PIDAM UNIVERSITY-BOSASO

PIDAM UNIVERSITY-BOSASO

COURSE: ENTREPRENEURSHIP
SEMESTER: ONE & TWO

UNIT 1: Introduction to Entrepreneurship

LECTURER: SAID MOHAMED
ACADEMIC YEAR: 2023-2024
DATE: 15 OCT 2023
 Introduction to the Course
• In this course Entrepreneurship and small business
management, we will focus our attention on the development
of entrepreneurship and small business management.
Entrepreneurship is a vast field in business education and that
is why we have had to restrict ourselves to the small business
management section.
• Our primary focus in this unit is to make sure we understand
the nature of entrepreneurship and its application to small
business management.
• understand how to establish and manage small businesses.
 The Nature of Entrepreneurship

• The word Entrepreneur has been taken from the French

language, entreprendre which means Adventurer.
• The concept of Entrepreneurship has developed over the
years and started in 17th Century, and exposure to
entrepreneurship skills knowledge to the person.

• What is important to us in our own study is a study of how

new businesses emerge and also how they are to be run or
managed.
 Cont………..

• In a way, we can say that our interest in studying

entrepreneurship is not to understand existing business
organizations but rather to understand how to establish and
manage small businesses.
• In economics, we were told that there are four factors of
production. The four factors of production are land, labor,
capital and the entrepreneur.
• The Entrepreneur according to economic theory is the
person who coordinates the other three factors of
production.
 Cont……..

• Following this we shall define the entrepreneur as someone

who starts a company / business, arranges business deals and
takes the risks in order to make a profit.

• The words underlined in our definition are very important.

Firstly, the entrepreneur is the one who starts the company or
business. Interestingly, one of the key objectives of this
course is to equip students with the necessary skills to start
their own business.
 Cont…..

• Secondly, the entrepreneur takes the necessary business

risks. The information that we are given is that the
entrepreneur takes the necessary business risks in the
market place. If the entrepreneur is successful, she/ he
makes a profit.
• However, if the entrepreneur is unsuccessful, the result
will be a loss. From what we have discussed so far, it is
very clear that entrepreneurship is all about starting
businesses and running it.
Definitions of entrepreneurship and Entrepreneur

Entrepreneurship: Is process of creating something new

and assuming the risk and rewards

Entrepreneurship: as an activity or Process involves

identifying opportunity that is one which is potentially
valuable in the sense of profitability.

Also defines: as field of study seeks to understand how

opportunities to create something new arise and are
discovered.
 Who is Entrepreneur

• An Entrepreneur: is one who creates a new business in the face of

risk and uncertainty for the purpose of profit making -
• Entrepreneur Is an individual who takes risk and starts some thing
New for the purpose of profit making.
• Entrepreneur as an innovator : an individual developing
something unique achieving profit and growth by identifying
significant opportunities and assembling the necessary resources to
capitalize on them.
• Although many people come up with great business ideas, most of
them never act on their ideas
 Characteristics of Entrepreneur
1. Hardworking: willingness to work hard overtime.
2. Desire for high achievement: have strong desire to achieve
high goal in business.
3. Highly optimistic: they are optimistic future oriented that
the situation will become favorable to business in future.
4. Independence: one of the most common characteristics of
the successful “entrepreneurs”
 Cont….

5. Innovative: creating new business idea which meant to

meet customers requirement in view of the changing taste
of customers from time to time.
6. Risk taking: if you are afraid of uncertainties then you
cannot be an entrepreneur.
7. Honest and efficient: Integrity behavior with maximum
efficiency in operation.
 Types of Entrepreneurs

1. Innovating Entrepreneur: is one who introduces new goods

and services with new methods and approaches.

2. Imitative Entrepreneurs: they are characterized by

readiness to adapt successful innovations inaugurated -
 Factors considered to be an Entrepreneur

1) Business idea: new business or project usually begins

with an idea is an output or creativity.
2) Skill: the entrepreneur needs to have technological
and managerial skills.
3) Capital: there is need for varies resources to start
and sustain the business.
The Managerial Functions of the Entrepreneur
In the literature, we have identified five basic functions of the entrepreneur.
The functions are planning, organizing, staffing, leading and controlling.
1. The Planning Function
• A business does not give birth and emerge to itself. It must be started by
someone. And that person is the entrepreneur as we have earlier discussed.
• Every business organization must have an objectives and the aim of every
business enterprise is to make profit
• planning is essentially deciding in advance what is to be done, how it will be
done, who will do it, what resources will be used and of course the
implementation and control. The critical elements of planning are the
objectives, strategies, resources and implementation
 2. Organizing Function
• Every business enterprise should have an organizational structure.
• You are requested to note that departmentation is very crucial for any
organization to succeed. Departmentation divides an organization along
functional lines. For example a marketing department will carry our
marketing functions
• A simply organizational structure is shown as in Figure 1.2 in your book
3. The Staffing Function
• the next important function of the entrepreneur is staffing of the
organization. The staffing function involves effective staff recruitment
and selection, staff placement and later the appraisal and development
of staff.
 Cont……

• We must note at the that the performance of any organization depends

on the quality of its staff.
• In staffing all the jobs in the organization must be first identified.
Secondly the level of skills required to perform the tasks must also be
determined. And finally people who fit properly into the jobs will be
recruited and selected.

• In the literature, we say that “you should get the right man for the
right job”
• After deploying staff to various jobs, the entrepreneur is expected to
monitor the performance of all staff through an effective appraisal
system.
 The Leading Functions of the Entrepreneur.
• After staffing, the next important function of the entrepreneur is
leading. Leadership is at the core of the function of leading. But at
this point, we need to define what leadership means. Leadership is
the act or process of influencing or guiding people so that they will
strive/try willingly towards the achievement of group or corporate
objectives. The primary essence of leadership in entrepreneurship
is followership.
• A good leader will guide, motivate and conduct.
There are two types of leadership styles :
1. Job centered leadership and
2. Employee centered leadership.
 Cont….

1. Job – Centered Leadership

• Here the leader simply structures the job of his subordinates and
ensures that they perform the assigned tasks. In a way, this leadership
style pays little or no attention to the fact that the workers are
human beings and should be treated as such.
2. Employee – Centered Leadership
• Here the entrepreneur pays more attention to the human aspects of
managing employees thereby building high performance teams.
• In employee – centred leadership, the entrepreneur will strive to
motivate the workforce.
 Controlling Functions of the Entrepreneur
• The control function of the entrepreneur basically involves the
measurement and correction of the performance of the business
activities to ensure that organization objectives are being met.
• We must note that for control to be effective, there are two pre-requisites:
1. There must be laid out plans against which performance will be measured.
2. There must be a clearly defined organization structure
• The Control Process involves three critical stages :
1.The establishment of standards whether in quantitative or qualitative terms.
2. Measurement of performance against the set plans and set standards.
3. Correction of observed deviations.
 Common Functions of Entrepreneurs

The general functions of a successful entrepreneur are as

follows;
1. Taking Initiative: Entrepreneur is a pro-active activity that
takes such actions, which others can’t even perceive.

2. Organizing Resources: Organizing entails identifying those

resources that are required to transform a particular idea into
reality. The resources include human and nonhuman resources .
 Cont………

3. Identifying Opportunities and Prospects: Entrepreneur

searches those activities of value that have an economic and
social contribution which have got profitable prospects
therefore, entrepreneurs are called searchers of hopes.
4. Risk-Taking: Entrepreneur takes the risk for the new
venture, these risks includes; volatile market, theft, robbery,
economic fall and inflations.
 Cont…..

5. Decision Making: Entrepreneur has to decide multivariate

issues like equipment to be used, quality, price and its
variation, deficiency, capital structure, the feasibility of the
project, organizational structure, philosophy of management
and etc.
Decisions are vital to the entrepreneurs because it results the
success or failure of the business idea.
 Common Functions Cont….

6. Technology Transfer and Adaptation: This function of

entrepreneurship involves identifying appropriate technology with
market potentials and adapts it into the local environment.

7. Social Responsibility: entrepreneur performs social

responsibility that protects the welfare, benefit and economic
gain of the society. It promotes the community standard by
providing jobs and amenities.
 Cont….

8. Experience Sharing: Entrepreneurs may spread in society

through publishing and sharing its success stories. Thus
entrepreneurship holds workshops, industrial visits through which
the entrepreneurial experience in different counties may be shared
with a widespread adaptation of success.
9. Balanced Economic Development: Sustainable economic
development requires a balanced development among various
regions and sectors of a country. Entrepreneurs make it possible by
establishing business ventures in various parts of the country in
various sectors of the industry.
THE END OF UNIT1

ANY QUESTIONS?
 PIDAM UNIVERSITY-BOSASO

COURSE: ENTREPRENEURSHIP
SEMESTER: ONE & TWO

UNIT 2: Forms of Business Organizations

LECTURER: SAID MOHAMED
ACADEMIC YEAR: 2023-2024
DATE: 24 OCT 2023
 Introduction
• There are various forms of business organizations. The major ones are
the Sole proprietorship, the partnership, and the limited liability
company or Co-orporations. Each of them has its advantages and also
disadvantages.
• We will start by discussing the proprietorship as a form of business
organization
• The Proprietorship or Sole Proprietorship
• A proprietorship is one of the simplest and most popular form of
business organization.
• A sole proprietorship is a business that is owned and managed by only
one person.
 Cont……
• The advantages of a proprietorship Includes;
1. Low start-up capital- Needs little money to finance and start the business
2. Lack of operational restrictions- has unlimited freedom to take business
decision
3. Secrecy and privacy: is another major advantage of the proprietorship
The Disadvantages of a proprietorship
1. the Sole proprietorship is unlimited liability- owner is responsible for all
debts incurred for a sake of business.
2. a proprietorship is lack of finance-unable to attract bank financing debts
3. a proprietorship is that of limited size-there is a limit to the size of the
business and it May not grow
 The Partnership

• Partnership has been defined as the relation which subsists/exists

between persons carrying on a business in common with a view to
profit. Its Business owed and managed by two or more persons.
• The important things to note are that there must be a business
in common and also there must be the intention to make profit.
Every partnership should ideally state:
1. How profits or losses will be shared
2. How assets will be divided when the partnership is dissolved
3. The duties of every partner
 Types of Partners

1. Active/Managing partner: the partners actively participate in

the business of the partnership. If there are three partners, the
three of them participate actively in running the partnership.
2. Dormant/Sleeping partner: In this situation, the partner
although his name does not feature in the actual business of the
partnership, he or she shares in the profit/Loss of the business.
3. Nominal partner: Here the person (partner) lends his / her
name to a business without having any real interest in it.
A partnership is usually created by a contract entered into by
parties and is governed by the ordinary laws of contract.
The Advantages & Disadvantages of the
Partnership
Advantages of Partnership Includes the following:
1. increased capital- The Business Capital will be more than
sole Proprietorship
2. Improved managerial decision making-Better decisions can
be taken as group
3. Chances for expansion of the business of the partnership.
4. Risk Sharing-Profit and loss will be shared the members of
partnership
Disadvantages of Partnership

Disadvantages of Partnership Includes the following:

1. Partnership is unlimited liability- Partners are
responsible for their obligations
2. Partnership is that of succession/ continuity- If a
partner becomes mad the partnership is terminated
3. The size limitation imposed on it by its nature-the
partnership is larger than a proprietorship but it is
still not the biggest form of business organization
 Limited Company

A limited company is one of the three business structures used in

the world. The business structure allows an individual to create a
business as a separate entity. It allows the owner to and any
other shareholder to only risk their investment and keep their
personal finances protected. Therefore, its popular way to set up
a business as it offers protection should the business fail.
Any business debts will only have to be paid by the business, not
the owner or the shareholders. Whereas a sole trader and
partnership businesses the owners are seen as one entity in the
eyes of the law, meaning that the owner is responsible for any
business debts and failures.
Advantages of a Limited Company Limited Company

1. Tax Efficient: It’s well known that a limited company is

more likely to be tax efficient compared to a sole trader, and
that is one of the many reasons it’s a popular business model.
A limited company director will usually take the maximum
amount that is not being taxed.
2. Separate Entity: In the eyes of the law, a limited company
business is a separate entity to its owner. This is another great
benefit of setting up a limited company, rather than a sole
trader.
 Advantages of a Limited Company Limited Company

3. Professional Status: When a business is set up as a sole

trader, the business is not officially registered with the
Companies House. This makes the process easier, however,
anyone can use your name for their business and you will have no
right to take action against this unless you get it trademarked.
4. Company Pension: As an owner of the limited company, the
director can invest pre-tax sum into a company pension scheme.
This means that the director can save money instead of taking
money out and investing it in a personal pension scheme, which
will be subjected to both business and personal tax.
 Limited Company

Disadvantages of a Limited Company

After seeing the positives of a limited companies, there come some
negatives.
Here are the disadvantages of a limited company:
1. Complicated to Set-up: A sole trader it is pretty easy and
straightforward as you only have to register with the Revenue and
Customs authorities. Whereas setting up a limited company will
mean registering with the Companies House. You will also have to
pay a fee for setting up, and aslo follow all law procedures of the
country.
 Limited Company

2. Complex Accounts: Limited company accounts can be complicated

compared to other business structures. This will require the director to
record information on the monthly basis. Some of the things that need
to be covered are tax recognitions and returns, business expenses and
keeping the business accounts up to date. As the accounts for limited
company are quite complex, it is essential that you hire help.
3. Accountancy Costs: It’s strongly advised that you hire an
accountant for your limited company in order to deal with your taxes.
Some of the tasks that an accountant can do for you include, filing your
company tax returns, paying your corporation tax, as well as filing your
VAT returns (if applicable).
 Limited Company

4. Ownership: A limited company is likely to have

shareholders, and those shareholders have a say in how the
business is run. The way a sole trader is run as well as its
general goals are all dictated by the owner. However, if a
limited company has multiple shareholders then their
opinions and views need to be taken into account. The
bigger the share that other people, the less ownership you
have. Therefore, be prepared to share some decisions with
your shareholders/partners when running your limited
company.
Cont……..

5. Public Records: As a limited company owner, you have

to register your house with the Companies House. This will
mean that you provide information on company accounts,
company records, company directors and company
shareholders. The information you provide to the
Companies House is then published and can be accessed by
anyone. This reduces the level of privacy a business has. If
you trade as a sole trader, your privacy remains to yours
only.
THE END OF UNIT2

ANY QUESTIONS?
 PIDAM UNIVERSITY-BOSASO

COURSE: ENTREPRENEURSHIP
SEMESTER: TWO

UNIT 3: The Nature of Small Business

LECTURER: SAID MOHAMED
ACADEMIC YEAR: 2023-2024
 The Nature of Small Business

• If you look around you will note that a lot of micro

businesses litter the country’s landscape. Here includes
barber shops, meat shops, cosmetic shops, mechanic
workshops and others owned and operated by what we had
earlier described as proprietors.
• In terms of numbers, these small businesses are larger than
the bigger and more established corporate bodies. These
small businesses are largely important because they employ
a lot of people and thereby contribute in no small measure
to the economic development of the country.
 Definition of Small Business

It is not easy to define small business. This is because the

definition presents conceptual problems. The problems arise
because different people see small business from different
binoculars/eye glasses.
The small urban hair dresser, urban chemist shop and
Microfinance Banks may also define a small business from a
different outlook altogether Because of the problems of
harmonizing all the definitions of small business.
We shall present a simple and functional definition of small
business.
 Definition of Small Business
• Small business is defined as a privately owned Business that has
fewer employees, limited size, Little Capital and less annual
revenue than partnership and a corporation companies .
• We shall define a small business as one that is independently
owned and operated and is not dominant in its field of operation.
• It is important for us to reflect on this simple definition of small
business. The underlined words are very important if we are to
fully appreciate the intended meaning of the definition.
• The definition seeks to focus on the ownership, operations and
their scope of influence in the operating environment.
 Identifying a Small Business
• We shall now go a step further to provide a general framework that will
enable us to identify any small business in our environment.
• In identifying any small business, we need to have certain criteria
which distinguishes the small business from the bigger businesses.
• Some of the criteria are as follows:
1. Initial Capital outlay (start-up capital)
• Initial capital outlay or start-up capital ordinarily refers to the financial
resources that are needed to start a business. If the initial capital
outlay needed to start a business is small then that may lead us to
conclude that the business is a small one. For example USD10,000.
 Cont…..

• Small businesses can be setup the following ones:

• a food stuff shop
• a pay phone center
• Cafeteria
• a street hawking business
Generally all of the businesses qualify as small businesses. Although any
business that requires a small initial layout to start can be called a
small business, there is no specific amount of capital that acts as a
dividing line between small and big businesses.
 Identifying a Small Business

2. Number of employees
• A second criteria that can be used to distinguished between a small business and a
big one is the number of employees that the business has. For example a business
that has 5 employees is obviously a small one. But another business that has about
10,000 employees cannot be said to be a small business
3. Ownership Structure
• Another criteria which can be used to distinguish between a small business and a
big one is the ownership structure.
• As we know in Unit 2 when we discussed forms of business organizations, there are
many types of business organizations with different ownership structures. We have
the proprietorship, the partnership and incorporated company. A business owned
by an individual obviously is a small one
 Cont……

4. Types of Technology Employed.

• Another visible criteria used to distinguish a small business from a big
business is the type of technology employed. Because of the small size
and relatively low capital base, the small business employs relatively
simple technology in operations. This is because the small businesses
due to their low capital base cannot afford to acquire complex
technology that comes expensive.
• Consider for example a small cottage palm oil mill located in a rural
area can not employ high technology equipment and programs because
of costs.
 Types of Small Business

By business types we mean the various functional groupings in

the economy. This grouping is based on the activities of the
business concerned. The type of businesses are trading and
commerce enterprises, service enterprises and small
manufacturing enterprises.
 Types of Small Business

1. Trading and Commerce enterprises

• Obviously trading is one of the commonest business activities in
many countries. A trader is one who buys goods from A and sells
the same goods to B at a much higher price. The difference
between the selling price and the purchase price is the profit of
the trader. Perhaps when you look around you, you will notice a
lot of small businesses selling such items as:
• sachet water, bread and biscuits and recharge cards
These trading and commerce enterprises possibly constitute
about over 80% of the total number of small business.
 Types of Small Business

2. Service Enterprises
• After the trading and commerce enterprises the next type of small businesses
are the service enterprises. Service enterprises are not engaged in buying and
selling. Rather, they are engaged in providing services to people and
organizations.
Examples of service enterprises are:
• barber shop
• hair dressing salons
• shoe repair shops
• a dentist shop
 Cont….

3. Small manufacturing enterprises

• Small manufacturing enterprises are another and major group of
businesses in the world. They engage in basic manufacturing activities
that do not involve complex processes or technology. Also they may not
involve huge capital outlays.
The examples includes:
• soap making enterprises
• sachet water making enterprises
• exercise book making enterprises
• bread making enterprises
Advantages and Disadvantages of small
business
Advantages of small business are as follows:
1. Low start up capital-requires low start-up cost of capital
2. Ease of Entry and Exit- has easy entry and easy to exit business
3. Operational Flexibility- decision making is simple for the owner
Disadvantages of Small Business are as under:
4. Lack of capital-Limited cash is available to the owner
5. Lack of managerial skills-Entrepreneur may not have enough
knowledge to run the business
6. Lack of adequate technology- Limited availability of technology
 PIDAM UNIVERSITY
COURSE: ENTREPRENEURSHIP
SEMESTER: ONE & TWO

UNIT 4: Critical Success Factors in Entrepreneurship

LECTURER: SAID MOHAMED
ACADEMIC YEAR: 2023-2024
DATE: 05 NOV 2023
 Critical Success Factors in Entrepreneurship

• In economic theory, we were told that there are four factors

of production like land, labour, capital and the entrepreneur.
Although the entrepreneur is the fourth factor of production,
it is the most important of all the factors. The entrepreneur
brings the other factors of production together. Success or
failure in a business depends on the entrepreneur. Our focus
in this discussion is to understand those factors that are
critical for success in entrepreneurship. But before we
examine that, we shall first examine the causes of business
failures.
 The Causes of Business Failure

As said earlier, we will discuss the causes of business failure so as

to give the would – be entrepreneur adequate information on what
could lead to failure in business. This is important because
prevention is better than cure.
• Let us now discuss the causes of business failure:
1. Unbalanced experience in a line of business
• This is one of the major causes of business failure. Every line of
business has its own unique features. And these need to be
studied and understood. For example in the oil and gas industry
We have the upstream and downstream segments of the industry.
 Cont……

2. Poor managerial experience

• The difference in performance between two organizations can be
traced to their different management. Good and effective
managers make a lot of difference in an organization. An
organization with a good crop of managers will obviously show
superior performance than one with poor managers. So it is very
easy for us to say that poor managerial experience on the part of
the entrepreneur can lead to business failure.
• In most cases the entrepreneur does not have the managerial
skills to manage people in the enterprise
 Cont…

3. Lack of information about the customer

• All over the world today and in every situation, the business
is woven around the customer. Successful businesses direct
their energies towards satisfying their customer. And as is
said, “The Customer is King”. It therefore follows that
any business that does not have sufficient information about
the customer is likely to fail. This is because the customer is
likely to switch alliance.
• Knowledge of the customer is very important.
 Cont….
4. Lack of product development
• Customers are always asking for new products with new and
better features. The product development initiatives on the
part of successful and enterprising firms. Besides, customers are
asking for better service in the banking halls. They are asking for
on line real time banking services. They want ATM instead of the
routine bank teller. A successful entrepreneur is one that will
continue to develop new products that will appeal to customers.
• An entrepreneur without product development initiatives will
obviously find out that he / she has gone out of business.
 Critical Success Factors in Entrepreneurship

• We have spent quite some time discussing the causes of

business failure. We did that so that the entrepreneur will
be adequately informed of the various traps/Tricks that
await him or her and then know how to avoid them.
Obviously not all businesses will turn out to be very
successful. Some will turn out to be successful while
others will fail.
 Cont…….
• If we take a look at many successful enterprises today, we can
see that there must be some things, some inner driving forces
that make success possible. Nearly all successful managers
behave alike. They take calculated risks. They understand
their strategic direction and at the same time they remain
focused.
• Critical Success Factors includes;
1. Existence of a good business opportunity 2.Technical
Competence 3.High Mental Ability 4.Human Relation
Skills and 5.Creativity.
1. Existence of a good business opportunity
The entrepreneur does not operate in a vacuum. He operates in an
environment made up of other business operators and of course the
entire population that forms the base of customer relationship.
• Since we are discussing critical success factors in
Entrepreneurship, it must also be important to stress that the
objective of the entrepreneur is to make a profit.
• Profits however cannot be made unless there exists a good
business opportunity which the entrepreneur has seen and wants
to exploit. Part of the skills of the good and successful
entrepreneur is the ability to see a good business opportunity
when others do not see it.
 2. Technical Competence
We start our discussion by clearly identifying technical competence as one
of the important characteristics for success in a small business.
• Technical competence ordinarily refers to the ability of the
entrepreneur to understand the business in question and also posses the
relevant knowledge and skills to engage in the business. For example, a
person engaged in the business of photography must understand the
handling of cameras, films and to some extent film processing. These
are the things that contribute to successful photography.
Other Examples are available;
• Medical Doctor. Hair dresser, Architecture Engineer, Aviation airliner
must have enough knowledge and skills for their fields.
 3. High Mental Ability
• Another critical success factor is high mental ability. High mental
ability is very important for an entrepreneur to be really
successful. Mental ability refers to the capacity to understand. It
enables the entrepreneur to think and develop strategies that will
lead to success in a highly competitive environment. The ability to
think enlarges the entrepreneur’s vision and assists to generate
ideas on how to see the competition from a larger view.
• High mental ability enables the entrepreneur to anticipate the
moves of competitors well in advance and then take necessary
steps to protect his /her business from invasion by competitors
 4. Human Relation Skills
• Possession of good human relation skills is another critical
success factor in Entrepreneurship. We have deliberately
chosen human relation skills because it stands on its own as an
aspect of management competence. We have chosen the
human relation aspect of management because as we said, the
entrepreneur is the factor that organizes the other factors of
production.
• Possession of good human relations skills ensures that the
entrepreneur gets along well with the following: Employees,
Business associates, Customers, Suppliers and Government.
 Cont….

• For purposes of convenience and for understanding, we shall

divide human relations skills into three namely:
A. Communication skills: Communication is the process of
exchanging information between one person and another.
• It could be between one person and a group of persons.
Communication could also be between an enterprise and
third parties or customers.
• Communication provides a link between people in an
organization.
 Cont………

Here are some hints of good human relation skills:

1. Address people by name
2. Smile at people
3. Be warm to people
4. Show interest in people and their problems
5. Listen to people
6. Act like a member of a team
7. Be humble
 Motivational skills
B. Motivational skills: is a process of inducing people to
engage in an activity willingly.
Motivational Skills are very important for the entrepreneur to
possess. The entrepreneur works with subordinates and therefore
should know how to motivate them.
There are other motivators such as:
1. a good work environment
2. full appreciation for work done
3. Job security
 Leadership skills
C. Leadership skills: is the process of influencing employees to
achieve specific objectives. A good leader attracts good
followership and shows how to do it.
Finally leadership skills are another key skills that are critical for success.
Some good leadership traits include the following:
1. ability to socialize well with people
2. self assurance and control
3. emotional stability
4. good moral standing
5. confidence
 5. Creativity
Creativity is a very important success factor in
entrepreneurship. We shall here define Creativity as the
ability to process and arrange information that leads to new
knowledge. This new knowledge will now be deployed to
invent new products, modify existing products or provide
better service to customers.
Creative people are innovative people.
 Cont…….

Characteristics of Creative people includes the following:

1. They generate new ideas in a short time
2. They are motivated by challenges
3. They convert problems to opportunities
4. They believe in themselves
5. They value their mental independence
6. They are very flexible in their thinking
7. They enjoy experimenting with new idea
THE END OF UNIT4

ANY QUESTIONS?
 PIDAM UNIVERSITY

COURSE: ENTREPRENEURSHIP
SEMESTER: ONE & TWO

Chapter 5: Identifying Business Opportunities

LECTURER: SAID MOHAMED
ACADEMIC YEAR: 2023-2024
DATE: 12 NOV 2023
Identifying Business Opportunities
• In a real life situation, the key problem faced by a would be
entrepreneur is how to identify business opportunities. Let us tell
ourselves the truth. It is not an easy task to identify a business
opportunity given the proliferation/rise of business in some countries.
Ordinarily the large multi-national corporations like appear to have
dominated world business. Given their sheer/complete size and financial
muscle, the thinking is that they should control the market and dictate
operating standards, But that is far from the truth. There is still a lot of
room for new entrepreneurs only if they can be able to see clearly the
opportunities that exist in the various sectors of the economy.
• In this unit, we shall direct our attention towards the identification of
business opportunities
Definition of Business Opportunities
• Business Opportunity is a chance for a person to start a
business, in order to generate income. It can be found when there is
a need of product and service, Means to fulfill the need and the
method to benefit.
Business Opportunity can be divided:
1. Local Business Opportunities: its an opportunity that can be found
in the local environment
2. National Business Opportunities: its an opportunity available
within the country context.
3. International Business Opportunities: It can be chance available
Factors that effects the Business Opportunity
1. Studying the Population Data
In business, we work with information and it must be information that is
verifiable and also scientific and that is why our first port of call is to
study the population data. Study of a population data is very important.
The population of a country determines the level of demand for
goods/services.
2. Demographic trends
We have been presented with data on the Nigerian population. The
information on the total population is not all that we require. We will also
require information on demographic trends. Demography is the study of
human populations and the ways in which they change. Let us now
discuss the components of a demography
 2. Demographic trends

A. Age distribution of population

• The importance of the age distribution of population is that it
assists the entrepreneur to know in advance the total size of
the market he or she wants to go into. For example, an
entrepreneur wishing to go into the manufacture of baby
napkins must first find out the number of children in the age
bracket that usually uses napkins.
• When the number of children that are of napkin using age are
known then it will be easier to evaluate the size of the baby
napkin market.
Factors that effects the Business Opportunity

B. The size of the working population

• When you look at a population, major information that you must wish
to extract is the size of the working population and the trend over
time. Not all members of a population are economically active.
Practically, working population can be found within the age bracket of
between 15 to 60 years of age. In most cases, people below 15 years of
age are dependents of their parents. Also, people above 64 years of
age may not be economically active. The importance of estimating the
working population is that it enables the entrepreneur to measure the
Purchasing power of a population. The total work force can be divided
into two namely.
Factors that effects the Business Opportunity

C. The birth rate and the death rate

• In studying the demographic trend, it is also important to look at
the birth and death rates and track their movement over time.
The birth rate and death rate both affect the size of the
population. If the birth rate exceeds the death rate, then the
population will increase. But if the birth rate is lower than the
death rate, the population size will decrease. If that happens
demand for goods and services will shrink.
 Cont…….

D. The Gender distribution of a population

Of course you are aware that there are goods that are peculiar to the
female folk/widespread. There are also goods that are peculiar to the
male folk.
Before embarking on a manufacturing mission, the entrepreneur must
know in advance the number of his or her target market. For example
a hair shampoo manufacturer targeting the University of Lagos
community should first arm him or herself with information on the
number of females in the University of Lagos. Without that type of
information, disaster may await the entrepreneur.
 Cont……

E. Ethnic and religious structure of a population

• When you look at a population data, you do not just measure the total
size of the population. It is important that you understand both the
ethnic and religious structure of the population. For example, in Nigeria
today, it will be important for the entrepreneur to know the number of
Muslim or Non Muslim in a given population. The reason is for example
the Muslim man or woman has a peculiar mode of dressing which is
different from the Non-Muslim mode of dressing.
• Apart from ethnic considerations, the religious structure of the
population needs to be also estimated. For example only a foolish
entrepreneur will try to sell pork to a largely Muslim community. This is
so because the Islamic religion does not welcome the eating of pork.
 Cont….
3. Economic, political and regulatory trends.
Apart from studying population data, the entrepreneur needs to
understand some other trends in the economy. The trends are the
economic, political and regulatory trends.
A. Economic trends
Economic trends will emerge from the interplay of fiscal and monetary
policies. Very critical are the following:
1. Gross Domestic Product (GDP) growth rate
2. The inflation rate and influence on prices
3. Movements in interest rate
 Cont……

B. Political and regulatory trends

• In the general literature, we are told that a stable political
system is a pre-condition for economic growth and
development. It means that any one wishing to study
economic growth and development in any economy must also
study political developments.
• This will enable the entrepreneur to predict the direction of
Government political thought. Apart from political trends, the
entrepreneur must also understand regulation in the
economy.
Classification of Goods and Services
• Classification of goods and services We are making
progress. We have seen that population data is very
important for the entrepreneur and so also are the trends in
the economy.
• We shall go a step further to attempt a classification of
goods and services. It will enable the entrepreneur tie the
knots of information together and take a bold decision on
where to invest. Let us classify goods and services into four
categories namely: Essential and Non- essential goods,
Durable and Non-durable goods.
 Classification of Goods and Services
A. Essential goods and services
In our model, we shall define essential goods as those goods that
are very essential/basic and the consumption of which are
considered very compulsory for virtually every member of society.
Essential services are equally important and will include services
like medical service. Example of an essential good is water.
B. Non-essential goods and services
Non essential goods and services are those that are non-essential
and the purchase of which is optional. Examples of non-essential
goods include items like ice cream, Fruits and internet service.
 Classification of Goods and Services

C. Durable goods.
• We shall define durable goods as those goods that are used for very
long periods and the purchase of which are made infrequently.
• For example, a motor car will have a life span of about 20 years if
properly maintained. Also a building can last for over 100 years if
properly maintained. Sugar Rice and Cement are other examples.
D. Non-Durable goods
• Non-durable goods are goods that are purchased frequently. For
example, car spark plugs are non-durable and are changed frequently.
Car fuel filters are non-durable and used to service cars. Natural
drinks, Vegetables and animal milk are other examples.
 Classification of goods and services
ESSENTIAL GOODS AND SERVICES NON-ESSENTIAL GOODS AND SERVICES

Water Cheese
Petrol and Kerosene Butter
Food items Ice Cream
Housing Coca cola
Medical care DVD player
Salt Television
DURABLE GOODS NON – DURABLE GOODS
Aero plane Car fuel filter
Ship Vegetables
Car Car spark plug
Building Animal Milk
 Identifying business opportunities
We have seen that in identifying business opportunities, we
need to establish the following:
1. Population figures
2. Demographic data like Sex of the population etc.
3. Trends in demography
4. Political and regulatory trends
5. Economic trends
6. Classification of goods
 Cont….

Having done that, the entrepreneur will now draw up a list of his or her
opportunity space.
An opportunity space is a table which sets out a list of goods and
services against their demand levels.
• Finally, the entrepreneur matches his competence with the
opportunity space paying attention to the following;
1. The action of manufacturers and their strong operating niches.
2. The action of suppliers and their uncovered areas
3. Inter – firm rivalry
4. Niches that are open and yet to be covered by an operator.
 Cont…..

In selecting the specific business opportunity to tap into the

following guidelines are advocated:
1. Write out a list of goods and services usually demanded by a
given segment of the population you are targeting.
2. Divide the goods and services into essential and non-essential
goods and services.
3. Divide goods and services into durable and non-durable goods.
Based on your division, choose business in the essential goods and
services segment. Also choose business in the area of non-durable
goods and services since the goods are frequently demanded.
THE END OF UNIT5

ANY QUESTIONS?