KNOW ABOUT

BUSINESS

Entrepreneurship Education
in Schools and Technical Vocational Training Institutions

MODULE 1
What Is Enterprise?

Authors:

George Manu
Robert Nelson
John Thiongo

Editors:

Peter Tomlinson and Klaus Haftendorn

 International Labour Office, Geneva
International Training Centre of the ILO, Turin

Copyright © International Training Centre of the ILO 2005

This publication enjoys copyright under Protocol 2 of the Universal Copyright Convention. Applications for
authorization to reproduce, translate or adapt part or all of its contents should be addressed to the
International Training Centre of the ILO. The Centre welcomes such applications. Nevertheless, short
excerpts may be reproduced without authorization, on condition that the source is indicated.

Know About Business

ISBN 92-9049-XXX-X

First published 1996

Second edition 2000
Third edition 2002
Fourth edition 2004
Revised edition 2005

The designations employed in the publications of the International Training Centre of the ILO, which are in
conformity with United Nations practice, and the presentation of material therein do not imply the
expression of any opinion whatsoever on the part of the Centre concerning i.a. the legal status of any
country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The
responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their
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Illustrations: Gianmaria Roccia – Design and Printing: International Training Centre of the ILO, Turin
Foreword

At the end of the 1980s and beginning of the 1990s the ILO was strongly involved in
SME development and vocational education through a number of projects involving
government institutions and private sector institutions. Training of entrepreneurs in
management skills was part of those projects. Entrepreneurship education was seen as
an important element to develop entrepreneurial attitudes for future entrepreneurs.
However, no specific training programs were available.
To close this gap, funds were provided from ILO Geneva (SED unit in ENT/MAN) and
from the International Training Centre of the ILO in Turin (SME unit) in 1996 to develop
a training package for TVET institutions that includes entrepreneurial education and
business skills. A workshop was organized in Turin with the participation of Mr. G. Manu
from ITCILO, Mr. J. Thiongo, a Kenyan consultant and Prof. R. Nelson from the University
of Illinois, USA to develop the KAB training materials for trainers and instructors of TVET
institutions. The material was field tested in Kenya and then finalized and printed.

Entrepreneurship education stimulates young people to think about entrepreneurship

and the role of the business community in economic and social development. Students
also get an opportunity to analyze the changes taking place in their countries and are
encouraged to consider self-employment and enterprise creation as a career choice.

The importance of education and training for an entrepreneurial society has been
underlined on several occasions through United Nations Declarations (the Youth
Employment Network (YEN) promotes Entrepreneurship Education as a means to reach
the Millennium Goal to halve youth unemployment by 2015) and Conventions. ILO
Recommendation No. 189, adopted in 1998, refers to entrepreneurship education as a
way of promoting a positive enterprise culture.
A number of countries have adopted KAB in their National Education Program since
2000. The experience made with KAB and an increasing demand for the introduction and
adaptation of KAB in other countries has led to the decision to review and update KAB so
that it corresponds better to the needs of education programs in a fast-changing and
globalizing world.
A one week workshop in ILO’s International Training Centre was organized by the
Enterprise Development Program Manager Mr. Peter Tomlinson and Mr. Klaus Haftendorn,
Global KAB Program Coordinator, with the authors and KAB practitioners in May 2004.
The present new edition is the outcome of this workshop. All the modules were reviewed
during the workshop and the authors introduced changes in the text. Additional topics
for Modules 6 and 7, and a new Module 9, How to Elaborate One’s Own Business Plan,
were written by Klaus Haftendorn to enable students and learners to test a business idea
in a real life situation. Furthermore, he put together with the help of Dominique
Papenheim the Learners’ Workbook by extracting the worksheets from the modules and
adding a glossary of economic terms used in KAB. The focus of KAB was thus extended
from vocational training to general secondary education.
This new edition constitutes the generic version of Know About Business for all further
national adaptations.
Many thanks are given to all those who participated in the revision work of KAB and
contributed to the new generic version.
Klaus Haftendorn and Peter Tomlinson Editors of KAB
MODULE 1

What Is Enterprise?
Module objectives:
• To enable learners to recognize that everybody is involved in an
enterprise in one way or another.
• To enable learners to appreciate that everybody’s lifestyle is affected by
the roles they play in their enterprises.

Module coverage:
Page
1. Meaning and scope of enterprise..................................................2

2. Different forms of enterprises .................................................. 10

3. Roles people play in enterprises ................................................20

4. Small enterprises.....................................................................30

!
I TOPIC 1: Meaning and Scope of Enterprise

II SUGGESTED TIME:

• 2 hours

III OBJECTIVE:

• To enable learners to identify and interpret the terms and elements involved
in the concept of enterprise, in both the wider and the narrower context.

IV RATIONALE:

• Through understanding the narrow and broad meanings of the term

enterprise, learners will be able to recognize that everybody is involved in
business activities in one way or another.

V ACTIVITIES:
1. Have the learners define the meaning of enterprise. They may also look up the
term in their dictionaries.

2. As the definitions are being given, have each learner write down the key terms
that are mentioned by most of the other learners.

3. Have each learner write down required elements for each key term.

4. Show TRANSPARENCY 1, Key Terms Explaining Enterprise, and have the learners
compare these elements with those they identified.

5. On WORKSHEET 1, have the learners write examples of enterprises that provide

goods or services to, or receive them from their training institution or
organization.

6. Have the learners complete WORKSHEET 2 on what attributes are required to

engage in an enterprise.

7. Show TRANSPARENCY 2 and have the learners compare the transparency’s

responses with those they have indicated on their worksheets. Discuss each of the
terms listed on the transparency and add others which have been identified by
the learners.

8. Have the learners read HANDOUT 1.

 MODULE 1: Topic 1

! WORKSHEET 1
Write examples of enterprises that exist as a result of the presence of your
institution or organization. For example, if you belong to a school, the
enterprises that exist as a result of the presence of your school are the
canteen and internet café.

Enterprises that provide goods or services to, or receive

them from my training institution or organization

1. 11. 21.

2. 12. 22.

3. 13. 23.

4. 14. 24.

5. 15. 25.

6. 16. 26.

7. 17. 27.

8. 18. 28.

9. 19. 29.

10. 20. 30.

 MODULE 1: Topic 1

! TRANSPARENCY 1

Key Terms Explaining Enterprise

ENTERPRISE IS:
TERM ELEMENTS
• Idea -Identification
-Imagination
-Thought
• Planned -Thought out
-Written down
• Implemented -People used
-Materials used
-Money used
• Activity -Can be seen
-Can be touched
• Reward -Satisfying
-Acceptable feedback
MEANING OF ENTERPRISE

• wider An idea that is translated into

context: a planned and implemented activity
• narrower Business venture or
context: undertaking that brings profit

Note: Emphasis in this package is on the narrower

meaning of enterprise
 Module 1 Topic 1

! WORKSHEET 2

For each letter on the left, identify words that would contribute to
explaining what attributes are required to engage in an enterprise.

Letter Possible terms

E
N
T
E
R
P
R
I
S
E
 MODULE 1: Topic 1

! TRANSPARENCY 2

Letter Possible terms

E Energy, Experience

N Need to achieve, New ideas, Novelty

Task oriented, Time management,

T Talents

Empathy, Efficiency, Effectiveness,

E Employees’ management

Resourcefulness, Research, Rapid

R growth

Planning, Production, Promotion, Profits,

P Patience, Persistence, Perseverance

Risk-taking, Results, Rewards,

R Relationships

Innovation, Information, Insight,

I Intuition, Initiative, Ideas

Skills, Sales, Success, Self-confidence,

S Systematic, Self-reliance

Endurance, Environmental responses,

E Emotional attachment to tasks
! HANDOUT 1

Meaning and Scope of Enterprise

In its wider sense, an enterprise is any identified idea that is translated into a planned
and satisfactorily implemented activity. In its narrower sense, it refers to a business
venture or undertaking. Practically all projects and undertakings can be referred to as
enterprises if the five steps mentioned in the above definition are followed, i.e. idea
identification, planning, implementation, successful completion of an activity and
accepting the reward.

You become an enterprising man or woman if you are consistent in systematically

following the above process whenever you are involved in dealing with issues in your
life. By understanding the enterprise concept in the above context, you appreciate that
most people have the potential to be enterprising, and that even you can realize your
own business enterprise. The difference between enterprising men and women who are
able to deal positively with the challenges and problems they face in their daily lives and
those who are unable to do so is to be found in the approaches and attitudes they have
when addressing issues and solving problems.
Being enterprising can bring benefits to you as an individual, and also help you to
become a valued member of your family, community, place of work and society in
general. Being enterprising will specifically enable you to achieve a great deal, and you
will stand out in the crowd due to your attitude and systematic approach to issues. By
adopting an enterprising approach you will know what to do in whatever circumstances
you find yourself in. This kind of approach will enable you to appreciate the challenges of
life because you will generally be able to translate them into positive results.

To help you become enterprising, you will need the following tools:

E Energy
Working hard, but also in a smart way, is key in entrepreneurship. Lots of both mental
and physical energy is needed to be able to face all the challenges involved in providing
solutions to issues and for the successful completion of projects. To sustain this energy,
you need to stimulate your brains and all your senses – sight, hearing, touch, smell and
taste – so that they all stay alert in identifying what needs to be done in different
situations. You also need to be healthy and physically fit, and this can be achieved
through appropriate diet and exercise.

N Need to achieve
You have the motivation to achieve success and accomplish all the activities you engage
in. Your attitude and perceptiveness enable you to work towards acceptable results
whenever you set out to do something. This approach enables you to work harder than
the ordinary man or woman.
T Task oriented
You are convinced that to gain satisfying rewards tasks have to be well executed and
completed on time. Efficiency, effectiveness and time management are important
aspects that enable you to complete tasks. Being able to focus on results helps you to
concentrate on whatever you set out to do.

E Empathy
You are able to mentally put yourself in the position of the person or persons you intend
to influence. You want to feel what they are feeling. You are able to put yourself in their
shoes. In the case of a business enterprise you are able to imagine how a potential
customer would feel.

R Resourcefulness
You are able to provide the leadership and guidance needed to realize the enterprise.
Identification, mobilization and effective utilization of both the physical and the non-
physical resources needed in undertaking a venture are very important in the enterprise
process.

P Planning
To be able to see the total picture of the enterprise in terms of why it should be set up,
what needs to be done, how it will be done, who will do it and when it will be done, it is
necessary to establish a written plan. This will help to clarify the situation and permit
decisions to be made as to whether to engage in activities that will result in an
enterprise being set up or not. In the case of business ventures, it is through planning
that indications on whether there will be profits or losses will be made available.

R Risk-taking
The decision to go ahead and start the enterprise or undertake the activity must be
made. All enterprising men and women make this decision only after they have done a
certain amount of research, so that in the end they are usually able to achieve the
results, succeed and receive the rewards. You will always have to take this first step, as
it marks the difference between enterprising and non-enterprising men and women.
Success begins with the decision to start moving in the right and desired direction.

I Innovation
The ability to apply new ideas that will enable you to undertake activities differently is
another hallmark of enterprising men and women. Through individual initiative,
imagination, intuition and insight you will be able to change things around or devise
ways of doing things to accommodate whatever new situation you may find yourself in.
Information on different issues and fields is an important input for being innovative.
Enterprising men and women therefore place great value on information and are always
alert and constantly engaging in research.
S Skills
Enterprising men and women have the ability or know-how that enables them to
undertake and complete activities. Most men and women have a certain amount of
knowledge, attitudes and practical skills that can be useful when realizing an enterprise.
You should therefore evaluate the talents and level of skills you have and how they can
be harnessed to realize an enterprise. Talents and acquired skills have to be constantly
utilized and applied; otherwise they can also be forgotten and wasted.

E Endurance
There are many challenges to be faced when trying to set up an enterprise. Women face
specific challenges, some of which are negative and discouraging. To ultimately realize
the enterprise that will provide you with the rewards you desire, the ability to keep on
track despite the many challenges along the way is critical. Patience, persistence and
confidence are some of the attitudes you will need to adopt to enable you to endure the
physical and mental challenges you may encounter.
I TOPIC 2: Different Forms of Enterprises

II SUGGESTED TIME:

• 4 hours

III OBJECTIVE:

• To enable learners to understand that, like everybody else, they will be

engaged in enterprise through the various activities they undertake now and
in the future.

IV RATIONALE:

• By understanding the various categories into which enterprises can be

classified, learners will appreciate that enterprises exist to accommodate the
various interests and needs in society.

V ACTIVITIES:
1. Show TRANSPARENCY 1 on sample enterprises and relate these enterprises to
those identified earlier in WORKSHEET I Topic 1.

2. Using WORKSHEET 1, analyze the 15 sample enterprises according to the

classifications in TRANSPARENCY 2. (Each example can be placed in more than
one form of classification).

3. Using WORKSHEET 1, have each learner give a specific example and classify the
sample enterprises as business or non-business.

4. Discuss TRANSPARENCY 3.

5. Discuss each form of classification using the points in the transparencies.

6. Ask the learners to state how the enterprises identified in WORKSHEET 2 benefit
from the existence of a school.

7. Have the learners read HANDOUT 1.

! TRANSPARENCY 1

Sample Enterprises

1. 2. 3.
Church Bakery Farm

4. 5. 6.
Parlor School Hospital

7. 8. 9.
Hardware Restaurant Shoe Repair
Store Store

10. 11. 12.

Bus Terminal Grocery Bank

13. 14. 15.

Internet Cafe Movie House Newspaper
Stand
 MODULE 1: Topic 2

! WORKSHEET 1

Classify the enterprise, fill in an example of a specific enterprise you

are aware of and identify whether it is of the business or non-
business type.

SPECIFIC BUSINESS OR
ENTERPRISE TITLE CLASSIFICATION
EXAMPLE NON-BUSINESS

1. Church

2. Bakery

3. Farm

4. Parlor

5. School

6. Hospital

7. Hardware Store

8. Restaurant

9. Shoe Repair Store

10. Bus Terminal

11. Grocery

12. Bank

13. Internet Café

14. Movie House

15. Newspaper Stand

! TRANSPARENCY 2

Classification of Enterprises

▪ Private vs Public

▪ Profit vs Non-profit

▪ Formal vs Informal

▪ Individual vs Community

▪ Local vs Foreign

▪ Business vs Social

▪ Small vs Large

▪ Manufacturing vs Service

▪ Consumer vs Industrial
! TRANSPARENCY 3

Differences Between
Business Enterprises and
Non-Business Types of Enterprise

Non-Business Types
Business Enterprises
of Enterprise

• Various types of
• Profits are a primary
human needs are
motive
catered for

• Products/services must • Products/services

be demanded people may want

• Products/services are • Market situation need

sold in a market not be present

• Products/services may
• Products/services must
not necessarily be paid
be paid in full
in full
 MODULE 1: Topic 2

! WORKSHEET 2

State how each of the enterprises listed below might benefit from the
existence of a school nearby.

Retail
Newspaper stand _______________________________________________
Clothing store __________________________________________________
Bicycle shop ___________________________________________________
Camera shop___________________________________________________
Art and craft gallery _____________________________________________
Drugstore _____________________________________________________
Gift shop ______________________________________________________
Florist ________________________________________________________
Pet shop ______________________________________________________

Food and Recreation

Grocery store __________________________________________________
Restaurant ____________________________________________________
Sari-sari store __________________________________________________

Other
Wholesaling____________________________________________________
Farming_______________________________________________________
Artist _________________________________________________________
Building contractor ______________________________________________
Transportation__________________________________________________

Services
Computer services ______________________________________________
Print shop _____________________________________________________
Landscaping ___________________________________________________
Interior decorating ______________________________________________
Warehousing and storage _________________________________________
Auto repair shop ________________________________________________
Accounting and tax service ________________________________________
Business franchise services________________________________________
Car wash ______________________________________________________
Employment agency _____________________________________________
Travel agency __________________________________________________
Real estate agency ______________________________________________
Internet café___________________________________________________
Bank _________________________________________________________
Security_______________________________________________________
Manufacturing
Machine shop __________________________________________________
Medical equipment ______________________________________________
Food processing ________________________________________________
Industrial equipment ____________________________________________
Cosmetic and beauty products _____________________________________
 MODULE 1: Topic 2

! HANDOUT 1

Different Forms of Enterprise

People in a community have many interests and different needs and wants in their lives.
It is the role of enterprising men and women to identify these interests, needs and
wants and establish specific enterprises through which these interests, needs and wants
can be satisfied. All enterprises provide satisfying rewards for those who successfully
establish them.

Terms used to classify enterprises include private, public, formal, informal, individual,
community, local, foreign, small, large, business, social, manufacturing, and service,
casual or industrial. Enterprises that succeed, irrespective of their nature, come up with
irresistible and valued approaches that contribute to providing solutions to problems, as
well as satisfying the desired needs and wants. The key difference between all types of
enterprise lies in the rewards they provide. Business ventures provide profits as rewards,
while non-business ventures provide other types of rewards which could be either
physical or psychological. Enterprising men and women will therefore engage in
enterprises depending on what kind of rewards they expect from them.

Specific enterprises in a community have the potential to benefit from the existence of
all the others. Output from one enterprise normally becomes input for other enterprises,
and this helps in money circulation among the enterprises and within the community.
The more money that circulates in the community, the more prosperous the community
becomes. The synergistic nature of all enterprises in a community creates an
environment where there are lots of opportunities to be exploited by enterprising men
and women. It is therefore up to these men and women to identify the opportunities
available and exploit them. Almost all communities have lots of unexploited
opportunities that can increase this synergy if properly harnessed, to create even more
opportunities for everyone.

In the course of training and education, men and women acquire different skills that lead
to different careers. They are applied in trade, services, manufacturing, food processing,
recreation, information and communication, and other forms of enterprises. Acquired
skills are great assets that men and women should be proud of. The existence of many
types of enterprise in your community affords you opportunities to apply the skills you
have acquired in the course of your training. All types of skill learnt have a chance to be
applied if opportunities are sought in all types of enterprise. It is normal for men and
women to consider the compatibility of personal values, interests and expectations with
the type of enterprise they would wish to associate with. This, however, if taken too far,
could limit the opportunities for individual men and women.
The essence or key message is to appreciate that you have started in the right way by
acquiring the skills. The next step is to be alert and evaluate the many enterprises in
your community and note their potential synergistic nature. The final step is to identify
how the skills you have acquired can be applied or utilized in the various possible
enterprises. You can therefore do what you can, with what you have, where you are, and
still succeed.
I TOPIC 3: Roles People Play in Enterprises

II SUGGESTED TIME:

• 2 hours

III OBJECTIVE:
• To enable learners to recognize that, although everybody is involved in
enterprise, people play different roles and each person chooses the part he/
she wants to play.

IV RATIONALE:
• Through identifying the roles people play in enterprises, learners are able to
note that, although all roles are important, some are more crucial than others
for the overall success of the enterprise. The roles are each rewarded
differently, depending on their level of importance.

V ACTIVITIES:
1. All learners will be involved in a simulated enterprise.

2. All the learners decide together what kind of enterprise they want to form.

3. Each learner then chooses the role he/she wants to play in the enterprise and
writes down his/her specific duties.

4. After 15 minutes of the simulation, stop the exercise and ask each of the learners
to explain their role to their colleagues using the questions in TRANSPARENCY 1.

5. Show TRANSPARENCY 2 on the roles of entrepreneurs for comparison with the

roles identified by the learners.

6. Through the suggested titles and levels of skill given in TRANSPARENCY 3,

learners discuss their responses, particularly in relation to their own levels of skill
and the classification of skills provided in the worksheet.

7. Have the learners fill in WORKSHEET 1 on the roles of entrepreneurs in business

and compare them with those given in HANDOUT 1.

8. Show TRANSPARENCY 4 to indicate that there are many factors that influence the
choice of roles different people decide to play in an enterprise.

9. Have the learners read HANDOUT 2, which shows that entrepreneurs enter into
business using different strategies.

MODULE 1: Topic 3
! TRANSPARENCY 1

Roles Questionnaire

1. What role were you playing in the

enterprise?

2. What is the importance of your role to the

enterprise?

3. What rewards would you get from your

role in the enterprise?

4. How do you rate your role in relation to

the others?

5. Why did you decide to choose the role you

were playing?

6. Would you want to change your role if

given another chance?
! TRANSPARENCY 2

!
 MODULE 1: Topic 3

! TRANSPARENCY 3

Sample Enterprises
and Those Who Sustain Them

SUPERMARKET RESTAURANT

Food Checker Cook

Stock Controller Dishwasher

Produce Manager Salad Maker

Store Manager Waiter

Meat Manager Waitress

Bookkeeper Manager

Baker Cashier

Maintenance Worker Custodian

Secretary Bartender

HOSPITAL SCHOOLS

Nurse Teacher

Nurse's Aide Nurse

Doctor Secretary

Dietician Librarian

Administrator Bus Driver

Occupational Therapist Principal

Physical Therapist Counselor

Bookkeeper Audio-Visual Operator

Secretary Superintendent

Cook Cook

Janitor Bookkeeper

Security Guard Coach

Ambulance Driver
Psychologist

Psychiatrist

Cashier

Speech Therapist

Hearing Therapist

Laboratory Assistant

Surgeon
! WORKSHEET 1
Describe each role that entrepreneur takes in the enterprise.

ROLES OF ENTREPRENEURS IN BUSINESS

Role Description

1. Promoter

2. Partner

3. Shareholder

4. Director

5. Organizer

6. Initiator of
Ideas

7. Risk-taker

8. Planner

9. Controller

10 Coordinator
 MODULE 1: Topic 3

! TRANSPARENCY 4

• Location within the country

• Local community
• Friends
• Family life and wealth
• Lifestyle and leisure
• Religion and morals
• Career visions
• Personality
! HANDOUT 1

Roles of Entrepreneurs in Business

1. Promoters: Entrepreneurs are promoters because they can scan the
environment, identify opportunities, marshal resources and implement the
business idea.

2. Partners: Entrepreneurs solicit the participation of other persons in a business

project because of the following:

(a) the degree of success or failure factor involved,

(b) the complexity of a business idea may require more than one person to run
it,
(c) the influence, experience and capacity of others may be useful, and
(d) friendships or acquaintanceships may be consolidated through joint
business association.

3. Shareholders: Potential entrepreneurs would participate as shareholders

under the following circumstances:

(a) when the enterprise requires too much investment,

(b) when they do not want to commit their full time to the enterprise,
(c) when risks may be reduced by spreading their investment portfolio, and
(d) when they do not have the capacity to manage such an enterprise.

4. Directors: Entrepreneurs participate as directors by contributing positive ideas

to advance the enterprise’s objectives. Such would include:

(a) ensuring compliance with all legal requirements,

(b) safeguarding the interests of employees, especially women, particularly in
the context of decent work,
(c) safeguarding the interests of shareholders in the context of return on
investment,
(d) ensuring that business is conducted honestly and diligently, and is devoid of
fraud and deceit,
(e) ensuring social responsibilities and expectations are met.

5. Organizers: For an entrepreneur to effectively control or monitor operations

and facilitate communication with workers, it is advisable to have an
organizational structure for the enterprise. Organizational structures can be
formal or informal, for instance:

(a) various members of a family are assigned various positions,

(b) various employed assistants are assigned administrative positions in the
running of a small business.
6. Initiating ideas: Entrepreneurs come up with new ideas. This is an important
area for an entrepreneur as it determines his/her rate of expansion in business,
e.g. new designs and use of products.

7. Taking risks: Entrepreneurs take risks in business, e.g. starting businesses

which have an equal chance of success or failure. Resigning from a secure job to
start a business is also risk-taking.

8. Planning: Entrepreneurs are aware of the importance of planning and of the

limitations of planning in the context of the above roles.

9. Controlling: Entrepreneurs are leaders rather than followers; they make the
final decisions and control all aspects of business operations.

10. Coordinating: Entrepreneurs must coordinate all the production factors

needed in the business, i.e. capital, labor and land.

!
! HANDOUT 2

Types of Entrepreneurs
Before starting a business, there is a need to identify the type of entrepreneur you might
choose to be. Many types of entrepreneur are needed to help the country to grow. Let’s
look at the possibilities.

1. Self-Employed: Individuals who perform all the work and keep all the profit. This
includes everything from family-run stores, agents, repair persons, accountants, to
physicians and lawyers. It can be a full-time job because no one else is involved.

2. Opportunistic Entrepreneurs: Those who start a business and expand as

fast as possible in order to be able to hire other employees. Usually, these additional
employees have the necessary expertise that the owner does not have.

3. Inventors: Those with particular inventive abilities who design a better product
and then create companies to develop, produce and sell the item. High-technology
companies of this type are a new trend.

4. Pattern Multipliers: Those who look for an idea someone else has already had
so that they can then create their own business based on this model. Franchise
operation or chain stores are a form of this approach.
1.
5. Economy of Scale Exploiters: Those who benefit from a large volume of
sales by offering discount prices and operating with very low overhead.

6. Acquirers: Those who take over a business started by somebody else and use their
own ideas to make it successful. This often happens when there is a financial problem
in the current operation. Fresh management ideas may save the business.

7. Buy-Sell Artists: Those who buy a company for the purpose of improving it so
that they can sell it again for a profit.

8. Speculators: Those who purchase a commodity and resell it for a profit. Real
estate, art, antiques and crops are typical speculator items.

9. Internal Entrepreneurs (Intrapreneurs): Those who create new ideas

and turn them into a successful project within an existing business. Although they
have neither the profit nor the personal financial risk of their own business, they
need to use the same methods of operation as an entrepreneur.

10. Franchisee: A franchisee is an individual who starts a business for which a widely
known product image has already been established. The franchisee owns the
business and assumes its operating responsibilities subject to specifications set out
by the franchisor.

11. Necessity Entrepreneur: Unemployed person who needs to establish his/her

own business in order to survive, e.g. shoe shine boy, micro trading.
I TOPIC 4: Small Enterprises

II SUGGESTED TIME:

• 5 hours

III OBJECTIVE:

• To enable learners to understand facts about small enterprises.

IV RATIONALE:

• By understanding the statistics, features, characteristics, types and

usefulness of small enterprises, learners will be able to make better and more
realistic decisions on how they would want to be involved.

V ACTIVITIES:
1. Divide the learners into two groups and have them debate the following
statement:

“Small businesses are not critical for the country’s economic development. All
small businesses should be closed down for the sake of economic growth and
competitiveness.”

2. Compare the information generated with the meaning, statistics and reasons for
interest in small businesses given in TRANSPARENCIES 1 to 4.

3. Have the learners categorize the characteristics of small enterprises as strengths

or weaknesses and compare them with those given in TRANSPARENCY 5 and
HANDOUT 1.

4. Have the learners fill in WORKSHEET 1 to see whether they are able to identify
small businesses. Use HANDOUT 2 to show a sample categorization. Add any
unique businesses to the list.

5. Show TRANSPARENCIES 6, 7 and 8 to indicate the survival strategies of small

enterprises, the local nature of small enterprises and the areas where small
enterprises do well.

6. Emphasize that:

• Small enterprises have a role to play in all countries and in all sectors of the
economy.
• They have unique features that enable them to emerge and grow.
 MODULE 1: Topic 4

! TRANSPARENCY 1

Elements that constitute the meaning

• Independent management
• Owner supplied capital
• Mainly local area of operation
• Relatively small size within industry

B
• “A business is small if the owner has direct lines
of communication with the operating managers
and has personal contact with a large proportion
of the work force, including key personnel.”

C
• “Individually owned and operated business”
D
• In the Philippines, the government developed a
classification system that would indicate whether
a business is micro, small, medium or large.

• Asset Size:

Micro enterprises – less than 1.5 million pesos

Small enterprises – 1.5 to 15 million pesos
Medium enterprises – 15 to 60 million pesos
Large enterprises – more than 60 million pesos

• Employment Size:
Micro enterprises – 1 to 9 employees
Small enterprises – 10 to 99 employees
Medium enterprises – 100 to 199 employees
Large enterprises – more than 200 employees
! TRANSPARENCY 2

Small Business Statistics

and Observations

1) In most countries UP TO 99% of all businesses are small

businesses.
2) OVER 40% of most countries’ business employees are
employed in small businesses.
3) APPROXIMATELY 40% of the total volume of business
in many countries is done by small firms.
4) APPROXIMATELY 75% of new jobs are generated by the
small business sector.
5) 50% of all small enterprises fail in the first two years.
6) 60% of the money used to initiate small businesses is
generated from private sources, such as personal savings
and borrowing from friends.
7) The cost of creating jobs through small businesses is a
small fraction of what it takes to create jobs in large
enterprises.
8) Small enterprises accommodate the biggest share of
employees in retailing, wholesaling and service.
9) Small businesses provide the bulk of sales and employees
in certain segments in manufacturing.
10) Poor management is the biggest cause of failure in small
businesses.
11) The chances of any new business surviving more than
five years is one to four.
12) In almost all countries small business is the natural home
of entrepreneurship.
13) In the Philippines,

• 99.6% of the total establishments are micro, small

and medium enterprises

• 69.9% of the labor force is employed by the micro,

small and medium enterprises

• 32% of the country’s total sales volume is contributed

by micro, small and medium enterprises
Source: http://www.dti.gov.ph/SME.php
 MODULE 1: Topic 4

! TRANSPARENCY 3

!
! TRANSPARENCY 4

!
• Small business operators constitute a large and
vocal political pressure group that cannot be
ignored.
• There are large numbers of people involved in
small enterprise.
• Participants (employees and sometimes owners)
tend to be underprivileged.
• Small enterprises offer many job opportunities,
especially for women.
• Small enterprises alleviate poverty and contribute
to development.
 MODULE 1: Topic 4

! TRANSPARENCY 5

• Financial limitations • Personal touch

• Staffing problems • Greater motivation
• High direct costs • Greater flexibility
• Too many eggs in one • Less bureaucracy
basket • Unobtrusive (less
• Credibility conspicuous)
• Quality limitations • Serves local markets
! HANDOUT 1

Weaknesses and Strengths of

Small Enterprises

SMALL ENTERPRISE WEAKNESSES:

Financial limitations: Balancing “cash in” and “cash out” is a struggle, especially
when trying to expand. Instead of receiving the red carpet
treatment by financiers when asking for a loan, the small
businessperson is often made to feel like a second-class
citizen. Small enterprises can’t use credit as a selling tool
as readily as companies with large financial reserves.
Additionally, many small enterprises have trouble staying
afloat while waiting for their products to win acceptance in
the marketplace.

Staffing problems: Small companies cannot pay top salaries and provide the
opportunities and status normally associated with a big
company job. Small enterprise owners must also
concentrate on the day-to-day problems of running the
business and generally have little time left to think about
objectives.

Higher direct costs: A small enterprise cannot buy raw materials, machinery
or supplies as cheaply as a large company, or obtain a
large producer’s economies of scale. So per unit
production costs are usually higher for small enterprises,
but overhead costs are generally somewhat lower.

Too many eggs

In one basket: A large diversified company can take a licking in one
sector of its business and still remain strong. This is not
so for the small business with only a few product lines. A
small company is vulnerable if a new product doesn’t
catch on, if one of its markets is hit by a sharp recession,
or if an old product suddenly becomes obsolete.

Lack of credibility: The public accepts a large company’s products because its
name is well known and usually respected. A small
enterprise must struggle to prove itself each time it offers
a new product or enters a new market. Its reputation and
past successes in the marketplace seldom carry weight.
SMALL ENTERPRISE STRENGTHS:

Personal touch: Customers will often pay a premium for personalized

attention. In fact, in many industries where product and
price differences are minimal, the human factor emerges
as a prime competitive advantage.

Greater motivation: Key management of a small enterprise normally consists

of the owner(s). Consequently, they work harder, longer
and with more personal involvement. Profits and losses
have more meaning to them than salaries and bonuses
have to the employees of a larger company.

Greater flexibility: A small enterprise has the prime competitive advantage of

flexibility. A big business cannot close a plant without
opposition from organized labor, or even raise prices
without possible intervention from the government, but a
small enterprise can react quickly to competitive changes.
A small enterprise also has shorter lines of
communication. Its product lines are narrow, its markets
limited and its factories and warehouses close by. It can
quickly spot trouble or opportunity and take appropriate
action.

Less bureaucracy: Grasping the big picture is difficult for executives of large
companies. This “management myopia” leads to
redundant actions and bureaucratic inefficiencies. In a
small business the whole problem can be understood
readily, decisions can be made quickly and the results can
be checked easily.

Unobtrusive
(less-conspicuous): Because it is not quite as noticeable, the small
company can try new sales tactics or introduce new
products without attracting undue attention or opposition.
Large companies are constantly faced with proxy battles,
antitrust actions and government regulations. They are
also inflexible and hard to change or restructure.
 MODULE 1: Topic 4

! WORKSHEET 1

Local Small Businesses

List up to 15 businesses in your community that you consider efficient, smart,
lucrative or suitable. Since there may be more than 15 small businesses,
concentrate on the types that most interest you as possibilities for self-
employment. Don’t leave out any possibilities just because you feel you don’t
have the necessary capabilities for success. If you don’t possess all the
necessary capabilities, you can probably develop them or hire others who have
them to help you out. Include every possibility that seems appealing.

1. _____________________________________________________

2. _____________________________________________________

3. _____________________________________________________

4. _____________________________________________________

5. _____________________________________________________

6. _____________________________________________________

7. _____________________________________________________

8. _____________________________________________________

9. _____________________________________________________

10. _____________________________________________________

11. _____________________________________________________

12. _____________________________________________________

13. _____________________________________________________

14. _____________________________________________________

15. _____________________________________________________
 MODULE 1: Topic 4

! HANDOUT 2

Examples of Small Enterprises

MANUFACTURING BUSINESSES
1. Food and kindred products
2. Tobacco manufacturers
3. Textile mill products
4. Apparel and other finished products
5. Wood products (except furniture)
6. Furniture and fixtures
7. Paper and allied products
8. Printing, publishing and allied industries
9. Chemicals and allied products
10. Petroleum refining and related industries
11. Rubber and miscellaneous plastic products
12. Leather and leather products
13. Stone, clay, glass and concrete products
14. Primary metal industries
15. Fabricated metal products (except machinery and transportation equipment)
16. Machinery (except electrical)
17. Electrical and electronic machinery, equipment and supplies
18. Transportation equipment
19. Measuring, analyzing and controlling instruments (photographic, medical and optical
goods; watches and clocks)
20. Miscellaneous manufacturing

WHOLESALE TRADE
1. Wholesale trade (durable goods)
2. Wholesale trade (non-durable goods)

RETAIL TRADE
1. Building materials, hardware, garden supplies dealers
2. General merchandise stores
3. Food stores
4. Automotive dealers and petrol service stations
5. Apparel and accessory stores
6. Furniture, home furnishing and equipment stores
7. Eating and drinking establishments
8. Miscellaneous retail

SERVICES
1. Hotels, boarding houses, camps and other lodging places
2. Motor vehicle repairs, services and garages
3. Personal services
4. Amusements and recreation services (except motion pictures)
5. Business services
6. Miscellaneous repair services
7. Motion pictures
8. Health services
9. Legal services
10. Educational services
11. Social services
12. Membership organizations
13. Museums, art galleries and botanical and zoological gardens
14. Miscellaneous services
15. Banking and foreign exchange services
16. Brokerage services
17. Cosmetics and beauty care services
18. Computer/office services
19. Information technology services
20. Security services
21. Postal (mail/courier) services
22. Writing
23. Repairing items
24. Mailing/delivery services
25. Events organization
26. Odd jobs
27. Coaching services (e.g. exams, music)
 MODULE 1: Topic 4

! TRANSPARENCY 6

Enterprise Survival Strategies

• Aiming at specialized market segments

• Localizing business
• Providing personal touch
! TRANSPARENCY 7

Local Nature of Small Businesses

!
 MODULE 1: Topic 4

! TRANSPARENCY 8

Areas Where Small Businesses Do Well

• Filling a demand limited to a region or locality.

• Manufacturing calling for short runs or special
lots.
• Providing technical repair services.
• Providing personal services.
• Situations where markets change fast.