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CHAPTER ONE
INTRODUCTION
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.
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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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
development.
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 DEFINED:
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.”
Schumpeter
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
advances.
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
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.
NEED FOR ENTREPRENEURSHIP
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-
EMPLOYMENT GENERATION:
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.
SMALL BUSINESS DYNAMISM:
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.
BALANCED ECONOMIC DEVELOPMENT:
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.
FACTORS INFLUENCING ENTERPRENURESHIP
The emergence of entrepreneurs in a society depends upon closely interlinked
social, religious, cultural, psychological, and political and economic factors.
FAMILY TRADITION:
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:
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.
PSYCHOLOGICAL FACTORS:
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
entrepreneurship.
POLITICAL FACTORS:
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.
ECONOMIC POLICIES:
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.
QUALITIES OF AN ENTREPRENEUR
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
others.
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.
ENTREPRENEURIAL FUNCTIONS
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
distributor.
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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CHAPTER TWO
ENVIRONMENTAL SCANNING AND SECTORAL STUDIES
SWOT ANALYSIS
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
strategies.
S- Strengths.
W- Weaknesses.
O- Opportunities.
T- Threats.
STRENGTHS AND WEAKNESSES:
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.
OPPORTUNITIES AND THREATS:
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.
ENTREPRENEURIAL 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.
INTERNAL ENVIRONMENT (Micro Environment)

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A) PRODUCT:
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.
B) PRICE:
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
product.
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.
C) PLACE:
The business must have a location that it can afford, and that is convenient and
suitable for customers and any supplier.
D) PROMOTION:
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 (Macro Environment)
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.
ENVIRONMENTAL ANALYSIS
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
manner.
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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CHAPTER THREE
SCOPE FOR ENTREPRENEURSHIP IN SMALL BUSINESS SECTOR
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
INDUSTRIAL 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.
AGRICULTURAL AND ALLIED INDUSTRIAL SECTOR
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
marketing.
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.
SERVICE SECTOR
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
sector
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
bright.
ENTREPRENEURSHIP AND PROCESS OF LIBERALIZATION

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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.
CHANGING ROLE OF ENTREPRENEURSHIP IN THE ERA OF
LIBERALIZATION, PRIVATIZATION AND GLOBALIZATION
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
unutilized.
ENTREPRENEURSHIP AS A CATALYST FOR MEETING
GLOBAL CHANGES AND CHALLENGES
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
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
them.
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
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
resolution.
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
photograph.
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
manuscript.
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
headphones.
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.
KEY SECTORS FOR THE NEWAGE ENTREPRENEURS
Cyber Cafes
Bio Tech
Apparels
Rural Products like Handicrafts etc
Beauty Parlours……

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CHAPTER FOUR
BUSSINESS ORGANISATION
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
categories:
Land
All the natural resources – mineral deposits, the site of the
factory, water, timber etc.
Labour
All the human resources – employees.
Capital
Tools, machinery and equipment, finance that the owner invested
in the business.
Enterprise
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.
Advantages
The owner retains all the profits.
You have complete control over all the decisions that have to be
made.
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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Disadvantages
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.
Overdrafts.
Government grants.
Trade credit.
Debt factoring.
Objectives
Survival
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).
Partnerships

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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.
Advantages
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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Disadvantages
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.
Overdrafts.
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.
Objectives
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
Advantages
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).
Disadvantages
Profits are shared among more people.
A legal process has to be adhered to when setting the company
up.
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.
Overdrafts.
Government grants.
Trade credit.
Debt factoring.
Objectives
Profit maximisation.
Growth.
Status.
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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Advantages
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
business.
Disadvantages
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.
Overdrafts.
Debentures.
Government grants.
Trade credit.
Debt factoring.

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Objectives
Profit maximisation.
Growth.Maximise sales.
To be dominant in their market.
Image.
Plcs may be global companies, or multinationals (having
manufacturing plants in more than one country. In doing so, they
can:
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
country).
Receive tax benefits and government grants from more than one
country.
Franchises
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
products/services.
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
investment.
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
own.
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
continue.
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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Charities
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.
+-Objectives
To be recognised as a charity they must have one of the following
aims:
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:
Education.
Recreation.
Housing.
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.
Objectives
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
level.
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
Taxation
Objectives
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
corporations.
Sources of Finance
Central government.

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The public – TV licensing, merchandise etc.
Objectives
To provide a quality service. To manage their funds efficiently to make the best use of them.
To serve the interests of the public.
Privatisation
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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CHOICE OF FORM OF ORGANISATION
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)
served.
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
company.
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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CHAPTER FIVE
SMALL AND MEDIUM ENTERPRISES
DEFINITION, CHARACTERISTICS AND BENEFITS OF SMEs
Definition:
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
follows:
• 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.
Characteristics:
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
operations.

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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
planning.
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?
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?
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?
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?
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
idea.
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.
SOURCES OF PRODUCT / PROJECT IDEA
An entrepreneur can get idea of new product from the following
sources.
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
example.
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.
CHAPTER SIX
Entrepreneurship in Nigeria
History
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
money.
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.
ENTERPRENEURIAL DEVELOPMENT 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
population.
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
society
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
freedom.
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
Entrepreneurship
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
opportunities.
• 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
community.
• 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
functions.
• 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
employees.
• 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
1971.
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
foreigners.

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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
entrepreneurs.
Member firms of NASME face the daily challenge of unsupported macroeconomic
environment.
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
opportunities.
• 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
development.
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
Development
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
(NAFDAC).
• 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).
Others

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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
include:
• 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
institutions.
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
need.

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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.
AN OVERVIEW OF POLICIES AND INCENTIVES FOR
PROMOTING SMALL AND MEDIUM SCALE
ENTERPRISES IN NIGERIA
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
SMEs;
(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
areas;
(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
modernisation.

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CHAPTER SEVEN
GROWTH STRATEGY
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:
Expansion

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Diversification → Internal Growth
Mergers
Subcontracting → External Growth
Joint Venture
Expansion
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.:
Reliance
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
market.
Problem in Expansion
Technology often necessary to upgrade technology.
Marketing Expansion is possible & profitable only when
increasing the output.
Risk : It involves additional risk.
DIVERSIFICATION
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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CHAPTER EIGHT
INTRODUCTION TO BUSINESS PLAN
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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CONTENTS OF A BUSINESS PLANI. INTRODUCTORY PAGE
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.
II. EXECUTIVE SUMMARY
Three to four pages summarizing the complete business Plan.
III. INDUSTRY ANALYSIS
A. Future outlook and trends.
B. Analysis of competitors.
C. Market Segmentation.
D. Industry forecasts.
IV. DESCRIPTION OF VENTURE
A. Product(s)
B. Service(s)
C. Size of business.
D. Office equipment and personnel.
E. Background of entrepreneurs.
V. PRODUCTION PLAN
A. Manufacturing process (amount subcontracted)
B. Physical Plant.
C. Machinery and Equipment.
D. Names of Suppliers of raw materials.

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VI. MARKETING PLAN
A. Pricing.
B. Distribution.
C. Promotion.D. Product forecasts.
E. Controls.
VII. ORGANIZATIONAL PLAN
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.
VIII. ASSESSMENT OF RISK
A. Evaluate weakness of business.
B. New technologies.
C. Contingency Plans.
IX. FINANCIAL PLAN
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.
INDUSTRIAL ANALYSIS:
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.
DESCRIPTION OF VENTURE:
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
interest.
PRODUCTION PLAN:
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
manufacturing.
MARKETING PLAN:
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.
ORGANIZATIONAL PLAN:
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.
ASSESSMENT OF RISK:
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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FINANCIAL PLAN:
The financial plan should include proforma income statements,
break –even analysis, proforma cash flow, proforma balance
sheet, and proforma sources and uses of funds.
APPENDIX:
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.
CONCLUSION
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.
WHY BUSINESS PLANS FAIL?

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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
service.
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
savings.
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
disastrous.
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.