LAGOS CITY POLYTECHNIC/SOUTHWESTERN UNIVERSITY E-LEARNINGSCHOOL OF MANAGEMENT AND BUSINESS STUDIES

DEPARTMENT OF BUSINESS ADMINISTRATION PROGRAMME: Higher National Diploma and Bachelor of Science in Business Administration and ManagementCOURSE TITLE: ENTREPRENEURSHIP SKILLS COURSE CODE: GNS 311/312CREDIT HOURS: 3 HOURS A WEEKLECTURER: ADEGOKE, O. O. (Ph.D.)

COURSE STRUCTURE AND OUTLINE

There are five modules in this course. They are as follows:

MODULE 1 –OVERVIEW OF ENTREPRENEURSHIP

1.1 – Concept of entrepreneurship 1.2 -Evolution of Entrepreneurship 1.3 -Definition of Key Concepts 1.4 -Entrepreneurship Skills 1.5 -Essential Characteristics of Entrepreneurs 1.6 -Motivation for Entrepreneurship

MODULE 2: ENTREPRENEURIAL ENVIRONMENT 2.1 Nature, Definitions and Types of Business Environment 2.2 The Changing Environment 2.3 SWOT Analysis

MODULE 3: ENTREPRENEURIAL PROCESS 3.1 Phases of the Entrepreneurial Process 3.2 Business Opportunities 3.3 The New Business Planning Process 3.4 Creativity and Innovation

MODULE 4: BUSINESS MARKETING AND GROWTH 4.1 Marketing Activities 4.2 Business Growth 4.3 Family Business

MODULE 5: BUSINESS ETHICS, SOCIAL RESPONSIBILITY, AND PROBLEMS OF ENTREPRENEURSHIP IN NIGERIA

1 Business Ethics

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2 Social Responsibility of Entrepreneurs 3 Problems of Entrepreneurship in Nigeria

MODULE 1 –OVERVIEW OF ENTREPRENEURSHIP

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Introduction

In this module, you will be introduced to the concepts of entrepreneurship, define

entrepreneurship from various perspectives. In addition, you will understand the various

characteristics of a successful entrepreneur and what motivates them.

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Learning Outcomes

At the end of this module, you should be able:1. Have a general understanding of the concept of

entrepreneurship2. Briefly see the progression of entrepreneurship through the

centuries3. Define entrepreneurship from various perspectives4. Identify the various characteristics of a successful

entrepreneur5. Understand motivation for entrepreneurship

1.1 – Concept of entrepreneurshipEntrepreneurship is of great interest worldwide. Globally scholars and professionals alike have debated on the origin of entrepreneurship. An entrepreneur assembles and then integrates all the resources needed – the money, the people, the business model, the strategy and the risk-bearing ability – to transform the invention into a viable business. Entrepreneurship is much more than a mere creation of business, the characteristics of seeking opportunities, taking risks beyond security, having the tenacity to push an idea through to reality combined into a special perspectives that permeates entrepreneurs.

One of the greatest achievements of the global world today is the understanding of the role entrepreneurship plays in the process of economic development (Sagagi, Anyanwu, Aliu & Abimbola, 2012), High (2004) sees that entrepreneurship pervades nearly every aspect of economic development; it does not only spur growth through creativity and innovation, but also creates incremental improvements that over time exerts large cumulative effects. Successful entrepreneurship entails the cohesive process of creativity, risk taking, opportunity identification, innovation, and value addition.

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ITQs

1. Globally scholars and professionals alike have debated on ... 2. An entrepreneur assembles and then integrates all ………3. One of the greatest achievements of the global world today is

……

ITAs

1. Globally scholars and professionals alike have debated on the origin of entrepreneurship.

2. An entrepreneur assembles and then integrates all the resources needed.

3. One of the greatest achievements of the global world today is the understanding of the role entrepreneurship plays in the process of economic development

Entrepreneurship education has been introduced into the curriculum of university students by the National University Commission (NUC) to develop the initiative in undergraduates that will help them to be more creative and self-confident in whatever they undertake and to act in a socially responsible way as they come up with creative way of thinking that will eventually become a reality of either a product, service, or eventually and established venture while still a student and eventually after graduation to cub the pawns of the enemy of the economy “unemployment”.

Entrepreneurship is far above mere creation of business, though an important facet of it. The characteristics of seeking opportunities, taking risks (which may be moderate or beyond security), and having the tenacity to push an idea through to reality. Entrepreneurial mindset can be developed in individuals which can be exhibited inside or outside an organisation, in profit or not-for-profit organisations, and in business and non-business activities for the purpose of coming up with ideas. Therefore, entrepreneurship is an integrated concept that permeates an individual’s business in an innovative manner. Stokes, Wilson, and Mador (2010) entrepreneurs are seen as human beings that have:

the capacity to fulfill creative potential and discover new things; those who engage in entrepreneurial projects, involving specific practices such as

spotting opportunities, recombining resources, and organising tasks been driven by many different motivations, including extrinsic financial rewards

and intrinsic goals, such as the satisfaction form just seeing the project through recognize the opportunity, before it is taken to the market distinguished innovation from invention and/or creativity.

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ITQs

1. Entrepreneurship education has been introduced into ……………… (NUC).

2. Entrepreneurial mindset can be …………………….

1.2 - Evolution of Entrepreneurship

From the account of Kuratko (2012), the word entrepreneur is derived from the French entreprendre, meaning “to undertake”. From the business viewpoint is to start a new business. The word was originally used to describe people who ‘take on the risk’ between buyers and sellers or “undertake’ a task such as starting a new venture. The entrepreneur is one who undertakes to organize, manage, and assume the risks of business.

The evolution of entrepreneurship can be studied from various perspectives. Various periods as presented by Hisrich, Peters, and Shepherd (2013) spans through the earliest period to the 21st century.

Earliest Period

The earliest definition of an entrepreneur as a go-between was actualized by Marco Polo who attempted to establish trade routes to the Far East. As a go-between, he normally signed a contract with a money person like a venture capitalist today, to sell his goods. The entrepreneur was the merchant-adventurer who took a loan at 22.5% interest rate including insurance. The capitalist was a passive risk bearer, it was the merchant-adventurer who took the active role in trading, bearing all the physical and emotional risks.

Middle Ages

In the Middle Ages, the word entrepreneur was used to describe both an actor and a person who managed large production projects. In this situation, the individual did not take any risks, but merely managed the project using the resources provided, usually by the government of the country. An entrepreneur during the Middle Ages was the cleric – the

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ITAs

1. Entrepreneurship education has been introduced into the curriculum of university students by the National University Commission (NUC).

2. Entrepreneurial mindset can be developed in individuals which can be exhibited inside or outside an organisation, in profit or not-for-profit organisations, and in business and non-business activities for the purpose of coming up with ideas.

person in charge of great architectural works, such as castles and fortifications, public buildings, abbeys, and cathedrals.

17th Century

In the 17th century, the individual who entered into a contractual arrangement with the government to perform a service a service or to supply stipulated products is termed an entrepreneur. Since the contract price was fixed, any resultant profits or losses is for the entrepreneur. John Law was a prominent entrepreneur this period, a Frenchman that was allowed to establish a royal bank. The bank evolved into an exclusive franchise to form a trading company in the new world – the Missisippi Company. But the monopoly on French trade let to Law’s downfall when he attempted to push the company’s stock price higher than the value of its assets, leading to the collapse of the company.

Richard Cantillon in the 1700s understood Law’s mistake. He viewed the entrepreneur as a risk taker, observing that merchants, farmers, craftmen and other sole proprietors buy at a certain price and sell at an uncertain price, therefore operating at a risk.

18th Century

In the 18th century, the person with capital is different from the one who needed the capital, that is, the entrepreneur is different from the capital provider (venture capitalist now). One reason for this differentiation was the industrialization occurring throughout the world. Many of the inventions developed during this period were reactions to the changing world. Inventions developed during this period were reactions to the changing world, like the inventions of Eli Whitney and Thomas Edison. Both of which were developing new technologies but were unable to finance their inventions by themselves. Whitney financed his cotton gin with expropriated British crown property. While Edison raised capital from private sources to develop and experiment in the fields of electricity and chemistry. Both Edison and Whitney were capital users (entrepreneurs), not providers, (venture capitalists). A venture capitalist is a professional money manager who makes risk investment from a pool of equity capital to obtain a high rate of return on the investment.

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From the account of Kuratko (2012), the word entrepreneur is derived from the French entreprendre, meaning “to undertake”.

19th Century

In the late 19th and 20th centuries, entrepreneurs operated like mere managers and were viewed from an economic viewpoint. At this period entrepreneurs organized and operated an enterprise for personal gain. He contributed his initiative, skill, and ingenuity in planning, organizing, and administering the venture. He assumed the chance of loss and gain consequent to unforeseen and uncontrollable circumstances.

Andrew Carnegie was an example for this period, he invented nothing but adapted and developed new technology in the creation of products to achieve economic vitality. Carnegie, who originated from a poor Scottish family under the American steel industry, one of the wonders of the industrial world, primarily excelled through his unremitting competitiveness rather than his inventiveness or creativity.

In the mid-20th century, the notion of an entrepreneur as an innovator was established. “the function of the entrepreneur is to reform or revolutionize the pattern of production by exploiting an invention, or more generally, an untried technological method of producing a new commodity or producing an old one in a new way, opening a new source of supply of materials or a new outlet for products, by organizing a new industry. Not only to create or conceptualize but also the ability to understand all the forces in the environment. The newness consists of anything from a new product to a new distribution system to a method for developing a new organisational structure.

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ITQs

1. One of the greatest achievements of the global world today is the understanding of the role ____________________plays in the process of economic development

2. The _____________________ defines an entrepreneur as a go-between was actualized by Marco Polo who attempted to establish trade routes to the Far East.

3. In the _________________ an entrepreneur is an innovator or developer who recognizes and seizes opportunities; converts those opportunities into workable/marketable ideas; adds value through time, effort, money, or skills; assumes the risks of the competitive marketplace to implement the ideas; and realizes the rewards from these efforts”manner.

Hisrich, Peters, and Shepherd concluded by seeing entrepreneurship in the 21st century as the process of creating something of value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.

In the 21st century, an entrepreneur is an innovator or developer who recognizes and seizes opportunities; converts those opportunities into workable/marketable ideas; adds value through time, effort, money, or skills; assumes the risks of the competitive marketplace to implement the ideas; and realizes the rewards from these efforts” (Cunningham, & Lischeton, 1991).

Entrepreneurship over the years have metamorphosed merely from having a business and risk taking to a comprehensive dynamic process. Kuratko (2009) developed an integrated twenty first century definition of entrepreneurship as follows:

Entrepreneurship is a dynamic process of vision, change, and creation that requires an application of energy and passion toward the creation and implementation of new ideas and creative solutions. The essential ingredients include the willingness to take calculated risks – in terms of time, equity, or career; the ability to formulate an effective venture team; the creative skill to marshal needed resources; the fundamental skill of building a solid business; and, finally, the vision to recognize opportunity where others see chaos, contradiction, and confusion, and capture the opportunity to meet the needs and wants of customers whether present or potential ones.

3 - Definitions of key Concepts of Entrepreneurship

There is no single definition of entrepreneurship, it all depends on the focus of the one defining it and from which perspective one looks at it. The term entrepreneurship has

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ITAs

1. Entrepreneurship

2. Earliest Period

3. 21st Century

Activity (Allow 15 minutes)

Discuss briefly the evolution of entrepreneurship through the centuries.

Post your response on the LMS

gone through various periods and phases, but in our ever changing and dynamic business environment the following definitions are acceptable:

Entrepreneurship is the creation of new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying significant opportunities and assembling the necessary resources (Scarborough, 2011).

1.3.1 Three Dimensions of Entrepreneurship Definitions

To further understand what entrepreneurship is, the three dimensional framework developed by Stokes, Wilson and Mador (2010) would be looked into. According to Stokes, Wilson and Mador (2010), definitions of entrepreneurship by various authors can be categorized into three main dimensions, which focus on:

Behaviours Processes Outcomes

The three dimensions of entrepreneurship

Outcomes of entrepreneurship

Behaviours required of Processes undertaken by Entrepreneurs entrepreneurs

Figure 1.1

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Entrepreneurship as Process

Definitions here focus on what is involved and why it matters to individuals, organizations, and society as a whole. For example:

Entrepreneurship is the process of creating something new of value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence (Hisrich & Peters, 2005).

Entrepreneurship is the process by which individuals personally or within an organization pursue opportunities without regard to the resources they currently control (Stevenson & Jarilo, 1990).

Entrepreneurship is the process of starting new businesses, generally in response to opportunities, that is, pursuing opportunities by changing, revolutionizing, transforming, or introducing new products or services (Robbins & Coulter, 2013).

Entrepreneurship is generally seen as any new activity that creates organizational change and accrues economic value. Mazuyka and Birley (2002) explained that entrepreneurship is the process of:

Identifying and developing an opportunity in the form of a vision Validating and conceptualizing a business concept and strategy that help attain the vision Marshalling the required resources to implement the concept Implementing the business concept or venture Capturing the opportunity through the growth of the enterprise Extending the growth of the enterprise through sustained entrepreneurial activities Capturing greater value in the market place

The main focus of the process dimension is in the development of a new business or innovation strategy and the writing of a business plan, activities that are sometimes considered as surrogate for the entrepreneurship process itself.

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ITQs

1. Entrepreneurship is the process by which …… (Stevenson & Jarilo, 1990).

2. Entrepreneurship is generally seen as …….. economic value.

Entrepreneurship as Behaviours

These definitions highlight the role of entrepreneurs and the behaviours that distinguish them from others.

Entrepreneurship is the characteristics of seeking opportunities, taking risks beyond security, and having the tenacity to push an idea through to reality (Kuratko, 2002).

Entrepreneurship is the inspiration of an idea, the struggle of men and women against long odds, and the satisfaction that come from succeeding on one’s own (Sirropolis, 1994). Entrepreneurship is a way of thinking, reasoning and acting that is opportunity based, holistic in approach and leadership balanced (Timmons and Spinelli, 2004).

Entrepreneurship is a kind of behavior that includes: initiative taking, the organizing and reorganizing of social and economic mechanisms to turn resources and situations to practical account, the acceptance of risk or failure (Shapero, 1975).

Entrepreneurship consists of the competitive behaviours that drive the market process (Kirzner, 1973).

Entrepreneurship facilitate the introduction of new combinations by such things as introducing new products or processes, identifying new market or sources of supply or creating new organization of industry (Schumpeter, 1934).

Entrepreneurship as Outcomes

These definitions focus on the results of entrepreneurship (as a process or set of behaviours). Outcomes are usually understood in terms of new products and services, innovation, new ventures and or the creation of value for society. For example:

Entrepreneurship results in the creation, enhancement realization and renewal of value, not just for the owners but for the participants and stakeholders (Timmons and Spinelli, 2004).

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ITAs

1. Entrepreneurship is the process by which individuals personally or within an organization pursue opportunities without regard to the resources they currently control (Stevenson & Jarilo, 1990).

2. Entrepreneurship is generally seen as any new activity that creates organizational change and accrues economic value.

Entrepreneurship is the dynamic force that facilitates the creation of incremental wealth (Hisrich, Peters and Shephard, 2010).

Entrepreneurship is the introduction of new economic activity that leads to change in the market place (Simon in Sarasvathy, 1999).

Sagagi et al. (2012) further summarized the key features of the various definitions of entrepreneurship as follows:

The environment within which entrepreneurs occur The people engage in entrepreneurship Entrepreneurial behaviours displayed by entrepreneurs The creation/establishment of organizations by entrepreneurs. Opportunities identified and exploited. Innovation, whether incremental, radical and or transformative. Assuming risk, at personal, organizational and even societal levels. Adding value to the entrepreneur and society

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ITAs

1. Entrepreneurship is the characteristics of seeking opportunities, taking risks beyond security, and having the tenacity to push an idea through to reality (Kuratko, 2002).

2. Entrepreneurship is the dynamic force that facilitates the creation of incremental wealth (Hisrich, Peters and Shephard, 2010).

ITQs

1. Entrepreneurship is the characteristics of ….. (Kuratko, 2002).

2. Entrepreneurship is the dynamic force that …………. (Hisrich, Peters and Shephard, 2010).

1.3.2 Definitions of Other Entrepreneurship Terms

EntrepreneurScholars have also given several definitions of the concept ‘entrepreneur’. For instance in 1816, Putari (2006) quoted Say who asserts that the entrepreneur is the agent "who unites all means of production and who finds in the value of the products...the reestablishment of the entire capital he employs, and the value of the wages, the interest, and rent which he pays, as well as profits belonging to himself." He views entrepreneurs as change agents (Say, 1816). Knight (1921) views entrepreneurs as individuals who attempt to predict and act upon change within markets. Schumpeter (1934) conceives the entrepreneur as the innovator who implements change within markets through the carrying out of new combinations such as introduction of new techniques of production, reorganization of an industry and innovation. He further argued that the entrepreneur is an innovator, one that introduces new technologies into the workplace or market, increasing efficiency, productivity or generating new products or services (Deakins & Freel, 2009). Cantillon (circa 1730) conceptualized the entrepreneur as: the "agent who buys means of production at certain prices in order to combine them" into a new product (Schumpeter, 1951). In Quick MBA (2010), the entrepreneur is defined as one who combines various input factors in an innovative manner to generate value to the customer with the hope that this value will exceed the cost of the input factors, thus generating superior returns that result in the creation of wealth. The entrepreneur is the person who perceives the market opportunity and then has the motivation, drive, and ability to mobilize resources to meet it (Di-Masi, 2010). An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome (Wikipedia, 2010). The entrepreneur is anyone who has the capacity and willingness to undertake conception, organization, and management of a productive venture with all attendant risks, while seeking profit as a reward (Business Dictionary, 2010). Interestingly, small business experts also have their definitions of the concept ‘entrepreneur’ (Thinking like, 2010) for instance: Reiss (2010), views the entrepreneur as the person that recognizes and pursues opportunities without regard to the resources he/she is currently controlling, with confidence that he/she can succeed, with the flexibility to change course as necessary, and with the will to rebound from setbacks.

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Entrepreneurs are individuals or groups of individuals who carryout entrepreneurship activities to build business empires.

Pinson (2010) visualized the entrepreneur as a person who starts a business to follow a vision, to make money, to be the master of his/her own soul (both financially and spiritually) and is an "educated" risk taker. Murphy (2010) conceives an entrepreneur as a person who is dynamic and continues to seek opportunities and/or different methods of operation and will do whatever it takes to be successful in business. Given the above wide range of factors and behaviour which are used to define the concept ‘entrepreneur’, we can see the difficulty and impossibility of finding a unified definition of the ‘entrepreneur’. Hence, to Di-Masi (2010), the concept ‘entrepreneur’ can be best used in the past tense to describe a successful business person. Thus, entrepreneurs are business persons who identify the existence of business opportunities and based on this they create businesses thereby creating new products, new production methods, new markets and new forms of organization to satisfy human needs and wants mostly at a profit. It should also be noted that though most entrepreneurial businesses start small, entrepreneurs are not only small business owners; they can also be big business owners. This is because successful entrepreneurs, unlike small business owners, are innovative and, when operating in an enabling business environment, can rapidly create a large amount of wealth while bearing very high risk. In fact, innovation is considered to be the strategic tool of entrepreneurs; this is one of the tools that enable them gain strategic advantage over competitors (QuickMBA, 2010). Entrepreneurs are individuals or groups of individuals who carryout entrepreneurship activities to build business empires.

Intrapreneurs There given situations where an entrepreneur is not able to establish his or her own business and as such has to work in an organization. In this case they are referred to as ‘Intrapreneurs’ that is, entrepreneurs within an organization. These individuals are entrepreneurs in their own right because they pursue the exploitation of business opportunities as they emerge and are also visionaries within a given organization. Thus, once identified, these individuals should be encouraged to manifest their entrepreneurial abilities to the benefit of the organization otherwise they will be frustrated and may leave the organization or start their own businesses. Intrapreneurship is the processes and activities by which corporate organization behave entrepreneurially.

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Intrapreneurship is the processes and activities by which corporate organization behave entrepreneurially.

How does an entrepreneur differ from an intrapreneur?An entrepreneur is a person who create a venture or startup a business and nurture it, takes risks of bringing together the factors of production to meet the society’s need at a profit, while an intrapreneur work within an existing organization to pursue the exploitation of business opportunities.

Technopreneur We could also have technopreneur, who is an individual whose business is in the realm of high technology, who at the same time has the spirit of an entrepreneur. A technopreneur’s business involves high technology or to put it more clearly a technopreneur is a technological innovator and a business man all combined in one individual (Ogundele, 2007).

1.3.3 Types of entrepreneur Based on the interaction with the business environment, various types of entrepreneurs can emerge. To this effect, Rockstar (2008) identifies the four types of entrepreneurs as Innovative, Imitating, Fabian and Drone.

1.3.3.1 Innovative Entrepreneurs This type of entrepreneur is preoccupied with introducing something new into the market, organization or nation. They are interested in innovations and invest substantially in research and development.

1.3.3.2 Imitating EntrepreneursThese are also referred to as ‘copy cats. Always looking for ways to make a particular product better so as to gain an upper hand in the market.

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Activity (Allow 15 minutes)

Differentiate between an Entrepreneur, technopreneur, and

intrapreneur.

Post your response on the LMS

1.3.3.3 Fabian EntrepreneursThese are entrepreneurs who are very much skeptical in their approach to adopting or innovating new technologies in their enterprise. They are not adaptable to the changing environment

1.3.3.4 Drone Entrepreneurs These are individuals who refuse to adopt and use opportunities to make changes in production. They only follow traditional methods instead of adopting new ways of doing things.

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ITQs

1. Knight (1921) views entrepreneurs as …………... 2. Rockstar (2008) identifies the four types of entrepreneurs as ……,

…….., …………, and …………3. A technopreneur’s business involves ……….(Ogundele, 2007).

ITAs

1. Knight (1921) views entrepreneurs as individuals who attempt to predict and act upon change within markets.

2. Rockstar (2008) identifies the four types of entrepreneurs as Innovative, Imitating, Fabian and Drone.

3. A technopreneur’s business involves high technology or to put it more clearly a technopreneur is a technological innovator and a business man all combined in one individual (Ogundele, 2007).

4 Entrepreneurship Skills

For entrepreneurs to be successful they need to possess some abilities that will enable their ventures to succeed, survive and grow. These abilities are skills that entrepreneurs should possess are the entrepreneurship skill.

• Skill is the ability to do something well; expertise; an ability to do an activity or job well, especially because you have practiced it.

• Skills are seen as competencies, therefore entrepreneurial skills are competences possessed by entrepreneurs to enable their ventures succeed, survive, and grow.

• Entrepreneurial skills are the basic skills necessary to enable you start, develop, finance and succeed in your home enterprise.

• Entrepreneurial skill can be defined as the ability to create something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence (Hisrich & Peters, 2002).

• Entrepreneurial skill is the ability of an individual to exploit an idea and create an enterprise (Small or Big) not only for personal gain but also for social and developmental gain (Olagunju, 2004).

Skills Needed by Successful Entrepreneurs

As entrepreneurs are operating in a dynamic environment with a lot of competition, they should possess skills that will make their ventures to stand out. This has led the Federal Government to infuse entrepreneurship into the school curriculum from the Secondary Schools to tertiary institutions. It is of utmost importance that every business person should possess entrepreneurial skills that will enable their ventures to be competitive. These entrepreneurial skills are not limited to Small and Medium Scale organisations again but all organisations appreciate entrepreneurial skill in their worker, this is why we have intrapreneurs in organisation.

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As entrepreneurs are operating in a dynamic environment with a lot of competition, they should possess skills that will make their ventures to stand out.

Skills can be acquired and taught after birth. They are things you do well and what most performance comments are based upon, such as having good writing abilities and being a clear communicator. A skill is something that you learn to do over a period of time. During education or work you will learn new skills that you can use for different things. For example you can learn the skill of using a camera while studying a media subject. In terms of entrepreneurship, we hear of…. entrepreneurs are made. Various skills have been presented by various authors as

• Communication skills

• Human relations/Interpersonal skills

• Math skills

• Problem-solving & Decision-making skills

• Technical skills

• Basic Business skills

• Leadership skills

• Computer skills

• Decision making skills

• Practical skills

• Planning skills

• Creative and critical thinking skills

Prof. H. M. Bwisa came up with entrepreneurship skills using the acronym ENTREPRENEURS. This is very creative and as you go through you will see they are essential skills that an entrepreneur who want his/her entrepreneurial venture to be successful, survive and grow must adopt.

Bwisa’s key entrepreneurship skills from the word entrepreneurs byProf. Bwisa, 2016

The skill Elaboration

Envisioning Entrepreneurs must be able to envision, set goals and strategically plan their affairs

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Negotiation Entrepreneurs not only negotiate prices, they also persuasively resolve differences between themselves and customers and other people in a positive, mutually beneficial way.

Trend-setting Entrepreneurs must be able to see changes coming in their industry. They must keep up to date on new startups and technology advances. They must have the creative ability to lead as others follow

Reading Entrepreneurs do just read documents, they also read and interpret the times and trends and indeed read the moods of the market

Entertaining The ability to be entertaining boosts entrepreneurial success

Problem-solving Entrepreneurs use their problem analysis and solving skills like Cause & Effect Analysis, the 5 Whys etc. as a cornerstone for their success

Risk-taking It is not just taking risk; it is taking calculated risk. Entrepreneurs do business plans to minimize risks

Ethical Entrepreneurs understand that the customer is king and treat him/her ethically

Networking It is said that “You are the average of the five people you spend the most time with.” entrepreneurs connect with positive and like-minded people. They believe in alliances

Efficiency In order to handle the pressures of

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their busy lifestyles, entrepreneurs must have the ability to manage time well and to take care of personal business efficiently and effectively

Understanding It is not just reading. To correctly interpret the reading entrepreneurs must understand the reading; the situation; the customer. They must have the ability to read and understand the market

Resiliency Entrepreneurs recognize that not everything goes as planned. They learn to weather the business ups and downs. This skill enables the entrepreneur to keep going when the outlook is bleak.

Selling Entrepreneurs must sell. They must sell ideas, products etc. to customers, investors or employees.

http://www.mukmik.co.ke/downloads/HPS%202112.entrepreneiurship%20%20skills.ppt#:~:text=Entrepreneurial%20opportunities%3B%20business%20opportunities%20and,entrepreneurial%20motivation%2C%20internal%20motivation%20factors.

Table: 1.1

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Activity (Allow 15 minutes)1. Entrepreneurship skills are essential to entrepreneurs. Discuss

2. Discuss Bwisa entrepreneurship key skills.

3. State vivid definitions of entrepreneurship skills.

4. Is there any difference between entrepreneurship skills and traits?

5 -Essential Characteristics of Entrepreneurs

The entrepreneur is the aggressive catalyst for change in the world of business. He or she is an independent thinker who dares to be different amid a background of common events. From entrepreneurship literature we see a variety of characteristics of entrepreneurs among which are critical and germane are personal initiative, ability to consolidate resources.

Researchers have invested a great deal of time and effort over the last few decades trying to paint a clear picture of “the entrepreneurial personality.” Although these studies have identified several characteristics entrepreneurs tend to exhibit, none of them has isolated a set of traits required for success.

Kuratko (2012) has these prominent characteristics of entrepreneurs as:

a.Total commitment, determination, and perseveranceb. Drive to achieve and growc.Opportunity and goal orientationd. Taking initiative and personal responsibilitye.Persistence and problem solvingf. Realism and sense of humorg. Seeking and using feedbackh. Internal locus of controli. Calculated risk taking and risk seekingj. Low need for status and powerk. Integrity and reliabilityl. Tolerance for failurem. High energy leveln. Creativity and innovativenesso. Vision

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Activity (Allow 15 minutes)1. Entrepreneurship skills are essential to entrepreneurs. Discuss

2. Discuss Bwisa entrepreneurship key skills.

3. State vivid definitions of entrepreneurship skills.

4. Is there any difference between entrepreneurship skills and traits?

p. Self-confidence and optimismq. Independencer. Team building

All these are more are germane for the success of an entrepreneur.

Scarborough and Cornwall (2016)Entrepreneurs have some common characteristics, including a desire for responsibility, a preference for moderate risk, confidence in their ability to succeed, desire for immediate feedback, a high energy level, a future orientation, skill at organizing, and a value of achievement over money.

1. Desire for responsibility. Entrepreneurs feel a deep sense of personal responsibility for the outcome of ventures they start. They prefer to be in control of their resources, and they use those resources to achieve self-determined goals.

2. Preference for moderate risk. Entrepreneurs are not wild risk takers but are instead calculated risk takers.

3. Self-reliance. Entrepreneurs must fill multiple roles to make their companies successful, especially in the early days of a start-up. Because their resources usually are limited, they end up performing many jobs themselves, even those they know little about. Yet, entrepreneurs demonstrate a high level of self-reliance and do not shy away from the responsibility for making their businesses succeed. Perhaps that is why many entrepreneurs persist in building businesses even when others ridicule their ideas as follies.

4. Confidence in their ability to succeed. Entrepreneurs typically have an abundance of confidence in their ability to succeed and are confident that they chose the correct career path. Entrepreneurs’ high levels of optimism may explain why some of the most successful entrepreneurs have failed in business—often more than once—before finally succeeding.

5. Determination. Some people call this characteristic “grit,” the ability to focus intently on achieving a singular, long-term goal. Desire for immediate feedback. Entrepreneurs enjoy the challenge of running a business, and they like to know how they are doing and are constantly looking for feedback. The feedback they receive from their businesses drives them to set higher standards of performance for their companies and themselves.

6. High level of energy. Entrepreneurs are more energetic than the average person. That energy may be a critical factor given the incredible effort required to launch a start-up company. Long hours and hard work are the rule rather than the exception, and the pace can be demanding.

7. Future orientation. Entrepreneurs have a well-defined sense of searching for opportunities. They look ahead and are less concerned with what they did yesterday than with what they might do tomorrow. Not satisfied to sit back and revel in their success, real entrepreneurs stay focused on the future.

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8. Skill at organizing. Building a company “from scratch” is much like piecing together a giant jigsaw puzzle. Entrepreneurs know how to put the right people together to accomplish a task. Effectively combining people and jobs enables entrepreneurs to transform their visions into reality.

Other characteristics that entrepreneurs tend to exhibit include the following: 9. High degree of commitment. Entrepreneurship is hard work, and launching a company

successfully requires total commitment from an entrepreneur. Business founders often immerse themselves completely in their companies. Most entrepreneurs must overcome seemingly insurmountable barriers to launch a company and keep it growing. That requires commitment and fortitude.

10. Tolerance for ambiguity. Entrepreneurs tend to have a high tolerance for ambiguous, ever-changing situations, the environment in which they most often operate. This ability to handle uncertainty is critical because these business builders constantly make decisions using new, sometimes conflicting information gleaned from a variety of unfamiliar sources.

11. Creativity. One of the hallmarks of entrepreneurs is creativity. They constantly come up with new product or service ideas, unique ways to market their businesses, and

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ITQs

1. Entrepreneurs must fill multiple …….. a start-up.2. Entrepreneurs are more energetic than the ………………….3. Entrepreneurs have a well-defined sense of

……………………..

ITAs

1. Entrepreneurs must fill multiple roles to make their companies successful, especially in the early days of a start-up.

2. Entrepreneurs are more energetic than the average person.3. Entrepreneurs have a well-defined sense of searching for

opportunities.

innovative business models. Their minds are constantly at work developing unique business models, services, and products.

12. Flexibility. One hallmark of true entrepreneurs is their ability to adapt to the changing needs and preferences of their customers and the changing demands of the business environment. In this rapidly changing global economy, rigidity often leads to failure. Successful entrepreneurs learn to be masters of improvisation, reshaping and transforming their businesses as conditions demand.

13. Resourceful. Entrepreneurs excel at getting the most out of the resources that are available, however limited they may be. They are skilled at bootstrapping, a strategy that involves conserving money and cutting costs during start-up so that entrepreneurs can pour every available dollar into their businesses.

14. Willingness to work hard. Entrepreneurs work hard to build their companies, and there are no shortcuts around the workload.

15. Tenacity. Obstacles, obstructions, and defeat typically do not dissuade entrepreneurs from doggedly pursuing their visions.

Differences between entrepreneurial ventures and small businessesMany people believe entrepreneurial ventures and small businesses are the same, this is far from the truth. Some key differences distinguishes them. Entrepreneurs create their ventures (organizations) that pursue opportunities, characterized by innovative practices, and have growth and profitability as their main goals. Whereas, small businesses are independently owned, operated, and financed; has fewer than 100 employees, does not necessary engage in any new or innovative practices, and has relatively little impact on its industry. To be entrepreneurial, businesses must be innovative, seeking out opportunities.

6 - Motivation for Entrepreneurship

Motivation – An Important Factor

The performance of an entrepreneur is dependent on his/her ability and willingness to perform. Here, by ability we mean a function of education, experience and skill and by willingness we mean to perform depending upon the level of motivation. Motivation is one of the fundamental factors required for an entrepreneur to promote his/her ideas.

Why is Motivation Required?

The term motivation has been derived from the word ‘motive’ which is nothing but what prompts any person to act in a particular manner. Motives are the definition of a person’s goals, dreams and needs. They direct human behavior to towards achieving their goal.

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When everything is properly organized, then what is the need of motivation?

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ITQs

1. Entrepreneurs create their ventures (organizations) that ………….. their main goals.

2. The performance of an entrepreneur is ……….. perform.3. Obstacles, obstructions, and defeat typically do not

dissuade entrepreneurs from ……………….4. Motives are the definition of a person’s ………………..

The following points answer this question and gives an idea why motivation is an important factor for an entrepreneur −

Tough competition − An entrepreneur needs to face tough competition, in order to sustain and make a mark in this global market. To cope with this competition, motivation is required at each stage of the firm.

Unfavorable environment − Nobody knows what the future holds. One has to take care of the current economy and should be prepared for the worst situations of deteriorating economic conditions. For this, motivation and optimism is essential.

To create public demand − Market runs by the people and for the people. To run a business profitably, it is required to create a public demand for your product or service in the market and attract as many customers as possible. To do this in the right way, motivation is required.

To enhance creativity − Market always wants something new and different. If every firm offers the same product without any variation then there is no point of preferring one brand in particular. To sustain one has to be innovative. Add some new features in the existing products and services, make them more user friendly in a considerable budget. This requires motivation too.

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ITAs

1. Entrepreneurs create their ventures (organizations) that pursue opportunities, characterized by innovative practices, and have growth and profitability as their main goals.

2. The performance of an entrepreneur is dependent on his/her ability and willingness to perform.

3. Obstacles, obstructions, and defeat typically do not dissuade entrepreneurs from doggedly pursuing their visions.

4. Motives are the definition of a person’s goals, dreams and needs.

To increase productivity − It is very important to take care of the quality of the product as well as the profit. People will always prefer a product which is cost efficient and of good quality. So, motivation is required for increase the productivity.

Thus motivation plays a unique role in establishing a company by frequently boosting the entrepreneur to do effective things efficiently.

What Motivates an Entrepreneur?

Many research studies have been conducted by researchers to understand and answer this question so that the factors that motivate people to take all the risk and start a new enterprise can be identified.

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ITAs

1. An entrepreneur needs to face tough competition, in order to sustain and make a mark in this global market.

2. To run a business profitably, it is required to create a public demand for your product or service in the market and attract as many customers as possible.

3. People will always prefer a product which is cost efficient and of good quality.

ITQs

1. An entrepreneur needs to face tough competition…………...2. To run a business profitably, it is required to …………..3. People will always prefer a product which is …… and ……..

The 6Cs that motivate entrepreneurs to establish their own business are as follows −

Change − Entrepreneurs frequently want change, not only change, they also want to be the bearers of change. They are solution givers and want to interrupt the status quo. They have a vision like "I want to assemble the world's information" or "I want to put an AC at every desk" and they take an attempt to make this change. In this attempt, some succeed and some fail.

Challenge − Some people love challenges and they opt for starting a new business as it is very challenging to handle big problems. These people find typical job in a big corporate as boring and not challenging enough.

Creativity − Running one’s own business is all about being more creative and having the independence to make new discoveries. For example, testing a new website design, launching a new marketing scheme, creating inventive items that solve a known issue in a different way, creating new advertising campaigns, etc. One needs to have an infinite room to welcome and introduce creativity in a small business.

Control − Some people tend to start a business because they don't want to be pushed around and work for a product/company in which they have no way to shape their destiny. They want to be their own boss having their own time, own pace, location of their choice, employees of their choice and have a progressive role in deciding the direction of the company.

Curiosity − Successful entrepreneurs are always anxious and ask − "what if we do X this way?” They want to have more than one option to do a work and choose the best one from them. They want to understand the customer's perceptions, point of views, markets and competitors. They are frequently anxious to see how their particular theory like "people want to do A with B" works. In this aspect, they can’t be differentiated from a scientist who is trying to prove his theorem.

Cash − The last but not the least part is the cash. Money says it all. Many nonentrepreneurs have a misconception that cash comes first for entrepreneurs but this is never really true. However, money is not the primary motivation.

From the above discussion, it can be said that the highest motivating factor is the urge to get something or the drive to do something differently.

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Results of Motivation

Successful entrepreneurship needs determination, freedom, discipline, connectivity and an abundance of skills in planning. People with a complete package of physical strength combined with perseverance, mental strength, and self-discipline have the passion and urge to succeed. 

With proper motivation, we get the following outcomes −

Heavy industrialization − Tremendous growth can be seen in industrialization. Example: Companies like TISCO, TELCO have been set up and are flourishing.

Self-employment − A common man gets a chance to make a difference, set a new standard of industrial growth. Example: Entrepreneurs like Dhirubhai Ambani and Azim Premji are born.

Economic growth − When there is growth in an individual’s economy, there is a growth in the company’s economy, which in turn results in the growth of that particular area and country. Example: Emergence of smart cities concept.

Creating new jobs − More entrepreneurship leads to more job openings. More job openings leads to more employment opportunities.

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Activity (Allow 15 minutes)1. Differentiate between entrepreneurship and small

businesses.2. Discuss briefly the 6Cs that motivates entrepreneurs.

Post your response on the LMS

The highest motivating factor is the urge to get something or the drive to do something differently.

Proper social benefit − When a country’s economy grows or increases we see that more advanced and proper social benefits are provided to the general public like construction of roads, school, hospital, colleges, etc.

Entrepreneurial drive is the inbuilt encouragement some people possess to make something happen. It is the energy that pushes one forward as a founder and forces not to give up in the face of failure, ultimately leading to success. School of Business, The University of Hong Kong (Retrieved on May 30, 2014).

Summary

Module one the general overview of entrepreneurship comprise of six units. The concept of entrepreneurship was briefly discussed. Evolution of entrepreneurship from the earliest period to the twenty-first century and the various definitions of entrepreneurship and its other key concepts were presented and discussed. Various skills and essential characteristics of entrepreneurs were presented, after which the motivation for entrepreneurship was briefly discussed.

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ITAs

1. B-Three2. Tenacity

ITQs

1. The definitions of entrepreneurship can be categorized into __________ dimensions.a. Four b. Threec. Two

2. _____________ are the obstacles, obstructions, and defeat typically that does not dissuade entrepreneurs from doggedly pursuing their visions.

References/Read More:

1. Barringer, B. R. & Ireland, R. D. (2013). Entrepreneurship, successfully launching new ventures (4th Edn). Boston: Pearson

2. Cooney T., OECD (2012). Report for the workshop on skills development for SMEs and entrepreneurship: Entrepreneurship skills for growth-orientated businesses

3. European Commission (2006). Recommendation of the European Parliament and of the Council of 18 December 2006 on key competences for lifelong learning (2006/962/EC)

4. European Commission (2012). Towards a job rich recovery. 5. Hisrich, R. D., Peters, M. P. & Shepherd, D. A. (2016).

Entrepreneurship (10th Ed.) . Toronto: McGraw Hill.6. http://bankofinfo.com/entrepreneurship-definition-by-

various-author/7. https://invoice.ng/blog/business-skills-nigerian-

entrepreneurs/8. https://pdfs.semanticscholar.org/0b75/

c00b27b140e3f09439b56519393fb9f10312.pdf9. https://www.academia.edu/25526008/

ENTREPRENEURSHIP_What_is_entrepreneurship10https://www.google.com/search?

q=characteristics+of+entrepreneurship&rlz=1C1GCEU_en11https://www.inc.com/sujan-patel/10-essential-characteristics-

of-highly-successful-.html12Kuratko, D. F. (2008). Introduction to Entrepreneurship (8th

ed.). Canada: South-Western Cencage Learning.13Oduyoye, O. O. & Onu, C. A. (2014). Foundations of

Entrepreneurship. Ogun State: Babcock University.

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14Scarborough, Norman M. & Cornwall, J. R. (2016). Essentials of Entrepreneurship and Small Business Management (6th Edn). Boston: Pearson.

15Schoof U. (n.d.)SEED Working Paper No. 76, International Labour Organization (2206), Stimulating Youth Entrepreneurship

16 Top 5 Essential Business Skills For Nigerian Entrepreneurs17Tutorial point, Simplyeasylearning,

https://www.tutorialspoint.com

Glossary of terms

Entrepreneurship is the process by which individuals personally or within an organization pursue opportunities without regard to the resources they currently control (Stevenson & Jarilo, 1990).

Entrepreneurship is the process of starting new businesses, generally in response to opportunities, that is, pursuing opportunities by changing, revolutionizing, transforming, or introducing new products or services (Robbins & Coulter, 2013).

Entrepreneurial skills are the basic skills necessary to enable you start, develop, finance and succeed in your home enterprise.

Desire for responsibility. Entrepreneurs feel a deep sense of personal responsibility for the outcome of ventures they start.

Self-reliance. Entrepreneurs must fill multiple roles to make their companies successful, especially in the early days of a start-up.

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MODULE 2 - ENTREPRENEURSHIP AND THE BUSINESS ENVIRONMENT

Image Source: https://images.search.yahoo.com/images/view

Introduction

In the previous module, we were introduced to the concepts of entrepreneurship, defined entrepreneurship from various perspectives. In addition, we also understood the various characteristics of a successful entrepreneur and what motivates them.

In this module, you will understand the environments which influence and affect the performance of entrepreneurs. The types of environment for the resources and opportunities necessary for its existence and how to analysis the business environment will be discussed.

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Learning Outcomes

At the end of this module, you should be able:1. Discuss the business environment generally2. Understanding the changing environment3. Identify and discuss the internal external environmental

factors4. Identify and discuss the task/specific and general external

business environmental factors5. Understand the managerial technique of SWOT Analysis in

order to come up with strategies for your entrepreneurial venture

1 Nature, Definitions, and Types of Business Environment

2.1.1 Definitions of Business EnvironmentThe business environment is defined simply as the factors, forces, dimensions, elements within and outside the organisation has affects its performance. Harrison (1986) defines environment as all the conditions, circumstances, and influences surrounding and affecting the development of the total organisation or any of its internal system. Adeleke (2016) emphasized that Harrison argued that the environment contains forces of complexity that are dynamic to varying degrees under different circumstances. Most authors define and treats only the external environment since it is believed that managers have control over the internal environment.

2.1.2 Types of Business Environment

Image Source: https://images.search.yahoo.com/images/view;

Figure 2.1

The entrepreneur operates in a business environment that is dynamic, complex, and volatile. The business environment can be divided into two, which are the internal and external environment.

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ITQs

1. The business environment is defined simply as ……….2. Harrison (1986) defines environment as …………….3. The entrepreneur operates in a business environment

that is ………….., ………….., and ……………….

Image Source: https://s3-eu-west 1.amazonaws.com/aaimagestore/essays/1194353.006.png

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ITQs

1. The business environment is defined simply as the factors, forces, dimensions, elements within and outside the organisation has affects its performance.

2. Harrison (1986) defines environment as all the conditions, circumstances, and influences surrounding and affecting the development of the total organisation or any of its internal system.

3. The entrepreneur operates in a business environment that is dynamic, complex, and volatile.

Figure 2.22.1.2.1 Internal EnvironmentThe internal environment according to Adeleke (2016) can be grouped into seven factors generally under the control of management. All these factors do influence the decisions of business, but since all these factors are usually under the control of business, some authors do not include them in the discussion of business environment. These are:i. Organisational objectivesii. Organisational resourcesiii. Organisational behaviouriv. Strengths and weaknessesv. Distinctive competencesvi. Organisational structure and tasks; and vii. People (employees)

Each of the internal environment factors under management control is discussed very briefly.i. Organisational Objectives

Adeleke (2003) says organisational objectives can be seen as intents, hopes, and aspirations which the organisations proposes to pursue and achieve within specific time limit. Objectives are expected to answer the question: where does an organisation want to go and how does it get there. Some of the objectives of setting up entrepreneurial ventures are for effectiveness and efficiency in management and operations, increased growth sales, innovation and change, excellent customer satisfaction, and, profitability to mention a few.

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ITQs

1. The internal environment according to Adeleke (2016) can be grouped into ………………

2. Objectives are expected to answer the question: ………….

ITAs

1. The internal environment according to Adeleke (2016) can be grouped into seven factors generally under the control of management.

2. Objectives are expected to answer the question: where does an organisation want to go and how does it get there.

ii. Organisational ResourcesOrganisational resources to Alonso (2017) are all assets that a corporation has available to use in the production process. There are four basic types of organisational resources which are human resources, financial resources, tangible resources, and information resources (Wozniak, 2018).a. Human Resources

The employees that work for a business. Their skills, knowledge, capacity, and disposition of all persons employed in the organisation

b. Financial Resources Financial investments, cash, financial capital of an organisation used to fund both current and long-term activities.

c. Tangible ResourcesIncludes raw materials, parts, production, offices and all kinds of equipment.

d. Information ResourcesIt includes all kinds of useful information and data needed for the effective decision making also knowledge and key competences of the employees.

iii. Organisational BehaviourThis as to do with the organisational identity that shapes the world-view of an organisation. It includes the management philosophy, leadership quality, shared value and culture, organisational policies, individual perception, and behaviour as it affects the organisation, individual integration into the organisation, the socialization process, organisational dynamics and design, group behaviour and conflict resolution. These all constitute organisational behaviour.

iv. Strength and WeaknessStrengths ae positive internal factors that companies draw on to accomplish their missions, goals, and objectives which includes special skills or knowledge, a superior proprietary product of process, a positive public image, financial strength and many more. While weaknesses are negative internal factors that inhibit companies’ ability to accomplish their missions, goals, and objectives which includes lack of capital, shortage of skilled workers, inferior location, production inefficiencies and much more.

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Organisational resources to Alonso (2017) are all assets that a corporation has available to use in the production process.

Identifying strengths and weaknesses helps owners understand their businesses as they exist (or that, for start-ups, will exist). An organization’s strengths should originate in the core competencies that are essential to gaining an edge in each of the market segments in which the firm competes. The key to building a successful strategy is using the company’s underlying strengths as its foundation and matching those strengths against competitors’ weaknesses.

v. Distinctive CompetenceThese are areas in which the entrepreneurial venture makes, do, or perform better than its competitors, a capability that serves as a source of the venture’s competitive advantage over rivals. Which gives a small business or start-up the upper hand by allowing it to provide products or services that customers will choose over that of rival firms.

vi. Organisational Structure and TasksThe organisational structure consists of the posts and positions within a venture/firm that creates an internal environment for human performance. The structure should be designed to take care of human abilities and motivation, which should reflect the relationships of the roles and responsibilities of individuals within the organisation.The tasks on the other hand are assigned work to be executed or carried out within the organisation. Each identified positon in the venture/firm is assigned with tasks to be carried out so as to achieve organisational objectives

vii. PeopleThese are employees working in a venture/firm. They are the active agents that enables the organisation achieves her goals. The more equipped, competent and skilled the employees are, the better the venture/firm would be able to achieve its objectives.

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ITQs

1. The _______________________ is defined simply as the factors, forces, dimension, elements within and outside the organisation has affects its performance.

2. The business environment can be divided into two, which are the _________ and ___________environment.

3. Adeleke (2003) says __________________________ can be seen as intents, hopes, and aspirations which the organisations proposes to pursue and achieve within specific time limit. .

2.2 The Changing Environment – The External Environment

data:image/jpeg;base64,/9j/4AAQSkZJRgABAQAAAQABAAD/

2.2.1 Characteristics of the External Environmental Factors: The following are the characteristics of the external environment:

i. Complexityii. Uncontrollableiii. Dynamismiv. Far-reaching impactv. Multi-dimensional

i. ComplexityExternal environmental factors produce certain degree of complexity in their interaction with organisations. This complexities arise from a number of factors, events, conditions, and influences arising from different sources.

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ITAs

1. Business environment2. Internal, External3. Organisational objectives

ii. UncontrollableMost of the interactions of the forces and institutions in the external environment are beyond the control of the venture or firm.

iii. DynamismThe factors in the external environment are constantly changing and not static. Due to the many and varied operating influences, there is dynamism in the environment causing it to be changing continuously in shape and character.

iv. Far-reaching impactChanges of the environmental factors have a far-reaching impact on the organisation in several ways.

v. Multi-dimensionalThe changes in the environmental factors can assume multi-dimensional nature, that is, the changes can come from the South, North, East, or West and can have more than one factor.

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ITQs

1. External environmental factors produce …………... 2. Most of the interactions of the forces and institutions in

the external environment are ………………….

ITAs

1. External environmental factors produce certain degree of complexity in their interaction with organisations.

2. Most of the interactions of the forces and institutions in the external environment are beyond the control of the venture or firm.

2.2.2 The Task/Specific/Operating EnvironmentThe task or specific environment are factors/forces/dimensions/ elements/institutions that have direct effect on the operations of a venture/firm, these are the ones that have direct working relationship. Each firm has a specific environment that is unique to that firm’s industry and directly affects the way it conducts day-to-day business. Among these are customers, competitors, Suppliers, Government Agencies, Labor Market

Customers: these are people and organisations that acquire goods and services from the venture/firm. Companies cannot exist or be successful without customers support. This is why it is essential for firms/ventures to monitor customers’ changing needs and wants, preferences, tastes, perception etc. It is essential for organisations to be responsive to marketplace changes. Williams (2016) identified two basic strategies for monitoring customers as reactive and proactive.Reactive customer monitoring is identifying and addressing customer trends and problems as they occur. This strategy entails listening and responding adequately to customers complaints.While the proactive monitoring of customers entails identifying and addressing customer needs, trends, and issues before they occur. For example, some stores that sells toys have switched from selling gift certificates to selling electronic gift cards,that are preprogrammed with a dollar amount and are swiped like credit cards.

CompetitorsThese are companies in the same industry that sell similar products or services to customers. They organisations that competes with it for resources commonly money. It is important for companies to periodically keep close track on what their competitors are doing. This is done through a competitive analysis which involves deciding who your competitors are, anticipating competitors’ moves, and determining competitors’ strength and weaknesses.

SuppliersThese are companies that provide material, human, financial, and informational resources to our companies.

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Each firm has a specific environment that is unique to that firm’s industry and directly affects the way it conducts day-to-day business.

Industry Regulators These are elements of the task environment that has the potential to control, legislate, or otherwise influence an organisation’s policies and practices.

Government AgenciesThese are regulatory bodies that see to organisations upholding the tenet of their industry.

Labour MarketThese are organisations that make available competent individuals to fill employment space in organisations.

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ITQs

1. The ________________________ are factors/forces/dimensions/ elements/institutions that have direct effect on the operations of a venture/firm, these are the ones that have direct working relationship.

2. _______________________ is a characteristic of the External Environmental Factors:

3. __________ are companies that provide material, human, financial, and informational resources to other companies.

ITAs

1 .Task or specific environment2 Complexity/Uncontrollable/Dynamism/Far-reaching

impact/Multi-dimensional

3. Suppliers

2.2.3 General Environment

General EnvironmentThese are factors/elements/forces/dimensions outside the organisation that has indirect influence/effect on its performance. Changes in any sector of the general environment ultimately affect most organisations. The dimensions of the general environment can be captured with an acronym – PESTEL. P – Political factors; E – Economic factors; S – Socio-cultural and demographic factors; T – Technological factors; E – Ecological/Environmental factors; and L – Legal factors.

Political FactorsThese are government actions that affects the operations of a company or business and the relationship between business and government. Political environment includes political conditions such as general political stability, taxation policy, trade regulations, security of life and property, corruption index. Political processes shape a society’s laws, which constrain the activities of organizations and thus create both opportunities and threat. This can also be seen as the influence exerted by the three political arm of government which are the legislature, executive and judiciary in shaping, directing, developing, and controlling business activities.

Economic FactorsThis is the overall health and vitality of the economic system in which the organisation operates. They are economic variables which influence the cost of doing business, the level of the profit obtainable and the consumption level of buyers. Important economic factor of business are general economic growth, inflation, interest rate, fiscal and monetary policies, and are worth considering by any business executive

Technological FactorsThese are the methods available to convert resources available into products or services, that is the scientific and technological advancements. Technology being the knowledge, tools, and techniques used to transform inputs into outputs. Positive change in technology help companies provide better product or produce products more efficiently. As technological changes benefit a business, it can also

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Changes in any sector of the general environment ultimately affect most organisations.

threaten it. Element of technological factors are technological changes, new or improved distribution channel, improved communication and infrastructure, technological absorption.

Ecological Factors This includes all factors that occur naturally on Earth, including plants, animals, rocks, and resources such as air, water, and climate. It includes laws and local regulations on waste disposal, energy consumption and pollution monitoring and so on.

Legal FactorsOrganisations need to comply with the country’s laws and regulations that guide their business. The attitude of government toward business. Globally laws passed by governments of various nations cover areas as competition, commerce, employment, minimum wages, environmental protection, worker safety, copyright and patents and much more.

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ITQs

1. They are economic variables which influence the cost of doing business, ………………….

2. As technological changes benefit a business, it can also ……….

ITQs

1. They are economic variables which influence the cost of doing business, the level of the profit obtainable and the consumption level of buyers.

2. As technological changes benefit a business, it can also threaten it.

2.2.4 SWOT ANALYSIS

For entrepreneurs to formulate meaningful strategies, they need to understand the circumstances, forces, events, and issues that shape the venture’s situation, which requires them to conduct an audit of both the internal and the external factors that influence the company’s ability to compete. SWOT analysis in which SWOT stands for internal strengths and weaknesses (SW) and external opportunities and threats (OP) is a careful assessment of the strengths, weaknesses, opportunities and threats that affect organisational performance. It is also an assessment that provides a concise overview of a venture’s strategic situation.

Entrepreneurs are able to get external information about opportunities and threats from a variety of sources such as customers, government reports, professional journals, suppliers, bankers, friends in other organisations, consultants, or association meetings and more. While internal information about the internal strengths and weaknesses are gotten from a variety of reports, including budgets, financial ratios, profit and loss statements, and surveys of employee attitudes and satisfaction.

Image Source: http://images.sampletemplates.com/wp-content/uploads/2015/04/swot-analysis-template-PDF.jpg

Figure 2.3

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Image Source: https://images.ctfassets.net/ewhhtaabqlyo/4RcFxZshPyseMmGu0eo8wM/89e819c665bdfef2061d8a7615c6da08/swotb.jpg?q=75&fm=jpg&fit=thumb&w=1024

Figure 2.4

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In practice, a SWOT analysis provides a snapshot view of the current condition of a business/venture. It helps to identify potential business opportunities that match the entrepreneur and his/her planned venture. SWOT analysis helps a company determine how to increase internal strengths and minimize internal weaknesses while maximizing external opportunities and minimizing external threats.

Internal Strengths and Weaknesses

Organisational strengths are positive inward skills, characteristics, and capabilities to enable it achieve strategic performance. Strengths may include things like a deep pool of management talent, surplus capital, a unique reputation and/or brand name, well established distributions channel. While weaknesses are internal characteristics that might inhibit or restrict the organisations performance. Entrepreneurs are to perform an internal audit of specific functions, such as marketing, finance, production, and R&D (Research and Development). Internal analysis also assesses overall organisation structure, management competence and quality, and human resource (HR) characteristics.

External Opportunities and Threats

Threats are characteristics of the external environment that may prevent the organisation form achieving its strategies goals. An external threat for Intel, is that its microprocessors power most PCs use is hurt by the decline in demand for personal computers as more people now use tablets and smartphones. While opportunities are characteristics of the external environment that has the potential to help the organisation achieve or exceed its strategic goals. US auto manufacturers had had the opportunity to steal customers from Toyota because of the quality, safety, and public relations problem that Toyota experienced in the year 2010.

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ITQs

1. The ________________________ are factors/forces/dimensions/ elements/institutions that have indirect effect on the operations of a venture/firm, these are the ones that have direct working relationship.

2. _______________________ helps a company determine how to increase internal strengths and minimize internal weaknesses while maximizing external opportunities and minimizing external threats.

Examples of SWOT factors

POSITIVE FACTORS NEGATIVE FACTORS

Inside the Company

Strengths Weaknesses

Important core competences

Financial strengths Innovative capacity Skilled or experienced

management Well-planned strategy Effective entry wedge A strong network of

personal contacts Positive reputation in the

marketplace Proprietary technology

Inadequate financial resources

Poorly planned strategy Lack of management

skills or experience Inadequate innovation

capacity Negative reputation in

the marketplace Inadequate facilities Distribution problems Limited marketing skills Production inefficiencies

Outside the Company

Opportunities Threats

An untapped market potential

New product or geographic market

Favourable shifts in industry dynamics

High potential for market growth

Emerging technologies Changes allowing

overseas expansion Favourable government

New competitors Rising demands of

buyers or suppliers Sales shifting to

substitute products Increased government

regulations Adverse shifts in the

business cycle Slowed market growth Changing customer

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ITAs

1. General environment

2. SWOT analysis

deregulations Increasing market

fragmentation

preferences Adverse demographic

shifts

Source: Longenecker, Petty, Palich, and Hoy (2014) in Small Business Management: Launching and Growing Entrepreneurial Ventures (17th Edn)

Table 2.2

Managers evaluate the external environment based on the task and general environmental factors.

Summary

In this module, we understood that entrepreneurial ventures operate in an ever changing, volatile, uncertain environment. The nature of the business environment was generally discussed, terminologies of the business environment was defined. The business environment (micro (internal) and macro (external) environment were discussed. The changing external (macro) environment further divided into two, that is, the task/specific/operating and the general environment were extensively discussed also. The managerial technique, SWOT analysis to help entrepreneurs know the present state of affairs, a foundation to come up with strategies to enable the entrepreneur to operate successfully was extensively discussed.

References/Read More:

1. Adeleke, A. Entrepreneurship Development: A practical Approach. Lagos: Peace Print and Packaging.

2. https://www.intel.com/content/dam/www/public/us/en/documents/research/2013- vol17-iss-1-intel-technology-journal.pdf

3. Longenecker, J. G., Petty, J. W., Palich, L. E., & Hoy, F. (2014). Small Business Management, Launching and Growing Entrepreneurial Ventures.

4. Oduyoye, O. O. & Onu, C. A. (2014). Foundations of Entrepreneurship. Ogun State: Babcock University.

5. Welch, D., Naughton, K., Helm, B. (2010). Detroit’s Big Chance. Bloomberg Businessweek, 38 – 44.

Glossary of terms

The business environment is defined simply as the factors, forces, dimensions, elements within and outside the organisation has affects its performance.

The internal environment according to Adeleke (2016) can be grouped into seven factors generally under the control of management.

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Strengths ae positive internal factors that companies draw on to accomplish their missions, goals, and objectives which includes special skills or knowledge, a superior proprietary product of process, a positive public image, financial strength and many more.

Customers: these are people and organisations that acquire goods and services from the venture/firm.

Organisational strengths are positive inward skills, characteristics, and capabilities to enable it achieve strategic performance.

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MODULE 3 ENTREPRENEURIAL PROCESS

Introduction In the last module, we understood the environments which influence and affect the performance of entrepreneurs. The types of environment for the resources and opportunities necessary for its existence and how to analysis the business environment was discussed.

In this module, the entrepreneurial process and business opportunities will be discussed. You will also learn the creativity and innovation. Moreover, business planning process will also be discussed.

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Learning Outcomes

At the end of this module, you should be able:1. Discuss generally what entrepreneurial process is all

about2. Understand the six phases of the entrepreneurial

process3. Discuss business opportunities4. Understand creativity and innovation5. Discuss the new business planning process

3.1 Phases of Entrepreneurial Process

The entrepreneurial process will be discussed in six steps:i. Idea Generation ii. Identification of Business Opportunitiesiii. Evaluation of Business Opportunitiesiv. Development of a business planv. Determination of Required Resourcesvi. Managing the Entreprise (Vennapoosa, 2012)

Although these steps are a process but no one state is totally completed or dealt with in isolation before work on other steps starts (Hisrich, Peters, & Shepherd, 2016).

i. Generation of IdeasAn idea is an insight, a thought, an impression or a notion. While a business idea is a mental picture of a course of action to take on a given situation, so as to come up with a positive result, which could be a product of a service. Idea generation is possible through vision, insight, observation, experience, education, training and exposure of the entrepreneur and more (Hisrich et al., 2016).

ii. Identification of Business OpportunitiesIt is not all business ideas that turn to a business opportunity. An opportunity is a favorable set of circumstances that creates a need for a new product, service, or business. An opportunity is an idea that is based on what customers need and want. While opportunity identification is the process by which an entrepreneur comes up with opportunity for a new venture, that is, start-ups. The essence of entrepreneurship is to identify and exploit these opportunities. Most business opportunities do not just emerge. Rather, they result from an entrepreneur’s alertness to possibilities or, the establishment of mechanisms that identify potential opportunities. In Opportunity identification or recognition, the entrepreneur spots a hole in the market, or identifies a need (Stokes, 2010). Opportunity identification culminates into start-ups these three basic forms, which are: new market, new technology, and new benefits.

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ITQs

1. An idea is …………………………. 2. While a business idea is a mental picture of a ………... 3. An opportunity is a favorable set of circumstances that ……..

New MarketNumerous startups develop from new market opportunity which is concerned with providing customers with a product or service that does not exist in a particular market but that does not exists somewhere else. It is greatly believed that this type of startup idea as a great potential.

New Technology This involves new or relatively new knowledge breakthrough. This type of business can be high risk because there is usually no definite model of success to follow, but it can offer tremendous promise.

New BenefitsThis is based on offering customers benefits from new and improved products or better ways of performing old functions.

Opportunity identification is central to the domain of entrepreneurship, at its core entrepreneurship resolves around the questions of why, when, and how opportunities for the creation of goods and services in the future arise in an economy.

iii. Evaluation of Business OpportunitiesIt has been observed that it is the identification and evaluation of business opportunities are the most difficult task in the entrepreneurial process. After opportunity has been identified by the entrepreneur, the evaluation process commences. The evaluation process involves consciously deciding whether the opportunity identified is valuable and worth pursuing, this step is the most critical step because it allows the entrepreneur to assess whether the opportunity identified if exploited can generate the needed returns to compensate for the resources required. The factors that enable an entrepreneur determine if an idea is a good investment opportunity or not;

There must be a clearly defined market need for the product or service. Customers must perceive that the new business or product

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ITAs

1. An idea is an insight, a thought, an impression or a notion. 2. While a business idea is a mental picture of a course of action

to take on a given situation, so as to come up with a positive result, which could be a product of a service.

3. An opportunity is a favorable set of circumstances that creates a need for a new product, service, or business.

will give them better value for their money than existing businesses or products.

The proposed venture or business must have the ability to achieve a durable or sustainable competitive advantage. Competitive advantage means what you can do better than the competitors that will attract customers to your business (quality, speed, price, location, selection, services).

There must be significant profit and growth potential. The economics of the new venture needs to be rewarding allowing for significant profit and growth potentials.

The timing must be right. Poor timing can prevent product or service from constituting a valuable investment opportunity, even when the concept is good.

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ITQs

1. ……………. is central to the domain of entrepreneurship.2. It has been observed that it is the …………………are the

most difficult task in the entrepreneurial process.

ITQs

1. Opportunity identification is central to the domain of entrepreneurship.

2. It has been observed that it is the identification and evaluation of business opportunities are the most difficult task in the entrepreneurial process.

iv. Development of a Business PlanA business plan is the description of the future direction of the business. It documents all aspects of planned activities. It documents all aspects of planned activities. A business plan usually gives guidelines for an entrepreneur who is embarking on a new business, expanding or buying a business venture.A business plan presentation should cover five basic areas: ● Your company and its products and services. The presentation should answer in simple terms the first question that every potential lender and investor has: What does your company do?● The problem to be solved, preferably told in a personal way through a compelling story. Is it eliminating the time, expense, and anxiety of waiting for the results of medical tests with a device that instantly reads blood samples? Or making hearing aids more effective at filtering out background noise while enhancing the dominant sound for the user?● A description (again in simple terms) of your company’s solution to the problem. Ideally, the solution your company has developed is unique and serves as the foundation of your company’s competitive edge in the marketplace. ● Your company’s business model. This part of the presentation explains how your company makes money and includes figures such as revenue per sale, expected gross profit and net profit margins, and other relevant statistics. This is your opportunity to show lenders and investors how your company will produce an attractive payback or payoff. ● Your company’s competitive edge. Your presentation should identify clearly the factors that set your company apart from the competition.

v. Determining the Required ResourcesThe entrepreneur has to determine the resources needed for the business opportunity to be exploited. The resources should be clearly defined and obtained at the lowest possible cost. This process starts with the evaluation of the entrepreneur’s present resources. The major resources are: Manpower (employees), Money (Financial resources), Materials (physical resources), Machinery (Technology and equipment); and Time. After establishing the required resources, the next step is to acquire the resources needed. The entrepreneur is to select the resource that will be helpful in accomplishing the set goals and objective.

vi. Managing the EntrepriseBusinesses do not operate automatically on their own. There must be someone or people to direct the activities of the entreprise in achieving its purpose, that is, the managers. The manager’s actions will determine the forte of the entreprise. Management of the proposed business is very important. Lack of competent management has been the major cause of business failure in many SMEs. Potential entrepreneurs ought to have the right experience or find a well-equipped individual to run the entreprise

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3.2 Business Opportunities IntroductionMoney is not really the first step in any startup effort. Idea generation or establishment of the possibilities for a new venture and the associated features of such business opportunity in terms of its potential economic values, newness of the ventures, and desirability of the product/service in the environment of operations. Essential qualities of an opportunity, three ways to identify an opportunity, types of opportunities and different types of opportunities will be discussed. So also we will discuss the opportunity recognition Process

3.2.1 Business OpportunitiesBusiness opportunity refers to the extent to which possibilities for new ventures exist and the extent to which entrepreneurs have the capability to influence successful actualization through their own actions. It is a perceived means of generating incomes that previously have not been exploited and are not currently being exploited by others. An entrepreneur recognizes a problem or an opportunity gap and creates a business to fill it. Most entrepreneurial ventures are started in one of two ways. Some ventures are externally stimulated and others internally stimulated. An entrepreneur who decides to start a business like Jeff Bezos of Amazon who searched for and recognized an opportunity. Bezos quit his lucrative job. Other firms are internally stimulated. A common mistake entrepreneurs make in opportunity identification process is picking a currently available product or service that they like or are passionate about. An opportunity has four essential qualities: it is durable; attractive, timely and anchored on a product, service that creates or adds value for its buyers and end users.The recognition of business opportunity to Hisrich, Peters, and Shepherd (2010) is fundamental to the entrepreneurial process as well as growing a business. A business opportunity represents a possibility for an entrepreneur to successfully fill a large enough unsatisfied need that enough that results into substantial sales and profits.

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Money is not really the first step in any startup effort.

Activity (Allow 15 minutes)1. List and explain the Phases of Entrepreneurial Process

Post your response on the LMS

3.2.2 A Model of Opportunity Recognition Process

Image Source:https://images.slideplayer.com/18/5701988/slides/slide_23.jpg

Figure 3.1

This model clearly identifies the aspects of opportunity recognition. It states that recognizing opportunities often results from the knowledge and experience of the individual entrepreneur, where appropriate, his/her business. The prior knowledge is as a result of a combination of education and experience and the relevant experience could be work related or as a result of personal experiences or events. The entrepreneur need to be aware of this knowledge and experience and have the desire to understand and make use of it. Entrepreneurship alertness and entrepreneurship networks are very important factors in this process. There is an interaction effect between entrepreneurial alertness and entrepreneurial prior knowledge of markets and customer problems. Those entrepreneurs who have the ability to recognize meaningful business opportunity are in a strategic position to successfully complete the production planning and development process and successfully launch new ventures.

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ITQs

1. The six steps process of starting a new venture is typified in the _______________________________.

2. ____________________ is based on offering customers benefits from new and improved products or better ways of performing old functions.

3. A ________________________ represents a possibility for an entrepreneur to successfully fill a large enough unsatisfied need that enough that results into substantial sales and profits.

ITAs

1. Entrepreneurial process 2. New Benefits3. Business opportunity

3.3 Creativity and Innovation

Image Source

https://weareive.org/wp-content/uploads/2018/07/Creativity-Innovation-Mind-Map.png

Figure 3.2

3.3.1 Overview of Creativity and Innovation

One of the beliefs of entrepreneurship is to create new and useful idea that solves problems and challenges faced by people on a daily basis. Entrepreneurs become successful as the create value in the market place when they combine resources in new and different ways to gain a competitive edge over their rivals. Creativity and innovation are not just useful and desirable components of entrepreneurship, they are central to it. Often creativity and innovation are believed to be the same thing, that is, something new or different. There is a clear cut difference between these two terms from research.

The entrepreneur’s “secret” for creating value in the marketplace is applying creativity and innovation to solve problems and to exploit opportunities people face every day. Creativity is the ability to develop new ideas and to discover new ways of looking at problems and opportunities. Innovation is the ability to apply creative solutions to those problems and opportunities to enhance or to enrich people’s lives. Entrepreneurship is the

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result of a disciplined, systematic process of applying creativity and innovation to needs and opportunities in the marketplace.

Entrepreneurs must always be on guard against paradigms—preconceived ideas of what the world is, what it should be like, and how it should operate— because they are logjams to creativity. Successful entrepreneurs often go beyond conventional wisdom as they ask, “Why not?” ● Success—even survival—in this fiercely competitive, global environment requires entrepreneurs to tap their creativity (and that of their employees) constantly.

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ITAs

1. One of the beliefs of entrepreneurship is to create new and useful idea that solves problems and challenges faced by people on a daily basis.

2. Creativity is the ability to develop new ideas and to discover new ways of looking at problems and opportunities.

3. Innovation is the ability to apply creative solutions to those problems and opportunities to enhance or to enrich people’s lives

Creativity depends on two central characteristics which are difference or novelty and individual talent and vision rooted in a Western philosophical tradition (Bilton, 2007). Without creativity, that is, the generation of new and valuable ideas, there would not be any entrepreneurship. The conceptual starting point for entrepreneurship is the individual creative potential of people. All human beings are capable of generating new and potentially valuable ideas.

Creativity is the starting point for innovation, it involves the discovery of something new and valuable. For years, people assumed that creativity was an inherent trait. Today, however, we know better. Research shows that almost anyone can learn to be creative. The left hemisphere of the brain controls language, logic, and symbols, processing information in a step-by-step fashion. The right hemisphere handles emotional, intuitive, and spatial functions, processing information intuitively. The right side of the brain is the source of creativity and innovation. People can learn to control which side of the brain is dominant in a given situation.

3.3.2 Barriers to Creativity

The number of potential barriers to creativity is limitless, but entrepreneurs commonly face 10 “mental locks” on creativity:

Searching for the one “right” answer, focusing on “being logical,” blindly following the rules, constantly being practical, viewing play as frivolous, becoming overly specialized, avoiding ambiguity, fearing looking foolish, fearing mistakes and failure, and believing that “I’m not creative.”

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Creativity is the starting point for innovation, it involves the discovery of something new and valuable.

3.3.3 Stimulating Creativity

Entrepreneurs can stimulate creativity in their companies by:

expecting creativity, expecting and tolerating failure, encouraging curiosity, viewing problems as challenges, providing creativity training, providing support, rewarding creativity, and modeling creativity.

Entrepreneurs can enhance their own creativity by using the following techniques:

allowing themselves to be creative, giving their minds fresh input every day, keeping a journal handy to record their thoughts and ideas, reading books on stimulating creativity or taking a class on creativity, and taking some time off to relax.

3.3.4 Creativity Process

In brief, the creative process consists of seven steps:

Image Sourcehttps://lh6.googleusercontent.com/proxy/X1Gnqa6IE1B6NGU2dbfW7ZfkUU9PuzEJCf_9GbWtWOsmM3hBvkQGj48Ios-

Figure 3.3

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Step 1, preparation, involves getting the mind ready for creative thinking; Step 2, investigation, requires the individual to develop a solid understanding of the problem or decision; Step 3, transformation, involves viewing the similarities and the differences among the information collected; Step 4, incubation, allows the subconscious mind to reflect on the information collected;Step 5, illumination, occurs at some point during the incubation stage when a spontaneous breakthrough causes “the light bulb to go on”; Step 6, verification, involves validating the idea as accurate and useful; and Step 7, implementation, involves transforming the idea into a business reality.

The five techniques especially useful for improving the creative process are:

● Brainstorming is a process in which a small group of people interact with very little structure with the goal of producing a large quantity of novel and imaginative ideas.

● Mind mapping is a graphical technique that encourages thinking on both sides of the brain, visually displays the various relationships among ideas, and improves the ability to view a problem from many sides.

● Force-field analysis allows entrepreneurs to weigh both the advantages and the disadvantages of a particular decision and work to maximize the variables that support it and minimize those that work against it.

● TRIZ is a systematic approach designed to help solve any technical problem, whatever its source. Unlike brainstorming and mind mapping, which are right-brain activities, TRIZ is a left-brain, scientific, step-by-step process that is based on the study of hundreds of the most innovative patents across the globe.

● Rapid prototyping is based on the premise that transforming an idea into an actual model will point out flaws in the original idea and will lead to improvements in its design.

The protection of intellectual property through patents, trademarks, and copyrights.

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Activity (Allow 15 minutes)1. List and explain the seven creative process

Post your response on the LMS

● A patent is a grant from the Federal Government that gives an inventor exclusive rights to an invention for 20 years.

A trademark is any distinctive word, symbol, or trade dress that a company uses to identify its product and to distinguish it from other goods. It serves as a company’s “signature” in the marketplace.

● A copyright protects original works of authorship. It covers only the form in which an idea is expressed and not the idea itself and lasts for 70 years beyond the creator’s death.

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ITQs

1. The protection of intellectual property through …….., …….., and ………….

2. Force-field analysis allows entrepreneurs to ………………3. ……………….. is the starting point for innovation, it

involves the discovery of something new and valuable.

ITAs

1. The protection of intellectual property through patents, trademarks, and copyrights.

2. Force-field analysis allows entrepreneurs to weigh both the advantages and the disadvantages of a particular decision and work to maximize the variables that support it and minimize those that work against it.

3. Creativity is the starting point for innovation, it involves the discovery of something new and valuable.

Innovation is the key to economic development of any company, region of a country or a country itself. As technologies change, old product decreases in sales and old industries dwindle. Inventions and innovations are the building blocks of the future of any economy. The word innovation comes from the Latin innovare which means “to make something new”. Innovation is the process of turning ideas into new opportunity for value creation and putting this into widely used practice.

Roberts (1988) defines innovation successful commercial implementation and exploitation of new ideas or inventions. It is the process of taking new ideas effectively and profitably through to satisfied customers. Innovation is a specific tool of entrepreneurs as they exploit change as an opportunity for a different business or service arise which is capable of being learned. Entrepreneurs achieve competitive advantage through acts of innovation. Schumpeter (1934) in his book Theory of Economic Development describes the main types of entrepreneurial behaviour or innovation as:

Introducing a new good; Introducing a new method of production; Opining a new market Conquering a new source of raw materials Rearranging an industry in a new way

3.3.4 Types of Innovation

Hisrich et al. (2016) identified three levels of innovation based on the uniqueness of idea. This are breakthrough innovation, technological innovation, and ordinary innovation.

i. Breakthrough InnovationThese are extremely unique innovations that often establish the platform on which future innovations in an area are developed, they are inventions like penicillin, nano technology, the Internet, the automobile, the airplane, the computer, the steam engine and more.

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Innovation is the key to economic development of any company, region of a country or a country itself.

ii. Technological InnovationThis type of innovation occurs more frequently than breakthrough innovation. They are very meaningful innovations as they offer advancements in the product/market area. They usually need to be protected, such innovations as the personal computer, the flip watch for containing pictures, voice and text messaging, the jet airplane and much more.

iii.Ordinary InnovationThis type of innovation occurs most frequently. They extend the technological innovation into a better product or service or one that has a different – usually better – market appeal. These innovation usually come from market analysis and pull not technology push. Examples are sticky note, palm top, android phones, smartphones, MP3 and more.

Kuratko (2009) is also of the opinion that there are three basic types of innovation based on their order of originality. They extend from totally new to modifications of existing products or services which are invention, extension, duplication, and synthesis.

i. InventionsThis is the creation of a new product, service, or process – often one that is novel or untried. Such concepts tend to be “revolutionary.” For example Wright Brothers – airplane; Thomas Edison – light bulb; Alexander Graham Bell – Telephone.

ii. ExtensionIt is the expansion of a product, service, or process already in existence. Such concepts make a different application of a current idea. For example Ray Kroc – McDonald’s; Mark Zuckerberg, Facebook; Barry Sternlicht, Starwood Hotel & Resorts

iii. DuplicationIt is the replication of an already existing product, service, or process. The duplication effort, however, is not simply copying but adding the entrepreneur’s own creative touch to enhance or improve the concept and beat the competition. For example, Wal-Mart -- Departmental Stores.

iv. SynthesisThis is the combination of existing concepts and factors into a new formulation. It involves taking a number of ideas or items already invented and finding a way that they can form a new application. For example Fred Smith – FedEx; Howard Schultz, Starbucks.

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3.3.5 Sources of Innovation

It is essential that potential entrepreneurs be always alert to the opportunities that lie in the external and internal environments in which they live. Peter Drucker (1985) listed eight sources of entrepreneurial opportunities which are trends, unexpected occurrences; incongruities; process needs; industry and market changes; demographic changes; perpetual changes; and knowledge-based concepts.

Trends

Observing trends closely grants an entrepreneur to recognize potential opportunity and how to create opportunities for them to pursue. Trends should be observed in all works of life basically addressing aspects of the general environment.

The following are examples of such trends:

Societal Trends: Healthy fare restaurants, organic foods, healthy-focused groceries, fitness and weight-loss centres, in-house exercise equipment and more

Technology trends: Smartphones, Smartphone apps, Wi-fi networks, E-commerce and more

Economic trends: Higher disposable income, dual wage-earner families, Discount stores and more, alternatives to traditional fossil fuel

Unexpected Occurrences

These are successes or failures that, because they were unanticipated or unplanned, often people to be a major innovative surprise to everyone. World events, including natural disaster, acts of terrorism and wars, have all given rise to innovative new products and services including security devices, services, and rescue equipment.

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Activity (Allow 15 minutes)1. List and explain Hisrich et al. (2016) three levels of

innovation.2. List and explain Kuratko (2009) four types of innovation

Post your response on the LMS

Incongruities

This occurs when a g6ap or difference exists between expectations and reality. For example Fred Smith proposed overnight mail delivery, he was told, “U.S. Post Office would have started if it was profitable”. An incongruity existed between what Smith felt was needed and the way business was currently conducted and he created FedEx.

Process Needs

It occurs when an answer to a particular need is required. Venture capitalists often refer to these needs as “pain” that exists in the marketplace — the entrepreneur is to come up with the innovative solution, or “painkiller.”

Demographics Changes

These arise from trend changes in population, age, education, occupations, geographic locations, and similar factors. Demographic shifts are important and often provide new entrepreneurial opportunities.

Changes in Perception

These are changes that occur in people’s interpretation of facts and concepts. Perception do cause major shifts in ideas to take place. Fitness craze, has caused the perceived need to be healthy and physically fit, this has created a demand for both healthy foods and healthy facilities globally.

Knowledge-Based Concept

Inventions are knowledge-based, they are the product of new thinking, new methods, and new knowledge. This form of innovation is time consuming since it moves from initiation through to implementation. For example cell phone technology Internet access, music and more.

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ITQs

1. Venture capitalists often refer to ………….2. Trends should be observed in all works of life basically

………………….3. …………….. are important and often provide new

entrepreneurial opportunities.

Innovation Management Process

This is a four stage process as follows:

Stage 1 involves scanning the environment for relevant signals indicating opportunities and threats for change. Basically the idea generation stage.

Stage 2 involves deciding which of these signals to respond to, based on a strategic view of how entreprise can best develop. Basically the idea screening and concept development and testing stage.

Stage 3 involves acquiring the resources to enable the response. This may be as a result of R&D or acquiring key resources from elsewhere (via technology transfer). Resource acquisition, that is, human capital, financial capital, information resources, and material resources

Stage 4 involves implementing the project, developing both the technology and market in order to respond effectively. Technological and market development stage, that is, market strategy and business analysis, and life cycle management stage.

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ITQs1. ______________________ is the starting point for innovation,

it involves the discovery of something new and valuable..2. ____________________ is an extremely unique innovations that often

establish the platform on which future innovations in an area are developed

ITAs

1. Venture capitalists often refer to these needs as “pain” that exists in the marketplace.

2. Trends should be observed in all works of life basically addressing aspects of the general environment.

3. Demographic shifts are important and often provide new entrepreneurial opportunities.

3.4 Business Planning Process

Scarborough and Cornwall (2016) and Longenecker et al. (2017) came up with a new

business planning process that spans from idea generation to launching the business.

This will be discussed in brief. After coming up with a business idea which seem to be

Conducting a feasibility analysis the easiest of the business planning process, the five

steps in between are idea assessment, conducting a feasibility analysis, developing a

business model, crafting a business plan, creating a strategic plan and launching the

business.

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Business ideas

Conducting an idea assessment

Conducting a feasibility analysis

Developing a business model

ITAs

1. Creativity2. Breakthrough Innovation

The New Business Planning Process Source: Scarborough & Cornwall (2017) Figure 3.4

3.4.1 Idea AssessmentThis is the process of examining a need in the market, developing a solution for that need, and determining the entrepreneur’s ability to successfully turn the idea into a business. As the entrepreneur observes a need in the market, using the creative process to generate many business ideas that might address this need. Each step in the new business planning process narrows down the number of ideas until the entrepreneur is ready to launch a business that has been carefully researched and tested. The idea assessment helps the entrepreneur efficiently evaluate the numerous ideas that come out of the creative process before committing the time and effort to craft a business plan, design a business model, or even conduct a feasibility analysis. Since this idea screening tool is intended provide a quick assessment it only takes into account the merits of an idea relative to five very important factors: Strength of the business ideaThe best business ideas will meet a definite market need, create value for end users, and offer products or services that customers favor and find easy to use.

Targeted market and customers Businesses are more likely to thrive if they focus on a sizeable market that is easy to identify, growing rapidly, and composed of customers with high levels of purchasing power that they are very willing to use.

Industry and competitive advantageThe most favorable industries for start-ups have few or no competitors, are growing quickly (to allow room for new entrants), and feature high operating margins.

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Creating a strategic plan

Crafting a business plan

Launching the business

Capability of foundersThe founders are expected to have industry-related experience, skills, and networks, as well as great passion for and fit with the new business.

Capital requirements and venture performanceAn entrepreneur will excel better when the venture needs little capital to launch, its anticipated profit potential is great, and similar enterprises perform very well.

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ITQs

1. The idea assessment helps the entrepreneur efficiently evaluate the ……………..

2. ……………………., and …………….. came up with a new business planning process that spans from idea generation to launching the business.

3. As the entrepreneur observes a need in the market, using the ……………………………..

ITAs

1. The idea assessment helps the entrepreneur efficiently evaluate the numerous ideas that come out of the creative process before committing the time and effort to craft a business plan, design a business model, or even conduct a feasibility analysis.

2. Scarborough and Cornwall (2016) and Longenecker et al. (2017) came up with a new business planning process that spans from idea generation to launching the business.

3. As the entrepreneur observes a need in the market, using the creative process to generate many business ideas that might address this need.

3.4.2 Feasibility AnalysisAfter conducting the idea assessment, an entrepreneur scrutinizes the idea further through a feasibility analysis. A feasibility analysis is a preliminary assessment of a business idea that enables one know whether or not the venture envisioned is likely to succeed. A feasibility analysis consists of four interrelated components: an industry and market feasibility analysis, a product or service feasibility analysis, a financial feasibility analysis, and an entrepreneur feasibility analysis. Deciding to conduct a feasibility analysis (business opportunity evaluation) before proceeding to the business model and plan stage saves the entrepreneur a lot of time, money, and heartache.When evaluating the feasibility of a business idea, an analysis of the industry and targeted market segments serves as the starting point for the remaining three components of a feasibility analysis. The focus in this phase is two-fold: (1) To determine how attractive an industry is overall as a “home” for a new business and (2) to evaluate possible niches a small business can occupy profitably.

Industry and Market FeasibilityWhen examining an industry, an entrepreneur should examine both the general and the task environment of the macro environment that can have an impact across many industries and the specific competitive environment of the industry of interest.

General Macro Environment of an IndustryThese are the highlights of possible effect of these dimensions● Sociocultural trends can lead to dramatic changes, creating whole new industries and fundamentally transforming existing industries. ● Technological breakthroughs lead to the development of new products and entirely new industries. ● Changing demographics create opportunities for entrepreneurs. ● Economic trends, both positive and negative, create opportunities. ● Political and legal change, such as new laws and regulations, create opportunities for entrepreneurs. ● Global trends that open global markets allow businesses to seek customers and suppliers from all corners of the world and can help in even the smallest business.

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A feasibility analysis is a preliminary assessment of a business idea that enables one know whether or not the venture envisioned is likely to succeed.

Task/Specific macro environment The task or specific external/macro environment will be discussed focusing essentially on Porter’s Five Forces Model. Porter’s Five Forces Model is a useful tool in assessing specific industry attractiveness within the competitive. The entrepreneurs should assess the five forces that shape the competitive environment for every business which are: ● the rivalry among competing firms ● the bargaining power of suppliers ● the bargaining power of buyers ● the threat of new entrants ● the threat of substitute products or services

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ITQs

1. When evaluating the feasibility of a business idea, an analysis of the industry and targeted market segments serves as ……………………

2. Sociocultural trends can lead to …………………3. Technological breakthroughs lead to …………… 4. Changing demographics create opportunities for ………...

ITQs

1. When evaluating the feasibility of a business idea, an analysis of the industry and targeted market segments serves as the starting point for the remaining three components of a feasibility analysis.

2. Sociocultural trends can lead to dramatic changes, creating whole new industries and fundamentally transforming existing industries.

3. Technological breakthroughs lead to the development of new products and entirely new industries.

4. Changing demographics create opportunities for entrepreneurs.

Students are to do a further study of Porter’s five forces model for a deeper understanding The industry is more attractive when:

Source: https://www.researchgate.net/profile/Alexander_Malm/publication/296695687/figure/fig118/AS:614401837105182@1523496221778/Porters-Five-forces-model-for-the-external-environment-of-the-rheometer-market.png Figure 3.5

After surveying the power these five forces exert on an industry, entrepreneurs can evaluate the potential for their companies to generate reasonable sales and profits in a particular industry. In other words, they can answer the question, “Is this industry a good home for my business?” Table 4.1 provides a matrix that allows entrepreneurs to assign quantitative scores to the five forces influencing industry attractiveness. Note that the lower the score for an industry, the more attractive it is.You are to do a further study on Fig. 4.6 of Scarborough and Cornwall (2016). Essentials of Entrepreneurship and Small Business pg. 158 on Five Forces Matrix.

If the response to the five forces analysis is attractive, the next step is to identify potentially attractive market niches present in the industry. A market niche is a subset of the market on which a specific product is focused. It is also a small market segment. Questions entrepreneurs should address at this stage of the feasibility analysis include: ● Which niche in the market will we occupy? ● How large is this market segment, and how fast is it growing? ● What is the basis for differentiating our product or service from competitors?

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● Do we have a superior business model that will be difficult for competitors to reproduce?

Companies can shield themselves from some of the negative impact of these five forces by finding a niche and occupying it. The following cautions with a niche strategy should be noted by entrepreneurs: Entering a niche requires adaptability in your initial plan. While developing their business models, entrepreneurs can misjudge what customers actually need within a niche market. Unless they are willing and able to adjust their business models to react to the realities of the market niche, the business will fail if it does not offer the customers what they really want. ● Niches change. Even if an entrepreneur evaluates the market correctly in the beginning, niche markets (like any market) change over time. Success in a niche requires that entrepreneurs adapt as the market changes. Too many entrepreneurs get stuck doing the same thing or offering the same product while their customers’ needs and wants change. Even though it is a niche, the market is not isolated and is subject to the same forces and trends that can control any market. ● Niches can go away. Although many niches can last for years, no market is forever. Niches can dry up—sometimes quite suddenly. Again, adaptation can offer some hope, but if the decline is too rapid, niche businesses can fail. ● Niches can grow. Although significant growth in a market may not sound bad, it can attract more competitors. If a niche market grows large enough, it can attract some very large competitors. At some point the entrepreneur’s cozy market niche can become quite crowded. Eventually, it may no longer be a true market niche, which requires that the entrepreneur adapt his or her business strategies to meet this more competitive market, so it should be operated as such.

Product or Service Feasibility: Is there a marketOnce it is established by entrepreneurs the existence of potential market for their product or service idea they sometimes rush in with a lot of enthusiasm ready to launch a business without due consideration. A product or service feasibility analysis determines the degree to which a product or service idea appeals to potential customers and identifies the resources necessary to produce the product or provide the service. This portion of the feasibility analysis addresses the question, “Are customers willing to purchase our goods and services?”

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Activity (Allow 15 minutes)With the aid of a diagram, explain Porter’s five forces model

Post your response on the LMS

Entrepreneurs need feedback from potential customers to successfully answer this question which will be made possible through the conduct of both primary and secondary research. ● Primary research tools include customer surveys, focus groups, building prototypes, conducting in-home trials, and “windshield” research (driving around and observing the competition). ● Secondary research gathers existing data from trade associations and business directories, industry databases, demographic data, census data, forecasts compiled by government agencies, market research reports, articles in magazines and journals, local data, and the Internet.

Financial Feasibility Analysis: Is there enough margin?This feasibility analysis involves assessing the financial feasibility of a proposed business venture, that is, a broad financial analysis that examines the basic economic feasibility sufficiency. This component of the feasibility analysis answers the question, “Can this business generate adequate profits?” If the business concept passes the overall feasibility analysis, an entrepreneur should conduct a more thorough financial analysis when developing the business model and creating a full-blown business plan. The four major elements to be included in a financial feasibility analysis include the initial capital requirement, estimated earnings, time out of cash, and resulting return on investment.● Capital requirements. Start-up companies often need capital to purchase equipment, buildings, technology, and other tangible assets and to hire and train employees, promote their products and services, and establish a presence in the market. ● Estimated earnings. In addition to producing an estimate of the start-up company’s capital requirements, an entrepreneur should forecast the earning potential of the proposed business. ● Time out of cash. To estimate time out of cash, take the negative cash flow from the business each month and divide by how much available cash is left in the business. This gives the number of months the business can survive at its current rate of negative cash flow. ● Return on investment. A venture must produce an attractive rate of return relative to the level of risk it requires. This risk–return tradeoff means that the higher the level of risk a prospective business involves, the higher the rate of return it must provide to the entrepreneur and investors.

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ITQs

1. A product or service feasibility analysis determines …………………………………….

2. Primary research tools include ……………3. A venture must produce an ……………….

Entrepreneur feasibility: Is this business idea right for me?It is of utmost importance to go ahead with an entrepreneur feasibility even if the earlier three analysis had been fully positive. Checking for the readiness of an entrepreneur is very much essential.● Many new businesses require that an entrepreneur possess a certain set of knowledge, experiences, and skills to have a chance of being successful. ● Entrepreneurial readiness also involves issues such as temperament and work ethic. Beyond the entrepreneur’s readiness to start a business, the second aspect of entrepreneur feasibility is to assess whether the business can meet the financial and nonfinancial needs of the entrepreneur and the team. Will the business be able to generate enough profit to support everyone’s income needs? If it is successful, will it also meet the wealth goals of the founding team? 3.4.3 Developing and Testing a Business modelWhen building a business model, the entrepreneur addresses a series of key questions that will explain how a business will become successful. Questions such as:What value does the business offer customers? Who is my target market? What do they expect of me as my customers? How do I get information to them, and how do they want to get the product? What are the key activities to make this all come together, and what will they cost? What resources do I need to make this happen, including money? Who are key partners I will need to attract to be successful?

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ITQs

1. A product or service feasibility analysis determines the degree to which a product or service idea appeals to potential customers and identifies the resources necessary to produce the product or provide the service.

2. Primary research tools include customer surveys, focus groups, building prototypes, conducting in-home trials, and “windshield” research.

3. A venture must produce an attractive rate of return relative to the level of risk it requires.

The nine basic elements of a business model are:● Customer segments. A good business model always starts with the customer. The entrepreneur’s first step is to identify a segment of customers who have a clearly defined need. Value proposition. The value proposition is the collection of products and/or

services the business will offer to meet customers’ needs. ● Customer relationships. Not every business provides the same type and same level of customer service. ● Channels. Channels refer to both communication channels (promotion) and distribution channels (product placement). Communication channels define how the customers seek out information about this type of product. The distribution channel defines the most effective way to get products to the customers for this type of business. ● Key activities. The goal is to build a basic checklist of what needs to be done to open the business and what activities are necessary to ensure its long-term success.Key resources. This will serve as an initial checklist to ensure that all key resources have been identified that will support a successful launch and sustain the business as it grows. ● Key partners. This segment of the business model includes important suppliers, outsourcing partners, investors, industry partners, advisers, and all other external businesses or entities that are critical to make the business model work. ● Revenue streams. How will the value proposition generate revenue? ● Cost structure. The key activities, key resources, and key partners components of the plan help identify the basic types of costs and give some estimate of their scope.

3.4.4 Business Plan

A business is a planning tool that builds on the foundation of the idea assessment, feasibility analysis, and business model discussed earlier. A business plan provides a more comprehensive and detailed analysis than the first three steps in the new business planning process. Together with a well-developed business model, it functions primarily as a planning tool describing in greater detail how to turn the model into a successful business Scarborough & Cornwall, 2016). They further added that the primary goals of the business plan are to guide

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Activity (Allow 15 minutes)1. What is a business model2. Explain the nine basic elements of a business model3. Differentiate between product and financial feasibility analysis

Post your response on the LMS

entrepreneurs as they launch their businesses and to help them acquire the necessary financing to launch. From research it is believed that, whatever their size, companies that engage in business planning outperform those that do not. A business plan offers: ● a systematic, realistic evaluation of a venture’s chances for success in the market. ● a way to determine the principal risks facing the venture. ● a “game plan” for managing the business successfully during its start-up. ● a tool for comparing actual results against targeted performance. ● an important tool for attracting capital in the challenging hunt for money.

A business plan is a written summary of an entrepreneur’s proposed business venture, its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities. A business plan describes which direction the company is taking, what its goals are, where it wants to be, and how it intends to get there. Crafting a business plan is an entrepreneur’s last insurance against launching a business destined to fail or mismanaging a potentially successful company. A business plan serves two essential functions. First, it provides a battery of tools—a mission statement, goals, objectives, budgets, financial forecasts, target markets, and entry strategies—to help entrepreneurs subject their ideas to one last test of reality before launching the business. The business plan also helps the entrepreneur to lead the company successfully through its launch and early start-up phases. The second function of the business plan is to attract lenders and investors. A business plan must prove to potential lenders and investors that a venture will be able to repay loans and produce an attractive rate of return.

Preparing a sound business plan requires time and effort, but the benefits greatly exceed the costs. Building a plan forces a potential entrepreneur to look at his or her business idea in the harsh light of reality by putting the concepts developed in the business model into specific detail. To get external financing, an entrepreneur’s plan must pass three tests with potential lenders and investors: (1) the reality test, (2) the competitive test, and (3) the value test. The first two tests have both an external and internal component. An effective business plan should pass these three tests:

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A business plan provides a more comprehensive and detailed analysis than the first three steps in the new business planning process.

● Reality test. The external component of the reality test revolves around proving that a market for the product or service really does exist. The internal component of the reality test focuses on the product or service itself. ● Competitive test. The external part of the competitive test evaluates the company’s relative position to its key competitors. The internal competitive test focuses on the management team’s ability to create a company that will gain an edge over existing rivals. ● Value test. To convince lenders and investors to put their money into the venture, a business plan must prove to them that it offers a high probability of repayment or an attractive rate of return.

Although a business plan should be unique and tailor-made to suit the particular needs of a small company, it should cover these basic elements: executive summary, mission statement, company history, business and industry profile, description of the company’s business strategy, profile of its products or services, statement explaining its marketing strategy, competitor analysis, owners’ and officers’ résumés, plan of operation, financial data, and loan or investment proposal.

To increase their chances of success when using their business plans to attract capital, entrepreneurs must be aware of the criteria lenders and investors use to evaluate the creditworthiness of businesses seeking financing. Lenders and investors refer to these criteria as the five the “five Cs of credit” and why they are important to potential lenders and investors reviewing business plans.

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ITQs

1. A business plan provides a more ………………..2. The internal component of the reality test

focuses on …………………………….3. The internal competitive test focuses on ………4. A good business model always starts with the ………...

Small business owners need to be aware of the criteria bankers use in evaluating the creditworthiness of loan applicants, known as the five Cs of credit: capital, capacity, collateral, character, and conditions. ● Capital—Lenders expect small businesses to have an equity base of investment by the owner(s) that will help support the venture during times of financial strain. ● Capacity—A synonym for capacity is cash flow. The bank must be convinced of the firm’s ability to meet its regular financial obligations and to repay the bank loan, and that takes cash. ● Collateral—Collateral includes any assets the owner pledges to the bank as security for repayment of the loan. ● Character—Before approving a loan to a small business, the banker must be satisfied with the owner’s character. ● Conditions—The conditions–interest rates, the health of the nation’s economy, industry growth rates, etc.—surrounding a loan request also affect the owner’s chance of receiving funds.

3.4.5 Building a Strategic PlanIn today’s global competitive environment, any business, large or small, that is not thinking and acting strategically is extremely vulnerable. Every business is exposed to the forces of a rapidly changing competitive environment, and in the future small business executives can expect even greater change and uncertainty. From sweeping political changes around the planet and rapid technology advances to more intense competition and newly emerging global markets, the business environment has become more turbulent and challenging to business owners. Although this market turbulence creates many challenges for small businesses, it also creates opportunities for those companies that have in place strategies to capitalize on them. Entrepreneurs’ willingness to adapt, to create change, to experiment with new business models, and to break traditional rules has become more important than ever. “It’s not the strongest or the most intelligent

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ITQs

1. A business plan provides a more comprehensive and detailed analysis than the first three steps in the new business planning process.

2. The internal component of the reality test focuses on the product or service itself.

3. The internal competitive test focuses on the management team’s ability to create a company that will gain an edge over existing rivals.

4. A good business model always starts with the customer.

[companies that] survive,” says American Express CEO Ken Chenault, “but those most adaptive to change.Strategic planning involves developing a game plan to guide a company as it strives to accomplish its vision, mission, goals, and objectives and to keep it from straying off course. A solid strategic plan provides managers and employees a sense of direction when everyone is involved in creating and updating it. As more team members become committed to making the plan work, it takes on special meaning. It gives everyone targets to shoot for, and it provides a yardstick for measuring actual performance against those targets, especially in the crucial and chaotic start-up phase of the business.An important change that entrepreneurs are facing is the shift in the world’s economy from a base of financial to intellectual capital. “Knowledge is no longer just a factor of production,” says futurist Alvin Toffler. “It is the critical factor of production.” Today, a company’s intellectual capital is likely to be the source of its competitive advantage in the marketplace. Intellectual capital is comprised of three components which are human capital, structural capital and customer capital.

1. Human capital consists of the talents, creativity, skills, and abilities of a company’s workforce and shows up in the innovative strategies, plans, and processes the people in an organization develop and then passionately pursue. 2. Structural capital is the accumulated knowledge and experience that a company possesses. It can take many forms, including processes, software, patents, copyrights, and, perhaps most important, the knowledge and experience of the people in a company. 3. Customer capital is the established customer base, positive reputation, ongoing relationships, and goodwill that a company builds up over time with its customers.Entrepreneurs are increasingly recognizing that the capital stored in these three areas forms the foundation of their ability to compete effectively and that they must manage this intangible capital base carefully. Every business uses all three components in its strategy, but the emphasis on each one varies from company to company.

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ITQs

1. In today’s global competitive environment, any business, large or small, that is not thinking and acting strategically is extremely …………..

2. Intellectual capital is comprised of ………., ……….., and …………..

3. A solid strategic plan provides managers and employees a sense of …………………………….

The goal of developing a strategic plan is to create for the small company a competitive advantage, that is, a value proposition that sets a small business apart from its competitors and gives it a unique position in the market that is superior to its rivals. It is the differentiating factor that makes customers want to buy from your business rather than from your competitor. Entrepreneurs should examine five aspects of their businesses to define their companies’ competitive advantages through the products they sell; services they provide; the pricing they offer; the way they sell; and values to which they are committed. Building a competitive advantage alone is not enough; the key to success over time is building a sustainable competitive advantage. In the long run, a company gains a sustainable competitive advantage through its ability to develop a set of core competencies that enable it to serve its selected target customers better than its rivals. Core competencies are a unique set of capabilities that a company develops in key areas, such as superior quality, customer service, innovation, team building, flexibility, and responsiveness, which allow it to vault past competitors.

Entrepreneurs need to constantly differentiate their businesses from that of their larger competitions by using their and their special abilities their businesses offer to customers. Strategic management enhances a small company’s effectiveness, but entrepreneurs first must have a process designed to meet their needs and their business’s special characteristics. The strategic management procedure for a small business should include the following features: ● It has a relatively short planning horizon—two years or less for most small companies. ● It is informal and not overly structured; a shirtsleeve approach is ideal. ● it encourage the participation of employees and outside parties to improve the reliability and creativity of the resulting plan. ● It should not begin with setting objectives because extensive objective setting early on may interfere with the creative process of strategic management.

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ITQs

1. In today’s global competitive environment, any business, large or small, that is not thinking and acting strategically is extremely vulnerable.

2. Intellectual capital is comprised of three components which are human capital, structural capital and customer capital.

3. A solid strategic plan provides managers and employees a sense of direction when everyone is involved in creating and updating it.

● It should maintain flexibility; competitive conditions change too rapidly for any plan to be considered permanent. ● It should focus on strategic thinking, not just planning, by linking long-range goals to day-to-day operations. ● It should be an ongoing process because businesses and the competitive environment in which they operate constantly change.

Summary

In this module, we learnt that the entrepreneurial process being an action towards the formation of a new product, service or venture was discussed bringing out the six steps involved. Thereafter, business opportunities was further discussed and creativity and innovation that is germane to entrepreneurship was addressed. After which the new business planning process, a seven step process was discussed spanning from generation of business ideas to conducting idea assessment, conducting a feasibility analysis, developing a business model, crafting a business plan, creating a strategic plan and finally launching the business.

References/Read More:

Oduyoye, O. O. & Onu, C. A. (2014). Foundations of Entrepreneurship. Ogun State: Babcock University.

Scarborough, Norman M. & Cornwall, J. R. (2016). Essentials of Entrepreneurship and Small Business Management (6th Edn). Boston: Pearson.

Barringer, B. R. & Ireland, R. D. (2013). Entrepreneurship, successfully launching new ventures (4th Edn). Boston: Pearson

Glossary of terms

A business plan is the description of the future direction of the business.

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Activity (Allow 15 minutes)1. With your knowledge of entrepreneurial process, come

up with an entrepreneurial venture of your choice.2. Conduct an idea assessment of a product or service of

your choice

Post your response on the LMS

Business opportunity refers to the extent to which possibilities for new ventures exist and the extent to which entrepreneurs have the capability to influence successful actualization through their own actions.

Creativity is the starting point for innovation, it involves the discovery of something new and valuable.

Brainstorming is a process in which a small group of people interact with very little structure with the goal of producing a large quantity of novel and imaginative ideas.

TRIZ is a systematic approach designed to help solve any technical problem, whatever its source.

A patent is a grant from the Federal Government that gives an inventor exclusive rights to an invention for 20 years.

A trademark is any distinctive word, symbol, or trade dress that a company uses to identify its product and to distinguish it from other goods.

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MODULE 4 BUSINESS FINANCING, SMALL BUSINESS MARKETING AND GROWTH

Image fromhttps://i0.wp.com/startuptipsdaily.com/wp-content/uploads/2016/04/15-small-

business-ideas-for-beginners.jpg?resize=768%2C431&ssl=1

IntroductionIn the previous module, the entrepreneurial process and business opportunities was discussed. We also learnt the creativity and innovation. Moreover, business planning process was also discussed. In this module, we will discuss the order for entrepreneurial ventures to run successfully and how they can be financed. We will also learn small business marketing and growth. The different strategies for growth will be presented, the challenges that goes will growth and ways of overcoming them will also be outlined.

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Learning Outcomes

At the end of this module, you should be able:1. Explain how a small business can be financed2. Discuss Small Business Marketing 3. Explain small Business Growth

1 Business Financing

Source: https://www.1stcapitalloans.com/s/cc_images/teaserbox_4097282716.PNG?t=145386588IntroductionBusiness financing is the provision of finance for the meeting of business financial needs. This is an aspect of financial management. Capital is a crucial element in the process of creating new ventures, raising money to launch a new business venture as always been a challenge for many entrepreneurs. Finance can be required for different purposes and at different time and stages of a business. When initially financing a small business, the owner will rely mostly on personal savings and can also seek financing from family and/or friends. Most entrepreneurs face difficulty finding outside sources of financing. Many banks shy away from making loans to start-ups, venture capitalists are looking for ever-larger deals, private investors have grown cautious, and making a public stock offering remains a viable option for only a handful of promising companies with good track records and fast-growth futures. The result has been a credit crunch for entrepreneurs looking for small to moderate amounts of start-up capital.

4.1.1 Concept of Business FinancingBusiness financing is the provision of finance for the meeting of business financial needs. This is an aspect of financial management. Capital is any form of wealth employed to produce more wealth. It exists in many forms in a typical business, including cash, inventory, plant, and equipment. Entrepreneurs have access to different types of capital: equity and debt. Equity financing is simply money invested in the venture with no legal obligation for entrepreneurs to repay the principal amount or pay interest on it. It requires sharing the ownership and/or profits with the funding source. While debt financing is money borrowed with the intent to pay it back on certain terms and conditions. It requires the borrower to pay back the amount borrowed within a certain time including the term of loan and the interest rate.

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Entrepreneurs need to have as vivid understanding of the alternatives that are available as regards to raising money as capital for their ventures. The need to raise money is strange to some entrepreneurs because they believe their business can be adequately funded internally. Many entrepreneurs go about raising funds haphazardly because they lack the experience in this area and because they are not aware of their choices, which may make them to place much reliance on some sources of capital and not enough on others.Often financing a business weigh heavily on entrepreneurs. We have four basic firm characteristics that significantly affect how a venture is financed: the firm’s economic potential, the size and maturity of the company, the nature of its assets, and the personal preferences of the owners with respect to the trade-offs between debt and equity. So it is essential to understand how these characteristics come into play in financing a venture. Summarily an entrepreneurial firm with high-growth potential has a more possible sources of financing than firms that provides a good lifestyle for its owners but little in the way of attractive returns to investors. While older and larger companies have more access to bank financing, while smaller firms tend to rely more on personal loans and credit cards. Tangible assets serve as great collateral when a business is requesting a bank loan, while intangible assets have little value as collateral for lenders.

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ITQs

1. Business financing is the provision of ………2. Finance can be required for ……………3. Equity financing is simply money invested in ………….

ITAs

1. Business financing is the provision of finance for the meeting of business financial needs.

2. Finance can be required for different purposes and at different time and stages of a business.

3. Equity financing is simply money invested in the venture with no legal obligation for entrepreneurs to repay the principal amount or pay interest on it.

4.1.2 Reasons Why New Ventures Need Funding There are three major reasons most entrepreneurial ventures need to raise during their early life: cash flow challenges, capital investments, and lengthy product development cycles. This is discussed briefly in figure 4.1.1

Fig. 4.1. Three Reasons Start-Ups Need Funding

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Cash Flow Challenges

Inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales

Capital Investments

The cost of buying real estate, building facilities, and purchasing equipment typically exceeds a firm’s ability to provide funds for these needs on its own.

Lengthy Product Development Cycles

Some products are under development for years before they generate earnings. The up-front costs often exceed a firm’s ability to fund these activities on its own

ITQs

1. Entrepreneurs need to have as vivid understanding of ……..2. Often ……………….. weigh heavily on entrepreneurs.3. Tangible assets serve as great collateral when a business is

…………., while intangible assets have little value as collateral for …………..

ITQs

1. Entrepreneurs need to have as vivid understanding of the alternatives that are available as regards to raising money as capital for their ventures.

2. Often financing a business weigh heavily on entrepreneurs.3. Tangible assets serve as great collateral when a business is

requesting a bank loan, while intangible assets have little value as collateral for lenders.

4.1.3 Secrets of Successful FinancingScarborough and Cornwall (2016) enumerated the following “secrets” to successful financing when entrepreneurs are searching for the capital to launch their ventures:

Choosing the right sources of capital for a business can be just as important as choosing the right form of ownership or the right location.

The money is out there; the key is knowing where to look Raising money takes time and effort. Creativity counts. The Internet puts at entrepreneurs’ fingertips vast resources of information

that can lead to financing. Use it. Put social media to work to locate potential investors, Be thoroughly prepared before approaching potential lenders and

investors. Entrepreneurs cannot overestimate the importance of making sure that the

“chemistry” among themselves, their companies, and their funding sources is a good one.

Plan an exit strategy. When capital gets tight, remember to bootstrap.

4.1.4. Sources of FinancingThere are two major sources of financing – equity financing and debt financing. Equity capital represents the personal investment of the owner (or owners) in a business and is sometimes called risk capital because these investors assume the primary risk of losing their funds if the business fails. If a venture succeeds, however, founders and investors share in the benefits, which can be quite substantial. Equity financing can further be divided into two, that is, personal financing and others.

Sources of Personal FinancingThe initial fund that usually gets a company off the ground is from the founders’ own pockets. This is depicted in figure 4.1.3

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There are three major reasons most entrepreneurial ventures need to raise during their early life: cash flow challenges, capital investments, and lengthy product development cycles.

Fig. 4.2 Sources of Personal Financing

It is important to discuss more on bootstrapping, these are examples of bootstrapping: Buy used instead of new equipment Coordinate purchases with other businesses Lease equipment instead of buying Obtain payments in advance from customers Minimize personal expenses Avoid unnecessary expenses, such as lavish office space or furniture Buy items cheaply, but prudently, through discount outlets or online actions such

as e-Bay, rather than at full-price stores Share office prepare entrepreneurs raise debt or equity financing depicted on

Figure 4.3 Share space or employees with other businesses. Hire interns

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Personal Funds

Involves both financial resources and sweat equity. Sweat equity represents the value of the time and effort that a founder puts into a firm.

Friends and Family

Often comes in the form of loans or investments, but can also involve outright gifts, foregone or delayed compensation or reduced or free rent.

Bootstrapping

Finding ways to avoid the need for external financing, or funding through creativity, ingenuity, thriftiness, cost-cutting, obtaining grants, or any other means necessary.

ITQs

1. Choosing the right sources of capital for a business can be just as important as …………………………….

2. There are two major sources of financing – …………. financing and ……….. financing.

3. ………………….represents the personal investment of the owner (or owners) in a business and is sometimes called risk capital because these investors assume the primary risk of losing their funds if the business fails.

Before raising other equity and debt financing it is important to discuss these three steps involved to properly

ITAsITQs

Figure 4.2

Other Sources of Equity FinancingThe other sources of equity financing are Business Angels, Venture Capital, and Public Offering. Business angels are individuals who invest their personal capital directly in start-ups. Venture capital is money that is invested by venture capital firms in start-ups and small businesses with exceptional growth potential. While initial public offering (IPO) is the first sale of stock by a firm to the public traded at the stock exchange.Venture capitalist to Kuratko (2009) are experienced professionals who provide a full range of financial services for new or growing ventures, including the following:

Capital for start-ups and expansion Market research and strategy for businesses that do not have their own marketing

departments Management-consulting functions and management audit and evaluation.- Contacts with prospective customers, suppliers, and other important business

people Assistance in negotiating technical agreements Help in establishing management and accounting controls Help in employee recruitment and development of employee agreements Help in risk management and the establishment of an effective insurance program

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Step 1

Determine precisely how much money is needed.

Step 2

Determine the most appropriate type of financing or funding

Step 3

Develop a strategy for engaging potential investors or bankers

ITAs

1. Choosing the right sources of capital for a business can be just as important as choosing the right form of ownership or the right location.

2. There are two major sources of financing – equity financing and debt financing.

3. Equity capital represents the personal investment of the owner (or owners) in a business and is sometimes called risk capital because these investors assume the primary risk of losing their funds if the business fails.

Counseling and guidance in complying with a myriad of government regulations

4.1.5 Sources of Debt FinancingDebt financing involves getting loans or selling corporate bonds. Debt is money borrowed with the intent to pay it back on certain terms and conditions (usually payment of money back with an added interest). Commercial banks are the very heart of the financial market for small businesses, providing the greatest number and variety of loans to small companies. Different types and forms of loans can be obtained from commercial banks ranging from short term, to intermediate and long-term loans. Bank of Industry and African Development Bank in their limited way do finance small and medium scale enterprises.

Crowd funding is a method of raising capital that taps the power of social networking and allows entrepreneurs to post their elevator pitches and proposed investment terms on specialized Web sites and raise money from ordinary people who invest as little as $100 (in Nigeria it can be as low as N50,000 or much less). It is popular tool for entrepreneurs to use to help get hat-to-find seed capital. Longenecker et al. (2014) presented four basic approaches to crowdfunding has been identified, these comes in the form of donations; rewards; pre-purchases, and equity investing. Donations are more of charitabl-e givens that does not expect anything in return. With rewards on the other hand, supporters make a monetary contribution in return for a reward of some type, this can sometimes be used by innovative small start-ups but not generally suitable for a for-profit business start-up. Pre-purchase crowdfunding allows one to sell products before it has been created. Invariably the product is being paid for even before creation or production. The payment for the order is then used to produce the products. Equity crowdfunding involves investors that are purchasing an ownership interest (equity) in the business but usually a very small percentage of ownership.

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ITQs

1. Debt financing involves ………………..2. …………. is money borrowed with the intent to pay it back

on certain terms and conditions.3. Commercial banks are the very heart of the financial market

for small businesses, providing the …………….4. Donations are more of charitable givens that ……………..5. ………….. allows one to sell products before it has been

created.

HG.org legal resources added lending based crowdfunding and was silent about reward crowdfunding. Lending/debt based crowdfunding entails contributors giving small, usually short term loans, that is, getting borrowers’ money from multiple people. There is a binding agreement with the individuals to repay the amount at set time intervals and at a set interest rate. This is the most common form of crowdfunding adopted by entrepreneurs. There are various sites to access in raising funds through crowdfunding globally in different kinds of industry. For example in Nigeria we have NaijaFund, KickStarter, GOFUNDME, INDIEGOGO, and many more. It is important to note that as crowdfunding is not all a bed of roses, it also has a darkside, that is, its shortfalls. This is why it is important to engage in the following to avoid a kickstarter disaster; start with a business plan; have contracts in place; be honest about the risks involved, remember that backers view themselves as customers, not investors (Klein, 2014).

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ITAs

1. Debt financing involves getting loans or selling corporate bonds.

2. Debt is money borrowed with the intent to pay it back on certain terms and conditions.

3. Commercial banks are the very heart of the financial market for small businesses, providing the greatest number and variety of loans to small companies.

4. Donations are more of charitable givens that does not expect anything in return.

5. Pre-purchase crowdfunding allows one to sell products before it has been created.

2 Entrepreneurial Marketing

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IntroductionEntrepreneurs are habitually passionate about their products or services in which they talk about its features all day, but sometime ignore or forget the fact that customers buy a product or service because of the benefits they hope to derive from it. Marketing forms the cornerstone for the initiation, growth, and profitability of any entrepreneurial venture.

4.2.1 Entrepreneurial Marketing and Marketing ConceptEntrepreneurial marketing to Stokes et al. (2010) is the business function of attracting and retaining customers, carried out in an entrepreneurial context. That is, marketing carried out by successful entrepreneurs and therefore takes key elements of the entrepreneurship process. It is also defined by Morris, Schindehutte, and LaForge (2002) as the proactive identification and exploitation of opportunities for acquiring and retaining profitable customers through innovative approaches to risk management, resource leveraging, and value creation.The marketing concept for entrepreneurs requires knowing what a market consists of, the understanding of marketing research, the development of a marketing plan, and the proper approach to a pricing strategy. A market is simply seen as a group of customers or potential customers who have the purchasing power and unsatisfied needs. A number of techniques and strategies do assist entreprene1.urs to effectively analyze their potential market. Here are common elements in the marketing skills of great entrepreneurs by Dickson (1994):1. They possess unique environmental insights, which they use to sport

opportunities that others overlook or view as problems.2. They develop new marketing strategies that draw on their unique insights.

They view the status quo and conventional wisdom as something to be challenged.

3. They take risks that others, lacking their vision, consider foolish.4. They live in fear of be preempted in the market5. They are fiercely competitive 6. They think through the implications of any proposed strategy, screening it

against their knowledge of how the marketplace functions. They identify and solve problems that others do not even recognize.

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7. They are meticulous about details and are always in search of new competitive advantages in quality and cost reduction, however small.

8. They lead from the front, executing their management strategies enthusiastically and autocratically. They maintain close information control when they delegate

9. They drive themselves and their subordinates10. They are prepared to adapt their strategies quickly and to keep adapting them

until they work. They persevere long after others have given up.11. They have clear visions of what they want to achieve next. They can see

further down the road than the average manager can see.

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ITQs

1. Entrepreneurial marketing to Stokes et al. (2010) is the …….. 2. A market is simply seen as a ………………………3. Marketing forms the cornerstone for the

…………………………..

ITAs

1. Entrepreneurial marketing to Stokes et al. (2010) is the business function of attracting and retaining customers, carried out in an entrepreneurial context.

2. A market is simply seen as a group of customers or potential customers who have the purchasing power and unsatisfied needs.

3. Marketing forms the cornerstone for the initiation, growth, and profitability of any entrepreneurial venture.

4.2.2 Uniqueness of Marketing to Entrepreneurs Marketing is vital to entrepreneurs since no venture can become established and grow without a customer market. Entrepreneurs are expected to create the offer, that is, design the product and set the price), take the offer to the market through distribution, and at the same time, tell the market about the offer through communications. All these activities addresses the Four Ps of marketing: product, price, place (distribution), and promotion (communication). Entrepreneurs are to design the entire marketing from product and price to distribution and communication.As a result of the difficulty of products from production to distribution, entrepreneurs rely on creativity rather than to achieving a compelling image in the marketplace. To gain market acceptance entrepreneurs engage in building brand awareness. Entrepreneurs always bring out something new and unique about their products or services.

4.2.3 Unique Marketing Challenges faced by EntrepreneursEntrepreneurial marketing is different from marketing done by established companies for the following reasons:

Entrepreneurial ventures typically have limited resources – ranging from financial to managerial aspect.

Little or no funds are invested in marketing activities, hiring highly experienced marketing managers, for conducting extensive marketing research, testing their strategies, and carefully designing marketing campaigns, new ventures find creative and less costly means to validate their ideas and reach customers.

Entrepreneurs also faced with the issue of little or no market share and a confined geographic market presence.

There is limited information as the disposal of entrepreneurs Decision making is usually muddled up by strong personal biases and

beliefs. Research has shown that common marketing-related dangers for

entrepreneur including overestimating demand, overestimating demand, underestimating competitor response, and making uninformed distribution decisions.

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Marketing is vital to entrepreneurs since no venture can become established and grow without a customer market.

Entrepreneurs market to multiple audiences of investors, customers, employees, and business partners. Since none of these bonds is well established for early-state companies, entrepreneurs ought to be both customer oriented and relationship oriented. Customer orientation requires understanding the market and where it is going. While relationship orientation requires understanding the market and where it is going. A relationship orientation is needed to create structural and emotional ties with all stakeholders. Thus, marketing helps entrepreneurs acquire resources by selling their ideas to potential investors and partners. It also allows entrepreneurs to leverage scarce resources through innovative business approaches.

4.2.3 Marketing Research Marketing research is the collection and analysis of a reliable information that improves managerial decisions. Questions answered by marketing research are: what products and attributes are important for customers? How is customers’ willingness to buy influenced by product design, pricing, and communications? Where do customers’ willingness to bugy influenced by product design, pricing, and communications? Where do customers buy this kind of product? How is the market likely to change in the future?Information can be gathered through primary and secondary data. Secondary data is collected from published sources like an industry association or census reports while primary data through focus groups, surveys, or experiments.

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ITQs

1. Marketing research is the ……………………. 2. Entrepreneurs market to multiple ……………….

ITQs

1. Marketing research is the collection and analysis of a reliable information that improves managerial decisions.

2. Entrepreneurs market to multiple audiences of investors, customers, employees, and business partners.

4.2.4 Marketing Strategies for EntrepreneursMarketing strategies areA company’s marketing strategy must close align with its resources and capabilities. The three major marketing strategies important to entrepreneurs. Segmentation, targeting, and positioning are key marketing dimensions that set the strategic framework.

Segmentation, Targeting, and PositioningSegmentation and targeting are the processes that enable the marketers to identify right customers for their company’s products and services, that is, the process of identifying a specific set of characteristics that differentiates one group of consumers from the rest. Demographic characteristics include age, education, gender, and income; lifestyle characteristics include descriptors like active, individualistic, risk taking, and time pressured. Behavioral characteristics include consumer traits such as brand loyalty and willingness to adopt new products. A segment is

Targeting compares the defined segments and then selects the most attractive one, which becomes the PTA. Targeting is the The attractiveness of a segment is related to its size, growth rate, and profit potential. Targeting decisions should reflect the company’s specific capabilities and longer-term goals.

As segmentation and targeting profile a company’s customers, positioning relates to competitors and to customers’ perceptions of your product. Positioning usually describle a company’s offering relative to certain product attributes – the ones customers care about most.

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ITQs

1. A company’s marketing strategy must …………….2. Targeting compares the defined ………….

ITAs

1. A company’s marketing strategy must close align with its resources and capabilities.

2. Targeting compares the defined segments and then selects the most attractive one, which becomes the PTA.

4.2.5 The Marketing Mix

The marketing mix – the Four Ps of product, price, place, and promotion – is a set of tools your company can use to achieve its marketing goals. Product strategyProduct strategy address value propositions being offered to customers and make sure our goods are differentiated. The stage of the product on its lifecycle is crucial also and quality should never be compromised it is germane. New products should address the unmet needs of the customers. Any positioning statement has four elements of target group and need; brand; concept; and point of difference. It is important for entreprneurs to know which attributes customers consider important and how customers rate the company’s product and competing products on each attribute. In a business environment with intense global completion and fast paced technology, entrepreneurs must ocntinue to develop new products in order to maintain a profitable market position, even after creating a winning new venture.

Pricing StrategyDeveloping an optimal pricing strategy is a daunting challenge for every company. Many entrepreneurs use a cost-based method, marking up a product based on its cost plus a desired profit margin in setting prices. Another method is matching competitor’s pricing. The perceived value pricing also adopted for pricing a new or innovative product or service. Two well-known pricing strategies which represent opposite ends of the pricing spectrum are pricing skimming and penetration pricing. Price skimming sets high margins. Penetration pricing aims to gain high market share with lower margins and relatively lower prices. Since entrepreneurs are expected to bring something new to the marketplace, a skimming strategy is usually the best.Another pricing strategy is price discrimination, that is, charging different prices to different customer segments. Pricing is of utmost importance entrepreneurs because it plays a role in how consumers perceive a product’s position in the market. Price serves as a quality cue to consumers, especially when they have had limited experience with the product.

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The marketing mix – the Four Ps of product, price, place, and promotion – is a set of tools your company can use to achieve its marketing goals.

Distribution Strategy (Place)Distribution can be problematic for entrepreneurial activities in various industries. Effective distribution is the availability and accessibility of a service to its target customers. There is a great deal of interdependency in a distribution channel: each channel member has a particular function to perform, and each relies on the others. Entrepreneurs specifically are inclined to rely on other companies to fulfil certain distribution tasks for them. Distribution channel strategy includes three types of channel coverage which are intensive, selective, and exclusive. The appropriate strategy depends on the type of product or service to deal in. Intensive coverage works for consumer goods and other fast-moving products. Selective distribution brings the product to specific distributors, often limiting selection geographically by establishing a dealer network. Selective distribution can protect dealers and retailers from competition, while helping manufacturers maintain prices for luxury products. Exclusive distribution is often used for luxury products.Channel partnerships (or relationships) have important implications for entrepreneurs. Frequently the channel member with the most power will prevail. It is worthy to note that channel partnership can speed a young company’s growth, preserve resources, and transfer risk, entrepreneurs must carefully manage their relationships with channel partners. Entrepreneurs succeed with their distribution strategies when they have a strong understanding of channel economics. Multichannel distribution is germane for entrepreneurs because it gives the company the ability to reach multiple segments, gain marketing synergies, provide flexibility for customers, save on customers acquisition costs, and build a robust database of purchase information.

Marketing Communications Strategy:Marketing communications convey messages to the market, that is, messages about the company’s products and services as well as about the company itself. Communications mix is defined as advertising, sales promotion, public relations, personal selling, and direct marketing (sometimes included with advertising). The components of the communications mix, like those of the marketing mix, are also referred to as tools, and the use of these tools by marketers differs substantially across business and industry contexts. For example, consumer product companies’ communications are often baimed as mass markets, so they make more use of advertising and sales promotions, while business-to-business companies use more customized, interactive tools, such as personal selling by a salesforce.In many instances variety of tools of marketing are needed to effectively communicate products and services to customers today, so as a result of this multiple methods integrated marketing communications is adopted. The question an entrepreneur should consistently answer is “What is the most effective way to communicate with my customers and influence their actions?”. The sooner the answer to this question, the better for the entrepreneur. To select the most effective communications tools for a company a range of factors should be considered – cost, timing, and target market.

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The push and pull strategies are two key communications strategies. The push strategy aims to push a product through the channel of distribution using tools such as trad promotions, and personal selling to distributors or other channel members. Whereas a pull strategy’s goal is to create end-user demand and rely on that demand to pull the product through the channel. Pull strategies, which are directly targeted to end-users are advertising and consumer sales promotions.

The Communication Mix

Marketing Communication

Customers’ Perspective of the 4 Ps Figure 4.3

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Advertising

Broadcast ads

Print ads

Outdoor ads

Online ads

Sales Promotion

Consumer promos

Trade promos

Sales promos

Public Relations

Press relations

Publicity

Public affairs

Investor relations

Personal Selling

Outside sales force

Inside sales force

Direct Marketing

Direct mail

Catalogs

Telemarketing

Permisson e-mail

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http://www.sales-and-marketing-for-you.com/define-marketing-mix.html

It is important for entrepreneurs to understand the perspective of the customers.

The “4 Cs” marketing mix definition seeks to turn traditional marketing thinking on it's

head by looking sales and marketing in a customer-centric way. Instead of looking at how

each aspect of marketing is seen by the business, you look at these from the customer's

perspective.

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ITQs

1. ______________________ is finding ways to avoid the need for external financing, or funding through creativity, ingenuity, thriftiness, cost-cutting, obtaining grants, or any other means necessary.

2. Effective _____________________ is the availability and accessibility of a service to its target customers

ITAs

1. Bootstrapping2. Distribution

3 Nature of Business Growth

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Globally entrepreneurship is recognized as the engine of economic growth and poverty reduction. This is because the social and economic value added through innovation and employment generation is critical to the increase in the overall productiveness of the economy. The more the enterprises produce the more inputs in the form of raw materials, labour and other supplies are required. Thus, it is essential for businesses to grow in order to serve the interest of the owners and also contribute positively to the economic development of regions and nations (Acs, 2006 and Autio, 2007). Thus, managers and owners are expected to design and implement effective strategies to ensure the survival and growth of businesses. Business growth means expanding firm’s products and services or expanding its target markets, or some combination of each. Any increase in the volume of activities of enterprises is a clear indication of growth. Businesses grow for a number of reasons including to take advantage of a gap in the market, to gain a competitive advantage over rivals, and to win increased market share. Usually ventures start small because of limited knowledge of the market, shortage of capital and lack of skilled employees etc. It is expected that as the entrepreneur gains more skills, knowledge and acquire additional resources, the volume of activities of the business will expand. An entrepreneur may also capitalize on changes in the environment to expand his operations in order to exploit new opportunitiesGovernments in many developing countries, Nigeria inclusive, have not provided an enabling environment for businesses to flourish. However, the ultimate responsibility for growing businesses rest on the shoulders of owners/managers.

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ITQs

1. Globally entrepreneurship is recognized as ……….2. The more the enterprises produce the more inputs in ……..3. …… means expanding firm’s products and services or

expanding its target markets, or some combination of each.

4.3.1 Growth of Business There are three key indicators of the size of a business enterprise, namely:

Value of assets Number of employees Sales turnover

Types of Growth (a) Internal growth – This is growth that occurs when a firm expands through

selling more of its existing products or services or new products/services. Following increase in sales, the firm may employ additional staff, increase its total asset base or capital base.

(b) External growth – This occurs when a firm acquires, takes over or merges with another firm thus increasing all or some of its size indicators.

Why Grow? The motivating factors for growth include:

Economies of scale e.g., managerial, technical, purchasing, financial Personal ambition Market power – to compete more effectively Reduce risk of failure Need to accommodate the growth of key customers Ability to attract and retain talented employees To increase the status of the firm Avoid takeover: Larger firms are less likely to be taken over. Attract resources: Size enables firm s to attract more resources.

Growth and Cash flow Growth can place strains on cash flow as:

Firms invest in more stocks Firms expand into new locations

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ITAs

1. Globally entrepreneurship is recognized as the engine of economic growth and poverty reduction.

2. The more the enterprises produce the more inputs in the form of raw materials, labour and other supplies are required.

3. Business growth means expanding firm’s products and services or expanding its target markets, or some combination of each.

Firms invest in new equipment Additional staff is employed thus increasing the wage bill.

All of these increase the need for additional cash. Yet, it is likely to take time before the goods are sold and cash is received from sales. Meanwhile, it can cause cash flow problems; this is called “overtrading”. 4.3.2 Managing Growth To control a business as it grows, a firm may need to:

Engage in more elaborate planning Develop a formal organization structure e.g., a functional structure. Use performance appraisal systems Improve internal communication systems Produce job descriptions

Decentralize operations and delegate authority Set budgets

Install more sophisticated control systems.

4.3.3 Problems of Growth The following are some of the problems experience with business growth:

Cash flow problems – overtrading Diseconomies of scale – control, communication and coordination problems Problem of delegation e.g., having to learn how to manage other people rather

than doing everything oneself. Risk of loss of direction and control, i.e., different departments, business units,

managers pursue their own objectives/goals. Inadequate personnel and other resources to support growth.

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ITQs

1. __________________ means expanding firm’s products and services or expanding its target markets, or some combination of each..

2. The two types of growth are ___________________ and _____________________.

4.5 Case Study

Ricardo De La Blanca Brigati is the CEO of the DLB Group, a full service marketing company with about 10 million in revenues operating throughout the Americas and in Spain. He encourages his clients to focus on African American , Hispanic, Asian American, and Native American consumers. He sees the buying power of these segments, but few small businesses are making adjustments to serve them. DLBs websites offers examples of how the company helps clients, both in the United States and abroad, develop comprehensive marketing strategies that set them apart by adapting to (and respecting)other cultures.

Vennapoosa, C. (2012). Entrepreneurship. http://www.exforsys.com/career-centre/entrepreneurship /entrepreneurship-innovation.html.

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ITAs

1. Business growth3. Internal and external growth

Activity (Allow 15 minutes)1. Identify a minority group to which you do not belong to. What

steps could you take to learn about that market segment in order to sell those consumers a product or service?

2. Suppose your small business was contacted by a company in another country that wants to sell your products in its market. What would you want to know about that market before going into it?

3. Choose a country of your choice and determine what changes you would have to make to your marketing plan to adjust to the different culture.

Post your response on the LMS

Summary The need for entrepreneurs to be more intentional on issues of financing their ventures was established in this module. The secrets of successful financing and the sources of financing were discussed. Entrepreneurial marketing and the marketing concept were defined. The uniqueness of marketing to entrepreneurs was emphasized, the need for marketing research bringing out the importance role of customers. The marketing mix was briefly discussed and various marketing strategies and the need to adopt one or two marketing strategies that will enable the entrepreneurial venture to succeed, survive, and grow in a changing environment. The unique marketing challenges faced by entrepreneurs were also discussed to prepare entrepreneurs. The marketing mix and customers perspective to marketing mix were addressed to enable entrepreneurs understand the perspective of the entrepreneurs. Business growth was discussed bringing out the importance of business growth in entrepreneurship. This is a major difference between entrepreneurial ventures and ordinary businesses, the growth factor must be factored in from inception of start-ups. The need for growth, management of growth, and problems associated with growth were also addressed.

References/Read More:

1. Barringer, B. R. & Ireland, R. D. (2013). Entrepreneurship, successfully launching new ventures (4th Edn). Boston: Pearson

2. Barringer, B. R. & Ireland, R. D. (2013). Entrepreneurship: Successfully launching new businesses. Boston: Pearson.

3. http://www.sales-and-marketing-for-you.com/define-marketing-mix.html4. https://i0.wp.com/startuptipsdaily.com/wp-content/uploads/2016/04/15-small-

business-ideas-for-beginners.jpg?resize=768%2C431&ssl=15. https://www.mindtools.com/pages/article/newSTR_94.htm 6. https://www.moneyadviceservice.org.uk/en 7. Longenecker, J. G., Petty, J. W., Palich, L. E., & Hoy, F. (2014). Small Business

Management, Launching and Growing Entrepreneurial Ventures. United States: Cengage Learning.

8. Oduyoye, O. O. & Onu, C. A. (2014). Foundations of Entrepreneurship. Ogun State: Babcock University.

9. Scarborough, Norman M. & Cornwall, J. R. (2016). Essentials of Entrepreneurship and Small Business Management (6th Edn). Boston: Pearson.

Glossary of terms

Business financing is the provision of finance for the meeting of business financial needs.

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Equity capital represents the personal investment of the owner (or owners) in a business and is sometimes called risk capital because these investors assume the primary risk of losing their funds if the business fails.

Business angels are individuals who invest their personal capital directly in start-ups.

Venture capital is money that is invested by venture capital firms in start-ups and small businesses with exceptional growth potential.

Marketing research is the collection and analysis of a reliable information that improves managerial decisions.

Business growth means expanding firm’s products and services or expanding its target markets, or some combination of each.

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MODULE – 5 BUSINESS ETHICS, SOCIAL RESPONSIBILITY, AND PROBLEMS OF ENTREPRENEURSHIP IN NIGERIA

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IntroductionIn the last module, we discussed the order for entrepreneurial ventures to run successfully and how they can be financed. We also learnt small business marketing and growth. The different strategies for growth was presented, the challenges that goes with growth and ways of overcoming them was also outlined. Business ethics which involves the moral values and behavioral standards that business people draw on as they make decisions and solve problems will be discussed. In addition, in this module, we will learn about ethical environment in which decisions ought to be taken especially when faced with ethical dilemma, so he/she has to make a choice from what is right or what is wrong. We will also learn corporate social responsibility, understand why business ethics and responsibilities are good for any entrepreneur and the reasons why business managers are advised to adhere to them. Some of the problems

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entrepreneurs face in Nigeria will be enumerated and some ways of overcoming the identified problems will be evaluated.

1 BUSINESS ETHICS IntroductionBusiness ethics are the practices expected from a business in the light of human values. These practices guide the behaviour, performance, production, accountability, transparency, financial reporting system, general corporate governance, decision making, among others of a business.The entrepreneur’s personal values begin to shape the business from day one. Entrepreneurs’ personal values and beliefs influence the way they lead their companies and are apparent in every decision they make, every policy they write, and every action they take. Entrepreneurs who succeed in the long term have a solid base of personal values and beliefs that they articulate to their employees, put into practice in ways that others can observe, and are demonstrated throughout the culture of the organization. Values-based leaders do more than merely follow rules and regulations; their consciences dictate that they do what is right. For many entrepreneurs, the ability to determine the values and ethics that will shape how business will be conducted is a major motivation to launching a venture.The values and morals that entrepreneurs draw on to guide their ethical behaviors come from a variety of sources, including their family upbringing, their faith traditions, mentors who have shaped their lives, and the communities they grew up in. Bringing their personal values into their decision making and actions in their businesses helps ensure that entrepreneurs will act with integrity. Acting with integrity means that entrepreneurs do what is right no matter what the circumstances. In some cases, ethical dilemmas are apparent. Entrepreneurs must be keenly aware of the ethical entrapments awaiting them and know that society will hold them accountable for their actions. More often, however, ethical issues are less obvious, cloaked in the garb of mundane decisions

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Learning Outcomes

At the end of this module, you should be able:1. understood the concepts of business ethics 2. understood the need for business ethics; 3. learnt the ethical principles for entrepreneurs; 4. understood the importance of ethics in business;5. understood social responsibility of entrepreneurial

ventures; and6. problems of entrepreneurship in Nigeria and ways of

overcoming them

and everyday routine. Because they can easily catch entrepreneurs off guard and unprepared, these ethical “sleepers” are most likely to ensnare business owners, soiling their reputations and those of their companies. Repeated enough times, these unethical acts can become habits that shape the moral character of the entrepreneur. To make proper ethical choices, entrepreneurs must first be aware that a situation with ethical implications exists.

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ITQs

1. Business ethics are the practices expected from …………...2. The entrepreneur’s personal values begin to ………….3. Values-based leaders do more than merely follow rules and

regulations; their consciences dictate that they do what is ……….

4. To make proper ethical choices, entrepreneurs must first be ………………………

ITAs

1. Business ethics are the practices expected from a business in the light of human values.

2. The entrepreneur’s personal values begin to shape the business from day one.

3. Values-based leaders do more than merely follow rules and regulations; their consciences dictate that they do what is right.

4. To make proper ethical choices, entrepreneurs must first be aware that a situation with ethical implications exists.

5. 1.1 Concepts of Business EthicsBusiness ethics is a sensitive and highly complex issue, but it is not a new one. In 560 BC, the Greek philosopher Chilon claimed that a merchant does better to take a loss than to make a dishonest profit (n.d). Ethical dilemmas lurk in the decisions—even the most mundane ones—that entrepreneurs make every day. Succumbing to unethical temptations ultimately can destroy a company’s reputation, one of the most precious and most fragile possessions of any business.Ethics is defined as the discipline dealing with what is good and bad and with moral duty and obligations. Ethics is an individual’s personal belief about whether a behaviour, action or decision is right or wrong (Griffin, 1999). What an individual considers to be right or wrong, good or bad comes from various sources.Business ethics refers to ethical standards that are applicable when people engage in business transactions. According to Weihrich and Koontz (2016) business ethics is concerned with truth and justice. It is concerned with what is good or bad, right or wrong in business transactions.Most business organizations and indeed most organizations prescribe ethical standards which employees are expected to adopt in conducting their activities. For example, organizations define what is fair and just, good and bad in dealing with various stakeholders such as employees, customers, etc. Finally, it could be reasoned further that Ethics go beyond the law because they are standards of behaviour that are expected of both the individual and the corporate legal person. Ethics define for the individual what is morally right or wrong. On the other hand, business ethics enables business managers to question their business activities, actions and decisions in line with moral principles concerning their products, services, managerial competences and relationships with the society they do business with.

5.1.2 Need for Business Ethics The points below discuss ethics is essential for entrepreneurs in carrying out their business (Sagagi, Anyanwu, Aliu, & Abimbola, 2012): 1. Stop business malpractices: Some businessmen engage in business malpractices by indulging in unfair trade practices like black-marketing, artificial high pricing, adulteration, cheating in weights and measures, selling of duplicate and harmful products, hoarding, etc. These business malpractices are harmful to the consumers. Business ethics help to stop these business malpractices.

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Ethical dilemmas lurk in the decisions—even the most mundane ones—that entrepreneurs make every day.

2. Improve customers' confidence: Business ethics are needed to improve the customers' confidence about the quality, quantity, price, etc. of the products. The customers have more trust and confidence in the businessmen who follow ethical rules. 3. Survival of business: Business ethics are needed for the survival of business. The businessmen who do not follow it will have short-term success, but they will fail in the long run when discovered by the customers. 4. Protecting employees and shareholders: Business ethics are required to protect the interest of employees, shareholders, competitors, dealers, suppliers, etc. It protects them from exploitation through unfair trade practices. 5. Develops good relations: Business ethics are important to develop good and friendly relations between business and society. 6. Creates good image: Business ethics create a good image for the business and businessmen. If the businessmen follow all ethical rules, then they will be fully accepted and not criticized by the society. The society will always support those businessmen who follow this necessary code of conduct. 7. Smooth functioning: If the business follows all the business ethics, then there will be absence of disruption in the relationship among employees, shareholders, consumers, dealers and suppliers. This will result in smooth functioning of the business. So, the business will grow, expand and diversify easily and quickly. It will have more sales and more profits. 8. Consumer satisfaction: Today, the consumer is the king of the market. Any business simply cannot survive without the consumers. Therefore, the main aim or objective of business is consumer satisfaction. If the consumer is not satisfied, then there will be no sales and thus no profits too. Consumer will be satisfied only if the business follows all the business ethics. 9. Importance of labour: Labour, i.e. employees or workers play a very crucial role in the success of a business. Therefore, business must use business ethics while dealing with the employees. The business must give them proper wages and salaries and provide them with better working conditions. The employees must also be given proper welfare facilities. 10. Healthy competition: The business must use business ethics while dealing with the competitors. They must have healthy competition with the competitors. They must not do cut-throat competition. Similarly, they must give equal opportunities to small-scale business.

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Activity (Allow 15 minutes)1. List and explain the 10 points to discuss how ethics is

essential for entrepreneurs in carrying out their business according to Sagagi, Anyanwu, Aliu, and Abimbola (2012)

2. Explain the Concepts of Business Ethics

Post your response on the LMS

5.1.3 Ethical Principles for Entrepreneurs Ethical Principles are ethical values translated into active language establishing standards or rules describing the kind of behavior on ethical person should and should not engage in (Josephson Institute, 2010). The following principle represents the kind of behaviours expected from every ethical entrepreneur (business executive) as presented by Josephson Institute (2010) and Scarborough and Cornwall (2016). 1. Honesty The virtues of honesty and truthfulness are the hallmark of ethical executives. Such entrepreneurs do not deliberately mislead or deceive others by misrepresentations, over-statements, partial truths, selective omissions, or any other means. 2. Integrity In a nutshell, ethical entrepreneurs are principled, honourable and upright. They courageously fight for their beliefs. They exhibit personal integrity and the courage of their convictions by doing what they consider to be right even in the face of pressure to do otherwise. 3. Promise-keeping and trustworthiness Ethical entrepreneurs make a very reasonable effort to fulfill the letter and spirit of their promises and commitments. They are trustworthy. They call a spade by its name. They do not interpret agreements in an unreasonably technical or legalistic manner as a means of rationalizing non-compliance, or creating justifications for escaping their commitments. 4. FidelityBe faithful and loyal to family, friends, employers, and country; do not use or disclose information earned in confidence; in a professional context, safeguard the ability to make independent professional judgments by scrupulously avoiding undue influences and conflicts of interest. 5. Fairness. Be fair and open-minded, be willing to admit error and, when appropriate, change positions and beliefs; demonstrate a commitment to justice, the equal treatment of individuals, and tolerance for diversity; do not overreach or take undue advantage of another’s mistakes or adversities

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ITQs

1. Ethical Principles are ethical values translated into ………2. The virtues of honesty and truthfulness are the ………3. In a nutshell, ethical entrepreneurs are ………………….4. Ethical entrepreneurs make a very reasonable effort to

……………………

6. Loyalty Ethical entrepreneurs are ever loyal to persons in their business organization and the organization they are working for. They demonstrate friendship in adversity, and support and devotion to duty. They do not divulge confidential information no matter what they personally stand to gain by so doing. 7. Fairness Ethical entrepreneurs are fair, just, and treat individuals equally. They tolerate and accept diversity, are willing to admit they are wrong and, where appropriate, are to change their positions and beliefs. They do not exercise power arbitrarily, and neither use overreaching nor indecent means to gain or maintain any advantage. They do not take undue advantage of another’s mistakes or difficulties. 8. Concern for Others Ethical entrepreneurs strive to achieve their business objectives in a manner that causes the least harm and the greatest positive good. They treat others the way they would like to be treated. They are caring compassionate, benevolent and kind. 9. Respect for Others One of the traits of ethical entrepreneurs is respect for others. They show great respect for the human dignity, autonomy, privacy, rights and interests of all stakeholders in their decisions. They are imbued with the sense of courtesy. They treat all persons with equal respect and dignity irrespective of gender, race, socio -economic status and race. 10. Law abiding Ethical entrepreneurs meticulously abide by laws, rules and regulations guiding their business activities.

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ITAs

1. Ethical Principles are ethical values translated into active language establishing standards or rules describing the kind of behavior on ethical person should and should not engage in (Josephson Institute, 2010).

2. The virtues of honesty and truthfulness are the hallmark of ethical executives.

3. In a nutshell, ethical entrepreneurs are principled, honourable and upright.

4. Ethical entrepreneurs make a very reasonable effort to fulfill the letter and spirit of their promises and commitments.

11. Commitment to Excellence Ethical entrepreneurs are sticklers to excellence. In the performance of their duties they are informed and prepared and always striving to increase their proficiency in all areas of responsibility. 12. Leadership Ethical entrepreneurs appreciate the responsibilities and opportunities of their position of leadership. In keeping with this they strive to be positive role models by their own conduct and by helping to create an environment in which principled reasoning and ethical decision making are highly prized. 13. Reputation and morale Ethical entrepreneurs appreciate the need to maintain their organizations’ good reputation while at the same time building the morale of their employees. They do these by engaging in no conduct that might undermine respect and taking whatever actions are necessary to correct or prevent inappropriate conduct of others. 14. Accountability Ethical entrepreneurs are willing to be held accountable for the ethical quality of their decisions and omissions to themselves, their colleagues, their companies, and their communities.

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ITAs

1. Ethical entrepreneurs are ever loyal to persons in their business organization and the organization they are working for.

2. Ethical entrepreneurs are sticklers to excellence.3. Ethical entrepreneurs appreciate the responsibilities and

opportunities of their position of leadership.4. Ethical entrepreneurs meticulously abide by laws, rules

and regulations guiding their business activities.

ITQs

1. Ethical entrepreneurs are ever loyal to …………2. Ethical entrepreneurs are sticklers to ……………..3. Ethical entrepreneurs appreciate the ………………….4. Ethical entrepreneurs meticulously abide by …………….

Areas of Managerial EthicsThe three areas of managerial ethics are: 1. How the organization treats its employees:

Recruitment and separation Working conditions Wages and incentives Individual respect as human beings Health and safety

2. How employees treat the organization Conflict of interest Secrecy Honesty and expense account.

3. How the organization treats economic agents: Customers Competitors Shareholders Suppliers Dealers Unions

Code of Ethics These are general guidelines with respect to the values and ethical standards that can be used by managers to guide their decisions. Areas of considerations as they affect ethics and which must be addressed so as to affect positive results, peace, progress, and harmony are:

Bribes

Honesty of records keeping Misappropriation of corporate assets Confidentiality of corporate information Political contributions Conflict of interest Customer/supplier relationships

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Code of ethics general guidelines with respect to the values and ethical standards that can be used by managers to guide their decisions.

Principles of Ethical BehaviourEthics is about making choice, most entrepreneurs encounter ethical dilemmas that are tough to resolve. Making ethical dilemmas involve a conflict between the needs of the part and the whole – the individual versus the organization or the organisation versus the society as a whole. According to Prof. LaRue Hosmer in 1994, a number of different ethical principles can be used in business decisions especially when dealing with ethical dilemmas. Each of these ten ethical principles is follows to guide our ethical behaviour:

i. Self Interest: An ethical principle that hold that you should never take any action that is not in your or your organisation’s long-term self-interest.

ii. Personal Virtue: An ethical principle that hold that you should never do anything that is not honest, open, and truthful and that you would not be glad to see reported in the newspaper or TV.

iii. Religious Injunction: An ethical principle that hold that you should never take any action that is not kind and that does not build a sense of community.

iv. Government Requirement: An ethical principle that hold that you should never take any action that violates the law, for the law represents the minimal moral standard.

v. Utilitarian Benefit: An ethical principle that hold that you should never take any action that does not result in greater good than harm for the society of which you are a part.

vi. Universal Rules: An ethical principle that hold that you should never any action that you would not be willing to see others, faced with the same or a closely similar situation, also be free to take”.

vii. Individual Rights: An ethical principle that hold that you should never any action that abridges the agreed-upon and accepted rights of others.

viii. Economic Efficiency: An ethical principle that hold that you always act to maximize profits subject to legal and market constraints, for maximum profits are the sign of the most efficient production.

ix. Distributive Justice: An ethical principle that hold that you should never any action in which the least (fortunate people) among us are harmed in some way.

x. Contributive Liberty: An ethical principle that hold that you should never any action that will interfere with the right of all of us (to) self-development and self-fulfillment.

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Activity (Allow 15 minutes)List and explain the ten principles of ethical behavior

Post your response on the LMS

Ethical DilemmasAn ethical dilemma is a situation in which all alternative choices or behaviours have potentially negative consequences. Right or wrong cannot be clearly distinguished

2 Corporate Social Responsibility Social responsibility has become a major issue in management. Major production and distribution activities in modern societies are carried out by organizations. Most of societies’ resources - financial, intellectual and material – are under the control of organizations. These organizations significantly affect the future of society. The concept of social responsibility deals with the corresponding obligations that organizations have toward society. According to Griffin (2004) social responsibility is the set of obligations an organization has to protect and enhance the society in which it functions

Social responsibility involves how an organization responds to the needs of the many elements in society, including shareholders, lenders, employees, consumers, governmental agencies, and the environment. Because business is allowed to operate in society, it has an obligation to behave in ways that benefit all of society.

Simple Ways for a Small Business to Be Socially Responsible1. Encourage recycling. Place recycling bins throughout the workplace. If the business sells retail products, encourage customers to bring reusable shopping bags. Use recycled products whenever possible. 2. Support local fundraisers. Provide local fundraising events with donated products or services. Encourage employees to participate in fundraising events as a team representing the company. 3. Join in community service. Allow employees to participate in community volunteer projects on company time. Designate a day a year for all employees to help with a local charity, such as planting trees on Arbor Day, cleaning up a section of a local highway, helping with a Habitat for Humanity building project, or volunteering at an inner city school. 4. Reduce energy usage. Encourage employees to help find ways to reduce energy consumption in your business. Provide recognition to employees whose ideas help reduce energy usage.

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Social responsibility has become a major issue in management.

5. Create a grant program. Set up a fund that local nonprofits can apply to for small grants. Create a matching program to encourage employee giving to the fund by committing to company matching donations for their gifts. 6. Support local causes. Work with employees to identify local causes that the business can support by offering publicity for that cause. Promotion can include flyers in the window, promotion on the company website, employee T-shirts supporting the cause, and social media campaigns. 7. Partner with local schools. Partner with local schools by providing supplies and encouraging employees to serve as volunteers. Mentor young people through a job shadowing program.

Stakeholders are the various groups and individuals who affect and are affected by a business.

Key StakeholdersInternal StakeholdersEmployeesExternal InvestorsCompany Founders Management

External StakeholdersCustomersCreditorsGovernmentCommunity and General PublicSuppliersSpecial Interest GroupsUnionsFamily

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ITQs

1. The concept of social responsibility deals with …………….2. According to Griffin (2004) social responsibility is

…………….3. Ethics is about making …………….

Entrepreneurship ventures can be socially responsible to her stakeholders in the following ways:

Employees The wages, conditions of service, retrenchment and privacy should be fair and just, conducive working environment. Labour Unions There should be honesty in honouring agreements, good strategies in handling negotiations and industrial action.

Trade Associations Loyalty, honesty in honouring agreements.

Dealers Honesty in honouring agreements, hiring and firing. Customers Product safety, truthful advertising, suitable guarantee and warranty of equipment.

Suppliers Honesty in honouring agreements, Purchasing and receiving goods and services

Competitors Fair versus unfair competition.

Shareholders Insider trading, truthful stewardship, conflict of interest.

Creditors Payment for supplies, legal proportion of interest due and return on prinicipal.

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ITAs

1. The concept of social responsibility deals with the corresponding obligations that organizations have toward society.

2. According to Griffin (2004) social responsibility is the set of obligations an organization has to protect and enhance the society in which it functions

3. Ethics is about making choice, most entrepreneurs encounter ethical dilemmas that are tough to resolve.

Government Tax evasion, economic sabotage, truthful disclosure.

The Society at Large Environmental concerns, Employment of members of the community, fair play, Interest in support of local government and support of cultural and charity projects.

The firm itself Confidentiality, loyalty, obedience.

CompetitorsNorms established by the society and the industry for competitive conduct, See each firm as a co-competitor and not an enemy

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ITAs

1. Business ethics2. Stakeholders

ITQs

1. __________________ are ethical standards that are applicable when people engage in business transactions.

2. __________________ are the various groups and individuals who affect and are affected by a business.

3 Problems of Entrepreneurship in Nigeria

5.3.1 Problems of EntrepreneurshipBakare, Onu, Adefulu, and Akpa (2009) and Badi (2006), enumerated some of the challenges confronting entrepreneurs in the developing countries of the world, especially in Nigeria as follows:

Wrong selection of business Capital shortages Manpower problems Failure to adapt to the dynamics of the business environment Entrepreneurship activity in Nigeria is more of necessity Technological problems Infrastructural problems Competition from expatriate companies and foreign products High cost of doing business in Nigeria Lack of business plan Lack of credit facilities Corruption Security issues The lack of enforcement of Nigerian patent laws Poor planning Poor product or service

5.3.2 Possible Solutions to the identified problemsBaba (2013) enumerated four possible ways which are:

1. Future and upcoming entrepreneurs should concentrate during their period of studies in higher institutions of learning in order to acquire the required technical skill which will help them to identify business opportunities.

2. Strong patent laws should be provided by the federal government so that local entrepreneurs will be protected from foreign producers.

3. The government should give loans to entrepreneurs when needed.4. Governemt officials should discourage corruption, tribalism, religious bias and

favoritism and ensure that every individual is treated with equal right and respect. 5. Improvement of the standard of living if different weaker sections in the society6. Creation of employment opportunities, and much more

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ITQs

1. Strong patent laws should be ………………..2. Improvement of the standard of living if ……………….3. Creation of ………………………………

Summary

In this study, we discussed the need for business ethics in entrepreneurial ventures, ethical principles and the importance of ethics in business, areas of managerial ethics, code of ethics to equip entrepreneurs when faced with ethical dilemma. We also understood that as a result of every organisation owing its stakeholders a duty of care social responsibility to various stakeholders were treated. Thereafter general problems encountered by entrepreneurs and possible solutions were discussed.

References/Read More:

7 Ways Small Business Can Embrace Social Responsibility,” Business That Cares, September 21, 2010, http://businessthatcares.blogspot.com/2010/09/7-ways-small-business-can-embraceBarringer, B. R. & Ireland, R. D. (2013). Entrepreneurship, successfully launching new

ventures (4th Edn). Boston: Pearson

Entrepreneurship Journals

https://www.deluxe.com/sbrc/financial/top-10-challenges-faced-entrepreneurs-today-solvedKuratko, D. F. (2009). Introduction to Entrepreneurship, 8th Edn. United States: South-

Western Cengage Learning.

Longenecker, J. G., Petty, J. W., Palich, L. E., & Hoy, F. (2014). Small Business Management, Launching and Growing Entrepreneurial Ventures. United States: Cengage Learning.

Oduyoye, O. O. & Onu, C. A. (2014). Foundations of Entrepreneurship. Ogun State: Babcock University.

Robbins, S. P., & Coulter, M. (2013). Management, 11 Edn. Boston: Pearson.

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ITAs

1. Strong patent laws should be provided by the federal government so that local entrepreneurs will be protected from foreign producers.

2. Improvement of the standard of living if different weaker sections in the society

3. Creation of employment opportunities, and much more

Sagagi, M. S., Anyanwu, S., Aliu, S., & Abimbola, O. (2012). Training manual for general entrepreneurship courses in universities.

Scarborough, Norman M. & Cornwall, J. R. (2016). Essentials of Entrepreneurship and Small Business Management (6th Edn). Boston: Pearson.

Small and Medium Scale Business Journals

Stokes, D., Wilson, N., & Mador, S. (2010). Entrepreneurship. United States: South-Western Cengage Learning.

Glossary of terms

Business ethics are the practices expected from a business in the light of human values.

Ethics is defined as the discipline dealing with what is good and bad and with moral duty and obligations.

Ethics is an individual’s personal belief about whether a behaviour, action or decision is right or wrong (Griffin, 1999).

Ethical Principles are ethical values translated into active language establishing standards or rules describing the kind of behavior on ethical person should and should not engage in (Josephson Institute, 2010).

Social responsibility is the set of obligations an organization has to protect and enhance the society in which it functions

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