Entrepreneurship

Course Code: BMGT4162

Course Instructor: Dr Geremew Teklu

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 CHAPTER ONE

The Nature of Entrepreneurship

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 Eyes Breaking Question
1. Have you taken any training on entrepreneurship or related
subject?
2. If “Yes” what were the lessons taken from that exposure?
3. What is your expectation from this course?
4. Mention at least three socioeconomic problem in your
vicinity that often bother you. Explain why?
5. To which one you think you can contribute some thing to
solve? How?
6. Mention at least three Strengths/Weakness/Opportunities/
Threats of yours that may help/deter you from solving the
above problem.

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1.1 The Concept of Entrepreneurship
The concept of creativity - thinking new things
The concept of innovation – doing new things
The concept of entrepreneurship – creating value

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 What is Entrepreneurship?
Entrepreneurship: process of creating value from
opportunities by devoting time and effort
It requires to bear associated risks: financial,
psychic, and social,
It appreciates receiving the resulting rewards:
personal satisfaction and independence.

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Cont…
Entrepreneurship is a dynamic activity, which
helps the entrepreneur to bring changes in:
The process of production
Innovation in production
New usage of materials
Creator of market etc.

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 Who is Entrepreneur?
Entrepreneur: a person who continuously seeks
and acts upon opportunities for economic and or
social gains
Apply the principle of creative problem solving.
 Entrepreneurs have the attitude and determination
to change the statuesque

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 Entrepreneurial skill
Management skill
i. Planning
ii. Marketing
iii.Finance
iv.Time management
People skill
i. Leadership
ii. Motivating
iii.Negotiation
iv.Communication
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 Common myths about entrepreneurs
 Entrepreneurs are born, not made.
 Entrepreneurs are gamblers.
 Money is the key to entrepreneurial success.
 You have to be young to be an entrepreneur.
 You must have a degree in business to be an
entrepreneur.

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The Potential limitations of Entrepreneurship
Uncertainty of income
Risk
Financial
Career
Family and social
Psychic
Long hours and hard work
Lower quality of life until the business gets established
High level of stress
Complete Responsibility

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1.2 Historical Development
In the 14th century
In the earliest period: An entrepreneur was viewed as a
go- between, who attempt to establish trade routes and
signed contracts with many persons to sell goods.
In the Middle Ages: The term entrepreneur used to
describe a person managing large production projects.
In this case, the person would not take any risks but would
merely manage the project using the resource provided.

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Cont’d ….
17th Century: buys at given price and sells at an
uncertain price, therefore operating at a risk
18th Century: the person with capital was differentiated
from the one who needed capital. In other words,
entrepreneur was distinguished from the capital provider.
19th and 20th Centuries: contributes his own initiative,
skill and cleverness in planning, organizing and
administering the enterprise, assuming the chance of loss
and gain
In the middle of the 20th century, the notion of an
entrepreneur as an innovator was established.
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1.3 Types of Entrepreneurs
1. The individual entrepreneur
2. Entrepreneur
3. The entrepreneurial organization

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1.4 The Role of Entrepreneurs
What do you think the role of entrepreneurs to
Ethiopian economy?

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Cont’d …
Bill Gates, founder of Microsoft company
Ermiyas Amelga- Highland Spring Mineral Water,
Access Real Estate, Zemen Bank, Lovely Biscuits,….
Thomas Edson … electric bulb
Haile G/selassie … Athletics – multi-business owner
Sheh M. Alhamudihn … Midrock
 Dr. Eleni G/mariam … ECX

Contribution of these peoples?

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 Benefits of Entrepreneurship
To an Individual:
 Self Employment
 Employment and livelihood for others
 Freedom to use own ideas – Innovation and creativity
 Unlimited income / higher retained income
 Independence … Satisfaction
 Opportunity to do what they enjoy
 Create their own destiny
 Make a difference
 Reach their full potential, 24/7
 Contribute to society and be recognized for their efforts
 Do what they enjoy and have fun in it!
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To the Nation
Helps to reduce unemployment in the country.
Wealth creation
Inspire others towards entrepreneurship
Enhance the number of enterprise
Provide diversity in firms
Combine economic factors
Provide market efficiency
Improves quality of life: discovery of new products
and services at lower prices
Stimulates innovation & efficiency

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 1.5 Creating Entrepreneurial Mind
Set
The 10 PECS: PERSONAL
ENTERPRENEURIAL COMPETENCIES

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Cont’d …
1. Opportunity seeking and initiative
2. Goal setting
3. Systematic planning and monitoring
4. Information seeking
5. Risk taking
6. Persistence and Commitment
7. Quality
8. Efficiency
9. Persuasion and networking
10. Independence and self-confidence

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1. Opportunity seeking and initiative
Does things before asked or
forced by events- proactive
Seizes opportunities to start a
new business, obtain finance,
equipment, land, work space or
assistance etc.
Takes action to extend the
business into new areas, products
or services (Continuously moves
into new frontiers)

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 Exercises - Opportunity Seeking
. . .
. . .
. . .
Connect the nine dots without uplifting your pencil
“Creativity emerges from the elimination of all
unnecessary assumptions.”

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 NINE DOTS

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2. Risk Taking

 Deliberately calculates risks

and evaluates alternatives
 Takes action to reduce risks
and control outcomes
 Faces challenges and
moderate risks

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3. Demand for Efficiency and Quality

 Finds ways to do things better, faster

and cheaper
 Acts to do things that meet or exceed
standards of excellence
 Develops ways / procedures that
ensure the required quality

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4. Persistence
 Takes action in the face of a
significant obstacle
 Acts repeatedly or switches to
alternative strategies to meet a
challenge or overcome an obstacle.
 Takes insistent actions or switches
between alternatives to attain goal
 Takes personal responsibility and
demonstrate proactive stance
 Story of persistent people like
Tomas Edison

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5. Commitment to the work contract
Makes a personal sacrifice or go
to an extra mile to complete a
job (honors his/her word)
Does ‘low level’ jobs to get a job
done
Strives to keep customers
satisfied and places long term
goodwill over short term gain

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6. Information Seeking
Seeks information from clients, suppliers,
competitors and other sources
Does research on how to provide a product or
service
Seeks the advice of experts

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7. Goal Setting
 Sets personally meaningful
and challenging
goals/objectives
 Articulates clear and
specific long range goals
 Sets SMART short term
objectives

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8. Systemic Planning and Monitoring
 Plans by breaking large tasks
into small steps with deadline
 Evaluates performance,
receive feedbacks and change
accordingly
 Keeps neat financial records
and utilizes them for business
decisions

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9. Persuasion and Networking
 Uses deliberate strategies to
influence or persuade others
 Uses key people to accomplish
objectives
 Acts to develop and maintain
business contacts

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10. Independence and Self- Confedence
 Looks for freedom and autonomy
from control of others/ curtailing
rules
 Sticks with own judgment
 Expresses confidence to
accomplish ‘difficult tasks’

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1.6 Background of Entrepreneurs
Family Environment
Education
Age
Physical Attributes
Marital Status
Working History
Family contacts
Professional contacts
Lifestyle

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Personality Traits of Successful Entrepreneurs
Need for achievement
Willingness to take risk
Self-confidence
Innovation and creativity
Total commitment
Effective time management
An ability of decision making
Desire for Independency

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Barriers to Creativity – Entrepreneurship
Be aware that there are numerous barriers to creativity,
including:
Searching for the one ‘right’ answer
Focusing on being logical
Blindly following the rules
Constantly being practical
Viewing play as frivolous
Becoming overly specialized
Avoiding ambiguity
Fearing looking foolish
Fearing mistakes and failure
Believing that ‘I’m not creative
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 Thank You!

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 CHAPTER TWO
Business Planning

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2.1 Opportunity Identification and
Evaluation
1. Scanning the Environment/ Getting the Idea
2. Opportunity Identification
3. Opportunity Development
4. Opportunity Evaluation
5. Assessment of the Entrepreneurial Team

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 To Improve Your Capacity of Generating
New Ideas
• Copy somebody else's successful idea
• Combine two or more ideas to form a new one
• Solve problems to people
• Find what the competitors are bad
• Develop hobby
• Build on your skills
• Turn wastes into useful things
• Bring ideas from holidays
• Brain storm
• Talk and listen to people
• Make lists and play around with
• Look for gaps in the market
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• Find new ways to do things
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 B. Business idea selection
The Funnel model
a. Macro screening – General
b. Micro screening – industry specific
c. SWOT Analysis – round the business idea

40
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 What is a Business Plan?
A written statement of what you hope to achieve in
your business and how are you, going to achieve it.
A comprehensive set of guidelines for a new venture.

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 The Purpose of Business Plan
 help to crystallize & focus on the idea generated ,
 help to set objectives & give a yardstick against which to
monitor performance,
 Serve as a vehicle to attract external financial support the
business needed
 can convince investors the idea has growth opportunities
 entails taking a long term view of the business & its
environment,
 emphasizes the strengths & recognizes the weakness of the
proposed venture
 offers a sound basis for operation

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What are the Main Questions that the
Business Plan Should Answer?
Where you are now?
Where do you intend to go?
How do you get there?

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The elements of a business plan
All business plans should however address the following
major areas and contain the following sections:
1. Introductory contents
I. Cover page
II. Executive Summary
III. Table of Contents

2. Business Description
i) An overview of the industry the business will be in
ii) A description of the company
iii) Descriptions of the company's products or services
iv) The company's positioning
v) The company's pricing strategy

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 Cont’d
3. The market Description
I. Existing and potential customers
II. analyzing consumer behaviour
III. Existing and potential competitors
IV. Market niche
V. The sales forecast
VI. Sales strategy
VII. The market plan
4. Development& production Description
I. Development Status
II. Production Process
III. Cost of Development
IV. Labour Requirements
V. Expenses and Capital Requirements
VI. Legal issues

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Cont’d …
5. Management & organizational Structure
I. Ownership
II. Board of Directors/Board of Advisors
III. Support Services
6. Financial Documents
i) Risks
ii) Cash flow statement
iii) Income statement
iv) Balance sheet
v) Funding request and return
vi) Break even analysis
7. Appendix
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Why a business plan fails?
Unrealistic Financial Projections
Not Defining the Target Audience
Over-Hype
Bad Research
No Focus on your Competition
Hiding Your Weaknesses
Not Knowing your Distribution Channels
Including Too Much Information
Being Inconsistent
One Writer, One Reader
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Assignment
Assume that you want to start a business to
produce something or provide service; prepare a
business plan for your business in the near future,
be noted that you should follow the outline of
preparing the plan and not more than 12 pages type
written business plan.(Maximum score is 30%).

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 CHAPTER THREE

Business Formation

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Legal form of your business
Sole Proprietorship
Partnership
Corporation

50
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 Advantages of the Sole Proprietorship

Simple to create
Least costly form to begin
Profit incentive
Total decision-making authority
No special legal restrictions
Easy to discontinue

51
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Disadvantages of the Sole Proprietorship

Unlimited personal liability

Limited skills and capabilities
Limited access to capital
Lack of continuity

52 Chapter 5: Forms of Ownership

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 Partnership
An association of two or more people who co-own a
business for the purpose of making a profit.

53
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 Advantages of the Partnership
Easy to establish
Complementary skills of partners
Larger pool of capital
Ability to attract limited partners
 Little government regulation
 Flexibility
 Taxation

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 Disadvantages of the Partnership
Unlimited liability
Conflict of interest
Lack of continuity
Potential for personality and authority conflicts
Division of profits

55
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 Corporation
A separate legal entity from its owners.
An artificial person created by law with most of the
legal rights of a real person, including the rights to
start and operate a business, to buy or sell
property, to borrow money, to sue or be sued, and
to enter into binding contracts

56
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 Advantages of the Corporation
Limited liability of stockholders
Ability to attract capital
Ability to continue indefinitely
Transferable ownership

57 Chapter 5: Forms of Ownership

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 Disadvantages of the Corporation
Cost and time of incorporating
Double taxation
Potential for diminished managerial incentives
Legal requirements and regulatory “red tape”
Potential loss of control by founder(s)

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 Defining small enterprise
The size criteria
Size criteria used to define businesses are:
Number of employees,
Sales volume,
Asset size,
Insurance in force, and
Volume of deposits.

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In Ethiopia,

 Micro Enterprises are business enterprises found in all

sectors of the Ethiopian economy with a paid-up capital (fixed
assets) of not more than Birr 20,000, but excluding high-tech
consultancy firms and other high-tech establishments.

 Small Enterprises are business enterprises with a paid-up

capital of more than Birr 20,000 but not more than Birr
500,000 but excluding high-tech consultancy firms and other
high-tech establishments

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 Based on the number of employees
The generally accepted division of the size of business
based on number of employees is:
up to 19 workers-Micro (very small) business
20-100 workers-Small business
101-500 workers- Medium business

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 Economic/Control criteria:

The economic criteria commonly uses

Market share
Personalized management
Independence

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 Characteristics of Small Scale
Industries/Businesses/Enterprises
 A small unit is generally a one-man show. Even if SSI is run
on partnership or company, the activities are carried by one
of the partners or directors; the others are as sleeping
partners.
 In case of SSI, the owner himself or herself is a manager also
and hence an SSI is managed in a personalized fashion. The
owner takes effective participation in all matters of business
decision making.
 The scope of operation of SSI is generally localized, catering
to the local and regional demands.
 The gestation period i.e., the period after which return on
investment starts is relatively lower when compared to large
units.
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  SSI’s are fairly labour intensive with comparatively smaller
capital investment.
 Small units use indigenous resources and therefore, can be
located anywhere subject to the availability of these resources
like raw materials, labour etc.
 Using local resources Small Units are decentralized and
dispersed to rural areas. Thus small units promote balanced
regional development and prevent the influx of job seekers from
rural areas to cities.
 Small scale units are more change susceptible and highly
reactive and receptive to socio-economic conditions. They are
more flexible to adopt changes like introduction of new
products, new method of production, new materials, new
markets and new form of organization etc.

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ECONOMIC SOCIAL & POLITICAL ASPECTS OF SMALL
BUSINESS ENTERPRISE
 Employment creation
 Lower investment cost per job
 Poverty alleviation
 Indigenization
 Avenues for indigenous entrepreneurs
 Tapping of savings
 Utilizations of domestic technology
 Environmental impact

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Problems & Support Needs of Small Scale
Enterprise
a) Conducive Environment
b) Adequate Credit Assistance
c) Favourable government policies
Tax policy
Regulatory policy
Access to capital
Legal protection of property rights
Creating a business culture

d) Markets and Marketing Support

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Small Scale Business Failure factors in Ethiopia
Failure can be thrust upon an entrepreneur through
external conditions or fabricated by the entrepreneur
through personal shortcomings.
Small business owners are vulnerable to both
situations because they are usually preoccupied with
the immediate needs of survival.
 External conditions such as inflation; fabricated
failure can usually be traced to an owner’s arrogance
or simple lack of management acumen

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External Factors of Failure
Weak government policies Interruption in public
Discouraging taxation utilities like electricity &
system water
Bureaucracy and absence of Labour market trends,
good governance Too much increasing
Higher and fluctuating economy inflation
interest rates of banks and Infrastructural bottlenecks
micro finances Financial bottlenecks
Political intervention in the
business area & blind
government regulation
Lack of suitable market
places
Lack of focus in the follow
up of SSE
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Personal Factors of Failure
Inexperience and fear of the unknown
 Lack of creativity and engaging in old businesses
 Arrogance (overconfidence)
 Mismanagement of the venture
 Over investment in fixed asset
 Poor inventory & financial control
 Poor business philosophy
 Lack of planning
 Poor product or service quality

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Quiz
Give short answers for the following questions.
1)Write at least three characteristics of small scale
enterprise
2)Write at least three benefits of small scale enterprise
for the nation
3)Write at least three failure factors of Ethiopian small
scale entrepreneurs

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 Chapter Four:
Product and Service
Development

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 What is a Product?
A product is a solution to customers’ problems.
It includes physical objects, services, persons, places,
organizations, ideas or mixes of these entities.
A product is a combination of the physical characteristic as
well as the way people think and feel about it.

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Levels of a Product

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 The Core Product :the fundamental service or benefit that the
customer is really buying.
Example: A hotel guest is buying “rest & sleep”, the purchaser of a drill is
buying “holes.” Marketers must see themselves as benefit providers.
 The Actual Product - hotel room includes a bed, bathroom, towels, desk,
dresser, and closet. The actual product may have as many as five
characteristics that combine to deliver core product benefits. They are:
 Quality level

 Features

 Design

 A brand name

 Packaging

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Expected Product -a set of attributes and conditions that
buyers normally expect and agree to when they purchase this
product.
 For example, hotel guests expect a clean bed, fresh towels, working lamps,
and a relative degree of quiet.

The Augmented Product - product that meets the

customers’ desires beyond their expectations.
The augmented product includes any additional
consumer services and benefits built around the core and
actual product.
 A hotel can augment its product by including fresh flowers, fine dining and
room service, and so on.

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Potential Product - encompasses all the
augmentations and transformations that the product
might ultimately undergo in the future. While the
augmented product describes what is included in the
product today, the potential product points to its
possible evolution.
Here is where companies search aggressively for new
ways to satisfy customers and distinguish their offer.

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 Product Classifications
Durability & tangibility
Non-durable goods: are tangible goods that normally are
consumed in one or a few uses.
Durable goods: are tangible goods that normally survive
many uses.
Services: are intangible, inseparable, variable and
perishable. As a result they normally require more
quality control, supplier credibility, and adaptability.

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 The Nature and Characteristics of a Service

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Products may be further divided into:
Consumer Products

consumer goods as ‘Goods destined for use by

ultimate consumers or households and in such
form that they could be used without commercial
processing’. Consumer goods are products
intended for use by ultimate consumers for non-
business purpose.
Industrial products

‘Goods which are destined to be sold primarily for use

in producing other goods or rendering services as
contrasted with goods destined to be sold primarily
to the ultimate consumer.’
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 Classification of Consumer Product’s
 Convenience goods
 Shopping goods and

 Specialty goods.

 Unsought goods.

Convenience goods:
Convenience products are consumer products and
services that the consumer usually buys frequently,
immediately, and with a minimum of comparison and
buying effort.

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Convenience goods can further be classified into:
Staples – are convenience goods that consumers buy on
regular basis. Examples include soaps, tooth paste, etc.
Impulse goods – are convenience goods that are
purchased without any planning or search effort. Examples
include candy bars, magazines, etc.
Emergency goods – are purchased when a need is urgent
– umbrella during a rainstorm.

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Shopping Goods
Shopping goods are products for which customers
usually wish to compare quality, price and style in
several stores before purchasing.
Specialty goods
Specialty goods are those products for which
consumers have a strong brand preference and are
willing to expend special time and effort in
purchasing them
Unsought Goods – are goods that consumers are
unaware of or do not normally think of buying.

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 New product Development

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 The Concept of the Product Life Cycle
Assumptions
Products have a limited life;
Product sales pass through distinct stages with different
challenges, opportunities, and problems for the seller;
Profits rise and fall at different stages of the PLC;
Products require different marketing, financial
manufacturing, purchasing, and human resource
strategies in each stage;

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 Commercialization stage- Product Life cycle
Sales and Profit Life Cycles

85
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 Introduction Stage

Sales
Sales Low
Low sales
sales

Costs
Costs High
High cost
cost per
per customer
customer

Profits
Profits Negative
Negative
Create
Create product
product awareness
awareness
Marketing
Marketing Objectives
Objectives and
and trial
trial
Product
Product Offer
Offer aa basic
basic product
product

Price
Price Use
Use cost-plus
cost-plus

Distribution
Distribution Build
Build selective
selective distribution
distribution

Advertising Build
Build product
product awareness
awareness among
among early
early
Advertising adopters
adopters and
and dealers
dealers
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Growth Stage of the PLC

Sales
Sales Rapidly
Rapidly rising
rising sales
sales

Costs
Costs Average
Average cost
cost per
per customer
customer

Profits
Profits Rising
Rising profits
profits

Marketing
Marketing Objectives
Objectives Maximize
Maximize market
market share
share
Offer
Offer product
product extensions,
extensions, service,
Product
Product warranty
service,
warranty
Price
Price Price
Price to
to penetrate
penetrate market
market

Distribution
Distribution Build
Build intensive
intensive distribution
distribution

Advertising Build
Build awareness
awareness andand interest,
interest,
Advertising preference
preference in
in the
the mass
mass market
market
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Maturity Stage of the PLC

Sales
Sales Peak
Peak sales
sales

Costs
Costs Low
Low cost
cost per
per customer
customer

Profits
Profits High
High profits
profits

Marketing Maximize
Maximize profit
profit while
while defending
defending
Marketing Objectives
Objectives market
market share
share
Product
Product Diversify
Diversify brand
brand and
and models
models

Price
Price Price
Price to
to match
match or
or best
best competitors
competitors

Distribution
Distribution Build
Build more
more intensive
intensive distribution
distribution

Advertising
Advertising Stress
Stress brand
brand differences
differences and
and benefits
benefits
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Decline Stage of the PLC

Sales
Sales Declining
Declining sales
sales

Costs
Costs Low
Low cost
cost per
per customer
customer

Profits
Profits Declining
Declining profits
profits

Marketing
Marketing Objectives
Objectives Reduce
Reduce expenditure
expenditure and
and milk
milk the
the brand
brand

Product
Product Phase
Phase out
out weak
weak items
items

Price
Price Cut
Cut price
price
Go
Go selective:
selective: phase
phase out
out unprofitable
unprofitable
Distribution
Distribution outlets
outlets
Advertising
Advertising Reduce
Reduce to
to level
level needed
needed toto retain
retain
hard-core
hard-core loyal
loyal customers
customers
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Product Protection (Intellectual Property)
What is Intellectual Property?
Intellectual property is a valuable asset for an
entrepreneur.
It consists of certain intellectual creations by
entrepreneurs or their staffs that have commercial value
and are given legal property rights.
 Examples of such creations are a new product and its
name, a new method, a new process, a new promotional
scheme, and a new design.

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Product Protection (Intellectual Property)

The Four Key Forms of Intellectual Property

1) Patents
2) Copyrights
3) Trademarks
4) Trade Secrets

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 The main forms of intellectual property rights are:

 Copyright covers literary works (such as novels, poems

and plays), films, music, artistic works (e.g., drawings,
paintings, photographs and sculptures) and architectural
design.
The right holder(s) of a work can authorize or prohibit:
 its reproduction in all forms, including print form and
sound recording;
 its public performance and communication to the public;
its broadcasting;
 its translation into other languages; and
 Its adaptation, such as from a novel to a screenplay for a
film.

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 .
A copyright is that the intellectual property is protected
for the life of the originator plus 50 years. This
protection affords an extraordinary property right and a
substantial estate.
 A copyright extends protection to authors, composers,
and artists, and it relates to a form of expression rather
than the subject matter. This distinction is important
because most intellectual property has proprietary
information in terms of subject matter, and if that
property cannot be patented, the copyright only prevents
duplicating or using the original material.

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 Obtaining a Copyright .
Once a copyright declaration has been printed on material,
a formal filing process may proceed as follows.
i. Declaration; Print copyright declaration by the owner of
property.
ii. Application & Deposit; Make application to the
copyright office, pay required fees & forward concurrently
with application copies of material excerpts required for
deposit.
iii. Issue; Obtain verification of copyright and registration
number

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  Copyright Infringement .
Copyright infringement occurs when one work
derives from another or is an exact copy or shows
substantial similarity to the original work. To prove
infringement, a copyright owner is required to show
that the alleged infringer had prior access to the
copyrighted work and that the work is substantially
similar to the owner’s.
How much is the penalty for copy right infringement
in our country? Both in terms of imprison and
financial fine.

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 A patent
 A patent is an exclusive right granted for an invention –a
product or process that provides a new way of doing
something, or that offers a new technical solution to a
problem.
 A patent provides patent owners with protection for their
inventions. Protection is granted for a limited period,
generally 20 years.
 Patent protection means an invention cannot be
commercially made, used, distributed or sold without the
patent owner’s consent.

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An idea is patentable if it meets three criteria: novelty,
usefulness, and non-obviousness.

Novelty: Nothing essentially the same as the claimed

innovation exists; i.e., the invention must be new.

Usefulness: The invention must provide significant

benefits to society, although this requirement is generally
more relaxed than it sounds.

Nonobviousness: The invention must possess a new

characteristic that is not known in the field and must not
be obvious to a person with an average or ordinary
knowledge of the field at the time the application is filed.

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 .
What can be patented?
Processes: Methods of production, research, testing,
analysis & other technologies with new applications.
Machines: Products, instruments, machines and other
physical objects that have proved to be useful and unique.
Manufactures: combination of physical matter not found
in nature fabricated in unique and useful applications.
Composition of Matter: chemical compounds, medicine
and botanical compositions that do not exist in nature in an
uncultivated state nor those that could evolve in nature,
those are new and useful.

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 .
The patent process:
1st . Establish the inventions novelty
2nd . Document the device
3rd . Search existing patents
4th . Study search results
5th . Submit the patent application
6th . Prosecute the patent application

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 A Trademark
 A Trademark protects a symbol, word, or design, used
individually or in combination, to indicate the source of goods
and to distinguish them from goods produced by others.
Unlike the patent, a trademark can last indefinitely as long
as the mark continuous to perform its indicated function.
It is important to note that registration with a patent &
trademark office establishes legal documentation that can
be used in court.
Without registration the privilege of ownership is subject to
contention in a civil action between the parties. Registration
is a reasonable course of action.
For example,
 Word: “McNugget”—think McDonald’s
: “coke”- coca cola corporation
 Slogan: “Just do it”—think Nike

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Trade secret
Trade secrets: consist of knowledge that is kept secret in
order to gain an advantage in business. “Customer lists,
sources of supply of scarce materials, or sources of supply
with faster delivery or lower prices may be trade secrets,”
A trade secret is any formula, pattern, physical device,
idea, process, or other information that provides the
owner of the information with a competitive advantage in the
marketplace.
Trade secrets include marketing plans, product formulas,
financial forecasts, employee rosters, logs of sales calls,
and similar types of proprietary information.
It is business information that is the subject of reasonable
efforts to preserve confidentiality and have value because it is
not generally known in the trade.
Examples are formulae, devices, manufacturing
processes, customer lists & preferences.

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Trade Secret Protection
Not all information qualifies for trade secret protection. In
general, information that is known to the public or that
competitors can discover through legal means doesn’t qualify
for trade secret protection. The strongest case for trade secret
protection is information that is characterized by the
following:
 Is not known outside the company.
 Is known inside the company on a “need-to-know” basis only.
 Is safeguarded by stringent efforts to keep the information
secret.
 Is valuable and provides the company a competitive edge.
 Was developed at great cost, time, and effort.

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Trade Secret Protection Methods
Physical Measures For Protecting Trade Secrets
– Restricting access to confidential material.
–Labeling documents “proprietary,” “restrictive,” or
“secret.”
– Password protecting confidential computer files.
– Maintaining log books for visitors.
– Maintaining log books for access to sensitive material.
– Maintaining adequate overall security measures.

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 .
Trade Dress
Definition: A specialized type of trademark for
packaging where the totality of all elements of the
packaging that is capable of identifying and
distinguishing goods or services.
For example, shape of Coca-Cola bottle, Barbie pink,
Tiffany’s “little blue box,” Taco Bell restaurant

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 CHAPTER FIVE:
Marketing and New Venture
Development

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The Marketing Perspective
Marketing is the process of planning and executing the
conception, pricing, promotion, and distribution of ideas,
goods, and services to create exchanges that satisfy
individual and organizational objectives.

Market is a group of potential customers having needs

to satisfy, ability to buy and willingness to pay in order
to satisfy these needs.

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Cont….
Marketing consists of a multitude of activities that
include decisions about the company’s product or
services, pricing policies, promotions and methods of
distribution.
The ultimate goal is to facilitate exchanges between
an enterprise and its customers.
The exchange relationship exists as one party
becomes willing to “give something of value” to
“receive something of value” from the other party.
Marketing is a process of conceiving that exchange,
and then accomplishing the tasks necessary to deliver
the goods or services in a manner that satisfies
customers and meets business objectives.
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 The Challenges and Opportunities of Marketing in
today’s Economy
 Power Shift to Customers

 Massive Increase in Product Selection

 Audience and Media Fragmentation

 Shifting Demand Patterns

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 FOUR Ps CONCEPT
PRODUCT PRICE
Quality Basis of price
Design List price
Features Discount
Name Payment period
Size etc. Credit Terms
Target
PROMOTION Customers PLACEMENT
Advertising Channels
Sales Locations
promotion Inventory
Personal selling Transportation
Public relations Logistics
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 Marketing Mix
Product Mix
Product planning and development:
Branding:
Packaging
Labeling:

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 Price Mix
Price is the amount of money consumers have to pay
to obtain the product
 Methods of Pricing
Cost plus pricing
Mark-up pricing
Skimming Pricing
 Penetration pricing
Premium Pricing
Psychological Pricing

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 Promotion Mix
Advertising (e.g. using posters , newspapers , magazines
billboards, radio): it can be such as informative advertising,
persuasive advertising, and reminder advertising
Personal selling: oral presentation in conversation with
one / more consumers for the purpose of making sales
Sales promotion: includes gifts, games, sampling,
coupons, and window displays.
Publicity: any information about the organization, its
personnel or its products that appear in any medium on a
non-paid basis.

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 Place Mix
 Direct versus Indirect Channels
Direct Channel
 Door to door selling
 Manufacturer’s sales branches
 Direct mail:

Indirect Channel
 Merchant middlemen:
 Wholesalers
 Retailers
 Agent middlemen:

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Channel Levels/length
 Zero level Channels (M to C):
 One level channel (M to R to C):
 Two level channels (M to W to R to C):
 Three level channels (M to A to W to R to C):

Channel Intensity
 Exclusive
 Selective
 intensive

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 Market segmentation
Market segment is a group of individuals or
organizations within a market that share one or more
common characteristics.
Market Segmentation can be done based on:
Geographic Segmentation,
Demographic Segmentation,
Psycho graphic Segmentation, and
Behavioral Segmentation

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 Marketing research
 Marketing research is the systematic and objective
identification, collection, analysis, and dissemination of
information for the purpose of assisting management in
decision making related to the identification and
solution of problems and opportunities in marketing.
 The Steps of Marketing Research includes
 Define the research purpose or objectives
 Research Design Formulation
 Gather secondary data
 Gather Primary Data
 Data Preparation and Analysis
 Report Preparations and Presentation

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Michael Porter’s Five Force Model

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Market Entry Mode and Risk

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 Marketing Strategies
 Concentration
 New Market Development
 New Product Development
International Vs Domestics Market
 International marketing (IM) or global marketing refers to
marketing carried out by companies overseas or across
national borderlines. This strategy uses an extension of the
techniques used in the home country of a firm. It refers to
the firm-level marketing practices across the border
including market identification and targeting, entry mode
selection, marketing mix, and strategic decisions to compete
in international markets.

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Marketing Intelligence(MI)
Organizationally, Marketing Intelligence can be the name
of the department that performs both the market
intelligence and competitor analysis roles. Competitive
Intelligence describes the broader discipline of researching,
analyzing and formulating data and information from the
entire competitive environment of any organization.
MI is responsible to collect the information relevant to a
company’s markets, gathered and analyzed specifically for
the purpose of accurate and confident decision-making in
determining market opportunity, market penetration
strategy, and market development metrics.

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 Sources of market intelligence
 Existing competitors: identified through telephone
directories, association, licensing agencies,
advertisements, and public documents
 Trade publications: specialized publications, magazines,
news letters, catalogs, and brochures.
 Securities Analyst’s Reports: Securities brokers,
investment bankers, private investment companies, and
experienced private investors.
 Government sources: volumes of government reports and
document in the public sector. (e.g. Department of
Commerce, Chamber of Commerce etc)
 Potential customers: informal discussion with the end-
users.

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 CHAPTER SIX
FINANCING A NEW VENTURE

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  This chapter describes some common as well as some
not so common sources of capital and the condition
under which the money is obtained.
Source of capital; Different sources of capital are
generally used at different times in the life of the
venture.
Over all there are two types of financing
available: Internal and External

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Internal Financing
this refers to financing sources from entrepreneur own
sources.
Internally generated fund can come from several
sources.
Profit deployment: - this is usually when the profits you
generated from your firm is used back for new venture
financing.
Selling assets that are currently idle. Given that the firm
expects more return than these assets

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Renting instead of owing assets. That is, by spending low
money on especially plant assets the firm may finance its
business.
Reducing short term assets
Keeping inventory at lower level. During the initial
period of its operation the firm need not be luxurious in
inventory
By collecting bills more quickly.

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External financing
it refers to financing sources out side the
entrepreneur source.
External financing may be further be classified into
two: debt financing and equity financing.

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  Debt financing
 Is a financing method involving
an interest bearing loan
instrument i.e. expected fined
payment what ever happened to
your business
 It requires that some assets be
available as collateral.
 No decision making right but may
provide a form of advise
 No ownership position
Equity financing
Does not require
collateral and offers the
investor some form of
owner ship position in
the venture
the investors share in the
profit
of the venture as well
as any disposition of the
assets on appropriate
basis.

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How do Banks make lending decision?
Character: this is the sum of mental and moral qualities.
Capacity: it refers to earning power. The capacity to
generate profit over a period of time.
Capital: refers to the borrower’s financial soundness or
strength.
Collateral: It is any thing of value pledge as additional
security to secure the performance or the discharge of an
obligation.
Conditions: banks do not look only at you but also look at
your environment example country, mkt, etc.

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 CHAPTER SEVEN
GROWTH STRATEGIES FOR
SMALL FIRMS

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 Need for Growth

Survival

Economies of Scale
Expansion of Market

Owners Mandate

Technology

Government Policy

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New Venture (Growth) Expansion Strategies
Internal growth strategies.
The main internal strategies for growth are: intensive,
integrative and diversification,
Intensive Strategies
Intense growth can take place when current
products and current markets have the potential for
increasing sales.
Market penetration, market development, and
product development are sometimes referred to as
intensive strategies

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 Ansoff’s growth matrix

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 

market penetration strategy seeks to increase

market share for present products or services in
present markets through greater marketing efforts.

Market development involves introducing present

products or services into new geographic areas.

Product development is a strategy that seeks

increased sales by improving or modifying present
products or services

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Integration Strategies
Forward integration involves gaining ownership or
increased control over distributors or retailers.
Backward integration is a strategy of seeking
ownership or increased control of a firm’s suppliers.
Horizontal integration refers to a strategy of seeking
ownership of or increased control over a firm’s
competitors.

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Diversification Strategies
Diversified growth occurs when new products are developed
to be sold in new markets.
A diversification strategy, introduces a new product or
service to a market segment that currently is not served.

 Concentric/ Related Diversification

When a firm enters into some businesses, which is related with

its present business in terms of technology, marketing or
both.

 Conglomerate (Unrelated) Diversification

conglomerate diversification—diversifying into an industry

unrelated to its current one.
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External Growth Strategy (Joint Ventures, Mergers,
or Takeovers)
Joint Venture/Partnering
Joint venture is a popular strategy that occurs when two or
more companies form a temporary partnership or consortium
for the purpose of capitalizing on some opportunity
Merger
A merger occurs when two organizations of about equal size
unite to form one enterprise.
Franchising
Under a franchising agreement, the franchiser grants rights
to another company to open a retail store using the franchiser’s
name and operating system. In exchange, the franchisee pays
the franchiser a percentage of its sales as a royalty.

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Acquisitions (Buying an Existing Business)
Relatively quick way to move into business is through
acquisitions purchasing another company already
operating in that area.

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Questions?
140