantages and disadvantages. Some of these alternatives can be a bit
confusing. However, it will be clear as you read through this session.
Objectives
1. identify the various alternatives available to an investor other than starting a business
from the scratch
2. explain the various alternatives available to owning a business than starting a business
from the scratch.
Now read on …………..
2.1 Licensing
Licensing is the practice of leasing a legally protected property (such as a trademarked or
copyrighted name, logo, likeness, character, phrase or design) to another party in conjunction
with a product, service or promotion. It is based on a contractual agreement between the
owner of the property (or its agent) known as the licensor; and a licensee – normally a
manufacturer or retailer. It grants the licensee permission to use the property subject to
specific terms and conditions, which may include the purpose of use, a defined territory and a
defined time period. In exchange for this usage, the licensor receives financial remuneration –
normally in the form of a guaranteed fee and/or royalty on a percentage of sales. Most
agreements are set out in a licensing agreement. We have licensing agreement frameworks
for sale however we do recommend using a lawyer to execute all legal documents. However
being able to present your lawyers with a basic framework of a licensing agreement with your
key commercial terms could possibly help to reduce consultation time at the initial stages of
the legal process.
2.1 The Benefit of licensing to the Licensors

The key benefit for a licensor is the ability to exploit and enhance its brand or property.
Licensing can do this by:
a) increasing its brand presence at retail or distribution outlet
b) creating further brand awareness to support its core products or services
c) supporting and enhancing its core values by associations with the licensed
products/service or category (e.g. association with a healthy food or with a cutting
edge mode of fashion)
d) entering new markets (consumer or geographical) which were unfeasible with its own
resources or capabilities
e) generating new revenue streams, often with little involvement or additional financial
or other resource implications
2.2 The Benefit of Licensing to the Licensees

The key benefit for a licensee (especially manufacturer or retailer) is the ability to
significantly increase consumer interest in and sales of its products or services. Licensing can
do this by:
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a) transferring the values and consumer favour towards the property to the licensed
product or service
b) providing added value and differentiation from competitive offerings
c) providing additional marketing support or momentum from the core property’s
activity provided by the licensor
d) appealing to new target markets who have not historically been interested in a
licensee’s product or service
e) giving credibility for moving into new market sectors through product extension
f) gaining additional retail space and favour.
2.3 Franchising
Franchising is an arrangement where one party (the franchiser) grants another party (the
franchisee) the right to use its trademark or trade name as well as certain business systems
and processes to produce and market a good or service according to certain specifications.
The franchisee usually pays a one-time franchise fee plus a percentage of sales revenue as
royalty.
2.4 Advantages of the Franchising Model

The advantages of franchising includes the following:
a) Franchisees require less initial capital than independently starting a company and can use
proven successful strategies and trademarks.
b) Franchisees are provided with significant amounts of training, not common to most
entrepreneurs.
c) The franchisor benefits because it can expand rapidly without having to increase its labour
force and operating costs, using much less capital.
d) Franchised stores have a higher margin for the parent company than company-owned stores
because of minimal operating expenses in maintaining franchised stores.
2.5 Drawbacks of the Franchising Model

The drawbacks in franchising includes the following:
a) Franchising stores reduces the amount of control that the parent company has over its
products and services, which may lead store quality to vary greatly from store to store.
b) Franchisees must pay a percentage of their revenues to the parent company, reducing their
overall earnings.
2.4 Buying an existing company

For some entrepreneurs, buying an existing business represents less of a risk than starting a new
business from scratch. While the opportunity may be less risky in some aspects, you must perform
due diligence to ensure that you are fully aware of the terms of the purchase. If you have decided to
buy an existing business, you will want to be sure you are making the right choice in your new
venture. Only you can determine the right business for your needs; however, the following topics can
help guide you make the best decision. There are many favorable aspects to buying an existing
business such as drastic reduction in startup costs. You may be able to jump start your cash flow
immediately because of existing inventory and receivables. However, there are also some downsides
to buying an existing business. Purchasing cost may be much higher than the cost of starting a new
business because of the initial business concept, customer base, brand and other fundamental work
that has already been done. Also, be aware of hidden problems associated with the business like debts
the business is owed that you may not be able to collect.
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Summary
In this session we looked at franchising, licensing and buying an existing company as

alternatives to starting a business from the scratch. We also considered the benefits and
drawbacks of the various alternatives available to starting a business from the scratch.
Activity 5.2
1. Identify and explain the two alternatives available to starting a business from the scratch.
1. a) Licensing is the practice whereby one party (licensor) leases a legally protected
property (such as a trademarked or copyrighted name, logo, likeness, character, phrase or
design) to another party (licensee) in conjunction with a product, service or promotion for
a fee.
b) Franchising is an arrangement where one party (the franchiser) grants another party (the
franchisee) the right to use its trademark or trade name as well as certain business systems
and processes to produce and market a good or service according to certain specifications.
The franchisee usually pays a one-time franchise fee plus a percentage of sales revenue as
royalty.
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SESSION 3: REGISTERING A BUSINESS IN GHANA
In order to be recognised as a legal business in Ghana, the business must be duly registered
with the Registrar General’s Department. We hope that you will be clear in your mind about
the processes involved in registering the different types of business organisation in Ghana
after you read through this session.
Objectives
1. explain the process in registering a business in Ghana.
2. identify and explain the documents required in registering a business
Now read on ………..
3.1 The process

In establishing a business in Ghana, there are certain processes that businesses go through in
order to get registered. The processes have been discussed below for the different types of
business organisations.
3.2 Incorporation of Limited Liability Companies

The process involved in registering a limited liability company is as follows:
a) Acquire a Tax Identification Number.
b) Check for availability of company name and submit company documents to obtain an
incorporation certificate.
c) Obtain from the Registrar-General’s Department the certificate to commence business
d) Deposit paid-in capital in an account
e) Apply for business licenses at the Metropolitan Authority
f) Inspection of work premises by the Metropolitan
g) Apply for social security
3.3 Incorporation of Partnerships

The process involved in registering a partnership are as follows:
a) Present duly completed form together with a stamped partnership agreement at the
Registry.
b) Pay prescribed fee of GH 75.00 cedi.
c) Registrar examines document and issues certificate of registration.
3.4 Incorporation of External Company

The process involved in registering an external company are as follows:
a) Applicant may purchase and complete Forms 20 and 21 from the Ghana Publishing
Company Limited.
b) Submit duly completed forms at the in-house bank together with the following:
Either
i) A certified true copy of the Memorandum and the Articles of the Association
of the Company registered outside Ghana in English;
ii) A certified true copy of the Certificate of Incorporation.
iii) Power of Attorney to the Local Manager
Or
i) All the constitution of the External Company;
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ii) All these duly endorsed by the Ghana Mission in the Country if any or the
nearest country where there is Ghana Mission.
c) Pay prescribed fee of US$1000 or cedi equivalent.
d) The Registrar examines registers and notifies the local manager in writing
e) Filling of annual returns each year at US$500 or Cedi equivalent.
3.5 Documents required

In registering a business, there are certain important documents that are needed. They are
Articles of Association and Memorandum of Association. These documents are discussed
below:
1. Articles of Association
The Articles of Association (often referred to as just ‘articles’) is the document which sets out
the rules for the running of the company's internal affairs. The company's articles delivered to
the Registrar must be signed by each subscriber in front of a witness who must attest the
signature. In the event that articles are not registered for the new company, model (default)
articles will be registered. These model articles can be chosen to be adopted in the form 3.
This new procedure was introduced by the Companies Act 1963, Act 179.
2. Form 3
This contains the intended situation of the Registered Office, (this will be the registered
office in Ghana), the details of the consenting Secretary and Director(s), details of the
subscribers and, in the case of a company limited by shares, details of the share capital. The
form also includes the Statement of Compliance that the requirements of the Companies Act
have been complied with.
3. Memorandum of Association
This contains the names and signatures of the subscribers that wish to form the company and,
in the case of a company limited by shares, a commitment by the subscribers to take at least
one share each. It must be noted that in Ghana, the Articles of Association and the
Memorandum of Association are together referred to as the Regulations.
Summary
In this session we looked at the process involved in registering the different types of business
organisations in Ghana and the documents required to register a business.
Activity 5.3
1. State the process involved in registering a limited liability company in Ghana
2. Explain the following documents used in registering a business
a) Articles of Association
b) Memorandum of Association

1. Incorporation of Limited Liability Companies
a) Acquire a Tax Identification Number.
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b) Check for availability of company name and submit company documents to obtain an
incorporation certificate.
c) Obtain from the Registrar-General’s Department the certificate to commence business
d) Deposit paid-in capital in an account
e) Apply for business licenses at the Metropolitan Authority
f) Inspection of work premises by the Metropolitan
g) Apply for social security
2. a) The Articles of Association (often referred to as just ‘articles’) is the document which
sets out the rules for the running of the company's internal affairs. The company's
articles delivered to the Registrar must be signed by each subscriber in front of a
witness who must attest the signature. In the event that articles are not registered for
the new company, model (default) articles will be registered.
b) The Memorandum of Association contains the names and signatures of the subscribers
that wish to form the company and, in the case of a company limited by shares, a
commitment by the subscribers to take at least one share each.
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SESSION 4: SUPPORT INSTITUTIONS FOR START-UPS
Hello! You are welcome to the fourth session of this unit. From our discussion so far from the
previous sessions, we learned about the legal forms of business organisations and the
alternatives to starting a business from the scratch. We also looked at the process and
documents required in registering a business in Ghana. In this session, we are going to look at
some institutions that provide support for start-ups in Ghana.
Objectives
1 identify some institutions that provide support to start-ups in Ghana
2. explain the kind of support provided by these institutions
Now read on …………………….
4.1 National Board for Small Scale Industries (NBSSI)

The National Board for Small Scale Industries (NBSSI) is the apex governmental body for
the promotion and development of the Micro and Small Enterprises (MSE) sector in Ghana.
It was established by an Act of the Parliament of the Third Republic of Ghana (Act 434 of
1981) and operationalised in 1985 because government views the sector as having the
potential to contribute substantially to reducing the high unemployment and to the growth of
the economy of Ghana. MSEs account for a significant share of economic activity in Ghana
and can play an important role in achieving the development goals for production. The long-
term goal is for MSEs to maximize their contribution to the country’s economic and social
development with respect to production, income distribution and employment and the closer
integration of women and people in rural areas with the national economy.
4.2 Venture Capital Trust Fund

The Venture Capital Trust Fund (VCTF, Trust Fund) was established by ACT 680, 2004 by
the Government of Ghana to provide financial resources to Small and Medium Scale
Enterprises (SMEs). In accordance with the VCTF ACT 680, 2004 the VCTF is to: “Provide
financial resources for the development and promotion of venture capital financing for SMEs
in Ghana by providing credit and equity financing to eligible Venture Capital Finance
Companies (VCFCs) to support SMEs; and the provision of monies to support other activities
and programs for the promotion of venture capital financing, as the Board may determine in
consultation with the Minister."
4.3 Council for Technical and Vocational Education and Training (COTVET)
The COTVET Act (Act 718) was passed by Parliament in July 2006 establishing the Council
for Technical and Vocational Education and Training (COTVET). The Act mandates the
Council to formulate policies for skills development across the broad spectrum of pre-tertiary
and tertiary education, formal, informal and non-formal, ensure quality in the delivery of
access to technical and vocational education and training and facilitate research and
development in technical and vocational education and training. The overall goals of the
Council are to ensure that the unemployed particularly the youth are given competitive,
employable and entrepreneurial skills nationally and globally within the formal and informal
sectors; and to ensure that graduates coming out of our formal, informal and non-formal
TVET institutions are endowed with employable and entrepreneurial skills.
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4.4 Association of Ghana Industries (AGI)
The Association of Ghana Industries (AGI) is a voluntary business association of over 1200
members, made up of small, medium and large scale manufacturing and services industries in
agro-processing (food and beverages), agri-business, pharmaceuticals, electronics and
electrical, telecommunications, information technology, utilities, service industries, transport,
construction, textiles, garments, leather, banking and advertising.
As the leading voice of manufacturing industries in the country, AGI is dedicated to:
a) Advocating policies that advance the growth and development of industries;
b) Facilitating international trade through exhibition of member products in countries
across the sub-region;
c) Strengthening national industry associations through the sharing of knowledge,
experience and critical information;
d) Providing members with a vast network of contacts, especially in the West African
sub-region;
e) Hosting the industry and technology exhibition to promote members’ goods.
4.5 Private Enterprise Federation (PEF)
PEF operates in four main areas, namely:
1. Policy Research / Advocacy Role - PEF’s advocacy role is aimed at influencing

government policies and regulations and involves the performance of the following activities:
a) Undertaking policy based research for making effective representation to government
on behalf of member associations on issues of concern to the private sector, such as
land reform the impact of the legal and regulatory framework, competitiveness, the
tax regime, multilateral and bilateral trade agreements;
b) Monitoring best management practices and identifying strategic factor accounting for
enhanced enterprise competitiveness, and disseminating such best practice findings
among member enterprises.
c) Making proposals to government to mainstream such best practices in industry.
2. Contract Management Services - PEF also act as contract management services
providers:
a) Provides consultancy services to clients in the area of socio-economic research and
analysis, business advisory services, project development and management and
related services;
b) Provides fee-based project and technical assistance contract management service on
behalf of international development clients, using expertise available within PEF, its
member organizations and outside consultants.
3. Institutional Capacity Development and Training: - PEF focuses on programmes to:
a) Strengthen its members and other private sector advocacy bodies by designing and
carrying out training to enhance their performance;
b) Develop model training and technical support programs based on best management
practices for adoption by PEF members and non-members especially SMEs
transitioning from the informal sector to the formal sector economy.
4. Promotion of Technology Based Enterprises
a) Identifies and initiates contracts with technology based enterprises for example,
agribusiness, biotechnology, etc, and helps promote these for effective performance;
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b) In collaboration with member associations PEF collects, analyses and disseminates
relevant information on opportunities and resources.
4.6 Microfinance and Small Loans Centre (MASLOC)

Microfinance and Small Loans Centre (MASLOC) is a microfinance apex body responsible
for implementing the Government of Ghana’s microfinance programmes targeted at reducing
poverty, creating jobs and wealth. Over the years MASLOC has modestly established itself
not only as a microfinance institution that disburses micro and small loans to the identified
poor in the various sectors of the Ghanaian economy, but also provides business advisory
services, training and capacity building for small and medium scale enterprises (SMEs) as
well as collaborating institutions, to provide them with the required skills and knowledge in
managing their businesses efficiently and effectively. MASLOC was established in 2006 by
the Government of Ghana.
4.7 Microfinance Institutions (MFIs)

GHAMFIN is an informal network of institutions and individuals that operate within Ghana's
Microfinance Industry. This network evolved from the concern of some Ghanaian
Microfinance Institutions (MFIs) for the development of best practices in delivery of
microfinance services. Their concern and initiatives was promoted by a World Bank
sponsored action research project, which sought to identify for wider application, innovative
techniques of financial services delivery that had been successful in improving access of
micro entrepreneurs to financial services. This action research project, which started with the
profiling of three (3) Ghanaian MFIs, grew into an informal network of organizations
interested in providing effective financial services to the poor. Today, the informal group has
been formalized and registered as a company limited by guarantee, the Ghana Micro Finance
Institutions Network (GHAMFIN). GHAMFIN was legally registered in August 1998. Its
membership consists of 80 regulated and non-regulated microfinance institutions that
together are serving over 60,000 clients. Its members include institutions of different sizes
and legal structures such as commercial banks, savings and loan institutions, NGOs,
cooperative, rural banks and traditional 'Susu' savings clubs. The network has an executive
committee of 11 members, of whom presently two are women. It has a permanent secretariat
with six paid employees, including a full-time executive director.
4.8 Rural and Community Banks

There are over hundred and thirty-five rural banks in the ten regions of Ghana. The
importance of Rural/Community Banks as providers of financial services to ensure growth in
a predominantly agro-based economy cannot therefore be over-emphasised. The banks
undertake a mix of micro finance and commercial banking activities structured to satisfy the
need of the rural areas. They provide banking services by way of funds mobilization and
credit to cottage industry operators, farmers, fishermen and regular salaried employees. They
also grant credits to customers for the payment of school fees, acquisition/rehabilitation of
houses and to meet medical expenses. Some of the banks have subsidiary companies engaged
in consumer credit and other developmental activities. Rural/Community Banks devote part
of their profits to meet social developmental activities such as donations to support education,
health, traditional administration and the needy in their respective communities. Some of the
banks have specific gender programmes focusing on women-in-development and credit-with-
education activities for rural women. Rural/Community Banks are, therefore, the main
vehicle for financial intermediation, capital formation and retention of rural dwellers in the
rural areas.
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4.9 Business Development Producers
Business Development Producers are regulated, closed-end investment firms that make loans
to, and/or invest in small, developing, or financially troubled companies. They have stepped
into a role that commercial banks vacated during the financial crisis, lending to companies
that may not otherwise get financing. BDC is a company that is created to help grow small
companies in the initial stages of their development. BDCs are very similar to venture capital
funds. Many BDCs are set up much like closed-end investment funds and are actually public
companies that are listed on the stock exchange. To qualify as a BDC, companies must be
registered in compliance with the Companies Act. A major difference between a BDC and a
venture capital fund is that BDCs allow smaller, non-accredited investors to invest in startup
companies. Some of the reasons why BDCs have become popular are that they provide
permanent capital to their management, allow investments by the general public and use
mezzanine financing opportunities.
4.10 Business Incubators

Business incubators are programs designed to support the successful development of
entrepreneurial companies through an array of business support resources and services,
developed and orchestrated by incubator management and offered both in the incubator and
through its network of contacts. Incubators vary in the way they deliver their services, in their
organizational structure, and in the types of clients they serve. Successful completion of a
business incubation program increases the likelihood that a startup company will stay in
business for the long term. Incubators differ from research and technology parks in their
dedication to startup and early-stage companies. Research and technology parks, on the other
hand, tend to be large-scale projects that house everything from corporate, government or
university labs to very small companies. Most research and technology parks do not offer
business assistance services, which are the hallmark of a business incubation program.
However, many research and technology parks house incubation programs.
Summary
In this session we looked at the various institutions that provide support for start-ups in
Ghana, their major functions and the kind of support they provide to start-ups.
Activity 5.4
1. Identify 5 institutions that provide support to start-ups in Ghana

2. Explain the kind of support provided by these institutions identified in (1) above

1. Five (5) institutions that provide support to start-ups in Ghana
a) Venture Capital Trust
b) Micro and Small Loan Centre
c) Rural and Community Banks
d) Business Development Producers
e) Incubators
2. The kind of support rendered by these institutions are as follows:
a) Venture Capital Trust: It provides financial resources for the development and
promotion of venture capital financing for SMEs
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b) Micro and Small Loan Centre: It disburses micro and small loans to the identified poor
in the various sectors of the Ghanaian economy, and also provides business advisory
services, training and capacity building for small and medium scale enterprises
(SMEs) as well as collaborating institutions, to provide them with the required skills
and knowledge in managing their businesses efficiently and effectively
c) Rural and Community Banks: They provide banking services by way of funds
mobilization and credit to cottage industry operators, farmers, fishermen and regular
salaried employees.
d) Business Development Producers: They make loans to, and/or invest in small,
developing, or financially troubled companies.
e) Incubators: They support the successful development of entrepreneurial companies
through an array of business support resources and services, developed and
orchestrated by incubator management and offered both in the incubator and through
its network of contacts.
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SESSION 5: BASICS IN CONTRACT AND BUSINESS LAWS
Businesses like human beings undertake transactions in one way or the other. There is the
need to exchange goods and services, acquire properties, hire employees and a host of other
transactions. The business must also seek to the welfare of its hired workers. Furthermore, the
business must also protect its intellectual property. In this session, we will look at how a
business goes about its daily transactions and the laws that govern such transactions.
Objectives
1. define law of contract and explain the elements of a valid contract
2. explain employment contract
3. explain contract for sale of goods
4. explain free competition and copy right
5.1 Meaning of Contract

A contract is a legally-enforceable promise or set of promises made by one party to another.
A contract is a legally binding agreement concerning a bargain which is essentially
commercial in its nature and involves the sale or hire of commodities such as goods, services
or land. A contract is a legally binding agreement between two or more persons for a
particular purpose. The most common types of contracts are the contract of sale, whereby a
person acquires the ownership of property in return for payment of a certain price; lease and
hire of services, whereby a person offers his services to another in return for remuneration;
and lease and hire of things, whereby a person is temporarily granted the enjoyment of
property (e.g., an apartment), in return for a price (rent); and mandate whereby a person gives
another the power to represent her.
5.2 Essential Elements of A Valid Contract

All agreements are not contracts. Only that agreement which is enforceable at law is a
contract. An agreement which is not enforceable by law cannot be contracted. Thus, the term
agreement is wider in scope than a contract. All Contracts are agreements, but all agreements
are not contracts. An agreement, to be enforceable by law, must possess the essential
elements of a valid contract. All agreements are contract if they are made by the free consent
of the parties, competent to contract, for a lawful consideration and with a lawful object and
are not expressly declared to be void.
The following are the essential elements of a valid contract:
1. Offer
The first element in a valid contract is an offer. An offer needs to be in a contract because it is
the basis for the contract. In a contract, it is very important that a party would make an offer.
To make an offer, there should be at least two parties or even more so that it would be legally
capable of entering into a contract. If the offer is accepted, then it would constitute a legally
valid contract. When an offer is being made, the other party or person would know what is
being offered and what the person or party who made the offer expects to have in return.
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2. Acceptance - After making an offer in the contract, there should be acceptance. For a
contract to be made there should be acceptance from the other party or person. When the
other party is clear with the offer, he/she would make an acceptance once he/she is clear with
the rules and regulations being offered in the contract. There will be no contract if the parties
are still negotiating or discussing and have not accepted the offer. The person or party can
accept the offer being made in writing or orally, which is made verbally or being spoken out.
For example, a tourist writes to hotel K requesting information about the cost and availability
of accommodation for the week commencing on the 15th April 2011. The staff at hotel K
answers the inquiry and states that the accommodation available for that week would cost
GHS 600 and if the tourist responds with the deposit of GHS 600 within a week, then the
room will be allocated to him. If the tourist accepts the offer, then a contract has been made
between the tourist and hotel K
3. Consideration - Consideration is also a very important element in the contract.

Consideration is what the other person would be giving in return. It would be considered as
an exchange which would be made between the promisee and promissor. There should be a
consideration in a contract so that it would be legally valid. For example, a customer in a fast-
food restaurant like McDonald's orders a set lunch which costs GHS 50. By ordering the set
lunch, the customer is agreeing to pay GHS 50 as consideration.
4. Intention to Create Legal Relations - An agreement is not a contract in the strict sense
unless it is the common intention of the parties that it should be legally enforceable. If there is
no intention to create legal relations in a contract, the contract cannot be subject to a lawsuit.
For example, if a parent makes a promise to his child whom he will buy her a mobile phone if
she passes her exams, and the parties do not intend it to be legally binding, then such a
promise cannot be enforced by law.
5. Certainty - The terms and regulations being made in a contract should be stated clearly
and understood by the parties to the contract. If the agreement is not certain, it would be no
longer valid.
6. Capacity - Capacity to a contract means that the parties to the contract must have the legal
capacity to do so. In Ghana, twenty one (17) year old is stated as the age of a major. Minors,
who are people below this age have no capacity to enter contracts. Therefore, insane people
or people with unsound minds also cannot enter any valid contracts.
All the elements mentioned above must be present in order to make a valid contract. If any
one of them is absent, the agreement does not become a contract.
5.3 Types of Contracts

There are several classifications of contracts, including the following:
1. Contracts under Seal: Traditionally, a contract is an enforceable legal document only if it
was stamped with a seal. The seal represented that the parties intended the agreement to entail
legal consequences. No legal benefit or detriment to any party was required, as the seal was a
symbol of the solemn acceptance of the legal effect and consequences of the agreement.
2. Express Contracts: In an express contract, the parties state the terms, either orally or in
writing, at the time of its formation. There is a definite written or oral offer that is accepted
by the offeree (i.e., the person to whom the offer is made) in a manner that explicitly
demonstrates consent to its terms.
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3. Implied Contracts: Although contracts that are implied in fact, and contracts implied in
law are both called implied contracts, a true implied contract consists of obligations arising
from an agreement and intent to promise, which have not been expressed in words. It is
misleading to label as an implied contract one that is implied in law because a contract
implied in law lacks the requisites of a true contract. The term quasi-contract is a more
accurate designation of contracts implied in law. Implied contracts are as binding as express
contracts. An implied contract depends on substance for its existence; therefore, for an
implied contract to arise, there must be some act or conduct of a party, in order for them to be
bound.
4. Executed and Executory Contracts: An executed contract is one in which nothing

remains to be done by either party. The phrase is, to a certain extent, a misnomer because the
completion of performances by the parties signifies that a contract no longer exists. An
executory contract is one in which some future act or obligation remains to be performed
according to its terms.
5. Bilateral and Unilateral Contracts: The exchange of mutual, reciprocal promises

between entities that entails the performance of an act, or forbearance from the performance
of an act, with respect to each party, is a Bilateral Contract. A bilateral contract is sometimes
called a two-sided contract because of the two promises that constitute it. The promise that
one-party makes constitutes sufficient consideration for the promise made by the other. A
unilateral contract involves a promise that is made by only one party. The offeror (i.e., a
person who makes a proposal) promises to do a certain thing if the offeree performs a
requested act that he or she knows is the basis of a legally enforceable contract. The
performance constitutes an acceptance of the offer, and the contract then becomes executed.
Acceptance of the offer may be revoked. However, until the performance has been
completed. This is a one-sided type of contract because only the offeror, who makes the
promise, will be legally bound. The offeree may act as requested, or may refrain from acting,
but may not be sued for failing to perform, or even for abandoning performance once it has
begun, because he or she did not make any promises.
6. Unconscionable Contracts: it is contract is one that is unjust or unduly one-sided in favor

of the party superior bargaining power. The adjective unconscionable implies an affront to
fairness and decency. An unconscionable contract is one that no mentally competent person
would accept and that no fair and honest person would enter into.
7. Adhesion Contracts: Adhesion contracts are those that are drafted by the party who has
the greater bargaining advantage, providing the weaker party with only the opportunity to
adhere to (i.e., to accept) the contract or to reject it. (These types of contract are often
described by the saying "Take it or leave it.") They are frequently employed because most
businesses could not transact business if it were necessary to negotiate all the terms of every
contract.
8. Aleatory Contracts: this is a mutual agreement the effects of which are triggered by the
occurrence of an uncertain event. In this type of contract, one or both parties assume the risk.
A fire insurance policy is a form of aleatory contract, as an insured will not receive the
proceeds of the policy unless a fire occurs, an event that is uncertain to occur.
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9. Void and Voidable Contracts: A void contract imposes no legal rights or obligations
upon the parties and is not enforceable by a court. It is, in effect, no contract at all. A
voidable contract is a legally enforceable agreement, but it may be treated as never having
been binding on a party who was suffering from some legal disability or who was a victim of
fraud at the time of its execution. The contract is not void unless or until the party chooses to
treat it as such by opposing its enforcement. A voidable contract may be ratified either
expressly or impliedly by the party who has the right to avoid it.
5.4 Employment Contract

An employment contract is a written legal document that lays out binding terms and
conditions of employment between an employee and an employer. An employment contract
generally covers an overview of job responsibilities, reporting relationships, salary, benefits,
paid holidays, paid vacation, details of employment termination including cause, severance
package, and notice, etc. An employment contract is written most frequently for high-level
jobs and for senior employees who have a lot to lose if an employment relationship does not
work out as planned. An employment contract is also negotiated for union represented
employees.
5.5 SSNIT contribution

The National Pensions Act (2008) is divided into four parts; Part One is on the establishment
of a contributory three-tier pension scheme and National Pensions Regulatory Authority, Part
Two deals with the basic national social security scheme. Part Three provides for
occupational pension schemes, provident fund and personal pension schemes and
management of the schemes, and Part four is on general provisions.
Part One - Establishment of Contributory Three–tier Pension Scheme and National Pensions
Regulatory Authority.
This Part establishes a contributory three-tier pension scheme as follows:
a) First-tier basic national social security scheme, which incorporates an improved system of
SSNIT benefits and shall be mandatory for all employees in both the private and public
sectors; b) second tier occupational (or work-based) pension scheme, mandatory for all
employees but privately managed, and designed primarily to give contributors higher lump
sum benefits than presently available under the SSNIT or Cap 30 pension schemes; and
c)Third tier voluntary provident fund and personal pension schemes, supported by tax benefit
incentives for workers in the formal sector who want to make voluntary contributions to
enhance their pension benefits and also for workers in the informal sector.
Part Two - Basic National Social Security Scheme - This Part deals with the basic national
social security scheme which is the first tier of the three-tier pension scheme. It is a revision
of the existing Social Security Act, 1991 with an improved system of benefits. The basic
national social security scheme will concentrate on the payment of monthly and other related
benefits. It is mandatory for all workers in the formal sector and optional for self-employed.
Part Three - Occupational Pension Schemes, Provident Fund and Personal Pension Schemes
and Management of the Schemes. Part Three of the Act deals with occupational pension
schemes, provident funds and personal pension schemes as well as the management of the
schemes. It provides for the second and third tier of the three-tier pension scheme and may
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be classified as the privately-managed schemes portion. The occupational pension scheme
which is the second tier is work-based and mandatory. The employee is paid a lump sum
money on termination of service, death or retirement. The privately managed schemes (2nd
and 3rd tiers) allow the use of future lump sum pension benefits to secure mortgages. This
means that workers can obtain their own houses before retirement by using their pension
benefits as collateral.
5.6 Dismissal - Section 12 of the Labour Act 651 of 2003 requires a written contract of
employment for work done for a period of six months or for a number of working days
equivalent to six months or more within a year. The contract shall express in clear terms the
rights and duties of the parties. Particulars are listed in Schedule 1 to the Act, namely names
of parties, date of first appointment, job title, pay (including overtime rates), hours of work,
holidays, sickness and work-related injury entitlements, social security or pension scheme,
termination notice and disciplinary rules/grievances. The contract must be signed by both
parties and dated. Special provisions to relate to temporary and casual workers (Part X of the
Labour Act). A contract of employment for a casual worker needs not to be in writing;
however, casuals have rights to minimum remuneration for each day worked, overtime and
medical facilities. Temporary workers are entitled to the Act’s minima in respect of minimum
wage, hours of work, rest periods, paid public holidays, night work and sick leave,
irrespective of whatever terms agreed by the parties. Subject to more favourable provisions
for workers, negotiated in collective agreement (s.19), grounds for termination (s.15) include:
a) by mutual consent of the parties;
b) by the worker on grounds of ill-treatment or sexual harassment;
c) by the employer if the worker dies before the end of the employment period;
d) by the employer if the worker is medically certified to be unfit for the job;
e) by the employer if the worker is unable to do the job because of misconduct; and
f) by redundancy (s. 65).
Notice must be in writing. Notice for termination follows a scale: when contracts are for more
than 3 years, one month’s notice; when the contract is for less than 3 years, two weeks’ notice
or two weeks’ pay in lieu of notice; or when contracts are on a week to week basis, 7 day’s
notice. However, where the parties have signed an “at will” clause in the contract, that
contract may be ended at the close of any day at will. Notwithstanding the notice provision,
either party can buy out by paying a sum equal to the amount of remuneration which would
have accrued to the worker during the period of notice. Where an employee who is warned in
writing commits a similar offence within six months the employer can terminate without
notice. Section 57(8) forbids an employer from dismissing a woman because of her absence
from work on maternity leave. Section 50 protects the employment of a person who suffers a
disability if the residual capacity for work is such that the worker can be found employment
in the same or some other corresponding job in the same undertaking, but if no such job can
be found, the employer may terminate the employment by notice.
5.7 Discrimination
The Constitution of Ghana and the labour laws prohibit discrimination on the basis of race,
sex, ethnic origin, creed, colour, religion, social, or economic status. Part VI of the Labour
Act ensures protection of working women and Part V protects workers with disabilities.
Section 68 specifies that every worker shall receive equal pay for equal work without
distinction of any kind. Section 46 offers special incentives for the employment of persons
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with disabilities, and section 53 places special emphasis in training and retraining to enable
the worker to cope with any aspect of the job.
5.8Employee Safety
It is the duty of your employer to ensure that everybody employed by him or her works
under satisfactory, safe and healthy conditions.
Obligations of the Employer:

An employer shall:
a) Provide and maintain at the workplace systems of work that are safe and without risk
to health;
b) Ensure the safety and absence of risks to health in connection with the use,
handling, storage and transport of articles and substances;
c) Provide the necessary information, instructions, training and supervision having
regard to the age, literacy level and other circumstances of the worker to ensure the
health and safety of those other workers engaged in the particular work;
d) Take steps to prevent contamination of the workplace by, and protect the workers
from, toxic gases, noxious substances, vapours, dust, fumes, mists and other
substances or materials likely to cause risk to safety or health;
e) Supply and maintain at no cost to the worker adequate safety appliances, suitable fire-
fighting equipment, personal protective equipment, and instruct the workers in the use
of the appliances or equipment;
f) Provide separate, sufficient and suitable toilet and washing facilities and
adequate facilities for storage;
g) Provide an adequate supply of clean drinking water at the workplace; and
h) Prevent accidents and injury to health arising out of or connected with work by
minimizing the causes of hazards inherent in the working environment.
Obligation of the Employee

An employee shall use the safety appliances, fire-fighting equipment and personal protective
equipment provided by the employer in compliance with the employers’ instruction.
5.7 Sale of goods law and product liability, consumer protection

A contract of sale of goods is a contract whereby the seller transfers, or agrees to transfer, the
property in goods to the buyer for a money consideration, called the "price". A contract of
sale may be absolute or conditional. Where, under a contract of sale, the property in the
goods is transferred from the seller to the buyer, the contract is called a "sale", but where the
transfer of the property in the goods is to take place at a future time, or subject to some
condition thereafter to be fulfilled, the contract is called an "agreement to sell". An agreement
to sell becomes a sale when the time elapses, or the conditions are fulfilled subject to which
the property in the goods is to be transferred. .
The Price
a) The price in a contract of sale may be fixed by the contract, may be left to be fixed in
manner thereby agreed or may be determined by the course of dealing between the
parties.
b) Where the price is not determined in accordance with the foregoing provisions the
buyer must pay a reasonable price and what is a reasonable price is a question of fact
dependent on the circumstances of each particular case.
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c) Where there is an agreement to sell goods on the terms that the price is to be fixed by
the valuation of a third party, and such third party cannot or does not make such
valuation, the agreement is avoided, provided that, if the goods or any part thereof
have been delivered to and appropriated by the buyer, the buyer must pay a
reasonable price therefor.
d) Where such third party is prevented from making the valuation by the fault of the
seller or buyer, the party not in fault may maintain an action for damages against the
party in fault.
Rights of an unpaid seller

Notwithstanding that the property in the goods may have passed to the buyer, the unpaid
seller of goods, as such, has, by implication of law,
a) a lien on the goods or right to retain them for the price while he is in possession of
them;
b) in case of the insolvency of the buyer, a right of stopping the goods in transit after he
has parted with the possession of them;
c) a right of resale
d) where the property in goods has not passed to the buyer, the unpaid seller has, in
addition to his other remedies, a right of withholding delivery similar to and
coextensive with his rights of lien and stoppage in transit where the property has
passed to the buyer.
5.8 Free Competition

A free market is a market economy in which the forces of supply and demand are not
controlled by a government or other authority. A free market contrasts with a controlled
market or regulated market, in which government intervenes in supply and demand through
non-market methods such as laws controlling who is allowed to enter the market, mandating
what type of product or service is supplied, or directly setting prices. Although free markets
are commonly associated with capitalism in contemporary usage and popular culture, free
markets have been also advocated by market socialists, cooperative members and advocates
of profit sharing.
5.9 Copyright
Copyright is a legal concept, enacted by most governments, that grants the creator of an
original work exclusive rights to its use and distribution, usually for a limited time, with the
intention of enabling the creator of intellectual wealth (e.g. the photographer of a photograph
or the author of a book) to receive compensation for their work and be able to financially
support themselves.
Copyright is a form of intellectual property (as patents, trademarks and trade secrets are),
applicable to any expressible form of an idea or information that is substantive and discrete. It
is often shared, then percentage holders are commonly called rightsholders: legally,
contractually and in associated "rights" business functions. Generally, rightsholders have "the
right to copy," but also the right to be credited for the work, to determine who may adapt the
work to other forms, who may perform the work, who may financially benefit from it, and
other related rights.
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Summary
In this session, we looked at the law of contract and the elements that constitute a valid
contract, employment contracts, the laws governing SSNIT contributions in Ghana, employee
dismissal, discrimination and employee safety at the workplace. We also considered the laws
governing the sale of goods in Ghana and consumer protection. Finally, we treated free
completion and copyright issues.
Activity 5.5
a) What is a contract?
b) Identify the elements of a valid contract
c) Define contract of sale of goods?

a) A contract is a legally-enforceable promise or set of promises made by one party to
another. A contract is a legally binding agreement concerning a bargain which is
essentially commercial in its nature and involves the sale or hire of commodities such as
goods, services or land.
b) The elements of a valid contract are offer, acceptance, and consideration, intention to
create legal relations, certainty and capacity.
c) A contract of sale of goods is a contract whereby the seller transfers, or agrees to
transfer, the property in goods to the buyer for a money consideration, called the
"price".
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SESSION 6: BUSINESS ETHICS
You are welcome to this session. In this session, we are going to look at the ethical issues that
confront business and the responsibilities businesses have towards its stakeholders. There are
various schools of thoughts that argue if indeed it is necessary or not for business to comply
with ethical standards in the environment in which they find themselves. We will discuss the
issues of ethics and corporate social responsibility and how they affect businesses.
Objectives
1. define business ethics and corporate social responsibility
2. identify ethical principles that guide entrepreneurial behaviour
3. explain why ethical lapses occur
4. identify what constitutes unethical practice
5. identify what price business pay for acting in an ethical manner
Now read on ……………….
6.1 Business Ethics

Business Ethics involves a code of conduct based on the moral values and behavioural
standards business people rely on to guide them as they take decisions and solve problems.
Business ethics originate from the commitment to do what is right. It is the behavior that a
business adheres to in its daily dealings with the world. The ethics of a particular business
can be diverse. They apply not only to how the business interacts with the world at large, but
also to their one-on-one dealings with a single customer.
6.2 Corporate social responsibility

Corporate Social Responsibility (CSR) is the responsibility of an organization for the impacts
of its decisions and activities on society, the environment and its own prosperity, known as
the “triple bottom line” of people, planet, and profit. A firm's implementation of CSR goes
beyond compliance and engages in actions that appear to further some social good, beyond
the interests of the firm and that which is required by law. CSR is a process with the aim to
embrace responsibility for the company's actions and encourage a positive impact through its
activities on the environment, consumers, employees, communities, stakeholders and all other
members of the public sphere who may also be considered as stakeholders.
Arguments for CSR
a) Problem Creators
For corporations, many believe that they are the cause of many of the world's problems.
Because corporations use more energy and produce more solid waste disposal than
individuals, they have a responsibility to correct these problems. Corporations should find
environmentally friendly ways to create their products.
b) Planet Home
It is argued that it is in an individual's best interest to be socially responsible. An individual's
actions determine what kind of world he lives in tomorrow. If everyone continued to pile up
non-biodegradable waste in the landfills, eventually there will be nowhere to dispose of
wastes. If all the world's resources were consumed as if there will be no tomorrow, then
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eventually all the natural resources will be used up. The argument is that if everyone does his
part, it will lessen the global impact.
(c) Available Resources

Corporations are perceived to have the resources to make a difference. In both manpower and
financial capital, they can use these funds to confront social issues. Corporations have
scientists and educated thinkers at their disposal who are adept at putting their minds to
solving problems, which could be used for solving social issues. They also have the financial
capital to rebuild infrastructures.
(d) Public Image

For a business, consumers are the most important aspect of the business. Creating a positive
public image in the eyes of the consumer happens through social responsibility. Corporations
that are perceived to care about the communities, they do business in because of their
involvement in environmental initiatives, cleaning up bad neighborhoods and providing
health care for those in need, help make consumers feel good about spending their money on
their products or services. Public image also impacts the type of talent attracted for
employment with a corporation.
(e) Government Regulation

If consumers complain enough about the damage, a corporation is having on society, the
government will enact regulations that impact the corporation's wallet. If the government gets
involved, then there is always someone looking over the corporation's shoulder as it conducts
business. The restrictions of government intervention impact profits. It is better for a business
to control this on its own without having a third party control how it operates. Regulations
impact decision-making, which could lead to the corporation to not being able to meet market
demand.
Arguments against CSR
a) Role of Profit
One of the biggest features addressed by CSR is its intent to cause companies to recognize
responsibilities to stakeholders outside of shareholders. This includes customers,
communities, employees and suppliers. While proponents of CSR point out the long-term
benefits of taking care of these core relationships, shareholders are often deterred at the
notion that companies will invest in anything that does not create immediately obvious
financial gain. With CSR, detecting measurable bottom line benefits is a challenge as social
and environmental programs are hard to account for with regard to financial gain.
(b) Competitive Disadvantage

One of the most common arguments companies make when indicating reluctance to CSR
policies is the disadvantage it causes against companies that do not. In other words, if
company A does its part to invest resources to take care of its communities and the
environment and company B does not, company B retains its resources, including money, for
other business pursuits. Thus, without strict adherence industry wide, some companies argue
that they cannot fall behind by putting money into CSR programs. .
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c) Loss of Focus
A main driver at the onset of CSR was increased interest in making the customer a primary
focus of business operations. This coincides with continued realization that customer
retention and loyalty are keys to long-term business success. Detractors of CSR as a major
component of corporate governance argue that guidelines have expanded beyond this basic
initial emphasis. Many companies that abide by CSR guidelines do so more from fear of
public backlash than because they believe it is good for long-term business performance.
d) Lasting Impact
How long CSR will remain a prominent business concern is a common question asked by
those who argue against CSR as a major concern with corporate governance. CSR has existed
for more than 50 years. However, its prominence as a major business consideration has
certainly increased in the 21st century due to heightened awareness of ethical issues in
business and environmental preservation standards. Detractors argue that CSR emphasis is a
short-term trend in response to prominent scandals and current interest in green-friendly
practices.
6.3 Ethical Principles
Ethical theories and principles are the foundations of ethical analysis because they are the
viewpoints from which guidance can be obtained along the pathway to a decision. Each
theory emphasizes different points such as predicting the outcome and following one's duties
to others in order to reach an ethically correct decision. However, in order for an ethical
theory to be useful, the theory must be directed towards a common set of goals. Ethical
principles are the common goals that each theory tries to achieve in order to be successful.
These goals include beneficence, least harm, respect for autonomy and justice.
1. Beneficence
The principle of beneficence guides the ethical theory to do what is good. This priority to "do
good" makes an ethical perspective and possible solution to an ethical dilemma acceptable.
This principle is also related to the principle of utility, which states that we should attempt to
generate the largest ratio of good over evil possible in the world. This principle stipulates that
ethical theories should strive to achieve the greatest amount of good because people benefit
from the most good. This principle is mainly associated with the utilitarian ethical theory. An
example of "doing good" is found in the practice of medicine in which the health of an
individual is bettered by treatment from a physician.
2. Least Harm
This is similar to beneficence, but deals with situations in which neither choice is beneficial.
In this case, a person should choose to do the least harm possible and to do harm to the fewest
people. For instance, in the Hippocratic oath, a physician is first charged with the
responsibility to "do no harm" to the patient since the physician's primary duty is to provide
helpful treatment to the patient rather than to inflict more suffering upon the patient. One
could also reasonably argue that people have a greater responsibility to "do no harm" than to
take steps to benefit others. For example, a person has a larger responsibility to simply walk
past a person rather than to punch a person as they walk past with no justified reason.
3. Respect for Autonomy

This principle states that an ethical theory should allow people to reign over themselves and
to be able to make decisions that apply to their lives. This means that people should have
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control over their lives as much as possible because they are the only people who completely
understand their chosen type of lifestyle. Each man deserves respect because only he has had
those exact life experiences and understands his emotions, motivations and body in such an
intimate manner. In essence, this ethical principle is an extension of the ethical principle of
beneficence because a person who is independent usually prefers to have control over his life
experiences in order to obtain the lifestyle that he enjoys.
There are, however, two ways of looking at the respect for autonomy. In the paternalistic
viewpoint, an authority prioritizes a dependent person's best interests over the dependent
person's wishes. For example, a patient with terminal cancer may prefer to live the rest of her
life without the medication that makes her constantly ill. The physician, on the other hand,
may convince the patient and her family members to make the patient continue taking her
medication because the medication will prolong her life. In this situation, the physician uses
his or her authority to manipulate the patient to choose the treatment that will benefit him or
her best medically. As noted in this example, one drawback of this principle is that the
paternalistic figure may not have the same ideals as the dependent person and will deny the
patient's autonomy and ability to choose her treatment. This, in turn, leads to a decreased
amount of beneficence.
6.4 Ethical Lapses
An ethical lapse is a mistake or error in judgement that produces a harmful outcome. A lapse
in ethics does not show a complete lack of integrity, just an oversight or an ethical blind spot.
Routinely producing harmful results is not considered a "lapse", that is just considered
unethical. Ethical lapses can be large or small scale, kept private or publicized and be illegal
or within the realm of the law, but immoral. In academia, the causes of these lapses (in a
regularly ethical person) are sometimes called fallacies. The following are the reasons why
ethical lapses occur:
1. Lapse from Subjectivity

This type of ethics lapse occurs when an unethical action is allowed due to the idea that
morality cannot be defined. It is true that the exact definition of what constitutes as "ethical"
differs from person to person, but that fact should not be used to justify an unethical action.
There are thousands of actions that most people would consider wrong, regardless of their
personal moral codes. Deception, theft and murder are considered wrong by the majority of
cultures throughout the world. Generally, minimizing harm is the moral rule of thumb to
follow when the situation seems ethically ambiguous.
2. Lapse from Attempted Tolerance

This lapse has a similar basis as the subjectivity fallacy, but it happens for a different reason.
Tolerance lapses happen when a moral agent acts unethically (or allows unethical action) in
an attempt to keep from offending anyone. This lapse is driven by the thought that ethics is a
personal choice and one person's ethics should not override another's.
3. Authority Fallacy
This lapse happens when someone acts unethically because their action has not been deemed
unethical by a noted authority. An action may not be listed as unethical in a traditional
source, such as a corporate code of conduct or religious dogma, but it can still be a lapse in
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ethics. As with any ethical dilemma, the consequences of the action should be considered
along with an official or authoritative advice.
4. Status Quo Fallacy

This type of lapse in judgment happens because the unethical act is done by everyone, has
always been done or is part of some tradition. It is possible for a great number of people to be
mistaken about the ethical validity of an action. For example, slavery, a morally repressible
action, was once widely considered acceptable.
5. Lapse of Conscience
This lapse happens when someone decides to go against what they know to be ethical. A
normally ethical person acts unethically simply because they want to act unethically. This
could be a sudden drive for gain at another's expense or a case of carelessness.
6.5 Unethical practices

Unethical practice is any action that is aimed at taking advantage of another without their
knowledge or consent. Most define this as manipulating someone without their permission.
Unethical actions are not necessarily illegal. The following are some actions that constitute
unethical practices:
1. Theft
Theft at work comes in a variety of forms, and often times employees do not view it as
unethical behavior, believing no one gets hurt by the action. Employees take home office
supplies, use business computers for personal tasks, pad expense accounts and abuse sick
time or allotted personal days.
2. Vendor Relationships
Businesses that buy from and sell products to other businesses are sometimes subject to
unethical behavior. The practice of accepting gifts from a vendor in exchange for increased
purchasing is not only unethical, it may have legal repercussions. The same can be said for
offering a customer kickback to increase his purchasing habits. Ethics policies often contain
guidelines for giving or accepting gifts with vendors or other business associates, such as a
cap on the value of the gift. Other businesses strictly forbid giving gifts or any other item
with monetary value. This is a safeguard to prevent any perception of unethical behavior.
3. Bending the Rules

Bending the rules in a business situation is often the result of a psychological stimulus. If an
employee is asked to perform an unethical task by a supervisor or manager, he may do it
because his allegiance to authority is greater than his need to abide by the rules. Turning the
other way to avoid trouble for another employee is still unethical, even though the motivation
may be empathetic. For example, knowing that a coworker is having issues outside work
justifies watching him leave early each day without reporting it.
4. Environmental pollution
Unethical behavior by companies, such as releasing pollutants into the air, can affect cities,
towns, waterways and masses of people. Though accidents can occur, the release of harmful
toxins into the environment due to lax safety standards, improper maintenance of equipment
or other preventable reasons is unethical. If a business willingly continues production of a
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product knowing inherent environmental risks exist, it can certainly be categorized as
unethical behavior
5. Wages and Working Conditions

Other unethical practices include not paying workers a fair wage, employing children under
the legal working age and unsafe or unsanitary working conditions. Any practices that are not
in compliance with fair labour standards and federal working guidelines fall into this
category.
6.6 Price for acting ethically
The following are the benefits of acting ethically in society:

a. Potential Avoidance of Fines
b. Better Access to Capital
c. Improved Brand Reputation
d. Improved Employee Commitment
e. Improved Customer Loyalty
f. Decreased Vulnerability
Summary
In this session we looked at what business ethics is, as well as corporate social responsibility
and its implications on business. We also learned about the ethical principles that guide
entrepreneurial bebaviour, the reasons why ethical lapses occur in business. Finally, we also
considered some unethical practices in business and the price businesses pay for acting in an
ethical manner.
Activity 5.6
1. What is corporate social responsibility?
2. Identify and explan three ethical principles that guide entrepreneurial behaviour
3. Identify some unethical practices in business

1. Corporate Social Responsibility (CSR) is the responsibility of an organization for the
impacts of its decisions and activities on society, the environment and its own prosperity.
2. Ethical principles that guide entrepreneurial behaviour
a) Beneficence
The principle of beneficence guides the ethical theory to do what is good. This
priority to "do good" makes an ethical perspective and possible solution to an ethical
dilemma acceptable. This principle is also related to the principle of utility, which
states that we should attempt to generate the largest ratio of good over evil possible in
the world.
b) Least Harm
This is similar to beneficence, but deals with situations in which neither choice is
beneficial. In this case, a person should choose to do the least harm possible and to do
harm to the fewest people.
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c) Respect for Autonomy
This principle states that an ethical theory should allow people to reign over
themselves and to be able to make decisions that apply to their lives. This means that
people should have control over their lives as much as possible because they are the
only people who completely understand their chosen type of lifestyle.
3. Unethical practices in business include:
a) Theft
b) Vendor relationship
c) Environmental pollution
d) Paying unfair wages
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UNIT 5: LAWS ON BUSINESS OWNERSHIP AND CONTROL
One of the popular concepts in business is the laws on business ownership and control. A
business cannot run independently on its own, it has to be owned and controlled by an
individual or group of individuals. There are various forms of business organisations and
each form has specific laws regarding how it is owned and controlled. These businesses have
been differentiated for regulatory and tax purposes. In this unit, we explore the different
forms of business ownership, laws governing the running and control of business, and the
responsibility of business towards their stakeholders.
OUTLINE:
Session 1: Identify and explain the various forms of business ownership
Session 2: Identify and explain the various alternatives to starting a business from the
scratch
Session 3: Explain the process and documents required in registering a business in Ghana
Session 4: Identify the various institutions that support start-ups
Session 5: Identify the basic laws in business
Session 6: Define business ethics and outline the responsibilities businesses have to their
stakeholders
Objectives
By the end of this unit, you should be able to:
1. identify and explain the various forms of business ownership
2. identify and describe the various alternatives to starting a business from the scratch
3. explain the process and documents required in registering a business in Ghana
4. identify the various institutions that support start-ups
5. identify the basic laws governing business
6. explain business ethics and the responsibilities of business towards its stakeholders
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SESSION 1: MANAGEMENT, LEADERSHIP AND STRATEGY
This session aims to define and explain what management is all about. If you belong to any
group at all, then you are already a part of an organisation. How are organisations able to
achieve what they exist for? Organisations are to be managed so as to be able to achieve their
purpose. All you need now is to carefully study this session and you will come to realize that
management is a subject that aims at improving the activities of organisations.
Objectives
1. explain Management, leadership and strategy
2. identify the qualities of a good manager
3. explain how to develop a strategy
4. explain venture life cycle and management of growth
Now read on ………………..
1.1 Definition of Management

Management in business and organizations means to coordinate the efforts of people to
accomplish goals and objectives using available resources efficiently and effectively.
Management comprises planning, organizing, staffing, leading or directing, and controlling
an organization or initiative to accomplish a goal. F.W. Taylor defines management as the
“Art of knowing what you want to do and then seeing that it is done the best and cheapest
way”. Henry Fayol also posits that “To Manage is to forecast, to plan, to organise, to
command, to co-ordinate and to control”. “Management is work and as such it has its own
skills, its own tools and its own techniques” (Peter F. Drucker). A fairly complex definition
that seeks to draw attention to important aspects of managing is that: “Management is the
process of planning, organizing, leading, and controlling efforts of organisational resources to
achieve stated organisational goals” (Mescon et al, 1985).
1.2 Leadership
Leadership is a vital role in any organisation. It involves defining the direction of a team and
communicating it to people, motivating, inspiring and empowering them to contribute to
achieving organisational success. Leadership requires being strategically focused and
applying behavioural techniques to build commitment and attain the best work from your
people. The ingredients of effective leadership are complex and are widely agreed to depend
on the specific leadership situation, considering the difficulty of tasks, the degree of a leader's
authority and the maturity and capabilities of subordinates. Leadership skills often take time
to learn, because they are multi-faceted, behavioural and context dependent. Becoming an
effective leader is a challenge to many new managers, but offers the rewards of successfully
orientating people’s work to be most effective and achieving excellence in team performance.
An understanding of the principles of strategic thinking, direction setting, communication and
motivation provides a springboard for developing skills and an effective management style to
suit your personality and leadership situations.
1.3 Qualities of a Good Manager

There are several qualities of a good manager. The entrepreneur must possess some or all of
these qualities. Some of these qualities are:
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a) Creativity
Creativity is what separates competence from excellence. Creativity is the spark that propels
projects forward and that captures peoples' attention. Creativity is the ingredient that pulls the
different pieces together into a cohesive whole, adding enthusiasm and appeal in the process.
b) Structure
The context and structure we work within always have a set of parameters, limitations and
guidelines. A stellar manager knows how to work within the structure and not let the structure
impinge upon the process or the project. Know the structure intimately, so as to guide others
to effectively work within the given parameters.
c) Intuition
Intuition is the capacity of knowing without the use of rational processes; it is the cornerstone
of emotional intelligence. People with keen insight are often able to sense what others are
feeling and thinking; consequently, they are able to respond perfectly to another through their
‘deeper understanding’. The stronger one's intuition, the stronger manager one will be.
d) Knowledge
A thorough knowledge base is essential. The knowledge base must be so ingrained and
integrated into their being that they become ‘transparent’, focusing on the employee and what
she/he needs to learn, versus focusing on the knowledge base. The excellent manager lives
from a knowledge base, without having to draw attention to it. .
e) Commitment
A manager is committed to the success of the project and of all team members. She/he holds
the vision for the collective team and moves the team closer to the end result. It is the
manager's commitment that pulls the team forward during trying times.
1.3 Developing strategy

Every organisation must have a strategy that guides its operations. Developing an effective
strategy gives an organisation a competitive edge over its rivals. We will look at how a
business can develop a strategy to gain a competitive advantage in its environment. In
developing a successful strategy, the organisation must consider the following:
a) Mission Statement
A corporate mission statement defines what the venture does, who it serves, and how it serves
(creates value for) its clients. It is designed to provide clarity of focus and direction for those
in the venture and answers the questions of who we serve and how. It also creates clarity of
value for those outside the venture and answers the question of whether this venture can be of
value to me and/or my venture.
In developing a mission statement, follow these two simple steps. Step one is to develop
answers to the three components of the mission statement:
1. What do we do? What are our products and services?
2. Who do we serve? Who finds these products and services of value?
3. What value do we provide? What business problem, human need, or desire do
our products and services fulfill?
In step 2, you draft a mission statement (one or two sentences) that captures the above
components in a compelling manner.
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b) Vision Statement
A corporate vision statement sets a dynamic and compelling view of the venture at some
point in the future. It is an emotional driver to some “big idea” or challenge that drives those
in the venture towards it. It is not intended for those outside the venture. It is not a goal, as
they should be specific, measurable, attainable, realistic and time bound, but rather it can be a
wild, crazy, and even unattainable idea, as long as it provides a deeply emotional drive to
accomplish something great that those in the venture can get behind and drive toward.
Example: We are the number one provider in outdoor equipment in the world .
c) Values
Corporate Values are a venture’s ethical and moral compass and decision making foundation.
They are the ideals and ethics that management holds dear. They drive decision making in
that they are constantly referred to in the decision making process. That is, when in a tough
spot, the answer needs, first and foremost, to be consistent with the venture values. They are
generally for both internal and external consumption. They tell those in the venture how
things are done and those outside the venture why they want to be associated with this
venture.
d) Objectives
Once a venture has developed its mission statement, its next step is to develop the specific
objectives that are focused on achieving that mission. Objectives are the specific measurable
results of the initiative. A venture's objectives offer specifics of how much of what will be
accomplished by when. For example, one of several objectives for a community initiative to
promote care and caring for older adults might be: "By 2015 (by when), to increase by 20%
(how much) those elders reporting that they are in daily contact with someone who cares
about them (of what).
e) Strategy
A strategy is an overall approach and plan. So, strategic planning is the overall planning that
facilitates the good management of a process. Strategic planning takes you outside the day to-
day activities of your venture or project. It provides you with the big picture of what you are
doing and where you are going. Strategic planning gives you clarity about what you actually
want to achieve and how to go about achieving it, rather than a plan of action for day to-day
operations. The word "strategy" comes from the Greek word for "generalship". Like a good
general, strategies give overall direction for an initiative. A strategy is a way of describing
how you are going to get things done. It is less specific than an action plan (which tells the
who-what-when); instead, it tries to broadly answer the question, "How do we get there from
here?" (Do we want to take the train? Fly? Walk?).
1.4 Venture Life Cycle and management of growth

A venture life cycle describes how businesses go through a series of phases as they grow and
develop. Certain models have been developed to describe this cycle. We will look at
Greiner’s growth model and Churchill and Lewis growth model.
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Greiner’s Growth Model
Greiner (1972, 1998) describes how companies go through a series of phases as they grow
and develop.
Figure 1: Greiner (1988) growth model
a) Creativity
When companies form and enter the Creative Phase, they are typically driven by the creative
force of the founder and the new products and services that create value for customers.
Innovation is natural and people do whatever is needed to make things work.
In addition, the issues raised above, the stage may have its own issues including leadership
crisis. Initially, the founder (or the startup team) is able to cope with the demands of
leadership, but as the venture grows, they are pulled more and more in different directions
until they are unable to fulfill their duties. The increasing complexities of the firm may lead
to challenges to the leader's ability, who may originally be the inventor and developer of the
venture products and who may find management and leadership a difficult challenge.
b) Direction
The response to the leadership crisis is to get more professional in management, for example
by hiring managers who have got more experience and education in the subject, typically at a
larger firm. Professional managers know more about planning and tactics and help out with
strategic thinking and operation plans. Rather than rushing around doing what seems to be
needed at the time, a longer-term view starts to emerge, giving direction and focus to
proceedings. This stage also includes separation of activities such as budgeting and
marketing, although these are probably not yet done by a separate department.
Other issues that may occur at this stage include autonomy crisis. As professional managers
start to direct the proceedings they typically have a greater interest in their own areas of
interest than those of others or the overall firm. They seek personal success and will fight to
achieve this. When they own all the resources they need, this is fine, but as the firm grows
they fall into conflict with one another, arguing over resources and rewards. The question
hence arises of how to give managers and individuals the freedom to choose and succeed in a
way that also helps the whole venture.
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c) Delegation
The response to the autonomy crisis is to divide and conquer with greater structure and
deeper hierarchy, where individual departments and operational units have individual
managers and are delegated greater autonomy. This is the time when middle managers
appear, running multiple operational units where they manage managers rather than give
direct orders to the front line.
The stage comes with control crisis. There are problems in delegation and in particular as it
gets more complex in a growing firm, for example where the communicated requirements are
not always understood, and where managers make autonomous decisions that, while they
may make sense at their level are suboptimal for the overall organization. Not knowing
enough about what is really going on at the bottom of the organization, middle and senior
managers at the end of this stage start to lose control over everyday operations.
d) Coordination
The response to the loss of control is to put additional effort into reporting up and
communicating in all directions. Isolated business teams and product organizations are joined
up in business units and other collective organizations. Finance is still managed centrally and
becomes more sophisticated, looking at such as business unit return on investment. Reporting
becomes more sophisticated with increasing demands on business units for information about
all aspects of the business.
Key issue to deal with red tape crisis. This coordination does not come at a price and the
increasing reporting and control adds layers of bureaucracy at all levels. Layers in the venture
face off against one another and perhaps play cat and mouse games of reports that look good
and audits that seek hidden problems.
e) Collaboration
The growing antagonism of cold coordination is addressed by attention to human connection
and more collaborative, supportive approaches. Bureaucracy is simplified and trust is rebuilt
with a greater focus on common organizational goals. Structures may be implemented to
connect people in multiple dimensions, such as the use of matrix management. Reward
systems may also be realigned to promote team and organizational success rather than just
individual performance.
There may be growth crisis at this stage. While a collaborative organization is better in many
ways than previous forms, there are now problems in how to grow further without
overloading current systems and processes.
6) Alliances
The final stage is to address the crisis of internal growth by looking externally. One approach
is to pursue growth through mergers and acquisitions. Another way is to create a virtual
super-organization by forming partnerships and alliances where the business value created
can benefit everyone. A typical way this happens is where each partner contributes particular
skills and competences to a total customer solution. No doubt there are crises beyond this
phase, but Greiner's model does not discuss them. Typical problems include a repetition of
earlier phases, but on a grander scale. For example, where communication between partners
is weak leading to more formal coordination. Mergers and Acquisitions are also subject to
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failure, often because of cultural and personal differences.
Churchill and Lewis Growth Model
Figure 2: Churchill and Lewis (1983) growth model
According to the Churchill and Lewis (1983) growth model a business goes through five
stages of growth/development. These five stages involve conception/existence, survival,
success, take-off, and maturity. This growth model focuses on how the entrepreneur's role
evolves with growth and what skills are required at each of the five stages
a) Conception/Existence
At conception the business owner is in actual sense the business and he/she is responsible for
ensuring that everything happens. This stage is defined by the sole intention of survival and
features minimal levels of formal planning and defining of systems. It is at this stage that
many businesses fall and are thus unable to reach stage. .
b) Survival
Here the business has grown into a workable entity but the lead agenda is still survival. The
Churchill and Lewis growth model provides that the business will have a simple
organizational structure under the leadership of the owner who is still the face of the business.
The few persons employed, including perhaps a sales manager or foreman, don't have the
power to make decisions and will do according to what the owner sees fit. The level of formal
planning is still limited. Many businesses will remain at this stage and another good number
will also see profitability and progress to stage three. .
c) Success
At this stage the business is large enough and the owner will need to hire some managers to
take over some of his/her responsibilities. The owner will work through this management
team and will develop strategies intended to have him/her maintain control over operations.
This sort of control will however not be possible in the event of further growth and
subsequent hiring of more managers. This model posits that the owner and the business will
begin to acquire separate identities and will no longer be synonymous with each other. At this
stage, the owner will now be forced to tackle the twin agendas of ensuring profitability and
finding worthy managers who can help take the business to the next level.
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d) Take-off
The model at this stage, posits that many owners end up being unsuccessful in their quest to
manage the business. A pivotal stage, failure at take-off normally occurs due to attempts at
growing the business too rapidly or the inability to have effective delegation. Some owners
who realize the magnitude of the challenge in time will resort to selling off the business.
Alternatively, investors and creditors with a stake in the business will move to replace the
owner. The business may move forward if appropriate actions are taken in time but failure to
do so may see a relapse to stage. .
e) Maturity
Here the owner and the business are completely distinct. The business has a decentralized
structure and appropriate structures in place. There are enough resources to sustain
profitability and the main agenda is to ensure that a twin-pronged combination of an
entrepreneurial spirit and response flexibility is embraced for the achievement of more
growth. According to the model, failing to do this will result in ossification which features
the unhealthy traits of risk avoidance and absence of innovation.
Summary
In this session we looked at the meaning of management, leadership and strategy. We also
considered the qualities a manager must possess in order to effectively manage a business,
how a business develops its strategy, which includes the mission statement, the vision
statement, objectives, values and so on. We also focused on the series of phases a business
goes through as it grows and develops using the Greiner’s model and Churchill and Lewis
model.
Activity 6.1
1. Differentiate between management and leadership

2. Identify and explain 5 qualities of a good manager
1. Management is the art of knowing what you want to do and then seeing that it is done
the best and cheapest way. On the other hand, leadership involves defining the direction
of a team and communicating it to them, motivating, inspiring and empowering them to
contribute to achieving organisational success.
2. Qualities of a Good Manager
a. Creativity – Creativity is what separates competence from excellence. Creativity is the
spark that propels projects forward and that captures peoples' attention. Creativity is
the ingredient that pulls the different pieces together into a cohesive whole, adding
enthusiasm and appeal in the process.
b. Structure – The context and structure we work within always have a set of parameters,
limitations and guidelines. A stellar manager knows how to work within the structure
and not let the structure impinge upon the process or the project. Know the structure
intimately, so as to guide others to effectively work within the given parameters.
c. Intuition – intuition is the capacity of knowing without the use of rational processes; it
is the cornerstone of emotional intelligence. People with keen insight are often able
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to sense what others are feeling and thinking; consequently, they are able to respond
perfectly to another through their ‘deeper understanding’. The stronger one's
intuition, the stronger manager one will be.
d. Knowledge – A thorough knowledge base is essential. The knowledge base must be
so ingrained and integrated into their being that they become ‘transparent’, focusing
on the employee and what she/he needs to learn, versus focusing on the knowledge
base. The excellent manager lives from a knowledge base, without having to draw
attention to it. .
e. Commitment – A manager is committed to the success of the project and of all team
members. She/he holds the vision for the collective team and moves the team closer
to the end result. It is the manager's commitment that pulls the team forward during
trying times.
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SESSION 2: HUMAN RESOURCE SKILLS
Human resource is a very important aspect of every organisation. Without the requisite
human resource, the effective running of an organisation will not be achieved. We shall look
at how an organisation acquires its human resource and the succession planning strategies
they employ to keep and replace the human resource.
Objectives

1. explain the sources of recruitment available to an organisation
2. explain intrinsic and extrinsic motivation
3. explain a team and identify the stages involved in team formation
4. identify the strategies used in handling conflicts
5. explain succession planning
2.1 The Human Resource Management Process
According to Noe, Hollenbeck, Gerhart, and Wright (2010), human resource

management is a philosophy, policy, system and practices that can affect the
behavior, attitudes and performance of employees. Activities of HRM include HR planning,
staffing, training and development, performance management, compensation management,
safety and health and employee relations. SME managers has ignored the function of
HRM practices as a main driver of organizational success. HRM practices can improve
the performance of SMEs by contributing to employee and customer satisfaction,
innovation, productivity, and development of good reputation for the venture (Noe et al.,
2010).
The Entrepreneur would have to function as the HR manager (or outsource such function),
focusing on the day-to-day operations of employment and placement; compensation; training,
and labor relations for the venture. He or she would have to oversee the human resource
budget; employee training, hiring and termination policies; and employee salaries. He or she
must possess people skills, which will enable them to get along with people in the venture. At
times, when confronted with difficult situations such as layoffs or terminations, they have to
demonstrate communication skills and tact. They should have an open-door policy as they are
the information hub for the venture. They must practice discipline and fairness with all
employees.
2.2 The HRM Process

Human Resource Management is a management function that helps the managers to
recruit, select, train, and develop members for an organization. There are several activities in
HRM including the following. First, is Human Resource Planning (HRP). HRP is
understood as the process of forecasting an organizations future demand for, and supply of,
the right type of people in the right number. Then there is Job Analysis; the process of
studying and collecting information relating to the operations and responsibilities of a
specific job. The immediate products of this analysis are job descriptions and job
specification.
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Recruitment is the process of finding and attracting capable applicants for employment. The
process begins when new recruits are sought and ends when their applications are submitted.
The result is a pool of applicants from which new employees are selected (See diagram at the
end of session).
Other HRM activities are explained below:
Selection is the process of differentiating between applicants in order to identify (and hire)
those with greater likelihood of success in a job.
Placement is understood as the allocation of people to jobs. It is the assignment or

reassignment of an employee to a new or different job.
Training and development is an attempt to improve current or future employee performance

by increasing an employee’s ability to perform through learning, usually by changing the
employee’s attitude or increasing his or her skills and knowledge. The need for training and
development is determined by employee’s performance deficiency, computed as follows:
Training and development need = standard performance – actual performance.
Remuneration is the compensation an employee receives in return for his or her contribution
to the organization.
Safety and health means freedom from the occurrence or risk of injury or loss. In order to
ensure the continuing good health of their employees, the HRM focuses on the need for
healthy workers and health services.
Welfare is defined as a term which is understood to include such services, facilities, and
amenities as may be established in or in the vicinity of undertakings to enable the person
employed in them to perform their work in healthy, congenial surroundings and to provide
them with amenities conducive to good health and high morale.
Promotions means an improvement in pay, prestige, position and responsibilities of an

employee within his or her organization. Transfer involves a change in the job (accompanied
by a change in the place of the job) of an employee without a change in the responsibilities or
remuneration. Separations: Lay-offs, resignations and dismissals separate employees from
the employers.
Industrial relations is concerned with the systems, rules and procedures used by unions and
employers to determine the reward for effort and other conditions of employment, to protect
the interests of the employed and their employers, and to regulate the ways in which
employers treat their employees.
Trade Unions are voluntary organizations of workers or employers formed to promote and
protect their interests through collective action.
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Disputes and their settlement – Industrial disputes mean any dispute or difference between
employers and employers, or between employers and workmen, or between workmen and
workmen, which is connected with the employment or non-employment or terms of
employment or with the conditions of labour of any person
2.3 Sources of Recruitment

Every organisation has the option of choosing the candidates for its recruitment processes
from two kinds of sources (internal and external sources). The sources within the organisation
itself (like transfer of employees from one department to other, promotions) to fill a position
are known as the internal sources of recruitment. Recruiting candidates from all the other
sources (like outsourcing agencies etc.) are known as the external sources of recruitment.
Generally, the human resource management (HRM) function recognises two main sources of
candidates for the job positions: internal and external sources.
2.4 Internal Recruitment

Internal recruitment is a recruitment which takes place within the concern or organization.
Such sources are readily available to an organization. They are primarily three – Transfers,
promotions and re-employment of ex-employees:
a) Transfers: The employees are transferred from one department to another according to
their efficiency and experience.
b) Promotions (internal job postings): The employees are promoted from one department to
another with more benefits and greater responsibility based on efficiency and experience.
c) Re-employment of ex-employees: With this source, ex-employees can be invited and

appointed to fill vacancies in the concern. Retired and retrenched employees may also be
recruited once again in case of shortage of qualified personnel or increase in load of work.
Recruitment of such people save time and costs of the organisations as the people are already
aware of the organisational culture and the policies and procedures.
2.5 External Recruitment

External sources of recruitment have to be solicited from outside the organization. This
source may cost the venture a lot of time and money. This source includes employment at
factory gate, advertisements, employment agencies, educational institutes, labour contractors,
recommendations etc.
a) Employment at factory gate: This a source which the applications for vacancies are
presented on bulletin boards outside the factory or at the gate. It is applicable where factory
workers are to be appointed. There are people who keep on soliciting jobs from one place to
another. These applicants are called unsolicited applicants. These types of workers apply on
their own for their job. For this kind of recruitment workers have a tendency to shift from one
factory to another.
b) Advertisement: Job vacancies are advertised in the media. The advantage of

advertisement is that more job applicants can be reached from advertisements. Medium used
is Newspapers and Television.
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c) Employment Agencies: There are certain professional organizations that recruitment and
employment people for organisations. These private agencies run by private individuals
supply required manpower to needy organisations.
d) Educational Institutions: There are certain professional Institutions which serve as an

external source for recruiting fresh graduates from these institutes. This kind of recruitment is
done through such educational institutions. They have special recruitment cells which help in
providing jobs to fresh graduates.
e) Recommendations: It is the act of saying that someone or something is good and deserves
to be chosen. There are certain people who have experience in a particular area. They enjoy
goodwill and a stand in the company. There are certain vacancies which are filled by
recommendations of such people. The biggest drawback of this source is that the company
has to rely totally on such people which can later on prove to be inefficient.
f) Labour Contractors: These are the specialist people who supply manpower to the factory
or manufacturing plants. Through these contractors, workers are appointed on contract basis,
i.e. for a particular time period. Under conditions when these contractors leave the
organization, such people who are appointed have to also leave the concern.
g) Unsolicited Applicants: Many job seekers visit the office of well-known organisations on
their own. Such callers are considered nuisance to the daily work routine of the enterprise.
They can help in creating the talent pool or the database of the probable candidates for the
organisation.
2.6 Motivation
Motivation refers to internal and external factors that stimulate desire and energy in people to
be continually interested and committed to a job, role or subject, or to make an effort to attain
a goal. Motivation results from the interaction of both conscious and unconscious factors
such as the (a) intensity of desire or need, (b) incentive or reward value of the goal, and (c)
expectations of the individual and of his or her peers. These factors are the reasons one has
for behaving in a certain way. An example is a student that spends extra time studying for a
test because he or she wants a better grade in the class.
2.7 Types of Motivation

a) Intrinsic motivation
It refers to motivation that comes from inside an individual rather than from any external or
outside rewards, such as money or grades. The motivation comes from the pleasure one gets
from the task itself or from the sense of satisfaction in completing or even working on a task.
An intrinsically motivated person will work on a math equation, for example, because it is
enjoyable. Or an intrinsically motivated person will work on a solution to a problem because
the challenge of finding a solution is provides a sense of pleasure.
In neither case does the person work on the task because there is some reward involved, such
as a prize, a payment, or in the case of students, a grade. Intrinsic motivation does not mean,
however, that a person will not seek rewards. It just means that such external rewards are not
enough to keep a person motivated. An intrinsically motivated student, for example, may
want to get a good grade on an assignment, but if the assignment does not interest that
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student, the possibility of a good grade is not enough to maintain that student's motivation to
put any effort into the project.
b) Extrinsic motivation
It comes from outside an individual. The motivating factors are external, or outside, rewards
such as money or grades. These rewards provide satisfaction that the task may not provide
An extrinsically motivated person will work on a task even when they have little interest in it
because of the anticipated satisfaction they will get from some reward. The rewards can be
something as minor as a smiley face to something major like fame or fortune. For example,
an extrinsically motivated person who dislikes math may work hard on a math equation
because he wants the reward for completing it. In the case of a student, the reward would be a
good grade on an assignment or in the class. .
Extrinsic motivation does not mean, however, that a person will not get any pleasure from
working on or completing a task. It just means that the pleasure they anticipate from some
external reward will continue to be a motivator even when the task to be done holds little or
no interest. An extrinsically motivated student, for example, may dislike an assignment, may
find it boring, or may have no interest in the subject, but the possibility of a good grade will
be enough to keep the student motivated in order for him or her to put forth the effort to do
well on a task.
2.8 Meaning of a Team

A team is generally established to work on a particular project or task. When the task is
complete, the team then generally disbands. There is often an expectation that any team is
effective immediately but this is an unrealistic expectation because before a team can become
highly effective, the members need to grow and mature. Tuckman (1965) provides the stages
in team formation as follows:
a) Forming
In this stage, most team members are positive and polite. Some are anxious, as they have not
fully understood what work the team will do. Others are simply excited about the task ahead.
As leader, you play a dominant role at this stage, because team members' roles and
responsibilities are not clear. This stage can last for some time, as people start to work
together, and as they make an effort to get to know their new colleagues.
b) Storming
At this stage, people start to push against the boundaries established in the forming stage.
This is the stage where many teams fail. It starts where there is a conflict between team
members' natural working styles. People may work in different ways for all sorts of reasons,
but if differing working styles cause unforeseen problems, they may become frustrated. It
happen in other situations. For example, team members may challenge your authority, or
jockey for position as their roles are clarified. Or, if you have not defined clearly how the
team will work, people may feel overwhelmed by their workload, or they could be
uncomfortable with the approach you are using. Some may question the worth of the team's
goal, and they may resist taking on tasks. Team members who stick with the task at hand may
experience stress, particularly as they do not have the support of established processes, or
strong relationships with their colleagues.
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c) Norming
This is when people start to resolve their differences, appreciate colleagues' strengths, and
respect your authority as a leader. Now that your team members know one-another better,
they may socialize together, and they are able to ask each other for help and provide
constructive feedback. People develop a stronger commitment to the team goal, and you start
to see good progress towards it. There is often a prolonged overlap between storming and
norming, because, as new tasks come up, the team may lapse back into behaviour from the
storming stage.
d) Performing
The team reaches the performing stage when hard work leads, without friction, to the
achievement of the team's goal. The structures and processes that you have set up support this
well. As leader, you can delegate much of your work, and you can concentrate on developing
team members. It feels easy to be part of the team at this stage, and people who join or leave
would not disrupt performance.
e) Adjourning
Many teams will reach this stage eventually. For example, project teams exist for only a fixed
period, and even permanent teams may be disbanded through organizational restructuring.
Team members who like routine, or who have developed close working relationships with
other team members, may find this stage difficult, particularly if their future now looks
uncertain.
2.9 Handling conflicts

Conflict management is the process of limiting the negative aspects of conflict while
increasing the positive aspects of conflict. The aim of conflict management is to enhance
learning and group outcomes, including effectiveness or performance in organizational
setting (Ra him, 2002, p. 208)
2.10 Conflict Management Strategies

Basically, there are three different major strategies of managing conflict within and across
organizational and societal setting. They include: conflict resolution, conflict prevention and
conflict stimulation. These are explained below.
a) Conflict Resolution
Conflict resolution is conceptualized as the methods and processes involved in facilitating the
peace process between conflicting parties. This strategy attempts to resolve conflict through
active communication of conflicting motives or ideologies to the rest of the groups and
engaging the parties in collective negotiation. This strategy also involves the use of non-
violent resistance measures in an attempt to promote effective resolution.
b) Conflict Prevention.
Conflict prevention involves the use of actions to resolve, manage or contain dispute before
they become violent. It consist of two methods. The first is direct prevention, which is
aimed at preventing short-term, often imminent and escalation of a potential conflict. The
second is method is structural prevention. This method does not only aim at reducing
violence but also, addressing its root causes and the environment of the conflict.
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c) Conflict Stimulation
This is the process of creating framework to encourage conflict between and among people
especially in the organization in order to cause change. Conflict stimulation motivates
employees to change when necessary. It also keeps the organization or team from stagnation
2.11 Succession Planning

Succession planning is the identification and development of potential successors for key
positions in an organization, through a systematic evaluation process and training. Unlike
replacement planning (which grades an individual solely on the basis of his or her past
performance) succession planning is largely predictive in judging an individual for a position
he or she might never have been in.
Succession planning may be broadly defined as a process for identifying and developing
potential future leaders or senior managers, as well as individuals to fill other business-
critical positions, either in the short- or the long-term. In addition to training and development
activities, succession planning programmes typically include the provision of practical,
tailored work experience that will be relevant for future senior or key roles. It is possible for
succession planning schemes either to encompass individual senior or key positions or to take
a more generic approach targeting a ‘pool’ of positions for which similar skills are required.
Summary
In this session we looked at the internal and external sources of recruitment available to a
business, and internal and external sources of recruitment. We also considered how teams are
formed and how conflicts are handled in organisations. We further looked at succession
planning.
Activity 6.2
1. Outline the sources of recruitment for the entrepreneur.
2. Outline the path for team formation.

1. The sources of recruitment are
a) Internal sources are primarily three – transfers, promotions and re-employment of ex-
employees.
b) External sources of recruitment include – Employment at factory gate, advertisements,
employment exchanges, employment agencies, educational institutes, labour
contractors, recommendations etc.
2 The team formation process is as follows:
a. Forming
b. Storming
c. Norming
d. Performing
e. Adjourning
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A diagram of Hiring Process
Source: SmartDraw Software, LLC
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SESSION 3: PRINCIPLE OF MARKETING
Hello! You are welcome to this session. In this session we will look at how an organisation
markets its products or services. We will consider the strategies an organisation employ to
channel its products or services to final consumers and the relationship that organisations
need to maintain with customers in order to sustain their marketing programmes.
Objectives

1. explain target marketing
2. identify the generic marketing strategies used by an organisation to market its
products or services
3. identify and explain the 7Ps of marketing
4. explain customer care and customer relationship management
Now read on ………………..
3.1 Meaning of Marketing

“Marketing is the management process responsible for identifying, anticipating, and
satisfying consumers’ requirements profitably (CIM, UK) The key feature of this definition is
that it places the consumer at the centre of the organisation’s activities. The marketing
concept, thus, means focusing on customer needs. In practice, this consumer orientation
should fill every part of a business if it is to succeed.
3.2 7Ps of small business marketing (emphasis on brands and packaging)
1. Product
In marketing, the term “product” is often used as a catch-all word to identify solutions a
marketer provides to its target market. We will follow this approach and permit the term
“product” to cover offerings that fall into one of the following categories:
a) Goods – Something is considered a good if it is a tangible item. That is, it is something

that is felt, tasted, heard, smelled or seen. For example, bicycles, cell phones, and donuts are
all examples of tangible goods. In some cases there is a fine line between items that affect the
senses and whether these are considered tangible or intangible. We often see this with digital
goods accessed via the Internet, such as listening to music online or visiting an information
website. In these cases there does not appear to be anything that is tangible or real since it is
essentially computer code that is proving the solution. However, for our purposes, we
distinguish these as goods since these products are built (albeit using computer code), are
stored (e.g., on a computer hard drive), and generally offer the same benefits each time (e.g.,
quality of the download song is always the same).
b) Services – Something is considered a service if it is an offering a customer obtains through

the work or labour of someone else. Services can result in the creation of tangible goods (e.g.,
a publisher of business magazines hires a freelance writer to write an article) but the main
solution being purchased is the service. Unlike goods, services are not stored, they are only
available at the time of use (e.g., hair salon) and the consistency of the benefit offered can
vary from one purchaser to another (e.g., not exactly the same hair styling each time).
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c) Ideas – Something falls into the category of an idea if the marketer attempts to convince
the customer to alter their behavior or their perception in some way. Marketing ideas is often
a solution put forth by non-profit groups or governments in order to get targeted groups to
avoid or change certain behavior. This is seen with public service announcements directed
toward such activity as youth smoking, automobile safety, and illegal drug use.
Branding
Branding involves decisions that establish an identity for a product with the goal of
distinguishing it from competitors’ offerings. In markets where competition is fierce and
where customers may select from among many competitive products, creating an identity
through branding is essential. It is particularly important in helping position the product (see
discussion of product position) in the minds of the product’s target market. While consumer
products companies have long recognized the value of branding, it has only been within the
last 10-15 years that organizations selling component products in the business-to-business
market have begun to focus on brand building strategies. The most well-known company to
brand components is Intel with its now famous "Intel Inside" slogan. Intel’s success has led
many others b-to-b companies and even non-profits to incorporate branding within their
overall marketing strategy. At a very basic-level, branding is achieved through the use of
unique brand names and brand marks. The brand name, which may be either the individual
product name or a name applied to a group or family of products, is important for many
reasons, including suggesting what the product is or does (e.g., Mop-and-Glow). The name is
also what we say when we discuss the product (i.e., word-of-mouth marketing).
Packaging - Nearly all tangible products (i.e., goods) are sold to customers within a
container or package that, as we will discuss, serves many purposes, including protecting the
product during shipment. In a few cases, such as with certain produce items, the final
customer may purchase the product without a package, but the produce marketer still faces
packaging decisions when it comes to shipping to the store.
2. Price - In general, price is a component of an exchange or transaction that takes place

between two parties and refers to what must be given up by one party (i.e., buyer) in order to
obtain something offered by another party (i.e., seller). However, this view of price provides
a somewhat limited explanation of what price means to participants in the transaction. Price
is the only element of the 7Ps that generate revenue for the organization.
.
3. Promotion - Promotion is a form of corporate communication that uses various methods to
reach a targeted audience with a certain message in order to achieve specific organizational
objectives. Nearly all organizations, whether for-profit or not-for-profit, in all types of
industries, must engage in some form of promotion. Such efforts may range from
multinational firms spending large sums on securing high-profile celebrities to serve as
corporate spokespersons to the owner of a one-person enterprise passing out business cards at
a local businessperson’s meeting. Like most marketing decisions, an effective promotional
strategy requires the marketer understand how promotion fits with other pieces of the
marketing puzzle (e.g., product, distribution, pricing, target markets). Consequently,
promotion decisions should be made with an appreciation for how it affects other areas of the
company. For instance, running a major advertising campaign for a new product without first
assuring there will be enough inventory to meet potential demand generated by the
advertising would certainly not go over well with the company’s production department (not
to mention other key company executives. .
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4. Place/Distribution - Distribution decisions focus on establishing a system that, at its basic
level, allows customers to gain access and purchase a marketer’s product. However,
marketers may find that getting to the point at which a customer can acquire a product is
complicated, time consuming, and expensive. The bottom line is a marketer’s distribution
system must be both effective (i.e., delivers a good or service to the right place, in the right
amount, in the right condition) and efficient (i.e., delivers at the right time and for the right
cost). However, as we will see, achieving these goals takes considerable effort. Distribution
decisions are relevant for nearly all types of products. While it is easy to see how distribution
decisions impact physical goods, such as laundry detergent or truck parts, distribution is
equally important for digital goods (e.g., television programming, downloadable music) and
services (e.g., income tax services).
5. People - Anyone who comes into contact with your customers will make an impression,
and that can have a profound effect, positive or negative, on customer satisfaction. The
reputation of your brand rests in your people’s hands. They must, therefore, be appropriately
trained, well motivated and have the right attitude. It is essential to ensure that all employees
who have contact with customers are not only properly trained, but also the right kind of
people for the job. Many customers cannot separate the product or service from the staff
member who provides it. This shows the importance of your people. The level of after sales
support and advice provided by a business is one way of adding value to what you offer, and
can give you an important edge over your competitors. This will probably become more
important than price for many customers once they start to use you.
6. Process - The process of giving a service and the behaviour of those who deliver are
crucial to customer satisfaction. Issues such as waiting times, the information given to
customers and the helpfulness of staff are all vital to keep customers happy. Customers are
not interested in the detail of how your business runs, what matters to them is that the system
works. Process is one of the 'P's that is frequently overlooked. A customer trying to reach
your company by phone is a vital source of income and returning a value; however, so often
customers have to stay on hold for several minutes listening to a recorded message before
they are able to get through. Many of these customers will give up, go elsewhere and tell their
friends not to use your company – just because of the poor process that is in place. Even if
they do get through, they will go away with a negative impression of the company. The
reason for this is that the systems are not usually designed by marketers; they are designed for
the company's benefit, not the customers. This part of the process is the first experience of a
company that many customers have. There is no value in making the rest of the company run
perfectly if this part is faulty. As a consequence, this 'P' could be a great source of
competitive advantage if used wisely.
7. Physical evidence
A service cannot be experienced before it is delivered. This means that choosing to use a
service can be perceived as a risky business because you are buying something intangible.
This uncertainty can be reduced by helping potential customers to ‘see’ what they are buying.
Case studies and testimonials can provide evidence that an organisation keeps its promises.
Facilities such as a clean, tidy and well-decorated reception area can also help to reassure. If
your premises are not up to scratch, what would the customer think your service is? The
physical evidence demonstrated by an organisation must confirm the assumptions of the
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customer, a financial services product will need to be delivered in a formal setting, while a
children’s birthday entertainment company should adopt a more relaxed approach.
3.3 Target Marketing

This involves breaking a market into segments and then concentrating your marketing efforts
on one or a few key segments. It can be the key to a small business’s success. The beauty of
target marketing is that it makes the promotion, pricing and distribution of your products
and/or services easier and more cost-effective. It provides a focus to all of your marketing
activities.
A target market is a group of customers towards which a business has decided to aim its
marketing efforts and ultimately its merchandise. A well-defined target market is the first
element to a marketing strategy. The marketing mix variables of product, place (distribution),
promotion and price are the four elements of a marketing mix strategy that determine the
success of a product in the marketplace. Target markets are groups of individuals that are
separated by distinguishable and noticeable aspects.
3.4 Target Marketing Process

1. Segmenting
This is a marketing strategy that involves dividing a broad target market into subsets of
consumers who have common needs and priorities and then designing and implementing
strategies to target them. Segmentation means breaking up the total market into smaller,
homogeneous segments.
Criteria for segmenting

An ideal market segment meets all of the following criteria:
a) It is possible to measure.
b) It must be large enough to earn profit.
c) It must be stable enough that it does not vanish after some time.
d) It is possible to reach potential customers via the organization's promotion and
distribution channel.
e) It is internally homogeneous (potential customers in the same segment prefer the same
product qualities).
f) It is externally heterogeneous, that is, potential customers from different segments
have different quality preferences.
g) It responds consistently to a given market stimulus.
h) It can be reached by market intervention in a cost-effective manner.
i) It is useful in deciding on the marketing mix.
3.5 Methods for segmenting consumer markets

a) Geographic segmentation
Marketers can segment according to geographic criteria—nations, states, regions, countries,
cities, neighbourhoods, or postal codes. The geo-cluster approach combines demographic
data with geographic data to create a more accurate or specific profile. With respect to region,
in rainy regions merchants can sell things like raincoats, umbrellas and gumboots. In hot
regions, one can sell summer clothing. A small business commodity store may target only
customers from the local neighborhood, while a larger department store can target its
marketing towards several neighborhoods in a larger city or area, while ignoring customers in
other continents
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b) Demographic Segmentation
It refers to study about the different aspects of population. Markets can be divided on
demographic factors like age, gender, education etc. The various demographic factors are:
Age: The primary method of analysing markets by age is to divide the total population into
age groups and analyse the wants and needs of each group.
Gender: Marketers devote much attention to male and female differences in purchasing.
Today, marketers segment female groups into college girls, working women, housewives,
etc. Again, male groups can be further classified.
Income: Buying patterns depends on income of the consumers. No two individuals or
families spend money in exactly the same way. If a researcher knows a person’s income,
he can predict with some accuracy wants and needs of that person and how those wants
are likely to be satisfied.
Education: Market can be segmented on the basis of education – matriculation or less, under
graduates, graduates, post-graduation, etc. Most studies show that the highly educated
people spend more than the poorly educated in respect of housing, clothing, recreation,
etc.
Family Size: The consumption patterns of certain products definitely vary with the number
of people in the household. Manufacturers of certain products such as ice-cream market
family packs.
Family Life Cycle: The market can be segmented as bachelors, newly married couples,
married with grown up children, older married couples, etc. For selling tours and
vacations, Life Insurance policies etc., this segmentation is of use.
Race and Religion: Consumption patterns of certain products differ on the basis of religion
and race, such as alcohol and meat products.
c) Psychographic Segmentation
It refers to individual aspects like life style and personality. The bases for such segmentation
are lifestyle and personality. For Life-Style, sellers study the life-styles of the consumers. For
example, a manufacturer of readymade garments may design his clothes differently matching
different life styles of college-students (more fashionable), office-goers (more sober) and so
on. In the case of personality, characteristics such as leadership, independence, masculine,
impulsive, ambitious, etc., do influence buying behaviour.
d) Behavioural Segmentation
In this case, buyers are divided into groups on the basis of their response to the product –
usage rate, user status, loyalty status, buying motives, and so on.
Usage Rate: One possible way to define target market is by product usage. There can be
heavy users, medium users, light users, and nonusers. Targeting on this basis may be
useful to the seller who wants to increase consumption by present users and to convince
and induce nonusers to become users.
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User Status: Market can be segmented on the basis of user status such as: non-user, ex-user,
potential user, first-time user, regular-user, and so on.
Readiness Stage: Market can be segmented on the basis of people’s readiness to buy the
product. Some people are well informed and are interested to buy the product. Some other
may be well informed but not interested to buy the product.
Buying Motives: Buyers buy the product with different buying motives such as economy,
convenience, prestige, etc. Accordingly promotional appeals can be directed to the target
audience
e) Segmentation by occasions
Occasion segmentation is dividing the market into groups on the basis of the different
occasions when the buyers plan to buy the product or actually buy the product or use the
product. Some products are perceived to be apt for a particular time or day or event. Thus the
motive behind occasion segmentation is to increase the ‘reason to buy’ so as to improve the
sales of a particular product or service.
f) Segmentation by benefits
Benefit segmentation is essentially dividing the market on basis of the characteristics or
features of the product or the service as perceived by the customers. In this method the
different benefits that the product offers defines the target audience. Example: Toothpaste is a
great product to showcase benefit segmentation. Depending upon the audience segment the
benefit that the toothpaste provides would be highlighted. .
2. Targeting
Following the brainstorming of possible segments in step one, the next step is to pick a select
market to target or focus on. Companies often focus on one market segment at a time with
marketing and ad campaigns. Whichever market is the most attractive from a profit
standpoint or long-term potential is usually selected first. Factors including size of the
market, growth potential and competitive intensity impact the perceived opportunity in
targeting a given market.
3. Positioning
Positioning is how the company wants the targeted market to perceive its brand or product.
Some companies make quality a key positioning message and try to market their product as
top quality for the target market segment. Other qualities commonly used to differentiate
include service, unique features, environmental friendliness, family friendliness, safety,
reliability, durability and low cost. The key is to stand out from competitors with a unique
message that appeals to the interests of the targeted market.
3.6 Target marketing strategies

1. Undifferentiated/Mass marketing Strategy
This is a market coverage strategy in which a firm decides to ignore market segment
differences and appeal the whole market with one offer or one strategy. The idea is to
broadcast a message that will reach the largest number of people possible. Traditionally mass
marketing has focused on radio, television and newspapers as the media used to reach this
broad audience. By reaching the largest audience possible exposure to the product is
maximized. In theory this would directly correlate with a larger number of sales or buys into
the product. Mass marketing is the opposite to niche marketing as it focuses on high sales and
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low prices. Mass Marketing aims to provide products and services that will appeal to the
whole market. Niche marketing targets a very specific segment of market for example
specialized services or goods with few or no competitors.
2. Differentiated marketing strategy

This involves the preparation and communication of different brand and product messages to
different types of customers. This approach is also known as segmented marketing. It is one
where the company decides to provide separate offerings to each different market segment
that it targets. It is also called multi-segment marketing and as is clearly seen that it tries to
appeal to multiple segments in the market. Each segment is targeted uniquely as the company
provides unique benefits to different segments. It increases the total sales but at the expense
of increase in the cost of investing in the business.
3. Concentrated marketing strategy

It is a strategy whereby a product is developed and marketed for a very well defined and
specific segment of the consumer population. It is particularly effective for small companies
with limited resources because it enables the company to achieve a strong market position in
the specific market segment it serves without mass production, mass distribution, or mass
advertising. .
4. Niche marketing strategy

It is a business strategy that targets small, well-defined segments of the population rather
than the population as a whole. It is an effort to connect with and sell to a particular group of
consumers. There are many different ways to define a niche market, with some examples
revolving around geographic location, age, gender, sexual orientation, religion, or profession.
While the marketer is open to consumers of all types, the main focus of the public relations
and marketing efforts seeks to identify with the niche market and meet needs that are
common to that particular set of customers. It is not unusual for a business to identify a
target market or markets that are likely to exhibit substantial interest in the goods and
services offered for sale. One of the basics of niche marketing is to investigate what is
important to each market of consumers and determine specific ways in which the goods and
services offered will prove interesting to that group of consumers.
3.7 Customer care and relationship management

Customer care or service is the provision of service to customers before, during and after a
purchase. According to Turban et al. (2002), it is a series of activities designed to enhance the
level of customer satisfaction – that is, the feeling that a product or service has met the
customer expectation. The importance of customer service may vary by product or service,
industry and customer. The perception of success of such interactions will be dependent on
employees who can adjust themselves to the personality of the guest. It plays an important
role in an organization's ability to generate income and revenue. From that perspective, it
should be included as part of an overall approach to systematic improvement.
A customer service experience can change the entire perception a customer has of the
organization. Some have argued that the quality and level of customer service has decreased
in recent years, and that this can be attributed to a lack of support or understanding at the
executive and middle management levels of a corporation and/or a customer service policy.
To address this argument, many organizations have employed a variety of methods to
improve their customer satisfaction levels, and other key performance indicators.
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Customer relationship management (CRM) is an organized process by which a company
keeps track of contacts and conversations with customers. In larger companies, different
departments deal with the same customer and it is important for them to be able to reference
other information exchanges that occurred with other areas of the company. CRM. It allows
companies to maintain better relationships with their customers, by making the customers'
experience with the organization more efficient and pleasant. CRM systems often include
protocols and scripts for handling common customer complaints and situations, to aid a
company in presenting a consistent level of customer service. The effectiveness of a CRM
process still depends on the employee's understanding and appropriate use of the system.
Summary
In summary, we looked at segmentation, targeting and positioning as elements of the target
marketing process. We also considered the generic marketing strategies used by organisations
to market its products or services. We further looked at the 7Ps of marketing, customer care
and customer relationship management.
Activity 6.3
1. Outline the elements of the target marketing process.
2. Explain in your own words what you understand by customer care.

1. The elements of the Target marketing process are as follows:
a. Segmenting
b. Targeting
c. Positioning
2. Customer care or service is the provision of service to customers before, during and after a
purchase. Customer service is a series of activities designed to enhance the level of customer
satisfaction – that is, the feeling that a product or service has met the customer expectation. The
importance of customer service may vary by product or service, industry and customer. The
perception of success of such interactions will be dependent on employees who can adjust
themselves to the personality of the guest.
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SESSION 4: MANAGING OPERATIONS
How an organisation manages its operations is a key determinant of its success or failure. In
order to be successful, an organisation will have to plan carefully where it will locate its
business, how its facilities will be arranged and how this arrangement will affect the timely
delivery of its products. Also, the organisation will have to plan how it will manage its
inventory in order not to run of stock, it must also ensure that its products meet the required
standards. Moreover, the organisation must also streamline the processes involved in
purchasing its raw materials.
Objectives
1. identify and explain the factors to consider in locating a business
2. explain facility layout
3. explain inventory management
4. explain quality management with emphasis on SERVQUAL
5. explain the Just-In-Time approach to inventory management
Now read on ………………….
4.1 Factors to consider in locating your business

Selecting the best location for the business is one the most important decisions involved in
starting a business. The location will affect everything from the amount of customer traffic,
the costs involved, the availability of employees, plus many additional factors. Location is
especially important to retail store owners. The location of the business is directly linked to
whether or not the business will be successful. The proper location determines whether or not
the customers will frequent the business or not. The location for non-retail businesses is also
important, although it is linked more towards the costs that will be involved. The
infrastructure available for the transportation of products is also important. If the business is a
service-oriented one, then the location can be a reflection of the overall successfulness of the
business. The location can attribute to the image people have of the business. The following
are several of the major factors to consider when choosing a proper site:
1. The Market
This is one of the most important factors in deciding on a location. The business must be able
to satisfy all its markets from the location. The location must allow convenient access to all
the customers, both current and prospective, as well as convenient access for the customers.
A good method to help in this decision is marking the location of the current and prospective
customers on a map. It is also helpful to mark the location of the competitors on the map. By
examining the location of all the customers and competitors, a proper location can be picked
that will help meet the needs of the customers. .
2. The Labour Force

The next factor for analysis is the available labour force. Recent years has seen the increased
mobility of people when considering the distance they will commute to work. A good rule of
thumb that many people use is a check to see if the area can provide at least ten available
people for consideration for each one that will be hired. Another factor to look at is the
average wage for the area. This wage rate also needs to be compared to the amount that the
competitors have to pay their employees. Small towns generally have lower wages and
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people with a better work ethic. An additional consideration is whether the business will
require skilled or unskilled employees. If the local people are unsuitable, then how conducive
is the area for attracting people. .
3. Transportation
The transportation available to the location is another factor to consider when deciding on a
site. The transportation means that will be required for the business or by the customers might
include close proximity to an airport, railroad, or major interstate. The delivery costs to the
customers should also be examined.
4. Raw Materials
It is helpful to establish your business close to the source of your raw material. If all the
suppliers are in one general area, it may save delivery time and money to locate in that area.
5. Site Location
Is there a suitable site available in the location that has been picked? Such determinants may
include the availability of zoning and sufficient amount of land that will allow the possibility
of future expansion. Another detail to think about is whether or not there are adequate water
and sewer systems, as well as electricity.
6. Community interest
Another factor to think about is the communities’ attitude towards new development. Look
for an area that shows interest in your type of business.
4.2 Facility layout

Facility layout and design is an important component of a business's overall operations, both
in terms of maximizing the effectiveness of the production process and meeting the needs of
employees. The basic objective of layout is to ensure a smooth flow of work, material, and
information through a system. The basic meaning of facility is the space in which a business's
activities take place. The layout and design of that space impact greatly how the work is
done; the flow of work, materials, and information through the system. The key to good
facility layout and design is the integration of the needs of people (personnel and customers),
materials (raw, finishes, and in process), and machinery in such a way that they create a
single, well-functioning system. .
4.3 Factors in Determining Layout and Design

Small business owners need to consider many operational factors when building or
renovating a facility for maximum layout effectiveness. These criteria include the following:
1. Ease of future expansion or change

Facilities should be designed so that they can be easily expanded or adjusted to meet
changing production needs. Although redesigning a facility is a major, expensive undertaking
not to be done lightly, there is always the possibility that a redesign will be necessary.
2. Flow of movement
The facility design should reflect recognition of the importance of smooth process flow. In
the case of factory facilities, the plan will show the raw materials entering your plant at one
end and the finished product emerging at the other. The flow need not be a straight line.
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Parallel flows, U-shaped patterns, or even a zigzag that ends up with the finished product
back at the shipping and receiving bays can be functional.
3. Materials handling
Business owners should make certain that the facility layout makes it possible to handle
materials (products, equipment, containers, etc.) in an orderly, efficient and simple manner.
4. Space utilization
This aspect of facility design includes everything from making sure that traffic lanes are wide
enough to making certain that inventory storage warehouses or rooms utilize as much vertical
space as possible.
5. Ease of communication and support

Facilities should be laid out so that communication within various areas of the business and
interactions with vendors and customers can be done in an easy and effective manner.
Similarly, support areas should be stationed in areas that help them to serve operating areas
4.4 Inventory management

Inventory is the stock of any item or resource used in an organization. An inventory system is
the set of policies and controls that monitor levels of inventory and determine what levels
should be maintained, when stock should be replenished, and how large orders should be. By
convention, manufacturing inventory generally refers to items that contribute to or become
part of a firm’s product output. Manufacturing inventory is typically classified into raw
materials, finished products, component parts, supplies, and work-in-process. In distribution,
inventory is classified as in-transit, meaning that it is being moved in the system, and
warehouse, which is inventory in a warehouse or distribution centre. Retail sites carry
inventory for immediate sale to customers. In services, inventory generally refers to the
tangible goods to be sold and the supplies necessary to administer the service.
4.5 Purposes of Inventory

All firms keep a supply of inventory for the following reasons:
1. To maintain independence of operations

A supply of materials at a work centre allows that centre flexibility in operations. For
example, because there are costs for making each new production setup, this inventory allows
management to reduce the number of setups.
2. To meet variation in product demand

If the demand for the product is known precisely, it may be possible (though not necessarily
economical) to produce the product to exactly meet the demand. Usually, however, demand is
not completely known, and a safety or buffer stock must be maintained to absorb variation.
3. To allow flexibility in production scheduling

A stock of inventory relieves the pressure on the production system to get the goods out. This
causes longer lead times, which permit production planning for smoother flow and lower-cost
operation through larger lot-size production. High setup costs, for example, favor producing a
larger number of units once the setup has been made.
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4. To provide a safeguard for variation in raw material delivery time
When material is ordered from a vendor, delays can occur for a variety of reasons: a normal
variation in shipping time, a shortage of material at the vendor’s plant causing backlogs, an
unexpected strike at the vendor’s plant or at one of the shipping companies, a lost order, or a
shipment of incorrect or defective material.
5. To take advantage of economic purchase order size

There are costs to place an order: labour, phone calls, typing, postage, and so on. Therefore,
the larger each order is, the fewer the orders that need be written. Also, shipping costs favor
larger orders—the larger the shipment, the lower the per-unit cost. .
4.6 Inventory Costs

In making any decision that affects inventory size, the following costs must be considered:
1. Holding (or carrying) costs. This broad category includes the costs for storage facilities,
handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the
opportunity cost of capital. Obviously, high holding costs tend to favor low inventory levels
and frequent replenishment.
2. Setup (or production change) costs. To make each different product involves obtaining the
necessary materials, arranging specific equipment setups, filling out the required papers,
appropriately charging time and materials, and moving out the previous stock of material. If
there were no costs or loss of time in changing from one product to another, many small lots
would be produced. This would reduce inventory levels, with a resulting savings in cost. One
challenge today is to try to reduce these setup costs to permit smaller lot sizes. (This is the
goal of a JIT system.)
3. Ordering costs. These costs refer to the managerial and clerical costs to prepare the
purchase or production order. Ordering costs include all the details, such as counting items
and calculating order quantities. The costs associated with maintaining the system needed to
track orders are also included in ordering costs.
4. Shortage costs. When the stock of an item is depleted, an order for that item must either
wait until the stock is replenished or be canceled. When the demand is not met and the order
is canceled, this is referred to as a stock out. A backorder is when the order is held and filled
at a later date when the inventory for the item is replenished. There is a trade-off between
carrying stock to satisfy demand and the costs resulting from stock outs and backorders. This
balance is sometimes difficult to obtain because it may not be possible to estimate lost profits,
the effects of lost customers, or lateness penalties. Frequently, the assumed shortage cost is
little more than a guess, although it is usually possible to specify a range of such costs.
4.7 Stocktaking
Stocktaking is the process of counting by hand the number of each type of product in your
store/dispensary. Stocktaking is conducted for both managerial and financial reasons. The
management functions of stocktaking are to:
a) Verify the accuracy of storekeeping records.
b) Ensure efficient organisation of stocks in storage
c) Ensure that all stocks are useable
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The financial function of stocktaking is to determine the value of stocks held in storage to the
organisation to complete picture of its assets. This should be done on a quarterly basis and
obligatory at the end of the year.
4.8 Fixation of Stock Level

Material control involves physical control of materials, preservation of stores, minimization
of obsolescence and damages through timely disposal and efficient handling. Effective stock
control system should ensure the minimization of inventory carrying cost and materials
holding cost. Level of stock is the important aspect of inventory control. Stock level may be
overstocking or under stocking. Overstocking requires large capital with high cost of holding.
In the case of under stocking, production and overall performance of the concern as a whole
will affect. Thus, fixation of stock level is essential to maintain sufficient stock for the
smooth flow of production and sales.
4.9 Management of quality (emphasis is on SERVQUAL)

Service quality is needed for creating customer satisfaction and service quality is connected
to customer perceptions and customer expectations. Service quality can be described as the
result from customer comparisons between their expectations about the service they will use
and their perceptions about the service company. That means that if the perceptions would be
higher than the expectations the service will be considered excellent, if the expectations equal
the perceptions the service is considered good and if the expectations are not met the service
will be considered bad.
Customer satisfaction can also be described as a judgement that a product or service feature,
or the product or service itself, provides pleasurable consumption. Satisfaction can also be
described as a fulfillment response of service and an attitude change as a result of the
consumption. Satisfied customers are likely to become loyal customers and that means that
they are also likely to spread positive word of mouth. Understanding which factors that
influence customer satisfaction makes it easier to design and deliver service offers that
corresponds to the market demands.
The SERVQUAL method from Zeithaml, Parasuraman and Berry (1985) is a technique that
can be used for performing a gap analysis of an organization's service quality performance
against customer service quality needs. SERVQUAL is an empirically derived method that
may be used by a services organization to improve service quality. The method involves the
development of an understanding of the perceived service needs of target customers. These
measured perceptions of service quality for the organization in question, are then compared
against an organization that is "excellent". The resulting gap analysis may then be used as a
driver for service quality improvement. SERVQUAL takes into account the perceptions of
customers of the relative importance of service attributes. This allows an organization to
prioritize and to use its resources to improve the most critical service attributes. The data are
collected via surveys of a sample of customers. In these surveys, these customers respond to a
series of questions based around a number of key service dimensions.
The methodology was originally based around 5 key dimensions:

a. Tangibles: Appearance of physical facilities, equipment, personnel, and
communication materials.
b. Reliability: Ability to perform the promised service dependably and accurately.
c. Responsiveness: Willingness to help customers and provide prompt service.
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d. Assurance: Knowledge and courtesy of employees and their ability to convey trust
and confidence.
e. Empathy: The firm provides care and individualized attention to its customers.
This has been adapted later by some to cover:

a. Tangibles: Appearance of physical facilities, equipment, personnel, and
communication materials.
b. Reliability: Ability to perform the promised service dependably and accurately.
c. Responsiveness: Willingness to help customers and provide prompt service.
d. Competence: Possession of required skill and knowledge to perform service.
e. Courtesy: Politeness, respect, consideration and friendliness of contact personnel.
f. Credibility: Trustworthiness, believability, honesty of the service provider.
g. Feel secure: Freedom from danger, risk, or doubt.
h. Access: Approachable and easy of contact.
i. Communication: Listens to its customers and acknowledges their comments. Keeps
customers informed in a language which they can understand.
j. Understanding the customer: Making the effort to know customers and their needs.
The authors conducted a qualitative study, from which they concluded that customers ranked
the importance of two SERVQUAL dimensions consistently regardless of service industry.
Reliability is the most important contributing factor to service quality and tangibles is the
least important.
4.10 Purchasing process and JIT

Purchasing is the formal process of buying goods and services. The purchasing process can
vary from one organization to another, but there are some common key elements.
The process usually starts with a demand or requirements – this could be for a physical part
(inventory) or a service. A requisition is generated, which details the requirements (in some
cases providing a requirements speciation) which actions the procurement department. A
request for proposal (RFP) or request for quotation (RFQ) is then raised. Suppliers send their
quotations in response to the RFQ, and a review is undertaken where the best offer (typically
based on price, availability and quality) is given the purchase order. Purchase orders are
normally accompanied by terms and conditions which form the contractual agreement of the
transaction. The supplier then delivers the products or service and the customer records the
delivery (in some cases this goes through a goods inspection process). An invoice is sent by
the supplier which is cross-checked with the purchase order and documents specifying which
goods have been received. The payment is then made and transferred to the supplier.
Just-In-Time (JIT) manufacturing is a Japanese management philosophy applied in
manufacturing which involves having the right items of the right quality and quantity in the
right place and the right time. It has been widely reported that the proper use of JIT
manufacturing has resulted in increases in quality, productivity and efficiency, improved
communication and decreases in costs and wastes. Just in Time (JIT) production is a
manufacturing philosophy which eliminates waste associated with time, labour, and storage
space. Basics of the concept are that the company produces only what is needed, when it is
needed and in the quantity that is needed. The company produces only what the customer
requests, to actual orders, not to forecast. JIT can also be defined as producing the necessary
units, with the required quality, in the necessary quantities, at the last safe moment. It means
that companies can manage with their own resources and allocate them very easily. Benefits
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that JIT concept can provide to the company are huge and very diverse. The main benefits of
JIT are listed below:
a. Reduced set up times in warehouse - the company in this case can focus on other
processes that might need improvement.
b. Improved flows of goods in/through/out warehouse - employees will be able to
process goods faster.
c. Employees who possess multi-skills are utilized more efficiently – the company can
use workers in situations when they are needed, when there is a shortage of workers
and a high demand for a particular product.
There are several problems which are connected within JIT concept. Maybe the major
problem with JIT operation is that it leaves the supplier and downstream consumers open to
supply shocks. With shipments coming in sometimes several times per day, the company is
especially susceptible to an interruption in the flow. For that reason, some companies are
careful to use two or more suppliers for most of their assemblies. The hidden costs are
present and they include labour union leverage, problems with flexible manufacturing
systems (FMS), problems developing for the flexible workforce, difficulties with supplying
commodities using JIT, increased expenses for suppliers.
Summary
In this session we looked at the factors an organisation should consider in locating its
business and how its facility should be laid out in order to ensure timely delivery of products.
We considered how an organisation manages its inventory and how it ensures that its
products or service conform to quality standards. Finally, we looked at purchasing process
and JIT.
Activity 6.4
1. As an entrepreneur who wishes to start a new business, identify the factors you
will consider in locating your business.
2. What is the relevance of Inventory to a small business?
1. Factors to consider in locating a business

a. The Market
b. The Labour Force
c. Transportation
d. Raw Materials
e. Space for expansion
f. adequate water
g. sewage systems, electricity
2. Relevance of inventory to a business
a. To maintain independence of operations
b. To meet variation in product demand
c. To allow flexibility in production scheduling
d. To provide a safeguard for variation in raw material delivery time
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SESSION 5: FINANCE AND RECORDS KEEPING
Every organisation, big or small, will require some funding to enable it run its operations
effectively. Funding has become a major challenge to most business in recent times due to
high cost of borrowing or unwilling of investors to pump monies into business. This has
made very difficult for businesses, especially small business to operate to full capacity. It is
also imperative for businesses to keep proper records of their activities to ensure transparency
in their operations.
Objectives
1. identify and explain why small businesses fail financially
2. identify and explain the sources of funds available to a business
3. explain the importance of financial statement and analysis to a business
Now read on ……………………
5.1 Why small businesses fail financially

Many small businesses pull out of business before their first anniversary. This phenomenon is
worrisome and is caused by many factors as follows:
1. Under-capitalisation
A number of entrepreneurs do not know where to go to ask for a loan. A bank, credit union,
investors or venture capital companies could provide funding to start a firm. An aspiring
entrepreneur must have a percentage of the loan being requested, a good credit score, and the
means to pay back the loan. Most banks and institutions are tight with the amount they want
to loan for small businesses. In some cases this is due to the requesting entrepreneur not
understanding how much money his or her new firm will require. Often, entrepreneurs
underestimate the money and time required to make a business profitable. For many small
businesses the lack of start- up capital causes a shortcoming before the business reaches
profitability.
2. Poor Cash Flow

A lack of cash flow is often the biggest failure indicator. A lack of cash flow could cause a
business to fall behind on wage payments, rent, and insurance and loan payments. A lack of
cash flow also could inhibit the venture’s ability to reinvest for future profits such as the
ordering of products or supplies and marketing execution. When a venture is borrowing to
pay off past debts, it is usually a sign of disaster to come.
3. Poor Record Keeping

Keeping good detailed records of sales, expenses and debts alone is critical for the survival of
any business. This is especially true for volatile small businesses.
How can any financial planning be done when there is no understanding of cash on hand,
outstanding credits and current expenses? Poor record keeping makes it virtually impossible
for owners to know the financial status of his or her venture. The fact is many small firm
owners do not want to complete this menial task, regardless of its importance.
4. Poor Planning
Poor planning or a complete lack of planning is one major reason small businesses have a
short life expectancy. The importance of researching demand for product or service,
identifying the target market, calculating necessary capital and selecting a location are all
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critical facets of planning that lead to determining a clear business plan. Another area of
planning entrepreneurs should consider is the managerial duties that will be required in day-
to-day operations. The owner will not simply be selling the product and talking to customers.
In most cases he will be involved in all aspects of the business and should not underestimate
the impact of these activities on his or her time and availability. Proper planning plays a
critical role in the success of small businesses and should not be overlooked.
5. Tax and Regulation Burdens

Burdens brought on by tax codes and regulations have a significant impact in determining the
success of small businesses. Small business owners spend an incalculable amount of time
determining whether the regulation applies or not, whether his or her business is in
compliance, and what, if any action needs to be taken. Small businesses are required by law
to file their tax returns, fulfill other local government levies and pay employees’ social
security. This is a significant financial difference for small businesses competing with large
firms. It is easy to understand how these hardships translate to financial and management
difficulties for small business owners. The government is aware of these challenges for small
businesses and must search for an answer to level the playing field.
5.2 Start-up and running costs

New businesses spend money before they ever open their doors or offer product for sale. This
money needed to start a new venture is termed as the start-up cost. Start-up costs are one-off
costs associated with setting up a business. For example, for a sandwich delivery service,
these might include buying a van, getting uniforms for staff, bread baskets as well as cutlery
and equipment. It may also include buying premises. On the other hand, running costs are the
day-to-day costs associated with operating a business.
5.3 Sources of Funds

There are several Initial expenses and running costs associated with a venture. These
includes legal and licenses fees, office supplies and equipment, brochures and letterhead
design costs, business cards, website development, utility deposits and installations, rent
deposit, cell phones/pagers, banking setup fees, computer and accessories costs. Furthermore,
there are long term expenses such as acquisition of office space. There are some expenses
that are repetitive in nature such as salaries and wages, tax payable, rent, utilities, internet
usage, insurance, advertising, maintenance and repairs, travelling, banking charges, legal and
professional fees. It is imperative for the entrepreneur to have adequate fund to meet such
financial need.
An entrepreneur can raise funds from own capital (equity financing), owe capital or (debt
financing) sources or both (a blend of both).
The own sources often include relying on personal savings from previous or current
employment; rely on Susu or receive support from family and friends through remittances.
Existing firms might want to plough back profit. The owe source includes vendor financing
/trade credit, microlenders, factoring, leasing/ hire purchase, banks (term loans & overdrafts),
rural banks, credit unions, financial NGOs, savings and loan Associations. The entrepreneur
at certain stage of the venture would want to take advantage of the capital market.
Read on for some further details to some of these methods for raising finance.
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1. Issuing Shares on the capital market
Ordinary (equity) shares are issued to the owners of a venture. They have a nominal
or 'face' value. The market value of a quoted venture's shares bears no relationship to
their nominal value, except that when ordinary shares are issued for cash, the issue
price must be equal to or be more than the nominal value of the shares.
Preference shares have a fixed percentage dividend before any dividend is paid to
the ordinary shareholders. As with ordinary shares a preference dividend can only be
paid if sufficient distributable profits are available, although with 'cumulative'
preference shares the right to an unpaid dividend is carried forward to later years. The
arrears of dividend on cumulative preference shares must be paid before any dividend
is paid to the ordinary shareholders.
2. Loan stock
Loan stock is long-term debt capital raised by a company for which interest is paid,
usually half yearly and at a fixed rate. Holders of loan stock are therefore long-term
creditors of the venture. Loan stock has a nominal value, which is the debt owed by
the venture, and interest is paid at a stated "coupon yield" on this amount. Debentures
are a form of loan stock, legally defined as the written acknowledgement of a debt
incurred by a venture, normally containing provisions about the payment of interest
and the eventual repayment of capital.
3. Retained earnings
For any venture, the amount of earnings retained within the business has a direct
impact on the amount of dividends. Profit re-invested as retained earnings is profit
that could have been paid as a dividend. The major reasons for using retained earnings
to finance new investments, rather than to pay higher dividends and then raise new
equity for the new investments is that the use of retained earnings as opposed to new
shares or debentures avoids issue costs and the use of retained earnings avoids the
possibility of a change in control resulting from an issue of new shares.
4. Bank lending
Borrowings from banks are an important source of finance to companies. Companies
can borrow from banks to finance short to medium term investments like acquiring
raw materials or new machinery.
5. Leasing
A lease is an agreement between two parties, the "lessor" and the "lessee". The lessor
owns a capital asset, but allows the lessee to use it. The lessee makes payments under
the terms of the lease to the lessor, for a specified period of time. Leasing is,
therefore, a form of rental. Leased assets have usually been plant and machinery, cars
and commercial vehicles, but might also be computers and office equipment.
6. Hire purchase
Hire purchase is a form of installment credit. Hire purchase is similar to leasing, with
the exception that ownership of the goods passes to the hire purchase customer on
payment of the final credit installment, whereas a lessee never becomes the owner of
the goods.
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7. Government assistance
The government provides finance to companies in cash grants and other forms of
direct assistance, as part of its policy of helping to develop the national economy,
especially in high technology industries and in areas of high unemployment.
8. Venture capital
Venture capital is money put into an enterprise which may all be lost if the enterprise
fails. A businessman starting up a new business will invest venture capital of his own,
but he will probably need extra funding from a source other than his own pocket.
However, the term 'venture capital' is more specifically associated with putting
money, usually in return for an equity stake, into a new business, a management buy-
out or a major expansion scheme. The institution that puts in the money recognises
the gamble inherent in the funding. There is a serious risk of losing the entire
investment, and it might take a long time before any profits and returns materialise.
9. Franchising
Franchising is a method of expanding business on less capital than would otherwise
be needed. For suitable businesses, it is an alternative to raising extra capital for
growth. Under a franchising arrangement, a franchisee pays a franchisor for the right
to operate a local business, under the franchisor's trade name. The franchisor must
bear certain costs (possibly for architect's work, establishment costs, legal costs,
marketing costs and the cost of other support services) and will charge the franchisee
an initial franchise fee to cover set-up costs, relying on the subsequent regular
payments by the franchisee for an operating profit.
5.4 Models of credit granting

One of the challenges entrepreneurs face is funding. The issue is accessibility,
availability and affordability of funds. In recent times, with the influx of microfinance
institutions and banks, the issue is not so much of availability, but the cost of access.
SMEs credit is found to be most expensive because of the risk associated with
financing an unproven idea or venture. Funding is required in the entire life of the
venture – from development, start up and existence, early growth, rapid growth and
finally the exit stages of the venture.
Financing the venture with equity capital may not always be helpful or possible.
There will be the need for debt (to seek support from lenders) sometime in the life of
the venture. Being able to secure a loan from a lender means that you are able to meet
the credit criteria. Some of the credit granting models used are CAMPARI de ICE or
CAMEL or the 5Cs.
1. The CAMPARI de ICE model

The issues that is often of importance to the lender as the following:
• C – character of the applicant (reputation)
• A – ability to enter into loan contract
• M – means i.e. strategy for managing risk and the suitability of its assets
• P – purpose of the loan
• A – amount of the loan
• R – repayment probability
• I – insurance i.e. security or collateral
• I – interest i.e. the expected reward due to the level of risk
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• C – commission i.e. commitment fees for reserving the facility to the borrower
• E – extras e.g. hidden fees such as legal fees.
2. CAMEL model
This often used in lending to MFIs. In the CAMEL model, the lender looks at the following:
• C – capital adequacy (seed capital invested in the business)
• A – asset quality (net worth (total assets- total liability)
• M – management (skill and experience of the entrepreneur)
• E – earnings (potential return on assets)
• L – liquidity (sufficient cash flow to meet obligations as and when they arise
3. Five Cs model
It is the most commonly used model. It looks at the following:
 C- character – borrower reputation/integrity
 C- capital – net worth (total assets – total liability
 C- conditions – of the borrower and the overall economy
 C- collateral – insurance or security
 C- capacity – sufficient cash flow to meet the obligation
5.5 Meeting creditors requirements

The following are some of the ways to help secure credit:
 Apply to lenders that share your vision
 Always keep an up-to-the-second records
 Develop a well thought business plan
 Be honest and use loans for their intended purposes
 Meet payment deadlines
 Prepare and submit documentations that meet lenders’ criteria
 Negotiate for flexible terms of repayment
5.6 Institutions that provide financial support

One major constraint that businesses face is the availability and adequacy of funds.
Inadequate funds have seen many businesses operate either below their full capacity or
wound up. However, there are some institutions that provide funding to businesses to enable
them continue with their operations. These institutions are discussed below.
1. National Board Small Scale Industries

The National Board for Small Scale Industries (NBSSI) is the apex governmental body for
the promotion and development of the Micro and Small Enterprises (MSE) sector in Ghana.
It was established by an Act of the Parliament of the Third Republic of Ghana (Act 434 of
1981) and operationalised in 1985 because government views the sector as having the
potential to contribute substantially to reducing the high unemployment and to the growth of
the economy of Ghana. MSEs account for a significant share of economic activity in Ghana
and can play an important role in achieving the development goals for production. The long-
term goal is for MSEs to maximize their contribution to the country’s economic and social
development with respect to production, income distribution and employment and the closer
integration of women and people in rural areas with the national economy.
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2. Business Sector Advocacy Challenge
The BUSAC fund supports the growth of a competitive private sector in Ghana by improving
the business environment. The BUSAC fund enables the private sector in Ghana – as well as
trades unions and the media – to influence public policy formulation by undertaking
appropriate research, developing evidence-based policy positions, advocating those positions
with government and other private sector organisations.
3. Micro Finance Institutions

GHAMFIN is an informal network of institutions and individuals that operate within Ghana's
Microfinance Industry. This network evolved from the concern of some Ghanaian
Microfinance Institutions (MFIs) for the development of best practices in delivery of
microfinance services. GHAMFIN regularly collaborates with government and donor
organizations in Ghana, particularly in the area of policy change activities and
implementation of capacity building and institutional strengthening programs e.g., MicroStart
(UNDP/AfDB), and the Social Investment Fund.
4. Banks
Banks are a major source of funding for businesses. They provide short to long term financial
assistance to businesses to enable them expand their operations. The financial support may
come in the form of an overdraft, mortgage or a collateral loan.
5.7 Records Keeping and Documents

Record keeping is an important aspect of every business. It helps the business to ascertain the
true financial position of its affairs. It also helps the business to meet its financial obligations.
Book keeping includes recording of journal, posting in ledgers and balancing of accounts. All
the records before the preparation of trial balance is the whole subject matter of book
keeping. Thus, book keeping may be defined as the science and art of recording transactions
in money or money’s worth so accurately and systematically in a certain set of books
regularly that the true state of business’ affairs can be correctly ascertained. Here, it is
important to note that only those transactions related to business are recorded which can be
expressed in terms of money.
5.8 Objectives of Book keeping

It is important to keep records for the following reasons:
a) Book- keeping provides a permanent record of each transaction.
b) Soundness of a firm can be assessed from the records of assets and abilities on a
particular date.
c) Entries related to incomes and expenditures of a concern facilitate to know the profit
and loss for a given period.
d) It enables to prepare a list of customers and suppliers to ascertain the amount to be
received or paid.
e) It is a method gives opportunities to review the business policies in the light of the
past records.
f) Amendment of business laws, provision of licenses, assessment of taxes etc., are
based on records.
8. Cash Book
Cash Book is a sub-division of Journal recording transactions pertaining to cash receipts and
payments. Firstly, all cash transactions are recorded in the Cash Book wherefrom they are
posted subsequently to the respective ledger accounts. The Cash Book is maintained in the
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form of a ledger with the required explanation called as narration and hence, it plays a dual
role of a journal as well as ledger. All cash receipts are recorded on the debit side and all cash
payments are recorded on the credit side. All cash transactions are recorded chronologically
in the Cash Book. The Cash Book will always show a debit balance since payments cannot
exceed the receipts at any time.
5.11 Financial Statements and Analysis

Financial Statements represent a formal record of the financial activities of an entity. These
are written reports that quantify the financial strength, performance and liquidity of a venture.
Financial Statements reflect the financial effects of business transactions and events on the
entity. The four main types of financial statements are:
1. Statement of Financial Position

Statement of financial position, also known as the Balance Sheet, presents the financial
position of an entity at a given date. It is comprised of the following three elements:
a) Assets: Something a business owns or controls (e.g. cash, inventory, plant and
machinery, etc)
b) Liabilities: Something a business owes to someone (e.g. creditors, bank loans, etc)
c) Equity: What the business owes to its owners. This represents the amount of capital
that remains in the business after its assets are used to pay off its outstanding
liabilities. Equity therefore represents the difference between the assets and liabilities.
2. Income Statement
Income statement, also known as the Profit and Loss Statement, reports the venture's
financial performance in terms of net profit or loss over a specified period. Income Statement
is composed of the following two elements:
a) Income: What the business has earned over a period (e.g. sales revenue, dividend
income, etc)
b) Expense: The cost incurred by the business over a period (e.g. salaries and wages,
depreciation, rental charges, etc)
Net profit or loss is arrived by deducting expenses from income.
3. Cash Flow Statement

Cash flow statement presents the movement in cash and bank balances over a period. The
movement in cash flows is classified into the following segments:
a) Operating Activities: Represents the cash flow from primary activities of a business.
b) Investing Activities: Represents cash flow from the purchase and sale of assets other
than inventories (e.g. purchase of a factory plant)
c) Financing Activities: Represents cash flow generated or spent on raising and repaying
share capital and debt together with the payments of interest and dividends.
4. Statement of Changes in Equity

Statement of Changes in Equity, also known as the Statement of Retained Earnings, details
the movement in owners' equity over a period. The movement in owners' equity is derived
from the following components:
a) Net Profit or loss during the period as reported in the income statement
b) Share capital issued or repaid during the period
c) Dividend payments
d) Gains or losses recognized directly in equity (e.g. revaluation surpluses)
e) Effects of a change in accounting policy or correction of accounting error.
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A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical
values taken from an enterprise's financial statements. Often used in accounting, there are
many standard ratios used to try to evaluate the overall financial condition of a corporation or
other organization. Financial ratios may be used by managers within a firm, by current and
potential shareholders (owners) of a firm, and by a firm's creditors. Financial analysts use
financial ratios to compare the strengths and weaknesses in various companies. If shares in a
venture are traded in a financial market, the market price of the shares is used in certain
financial ratios.
Financial ratios allow for comparisons
 between companies
 between industries
 between different time periods for one venture
 between a single venture and its industry average
Summary
In this session, we looked at the reasons why small businesses fail financially and the various
sources from which small businesses may acquire funds to start or expand their operations.
We also considered the relevance of book keeping to a small business and how they ensure
their financial performance using financial ratios.
Activity 5.1
1. State four reasons why a small business may fail financially.
Suggested Answer
1. Four reasons why small businesses fail financially are:
a) Under-capitalisation
b) Poor Cash Flow
c) Poor Record Keeping
d) Poor Planning
140
SESSION 6: USING INFORMATION COMMUNICATION TECHNOLOGY
In the knowledge society, firms need to develop competitive advantages based on an

adequate and intensive use of information and communication technologies (ICTs), which is
an essential element of success in today’s market. This fact is especially relevant for small
and medium sized enterprises (SMEs), whose survival depends, among other factors, on the
use they make of ICTs to develop new organizational models, compete in new markets or
enhance their internal and external communication relationships.
Objectives
1. explain the meaning of ICT
2. identify the benefits of ICT to SMEs
Now read on.....................
6.1 Meaning of Information Communication Technology
Information and communications technology (ICT) is often used as an extended synonym for
information technology (IT), but is a more specific term that stresses the role of unified
communications and the integration of telecommunications (telephone lines and wireless
signals), computers as well as necessary enterprise software, middleware, storage, and audio-
visual systems, which enable users to access, store, transmit, and manipulate information.
The term ICT is also used to refer to the convergence of audio-visual and telephone networks
with computer networks through a single cabling or link system. There are large economic
incentives (huge cost savings due to elimination of the telephone network) to merge the
telephone network with the computer network system using a single unified system of
cabling, signal distribution and management.
6.2 ICT and SMEs
The relevant literature has traditionally suggested different perspectives or aspects of ICTs
that must be considered by SMEs. From an economic and management view-point, ICTs
have been regarded as: (1) a social construction; (2) an information provider; (3) an
infrastructure – hardware and software; and (4) a business process and system. From a
marketing point of view, ICTs have also been viewed as: (1) a variety of separate applications
(Internet, databases, PowerPoint); (2) a marketing channel; (3) a communication/promotional
medium; (4) a marketing technique; and (5) a tool for relationship marketing.
Obviously, ICTs are more than just computers or the Internet. Although there has been a
tendency to focus on Internet technology, the study of technology effects in economy and
business fields must also be closely considered. Today, ICTs must be conceived broadly to
encompass the information that businesses create and use, as well as the wide spectrum of
increasingly convergent and linked technologies that process that information. Therefore,
ICTs can be viewed as a collective term for a wide range of software, hardware,
telecommunications and information management techniques, applications and devices, and
141
are used to create, produce, analyse, process, package, distribute, receive, retrieve, store and
transform information (Porter and Millar, 1985; Brady et al., 2002).
Nowadays, the widespread uses of ICTs are changing the way people or companies work. It
is a feature of the technological advancements of this period in history where there has been
immense innovation in information management and communication so that in many
countries, information and knowledge are easily conveyed, accessed and used. Thus, the pace
of technological change and what is available for use by firms has revolutionized how they
interact and do business.
In particular, ICTs have a valuable potential for developing SMEs through more effective use
and better integration of ICTs in business processes while assisting them to make more
efficient decisions relevant to their performance. ICTs have the potential to generate a step
change among SMEs and make them more competitive, innovative and generate growth.
Since SMEs play a role of increasing importance in the economy (especially when we
consider their contribution to the generation of jobs as well as the social-economic
development of the community where they are located) (Hartigan, 2005), it is then desirable
that SMEs are stimulated into adopting new technologies more rapidly, and creating
innovative products more competitively. It requires that SMEs have the right environment to
prosper, form a skilled workforce and drive economic growth. In recent years, large
numbered SMEs have acquired direct access to computers or other types of digital
technologies, primarily for individual task development.
Yet now, these computers are beginning to be connected to each other, and for the first time
there is an opportunity for very large numbers of small companies to use computing and
communication capabilities to help coordinate their work. Specialized products have been
successfully developed and commercialized, and to some observers these applications herald
a paradigm shift in technology usage and implications. On the other hand, the improvements
in the costs and capabilities of ICTs are changing the ways in which certain kinds of
communications and coordination can occur (Summut-Bonnii and McGee, 2002).
Lowering the costs of coordination between firms may encourage more market transactions,
and at the same time, closer coordination across firm boundaries. Moreover, new capabilities
for communicating information faster, less expensively, and more selectively, may help to
create a rapidly changing organization with highly decentralized networks of shifting projects
teams (Roberts, 2000). In addition, the sum of these changes is creating a pervasive feeling in
business today that global interdependencies are becoming more critical. Thus, companies
realize that they need to take advantage of ICT capabilities for improving their
competitiveness and productivity (Ragaswamy and Lilien, 1997).
However, it is important to take into account that to adopt ICT systems and elements and
strategies, the benefits must outweigh investment and maintenance costs. Consequently,
commercial issues and potential returns must drive adoption. Beyond a certain level of ICT
adoption and diffusion, not all SMEs will necessarily catch up with large firms simply
because ICT may not bring large benefits, and SMEs will stay with traditional business
142
processes. Other aspects that should also be considered are the availability of ICT
competencies within the firm as well as the availability and cost of appropriate interoperable
small firm systems, network infrastructure and ICT-related support services (Leenders and
Wierenga, 2002; Prasad et al., 2001; Roberts, 2000).
6.3 Guidelines for introducing ICT into SMEs

Guided by these considerations, some key elements can be mentioned to foster an adequate
introduction of ICT-based solutions in SMEs. First, it is highly recommended that ICT-based
solutions be introduced gradually in SMEs since sudden transformations risk failing against
unaware and unready business organizations (Argyres, 1999). Second, adequate training and
support are required (Wei and Morgan, 2004). It is useful to outline that one of the main
difficulties for SMEs in exploiting ICTs potentials is the lack of awareness of the benefits to
be derived coupled with little or no specific training on ICTs (both at application and
methodological levels). The smaller the enterprise, the greater this problem gets, since most
small companies are not using information technology for their activities (apart from specific
accounting services, and little more). Consequently, several problems must be solved to make
ICTs simpler to use, reliable and well integrated in the SMEs activities.
6.4 The Benefits of ICT to SMEs

On the whole, ICT applications can provide several benefits across a wide range of intra and
inter firm business operations and transactions. Certainly, ICT applications can contribute to
improve information and knowledge management inside the firm, can reduce transaction
costs and can increase the speed and reliability of transactions for both business-to-business
(B2B) and business-to-consumer (B2C) transactions. In addition, they are effective tools for
improving external communications and quality of services for established and new
customers. More specifically, SMEs can obtain a wide range of benefits from the use of ICT
(Cela, 2005).
Among these benefits, it is possible to mention:

1. Enhance the productivity and effectiveness of certain activities or functions (Brady et al.,
2002).
2. Favour the adoption of new organizational, strategic and managerial models (Johnston
and Lawrence, 1998; Kahn, 1996, 2001).
3. Enable the access to new environments as well as the generation of new markets and
business models (Corbitt, 2000; Javalgi and Ramsey, 2001).
4. Improve the qualification and specialization of human resources, which increases the
efficiency and efficacy (Vilaseca, 2003).
ICTs play an important role in enhancing the productivity and effectiveness of certain
activities or functions made by SMEs (Brady et al., 2002; Webster, 1992). For instance, ICTs
facilitate the selective automation of processes related to supporting the field sales force and
integrating sales activity into the company’s information structure. On the other hand, they
provide ready access to a vast array of global information resources and facilitate the
gathering of valuable competitive knowledge and consumer-related information that
simplifies marketing decision processes. Finally, ICTs provide the marketer with
extraordinary capability to target specific groups of individuals precisely and enable them to
practice mass-customization and one-to-one marketing strategies, by adapting
communications and other elements of the marketing mix to consumer segments (Pine et al.,
143
1995; Prasad et al., 2001).
Summary
In this session we looked at the meaning of ICT and how it can be integrated into the
activities of SMEs and the benefits that SMEs derive from ICT.
Activity 6.6
1. What is your understanding of ICT?
2. What are some benefits SMEs derive from adopting ICT in their operations
Suggested answer to Activity 6.6

1. Provide your own answer
2. Among these benefits, it is possible to mention:

a) Enhance the productivity and effectiveness of certain activities or functions.
b) Favour the adoption of new organizational, strategic and managerial models.
c) Enable the access to new environments as well as the generation of new markets and
business models.
d) Improve the qualification and specialization of human resources, which increases the
efficiency and efficacy.
144
UNIT 6: SMALL BUSINESS MANAGEMENT
Hello! You are welcome to this unit. In the previous unit, we looked at how a business
organisation is set up, the type of ownership a business may take and the process of
registering the business. We also looked at institutions that provide support for start-up
businesses. In this unit we will look at how the resulting business will be managed. The team
needed to run the business and how the business will market its products or services. We will
also look at how the business acquire its funds and how its applies ICT to enhance its
operations.
OUTLINE
Session 1: Management, Leadership and Strategy
Session 2: Human Resource Skills
Session 3: Principles of Marketing
Session 4: Managing Operations
Session 5: Finance and Record Keeping
Session 6: Using Information Communication Technology
Objectives
By the end of this unit, you should be able to:
1. explain management, leadership and strategy
2. explain the human resource function of a business
3. explain the marketing concept
4. describe the operations management function of a business
5. describe the finance and record keeping function of a business
6. explain how a business uses ICT to manage its activities
101

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DEVELOPING THE ENTREPRENEURIAL MINDSET UNIT 1

UNIT 1: DEVELOPING THE ENTREPRENEURIAL

This unit covers six sessions as outlined below

Session 1: Introduction and Meaning of Entrepreneurship

SESSION ONE: INTRODUCTION AND MEANING OF

1.2 Definition of Entrepreneurship

a. According to Fry (1993), entrepreneurship is the act of starting or growing

d. An innovative process where an individual (a prospective entrepreneur)

Therefore, entrepreneurship is the process of creating something new out

1.3 Increased Interest in Entrepreneurship

1.3.1 Entrepreneurship as a generic activity

irrespective of the programme one pursues or activity engaged in you can be

1.3.2 Expectation from the course

It will enable you ddevelop essential entrepreneurial attitudes and skills. It

As a guideline for group work, students would be made to form groups of 8 to

Self Assessment Questions

This is a blank sheet for your short notes on:

SESSION 2: THEORIES OF ENTREPRENEURSHIP

2.1 Theoretical foundations of Entrepreneurship

2.2 The Economic Theory

2.4 Psychological theory

2.7 Motivation theory by McClelland (acquired needs theory)

2.8 The Kakinada’s Experiment

Self Assessment Questions

Assess yourself by answering the following questions

This is a blank sheet for your short notes on:

The entrepreneurial mindset is marked by imagination, initiative, and a readiness to undertake

Entrepreneurial mind-set is about seeking and taking advantage of opportunities responsible –

3.2 Developing the Entrepreneurial Mind-set

3.2.1 Having Vision and Purpose

3.2.2 Seeking opportunities

3.2.4 Be open to ideas

3.3 Outcome of developing an entrepreneurial mindset

This session looked at the processes of developing entrepreneurial mindset, ways of

Self Assessment Questions

Assess yourself by answering the following questions

This is a blank sheet for your short notes on:

SESSION 4: ROLE OF ENTREPREURS

At the end of this session you will be able to:

4.1 Role of Entrepreneurs in the Ghanaian Economy

With the conscientious application of discipline, entrepreneurs exploit resources

Entrepreneurs are found to rejuvenate decaying economies. In course of the creation of

Self Assessment Questions

1. Explain the role of entrepreneurs in the development of an

This is a blank sheet for your short notes on:

SESSION 5: TYPES OF ENTREPRENEURS

Extrapreneurship is associated above all with starting up a business from an existing

5.1.1 Opportunist Entrepreneurs:

iii. Are resourceful- opportunist entrepreneurs have the ability to

v. Characterized by a level of restlessness – these type of

vi. Tend to lose interest in business once established- once

vii. Have an appetite for challenges- opportunist entrepreneurs are

5.1.2 Craft Entrepreneurs

ii. Manage the enterprise- unlike opportunist entrepreneurs, craft

iii. Train apprentices- these entrepreneurs in turn train others to

iv. Direct skilled worker

v. Participate directly in daily work so that final product reflects

5.1.3 Nascent Entrepreneurs

5.1.4 Novice Entrepreneurs

5.1.5 Serial Entrepreneurs

5.1.6 Portfolio Entrepreneurs

This session have been to explain the types of entrepreneurship including

Self Assessment Questions