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7/30/2019 Enterpreneurship Hndnew http://slidepdf.com/reader/full/enterpreneurship-hndnew 1/113  CHAPTER ONE  INTRODUCTION The ultimate measure of a man Is not where he stands In moments of comfort and convenience But where he stands At times of challenge and controversy. - Martin Luther King.  The words entrepreneur, intrapreneur and entrepreneurship have acquired special significance in the context of economic growth in a rapidly changing socio-economic and socio-cultural climates, particularly in industry, both in developed and developing countries. Entrepreneurial development is a complex phenomenon. Productive activity undertaken by him and constant endeavor to sustain and improve it are the outward expression of this process of development of his personality. WHO IS AN ENTREPRENEUR ? An entrepreneur is a person with a dream, originality and daring, who acts as the  boss, who decides as to how the commercial organization shall run, who co- ordinates all activities or other factors of production, who anticipates the future trend of demand and prices of products. An entrepreneur is one of the important segments of economic growth. Basically he is a person responsible for setting up a business or an enterprise. Infact, he is one who has the initiative, skill for innovation and who looks for high achievements. He is a catalytic agent of change and works for the good of people.

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The ultimate measure of a manIs not where he stands

In moments of comfort and convenience

But where he stands

At times of challenge and controversy.

- Martin Luther King.

 The words entrepreneur, intrapreneur and entrepreneurship have

acquired special significance in the context of economic growth in

a rapidly changing socio-economic and socio-cultural climates,

particularly in industry, both in developed and developing

countries. Entrepreneurial development is a complex

phenomenon. Productive activity undertaken by him and

constant endeavor to sustain and improve it are the outward

expression of this process of development of his personality.


An entrepreneur is a person with a dream, originality and daring, who acts as the

 boss, who decides as to how the commercial organization shall run, who co-

ordinates all activities or other factors of production, who anticipates the future

trend of demand and prices of products.

An entrepreneur is one of the important segments of economic growth.

Basically he is a person responsible for setting up a business or an enterprise.

Infact, he is one who has the initiative, skill for innovation and who looks for high

achievements. He is a catalytic agent of change and works for the good of people.

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He puts up new green-field projects that create wealth, open up many employment

opportunities and leads to the growth of other sectors.

The entrepreneur displays courage to take risk of putting his money into an idea,

courage to face the competition and courage to take a leap into unknown futureand create new enterprises/ business. This creative process is the life blood of the

strong enterprise that leads to the growth and contributes to the national


The entrepreneur will always work towards the creation and enhancement of 

entrepreneurial society. The best entrepreneur in any developing country is not the

one who uses much capital but an individual who knows how to organize the

employment and training of his employees.

We can define entrepreneur as one who innovates, raises money, assembles inputs,

choose managers and sets the organization going with his ability to identify them.


Entrepreneurship is an elusive concept.

“Entrepreneurship is based on purposeful and systematic innovation. It included

not only the independent businessman but also company directors and managers

who actually carry out innovative functions.”


In the above definition, entrepreneurship refers to the functions performed by an

entrepreneur in establishing an enterprise. Just as management is regarded as what

managers do, entrepreneurship may be regarded as what entrepreneurs do. In other 

words, entrepreneurship is the act of being an entrepreneur.

Entrepreneurship is a process involving various actions to be undertaken to

establish an enterprise. It is thus, process of giving birth to a new enterprise.

Entrepreneurship is composite skill, the resultant of a mix of many qualities and

traits- these include tangible factors as imagination, readiness to take risks, ability

to bring together and put to use other factors of production, capital, labour, land, as

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also tangible factors such as the ability to mobilize scientific and technological


A practical approach is necessary to implement and mange a project by securing

the required licenses, approvals and finance from governmental and financialagencies. The personal incentive is to make profits from the successful

management of the project. A sense of cost consciousness is even more necessary

for the longterm success of the enterprise. However, both are different sides of the

same coin.

Entrepreneurship lies more in the ability to minimize the use of resources and put

them to maximum advantage. Without any awareness of quality and desire for 

excellence, consumer acceptance cannot be achieved and sustained. Above all,

entrepreneurship today is the product of teamwork and the ability to create, build

and work as a team. The entrepreneur is the maestro of the business orchestra,

wielding his baton to which the band is played.

The basic two elements involved in entrepreneurship are as follows;-


Innovation, i.e. doing something new or something different is a necessary

condition to be called a person as an entrepreneur. The entrepreneurs are

constantly on the look out to do something different and unique to meet the

requirements of the customers. They may or may not be inventors of new products

or new methods f production but they possess the ability to foresee the possibility

of making use of the inventions for their enterprises. In order to satisfy the

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changing preference of customers nowadays many enterprises have adopted the

technique of innovation.

RISK- BEARINGEntrepreneurship is the propensity of mind to take calculated risks with confidence

to achieve a predetermined business or Industrial objective. The capacity to take

risk independently and individually with a view to making profits and seizing the

opportunity to make more earnings in the market-oriented economy is the

dominant characteristic of modern entrepreneurship.

In fact he needs to be a risk taker, not risk avoider. His risk bearing ability enables

him even if he fails in one succeed. The Japanese proverb says “Fall seven times,

stand up eight”. Though the term entrepreneur is often used interchangeably with

entrepreneurship, yet they are conceptually different.

The relationship between the two is just like the two sides of the same coin.

Thus, entrepreneurship is concerned with the performance and co-ordination of the

entrepreneurial functions. This also means that entrepreneur precedes



Entrepreneurship promotes small business in the society. Government has

accepted the fact that small firms have a crucial role to play in the economic

development of the country. Small businesses are an essential part of our future

economic prosperity because of the following reasons-


Entrepreneurial development is looked at as a vehicle for employment generation

through promotion of small business. India, being far more developed and forward

looking country than some of the third world countries, can provide lead to

entrepreneurial development activities.

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However, India can benefit from the well- documented success experiences of 

developed countries like USA, Japan and UK in the field of employment

generation and small business promotion.

Steady growth in consumer spending, expanding retail sales, a strong housingmarket, continued expansion of the service sector, low rates of inflation and of 

labour cost increases and failing interest rates contributed to a healthy

environment for small business.

In India, the government policies, political and economic environment greatly

encourage the establishment of new and small enterprises. Self- employment and

small scale industry schemes have been further liberalized during the last decade.

The employment in the small-sector increased from 9.00 million people in 1984-

85 to 13.9 million people in 1994-95. This indicates an increase of 5.4% p.a in

employment in this sector.


Great dynamism is one of the qualities of the small and medium enterprises.

This quality of dynamism originates in the inherent nature of the small business.

The structure of small and medium enterprises is less complex than that of large

enterprises and therefore facilitates quicker and smoother communication and

decision- making. This allows for the greater flexibility and mobility of small

 business management. Also, small enterprises, more often make it possible for 

owners, who have a stronger entrepreneurial spirit than employed mangers, to

undertake risk and challenges.


Small business promotion needs relatively low investment and

therefore can be easily undertaken in rural and semi-urban areas.

 This in turn creates additional employment in these areas and

prevents migration of people from rural to urban areas. Since

majority of the people are living in the rural areas, therefore,

more of our development efforts should be directed towards this

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sector. Small enterprises use local resources and are best suited

to rural and underdeveloped sector. This in turn will also lead to

dispersal of industries, reduction in concentration of economic

power and balanced regional development.INNOVATIONS IN ENTERPRISES:

Business enterprises need to be innovative for survival and better performance. It

is believed that smaller firms have a relatively higher necessity and capability to

innovate. The smaller firms do not face th

e constraints imposed by large investment in existing technology. Thus they are

 both free and compelled to innovate.


The emergence of entrepreneurs in a society depends upon closely interlinked

social, religious, cultural, psychological, and political and economic factors.


Individuals who for some reason, initiate, establish maintain and expand new

enterprises generate entrepreneurship in society. It is observed that entrepreneurs

grow in the tradition of their families and society and accept certain values and

norms from these sources.


Religious, social and cultural factors also influence the individual taking up an

entrepreneurial career, in some countries there is religious and cultural belief that

high profit is unethical. This type of belief inhibits growth of entrepreneurship.


The psychological factors like high need for achievement, determination of unique

accomplishment, self confidence, creativity, vision, leadership etc, promote

entrepreneurship among individuals. On the other hand psychological factors like

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security, conformity and compliance, need for affiliation etc restrict promotion of 



The political and also the political stability of country influence the growth of entrepreneurship. The political system, which promotes free market, individual

freedom and private enterprise, will promote entrepreneurship.


The economic policies of the government and other financial institutions and the

opportunities available in a society as a result of such policies play a crucial role in

exerting direct influence on entrepreneurship.

In view of the haphazard development of economic zones, Government is

encouraging the entrepreneurs to establish their business in backward and tribal

areas. This is primarily to arrest the migration of people from the villages to cities

and to create employment opportunities locally. Government is promoting such

development by giving incentives like tax holidays (both sales and income),

subsidized power tariff, raw materials, transportation cost etc.


 The skills required by entrepreneurs can be classified in to three

main areas:

1. Technical skills involve such things as writing, listening, oral

presentations, coaching, and technical know-how.

2. Business management skills include those areas involved in

starting, developing and managing any enterprise.

3. Personal entrepreneurial skills differentiate an entrepreneur

from a manager and include inner control (discipline), risk taking,

innovativeness, persistence, visionary leadership, and being

change oriented.

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The qualities that contribute to the success of an entrepreneur are as follows: -

1. Risk Taking: - Entrepreneurs are moderate risk takers. They enjoy he

excitement of a challenge, but they do not gamble. Entrepreneurs avoid low- risk situations because there is a lack of challenge. They avoid high risk situations

 because they want to succeed. They like achievable challenges. They do not tend

to like situations where the outcome of a quest depends upon a chance and not on

their efforts. They like to influence the outcome of their quest by putting in more

efforts and then experiencing a sense of accomplishment. A risk situation occurs

when an entrepreneur is required to make a choice between two or more

alternatives whose potential outcomes are not known and must be evaluated in

advance, with limited information. A risk situation involves potential gain and

 potential loss. As the size of the business expands the problems and opportunities

 become more numerous and complex. Business growth and development require

an entrepreneur not to be afraid of taking decisions and certain risks. Most people

are afraid to take risks because they want to be safe and avoid failure. An

entrepreneur always takes a calculated risk and is not afraid of failure.

2. Self- Confidence: - A man with self – confidence has clear thoughts and well-

defined goals to achieve in his life. An entrepreneur gets into business or industry

with a high level of self- confidence. He is able to evaluate his competencies and

capabilities in a realistic manner. He can set realistic and challenging goals. He is

confident of achieving these goals. He possesses a sense of effectiveness, which

ultimately contributes to success of his venture. He puts forward his case

confidently and gets needed help from concerned agencies/ authorities.

3. Optimist: - An entrepreneur is able to visualize the hidden opportunities in the

environment and translate them into business realities. An entrepreneur exhibits a

 positive and optimistic attitude towards such opportunities. The entrepreneur 

approaches his task with the hope of success and not with a fear of failure. In the

 process of accomplishing his task he may also fail but the failure experience does

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not change his thinking. He is always an optimist in his outlook. The positive

outlook develops a drive in the entrepreneur to attempt new things and innovate.

4. Need for achievement: - The need to excel known as achievement is a critical

factor in the personality of an entrepreneur. People with high need for achievement have desire for success in competition with others or with a self 

imposed standard of excellence. They try to accomplish something new and try to

innovate themselves in long term goals. They try to accomplish challenging tasks.

They know their own strengths and weaknesses, the facilitating factors and

constraints in the environment and the resources needed to accomplish their tasks.

If the objectives are accomplished they feel elated.

5. Need for independence: - The need for independence is the prime characteristic

that has driven the entrepreneurs to start their own business. These entrepreneurs

do not like to be controlled by others. They do not wait for direction from others

and choose their own course of action. They set their own challenging goals and

 put efforts to achieve this goal. The independence provides opportunity for trying

out new ideas and helps them achieve their goals.

6. Creativity: - Entrepreneurs are highly creative people. They always try to

develop new products, processes or markets. They are innovative, flexible and are

willing to adopt changes. They are not satisfied with conventional and routine way

of doing things. They involve themselves in finding new ways of doing the things

for the better.

7. Imaginative: - Successful entrepreneurs possess a high degree of imagination

and foresightedness. Entrepreneurs have a great vision. Knowing the present and

the past the entrepreneur is able to predict the future events the business more

accurately than others. It is because of their visionary nature and power of 

imagination that helps them in anticipating problems and evolving actions

strategies for such problems.

8. Administrative ability: - A successful entrepreneur is always a good

administrator. He knows the art of getting things done by other people without

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hurting their feelings of self- respect. He has strong motivation towards the

achievement of a task and puts in necessary efforts in getting things done by


9. Communication ability: - Communication ability is the ability to communicateeffectively. Good communications also means that both the sender and the

receiver understand each other and are being understood. An entrepreneur who can

effectively communicate with customers, employees, suppliers and bankers will

always succeed in their business.

10. Clear objectives: - An entrepreneur has clear objectives as to the exact nature

of the business, the nature of the goods to be produced and the subsidiary activities

to be undertaken. A successful entrepreneur has the objective to establish the

 product to make profit or to render social service.

11. Business Secrecy: - An entrepreneur who is successful always guards his

 business secrets. Leakage of business secrets to trade competitors is a serious

matter; therefore an entrepreneur should carefully guard it. An entrepreneur must

 be able to make a proper selection of his assistant since most of the time it is the

assistant who leaks the trade secret.

12. Emotional stability: - The most important personality factors contributing to

the success of an entrepreneur are emotional stability, personal relations,

consideration and tactfulness. An entrepreneur must maintain good relations with

the customers if he wishes to enjoy their continued patronage. He must also

maintain good relation with his employees, whom he shall motivate to perform

their jobs at a high level of efficiency. An entrepreneur who maintains good

human relations with customers, employees, suppliers and the community has a

 better chance to succeed in his/ her business.

13. Open-mindedness: - Open- mindedness means a free and frank approach in

accepting one’s own errors and change for the better. An entrepreneur must be

willing to learn from his past experience, mistakes and moulds himself for better.

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14. Technical knowledge: - Technical knowledge implies knowledge about the

 product, process or technology used in manufacturing. An entrepreneur who has

reasonable level of technical knowledge will always be successful. Technical

knowledge is easy to acquire if the entrepreneur tries hard to acquire it.15. Patience: - Patience means ability to wait. Patience also means doing the work 

and waiting for the result. A certain amount of patience is necessary in any type of 

vocation. An entrepreneur should not wait for actions but can certainly wait for 

result for his efforts.

16. Hard working and energetic: - Ability and willingness to work hard is an

important quality of an entrepreneur. A person having physical and mental stamina

to cope with the hard work and human relation is fit to become a successful

entrepreneur. By carrying out well- planned and systematic work, success is

always the end result.

17. Good organizer: - Entrepreneurs are good organizers of resources like men,

machines, materials and money needed to start and run the business smoothly.

They can convince the employees, investors, customers and co- ordinate the

activities of individuals and groups in the accomplishment of business objectives.

An entrepreneur works like a coordinating force among the resources, mould and

manages them effectively.


An entrepreneur is said to perform the following functions:

1. Assumption of risk: - Risk bearing or uncertainty bearing is the most important

function of an entrepreneur which he tries to reduce by his initiative, skill and

good judgment.

2. Business decisions: - The entrepreneur has to decide

a. To enter the industry this offers him the best prospects

 b. To produce goods that he thinks will pay him the most

c. To employ those methods of production which seem to him the most profitable.

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d. To effect suitable changes in the size of the business , its locationthat are

needed for the development of his business.

3. Managerial Functions: - The entrepreneur performs the managerial functions

such asa. Formulating production plans

 b. Overseeing finances

c. Dealing with the purchases of raw materials

d. Providing production facilities

e. Organizing sales

In large establishments these management functions are delegated to professional

managers an entrepreneur performs many useful functions such as

Undertakes a venture

Assumes risk and

Earns profits

Identifies opportunities to start business either as a manufacturer or a


The entrepreneurship exists in every field of economic endeavor.

Entrepreneurship has also been developed in the trading sector. A manufacturing

entrepreneur demonstrates his entrepreneurial talents by bringing out new products

while a trading entrepreneur performs his entrepreneurial functions in creating

demand for the business he deals.

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The business environment keeps changing. Government policies and regulations,economic conditions, social conditions, technological factors, competitive

situation etc. Undergo changes. The environmental changes may open up new

opportunities or pose new threats.

Constant monitoring of the environment is therefore, necessary to identify the

emerging opportunities and threats. In order to understand to what extent a firm

will be able to exploit the opportunities and fight the threats, it is necessary to

evaluate the strengths and weaknesses of the firm. Thus, an analysis of the

strengths and weaknesses of the firm and the opportunities and threats in the

environment that is the ‘SWOT’ analysis is essential for framing the business


S- Strengths.

W- Weaknesses.

O- Opportunities.

T- Threats.


Strengths and weakness analysis is a real test for management. The strength and

weaknesses would decide whether a company should continue in a business, take

up new lines of business, as well as the strategy to be employed in doing so.

For e.g. in case of some products, small scale units have definite advantage over 

large- scale units in costs. If a large scale unit were not able to compete with the

small- scale units, in such a case, it would be wise on the part of the large unit to

give up the business of such products.

The strengths and weakness analysis is done by functional audit of different areas

like marketing, finance, design/ engineering, operations etc. The audit is to be

done on the basis of the quantity and quality of skills and the infrastructures

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support 3 available facilities in terms of physical facilities, resource available,

speed and flexibility in arranging them.


Monitoring of the environmental changes is necessary to reshape the company’s business and products, if needed, to ensure survival and growth.

Certain changes in the environment may bring about new opportunities for some

companies while they pose new threats for some others.

For e.g. the new industrial policy of Nigeria has brought about enormous new

 business opportunities but at the same time it poses new threats or challenges to

many existing firms because of the increase in competition. The existing firms

should therefore, frame strategies to effectively fight the increasing competition.

The primary reason of the environmental analysis is to identify the threats as well

as the opportunities developing in the business environment. The search for 

opportunities may start on account of increased aspiration for performance of the

organization. While ,the analysis of threat is to examine the development in the

environment that may affect the current strategies ineffective and irrelevant and

thus, affect the survival of the organization. The threats or opportunities for any

 business developed because the needs of the customer keep on changing. For e.g. a

customer who was happy with the product now wants another because of change

in his needs. In view of the above, many companies have to reframe their 

objectives and strategies in order to survive in the changing business environment.


Entrepreneurship environment refers to the various facets within which

enterprises- big, medium and small and others have to operate. The environment

therefore, influences the enterprise. By and large, an environment created by

 political, social, economic, national, legal forces etc influences entrepreneurship.


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The business has to produce a product that people want to buy. They have to

decide which ‘market segment’ they are aiming at – age, income, geographical

location etc. They then have to differentiate their product so that it is slightly

different from what is on offer at present so that people can be persuaded to ‘give

them a try’.

In other words product is a bundle of satisfaction that a costumer buys. It represent

solution to a customer’s problem .It is in this context that marketing definition of a

 product is more than just what the manufacturer understand it.


To a manufacturer, price represent quantity of money received by the firm or seller 

.To customer, it represent sacrifice and hence his perception of the value of 


The price must be high enough to cover costs and make a profit but low enough to

attract customers. There are a number of possible pricing strategies.

The most commonly used are:

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• PENETRATION PRICING – charging a low price, possibly not quite covering

costs, to gain a position in the market. This is quite popular with new businesses

trying to get a ‘toehold’.

• CREAMING – the opposite to penetration pricing, this involves charging a

deliberately high price to persuade people that the product is of high quality.

Luxury car makers often use this strategy

• COST PLUS PRICING – this is the most common form of pricing.

Costs are totaled and a margin is added on for profit to make the total price.


The business must have a location that it can afford, and that is convenient and

suitable for customers and any supplier.


Promotion means moving from one end to another. Promotion means all those

tools that a marketer uses to take his product from the factory to the customer and

hence involves advertising, sales promotion, personal selling, public relations

 publicity and merchandising.

Customers have to be made aware of the product. The two main considerations are

target market and cost. A new business will not be able to afford to advertise on

national television, for instance and would not wish to because its market will be

local to start with. Leaflets, billboards, advertisements in local newspapers,

Yellow Pages and ‘word of mouth’ would be more appropriate.


External Environment:

Also known as Macro Environment, are the “uncontrollable factors” which a

company must monitor and respond to. They consist of economic, political,

technological, social-cultural and legal.

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Economic Environment:

It consists of factors that affect consumer purchasing power and spending patterns.

Markets require purchasing power as well as people. Economic conditions,

economic policies and economic systems are the important external factors thatconstitute the economic environment of a business.

For example, the economic conditions of a country, the nature of the economy, the

stage of development of the economy, economic resources, the level of income,

the distribution of income and assets etc. are among very important determinants

of business strategies.

Technological Environment:

Technology is the most dramatic force shaping people’s lives. Factors such as

 –technological development, stages of development, change and rate of change in

technology and research and development affect marketing strategies. Also the

cost of technology acquisition, impact of technology on human beings and the

environmental effects of technology affect marketing decisions.

Political environment:

Political environment is composed of laws, government agencies and pressure

groups that influence and limit various organizations and individuals in a society.

The main political trends are:

(a) Substantial amount of legislation regulating business.

(b) Growth of public interest groups and

(c) Changing government agency enforcement.

Socio-cultural environment:

The basic beliefs, values and norms shape the society and its people. Even when

 people of different cultures use the same basic product, the mode of consumption,

condition of use, purpose of use or the perception of the product attributes may

vary so much so that the product attributes, method of promoting the product may

have to be varied to suit the characteristics of different markets. Even the value

and beliefs associated with colour vary significantly between different cultures.

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Legal environment:

Government all over the world are an important aspects of their economy and even

in the so called free economy, viz.US, government intervention in industry is areality. The extent of intervention varies, while in US this is relatively low; in

developing countries this is quite high. Nigeria , for example, has had a history of 

a controlled economy with the government deciding the rules of the game ,be it

the extent of foreign private investment ,or goods to be exported or imported or 

even whether a unit can be allowed to produce a product Regulation in

advertising ,like ban on advertising a specific product like cigarettes, liquor and

distribution of goods as in the case of kerosene and earlier in case of food product

too, is the reality of Nigeria scenario.


This integrated approach which is the key to the development of backward areas

implies a very careful environment analysis or research study of the target groups

of beneficiaries, their activities and differential needs and the practical modes of 

operation by which their activities can be linked with the covering enterprise.

Unless these studies are made meticulously, the entire planning will only give

unproductive results. Most of the development schemes fail to benefit the target

clientele because elaborate linkages are not identified and built up. An imaginative

study should

1. Identify the beneficiaries or target groups.

2. Analyze the environment for immediate feasible enterprises in an integrated


3. Delineate the linkages and institutional arrangements.

4. Recommend appropriate organizational structures to provide necessary

 promotional support.

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Unfortunately, in most of the studies on backward areas, there is a tendency to

make generalizations and ignore the specific details of feasible projects. As a

result, immediate perception of concrete opportunities by interested entrepreneurs

is left in confusion. Sometime! “Area studies” make a general statement of demand and resources and recommend certain enterprises, which are not

immediately feasible due to important reasons unaccounted for in such studies. It

is also not seriously contemplated whether the recommended enterprises are

feasible within the capabilities and investment capacity of the target- group.

In short, most of the studies fail to disconcern the real issues of growth in the

target area and fail to identify the concrete and specific needs of these endowments

like resource skill etc. to flourish. Enunciation of general objectives, generic

 beneficiaries tend to blur the distinct contours of one homogeneous group from the

other. Also, the extension of certain standard facilities or services does not serve

their actual needs. All this possibly happens because in such basic studies we fail

to identify clearly the target groups and their specific problems, and make

theoretical studies on resources and demand in an impersonal manner, as a result

of which even the schemes devised on the basis of such studies tend to become too

impersonal and rigid.

Sometimes, the scheme become so flexible on account of a standardized petrified

approach that in some most genuine cases demanding a certain departure from the

fixed framework, the scheme is incapable of giving requisite help. It is therefore,

absolutely necessary that any action plan for a backward area must first identify

the target- group, identify the specific services they need for monitoring their 

enterprises and devise an appropriate structural support for comprehensive

coverage of their needs.

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Small- scale business provides good scope for the growth of entrepreneurial

activities .An entrepreneur has good opportunity and vast scope in selling service

rather than manufacturing a product. The entrepreneur can achieve better results if 

the size of the business is small. It is for this reason that small firms have higher 

 productivity, greater efficiency and low labour turnover.

The scope for entrepreneurial activities in small business sector can broadly be

classified into:

1. Industrial sector 

2. Agricultural and allied industrial sector 

3. Service sector 


Small scale industries occupy an important place in the industrial sector. They

have contributed over 40% in the gross industrial production in 1998.

Small- scale industries: The basic objectives underlying the development of 

small- scale are the increase in the supply of manufactured goods, promotion of 

capital information the development of indigenous entrepreneurial talents and

skills and the creation of broader employment opportunities. This sector provides a

wider scope for the potential entrepreneur to develop his or her own industry.

There is a good scope and enormous potential to use technology based products in

the small- scale sector.

An entrepreneur can exploit a profitable venture in any of the industries reserved

for exclusive department under the small- scale sector. There are as many at 384

items for exclusive purchase from the small- scale industries.

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Small- scale industries play an important role in increasing the national income, in

meeting the shortage of consumer’s goods, in promoting balanced regional

development, in reducing inequalities in the distribution of income and wealth and

in relieving the economic pressure on land and over crowding in urban areas.Outdated technology, shortage of finance, shortage of raw material and inadequate

marketing facilities are some of the problems faced by small entrepreneurs.


There is a vast cope for entrepreneurial activities in the agricultural sector. By

establishing a link between agriculture and allied industries, the rural entrepreneur 

can exploit opportunities in areas of farming, agricultural processing and


The government has given priority to IRDP programme and ensured adequate

flow of credit to small and marginal farmers through re-financing facilities and by

establishing national bank for agriculture and small development.

Trade: Trading takes place in wholesaling and retailing. It may be in domestic or 

overseas market. The retailer entrepreneur makes the goods available at the time

and places the consumer wants them. He may decide to start single line store,

specialty shop, departmental store etc. trade in overseas market is in wholesale.

The business environment directly influences the growth of entrepreneurship in a

 particular line of trade. The trade policy of India has been directed to promote

export. Hence incentives and facilities have been provided to the entrepreneurs to

motivate them to develop export.


The service sector has gained importance for the entrepreneurs because of its rapid

expansion. Service sector includes all kinds of business and provides opportunities

to the entrepreneurs in business such as hotels, tourist services, personal services

such as dry cleaning, beauty shops, photographic studies, auto repair, electric

repair shops, wielding repair etc.

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Transport: They provide time and place utilities in urban and rural areas to both

men and material. The different modes or transport are of immense importance in

the areas, which are not served by roads and railways. There is a scope for 

entrepreneur to design prototypes of new carts with the application of indigenoustechnology so that they may have better mobility and greater carrying capacity.

The primary need in the rural area is an efficient system of road transport.

The rural economy has a good opportunity for an entrepreneur to develop some

 business. They can exploit possibilities for a venture in some shops or services.

Entrepreneurship flourishes in small business sector for they have enormous

opportunities in manufacturing and non- manufacturing activities.

The government is keen in encouraging the competitive strength of the small scale

 producers and it has taken a number of measures such as:-

The establishment of a network of industrial estates through ought the country

where work sheds equipped with the necessary facilities made available to

 prospective entrepreneurs on subsidized rental basis.

The reservation of a number of products for the exclusive production to small


The introduction of ancillarization programme under which large and small

industries are to be linked in a harmonious productive relationship

 The supply of machines on hire purchase basis to the small

entrepreneurs on easy terms of payment

 Technical counseling to small units so as to improve their

efficiency and viability

 These are golden opportunities for the prospective entrepreneurs

to self employed independent businessman. The future is very



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The process of liberalization and privatization initiated since 1991 is trying to

make environment more conducive to growth of entrepreneurship. Many areas like

telecommunication, power, generation, oil and natural gas, coal and steel, civil

aviation, banking etc. which were earlier reserved for public sector are now madeopen to private participation also. The process of liberalization has opened the

floodgates of entrepreneurial opportunities.

Private initiative and funds have started flowing into these sectors. Reforms have

swept all major sectors of the economy, opening up the country for the easier 

movement of the population and material across the national boundaries. Foreign

trade and investment regime points to liberal order, which is welcome to domestic

and foreign private sector entrepreneurs. The opening up has been substantial and

going by the ratio of foreign trade turnover to GDP and flows of market based

foreign capital.

The world is shrinking into a global village due to economic interdependence and

the revolution in communication technology. ‘Globalization’ has become the

 password. Today changes are taking place at a greater pace and the world is

 passing through an exciting stage of technological progress on several fronts.

Technology is perhaps the most important resource for any nation. Invention,

innovation, adoption of new technologies, processes and their commercialization

are the major factors in wealth creation and making the country technologically

superior, which in turn, leads to economic supremacy. Nigeria has a large

reservoir of qualified science and technology manpower and the necessary

infrastructure for indigenous R&D and industrial development.

 Now we face the implication of a new international economy, which is less

energy- intensive and more knowledge - intensive. New materials are reducing the

demand for ferrous and non- ferrous materials; transportation costs are falling as

 products become lighter and smaller; international communication is

instantaneous. It is a new order in which central planning by large institutions is

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 becoming less effective, and small- scale enterprises are becoming more efficient

and effective.

Entrepreneurs and new enterprises, rather than governments and major 

corporations are the instruments of change. The relative growth of theinformation/service sector in the new international economy that is emerging is

removing many of the traditional barriers. In this sector, geography access to

capital and access to resources is of less importance.



Challenges of liberalization, privatization and globalization call upon the

entrepreneurship to play amore creative and dynamic role than ever before.

Entrepreneurship can now set the goal of making Nigeria a developing country.

They need not just aspire but make it a mission take it up and accomplish it.

Ignited mind of entrepreneurs can be powerful resources, which can help

 Nigeria, become a big economic power in the years to come.

It is indeed characteristic of entrepreneurs to have foresight, a vision and skill to

see an opportunity and exploit it. Globalization, which means integration with the

world economy, brings the influence of external sources into our society. Experts

have pointed out that these are economic of trade or market forces and they have a

 beneficial influence in developing our core competencies in area which have a

competitive advantage.

As already discussed we have a good scope for developing our services.

Entrepreneurs have to exploit this opportunity and with their sense of efficiency

help the service sector to start, grow and develop perfectly. Direct linkages of 

technology to the nation’s strategic strengths are becoming clear since the last

decade. Entrepreneurs have to realize that technology is the core strength of our 

nation and therefore help it get on the path of technological development.

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By core strength and competency it is meant that in certain areas

we have inherent strength and therefore show better result in a

shorter period of time.

 Nigerian human resource based is one of the greatest core competencies.Changing role of entrepreneurs may be summed up as follows:

In the era of liberalization, privatization and globalization, an entrepreneur will

have to

• Explore and exploit opportunities for trade in the world economy

• Discover, utilize, and develop the core strength of the economy.

• Conduct R&D activities to meet the global standards

• Improve the quality of technology and quality of manufacture to be able to

complete well with foreign competition.

• Reduction of cost of production to make the product/service available at a

competitive price.

• Undertake advertising, sales promotion, marketing, packaging effectively

for capturing foreign markets.

• Develop new products, new areas of production for widening the countriestrade

• Search new markets and capture more and more markets.

• Expanding the geographical base of the marketing.

• Increase production to accelerate economic growth rate

• Come up with innovative ideas to solve financial, economic

and other problems of the countries.

• Play the role of imitating entrepreneurs i.e. study the latest

changes in the advanced countries- and use them gainfully.

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• Utilize the underutilized/ unutilized capacity so that full

benefits can be enjoyed e.g. Hydropower capacities are still




The relationship between entrepreneurship and economic growth development has

already been analyzed. The later is the result of entrepreneurship. Every process of 

economic growth/ development is the outcome of changes that occur in various

spheres. Infact, one cannot imagine either of them without a change. Change is

therefore the essence of growth and development.

Entrepreneurs are some times called carriers or agents of change. It is in this

context that entrepreneurs are known as catalysts of change. In the capacity of 

catalyst an entrepreneur reaches for opportunities and areas- where changes can be

expected and are necessary. An innovative entrepreneur is instrumental in bringing

about a change. He introduces new ideas, new techniques, new combinations,

discovers new sources of supplies etc. An imitating entrepreneur on the other hand

uses the changes launched by others. Changes and entrepreneurship go together.

Drucker says, “Entrepreneurs see as the norm and all healthy. Usually they do not

 bring about the changes themselves. But the entrepreneur always searches for 

change, responds to it and exploits it as an opportunity”. Entrepreneurs have to

 play an important role- the role of catalysts in the new international scenario that is

going to open the economy to new areas and prospects.

Entrepreneurs are supposed to visualize and utilize the opportunities that are going

to occur. The world trade is going to open doors to new challenges. New and

changed approaches will have to be adopted for meeting these challenges

successfully. As a catalyst an entrepreneur will have to:-

Foresee prospect changes in the global economic and social environment. He

will also have to be instrumental in bringing about changes.

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Absorb new inventions and innovations in the technological sphere as

technology plays an important role in the world of trade and commerce.

Initiate new activities in both business and non- business spheres. In capacity

of an innovative entrepreneur. He has to introduce new combination of resources,come up with bright ideas to utilize underutilized resources, to put them to

multiple uses and apply them to new and unknown activities.

Bring about an attitudinal change in the minds of the people and the society in

general. A conservative and religious society or a society that is bound by customs

and traditions cannot take full advantage of entrepreneurial opportunities. An

entrepreneur may have to strive to convert the society into a dynamic, rational and

a progressive one. He may have to influence the government into bringing about

economic reforms of various types for exploiting global opportunities.

Exploit change and use it not only for his and for the benefit of his

organization but also for the benefit of his economy.

Entrepreneurs play a crucial role in the development of an economy. They play the

role of catalysts of change and are capable of converting an underdeveloped

economy into a developing one and a developing economy into a developed one.

Global changes and challenges may be compared to a knife. A knife when used

 properly brings benefits or serves as a tool for work. The same knife can cut and

harm if used wrongly. Entrepreneurs have to convert global changes and

challenges into opportunities, exploit them effectively and intelligently so that the

economy emerges a winner, a beneficiary of globalization and not as its victim.


Creativity implies conceptualizing, visualizing or bringing into being something

that does not yet exist. It is about curiosity and observation. In the history of 

science, there are interesting examples of creativity occurring at the same time

with no contact between the individuals involved. Newton and Leibritz created the

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mathematics of calculus in the seventeenth century quite independently of each

other, despite their allegations of plagiarism.

Creativity seems to come “out of the blue” triggered by a problem to be solved or 

an idea to be expressed. Its roots and origins are mysterious and unknown but itsexistence cannot be denied. This meta- physical aspect has meant that science has

shied away from the topic though it is now becoming a subject of serious study

among cognitive scientists and experimental psychologists.

Entrepreneurs are familiar with ideas that suddenly come to mind and are not too

concerned with their origins. This is the starting point of the entrepreneurial

 process. We see creativity as a talent, an innate ability, though we recognize that it

can be developed and that there are techniques that promote creativity and

 problem solving. Creativity is also a function of how people feel. Some are more

creative under pressure whilst others need complete relaxation. Some use

divergent thinking in their creativity whilst others prefer convergent thinking.

One thing that seems common to all forms of creativity is joy. Einstein comments

that the idea that the gravitational field has only a relative existence was the

happiest thought of my life. His creative genius had come up with the idea of 

relativity and it made him happy. There is an intense personal satisfaction in

having come up with something new and novel. This is one reason why

entrepreneurs see their activities as fun. There is the joy of creativity all around


 For the entrepreneur, creativity is both the starting point and the reason for 

continued success. It is the secret formula by which he or she overcomes obstacles

and outsmarts the competition. Arguably every one of us has the ability to be

creative but do we all use and exploit this ability? Many of us simply do not act

creatively much of the time.

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Possibly we are not motivated and encouraged perhaps we do not believe in

ourselves and the contribution and difference we could make. There is certainly a

skills and technique element to creativity- in a business context, for example, we

can be taught creative thinking and behaviour in the context of decision making but this is clearly only part of the explanation. The issue of making is also a

critical element.

Many people have the ability to play a musical instrument. They have a skill and

 possibly natural talent and they can be taught more skills and techniques whilst

they are willing to persevere and practice. Furthermore, some people who play

music naturally appreciate the meaning the composer was trying to convey when

the work was written. Others have to be taught this interpretation. Some people

simply see things that others cannot until they are given a detailed explanation.

The same implies to opportunity spotting.

People who miss the valuable opportunities that others see first often have access

to the same information but it means something different to them.

Discovery consists of looking at the same thing as everyone else and thinking

something different. In just the same way many young people can dribble, head

and pass a football, and their skills can be improved with coaching. But when they

watch a football match or play in one are they able to see the whole game? Can

they spot goal scoring opportunities and positions and get there ahead of a

defender? Most people who watch team sports such as football simply follow the

movement of the ball exactly as the television camera tends to do. They ignore or miss

the emerging patterns as the other player’s move of the ball in search of good positions.

This partially explains why we do not all seem to see the same game evolve, even though

we are present at the same match.


Innovation builds creativity when something new, tangible and value creating is

developed from the ideas, innovation can be focused on the theme of being better-

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incremental improvements-as well as the theme of being radically different. The

former will often form the world of the entrepreneur, who us attempting to make

his or her organization d stronger than his rivals .The later is often, but certainly

not always, reserved for the true entrepreneur, who is more concerned with doingsomething genuinely new and different rather than improving on ideas that have

gone before.

Innovation is about seeing the creative new idea through to completion, to final

application but, of course, this will not necessarily be a business. It is the

entrepreneur who builds a business around the idea and innovation. Both can be

difficult roads and require courage and perseverance as well as creativity and

imagination. These are attributes that the entrepreneur brings and his or her role in

innovation is crucial.

There are the basic approaches with innovation, which are not mutually exclusive.

First, it is possible to have a problem and to be seeking solution, or at least a


Edwin Land invented Polaroid camera because his young daughter could not

understand why she had to wait for the pictures to be printed when he took 


Second, we might have an idea in effect a solution and be searching for a problem

to which it can be applied.

3Ms Post- it notes happened when a 3m employee created a glue with only loose

sticking properties, and a college applied it to a need he had for making page in a


Third, we might identify a need and design something that fits.

James Dyson’s dual cyclone cleaner came about because of his frustrationwith his

existing machine, which was providing inadequate for cleaning upthe dirt and

dust he generated when he converted an old property.

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Generating opportunities form ideas requires us to attribute meaning to the ideas.

Ideas from in our minds and at this stage they mean something to us, personally.

Typically, they became a real opportunity when we expose the ideas and share

them with other people, who may well have different perceptions, attributedifferent meanings and see something we miss initially.

This process of exploration is fundamental for determining where the

opportunities for building new values are. In other words, innovation comes from

the way we use our ideas.

Crucially the person with the initial idea may not be the person who realizes where

the real opportunity lies. An inventor is not always an opportunity spotter and

often not a natural project champion. Picasso claimed that great people steal ideas

and create opportunities where others cannot see the potential. Creativity is the

talent of the inventor and innovation is the talent of the project champion who

turns ideas into reality. Entrepreneurs do both these things but they do more. They

do not just complete the successful application of an idea; they build something of 

value in the process.

The Sony walkman provides an excellent illustration of what happens. The idea

came to Sony co- founder Akio Morita when he was questioning why he was

finding it difficult to listen to music when he was in public places or walking

round a golf course. The idea became an innovative new product and a valuable

opportunity when Morita shared his idea with other colleagues in Sony, and

existing technologies and competencies were used to develop the compact

 personal radio with adequate playing time from its batteries and individual


The project was championed, resourced and implemented. Personal cassette and

CD players have systematically joined the original radio. It was simply a great

idea that rejuvenated Sony at the time it was conceived; and it has brought value

and affected the lives of millions of people around the world.

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This endeavors to pull the stand together. Creativity (the idea) is the starting point

whether it is associated with invention or opportunity spotting. This creativity is

turned to a practical reality (a product, for example) through innovation.

Entrepreneurship then sets that innovation in the context of an enterprise (theactual business), which is something of recognized value.

To be exploited fully and effectively, creativity and innovation need to be

supported by certain talents and aspects of temperament. We also need a base of 

knowledge, which we use to help generate and develop our new ideas. In part of 

this is developed through our experiences but it also needs to be supplemented

further by certain key skills. In very simple terms, talent and temperament

combined with knowledge helps us find out and discover new possibilities. Key

skills can enhance the discovery process, whilst other skills help us design and

craft new opportunities from the ideas.


Cyber Cafes

Bio Tech


Rural Products like Handicrafts etc

Beauty Parlours……

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Everyone has wants – some are for things like food or clothes,others are for entertainment, leisure, travel etc. In order to satisfythese wants we have to consume goods and services. It is throughbusiness activity that goods and services are provided.Business activity is any kind of activity that results in goods or 

services being provided that satisfy consumers’ wants.

Goods are tangible while services are intangible. Goods sold to

the public are consumer goods – things like cars, sports

equipment and games consoles, which are durable.

Consumer goods can also be non-durable – like newspapers,

magazines and chocolate.

 You use durable goods over a long period of time, whereas you

use up non-durable goods quickly.

Services are things like facilities to the public – such as

hairdressing, window cleaning, and receiving loans from banks.

Business activity creates wealth – the more goods that are

produced, the greater amount of wealth. Wealth is not simply

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money, but the total of goods and services that can be given a

monetary value.

Goods and services are the outputs of business activity. In order

to produce an output, the business has to use resources, orinputs – people, buildings, machinery etc. These resources can

also be called factors of production. These factors fall into four



All the natural resources – mineral deposits, the site of the

factory, water, timber etc.


All the human resources – employees.


 Tools, machinery and equipment, finance that the owner invested

in the business.


 The business ideas the entrepreneur has on how to use the above

resources in order to produce a good.

Sectors of Business

Businesses are grouped into sectors, according to the types of 

products and services that they provide.

Primary sector businesses

 These grow products or extract resources from the ground.

Examples are mining, farming, forestry.

Secondary sector businesses

 These manufacture products from raw materials. Examples are

construction of new buildings, factories and ships, as well as

products ranging from tinned food to TV sets.

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Tertiary sector businesses

 These do not produce a product – they provide a service instead.

Examples are shops, hotels, banks, insurance companies.

Private Sector Organisations

 There are many different types of organizations operating in the

world . A definition of an organisation is a group of people who

come together and use their resources and knowledge to achieve

a common goal.

Private sector organisations are sole traders, partnerships,

limited companies and franchises.

Sole Proprietorships (traders)

 These are one-owner businesses (owned and controlled by the

one person). There are bound to be many examples of sole

traders in your local area – like retail stores or corner shops,

hairdressers, workshops, bakeries,

restaurants, laundries, tailoring and draper shops, dry-cleaners

and dyers and other enterprises requiring small capital, catering

to local markets, involving limited risks and the use of personal

knowledge and skills , etc.


 The owner retains all the profits.

 You have complete control over all the decisions that have to be


 You can choose your own hours of work and vacation time.

 There is a greater personal service offered to your customers.

 This type of organisation is very cheap to set up.

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 You have unlimited liability – you carry all the business’s debts if 

it fails, even if this involves selling all your personal possessions

in order to pay it off.Restricted sources of finance – banks will charge you high rates of 

interest if they will commit to a loan at all.

 You have no one to share decisions with and you cannot share

your workload with other people.

 The business has to shut down when you are on vacation or ill.

Possible Sources of Finance

 Your own personal savings.

Retained profits (profit kept back from the previous trading

period and ploughed back into the business).

Bank loans.


Government grants.

 Trade credit.

Debt factoring.



Profit maximisation

Create a good image.

Improve your personal circumstances.

Satisfying (generating a sufficient level of profit to satisfy the

owner, while not making a high level of profit).


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Partnerships are businesses with 2 to 20 partners – people who

own and control the business together. A Partnership Agreement

is drawn up, stating the rights of partners and procedures to be

followed upon the death of a partner, a new partner joining thebusiness or a partner leaving. Allowances are made for solicitors,

accountants and members of the Stock Exchange, meaning they

can have more than 20 partners.

 You could also have ‘sleeping partners’ – people who invest in the

business but have no control over the way it is run, the

advantage being that they usually have limited liability, and will

only lose their investment in the business if it fails (although

sometimes this may not be the case if these people have been

regular partners before becoming sleeping partners, as any

decisions made by them beforehand may still have an impact).

 These include medium sized service and trading concerns, like

wholesalers, hotels, transporters, hire-purchase firms,

confectioners, and professionals like attorney, lawyers, chartered

accountants, architects, consultants, etc. Also, small

manufacturing firms requiring simple techniques and processes.


Partners may have different areas of expertise – operations,

finance, human resources, marketing etc.

More finance is available to the business – you can pool capital

from all the partners.

 You can share the workload with other partners.

 You can raise finance from lenders more easily than sole traders

can – there is less ‘risk’ involved.

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Unlimited Liability (possibly even for ‘sleeping partners’).

Profits need to be shared (or appropriated) between partners.

Disagreement may occur, with people having different methodsand ideas.

A new Partnership Agreement has to be drawn up every time a

partner joins, leaves or dies due to the change in circumstances.

Sources of Finance

Personal savings.

Retained profits.

Inviting new partners to join (increases investment).

Bank loans.


Government grants.

 Trade credit.

Debt factoring – where a specialist factor provides finance against

any invoices which have not been paid (around 80% of the total

amount due), the balance (20%) being paid back when the

customers settle the invoices. An administrative charge and

service fee is payable by the business to the factor.


 These are the same as a sole trader’s objectives. Sole traders and

partners are often referred to as being self-employed, as they

own the business that they also work for.

Private Limited Companies

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Private limited companies are companies whose shares are

owned privately – not available to the public on the Stock Market.

 There is a minimum of one shareholder (owner) in a private

limited company, and a director or most commonly, a board of directors runs the business. A shareholder can be a director, and

there must be at least one director and one company secretary

(who keep all the company records). The company must produce

a Memorandum of Association and Articles of Association that

state the details of the company, responsibilities of its directors

and the rights of its shareholders. Private limited companies tend

to be family businesses, although this is not always the case


Shareholders have limited liability – they only lose their invested

capital if the business fails.

More finance can be raised from shareholders and other sources.

Control of the business is not lost to outsiders who have no

knowledge of it (like public limited companies).


Profits are shared among more people.

A legal process has to be adhered to when setting the company


Shares cannot be sold to outsiders – it might be more difficult to

raise finance.

 You have to abide by the Companies Act requirements.

Annual accounts have to be published for the business, although

these do not have to be made available to the general public.

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Sources of Finance

Company profits.

New shareholders joining the company.Bank loans.


Government grants.

 Trade credit.

Debt factoring.


Profit maximisation.



Sales maximisation.

Public Limited Companies

A public limited company, or plc, is a company whose shares are

available to be purchased on the Stock Market. You need to have

at least two shareholders and £50,000 of share capital to start

one up. The same legal documents as a private limited company

have to be drawn up. A board of directors – appointed by

shareholders – controls the company. Public limited companies

can also be called corporations.

Examples of public limited companies include the mobile phone

giants Vodafone and TMobile.

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 You can raise immense amounts of finance.

Plcs are usually market leaders. You can borrow money from lenders easily due to the size of the



 There are a lot of set-up costs involved – prospectuses and

underwriting (an insurance against some shares remaining

unsold, meaning fees have to be paid to the underwriter who

must buy these unsold shares) need to be set up before gaining

the interest of investors.

 The Companies Act must be adhered to.

 The business has no control over who buys the shares on the

Stock Exchange in the long term, although they can choose

whom they wish to sell to when trading begins.

 You must publish annual accounts and make them available to

the general public upon request.

Sources of Finance

Retained profits.

Selling shares to the public.

Bank loans.



Government grants.

 Trade credit.

Debt factoring.

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Profit maximisation.

Growth.Maximise sales.

 To be dominant in their market.


Plcs may be global companies, or multinationals (having

manufacturing plants in more than one country. In doing so, they


 Take advantage of economies of scale – buying more products at

a lower unit cost.

Avoid legislation in the home country that might have a negative

effect on the business’s profitability.

Avoid restrictions on quotas (number of imports brought into the


Receive tax benefits and government grants from more than one



A franchise is an agreement that allows an individual or group to

use another business’s name and sell their products and services.

 The individual is called the franchisee, and the business selling

their name is called the franchiser . A small percentage or fixed

sum is given to the franchiser in return for using their name and


Examples of franchises are the Mr. Biggs and MTN.

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 Advantages (to the Franchiser)

 You can increase your market share without a great deal of 


Revenue is reliable (you get a set payment or a percentage of profits each year).

Risks are shared between the franchiser and franchisee.

 Advantages (to the Franchisee)

 The franchiser will undertake its own marketing strategy;

therefore you will not have to carry out much advertising on your


 The franchiser may train you in the operation of machinery or the

routine that you must follow.

 The risk of failing will be reduced because the business already

has a good reputation.

Disadvantages (to the Franchisee)

 You have to pay the franchiser a percentage of profits or a

royalty payment.

 The franchiser might not renew the franchise after a certain

period of time, leaving you without the backing and permission to


The products you sell, the price you sell them at, and the layout

of the shop may be dictated by the franchiser, meaning you will

be less able to make your own decisions.

Voluntary Organisations

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A Register of Charities is kept by the government, which also

regulates the activities of charities. Professionals working for

them often run charities, and the charity is usually exempt frompaying some taxes.

Examples of charities include old peoples home, motherless

babies home, etc.

Sources of Finance

Public and private donations.

Government grants.

Lottery grants.

Profits from sales in charity shops, raffles, jumble sales and mail

order goods.


 To be recognised as a charity they must have one of the following


 To relieve poverty.

 To advance education.

 To advance religion.

 To carry out activities beneficial to the local community.

Voluntary Organisations

 These are usually run and staffed by volunteers. Examples

include the Scouts, local youth clubs and some sports clubs.

Voluntary organisations bring together people with similar

interests, and are run by a committee of elected volunteers.

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Sources of Finance

Grants from the Lottery, sports councils or local authorities.

Fees payable upon joining or for use of facilities.

Public Sector Organisations

Public sector organisations are owned and controlled by either

local or central government (State and Federal)

Local Government Organisations

Local authorities/councils provide services including:




Refuse collection

 They are set up by central government and are run by locally

elected councillors. The day to- day running of the services are

organised by council employees. A local council aims to meet the

needs of the local community and provides services that might

be considered unprofitable if handled by private firms, for

example libraries and archives.

Sources of Finance

Central government.

Business rates.

Council tax.

Charges for using services, e.g. leisure centres and parking.


 To meet the needs of the local community.

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 To make cost-savings.

 To stick to budgets set down by central government and at local


Central Government Organisations The House of Senate and National House Assembly provide

important services nationally from departments such as the

 Treasury, Trade and Industry, Health, Transport and Defence.

Politicians are elected to be overall in charge of the departments

in line with the best interests of thepopulation; however

employed civil servants run them.

Sources of Finance



 To improve society.

 To make best use of the funds available to them.

 To manage taxation to protect people who are in a less

favourable position.

Public Corporations

Corporations are companies that are owned by central

government. A government minister appoints a chairperson and

board of directors, or governors, to run them on the behalf of the

government. The Post Office and the BBC are examples of public


Sources of Finance

Central government.

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 The public – TV licensing, merchandise etc.


 To provide a quality service. To manage their funds efficiently to make the best use of them.

 To serve the interests of the public.


 The last 10 years has seen the government selling off key public

corporations as a cost cutting measure.

 The government has sold these companies off because:

 The Treasury can receive a huge amount of income from the

selling of these corporations.

 They were very poorly managed and did not make a profit; they

could be profitable if someone else managed them.

 They wanted to increase share ownership and let the public have

a chance to benefit from the success of the economy by buying

into these businesses.

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As explained earlier, a business enterprise can be organised into

several forms.Every form of organisation has its own merits and demerits. A

businessman has to keep in view these merits and demerits while

selecting an appropriate form of organisation. The choice has to

be made both at the time of setting up a new enterprise and at

the time of expansion and growth of an existing concern.

At the time of launching a new business enterprise, the choice of 

the form of ownership is dictated by several factors as given

below :

1. Nature of business – Service, trade, manufacturing.

2. Size and of operations – Volume of business (large, medium,

small) and size of the market area (local, national, international)


3. Degree of direct control desired by owners.

4. Amount of capital required initially and for expansion.

5. Degree of risk and liability and the willingness of owners to

assume personal liability for debts of business.

6. Division of profits among the owners.

7. Duration of Business (Length of life desired by the business). 

8. Government Regulation and Control

9. Managerial Requirement (Scope and plan of internal

organization) .

10.Flexibility Operation

11Tax Burden

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It must be noted that these factors are interrelated and

interdependent. For instance, the amount of capital required and

the degree of risk involved depend upon the nature and volume

of business operations. The degree of control and the division of profits are both related to risk and liability. Therefore, an

entrepreneur division of profits are both related to risk and

liability. Therefore, an entrepreneur should not consider these

factors in isolation. The interrelationship between these factors

should be duly considered. The impact of each one of these

factors on the choice of a suitable form of ownership is described

as follows.

Nature of Business

 The nature of business has an important bearing on the choice of 

the form of ownership. Business providing direct services, e.g.,

small retailers, hair-dressing saloons, tailors, restaurants, etc.,

and professional services, e.g., doctors, lawyers, etc., depend for

their success upon personal attention to customers and the

personal knowledge or skill of the owner and are, therefore,

generally organised as proprietary concerns. Business activities

requiring pooling of skills and funds, e.g., wholesale trade,

accounting firms, tax consultants, stock brokers, etc., are better

organised as partnerships. Manufacturing organisations of large

size are more commonly set up as private and public companies.

2. Size and area of operations

Large scale enterprises catering to national and international

market can be organised more successfully as private or public

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companies. The reason is that large – sized enterprises require

large financial and managerial resources which are beyond the

capacity of a single person or a few partners. On the other hand,

small and medium scale firms are generally set up a partnershipand proprietorship. Small scale enterprises like generally hair-

dressers, bakeries, laundries, workshops, etc. cater to a limited

market and require small capital. The risk and liability are not

heavy and the management problems can easily be handled by

the owner himself. Therefore, the owner likes to be his own

master by organising as a sole proprietor. He can maintain fact-

to-face relationship with his customers which is important in

small service enterprises like painters, decorators, repair shops,

beauty parlours, etc. Medium-sized enterprises and professional

firms, e.g., health clinics, chartered accountants, etc. are

predominantly partnerships. They pool their capital and expertise

to operate on a larger scale and to avail of the benefits of 

specialisation. Large scale enterprises and enterprises involving

heavy risks, e.g., engineering firms, departmental stores, five star

hotels, chain stores, etc., are normally organised as companies.

 These enterprises require huge capital, heavy risks and expert

managers. Proprietary and partnership forms are unable to

provide these resources. The company form is, therefore, best

suited to large scale enterprises.

Similarly, where the area of operations is widespread (national or

international), company ownership is appropriate. But if the area

of operations is confined to a particular locality, sole

proprietorship or partnership will be a more suitable choice.

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3. Degree of Control Desired

A person who desires direct control of business prefers

proprietorship rather than the company because there is a

separation of ownership and management in the latter case. Incase the owner is not interested in direct personal control but in

large scale operation, it would be desirable to adopt the company

form of ownership.

4. Amount of Capital Required

 The funds required for the establishment and operation of a

business have an important impact on the choice. Enterprises

requiring heavy investment, i.e., iron and steel plants, etc.,

should be organised as joint stock companies. A partnership has

to be converted into a company when it grows beyond the

capacity and resources of a fewpersons. Requirements of growth

and expansion should also be considered in makingthe choice.

 There is maximum scope for expansion in case of a public


Where the funds required initially are small and scope for

expansion in case of public company. Where the funds required

initially are small and scope for expansion is not desired,

proprietorship or partnership is a better choice.

5. Degree of risk and liability

 The volume of risk and the willingness of owners to bear it, is an

important consideration. A single individual may have large

financial resources sufficient for a medium scale enterprise but

due to unlimited personal liability he may not like to organise as

a proprietor or a partnership. Due to limited liability and a large

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number of shareholders, there is maximum diffusion of risk in a

public company. But an enterprising individual not afraid of 

unlimited liability may go in for sole proprietorship.

6. Division of ProfitsA sole trader receives all the profits of his business but be also

bears all the risks. If a person is ready to bear unlimited personal

liability and desires maximum share of profits, proprietorship and

partnership are preferable to company form of organisation.

7. Duration of Business

 Temporary and a hoe ventures can be organised as

proprietorships and partnerships as they are easy to form and

dissolve. But they lack continuity and stability. Enterprises of a

permanent nature can be better organised as joint stock

companies and co-operative because they enjoy perpetual

succession. A business requiring a long period for establishment

and constitution should be organised as a corporate body.

8. Government regulation and control

Proprietorships and partnerships are subject to little regulation

and control by the Government. Companies and co-operatives

are, on the other hand, subject to several restrictions and have to

undergo several legal formalities. But this face is not very

important and it can be helpful in making the choice only when

all other factors are unable to indicate a clear-cut choice.

9. Managerial Requirement

Organisational and administrative requirements depend upon the

size and nature of business. Small businesses using simple

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processes of production and distribution can be managed

effectively as proprietorships and partnerships. On the other

hand, giant enterprises involving the use of complex, techniques

and procedures require professional management. Suchenterprises can be managed efficiently only as joint stock

companies. Due to identity of ownership and management,

motivation is very high in proprietorships and partnerships. Such

motivation is lacking in a company due to separation of 

ownership from management.

10. Flexibility of Operations

Business which require a high degree of administrative flexibility

should better be organised as proprietorships or partnerships.

Flexibility of operations is linked with the internal organisation of 

a business. The internal organisation of sole proprietorship and

partnership is much more simple and less elaborate than the

internal organisation of a joint stock company. Moreover, the

objectives and powers of a company cannot be changed easily or

without legal formalities.

11. Tax burden

Various forms of ownership are taxed differently under the

Income-tax Act in Nigeria. If the expected volume of profit is very

high it may be profitable to start a company. A company is taxed

at a uniform rate, i.e., the rate of tax remains the same

irrespective of the volume of taxable income.

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The concept of SMEs is relative and dynamic. The definitions change over a

 period of time and depend, to a large extent, on a country’s level of development.

Prior to 1992, different government agencies in Nigeria such as the Central Bank 

of Nigeria tended to adopt various definitions to reflect differences in policy focus.

However, in 1992, the National Council on Industry streamlined the various

definitions in order to remove ambiguities and agreed to revise them every four 

years. Small Scale Enterprises were defined as those with fixed assets above N1

million but not exceeding N10 million, excluding land but including working

capital, while Medium Scale Enterprises are those with fixed assets, excluding

land but including working capital, of over N10 million but not exceeding N40

million. The definitions were revised in 1996 with Small Scale Industry defined as

those with total cost, including working capital but excluding cost of land above

 N1 million but not exceeding N40 million with a labour size of between 11 and 35

workers; while Medium Scale Industry was defined as those with total cost,

including working capital but excluding cost of land, above N40 million, but not

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exceeding N150 million with a labour size of between 36 and 100 workers. And

at the 13th Council meeting of the National Council on Industry held in July, 2001

Micro, Small and Medium Enterprises (MSMEs) were defined by the Council as


• Micro/Cottage Industry

An industry with a labour size of not more than 10 workers, or total cost of not

more than N1.50 million, including working capital butexcluding cost of land.

• Small-Scale Industry

An industry with a labour size of 11-100 workers or a total cost of not more

thanN50 million, including working capital but excluding cost of land.

• Medium Scale Industry:

An industry with a labour size of between 101-300 workers or a total cost of over 

 N50 million but not more than N200 million, including working capital but

excluding cost of land.

• Large Scale

An industry with a labour size of over 300 workers or a total cost of over N200

million, including working capital but excluding cost of land.


The SMEs are characterized by limited access to financial capital, simple

management structure resulting from the fusion of ownership and management by

one person or very few individuals. SMEs tend to strongly revolve around the

owner-managers, rather than as a separate corporate entity. There is often greater subjectivity in decision taking, and prevalence of largely informal employer -

employee relationships. As a result of their greater use of local resources, they are

widely dispersed throughout the country. They are also closely attached to the

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 products that launched them; many are labour-intensive although modern SMEs

are increasingly employing reasonably high technology

Sources of Information for Entrepreneurship Development

1. The Library is a primary resource for information. Government agencies have a

variety of publications which may be useful. Some colleges and universities have

reference libraries which may have a circulation section available to the public.

Also research institutes and some large corporations have libraries with sections

on specific topics. Libraries are the storehouse of information which may be useful

in operating a small business. Books, periodicals, reports and newspapers may

contain information which can be of help in solving some of the problems in

operating a business.

2. Internet can be used to carry out research and to find useful

information and data. Examples of these search engines are Google, Bing, Ask etc

Also E-mail can be used to communicate with providers of information who have

websites on the internet.

3. Subscribing to Trade Papers and Magazines. Desirable entrepreneurs should

have time to read articles especially in understanding new trends and

developments relating to business. It is advisable to keep a file of pertinent articles

for future reference. Example of such is the page 4 of punch news papers

(Nigerian Newspaper) which carries articles that are related to entrepreneurship

and business.

4. Industrial Data is helpful in comparing a business to other similar businesses.

The data is available from trade associations or government agencies and includes

ratios such as; stock turnover, cash discounts percentage mark-up etc.

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5. Membership-Based Organisations can provide services such as conducting

research, organizing education and training programmes, implementing new

technology, responding to members’ questions and concerns and disseminating

information through newsletters, magazines and special reports. Example of suchmembership-based organization is MAN (Manufacturers Association of Nigeria)

6. Training Programmes can help entrepreneurs to develop formal plans for 

improving their managerial skills and ability. Training courses and adult education

 programmes are designed by many institutions, agencies and associations.

Entrepreneurs should be aware of these personal development possibilities and

take full advantage of them. One of such institution is (CMD) Centre for 

Management Development at Magodo area in Lagos (Nigeria).

7. Employees. The people who work for a business can provide answers to

specific problems in a business. For example, entrepreneurs might ask employees

for their advice and assistance about stock display or customer attitudes.

Employees are in a good position to give valuable advice providing they know that

their opinions and suggestions are valued.

Also customers can supply very special information about the products and

services they buy. Customers should be asked about their opinions because they

are an excellent source of information about the relative strength and weaknesses

of a business operation.

8. Other Business Owners. Most businesses have common problems and owners

are generally willing to discuss their problems with one another. Occasionally, the

competitive nature of business may discourage this frank exchange, but if business

are unrelated and do not compete for the same customers, entrepreneurs may be

willing to share ideas concerning solutions to a common problem. In this way, all

 business owners can benefit from this interaction and improve their business


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Apart from the membership-based organisations and training programmes, the

government of Nigeria, like its counterparts, the world over, has realized the

importance of entrepreneurship development and has over the years formulated

various public policies to encourage, support and fund the promotion anddevelopment of entrepreneurship. Development in small and medium enterprise

are what give a developing nation like ours the base for employment creation,

solid base for creating a middle class and encouragement for the use of local raw

materials and technology.

 Among these establishment for the promotion and development of 

entrepreneurship are:

The Nigerian Export Promotion Council (NEPC): It was established in 1976

and formally management in March, 1977 to minimize the bureaucratic

 bottlenecks and increase autonomy in dealing with members of the organized

 private sector. Its goal and mission me to make the non-oil export sector a

significant contributor to Nigeria’s GDP and to facilitate opportunities for 

exporters to promote sustainable economic development.

The Raw Materials Research and Development Council (RMRDC) is also an

agency of the Federal Government of Nigeria which is vested with the mandate to

 promote the development and utilization of Nigeria’s industrial raw materials. It is

today, Nigeria’s focal point for the development and utilization of the nation’s vast

industrial raw materials. It is hoped that RMRDC through its numerous

 programmes, will promote new investments in the other local resources and

encourage industries to substitute local raw materials for currently imported ones.

The Small and Medium Enterprises Development Agency of Nigeria

(SMEDAN) was established in 2003 to promote the development of the MSME

sector of the Nigerian Economy. The agency positions itself as a “one stop shop”

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for micro, small and medium Enterprises Development. The mission is to facilitate

the access of micro, small and medium entrepreneurs and investors to all resources

required for their development. It compiles, reviews and updates all existing

economic policies, regulations, incentives and legislation affecting MSMEoperation within the state. Other institution established was the Industrial

Development Centers (IDCs) which is to provide extension service to SMEs in

such areas as project appraisal for loan application, training of entrepreneurs,

managerial assistance, product development as well as other extension services.

In conclusion, we all need information to operate successfully, and with the

internet, much is available. Some of these information will come to you

automatically, e.g. company annual reports, membership newsletters, press

 briefings by ministers and heads of agencies and departmental brochures, etc.

Finding and subscribing to good newsletters (free or subscription based) can

ensure that quality, relevant and up to data information regularly comes to you. In

this age of e-government, it has become much easier to source information from

government, ministries, and agencies. You can receive updated news or updated

web pages or both. Newsletters and services like these can assure a quality, regular inward flow of information.

Various Sources of Information for Entrepreneurship Development 

Entrepreneurs need to be reminded from time to time about the basic functional 

areas, regarding their enterprises so that they can be up to date and for them to beefficient and effective managers. In the light of this, we have to recognize

information as a veritable resource of entrepreneurship development.

 Nature and Types of Information Required By Entrepreneurs

(a) Marketing Information

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Whoever engages in a business, whoever embarks on entrepreneurial tasks will-

knowingly or unknowingly engage in marketing. We can state that whenever 

 people engaged in business, they also engage in marketing. Some aspects of 

marketing have over the years changed dramatically. Selling alone wasconsidered to be the actual marketing activity.

Quality products and services in the historical sense were no longer all

that customers were looking for. More manufacturers, more distributors and

increasing buying power changed the “market-place”. Globalization of markets set

in, and new and more sophisticated management instruments were needed to help

manufacturers, distributors and entrepreneurs 10 stay in business and grow with

growing markets and all of this despite over-increasing competition and fighting

over market shares.

Any market primary consists of people and entrepreneurs need to concentrate

his/her efforts on one of the segment of the market in which the products have the

greatest potential appeal. Good market segmentation is a must for any successful

marketing approach.

(b) Technical Information

In developing a business idea there is a need for potential entrepreneur to adopt a

carefully moderated and intelligent technical approach.

Planning is a process that never ends for business. It is extremely important in the

early stages of any venture when the entrepreneur will need technical information

to prepare a preliminary business plan. There are different types of technical

information that may be part of any business operation. This may include-

designing of premises, products others may include nature of products/services

you will like to engage in. it may also includes tools and equipment you require or 

materials needed for your production process. It may also be technology choice or 

advice on location and premises.

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(c) Information and Communication Technology (ICT)

Information and communication technology is very important source of 

information for Entrepreneurship development as we know that the whole world is

now a global village where information about a product/service can be easilysourced. One can source through the internet and find out the kind of hardware,

software for the kind of business one want to venture into. It may be packages on

accounting and production or databases appropriate for the business.

(d) Technology Is Constantly Changing the Demands of Consumers

Businesses use new technologies to produce new products and services.

Entrepreneurs should realize’ that new technological developments such as the

internet and cell phones increase the exchange of information and may have an

effect on the operations of their business, Entrepreneurs may not be aware of the

nature and effects of all new technologies, yet, they must try to determine

technical developments which are likely to have the greatest impact on their 

 business operations.

(e) Financial Information

Whether a business is small or large, owners and executives-must have financial 

information relating to the type of business they want to establish. One of the most

often overlooked areas of information for entrepreneurship development is the

financial information. Often regarded as a ‘back-office’ aspect of the business, the

financial information plays a critical role for decision making. Because decisions

are only as good as the information on which they are based, establishing a

reliable data from business: environment must be a priority for all businesses

regardless of size and industry. It is only when you have proper financial

information than an entrepreneur will know the amount of capital require for the

kind of business he is going into and ways of sourcing fat it. Money plays a major 

role in an enterprise. At the beginning of any business, money is needed to

 purchase the necessary tools/equipment, materials/supplies and other needs. To be

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competitive, small business owners must prepare for all future events and market

changes. One of the most important aspects of such preparation is the cash flow


Failure to properly plan cash flow is one of the leading causes for small businessfailure.

Knowing some basic accounting will help you better manager of your cash flow.

(e) Legal Information

Business is the totality of the economic and commercial life of any nation.

Business could be carried on as a small, medium or large scale enterprise. It could

also be carried on as domestic or international business but you have to know the

legal implication on each one of them. This is where the legal information is very

important. For example, if one wants to establish a private company in Nigeria, it

has to be a minimum of two (2) persons and maximum of fifty (50) members and

there are other documents required by the Corporate Affairs Commission (CAC)

Registrars of Companies before incorporation of any company. One also needs to

know about the copyright and Trade Mark Laws and also compliance with legal

requirement with regard to Environmental Impact Analysis (EIA).

How to Identify and Evaluate Business Ideas and Opportunities

Generating a Business Idea

Every business comes out of an idea. Businesses are started by men and women

who see that people want to buy a particular product or service. When you have afirst vague thought about a business opportunity you need to develop it into a

 business idea. A good business idea is essential, or even a prerequisite, for a

successful business venture.

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However, good business ideas do not usually just occur to an

entrepreneur. Rather, they are the result of hard work and effort on the part of the

entrepreneur in generating, identifying and evaluating opportunities.

What is a Business Idea?

A business idea is the response of a person or persons, or an organization to

solving an identified problem or to meeting perceived needs in the environment

(markets, community, etc). Finding a good idea is the first step in transforming the

entrepreneur’s desire and creativity into a business opportunity. Creativity, as used

here, refers to the ability enterprising individuals or potentially enterprising

individuals to design, form, make or do something in a new or different way.

The ability to come up with creative solutions to needs/problems and to market

them often marks the difference between success and failure in business. It also

distinguishes high-growth or dynamic businesses from ordinary, average firms.

Real, successful entrepreneurs are creative in identifying a new product, service or 

 business opportunities.

To be creative, you need to keep your mind and eyes open as you work through the

 principles of generating and assessing business ideas and opportunities explained 

below, and apply the techniques.

Two things should however be noted;

(a) although it is a prerequisite, a business idea is only a tool

(b) an idea by itself , however good, is not sufficient for success.

In other words, notwithstanding its importance, an idea is only a tool that needs

to be developed and transformed into a viable business opportunity.

In other words, a business idea is a short and precise description of the basic

operations of the business. Your business idea will tell you:

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• What product or service your business will sell.

• Who your business is going to sell to.

• How your business is going to sell its products or services

• Which need your business will fulfill for the customers.


What product or service will your business sell? Your business idea should be

 based on what you are good at. Maybe you have experience in a specific line of 

 business or have been trained in a skill. The business idea will help you to focus

on what you could do.


Who will buy your product or service? Your customers can be individual or other 

 businesses. They may all be within a small area or they can be spread over a large

area, maybe the whole country. Will you only try to sell to a specific type of 

customer or to everyone in an area? It is important to be clear who you intend to

sell to.


How are you going to sell your product or service? If you plan to open a shop this

is clear, but a manufacturer or service operator can sell in many different ways. A

manufacturer can, for example, sell either direct to customers or to retailers.


Which need will your product or service fulfill for customers? Your business idea

should always have the customer and the customer’s needs in mind. It is important

to find out what the customers want and to listen to your future customers when

you work out your business idea.

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It is difficult to attract customers to a new business. Your products or services

must offer something “special” for the customers to come to your new business. If 

you offer many different products or services to many different kinds of 

customers, it is almost impossible to stand out and be noticed by new customers. If you specialize in one or a few similar products or services that you sell to a

specific group of customers, it is easier to be “special’ and attract customers. .

Many new entrepreneurs make the same mistake when they develop their business


They think because their business is introducing a new product or service, there

must be a demand for it. But just because the product or service is new does not

mean that there is demand for it. Make sure that there is a demand for your 

 product or service.


An entrepreneur can get idea of new product from the following


1. Unsatisfied Demand The Success of “Maggi” noodles is an example of unsatisfied

demand for fast foods. “Surf” catered to the upper segment of 

the market. Later “Nirma” entered to satisfy the lower strata of 

the market. The acceptance of “SINTEX” water tanks is another


2. End / by Product

End products and by products can throw light on new project

ideas. For example mini steel plants have been started, using

steel scrap which was endproduct large steel plants. Liquor

industries are started, using molasses which was a by – product

in sugar industry.

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3. Imports and Exports

 The Government of India is now encouraging exports. There is

now great scope for import substitution and export of various

items. AVT group of companies are successfully exporting tissueculture plants.

4. Emerging Technologies

Commercial exploitation of indigenous or imported technologies

is another source of project idea. One best example is Xerox. Till

Xerox Corporation adopted the idea in 1960, it remained as an

unexploited invention.

5. Social and Economic Trends

Social and economic status of people always change and offer

vast opportunities. For example, there is now a shift towards

ready-made garments; possessing consumer durables on hire-

purchase basis, etc.

6. Revival of Sick Units

A dynamic entrepreneur, can revitalize and turn a sick unit into a

profitable one.

7. Chance Factors

An entrepreneur may come across a chance factor which may

trun out to be a good project idea. eg : Imported mixies were not

suitable to the ingredients used in

India. Satya Prakash Mathur’s wife complained to him about the

non-suitability of imported mixies. So Mathur manufactured

“Sumeet” mixie to suit Indian conditions.

 Thus he become a great entrepreneur.

8. Trade Fairs

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 Trade fairs are organized by Industries Department of the Central

and State Governments and Trade Organizations. Machinery and

tools for the small scale units, and ancilliary products required by

the major industries are displayed at the national.State and district level fairs. Dynamic entrepreneur can get lots

of ideas by visiting these fairs.

9. Trade and Professional Journals

Trade and professional journals / magazines are also sources of ideas. These

 journals/magazines give information relating to products manufactured and spares,

component required by various industrial units belonging to a particular trade.


Entrepreneurship in Nigeria


Entrepreneurship started when people produced more products than they needed,

as such, they had to exchange these surpluses. For instance, if a blacksmith

 produced more hoes than he needed, he exchanges the surplus he had with what he

had not but needed; maybe he needed some yams or goat etc, he would look for 

someone who needed his products to exchange with. By this way, producers came

to realize that they can concentrate in their areas of production to produce more

and then exchange with what they needed.

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So through this exchange of products, entrepreneurship started. A

typical Nigerian entrepreneur is a self made man who might be said to have strong

will to succeed, he might engage the services of others like; friends, mates, in-laws

etc to help him in his work or production. Through this way, Nigerians in theolden days were engaged in entrepreneurship. Early entrepreneurship is

characterized with production or manufacturing in which case the producer most

often started with a small capital, most of it from his own savings. Early

entrepreneurship stared with trade by barter even before the advent of any form of 


Modern entrepreneurship in Nigeria started with the coming of the colonial

masters, who brought in their wears and made Nigerians their middle men. In this

way, modern entrepreneurship was conceived. Most of the modern entrepreneurs

were engaged in retail trade or sole proprietorship.

` One of the major factors that have in many ways discouraged this flow of 

entrepreneurship development in Nigeria is the value system brought about by

formal education. For many decades, formal education has been the preserve of 

the privilege. With formal education people had the opportunity of being

employed in the civil service, because in those days the economy was large

enough to absorb into the prestigious occupation all Nigerians their goods. As

such, the system made Nigerians to be dependent on the colonial masters.

Again the contrast between Nigerian and foreign entrepreneurs during the colonial

era was very detrimental and the competitive business strategy of the foreign

entrepreneurs was ruinous and against moral standards established by society.

They did not adhere to the theory of “live and let’s live”. For instance, the United

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African Company (UAC) that was responsible for a substantial percentage of the

import and export trade of Nigeria, had the policy of dealing directly with

 producers and refused to make use of the services of Nigerian entrepreneurs. The

refusal of the expatriates to utilize the services of local businessmen inhibited their expansion and acquisition of necessary skills and attitude. Because of this, many

eventually folded up. Those that folded up built up resentment against business

which became very demoralizing to other prospective entrepreneurs. As a result,

the flow of entrepreneurship in the country was slowed down. But, with more

 people being educated and the fact that government could no longer employ most

school leavers, economic programs to encourage individuals to go into private

 business and be self reliant were initiated.

Such economic policy programs that are geared towards self reliance for 

individuals are programs as Open Apprenticeship Scheme, Graduate Employment

Programs etc and other policies that encourage or make it easy for entrepreneurs to

acquire the needed funds e.g.; Peoples Bank of Nigeria, Funds for Small-Scale

Industries(FUSSI), co-operative societies etc were established to assist

entrepreneurs in Nigeria.


While these statistics bide well for the country's economic prospects, they also

serve to reaffirm the vital importance of entrepreneurial development in achieving

that potential.

 Past Entrepreneurship Developments

People of the Ibo community in Nigeria are considered one of the oldest

entrepreneurs in history, their expertise stretching back to times before modern

currency and trade models had developed elsewhere on the planet. In the more

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recent past, Nigerians adapted their natural talents to evolve traditional businesses

and crafts that have sustained most of the country's rural and urban poor for the

 better part of the last half century. While the oil boom of the '70s brought in

 billions of petrodollars, most of the country's population remained untouched bythe new-found prosperity, thanks to widespread political corruption and

catastrophic economic mismanagement. Because of these and other factors, the

World Bank estimates that 80% of oil revenues benefited just 1% of the


Most of Nigeria's current woes trace back to a historic overdependence on oil to

the negligence of all other sectors, including customary trades and agriculture.

Decades of non-inclusive policies alienated the vast majority of Nigerians,

 plunging the country into a miasma of extreme poverty and ravaging civil and

 political strife. The climate of economic stagnation spawned a mammoth informal

economy that continues to sustain the bulk of Nigeria's 148 million people. It is a

measure of Nigeria's inherent entrepreneurial capacity that this informal,

unorganised sector presently accounts for 65% of Gross National Product and

accounts for 90% of all new jobs.

All these factors have tremendous relevance for Nigeria's future prospects, even

more so considering the extent of official neglect and lack of assistance and

infrastructure that the country's indigenous entrepreneurs have had to overcome.

Harnessing the informal economy and leveraging its full potential is a prerequisite

for Nigeria to emerge from the shackles of its Third World legacy.

Role And Importance Of Entrepreneurship In Society 

 Economists and businessmen have no doubts that private sector is in a lot of 

ways much more efficient and effective than the public one, but few common

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 people share this opinion. They generally believe that their greedy neighbours

embark on business enterprises driven mostly by insatiable passion for money and

other selfish aspirations and they refuse to see the role business plays in modern

society – the role that makes business not selfish at all.

First and foremost, business produces and distributes goods and 

 services to satisfy certain public needs. To fulfill this task, business has to be very

flexible and constantly research consumer demands: what’s the point producing

something that nobody wants to buy?

Second , business creates job opportunities. More than that, most jobs business

helps create are productive jobs, i.e., people employed by business ventures

 produce “real” goods and services.

Third , business provides income - here we come at last to the money matter 

But don’t forget: income that business provides is by no means restricted to the

 profit its owners get. It pays salaries and wages to its employees, and this way,

makes the whole business world go round: they spend the money they earn buying

all kinds of goods and favour further development of business ventures.

Forth , business contributes to national well-being . It does it in several ways: by

means of taxes it pays which make it possible for the government to maintain all

kinds of public and social institutions and services; by investing money in

developing science and technology and constructing new enterprises; by full use

of local recourses, including those located in remote rural areas, and in a number 

of other ways.

Fifth , business helps enlighten and educate people and encourages their further 

 personal growth. High level of competition makes it vital for both businessmen

and their employees to be involved in the constant process of learning and

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developing their personal qualities such as creativity, determination,

communication skills and vision for new business opportunities.

So you see, that despite public opinion on this matter, business is not all that

selfish. In fact, it is much more unselfish than a lot of public institutions It does

not exist to satisfy its own needs – that is a way to business failure. On the

contrary, its function is to satisfy in the long run the consumer demands – our 

demands, and to make our life comfortable. So, when you make this crucial

decision to embark on a business enterprise, bear it in mind that it is a way to serve


Goals Of Individuals And Society

Setting goals, and then working to achieve them, is a sign of maturity and

responsibility in a society, just as it is a sign of maturity in an individual. What

goals have people set for themselves in their economic life? And how well are

these goals being achieved? These are the questions discussed in this handout.

One important goal that the people have set for their economy is FULL

 PRODUCTION in order to achieve full employment. We want to make full use of 

the productive resources that are available -labour, capital and natural resources

-and use these resources efficiently.

How well are we achieving the goal of full employment and full production? The

nation can’t realistically expect to provide jobs continuously for 100% of the-men

and women who are able and willing to work. There will always be some

unemployment – roughly 2 to 5% of the labour force. But when millions of people

are unnecessarily unemployed, it means they are not making a productive

contribution to the country and they are not earning an income. For this reason, the

goal of full production -which requires both full employment and efficiency – is

one of the most important in our economy.

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A second major goal is STABLE GROWTH . We want the economy to become

 bigger and better through the years. We measure the amount of our national output

of goods and services by looking at statistics of Gross National Product.

 Economic growth is a steady increase in GNP per person (total GNP divided bythe nation’s population). We want GNP to increase more or less at a steady rate – 

about 4 or 5% each year (informal sector estimate) – without having business

recessions or rapidly rising prices (inflation), or increases in unemployment.

Production, employment and growth of GNP are all pretty easy to measure. When

we come to certain other economic goals, however, we have to talk about them in

more general terms.

FREEDOM OF CHOICE is a goal that practically everyone would include high

on the list. But what does it mean in concrete terms? Economists have pointed out

that freedom of choice is important for consumers, for workers, and for business.

Freedom of consumer choice means that consumers will be able to select the

goods they want to buy from a fairly wide range of alternatives, according to

individual needs and preferences. We are not satisfied with a system where the

consumer is told: “You can have any size and colour hat you want – as long as it’smedium and black!”

Freedom of occupational choice is an important area of economic freedom. Men

and women want to be able to choose the kind of work they will enjoy doing and

that will provide adequate wages and personal satisfaction.

Finally, there is much talk about the importance of “free enterprise”. This is

important aspect of freedom of choice. It gives people the freedom to start their 

 business and use the factors of production in such a way as to make a profit. Much

of the current economic system is built on the foundation of this particular 


 EQUALITY OF OPPORTUNITY for men and women in the society is another 

goal. It is closely related to freedom of choice, because it says that all people

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should approximately the same degree of freedom – to exercise their rights as

consul workers and enterprises.

The goal of  ECONOMIC SECURITY means that we want the members of 

economic society to have enough money to be able to buy adequate food, clothing,

shelter and other necessities.

Widespread poverty not only means failure to achieve the goal of economic

security for these people, but it also raises serious questions about whether we are

achieving the goal of  ECONOMIC JUSTICE in society. Not everyone agrees on

the meaning of fairness and justice in economic life, but it goal that nearly

everyone feels is important to define and work toward.

Finally, there is one economic goal that is not limited to the boundaries of the

country, but spreads overseas to other countries. This is the goal of 

 INTERNATIONAL BALANCE . We want to maintain a strong and balanced

relationship in foreign trade and international payments.

Failure to achieve this goal not only causes serious economic problems at home

and abroad, but also increases international tensions threaten world peace.

 Activities of Different Industrial Association In Relation To


An Industrial association can be defined as an association that supports

andprotects the rights of a particular industry and the people who work in that 

industry.Industrial associations lobby and urge governments or its agencies to take stronger 

action on things affecting their members or their line of interests. Modern

industrial associations were formed to provide the needed supports and enabling

environment to promote the growth of entrepreneurship culture.

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 NACCIMA was founded in 1960 as a voluntary association of manufacturers,

merchants, mines, farmers, financers, industrialists, trade groups who network 

together for the principal objectives of promoting, protecting and improving

 business environment for micro and macro benefits. The body performs manyfunctions.

•  It provides a network of national and international business contacts and 


•  It promotes, protects and develops all matters affecting commerce,

industry, mines and agriculture and other form of private economic

activities by all lawful means.

•  It promotes, support and oppose legislative and other measures affecting 

commerce, industry, mines and agriculture in Nigeria.

•  It contributes to the overall economic stability of the community.

•  It encourages an orderly expansion and development of all segments of 


•  It contributes to the social, political and economic development of Nigeria.

4. Manufacturers’ Association of Nigeria (MAN)

This was formed as a company limited by guarantee to perform important roles on

 behalf of its members as well as the development of the country. It sectoral groups

include food, beverages, and tobacco, chemicals and pharmaceuticals, domestic

and industrial plastic, rubber and foam, basic metal, iron and steel and fabricated

metal products, pulp, paper and paper products, printing and publishing, electrical

and electronics, textile, wearing apparel, carpet, leather and leather footwear, et

cetera. The Manufacturers’ Association of Nigeria (MAN) performs so many


•  It encourages a high standard of quality for members’ products through the

collection and circulation of useful information and the provision of advice.

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•  It encourages the patronage of Nigerian made products by Nigerians and 

by consumers in foreign countries.

•  It develops and promotes the contribution of manufacturers to the national 

economy through government.•  It provides the manufacturers in the country with information on industrial,

labour, social, legal, training and technical matters.

5. Nigerian Employers Consultative Association (NECA)

It is the umbrella organization for employers association of Nigeria and was

founded in 1959 with its memberships drawn from the private and public sector 

employers associations. It performs many roles in Nigeria.

• It promotes and encourages any technical or other forms of education for 

the development of employees.

• It assists in the maintenance and promotion of good relations between

members and their employees.

• It encourages the payment of equitable rates of wages and salaries to the


• It promotes influences, modifies or seeks the appeal of legislative and other 

resources affecting or likely to affect the employers.

Small and Medium Enterprises Agencies of Nigeria (SMEDAN)

This is a “One stop shop” for micro small and medium enterprises development.

SMEDAN was established by the SMEDAN Act of 2003 to promote the

development of the MSME Sector of the Nigeria economy. Its mission is to

facilitate the access of micro, small and medium entrepreneurs/investors to all the

resources required for their development.

These industrial associations provide increased support for entrepreneurial

development in the forms of training, logistics and funding for their members.

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 Emerging entrepreneurs are therefore encouraged to join any of these

associations in order to access the numerous benefits they provide.

Entrepreneurship Supportive Agencies In Nigeria

Manufacturer Association of Nigeria (MAN)

MAN was formed as a company limited by guarantee to perform important roles

on behalf of its members. It was established as a national industrial association in


The activities of MAN are focused on sectoral group interactions.

The list of sectoral groups includes:

•  Food, Beverages and Tobacco .

• Chemicals and pharmaceutical 

•  Domestic and industrial plastic, rubber and foam.

•  Basic metal, iron and steel, and fabricated metal products.

•  Pulp, paper and paper products, printing and publishing.

•  Electrical and electronics.

• Textile, weaving, apparel, carpet, leather and leather footwear.

• Wood and wood products including furniture.

•  Non-metallic mineral products.

•  Motor vehicle’ and miscellaneous Assembly.

•  MAN export group.

Functions of Manufacturer Association of Nigeria (MAN)

This industrial association perform the following functions among many;

•  It encourages the patronage of Nigerian made products by Nigerians and 


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•  It encourages high standard of quality for member’s products through the

collation and the provision of advice.

•  It provides’ for manufacturers venue for formulating and influencing 

 general policy, in regard to industrial matters.

National Association of Small And Medium Enterprises (NASME)

It is a private sector organization in Nigeria. Its membership is drawn from small

and medium scale enterprises. It is devoted’ to networking capacity building,

 policy advocacy and promotion of the performance of its members firms and

operators. NASME works to improve the welfare of its members and make input

in industrial policy.

Analysis and publications from NAMSE on business environment,

competitive enlightenment and policy making are useful to Nigerian


Member firms of NASME face the daily challenge of unsupported macroeconomic


Nigerian Association of Chambers Of Commerce, Industry, Mines and

Agriculture (NACCIMA)

This body is a voluntary association of manufacturers, merchants, mines, farmers,

financiers, industrialists, trade groups who network together for the principal

objectives of promoting, protecting and improving business environment for micro

and macro benefits. The first Chamber of Commerce in Nigeria, the Lagos

Chamber of Commence was founded in 1988 while NACCIMA, the umbrella

organization for all chambers of Commerce in Nigeria was established in 1960.

Roles of NACCIMA

•  It contributes to the socio-politico-economic development of Nigeria.

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•  It provides a network of national and international business contacts and 


•  It promotes and develops all matters affecting commerce, industry, mines

and agriculture and other forms of private economic activities.•  It considers legislative and other measures affecting commerce, industry,

mines and agriculture in Nigeria.

Small and Medium Enterprises Development Agency of Nigeria (SMEDAN)

This body was established to promote the development of micro, small and

medium Enterprises (MSME). Its mission is to facilitate the access of micro, small

and medium entrepreneurs/investors to all resources required for their 

development. Its vision is to establish a structured and efficient micro, small and

medium enterprises sector that will enhance sustainable development of Nigeria.

If SMEDAN functions optimally it will be one of the most veritable channels to

combat poverty.

Like any other agency of its kind, harsh economic condition couple with week 

government institutions does not help its performance.

National Poverty Eradication Programme (NAPEP)

This programme aimed at poverty eradication and empowerment. There are four 

major intervention schemes in Nigeria’s current poverty eradication programme.

One is Youth Empowerment Scheme (YES), it is targeted at youth. YES is

more than employment scheme as it is aimed at the provision of training

opportunities, skills acquisition, employment opportunities, wealth creation

through enhanced income generation, improved social status and rural


It is primarily aimed at the economic empowerment of Nigerian youths. Its impact

is still below expectation.

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Micro Finance Institutions (MFIS)

These financial institutions are set up to meet the credit needs of the rural and

urban poor, artisans, farmers, petty traders, vulcaniser, etc. CBN gave a directive

to all erstwhile community Banks to convert to MFls by recapitalizing to meet thenew guidelines for the setting up of MFls. One of the challenges microfinance face

in Nigeria is that they do not reach to great number of poor Nigerians. The effect

of not appropriately addressing this situation would further accentuate poverty and

slow down economic growth and development.

Small and Medium Industries Equity Investment Scheme (SMIEIS)

The Scheme requires all banks in Nigeria to set aside ten (10) percent of 

their Profit After Tax (PAT) for equity investment and promotion of small and

medium enterprises. The 10% of the profit After Tax (PAT) to be set aside

annually shall be invested in small and medium enterprises as the banking

industry’s contribution to the federal governments efforts towards stimulating

economic growth, developing local technology and generating employment.

Activities covered by the scheme include all legal business activity with the

exception of trading/merchandising and financial services. Beneficiaries areexpected to comply with guidelines of the scheme and ensure prudent utilization

of fund. Like its other counterparts its performance is still below expectation.

Functions Of Support Agencies In Small And Medium Scale Industrial  


What are the functions of support agencies in small and medium scale

industrial development in Nigeria?

Some supportive agencies are established by the government at all levels to

facilitate the promotion of entrepreneurship in Nigeria. These agencies are

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established to cope with the dynamics of the economy at a particular time. Their 

 basic functions can be discussed under these roles.

1.  Participatory

2.  Regulatory3. Facilitating 

 Participatory Agencies

The agencies in this category aid in providing goods and services which are best

 produced by the government. They provide goods and services that are highly

subsidized or goods produced below the average cost. The services provided by

these agencies are essentially to encourage entrepreneurship. Examples are

FERMA, Federal Road Maintenance Agency, public corporations such as PHCN,

 NEMA, FAAN etc.

 Regulatory Agencies

These are agencies established for regulating business. They are involved in

inspection of facilities, laboratory test of products, approval of facilities and

 product etc. They include the following:

•  Standards Organization of Nigeria (SON)

•  National Agency for Food and Drugs Administration and Control 


•  National Drug Law Enforcement Agency (NDLEA).

• Federal Environmental Protection Agency (FEPA)

•  State Environmental Protection Agency (SEPA).

Facilitative Agencies

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These are agencies set up to facilitate the establishment and successful existence

of small scale industries. They are saddled with the responsibility of ensuring

conducive environment for SMEs. Their function may include specialized fund for 

SMEs or otherwise. In this category we have such institutions as:

• The Industrial Training Fund (ITF)

•  Federal Institute of Industrial Research Oshodi (FIIRO)

•  Bank of Industry (BOI)

• The Industrial Development Centre (IDC)

• Universities and Polytechnics

•  Nigerian Export Promotion Council (NEPC)

• The National Directorate of Employment (NDE)

•  National Poverty Eradication Programme. (NAPEP)

• Small and Medium Enterprise Development Agency of Nigeria (SMEDAN)

 Industrial Association

Government has also established some industrial association to foster industrial

harmony. These associations were created by law or decree at different times.

They include:

1. The Manufacturers Association of Nigeria (MAN)

2. The National Association of Small Scale industrialists (NASSI)

3. The Nigerian Employers Consultative Association (NECA).

4. The Nigerian Association of Chambers of Commerce, Industry, Mines

and Agriculture (NACCIMA).


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Federal Government especially is in collaboration with some international bodies

to promote small and medium scale industries, Just as they do in other sectors,

their functions cover funding, research and development etc. these bodies


• The World Bank 

• United Nations Children’s Fund (UNICEF)

• United Nations Industrial Organization (UNIDO)

•  African Development Bank (ADB).

Roles of Commercial and Development Banks in the Promotion of Small and Medium Enterprises

The Commercial and Development Banks are contributing a lot towards the

 promotion of small and medium enterprises especially in the various functions

they carry out in their day to day operations. The potential entrepreneurs are

therefore to benefit from the functions and assistance rendered by these financial


Financial Institutions Involved In Entrepreneurship Development

The Nigerian Industrial Development Bank (NIDB), the National Economic

Reconstruction Fund (NERFUND) and the Nigerian Bank for Commerce and

Industry (NBIC) have been brought together to form the Bank of Industry (BOI).

On the other hand, the Family Economic Advancement Programme (FEAP),

Peoples Bank of Nigeria (PBN) and the Nigerian Agricultural and CooperativeBank (NACB) have become a single Bank, the Nigerian Agricultural, Cooperative

and Rural Development Bank (NACRDB).

Bank of Industry (BOI)

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The Bank of Industry (BOI) is owned by the Federal Government of Nigeria. This

 bank emerged from the government’s rationalization of some development

Finance Institutions (DFIs) namely the Nigerian Bank for Commerce (NBCI),

 Nigerian Industrial Development Bank (NIDB) and the Nigerian EconomicReconstruction Fund (NERFUND).

The Bank of Industry has four subsidiaries from its merger:

• Leasing Company of Nigeria (LECON)

•  NIDB Trustees Limited (NTL)

•  NIDB Consultancy and Finance Limited (NIDB Consult)

• Industrial and Development Insurance Brokers (IDIB)

Types of Projects Financed by BOI

• Projects in the areas where Nigeria has comparative advantage

• Projects that engage in the efficient conversion of local raw materials into

finished products

• Ventures that can be least cost producers of good quality products that

could be successfully marketed locally and/or internationally.

Products and Services Deliverable by BOI

• Medium and Long-term loans.

• Working Capital Finance

• Equity Financing

• Management of dedicated funds

• Loan guarantees

• Co-financing

• Investments in Corporate Boards

• Business Development Services

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• Lease financing

• Trusteeship

• Stock Brokerage

Foreign Exchange Dealership• Insurance Brokerage

The huge SMIEIS funds currently accumulated by the Banks will help BOI fulfill

its mandate. It is expected that the bank’s contribution to the economy will grow

stronger as the implementation of the economic reforms progresses to widen the

scope of needs for economic/business development financing.

Role of Personal Savings And Portfolio Investment 

What Are The Role of Personal Savings And Portfolio

Investment in National Economic Development?

The contribution of entrepreneurship in the promotion of economic development

can not be underestimated. The entrepreneurs are the change agents and the prime

movers of the economy. Entrepreneurs use human and economic resources to help

them to implement their ideas. Economic resources include money and equipment.

When you have estimated how much start-up capital you need for your new

business, the next questions is; where do you get that capital from? You will need

the full amount at the start because the money is for initial investments and

working capital for the first months of operation. It is therefore important that you

do not start setting up your business until you have all the start-up capital you


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In terms of  personal finance, saving refer to preserving money for future use-

typically by putting it on deposit – this is distinct from investment where there is

an element of risk.

Savings can be described as substantial part of income kept for future use by an

individual, households a firm and government. In other words savings is the

 portion of the income that is set aside for further investment or for future use.

Reasons For Savings

Savings is not a new phenomenon in economic circle. There are a number of 

reasons for savings depending on the circumstantial problems/issues surroundingit. Such reasons include:

•  Investment purposes

• For family up-keeping 

• To acquire assets

• For special needs

• For old age

Methods of Savings

1. Banks

a. Current 

b. Savings

c. Deposit 

2. Thrift and Cooperatives

3. Financial institutions

4. Buying of shares

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Saving differs from savings in that the first refers to the act of putting aside

money for future use, whereas the second refers to the money itself one saved.

 Portfolio investment is strictly connected with a portfolio diversification process.

It is part of the capital account on the balance of payments statistics.

Some examples of portfolio investment are:

• (Government) bonds

• Shares and stocks

• Debentures and 

• Acquisition of assets 

Brokerage firms are most commonly thought of in relationship to the sales and

 purchase of stock/shares. Stock can help your money grow in two ways. If the

share price of your stock goes up, you can draw a profit also known as a capital

gain – when you sell your shares.

Some stocks pay investors a dividend, which is a portion of the company’s profits,

on a regular basis.

Stock prices are driven by supply and demand. If a company is doing well or its

shares are selling at a fair price, many investors may buy its stock, creating

demand. Demand drives up the price. If the company is not doing well-or the share

 price has been driven too high-investors may stop buying or begin selling. Stocks

are bought and sold at the stock market.

This is where public companies seeking capital meet investors who seek profits.

At the stock market, each stock is registered with a particular exchange. Today

there are stock markets allover the world. Stocks are bought and sold on a daily

auction conducted by stock traders and specialists.

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When a stock market does well and prices rise over a period of time, its called a

 bull market. When prices decline for a period of time, it’s called a bear market.

Differences between Shares and Debentures

• Shareholders are effectively owner’s debenture-holders are creditors.

• Shareholders may vote for Annual General Meetings (AGMs) and be elected as

directors; debenture-holders may not vote at AGMs or be elected as directors.

• Shareholders receive profit in form of dividends; debenture holders receive a

fixed rate of interest.

• If there is no profit, the shareholder does not receive a dividend; interest is paid

to debenture-holders regardless of whether or not a profit has been made.




In order to realise the benefits of promoting small and medium scale enterprises,

the Federal Government has employed monetary, fiscal and industrial policy

measures to achieve its desired goals, which included:

(i) Employment generation,

(ii) Industrialization particularly of rural areas and even development through

industrial dispersal. Accordingly, it has enunciated policies through national

development plans, annual budgets and its agencies to provide financial assistance,

training and some infrastructural support to SMEs.

Specifically, the government has been active in the following areas:

(i) Funding and setting up industrial areas and estates (to reduce overhead costs);

(ii) Providing local finance through its agencies - the Central Bank of 

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 Nigeria Federal Ministry of Industries (Small-Scale Industry

Credit Scheme - SSICS), Nigerian Industrial Development Bank 

(NIDB), Nigerian Bank for Commerce and Industry (NBCI);

(iii) facilitating and guaranteeing external finance through the WorldBank, African Development Bank and other international institutions willing to,

and capable of assisting SMEs;

(iv) Facilitating the establishment of the National Directorate of 

Employment (NDE) which also initiates the setting up of new


(v) Setting up of the erstwhile National Economic Reconstruction

Fund (NERFUND) which is a source of medium to long-term local and foreign

loans for small and medium scale businesses,  particularly those located in the rural


(vi) initiating the them Family Economic Advancement Programme

(FEAP); and

(vii) provision of technical, training and advisory assistance

 programmes through establishment of Industrial Development Centres, etc.

1. Industrial Development Centres (IDCs)

Essentially, IDCs are established to provide extension services to SMEs in areas

such as technical appraisal of loan application, training of entrepreneurs,

managerial assistance, product development, production planning and control as

well as other extension services. The first IDC was established in Owerri in 1962

 by the then Eastern Nigeria Government and taken over in 1970 by the Federal

Government. Subsequently, in the Second National Development Plan (1970 -

1975), the Federal Government initiated the setting up of more IDCs at Zaria,

Oshogbo, Maiduguri, Abeokuta, Sokoto, Benin City, Uyo, Bauchi, Akure, Ilorin,

Port Harcourt, Kano and Ikorodu.

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2. Small Scale Industries Credit Scheme (SSICS)

A basic thrust of government’s financial policy with respect to SMEs is the

 provision of credit facilities to ensure their development and sustenance.Accordingly, the Federal Government set up in 1971, a Small Industries

Development Programme to provide technical and financial support for SMEs.

This led to the setting up of the Small Industries Credit Committee (SICC) to

administer the Small Industries Credit Fund (SICF) throughout the country. The

SICF was formally launched as the Small Scale Industries Credit Scheme (SSICS)

in the Third National Development Plan, 1975-1980. The scheme, which operated

as a matching grant between the Federal and State Governments, was designed to

make credit available in liberal terms to SMEs and was managed by the states’

Ministries of Industry, Trade and Co-operatives through the Loan Management

Committees (LMCs). However, the SSICS which was meant to be a revolving

loan scheme became increasingly starved of funds arising from massive loan

repayment defaults, such that the Federal Government, by 1979 extricated itself 

from the scheme and introduced a new policy of using the Nigerian Bank for 

Commerce and Industry (NBCI) as an apex financial body for funding SMEs. The

rationale was that banking discipline and prudence would not only ensure the flow

of financial assistance to‘bankable’ projects, it would also facilitate loan recovery.

3. The Nigerian Bank for Commerce and Industry (NBCI)

The NBCI was set up by the Federal Government through Decree 22 of 1973 to

 provide, among other things, financial services to indigenous business community,

 particularly SMEs. The NBCI operated as the apex financial institutional body for 

SMEs. It also administered the SME I World Bank Loan Scheme of US$41

million secured in 1984. The scheme had maturities period ranging from 4 to 10

years, including a moratorium of 2 to 4 years, and the foreign exchange risk was

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 borne by the Federal Government. NBCI has been merged with NIDB and

 NERFUND to form the new Bank of Industry.

4. The Nigerian Industrial Development Bank (NIDB)The NIDB, which was set up in 1964, provided credit and other facilities to

industrial enterprises especially medium and large scale ones. Some small-scale

enterprises also come under its scope of financing whose terms are relatively soft.

An attractive feature of NIDB’s financing is its policy of equity participation in

the paid up share capital of some of the projects financed.

5. Central Bank of Nigeria (CBN)

The Central Bank of Nigeria has since 1970 been instrumental to the promotion

and development of enterprises particularly in the small and medium scale sub-

sector. The CBN credit guidelines required that the commercial and merchant

 banks allocate a minimum stipulated credit to sectors classified as preferred,

including the SMEs. The CBN also stipulated differential interest rates for sectoral

credit allocations with varying moratorium on the repayment of loans and

advances. For instance, the CBN in 1979/80 directed that at least 10 per cent of the

loans advanced to indigenous borrowers should be allocated to SMEs. This was

subsequently raised to 16 and minimum of 20 per cent of total loans and advances

from April 1980 and 1990, respectively.

However, given the uneconomic nature and cumbersome administration of such

loans, banks preferred to pay prescribed penalties rather than channel credit to the

SMEs. The failure of the banks to meet the prescribed credit allocation led the

CBN to mandate such defaulting banks as from 1987, to make such lending

shortfalls available to it for onward transfer to the relevant sector or sub-sector.

This brought about a remarkable improvement in credit to the SMEs as banks

continued to meet this minimum sectoral credit requirement while it lasted.

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6. World Bank SME II Loan Scheme

In order to promote the establishment of a new generation of viable investments

and services as well as improve the quality and range of financial and extension

services available to SMEs, the Federal Government negotiated for a financialassistance package from the World Bank from 1987. The loan package was

approved in 1989 and the SME Apex Unit located in the CBN executed it. The

total project cost was estimated at $418 million, including $264.4 million (63%) in

foreign exchange. The World Bank provided a loan of $270.0 million or 65% of 

the total project cost (100% of the foreign exchange requirements and 4% of local

costs). The balance of $148 million was to be financed by the beneficiary

enterprises and the participating banks (Pbs) from their own resources. The Pbs

are to bear the credit risk while the foreign exchange risk is to be borne by the

Federal Government. The loan was sub divided into five components, namely, line

of credit ($200 million), pilot financial restructuring ($20 million), pilot mutualist

credit guarantee scheme ($45 million), equipment leasing ($25 million) and others

($20 million). Pilot financial restructuring and pilot mutualist credit guarantee

scheme were cancelled and replaced with the urban mass transit scheme. Term

loans provided under the programme have a maturity period of 15 years, including

a grace period of 3 years. The scheme also provided working capital to the

 beneficiaries with maturity period of 3 years and 1-year grace period. When the

 programme began, approval of projects and disbursement of funds were very slow

 because of inadequate publicity, lengthy and cumbersome approval processes,

assumption of all credit risks by the Pbs and he floating of the naira, which

affected the viability of many projects.

7. National Economic Reconstruction Fund (NERFUND)

The Federal Government, through Decree No. 2 of 26th January 1989 established

the National Economic Reconstruction Fund (NERFUND). The main focus of 

 NERFUND is the provision of soft, medium to long term funds for wholly

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 Nigerian owned SMEs in manufacturing and agro-allied enterprises, mining,

quarrying, industrial support services, equipment leasing and other ancillary

 projects. The NERFUND decree provides for eligible enterprises under the

scheme, as SMEs, with fixed assets plus cost of new investment (land excluded),not exceeding N36 million and sourcing not less than 60 per cent of their raw

materials locally in the case of manufacturing projects. The interest rates payable

on funds obtained from NERFUND are expected to be slightly lower than the

market rates and shall be fixed during the duration of the loan. Furthermore, the

rates payable by the participating banks (Pbs) are limited to 1.0 per cent above

 NERFUND’s cost of borrowing the particular fund. Pbs are allowed a spread of 

not more than 4.0 per cent over their cost of funds. For all types of facilities, and

irrespective of the ability of the beneficiary to pay maturing obligations, it is

required that a Pb repays NERFUND, failing which the CBN will automatically

debit the bank’s accounts with it. Thus, Pbs are expected to bear the full credit risk 

involved in financing SMEs under the scheme. The fund has granted loan

approvals to a number of projects spread across the country. The number rose

significantly from 5 in 1989 to 75 in 1990 after which it maintained a downward

trend. NERFUND’s investments in the projects have been substantial, the total

naira component was N774.2 million, while the counterpart approval in foreign

exchange was $97.5 million.

8. State Governments

State Governments, through their Ministries of Commerce and Industries also

 promote the development of SMEs. In this connection, some State Governments

 promote the SMEs through state-owned Finance and Investment companies which

 provide technical and financial assistance to SMEs. However, owing to numerous

constraints, some were less active than others.

9. The National Directorate of Employment (NDE)

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Established in 1986, the NDE is another channel through which government has

 promoted the development of SMEs. In January 1987, NDE launched a number of 

 programmes to generate selfemployment. These were (i) Small Scale Industries

(SSI), (ii) Agriculture, (iii) Youth Employment and Vocational SkillsDevelopment and (iv) Special Public Works. The programme operates two credit

guarantee schemes complemented by an entrepreneur development programme to

assist the SMEs. The two credit schemes are the Graduate Job Creation Loan

Scheme (GJLS) and the Matured People’s Scheme (MPS). Facilities under the two

schemes are repaid over a five-year period at a concessionary interest rate with

varying periods of moratorium. SME projects covered included soap making, food

 processing, flour milling.

10. International Financial Assistance

Government has continued to approach international financial agencies to source

needed foreign capital for the SMEs. Such international agencies include the

World Bank and its affiliates and the African Development Bank (ADB). The

Federal Government often guarantees and agrees to monitor or co-finance the

SMEs receiving such external financial support. For example, in 1988, the African

Development Bank granted an export stimulation loan of US$252 million for 

SMEs in Nigeria. The loan is repayable in 20 years with a concessionary interest

rate of 7.3 per cent.

11. Bank’s Equity Holding in Companies

In its 1988 Budget, the Government amended the Banking Act Section 73(f) of 

1969, which restricted banks from holding equity shares in non-banking related

enterprises. The Government thus provided opportunities for Banks to participate

in the ownership of business. The policy objectives are to stimulate increased

availability of equity capital to SMEs and help in restructuring their capital bases

for survival and growth.

12. The Second Tier Securities Market (SSM)

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In order to deal with the bias of the capital market in favour of large enterprises,

the Second Tier Securities Market (SSM) was established in 1985 to assist small

and medium sized indigenous enterprises in accessing funds from the capital

market for expansion and modernisation.13. Other Technical Training and Extension Services Programmes

This includes activities of Industrial Training Fund (ITF), Raw Materials Research

and Development Council (RMRDC), Federal Institute of Industrial Research,

Oshodi (FIIRO), Project Development Agency (PRODA), and Centre for 

Management Development (CMD).

An Appraisal of Policy Measures and Incentives

An appraisal of the various policies and incentives aimed at promoting the

development of the SMEs showed various degree of success. The implementation

of the IDCs was poor and their performance devoid of luster. This is because

many of them were inadequately equipped and funded. The SSICs was largely

unsuccessful because of the dearth of executive capacity to appraise, supervise and

monitor projects. As a result many unviable projects were funded which led to

massive loan repayment default. Consequently, the scheme, which was expected

to be revolving, had to be stopped.

As the main Federal Government instrument for SME credit provision, the NBCI

approved a total of 797 projects, amounting to N965.5 million between 1973 and

1989 and disbursed N141.82 million between 1981 and 1988. These covered

various sub-groups such as textiles, paper products etc. The Bank financed a total

of 126 projects under the World Bank Loan Scheme 1 and many others were

cancelled for failure of project sponsors to contribute their counterpart funding.

The NBCI has however, suffered major problems culminating in a state of 

insolvency in 1989. The NIDB has played a major role in SMEs financing, its

assistance covers 17 sub-sectors of industry. The NIDB disbursed a total of N

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174.6 million to the SMEs between 1980 and 1988. The level of NIDB’s direct

 project sanctions and disbursement to the SMEs since 1989, however, has tended

to fluctuate downwards due to the establishment of NERFUND, the SME II Loan

Scheme, amongst other reasons.

The CBN has continued to play a leading and catalytic role in channeling credit to

the SMEs through its guidelines to the banks. This has resulted in expanded credit

to the SME sub-sector. For example, hanks’ loans and advances to the SMEs rose

from N113.4 million in 1980 to N1,454.3 million, N5,900 million, N20.400

million and N42,302.1 million in 1986, 1990, 1992, and 1996, respectively. Loans

and advances to the SMEs as a percentage of total loans rose from 1.8 per cent to

9.3, 22.9, 40.0 and 26.8 per cent in 1980, 1986, 1990, 1992 and 1996, respectively.

 NERFUND since its inception, and up to 1994, approved 373 projects with

disbursements initiated on 200 and commitment of US$80.9 million and N333

million. About 70 of the sub-projects have been fully disbursed while 21 of them

have fully amortized the total loan value. Despite these successes, NERFUND was

confronted by a number of problems. Evidence in this regards suggest poor and

untimely loan recovery rate, while demand for loans have plummeted after 1990

 because of concern for foreign exchange risk which was borne by the borrower.

Furthermore, the SME Apex Office approved a total of 211 projects for US$132.8

million between 1990 and end March 1994 when projects approval closed. Total

disbursements of $107.1 million as at June 1996 resulted in the establishment of 

85 new SMEs and the expansion, diversification and modernization of 102

existing ones. Also, the number of SMEs listed on the Second Tier Market (SSM)

has risen to 16, 19 and stood at 20 in 1990, 1991 and 1995, respectively. While at

least 4 SMEs have moved to the Main List of the market. This shows increasing

use of the capital market by the SMEs to raise funds for expansion and


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Strategy means a deliberate and well planned course of action

designed to achieve specific objectives.

Growth Strategy

It defined as a strategic plan formulated & implemented to

expand the operations of a business firm. The main strategies for

growth are as follows:


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Diversification → Internal Growth


Subcontracting → External Growth

 Joint Venture


Expansion and diversification are in the form of internal growth.

Internal growth implies to increase in scale of operations without

 joining hands with other firms.

Market Penetration

It increases the sales of existing product in the existing markets

for eg. LML launched a scheme of exchanging old scooter for new

to increase its sales, Titan

Company now recently announced a scheme as exchange offer.

Market Development

It involves exploring new markets for existing products. Eg.:


Product Development

It implies developing new or modified products for sale in the

existing markets for

eg LG recently launched a 5 categories as toothpaste, soap,shampoo, daspers etc.

Advantages of Expansion

It provides economics of large scale operation.

It face better competition in the market.

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Expansion can be done by his own funds.

Limitation of Expansion

Sometimes Growth will take show.

It is not always possible to grow in the present product


Problem in Expansion

 Technology often necessary to upgrade technology.

Marketing Expansion is possible & profitable only when

increasing the output.

Risk : It involves additional risk.


 The firms introduce or add a new products or markets to its

existing business line.

 This approach is called as diversification. It is a process of entry

into a field of business which is new to an enterprise several

companies business houses both in private & public sectors have

adopted it. For eg ITC Ltd, originally agaretle company but it

hasdiversified in to hotel, finance, agri – business , paper & deep

sea fishing.

It has four types

Horizontal Integration

Vertical Integration

Concentric Integration

Conglomerate Integration

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Horizontal Integration

In this type of diversification a company adds up same type of 

products at the same level of production or marketing process.

 Two or more competing firms are brought together under singleownership.

Vertical Integration In this type of growth strategy new product

or services are added which are complementary to the existing

product or service line. It involves backward or forward

integration from the product.

Concentric Diversification

When a firm enter unto some business which is related with its

present business in terms of technology, marketing or both it is

called as concentric diversification. For eg. In Technology side

Nestle has added Tomato Ketchup Maggi Noodles to it range of 

baty food.

Conglomerate Diversification

When a firm enter into business which is unrelated to its existing

business in both technology as well as in marketing.

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 The business plan is written document prepared by the

entrepreneur that describes all the relevant external and internal

involved in starting a venture.

Entrepreneur should consult with many other sources in its

preparation like lawyers, accountants, marketing consultants and

engineers. Business plan could take more than 200 hrs to

prepare but varies from person to person according to their

knowledge and experience, with purpose about a new venture to

a potential investor.

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A. Name and address of business.

B. Name(s) and address (es) of principals.

C. Nature of business.

D. Statement of financing method.

E. Statement of confidentiality of report.


 Three to four pages summarizing the complete business Plan.


A. Future outlook and trends.

B. Analysis of competitors.

C. Market Segmentation.

D. Industry forecasts.


A. Product(s)

B. Service(s)

C. Size of business.

D. Office equipment and personnel.

E. Background of entrepreneurs.


A. Manufacturing process (amount subcontracted)

B. Physical Plant.

C. Machinery and Equipment.

D. Names of Suppliers of raw materials.

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A. Pricing.

B. Distribution.

C. Promotion.D. Product forecasts.

E. Controls.


A. Form of ownership.

B. Identification of partners or principal shareholders.

C. Authority of principals.

D. Management- team background.

E. Roles and responsibilities of members of organization.


A. Evaluate weakness of business.

B. New technologies.

C. Contingency Plans.


A. Proforma income statement.

B. Cash Flow Projections.

C. Proforma balance sheet

D. Break-Even analysis.

E. Sources and application of funds.

X. APPENDIX (contains backup material)

A. Letters.

B. Market Research Data.

C. Leases or contracts.

D. Price lists from suppliers.

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 This is prepared after total plan is written. This about 3 to 4pages

in length, this summary should stimulate the interest of the

potential investor. This highlight concise and convincing manner

the key point in the business plan stating the nature of theventure, financing needed, market potential, and supports to why

it will succeed.


 This reviews industry trends and competitive strategies. The

industry outlook ,including future trends and historical

achievements, insight of new product developments in this

industry. Competitor should be identified, with appropriate

strengths and weakness described and how will it affect the new

ventures potential success in the market.


It states the product produced by venture which includes patent,

copyright, or trademark status. It also gives a brief idea where

the business will be located including the construction of building,

leased or owned. In description of venture the type of office

equipment will be required whether it will be purchased or

leased. He (entrepreneur) should also look at the management

experience, stating their education, age, special abilities and



 This includes details of manufacturing process a product, which is

very necessary. If the manufacturing is to be carried out in whole

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or in part by the entrepreneur, he or she will need to describe to

physical plan layout: the machinery and equipment needed to

perform the manufacturing operations: raw material and

suppliers names, addresses, and the terms; costs of manufacturing and any future capital equipment needs. It should

also include state subcontractors name and addresses; costs of 

subcontracted manufacturing; raw material required for



 The marketing plan represents a significant element in the

business plan for a new venture. Marketing planning should be an

annual activity that focuses on implementing decisions related to

the marketing mix variables (product, price, distribution, and

promotion). Like the annual budgeting cycle, market planning has

also become an annual activity and should be incorporated by all

the entrepreneurs, regardless of the size or type of the business.

 These marketing plans must be monitored frequently, especially

in the early stages of start up.


 The organizational plan describes the venture form of ownership

i.e. whether it is proprietorship, partnership or a corporation. If 

the venture is a partnership, the term of partnership should be

included, name of partners, term of agreement, specimen

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signatures of the partners etc. If it is a corporation venture than it

is important to detail the shares of the stock authorized, share

options, names and address, resumes of the directors and

officers of the corporation. If it is an incorporation venture than itshould state the principal shareholders and shares owned by

them; type and number of shares stating voting or non-voting

stocks have been issued, members of board of directors, check

signing authority or control. The plan also states how many

members are there in management team and their background,

their roles and responsibilities stating their salaries, bonuses or

other forms of payment for each members of the management

team. This is also helpful to provide an organization chart

indicating the line of authority and responsibilities of the

members of the organization. This information provides the

potential investor with a clear understanding of who controls the

organization and how other members will interact in performing

their management functions.


All ventures face some potential hazards, given the particular

industry and competitive environment. An entrepreneur should

make assessment of risk and prepare an effective strategy to

deal with them. Even if these factors present no risks to the new

venture, the business plan should discuss why that is the case.

Contingency plans and strategies illustrate to the potential

investor that the entrepreneur is sensitive to important risks and

is prepared should any occur.

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 The financial plan should include proforma income statements,

break –even analysis, proforma cash flow, proforma balance

sheet, and proforma sources and uses of funds.


It generally contains business plan generally back up material

that is not necessary in the text of the document. Reference to

any of the documents in the appendix should be made in the plan

itself. Letters from customers, distributors or sub- contractors are

examples of information that should be included in the appendix.

Any documentation of information that is secondary data or

primary research data used to support plan decisions should also

be included. Leases, contracts or any others types of agreement

that have been initiated may also are included in the appendix. It

should also include price lists from suppliers and competitors may

be added.


A business plan is a crucial component for an entrepreneur. A

business plan is presented to a bank to obtain funds in the initial

stage of a project. It is a monetary rule that a business plan has

to be presented to a bank before the release of funds by the

financial institutions. Hence, business plan is a stepping- stone

for an entrepreneur in the commencement of a project.


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Generally a poorly prepared business plan can be blamed on one

or more of the following factors:

Goals set by the entrepreneur are unreasonable.

Goals are not measurable.

 The entrepreneur has not made a total commitment to the

business or to the family.

 The entrepreneur has no experience in the planned business.

 The entrepreneur has no sense of potential threats or

weaknesses to the business.

No customer need was established for the proposed product or


Setting goals requires the entrepreneur to be well informed about

the type of business and the competitive environment. Goals

should be specific and not so mundane as to lack any basis of 

control. For example, the entrepreneur may target a specific

market share, units sold, or revenue. These goals are measurable

and be monitored overtime.

In addition, the entrepreneur and his or her family must make a

total commitment to the business in order to be able to meet the

demands of a new venture. For example, it is difficult to operate

a new venture on a part- time basis while still holding on to a full-

time position. And it is difficult to operate a business without an

understanding from family members as to the time and resources

that will be needed. Lenders or investors will not be favorably

inclined toward a venture that does not have full- time

commitment. Moreover, lenders or investors will expect the

entrepreneur to make a significant financial commitment to the

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business even if it means a second mortgage or a depletion of 


Generally, a lack of experience will result in failure unless theentrepreneur can either attain the necessary knowledge or team

up with someone who already has it. For example, an

entrepreneur trying to start a new restaurant without any

experience or knowledge of the restaurant business would be


 The entrepreneur should also document customer needs before

preparing the plan. Customer needs can be identified from direct

experience, letters from customers, or from marketing research.

A clear understanding of these needs and how the entrepreneur’s

business will effectively meet them is vital to the success of the

new venture.