ENTREPRENEURSHIP

TOPIC 1. INTRODUCTION TO ENTREPRENUERSHIP

Meaning of entrepreneurship
This is the process of identifying business opportunities and gathering the necessary resources to start and run a
business.
An entrepreneur who identifies business opportunities and gets the necessary resources in order to start and run a
business. The entrepreneur therefore creates new businesses or transform the existing ones in the face of risks and
uncertainties in order to make profits
Terms used in entrepreneurship
i) Entrepreneurship
Entrepreneurship is the process of scanning the environment in order to identify a business opportunity, gathering
resources with the aim of establishing a profit making enterprise, under conditions of risk.
ii) Entrepreneur
An entrepreneur is someone who detects a previously untapped opportunity to make some profits (either by
lowering the costs of producing the existing goods /services or by creating new ways for people to satisfy their
needs or wants through new products). They then brings together the necessary factors of production to exploit
these opportunities.
iii) Intrapreneurship
It is the practice of entrepreneurship by employees within an organisation. Intrapreneurship is a novel way of
making organisations more profitable where imaginative employees entertain entrepreneurial thoughts. It is a
significant method for companies to reinvent themselves and improve performance.
iv) Intrapreneur
An intrapreneur is an employee who uses entrepreneurial skills to generate profits for the venture they works for.
v) An enterprise
It is a business organisation that provides goods and services to make profits and has growth potential.
A business enterprise is a legally recognised organisation designed to provide goods and/ or services to
consumers.
vi) Business person
A person who undertakes any business activity for the purpose of making profit
1.3.2 Difference between self employment and salaried employment
Self employment
Self employment is a situation in which a person starts and operates a business enterprise. Since entrepreneurial
skills drive people into self employment, entrepreneurship training is therefore expected to prepare trainees for
starting and operating their enterprises effectively.
Self employment is a situation in which individuals create and run/operate their own income generating activities.
Salaried employment
Salaried employment is a process in which an individual is hired for a period of time, which may range from a
few months to a few years, and is paid a given amount of money as salary or wages for the work done.
The merits and demerits of salaried employment are varied and largely depend on a person’s qualification,
experience and specialisation area. The merits and demerits are also determined by the magnitude of growth,
investment ability, profit and government support of a given organisation.

Importance of entrepreneurship to an economy

i. Creation of employment-Through entrepreneurship, jobs are created which help in absorbing
people who would otherwise have been jobless e.g. people employed in the jua kali sector.

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 ii. Formation of capital-Profit earned by entrepreneurs may be used to expand the business or even
to start other businesses. Wages and salaries paid to the employees is a source of capital to them.
iii. Raising standards of living-Entrepreneurs pay wages and salaries to their employees which
enable them to acquire goods and services they need to live comfortable lives. Entrepreneurs also
provide a wide variety of goods and services to consumers hence leading to improved living
standards.
iv. Encourages the use of local resources-Entrepreneurship makes it possible to use/exploit local
resources. Idle resources such as scrap metal may be used to make jikos.
v. Improving infrastructure-The existence of businesses in the economy makes the government
establish or improve infrastructure such as roads, communication facilities and water. At other
times, entrepreneurs may combine forces to improve infrastructure in their area of operation.
vi. Savings on imports-Local entrepreneurs are able to produce goods and services that are a
substitute to imports. This helps the country to reduce the amount of money required to pay for
such imports.
vii. Reducing foreign dominance of the economy-Participation of local entrepreneurs in various
business activities helps in reducing investments by foreigners in the particular area.
viii. Promotion of technology/promotion of innovation, research and development-Entrepreneurs
are creative and they come up with new and better ways of accomplishing tasks. Most of the
inventions and innovations in our society have been developed by entrepreneurs.
ix. Promotion of entrepreneurial culture/helps in the creation of role models- Successful
entrepreneurs/entrepreneurial ventures encourage other members of society to initiate their own
businesses and hence act as role models in the business world.
x. It contributes to government revenue-Taxes and fees paid by entrepreneurial ventures
constitute part of government revenue/income that helps it to facilitate its operations.
xi. It promotes economic growth-Entrepreneurs produce goods and services. This increases the
volume of goods and services in the economy leading to expansion of the economy.
Class assignment
i) Discus various ways in which the employer and the employee benefit from entrepreneurship development.
(marks)
ii) Identify different entrepreneurial activities within your locality and their benefits to explain the community.
(10 marks)
iii) Discuss business environmental factors affecting entrepreneurship development (10 marks)

TOPIC TWO. EVOLUTION OF ENTREPRENEURSHIP

Myths associated with entrepreneurship in Kenya
The following are some of the myths associated with entrepreneurship:

i) Entrepreneurs take wild risks at the start of their business. Even though risk is an integral part of
business, the start of business is not considered the highest risk. An entrepreneur is more likely to face bigger
risks at the latter stage of the business.
ii) Entrepreneurs introduce break-through inventions in their start-up business. It would be easy to assume
that entrepreneurs introduce new inventions, usually technological inventions. This is not true. Innovation
may be important, but what makes entrepreneurship successful is the ability to execute an ordinary idea
exceptionally.
iii) Most successful entrepreneurs have years of experience in their chosen line of business. Bill Gates was
still a student when he started Microsoft with Paul Allen. This story of several inexperienced entrepreneurs
starting out a new business venture is replicated over and over again in the lives of millions of other
successful entrepreneurs.
iv) One needs a lot of money to start a business. This is not so. Money is not always an important prerequisite
to be able to start a business. What sets the successful entrepreneur apart from the not-so-successful is the
ability to make do with what little he or she has. For instance, they look for other sources of money such as
borrowing to grow their business.
v) Start-ups use equity, not debt money. Entrepreneurs who put up equity coming from their own pocket only
comprise less than 50% of the total start-ups. The majority of the companies are financed by debt.
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 Theories of entrepreneurship
1. Economic theory
The theory holds that entrepreneurial behaviour is determined by economic factors.Thus entrepreneurs are greatly
influenced by economic activities. From an economic point of view an entrepreneur is a person who brings
together the factors of production into a combination to make their value greater than before.
2. Psychological theory
The theory holds that entrepreneurs possess unique needs, values and attributes, which drive them into
entrepreneurial behaviour. It holds that people have personal traits and attributes, mental desires to be
independent.
3. Sociological theory
The sociological theory maintains that environmental factors such as values and beliefs influence entrepreneurial
behaviour. ( Max Weber, 1904). According too this theory, beliefs and societal aspects such as social status and
recognition influence entrepreneurial behaviour.
Importance of Entrepreneurship theories
i) Entrepreneurship theories bring greater understanding of entrepreneurship behaviour exhibited by different
entrepreneurs.
ii) They enable one to understand the need for entrepreneurship and why some people are more entrepreneurial
than others.
iii) The theories bring out various approaches and perceptions held by entrepreneurs.
iv) Show that the desire for entrepreneurship is innate as well as environmentally determined.
v) Helps us to understand the role played by role models through networks that provide support

TOPIC THREE: THE ENTREPRENEUR

An entrepreneur who identifies business opportunities and gets the necessary resources in order to start and run a
business. The entrepreneur therefore creates new businesses or transform the existing ones in the face of risks and
uncertainties in order to make profits.
An entrepreneur is therefore a business owner; he starts and organizes the business (the factors of production in
appropriate combination)

Types of Entrepreneurs
The following are the three main types of entrepreneurs.
i. Craft Entrepreneurs
ii. Opportunistic Entrepreneurs
iii. Egoistic Entrepreneurs
i. Craft Entrepreneurs. Craft entrepreneurs are those who may start a business using their learnt or acquired skills.
They may exhibit the following characteristics:
a. They are of blue collar origin i.e they come from the informal sector of employment.
b. Their education or training background is focused on the current business activity.
c. They may have low or high technology experience.
d. They have a reputation in a specific industry e.g masonry, teaching, engineering.
e. They are marginal people and were mostly associated with fellow workers. i.e they do not
identify with unions.
f. They have limited cultural background and social induction with entrepreneurship.
ii. Opportunistic Entrepreneurs. Opportunistic entrepreneurs are those entrepreneurs who may scan the
environment in search of a viable business opportunity that may exist. They are creative and very
hardworking and venture in businesses they do not necessarily have skills or training in.
These types of entrepreneurs exhibit the following characteristics:
a. They are of middle class origin
b. Their education involved many different kinds of courses
c. They have a variety of work experiences and they have been through various educational
courses.
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 d. They have a reputation across the industry.
e. They are more aggressive/ambitious.
f. They have been in senior profile levels in employment.

iii. Egoistic Entrepreneurs. Egoistic entrepreneurs venture into business not only because there exists a business
opening but because they would also like to satisfy their ego. They are highly motivated. These types of
entrepreneurs are:
a. They are very eager to experiment upon new ideas.
b. They can acquire material and financial resources to experiment upon new ideas
c. Their economic system is well developed enough to bear the costs of venturing into a business.
d. They are well networked are able to find new markets and customers with ease.

Characteristics of an entrepreneur
A good entrepreneur should have the following characteristics/Qualities:
3 Desire to achieve-An entrepreneur is a person who wishes to excel and has the drive to succeed while
competing with others. He/she always tries to accomplish something new.
4 Ability to solve problems-An entrepreneur is expected to struggle with determination to get solutions
even under difficult situation so that the business can succeed.
5 Risk taker-Entrepreneurs take viable business ventures even when they are not sure of the returns. They
assess situations and take calculated risks.
6 Initiative –An entrepreneur should be aggressive in implementing ideas well ahead of other businesses so
that he/she can be ahead of them.
7 Time consciousness-An entrepreneur should be able to use time wisely and avoid wasting it. A wise and
quickly implemented decision may mean success in business whereas time lost may mean failure.
8 Creativity and innovation-An entrepreneur should be able to generate new ideas as well as think of the
best ways of putting them into practice.
9 Independence and self confidence-Entrepreneurs are their own bosses and should believe in their ability
to do things and succeed.
10 Persistence and patience-An entrepreneur should not give up when challenges arise. Sometimes, he/she
takes time and make a repeated action or adopts a different course of action in order to overcome such
challenges so as to reach the target
11 Decisive-Entrepreneurs have strong problem, solving and decision making skills. The business
environment is such that decision has to be made quickly to respond to any situation that may arise.
12 Persuasive-Convincing people to believe in their ideas and buy their products keeps entrepreneurs in
business
13 Goal-oriented-Entrepreneurs are achievers who work towards set goals. They continually monitor
progress to determine whether they are achieving the goals they have set and where improvements need
to be made.
14 Seek information-Entrepreneurs use various methods to get the relevant information that is necessary for
the success of the business.
15 Concern for high quality products-An entrepreneur should strive to cope or beat the existing standards
of quality. This will enable him/her succeed in a competitive market.

Role of an entrepreneur in an enterprise

Entrepreneurs play different roles in an enterprise. These include:
a. Initiator . The entrepreneur as the prime mover of the business. He/she is the director of the enterprise and
comes up with ideas which he convinces the members of the organization to follow
b. Director . The entrepreneur as a person who engages the participation of others. They knows that they cannot
run the enterprise single handedly. To effectively manage the enterprise, he requires the knowledge and skills
from diverse persons.

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 c. Manager .The entrepreneur as the person in charge of coming up with the organizational structure. He/she
performs the general functions of manager(planning, organizing, controlling, motivating, directing and
staffing)
d. Financier . They is the controller of all the enterprise activities. He mobilizes resources needed to start and
run a business i.e finances, raw materials, human effort among others.

Class Assignment
An entrepreneur is e a business owner; he starts and organizes the business (the factors of production in
appropriate combination). Discus these factors of production and their rewards (10 marks)

TOPIC FOUR: CREATIVITY AND INNOVATION

Meaning of creativity and innovation

Creativity. Creativity is the ability to bring something new into existence. It is the ability to think and act in new
ways. This is done through the process of germination, preparation, incubation, illumination and verification.

Innovation. It is the process of doing things in a new way for value addition. It is thinking creatively about
something already existing. Innovation transforms creative ideas into useful application.

Discovery. It is making known that which has been in existence but whose uses have not been perceived. For
example, Harvey’s discovery of the circulation of blood in the body.

Invention. It means bringing something new that has not been in existence into existence. It is the act of creating
or producing by exercise of the imagination and have no prior existence. eg mobile phone money transfer.

Process of creativity
The process most commonly used to encourage creativity is brainstorming. It works best in a group situation.
It follows various steps:

i. SUBSTITUTE. Think of ways of replacing one thing with another. For example, could plastic replace
wood,
ii. COMBINE .Are there ways of bringing things together that could result in one unique item? For example,
could some services be combined to produce one-stop shopping?
iii. ADJUST, ADD, OR ADAPT .Figure out what changes can be made to improve products. Similar
products could be added together, for example, such as two blades joined to a twin razor.
iv. MODIFY, MAGNIFY, OR MINIATURIZE .Think about the possibilities of changing the size or the
nature of the product itself.
v. PUT PRODUCTS TO OTHER USES .This is a commonly used strategy. Excess newspapers can be
made into fire logs; a kitchen knife can be used as a screwdriver.
vi. ELIMINATE OR ELABORATE .Consider the benefits that can be derived from less use. For example,
packaging is reduced if refills are used. Generic products save advertising.
vii. REARRANGE OR REVERSE .Investigate the advantages of changing the order or sequence of events,
or see if things can work the opposite way. One example with a twist on this theme would be a car that
goes in two directions, not only one.

THE PROCESS OF INNOVATION

Creativity as a process has several stages. These are:

i) Germination. Growing of ideas in the entrepreneur mind.
ii) Preparation. Getting the mind ready for creative thinking using
Methods such as
 realizing that every situation is an opportunity to learn

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  reading on a variety of topics/subjects
 creating a file of interesting articles
 developing the ability to listen to and learn from others
 Attending trade shows and exhibitions.
iii) Investigation. Studying the problem and understanding its components

iv) Transformation. Identifying the similarities and differences in the information collected.

v) Incubation. The subconscious needs time to reflect on the information collected.(putting the ideas to
grow well and healthy for development)
vi) Illumination. This occurs when all the previous stages start getting clear.(removing unwanted ideas)
vii) Verification. Involves testing if the idea will work, is practical to implement and is a better solution to a
particular problem or opportunity. Experiments, test marketing and piloting are some of the methods that
can be used.
(vii) Implementation. Transforming the idea into reality by bringing it to the market. (opening the business)

Importance of creativity and innovation

i) Creativity and innovation are key to generation of new ideas and methods of improving
goods and services for customer satisfaction.
ii) Leads to increased productivity
iii) Helps in profit maximization
iv) Motivates employees to become more creative
v) Leads to diversification of products and services
vi) Introduces a variety of goods and services

Barriers to creativity and innovation

These are limitations to creativity and innovation which may include the following:
i. Negative Attitude. The tendency to focus on the negative aspects of problems and expend energy on
worry.
ii. Fear of Failure. For an entrepreneur failure is not a discouraging factor but is a necessary condition
and a stepping stone to success.
iii. High cost of research and development in organization.(expensive)
iv. Inability to protect invention through patents(copy pasting the ideas)
v. Being over specialized(assuming you know everything in the market)
vi. Believing that one is creative.(assumptions)
vii. Creativity is not taken seriously .(neglecting)

Managing barriers to creativity and innovation

i) Budgeting for research and development

ii) Rewarding creativity and innovation minds in the organization.
iv) Promoting creativity training and development
v) Avoiding mental blocks and obstacles(like stress)
vi) Being systematic (working logically)
vii) Being a problem solver in the society
viii) Approaching issues from different angles
viii) Focusing on end results rather than the means
ix) Embracing divergent views

TOPIC FIVE ENTREPRENEURIAL CULTURE

An Entrepreneurial Culture is a system of shared values, beliefs and norms of members of an organization or
community.

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 It includes; valuing creativity and tolerance of creative people, believing that innovating and seizing market
opportunities are appropriate behaviours to deal with problems of survival and prosperity, environmental
uncertainty, and competitors’ threats, and expecting the community and organizational members and to behave
accordingly.
An entrepreneurial culture will lead to the growth of trade and industry in a country.

Concept of Entrepreneurial Culture

Culture encompasses a wide variety of elements, such as values, norms and artefacts. These are dependent on
language, social situations, religion, political philosophy, economic philosophy, education, manners and customs.
i) Values .These are ideas about what is important in life. They guide the rest of the society.
ii) Norms. These are expectations of how people will behave in different situations. each community in Kenya
has their own culture.
iii) Artefacts. These refer to material culture. They are derived from the cultural values and norms.

NB: Culture is dynamic. Cultural change can be caused by the environment inventions and other internal
influences and contact with other cultures.

Elements of Entrepreneurial Culture

The following are elements of entrepreneurial culture:
 People are empowerment focused
 Value creation through innovation and change
 Attention to the basics/detail
 Hands-on management
 Doing the right thing
 Freedom to grow and to fail without embarrassment
 Commitment and personal responsibility
 Emphasis on the future (having focus)

NB: It is through the interaction of founding values, theories and new venture that organisational culture begins to
take shape and perpetuate itself.

Habits that promote entrepreneurial development

 Independence. A person who is independent finds it difficult to work for others. Such a person also has
the ability to create and innovate, therefore promotes entrepreneurial development.
 Time consciousness. Entrepreneurs value and effectively manage time and are able to achieve set goals.
 Direct/personal involvement. An entrepreneur is a hands-on person and believes in participatory
approach.
 Risk taking. An entrepreneur continually takes moderate or calculated risks. This enhances growth of
the enterprise.
 Willingness to fail or make mistakes. An entrepreneur does not fear failure but learns from it.
 Decision.Follows dreams with decision on how to develop.
 Relationship with others .Transactions and deal making. Build strong relationships with people around
them

Factors inhibiting (limits) entrepreneurial development

 Poor or lack of business acumen
 Poor marketing techniques
 Poor pricing policy or poor casting

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  Poor networking and benchmarking to expand business horizon, customer base and markets
 Negative attitude towards entrepreneurial culture
 Lack of achievement motivation
 Poor delegation due to belief of self righteousness, confidence or lack of trust in other people.
 Inability to uphold new technology, ideas and practices
 Failure to utilise time effectively

Ways of managing factors that inhibit development of entrepreneurial culture.

These include:
1. Relevant training to gain skills and experience
2. Ability to apply marketing, research, promotion and publicity
3. Employing people with right qualification to advice on pricing and costing of products to beat competition
4. Upholding social networking, joining business groups like chamber of commerce and business associations in
order to expand business horizon, customer base and markets.
5. Inculcate entrepreneurial culture and have positive attitude outlook towards entrepreneurial activity benefits.
6. Employ qualified experienced workers and delegate responsibility and encourage teamwork and team spirit
7. Training workers in appropriate technology use and innovative ways and practices
8. Manage time effectively by working within blocks of time. They can also be trained in time management and
time valuation.

Revision question and write in your books for revision

1. What are the 5 factors that have contributed to the growth of entrepreneurship in Kenya? (5 marks)
2. Outline four reasons for establishment of a business enterprise (4 marks)
3. A surgeon set up a clinic in a distant rural centre. The business was closed after six months. Identify
five possible causes for the failure (5 marks)
4. State four reasons why the government of Kenya is encouraging entrepreneurial knowledge in
schools
5. Identify five benefits of entrepreneurship to the developing economies such as Kenya (5 marks)
6. State 5 roles of an entrepreneur in production (5 marks)

TOPIC SIX: ENTREPRENEURIAL OPPORTUNITIES

Introduction
Starting a business requires knowledge, skills, abilities and values. It is therefore important for entrepreneurs to
develop viable business ideas by identifying community needs for products and services.
A business opportunity is an attractive idea which provides the possibility of a return for the entrepreneur taking
the risk. Such opportunities are presented by customer requirements and lead to the provision of a product or
service which creates or adds value to the buyers or end users.
Characteristics of a good business opportunity
A good business opportunity must fulfill or be capable of meeting the following:
 Real demand i.e. it should respond to unsatisfied needs or requirements of customers who have ability to
purchase and are willing to exercise that choice.
 Return on investment – provide durable, timely and acceptable returns or rewards for the risk and effort
required. (profit making motive)
 Competitive – Equal to or better compared to the competition in the market from the viewpoint of the
customer and available products or services.
 Meet objectives – meet the goals and aspirations of the person taking the risk.
 Available resources and competencies –must be within the reach of the entrepreneur in terms of resource,
competency, legal requirements etc.
Ways of generating business ideas
What is a Business Idea
 An opportunity in the environment which, can be translated into a business activity.
 The existence of a situation in the environment which, can be advantageously turned into a business
activity.

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  The existence of an opportunity which can be exploited for making money through the operation of
business activities.
 It is the response of a person (s) or organisation to solving an identified problem or to meeting perceived
needs in the environment (markets, community)
Why search and evaluate business ideas? (Importance)
 You need a great idea to start a new business. A good business idea is essential for successful business
venture both when starting a business and to stay competitive afterwards
 Business ideas need to respond to market needs. Customers have needs/wants waiting to be satisfied.
Firms that are able to satisfy these requirements are rewarded.
 Business ideas need to respond to changing consumer wants and needs. i.e. provide opportunities for the
entrepreneur to respond to demand with new ideas , products/services
 Business ideas help entrepreneurs stay ahead of competition. Challenge is to be different or better than
others. If you don’t come up with new ideas products/services a competitor will.
 Business ideas use technology to do things better. Technology has become the major competitive tool in
today’s markets as a result of which many people have to come up with new ideas.
 Business ideas are needed because the life cycles of products are limited. Products have a finite life, they
become obsolete or outdated. Firms have to introduce new products
 Business ideas help to ensure that businesses operate effectively and efficiently .
 There are so many business opportunities available at any one time and the requirements for translating
them into business activities differ between each of them.
 The need to develop a competitive edge by providing something new that has little or no competition
 The success and profitability differ between various business opportunities, hence need to pick one with
profit and success potential.
Sources of business ideas
Ideas can be generated from:
i) Hobbies/personal interests
ii) Personal skills/experience
iii) Mass media (newspapers, magazines, TV, internet)
iv) Business exhibitions
v) Surveys
vi) Customer complaints
vii) Changes in society
viii) Brainstorming
ix) Being creative

Ways of generating business ideas

There are various ways through which business ideas can be generated. These include:
 Identifying a need in the community: People usually have many unsatisfied needs. By carrying out a
market survey on the location where you need to establish your business and talking to the potential
customer may reveal gaps in that market.
 Market research: Conduct a market survey and try to identify business opportunities existing in the
market. People may be requiring new product/services or the ones existing could be having several
weaknesses. These are good opportunities for you.
 Listening to complaints of customers so that you improve an existing business.
 Brainstorming- This involves sitting in a group and trying to think of as many possible businesses as
possible using the ‘freewheel ’policy . Take time and digest all the suggested ideas as a basis for making
the final decision on the one most suitable for you.
 Creativity – By looking at things in a new way and combining two or more ideas in a new way, such as,
one stop shopping spots for customers e.g.. a restaurant and a salon combination.
 Business ideas can also be generated through developing personal hobbies and discussions with friends
Guidelines for Business Idea Generation Process:
 Think of as many ideas as possible
 Go out, look and listen.

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  Always analyse ideas carefully before finally selecting which ones to implement.
 Be simple
 Start small . “If you want to go somewhere start small”

Evaluation of business opportunities for viability.

Ideas and opportunities need to be screened and assessed for viability once they have been identified or generated.
This is not an easy task though important because it makes the difference between success and failure.
The exercise certainly helps in minimizing the risks and thus the odds of failure.
Identifying and assessing business opportunities involves determining risks and rewards/ returns reflecting the
following factors.
i. Personal goals and competencies of an entrepreneur. It is important for an entrepreneur to possess
competencies, knowledge, skills and abilities before starting a business where these competencies are
lacking, it’s vital to develop or bring in others/managers that compliment what is already available.
ii. Length of the ‘window of opportunity’. Opportunities do not exist forever. The entrepreneur has to
assess how long this window will be opened in order to make an investment decision.
iii. Industry/market. Is there a need for the product/service? It is also important to know the size of the
market.
iv. Management skills. Those businesses that require high level of capital injection, require proper
management skills.
v. Competition Check out whether the business has a competitive edge over other competitors e.g.
potential constraints and if the industry faces existing entry barriers.
vi. Resources. Availability and access of these resources determines whether certain opportunities can be
pursued.
vii. Environment. This refers to political, economic, geographical, legal, regulatory and also physical
environment within which a business operates.
viii. Business plan. The process of examining the factors discussed above is often the initial step in
developing a business plan. Investors and lenders may require these issues to be considered and set out in
form of a business plan.

TOPIC 7: ENTREPRENEURIAL MOTIVATION

For entrepreneurship to thrive, an entrepreneurs needs to be motivated. Motives are the needs, drives and values
that add energy to and direct one’s abilities.

Motivation refers to a drive that is sufficiently pressing to direct the person to seek satisfaction of the need while a
need becomes a motive when it is aroused to a sufficient level of intensity.
Motivation can be viewed better by looking at factors which help sustain the quality or intensity of the manifested
behaviour.
Theories of Motivation.
1.) Achievement Theory (McClelland). Human beings are seen to be driven by three main factors:
i. Need to achieve
ii. Need for power
iii. Need for affiliation

To achieve means success and therefore the underlying entrepreneur motivation. If you need to achieve you
select goals which will accomplish the need. This need makes an entrepreneur to be persistent. They choose
challenging tasks. This motivation behaviour is related to parental characteristics, family, culture, role
models.

2). Abraham Maslow’s Hierarchy of Needs

Draw the diagram showing maslow

This theory was developed by Maslow in 1954. It states that human needs are arranged in hierarchical order
beginning with the most basic need. (Draw the diagram from whatsapp)

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 1. Physiological needs They include basic needs (e.g. food, water, shelter) It includes the most basic needs
for humans to survive, such as air, water, Clothing and food. Maslow emphasized, our body and mind
cannot function well if these requirements are not fulfilled. Most of entrepreneurs venture into the
business activities in order to satisfy their basic needs (physiological needs)
2. Safety and security (secure source of income, a place to live, health and well-being) Safety needs refer to
a person’s desire for security or protection. Basically everything looks less important than safety and
protection (the physiological needs even sometimes). The healthy and fortunate adults in our culture are
largely satisfied in their safety needs. Safety and security needs include: Personal security; Financial
security; Health and well-being; Safety mesh against accidents, illnesses and their adverse impacts. this
may lead person to be motivated in doing business
1. Love and belongingness needs - after physiological and safety needs have been fulfilled, the third level
of human needs is social and involves feelings of belongingness. The need for interpersonal relationships
motivates behaviour.Examples include friendship, intimacy, trust, and acceptance, receiving and giving
affection and love. Affiliating, being part of a group (family, friends, work).
2. Esteem needs are the fourth level in Maslow’s hierarchy - which Maslow classified into two categories:
(i) esteem for oneself (dignity, achievement, mastery, independence) and (ii) the desire for reputation or
respect from others (e.g., status, prestige). Maslow indicated that the need for respect or reputation is
most important for children and adolescents and precedes real self-esteem or dignity.
3. Self-actualization needs are the highest level in Maslow's hierarchy, and refer to the realization of a
person's potential, self-fulfilment, seeking personal growth and peak experiences. Maslow (1943)
describes this level as the desire to accomplish everything that one can, to become the most that one can
be.
Entrepreneurial motivation factors
Although the motivations for venturing out alone vary greatly, the following are some of the reasons cited for
becoming an entrepreneur:

Internal motivations and drives include:

a) Need for self actualisation

b) Need for achievement
c) Need to take up a challenge
d) Need for inadequacy
e) Need for success in certain class (social)
f) Need for adventure – discover the business world
g) Need to reduce tension
h) Need to acquire the social status
i) Need to control power
j) Unemployment
External motivations and drives
a) Role models – looking at those already successful in business
b) Family background
c) Training
d) Support social systems
e) Geographical position of the area
f) Needs for external income as a push
g) Government incentives
h) Market availability
i) Infrastructure
j) Credit facilities

TOPIC 8: ENTREPRENEURIAL COMPETENCIES

Entrepreneurial competencies play an important role in entrepreneurship development. To achieve high
productivity levels in the enterprise, the entrepreneur needs to acquire entrepreneurial competencies in order to
carry out effective managerial and entrepreneurial functions.
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A competence is the ability, which an individual requires to do an assigned job. It is a work related concept which
refers to areas of work at which the person is competent.

Entrepreneurial competencies are clusters of related knowledge, attitudes, and skills which an entrepreneur must
acquire through managerial training and development to enable him produce outstanding performance, maximize
profit, while managing a business venture or an enterprise

Key entrepreneurial competencies

i. Time management. Time is a scarce resource, it is irreplaceable and irreversible, therefore to achieve
more in the day to day business, the entrepreneur must be thoroughly equipped with the skills for
managing his/her time effectively.
ii. Communication Skills. Communication is the transfer of ideas from the sender to the receiver. It is a
means of transmitting information, work instructions and feedback in the business enterprise. It is crucial
management tool, and an entrepreneur must learn to communicate in correct, clear, short and courteous
manner in order to accomplish desired goals.
iii. Human Resources Management. The entrepreneur needs to put in place both human resources (labor)
and capital resources (money, machinery, materials and methods) in order to achieve the overall
organizational goals and objectives. The effective management of human resources determines the
success or failure of the organization because all other resources depend on the human element.
iv. Marketing Management. A business enterprise will need to develop new products and services to
maintain it’s distinctiveness in a competitive market. This should be an ongoing process based on
information regarding changing customer needs and competitive strategies.
v. Social Responsibility. The establishment of every business venture is backed up by the profit motive
which leads to the production of goods and services. The entrepreneur needs to effect some social
responsibilities contribution to community development, product safely, employment generation, ethical
business among others.
vi. Leadership. For an entrepreneur to succeed, they must have the ability to direct the organization and
persuade others to meet the objectives of the business. They has to be creative with unique leadership
qualities and personal styles.
vii. Decision- making. They makes decisions on a daily basis and therefore has to acquire adequate
knowledge and skills in decision making to enable him/her make the right decisions and implementing
them in order to achieve the optimum result in a given situation.
viii. Financial Management. An entrepreneur needs to acquire knowledge on financial management issues
like anticipation of financial needs for the enterprise, acquisition of funds and allocation of funds in order
to yield optimum result.
TOPIC 9: STARTING A SMALL BUSINESS
An enterprise It is a business organisation that provides goods and services to make profits and has growth
potential.
A business enterprise is a legally recognised organisation designed to provide goods and/ or services to
consumers.
Procedure for starting a Small enterprise
For a business to succeed the right approach must be followed. Below is a suggested approach that can be
followed:
1. Idea generation. coming up with the business idea(about the kind of business someone wants to start)
2. Market survey. conduct market research in order to; Define problem, target population, collect data,
Analyse data, report findings about the customers in the market.
3. Business plan. coming up with effective business plan indicating; business
description,marketing,operation/production,management,finance,risks and assumption about the business
4. Selection of a suitable location of the business.
5. Mobilization of finance (raising funds to start and run the business)
6. Business registration to the relevant authorities (local govt or national govt)
7. Licensing. authority to operate

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Factors to consider when starting a small enterprise
 Entrepreneurial traits. ability and competences to start and run business
 Business management and technical skills
 Long term market demand for product/service
 The cost of starting, operating and personal finance
 The level of competition – direct, indirect and future
 The business location – zoning law and appropriateness
 The rules and regulations for operating the business.
 The anticipated profit.(objectives of the business)
 The machinery, tools and equipment required and their cost.
 The source of supply of goods/raw materials.

Causes of Business failure

 Inappropriate business management and technical skills (adaptable to changing customer needs).
 Inadequate financing (funds)
 Lack of proper record keeping
 Improper costing and pricing of the products/services
 Incompetent employees.(unskillful workers)
 Neglecting customers.
 Ignoring competition
 Neglecting suppliers

Challenges faced when starting a small business

i) Estimating market demand
ii) Estimating start –up capital and operating expenses
iii) Meeting legal requirements (rules and regulations)
iv) Financial institutions are redundant to lend to start –ups
v) Identifying reliable source of supply
vi) Lack of entrepreneurial skills, business management skills and technical
vii) Selecting a suitable business location.
viii) Deciding on the type of business ownership

FORMS OF BUSINESS OWNERSHIP

A business unit is an organization formed by one or more people with a view of engaging in a profitable activity.
The following are the types of business organisations:

i) Sole proprietorship –This is a business owned by one person.

Advantages.
 Ease of formation: this is the easiest form of business organization to establish.
 Easy to raise capital.
 Owner makes independent decisions: the business owner has complete control over the business is solely
responsible for all decisions in the business.
 Owner has personal contact with employees and customers.
 Owner enjoys all the profits.
 Flexibility: the business owner is able to respond quickly to business needs in day-to-day management
decisions of the business.
Disadvantages
 Bears all the losses.
 Capital base may be limited: This kind of business has less financing capacity. The amount of funds a
sole proprietor can raise is limited to their assets and their credit worthiness.

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  Has unlimited liability: The business owner has little or no protection against personal liability in the
event of bankruptcy or adverse legal judgement. Personal assets such as the owners house, land, car and
investments are liable to be seized if necessary to pay outstanding debts.
 Success of the business depends on the entrepreneur’s hard work.
 Business operations can be affected by death of the owner.

ii) Partnerships
A partnership is an association of two or more persons who come together to carry on a business with a view to
making profit. Although it is possible to establish a valid partnership without a formal agreement, it is advisable
to sign an agreement first. The agreement will state:
 The effective date of the partnership.
 The business name of the partnership.
 The contributions of capital by each partner
 How the business profits and losses will be shared.
 How a partner may withdraw from the partnership
 How the business assets and liabilities will be shared in the event of a dissolution.
Advantages
 Capacity for more capital; partners can raise more capital than a sole trader. The asset base is much
higher.
 Work is divided among partners.
 Better combination of skills and talents
 Losses and liabilities are shared among partners.
 Business can easily expand.
 Formation of the business is simple: the registration and legal formalities are easy and simple.
Disadvantages
- The liability of partners is unlimited.
- Partners are likely to disagree on various matters affecting the business.
- If one partner makes a mistake, all other partners suffer the consequences.
- Some partners may work harder than others, yet the profits are shared. This may discourage a hard
working partner.
- If the business relies heavily on one partner and the partner leaves or dies, the firm can easily collapse.
- Control is shared

iii) Private limited company – It is formed by a minimum of two shareholders and a maximum of fifty.
Advantages
 Can raise more capital through sale of shares.
 It has limited liability.
 Death of a shareholder does not affect its operations.
 They are managed by professionals.
Disadvantages
 Shareholders can only transfer their shares with the consent of other shareholders.
 The company is not allowed to appeal to the public for extra capital, so it may find it difficult to raise
money for expansion.
 Accounts of the company must be filed annually with the registrar of companies.
iv) Public limited company – It has a minimum of seven shareholders and no maximum number of shareholders
Advantages
 Shareholders liability is limited to the amount contributed.
 It can raise more funds through sale of shares.
 There is no restriction on the transfer of shares.
 Public companies can easily expand due to large capital base.
Disadvantages
 The procedure of forming the company is long and complicated.

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  Raising capital can be expensive due to the cost involved.
 As the company grows it may be difficult to manage.
 Once established it has to comply with many regulations.
 The accounts of a public company must be published, so there is no secrecy or privacy about its affairs.
 Owners exercise little control over the business.

v) Co-operative - It is formed by people with a common interest such as those in the same trade or dealing in
similar commodities. A cooperative is a business or organization owned by and operated for the benefit of
those using its services. Profits and earnings generated by the cooperative are distributed among the members,
also known as user-owners.
Advantages
 Less Taxation. Cooperatives that are incorporated normally are not taxed on surplus earnings (or
patronage dividends) refunded to members.
 Funding Opportunities. Depending on the type of cooperative you own or participate in, there are a
variety of government-sponsored grant programs to help you start
 Reduce Costs and Improve Products and Services. By leveraging their size, cooperatives can more easily
obtain discounts on supplies and other materials and services.
 Perpetual Existence. A cooperative structure brings less disruption and more continuity to the business.
 Democratic Organization. Democracy is a defining element of cooperatives. The democratic structure of a
cooperative ensures that it serves its members’ needs.

Class Assignment
1. Discuss 7 main clauses of Memorandum Of Understanding in formation of company under company
Act.(14 marks)
2. Discuss five main types of Co-operatives (10 marks)

BUSINESS LIFE CYCLE

Stage 1: Development / Seed Stage

The development or seed stage is the beginning of the business lifecycle. This is when your brilliant idea is
merely just a thought and will require a round of testing in its initial stage. In testing your business idea, you may
conduct research regarding the industry, gather feedbacks from your friends, family, colleagues, or other industry
specialists.
Challenges
 Business Idea Profitability
 Market Acceptance
 Establishing Business Structure
 Accounting Management

Stage 2: Start-up/Establishment Stage

In this stage, Business finished developing the products or services that your business has to offer and will begin
marketing and selling. The business is introduced in the market and commences its operations and activities.
Challenges
 Managing Cash Reserves
 Managing Sales Expectations
 Accounting Management
 Establishing Customer Base
 Establishing Market Presence

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Stage 3: Growth / Survival Stage
The business is consistently generating revenue and adding new customers. These recurring revenue will help pay
for your operating expenses and open up new business opportunities. Most of the customers knows the business in
the market. sales are high and the profits are high.
Challenges
 Dealing with Increasing Revenue
 Dealing with Increasing Customers
 Accounting Management
 Effective Management
 Market Competition

Stage 4 : Maturity Stage

Business has been a thriving company and established its presence in the industry. Business will expand and
spread its roots into new markets and distribution channels. In order to start capitalizing on the success of your
business, you will need to capture a larger market share and find new revenue. Therefore your business will
experience a rapid growth in revenue and cash flow.
Challenges
 Increasing Market Competition
 Accounting Management
 Moving into New Markets
 Adding New Products/Services
 Expanding Existing Business
Stage 5: Decline stage
It is the worse stage for the entrepreneurs; the business may start failing to perform well the market. most of
entrepreneurs ends up closing the business and going back from the first stage.
Challenges
 Increasing Market Competition
 Accounting Management
 Moving into New Markets
 Adding New Products/Services
 Expanding Existing Business
 Exit Strategy
Regulations Affecting Business
i) Legal registration e.g. registration of business names
ii) Tax compliance e.g. VAT, income TAX, PAYE
iii) Trade license e.g. single business permit
iv) Public health inspection
v) Environmental requirements e.g. NEMA
vi) Registration with relevant government department e.g. Ministry of Fishery, Livestock, Training
vii) Social Security requirement e.g. NSSF
viii) Zoning regulation e.g. Industrial zone
ix) Code of conduct

Business support services available for small businesses.

In order to increase chances of survival small businesses need to identify firms that offer support services where
they can get help with the running of the business. Some of the support services for small enterprises include:
i. Training services . This is necessary to improve capital in entrepreneurial, management and technical
skills
ii. Marketing services. To determine market demand and provide market linkages
iii. Business counselling. This will help improve management. Capacity of small business owners in
effective planning, implementation and control of business operations

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 iv. Banking services. This enables businesses to build credibility, reduce risks of handling cash and save
funds for future use.
v. Insurance services. Insurance firms are important for small business as it enables them reduce risks
associated with operating businesses.
vi. Postal services. To facilitate effective and affordable communication
vii. Book keeping. To ensure business records are accurate and up to date and that the organization is tax
compliant.
viii. Business incubators. To provide a nurturing environment for small businesses through the provision of a
wide range of business support services such as training, marketing assistance, networking, tax
preparation. Technology provision. Enables small businesses to embrace appropriate and affordable
technologies e.g. Agriculture Technology Development Centers, Kenya Industrial Research and
Development Institute ( KIRDI)

TOPIC 10: BUSINESS ENTERPRISE MANAGEMENT

Any business large or small must apply managerial skills in order to come up with decisions that are practical.
These decisions involve the utilisation of business resources so as to achieve organisational goals.
MANAGEMENT
Management can be defined as the process of administering and controlling the affairs of the organization, irrespective of its
nature, type, structure and size.
It is an act of creating and maintaining such a business environment wherein the members of the organization can work
together, and achieve business objectives efficiently and effectively
Management acts as a guide to a group of people working in the organization and coordinating their efforts, towards the
attainment of the common objective.
Levels of Management
1. Top-Level Management: This is the highest level in the organizational hierarchy, which includes Board of
Directors and Chief Executives. They are responsible for defining the objectives, formulating plans, strategies and
policies.
2. Middle-Level Management: It is the second and most important level in the corporate ladder, as it creates a link
between the top and lower-level management. It includes departmental and division heads and managers who are
responsible for implementing and controlling plans and strategies which are formulated by the top executives.
3. Lower Level Management: Otherwise called as functional or operational level management. It includes first-line
managers, foreman, supervisors. As lower-level management directly interacts with the workers, it plays a crucial
role in the organization because it helps in reducing wastage and idle time of the workers, improving the quality and
quantity of output.
Functions of Management
 Planning: It is the first and foremost function of management, i.e. to decide beforehand what is to be done in future.
It encompasses formulating policies, establishing targets, scheduling actions and so forth.
 Organizing: Once the plans are formulated, the next step is to organise the activities and resources, as in identifying
the tasks, classifying them, assigning duties to subordinates and allocating the resources.
 Staffing: It involves hiring personnel for carrying out various activities of the organization. It is to ensure that the
right person is appointed to the right job.
 Directing: It is the task of the manager to guide, supervise, lead and motivate the subordinates, to ensure that they
work in the right direction, so far as the objectives of the organization are concerned.
 Controlling: The controlling function of management involves a number of steps to be taken to make sure that the
performance of the employees is as per the plans. It involves establishing performance standards and comparing
them with the actual performance. In case of any variations, necessary steps are to be taken for its correction.
 Reporting − The manager has to keep updated information about all the ongoing tasks, and it is the sole
responsibility of the manager to report the updated status to the higher authorities; while all the employees are bound
to report to the manager.
 Budgeting − A task has to be completed within the given time frame as well as it should be cost efficient. The
manager needs to be double sure that all the amount invested in the project doesn’t exceed the budget given and in
case of imbalance, the budgeting manager has to report to the management.
 Coordination is an important feature of management which means the integration of the activities, processes and
operations of the organization and synchronization of efforts, to ensure that every element of the organization
contributes to its success.

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  Motivation is defined as the enthusiasm, energy level, commitment and the amount of creativity that an employee
brings to the organization on a daily basis. It is all about how engaged an employee feels in tandem to the
organization’s goals and how empowered he/she feels.
Challenges of a Manager
 Managing workforce diversity . Manager shouldn’t create or encourage discrimination among employees.
Employees from different background, culture, and ethnicity should be treated as equal and rewards should be given
only on the basis of work.
 Improving quality and productivity. It is the sole responsibility of the manager to increase the productivity
without hampering the quality. It can be done in two ways −
 Responding to labor storage. If there is a labor shortage then the manager should quickly respond to solve this
problem by arranging for the workforce required so that the product delivery is not delayed.
 Eradication of labor shortage. The manager needs to take quick action, if there is a labor shortage and should
assure with backup plans so that there is no labor shortage in future.
 Improving customer service. Manager faces the challenge to constantly improve customer service to survive in an
ever-competitive environment.
Qualities of a good manager
i) Intelligence – to enable him understand difficult ideas and deal with varied issues.
ii) Initiative – to enable him get solutions to problems and take control of situations
iii) Self confidence – to be able to lead others and set an example
iv) Communication skills – to clearly pass ideas to others to enable them to respond positively
v) Energy and enthusiasm – to set high standards of effort and involvement to encourage others to
follow his example.

INVENTORY MANAGEMENT

In many businesses, the cost of purchasing merchandise for resale (retailing) or the costs of purchasing and
converting materials into finished products (manufacturing) represent the business's most significant expenditures.
Keeping track of merchandise and materials, known as inventory, is important because of the
Considerable costs involved. This can be accomplished through a good inventory record keeping system.

Inventory Record Keeping

Inventory record keeping establishes and maintains information on current inventory, the additions and
withdrawals to inventory and inventory balances at the end of specified periods (week, month,
etc.). These records identify the products/materials, the quantities and the value (cost) of these products/materials.

There are two different methods used in inventory record keeping: perpetual and periodic.

i. Perpetual Inventory. The perpetual inventory method starts with a physical inventory (actual count) and
then adjusts this inventory for additions and withdrawals. The inventory at the end of the period is
calculated by subtracting the number of units sold from the total of the beginning inventory plus the
additional units produced. This method is used when reliable sales and production information is readily
available and the frequent taking of physical inventories would be burdensome. However, physical
inventories must be periodically taken (e.g., quarterly or annually) to check the calculated inventories.
The inventory records are then adjusted to agree with the physical inventories. The financial effect of
these adjustments is reflected in the balance sheet and the profit/loss statement of the business.

ii. Periodic Inventory. The periodic inventory starts with the physical inventory taken at the end of each
period. Sales or production amounts are then calculated based on the beginning and ending physical
inventories. This method is used when reliable sales or production data are not readily available.

Inventory Control

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Inventory control is the management of inventory and relies heavily on information provided by the inventory
record keeping system. Inventory is required to support the operations of the business, whether it be a retailing or
manufacturing business.
The proper management of inventory helps the business achieve its objectives in sales, costs and profits. The
business plan must recognize and define the role inventories will play in achieving the business objectives.

Inventory control consists of the following:

 Setting objectives for inventory: the type, quantity, cost and order/production point (what quantity will
initiate action for resupply) of products/materials.
 Recording and reporting actual results (done by the inventory keeping system).
 Comparing actual results with objectives and analyzing the differences.
 Taking action to correct problems or improve business performance.

Inventory Strategies

Every business competes within an industry and each industry has

a life cycle. The strategies employed by the business depend on
where in the life cycle the industry is. The management of
inventories is influenced by this life cycle.

Generally, there are four stages in the life cycle of an

industry. These are as follows:

* Development - Uniquely new products are being developed and

market tested. Products must be available for market
testing. There is little concern about inventory
investment, other than to be sure products are available
for market testing and development.

* Growth - The product has been demonstrated to have

significant market potential and the business strives to
gain a major market share. Investment in inventory is heavy
to ensure product availability to gain significant market
share.

* Maturity - Growth has leveled off. Inventories are very

closely controlled to keep investment in them just
sufficient to maintain market share.

* Aging - A period of retrenchment as competitive industries

take away or eliminate markets. Inventories decline as
unprofitable and marginally profitable segments of the
business are weeded out.

The proper control of inventories is essential to the success of

any business in which investment in inventories is significant.
Awareness of the competition and the state of new product
development is just as important as a finely honed record-keeping
system. While the record-keeping system is important, how it is
applied will determine the success of the business.

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10.3.4 MANAGING BUSINESS RESOURCES
MANAGING EMPLOYEES
One of the keys to successful businesses is the employment and retention of the right people. However the
employment of staff also brings with it legal obligations, including:
 Provision of a safe working place as per the Occupational Health and Safety Act;
 The need to have a policy dealing with discrimination and harassment in the workplace; and
 Payment of minimum wages and provision of conditions.
Employment Conditions
All employers have certain legal obligations to their employees, including:
 paying correct wages;
 ensuring a safe working environment;
 supporting an anti-discriminatory and anti-harassment workplace;
 taking out workers compensation insurance;
 paying superannuation contributions;
 Paying a range of employee-related taxes.
Employees may be entitled to:
 a range of leave entitlements;
 notice of termination and severance pay;
 Protection from unfair dismissal or unlawful termination.
All employers in Kenya are required to comply with, and exhibit a copy of, all relevant awards applicable to their
workplace.
To motivate and retain staff:
 Try to pay staff electronically or by cheque - avoid cash.
 Introduce staff incentives that encourage sales.
 Acknowledge staff performance and encourage good working morale.
 Determine the reason for staff turnover, if applicable.
 Identify training needs of staff and encourage ongoing learning.
 Be aware of occupational health and safety (OH&S) issues and have risk management policies and
processes in place.
 Ensure that staff and clients have facilities that will enhance relationships and satisfaction levels.
 Review the decor and layout of your premises to ensure that you are conveying the most professional and
appealing image to clients.

Personnel Selection
If your business will be large enough to require outside help, an important responsibility will be the selection and
training of one or more employees. You may start out with family members or business partners to help you. But
if the business grows - as you hope it will - the time will come when you must select and train personnel.
Careful choice of personnel is essential. To select the right employees determine beforehand what you want each
one to do.
Then look for applicants to fill these particular needs. In a small business you will need flexible employees who
can shift from task to task as required. Include this in the description of the jobs you wish to fill. At the same time,
look ahead and plan your hiring to assure an organization of individuals capable of performing every essential
function. In a retail store, a salesperson may also do stockkeeping or bookkeeping at the outset, but as the
business grows you will need sales people, stockkeepers and bookkeepers.
Once the job descriptions are written, line up applicants from whom to make a selection. Do not be swayed by
customers who may suggest relatives. If the applicant does not succeed, you may lose a customer as well as an
employee.
Some sources of possible new employees are:
1. Recommendations by friends, business acquaintances.
2. Employment agencies.
3. Placement bureaus of high schools, business schools, and colleges.
4. Trade and industrial associations.
5. Help-wanted ads in local newspapers.

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Your next task is to screen want ad responses and/or application forms sent by employment agencies. Some
applicants will be eliminated sight unseen. For each of the others, the application form or letter will serve as a
basis for the interview which should be conducted in private. Put the applicant at ease by describing your business
in general and the job in particular. Once you have done this, encourage the applicant to talk. Selecting the right
person is extremely important. Ask your questions carefully to find out everything about the applicant that is
pertinent to the job.
References are a must, and should be checked before making a final decision. Check through a personal visit or a
phone call directly to the applicant's immediate former supervisor, if possible. Verify that the information given
you is correct. Consider, with judgment, any negative comments you hear and what is not said.
Checking references can bring to light significant information which may save you money and future
inconvenience.
Personnel Training
A well-selected employee is only a potential asset to your business. Whether or not he or she becomes a real asset
depends upon your training. Remember:
 To allow sufficient time for training.
 Not to expect too much from the trainee in too short a time.
 To let the employee learn by performing under actual working conditions, with close supervision.
 To follow up on your training.
Check the employee's performance after he or she has been at work for a time. Re-explain key points and short
cuts; bring the employee up to date on new developments and encourage questions. Training is a continuous
process which becomes constructive supervision.
Personnel Supervision
Supervision is the third essential of personnel control. Good supervision will reduce the cost of operating your
business by cutting down on the number of employee errors. If errors are corrected early, employees will get more
satisfaction from their jobs and perform better.
Motivating Employees
Small businesses sometimes face special problems in motivating employees. In a large company, a good
employee can see an opportunity to advance into management. In a small company, you are the management. One
thing you may wish to consider is to give good employees a small share of the profits, either through part
ownership or a profit-sharing plan. Someone who has a "share of the action" is going to be more concerned about
helping to make a success of the business.
Simpler ways of motivating employees include:
 Introduce staff incentives that encourage sales.
 Acknowledge staff performance and encourage good working morale.
 Determine the reason for staff turnover, if applicable.
 Identify training needs of staff and encourage ongoing learning.
 Be aware of occupational health and safety (OH&S) issues and have risk management policies and
processes in place.
 Ensure that staff and clients have facilities that will enhance relationships and satisfaction levels.
 Review the decor and layout of your premises to ensure that you are conveying the most professional and
appealing image to clients.

MANAGING CAPITAL

Cash shortages can prevent you from meeting your financial obligations and make it difficult to expand your
business. In some cases it will mean you will need to close your business. It is important to know your cash flow
position. To manage your cash flow, take note of the following tips.

Account for Every Shilling and Cent

 Install an accounting system that produces relevant financial reports and meets tax requirements.
 Keep your financial records and bookkeeping up to date.
 Use the information in your accounting system to draw up a budget and cash flow forecast.
 Manage your cash inflow and outflow - be prepared for anticipated tax installments and other payments.
 Do your banking regularly, both for security reasons as well as keeping track of your cash flow.

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  Reconcile your bank statements regularly, double-checking receipts and payments with your own records.
 Ensure that you receive record and retain all tax invoices for taxable purchases to support your claim for
tax credits.
 Consider visiting your accountant every three months to review your business performance.
Other Important Factors
 Bill your customers early and often.
 Keep a detailed account of all your debtors and act promptly on overdue accounts.
 Promptly follow up any dishonoured cheques.
 Consider offering discounts for cash sales or early payments of credit purchases.
 Consider alternatives to improve your sales terms, eg lay-by terms, payment terms, credit terms.
 Keep a detailed list of amounts that you owe. Your debts may build up without your knowing.
 Use payable credit terms to your benefit, increasing the effectiveness of your cash flow.
 If suppliers want to be paid early, ask about discounts for early payments.
 Manage your investment debt. Don't over-borrow.
 Keep some cash for rainy days.
 Don't over-commit your personal expenses.

MANAGING TIME
Time management is critical to the achievement of organization goals. Projects or activities delayed due to poor
time management can cost the company in terms of poor image and loss of business opportunities due to being
perceived by customers as unreliable.

Benefits of Time Management

Proper time management has several benefits.
 It conserves time allowing for the completion of many more projects or activities.
 Proper time management ensures greater organization and therefore smoother operations
 Reduces anxiety and stress
 Motivates and organizes employees
 Reduces avoidance or procrastination
 Eliminates crisis management

Factors influencing the use of time

The use of time is influenced by the following factors:

 Goals, values, standards – whether or not one values time.

 Responsibilities – Many responsibilities require proper time management to complete tasks.
 Abilities:
– to plan, organize, perform a task
– to manage time

Managing Time Effectively

Rules for managing time effectively include the following:

 Realistic time plan

 Decisive – focus on the tasks at hand
 Leave unnecessary jobs out
 Delegate to competent employees
 Work faster
 Reward yourself and employees after successful completion of important tasks.
 Avoid procrastination
 Develop habits that save you time.

To-do Lists
Prepare to-do lists to ensure that you do the following;

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 Keep track of performance
 Prioritize tasks – Important ones first
 Focus on current task
 Plan and ensure completion

Making a Written Time Plan

A written time plan will enable you to prepare accurate to-do lists.
Your time plan should be:

 Simple to implement
 Complete – include all that is necessary to complete required tasks
 Flexible – able to be adapted to changing needs
 Workable – Give adequate time to each task
 Prioritize tasks according to importance rather than urgency.

MANAGING TECHNOLOGY
The use of technology is important because it increases labour productivity and this in turn increases local
competitiveness for both consumer and producer. Technology selected by entrepreneurs should favour locally
produced tools and equipment. This makes it easier to maintain them and replace them wwhen necessary.

Characteristics of appropriate technologies:

Simple: It must be simple to operate, with minimal adjustment problems..

Effectiveness: The technology should be judged by how well it fits in with the objectives of the user.
Availability: The technology should be easily available locally.
Flexibility: The technology selected must be able to adapt to changing times and technologies e.g. upgrades.
Durable: Technology that is durable requires less maintenance and repairs.
Efficient: It should be efficient in utilization of resources.
Cost Effective: The cost of technology should be justified by it’s overall benefits. Benefits should outweigh
costs.

11.0 FINANCIAL MANAGEMENT

11.1 Introduction

The success of business enterprise is determined by the ability of the entrepreneur to control the financial
resources of the business. An entrepreneur should maintain a sound system of accounting records as this would
aid in determining whether the business is making profit or a loss. This is necessary for decision making.

This sub-module unit covers sources of business finance, recording of business transactions and preparation of
financial statements.

11.2 Specific objectives

By the end of this sub-module unit, the trainee should be able to:
a) Explain the meaning of financial management
b) Explain the importance of financial management
c) Identify the various sources of business finance
d) Identify types of business records
e) Record business transactions in the books of accounts
f) Prepare financial statements
g) Interpret financial statements for business decisions
h) Explain the importance of budgeting to a business

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11.3 CONTENT
11.3.1 Meaning of financial management
This is the process of controlling the financial resources within a business enterprise. In order for the
entrepreneur to be an effective manager he needs to develop tools that aid in decision making. Some of the tools
that can be used are:
(i) Cash budgets
(ii) Cash flow statements
(iii) Income statements and a balance sheet

11.3.2 Importance of financial management

Financial management is important because:-
(i) It helps in planning business activities
(ii) Decisions can be made to make any necessary corrections where there’s need.
(iii) Evaluation of performance is necessary and proper management can be aided by the tools that have been
used.
(iv) Efficiency of use of resources and capital can be determined.

11.3.2 Sources of business finance

A business enterprise can finance its operation from various sources. These vary with the size of the business and
the stage of growth. Sources are categorised as either internal or external. Internal sources are generalised within
the business while external sources are acquired from other parties.

Examples of internal sources are:-

(i) Personal finance- personal savings are a major source of capital during the start-up stage. The personal
savings may be obtained from former employment, money saved in savings/ fixed deposit accounts, sale
of personal assets such as land.
Advantages of this source are:
- It is the least expensive since no interest is paid.
- It does not involve legal process of acquiring
- It allows for flexibility on the use of funds
Disadvantages:
- It may be inadequate for business needs.
- May be used without proper planning.
- May take too long to raise adequate capital.
(ii) Retained earnings – These are the unutilized profits from previous years which can be used to finance
other needs such as expansion and acquisition of more assets.
(iii) Provision for depreciation and provision for taxation – These can only be borrowed for a short period of
time before replacement of depreciated assets or payment due to taxes that are made .
(iv) Sale and lease back – A business can opt to sell its assets and then lease the same from the new owner. It
will be paying rent for use of the assets.
(v) Sale of assets – A business could have at its disposal assets that can be converted into cash. Good
examples of such assets are old equipment, motor vehicles and other chattels.

External sources of business finance.

This type of finance is obtained from persons and parties other than the business owners.
Examples of external sources are:-

i) Trade creditors – these provide a business with goods on credit terms such as 90 days before repayment can
be made.
The entrepreneurs can sell the goods and use the proceeds to pay off the creditor on the due date.
ii) Loans – these are borrowings from commercial lending institutions. The terms and institutions vary from one
institution to another.
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iii) Overdrafts – These are short term sources of finance from commercial banks that a business can resort to in
order to solve its liquidity problem. The repayment period is normally one year.
iv) Hire Purchase – a business can get equipment from a hire purchase firm and pay for them in installments until
the whole line purchase price is paid. It becomes the property of the business when the last installment is paid,
otherwise it was on hire before such last payment.
11.3.4 Types of Business Records
There are various types of records that may be maintained by a business depending on the size of the business.
The following are some of the important business records:
i) Purchases journal.
This is a record of all daily purchase of stock on credit. It keeps a record of daily purchase of stock on credit. It
keeps a record of persons from whom a business has purchased on credit.
It’s also referred to as the purchases day book.
ii) Sales journal.
This is used to record all the daily credit sales. It shows the particular persons to whom goods have been sold on
credit. It is also known as the sales day book.
iii) Purchases returns journal
It provides a list of goods returned outwards to supplies. Goods may be returned for reasons such as, they are
defective, wrong type of quantities or description supplied, or goods damage on transit.
iv) Sales returns journal
It provides a list of goods returned inwards to the business by the customers.
v) The cash book.
This is the book in which all the receipts and payments are made. There are different types of cashbooks that a
business may maintain. These include one column, two columns or three columns cash book. The petty cash book
and analysis cash book may also be maintained.
vi) The ledger
All accounts of assets, liabilities, capital, revenue and expenses are maintained in a book known as the ledger. An
account- a chronological entry of all transactions affecting a given item or person.
Recording transactions in the ledger is made based on the concept of double entry which means that ever
transaction must have at least two effects and should therefore be recorded twice.

12.0 MARKETING
12.1 Introduction
Marketing is an important aspect of business management. It is through marketing that a business creates
awareness about its products. An entrepreneur must endeavour to create awareness and interest to customers
about the products that his/her business deals with.
This sub-module unit deals with definition of the terms market and marketing, components of marketing and
methods of gathering market information
12.2 Specific Objectives
By the end of this sub-module unit, the trainee should be able to:
a) Define the terms market and marketing.
b) Outline the components of marketing
c) Identify ways of gathering market information
12.3 Content

12.3.1 Definition
A market refers to conditions that bring sellers and buyers together. This may be a physical location or any other
medium such as electronic or print. A market can also be a group of consumers or an organisation that are
interested in a product, have the resources to purchase the product, and is permitted by law and other regulations
to acquire the product. The market definition begins with the total population and progressively narrows as shown
in the following diagram.

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Marketing refers to the performance of business activities that direct the flow of goods and services from the
seller to the consumer. It is an integrated process through which businesses create value for customers and build
strong customer relationships in order to capture value from customers in return.
Marketing is used to identify the customer, to keep the customer and to satisfy the customer. With the customer as
the focus of its activities, it can be concluded that marketing management is one of the major components of
business management.

12.3.2 Components of marketing.

Market components are commonly referred to as marketing mix. Marketing mix consists of the following
components:
i) Product
Product refers to tangible, phyical products or services that a business offers for sale. During the product
design and development, an entrepreneur must make decisions pertaining to the following:
 Brand name
 Functionality
 Styling
 Quality
 Safety
 Packaging
 Repairs and Support
 Warranty
 Accessories and services
ii) Place/ Distribution
Place refers to the actual location where the product is to be sold. It includes the activities that make the
product available to target consumers. In this case, an entrepreneur must make decisions pertaining to:
 Distribution channels
 Market coverage (inclusive, selective, or exclusive distribution)
 Specific channel members
 Inventory management
 Warehousing
 Distribution centers
 Order processing
 Transportation
 Reverse logistics
iii) Price
Price is the unit value attached to a product i.e. the amount of money that customers have to pay to obtain
the product. The entrepreneur in this regard must make decisions in relation to:
 Pricing strategy (skim, penetration, etc.)
 Suggested retail price
 Volume discounts and wholesale pricing
 Cash and early payment discounts
 Seasonal pricing
 Bundling
 Price flexibility
 Price discrimination
iv) Promotion
Promotion is the process of letting buyers know about a product, how it is made, its benefits, cost, and
quality among others.
It constitutes the activities that communicate the benefits of the product and persuade target customers to
buy it. The marketing communication decisions include:
 Promotional strategy (push, pull, etc.)
 Advertising
 Personal selling & sales force
 Sales promotions

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  Public relations & publicity
 Marketing communications budget
 Product development - specifying, designing, and producing the first units of the product.
 Pricing decisions
 Distribution contracts
 Promotional campaign development

13.0 ENTERPRISE SOCIAL RESPONSIBILITIES

13.1 Introduction
Social responsibility consists of those obligations a business has to society. It also involves specific
responsibilities and responsiveness to society. This requires obligation of businessmen to pursue those enterprise
policies to make those decisions or to follow those lines of action which are desirable in terms of objectives and
values to society.

13.2 Specific Objectives

By the end of this topic, the trainee should be able to:
d) Define the terms social responsibilities and business ethics
e) Explain the meaning of enterprise social responsibility
f) Identify types of enterprise social responsibility
g) Explain the importance of enterprise social responsibility
h) Explain ethical behaviour in a business enterprise

13.3 CONTENT
13.3.1 Definition of terms

Social responsibility refers to the fact that businesses should not just be concerned with profit maximisation but
should do so in a socially responsible manner. This responsibility requires the management of the business to
consider the social and economic effects of their decisions on society. Businesses should therefore pursue profit
maximisation within acceptable moral limits.

Business ethics
Ethics concerns the rules and principles that define right and wrong good and bad conduct. Ethics also deals with
moral ability and obligations.
Business ethics is also called management ethics and it is the application of ethical principles to business
relationships and activities.
Statt (1999,19) sees business ethics as the application of ethical concerns to the world of business and has three
areas of concern namely;
a) Code of Ethics
Where a company has explicit guidelines for the members about what constitutes acceptable behaviour to
stakeholders like staff or customers
b) Changes in the board of directors
To include people from outside the business world who reflect broader interests.
c) Social responsibility
By a company in the marketing of its goods and services, The entrepreneurs and employees have ethical
responsibilities or obligations which are placed on them by virtue of the positions they occupy in the organisation.
- Entrepreneurs should adhere to high ethical standards e.g. dealing fairly honestly and responsibly with his
employees and other stakeholders
- Employees are expected to exhibit the same high ethical standard of behaviour that will affect the
company’s image financially and economically.

13.3.2 ENTERPRISE SOCIAL RESPONSIBILITY

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 - The business operators have a responsibility to protect and improve society and their actions should not in
any way endanger a community or society.
- They should display high degree of corporate responsiveness which is the ability of an organisation to
relate its operations and policies to the environment in ways that are mutually beneficial to the
organisation and the society.
- Every enterprise small or large is expected to make positive contribution
a) To the community development
b) Product safety
c) Employment generation
d) Ethical business practices
e) Contribution towards educational activities like award of scholarships
f) Creating opportunity for apprenticeship training etc
- Undertaking some of these responsibilities may endear the entrepreneur to his host community to enhance
his/her image and social standing thus contributing significantly to his business success.
- Every business has a social responsibility to contribute to the development of the society in which it
operates. This social responsibility can be carried out in various ways such as
a) Supporting and contributing towards environmental conservation programmes
b) Ensuring that the goods and services produced and sold to the people are safe for human consumption
c) Ensuring that workplace is safe and secure for workers
d) Ensuring that the activities of the business do not cause environmental pollution or harmful effects to the
surrounding community.
e) Supporting and contributing towards social welfare programmes such as contributing towards the care of
orphans. , HIV/AIDs victims and flood victims.

Businesses have a duty to obey the laws of the countries in which they operate and also to fulfil their
contracts. Businesses are also a part of society and therefore they have a responsibility to maintain healthy
and safe surrounding.
This is done by;
i) reducing air and water pollution by applying appropriate waste disposal methods
ii) packaging goods in environmentally friendly materials e.g. the polythene bags used for carrying goods
from the supermarkets or the shops do not decompose. They therefore make the environment very untidy and
unhealthy especially in towns.
i) Keeping the business premises and work place clean at all times.
ii) Preserving the surrounding natural vegetation as much as possible
iii) Producing goods and services that are safe to use. These may be sold to consumers when safe especially
when handling and using.

In conclusion therefore, is the implied obligation of the business acting in its official capacity to serve or protect
the interests of community other than itself only.

13.3.3 TYPES OF ENTERPRISE SOCIAL RESPONSIBILITIES

Social responsibility can be put into three main categories.
a) social obligation. Based on the fact that society supports a business by allowing it to exist, the business
has a duty to supply the society with quality goods and services.
It should carry out its activities and make profit `within the limits of the law.
b) social reaction. A business can sometimes be under pressure from society to do certain things. As such,
the response of business gives/shows is referred to as a social reaction because the business is reacting to
social pressure. This social reaction is not a voluntary action on the part of the business.
It is a behaviour demanded by a group or groups of people who have a direct interest in the organisations
actions. E.g. a business could be forced to withdraw offensive advertisements by the public through social
pressure.
c) social responsiveness. This refers to actions taken by a business voluntarily. These actions may be due to
the anticipation of future needs of a society which the business tries to satisfy. A business that responds

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 to the social needs will actively seek ways to solve social problems e.g. a business operating in a given
locality may decide to employ some of the local people in order to reduce unemployment in the area.

1) SAFETY OF PRODUCTS
A business should show social responsibility by
a) Producing quality and safe products i.e. products should not be harmful to people’s health
b) Fairly pricing products – prices should not be exploitative
c) Having clear advertisements that do not misrepresent facts
d) Treating customers fairly
e) Offering clear credit terms and adequate product information
f) Responding quickly to customers complaints
g) Conducting research before allowing a product in the market
h) Proper labelling, packaging and presentation of products in a manner that the quality and quantity hazards
of use and limitations of use are clearly set.
i) Advising consumers about products and their use
2) TO THE GOVERNMENT
The business should be socially responsible to the government by:
a) Complying with the government laws and regulations
b) Paying proper taxes
c) Supporting the government in welfare and development programmes
3) TO EMPLOYEES
Business should show social responsibility to employees by:
a) Paying them fairly without delay and treating them humanly.
b) Safeguarding their health and safety by proving safe working environment such as offering safety gear
e.g. dust coats, factory boots etc.
c) Providing employees welfare through provision of recreational facilities, housing, transport and credit
facilities
d) Offering equal opportunities in matters pertaining to promotions and training
e) Offering training and educational opportunities equally to employees
4) TO SUPPLIERS AND CREDITORS
Businesses should be socially responsible to suppliers through:
a) Fair and reasonable terms of purchase
b) Fairness in tender allocation
c) Paying suppliers for goods in time
d) Not defaulting in payments
e) Paying fair and reasonable interest rates to creditors
f) Paying interest and principle amount in time to creditors
5) TO THE COMMUNITY /GENERAL PUBLIC
a) By supporting or providing welfare programmes for the aged, handicapped and the under nourished in the
community
b) Making information concerning the business operations public
c) Ensuring that business activities of the business do not have harmful effects to the community
d) Providing educational recreational and healthy facilities
e) Offering employment opportunities to disadvantaged in the society and even handicapped members too. Thus
offering equal employment opportunities for employment to both males and females
f) Avoiding pollution of environment through such things as noise , and waste products
6) TO NATURAL ENVIRONMENT
A business should be socially responsible towards the environment by:
a) Recycling products – some of the materials that pollute the environment if thrown away carelessly can be
taken back to the factory for recycling. Such materials become raw materials when producing other products,
e.g. used plastic materials can be reprocessed into pellets which in turn can be used for furniture or trays
thereby creating a healthy environment.
b) Reducing all types of pollution(noise, water, air etc.)
 Ways of reducing noise can be devised e.g. those operating in Jua kali castor may be supplied ear plugs

29
 Business in the manufacturing sector should get a way of getting rid of unwanted chemicals and other wastes
instead of channelling them into rivers
 Businesses should devise proper ways of disposing their gabbage, such waste pollutes the environment when
disposed carelessly and it may breed flies especially during rainy seasons.
- However where effluent from factories must be channelled into the river then it needs to be treated first.
- used water by business operators if put back into the rivers is a threat to life of water creatures like fish
and also unsafe for human consumption.
e.g. Nairobi river has suffered such pollution as a result of passing through an area that has both manufacturing
and service industries.
13.3.4 Importance of Enterprise Social Responsibility
 A marketing tool
 Conducive atmosphere for the success of the business
 Environmental conservation programmes
 Ensures security for workers
 Social welfare programmes
Benefits of Social Responsibility
 It leads to creation of a better social environment both for the society and the business
 It improves the value of the business shares on the stock exchange
 It improves the image of the business to the public
 It makes the business follow government regulations
 It makes business live up to the social expectations
 Such social actions are profitable to the business in the future
 The business can develop new measures from which the society benefits
Limitations of Social Responsibility
 It increases costs to the business
 It makes the business to spend resources and thus reduces profit
 Increased social responsibility cost is passed onto the consumers in form of higher prices
 Most businesses lack the skills to solve social problems
 The business might misuse its powers on the society
 The business may deviate from its main purpose of existence

13.3.5 ETHICAL BEHAVIOUR IN A BUSINESS ENTERPRISE Ethics refers to prescribed or accepted

code of conduct. For a business to run smoothly there must be rules and regulations that govern the behaviour of
each and every employee.
These rules could either be written implied or naturally accepted especially if they affect the moral standards.
The Role of Ethics in Business
(i) Encouraging good working relationships among workers
(ii) Ensuring good working relationship between employer and employee
(iii) Ensuring rights of individuals in working environment are protected e.g. a doctor is expected to treat and not
kill
(iv) Ensuring that professionals relate professionally to their clients e.g. counsellor and their client
(v) Helping workers to protect and hold a good reputation
(vi) Helping the workers to develop proper skills and right attitude towards their work.
- The business set up and operations should be such that they provide ample facilities and opportunities for
each employee too practice the business ethics. For example, it would be very difficult for an employee to uphold
business ethics if the management mistreats him/her.
- Business ethics deals with how such values and principles affect business operations. Business ethics
therefore guides the business in ensuring fair play in business operations.
Need Fr Ethic Issues in Business
1. Creates fairness in competition
Business ethics ensures that there is fair play as business firms compete with each other. e.g. It would be unethical
to:
(i) Buy competitors products and destroy them before they reach the market
30
(ii) Discredit competitors products with a view to reducing their sales
(iii) Damage the competitors promotional materials such as bill boards
2. Ensures no discrimination in business
Business ethics ensures that there is no discrimination in areas such as recruitment, promotion training,
remuneration, and assignment of duties. Everybody should therefore be equal opportunity or equal chance
regardless of set of ethnicity.
3. Ensures protection of the environment
Ethics in business prohibits business units from carrying out activities that may cause pollution and degradation of
the environment.
Environment degradation may be caused by human activities such as logging and unplanned cultivation.
Pollution may be caused by activities like:
(i) Dumping effluents from production units into water masses thus causing water pollution. This is disastrous
to human health and animal.
(ii) Emitting carbon dioxide and other gases into atmosphere causing air pollution.
(iii) Damping of waste materials on the land surface causing solid waste pollution.
4. Avoid consumer exploitation
Ethics ensures that consumers are not exploited by the business through:
(i) Overcharging
(ii) False advertisement
(iii) Selling poor quality goods and services
(iv) Selling wrong quantities
(v) Selling harmful commodities
5. Ensures fair play in competition
Ethics ensures that businesses do not engage in unfair practices while competing with others. These practices
include:
(i) Destroying a competitor’s product or promotional tools such as billboards
(ii) Buying and destroying competitors products before they reach the market
(iii) Giving false information about a competitor’s product
6. Ensures rights of employees are upheld
Ethics ensures that the employer does not violate the rights of employees especially as laid out in terms and
conditions of employment. Such rights include payment of dues in time.
7. Eliminates use of unfair means of achieving business objectives
Ethics ensures that business operations are carried out in a professional way. For example it is unethical to give or
receive a bribe in order to win a business contract. It is also unethical to hold goods awaiting for their prices to go
up.

UNETHICAL BUSINESS PRACTICES

The question of ethical business practice is a widely debatable subject.
(i) Profit and morality are incompatible. For instance the pursuit of wealth is a barometer of success yet it is
popularly believed that wealth tends to corrupt individuals.
(ii) All ethical problems have simple solutions i.e. right or wrong. This is a misconception based on the
assumption that there is an absolute standard for judging moral conduct.
(iii) Ethics is simply a matter of compliance with laws and regulations
Despite these misconceptions, unethical behaviour is inherent in many entrepreneurs. This happens because of:
 Greed
 Inability to distinguish activities at work and at home
 Survivalist thinking
 Lack of foundation in the study of ethics etc.
However, some studies on ethical practices have shown that entrepreneurs have different concerns regarding
specific business issues. Etc.
Issues that entrepreneurs believe require a Issues that entrepreneurs view with greater
strong ethical position tolerance in regard to ethical position
 Evaluating faulty investment advice  Tax evasion
 Favourism in promotion  Collision on bidding
31
  Reporting dangerous design flaws  Insider trading
 Misleading financial reporting  Discrimination against women
 Misleading advertising  Copying an idea etc.
 Cigarette smoking on the job
Code of Conduct
The code of conduct within a business is a statement of ethical practices or guidelines to which an enterprise
adheres. A variety of such codes exist; some relate to the business at large and some relate to corporate conduct.
The codes cover subjects such as misuse of corporate assets, conflict of interest, use of inside information, equal
employment practices, falsification of books and records etc. The codes of conduct are normally written and
distributed to everyone in the business to read and follow.
Crime and the Small business
The cost of crime has become a major cause of small business failure all over the world. Crime in the business
may be internal i.e. employee dishonesty or external i.e. robberies which sometimes may even be in collision with
employees. The entrepreneur should be aware of such crime possibilities and make adequate provision for
tackling them as they may lead to bankruptcy.
Fraud
Fraud is very common and popular with the use of credit cards. The use of credit cards has grown tremendously in
the recent past and the front-line defence in the small business can be salespeople and cashiers. They should have
the knowledge and means to discover this type of crime effectively.
The following precautions can help reduce credit card fraud:
a) Scrutinise Signatures – compare signature on sales ship to that on the card.
b) Get Credit Authorisation – only one person whose signature is on the card is authorised to use it.
c) Ask for additional identification etc.
Cheque Deception
Sometimes small businesses pass bad cheques which costs them million of shillings. The entrepreneur needs to
establish a firm cheque cashing policy and procedure. This can be done by:
 Supervisor approval
 Photographs of customers
 Cheque cashing limit
 Intensive identification etc.

Shoplifting
This is a crime involving the loss of stealing merchandise and this causes great loss to small businesses. In many
cases, shoplifting is done by outsiders themselves, in collusion employeese or outsiders themselves.
To deal with this problem, the entrepreneur should make employees aware of this problem and minimise
opportunities for shoplifting. For instance customers who visit the business more often arrange the merchandise
or send sales people away, bears watching. Employees should also watch customers wearing loose clothing.
Opportunities for shop lifting can be minimised by checking customers at entry points when entering and leaving
etc. However, when shoplifting occurs,, the culprit should be arrested and prosecuted under the law.
Internal Theft
Internal theft is also very common in small business. The Presence or increase in internal theft may be attributed
to poor hiring practices where the entrepreneur does not take due attention to the background of employees, poor
employer- employee relationships, presence of theft opportunities, economic conditions etc.
The internal theft can be reduced by reduction of theft opportunities i.e. controlling keys – who should keep them,
use of designated entry and exit points, signing in and out of employees etc

14.0 BUSINESS PLAN

14.1 Introduction
A business plan is an important document for an entrepreneur because it acts as a guide and reference point in
regard to overall business management.
This sub-module unit outlines the major components of a business plan and how to write it.
14.2 Specific Objectives
By the end of this sub-module unit the trainee should be able to
a) Define the term business plan
32
 b) Describe components of a business plan
c) Explain the uses of a business plan
d) Prepare a business plan
14.3 Content
14.3.1 Definition of business plan
This is a written document justifying the business and gives a step-by-step explanation of how the business will
achieve its goals. It summarises the operational and financial objectives of a business and contains the details,
plans and budgets showing how the objectives will be achieved.
A business plan shows a clear picture of what the business is, where it is going and how the entrepreneur proposes
to get there.
14.3.2 Components of the business plan
A business plan should be comprehensive enough to give any potential user a complete picture and understanding
of the venture and will help the entrepreneur clarify his or her thinking about the business.
Although there is no generally accepted format of a business plan. A typical format would possess the following:
i) Cover page:
It contains the name of the business, its owner(s), nature of the business, and the organization to which
the business plan is to be presented.
ii) Executive summary:
Contains a brief summary of the main contents of the business plan. It is prepared after the entire plan is
written. It summarizes every chapter of the page.
iii) Business description:
Contains a comprehensive description of the business and what it intends to accomplish
Example of information contained includes:-
 Name of the business and its contact
 Vision and mission of the business.
 Location.
 Form of ownership.
 Major activity of the business.
 Major customers.
 Justification statements/viability
 The goals of the business
iv) Marketing plan:
The marketing plan outlines the specific action the entrepreneur intends to carry out to attract potential
customers. The marketing segment is divided into two major parts:
 Research and Analysis: describes the target market i.e. who the customers are, the size and its
trends, the existing and possible competition.
 Marketing strategy: This part describes the methods that will be used to market the product, price
the product, make sales, advertise and promote the product and also the distribution channels that
will be used.

iv) Organization/ management plan.

This is the section that describes the key management personnel required, their qualifications, duties,
salaries and incentives. The organization structure is also defined
- It also identifies other employees needed, their duties, pay, training needs.
- Other support services required are highlighted in this section e.g. banking services, legal services,
management consultancy Etc.
- Any licenses, permits or regulations affecting the business are discussed here.

v) Operational plan/Production plan.

This section describes the processes, activities, and requirements involved in realizing the operational
goals of the business and required raw materials.

vi) Financial plan

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 This section outlines the financial needs of the business and sources of raising the finances and also gives
the projections of income and expenditure through such key statements as:
- Cash flow statement
- Income statements (trading, profit and loss account statements) among others.

14.3.3 Uses of a business plan

A business plan is important for a business because it can be used to:
i) Obtain finances
ii) Hire staff
iii) Attract partners -
iv) To expand the business
v) Guide the business in its operations

16.0 EMERGING ISSUES AND TRENDS IN ENTREPRENEURSHIP

16.1 Introduction

Due to the dynamic nature of the business environment, the user of this manual is advised to scan the environment
for any emerging issues and trends in every sub-module unit and include it in the learning process. New
marketing methods and technologies for example, may emerge thus creating the need to be captured in the
learning process.

16.2 Specific Objectives

By the end of this sub- module, the trainee should be able to:-
a) Define of terms.
b) Identify the emerging issues and trends in entrepreneurship

16.3 CONTENT
16.3.1 Definition of terms

16.3.2 Emerging issues and trends in entrepreneurship

Trends refer to long term movements in a certain direction. In society a trend describes a direction in the tastes
and desires of the general population. For entrepreneurs, trends present an incredible world of opportunities. Once
an entrepreneur identifies a specific trend then all their imagination and creative ability can go into generating
products and services to satisfy the demand that the trend creates.

Due to the dynamic nature of the business environment, entrepreneurs are advised to scan the environment for any
new trends. New marketing methods and technologies for example, may emerge thus creating the need to be
inculcated within continuing business ventures.

Emerging trends in enterprise management can be classified as technological, global, social/cultural, or economic
issues. Technological trends equip an entrepreneur with knowledge that is useful in the expansion and growth of
the business. The use of new technology creates a competitive advantage for the business by opening a potentially
attractive market for an entrepreneur.

16.4 Emerging Issues and Trends in Entrepreneurship

a. Environmental conservation and the need to address environmental standards (NEMA).

b. New marketing methods and technologies such as allowing managers to manage their enterprises in
the comfort of their homes or mobile offices.
c. introduction of business incubation centres such as:-
i. export processing zones (E.P.Z’s)
ii. Kenya Industrial Research Development Institute (KIRDI)
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 iii. Agricultural technology centres
iv. Kenya Kountry Business Incubator (KeKoBi)
d. introduction of entrepreneurship education at all levels of education to inculcate the entrepreneurial
cultlure.
e. Globalisation –
i. Networks being created among entrepreneurs to enable them go global.
ii. Opening unlimited business opportunities which small business enterprises can pursue.
f. Business clubs – entrepreneurs are more aware and are forming business clubs in order to access
opportunities and markets.
g. Gender equity – more women entrepreneurs in self employment hence various financial and non-
financial organisations to develop products targeting women.
h. More youths being involved in self-employment ( Ministry of Youth Affairs)
i. Large organisations are changing products and services regularly to suit for upcoming needs of their
customers.
j. Many people prefer to start small stalls rather than the traditional retail shops.
k. E-Commerce
 Being used globally to access customers and suppliers.
 Use of ICT such as the Internet to market business activities and products.
 Allowing a business enterprise to post/ have its profile in a website.
 E-learning.

l. the need for meeting quality standards (KEBS)

m. Use of business plans which is becoming mores of a requirement with many financial institutions.
n. money transfer for example mobile phone payment service is used not only as a means of sending
and receiving money but also for selling goods/services, paying bills (electricity, water, creditors)
and also as a means of safe deposit/ banking.
o. human rights
p. Alcohol and Drug Abuse (ADA)/ Drug and substance abuse.
q. HIV/AIDS
r. Conflict resolutions among others

Challenges posed by emerging trends and issues in enterprise management

i. Delays in processing approvals
ii. Meeting the required environmental standards

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