Question One

Q1. “The government has constant interest in the continued performance and survival of business. ’
Giving examples, explain the role of the government as a promoter and protector of business interest in
Kenya. (10 Marks)

The Kenyan government involvement in business is one of the commercial duties it owes its
citizens. It provides the necessary environment for investments to be undertaken by itself or by
the local or foreign investors.
The role of government as a promoter of business
The promotional role of the government covers the government efforts to provide adequate
infrastructure and an environment conducive for business.
The government provides various incentives and schemes for encouraging business activities
besides basic infrastructure like roads, airports, supply of water and electricity, communication
and transportation system, banking and financial systems, industrial training centres, marketing
networks among others.
Some promotional activities performed by government include:
i. Promoting private and foreign investment;
ii. Maintenance of public utilities;
iii. Providing trade incentives;
iv. Matching and controlling money supply with development requirements;
v. Enabling effective utilization of various resources;
vi. Encouraging development attitude among various sectors;
vii. Encouraging optimal utilization of various natural resources;
viii. Ensuring equitable income distribution and
ix. Making economic resources productive and efficient
Examples on how the government of Kenya is involved in business promotion
 The government of Kenya through the industry regulator Communications Authority of
Kenya (CA) has started issuing 5G commercial licenses which is expected to deepen use
of Information Communication Technology among individuals and businesses;
 Due to the current Corona pandemic, the Kenyan economy shrank in the year 2020 due to
restrictions, however the government is targeting to vaccinate a certain percentage of the
population before opening the economy fully by easing most of the Covid-19 restrictions
currently in place;
 Youth Fund a state corporation is mandated to provide financial and business
development support services to youth owned enterprises;
 Building good road networks such as Isiolo-Marsabit highway, Nairobi Express Way,
Bypasses in major cities and towns which promote ease of transport;
  Kenya Business Training Institute is responsible for training and advising people in
business about business management strategies and better ways of producing goods and
services;
 Designating commercial attaches to the various embassies in the world to promote export
opportunities;
 Promotion of e-commerce and Small and Medium Enterprises among many other
government initiatives.
In conclusion the promotional role of the Kenyan government covers fiscal, budgetary and
monetary incentives for expansion of businesses and priority sectors of the economy.

The role of government as a protector of business interest in Kenya

The government protects business interest in Kenya through various ways such as regulation,
licensing and legislation.
 Regulation
These are the rule and restrictions the government requires business units to follow in their
business activities. Through this method, the government ensures high quality goods and
services and puts in control measures to protect consumers from exploitation, provides
patents and subsidy to benefit business firms, making operating controls, direct regulation on
monopoly to ensure enough output and restrict monopoly profit.
 Licensing
A license shows that a business has been permitted by the government to operate. The
government issues licenses to; regulate number of businesses in a given place, control type of
goods entering and leaving the country and ensuring that there is no illegal business.
 Enforcing standards
The government protects business interests by setting standards that businesses should
enforce and adhere to. This has been achieved through the establishment of the Kenya
Bureau of Standard (KEBS) whose main responsibility is to set standards especially for the
manufactured goods and see to it that the set standards are met. Goods that meet set standards
are given a diamond mark of quality. The Ministry of Public Health also ensures that
businesses meet certain standards as concerning facilities before such businesses can be
allowed to operate. Such standards may include clean toilets, clean water and well aerated
buildings.
 Legislation
The government of Kenya through the parliament and delegated legislation comes up with
rule and regulations that regulate business activities for example banning hawking in certain
areas and matatus being required to carry certain number of passengers.
Question two
Q2.Your friend Tom has been doing casual jobs in Qatar for the last one year. He intends to return back
to the country soon to start a business using his savings but he is not sure which type.

Explain three possible types of business forms that he can invest in. Give advantages of each. (10 Marks)

Possible business forms that Tom can invest in

 Sole Proprietorship

This is a business enterprise owned by one person called a sole trader. It usually deals with retail trade
such as a small shop, kiosk or agribusiness or direct service business such as barbershop or saloon. In
this type of business, the capital is contributed by the owner; the owner is personally responsible for the
management and may sometimes assisted by the family members.

Advantages of sole proprietorship business

 The capital required to start the business is small hence anybody who can spare small amounts
of money to start.
 Few legal procedures are required to set up this business.
 Decision making and implementation is fast because the proprietor does not have to consult
anybody.
 The trader has close and personal contact with customers. This helps them in knowing exactly
what the customers need and satisfying those needs.
 A sole trader is able to assess the credit-worthiness of his customers because of close personal
relationship.
 A sole trader is able to keep top secrets of the business operations and
 The sole proprietorship business is flexible as the owner can change the nature or even the
location as need arises.

 Partnership Business

This is a business which is owned by a minimum of two and a maximum of twenty members. The
capital is contributed by the partners themselves. In this business, the partnership has a limited life
that may end anytime because of death, bankruptcy or withdrawal of partners, each partner act as
an agent and co owner of the business and all the partners share responsibilities, profits and losses.

Advantages of a Partnership Business

 This business can raise more capital;

 The work is distributed among the partners. This reduces the workload for each partner;
 Varied professional and skilled labour of various partners leads to specialization;
 The partners can undertake any form of business agreed upon by all partners;
  There are few legal requirements in the formation of a partnership
 Losses and liabilities are shared among the partners
 The partners are exempted certain taxes paid by large business organizations

Incorporated Business Units

These are businesses that have separate legal entity from that of their owners. They include
cooperatives and limited liability companies.

Co-operatives

A co-operative society is a form of business organization that is owned by and run for the economic
welfare of its members. It is a body of persons who have joined together to do collectively what they
were previously doing individually for mutual benefit. The membership is open and voluntary to any
person who has attained the age of majority. Profits made at the end of every year are distributed to the
members in relation to their contribution. In co-operative societies, the business has perpetual existence

Advantages of Co-operative Societies

 Since the properties of co-operatives are owned collectively, they are able to serve the interest
of the members effectively;
 They have limited liability;
 The membership is free and voluntary;
 Members share profits through dividends that are given;
 They have improved the standards of living of their members through increased income;
 Co-operatives benefit their members through giving them credit facilities and financial loans;
 They run on a democratic basis;
 They are large scale organizations hence able to get the benefits of large scale organizations and
 Co-operatives enjoy a lot of support from the government and when they are in financial and
managerial problems, the government steps in to assist them.

Limited Liability Company

This is an association of persons registered under the company’s act who contribute capital in order to
carry out business with a view of making a profit. A company has a perpetual life which is independent
of the lives of its owners. Death, insanity or bankruptcy of a member does not affect the existence of the
company.

Tom can invest in either; private limited company where it is formed by a minimum of two and a
maximum of fifty shareholders and does not advertise its shares to the public or a Public limited
company where; it can be formed by a minimum of seven shareholders and no maximum and advertises
its shares freely to the public.

Advantages of a Limited Company

 Limited liability: the shareholders have a limited liability in that they are not liable for the
company’s debts beyond the shareholders capital contribution;
 Specialized management: limited companies are able to hire qualified and experienced staff;
  Wide choice of business opportunities: due to large amount of capital, a limited company may
be suitable for any type of investment;
 Continuity: limited companies have continuous life as it is not affected by the death, insanity or
bankruptcy of shareholders or transfer of shares;
 Economies of scale: their large size enables them to enjoy economies of scale of operations. This
leads to reduced costs of production which eventually raises the level of profit;
 Share of loss: large membership means that the risk of loss is shared and spread among the
shareholders and
 Wide range of sources of capital: limited companies can access a wide range of capital especially
through the sale of shares and debentures.

Question Three

Q3.Citing examples, discuss the importance of undertaking this unit “introduction to business studies”
(10 Marks)

Importance of undertaking Introduction to Business Studies

 Studying business studies lets a student to be able to acquire skills that will enable a student to
encounter the world of business. This can be achieved for example by engaging in any business
activity with confidence and competence.
 This unit will build a strong foundation for further studies and training in specialized areas such as
management, accounting, marketing, entrepreneurship, or information communication technology.
 It provides students with new, practical context for many subjects studied. For example
mathematics, science and technology and communications skills which are applied in the world of
business. These business skills will help people with their needs, challenges and problems by
creating products and services that help improve the quality of life.
 Learning Business studies demonstrates how a variety of areas of study can be combined into
productive activity. It provides an increased understanding of mutual dependence through business
system. For example the various sectors of the economy are interdependent and the major
coordinating factor is business ranging from public sector to private sector.
 Business studies also enables university students to acquire basic knowledge, skills and attitudes
necessary for development of self and the nation at large by starting and operating businesses. For
example starting a cyber café business near an educational institution.
 Business studies enable students to understand the role of government in business activities. For
example the role of government as a promoter, regulator and protector of business interests.
 It helps individuals to develop various intellectual abilities such as enquiry, critical thinking, analysis,
interpretation, rational judgment, innovation and creativity. For example being able to interpret
government budget critically and even advice through public participation on critical issues that can
be considered by the government in the annual budget.
 It enables students especially those pursuing Bachelors of Education (Arts) with a combination of
Business Studies to be able to acquire enough knowledge in the area of specialization to be able to
disseminate the same knowledge to his or her learners. Such as teaching business courses in
secondary schools or colleges.
 Learning business studies enable one to understand and appreciate the basic economic issues that
affect the society for example increase in prices of goods and services and inflation.
 Business studies help students to develop attitudes towards the environment in which people live.
This is because businesses affect daily life of people by influencing jobs, incomes and opportunities
for personal development. For example business activities will affect people as they work, spend,
save, invest, travel and even recreational activities.

Citations

https://knecnotes.co.ke/2020/12/11/chapter-1-introduction-to-business-studies/

OYUNGE MR MONAYOALBERTV. “An introduction to business studies (an undergraduate text book) for
students pursuing Bachelor of Education Degree (in process of manuscript)”. In: Bull. Int. Dairy Fed.
221:32-46. Elsevier; 2005.