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EED413 (ENTREPRENEURSHIP DEVELOPMENT)

INTRODUCTION:

Entrepreneurship Education is aimed at learning directed towards developing in the student

skills, competencies, understandings and attributes that will equip Students to be innovative, and
to identify, create, initiate, and successfully manage personal, community, business and work
opportunities, including working for themselves.

This course introduces students to advanced topics on entrepreneurship studies. It is expected to

build upon the sound foundations of E.Ed.126 and E.Ed.216 at the ND level respectively. Topics
treated at the lower levels are however included so that students at the HND level without prior
training in entrepreneurship will not be at a disadvantaged position. Moreover, as some of the
HND applicants must have had at least one year of industrial work experience those topics are
meant to enrich their focus and interest. The primary aim of the course is to equip the student
with the skills, competencies, understandings and attributes that will enable him to launch,
manage and grow his enterprise successfully after graduation. Thus at the end of this 4 credit
hour course the student should be able to:

GENERAL OBJECTIVES:

1. Understand the history of entrepreneurship development in Nigeria

2. Understand various life skills needed by an entrepreneur
3. Understand the various sources of information for entrepreneurship development
4. Appreciate the roles of commercial and development banks in small scale industrial
development.
5. Know the functions of various support agencies in small and medium scale industrial
development.
6. Understand the need for business planning.
Entrepreneurship/Entrepreneur
 Entrepreneurship is first and foremost a mindset. Entrepreneur is a person who
habitually creates and innovates to build something of recognized value around
perceived opportunities.
In this definition, all words are key words:
 'Entrepreneur' - can be an individual entrepreneur, but also an entrepreneurial
team or even entrepreneurial organization
 'A person' - emphasizes a personality rather than a system
 'Habitually' - just cannot stop being an entrepreneur
 'Creates' - starts from scratch and brings into being something that was not there
before
 'Innovates' - able to overcome obstacles that would stop most people; turns
problems into opportunities; deliver - sees ideas through to final application
 'Builds something' - describes the output of the creation and innovation process
 'Of recognized value' - encompasses economic, commercial, social, or aesthetic
value

ENTERPRISE
Okongwu and Saleh (2004) defined an enterprise as any goal directed and profit oriented activity
towards meeting social needs or delivering standard of living e.g a restaurant, repair shop, beauty
salon, book publishing company, wholesale and retail trading shop, manufacturing or
consultancy firm etc.
An enterprise is a business venture. It is an undertaking that involves uncertainty and risk as
well as innovation. An individual has the right to choose any income generating activity or self-
employment or entrepreneurship as a career option.

Practically all projects and undertakings can be referred to as enterprises if the following steps
are followed:

 Idea identification,
 Planning,
 Implementation,
 Successful completion of an activity, and
  Accepting the reward.

Nature and Types of Information Required by Entrepreneurs

A. Marketing information

B. Technical information

C. Information and communication technology (ICT)

D. Financial Information

Where to Obtain Information and Assistance

1. Industry data is helpful in comparing a business to other similar businesses. This data is
available from trade associations or government agencies and includes ratios such as: stock
turnover, cash discounts, percentage mark-up and average sales per month.

2. Membership-based organizations can provide services such as political lobbying,

conducting research, organizing education and training programmes, implementing new
technology, responding to members’ questions and concerns and disseminating information
through newsletters, magazines and special reports.

3. Subscribing to trade papers and magazines is also desirable. Entrepreneurs should set aside
time to read articles especially those important in understanding new trends and developments
relating to the business. Keep a file of pertinent articles for future reference.

4. Training programmes help entrepreneurs to develop formal plans for improving their
management skills and ability. Training courses and adult education programmes are designed
by many institutions, agencies and associations. Entrepreneurs should be aware of these personal
development possibilities and take full advantage of them.

5. Consultants can be of assistance both directly and indirectly. Pay special attention to the
approach and techniques used by a consultant to solve business problems. When working on
solutions to future problems, you may have to act as your own consultant and may want to use
these same techniques.
6. The library is a primary resource for information. Government agencies have a variety of
publications which may be helpful. Some colleges and universities have reference libraries
which may have a circulation section available to the public. Research institutes and some large
corporations have libraries with sections on specific topics. Trade associations and labour
organizations may also have libraries containing material related to specific needs. Libraries are
a storehouse of information which may be useful in operating a small business. Books,
periodicals, reports and newspapers may contain information which can be of help in solving
some of the problems in operating a business.

7. Internet can be used to carry out research and to find useful information and data. E-mail can
be used to communicate with providers of information who have web sites on the internet.

8. Business Development Services providers. There are many Business Development Services
providers who will offer guidance in various aspects of business operations.

Who Can Provide Information and Assistance?

“FREE”

1. Employees. Few entrepreneurs can do everything themselves, and they need qualified
employees to relieve them of most of the day-to-day operational problems. This allows them to
dedicate their time to working on the longer range problems. The people who work for a
business can provide answers to specific problems in a business. For example, entrepreneurs
might ask employees for their advice and assistance about stock display or customer attitudes.
Employees are in a good position to give valuable advice provided they know that their opinions
and suggestions are valued.

2. Customers. These people can supply very special information about the products and services
they buy. Customers should be asked their opinions because they are an excellent source of
information about the relative strengths and weaknesses of a business product or service.

3. Suppliers. Because the success of most suppliers depends on the businesses they serve, it
stands to reason that they should be interested in an entrepreneur’s success. Many suppliers are
able to give sound management advice because they are able to explain how other successful
businesses operate and provide suggestions about how businesses can improve.

4. Other Business Owners. Most businesses have common problems and owners are generally
willing to discuss their problems with one another. Occasionally, the competitive nature of
business may discourage this frank exchange. If the businesses are unrelated and do not compete
for the same customers, entrepreneurs may be willing to share ideas concerning solutions to
common problems. In this way, all business owners can benefit from this interaction and
improve their business operations.

5. Free Web Sites. Information and communication technology specialists will direct you to free
web sites. Consult them.

“FOR A FEE”

1. Professionals. Use the talents of professionals, such as web designers, IT specialists, financial
advisors, bankers, management consultants, insurance agents, accountants and bookkeepers,
estate agents, surveyors and lawyers, to assist in solving business problems. Try to develop good
questioning techniques to get as much advice and information as possible from these
professionals.
Each professional person is a potential resource, but entrepreneurs must be able to explain their
needs clearly and ask relevant questions concerning their needs so that professionals can provide
valuable advice.

THE ROLE OF COMMERCIAL AND DEVELOPMENT BANKS IN SMALL AND

MEDIUM SCALE INDUSTRIES DEVELOPMENT.

INTRODUCTION:

There is the doubt that the Commercial and Development Banks are playing a very significant
role for the promotion of small and medium scale enterprises in Nigeria. It is against this
background that, this section attempts to intimate the potential entrepreneurs to appreciate the
contributions of these financial institutions in the promotion of SMEs. Students should be able to
identify sources of finance to SMEs and know how to access their funds. They should understand
the modus operandi of government policies as they affect different sectors of the economy.

1. Financial Institutions Involved in Entrepreneurial Development.

The reduction of all six existing Development Finance Institutions (DFIs) to two; (BOI and
BOA) has narrowed the playing field and streamlined the operations of the DFIs. The Nigerian
Industrial Development Bank (NIDB), the National Economic Reconstruction Fund
(NERFUND) and the Nigerian Bank for Commerce and Industry (NBCI) have been brought
together to form the Bank of Industry(BOI). On the other hand, the Family Economic
Advancement Programme (FEAP), Peoples Bank of Nigeria (PBN) and the Nigerian
Agricultural and Cooperative Bank (NACB) have become a single Bank, the Bank Of
Agriculture (BOA).

These institutions, before the Government took the decision to merge them, were unable to
perform their roles effectively due to the following reasons:

1. Low Capitalization

2. Inefficient Operations

3. Poor loan portfolio

4. Poor Liquidity

5. Inability to access external lines of credit, and

6. Lack of capacity to finance projects

BANK OF INDUSTRY (BOI)

The Bank of Industry (BOI) is owned by the Federal Government of Nigeria. This bank emerged
from the government’s rationalization of some DFIs namely the Nigerian Bank for Commerce
and Industry (NBCI), Nigerian Industrial Development Bank (NIDB) and the Nigerian Economic
Reconstruction Fund (NERFUND).

TYPES OF PROJECTS FINANCED BY BOI

• Projects in the areas where Nigeria has comparative advantage
 • Projects that engage in the efficient conversion of local raw materials into finished
products

• Ventures that produce good quality products at a least cost and that could be
successfully marketed locally and/or internationally.

PRODUCTS AND SERVICES DELIVERABLE BY BOI

1. Medium and Long-term loans.

2. Working Capital Finance

3. Equity Financing

4. Management of dedicated funds

5. Loan guarantees

6. Co-financing

7. Investments in Corporate Boards

8. Business Development Services

9. Lease financing

10. Trusteeship

11. Stock Brokerage

12. Foreign Exchange Dealership

13. Insurance Brokerage

PROSPECTS

The BOI is intended to focus on the private sector in both funding and commercial operations.
The Bank has opted to adopt the existing prudential guidelines for Banks though more stringent
when compared with the CBN proposal to apply some standards used by other finance
companies for BOI.
BOI would focus on SMEs with linkages within the broad economy with a view to enhancing
overall industrial interaction, expanding output and employment and utilizing local resources to
its fullest advantage. The huge SMIEIS funds currently accumulated by the Banks will help BOI
fulfill its mandate.

It is expected that the bank’s contribution to the economy will grow stronger as the
implementation of the economic reforms progresses to widen the scope of needs for
economic/business development financing.

BANK OF AGRICULTURE (BOA)

The Bank is a development Finance Institution wholly owned by the Federal Government of
Nigeria. BOI was incorporated in 2000 following the merger of the defunct Nigeria Agricultural
and Cooperative Bank, People’s Bank of Nigeria and risk assets of the Family Economic

Advancement Programme (FEAP). Bank of Agriculture began operation on 6 th March 1973 as

Nigerian Agricultural Bank Limited. The two government institutions own the Bank in the
following ratio:

Federal Ministry of Finance 60%

Central Bank of Nigeria 40%

TYPES OF BUSINESS SUPPORTED BY BOA

BOA provides:

• Finance and credit facilities to agricultural and agro-allied industries.

• Loans to farmers, agricultural institutions, organizations and cooperative societies.

• Direct investments by way of equity participation in wholly owned or joint-venture

projects.

• Provision of guarantees to viable agricultural and agro-allied ventures.

• Encourages Rural savings scheme.

LENDING CHANNELS

The BOA has five channels of financial support to its clients:

i. On- lending Scheme:

This is lending through Cooperative Financing Agency (CFAs), Non-Government Organisations

(NGOs), Self Help Groups (SHGs) and some Private Sector micro-credit institutions

ii. Small Holder Scheme (SHS)

The Small Holder Scheme is designed for small and medium scale individual and group farming
organizations and funds are provided as loans on very favourable terms and conditions. Interest
charges are usually below the market rate.

iii. First/Second Livestock Development Programme (SLDP)

This programme projects are also designed for small and medium scale individual and group
farming organizations and funds are provided as loans on very favourable terms and conditions.
Interest charges are usually below the market rate.

iv. Special Projects

The special projects are usually undertaken in collaboration with such international financial
institutions and donor agencies as IFAD, ECOWAS and ILO.

v. Investments in projects

This targets mainly medium and large-scale entrepreneurs who have the capacity to provide
collateral securities.

PROSPECTS
• Sourcing of offshore credit facilities for loan disbursement.

• Participation in Agricultural Exchange Market through its subsidiary, the Food

Development Company.

• Creation of local market for raw material supply to local industries.

 • Diversification of operations to agricultural support services: desertification control
project, tangential agro-allied projects, equipment leasing, agro-chemicals
manufacture and others.

VARIOUS EXISTING INDUSTRIES AND SUPPORT AGENCIES IN NIGERIA.

INTRODUCTION:

The role of support agencies and various existing industries is quite paramount and therefore
potential entrepreneurs need to be intimated about the assistance they render and the functions
they discharge. This section therefore intends to highlight them. On completion of this course
students should be able to identify various industry/support agencies in Nigeria and their
functions. They should also know types and sources of plants and machinery used in small scale
industries, nature and type of material inputs for each industry type and be able to source
information about market and financial assistance; as well as understand the environmental
factors associated with Industrial and economic development in Nigeria.

World wide findings over the years have shown that small firms and entrepreneurships play very
important roles in national economic growth and development. The Government of Nigeria, like
its counterparts, the world over, has realized the importance of small and medium scale
enterprises and has, over the years formulated various public policies to encourage, support and
fund the establishment and development of SMEs. Developments in small and medium
enterprise are what give a developing nation the base for employment creation, solid base for
creating a middle class and encouragement for the use of local raw materials and technology.

In Nigeria, the main types of industry include:

  Extractive/Primary Industry: This encompasses stone quarrying, extraction of mineral
raw materials, etc.

 Manufacturing/Secondary Industry: This involves changing the form of raw materials to

useable or semi-useable products e.g. maize to flour, etc.

 Service/Tertiary Industry such as banks and professional service providers;

 Construction Industry such as roads, bridges, etc.

There are several support agencies established by government to assist the various industries in
different dimensions. Among the support agencies are:

THE SMALL AND MEDIUM ENTERPRISES DEVELOPMENT AGENCY OF

NIGERIA (SMEDAN):

SMEDAN was established by the SMEDAN Act of 2003 to promote the development of the
MSME sector of the Nigerian Economy.

The Agency positions itself as a “One Stop Shop” for Micro, Small and Medium Enterprises
Development. Micro Enterprises are included in the clientele of the Agency since they form the
bedrock for SME’s.

On its web site, its vision is to establish a structured and efficient micro, small and medium
enterprises sector that will enhance sustainable development of Nigeria. The mission is to
facilitate the access of micro, small and medium entrepreneurs/investors to all resources required
for their development.

Justification for the existence of SMEDAN rests on the fact that poverty, which is due to lack of
access to income-earning opportunities and lack of capacity to take advantage of the
opportunities, is a social malaise that is threatening global prosperity in general and national
economic growth and development in particular.

It is also realized that a well developed MSMEs sector has proven to be one of the most
veritable channels to combat poverty. The establishment of SMEDAN is therefore justified by
the need to trigger the development of Nigeria’s MSMEs in a structured and efficient manner.
Functions of SMEDAN

 Develop, test and disseminate new business models illustrating best business
practices to upgrade SMEs operations.

 Conduct seminars, conferences, workshops, and interactive sessions for promotional

and capacity building purposes.

 Encourage and facilitate business clusters, networks and cooperatives for enhanced
productivity and easier access to factors of production including finance.

 Encourage and facilitate new investments in designated priority areas in each State.

 Organize trade and investment exhibitions and interactive fora.

 Develop and apply standards and quality control measures for technologies and
products of SMEs.

 Improve the financial management skills of MSMEs through training workshops.

 Develop and implement effective strategies for opening up domestic and international
markets for MSMEs products.

 Liaise with financial institutions to harness and pool resources for utilization by
MSMEs.

 Develop and implement a strategy for the effective and timely disbursement of
SMIEIS funds.

 Hold regular consultations with international donor agencies, trade groups, relevant
ministries, research institutes, states and local governments with the view to share
ideas and partner in implementing programmes for the development of MSMEs.

 Attract foreign investments and funds for the development of the MSMEs sub-sector.

Entrepreneurship in Nigeria

Africa is the poorest, less-developed continent in the world. In most countries in Africa, the
governments have typically played a significant role in determining the course of development.
Many state-owned enterprises in Africa were created when it was believed that the fastest route
to development occurred when the state took on the role of the entrepreneur. Unfortunately, in
many countries, the performance of these state-owned firms, or parastatals, has been
substandard. Part of the problem with the state-owned enterprises is that they are run by
bureaucrats and are plagued with red-tape. Thus, these firms are typically run according to state
procedures, instead of cost-cutting and profit-maximizing concerns. The typical result is rampant
inefficiency (Elkan, 1988). Although Nigeria was at one time characterized by such
inefficiencies, it has recently has pursued entrepreneurship encouragement policies, and the
initial indicators suggest that the policies have been successful.

In Nigeria the state-owned enterprises traditionally clogged business opportunities and state
restrictions prevented entrepreneurs from entering the market. However, in the mid-1980s,
Nigeria abolished its marketing board, which prevented entry into certain industries, and opened
up its markets to competition from domestic entrepreneurs. Additionally, lower taxes and
increased price ceilings have increased the incentives to entrepreneurs. Although, Nigeria is still
plagued by many development problems, "preliminary evidence suggests a favorable response
by the private sector to the new entrepreneurial opportunities thus created" (Elkan, 1988).

The Challenges Faced By Entrepreneurs in Nigeria

Corruption is something that retards economic growth, and it exists in virtually all economies,
not necessarily developing economies or indeed Africa--although based on the structures in the
more advanced countries, they are able to control or to curb these kinds of practices. In Nigeria,
the EFCC, which is the economic crime and financial institution set up by the government, has
been able to deal largely with corruption. They have made quite a substantial amount of
investigation and recoveries. There has been talk of something like $5 billion recovered
including some of the money looted outside of the country by corrupt leaders. The current
operating climate for entrepreneurs is gradually becoming competitive and less rent-seeking.

But that is not the real constraint that retards entrepreneurship in Nigeria, based on the research
carried out by Lagos Business School (LBS) recently. The following factors tend to weigh down
entrepreneurs. The first is "Markets." The majority of our people don't have access to markets,
and in order for them to have access to markets, they have to understand the requirements of the
market. So this is one area where we are lacking--for instance, if you want to have access to the
U.S. market, you must know of the market regulations in the USA. Such understanding will
assist the entrepreneur to produce to be able to meet the needs of the market. Adequate and
timely market information must be provided. Also products must be competitive and meet
required standards.

Another major factor is "Infrastructure." This is basically [true] in all developing countries,
but more so in Nigeria. Poor infrastructure has been a major cause of Nigerian products not
being competitive in the International market. Public power supply has been the major constraint
to enterprise development. According to a study carried out by the World Bank in the last 10
years or so, it was pointed out that if government is able to remove power as a bottleneck,
Nigeria will gain at least 30% competitiveness in production.

Four years ago, we had a similar problem in telecoms, and in Nigeria, we had not more than 400
lines, phone lines But today, four years later, based on the reform agenda of the government--
they liberalized the telecoms sector and provided an enabling operating climate for private sector
participation in that sector -- about 50 million lines, the majority of which are either mobiles or
fixed wireless are operational. So we are able to cross the bridge of infrastructural deficiency in
the telecoms sector through getting our policy and regulations right as well as using transparent
means to license private sector operators.

Another important constraint is "Finance." Access to capital is a major constraint in Nigeria.

The government has tried to do something about this through having one form of intervention or
the other in the last. However, about five years ago , the Banker's Committee decided to set aside
10% of their profits as equity investments in small businesses. Everybody hailed that decision,
and that was good. Unfortunately, the rate at which the money was being dispersed to enterprises
has been very poor. So why was this happening?

First of all, you have to understand the mindset of the small businesses in Nigeria. They own
their businesses, and they like to control it themselves. Unlike what obtains in USA, Canada and
Europe where most people wanting to start a business will look for a partner, somebody with
equity. The philosophy is "Let's share the risk together. Let's leverage on the knowledge of one
another," and things like that. But back in Nigeria, the prevailing philosophy is "I want to start it
myself. I want to do it myself, at least up until the particular level that I know I have full control.
Then, maybe I can sell part of it, but for now, let me do all the sweating, and let me do all the
things that come with that sweating."

The second side is that up until five, maybe not more than eight, years ago, the financial services
sector had been used to lending through debt, not equity, so the mindset, again, is different. Most
lending has to do with collateral, so if you default, they sell off your collateral. In the new
participatory case, there is nothing to sell off, which means they have to do their homework a lot
more to know the right type of businesses to invest in--whether they are growing businesses or
not. They need to know all that, and that is where they can get their reward. So that has also
become a challenge for them. The challenge for the banks is that they need to learn the ropes of
venture capitalists.

On both sides, there are real challenges, and these have slowed down the investments in equity.
There is need for value orientation and sound financial education.

Another factor is inadequate documentation of processes and outcomes. The records are poorly
kept; and it is difficult for small businesses to have regular financial statements and things like
that. This common business practice in developed economies must be shown to entrepreneurs
and why it is important for them to have their own financial records--even to know how their
businesses are growing.

Western small businesses are very careful about documenting processes and outcomes. I think
the outcomes one is likely due to Small Business Administration (SBA) requirements, which we
don't have. But beyond the SBA requirements, the fact that entrepreneurs are able to document
their processes helps them to consistently control the outcome. That is one learning point that
must be imbibed by all entrepreneurs. In addition we need to start documenting some of the
processes which have been successful using daily reflection journals as well as documenting
various operational challenges and the solutions to these. This leads to effective use of feedback
mechanisms in future operational plans as well as in developing their own strategic plans.

Q-Understand the need for business planning.

 NEED FOR BUSINESS PLANNING

INTRODUCTION:

Planning especially Business Planning is very much required by all entrepreneurs. It must be
stressed, that planning makes the difference between success and failure. From the business
context a well planned business is bound to succeed. In this section there is an attempt to make
learners appreciate the role of business planning before the establishment of an enterprise. It
illustrates the process of writing a feasibility study (business plan) after going through the major
step of developing one. The series of steps followed by entrepreneurs to identify and explore
business opportunities are clearly work out. It also guide entrepreneurs to be conversant in
planning their business enterprises.

SPECIFIC LEARNING OUTCOMES:

1. Identify a viable business opportunity based on:

a. Need

b. Demand
c. availability of resources
d. import substitution
e. export oriented products
1. Explain the different steps in preparing a preliminary project report;
2. Explain how to formulate a project report;
3. Explain how to analyze a project report.

CONTENT

1. Identify A Viable Business Opportunity Based On:

 (a) Need
(b) Demand
(c) Availability Of Resources
(d) Import Substitution
(e) Export Oriented Products

OPPORTUNITY SCOUTING AND IDEA GENERATION

It is extremely important to take utmost care in identifying the product or service to be launched
by the entrepreneur otherwise it might prove to be a very costly mistake. He must develop
sensitivity to changes around him, which can provide business opportunities and then carefully
scan his environment to generate ideas. After tentatively identifying four to five ideas he should
go in for detailed assessment and feasibility study. This will help him to crystallize one idea in an
objective and systematic manner, which will greatly enhance his chances of success.

The Entrepreneur looks ahead to see what can be done in future rather than indulge in
concentrating on the past. Where others see problems and shortcomings he sees opportunities for
starting a business. He is the one who makes things happen by perceiving an opportunity and
organizing the resources needed to exploit this opportunity. He creates a new business in face of
risk and uncertainty for the purpose of achieving profit and growth.

The entrepreneurial experience begins with the idea for starting a new venture. The idea has to
be sifted and refined so that he can identify a new product or service to be produced or offered.
Usually there is a triggering factor, which makes the entrepreneur take the plunge to start his
business. However one has to systematically make a business plan and study the feasibility of the
proposed venture before doing so.

The entrepreneurial process begins with identifying an opportunity and evaluating it through an
initial screening process. If it appears reasonable a detailed business plan can be made. If not it
can be discarded.

Clearly, except in very rare cases, opportunities just do not ‘occur’ to the individual. These have
to be actively searched/ scouted for. Hence, the start up process for a new venture creation begins
with scouting for opportunities. The process may start from an arm’s length, that is, one may just
look around one’s immediate context- family, community, and job and build up a case for
business from the bottom-up. Else, one may take a top-down approach, starting from the
scanning of the international and macro economic environment and conducting/using
industrial/consumer surveys and identifying appropriate business ideas. An entrepreneur can
sense and intelligently seize opportunities, which exist in the environment. An entrepreneur can
look at his community and determine to intervene in solving existing community problems
and/or challenges with the objective of improving community living standards.

Often it is said that necessity is the mother of all inventions. However, in the context of
entrepreneurship, opportunities besides existing in the environment in the form of needs and
problems of people around might have to be ‘created.’ Thus, the entrepreneurs meet not only the
existing needs; they create the new needs as well!

It is also possible to create opportunities; noodles, Credit cards, FM radio are all examples of
needs which were created either out of demographic changes e.g. with more women opting for
employment the need for a quick snack was created resulting in the phenomenal success of the
two minute noodles and packaged food. Hectic work schedules, frequent corporate traveling
created the need for fast banking services and hence the ATM, credit card, debit card and
telephone banking came in vogue.

OPPORTUNITY SCANNING

Once the entrepreneur perceives opportunities, it becomes important for him to scan the
environment. It is quite possible that many of the promising opportunities might not make
commercial sense. Scanning involves close examination of the environmental conditions and
their impact upon the business idea. It is not a cursory exercise but rather an attempt to look
beyond the immediate opportunities to the emerging trends. An attempt can be made to modify,
adapt, re-arrange, substitute, combine, or reverse these trends.
Environmental Analysis

As the economies are getting internationally integrated, for an analysis of the environment of
entrepreneurship you would be required to develop an understanding of international, domestic
macro economic, and industry/sector specific factors.

Today, hardly any business is unaffected by international developments. The strides in the IT
sector and telecommunications along with the steady progress of WTO negotiations relating to
removal of tariff and non-tariff barriers on trade, investment and intellectual property have truly
made the world a global economic village. Even as a local player, you cannot wish away global
competition. Today a local bakery owner has to compete with other locally available
confectioneries as well as big national and international brands such as Danish Cookies.

As the economies increasingly get integrated, so does their susceptibility to external happenings.
For example, September 11 in the USA and/or an outbreak of SARS or bird flu in any part of the
globe had ramifications in the rest of the world. As a potential entrepreneur, you will have to
keep all these factors in mind as you pursue your entrepreneurial dreams.

In fact, the world of business is being increasingly modified by three concurrent happenings
internationalization thanks to WTO, digitization, thanks to advances in IT & communication, and
outsourcing, thanks to the resultant interdependencies. These trends influence different
businesses differently. What we are concerned here is to examine these developments from the
standpoint of small business. We would be restricting ourselves to a brief discussion of the
impact of WTO on the small-scale sector.

You may be aware that trade and investment liberalization means, among other things, lowering
of customs/import duties and allowing foreign direct investment (via multinationals). Both of
these have a potential impact on the future of small-scale industries. As imports get liberalized,
the units in the small-scale sector that had long been sheltered by the protective measure of
reservation of manufacture get exposed to external competition. This is what exactly happened in
case of local textile industry and other manufacturing units that are closing shops in recent times.
Clearly, implications of the WTO on the SSI are far from being one sided. If one is truly an
entrepreneur, one should see more of opportunities than threats.

Macro Environment

The macro environment of an entrepreneur consists of the political, technological, social, legal
and economic segments. All of these are not an immediate part of the entrepreneur’s venture yet
they have an impact on his enterprise. Let us now examine the elements of the macro
environment of the entrepreneur one by one.

Political Environment

Entrepreneurship can flourish under a stable and conducive political climate. Government
policies which give priority to growth of trade and industry, provide infrastructural facilities,
Institutional support can give a fillip to entrepreneurship.

Considering the employment and export potential, the short gestation period and the fact that
small industries act as a seedbed for nurturing and developing entrepreneurship, the Government
is very supportive of the small-scale sector. It has created an extensive Institutional framework
for provision of finance, technology as well as help in marketing is made available by
government institutions like BOI, NACRDB, SMEDAN, RMRDC, IDCs, TIDCs, etc.

Technological Environment

The level of technology, the trends and the rate of change in technology existing in a society all
have a direct impact on enterprise creation. Changes in technology, both innovation and
invention change industry structures by altering costs, quality requirements and volume
capabilities. In the advanced countries of the West more pure invention takes place which can
create new industries for example Automobile, Aeronautical, Computer Hardware,
Telecommunications, Pharmaceuticals etc. In developing economies there is usually an imitation
of the above through process innovation. It has been observed that many small units use obsolete
technologies and do not invest in R&D. As a result their goods are of poor quality and lack
standardisation. A direct consequence of this is their inability to face competition. In many
industries the technological threshold is low and as a result the success of an entrepreneur
promotes many others to start similar businesses and he loses the initial competitive advantage.
On the other hand if he uses certain costly technology chances of others quickly becoming his
competitors is less.

Apart from these the effect of technology on environmental laws, issues like a product being
tested on animals or use of child labour etc also have to be kept in mind.

Socio-Cultural Environment

The customs, norms and traditions of the society also play an important role in either hindering
or promoting enterprise. For example, we sometimes say that the Ijebus are very enterprising. In
certain traditional communities of our country working of females out of the home environment
is frowned upon. Many times the choice of occupation is also dictated by the family traditions.
Many vegetarians might not like to start poultry or fishery farms in spite of their economic
potential. It is definitely wrong to sight a piggery farm in a predominantly Muslim community.

Socio-cultural factors are crucial for the operations of TNCs also. It is very important for a TNC
to understand the socio-cultural background of their customers in the host country. Socio-cultural
environment is also concerned with attitudes about work or quality concerns, ethics, values,
religion etc.

Legal Environment

The laws of the country can make the process of setting up business very lengthy and difficult or
vice-versa. Many times one hears of people complaining of the bureaucratic procedures in
Nigeria, which act as a damper on new venture creation. The labour laws and legal redress
system also have a bearing on business operations. Patents, Agreements on trade and tariffs and
environmental laws also need to be studied. Copyright, trademark infringement, dumping and
unfair competition can create legal problems in the shape of long drawn out court battles.
Simpler legal procedures can facilitate the process of new venture creation and its smooth
functioning including setting up of ancillaries, foreign tie-ups and joint venture
Economic Environment

Nigeria has today achieved a GDP growth of 7 % and aspiring for 10 % GDP in the near future.
Liberalisation, Globalisation and subsisting economic reforms in Nigeria and the ECOWAS, has
increased the space for business operations. It has also opened channels for foreign investors,
banks, insurance and infrastructure companies to start operations. The resultant competition,
rapid and complex changes have changed existing business environment, which have to be
handled by the entrepreneurs.