KABALE UNIVERSITY E-LEARNING NOTES

ENTREPRENUERSHIP SKILLS
CODE: DEE
Importance of Entrepreneurship to individuals

(1) It makes people start their own business

(2) It brings about net working among the individuals
(3) It high lights about the outside world.

ENTREPRENUERSHIP TO COMMUNITY

(1) They bring goods and services near to the people

(2) They provide market for the community’s products.
(3) Create jobs for the members of the country
(4) Contribute to the country’s economic development in terms of infrastructure
development
(5) Provide solutions to the problems of the country
(6) Bring about new ideas and innovations to the country.

To the Government

(1) They contribute a lot to government revenue in form of taxes

(2) They help to reduce on unemployment rate in the country
(3) They help to maintain constant flow of goods and services which helps to check
on inflation
(4) They help in the development of infrastructure like roads, bridges, schools e.t.c
(5) They help to increase on the export potential of the country.
(6) They increase domestic investments through competition and inflow of foreign
capital.

BARRIERS TO ENTERPRENUER:

(a) INDIVIDUAL (INTERNAL)

(1) Poor entrepreneurship skills. Most entrepreprenuers lack creativity, they are not
flexible, they are not innovative and they do not endure the business risks.

(2) Lack of role models. These are very few in Uganda and upcoming entrepreneurs
do not copy from such people. This limits the number of people who will be willing to
aspire for the career of entrepreneurship.
(3) Lack of business ethics. Most entrepreneurs have unethical behavior e.g. they do
not pay loans, they do not pay salaries, they provide sub-standard goods and
services, they are corrupt they engage in smuggling, cheating e.t.c

(4) Low mobility and exposure. Mobility and exposure can shape entrepreneurs by
being creative and innovative. In this case people do not travel widely. Read widely
and don’t explore other areas.

(5) Lack of business and technical skills. Most entrepreneurs lack these skills and
yet most business require specialized skills to set up operate and manage.

(6) Most entrepreneurs lack motivation. This is due to lack of role models and limited
exposure and most entrepreneurs tend to be satisfied with their small business.

(7) Career dependence. Most Ugandans especially the educated depend on their
careers for survival. They regard entrepreneurship as a test resort for the educated
and it is normally regarded as an activity for failures in education.

(b) EXTERNAL FACTORS

(1) Political instability. Some areas in the country are politically unstable and this has
reduced the number of entrepreneurs in the country e.g. some have lost lives,
savings and business assets while others have been forced to close down.
(2) Business administrative procedures. The business environment is dominated by
complex regulations, favoritism, weak enforcement and businesses are forced into
the informal economy.
(3) Excessive taxation. The tax system is complicated, confusing and DS rapidly and
this affects the business carried out by entrepreneurs.
(4) Lack of access to finance. Banking institutions and other financial institutions give
little credit facilities to the entrepreneurs.
(5) Low purchasing power. Regarding low purchasing power, most people in Uganda
are low income earners and this limits their purchasing power.
(6) Poor infrastructure. Some parts in Uganda are characterized by bad roods,
shortage of electricity, water, shortage and lack of schools and hospitals.
(7) Economic instability. In this case Uganda depends on donor assistance, is inflated
plus economic problems.
(8) Lack of adequate social support groups. This is basically to support
entrepreneurs and innovators who come out to challenge the status quo”.
(9) Stigma attached to failures. In this case, people look down upon failed attempts
and failure is regarded as social sin and that is why may people do not join
entrepreneurship.
(10) Social cultural setbacks. Traditional ways and norms are rigid and do not allow
change and this discourages people from carrying out new activities.

(C) EMPLOYMENT FIRMS

(1) Too much bureaucracy i.e. unnecessary steps taken to set up an entrepreneurship
firm.
(2) Poor communication within the organization.
(3) Rigid culture within the organization
(4) Strong and rigid punishments for those who make mistakes.
(5) Lack of reward for entrepreneurship effort.

Solutions to the barriers of entrepreneurship

To achieve successful entrepreneurship development, three elements must be

considered i.e individual, Environment and Firm.

(A). INDIVIDUAL

The MAIR model suggests four factors that have to be considered. These include;

(a) M => MOTIVATION which refers to forces that influence an individual to take up an
entrepreneurship as a career. These may be pull and push factors.

(b) A =>ABILITY, for any enterprise to survive, it requires constant supply of relevant
skills from both the owners and the employees. Some skills are natural. The
majority of the people acquire entrepreneurship through training, observation,
experience and experimentation. Individuals need entrepreneurship skills, business
skills as well as technical skills, relevant to the industry to start and expand
business.

(c) I => Ideas. This is the starting point for any entrepreneurship venture, However, not
all ideas will be viable or marketable. The ideas of interest to entrepreneurship
development are the ones that are both viable and marketable.

(d) R – Resources. Any enterprise will require resources to survive. While some
resources are naturally endowed to an individual, a firm /nation, the majority of the
resources must be sourced and the entrepreneurs will need to have the ability to
acquire resources.

(B) ENVIRONMENT.
Entrepreneurship will be successful only where there is a conducive environment for it
to succeed. The following environmental factors are critical to the growth of
entrepreneurship.

Economic climate. In general an environment i.e. idea for business growth is

conducive to entrepreneurship. Four areas are normally considered.

(i) Government economic policy i.e. monetary, Fiscal, regulatory.

(ii) Infrastructure should be well developed and maintained to ease
communication.
(iii) The financial systems including banks and other financial institutions must
exist and operate efficiently to aid business transaction.
(iv) Legal frame work. The laws and regulations should not stop the development
of entrepreneurship. They should be clear.

 External Reward for Entrepreneurship. In this case how the society recognizes
and rewards the entrepreneurship is important for entrepreneurship development.
Entrepreneurs should be the first beneficiaries of their innovations.
 Training facilities and learning opportunities must be established for example
development programmes should be established in society.
 External leadership. Business leaders, political and capital leaders can play a big
role in entrepreneurship development. Business leaders can encourage an
environment that allows generation and growth of new ideas. Also political leaders
can set up policies that support the development of entrepreneurship.

(C) THE FIRM

Internal and external interrelationships have strong influence on entrepreneurship.

These factors include:-

(i) Organizational culture. This refers to the acceptable norms and behavior
within the organization. If this culture supports new idea generation and
implementation, then entrepreneurship development will be high. This requires
flexibility in operations and openness to change. It should also tolerate failures
as being natural.

(ii) Organizational structure. This should allow reporting relationships and

interdepartmental communication. This should allow the flow of ideas even
from the lower level technical staff, the organization needs to open up the
channels of communications.
 (iii) Leadership. A strong leadership is required to direct, change, leadership
should actively participate and support constructive change.

(iv) Reward structure. Organizations should always be able to recognize

innovation and reward it appropriately. Reward can be in form of recognition
material, promotion e.t.c.

ENTREPRENUERSHIP PROCESS:

The entrepreneurship process involves all the functions, activities and actions
associated with perceiving opportunities. An entrepreneur must find, evaluate and
develop an opportunity by overcoming the forces that resist the creation of something
new.

The five phases/stages/process include;

(1) Identification of opportunity (idea generation)

(2) Evaluation of the opportunity
(3) Development of the business plan
(4) Determination of the required resources
(5) Management of resulting enterprise.

Although these phases proceed progressively, no stage is handled in isolation, one

stage is completed before the work of other phases occurs.

(1) Identify the opportunity.

A person gets an idea for a new business either through search or chance, everybody
has ideas and it takes time, knowledge, money and effort to refine the idea into a
makeable invention.
Inventors are individuals who come up with a new product process.
An idea can be obtained through the sources of innovation which include the process
need industry and market structure, demography e.t.c.

(2) Evaluation of opportunity.

Whether the opportunity is identified by using input from customers, business

associates or technical people, each opportunity must be carefully screened and
evaluated. This is the most critical element of entrepreneurship process because it
allows the entrepreneur to assess whether the specific product or service has the
returns needed compared to the resources required.
(3) Developing a business plan.

A good business plan must be developed in order to exploit the identified opportunity. A
good business plan is essential to develop the opportunity and determining the
resources required and obtaining those resources and successfully managing the
enterprise.

(4) Determine the required resources.

The resources needed for addressing the opportunity must also be determined. This
process starts with the appraisal of the entrepreneurship present resources. He should
also identify the critical resources required. The entrepreneur should not also under
estimate the amount and variety of resources needed. These must be acquired in the
right time.

Sources of finance and supplied resources must be identified.

(5) Managing the enterprise.

After the resources have been acquired, the entrepreneur must use them to implement
the business plan. Any problem of the enterprise must be examined.

The entrepreneur must consider the management style and structure as well as
determined the very valuables for the success of the enterprise. A control system must
be established, so that any problem areas can be quickly identified and resolved.

THEORIES OF ENTREPRENUERSHIP:

(a) Sociological theory. This theory explains entrepreneurship as a process whereby

the individual society is very important in grooming entrepreneurs. Societies can
influence and individual to be creative and innovative in a particular field of activity.
These factors which affect the entrepreneur in society include;

(i) Child family Environment.

The family environment of an entrepreneur includes; the birth order, the parents’
occupation and social status and relationship. It has been found out that being the first
born or only child makes such children to receive special attention and therefore they
do not venture in entrepreneurship.

In terms of occupation, entrepreneurs tend to be self employed. Also the family net
work influences the ability to mobilize the resources necessary for the business. Most
successful businessmen belong to groups with internal relationship and trust.
(ii) Family background

This has a great influence on growth and development of entrepreneurship. In this

case the nature of activities that a particular family undertakes determines the type of
entrepreneurship in that society.

(iii) Religion.

This plays a major role towards entrepreneur because it emphasizes business ethics.

(iv) Environment

The personal background of the entrepreneur is determined mainly by the environment

in which they are born, brought up and work.

A number of factors determine the entrepreneur spirit among the people. The
entrepreneur must try to adopt or change the environment to suit his needs. The most
important essential tool for entrepreneur growth is the presence of a favourable
business environment.

(v) Time and age.

The time and age of entry into entrepreneurship are important factors for most
entrepreneurs. In terms of age, most entrepreneurs initiate their entrepreneurship
careers between the ages of 22 and 55. Although a career can be initiated before or
after these years, it is not as likely because an entrepreneur requires experience,
financial support and high level age in order to successfully manage a new business
enterprise. It is important to note that a person can join entrepreneurship at any age
provided he has the ability and interest of becoming an entrepreneur.

(vi) Culture.

This consists of the values, the norms and beliefs. HOFSTEDE (1991) identified four
dimensions of culture which include;

(a) Power distance. This refers to the inequality that exists in societies. It is believed
that inequality is expected as a natural order. But this has to be minimized by
emphasizing equal rights for all members of society even if it is not perfectly
achieved.
(b) Uncertainty Avoidance. This refers to the level of anxiety experienced by
members of the culture due to ambiguous (unusual) situations. This may vary as a
function of the society values and beliefs. In this case societies attempt to manage
uncertainty through the rules, technologies, laws, rituals in order to protect
members from anxiety. These help to standardize the behaviours of society
members.
(c) Individualism. This is a measure that indicates the degree to which individual
identity and self concept are linked to collective groups of the society. In such
societies personal values and goals are the prime determinants of the behavior.
(d) Masculine. This specifies the difference between the male and female and it also
refers to the styles of behaviours that have been applied to males and females. In
the male societies, individuals tend to set high performance standards and will act
forcefully to achieve those standards.

(vii) Migration

Some entrepreneurs came from other countries and they faced a number of problems
like limited knowledge of the language, discrimination, others were translated and the
only alternative for survival was self employment.

(viii) Occupational background. This has the advances of experience gained by a

person who works in other people’s firms or his own firm. This may be in terms of
managerial, financial, marketing e.t.c.

(ix) Gender. In some areas, women were considered to be of lower, class, they were
denied access to education, acquisition of skills other than those that would confine
them to child care and motherhood. They were economically marginalized and they
could not venture into entrepreneurship.

(x) Handicapped. This was a group of disadvantaged people in society. This was
because of poor working conditions. They were psychologically and physically
impaired and as a result they never achieved the status of entrepreneurs.

(xi) Education. The early entrepreneurship theorists advocated that

entrepreneurship cannot be taught in schools. They believed that entrepreneurs are
born, but currently entrepreneurship has been recognized as a discipline that can
be used to help an entrepreneur to acquire important traits that he may not posses.

Formal education helps an entrepreneur to develop entrepreneurship skills.

However each of higher education is not a limiting factor. But the level of education
that the society possesses may contribute much to the type of entrepreneurship in
their society.
Psychological theory. This is a way an entrepreneur thinks, perceives (loves)
himself and his environment and how this influences behavior.
Psychological theory considers two approaches;.
 (i) Traits approach. This suggests that individuals with certain characteristics
always become entrepreneurs e.g. Risk taker, decision maker, being
creative and innovative.
(ii) Cognitive Approach. This is closely related to the way people think and
process information. This caters for ones thinking capacity. Several
psychological theories have been analyzed and these theories bring out
personal characteristics that are closely to those of entrepreneurship and
they include:-

 The needs and achievement theory. This was developed by MC Rolland

who emphasized the need for achievement, the need for affliction and need
for power. He concluded that entrepreneurs have a strong need for
achievement.
 DOUGLAS MC GREGOR’S THEORY X AND Y. theory X said that man
generally hates work and therefore must be forced to do the work. We also
learn that people who fall under theory Y have strong self drive and can work
comfortably alone without supervision. This is a common characteristic of
entrepreneurs.
 MASLOW’S HIERACHY OF NEEDS: He said that there is that level where
the individual looks for self esteem or self actualization. This is the point
where entrepreneur needs recognition.
 HYGIENE THEORY. This indicates that motivating factors of an individual
involve achievement, recognition and advancement.

LOCUS OF CONTROL:

This refers to the strong drive inside individual that makes him to carryout certain
activities which include;

(a) Achievement motivation. People who have high levels of achievement,

motivation tend to set challenging goals and will always try to achieve these
goals.
(b) Affiliation needs. This refers to the desire to be close to other people.
Entrepreneurs are also driven by the need to stay in harmony with their
environment.
(c) Tolerance Ambiguity. This refers to the tendency to perceive ambiguous
situations in a more Neutral way.

ECONOMIC THEORY:
This theory looks at the entrepreneur as an innovator who is capable of identifying
opportunities and exploits them. He adds value in the form of time, money, and skills
and he accepts the risks in business.

SCHUMPTER. According to Schumpter, he defines an entrepreneur as a person who

destroys the existing economic order by introducing new products and services.

He talked about creative destruction. According to him, the development of

entrepreneurship is regarded as a factor of production. He looks at the entrepreneurship
as a source of disequilibrium in the economy. This is because of constant innovations
that take place. He argued that innovation leads to disequilibrium and alteration of the
existing market structure. This brings about a punctuated pattern of economic
development.

Schumpeter also said that with the emergency of large co-operations, the role of the
entrepreneur will become less important or absolute. This is because of creating a
department of research and development.

ISRAEL KIRNER 1973.

He defined an entrepreneur as a person who exploits information imperfection in order

to bring equilibrium in the market.

According to him he looks at close inspection of the individual. He discovers that

individuals spontaneously come up with the needs of satisfying their needs.
Spontaneous learning according to him is not planned learning. He also calls for the
state of mind that enables spontaneous learning to occur alertness. This state of mind
cannot be produced or improved upon. It is part of human nature in this case individuals
differ in their alertness.

CASSON’S THEORY OF ENTREPRENUER

He defined an entrepreneur as a person who specializes in taking judgmental decisions

about the coordination of scarce resources. The entrepreneur’s personal cooperative
advice in processing information which requires considerable judgments. This is
because the information collected is sometimes conflicting and at times incomplete.

He considered four aspects namely;

(1) INNOVATION. As the economy undergoes some economic DS, new and better
methods of dealing with such DS are initiated by the entrepreneur. Such information
or DS are important for the entrepreneur to make considerable judgment.
(2) UNCERTAINITY. Successful entrepreneur must be optimistic and should learn how
to do business and learn to live with shillings. He must also create networks of social
contacts that give them information they require for making judgment decisions.

(3) ENREPRENUERSHIP BUSINESS. As demands occur in the economy, the

entrepreneur must father as much information as possible. This is because of the
competition in the markets which requires continuous improvement.

(4) EQUILIBRIUM. If an economy is un equilibrium then it means that there is no need

for entrepreneurship. This is because the opportunities exploited are not available.

THE DARKSIDE OF ENTREPRENUERSHIP

Much as we talk about successful entrepreneurs in terms of their rewards and

achievements, there is also the dark side.

It is believed that an entrepreneur can be successful at the beginning but as the firm
expands, his time and energy becomes more and more scarce. According to Derek
(1980), he said that an entrepreneur who starts his own business does so because he is
a difficult employee. Some of the negative qualities include.

(1) Overbearing need for control.

A person who wishes to run his own business needs to be in control. Entrepreneurs are
driven by a strong desire to control both their ventures and destiny. This becomes a
problem when the organization expands.

(2) Sense of distruct.

A number of entrepreneurs have a strong distruct for the environment around them.
They are always scaring the environment to see whether there is any problem affecting
their business such environment interpret harmless acts as threats to the control.

(3) Desire for recognition. Most entrepreneurs desire to be recognized and will always
want to be seen and heard. They want to show people that they exist but cannot be
ignored by the society. Most entrepreneurs start small and grow big.
(4) Unrealistic optimism. For an entrepreneur optimism is a key factor that drives him
to success. However, when taken to its extreme, it can lead to the collapse of the
business. In this case the entrepreneur may ignore friends, the facts and reports and
keep thinking that everything will be ok.
(5) Stress. Research studies on the entrepreneur show that those who achieve their
goals pay high price. the majority of entrepreneurs suffer ulcers, persistent
Headaches, backache problems e.t.c.
In general, stress can be viewed as a function of gaps in one’s expectations and
one’s ability to meet the demands. If the entrepreneur is unable to fulfill his role
demands, their stress occurs. This is because expectations exceed the ability to
perform.

Stress can be considered under the following;-

(a) Loneliness. This is where entrepreneurs don’t interact with friends and family
members.
(b) Some entrepreneurs are too much occupied in their business and they ignore
leisure activities including holidays.
(c) Most successful entrepreneurs tend to be perfections and will always want things
to be done according to their ways. Also stress from work makes them impatient,
moody and at times rude to their customers.
At times they are not concerned with the problems affecting their employees.
(d) Need to achieve. Achievement is expected to bring some satisfaction; however,
many entrepreneurs are never satisfied with their work no matter how well it is
done.

RISK

This refers to the uncertainties in business and it includes the following;-

 Financial risk. Most entrepreneurs put a significant portion of their money to start
business. This also includes their savings. If the business failed, the entrepreneur
loses his money. He is exposed to personnel bankruptcy and that is why many
people are unwillingly to take this risk.
 Career risk. This is usually a major concern to people who have secured jobs with
high salaries who benefit from packages and prospects for advancement leaving
such jobs to go for entrepreneurship is not very easy for many people.
 Family and solid Risk. Starting new business takes up a lot of time and energy of
the entrepreneur. Consequently other commitments may suffer especially when the
entrepreneur is busy in his own activities.

Implications on CHRIS………..

 Human behaviours in an organization change from time to time and from individual
to individual and according to situations. Management should carefully study all
these situations and adjust accordingly.
 The workers’ minimum efforts at the work place are a reflection of how they are
handled by the management in terms of policies, predices and leadership styles. As
managers should their styles of management in order to suit with workers demands.
Induction and orientation programmes should be conducted by all management of
organizations, especially on the new recruits to acqn them with the culture and
history as well as performance of the organization. Management skills should
tolerate all the errors and other unnecessary questions from the new recruits as
they are able to learn from their mistakes. Management should advise, instruct and
guide them where they go wrong.
 Employees in an organization have self control and self direction so long as they
are committed to achieving organizational objectives. This depends entirely on how
they are treated by the management. Management should also know that
employees’ values and attitudes and expectations are already shaped and
reshaped by their agents in life by the time they join the organization, they directly
know what they want.
 Management should use effective communication including orienting the new
recruits and influencing policies and implementing rules and regulations in the
organizations. This mode of communication determines the degree of relationship
and coordination between management and workers.
 Employees in organizations have a tendency of complaining their developments in
a course of time, blend on they were before, how they are, how and predict how
they will be in future this enables them to decide either to remain working for the
institution or to look for greener pastures where they can enjoy better standards of
living.

PSYCHOLOGICAL RISK

Some entrepreneurs who have suffered financial problems have been unable to start
the business again. This effect makes some of them to remain in a depression.

TYPES OF ENTREPRENUERS:

(1) Innovating entrepreneurs. These are entrepreneurs who come up with something
new or something different. They introduce new techniques in production, new
products and services and new markets.

Advantages

- Such entrepreneurs bring new products

- They create new business organizations
- They provide employment
- They also bring about quality goods and services
 Disadvantages

- They destroy existing ideas

- They are costly/expensive to carryout
- They also change the skills needed in operations.

(2) Adoptive entrepreneurs. These are entrepreneurs who are already to copy what
has been done by successful innovative. In this case, they copy the technology
techniques innovated by other entrepreneurs.

Advantages
- They are able to transform the economy with the limited resources available
- They use cheaper techniques in production
- They occur at low costs of production.
- They require limited skills.

Disadvantages

- They produce low quality goods

- There is always high competition
- There is little or no growth

(3) Fabian Entrepreneurs. These are entrepreneurs who are continuous and skeptical
while practicing any change. They have neither the will nor the desire to introduce
new demands or new methods in production such entrepreneurs are shy and lazy.
Their dealings are determined by the custom, religion and tradition. They are not
interested in taking the risks. They try to follow the footsteps of their predecessors.

(4) Drone entrepreneurs. These are entrepreneurs who are characterized by refusal to
adopt and use opportunities to make demands in production such entrepreneurs
may even suffer losses but they do not make demands in production methods.
They are also referred to as (laggards) since they continue to operate in their
traditional way and resist demands.

Advantages
- They are comfortable
- They are very analytical
- They believe that they have a wiring formular.

On the other hand they have a high level of classical, they are conservative, they
fear risks.
(5) Individual entrepreneurs. These are entrepreneurs in small sector business such
entrepreneurs have the advantage of flexibility, quick decision making e.t.c but such
entrepreneurs can establish, operate and control an organization up to a certain
level. Individuals need to exist and support one another.

(6) Entrepreneurs by inheritance. At times people become entrepreneurs when they

inherit the family business. In this case businesses are possessed on from one
generation to another.

(7) Technological entrepreneurs. These are entrepreneurs who come up because of

scientific and technical skills. In this case technically qualified persons have entered
the field of the business.

(8) Craftsman entrepreneurs. These are entrepreneurs who own businesses. They
operate them and restrict themselves to the areas of individuals skills and
experience.

Advantages
- They use their personal relationship in business
- They also identify themselves with the tasks that they were involved in.

Disadvantages

- Limited skills
- They have limited operations and narrow education background.

(9) Opportunistic entrepreneurs. These are entrepreneurs who exploit many

opportunities to start their business. They try to engage in a number of many income
generating activities.

Advantages
- They are able to spread the risk
- They also tap opportunities from different sectors of the economy.
- They are growth oriented.
- They tend to view large organizations on the other hand, they lack concentration
on single opportunity, they need a lot of money to carry out such activities.
- They also require high level of education

(10) Network entrepreneurs. Such entrepreneurs use their relationship with other
people to start and expand their business.
 Advantages
- They benefit from the ideas and resources of their Networks. On the other hand,
networks can be very expensive to maintain.

(11) Visionary entrepreneurs. They have a big vision of what they want their firms to
be and they always work hard to achieve their vision.

Advantages
- Such entrepreneurs concentrate on the single opportunity and they always make
sure such an opportunity is achieved. On the other hand;
- They incur high costs of risks because of concentrating on the activity, misplaced
vision could be costly.

(12) Co-preneurs entrepreneurs. This refers to couple, the husband and wife who
come together, mobilize resources together in order to start and expand their
business.
(13) Push and pull entrepreneurs. These are entrepreneurs
Push
(ii) Who come in business circumstances or unfavorable conditions i.e. they are
forced to become entrepreneurs because of the following;
- Dissatisfaction of current job harassment.
- Being unemployed, nature of education system
- Low pay

(ii) Pull entrepreneurs. Are the ones who are attached in business because of the
following;

- Role model in society

- Provide employment to the family members.
- Prestige
- Government policy
- Being independent
(14) Corporate cast OFFS Entrepreneurs. This refers to the people who have been
retrenched or retired in organization such people set up organizations of their own.

INNOVATION AND CREATIVITY:

INNOVATION. This refers to the generation of ideas that results in improved efficiency
and effectiveness of a system or it can be defined as the process of creating something
different. It is also defined as the awakening of thought or re-arranging the old order ot
learning.
CREATIVITY.

Creativity is a process influenced by many external factors such as bus, environment,

the social forces and individual attributes.

Graham (1926) identified four stages of creating process which include;

(1) Preparation
(2) Incubation Preparation
(3) Insight
(4) Evaluation Incubation Evaluation
Insight
1. PREPARATION. This refers to the base of experience and knowledge such
preparation typically cautions effort which depends on one interest about a given
activity.

2. INCUBATION. This refers to that part of opportunity recognition process in which the
individual is contemplating about an idea or specific problem. This is where a person
is thinking about a problem and trying to see how to solve it.

3. INSIGHT. This is where the entrepreneur releases the benefits of the project.

SOURCES OF BUSINESS IDEAS:

- Through the process like newspapers, magazines

- Through having discussions or interviews
- Technical skills and experience possessed by an individual
- Through observation with development and changes taking place in and around
community
- Personal contact with people.

TYPES OF INNOVATION:

1. Introduction of a completely new product / service

2. Improvement on the quality of an existing good /service
3. Introduction of a new way of delivering a product /service
4. A new source of raw materials
5. A new organizational structure of the company
6. Looking for new markets for the goods and services
7. A new way of informing customers about a new product or service.
INNOVATION IN BUSINESS ENTERPRISES

(1) Get new ideas from all possible sources. Customer s on the markets can be
an excellent source of ideas for innovation e.g. in banking industry and many
serving organizations. They send questionnaires to their clients to find out about
their view of the services they provide. This can be in form of suggestion box.
(2) Constantly engaged with the customers. Working and interacting with
customers’ understanding and interpreting their needs and living with them, it will
help the organization to be innovative.
(3) Use vigorous screening exercise or process of the idea. A good idea is not
necessarily a viable opportunity. Before spending time and resources in
developing a product or service, carefully evaluate the idea and see if it is a
viable opportunity. The entrepreneur should have the competence to carry it out .
(4) Continuous seeking of information. The innovation process requires
information about markets and their sizes, the customer profile, the distribution
channels, the size and strengths of the competitors.
(5) Minimize and manage risks. The degree of risk considers how the actual
outcome will deviate from the expected outcome. Acquiring all the relevant
information the feasible, minimizes the risk.
(6) Gather the skilled people to build a competent team. Successful innovation
requires teams of skilled and educated people. Entrepreneurs need to recruit the
best people for their team. There is also need for strong consideration on how to
reward the team members.
(7) Customers are most sophiscated and always expect more. In this case
customers today are more demanding and are always looking for products that
are better designed to meet their individual needs.

SOURCES OF INNOVATION:

1. Unexpected occurrence
(a) Unexpected success. This is a system of fundamental change in behavior
where an entrepreneur expects a great number of customers which requires
recognition, understanding and support. This force the organization to wonder
how they have succeeded and it acts as a source of innovation.
(b) Unexpected failure. Many failures arise out of mistakes, negligence, greed,
stupidity, band wagon e.t.c
(c) Unexpected outside event. This refers to the events that come from outside
the country or organization and will significantly affect the operation of the
organization.
2. Incongnuity. This refers to the discrepancy or disagreement between what is and
what ought to be or what everybody assumes it to be. It is a symptom of an
opportunity to innovate. This can be considered under the following;
 Economically, if the demand of a product or service from a particular
organization is growing steadily, its economic performance should improve
and the suitability level should be high. But the lack of stability and good
results in such an industry brings about discrepancy between economic
realities.
 Situations may occur in an industry where people misconceive reality
combine their efforts on the area where the results do exist.
 Producers and suppliers at times misconceive what customers actually buy.
They assume that what represents value to the producer should be the same
to the customer
 Discrepancy can also occur where the process or the product upsets the
customer. There is need for the producer to remove the discomfort that
affects the customer.
3. Process need. This is an innovation that perfects an already existing process,
redesigning the old existing process around the available new knowledge e.g.
process need innovation in the mobile phones service which have tried to perfect the
communication system in Uganda. That is why the companies like MTN, UTL,
MANGO saw this as an opportunity to introduce the mobile phones in Uganda.
4. Industry and market structure. This is a form of innovation that occur from the
changes in the market structures in the economy. An example of innovation from the
demands in the industry and the market structures is the automobile industry.
Another example is introduction of the East African news paper which tries to cover
and report news in east Africa.
Another example is the Bus companies that have exploted the opportunity to
transport goods and services within East Africa.
5. Demographic factors. These are innovative opportunities that occur with in the
organization and industry as a result of demands on population. This includes the
size, the age structure, and composition e.t.c.
In many developing countries especially in education sector, because of the
increasing population, it has led to the increase in the number of institutions, schools
in the country.
6. Demands in perception. Perception refers to the attitudes towards a situation or
the way organizations and individuals look at a situation.
Demand in perception does not demand the facts but demands the meaning and
hence different consequences.
7. New knowledge. According to Brucher knowledge based innovation is the super
star of entrepreneurship. This is because it gets publicity and shows what people
talk about when they are analyzing the sources of innovation.
PRINCIPLES OF INNOVATION:

These include the “Dos” (things that have to be done) it also includes the Don’ts” (things
that should not be done and the conditions.

A. DOS
(1) Systematic innovation begins with the analysis of the opportunities i.e it begins with
thinking about the sources of innovative opportunities.
(2) The most important issue about innovation is therefore to go out, to ask and listen to
successful innovators, entrepreneurs / innovators use both the right side and left
side of their brain.
(3) An innovation to be effective has to be focused on a specific need that satisfies the
customers.
(4) Effective innovation starts small which requires little money, few people and only a
small and limited market.
(5) Successful innovation aims at leadership i.e. it should start small and end up as a
big business or high level of achievement.

B. DON’TS
1. Innovators should not try to be clever i.e innovators have to be handled in a
simple way if they are to attain any size or importance. Anything too clever
whether in design or execution is bound to fail.
2. Don’t diversify, do not try to do many things at ago. This is because innovations
that “stray” from the core are likely to fail. They remain ideas and do not become
innovations. This is because innovation needs the concentrated energy of a
unified effort.
3. Do not innovate for the future, innovate for the present. This is because an
innovation may have long range impact.

C. CONDITIONS
(1) Innovations work and it requires knowledge. Also some people are more talented
than others.
 (2) Innovators must build on their own strength. This is because successful
innovators look at opportunities over a wide range but they ask themselves which
of these opportunities fits their company and which ones are good for effective
performance.
(3) Innovation has an effect on the economy. This is because innovation always has
to be close to the market and focused on the market and indeed bring about the
change in the behavior of customers.

LINKAGE BETWEEN CREATIVITY, INNOVATION AND ENTREPRENUER

While the concepts of creativity, innovation and entrepreneurship are highly related and
overlaps, they are not identical. The capacity to make things happen or to implement is
not the same as creativity. Entrepreneurship therefore involves implementation and this
is due to innovation.

The diagram below shows the relationship between creativity, innovation and
entrepreneurship.

C I

E
As indicated in the diagram above, innovation is preceded by the generation of ideas
(creativity) innovation is the application of a creative new idea. This means that
creativity ends at the generation of new ideas while innovation ensures the
implementation of the generated ideas. If the creative idea is not implemented then the
creative person is not necessary. That is why in the diagram above the arrow from
creativity to innovation is doted (- - - - ).
At times a creative idea may fail to work even after passing the feasibility and viability
tests. This shows why the line from innovation to creativity is doted (< - - )
It is important to note that creativity can only lead to entrepreneurship through the
innovation process the arrows indicate.

INTRAPRENUERSHIP:
This refers to entrepreneurs that have been established with in large organizations.
They attempt to create a desired future in practice and they typically come up to
challenge the status Quo.
Intraprenuers need to be courageous, flexible, creative, moderate risk takers e.t.c.

TYPES OF INTRAPRENUERS:

(1) Administrative intraprenuers.

This where research and development is set up with the aim of spear heading and
encouraging greater creativity and innovation among employees in an organization.

(2) Opportunistic intraprenuers.

In this case companies open up their structures to allow individuals to persue
opportunities both internally and externally. This can be done through availing the
required resources and information exchanged both in and outside the organization.

(3) Acquisitive intraprenuers.

This involves an organization looking out for new innovations that have already been
developed, tested and perfected in other firms.

(4) Imitative intraprenuers.

This involves organizations copying and taking advantage of other firms’ innovations
using their superior resources to control the market for the new product or service.

(5) Incubative intraprenuers.

This involves creating new teams which are semi-autonomous new ventures,
development units and these units should be provided with seed capital and allowing
their independent actions to develop ideas.

IMPORTANCE OF INTRAPRENUERSHIP:

1. Many large organizations now realize the importance of intraprenuership

because of competitive advantage. This is because they generate and implement
new and stable ideas.
2. They tend to establish big or large business because of the team spirit among
the employees.
3. The increase the speed and cost effectiveness of technology transfer from
research and development to the market.
4. They create new products and new processes in the market or organization.
 5. They protect organizations against entrepreneurial flight. This is where best
entrepreneurial employees leave the established organizations to start their own
business.
6. They help to increase on the employment opportunities.
7. They are also a source of revenue to the government.

BARRIERS OF INTRAPRENUERSHIP:

(1) The cost of failure being too high and the reward of success being low. In this
case intraprenuers need to be given time or space in which to fail since failure is
unavoidable.
(2) Inertia. This is caused by established systems that no one is willing to change,
most organizations are governed by implicit and explicit systems that in most
cases people are redundant to demand. Many organizations use their existing
system to prove that they have the right answer.
(3) Hierarchy. Most organizations have big or large organizational hierarchies that
make it difficult to ask and get permission for anything new. They also tend to
create narrow career path and narrow minded thinking among the employees.
(4) No ideas are obtained from lower employees at times; they regarded them as
new or are far below the administrative hierarchy.
(5) Employers tend to treat problem identification as a sign of failure.
(6) There is a problem of careful control of all things through checks and balances.
(7) There are always secret decisions made to re-organize or change the policies.

FACTORS THAT ENCOURAGE INTRAPRENEURSHIP IN ORGANISATION:

1. Encouraging intrapreneurship culture in organizations. This can be done in the

following ways;
 Openly encouraging and supporting new ideas
 Conducting meetings with in organizations
 Allowing time for employees to think
 Encouraging leadership by examples
 Appropriate rewarding of effort, creativity and innovation.

2. Encourage employee development through training programmes.

3. Provide clear measurements for entrepreneurship effort as a means of rewarding
such effort.
4. Create a support structure in terms of availability of resources and accessibility to
encourage and support new things and innovation.
5. Emphasize team work which should be treated as II centres, rather than cost
centres.
6. Accepting individual and group listeners as a necessary part of experimentation and
innovation.
7. Create a culture of free creative thinking and problem solving.
8. Organizations should have a clear mission and objectives. This guides the individual
with the organizations especially when they want something new.
9. There should be a system of fifteen exchange between managers and intrapreneurs
10. Organization should emphasize individual responsibility and accountability.
11. Provide some degree of ownership rights in the organization.
12. Encourage company order involvement insisting on truth and honesty and also
emphasizing the feedback.
13. Encourage small flat organizational structure.

ENVIRONMENTAL ANALYSIS:

Many different courses inside and out of an organization influence the managers’
performance. Therefore the management functions of planning, organizing, controlling,
staffing e.t.c must be accomplished under constantly increasing conditions.

The manager must deal with two environments i.e. the internal environment which
usually can be controlled and the external environment which is unpredictable and
uncontrollable.

THE ORGANISAITONS.

Organizations vary in purpose and technology e.g. schools, hospitals, banks e.g. these
are all examples of organizations but with different goals and needs. All these
organizations have one thing in common i.e. managers. The manager is able to deal
with the internal and external environment.
An organization can be viewed as one element with a number of elements that depend
on each other.
The organization take resources and (inputs) from the bigger system which is (external
environment). These inputs are processed / transformed within the internal environment
to the outside in a demand form.
The figure below displays the fundamental elements of the organization as a system.

E.E

I.E
HUMAN Pdt
RESOURCE I/P PROCESS Srv
O/P
TRANSFER idea

Every organization interacts with the bigger system by taking resources and providing
output. A business firm has two major inputs.

(i) HUMAN INPUT. This comes from the people who work in the firm. They
contribute their time and energy to the organizations in exchange for wages and
other tangible and intangible benefits/rewards.

(ii) NON-HUMAN RESOURCES. This consists of raw materials and information.

These are transformed in collaboration with Human resources to provide other
resources e.g. a college uses resources to teach students. It is the manager who
must coordinate the activities of the entire system (organization) or many of the
sub systems. (The depth within the organization). The systems concept
emphasizes that;-

(a) The survival of the organization depends on its ability to adopt to the
demands of the environment.
(b) In meeting the demands to the total input, output cycle process must be focus
of the manager.

INTERNAL ENVIRONMENT:

This refers to the environment inside the organization in which the manager must
function or operate. It includes the discussions, the settings, where managers work the
day today activities that utilize much of their time and the skills required. It also includes
the following;-

1. Operations level. Every organization has operations functions. It is at this level

that focuses on performance. In this case there is the flow of materials and the
supervision of operations e.g. colleges must make sure that students are
properly processed, Register and taught and their records are maintained. The
 operations level is at the core of base of every organization. The manager must
allocate resources to produce the desired output.

2. Managerial level. As an organization increases in the size, someone must

coordinate the activities at the operations levels as well as deciding which
products or services to produce. The manager serves as a link between those
who produce the product or service and those who use the output.

3. Strategic level. Every organization operates in a broad, grad environment. As

part of the environment an organization is also responsible to the environment.

The strategic level must make sure that the managerial level operates within the
bounds of the society. This is because the source of authority in any organization
comes from the society and the organization must provide goods and services that
have been approved by the society.

SKILLS OF MANAGERS:

(1) Technical skills. This is the ability to use tools, procedures and techniques of
specialized field e.g Accountants, engineers, Nurses, Musicians e.t.c. in this case
managers must possess sufficient, technical skills to accomplish their jobs.
(2) Human skills. This refers to the ability to work with and understand people. To
manager people effectively, managers must participate effectively with others.
(3) Conceptual skills. This is the ability to understand all the activities and interests
of the organization. This skill involves understanding how the organization
functions as a whole and how the parts depend upon or relate to one another.

THE ROLE OF MANAGERS:

Managers perform ten different but closely related roles.

These roles can separated into three different groups.

(a) Interpersonal roles

(b) Informational roles
(c) Decisional roles
The figure below shows the ten different roles of managers.

IPR= Interpersonal roles

IPR IR
- Monitor IR= Informational roles
- Fixture head
- Leader - Disseminator DR=Decisional roles
- Liason - spokesperson

D.R

- Entrepreneur
- Disturbance
handler
- Resource

(1) Interpersonal roles.

These roles focus on interpersonal relationship. They result from formal authority.

- All managerial jobs require some duties that are symbolic or ceremonial in nature
e.g a minister giving out Diplomas at a graduation ceremony.
- The managers’ leadership role involves directing and coordinating the activities
of the subordinates. This may involve staffing (hiring, training, promoting,
increasing and motivating the subordinates. The leadership role involves
controlling and making sure that things are giving on according to the plan that
has been set by the organization.

LIAISON ROLE. The liaison role gets managers involved in interpersonal

relationships with other organizations. This involves interacting with other managers
and individuals in other organizations and they must maintain good relationship with
such people.

(2) Information roles.

This set of roles establishes the manager as the central focus for receiving and sending
out information. This aids the manager in gathering and receiving information.

- The monitor role involves examming the environment in order to gather

information about demands, opportunities and problems that may affect the unit.
- The dissemination role involves providing important information on to the
subordinates that they may not be aware of;
- In the spokes person role, the manager represents the unit to other people.
 The representation may be internal e.g. increasing the salary for members of the
organization. It may also be external when an executive speaks for the organization
on a particular issue of public interest.

(3) Decisional roles.

As an entrepreneur, the manager is always looking continuously for new ideas / new
methods to improve the performance of the organization.

- He must always look for new production areas.

- In the disturbance handler role, managers make decision in response to the
pressure that is beyond their control and the decisions must be taken quickly and
priority should be given to such urgent problems.
- The resource allocator makes the manager to be in the position of how to
allocate the scarce resources. This is because the resources are not always
enough.
- As a negotiator, the manager must begin with other units and individuals to
obtain advantages for their own units. The negotiation may be about work, the
terms and conditions, performance, objectives, resource or anything influencing
the unit or organization.

EXTERNAL ENVIRONMENT:

No organization is self sufficient whether profit or non profit, each organization provides
something outside the environment and in him depends on the environment for survival.
The external environment can be divided into two;-

1. Direct action component. Which influences the performance of the organization

directly?
2. Indirect action component. These influence the climate in which the organization
operates and under some conditions become direct action component.

DIRECT ACTION COMPONENTS:

The major direct action components of the managers external environment are the
organizations clients that must be satisfied. The competitors and the organizations and
individuals that supply resources.
The diagram below shows the direct action component of the diagram.

CLIENTS

- Customers
- Students
- Patients
- Citizens

Suppliers Competitors

- R/mtls - Intertype competition

- Funds - Intratype competition
- Energy
- People

The performance of the organization is influenced by the following factors;

(1) CLIENTS.

The organizations’ customers are critical and the managers must be constantly aware of
their present needs and emerging needs. This may involve changing the present
products /services, developing new ideas or entering new businesses.

(2) COMPETITORS.

The actions of the competitors that directly affect the manager include;

(a) Intratype. This occurs between institutions engaged in some activity.

(b) Intertype. This involves the competition between different types of organizations.

(3) SUPPLIERS.

Every organization requires inputs from the environment in the form of R/Mtls, services,
equipment, labour and funds. Organizations use these inputs to produce output. The
organization also depends on those who supply the resources.
The availability of the resources determines the organizations capacity to respond to
threat and opportunities presented to it.
Depending on the type of organization some suppliers will be more critical than others
e.g. the hospital needs funds and qualified staffs.

INDIRECT ACTION OF THE EXTERNAL:

This can affect the managers in at least two ways;-

(a) The outside environment can have a direct influence on the performance of the
organization.
(b) It can also influence the climate in which the organization functions e.g the
economy may expand or decline requiring response from management. Some of
these factors include:-
(i) Technology. Demand in technology can influence the activities of the
organization, technology may be a problem or constraint when opportunities
exist but the necessary equipment is not present. However, technological
innovation can create opportunities for new industries e.g. the effect of ATM on
banking.
(ii) Economic factors. Economic demands bring about both opportunities and
problems for managers. It has an effect on the demand for a company’s product
or service. It also facilitates the establishment of new enterprises e.g. a
slowdown in economic growth can bring failure to some organizations e.g.
demand in inflation, productivity, savings, unemployment e.t.c. managers must
constantly monitor demand in economic factors in order to minimize threats and
capitalize on opportunities.
(iii) Political and legal factors. This can come about due to the differences in
political situations in the sense that some countries are politically unstable and
this affects the neighbouring countries. Also different countries have different
rules and regulations e.g. skilling Uganda.
(iv) Social and cultural factor.
Different countries have different cultures and this makes the behavior,
traditions, customs and beliefs to be different and these influence the activities
 of the organization. Managers must identify the demanding cultural and social
conditions that will influence the organization.
(v) International factors.

These provide managers with both opportunities and threats especially for those
managers who depend on foreign resources. This could be a big problem for some
managers, there is always foreign competition in markets. It would provide
opportunities for the organization to sell their products in the new markets. Such
organizations which operate beyond the country boarders are referred to as
multinational companies. Such organizations become or subject to the nature of
different cultures, economic and political system.

SMALL SCALE INDUSTRIES:

According to BOLTON REPORT (1971), a small business is one with small market
share, administered by the owner who contributes all the capital for starting the
business.

According to the American Committee for economic development, a small business is

one with a small market share, capital is supplied by individual owners and workers are
from one community.

CHARACTERISTICS OF SMALL SCALE INDUSTRIES.

(1) Personalized. The Balton report emphasizes that it is one that is administered in a
personalized way. The control, planning, and organizing of the business operations
are conducted by the entrepreneur.

(2) Small market share. Small business majorly focus on serving a Niche in a given
community i.e. they serve a limited number of clients.

(3) Large owners’ equity. i.e. the owners of the business contribute most of the capital
because of the strong desire for Autonomy by the owners of the small business and
their own resources.

(4) Low Returns. Small businesses are faced with competition yet they serve a small
market share and the return on investment is likely to be small.

(5) Small initial capital requirement. I.e. small businesses are conducted with minimal
business operations and also require small resources to start the business.
(6) Limited number of employees. Small businesses are usually administered in a
personalized way and have small business operations and therefore they require
few people for its operations.

IMPORTANCE OF SMALL SCALE INDUSTRIES.

(1) They encourage innovation. Small businesses emerge as a result of brilliant ideas
from the entrepreneurs. With their existence entrepreneurs deliver the ability to
improve and modify on the existing ideas in order to offer services and goods to
boost economic development.
(2) Source of employment. The ability to start up business has helped to curb down
the unemployment levels of the country by allowing individuals to utilize the available
resources.
(3) They produce a productive outlet to large businesses. Small business use
materials produced by large industries in their daily operations as well as the
products from big industries.
(4) They provide a business for the emergency of big industries. This is because
as more and more small businesses dealing in similar commodities get more
organized a big industry is likely to emerge.
(5) Economic growth of the country is boosted. The ability to produce many
commodities is enhanced or contributed by the existence of small businesses which
increase on the supply levels to meet the demands of the people.
(6) They help to improve on the quality. Small businesses create a competitive
environment to large businesses and this makes them to produce high quality
products in order to get more markets.
(7) They help in the utilization of idle resources. Small country based businesses
make entrepreneurs to efficiently and effectively utilize and allocate the available
resources.
(8) Source of government revenue. The government receives money from small
businesses in form of taxes charged on products as well as trading licenses from
these industries.
(9) Small business through corporate social responsibility improve on the social
standards. Through infrastructural development in society for the benefit of the
individual.
(10) Small businesses cater for small markets. In the most effective and efficient
way and they also analyze the market needs of the consumers.
(11) Small businesses also produce role models in society i.e. some of the successful
entrepreneurs in the area where entrepreneurs can be encouraged to set up their
own businesses.
(12) They help to add on a variety of goods and services produced by other
industries.

PROBLEMS ENCOUNTERED BY SMALL SCALE INDUSTRIES:

1. Limited skills. This is caused by a single person in business operations who

might be having limited knowledge about the business.
2. Stiff competition. This is a big problem to small businesses because they are
easy to start and they attract many entrepreneurs and this makes the competition
to be stiff.
3. The existence of large businesses implies that small businesses enjoy a
limited market share which brings about low returns on investment.
4. Independence and autonomy of small business owners limits the development
of better ideas and therefore limits the expansion of the business.
5. Government regulations. Also affect the operations of small business e.g high
taxes for small businesses to operate and exist.
6. Limited finance. The absence of funds limits the ability of the entrepreneur to
allocate and utilize resources or even improve on their ideas.
7. Political instability. Where there is political instability. It is likely to affect the
development of small scale industries.

SMALL BUSINESS AND ENTREPRENUERIAL VENTURE:

An entrepreneurial venture refers to the entrepreneurship investment with a vision for

growth and strategies to ensure that the growth is attained usually characterized by
calculated risks.

The difference between a small business and entrepreneurial venture include;

(1) Entrepreneurial ventures have the potential to growth resulting from a visionary
approach towards business growth and innovative strategies while a small business
growth is limited to the size of the market it serves.
(2) Strategic objectives are set up by entrepreneurial, venture, commitment is set up for
stability. Whereas a small business focuses on earning ITS
(3) The level of risks of entrepreneurial venture is higher as compared to the small
business.
(4) Innovation is common in entrepreneurial venture in order to expand the business
where as small businesses are usually driven on rigid ideas.
SIMILARITY BETWEEN ENTERPRENUERIAL VENTURE AND SMALL BUSINESS:

(1) Both focus on the utilization of resources and returns on investment and all of
them are interested in ITS.
(2) Both of them embrace the identification of business ideas and opportunities so as
to establish and implement business operations.

BUSINESS START UP:

1. Starting from scratch. This refers to the starting of the business without any
form of agreement / plan written down. This is a situation where a person starts
business without considering even the history of the project.
2. Franchising. This refers to a small business that is set up in another area/region
but it is part of a large business organization.
3. Mergers. This is where businesses combine or come together either vertically or
Horizontally
4. Buying a failed bus. Some people or entrepreneurs can buy a bus that has
failed in order to make it active by developing new ideas for the expansion of the
business.
5. Buying an existing business. This is where an entrepreneur can acquire
business because of the good will or the benefits of such a business.
6. Starting a savings and credit cooperative society. This is where savings are
mobilized and loans availed to the members of the community.
7. Rehabilitation of the business. i.e. introducing or coming up with better ideas
for the business to start and continue operating.
8. Business extension. This is where a business is expanded to cover as many
areas as possible or a small business can be expanded into a big business.

FEASIBILITY STUDY:

This is the study which is aimed at determining whether the project or system is
practical or desirable. It aims at analyzing all the critical elements in various aspects in
the production of a given product or service.

 It should be able to answer such questions like whether or not the project
undertaken is based on pre-stated objectives.
 The most practical beneficial and desirable way to carry out the project.

The feasibility study refers to the pre-preliminary investigation of the following;-

(i) Entrepreneurship ability

(ii) Resource requirement
(iii) Resource availability
The aim of this preliminary test is to reach a decision as to whether the ideas under test
can work.

Feasibility study includes both the test of feasibility and viability. An idea is Feasible if
the entrepreneur has the ability to transform it into an enterprise or it is feasible if the
entrepreneur has the resources.

It is viable if the enterprise can achieve the free set objectives or stable in case of a
business enterprise or beneficial in case of a social or community project.

THE PROJECT CYCLE:

Complete implementation of the project involves seven stages which include the
following;

1. Project identification i.e. the development of new ideas

2. Project preparation i.e. lying down the parameters and characteristics of the
project
3. Project appraisal. This refers to a test of feasibility and viability.
4. Negotiation. This involves negotiating for resources necessary for the
development of the project.
5. Implementation. This refers to the actual operation of the project.
6. Post implementation. This is where the project is considered as profitable or not.

IMPORTANCE OF FEASIBILITY STUDY:

 Feasibility study reports help organizations to make decisions especially

regarding whether to take up the project or not
 Feasibility study reports are used in the planning process
 They are also used for soliciting for funds from the banks and other institutions.
 It is a reference document for implementation of the project i.e. when to start and
when to end.
 It helps to establish the size, the nature and how complex the business is.
 It helps to establish the project viability i.e. the stability of the project.
 It helps to identify the risks and uncertainties in reference to the project and the
measures to reduce the risks or manage the risks.
 They can be used to register the company with the relevant authorities.
 It can be used to request for tax exemptions.
 They help to close the information because of documentary evidence.
BUSINESS PLAN:

A business plan is a well prepared document which is intended to serve a particular

period of time.

- It is the study of whether the business could be feasible or possible.

- It may also be referred to as a management tool which focuses on the nature of
the business in a logical or organized way.
- It shows two sides i.e. the side of expenditure and the side of income.

PURPOSE OF BUSINESS PLAN:

(1) A business plan consists of action plan which acts as a time table for the
implementation of the various business activities in a logical way.
(2) A business plan helps the financiers such as banks, micro finance institutions,
insurance companies as well as individuals to decide whether to finance a
business or not.
(3) A business plan provides information about the management of the business and
the role of the stakeholders.
(4) It encourages the entrepreneur to think about what he wants and how he wants
to get it. This encourages the entrepreneur to be focused.
(5) A business plan helps employees to know their expected targets.
(6) A business plan provides adequate preparation for the business. It encourages
the entrepreneur and people involved in the business to think about the activities
of the business like production, marketing e.t.c.
(7) A business plan helps an entrepreneur to define specific goals which serves as a
yard stock to measure the progress of the business.
(8) A business plan facilitates the monitoring of the business performance based on
the set goals and objectives as a standard measurement.
(9) A business plan acts as a basis for determining government revenue from the
business itself.

THE COMPONENTS OF A BUSINESS PLAN (ELEMENTS)

(1) General description of the business plan.

This is basically a summary statement concerning the following issues;

(i) The type of business being planned
(ii) The needs of the market that you seek to satisfy
(iii) The characteristics that make the business different from other businesses.
(iv) The SWOT analysis
(v) The name, address, and location of the business

(2) Statements of mission, the goals and objectives.

(a) Mission statement. This is a brief statement that indicates the purpose of the
business. What does the business do?
(b) The goals. It is a medium or long term target that an entrepreneur must achieve
in a given period of time
(c) Objectives. These are specific targets that an entrepreneur must achieve on a
certain period of time.

(3) Marketing plan. This is an analysis of the possible position and opportunities of the
business being planned. It includes;-
(i) The position of the competitors
(ii) Selection of the distribution channels
(iii) You must consider the market size and expected market share.
(iv) An analysis of the product and its value to the customers.
(v) Expected sales and the plan for recruiting and motivating the sales force
(vi) You must know the current market price of similar products.

(4) The production plan. This is an analysis of the projected needs for manufacturing
the proposed goods or services. These include;
(i) The production process i.e. the flow of work and layout of the production
process
(ii) The plan capacity is required in a short run and long run to meet the market
demand
(iii) The purchasing plans
(iv) Inventory plans for stock, work in progress, and finished products
(v) The raw materials required, the amount i.e. the quantity and quality
(vi) Production control requirement
(vii) Specifications of machines, tools and equipments required.
 (viii) The quantities estimated to be produced i.e. goods or services delivered
(ix) The business site or location required for business.

(5) Financial plan

This covers the financial requirements of the proposed business, it includes the
projections of income and expenditure, balance sheet, and cash flows required for the
proposed business.

The financial plan must answer the following questions;

(i) What is the total cost required to set up the business

(ii) What the sources of funds and what will be associated costs
(iii) The financing of the proposed business
(iv) How will the income be used
(v) What is the breach even sale of the business
(vi) What is the expected rate of return on investment
(vii) Is the proposed business stable?

(6) ORGANISATIONAL PLAN

This is the framework around which the people, machines, equipment and other
physical parts of the plan are put together to have a moving organization.

This considers the following;-

(i) Who are people who are going to work in the business and that task or
responsibilities
(ii) Who will be the general manager and supervisor of the organization
(iii) What skill, knowledge and experience should they posses
(iv) How much would they be paid and what are some of the benefits that would
be given to them.

(7) ACTION PLAN

This is the plan put down by the entrepreneur in the form of a timetable to guide him on
how he is going to implement the idea of his business plan. Action plan is a
management tool which guides the manager or entrepreneur towards achieving the
business goals.
An action plan has a number of uses which include the following;

(i) It helps to obtain the information on the progress of the business

(ii) It is a timetable estimated for the implementation of the business plan
(iii) It helps to locate the sources of information and resources needed for the
business.
(iv) It also helps to identify the business barriers in advance.
(v) It helps in identifying the strength, weaknesses, opportunities and threats of
the business. (SWOT).

STEPS TAKEN IN PREPARING A BUSINESS PLAN

When preparing a business plan, entrepreneurs follow the steps below;

(1) Selecting the type of business to be carried out either business or service
(2) Conducting a market research for the selected type of business
(3) Collecting relevant data and information about the product or service e.g. cost of
machinery and equipment, environmental protection, regulations, R/MHS, and
whether they are available e.t.c.
(4) Drafting a proposed business plan
(5) Discussion of the draft business plan with acknowledgeable or experienced
person in similar business. At times this can be done together with the workers
(6) Finalizing your business plan by preparing an action plan for implementation.