Entrepreneurship

Development and Training

Author

Dr. Marus Eton

Department of Business, Faculty of Arts and Social Science, Kabale

University, Kabale, Uganda

Publication Month and Year: November 2019

Pages: 121

E-BOOK ISBN: 978-81-943354-1-2

Academic Publications

C-11, 169, Sector-3, Rohini, Delhi

Website: www.publishbookonline.com

Email: publishbookonline@gmail.com

Phone: +91-9999744933

Entrepreneurship Development and Training

Author

Dr. Marus Eton (PhD)

Dr. Eton Marus (PhD) comes with vast working experience

in academia. He is a dynamic, self-motivated professional with

multi-disciplinary academic background with professional

proficiency in the areas of Finance and Accounts, Business,

Monitoring and Evaluation. He is a Lecturer at Kabale

University in the department of Business. He has Doctorate in

Business Administration with specialty in (Finance). He has

additional qualifications in areas of Financial Management,

Monitoring and Evaluation, Accounting, and marketing. He is

an accomplished scholar and researcher. He has made a number

of publications in peer reviewed journals. He has presented

papers in international Conferences and renowned consultant in

business and research. He has wide experience in lecturing at

higher institution of learning. The Author lives in Uganda.

eton.marus@gmail.com. emarus@kab.ac.ug

256772880149/256701304416

Entrepreneurship Development and Training

Course Description

The Entrepreneurship course is a dynamic course designed to inspire

and engage learners in the fundamental aspects of an entrepreneurial mindset

and the unlimited opportunities it can provide. This course will empower

learners through entrepreneurial thinking and immerse them in

entrepreneurial experiences that will enable them to be creative and

innovative. Furthermore, the course will expose learners on the application

of entrepreneurship skills. Thus, creating and managing viable enterprises.

Course objective

To equip students with innovative and creative skills in the business

environment.

Learning outcomes

By the end of this course, a student should be able to

i) Develop critical thinking skills that will enable them to identify and

evaluate entrepreneurial opportunities, manage risks and learn from

the results.

ii) Analyze the process that enables entrepreneurs with limited

resources to transform a simple idea into a sustainable success.

iii) Establish goals, identify resources and determine the steps required

to start and manage a business.

iv) Demonstrate and interact with local entrepreneurs and business

owners within their own communities.

v) Develop a business plan for starting up a business

Detailed Course outline

1. Introduction 10hours

Introduction to entrepreneurship

The concept of entrepreneurship

The entrepreneur and entrepreneurial characteristics

Entrepreneurial success

2. Environmental analysis 15hours

Introduction to environmental analysis

Internal environmental analysis

External environmental analysis

Challenges in industrial analysis

3. Creativity and innovation 10hours

Purposeful innovation

Sources of innovative opportunity

The bright idea

Principles of innovation

4. Starting a business 10hours

Feasibility study

Business plan

Implementation follow up

Control of the business project

Contents

S. No. Chapters Page No.

1. Entrepreneurship Development and Training 01-25

2. Types/Classification of Entrepreneurs 26-39

3. The Entrepreneurial Process 40-51

4. Small Business in Uganda 52-60

5. Creativity and Innovation 61-74

6. Environmental Analysis 75-85

7. Feasibility Study 86-95

8. Introduction to A Business Plan 96-115

9. Entrepreneurship Development 116-121

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Chapter - 1

Entrepreneurship Development and Training

Introduction

An entrepreneur refers to the person or persons who undertake the task

and risk of organizing other factors of production (land labor and capital).

He is the coordinator or mobilizer, a risk taker, innovator and decision

maker.

The entrepreneur therefore organizes natural resources and capital goods

for production to take place. This is done in anticipation of demand and

supply.

Entrepreneurship is a process of creating something different with value

by devoting the necessary time and effort or entrepreneurship is the process

of creating incremental wealth.

Characteristics of Entrepreneurs

i) They are risk bearers that are; they risk their capital against

uncertainties in business.

ii) They are enterprising that is; have the courage and willingness to do

new things.

iii) They are creative and innovative that is; they bring about new ideas

and things.

iv) They are decision makers i.e. they are good and quick at deciding.

v) They are mobilizes that is are able to bring together the resources

(land, labor and capital) for production.

vi) Good planning i.e. should be good at determining in advance what,

when, where, and how to produce something.

vii) Patient, this is the ability to persevere and be diligent i.e. to endure

all kinds of business problem.

viii) Restless. they don’t rest unless their dreams come true

ix) Independence that is they are free from control, support or influence

of others.

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x) Have the need for achievement

xi) They are ambitious.

xii) They always want to win.

Problems Faced by Entrepreneurs

Taxation by the government.

Government intervention by nationalizing and fixing prices.

There is political pressure.

Competition for the market.

Lack of infrastructure for easy distribution of goods and services.

Fluctuating demand and supply situations which in turn affect

planning of what, when, where and how to produce.

Insufficient profits.

High inflationary tendencies.

Insufficient financial services and loan funds are low.

Importance of Entrepreneurship

i) It leads to employment opportunities both for the entrepreneur and

those who help him

ii) It contributes a lot to government revenue in form of taxes.

iii) Entrepreneurship utilizes those resources that would otherwise be

redundant.

iv) It helps to maintain constant flow of goods and services.

v) Provision of a variety of commodities to consumers raises their

standards of living

vi) The excess profits generated by entrepreneurs is used to finance

social services e.g. sport

vii) It helps in the development of infrastructure e.g. Bridges, roads.

viii) It may lead to the inflow of skills and the development oflocal skills

ix) It also helps to increases the export potential of a country.

x) It increases domestic investments through competition and inflow

of foreign capital

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The Process of Entrepreneurship

There are four Stages in the Entrepreneurship Process. They Include

i) Some Changes in The Real World

A change in the real world may bring a lead to produce something new,

this change is spotted through conscious acting of scanning the environment

for example change in weather conditions from humid to dry weather may

lead to the production of drought resistant crops in the areas where

Agriculture is rain fed.

ii) Idea Generation

At this stage a new idea over something comes from what is happening

in the real world, from the above for example the idea of producing drought

resistant crops may have come from understanding of a real change in the

weather conditions.

iii) Opportunity Identification

This involves conscious knowledge of the gap within the environment

that really needs to be filled. It starts with an assessment of new ideas with

possible opportunities associated to it.

iv) Viability and Feasibility

Opportunity identification also goes hand in hand with viability and

feasibility tests. At this stage an identified opportunity is to be tested on the

grounds whether it can be profitably exploited using the available resources

during a particular time period

Actual Operation of the Identified Opportunity

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Entrepreneurship Development

Introduction

Entrepreneur refers to someone who undertakes to organize, control,

manage and take risks/ profits of the organization.

Entrepreneurship refers to the process of creating and building a vision

of creating and building a vision from practically nothing, fundamentally it is

a human art.

1. Psychological Profile

Is the way an entrepreneur thinks, perceives or visualizes himself and

his environment and how this influences his behaviors? Behavior here entails

feelings, attitudes and opinions.

Many writers have tried to explain entrepreneurship in different but

mutually connected way. So different theories of entrepreneurship exist and

there have been different definitions of entrepreneurship but most of them

add something to other definitions.

Hisrich and Peters (1995) defined entrepreneurship as a process of

creating something different with value by devoting necessary time and

effort, assuming the accompanying financial, psychological and social risk,

and receiving the resulting rewards of monetary and personal satisfaction.

Another writer RonStandt (1984, 28) improved the above definition by

defining the entrepreneurship as a process of creating incremental wealth. He

said that the wealth is created by an individual (entrepreneur) who assumes

the major risk in terms of equity, time and career commitment or provides

value for some products or service may not be new or infused b the

entrepreneur by receiving and allocating the necessary skills and resources

A consistent universal theory of entrepreneurship does not exist but in

general the theory consists of several different approaches including

sociological, psychological, anthropological and economical approaches.

Timmons (1999) defines entrepreneurship as a way of thinking,

reasoning and acting that is opportunity obsessed, holistic in approach and

leadership balanced

Gupter and Sprihivan(1995) defines entrepreneurship to involve

combining factors of production to initiate changes and to that it is a

discontinuous phenomenon.

Donald and Richard (1989) defines entrepreneur as a process of

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innovation and new venture creation through four major dimension-

individuals, organization, environment and process and aided by

collaborativenetworks in the government, education and entrepreneurship.

The essence of entrepreneurship is the urge to match the continuous

changes in the environment with regard to the way an organization operates

and to the product innovation and improvement.Thus, the central

entrepreneurship role is constant desire to create something new such as;

new insights into the market, new corporate value, new manufacturing

processes, new product and service or new ways of managing all

entrepreneurial activity revolves around the birth and operation of new ideas.

The primary concern of entrepreneurship is desire to constantly adjust

with in the volatile business environment. As the economy undergoes

changes, newer and better methods of dealing with such changes are sought

and researched: a new organization, new insight into the market, new

corporate values, new manufacturing processes, new product or services,

new ways of managing.

Entrepreneurship process therefore through information synthesis,

observes such changes especially those signaling opportunities and makes

considerable judgment of the likely gains out of it. The entrepreneur thus

becomes innovative only if he discovers the ways which improves the

efficiency in the use of resources thereby improving production, productivity

and quality of a product or service required by the community.

Entrepreneurship is not a natural gift or talent peculiar only to some few

individuals. Under normal circumstances, it is believed that everybody can

upgrade his / her entrepreneurial skills through spontaneous and conscious

activity of training, experience, education and social structures such as

family; peers and religion. These factors interact with desire to create

something new and different from the common and general understanding of

a particular phenomenon.

Psychological Perspective of Entrepreneurship

In this study, several psychological theories have been analyzed above;

these theories bring out personality characteristics that are closely related to

those of entrepreneurs. These include: -

1. The Needs and Achievement Theory: Development by

McClelland emphasizes three for Achievement, need for utilizations

and Need for power. It pays attention to personal traits, motive and

incentives of on individual and concludes that entrepreneurs have a

strong head for achievement (McClelland writer 1971).

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2. From Douglas McGregor’s theory x and theory y, we can learn that

people who believe in theory y have strong self-drive and can work

comfortably alone. This is common characteristics of entrepreneurs.

3. From within the hierarchy of needs of has lows theory that within

them there is that level where the individual seeks esteem and self-

actualization. This can be likened to the entrepreneurs need for

recognition and applause.

4. The Hygiene theory developed by Hertzberg, indicate that the

motivating factors of an individual involve achievement,

recognition and advancement.

5. The Expectancy theory on the other hand, talks of behavior as being

determined by a combination of forces in the individual and the

environment.

6. A similar focus is found in locus of control theories that conclude

that an entrepreneur will probably have strong internal locus of

control (Low and Mac Millan 1988).

This means that an entrepreneur believes in his or her capabilities to

commerce and complete theories and events through his or her own actors.

However, prior research has suggested that individual involvement in

entrepreneurial activity cannot be predicted by a simple set of characteristics

(Sandbarg and Hofer 1987), But the above theories give us a clean indication

that entrepreneurship characteristics are a subset of the personality

characteristics of an individual as brought out clearlyby the psychologists. In

view of the above, the study will summaries the characteristics into those

most commonly identified with entrepreneurship. These will include among

others.

Achievement motivation.

Affiliation needs.

Loans of control.

Risk taking propensity.

Tolerance for ambiguity.

Researchers have said that there is no characteristic predisposition or set

of traits of the individual entrepreneur level of analysis that consistently

“predicts” entrepreneurial activities the study skill aims at establishing a

close link between entrepreneurship and human psychology. To achieve this,

we shall analyze each of the above traits in detail.

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Achievement Motivation

The root of the achievement motive lines with the Weberian concept of

the protestant work ethic.

McClelland (1961) proposed that the need for achievement was a

psychological motive derived from particular types of familiar socialization

intervening between ideological values the entrepreneurial behaviors.

Achievement motivation can be defined as behaviors towards

competition with a standard of excellence (McClelland 1953). People who

have high levels of achievement motivation tend to set challenging goals and

try to achieve these goals. These people value feedback and increase it to

assess their accomplishments Achievement motivation is accepted as

important characteristics of the individual and influences work behavior to a

great extent

Certain characteristics of individuals with high achievement need may

lead to different levels of entrepreneurship styles. For organization

McClelland and Koestler (1992) suggested that people with high levels of

achievement motivation will be future anointed and will take tasks seriously

if they believe that current tasks will influence future goals.

Besides, achievement motivation refers to a desire to outperform other

people, people with achievement motivation find satisfaction in companying

themselves to others and is motivated by this comparison.

Affiliation Need

Affiliation need refers to a desire to be close to other people in order to

feel re assured that the self is acceptable (McClelland, 1953). In his research

or the theory of psychological motivators McClelland found out that

entrepreneurs are also driven by the need to stay in harmony with their

environment, being of service, a problem swore and to make beneficial

contribution to the welfare of their immediate society.

Locus of Control

Locus of control refers to the perceived control over the events in one’s

life (Rotter,(1996) people with internal locus of control what happens in their

lives on the other hand, people with external locus of control tend to believe

that most of the events in their lives result from being lucky, being at the

right place at the right time, and the behaviors of powerful individuals

people’s beliefs in personal control over their lives influence their perception

of important events their attitude towards life, and their work behaviors.

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Locus of control may be related to pro – activeness. When individuals

believe that they can make a difference in their lives by performing certain

actions, they may be more willing to think about the future and act

proactively; research indicates that people with higher degrees of internal

locus of control tend to monitor the environment to obtain information.

Internal locus of control may also be related to risk taking orientation

research shows that internals tend to estimate probability of failure as lower

and decide in favor of risky options.

There is also reason to expect a positive relationship between the locus

of control, innovativeness and competitive aggressiveness, to the extent that

individuals feel that being compressively aggressive or being innovative are

ways of exerting control over the environment we can expect a positive

relationship between these variables.

Risk – Taking Propensity

This is defined as the “perceived probability of receiving rewards

associated with the success of a situation that is required by the individual

before he will subject himself to the consequences associated with failure,

the alternative situation providing less reward as well as less several

consequences that the proposed situation “risk taking is defined as a trait that

distinguishes entrepreneurs from non-entrepreneurs.

Risk taking propensity of the entrepreneur is expected to be related to

the risk-taking level of the entrepreneurial firm. When entrepreneurs have

the ability to influence the actions of the organization with their personal

decisions, their personal characteristics may be reflected in the actions of the

organized as a result the organizing be more risk taking the propensity may

positively influence innovativeness especially product innovativeness,

product innovativeness requires a certain degree of tolerance for taking risks,

because innovativeness benefit it’s from a willingness to take risks and

tolerate failures the risk – taking propensity of the entrepreneurs will

positively influence innovative attempts of employees and as a result the

organization may adopt an innovative orientation to face the competition.

Tolerance for Ambiguity

This refers to a tendency to perceive ambiguous situations in a more

neutral way people who have low levels of tolerance for ambiguity tend to

find unstructured and uncertain situations uncomfortable and want to avoid

these situations. A certain level of tolerance for ambiguity may influence

organization success positively because organization events are uncertain

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and UN structured most of the time and organization success requires the

willingness and ability to cope with uncertainty. Tolerance for ambiguity

may be related to certain entrepreneurial styles. Tolerance for ambiguity

found to be related to personal creativity (Terano 1990) and the ability to

produce more ideas during brain storming. These findings suggested that

creativity and innovative less requires a certain level of tolerance for

ambiguity. The ability to tolerate ambiguous situations may also be

positively related to the risk – taking style of the organization.

Tolerance for ambiguity may also be positively related to pro –

activeness.

This requires a desire to think about the future and take actions to

answer future situations and threats proactive organization need to think

beyond.

Conventional ways of operating and question the strong quos as a result pro

activeness requires the capability to handle the unknown, people who are

able to tolerate ambiguity may lead their organization to become more

proactive.

2. Sociological Aspect of Entrepreneurship

Sociological theory tries to explain entrepreneurship as a process

whereby the individual’s sociological background is one of the decisive push

factors that can influence such an individual to become innovative and

creative in a particular field of activity and thus become an entrepreneur.

Entrepreneurship is seen as a response to inferior social conditions, people

become creative (entrepreneurial) in the areas where they are socially

deprived or seen to have the possibility of being disadvantaged. It is said that

if people are disadvantaged they will become entrepreneurs and spear head

the drive for economic change.

The entrepreneurial skills are highly affected by sociological

environment which distinguishes different opportunities that one may be

able to exploit. That is to say, entrepreneurship can be affected by a number

of factors which surround a particular society they include:

i) Child Family Environment

The family environment of the entrepreneur includes birth orders,

parents’ occupation and social status, and relationship. It has been found that

being a first born or an only child is postulated to result in the child receiving

special attention and thereby more self-confidence. In terms of occupation of

the entrepreneur’s parents, there is strong evidence that entrepreneurs tend to

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be self-employed, or entrepreneurial fathers. Having a father who is self-

employed provides a strong inspiration for the entrepreneur. The overall

parental relationship regardless of whether they are entrepreneurs is perhaps

the most important aspect of the child hood family environment in

establishing the desirability of entrepreneurial activity for the individual.

Parents of entrepreneurs need to be supportive and encourage independence,

achievement and responsibility.

The family network influences the ability to mobilize resources

necessary for the business or enterprise. The capital can be mobilized

through inheritance patterns, family loans and cheap loans and cheap labor in

the family. Most successful businessmen belong to groups with internal

relationship and trust.

ii) Family Background

The family background has great influence on the growth and

development of entrepreneurship. The nature of activities that a particular

family undertakes determines the type of entrepreneurship that will be

adopted by the growing entrepreneurs. For example, if the family deals with

hand crafts there is a greater possibility of developing entrepreneurs in such

a field.

iii) Religion

In the sociological aspect of entrepreneurship, it has been found out that

religion plays a major role towards entrepreneurship. For example, some

religious communities in India i.e. Parseers, Marwarsand Sindlees are seen

to have an affinity for industrial activities. Religion exercises a strong

influence on attitudes towards material gains relatively to efforts.

iv) Environment

A complex and varying combinations of financial, institutional, cultural

and personal factors determines the nature and the degree of entrepreneurial

activity at any time. The personal background of the entrepreneur are

determined mainly by the environment in which they are born and brought

up and work.

A multiple of environmental factors determine the entrepreneurial spirit

among people. The entrepreneur in turn creates an impact on the

environment. Thus the interaction between the entrepreneur and his

environment is an ongoing process. At any one given point of time, the

entrepreneur delivers meaning from the environment prevailing at that time

and tries to adopt and or change the environment to suit their needs.

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The environment especially the external is dynamic and it keeps

changing and affects different organizations to a varying extent. For

example, government policies, political excessive red tape, ideological and

social conflicts, rising costs of input etc. Therefore, entrepreneurship is

environmentally determined and the most important tool for entrepreneurial

growth is the presence of a favorable business environment.

v) Race

There is no link between race and entrepreneurship. Entrepreneurs have

sprung from all region of the world without any bias to any particular region

(race). Evidence however exist which shows entrepreneurship in Africa is a

reality. For instance, African entrepreneurs raise start – up and operating

capital from community resources such as rotating credit systems involving

social groups.

vi) Time and Age

The time and age of entry into entrepreneurship are important factors to

most entrepreneurs. In terms of chorological age, most entrepreneurs initiate

their entrepreneurial careers between the ages of 22 and 55 (Hisrich and

Peters 1995). They also said although a career can be initiated before or after

these years, it is not as likely because an entrepreneur requires experience,

financial support, or high energy level in order to successfully launch and

manage a new venture. According to the study carried out in India, it was

found that two thirds of the entrepreneurs entered into entrepreneurship

before the age of 25 years. People from mercantile communities entered into

entrepreneurship comparatively at younger age due to their early orientation

and guidance by their parents. The important thing to note here is that a

person can join entrepreneurship at any age provided he/she has ability and

interest of becoming an entrepreneur.

vii) Culture

Hofstadter (1991) defines culture as the collective programming of the

mind which distinguishes the members of the group or category of people

from another. The mental programming referred to above consists of shared

values, beliefs and norms. These mental contracts influence how people

socialize their particular culture, and the way they perceive events. They also

help to determine what behaviors are considered appropriate or inappropriate

in various social situations.

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Hofstede Identified from Value-Oriented Dimensions of Culture that

may be used to Describe Cultural Groups. They Include

Power Distance

This is the general measure of the degree of interpersonal influence that

those who hold power in a social structure can exert over those who lack

power. According to Hofstede, it is the difference between the extents to

which

Superiors in a social hierarchy can determine the behaviors of a

subordinate compared to the extent that the subordinate can determine the

behavior of the superior.

In high power distance societies, inequality between social groups is

expected as part of “natural’ order. Consequently, there tends to be large

social and economic gaps between those who have power and those who do

not. In addition, movement between high and low power groups is restricted

creating a tendency towards distinct social classes with little exchange

between the groups.

In contrast low power distances societies attempt to minimize inequality

between classes, emphasizing the ideal of equal rights for all members of the

society even if it is not perfectly achieved. Social mobility is relatively easy

in low power distance societies and a large middle class is usually present to

bridge the gap between more or less privileged groups.

In high power distance cultures because of the social inequality

characterizing high power distance regions, access to educational systems

and economic resources may be restricted to the privileged class.Moreover,

members of the lower classes may not be accepted into entrepreneurial roles,

or lf they assure such roles, their activities may be devalued or considered

illegitimate.

Uncertainty Avoidance

The level of anxiety experienced by members of cultured due to

ambiguous events may vary as a function of the society’s values and beliefs.

Uncertainty evidence is a measure that indicates a group’s level of anxiety

regarding future event. It evaluates the degree of tolerance of a culture of the

ambiguity that is internet in a continuously unfolding future.

Societies attempt to manage uncertainty through rules, technologies,

laws and initials in order to protect members from anxiety. These devices

standardize the behaviors of society members and make the outcome of

social processes more predictable.

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Individualism

This is the measure that indicates the degree to which individual identity

and self-concept are linked to collective groups of the society. In

individualistic societies, personal values and goals are prime determinants of

behaviors and self-identity.

Of all Hofstede’s value dimensions, the one most directly associated

with Weston ideals of entrepreneurship is individualism. In the Weston

model, the activities of the entrepreneur are quite essentially individualistic.

Masculinity

Hofstedes final cultural direction is masculinity. Despite its name, this

construct does not measure specific differences between male and female,

rather it refers to learned styles of behavior that have been (stereotypically)

applied tomales and females.

The masculinity measure evaluates the general tendency to act either

assertively (Masculine) or in a nurturing manner (feminine) In high

masculinity societies, individuals tend to set high performancestandards and

act forcefully to achieve these standards. In societies with a low masculinity,

nurturance issues are prominent.

Its relation to entrepreneurship would seem to be through the

assertiveness and high need for achievement characteristics of “masculine”

culture. In masculine societies and material success achieved through

successful entrepreneurial ventures is valued and entrepreneurs who attain

such success are recognized and esteemed. Conversely in relatively feminine

cultures, achievements motivation, at least in the material sense, is relatively

weak and success is defined in terms of pleasant human relationships.

viii) Migration

Research has it that some entrepreneurs are / were migrants having

come from different places with in the state from outside limited knowledge

of the language or culture of the majority or discrimination against the

immigrants led to difficulties in securing jobs in existing firms. A viable

alternative in this inhospitable work environment is striking out ofone’s own.

Therefore the explanation forimmigrants high rate of business creation is a

combination of their social costiveness and difficultiesincluding exploitation

they encounter in the broader labor market one such explanation associated

with the early work of Ivan light among others, argued that the more

hardship and frustration in migration experienced in the main stream

economy, the more likely they were to seekemploymentand develop stronger

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economic and social bonds with in their ownethnic community. These in turn

complete in the broader market by providing them with information

networks services of credit, a loyal consumerbecause for their goods, and

steady supplyof co- ethnic laborers.

It should be noted however, that among immigrants, the traits of risk

taking and ambition are like

ix) Occupational background

It is widely held, but untested consensus that past experience is a better

predictor of decision, performance, and behavior than education (Bird 1993).

Thus, the most powerful way of learning is through ones occupation that is

direct experience of the subject matter. It is therefore, assured that one might

learn that entrepreneurship is desirable feasible and profitable from the

concrete experience of working in one own or other persons firms.

Occupational background or previous work experiences are described

etc formative and may encourage entrepreneurial behavior. The skills gained

through formative experience may be managerial, financial attitudinal or a

combination of these, and may build business competence, high lighting

opportunities for the individual

Small businesses have been suggested as incubators for future

entrepreneur, although they may be viewed as formative, it can also be

viewed as a reactive experience due to the fact that the organization

environment may be unstable and job prospects are limited as are rewards.

x) Gender

Gender is one of the sociological angles from which the theory of

entrepreneurship can be viewed Depending on the social, political, cultural

economic and historical as well as religious settings of the gender the theory

of the entrepreneur changes. In India the caste structure was such that social

mobility was estimated and this people born in a specific caste confirmed

themselves to particular look at women in this case study it was found that

women were in the lower caste particularly demised access to education

acquisition of skills other than those that would confide them to motherhood

and house care and as such the majority of them contented themselves with

the role of child upbringing and housekeeping. Not with standing this they

were economically marginalized and psychologically biased towards

initiation of business or in visionary ventures. As a result few of them ever

ventured into entrepreneurial activates. They therefore did not from their

perspective have the impetus to become innovators. Some religions societies

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like the Parsees, Marwari and Sindlees on the other hand in India had an

affinity for industrial activity and as result some of the women from such

societies tended to have an affinity for industrial occupation and

entrepreneurship in the same field.

Dominance of certain ethnical groups / sexes in entrepreneurship is

global phenomenon. The protestant ethics in the west, the samurais in Japan,

the trending classes in U.S.A and the family business concerns in France

from those we can clearly observe putting into consideration, family

background, the type of industry that could be started, the type of ownership

and the average annual, monthly income of the family all played down

heavily on the ideas of what an entrepreneur was from a gender perspective.

xi) The Handicapped

The handicapped in India also formed asset of their own in India.(these

of course transcended in all cases, education background, religious affiliation

and physical capacity. the handicapped formed quite a number in the Indian

community mainly due to the then high prevalence of polio and poor

working conditions. From their perspective they were already

psychologically and physically impaired as a result very few of them even

dreamt let alone really achieved the status of entrepreneur. They tended to

regard themselves as a less privileged caste of their own and did not very

much venture into entrepreneurship or become entrepreneurs not

withstanding that society as a whole already viewedthemnegatively all in all

m, the perspective of the entrepreneur was such that considering the social

economic and political settings of their surroundings, the handicapped did

not (generally) a result few of them ventured into entrepreneurships it

therefore acted (handicraft as a sort of barrier to expression but not complete

inability.

xii) Education

The early entrepreneurship theorists advocated that entrepreneurship

cannot be taught or learned in schools, they believed that entrepreneurship

has been recognized that one must be born with. Currently entrepreneurship

has been recognized as a discipline that can be used to help an entrepreneur

to acquire important traits which he might not possess.

Formal education; helps an entrepreneur to develop entrepreneurial

skills like resourcefulness. However, the lack of higher education is not an

obstacle or limiting factor. The study conducted in India reveals that

majority of entrepreneurs lacked higher education. Most of these were young

persons with higher education seemed to prefer white color jobs in the

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government. However engineers, technicians and other professionals are

however coming forward as entrepreneurs.

The level of education that the society possesses may contribute

substantially to the kind of entrepreneur that will grow in such a society.

Education helps the entrepreneur to know what is going on in other parts of

the world and can enable him / her to improve in all aspects of his or her

activities. Therefore, education is important factor that can influence

development of entrepreneurial skills or creativity.

xiii) Schools and Institutions

Schools and institutions form an integral and fundamental grouping in

society. As seen above the level of education is one of the key factors that

influence entrepreneurial participation in a society. Much as the individuals

in these schools/institutions in India were all in away affected by their

individual historical background which includes size of family, type of

family and economic status of family. According to Hadimahis study,

Zamidar family helped to gain access to political power and exhibited higher

levels of entrepreneurship.

We also observe that family status of the individual greatly influenced

social and physical mobility of a person. These institutions however were

also affected by religion, which exercises a strong influence on the attitude

towards material gain relatively to efforts. Max Weber propounded the

theory that the ‘protestant ethic’ among Christians fastened the right attitude

for entrepreneurial skills like resourcefulness however the lack higher

education is not a limiting factor. Since education and technical knowhow is

primarily acquired in schools/ institutions and we know that education is the

best means of developing man’s resourcefulness which encompasses

different decisions of entrepreneurship

It is important on this wrote to reveal the studies of AsdlokKuhar who

found that many of the very successful entrepreneurs were graduates and

post graduates particularly in engineering and other technical discipline and

also that Kamma and Brahim entrepreneur were relatively more educated

than others. This may be expected that higher levels of education may enable

the entrepreneurs to exercise their entrepreneurial talent more efficiency and

effectively. Therefore, it can be said that people from schools (institutions

are helped to acquire / discover themselves potential as entrepreneur. This is

focus, the elite perceived themselves as highly potential entrepreneurs had

high option of becoming as identifying them as one, hence explaining why

the greater majority of entrepreneurs are institutional outputs.

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3. Economic Theory of Entrepreneurship

This one looks at an entrepreneur as an innovator who is capable of

identifying opportunities, exploiting them and turning into Marketable ideas.

He adds value in the form of time, money, skills and accepts the rises of

competitive markets with regard to implementation of ideas or exploitations

of opportunities and eventually the community benefits from his effort.

Schumpeter (1934) defines entrepreneurship “essentially a creative

activity consisting of doing such things as are generally hot done in the

ordinary course of business.

Timmons (1999) defines entrepreneurship “as a way of thinking,

reasoning and acting that is opportunity obsessed holistic in approach and

leadership to exist, an activity ought to produce something different,

something specific, that changes and upgrades field from resources.

According to Hertzberg (1998) the entrepreneur’s business has two main

purposes. The first is to create the next satisfied customer “string to fulfill

some need, either real or perceived. The second purpose is to “out with

navels by (beating) the opportunities not yet taken and therefore to make the

largest profit possible. He creates satisfied customers by developing needs.

The entrepreneur is also important in that he improves an existing good

or service through innovations or develops a new one. This is an economic

action that can also create a need for a commodity by investing or marketing

it in a new way. An entrepreneur must also be constantly aware of what

people are looking for and also be aware of potential uses of client goods and

services when an entrepreneur is successful, he will make profit.

Schumpeter’s Theory of the Entrepreneur

He said the development of entrepreneurship was a Factor of Production

(F.O.P). He sees the entrepreneur as having a decision-making role and his

/her main function is to be viewed in a wide perspective and induces the

introduction of a new methods of production; opening of new market and

creation of new types of individual organization.

Schumpeter looks at entrepreneurship as the avenue through which

technological change comes. The resultant technological change comes. The

resultant technological change in essence means a form of economic

development. Scamper argues that as the economy develops progress will

eventually come to be “mechanized”.

Another salient aspect of the Schumpeterian view is that it emphasizes

the idea of the entrepreneur as a sow ice of disequilibrium in the economy

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Schumpeter argued that equilibrium and optimization, is the horn of a

healthy economy and the central reality for economic theory and economic

practice.

Also, Schumpeter initially sees innovation and hence economic growth

and development as being the province of bold individual entrepreneurs.

The Entrepreneur and Technological Change

Basic innovations are more or less exogenous to the economic system in

that their supply is perhaps influenced by market demand in some way, but

their genesis lies outside the existing market structure accordingly

Schumpeter argues that the entrepreneur seizes upon these basic inventions

and transforms them into economic innovations. In this aspect we may see

the entrepreneur as playing a key role in technological change in industry.

Micro economic theory points out that resource owners and producers

invest their talents and other resources in production with an aim of reaping

returns, similarly Schumpeter late that the successful innovator reaps level

short term profit which are soon bid away by imitators.

Schumpeter’s theory however portrays the bold entrepreneur as one who

does not let off because of the said imitators come into play there is always

new knowledge with in the entrepreneurs’ sphere. Indeed, the job of the

entrepreneur is precisely to introduce new knowledge.

The Obsolescence of the Entrepreneur

The obsolescence of the entrepreneur becomes clear when we look at

telemeters’ elaboration on the nature of large corporations and its role in his

theory Schumpeter believed that economic history influences economic

theory. Perhaps because of the changes he saw in contemporary economics

(rapid industry and increased expenditure on research and development in

large cops) Schumpeter argued that the entrepreneur role was gradually

being assimilated by the corp. He saw the inventive activities as singly under

the control of large firms and this reinforces their competitive position.

There is a historical trend in Schumpeter is idea that the entrepreneur will

eventually become “less important” or obsolete” and large firms would

occupy a more prime position.

This social function (entrepreneurship) is already losing importance and

is bound to lose it at an increasing rate in the future even if the economic

process itself of which entrepreneurship was the prime mover went on

unabated.

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The Entrepreneur and Disequilibrium

Schumpeter argues that in a world of limited knowledge,

entrepreneurship is necessarily an unpredictable and extra rational activity.

This argument leans towards a liberal social order continently, the

Schumpeterian view asserts that the capitalist process aided by

entrepreneurship) progressively raises the standards of life of the razzes.

Economics aim at bringing those things that once were for the elite to the

reaches of common individuals. And this Schumpeter says can only be done

through the success of risk takers (supported by entrepreneurs) similarly, the

rate of general economic progress will depend on the ability of individuals to

commend resources and direct them in unconventional and surprising

directions.

Yet, it’s the same process of innovations, Schumpeter argues, that thrice

dynamic disequilibrium, basically inventions are more or less exogenous to

the economic system. Entrepreneur base upon opportunities and strive to be

pioneers in production of new products. Those who are successful reap large

short-term profit. This as we noted earlier encourages competitors into the

market in the form of imitators. Similar, great innovations lead to the

elimination of jobs and firms. Schumpeter called this “creative Destruction”

the effects of entrepreneurship not only create progress, jobs, firms, and

improved standards of living, but also put some jobs, firms and products out

of business.

Schumpeter therefore argues that innovation leads to disequilibrium and

alternation of the existing market structure but as time goes on, the situation

eventually settles down to wait for the next wave of innovation. The result is

a punctuated pattern of economic development that is perceived as a series of

business cycles.

Israel Kirzners View of Entrepreneurship

Israel Kirzners procedure is based on an analogy, or a parallel between

what he calls the entrepreneurial element in individual decision making and

entrepreneurship in the market interaction. He isolates the entrepreneurial

element by contrast in routine optimizing behavior with what he claims we

can know about time individual action by means of a close inspection.

To Kirzner, close inspection reveals that individuals spontaneously

discover means of satisfying their wants. For example, an individual light

follow a sub conscious vision that is either vision or impression) and as a

result experience an unexpected gain he calls such spontaneous discovery –

the entrepreneurial element.

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Kirzner further identifies what he regards as a crucial kind of action in a

market economy that is arbitrage (this is the purchase and sale of same or

equivalent securities in order to profit from piece discrepancies). Kirzner

associates entrepreneurship in the market economy primarily with this

action. He further argues that as the entrepreneurial element in individual

decision making leads to a more efficient personal allocation of resources or

co-ordination of the individual’s plans, so also does entrepreneurship in the

market economy that arbitrage leads to economic coordination or the more

efficient allocation of resources in the economy.

The Discussion Will Focus on The Following

1) Entrepreneurial Element in Individual Decision Making

The attracting point for understanding Kirzners definition of

entrepreneurship is the isolated actor. This isolated learning is linked to

entrepreneurial characteristics which (sporadically) a rise from people in

their various isolated environments.

a) Spontaneous Learning

Kirzners idea of entrepreneurship is based on what he calls bounteous

learning. This he said is not planned learning. Thus, it is sub conscious

subconscious learning is synonymous with the transformation of a

previously recognized entrepreneurial vision into recognized contributor to

satisfaction, when Kirznerls says that an individual belief. Lay constitute an

entrepreneurial vision he was hot reforming to a conscious belief. He would

in essence bet that his belief was correct. His action would therefore be

indelibility choice.

b) Alertness

Kirzner calls the state of mind that enables spontaneous learning to

occur as alertness. According to kirznersjust as leaving is spontaneous, so

also is alertness. This state of mind cannot be produced as improved upon;

it’s part of human nature. Individuals may differ in their alertness.

c) Transformation of Spontaneous Learning into Conscious

Knowledge

After an entrepreneur has recognized his vision (or hunch), it’s longer

subconscious. According to Kirzner it becomes a factor of production. The

individual how takes it into account in his decision making. This when

individual recognizes that following previously subconscious vision is a

means of increasing his satisfaction, he simultaneously discovers that he

possesses a factor of production This entrepreneurship is a discovering

process although a subconscious one.

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d) Motivation for Subconscious Learning

In spite of the fact that spontaneous learning is a subconscious process,

Kirzner says that it’s encouraged by the possibility of gain. He says, lf we

know anything atall about theprocess of spontaneousdiscovery of

information, it’s thatthis processis some low altogether more rapid when the

relevant informationwill be of benefit to the potential discoverer.

2) The pure entrepreneur and the entrepreneur economy

According to Kirzner a pure entrepreneur is decisions maker whose

entire role arises out of his alertness to hitter to unnoticed opportunities. This

activity of these pure entrepreneurs can then explain how prices and input

and output quantities and qualities charges.

3) Alertness and Arbitrage

For Kirzner, the first characteristics of an entrepreneur is alertness the

crucial question (in the task of the theory of the market) concerns the nature

of the forces that bring about changes in the buying, selling, producing and

consuming decisions that make up the market. This force Kirzner says

consists of learning from mistakes for example the help to explain how

yesterday market experience can accounts for change on plans that might

generate alterations in prices in outputs or in the uses of inputs hence the fact

that men learn their experience in the market.

The learning which Kirzner has in mind is subconscious, and the

changes are hot consciously chosen Kirzner is hot referring here to market

participants who, each motivated by his personally protected gain from trade,

He is referring to a subconscious process. The expectation that traders have

of other’s plans change subconsciously. Traders are subconsciously alert to

changes.

In short, the pure entrepreneur first subconsciously discovers what he

regards as an opportunity to earn money by buying and selling (or by buying

F.O producing a good and selling it) then he fiancés his venture by burning

money from a capitalist, the entrepreneur uses the funds for his

entrepreneurial venture, and then he pays back the capitalist, including

interest and keeps the pure entrepreneur profit” A good descriptive label for

the behavior performed by the pure entrepreneur is arbitrage. Thus the

defining characteristics of entrepreneurship in the market economy are

arbitrage.

a) Differences among Individuals

Individuals in market differ in their alertness. For example, if two

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individuals buy and sell of the basis of sub conscious visions, the first may

be more correct, in the eyes of the superior insight, than the second. The

money earned by the first win corresponding be grater similarly if two

individuals buy and sell on the basis of some subconscious vision one may

come to subconsciously realize that the vision, in gain while the other

remainsinward of his vision contribution to his earnings. Leaving has

therefore accrued in the first instance only.

b) Learning as discovery and transformation

Learning in the market according to Kirzner, consists of a

transformation of a non-means into a means at least to the individual who

experience it. If an individual subconsciously learns that his perilous

subconscious vision enabled him to gain in a market. Later he experiences a

similar choice situation. At the later time, his knowledge, not his vision

would enable him to make a correct choice. At the time that the vision is

discoursed, it gets transformed into F.O.P knowledge. This alertness,

subconscious learning, and entrepreneurship are discovery processes.”

c) Encouragement of subconscious learning in a market

Subconscious learning in the market can be encouraged in two ways

according to Kirzner.

It can be encouraged by others advertising if the advertiser profits his

message to the potential consumer, or with conic illustration or a compared

by a certain piece of music surely this is because the advertiser knows hot

merely how to lower the cost to the consumer of learning his message but

how to encourage spontaneous learning by the closure with no deliberate

search for all”

Subconscious learning can be encouraged by institutional arrangement;

institutional arrangement determines the gains that are available to different

individuals when they subconsciously learn, because subconsciously

learning in some individuals is superior to that in other, it’s important that

those who are superior receive higher gains.

4) Entrepreneurship as Equilibrating

From a Logical Definitional Standpoint, Kirzner’s Notion of

Entrepreneurship as Equilibrating Combines Three Ideas

The first is the subconscious learning is equilibrating to the isolated

actor.

That subconscious learning about arbitrage opportunity is

equilibrating in markets.

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The subconscious learning would lead to a general equilibrium of

there were no changes in the non-entrepreneurial determinants of

DD and SS.

He states that, it’s only entrepreneurship which might eventually lead to

equilibrium (Kirzner 1999).

a) Subconscious learning is equilibrium:The tendency of purposeful

human beings to become aware of available opportunities (by

means subconscious learning tends, with greater or lesser rapidity,

to eliminate misallocation error. From Kirzners view point,

misallocation of resources means wrong decisions and these would

lead to disequilibrium.

b) The subconscious learning about arbitrage opportunities is

equilibrating in the market in the market economy, what Kirzner

calls the “entrepreneurial element in individual decision making

“impacts through arbitrage. Like the isolated individual, the

arbitrageur behaves according to subconscious vision. he a observes

price and follows his subconscious vision to arrange an exchange a

cow dollar value and a buyer who attaches a higher dollarvalue

given that his visionis correct, the result is entrepreneurial or market

“profit”

c) Subconscious Learning Win Lead to General Equilibrium:

Kirzner says that just as there is a tendency for arbitrage to lead to

equilibrium in a particular market there is also a tendency for it to

lead to an optimum general equal or equity in all markets. An equal

state is one in which to further learning resisting from following

subconscious vision is possible all the Knowledge of wants abilities

and knowledge that the economists assumes to be element from the

stand point of supervisor insight has been acquired by the various

individuals.

Cassion’s theory of Entrepreneurship

Like Schumpeter and Kirznercasson is another author who tried to

advance the economic theory of entrepreneurship Casson (1982) specifically

defines an entrepreneur as someone who specializes in taking judgmental

decision about the coordination of scarce resources after identifying new

opportunities the entrepreneurs persona comparative advantage lies in

processing information which requires considerable judgment. This is

because the information collected is sometimes conflicting and often

incomplete.

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In one of his essays on entrepreneurship Casson says the not effective

way to synthesize the lights of transactions of the firm is to build the theory

of the firm around the personality of the entrepreneur. The theories that

neglect the entrepreneurial dimension in explaining the behavior of the firm

can only after a partial explanation...

He continues that an entrepreneurial theory of the firm can encompass

all the major issues regarding the nature of the firm like the boundaries of the

firm the formation, the internal organization of the firm, the growth and

diversification of the firm and the role of the entrepreneur which he argues to

be the most fundamental.

Caisson’s theory from Economic Perspective Considered Four

Categories

i) Innovation

As the economy undergoes some economic changes, newer and better

methods of dealing with such changes are initiated by the entrepreneur. This

is because he is the one who can observe such opportunities through

information synthesis and makes considerable judgment of this information

to make a gain out of it.

ii) Uncertainty

Successful entrepreneurs must be optimistic and self-confident in order

to compete for resources (Rss) from rival entrepreneurs and to like with risk

but their judgment may turn out to be wrong the uncertain judgment. To

obtain widest possible synthesis of the latest information, they cultivate

networks of social contacts that feed them the information they require for

making judgment decisions

Caisson emphasizes here that information (knowledge) is very important

he argues that all other things being equal; it’s the optimistic and self-

confident entrepreneur who will prevail- whereby he takes a more favorable

view of the economic environment than others,and is therefore prepared to

pay more for, the Rss for which they are competing. In this way are

competing. In this way the entrepreneur believes to have better knowledge

than the others and outcome of his judgment becomes less certain.

iii) Entrepreneurial Businesses

The trend here is that as changes occur in the economy entrepreneur’s

getter as much information as possible. Then competition impacts on the

entire market situation resulting in improvement inform of new business,

normally one phase of entrepreneurship triggers off subsequent phases, for

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example which includes new firm formations; partnership formations;

diversification; inter firm joint ventures; merger; and growth through

learning such improvement automatically lead to economic growth.

iv) Equilibrium

If an economy is in equilibrium there are unexploited gains to be made

An entrepreneur is someone who notice some of the opportunities for

profitable trade and exploits them returning to the original equilibrium

position can either be achievement through increasing or decreasing price, or

through increasing or decreasing qualities entrepreneurs normally anticipate

such changes and plan in advance how to exploit them and gain out of them

entrepreneurs therefore move the economy to equilibrium.

Caisson attempts to identify a shared element between Schumpeter is

Kirzners and his theory by introducing the concept of entrepreneurial

judgment. The attempt to identify a shared element suggests that caissons

theory has generality and may be applied to all kinds of entrepreneurship. In

Caisson’s view, the concept of entrepreneurial judgment is of paramount

importance which is based on individuals their perceptions and the

information that they have available or choose to acquire.

Central to this concept is the recognition that different individuals will

make different outhouse because information is necessarily impotent and

costly to acquire in cognizance of this, Casson recounts that the

entrepreneurial theory of the firm suggests that a market economy driver by

practical judgment through a proper synthesis and coordination of

information mainly around the personality of the entrepreneur, is likely to

prove the most successful

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Chapter - 2

Types/Classification of Entrepreneurs

Literature on entrepreneurship is paying greater attention to the diversity of

entrepreneurs. Certain characteristics of the firms and the entrepreneurs who

own them can be more easily and clearly understood if we group and classify

certain types of entrepreneurs differently. The following are some of the

distinctions that can be used to classify entrepreneurs.

Motivation to Engage in Entrepreneurial Activity

Push (Forced): Push entrepreneurs are those whose dissatisfaction with

their current position for reasons unrelated to their entrepreneurial

characteristics, pushes them to start a venture.

Pull Entrepreneurs: Are those who are lured by their new venture idea

and initiate venture activity because of the attractiveness of the business idea

and its personal implications.

“Push” and ‘pull’ Entrepreneurs: Are combinations of the above two.

They are normally more motivated and thus outperform other types of

entrepreneurs. However, “push” entrepreneurs were found to be more

successful than ‘pull’ entrepreneurs. They are more determined and

persistent because they normally have nothing to fall back to.

Levels of Creativity and Innovation

Innovative Entrepreneur: Assemble a large variety of information and

combine a range of factors experimentally to produce new possibilities in

terms of markets, techniques, or products. Countries with a very

underdeveloped industrial base hardly produce this type of entrepreneur,

because of lack of the necessary infrastructure.

Imitative (Adoptive) Entrepreneurs: They imitate and adopt the

technology and techniques innovated by others. They are particularly

important in underdeveloped countries although not highly regarded in more

developed economies. However, imitative entrepreneurs also need to be

creative in order to modify innovations to suit their special conditions.

Opportunistic Entrepreneurs: They constantly look for and exploit

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serial opportunities because of their wide skills and knowledge accumulated

from a wider educational background, experience or exposure. They start by

exploiting small opportunities seeking and exploiting a series of, often

varied, opportunities as they grow. They ambition involve building large

organizations and are not afraid of borrowing to achieve this growth. They

usually find it easy to delegate and hire competence.

Visionary Entrepreneurs: They have almost similar characteristics to

the opportunistic Entrepreneurs however, while “opportunistic”

entrepreneurs pursue, serial business opportunities, the “Visionary”

entrepreneurs, concentrate on the unwavering pursuit of a single, powerful

opportunity. In Practice, this fixation may represent a false opportunity’ that

is ahead of its time or falls to consider significant obstacles to

implementation.

Craftsman entrepreneurs: They own the businesses in which they

operate, but tend to restrict their business to their individual skills and

experiences usually accumulated from limited education and exposure. They

have minimal growth ambitions, keeping their enterprises small as a means

of maintaining control. Control is normally autocratic, with little delegation

and strong paternalistic attitudes towards their workers. They avoid risk and

the use of loan money. Normally, they are not marketing oriented preferring

to build very strong with their existing customer.

Drone Entrepreneurs: At some instant in their business, craftsman

entrepreneurs are so comfortable with their achievements that they decide

not to tamper with what they consider a winning formula. Those

entrepreneurs that will not change under any circumstances are referred to as

drone entrepreneurs. Slowly but surely, this entrepreneur will be forced to

close.

Fabian Entrepreneurs: Are also reluctant to change, but are sometimes

forced by circumstances to change. They respond very slowly to changes in

the market, and this affects their growth and competitiveness. However, by

following a proven path, these entrepreneurs are protected from the

uncertainty of new innovations; they are therefore likely to survive for a long

time. They however grow very slowly or do not grow at all because they fail

to exploit new innovations that are normally more profitable.

Solo Entrepreneurs: At the level of organization these are

entrepreneurs who developed their business ideas on their own. The solo

entrepreneur is limited to his means and capabilities.

Network Entrepreneurs: These are entrepreneurs who get their ideas

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from the social networks, and develop them suing the networks are found.

These network entrepreneurs can draw from the means and capabilities

within the network to supplement his individual means and capabilities. The

network entrepreneur is therefore more likely to grow better and faster.

Coprenuers: Are entrepreneurial couples that work together as co-

owners of an enterprise. Although some scholars consider business co-

ownership a recipe for divorce, some researchers have described it as an

exciting proposition that involves nurturing and growing, a business with

someone you love – much like raising a child. It is important, however, to

first build a successful relationship before launching the enterprise.

Individual and Institutional entrepreneurs – Most start-up firms are

dominated by entrepreneurs acting individually, or coming together

individually. However, as the business grows and becomes more complex, it

becomes imperative to develop the entrepreneurial skills through a corporate

body.

Part Time Entrepreneurs: Starting business on a part time basis is a

popular gateway to Entrepreneurship that allows one to get the best of both

worlds by getting the benefits of Entrepreneurship and the security of a

regular salary. It also allows part timers to hedge against the risks of a

venture flop, and tests the waters before making the final commitment. Part

time entrepreneurs are normally suited for young enterprises because as

enterprises grow, they tend to take up more time until the entrepreneur

decides to become full time.

Corporate cast off and dropouts: Are produced by retrenched and

retiring employees and have become an important source of entrepreneurial

activity. Armed with adequate experience, severance packages, knowledge

of the industry, and a network of connections; these former employees will

normally have better start up options and a higher chance of entrepreneurial

success.

Under Further Study of Entrepreneurship, Entrepreneurs Have Also

Been Classified According to

Male or female entrepreneurs.

Rural or urban entrepreneurs.

Small and large-scale entrepreneurs.

First, second and third generation entrepreneurs.

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Importance of Entrepreneurs

1. They bring technology intensive, often risky, innovations to the

commercial market – and in the process, even help to develop

whole new industries. Entrepreneurs are driving a revolution that is

transforming and renewing economies worldwide. While in Uganda

we still depend on the same commercial products introduced almost

a century ago for our economic growth, the USA gets more than

half of its economic growth from industries that barely existed a

decade ago.

2. Entrepreneurship through innovation is the heart of economic

progress. It is the very basis of any nation’s economy and

wellbeing.

3. Entrepreneurs are the source of innovation, which is believed to be,

the heart of economic progress. Innovation is the very basis of any

nation and community’s economic progress.

4. Entrepreneurship is the catalyst that enables a country to compete

more favorably in the global market place. It enables nations to

compete in the global market place as respectable stakeholders and

not beggars at the mercy of others.

5. Entrepreneurial innovation raises the prospects for more productive

and satisfying lives by supplying new effective tools and methods,

and solutions to problems and inconveniences. Entrepreneurship is

the essence of free enterprise because the birth of new businesses

gives a market economy its vitality.

6. New ideas alter the fabric of society and keep the world fresh and

moving forward. New and emerging businesses creates a very large

proportion of innovation products and services that transform the

way we work and live, such as personal computers, software, the

Internet, and drugs.

7. Entrepreneurs are creators of jobs. It is a fact that entrepreneurship

and employment go hand in hand. As new products and services are

introduced, more staff will be required to produce, sell, and deliver

them.

8. An important aspect of entrepreneurship is social entrepreneurship.

In this case, the objective is not make profits per se, but to achieve

social good through the similar process of identifying opportunities,

exercising creativity, and building new structures. It is no accident

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that business entrepreneurs are also well equipped to play a role to

champion social causes.

9. Entrepreneurs, in an effort to market and promote their enterprises

support churches, schools, and communities, produce goods, feed a

hungry world, and keep their homes and families, while they invest

in the future to build a better community.

10. Entrepreneurial success comes when they can anticipate and deliver

what the consumers want and it in a way that satisfies them.

Entrepreneurs understand that making money begins with giving.

Entrepreneurship works best and creates the greatest wealth and

human progress for all when it aims at satisfying customers.

11. Entrepreneurs turn worthless waste, weeds, rocks and other

undesirable into coveted riches. Oil was worthless until

entrepreneurs with ideas and the freedom and faith to take risks

managed to locate it, extract it, and put it to work for humanity.

12. Governments balance their budgets by stimulating new wealth,

wealth from investment attributed to entrepreneurs.

13. Entrepreneurs are and have always been leaders in communities and

nations.

14. Entrepreneurs help to keep industries relevant by creating the

necessary timely innovation. They help the industry to evolve

slowly, maintaining stability and measured change at the same time.

They help to maintain the industry at “the edge of chaos,” where the

components of a system never quite look into place, and yet never

quite dissolve into turbulence either.

Benefits of Entrepreneurship

Research shows that people who seek a career in entrepreneurship work

harder and take higher risks than people employed in the regular salaried

jobs. However, more and more people are joining entrepreneurship, and

more still are starting too serious consider it’s a viable and interesting career

option. This is mainly because of the following reasons:

An Opportunity to Gain Control Over One’s Destiny:

entrepreneurship provides n entrepreneur the opportunity to achieve what

they consider to be important. Entrepreneurs are noted or wanting to always

be in full control of their lives, and entrepreneurship enables them to achieve

the full control they desire.

An Opportunity to Make a Difference: Entrepreneurship enable

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participating individuals to makes a difference in any a matter that is of

importance to the individual.

An Opportunity to Reach Ones Full Potential: Working for or under

other people will normally create barriers to one’s development in terms of

rules, policies, precedence and acceptable procedures. Entrepreneurship is an

instrument that allows entrepreneurs to challenge all their skills, abilities and

endurance without any external limitations.

An Opportunity to Make Lots of Money: Although money may not be

the primary motivator of entrepreneurs, it is still recognized as an important

motivation. Owning their own businesses give entrepreneurs the opportunity

the opportunity to earn salaries, dividends and profits; making so much cash

in the process.

An Opportunity to Contribute to Society and to be recognized for it

– An entrepreneur is always associated with his or her businesses, its

products and its services. In an effort to generate profits, they contribute to

the development of society and in the process become recognized for their

efforts.

An Opportunity to enjoy one’s Work: Entrepreneurship is about

doing what one enjoys.

Barriers to Entrepreneurship

Barriers to entrepreneurship are factors that hinder the development of

entrepreneurship. They hinder people from acquiring the practicing

entrepreneurial skills, but also prevent practicing entrepreneurs form

achieving the full benefits that entrepreneurship has to offer. Many of these

barriers are mainly perceptual obstacles, rather than any concrete, objective

obstructions in the way of making the entrepreneurial decision. Barriers can

arise from the social, economic and political environment with which the

individual interacts. They can also be caused by the adverse conditions

within the organization with which the individual works. However, most

barriers are a direct result of an individual’s failures and weaknesses.

Barriers or Threats at the Individual Level

Individual Weaknesses: This poses the biggest threat to

entrepreneurship in Uganda. Such barriers are ignored, as focus is normally

on the environmental factors. Since one can easily act to remedy these

weaknesses they usually form the main focus of entrepreneurship training

programs. Barriers at the individual level would include:

Poor Entrepreneurial Skills: Most entrepreneurs and potential

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entrepreneurs are short on entrepreneurial skills. They are risk adverse, lack

creativity, innovation, endurance, flexibility, and other entrepreneurial

characteristics. This means that many people will start business that are

images of existing businesses resulting in very intense competition in very

narrow fields that provide little returns for the investors. Entrepreneurial

characteristics can help businesses people to look for and exploit new

opportunities.

Lack of Business and Technical Skill: Business skills in marketing,

accounting, management, etc… are required by all practicing entrepreneurs

to effectively manage their entrepreneurial ventures. Many ventures also

require specialized technical know how to set up, operate and manage. Lack

of such skills many times limits the capacity of entrepreneurs to effectively

exploit the full potential of their ventures. Moreover, owing to the high rate

the illiteracy, many enterprising individuals even lack the capacity to

appreciate and acquire these skills.

Low mobility and Exposure: Mobility and exposure normally offers

the biggest revelation for new ideas that shape creativity and innovations that

shape entrepreneurship. However, Ugandans generally do not travel widely,

do not read widely and do not explore, ask or investigate. As a result, even

highly educated people remain largely narrow minded. This limits the

creativeness and innovativeness of Uganda’s potential and practicing

entrepreneurs.

Lack of Role Models in Entrepreneurship: Uganda is seriously short

of role models in the field of entrepreneurship, which limits the number of

people who willingly aspire for a career in entrepreneurship. Many people

have a very low opinion of struggling entrepreneurial upstarts, while they

consider the few successful entrepreneurs to be super lucky individuals who

can only be admired but not be emulated. As a result, very few people are

attracted to entrepreneurship as a career of choice. Most are forced into

entrepreneurship as a last resort, without enough interest and commitment.

Inspiration is a key characteristic of entrepreneurship. New entrepreneurs

need to be inspired entrepreneurs that they admire.

Lack of Business Ethics: Many entrepreneurs have failed, or been

compromised, because of unethical behavior. Unpaid loans, unpaid or highly

exploited employees, unpaid suppliers, substandard goods, tax evasion,

corruption, smuggling etc. characterize many business ventures in Uganda

today. While such tendencies may sometimes result in a quick profit, many

times these ills come back to haunt the entrepreneur, many times crippling

them completely.

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Complacency (Lack of Motivation): Because of lack of role models

and limited exposure, entrepreneurs in Uganda tend to be satisfied with

relatively small and modest achievements. They tend to have little

motivation for higher or extraordinary achievement. The tendency to

prematurely celebrate success limits the growth of many entrepreneurial

ventures.

Lack of Continuity: Very few firms in Uganda are known to survive

the death of their founders. Very few entrepreneurs have the opportunity to

pass on their enterprises to new generations and watch from the side as the

enterprises continue to prosper. Moreover, many firms are known to change

business or diversify very fast before gaining he required experience. Lack

of continuity affects the learning cycle of the firm and the entrepreneur and

therefore the long-term competitiveness of the enterprise.

Career Dependency: Ugandans especially the educated have long been

dependent on their careers to provide for their livelihoods. Entrepreneurship

has for long been regarded as a last resort effort mainly reserved for the

under-educated. Although this mindset is rapidly changing, its effect is still a

big barrier to entrepreneurship in Uganda.

Uncertainty of Income: In most cases the initial stages of the

entrepreneurial career are filled with uncertainty, and many entrepreneurs

will not have enough money even for their basic survival. There is no regular

income, and many entrepreneurs are forced to draw from their savings. This

is the most trying stage of any entrepreneur.

Risk of Losing the Entire Investment: Business failure is a reality that

threatens entrepreneurs at all level, but most especially the new enterprises.

Business failure will result not only in the loss of a job, but also the entire

investment and sometimes the entire livelihood. This threat becomes even

greater for entrepreneurs who mortgage all their savings and assets to

finance their enterprises.

Long Hours of Hard and Challenging Work: Without adequate

support structures and resources, entrepreneurs have no option but to engage

their own mental and physical energies to move their investments especially

during the early stages. Hard work and long hours is therefore a reality of

many an entrepreneurship career.

High levels of Stress: The pressure of hard-long hours of work and the

uncertainties associated with entrepreneurship result in highly stressful life

styles for entrepreneurs. Most entrepreneurs put significant investments in

their enterprises, have no steady incomes, have mortgaged everything to

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finance their businesses, and the line between their success and their failure

is every thin; causing enormous anxiety and stresses to the entrepreneur.

High Levels of Responsibility: Entrepreneurship brings the thrills of

being the boss, but also the responsibility for decisions that not only affect

the entrepreneurs and their families, but also the livelihood of employees,

suppliers and other stakeholders who somehow depend on the firm for their

own survival.

Barriers Arising from The Environment: The environment also

presents numerous barriers to practicing and prospective entrepreneurs in

Uganda. Some of these barriers are discussed below:

The Political-Legal Environment: Political Instability has dogged

different regions of Uganda for the past 40 years. This state of affairs has

robbed Uganda of many entrepreneurs, and many more entrepreneurs have

lost lifetime savings and business assets, while others have been forced by

Instability to close. This affects continuity and experienced and resource

accumulation are essential in today’s competitive environment.

Business Administrative Procedures: In many cases, the business

environment is dominated by complex and burdensome regulations,

favoritism, corruption, and weak enforcement mechanisms. As a result,

businesses are forced into the informal economy, countries are unable to

attract investment, and participation of the private sector in the decision-

making process is limited. As a result, businesses are forced into the

informal sector, and the country is unable to attract investment, and the

participation sector in decision making is limited.

Government Economic Policy: The formulation and delivery of

business policy is based on a narrow conception of conventional big

businesses and a consequent lack of specific attention to the circumstances

and needs of entrepreneurs. Moreover, the bulk of government’s monetary

and fiscal policies are aimed at appeasing the donor agencies and multilateral

financial Institutions, many times at the expense of business in general and

entrepreneurs in particulars.

Insensitive Government Institutions and Departments:

Entrepreneurs blame government Institutions and departments for having

little qualification and a minimal appreciation and understanding of the

importance of business and business formation among entrepreneurs. This

limits entrepreneurs’ access to these Institutions as support mechanisms or

potential clients. Arbitrary Interpretation of the regulations b officials has

cost many entrepreneurs much time and money.

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Excessive, Complex, and Arbitrary Taxation: The tax system in

Uganda is complicated, voluminous, confusing, changes rapidly and in most

cases beyond the comprehensive of the entrepreneur. The tax administration

is arbitrary and many times misunderstood, resulting in Adhoc tax

administrative solutions which foster rampant corruption. Very high taxes

also serve to discourage potential entrepreneurs.

Economic Environment

Lack of access of Finance: Banking System and Practices in Uganda

impose impossible demands on entrepreneurs. Banks have little incentive to

extend credit. The term of credit are unreasonable, requiring difficult

collateral and guarantees to secure the loan. Borrowers default on their loans,

resulting in high interest rates which are a very heavy burden to could be

entrepreneurs. Additional burdens include unreasonable demands, for audits,

inspections, and documentation; and the incompetence and insensitivity of

most banking staff.

Low Purchasing Power: Low incomes and a high rate of

unemployment limit the purchasing power of a relatively small Ugandan

population. This makes it hard for businesses in general and entrepreneurs in

particular to acquire the necessary economies of scale.

Poor Infrastructure: Uganda is still plagued with a very poor physical

and social infrastructure in terms of roads, electricity, water, bridges, schools

and hospitals. These hinder business development in many parts of the

country, and act as barriers to entrepreneurship.

Economic Instability: Due to over reliance on donor assistance,

borrowing, the import bill that far outweighs the export earnings, and over

reliance on imports, the Ugandan economy is very fragile and easily

destabilized by any small shocks in the international environment.

Social Barriers to Entrepreneurship

The Social Environment May Also have Certain Aspects that act as

Hindrances to Entrepreneurship. Such Hindrances Include the

Following

Lack of adequate social support groups to support entrepreneurs and

innovators who are out to challenge the status quo.

Many socio-cultural settings get stuck in the traditional ways and

norms – they are not willing to change these norms. This situation

discourages people from trying anything new and acts as a barrier to

creativity innovation and entrepreneurship.

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In many of our communities, there is a stigma attached to failure.

People look down upon failed attempts, preferring those that do not

tray at all. This works to discourage experimentation and

entrepreneurship.

Barriers Arising from the Employing Firm

There are also issues internal to the organizations that serve to block

entrepreneurial tendencies within the firms. When entrepreneurship within

the firms is obstructed, it has a negative impact on the general level of

entrepreneurship within the community. Barriers within the firms include:

Too much bureaucracy.

Inadequate communication and consulting within the organization.

Slow decision making resulting from bureaucracy and lack of

effective communication are familiar to many who work in large

organization.

Strong and rigid punishments for those who make mistakes and

those who divert from the accepted norms create an aversion to risk

and failure. People become too timid to make bold decisions and

stand out from the crowd. Employees fear that they will be blamed

if things go wrong and that it is better to keep their heads down.

Lack of resources.

Poor and inequitable reward for entrepreneurial effort tends to kill

the enterprising spirit.

Solutions to Barriers of Entrepreneurship

To achieve successful Entrepreneurship Development, three elements

stand out, namely; the individual, The Environment, and the firm.

The Individual

The MAIR model suggests four factors that have to come together in

order to create an entrepreneur. These are Motivation, Ability, Ideas and

Resources. These factors form the acronym MAIR by which the model is

known as:

Motivation: Refers to the force that influences an individual to opt and

take up Entrepreneurship as a career. These may be PULL and PUSH

factors. Individuals react differently to these stimuli, therefore are motivated

by different factors. Recognizing and rewarding innovation is a key

motivating factor.

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Ideas: Ideas are starting point for any entrepreneurial venture, however

not all ideas will be viable or marketable. The ideas of interest to ED are the

ones that are both viable and marketable. The challenge of ED is to support

and encourage innovations through actively exposing people to new ways,

products, methods and information.

Ability: For nay enterprise to survive, it requires a constant supply of

relevant skills from both the owners and the employs. Although some of

skills are naturally endowed to certain individuals, the majority are acquired

through training, observation, experience, experimentation. Individuals need

entrepreneurial and business skills as well as technical skills relevant to the

industry to start and grow enterprises. The challenge of ED is to propagate

these skills widely and effectively in order to support entrepreneurship.

Resources: Any enterprise will require resources to survive and thrive.

While some resources are naturally endowed to an individual, a firm or a

nation (community), the majority of resources must be sourced, and

entrepreneurs will need to have the ability to acquire resources. The

challenge of ED is to enable the individual to obtain the necessary resources

to operationalize their ideas and to create easy and affordable means access

to resources.

The Environment

Entrepreneurship and ED will be successful only where there is a

conducive environment for them to flourish. The following environment

factors are critical to the growth of entrepreneurship: Economic

environment, challenging circumstances, external rewards for

entrepreneurship, training facilitates, external leadership and learning

opportunities.

The Economic Climate: In general, an environment that is ideal for

business growth is conducive to entrepreneurship. Four areas are particularly

pertinent.

Government Economic Policy (Monetary, Fiscal & Regulatory):

Expansionary monetary policy is more conducive to entrepreneurship

development than contractionary: Fiscal policy is more to government

revenue and expenditure and the expansionary fiscal policy is more

conducive to ED. Situations where government leaves the forces of demand

and supply to control the distribution of resources allows Entrepreneurship to

flourish, since it has more rewards for the innovations.

Infrastructure should be well developed and maintained to ease

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communication. But also, government institutional policies and practices

should open up their services to entrepreneurs.

The financial systems including banks and non-bank intermediaries,

securities markets, and financial instruments like treasury bills, bills of

exchange, credit cards, cheques etc. must exist and operate efficiency to aid

business transaction.

Legal Framework: should not be too stringent to inhibit

Entrepreneurship, but should be clear and effective enough to provide

adequate protection to entrepreneur against fraud.

Challenging Circumstances: Challenging circumstances tend to bring

out latent creativity in people, and lack of challenge breeds complacency.

Competition for jobs and resources are good examples of challenging

circumstances. ED involves giving room for creativity and innovation and

eliminating the fear of making mistakes as a way tackling these challenging

situations.

External Rewards for Entrepreneurship: How the society recognizes

and rewards entrepreneurs is important for Entrepreneurship development.

Entrepreneurs should be the first beneficiaries of their innovations.

Situations where pirates and copycats take the profits from other people’s

innovations are not good for Entrepreneurship Development. Benefits should

not only come inform of profits, but recognitions in form of awards, role

modeling, special considerations etc.

Training Facilitates and Learning Opportunities: Availability and

quality of training facilitates and Entrepreneurship Development programs

and supply of role models for the young generations to emulate. Stimulate

the teaching entrepreneurship within educational institutions to enable

students read patterns and trends so as to envision the future the future, and

integrate knowledge acquired in responding to society needs.

External Leadership: Business leaders, political and cultural leaders,

and technological leadership can play a big role in Entrepreneurship

Development. Business leaders can encourage an environment that allows

generation and growth of new ideas. Political leaders can set policies that

support the development of Entrepreneurship, but can also participate

directly by setting up business, mobilizing and supporting people into

entrepreneurship, and generating new ideas and passing them to the public.

Entrepreneur support groups could be developed.

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The Firm

Internal and External Interrelationships have a Strong Influence on

Entrepreneurship. These Will Include Factors Such as

Organizational Culture: These are acceptable norms and behaviors

within the organization. If these permit new idea generation and

implementation, then the culture is supportive of ED. This requires

flexibility in operations and openness to change. It should support

experimentation and tolerate some degree of failure as a natural consequence

of innovation.

Organizational Structure: Define the reporting relationships and

interdepartmental communication. If the structure allows a smooth flow of

ideas and permits even lower level technical staff to exercise their creativity.

To support ED, the organization needs to open up channels of

communication, encourage frank exchange of ideas and freedom of

interaction at all levels.

Leadership: A strong leadership is required to direct change, which is

the driver of innovation. Leadership should actively participate and support

constructive change.

Reward structure: Organizations should be able to recognize

innovation and reward it appropriately. This requires formulating means of

measuring entrepreneurial effort so that reward is dispensed in a fair and

equitable manner. Reward can be in form of recognition, material, or

promotion.

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Chapter - 3

The Entrepreneurial Process

The entrepreneurial process involves all the functions, activities and action

associated with perceiving opportunities and creating organizations to pursue

them.

The process of starting a new venture is embodied in the entrepreneurial

process, which involves more than just problem solving in a typical

management position. An entrepreneur must find, evaluate, and develop an

opportunity by overcoming the forces that resist the creation of something

new. The process has five distinct phases.

i) Identification of opportunity – idea generation.

ii) Evaluation of the opportunity.

iii) Development of the business plan.

iv) Determination of the required resource, and

v) Management of the resulting enterprise.

Although these phases proceed progressively, no one stage is dealt with

in isolation or is totally completed before work on other phases occurs.

1) Identify the Opportunity

A person gets an idea for a new business either through a deliberate

search or a chance encounter. Where do would be entrepreneurs get their

ideas? More often than not it is through their present line of employment or

experience.

Ideas, Inventions & Innovations

Everybody has ideas; ideas are relatively easier to come by compared to

inventions. It takes knowledge, time, money and effort to refine and idea into

a workable invention. Turning an invention into an innovation-a new product

launched into, and accepted by the market place – takes even more effort and

a little luck. Inventors are individuals who conceive a new product, process

or services. Typical inventors have neither the interest nor the resources to

commercialize their inventions. Innovators are people seek to commercialize

inventions.

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Innovation may be defined as a complex series of activities, beginning

with an idea and followed by a succession of interwoven steps – research

and development, financing, marketing and production. Innovation is only

completed when the market accepts a product, process or service.

Entrepreneurship is identified with innovation. Innovation does not

always mean inventing something physical (technological innovation), but

could involve redefining the way something is done (social

innovation).Innovation is the specific instrument or entrepreneurship. It is

the act that gives resources the capacity to create wealth. Innovation creates

resources. There are no resources until entrepreneurs find a use for it through

innovation.

Drucker (1986) Looks at Seven Major Sources of Innovation That

Include

1. The Unexpected Success, Failure or Unexpected Event: Keeping

track of what is going on in the firm, the industry, the economy and

the environment. Monitor these activities as they have a high

indicator of change that has occurred or is waiting to happen many

people ignore. Failure normally frowned upon without examining

the root cause of failure that could highlight new opportunity.

2. Incongruities are Discrepancies or Dissonances Between “what

is” and “what was expected”: Incongruities are a sign of change

that has occurred, and therefore a sign of opportunity.

3. Process Needs: Necessity is the mother of invention. Once a need

is felt the innovator identifies what is need, and how it can be

produced. This involves understanding the problem, accumulating

knowledge of how it can be produced. This involves understanding

the problem, accumulating knowledge of how to satisfy the need,

and fitting the solution within people’s expectations.

4. Industry and Market Structure: Many times last a long time, and

are sometimes considered part of the order of nature destined to

endure forever. In reality however, these structures are quite fluid

and can be dismantled-sometimes with little effort. When such a

change occurs, everyone in the industry has to act, giving an

opportunity for innovation. Industry and market change are likely to

change if the industry grows very fast, convergence of technologies

or development of new technologies. Outsiders usually see the

opportunities while insiders see them as threats.

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5. Demographics: Define changes in population size, age structure,

composition, employment, educational status and income. The

consequence of these changes can be predicted and are o good

driver of innovation. However, it is common for established firms

to ignore these changes if they do not conform to their expectations

giving an opportunity to innovators.

6. Change in Perceptions: The way people perceive situations is

constantly changing. Understanding these perceptions will help

people innovate (health and fitness, healthy foods, security).A

change in perception does not necessarily change facts; it changes

the meaning of already existing facts. Timing is a critical factor in

innovations based on perceptions because perception changes very

fast and some of them are fads that disappear within a short time.

7. New knowledge: Knowledge based innovation is the most

publicized and recognized innovations. The knowledge may not

necessarily be scientific or technical. It can be social. It is

characterized by a long-time frame, large casualty rate,

unpredictability, and the big challenges it poses to the entrepreneur.

These innovations are normally a convergence of several different

kinds of knowledge from a variety of disciplines.

2) Evaluating the Opportunity – Feasibility Study

Whether the opportunity is identified by using input from consumers,

business associates, channel members, or technical people, each opportunity

must be carefully screened and evaluated. This evaluation of the opportunity

is perhaps the most critical element of the entrepreneurial process, as it

allows the entrepreneur to assess whether the specific product or service has

the returns needed compared to the resources required.

This evaluation process involves looking at the length of the

opportunity, its real and perceived value, its risks and returns, its fit with the

personal skills and goals of the entrepreneurs and its uniqueness or

differential advantage in its competitive environment.

The market size and the length of the window of opportunity are the

primary basis for determining the risks and rewards. These risks reflect the

market, competition, technology and amount of capital involved.

The amount of capital needed provides the basis for the return and

rewards.

The methodology for evaluating risks and rewards frequently indicates

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that an opportunity offers neither a financial nor a personal reward

commensurate with the risks involved.

Finally; the opportunity must fit the personal skills and goals of the

entrepreneur. It is particularly important that the entrepreneur be able to put

forth the necessary time and effort required to make the venture succeed.

Opportunity analysis, or what is frequently called a feasibility study, is

one method for evaluating opportunity. It is not a business plan

A feasibility study includes the following; a description of the product

or service, an assessment of the opportunity, an assessment of the

entrepreneur and the team, specifications of all the activities and resources

needed to translate the opportunity into a viable business venture, and the

source of capital to finance the initial venture as well as its growth.

3) Developing a Business Plan

A good business plan must be developed in order to exploit the defined

opportunity. This is a very time-consuming phase of the entrepreneurial

process. A good business plan is essential to developing the opportunity and

determining the resources required, obtaining those resources and

successfully managing the resulting venture.

4) Determine the Resources Required

The resources needed for addressing the opportunity must also be

determined. This process starts with an appraisal of the entrepreneur’s

present resources. Any resources that are critical need to be differentiated

from those that are just helpful. Care must be taken not to underestimate the

amount of variety of resources needed. The downside risks associated with

insufficient or inappropriate resources should also be assessed.

5) Manage the Enterprise

After resources are acquired, the entrepreneur must use them to

implement the business plan. The operational problems of the growing

enterprise must also be examined. This involves implementing a

management style and structure as well as determining the key variables for

success.

A control system must be established, so that any problem areas can be

quickly identified and resolved. Some entrepreneurs have difficulty

managing and growing the ventures they created.

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Intrapreneurship

Definitions

Entrepreneurship is the practice of embarking on a new business or

reviving an existing business by pooling together a bunch of resources, in

order to exploit new found opportunities.

Intrapreneurship is the practice of entrepreneurship by employees

within an organization.

In 1992, The American Heritage Dictionary acknowledged the popular

use of a new word, intrapreneur, to mean "A person within a large

corporation who takes direct responsibility for turning an idea into a

profitable finished product through assertive risk-taking and innovation".

Intrapreneurs are employees who work within a business in an

entrepreneurial capacity, creating innovative new products and processes for

the organization. Intrapreneurship is often associated with larger companies

that have taken notice of the rise in entrepreneurial activity in recent years;

these firms endeavor to create an environment wherein creative employees

can pursue new ways of doing things and new product ideas within the

context of the corporation. But smaller firms can instill a commitment to

intrapreneurship within its work force as well.

Difference between an Entrepreneur and an Intrapreneur

An entrepreneur takes substantial risk in being the owner and operator

of a business with expectations of financial profit and other rewards that the

business may generate.

On the contrary, an intrapreneur is an individual employed by an

organization for remuneration, which is based on the financial success of the

unit he is responsible for.

Intrapreneurs share the same traits as entrepreneurs such as conviction,

zeal and insight.

As the intrapreneur continues to expresses his ideas vigorously, it will

reveal the gap between the philosophy of the organization and the employee.

If the organization supports him in pursuing his ideas, he succeeds. If not, he

is likely to leave the organization and set up his own business.

Features of Intrapreneurship

Intrapreneurship involves innovation, the ability to take risk and

creativity. An Intrepreneur will be able to look at things in novel ways. He

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will have the capacity to take calculated risk and to accept failure as a

learning point. Central to ‘intrapreneurship’ is the concept of empowering

yourself as an employee. This can entail different things depending on the

specific goals and aspirations of the individual. It may include:

Negotiating flexible hours with your employer; instead of ‘clocking

in’ and ‘clocking off’ from the office at set times, you instead

commit to completing specific tasks within a given time period. The

hours during which you complete the tasks are left up to you.

Working from home for a portion, or even all of the week.

Assisting on tasks or projects that you have a strong interest in but

that fall outside of your prescribed duties and job description.

Initiating projects, products or services on behalf of the company to

bring in additional revenue. This might also entail you receiving a

commission.

Getting your employer to pay for or subsidize your study of subjects

that complement the business.

An intrapreneur thinks like an entrepreneur looking out for

opportunities, which profit the organization. Intrapreneurship is a novel way

of making organizations more profitable where imaginative employees

entertain entrepreneurial thoughts. It is in the interest of an organization to

encourage intrapreneurs. Intrapreneurship is a significant method for

companies to reinvent themselves and improve performance.

Another important factor that led to the choice between entrepreneurship

and intrapreneurship was age. The study found that people who launched

their own companies were in their 30s and 40s. People from older and

younger age groups were risk averse or felt they have no opportunities,

which makes them the ideal candidates if an organization is on the lookout

for employees with new ideas that can be pursued.

Entrepreneurship appeals to people who possess natural traits that find

startups arousing their interest. Intrapreneurs appear to be those who

generally would not like to get entangled in startups but are tempted to do so

for a number of reasons. Managers would do well to take employees who do

not appear entrepreneurial but can turn out to be good intrapreneurial

choices.

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Types of Intrapreneurship

Different Organizations Approach Intrapreneurship in Different Ways.

Below are some of the Common Approaches

Administrative Intrapreneurship: The company forms an

administrative arm (normally called the research and development – R &D

Team) to spearhead and encourage greater creativity and innovation.

Opportunistic Intrapreneurship: The Company opens up its structures

to allow individuals to pursue opportunities both internal and external to the

organization, with the company using its resources to exploit the new

innovations it finds attractive.

Acquisitive Intrapreneurship: The organization looks out for other

firms and entrepreneurial start-ups that have developed, tested and perfected

new innovations that could be beneficial to their operations. They then

acquire the innovative firms or their innovations through mergers, takeovers,

joint ventures, licensing agreements, buy outs etc...

Imitative Intrapreneurship: Firms copy and take advantage of other

firms’ innovations, and employ their corporate muscle and superior

resources to control the market for the new product or service.

Incubative Intrapreneurship: The Company creates new terms as

semi-autonomous new venture development units, provides them with seed

capital and allows them independent action to develop an idea from

inception to commercialization. The company can then reintegrate the

innovation into its mainstream operations once market viability has been

proven.

Organizational Characteristics That Encourage Intrapreneurship

The single most important factor in establishing an "intrapreneur-

friendly" organization is by making sure that employees are placed in an

innovative working environment. Rigid and conservative organizational

structures often have a stifling effect on intrapreneurial efforts. Conservative

firms are capable of operating at a high level of efficiency and profitability,

but they generally do not provide an environment that is conducive to

intrapreneurial activity and organizations that do not encourage creativity

and leadership often alienate talented employees. Erik Rule and Donald

Irwin stated in Journal of Business Strategy, companies do establish a culture

of innovation through:

1. Formation of intrapreneurial teams and task forces;

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2. Recruitment of new staff with new ideas;

3. Application of strategic plans that focus on achieving innovation;

and

4. Establishment of internal research and development programs are

likely to see tangible results.

Other keys to instilling an intrepreneurial environment in business

organizations include the following:

Support from Ownership and top Management –This support should

not simply consist of passive approval of innovative ways of thinking.

Ideally, it should also take the form of active support, such as can be seen in

mentoring relationships. Indeed, the small business owner's own

entrepreneurial experiences can be valuable to his firm's intrapreneurial

employees if he makes himself available to them.

Recognition that the style of Intrapreneurialism that is encouraged

needs to be Compatible with Business Operations and the

Organization's Overall Culture: Make sure that communication systems

within the company are strong so that intrapreneurs who have new ideas for

products or processes can be heard.

Intelligent Allocation of Resources to Pursue Intrapreneurial Ideas

Reward intrapreneurs – All in all, intrapreneurs tend to be creative,

dedicated, and talented in a variety of areas. They are thus of significant

value even to companies that do not feature particularly innovative

environments. Their importance is heightened, then, to firms that do rely on

intrapreneurial initiatives for growth. Since they are such important

resources, they should be rewarded accordingly (both in financial and

emotional terms).

Allow intrapreneurs to follow through – Intrapreneurs who think of a

new approach or process deserve to be allowed to maintain their

involvement on the project, rather than have it be handed off to some other

person or task force.

The Intrapreneur

The intrapreneurial employees, they are advised to be courageous,

moderate risk takers, frugal, flexible, and creative about their pathway. Their

task is to put together a team of enthusiastic volunteers, build a network of

sponsors, and ask for advice before asking for resources.

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Intrapreneurship Provides 10 Commandments for Employees to

Become Intrapreneurs

i) Do any job needed to make your project work regardless of your

job description.

ii) Share credit wisely.

iii) Remember, it is easier to ask for forgiveness than permission.

iv) Come to work each day willing to be fired.

v) Ask for advice before asking for resources.

vi) Follow your intuition about people; build a team of the best.

vii) Build a quiet coalition for your idea; early publicity triggers the

corporate immune system.

viii) Never bet on a race unless you are running in it.

ix) Be true to your goals, but realistic about ways to achieve them.

x) Honor your sponsors.

The Intrapreneural Organization

Intrapreneurs have been credited with increasing the speed and cost-

effectiveness of technology transfer from research and development to the

marketplace. While intrapreneurs are sometimes considered inventors,

inventors come up with new products.

Intrapreneurs come up with new processes that get that product to

market. Part of the reason they are considered similar to inventors is that

they are creative and are risk-takers in the sense that they are stepping out of

their traditional role within the business.

However, their risk-taking behavior is personal. In terms of the business,

they actually work towards minimizing the risk through the innovative

approaches they use to more efficient and effective product production and

sales.

Some Methods That Have Been Used by Businesses to Foster

Intrapreneurship are

Users of internal services are allowed to make their own choice of

which internal vendor they wish to use.

Intrapreneurial employees are granted something akin to ownership

rights in the internal intraprises they create.

Companywide involvement is encouraged by insisting on truth and

honesty in marketing and marketplace feedback.

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Intrapreneurial teams are treated as a profit center rather than a cost

center (i.e., they are responsible for their own bottom line). One

way some companies handle this is for the team to have their own

internal bank account.

Team members are allowed a variety of options in jobs, in

innovation efforts, alliances, and exchanges.

Employees are encouraged to develop through training programs.

Internal enterprises have official standing in the organization.

A system of contractual agreements between internal enterprises is

defined and supported by the organization.

A system for settling disputes between internal enterprises and

between employees and enterprises is part of the intrapreneurship

plan.

Importance of Intrapreneurship Nowadays

Organizations are finding it harder and harder to survive by merely

competing. They are, therefore, increasingly looking towards their

Intrapreneurs totakethem beyond competition to create new businesses in

new markets.

As competition intensifies the need for creative thinking increases. It is

no longer enough to do the same thing better or longer enough to be efficient

and solve problems. Nowadays business has to keep up with changes and

that requires creativity.

Develop success from failures: Discouragement and failure are two of

the surest stepping stones to success. No other element can do so much for a

man if he is willing to study them and make capital out of them.

According to Gary Hamel, Innovation Will be the Critical Element in

creating Wealth in the Future. Successful Intrapreneurship can Lead to

Promotions.

Greater remuneration (pay Raises, bonuses and/or Incentives).

Improved confidence & status within the company.

New career inside the company.

New career outside the company as a consultant or advisor.

Causes behind Retardation of Intrapreneurship

The Primary Factors Retarding Intrapreneurship are

The costs of failure too high and the rewards of success are too low.

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Intrapreneurs need to be given the space in which to fail, since

failure is an unavoidable aspect of the Intrapreneurial process. This

is not to say that organizations should simply condone failure, but

rather that organizations need to begin to measure and attribute

failure to either Intrapreneur fault, or circumstances beyond the

Intrapreneurs control - and punish and reward accordingly.

Similarly, the rewards for success are usually inadequate - few

organizations provide rewards for Intrapreneurs that even closely

approximate the rewards available to the Entrepreneurial

counterparts. Most incentivisation systems need to be upgraded

accordingly. A lot of companies talk about intrapreneurship and ask

people to take risks, but if those people succeed they get nothing

more than a small bonus, and if they fail they get fired. You can't

create wealth unless you are willing to share it

Inertia caused by established systems that no-one is willing to

change. Most Organizations are governed by implicit and explicit

systems, and in many cases peopleare reluctant to change them.

Intrapreneurs are met with; this is the way we’ve always done it

around here.

Hierarchy. Organizational hierarchies are what create the need to

ask for permission. The deeper the hierarchy, that harder it is to get

permission for anything new. Hierarchies also tend to create narrow

career paths and myopic thinking, further stifling creativity and

innovation. People lower down in the hierarchy have a tendency to

become dis-empowered through having to ask permission,

eventually developing the "victim mentality" that causes reactivity.

What then can Organizations do to Encourage Intrapreneurship?

Organizations, therefore, need to find ways to measure and reward

Intrapreneurship - both in terms of its frequency, and the rigour with which it

is pursued. Organizational processes and structures are required to foster

Intrapreneurship, just as they are for any other aspect of the organization.

Getting Started as an Intrapreneur

The First Step in Breaking out of Your Career Shackles is making the

Mental Commitment. Success Begins in the Mind. The Following Tips

will help you move forward as an ‘Intrapreneur’

Learn as much as you can about your company, how it operates,

what market it serves and how it makes profit.

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Research the business sector in which your organization competes.

What are the new market trends? Who are your main competitors?

Where is the industry headed?

Assess your strengths and weaknesses. Are you currently in the

right position/job in respect of those qualities?

If you could change your job structure (responsibilities, tasks, time

schedule, department etc.), what would you change? How might

this change benefit the company? How would these changes benefit

you?

What are your personal and career ambitions? How can you use the

company as a platform for achieving those ambitions while adding

value to the company?

Write out a detailed plan for how you might add additional value to

your company.

Whom would you approach in the company to put forward your

plan?

Given the current climate within the company, when would be the

best time to put your plan forward?

Take the bold step into becoming an ‘intrapeneur’. It will take

courage, discipline and commitment – but, in time, you will scale

new heights within your career.

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Chapter - 4

Small Business in Uganda

Various studies have depicted that Uganda is not short of craftsmen

entrepreneurs that can start and manage small businesses. In fact Uganda has

a very high small business ownership per capita compared to other countries

in the region. However, we are seriously short of ventures as described

above.

The term small business connotes a different meaning depending on the

environment and circumstances under which it is sought. However, we are

seriously short of visionary and opportunistic entrepreneurs that can start and

grow entrepreneurs under which it is sought. However, small businesses can

be clearly distinguished from medium and large businesses by considering

one or combination of factors such as:

A small number of employees

A small sale volume or turnover

A small size of assets in comparison with the largest competitors in

its industry.

A small market share i.e. the area of operation is primarily local,

although the market is not necessarily local.

A small degree of formalization

A large owner’s equity as capital is supplied and ownership is held

by an individual or a few individuals.

Note: The impact of these factors is a subject and qualitative judgment

depending on the industry in which the firm operates state of growth of the

economy, the people involved and the purpose for which the definition is

sought.

The 1998 policy paper defines small business in Uganda as employing

less than 50 people and an annual turnover of less than $300,000. However,

small business is some kind of business that has been done before i.e.

something that has been done before by another business owner somewhere

else.

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Small Business Start-Up in Uganda

There is no satisfactory, universal and quantitative definition of a small

business as of now. However, some researchers have tried to define it as

follows:

According to the Bolton Report (1971), a Small Business

Is a business with small market share?

It is administered by its owners in a personalized manner.

It does not take any instructions from outsiders.

The American Committee for Economic Development (1972) defines a

Small Business as

A business with small market share.

Capital is supplied by individual owners.

Workers and owners are in one community.

According to Bannock (1985) and Foley & Green (1989) small

businesses act as “motivation.” Most big businesses benefit by absorbing

ideas and products developed by small businesses. In case of business

failure, small business loses less than a large one.

Finally, one needs fewer resources to start a small business than those

required for big businesses. Small businesses create employment at grass

roots and contribute a lot to the country economy.

Importance of Small Business Sector

i) The small business provides a productive outlet for the energies of

the large enterprises and independent people who great pace by

economic independence.

ii) Small businesses provide the means of entry into the business

sector. This can be for existing, new, or entrepreneurial talents

which will grow to challenge large businesses.

iii) A small business is the traditional breeding ground for new

industries. It is the major source of innovation.

iv) Small businesses provide competition to large and well established

businesses.

v) Small businesses provide some check on monopoly profits and on

the inefficiency which monopoly breeds.

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vi) Many small businesses act as specialist suppliers of parts and

components to large businesses.

vii) Small businesses add to the variety of products and services. This is

because they exceed in a limited or specialized area which large

businesses can hardly achieve.

viii) Because of their small nature, small businesses are normally an

important source of innovation.

ix) Small businesses are traditional breeding ground for large

industries.

Entering into Entrepreneurship as a Necessity or as an Opportunity

Most people will be driven into entrepreneurship either as a necessary or

as an opportunity. Those who start due to necessity will be driven by “push”

factors, such as retrenchment, unfavorable conditions at the present

employment, redundancy, government policies, etc. they enter into

entrepreneurship as their last resort because they do not have any other

alternative. This is every common with “corporate cast offs and drop out.”

On the other hand, there might be an opportunity that has yet been

identified and exploited. A fore sighted entrepreneur would take such an

advantage to exploit such an opportunity. Such a person would be

encouraged by “pull” factors to join entrepreneurship as an opportunity.

Some of the “pull factors are need for achievement, need for independence,

desire to start something new, need for autonomy, etc. (Dawhurst & Burns,

1993).

Development Taxonomy

According to Halliday, (1987), Taxonomy is the classification of the

means by which the formation of an event or species takes place. In the case

of business development taxonomy, the events from which information can

be classified for a business to take place make the following.

Markets.

Industrial base.

Labor markets.

Environment.

Location.

Selection.

Premises selection.

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Business support structure.

Culture.

Photocopying or duplicating culture.

Availability of raw materials.

Water and power supplies.

Transport for workers, raw materials and finished products.

Political climate.

Government policies.

Competitive advantage.

Religion beliefs.

Proposal Evaluation

New business proposals are difficult to judge and evaluate. Many

businesses fail in their early stages (Mason, 1989). There are certain key

factors to be address during the process of the business startups. Some of

them are:

i) The Mair Model

This is a Mnemonic Standing for

M - Motivation and commitment

A - Abilities and ideas

I - Idea in relation to the market needs

R- Resources

When the above factors are present, any business will succeed if it has a

business plan.

The Start Up Model

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Motivation

Motivation is very varied. The need for independence may be as

important as any need for money. Family background and support can be

crucial. Sometimes there are “push” factors such as redundancy or

frustration in the existing career. There might also be “pull: factors (need for

independence or the invention of a new idea. Starting a business is a difficult

process and the necessary drive and commitment are a prerequisite.

Abilities

Abilities, skills and experience also vary considerably. They need to be

related to the idea. There are probably three areas of skills which are: craft or

technical skills; managerial skills and interpersonal or behavior skills. Very

often an individual will not have all three in particular, technical ability may

not be matched by management skills most especially those relating to the

market.

Idea

The key any start-up is to relate the business idea to the need in the

market. Often people into business because the can make or supply

something. Only if there is a clear customer need, backed by effective

demand, at an appropriate scale, can there be a viable business.

Secondly, it is crucial to understand the nature of the need being met:

The single most important question for a start-up is “exactly what business

are you in? This will indicate if they really understand the market needs.

Resources

Resources include physical items, such as premises, plant and furniture.

They also include human resources such as employees of different levels.

Resources also include finance which often perceived as the main need

although; this may not in fact be a key problem.

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The Plan

Having the success in the ingredients is not in itself sufficient. A

business plan must have a coherent plan which links all the elements

together and which charts its future progress s that it can be monitored.

1) Swot Analysis

This is an individual assessment of someone before starting any

business.

S - Strength

W - Weaknesses

O - Opportunities

T - Threats

Both strength and weaknesses are internal factors. They can, therefore,

be tamed, controlled or adjusted. Opportunities and threats are external

factors and are beyond one’s control. However, one should be able to take

safeguards against them.

2) Business Start-Up Options

There are Several Types of Businesses that one Could Easily Start up.

The Common ones are

Starting from scratch.

Purchasing an existing business.

Purchasing a failed business.

Purchase of franchise.

Establishing an agency.

Setting up a workers’ cooperative.

The Role and Importance of Small Business in Uganda Economy

Encourage Innovation and Flexibility: Smaller enterprises are sources

of new ideas, materials, processes and services that large firms may be

unable to provide. Small businesses usually devote themselves to developing

and marketing innovative products and services. This has forced small firms

to be flexible to readily face the changing market conditions and adapt

quickly to changing demands within their field and capacity.

Maintenance of close Relationships with Customer and the

community: Small and local businesses usually have a more intimate

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knowledge of their communities and thus take close interest in them. They

are able to understand their customers properly: they are in close touch with

the customers, suppliers and communities/stakeholders.

Keep large firm Competitive: Through introduction of new products

and services. Small business help checks the development of monopolies.

They encourage competition in large organizations through innovations and

creativities.

Job Creation: As small businesses are created and grow, they will

require staff to produce, sell and deliver their products or services thus

creating jobs, they use less advanced technology that uses more labor per

unit of capital.

Human Resource Development: Small businesses facilitate the

mobilization of the human resource, which could not have been absorbed in

agriculture or large scale enterprises, for productive activities. They employ

people with little or no skills and help to develop them into a pool of skilled

or semi-skilled workers that contribute to economic development.

Poverty Alleviation and Improved Quality of Life: Small businesses

are an important source of income for the lowest income household,

providing unsophisticated jobs and affordable entry point into business. This

helps to fight poverty. Moreover in their drive provide better, cheaper and

faster products and services in wider geographical areas, they thus provide

relevant products and services to population in all corners of the nation,

giving greater choice and a better quality of life.

Resource Mobilization: With a poor savings culture in Uganda, small

businesses are an important a venue for mobilizing and utilizing investment

capital that could not have been mobilized by formal financial institutions.

This is because the source of funds is normal self, close friends and relatives.

Entrepreneurial Development: They provide a productive outlet for

energies and talents of enterprising individuals, providing an affordable entry

point into business. This allows entrepreneurs not only to exploit and test

their entrepreneurial skills but also develop them as they put them into

practice.

Strengthen Economic Linkage: This is because small businesses

operate in socially, economically and geographically diverse sectors of the

economy, helping to create and strengthen forward and backward linkage

that result in improve efficiency. Large firms depend on small businesses to

distribute their products and supply raw materials used in the manufacture of

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these products. Small businesses cannot venture. They engage in a very wide

variety of activities reaching and servicing more people in the process.

International Competitiveness: With the reduction in trade barrier and

restrictions in the cross-border movements, small businesses provide the

opportunity for a diversified and more effective access to the international

markets. They are flexible and can respond early to change in the

international environment.

Economic Growth: Small businesses stimulate the creation of new

wealth by investing in a small but steady and predictable manner. Their

incomes are taxed to generate government revenue and products and services

contribute to GDP growth.

Problems Facing the Small Business Sector in Uganda

The Following are Problems Facing Small Business Sector in Uganda

Inadequate financing.

Inadequate management.

Burdensome government regulations and paper work.

Lack of technical training and advisory services on small business

management.

Inadequate information on business opportunities, available

services, new technologies, taxes/subsidies rules and regulations.

Poor physical infrastructure.

Limited research and development among others.

Small Business and Entrepreneurial Venture

Small business by definition includes entrepreneurial ventures because

most new ventures start small. However, small businesses are distinguished

from entrepreneurial ventures by the nature of the firm and aspirations/goals

of the owners.

Distinctions can be drawn from the Following

Potential for Growth: Entrepreneurial venture has a strong vision for

growth and strong potential for growth. This potential for growth results

from the fact that it is characterized by innovative strategic

practices/products which may lead to creation of new markets and industry

while for small businesses growth is always small business because a small

business operate within a given market.

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Strategic Objectives The entrepreneur sets up very specific strategic

objectives drafted to achieve the high potential for growth that includes

commitment to constructive changes and achievement of unusual results

arising from applications of new but many times risky innovations. The

principal objectives are profitability and growth while small business

objective are not as clear as demanding. Such objectives are mainly personal

rather than making profits. Many of them set up objectives but may lack

information due to lack of research.

The Level of risk Involved: The level of risk involved in an

entrepreneurial venture is high compared to small businesses. This is

because they are in most cases involved in many risk innovations.

Note: Many small businesses may/will posses some of the characteristic

of entrepreneurial venture at certain stages of their development especially

when starting. However, if they do not pursue growth through constructive

change and innovation they are not considered to be entrepreneurial.

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Chapter - 5

Creativity and Innovation

Creativity

Robert Hirsch, defined creativity as the process of creating something

different by devoting the necessary time and effort. This is accompanied by

financial, psychological and social risks

Proctor (1995) considers creativity to the phenomenon of a working new

thoughts rearing old learning and examining assumption to formulate new

theories or create awareness.

Creativity is therefore the generation of ideas that results in improved

efficiency and effectiveness of a system. although there are varying

definitions of creativity there is creative thinking which is the inner feeling

and can be improved upon.

Creativity is the powerful competitive weapon in the knowledge of

business.

It’s an important source of competitive strength for all the organization

concerned with growth and change.

Kerka (1999) organizes that creativity is a complex of that traits skills

and capacities including the ability to work automatically thinking openness

to experience and tolerate for ambiguity

The Process of Creativity

Creativity is a process which is influenced by many external factors

such as the business environment, social forces and individual attributes.

One of the earliest models of the creative process is attributed to Graham

Walles. In 1926 Graham identified four stages of the creative process as

preparation, incubation, insight and evaluation.

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The Stages are Frustrated Below

1) Preparation

This refers to the base of experience and knowledge that precedes the

creative ideals. such preparation is typically a conscious effort base on one’s

Interest and curiosity abort a given area of knowledge or activity.it includes

perception of idea and development of interest. During this phase one

becomes immersed and develops sensitivity to the issues and problems in a

field of interest

2) Incubation

This refers to that part of the opportunity recognitions process in which

an individual is contemplating an idea or a specific problem. it’s the part of

the process that occurs when a person is thinking about a problem as

considering an idea. Discussions of the incubation phase often make

reference to a specific problem that someone is trying to solve.

3) Insight

This is also called the illumination stage. Whereas incubation refers to

an ongoing process; insight refers to a moment of recognition. It’s the point

at which the whole answer or core solution springs into awareness suddenly

and spontaneously. The experience, however is not necessarily one that

pushes the process forward, but instead may feed back to the incubation and

preparation stages for further consideration.it should be noted that creativity

is not a linear process.one may move back and forth though the various stage

of consciousness as the process continues.

4) Evaluation

Not all ideas are good business opportunity and what seems to be a good

entrepreneurial idea may not be a real or legal business opportunity. Thus

evaluation is the phase in the creativity process when insights are analyzed

for them viability. This stage is also referred to as the verification or

confirmation stage since it involves deeper analysis into whether a concept is

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workable, whether the creator has the skills necessary to accomplish it, and

whether it’s truly profitable enough to undertake.

In this phase of the process ideas are put to test via various forms of

investigation such as preliminary market testing, financial viability analysis

and or feedback from business associates and others in one’s social network.

The results of this analysis feed back to the incubation and preparation phase

for more consideration.

It is this aspect of creativity that may be the most challenging because it

requires the creative person to be truly honest about the prospects of his new

insight. This is the phase that tests on entrepreneur’s commitment and

willingness to commit to a business start. At the same time neglecting the

analysis may also lead to failure.

Other Creativity Models

A number of models have been developed after the pioneer contribution

made by Graham Walles. Hills (1996), reports that the notion of elaboration

was added to Graham’s model to high light the importance of educing a

creative idea. Elaboration is the stage in which the creative insight is

actualized that is put into a formal form that is ready for final presentation

several authors have argued that elaboration is generally the most difficult

and time concerning part of the creativity process.

In the case of the entrepreneurial business opportunity elaboration

represents the process of business planning. Assuring that a business idea has

survived the evaluation stage and is still regarded as viable, this is the stage

when many details are worked out. In that process, as small problems

become apparent, the details of elaboration will also feed back to earlier

stages of the creative process of elaboration is where the skilled entrepreneur

engages in planning activities to reduce uncertainty.

Implementation is largely noted to be outside the creative thinking

process but it’s hot enough just to have creative thoughts, ideas has no value

until we put in the work to implement them. Very new idea that is put in

practice changes the world we live in.

Innovation

Innovation is a process of developing an idea into a new product or

service that adds value, creates market and increases customer satisfaction.it

is a means by which is an entrepreneur create new wealth. Innovation creates

a resource. It finally rests up on recognizing an opportunity that exploits a

market innovation applies to all levels of technology and therefore does not

have to be technician (Timmons 1994).

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Innovation is any practice perceived to be new by the relevant unit in

production.

Innovation is a temporary sequence of activities that occur in developing

and implementing new ideas.

Innovation is a complex activity which proceeds from conceptualization

of a new idea to generation of a new solution and actual radiation of

economic or social values.

Drucker (1985), defined innovation as: ‘the act that endows resources

with a new capacity to create wealth’. It also refers to purposeful and

organized search for changes and exploiting opportunities arising from such

changes for either economic or social change. Drucker argues that innovation

should be a systematic, organized and purposeful activity and that innovation

as well as entrepreneurship is discipline with simple rules.

As quoted by Drucker, Say defined innovation as changing the yield of

resources of changing the value of satisfaction obtained from resources by

the consumer.

Balunya (1997), defined innovation as the act o introducing something

new in this case can be anything ranging from products, organization

structures, etc.

Kao (1989) argued that for something to qualify as an innovation it must

be new, useful and able to solve an existing problem and be understandable.

Why Innovation?

Innovation is vital because the word is dynamic. A lot of things keep

changing both within and outside an organization some change are natural

and spontaneous. These changes could be demographics, perception,

industry and market structures including competition because of the

environment dynamism with in which people and organization operate its

necessary for the latter to be innovative to cope up with the changes and to

ensure survival in business.

Secondly because entrepreneurs aim at being at the top and reap profit

of their work, they have to keep advancing in ways of low things are done

and create something new or different that adds value. An entrepreneur aims

at being on top in business to out compete others, to achieve this he has to be

innovative.

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The Innovation Process

Timmons (1999) suggested the following steps in the innovation

process: Identifying an idea, developing the idea into a thorough opportunity,

evaluation and finally implementation. Timmons argues that the innovation

process has a number of problems that must be overcome if the innovation

process is to be successful. There is need to determine careful and thorough

evaluation whether an idea is an opportunity or not.

According to Balunywa (1997) the process of innovation begins with

the perception of a new idea and ends when the idea has been effectively

implemented and becomes part of organization operational activities. The

process involves exploiting and managing changing values. Even though

above definitions limit innovation to a process. It may be noted that

innovation can also be an event.

The process of innovation, according to Balunywa begins with

perception of a new idea, conceptualizing the idea by thinking about it and

refining it. The next stage is the development stage where for big

organization experience are undertaken and finally the implementation stage

where the innovation is operationalized. The stages of innovation are

illustrated below:

Innovation Process

1) Perception

At the first stage the entrepreneur perceives on idea, on opportunity or

need for innovation. At this stage the idea is a mere feeling. The

entrepreneur thinks about the idea and may necessitate going through the

creativity process.

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2) Conceptualization

Usually at the perception stage the idea is still vague. Therefore it’s of

the conceptualization stage when the idea is refined, thought about and made

more explicit. This is a stage for providing answers to such question like

how will the product or service be produced? Who are the users? How is the

organization to be structured?

3) Development Stage

This is the stage when full conditions for the innovation are how defined

and experiments undertaken to see if the product or service or product will

work.

At time the idea may be taken back to the drawing board to allow

gathering of more information. At this stage a strategy to implement the

innovation is evolved if it works.

4) Operation stage

This is the implementation stage decision are taken on investment, the

production team marketing mix decision and the structure to implement the

innovation. For small entrepreneurs, the development stage is combined with

the operation stage.

Types of Innovation

Timmons (1994) Summarizes Innovations into Three broad Categories

i) Incremental Innovation

This is the most common and features the introduction of a product

involving some level of newness and some value creation an example is the

introduction of Mobile telephone facilities

ii) Substantial Innovation

This is where there is a significant degree of product newness and

important value creation for the customer for example introduction of carried

soft drinks, carried beer changing of the packaging design of castle breweries

products.

iii) Transformational Innovation

This is the least common and involves radical new products that create

substantial value creation from the customer, for instance World Wide Web

(www)

Moving from incremental to trains formational types of innovation, the

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degree of product newness and value delivered to customer’s increases and

so does the potential to earn high profits. Concurrently, the degree of

business risk can also rise as one move up the innovation ladder.

Factors Leading to Innovations in Organizations

1) Customers are more Sophisticated and Expect More

Customers today tend to be more segmented demeaning. They are

looking for products that are better designed to meet their individual needs

customers expect high quality and better price products for instance a TV set

cars. In respects the customer is the driving force to innovation.

2) Customers have more choice

As the number of suppliers to the end market is generally rising

customer loyalty to particular suppliers is disappearing education are the

beauty product. There are several company loyalty to brand win be guided

be the satisfaction derived from consuming a particular product.

3) Ideas Make up More of the Value Chain

In today’s production process, physical inputs are being Asigly

substituted by intellectual input. Wealth creation is increasingly about

capturing and applying new ideas to create new products that exploit

identified opportunities.

4) Shorter Product Life Cycles

Before the test two decades, most motor vehicle manufacturing

companies were developing vehicles with an estimated life span of more

than 10years.Today, this has drastically reduced. With tastes and technology

rapidly changing and good ideas being quickly and superseded, there is

continual pressure to devise new and better products at a faster rate, for

instance the use of fiber car body instead of steal.

5) Target Market Strategy

Most firms and organization in the current business word have focused

targeted markets for their products. To be able to enter, survive and win the

market, often new or better product package is required to win against

entrenched competition.

Innovation in Business Enterprizes

1) Openness to New Ideas from all Possible Sources

Demanding customers in the most demanding markets can be an

excellent source of ideas for innovative products for instance in the banking

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industry in Kenya, Barclays Bank continuously send questionnaires to their

clients about their new of the services provided by the bank (suggestion

box).

2) Constantly Engage with Customers and Markets

Working and interacting continuously with customers, understanding

and interpreting their needs, living with the customers rather than studying

them from a distance will increase the potential to innovate.

3) Use Vigorous idea Screening Process

A good idea is not necessarily a viable opportunity. Before spending

time and resources in developing a product or service, carefully evaluate the

idea and see if it’s viable opportunity. The idea should fit the competencies

of the business /entrepreneur and should keep the firm a dire future

objective.

4) Continuous Seeking of Information

The innovation process requires information about markets and their

sizes, customer profile, distribution channels, costs regulatory compliance

the size and strength of competitors among others. Government universities

and research agencies can be very rich sources of timely information to keep

enterprises screen ideas and plan for the development and blanch of the

products.

5) Minimize and Manage Risk

Risk is the likelihood that the actual outcome will deviate from the

expected outcome. The degree of risk is a measure of the less than perfect

state of information that is available regarding the forces in favor and the

forces against the project. Acquiring all the relevant information that is

feasible minimizes risk.

6) Gather Skilled People to Build a Competent Team

Successful innovation requires teams of skilled and dedicated people.

Entrepreneurs need to recruit the best and bright people for their team. There

is need for strong consideration on how to reward the team members.

7) Provide a Strong Sense of Direction

Leaders in innovative enterprises know their firms and what they want

to be.

They have a strong outward focus, are confident and interested in ideas

and change. From their thorough understanding of their opportunities, the

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product they are developing and the market are seeking to capture, they

inspire and build confidence in their team.

Sources of Innnovation In Business Enterprises

1) The Unexpected Occurrence

This is a system of fundamental change in behavior, expectation of a

great number of customers, which requires relegation understanding

analysis, support and exploitation to the value and yield. It’s the diversion

from the normal business trend happening in an organization. It/s the urge

for change from the ordinary way of doing things.

In many organizations, the management fails to exploit such

opportunities because they believe that anything which has lasted for a fair

amount of time must be normal and go on forever. Anything that contradicts

it is considered unhealthy. Unexpected success is challenge to management‘s

judgments.

Unexpected success is not just an opportunity or innovation but

demands innovation. It forces organization to ask: what basic challenges are

how opportunities for the organization.

2) Unexpected Failure

Failures like success cannot be rejected and rarely go unnoticed. Many

failures arise out of mistakes, negligence, greed, stupidity thoughtless band

wagon –climbing or incompetence whether in design or expectation. It may

arise out of assumptions on which a product or service, its design or its

marketing strategy were based or may no longer fit reality. For instance,

changes in perception or value to a particular product to customers, changes

in income in which customers demand something quite different. Any

change like this is an opportunity for innovation.

Unexpected failure demands that the organization go out, look around

and listen. It calls for more study and more analysis most importantly it

should be considered as a symptom of innovative opportunity and be taken

seriously.

3) Unexpected Outside Event

These are events that come from outside the organization or enterprise

and significantly affect the operation of the organization. Unexpected outside

e3vent, may be above all an opportunity to apply already existing expertise

to a new application that does not change the nature of the “business” the

organization is in. It may be an extension rather than diversification.

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1. Incongruity

An incongruity is a discrepancy or disagreement between what is and

what ought to be or between what is and what everybody assumes it to be.

It’s a symptom of an opportunity to innovate (Drucker 1985).

An incongruity is a symptom of change either changes that has already

occurred or changes that can be made to happen. These are changes within

an organization, a market or a process. It’s this visible to people with in or

chose to the organization, market or process. There are four types of

incongruity that occurs in business organization or industry.

i) Incongruous Economic Realities

Economically, if the demand for a product or service from a particular

organization is growing steadily its economic performance should improve

thus increasing profitability. A lack of profitability and good results in such

an industry brings about incongruity between economic rarities.

ii) Incongruity between Reality of an Industry and the Assumption

About it

Situations may occur in an industry or service where people

misconceive reality. They will concentrate their efforts on the area where

results do exist. This is incongruity between reality and behavior. This

incongruity offers opportunity for successful innovation to whoever can

perceive and exploit it.

iii) Incongruity between Perceived and Actual Customer Values and

Expectations

Producers and suppliers at times misconceive what it is the customer

actually buys. They assume that what represents” value” 6to the producer is

the same to the consumer. Variations in expectations and values occur. The

reaction of the typical producer and supplier is then to complain that

customers are irrational or unwilling to pay for quality. Whenever such a

complaint isheard, there is reason to assume that the values and expectations

the producers holds to be real are incongruous with the actual values and

expectations of customers and clients. Then there is reason to for an

opportunity for innovation that is highly specific, and carries a good chance

for success.

iv) Incongruity within the Rhythm or Logic or Process

This is an internal incongruity with in a process rhythm or logic that

upset the customer. Customers are aware of it. It occurs where customers

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feel uncomfortable with the product or service so that the product or service

can be redesigned to remove the discomfort. He users or customers talks

about it,but what lacks however is somebody willing to listen somebody to

take seriously the customers concerns, so that the product orservice can

satisfy the customers.

2. Process Need

This is an innovation that perfects an already existing process,

replacement of weak links, redesigning old existing process around newly

available knowledge. The missing link forms the process need for innovation

with in an industry, business or service sometimes everybody within the

organization, an industry always knows that the need exists. Yet usually no

one does anything about it. However when the innovation appears

immediately accepted as “obvious” and soon becomes standard.

An example of the process need innovation is the mobile phone services

in Uganda. The telephone service in Uganda was introduced long time ago,

but the mobile services were not available. To perfect the communication

system there was a Need in the telephone industry that could allow

communication to take place anywhere. Celtel, MTN, Warid Mango saw this

as an n innovative opportunity and introduced mobile phones in Uganda.

3. Industry and Market Structure

This is a form of innovation that occurs from changes in the market

structures within the economy. In reality market and market structures can

remain stable for many years and can ensure that the market leaders and their

trailers establish sound foundation in the market. However a slight

disturbance of these structures can cause the collapse or disintegration of the

market or industry. Such a disturbance can be a source of innovative

opportunity within the industry or 9organisation.An example of innovation

from changes in industry and market structure is the Auto mobile industry.

On a local scene after the re-introduction of the EAS, in the newspaper

industry the East African newspaper has been trying to cover and report

news in E. Africa. Many bus companies like Gateway, Akamba, etc. have

come in to exploit the opportunity in the transport industry with in the

region.

4. Demographic Factors

These are innovative opportunities that occur within the organization or

industry as a result of changes in demographic factors. These may be

changes in population, its size, age structure, composition, employment,

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education, and income. Demographic factors are the most reliable. This is

because demographic changes are known. For instance the number of

students in Uganda expected to join p.1 by the year 2009 are already born or

those to join s.1 by the same year can be estimated. As a result those who

analyze demographic changes can exploit them and reap great rewards.

An example is the education sector in many developing countries

including Kenya, Uganda and Tanzania. Due to the increasing population as

per the projections, there is an increasing number of private institutions for

learning as the demand for education facilities outstrips the supply in public

institutions. As a result the education sector has been vibrant and innovative

individuals and organization are exploiting the opportunity. The demand for

accommodation has led to the construction of private hostels around the

college. These are innovations as a result of demographic changes.

5. Changes in Perception

Perception refers to attitude towards a situation or the way organization

individuals perceive or look at a situation. Changes in perception does not

change facts but changes the learning hence different consequences.

Drucker (1985) demonstrates this concept using two phases, the glass

is” half full”

And the glass is “half empty”. The two phases are mathematically the

same but interpreted differently due to perception. The interpretation will

depend on the mood rather than facts. Innovative opportunities occurs if the

general perception changes from seeing the glass as half full to seeing it as

half empty.

An example is the cinema industry. With the increasing number of video

tapes in the market there has been a sharp decline in people attending cinema

shows in cinema halls. These have been an increase in video show rooms.

There has also been an expansion of TV, video deck, DVD market. This is

innovation as a result of change in perception and tastes.

6. New Knowledge

This is innovation within an organization as a result of new knowledge

in production or service provision. According to Drucker knowledge-based

innovation is the “super star” of entrepreneurship. It gets publicity and

lowly. It’s what people mean when they talk of innovation.

7. The Bright Idea

Innovations based on a bright idea probably out number all other

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categories taken together. A very large population of the new businesses that

are described in the books of entrepreneurs and entrepreneurship are built

around” bright ideas”, e.g. the ball point pen, beer cars etc. Also, what is

called research in many businesses aims at finding and exploiting bright

ideas? Yet bright ideas are the most risky and least successful source of

innovative opportunities. The casualty rate is high.

Also no one knows which ideas for an innovation based on a bright idea

have a chance to succeed and which ones are likely to fail. Why did the zip

find acceptable and practically displace buttons, even though it tends to jam?

(After all a jammed zip or a dress, jacket, or appear of trousers can be quite

embarrassing.

Principles of Innovation

These are o number of “Dos” – Things that have to be done. There are

also a few “don’ts” –Things that should not be done and these are conditions.

a) The Do’s

Purposeful, systematic innovation begins with the analysis of the

opportunities. It begins with thinking about the sources of innovative

opportunities. In different areas, different sources will have different

importance at different times.

Innovation is both conceptual and perceptual. The most important issue

about innovation is therefore to go out, to ask and to listen. Successful

innovators use both the right side and the left side of their brains. They work

out analytically what the innovation has to be to satisfy an opportunity. Then

they go out and look at the customers, the users, to see what their

expectations, their values, their needs are. One can perceive that this or that

approach will not fit in with the expectations or the habits of the people who

have to use it.

An innovation to be effective has to be simple and it has to be focused.

It should do only one thing, otherwise, it confuses. If it’s not simple it

doesn’t work. Everything new runs into trouble, if complicated it cannot be

repaired or fixed. Indeed a greatest praise on innovation can relieve is for

people to say: This is obvious. Why didn’t I think of it? Innovation should be

focused on a specific need that it satisfies on a specific end result that it

produces.

Effective innovation starts small. They try to doone specific thing.

Innovations should better be capable of being started small, requiring at first

little money, few people and only a small and limited market. Otherwise

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there is not enough time o make the adjustments and changes that era almost

always needed for an innovation to succeed.

A successful innovation aims at leadership. It does not aim necessarily

at bellowing eventually a “big business, in fact no one can foretell whether a

given innovation will end up as a big business or a modest achievement.

b) The Don’ts

Try not to be clever. Innovations have to be handled by ordinary human

beings, if they to attain any size and importance at all, anything too clever,

whether in design or expectation is almost bound to fail?

Don’t diversify, don’t splitter, don’t try to do too many things at once.

Innovations that stray from a core are likely to fail. They remain ideas and

do not become innovations. An innovation needs the concentrated energy of

a unified effort behind it.

Do not innovate for the future, innovate for the present. An innovation

may have long –range impact, it may not its full maturity until 20 years later

they invention of computer and its uses.

c) Conditions

Innovation is work. It requires knowledge. There are clearly people who

are more talented than others. Also innovators rarely work in more than one

area.

To succeed, innovators must build on their strengths. Successful

innovators look at opportunities overt a wide range. But then they ask which

of these opportunities fits me, fits this company, packets to work what we (or

1) are good at and have shown capacity for in performance?

Innovation is an effect in the economy and society, a change in the

behavior of customers, farmer’s etc. It’s also a change in a process that is

how people work and produce something. Innovation therefore always has to

be close to the market, focused on the market, indeed market driven.

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Chapter - 6

Environmental Analysis

Many different forces inside and outside an organization influence a

manager’s performance. So he management functions of planning,

organizing and controlling often are must be accomplished under constantly

changing conditions. A manager must deal with the environments.

The organization‘s internal environment, which usually can be

controlled and the often unpredictable and uncontrollable conditions of the

outside world, the extend environment.

The Organization

Organizations vary in purpose and in technical needs e.g. schools,

hospital, bank, telephone companies, civil groups and restaurants are all with

differing goals and needs. But they and any other organization have other

extent in common.

The basic theory can help managers simplify and deal with the complex

interactions of internal and external environments. An organization can be

viewed as simply one element in a numbers of elements that depend on each

other. The organization takes Resource (I/P) from the larger system (the

external environment). Processes these resourceswithin its internal

environment and reforms them to the outsidein changed form (o/p). The

figure

Below Displays the Fundamental Elements of the Organization as a

System

The Organisation Environment as a System

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Every organization interacts with a larger system by taking resource and

providing o/p.

11p, human and non-human Resource. Human l1p comes from the

people who work in the firm. they contribute their time and energy to the

organization in exchange for wages and other tangibles and in tangibles

rewards, non-human Resource consist of raw materials and information.

These are transformed or used in contribution with human resource to

provide other resources.

A steel mill employs people and blasts furnaces, plus other tools and

machines, to transform ironore into steel, rubber, plastic, fabrics and in

combination with people, tools, and equipment makes auto mobiles.

A university uses resources to teach students, do research, and to

provide information to society though the education process. The l/p are

student, faculty and money, A hospital‘s l/p are staff, supplies and patients.

The patients are processed through the application of medical knowledge and

treatment. The o/p is patients restored to a level of health consistent with the

severity of the disease.

It’s the manager who must coordinate the activities of the entries system

(organization) or one of the many sub systems (department) within the

organization. For the manager, the systems concept emphasizes that;

i) The ultimate survival of the organization depends upon its ability to

adopt to the demands of the environment, and

ii) In heating these demands, the total i/p process o/p cycle must be the

focus of managerial attention.

The Internal Environment

The environment inside the organization in which a manager must

function is called the internal environment. It includes discussions of the

settings where managers work, the day to day activities that utilize much of

their time and some generalized skills necessary to cope with the internal

environment. It includes the following;

Three Management Levels

Most organization functions have at least three distinct but overlapping

levels, each requiring a different managerial focus and reemphasis. They

include:

i) The operations level.

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ii) The managerial level, end

iii) The strategic level.

These can be Illustrated Below

1) The Operations Level

Every organization whether it prod less a physical plot as a service, has

an operations function, in any organization therefore there is the operations

level that focuses on performing effectively, whatever (it is that) the

organization produces or does in the case of a physical product; there is the

flow of material and the supervision of the operations. Colleges must be sure

the students are properly processed, registered, scheduled, and taught and

their materials are maintained. Banks must see that the cheques are

processed and financial transactions recorded accurately and quickly.

As the figure above shows an operations function is at the core of every

organization. The managerial task here is to develop the best allocation of

resources that will produce the desired o/p.

2) The Managerial Level

As an organization increases in size, someone must coordinate the

activities at the operations level as well as deciding which products or

services to produce. These problems are the focus of the managerial level. A

dissatisfied student complains to the Dean of College. A sales manager

mediates disagreement between customers and sales people. At this level, the

managerial task is really too fold;

i) Managing the operations function

ii) Selling as a link between those who produce the product or service

and those who use the o/p.

Environment internal and

external

Strategic Level

Management Level

Operations Level

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In other words, for the operations level to do its work, a manager must

make sure it has the correct materials and also must see that the o/p gets sold

as used.

Managers and the Level of Management

The primarily focus of manager’s activities depend on their level in the

organization.

3) The Strategic Level

Every organization operates in a broad social environment. As a part of

the environment, an organization also is responsible to the environment. The

strategic level must make sure the managerial level operates within the

bounds of society. Since the ultimate source of authority in any organization

must provide goods and services to society in away approved by society.

Thus the strategic level determines the long range objectives and direction

for the organization that is how the organization will interacts with its

environment. The organization also may seek to influence its environment

though lobbying efforts, advertising effort or education. Programs aimed at

members of society.

Types of Managers and Levels of Management

Understanding the three levels of management can be helpful in

determining the primarily focus of manager’s activities at different levels in

an organization. For example asset of terms widely used in organization

includes top management, middle management and first level management.

In this case the top management corresponds to the strategic level,

middle management. Corresponds to the managerial level, and first level

management corresponds to the operating level.

NB: Refer to diagram behind.

While the terms top, middle, and first level management may not always

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correspond exactly to the three levels outlined above, they provide an

understanding of managers do at each level. The term manager covers all

three levels, from the chief, executive officer to the first level supervisor. All

are managers but the focus of their activities varies.

The actual terms used to identify managers at various organization

levels differ from organization to organization and business, education and

government.

Generally speaking, the activities of supervisors, chairpersons and

program managers are similar despite the different terms used to identify

them. A chairperson of a department in college could be expected to spend

most of the time dealing with the faulty as individuals. Similarly, manager’s

presidents and cabinet secretaries spend much of their time being concerned

about the work that their organization is doing in terms of the expectations of

owners, customers and tax payers.

The Skill of Managers

Certain general skills are needed for effective managerial performance

regardless of the level of the manager in the hierarchy of the organization.

however, the mix of skills will differ depending on the level of the manager

in the organization there are three basic skills;

i) Technical Skill: Is the ability to use the tools procedures or

techniques of a specialized field. Accountants, engineers, nurses,

physicians’ musicians each have specific technical skills in their

fields of specialization; managers must possess sufficient technical

skills to accomplish the jobs for which they are responsible.

ii) Human Skills: Is the ability to work with and understand people.

Which manage people effective, managers must participate

effectively with others.

iii) Conceptual Skill: Is the ability to comprehend all activities and

interests of the organization. This skill involves understanding how

the organization functions as a whole and how the parts depend

upon or relate to one another.

While all three of these skills are essential for effective managerial

performance, their relative importance to a specific manager depends on his

or her level in the organization. Technical skills is critical at the lower levels

of management but becomes less so as one moves up through the

management tanks. A production foreman and a nursing supervisor will need

more technical skills than the president of the company or hospital

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administrator, because they deal with day to day problems in manufacturing

and nursing.

On the other hand, the importance of conceptual skills increase as one

rises in the management.

The higher one is in the hierarchy, the more involved one becomes in

longer term decisions that can influence many parts of the organization or

the entire organization. Thus, conceptual skills are most critical for top

managers.

While human skills is critical at every level in management, it probably

is most important at the lowest level. The greatest number of manager

subordinate interaction are likely to occur at this level.

The Role of Managers

Recently it has been determined that managers perform 10 different but

closely related roles. The figure below shows that 10 roles can be separated

into three different groupings; interpersonal roles, information roles and

decisional roles.

The Overlapping Roles of Managers

1) Interpersonal Roles

These roles focus on interpersonal relationship. The three roles of figure

heads, leader, and liaison result from formal authority. By assuming them;

the manager is able to move into the informational roles that in turn lead

directly to the decisional roles.

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All managerial jobs require some duties that are symbolic or ceremonial

in nature.

The manager’s leadership role involves directing and coordinating the

activities of the subordinates. This may involve staffing (hiring, training,

promoting, dismissing) and motivation.

The Liaison role gets mangers involved in interpersonal relationship

outside of their area of command.

2) Information Roles

This set of roles establishes the manager as the central focus for

receiving and sending non-routine information. Through the three

interpersonal roles discussed above, the manager builds a network of

contacts.

The monitor role involves examining the environment in order to gather

information about changes, opportunities, and problems that may affect the

unit the formal and informal contacts developed in the liaison role are often

useful here.

3) Decisional Roles

While developing interpersonal relationships and activities are not ends

in themselves as the basis relationship to the process of decision making. In

fact, some people believe that these decisional allocated, and negotiators are

manager’s most important duties

The purpose of the entrepreneur role is to bring about changes for the

better in the unit. The effective first line supervisor is looking continually for

new ideas or new methods to improve the unit’s performance, the effective

college clean constantly plans change that win result in higher quality

education. The effective marketing manager always tries to seek for new

product ideas.

In the disturbance handles role, managers make decisions or take

corrective action in response to pressure that is beyond their control because

there are disturbances, he decisions usually must be made quickly, which

means that this role will take priority over other roles, the immediate goals is

to bring about stability, when an emergency room supervisor responds

quickly to a local disaster, a plant supervisor reacts to astrike, or a first line

manager responds to a breakdown in a key piece of equipment, each is

dealing with disturbances in the environment. These responses must be quick

and must result in a return to stability.

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The resource allocate role places a manager in the position of deciding

who will get what resources Including money, people, time and equipment.

Therefore are level enough relationship to go around; the manager must

allocate the scare Rss towards numerous possible ends. Resource allocation,

therefore, is one of the most critical of the manager’s decisional roles. A first

line supervisor must decide whether an overtime schedule should be

established or whether part time workers should be hired. The president of

the United States must decide whether to allocate more to defense and less to

social programs, or Vice versa.

In the negotiator role, managers must bargain with other units and

individuals to obtain advantages for their own units. The negotiations may be

over work, performance, objectives, RSS, or anything influencing the unit. A

sales manager may negotiate with the production department over a special

order for a large customer a first line supervisor may negotiate for new type

winters, a top manager may negotiate with a labor union representatives.

Management Levels and Management Roles.

A manager’s level in the organization influences which managerial roles

are emphasized. Obviously, top managers spend much more time in the

figure lead role than first line supervisors do.

The liaison role of top and middle managers involves individuals and

groups outside the organization while the liaison role at the first line level is

outside the unit but inside the organization.

Top manager monitor the environment for changes that can influence

the entire organization middle managers monitor the environment for

changes likely to influence the particular function that they manage

(marketing). And the first line supervisor is concerned about what will

influence his or her unit. However, while both the amount of time in the

various roles and the each role may differ, all managers perform

interpersonal informational and decisional roles.

The External Environment

No organization is self-sufficient, whether profit or nonprofit, each

organization provides something to the outside environment and in from

depends on the environment for survival. The numerous components of the

external environment can be classified into two categories

Direct influence on the performance of the organization and Indirect

action components, which influence the climate in which the organization

operates and may (under some conditions) become direct – action

components.

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Direct Action Components of the External Environment

The major direct – action components of a managerial external

environment are the organization clients that it must satisfy, it is competitors,

and the organization and individuals that simply Rss the figure below

illustrate the direct action component

The performance of the organization is influenced by the above factors,

i) Clients

A business organizations customer is clinical, and managers constantly

must be aware of the present needs and emerging needs of clients. This may

involve altering present products or services, developing new ones, or even

entering new business.

ii) Competitors

The actions of competitors that directly impact on managers are of two

basic types

a) Intra type

This occurs between institutions engaged in the same basic activity for

example competition between banks for customers

b) Intertype

This rises between different types of organization for example hospitals

compete with health maintenance organization for patients.

iii) Suppliers

Every organization enquires inputs from environment in the, of raw

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materials services, equipment, labor and funds. They use these inputs to

produce output. This organization depend on those who supply resources.

The availability of resources determines the organizations capacity to

respond to threats and opportunities presented to it Depending on the type of

organization, some suppliers will be more critical – and others for example a

hospital Leeds funds and qualified staff.

Indirect Action Component of The External Environment

These can affect Managers in at Least two Ways

a) The outside organization can have a direct influence on an

organization or an indirect influence through a direct influence

througha direct-action component for example a consumers

groupmaylobby for certain cases like equal credit opportunities on

product safely.

b) Certain indirect action components organization influences the

climate in which the organization functions for example the

economy may expand or decline requiring response from

management.

Some of the Most Important Components of the Indirect Action

Components Include

Technology

Changes in technology can influence the destiny of the organization.

Technology may be a constraint when opportunities exist but the necessary

equipment is not present. However technological innovation can create

opportunities for entirely new industries for example the effect of ATM on

banking.

Economic

Economic changes pose both opportunities and problems for managers.

It has an effect on the demand for a company product as service. It also

facilities the establishment of new enterprises. A major show down in the

economic growth can bring failure to some organization changes include

halation refers, productivity savings unemployment refers, productivity

savings unemployed refers etc.

Therefore managers must constantly monitor changes in economic

changes in order to minimize threats and capitalize on opportunities.

Political and Legal Factors

Nutritious laws and Authority characterize the political and legal

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environment faced by most managers. This indirect component may act as

both a constant and opportunity for example the vocational Education Act

provides opportunities for certain types of education while acting as a

constraint for others.

Cultural and Social Factors

Change appears to be a constant element in our social system, all the

people are part of the cultural and social order that affects their behavior,

traditions, customs and beliefs influence all the people and organization

managers must identify the changing cultural social conditions that win

influence their organization yet many organizations have not considered the

impact of such conditions or have under estimated their impact.

International

For many organizations this indirect action component presents great

challenges it provides managers with both opportunities and threats for those

managers who depend on foreign resources the international factors could be

a problem. For some managers or organization win provide foreign

competition.

In markets for other organization it will provide opportunities to sell

their plots in new markets. When a business firm decides to leave its national

broader and do business in other countries it becomes a multinational

company with the decision to become a multinational company the

international component takes an increasingly important and complying role.

The organization becomes subject to the nature of different cultures,

economic and political system

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Chapter - 7

Feasibility Study

This is an in-depth investigation aimed at determining how perfectible and

how desirable a specified project or process or system is. The investigation

aims at analyzing all the critical elements in various aspects in the

production of a given product or service.

The study eventually Results into A Project Feasibility Study Report,

Which Ways among Others Provide Answers to The Following

Whether or loot the project under study can be done and if so based on

pre-stated project objectives.

The most practical, beneficial and describe way to carry out the project.

Understanding of Feasibility Studies Which Include the Following

Feasibility studies in their practice applications incorporate viability

studies.

The position that feasibility studies occupies in the overall cantered

of the project cycle

The distinction between a feasibility study and a project report.

Feasibility Vs Viability Tests

The Feasibility Study/Test Refers to A Preliminary Inventory of the

Following

The entrepreneurship ability.

Resource requirement.

Resource availability.

The aim of this preliminary test is to reach a decision as to whether the

idea under test has promise as lot

In the day to day use of the term however, a feasibility study includes

both tests of feasibility and viability. An idea is feasible if it’s within the

entrepreneurships ability to transform it into an enterprise.

Its viable if the enterprise can achieve the pre – set objectives the

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profitable in case of a business enterprise or beneficial in the case of social

or community projects.

The Project Cycle

Complete Imploration of the Project Involves Several Stages Which

Include the Following

Project identification that is the development of new ideas.

Project preparation lie laying down the parameters and

characteristics of the project

Project appraisal that is tests of feasibility and viability.

Negotiation.

Implementation.

Post implementation evaluation.

The feasibility study proper is stage 3 in the cycle. However the

feasibility study report will also include aspects of stages 1-5

Pre – And Post Investment Report

A feasibility is or pre – investment decision is made it examines a

proposed project in terms of its areas.

Objectives, technical feasibility social impact, etc note that it’s different

from a detailed project report or a business plan in commercial terms

There are also post investment decision activities. These are project

work plans which include the following; detailed specifications and designs,

engineering drawing, site investigation, process designs, and tire schedules

for implementation.

The above two (post and pre) report type should also be destination from

a post – project evaluation report. This as they have suggests is a post –

implementation activity whose purpose is to evaluate the attainment of the

project objectives pre- investment decision includes the following:

Since the feasibility study report is the basis of a major investment

decision, the study light to be very broad but critical covering all the relevant

ground and taking advantage of the previous experience if any in related

fields.

The study should include adscription of the project objectives and

principle characteristics if it’s to be used as a bench more for

implementation, monitoring and evaluation of the project.

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Similarly the report should include a rundown of the main assumption

upon which predictions of performance are based. It also includes elements

of risks and uncertainty associated with the implementation of the project.

The report, a part from giving suggested courses of a firm, it should also

point out alternatives considered and make a case for the suggested choices

Quiz often it will be necessary to make a adjustments to some of the

parameters in order to attain reliable solutions of it may become necessary to

compromise on the type of technology to be employed, sources of inputs, the

production programs in order to enlace the viability of the project.

Not all the project will pass the feasibility / viability tastes, where the

tastes indicate that the project is not possible the report should stage so

giving logical explanations for this position.

The emerging trend for conducting as a whole studies and project

implementation as a whole is one that involves a section of stakeholders and

particularly the end users

Good feasibility studies are based on more listening, piloting,

demonstrating and main streaming.

Stakeholders in A Feasibility Study

Because feasibility studies solve a variety of stake holders, they include

a range of conflicting interests, each interested party will always went to bias

assumptions and expectations within them own ends at the forefronts of a

prospective investor may prepare a document based on extremely realistic

interests.

However, once the investor is satisfied that the project has got prospects

of success, its expected performance, he will also be prepared to get a loan

because of the supporting documents.

The Range of Potential Stakeholders win varies with the Uniqueness of

each Project but they include the Following

The investor.

The financial.

Supplies and contractors.

Consultants.

Government (firm the social economic angle).

Aid agencies.

Community.

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Contents of a Feasibility Study

As already noted the feasibility study is a very important step in the

project analysis cycle. The decision to threat depends mainly on the

recommendations of the study. This calls for thoroughness in the exercise.

The resulting report must contain answers to all aspects of the project to

minimize as much as possible risks and uncertainty which is associated with

new investment. The study must cover technical, final and marketing,

management, organizational, social – economic, environmental and any

other aspects that may affect the success or failure of the project.

Since feasibility studies are relevant to virtually all areas of activities, be

it in manufacturing, agriculture, import and export trade, community

development projects, it’s not redistrict to propose a standard format that a

feasibility study report ought to follow.

The relative important of different dimensions of analysis win every

with the type of project of which analyzing commercial project commercial

project, financial ability will be of paramount consideration for community

projects, social benefits will be more considered than profitability, if its

Agriculture the emphasis and content will include such considerations like

soil texture, diseases control, wealth cycles, these may not be relevant to be

manufacturing project

Other Services of Variation Include

The size of the project.

The costs involved.

The nature of the production process.

The expressed requirements of the stake holders sponsoring the

study.

Contents of a Feasibility Study

1. Executive Summary

It’s written last but appears first in the report.

It’s extremely important since many busy executives do not read the

entire report.

It also includes an outline of the principle objectives, characteristics

of the project, Major assumptions, total cost of the project and

expected sources of finance and the study’s major conclusions and

recommendations.

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2. Project Background

History of the background.

History of the project.

The importance/justification of the project.

3. The Project

Project description and detailed features of the proposed product or

services.

Brief details of cost estimates and the proposed sources of

financing.

Details of the executing firm/company and managerial expenses.

4. Market Analysis

Demand patterns that is collect and future trends, effective demand,

etc.

Expected market share.

Price projections.

Other marketing variables like distribution, promotion etc.

Competition that is their capacity, strength, and weaknesses future

entry and exit.

Competitive advantage. This is an analysis of the company /

industries own strengths and weaknesses.

5. Technical Feasibility

Location of the firm/business

Utilities and infrastructural facilities that is their availability,

adequateness and reliability.

Machinery, furniture and equipment, brief specifications,

availability in Local or export markets, schedule of supplies and

costs.

Buildings that is specifications, layout and cost motor vehicles that

is specifications, cost and source.

Raw material requirement that is the type quality and quality,

availability, sow ices and cost

Production process. This includes plant and lay out

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Production capacity and expected capacity utilization overtime.

6. Organization and Management

Top, middle and lower cadre personnel i.e. the skill and hours of

each required, their availability and cost.

Specialist skills consultants if required i.e. the hours required and

the cost.

Organizational structure.

Reward structure.

7. Financial Viability

The project cost that is capital expenditure and working capital.

Details of financing that are the cost and structure.

Estimate of the perfect results that are production and sales

schedule, perfected over a period of time.

Calculation of profitability, liquidity and payback period.

8. Economic Viability Analysis

Use of discounted cash flow, computation of the NPV and IRR.

The break even analysis.

Economic valuation of resources.

Social economic benefits.

Economic rate of return.

Environmental impact analysis.

The nature and type of disposal.

The effect of such disposals.

9. Outstanding Issues if Any

Conclusion and recommendations including a proposed implementation

schedule (when)

Annex.

Uses of Feasibility Study

Providing the information necessary to make the investment

decision.

Supporting application for financing.

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Serving as a reference document for project implementation

monitoring and evaluation.

Solving as a support document for license applications, tax

exemptions etc.

The Preliminary Consideration

Before embarking on the preparation of a feasibility study, it’s necessary

to put into proper perspective the project, project cycle and the feasibility

study report.

The Following Are Some of The Areas That Should Be Considered

The starting point.

What is the starting point of the project?

Is it new, replication, an extension or a reliabilities / reconstruction?

A New project: Starts from scratch which may be an advantage in the

sense that there are no previous experiences and the investor has a free hand

to be innovative. The disadvantage is that with such projects the risk and

uncertainty is high.

Replicated Project: They have the advantage of previous experience

and they normally follow a previous success story.

Extension Project: These also follow a success story and there are

fewer areas of risk and uncertainty since they are also expending in size they

will enjoy economies of scale and the viability is easy to establish.

Reliability/Reconstruction Projects: They are based on the assumption

that the existing activity has failed in one way as the other: Reforms may

include among others:

Project mismanagement.

Effects of civil disturbance or war.

Natural catastrophes or general economic decline.

2. Sectorial Differences

Different sectors of the economy: - Agric agro – industry,

manufacturing industry infrastructure, commerce, social /community

projects, etc. will call for different consideration issues and emphasis and

different skills and experience for an effective team.

Differences will also arise between project in the public sector, private

sector, joint venture projects, projects arising from foreign investment (FDI)

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and projects quitted by NGO’s and CBO’s. The spectrum of question that

needs answers will be different.

3. Scale of the Project

The preparation of e feasibility study is part of transaction cost. This

being the case, investment in the feasibility study should be in line with the

scale of the project. Just as it would be indivisible to commission a multi –

disciplinary project it would be equally have to settle for a brief over view

report as a basisfor making the decision to invest in a major project.

There is therefore a need to establish a match between the complexity

and thoroughness of a feasibility study and complexity and level of

investment expected.

Should the project prove viable economists will use the concept of

margin at cost to establish this match for example.

1) Oil Seed Processing Project or a Venture Capital Company.

Private sector projects.

Key issues will probably be technical feasibility and financially

viability.

Ownership, investment risk and management will probably be

vested in the same individual.

2) Copper/Cobalt Exaltation as Oil Pipeline Extension.

Large investment.

Probably public sector participation.

Key issues will extend to economic viability, social benefits and

environmental concerns.

Rural electrification, safe drinking water, rural communication

facilities.

Other Areas of Distinction

Projects that is purely domestic in characteristics Vs projects with

international inputs.

Different concepts of size base on different measures – level of

investment, of employees, sale, turn over etc.

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While Preparing Feasibility Studies the Following Should Be Born in

Mind

The order in which work is undertaken in feasibility study

preparation does not at ways strictly follow the order of the table of

contents as listed in the previous section.

Some modifications way needs to be done even after the investment

decision has been taken later decision.

In the project cycle may necessitate changes in options previously

prefixed.

Ordinarily B should follow A. however having decided on the product,

technology alternatives may offer an alternatives option which necessities

residing the characteristics of the product or service. Similarly location, C,

may have all desired qualities and may have the professed option. However

with the changes created by the AB interaction the scale of operations may

change hence necessitating a change in location.

Another area that may result in re – orienting previous decisions is the

stage of negotiation and contracting results of negotiations especially with

financiers, suppliers and contractors may affect the viability of the project,

yet these must be carried out after the feasibility study has been completed.

Negotiations by their very nature involve compromises and shifting of

positions making it unavoidable to alter positions previously regarded as

superiors.

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One possible escape route is far the feasibility study to work within

ranges within which negotiations and contracts should limit themselves

The need to review of previous positions often results in impasse

especially when decision makers have different professional backgrounds

and/or different perspectives of the projects objectives. Some professionals

are conservative and will be revenant shift from them profiled position, both

financial and economic analyses are key issue in feasibility study

preparation.

There is no outright answer; one must refers to the basis objectives of

the project financial analysis reflects the interests of the investor that is the

analysis examines the financial outcomes of the project. On the hand

economic cost/benefit analysis takes the macro perspective and examines

The alternative uses of the resources to be invested (opportunity cost),

and benefits from the project to the society and economy as a whole and

employment, contribution to G.D.P evaluation of poverty, reduction of

income, inequality of forex, economic linkages created, etc.

If the investment decision is being made by individuals then financial

results will prevail and if the project is intended to benefit the society, then

economic analysis will be given more weight.

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Chapter - 8

Introduction to A Business Plan

Start-Up of a Business

If you are planning to start a business the most important thing to do is

to know your behaviors and competences that is you can answer this

question “WHO AM I?” When you know who you are then the choice of

business is made easy. You only start businesses that in line with your

behaviors and competences. Many people cannot explain who they are in

terms of their behaviors. They are more comfortable telling you about their

achievements and behaviors of their neighbors. Moreover, successful

entrepreneurs know very well who they are and can describe their behaviors

in concrete terms. They know their strengths and weaknesses. It is important

to take advantage of the valuable/useful personal characteristics. Take

advantage of the weakness by looking at them as opportunities and not

threats (SWOT Analysis).

What are your Strengths?

When you are patient or have a good smile, you can do very well in a

customer service-oriented business

What are your Weaknesses?

When you are rude or short tempered, and then you are better off

avoiding customer service-oriented businesses. When you decide to have one

then it is better to employ a person who is customer service oriented to cover

up your weakness.

Generating Ideas

The environment that we live in is full of opportunities that can be

translated into business ideas but many are never recognized and tapped.

Business ideas are usually picked from existing problems, unmet needs or

underutilized resources. It is important to scan the environment and spot the

opportunities that do exist and develop ideas to match it. Businesses that are

not open to new ideas usually die in their first two years of operation. The

need to change with the changing business environment is supreme.

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Identifying business opportunities is not enough but a person with the

right characteristics to match the business opportunity is very important, that

is “A good person with a second class idea is better than a good idea with a

second class person.” That is the need to know your strengths and

weaknesses as discussed earlier in order to know what to do.

Creativity

Creativity is typically used to refer to the act of producing new ideas,

approaches or actions, while innovation is the process of both generating and

applying such creative ideas in some specific context.

Definitions of Creativity Are Typically Descriptive of Activity That

Results in

Producing or bringing about something partly or wholly new;

Investing an existing object with new properties or characteristics;

Imagining new possibilities that were not conceived of before and;

Seeing or performing something in a manner different from what

was thought possible or normal previously.

For example, Amabile et al.., (1996) suggest that while innovation

"begins with creative ideas,"

"...creativity by individuals and teams is a starting point for innovation;

the first is a necessary but not sufficient condition for the second”.

Creativity is a key to the development of both new and existing

businesses, especially for those who want to grow towards a profitable

business. Those people who are creative will be base what they come up

with on their resources and experiences.

Skills, Talents and Knowledge

Skills and talents are resources that one has and so they should be

exploited in starting and running a business. It is important to identify these

skills and talents that you have.

Another ways of identifying business ideas is by analyzing key

components like

Your Skills/Talents/Knowledge (skills mean Business)

Using your skills you can provide a service or make things (a product),

but think if the product or service will be used by another business or people

and ask yourself the following questions;

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Which people/businesses will consume this service or product?

What services or products to offer?

A skill

This is defined as the great ability or expertise that comes from training

and practice. It mainly involves the use of hands or body. A skill is

something which someone is good at doing. For example: those good at

plaiting hair can set up hair saloons or those who are grafting skills can set

up a horticulture nursery.

A Talent

This defined as a superior, apparently natural ability in the arts or

sciences or in the learning or doing of anything. It is usually a natural

inclination for a particular work. For example a strongman can do good work

as a bouncer. If you can sing then you can become a musician and even start

your own Music band

Knowledge

This defines as expertise acquired by a person through experience or

education; the theoretical or practical understanding of a subject, and what is

known in a particular field or in total; facts and information. For example, a

doctor may set up a medical clinic or a trainer who shares information as a

business. If you know how to write a business plan, you can start a

consultancy firm specializing in writing business plans

What skills do you have?

What talents do you have?

What knowledge do you know?

Problems (Problems Mean Opportunities)

When there is a problem usually one can solve it by creating a business,

for example traffic jams in Kampala lead to the introduction of boda-bodas

because they can move easily in the small spaces left by cars in the traffic

jam.

Qn. List of some common problems faced in the community and possible

solutions. (You can have more than two solutions for a single problem).

Problems /Possible Solutions/Opportunities

Resources (Things Can Make Money)

One can use the resources he/she has to develop a business idea. You

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can ask yourself the following questions about the resources that you do

have;

Can other people use it differently?

Can I package it differently?

Can it be used as a substitute for?

Can it be used to provide a service?

Can it be used by altering the size, shape, and color?

Can it be recycled or reused?

Can it be used by combining with other things?

Can its bits or parts be used?

Examples

Many people have land or by products of their business or old clothes in

their homes that they can use to start other businesses. Off cuts from

sweaters can be used as stuffing’s for cushions and pillows.

Needs (People want Things)

People Want Things all the Time. You Can get them (things) by

Producing Products or Offering a Service. That is

People or interest group has needs that are not fulfilled.

People want things/services but do not exist.

Have seen things/services but can’t find it.

The existing thing/services are out of date or style.

The existing products are not easy to use.

Quality may not good enough.

What is existing may be too expensive.

Therefore, we should always be on a look out for business ideas and in

doing so we could involve our families, peers or workmates. The outcome

will always be ideas for a service or product business that you can think of.

These ideas can be a valuable basis for identifying new business

opportunities, and new and better ways of solving problems in existing

enterprises.

At the end of it all, ask yourself the Following Questions, Using your

Business Idea

Does this idea match my strength?

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Does this idea help me to meet my personal objectives?

Which skills/talents/knowledge am I employing in this business

idea?

Is there an under/not utilized resource that I am using to produce a

product?

Which resources do I need to realize the business idea?

What gap am I filling? Is it a need or problem?

Are there people out there who will buy your product or pay for

your service?

The Entrepreneur

In starting and managing a business the entrepreneur is at the centre

stage. He/she can steer the business to success or failure.

The entrepreneur is the person who organizes runs and is responsible for

running a business, a person who has possession over a new enterprise or

venture and assumes full accountability for the inherent risks and the

outcome. Entrepreneur applies to someone who creates value by offering a

product or service. Entrepreneurs often have strong beliefs about a market

opportunity and organize their resources effectively to accomplish an

outcome that changes existing interactions.

Some observers see them as being willing to accept a high level of

personal, professional or financial risk to pursue that opportunity, but the

emerging evidence indicates they are more passionate experts than gamblers.

Being an Entrepreneur

Independence

Do not need to follow the orders of others. The customer is the boss, but

they decide themselves on how to act.

Pleasure – Happiness

If they manage to create a business in the area of hobby, interest or

knowledge, it is much more fun!

Economical Benefits

If the entrepreneur is successful, he will benefit personally. Can’t be

sacked! Most of the richest people in the world are entrepreneurs

Self Esteem

If you manage to be successful, you feel much better!

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Bankruptcy

Many small businesses become bankrupt and then you risk not only

losing your own money, but also others.

Difficulties

Entrepreneurs will face very high obstacles with pressure on friends and

family

Being Alone

When the entrepreneur is the only responsible actor behind the business

it can be very lonely.

Financial Insecurity

Variations in income – Based on the business, sometimes no money to

pay salaries.

Long Hours – Hard Work

In the beginning (or always) the entrepreneur will have to work long

hours to make ends meet.

The Entrepreneurial Process

First an idea to fulfill a need.

The idea is worked on.

Idea converts into an business idea.

The business idea is the ground for the venture.

Then we need to plan ourselves to start the company – what to we

need to do?

This plan is: the making of a business splan.

The business plan touches upon almost everything considering the

business.

Be realistic...

What personal talent, skill, knowledge and experience is needed?

Do I know where my strengths and weaknesses are – which will

affect my venture?

Do you realize what sacrifications are needed and are you ready to

make these sacrifications?

Why do we start companies?

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To do something which is more fun?

Use our talent, skills, expertise?

Be independent?

We want to grow ourselves and widen the horizon?

We are idealistist? (make a better world)

Of need?

To make money?

Four Elements needed to get your Business Started

Boundary

Creating a place for your business – in location and in people's

minds.

Resources

The money, product, knowledge etc. that make up the business.

Intention

The desire to start a business.

Exchange

Moving resources/products/services in exchange for money.

The Next Step

Nowto Focus on these Aspects with the Business Plan

The business plan is our tool – model to get the best results

Life Expectancy of Firms

50%- within 2 yrs from the start

65%- within 5 yrs from the start

90%- within 10 yrs from the start

A Business Plan

A Business Plan is like a road map that helps individuals gain financial

and other support for their enterprise or project. A business plan also enables

Businessmen to handle the opportunities and obstacles they will inevitably

encounter as they move forward with their dream.

The Business Plan is a report that describes the firms abiltiy to sell

enough of the product/service so that the firm will show growth and profits.

Meet Joseph Mayanja, a young entrepreneur. He has a great idea for a

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new technology that he thinks will revolutionize the consumer goods

industry. To get the business off the ground, he knows he will need

investment capital.

Now meet Joyce Namusoke. She runs a successful business but wants to

apply for a loan so she can expand her enterprise.

Finally meet Antony Kirigwajjo, he has an idea for a new product line

and wants to get approval and funding from the firms Directors team to

develop the line.

Every Business- whether it’s a start-up company, an expansion of an

existing firm –a spin off from the parent company, or even a project within

an established organization-needs a business plan to navigate successfully

through its own unique competitive environment.

Preparing a business plan is time consuming process, as a well-

developed plan has numerous sections and comprehensive information. To

prepare a business plan for your own business or project, you will need to

think carefully about a number of key issues –such as who your customers

and competitors will be, how much money you will need to invest in the

business and what kind of payoff you have in mind.(to name just a few).

But all of this work is very worthwhile. Armed with a well-prepared

plan you stand a much better chance of obtaining the investment shillings

and other forms of support you will need to make your business succeed.

In summary; the purpose of the business plan preparation is to gather all

the information necessary to make a decision on whether or not to go into a

particular business or to expand an existing business.

A second purpose is to provide you with enough information to decide

how best to operate the business. Later in the strategy formulation phase, you

will decide how the business will be run (who will manage the business,

what prices will be charged, how much advertising will be used, etc). The

strategies that you decide upon in the second phase will, to a great extent, be

based upon the information that you gather and analyze it in this first phase.

The third purpose is to compile information which, although of little

concern to you, helps readers of your business plan better understand your

business. If, for instance, you intend to use your business plan to get a bank

loan, you may want to include a brief history of your business, a description

of your products and services, etc.

A business Plan Is Important Because

It guides the owner in running the business.

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It is a way of selling yourself and your business to possible partners.

It shows that the business owner is organized and knows his or her

business.

It provides information about the business and the market one is to

operate in.

A well-prepared business plan will increase your chances, of obtaining

financial assistance from financial institutions e.g. banks.

Contents of a Business Plan

1. Description of Business

This section of the Business Plan provides background and the

information on how your business was started and how it is presently doing

or, if a proposed business, how and when you plan to start it. The business

description delivers this content in a straightforward and informative

manner, but with an upbeat and inspiration tone. The purpose of the business

description is to objectively explain and justify your business idea in a

positive and enthusiastic manner.

What goes into the business descriptions?

Include Information about the Business, Such as

What the history of the concept or the business is (is it on the

drawing board, at the start-up stage, ready to expand?)

What markets the business will serve.

What kind of business it is (manufacture, retailer, service business).

What the product or service is.

Why people will use it (what problem will the product or service

solve for customers?)

What the financial status is.

You May Decide To Also Include the Following Information

Who will manage the business (be sure to emphasize the skills and

experience of the management team, as readers familiar with the

industry will be most interested in the quality of the people on the

team).

What the structure of the business is (partnership, corporation,

franchise).

Where the business will be located.

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Where will you locate your business?

The Location of your Business is a Very Important Decision. The Wrong

Location Could Jeopardize the Success of your Business. Points to

Consider are

Do you need to be located close to customers, or are you able to

service your clients remotely via the telephone or over the Internet?

Do you need to be located close to suppliers? I.e. consider the

delivery costs for raw materials and supplies.

What Features Must your Premises Have? i.e.

Consider size, street frontage, show rooms, parking, loading bays,

and special facilities.

Do you intend to lease or purchase your premises?

Do you plan to operate your business from home?

A variety of factors will influence your selection of location and

premises. Ensure you make a wise decision, keeping in mind the costs and

inconvenience of relocating.

Tip: Be enthusiastic in your business description; this is the section in

which you present the value of your concept-why you believe the business

will be a resounding process.

Tip: In drafting the business description, balance your enthusiasm for

the venture with a measured acknowledgement of risks and costs involved.

1.1 Introduction

This is your first and perhaps easiest task in writing a Business Plan. In

this element of your Business Plan you are to introduce your company to the

reader and explain the purpose of your business plan. It should be used to

briefly familiarize the reader with who you are, what the goals of your

business are, and when these goals will be accomplished. If you are

presenting your plan to a banker, you may state how much you intend to

borrow, and what you intend to do with the funds.

The presentation of your plan is almost as important as its content,

particularly if you are going to present it to a bank. Even if it will never be

seen by anyone other than yourself, you should make it as neat and orderly

as possible, both as an exercise in good planning in it, and in order to make

easier to use.

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1.2 Business Vision

The best vision statements for result areas describe outcomes that are

five to ten years away, although some look even further out.

In general, you should base your vision statements on the best possible

outcome. In fact, you might want to envision something even better than

what you consider to be the best possible outcome. Remember that the

purpose of the vision statement is to inspire, energize, motivate, and

stimulate your creativity, not to serve as a measuring stick for success; that is

the job of your objectives and goals.

The quality of your vision determines the creativity, quality and

originality of your ideas and solutions. A powerful vision statement should

stretch expectations and aspirations helping you jump out of your comfort

zone.

Remember that the purpose of the vision statement is not to serve as a

"real" target that you are going to measure against to determine if you have

succeeded or failed. You should use your goals and objectives to do that.

Instead, the purpose of the vision statement is to open your eyes to what is

possible.

Describe your vision statement in present tense as if you were reporting

what you actually see, hear, think and feel after your ideal outcome was

realized.

Your vision statement should describe how you will feel when the

outcome is realized. Including an emotional payoff in your vision statement

infuses it with passion and will make it even more compelling, inspiring, and

energizing.

Examples of Vision Statements

"To be a leading entity to provide training, knowledge and consulting

services all over the world in the fields of self-development and human

resources development for individuals and business societies."

"Victor Valley High School is dedicated to providing the highest quality

educational program with the cornerstones of value learning, self-worth

among students and staff, quality performance among students and staff, and

transition for students to a productive and responsible participation in society

at large."

1.3 Business Mission

A paragraph that describes the firm’s goals and competitive advantage

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20-50 words, Keep it simple, clear and brief. The best mission statements

tend to be 3 to 5 sentences long. The mission statement should touch upon

what you want the company to focus on.

A mission Statement Summarises

Company goals.

Company added value.

Company target markets.

A mission statement is unique to a company and it describes what a

company does.

Examples of Mission Statements

"To create a profitable restaurant with an exciting atmosphere, great

food, and excellent service where people truly enjoy coming to eat. To

provide a safe, healthy, and rewarding workplace for our employees."

"Growing from strength to strength, XYZ is dedicated to improving the

quality of life, making it better, safer and easier." -- Submitted by Shaniz

"To provide high quality products that combine performance with value

pricing, while establishing a successful relationship with our customers and

our suppliers”

1.4 Business Goals

From the beginning the business owner should work to create clearly

defined goals for his or her business plan. A goal is something that we want

to achieve. Goals ought to be

These goals begin at the top of the business and work their way down.

Some are longer than three years and others are shorter than one year.

Categorize the goals into long-term (More than 3 years), medium term

(between 1 to 3 years) and short time (less than one year). However,

categorization of the goals will also depend on the type of business.

Businesses are formed to achieve something. For a business to remain in

operation, it must have a goal. Goals are results to be achieved. Goals are

also called objectives or ends. You may need to gather more information

when setting them.

There are Questions You Need to Ask When Establishing Business

Goals

What do I have to do to get where I want to be in 2 (5) years?

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What are the necessary means for doing this?

Who could help me in that?

What obstacles will I possibly face, and how can I overcome them?

Where do we want to go in terms of products, customers, profits,

return on investment?

What changes do we have to make in each section of the business to

get us there?

It will also help you to think seriously about what you can do to reach

your objective of having a

Successful Business. Consider the Following Points That Relate to you

Individual problems which interfere with the way to success - they

should be reduced!

External obstacles that hinder your plans - they should be

overcome!

Find some small and practical things that you can do over the

coming days to help you to reach your goals!

Think about help you could get from other people (what, from

whom?).

Try to divide your bigger goals into several smaller objectives.

Establish an order and priorities:

What has to be done first to achieve the next goal?

What would come next, and so on?

When doing this you should think of a realistic time-frame, such as

the next six months. If you want, you may enlarge this period of

time.

All Objectives Should be Smart i.e. Specific, Measurable, Achievable,

Realistic, and Timed as Explained Below

Specific: Be precise about what you are going to achieve

Measurable: Quantify your objectives

Achievable: Are you attempting too much?

Realistic: Do you have the resource to make the objective happen (men,

money, Machines, materials, and minutes?)

Timed: State when you will achieve the objective (within a month? By

March 2012?)

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Example of Goals

Start the business worth UGX 1,000,0000/= by November 2008

Finish construction of the poultry house which can house 200 birds

by August 2008

Stock 200 birds (layers) by November 2008

Reduce production costs by 500,000 every year.

Importance of Goals in business

Goals focus the efforts of individuals in the business.

For Example

“You cannot hit a target you can’t see!”

“If you do not know where you are going, you will never know

when you get there.”

Goals help in planning. We plan to achieve something.

Goals encourage people to work

Goals assist in watching and checking performance of workers and

the entire business

Questions That You Need to Answer after Writing down Your Goals

Are the goals which you have put to your introduction clear and

unambiguous to you and to the outside reader?

Do you understand them clearly?

Will you be able to say when you have achieved them or are they

are vague and indeterminate?

Do you know by when you aim to achieve them?

1.5 Important Contents

For an Existing Business, the Following Information Should Be Spelt

Out

Name of Business

Legal name and trade name, if any.

Date and place of Registration or Incorporation, If any

Date actual operations began or planned to begin.

Brief History

Discuss the type of business, the major events in the past operations and

discuss the results, mentioning sales history when pertinent.

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Legal Form of Organization

The Entrepreneur Has to Make a Choice When It Comes to Deciding

the Type of Business Organization, Which Includes the Following

Sole proprietorship.

Partnership.

Private limited liability Company (by shares or guarantee).

Franchise.

a) Sole Proprietorship

By definition, a single proprietorship is a business owned and operated

by one person. The owner and the business are synonymous in the eyes of

the law. All the assets in the firm are owned by the proprietor, subject only

to the liabilities incurred in its establishment and operation. The proprietor is

solely responsible for its debts, incurs and losses, assumes all its risks,

provides all its capital, and provides its total management. The only

requirement for its establishment is that the owner obtains any licenses

required in the city, town or local council.

Advantages of Sole Proprietorship

i) Simplicity of the organization.

ii) Owner’s freedom to make decisions.

iii) Owner’s enjoyment of all the profits.

iv) Minimum legal restrictions.

v) Ease of discontinuance.

vi) Tax advantages.

Disadvantages of Sole Proprietorship

i) Owner’s possible lack of ability and experience.

ii) Limited opportunity for employees.

iii) Difficulty in raising capital.

iv) Limited life of the firm.

v) Unlimited liability of proprietor.

Typical traders include tradesmen such as plumbers, electricians,

television repair people etc. Nowadays lots of people are setting up their own

businesses by creating small web-based companies working from home.

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b) Partnership

A partnership is usually defined as an association of two or more

persons to carry on as co-owners of a business for profit. Partnerships are

based upon a partnership agreement. The partnership agreement should

always be reduced to writing, even though this is not a legal requirement. It

should cover all areas of possible disagreement among the partners. It should

define authority and the rights and duties of each partner, and the limits to

such authority. It should include an agreement on how profits and losses are

to be divided.

Advantages of the Partnership

i) Ease of the organization.

ii) Combined talents, judgment and skills.

iii) Larger capital available to the firm.

iv) Maximization of the personal interest in the firm.

v) Definite legal status of the firm.

vi) Tax advantages.

Disadvantages of the Partnership

i) Unlimited liability.

ii) Limited life.

iii) Divided authority.

iv) Danger of disagreement.

Partnerships are typically found in professional services such as

accountants, solicitors, doctors, dentists etc. where the partners can share

expertise and skills. They can also share the workload; organizing work rotas

to allow for time off and holidays. Partners also pool their capital.

c) Private Company

A private company has a minimum number of two (2) shareholders

required and it limits the number of its members to 50 (employees are not

part of this number). Companies are owned by shareholders that each

contributes a stock of money into a central pool. This pool of capital is then

used to provide a core sum of finance, which is then added to by borrowing

and other forms of finance. Directors run the company on behalf of

shareholders who receive a share of the profits as dividends. Examples

include MTN, Airtel, Rwenzori beverages (makes of mineral water) among

others.

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Advantages of a Private Company

i) Limited liability to shareholders.

ii) Perpetual life (If all the shareholders died the business would go on

as a legal entity).

iii) Ease of transferring ownership.

iv) Ease of expansion.

v) Applicability to all sizes of firms.

Disadvantages of a Private Company

i) Government regulations.

ii) Expense of organization.

iii) Pay corporate tax (this is higher).

1.6 Product Description

The product description is the detailed description of the product/service

that you intend to market. It offers a thorough and straightforward

description of the products or services the business will provide to

customers. For example, include product characteristics such as

functionality, design, styles, and colors.

The product/service description should be complete enough to with a

clear idea of your products/services, if the product is unusual or not easily

described, include a picture or a drawing which will highlight the offerings

special features and unique points of differentiation. If a range of products or

services are being offered, highlight the principal one or two and list the rest

of the range here and/or put the full product/service range in an appendix. As

much as possible, describe the product or service from the customer's

perspective.

The description should tell what makes your company's product or

service different or unique in the marketplace. More detail on this will be

provided in the competitor analysis section, but a brief highlighting of

product distinctions and key selling attributes this will help one to

understand the product or service better.

After describing the product or service, state what benefits the customer

will receive from purchasing the product or service (e.g., what problem is

being solved). This will most likely further explain the value proposition

statement defined earlier.

Under the product description stress your USP - be sure to emphasize

your USP - Unique Selling Proposition. Your USP is the proprietary

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information that sets your product or service apart from your competition. If

you are using your business plan to solicit funds, this is what your financiers

will want to see. If it is an internal document, your USP will be critical to

your sales and marketing strategies. Without a USP, your product or service

will appear drab and there will be no compelling reason for people to buy it.

What would some USPs be? For a food product, it could be a

proprietary recipe (like Nalongo’s steamed food in Katwe) or a special way

the food is served (like the Mongolian food).

Tips

Focus on your success factors. In other words, think about how you are

going to make money. Why will your products or services be successful in

the marketplace? There are many numbers of reasons you can use - it's a

well-organized business, we use state-of-the-art equipment, our location is

exceptional, the market is ready for our product, it’s a great product at a fair

price, etc.

If you are selling a product, you may want to include full specifications.

If available, include a quality photograph as well.

One of your challenges will be to keep the "unique" in your USP

Example of a Product Description

Pap Café provides its customers, whether at its facility on Parliament

Avenue or one of the Mobile Cafes, the ability to custom order a coffee

beverage that will be blended to their exact specifications. Each of Pap’s

Baristas (a person who has acquired some level of expertise in the

preparation of espresso-based coffee drinks) will be trained in the fine art of

brewing, blending, and serving the highest quality hot and cold beverages,

with exceptional attention to detail.

Besides coffees, Pap Café will offer teas, domestic and Italian sodas,

frozen coffee beverages, seasonal specialty drinks, cakes, pastries and other

baked goods. Through the website and certain locations, Pap Café will

market premium items such as coffee mugs, T-shirts and sweatshirts, ball

caps, and more.

Format/Contents of A Business Plan

Executive Summary

Purpose of the Plan.

Finance Required for Starting Up the Business.

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Brief Description of the Business.

Nature of Business.

Background of the Business.

The Company and Industry Overview

Introduction.

Vision.

Mission Statement.

Purpose of the Business.

Core Values.

Corporate Goals.

Enterprise Objectives.

Short Term Objectives.

Medium Term Objectives.

Long Term Objectives.

Product or Service

Product Feature

Use of Service or Product.

Product Benefits.

Uniqueness of Product or Service.

Development Stage.

Skills and Technologies Required In the Business.

Marketing Plan

Marketing Strategy.

Product.

Promotion.

Pricing Strategy.

Place/Distribution

Market and Industry Analysis.

Situation Analysis.

SWOT Analysis.

PEST Analysis.

Competitive Analysis.

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Competitors Strengths and Weaknesses.

Market Size and Growth

Market Share Estimate

Special Market Characteristics

Operational Plan

The Operations Process.

Building and Equipment.

Location of the Business.

Facilities.

Management Plan

Human Resource Strategy.

Recruitment.

Selection.

Management Performance.

Reward and Compensation.

Owners/Directors/Managers.

Skills, Experience and Qualification.

Amount Expected to Be Paid to Each Worker.

Training Policy

Financial Plan

Finance Required to Start-up the Business.

Financial Planning.

Financing.

Projected Sources of Expenses.

Income Statement Projections.

Balance Sheet Projections.

Ratio Analysis.

Cash Flow Projections.

Monitoring Standards.

Control Measures.

Appendices

Charts

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Chapter - 9

Entrepreneurship Development

Entrepreneurship Development is a deliberate Endeavour in human resource

development, which is usually undertaken by the state or a community with

the major aims of: Developing competence among participants to start,

manager and develop enterprises and developing greater understanding of

entrepreneurship, as a means of providing an enabling environment for

entrepreneurship, as a means of providing an enabling environment for

entrepreneurs to thrive.

The Need for Entrepreneurship Development

Over the past few decades, entrepreneurship, has gained amazing

popularity not only in Uganda but also in the wider world. This is as a result

of the significant changes in the workplace and the social and political

environments that are funning the growth of entrepreneurship worldwide.

These factors include:

Technological advancements that have compressed technological

processes and enabled many things to be made/and services to be delivered

at a fraction of the original cost.

Entrepreneurial Education: Since the 1980s, the countries that have

invested in teaching entrepreneurship have harvested a rich crop of high

caliber entrepreneurs.

Downsizing – as big corporation reengineer their operations and

retrench unwanted staff, they have ended up releasing a number of qualified

and well-connected individual who have joined the entrepreneurial class.

Downsizing has also removed the myth of lifelong employment and

awakened people to the promise of entrepreneurship “Sometimes as a

fallback position. Downsizing has also made corporations to outsource non

core activities providing opportunities for entrepreneurs.

More sophisticated customers demanding higher quality and more

personalized goods and services have opened up interesting and profitable

for entrepreneurs to tap.

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Easier access to information, through vast communication networks like

the ‘worldwide web’, have enabled entrepreneurs to access a large number of

potential suppliers and customers quickly and at minimal cost.

Liberalization and globalization has enabled small entrepreneur firms to

access international markets without the threat of protectionism and other

trade barriers.

A shift to shift to service sector: As economies shift to the service sector

that requires personalized attention, smaller companies are able to create

profitable niches to compete with larger established firms.

Threats of Entrepreneurship/Barriers

Entrepreneurship, as a career, also possess many serious challenges,

which anyone hoping to take up a career in entrepreneurship should be aware

of in order to plan for them. The challenges include:

Uncertainty of Income: In most cases the initial stages of the

entrepreneurial career are filled with uncertainty, and many entrepreneurs

will not have enough money even for their basic survival. There is no regular

income, and many entrepreneurs are forced to draw from their savings. This

is the most trying stage of any entrepreneur.

Risk of Losing the Entire Investment: Business failure is a reality that

threatens entrepreneurs at all level, but most especially the new enterprises.

Business failure will result not only in the loss of a job, but also the entire

investment and sometimes the entire livelihood. This threat becomes even

greater for entrepreneurs who mortgage all their savings and assets to

finance their enterprises.

Long Hours of Hard and Challenging Work: Without adequate

support structures and resources, entrepreneurs have no option but to engage

their own mental and physical energies to move their investments especially

during the early stages. Hard work and long hours is therefore a reality of

many an entrepreneurship career.

High Levels of Stress: The pressure of hard-long hours of work and the

uncertainties associated with entrepreneurship result in highly stressful life

styles for entrepreneurs. Most entrepreneurs put significant investments in

their enterprises, have no steady incomes, have mortgaged everything to

finance their businesses, and the line between their success and their failure

is every thin; causing enormous anxiety and stresses to the entrepreneur.

High Levels of Responsibility: Entrepreneurship brings the thrills of

being the boss, but also the responsibility for decisions that not only affect

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the entrepreneurs and their families, but also the livelihood of employees,

suppliers and other stakeholders who somehow depend on the firm for their

own survival.

The process of Entrepreneurship Development

Entrepreneurship Development presupposes that although certain

characteristics are inborn, the bulk of entrepreneurial characteristics can be

developed through:

Acquired Factors: Individual personal effort through formal education,

work experiences, acquired technical skills and exposure.

Societal Influences: (or sociological factors) including imitating role

models, peer influence, cultural and religious beliefs and norms.

The Entrepreneurial Process

The process of starting a new venture is embodied in the entrepreneurial

process, which involves more than just problem solving in a typical

management position. An entrepreneur must find, evaluate, and develop an

opportunity by overcoming the forces that resist the creation of something

new. The process has four distinct phases: (1) identification and evaluation

of the opportunity, (2) development of the business plan, (3) determination

of the required resources, and (4) management of the resulting enterprise.

Although these phases proceed progressively, no one stage is dealt with in

isolation or is totally completed before work on other phases occurs.

For example, to successfully identify and evaluate an opportunity (phase

1), an entrepreneur must have in mind the type of business desired (phase 4).

Identify and Evaluate the Opportunity

Opportunity identification and evaluation is a very difficult task. Most

good business opportunities do not suddenly appear, but rather result from an

entrepreneur’s alertness to possibilities, or in some case, the establishment of

mechanisms that identify potential opportunities. For example, one

entrepreneur asks at every cocktail party whether anyone is using a product

that does not adequately fulfill its intended purpose. This person is

constantly looking for a need and an opportunity to create a better product.

Another entrepreneur always monitors the play habits and toys of her nieces

and nephews. This is her way of looking for any unique toy product niche

for a new venture.

Although most entrepreneurs do not have formal mechanisms or

identifying business opportunities, some sources are often fruitful:

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consumers and business associates, members of the distribution system and

technical people. Often, consumers are the best source of ideas for a new

venture. How many times have you heard someone comment, “If only there

was a product? That would…” This comment can result in the creation of

new business. One entrepreneur’s evaluation of why so many business

executives were complaining about the lack of good technical writing and

word-processing services resulted in the creation of her own business

venture to fill this need. Her technical writing service grew to 10 employees

in two years.

Due to their close contact with the end user, channel members in the

distribution system also see product needs. One entrepreneur started a

college bookstore after haring all the students complain about the high cost

of books and the lack of service provided by the only bookstore on campus.

Many other entrepreneurs have identified business opportunities through a

discussion with a retailer, wholesaler, or manufacturer’s representative.

Finally, technically oriented individuals often conceptualize business

opportunities when working on other projects. One entrepreneur’s business

resulted from seeing the application of a plastic resin compound in

developing and manufacturing a new type of pallet while developing the

resin application in another totally unrelated area—casket moldings.

Whether the opportunity is identified by using input from consumers,

business associates, channel members, or technical people, each opportunity

must be carefully screened and evaluated. This evaluation of the opportunity

is perhaps the most critical element of the entrepreneurial process, as it

allows the entrepreneur to assess whether the specific product or service has

the returns needed compared to the resources required. This evaluation

process involves looking at the length of the opportunity, its real and

perceived value, its risks and returns, its fit with the personal skills and goals

of the entrepreneur, and its uniqueness or differential advantage in its

competitive environment.

The market size and the length of the window of opportunity are the

primary basis for determining the risks and rewards. These risks reflect the

market, competition, technology, and amount of capital involved. The

amount of capital needed provides the basis for the return and rewards. The

methodology for evaluating risks and rewards frequently indicates that an

opportunity offers neither a financial nor a personal reward commensurate

with the risks involved. One company that delivered bark mulch to

residential and commercial users for decoration around the base of trees and

shrubs added loam and shells to its product line. These products were sold to

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the same customer base using the same distribution (delivery) system.

Follow-on products are important for a company expanding or

diversifying in a particular channel. A distribution channel member such as

Kmart, Service Merchandise, or Target prefers to do business with multi-

product, rather than single-product, firms.

Finally, the opportunity must fit the personal skills and goals of the

entrepreneur. It is particularly important that the entrepreneur be able to put

forth the necessary time and effort required to make the venture succeed.

Although many entrepreneurs feel that the desire can be developed along the

venture, typically it does not materialize. An entrepreneur must believe in

the opportunity so much that he or she will make the necessary sacrifices to

develop the opportunity and manage the resulting organization.

Opportunity analysis, or what is frequently called an opportunity

assessment plan, is one method for evaluating an opportunity. It is not a

business plan. Compared to a business plan, it should be shorter; focus on

the opportunity, not the entire venture; and provide the basis for making the

decision of whether or not to act on the opportunity.

An opportunity assessment plan includes the following: a description of

the product or service, an assessment of the opportunity, an assessment of

the entrepreneur and the team, specifications of all the activities and

resources needed to translate the opportunity into a viable business venture

and the source of capital to finance the initial venture as well as its growth.

The assessment of the opportunity requires answering the following

questions:

What market need does it fill?

What personal observations have you experienced or recorded with

regard to that market need?

What social condition underlies this market need?

What market research data can be marshaled to describe this market

need?

What patents might be available to fulfill this need?

What competition exists in this market?

How would you describe the behavior of this competition?

What does the international market look like?

What does the international competition look like?

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Where is the money to be made in this activity?

Developing a Business Plan

A good business plan must be developed in order to exploit the defined

opportunity. This is a very time-consuming phase of the entrepreneurial

process. An entrepreneur usually has not prepared a business plan before and

does not have the resources available to do a good job. A good business plan

is essential to developing the opportunity and determining the resources

required, obtaining those resources, and successfully managing the resulting

venture.

Determine the Resources Required

The resources needed for addressing the opportunity must also be

determined. This process starts with an appraisal of the entrepreneur’s

present resources. Any resources that are in critical need to be differentiated

from those that are just helpful. Care must be taken not to underestimate the

amount of variety of resources needed. The downside risks associated with

insufficient or inappropriate resources should also be assessed.

Acquiring the needed resources, in a timely manner while giving up as

little control as possible is the next step in the entrepreneurial process. An

entrepreneur should strive to maintain as large an ownership position as

possible, particularly in the start-up stage. As the business develops, more

funds will probably be needed to finance the growth of the venture, requiring

more ownership to be relinquished. Alternative suppliers of these resources,

along with their needs and desires need to be identified. By understanding

resource supplier needs, the entrepreneur can structure a deal that enables the

recourses to be acquired at the lowest possible cost and the least loss of

control.

Manage the Enterprise

After resources are acquired, the entrepreneur must use them to

implement the business plan.

The operational problems of the growing enterprise must also be

examined. This involves implementing a management style and structure, as

well as determining the key variables for success. A control system must be

established, so that any problem areas can be quickly identified and resolved.

Some entrepreneurs have difficulty managing and growing the venture they

created.