AHMADU BELLO UNIVERSITY, ZARIA, NIGERIA

DEVELOPED CURRICULAR FOR ENTREPRENEURSHIP AND INNOVATION

Course code: GENS202
Course Title: Entrepreneurship and Innovation
Level: Undergraduate

Course curriculum/contents

Module 1: Development Entrepreneurship/Intrapreneurship

 The concept of Organizations and Theories of Entrepreneurship

 The Entrepreneurial culture
 Barriers to Entrepreneurial practice
 The role of entrepreneurship in the economy and society

Module 2: The Nigerian Entrepreneurial Environment

 The Business External Environment (political, legal, socio-cultural, economic, natural,

technological etc)
 Identifying Business Opportunities and Threats

Module 3: Creativity and Intellectual Rights

 Intellectual Property and its Dimensions

 Copyright Laws in Nigeria
 Strategies for Protection of Intellectual Property(original ideas, concepts, products etc)

Module 4: Technological Entrepreneurship

 The interface between Technology Development and Entrepreneurship

 Technological Environment and Business

Module 5: Management of Innovation

 Innovation and Entrepreneurship

 Entry Strategies for New Ventures

Module 6: Women Entrepreneurship

 The Concept of Women Entrepreneurship

Module 7: Social Entrepreneurship

 The Concept of Social Entreneurship

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 Module 8: Business Opportunity Evaluation

 Sources of Business Opportunities in Nigeria

 Entrepreneurial ideas and Opportunities
 Elements of Venture Creation

Course Code: GENS301

Course title: BUSINESS CREATION AND GROWTH
Level: Undergraduate

Course curriculum/contents

Module 1: Concept of Business and New Value Creation

 Business Planning Process

 Typical Structure for a Business Plan for a Start-up Venture.
 Start Up Decision - What Motivates People to Begin New Businesses
 Factors that Motivate People to Begin New Businesses
 Opportunity Search and Identification
 Business Opportunity Identification Process
 Networking versus Solo Entrepreneurship Factor
 Opportunities from SWOT Analysis
 Legal Issues at Start Up
 Legal Formalities for Business Start Up
 How to Write a Feasibility Analysis Report
 Template and Structure for a Feasibility Analysis Report
 Feasibility Considerations
 Angel Financing
 Venture Capital Financing

Module: 2 Theories of Growth: An Overview

 Concept of Business Growth

 Reason for Business growth
 Types of Business Growth
 Challenges of Business Growth in Nigeria
 Critical Success Factors for Growing Businesses

Module 3: Sources of Funds

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  Sources of Funds for New and Entrepreneurial Ventures
 Advantages and Disadvantages of internal financing

Module 4: Marketing for Both Small and Large Businesses

 Differences between Small Business Marketing and Large Business Marketing

 Marketing Mix in New Ventures
 Factors Affecting Price
 International Marketing
 Modes of Market Entry
 Joint Venturing
 Direct Investment

Module 5: Managing Transition: from Start Up to Growth

 Transition In Business and Phases of Business Growth

 The Phases of Business Growth
 Managing Transition from Start up to Growth
 Transition Managers and the Transition Management Process
 Pitfalls in Managing Transitions from Start up to Growth
 Decision Making in Business Transition
 Business Control
 Personal Discipline in Business Transition

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Course code: NUTR711

Course title: INTRODUCTORY MANAGEMENT & ENTREPRENEURSHIP (2CU)

Level: Postgraduate

Course curriculum/contents

 Definition of entrepreneurial management

 Becoming an Entrepreneur, Idea Generation
 Business Plan Foundations
 Industry Analysis
 Market/Product Analysis
 Legitimacy and entrepreneurship
 Legal aspects of Organizing Business
 Effective Business Models
 Financial Analysis
 Concept Integration
 Managing uncertainty
 Managing New and Small Business
 Managing Investors
 Business development plan
 Entrepreneurial career

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Course code: SCI801:

Course title: Management Entrepreneurship (2CU)

Level: Postgraduate

Course curriculum/contents

 Business environment
 General management
 Financial management
 Entrepreneurship
 Feasibility studies
 Marketing and managerial problem solving

Course code: CEE004:

Course title: Entrepreneurship in Engineering (2 CU)

Level: Postgraduate

Course curriculum/contents

Module 1: Creating Value from Idea

 Introduction
 Engineers Create Value for Investors
 Technological Innovation and Innovators
 Case Study

Module 2: Ideas to Products and Market

 Introduction
 How to find ideas
 How to Turn your Idea into a Product
 Early detection of Market Potential
 Case Study

Module 3: Intellectual Property, Patents and Trade Secret

 Introduction
 Intellectual Property, Patents and Trade Secret
 Case Study of a Patent
 Patent Search and Conclusion before Drafting a Patent Application

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Module 4: Marketing Products

 Introduction
 Macroeconomics for innovators in Engineering
 Customers, Target Markets, Marketing and Market Analysis Resources
 The Power of Social Media Marketing
 Case Study

Module 5: Manufacturing and Distribution

 Introduction
 Manufacturing and Sourcing
 Break Even Analysis
 Sales and Distribution, Wholesale, Direct and Other
 Reaching your Customers, Advertising and Promotion
 Case Study

Module 6: Business Model and Business Plan

 Introduction
 Selecting your Business Model
 Cost Estimation and Pricing
 Assemble a Business Plan to Attract Investors
 Ethics in Engineering and Business Professions
 Legal Issues and Technology Licensing Option
 Financially Feasible Start-up Leadership, Teamwork and Management
 Case Study of Mature Firms

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 AHMADU BELLO UNIVERSITY (ABU), ZARIA, NIGERIA
CURRICULUM ON ENTREPRENEURSHIP

Contents
1.0 Module 1: Development Entrepreneurship/Intrapreneurship ....................................................... 1
1.1 The concept of Organizations and Theories of Entrepreneurship ............................................ 8
1.2 The Entrepreneurial culture ......................................................................................................... 13
1.3 Barriers to Entrepreneurial practice ............................................................................................ 16
1.4 The role of entrepreneurship in the economy and society ...................................................... 17
2.0 Module 2: The Nigerian Entrepreneurial Environment ................................................................. 19
2.1 The Business External Environment (political, legal, socio-cultural, economic, natural,
technological etc.) ................................................................................................................................ 19
2.2 Identifying Business Opportunities and Threats ....................................................................... 21
3.0 Module 3: Creativity and Intellectual Rights .................................................................................. 22
3.1 Intellectual Property and its Dimensions.................................................................................... 22
3.2 Copyright Laws in Nigeria ............................................................................................................. 24
3.3 Strategies for Protection of Intellectual Property (original ideas, concepts, products etc.)
................................................................................................................................................................ 27
4.0 Module 4: Technological Entrepreneurship.................................................................................... 29
4.1 The interface between Technology Development and Entrepreneurship ............................. 29
4.2 Technological Environment and Business .................................................................................. 30
5.0 Module 5: Management of Innovation ........................................................................................... 32
5.1 Innovation and Entrepreneurship ................................................................................................ 32
5.2 Entry Strategies for New Ventures .............................................................................................. 32
6.0 Module 6: Women Entrepreneurship .............................................................................................. 34
6.1 The Concept of Women Entrepreneurship ................................................................................. 34
7.0 Module 7: Social Entrepreneurship ................................................................................................. 38
7.1 The Concept of Social Entrepreneurship .................................................................................... 38

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 8.0 Module 8: Business Opportunity Evaluation .................................................................................. 46
8.1 Sources of Business Opportunities in Nigeria ............................................................................ 46
8.2 Entrepreneurial ideas and Opportunities .................................................................................... 52
8.3 Elements of Venture Creation ...................................................................................................... 57

GENS 202: ENTREPRENEURSHIP AND INNOVATION

1.0 Module 1: Development Entrepreneurship/Intrapreneurship

1.1 The concept of Organizations and Theories of Entrepreneurship

Meaning of Organization: Organization is a Process

Organization is a process which integrates different type of activities to achieve

organizational goals and objectives, to achieve these goals there must be competent
management providing them all those factors to perform their job efficiently and
effectively. Organization is nothing but is a process of integrating and coordinating
the efforts of men and material for the accomplishment of set objectives.

Every thinker is of the opinion that an organization is a process. They further have
added that this process lead identification of work to be performed which for
convenience sake should be objectively grouped and defined. Then the work should
be assigned to individuals according to their aptitude, technical knowledge, skill and
efficiency. For satisfactory working the individuals should be given some right and
authority. A mutual relationship between jobs (what to be done) duties (to be
performed) and authority (to be exercised) should be established.

Organization is just like a tool in the hands of management. Net results will be perfect
if the tool is well designed and handed properly.

Characteristics of Organization

Organization is an effective and necessary instrument for the attainment of

predetermined goals. The following are main characteristics of organization.

 Organization is an instrument used by the management for the attainment of planned

objectives.
 Management guides and directs the organization.
 A set of rules and instrument are communicated to all connected with the
organization.

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 It prefers to a group of personnel whose positions, rights, responsibilities are well
defined and classified according to the nature of assignments.

Nature of Organization

A set of five processes in commonly accepted as five functions of organization which

represents nature of organization, they are

 Subdivision of main work into small groups

 Based on principles of equality division of different activities ties
 Selection of suitable personnel and allocation of jobs according to suitability
 Allotments of rights and authority to those who have been assigned the job so that
may be able to accomplish their job satisfactorily
 Determination of positions at different levels

Importance of Organization

Any effective organization

 Makes the management simple and efficient

 Encourages specialization
 Improves techniques
 Encourages constructive thinking
 Increase productivity and
 Accelerates the progress

The management asks the organization to accomplish the tasks set-forth before it
which an effective organization is capable of achieving through its fruitful
organizational framework. This is why it is said that organization is a foundation upon
which the whole structure of management can be successfully built.

Theories of Entrepreneurship

People use the terms "entrepreneur" and "entrepreneurship" interchangeably. The

entrepreneur is the person who starts his own business. The exact definition of
"entrepreneurship" still remains a vague concept, though various entrepreneurship
theories have defined the concept.

Early Theories of Entrepreneurship

Richard Cantillon (1680-1734) was the first of the major economic thinkers to define the
entrepreneur as an agent who buys means of production at certain prices to combine
them into a new product. He classified economic agents into landowners, hirelings, and

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entrepreneurs, and considered the entrepreneur as the most active among these three
agents, connecting the producers with customers.

Jean Baptise Say (1767-1832) improved Cantillion’s definition by adding that the
entrepreneur brings people together to build a productive item.

Frank Knight's Risk Bearing Theory

Frank Knight (1885-1972) first introduced the dimension of risk-taking as a central

characteristic of entrepreneurship. He adopts the theory of early economists such as
Richard Cantillon and J B Say, and adds the dimension of risk-taking.

This theory considers uncertainty as a factor of production, and holds the main function
of the entrepreneur as acting in anticipation of future events. The entrepreneur earns
profit as a reward for taking such risks.

Alfred Marshall’s Theory of Entrepreneurship

Alfred Marshall in his Principles of Economics (1890) held land, labor, capital, and
organization as the four factors of production, and considered entrepreneurship as the
driving factor that brings these four factors together.

The characteristics of a successful entrepreneur include:

 thorough understanding of the industry

 good leadership skills
 foresight on demand and supply changes and the willingness to act on such risky
foresights

Success of an entrepreneur however depends not on possession of these skills, but on

the economic situations in which they attempt their endeavors.

Many economists have modified Marshall’s theory to consider the entrepreneur as the
fourth factor itself instead of organization, and which coordinates the other three factors.

Max Weber’s Sociological Theory

The sociological theory entrepreneurship holds social cultures as the driving force of
entrepreneurship. The entrepreneur becomes a role performer in conformity with the role
expectations of the society, and such role expectations base on religious beliefs, taboos,
and customs.
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Max Weber (1864-1920) held religion as the major driver of entrepreneurship, and
stressed on the spirit of capitalism, which highlights economic freedom and private
enterprise. Capitalism thrives under the protestant work ethic that harps on these values.
The right combination of discipline and an adventurous free-spirit define the successful
entrepreneur.

Mark Casson's Economic Theory

Mark Casson (1945-) holds that entrepreneurship is a result of conducive economic

conditions.

In his book "Entrepreneurship, an Economic theory" he states the demand for

entrepreneurship arising from the demand for change.

Economic factors that encourage or discourage entrepreneurship include:

 taxation policy
 industrial policy
 easy availability of raw materials
 easy access to finance on favourable terms
 access to information about market conditions
 availability of technology and infrastructure
 marketing opportunities

Joseph Schumpeter’s Innovation Theory

Joseph Schumpeter’s innovation theory of entrepreneurship (1949) holds an entrepreneur

as one having three major characteristics: innovation, foresight, and creativity.
Entrepreneurship takes place when the entrepreneur

 creates a new product

 introduces a new way to make a product
 discovers a new market for a product
 finds a new source of raw material
 finds new way of making things or organization

Schumpeter’s innovation theory however ignores the entrepreneur’s risk taking ability
and organizational skills, and place undue importance on innovation. This theory applies
to large-scale businesses, but economic conditions force small entrepreneurs to imitate
rather than innovate.

Other economists have added a dimension to imitating and adapting to innovation. This
entails successful imitation by adapting a product to a niche in a better way than the
original product innovators innovation

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Israel Kirtzner’s Theory of Entrepreneurship

Israel Kirzner (1935) hold spontaneous learning and alertness two major characteristics
of entrepreneurship and entrepreneurship is the transformation of spontaneous learning
to conscious knowledge, motivated by the prospects of some gain.

Kirzner considers the alertness to recognize opportunity more characteristic than

innovation in defining entrepreneurship. The entrepreneur either remedies ignorance or
corrects errors of the customers.

His entrepreneurship model holds:

1. The entrepreneur subconsciously discovering an opportunity to earn money by

buying resources or producing a good, and selling it
2. Entrepreneur financing the venture by borrowing money from a capitalist.
3. Entrepreneur using the funds for his entrepreneurial venture
4. Entrepreneur paying back the capitalist, including interest, and retaining the "pure
entrepreneurial profit.”

Leibenstein’s Theory of Entrepreneurship

Harvey Leibenstein (1922-1994) consider entrepreneur as gap-fillers. The three traits of

entrepreneurship include:

1. recognizing market trends

2. develop new goods or processes in demands but not in supply
3. determining profitable activities

Entrepreneurs have the special ability to connect different markets and make up for
market failures and deficiencies.

McClelland’s Theory of Achievement Motivation

McClellands Theory of Achievement Motivation hold that people have three motives for
accomplishing things: the need for achievement, need for affiliation, and need for power.
Need for achievement and need for power drive entrepreneurship.

David McClelland (1917-1988) considers entrepreneurs as people who do things in a

better way and makes decisions in times of uncertainty. The dream to achieve big things
overpowers monetary or other external incentives.

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McClelland’s experiment revealed that traditional beliefs do not inhibit an entrepreneur,
and that it is possible to internalize the motivation required for achievement orientation
through training.

Peter Drucker’s Theory of Entrepreneurship

Peter Drucker (1909-2005) holds innovation, resources, and an entrepreneurial behaviour

as the keys to entrepreneurship. According to him entrepreneurship involves

1. increase in value or satisfaction to the customer from the resource

2. creation of new values
3. combination of existing materials or resources in a new productive combination

What theories do you think explain entrepreneurial drive?

An analysis of various entrepreneurship theories reveal while what economists differ on

the force that drives entrepreneurs or the central characteristics of entrepreneurship,
they remain unanimous that entrepreneurship is a distinct concept and a central factor
of the economic activity.

1.2 The Entrepreneurial culture

Entrepreneurship is not an inborn skill; it is a product of the environment. It involves a

complex of economic and social behaviour. To be successful, an entrepreneur has to
remain dynamic and responsible to the whole environment. Entrepreneurship can hardly
survive under any given circumstances. It can flourish only under the right environment.
It is a part of the total system. The social values, culture, government policies, political
system, technology, economic conditions, customs, laws, etc. influence the growth of
entrepreneurship.

In fact, the entrepreneurship cannot be kept aloof from the changing social values,
ideologies, new emerging aspirations, environmental pressures, religious beliefs,
consumer wants and society needs etc. Business is a system made up of certain
environmental factors which require the entrepreneur to adopt a dynamic attitude and a
new strategy of their own.

Entrepreneurial culture implies a set of values, norms and traits that are conducive to the
growth of entrepreneurship.

Cultural values deeply affect entrepreneurship and the level of economic development –
Structural conditions make development possible – cultural factors determine whether
the possibility becomes an actuality.

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Culture has everything to do with the entrepreneurial process and focuses on the
discovery and interpretation of opportunities, neglected by others. No entrepreneur can
overlook the country’s cultural heritage and values if he wants to survive and progress.
He needs to function on the basis of social expectations, desires and goals. The
entrepreneur has to respect the human society, its cultural values and traditions.

Awareness and understanding of the cultural environment of business may be useful to

the entrepreneur in several ways:

i) To better understand the behaviour and conduct of people with regard to

entrepreneurship.

ii) To predict behaviour and determine how people will act in a certain situation as regards
to entrepreneurship.

iii) It develops the sensitivity of the entrepreneur.

iv) It facilitates change of the entrepreneur.

Understanding entrepreneurial culture is important, not only to the theoretical

understanding of entrepreneurship, but also to entrepreneurship as a practical enterprise,
which can provide new and fresh ideas of entrepreneurship, by looking at innovative
business behaviour in other times, in other societies and in other cultures – and also by
looking at entrepreneurship from novel angles and much wider perspective.

Culture is of great importance to entrepreneurship, because it determines the ethos of

people. It trains people along particular lines. It creates distinctions. It conveys a sense
of identity. It enhances social system stability. It creates people, enterprising men and
risk bearers. It determines goods and services. The understanding of culture enables the
entrepreneur to skillfully manipulate the cultural codes of his society, balancing between
the permissible and the profane, tugging moral codes into a new conformation.

The entrepreneur’s ability to “read” opportunities cannot be due to isolation or

separateness, but is rather due to a higher degree of sensitivity to what others are looking
for. And it is culture that gives pre-direction to the entrepreneur’s vision, enabling him to
read certain things. They can pick up the sense of where their fellows in the culture stand,
what values they adhere to, what purposes they pursue, what they consider beautiful
and what they deem profane.

The entrepreneur’s ability to move ahead with confidence, his struggle to turn setbacks
into opportunities, to advance and survive in the business world is the knowledge and
instinct that comes from experience gathered in a particular cultural milieu.

Sociologists like Max Weber argue that entrepreneurship is most likely to emerge under
a specific social culture. According to them, social sanctions, cultural values and role
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expectations are responsible for the emergence of entrepreneurship. For many
researchers, modern entrepreneurship is a distinctly new variant of a timeless species
created and sustained by culture and creative of it at the same time.

Some cultures are enormously supportive of entrepreneurship – indeed to the point where
entrepreneurship develops its own culture, such as in Hong Kong. Others (such as
Communist Countries) regard the entrepreneurial way of life with suspicion. The
differences go a long way towards explaining why some societies are vibrant and
progressive, while others stagnate.

Religion/ caste and family influences greatly determine entrepreneurial culture. Some
religions are found to be conducive to entrepreneurship, while others inhibit
entrepreneurship. Religious beliefs produce intensive exertion in occupational pursuits,
the systematic ordering of means to an end and the accumulation of assets. It is these
beliefs and the caste system that are found to influence the propensity to become an
entrepreneur.

Religion often determines what business one stays out of. In India for example, it is
religiosity that keeps many people in business and often determines what business one
stays out of. The mighty Birlas chose to stay out of the hotel business because of the
necessity to consider serving non-vegetarian food. Religion based norms become easy
and convenient reference points for designing one’s course of actions.

Family too plays an important role in shaping entrepreneurial instincts. Family

background, simply familiarity with a business environment, growing from “table talk” at
home is the key to increasing the probability that an offspring will later become an
entrepreneur. Entrepreneurs are very much in terms with the ‘conversations’ going on
around him. Brought up in a family, where commercial activity is part of the daily
household routine, it becomes a conscious battle for the entrepreneur to create viable
business.

The characteristics of the family enterprises – commitment, continuity, putting a face to

the company and close interaction between the family and the business – may have a
strong impact on the strategic choices in the business.

Family background of business-family values, business conversations as a part of the

daily household routine, family support and encouragement, has given these young
entrepreneurs, the drive, the desire, and the motivation to create their own viable
business unit. On the other hand, successful family business that have been forced on in
heritage, has curbed the development of independent, innovative ventures.

Family enterprises also play a major role in regional and local economics – often act as
the engines of their economic development as they have a positive attitude towards
growth, and their growth is usually more cost efficient than of other firms. The owners

15
that put a face to their family enterprises are committed to developing their firms as well
as to their continuity.

To conclude, the influence of human institutions such as norms, values, morals, family
ties and support – in other words – culture- form the framework within which individuals
can pursue entrepreneurial opportunities.

1.3 Barriers to Entrepreneurial practice

There may be a variety of barriers to enterprise, depending on the industry sector, region
and type of enterprise. The common barriers which act to limit enterprise across most
nations include:
 Regulatory barriers, such us administrative barriers to entry
 Cultural and social barriers, such as the ‘fear of failure’ and a lack of
entrepreneurial knowledge and skills and
 Financial and economic barriers, such us, insufficient access to risk capital, both
seed/early stage and longer term financing

Regulatory barriers

Creating a business environment conducive to entrepreneurship and enterprise creation

requires a broad range of reinforcing and supportive policies. These include fiscal and
monetary policies, which are essential to provide a basis for a stable macroeconomic
environment. They also include structural policies that determine the overall economic
framework in which the business sector operates, such as those affecting labour markets,
tax design, competition, financial markets and bankruptcy laws.

There is considerable evidence that regulatory and administrative burdens can impose
adversely on entrepreneurial activity. Legal entry barriers should be avoided unless their
benefits are very clear. Regarding the barriers to entry, we can indicate some that are
common in many countries: several legal forms of enterprise, with different procedures,
requirements and registration; the complexity of creating a company: in some countries,
the entrepreneurs need one day to register an enterprise, in others, they need so many
weeks; in addition to registration requirements, some countries require skill qualification
when the activity is deemed to be an artisanal nature or the elaboration of a business
plan certified by a business expert which attests to the enterprise viability.

Employment regulation limits management flexibility and leads to smaller firm size and
less research and development as well as less investment in technology.

Barriers to exit may also discourage entry, since exit and entry rates tend to be closely
related. Since firm entry involves considerable risk, with survival chances that are difficult
to assess, institutions that make exit very costly discourage entry.

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Cultural and social barriers

Creating an enterprise is a very difficult task because it demands knowledge of the

legislation, environment, market, institutions, etc. To install an enterprise in a country,
the entrepreneurs need to know well the language to have a better implementation and
adaptation in the place. The difficulties of language don’t help the complete integration
of the entrepreneurs and enterprises, specially the micro and small enterprises.

The lack of information on the available institutions is also a barrier for the creation of
enterprises because entrepreneurs don’t have enough information about the role,
services and mission of the institutions that give support to enterprise creation. The
limited access to social and business networks and institutions can also be considerate as
a barrier to enterprise creation.

The promotion of entrepreneurial culture must be fostered in order to improve the

motivation of persons, the appetence towards risk, the appropriate skills and knowledge,
factors that inhibit the creation of enterprises. Role models must be also presented in
order to give entrepreneurs an idea of the rewards and benefits of enterprise creation
and reduce the stigma of failure.

The real cost of enterprise creation is still a barrier for star-up an enterprises, both
personal and financial costs. The fear of failure is a barrier that still remains implanted in
most countries including Nigeria because the legal and social consequences of failure are
severe.

Information, communication and resources are very important tools that can be provided
by networks. The lack of access to the networks can be a significant entry barrier.

Economic and financial barriers

Access to finance is important for all firms in achieving their business objectives;
particularly for star-ups and business that seek to invest and grow.

The capital markets tend to be efficient to larger firms but newer and smaller growth
forms often depend upon external sources of finance and can face barriers in the market
that prevent them from raising even relatively modest sums of risk capital, specially for
innovative high-technology small firms and for businesses operating in disadvantage
areas.

1.4 The role of entrepreneurship in the economy and society

Most economists agree that entrepreneurship is essential to the vitality of any economy,
developed or developing.

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Entrepreneurs create new businesses, generating jobs for themselves and those they
employ. In many cases, entrepreneurial activity increases competition and, with
technological or operational changes, it can increase productivity as well. Entrepreneurs
also give security to other people; they are the generators of social welfare.

It is agreed that the benefits of small businesses go beyond income. Small businesses
broaden the base of participation in society, create jobs, decentralize economic power,
and give people a stake in the future.

Entrepreneurs innovate and innovation is a central ingredient in economic growth. As

Peter Drucker said, “The entrepreneur always searches for change, responds to it, and
exploits it as an opportunity.” Entrepreneurs are responsible for the commercial
introduction of many new products and services, and for opening new markets. A look at
recent history shows that entrepreneurs were essential to many of the most significant
innovations, ones that revolutionized how people live and work. From the automobile to
the airplane to personal computers – individuals with dreams and determination de-
veloped these commercial advances.

Small firms also are more likely than large companies to produce specialty goods and
services and custom-demand items. As Carl J. Schramm has suggested, entrepreneurs
provide consumers with goods and services for needs they didn’t even know they had.

Innovations improve the quality of life by multiplying consumers’ choices. They enrich
people’s lives in numerous ways – making life easier, improving communications,
providing new forms of entertainment, and improving health care, to name a few.

According to the 2006 Summary Results of the Global Entrepreneurship Monitor (GEM)
project, “Regardless of the level of development and firm size, entrepreneurial behavior
remains a crucial engine of innovation and growth for the economy and for individual
companies since, by definition, it implies attention and willingness to take advantage of
unexploited opportunities.” The GEM project is a multi-country study of entrepreneurship
and economic growth. Founded and sponsored by Babson College (USA) and the London
Business School in 1999, the study included 42 countries by 2006.

International and regional institutions, such as the United Nations and the Organization
for Economic Cooperation and Development, agree that entrepreneurs can play a crucial
role in mobilizing resources and promoting economic growth and socio-economic
development. This is particularly true in the developing world, where successful small
businesses are primary engines of job creation and poverty reduction.

For all of these reasons, governments may wish to pursue policies that encourage
entrepreneurship.

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2.0 Module 2: The Nigerian Entrepreneurial Environment

2.1 The Business External Environment (political, legal, socio-cultural,

economic, natural, technological etc.)

Introduction

A business does not operate in a vacuum. It has to act and react to what happens outside
the factory and office walls. These factors that happen outside the business are known
as external factors or influences. These will affect the main internal functions of the
business and possibly the objectives of the business and its strategies.

Main Factors

The main factor that affects most business is the degree of competition – how fiercely
other businesses compete with the products that another business makes.

The other factors that can affect the business are:

 Social – how consumers, households and communities behave and their beliefs.
For instance, changes in attitude towards health, or a greater number of
pensioners in a population.
 Legal – the way in which legislation in society affects the business. E.g. changes
in employment laws on working hours.
 Economic – how the economy affects a business in terms of taxation, government
spending, general demand, interest rates, exchange rates and European and
global economic factors.
 Political – how changes in government policy might affect the business e.g. a
decision to subsidise building new houses in an area could be good for a local brick
works.
 Technological – how the rapid pace of change in production processes and
product innovation affect a business.
 Ethical – what is regarded as morally right or wrong for a business to do. For
instance should it trade with countries which have a poor record on human rights.

Changing External Environment

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Markets are changing all the time. It does depend on the type of product the business
produces, however a business needs to react or lose customers.

Some of the main reasons why markets change rapidly:

 Customers develop new needs and wants.

 New competitors enter a market.
 New technologies mean that new products can be made.
 A world or countrywide event happens e.g. Gulf War or foot and mouth disease.
 Government introduces new legislation e.g. increases minimum wage.

Business and Competition

Though a business does not want competition from other businesses, inevitably most will
face a degree of competition.

The amount and type of competition depends on the market the business operates in:

 Many small rival businesses – e.g. a shopping mall or city centre arcade – close
rivalry.
 A few large rival firms – e.g. washing powder or Coke and Pepsi.
 A rapidly changing market – e.g. where the technology is being developed very
quickly – the mobile phone market.

A business could react to an increase in competition (e.g. a launch of rival product) in the
following ways:

 Cut prices (but can reduce profits)

 Improve quality (but increases costs)
 Spend more on promotion (e.g. do more advertising, increase brand loyalty;
but costs money)
 Cut costs, e.g. use cheaper materials, make some workers redundant

Social Environment and Responsibility

Social change is when the people in the community adjust their attitudes to way they
live. Businesses will need to adjust their products to meet these changes, e.g. taking
sugar out of children’s drinks, because parents feel their children are having too much
sugar in their diets.

The business also needs to be aware of their social responsibilities. These are the way
they act towards the different parts of society that they come into contact with.

Legislation covers a number of the areas of responsibility that a business has with its
customers, employees and other businesses.

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It is also important to consider the effects a business can have on the local community.
These are known as the social benefits and social costs.

A social benefit is where a business action leads to benefits above and beyond the
direct benefits to the business and/or customer. For example, the building of an attractive
new factory provides employment opportunities to the local community.

A social cost is where the action has the reverse effect – there are costs imposed on
the rest of society, for instance pollution.

These extra benefits and costs are distinguished from the private benefits and costs
directly attributable to the business. These extra cost and benefits are known as
externalities – external costs and benefits.

Governments encourage social benefits through the use of subsidies and grants (e.g.
regional assistance for undeveloped areas). They also discourage social costs with fines,
taxes and legislation.

Pressure groups will also discourage social costs.

2.2 Identifying Business Opportunities and Threats

The business world today is a fast-moving one, and the pace of change can at times
seem bewildering. The environment in which your business operates is changing all the
time, and there are many different factors that influence it. There are continual changes
in your market, your customers’ needs and preferences, the technology you use, your
sales channels, and the way you can deliver your products or services. These changes
can bring threats to your business, but they will also, undoubtedly, bring opportunities.
It’s important that you regularly take a step back and try to analyze the way in which
your business currently operates. Think about the factors that may promote change. Try
to identify threats, and make sure you are prepared for them. It is also important,
however, that you spot the many opportunities that arise.

With so many business opportunities available, it is often difficult to determine whether

a particular opportunity shows great promise or is likely to fail. Your goal is to learn how
to tell a good opportunity from a bad one. Here are some tips that will help you assess
the potential of any business opportunity that comes your way and make the right
decision.

One of the first factors to consider is the stability of the company associated with the
opportunity. In the case of a new business that does not yet have a proven track record,
you want to know who is behind the launch or who is supplying this company with
operating capital until the business begins to generate profits. Essentially, you want some
amount of assurance that the company will be around long enough for you to benefit

21
from a relationship with the opportunity, especially in terms of recouping any investment
of time or other resources.

Keep in mind that a new business or a plan to start a business may be riskier than going
with a company with an established track record. However, business opportunities of this
kind are not automatically suspect. If the funding is there and the organization is
structured properly, the opportunity is well worth your consideration.

Assessing the good or service offered by the business is also important. The best business
opportunities involve companies that offer something consumers will need or desire over
all other competing products. It is not a problem if the product is aimed at a niche market.
Business opportunities of this type are often great moneymakers, since they address
needs that are often overlooked by others. In addition, the competition is probably less
fierce in a niche market, a situation that will allow the company you are evaluating to
establish itself as the industry standard in that market.

Along with having a solid financial base and a product that is sure to attract attention,
the best business opportunities also have a comprehensive and well defined system for
getting the products to consumers. This includes such factors as a reliable process for
producing the good or service, excellent sales and marketing strategies, and an efficient
delivery to the buyer. Without the ability to satisfy orders quickly and efficiently, even the
best product is less likely to build a loyal client base.

The return you will receive is also very important when considering different business
opportunities. Will you earn an equitable return in comparison to what you invest in the
business in terms of time and other resources? If so, then there is a good chance the
opportunity is worth pursuing. If you are not sure, keep looking for something better.

You will find that in today’s market, it is worth your time to consider a home-based
business as well as a more traditional business setting. Business opportunities of this type
often start with business ideas that are new and fresh in terms of approach or some
aspect of the products offered. If you see merit in a given business idea and think it has
a good chance of succeeding, then look it over carefully. That home based business may
be the ideal investment vehicle for you.

3.0 Module 3: Creativity and Intellectual Rights

3.1 Intellectual Property and its Dimensions

Intellectual property is a valuable asset for an entrepreneur. It consists of certain

intellectual creations by entrepreneurs or their staffs that have commercial value and are
given legal property rights. Examples of such creations are a new product and its name,
a new method, a new process, a new promotional scheme, and a new design. A fence or
a lock cannot protect these intangible assets. Instead, patents, copyrights, and

22
trademarks are used to prevent competitors from benefiting from an individual’s or firm’s
ideas.

Protecting intellectual property is a practical business decision. The time and money
invested in perfecting an idea might be wasted if others could copy it. Competitors could
charge a lower price because they did not incur the startup costs. The purpose of
intellectual property law is to encourage innovation by giving creators time to profit from
their new ideas and to recover development costs.

Intellectual property rights can be bought, sold, licensed, or given away freely. Some
businesses have made millions of dollars by licensing or selling their patents or
trademarks.

Every entrepreneur should be aware of intellectual property rights in order to protect

these assets in a world of global markets. An intellectual property lawyer can provide
information and advice.

The main forms of intellectual property rights are:

Patents:• A patent grants an inventor the right to exclude others from making, using,
offering for sale, or selling an invention for a fixed period of time - in most countries,
for up to 20 years. When the time period ends, the patent goes into the public domain
and anyone may use it.
Copyright:• Copyrights protect original creative works of authors, composers, and
others. In general, a copyright does not protect the idea itself, but only the form in
which it appears - from sound recordings to books, computer programs, or
architecture. The owner of copyrighted material has the exclusive right to reproduce
the work, prepare derivative works, distribute copies of the work, or perform or display
the work publicly.
Trade Secrets:• Trade secrets consist of knowledge that is kept secret in order to gain
an advantage in business. “Customer lists, sources of supply of scarce materials, or
sources of supply with faster delivery or lower prices may be trade secrets,” explains
Joseph S. Iandiorio, the founding partner of Iandiorio and Teska, an intellectual property
law firm. “Certainly, secret processes, formulas, techniques, manufacturing know-how,
advertising schemes, marketing programs, and business plans are all protectable.”

Trade secrets are usually protected by contracts and non-disclosure agreements. No other
legal form of protection exists. The most famous trade secret is the formula for Coca-
Cola, which is more than 100 years old.
Trade secrets are valid only if the information has not been revealed. There is no
protection against discovery by fair means such as accidental disclosure, reverse
engineering, or independent invention.

Trademarks: A trademark protects a symbol, word, or design, used individually or in

combination, to indicate the source of goods and to distinguish them from goods

23
produced by others. For example, Apple Computer uses a picture of an apple with a bite
out of it and the symbol (®) which means registered trademark. A service mark similarly
identifies the source of a service. Trademarks and service marks give a business the right
to prevent others from using a confusingly similar mark.

In most countries, trademarks must be registered to be enforceable and renewed to

remain in force. However, they can be renewed endlessly. Consumers use marks to find
a specific firm’s goods that they see as particularly desirable — for example, Barbie dolls
or Toyota automobiles. Unlike copyrights or patents, which expire, many business’s
trademarks become more valuable over time.

3.2 Copyright Laws in Nigeria

A copyright is a legal device that gives the creator of a literary, artistic, musical, or other
creative work the sole right to publish and sell that work. Copyright owners have the right
to control the reproduction of their work, including the right to receive payment for that
reproduction. An author may grant or sell those rights to others, including publishers or
recording companies. Violation of a copyright is called infringement.

Copyright is distinct from other forms of creator protection such as Patents, which give
inventors exclusive rights over use of their inventions, and Trademarks, which are legally
protected words or symbols or certain other distinguishing features that represent
products or services. Similarly, whereas a patent protects the application of an idea, and
a trademark protects a device that indicates the provider of particular services or goods,
copyright protects the expression of an idea. Whereas the operative notion in patents is
novelty, so that a patent represents some invention that is new and has never been made
before, the basic concept behind copyright is originality, so that a copyright represents
something that has originated from a particular author and not from another. Copyrights,
patents, and trademarks are all examples of what is known in the law as Intellectual
Property.

As the media on which artistic and intellectual works are recorded have changed with
time, copyright protection has been extended from the printing of text to many other
means of recording original expressions. Besides books, stories, periodicals, poems, and
other printed literary works, copyright may protect computer programs; musical
compositions; song lyrics; dramas; dramatico-musical compositions; pictorial, graphic,
and sculptural works; architectural works; written directions for pantomimes and
choreographic works; motion pictures and other audiovisual works; and sound
recordings.

Enforcing copyrights law in Nigeria

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Although Nigeria has what may be considered a good copyright law and although the
Nigerian Copyright Commission takes its mandate seriously and has launched many
commendable programme but enforcement of existing legislation remains a major
problem.

There are several laws governing intellectual property protection in Nigeria. The country
has also ratified several copyright treaties, this is governed by Copyright Act No. 47 of
1988 (codified as Chapter 68, Laws of the Federation of Nigeria, 1990) as amended.

Although, the Copyright Act has been amended twice by the Copyright (Amendment)
Decree No. 98 of 1992 and Copyright (Amendment) Decree No. 42 of 1999. The Copyright
Act is in four parts and 41 sections. Part I addresses issues such as eligibility for copyright
protection, duration of copyrights, civil and criminal penalties for copyright infringement,
and ownership of copyright.

Part II addresses neighbouring rights; Part III focuses on the administration of copyrights
and addresses issues such as the establishment of the Nigerian Copyright Council and
the appointment of the Director and other staff of the Council. Finally, Part IV covers
miscellaneous topics including reciprocal extension of protection, presumptions and
interpretations. Nigeria has also ratified several treaties relating to the protection of
intellectual property.

Among these treaties are: the Paris Convention for the Protection of Industrial Property
(ratified September 1963), the Berne Convention for the Protection of Literary and Artistic
Works (ratified September 1963), the Rome Convention (Performers, Producers of
Phonograms and Broadcasting Organizations) (ratified October 1993), the Patent Law
Treaty (ratified April 2005), and the Patent Cooperation Treaty (ratified May 2005).
Nigeria has also assumed additional responsibilities by virtue of its membership in the
World Intellectual Property Organization (May 1993) and the World Trade Organization
(January 1995).

Professor Uche Ewelukwa Ofodile of the University of Arkansas School of Law, United
States has identified six factors that militate against effective copyright protection in
Nigeria.

The first factor is lack of popular support or public consultation. The Nigerian Copyright
Act was adopted in 1988 at the height of military rule in Nigeria without any debate or
discussion. Essentially, the Copyright Act, the primary legislative tool for copyright
protection in Nigeria today, was adopted without broad-based public discussion on the
necessity for copyright protection or the scope of protection that was desirable contrary
to paragraph 9 of the Adelphi Charter on Creativity, Innovation and Intellectual Property
which states that in making decisions about intellectual property laws, "there should be
wide public consultation."

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Inadequate cost-benefit analysis is the second factor identified as militating against
copyrights law. An effective intellectual property regime must strike an appropriate
balance between the monopoly powers of creators and the interest of the consuming
public. In developed countries, the adoption of intellectual property laws is usually
preceded by a detailed analysis of the cost and benefits of protection. Indeed, paragraph
2 of the Adelphi Charter states that "the public interest requires a balance between the
public domain and private rights. It also requires a balance between the free competition
that is essential for economic vitality and the monopoly rights granted by intellectual
property laws." Sadly, laws in Nigeria are frequently passed without serious attention to
the direct and indirect cost of a proposed legislation. There is need for serious economic
assessment of the costs and benefits of copyright protection in Nigeria.

The third factor is lack of public awareness. There is little public awareness or
understanding of the intellectual property laws in the country. Existing laws are not readily
accessible even to the educated class. The average man on the street is also ignorant of
touted benefits of intellectual property protection. The Nigerian copyright commission
admits that lack of awareness about the laws and administration of copyright constitutes
"a major inhibition to the development of a sound copyright system in Nigeria."
Meaningful public education at the grassroots level must form a critical component of
intellectual property enforcement in Nigeria.

Another factor is lack of inclusion of the course in the law school curriculum. Structured
legal education on intellectual property law must also be part of the equation. How many
universities offer courses on intellectual property law? Very few. How many university
libraries are equipped with basic books relating to intellectual property? Also very few.
Presently, very few lawyers in Nigeria have expertise in the field and only a handful of
universities in the country offer courses in this area. One solution could be for the Nigerian
government to tap into the expertise of Nigerians in the Diaspora. There are many
Nigerians abroad with expertise in intellectual property law who are willing to return to
Nigeria to help strengthen the course offerings of law faculties in the country for little or
no compensation.

The fifth factor is corruption and weak custom enforcement. Attention must also be paid
to the effect of corruption on intellectual property enforcement in Nigeria. Responsible
agencies are rarely, if ever, audited or probed. There is need for accountability on the
part of agencies challenged with the task of enforcing the country’s intellectual property
laws. For example, Nigerian ports are the principal gateways through which pirated
imports come into the country and pirated exports leave. What has been the record of
the Nigerian Custom Services in terms of interdiction? How does bribery and corruption
undermine the enforcement capacity of the Nigerian Custom Service or the police?

The last factor identified by Professor Ofodile is delays in the judicial enforcement. Delays
in the judicial system and other barriers to justice also discourage intellectual property
litigation and enforcement in Nigeria. Because intellectual property law is not taught in

26
many universities in Nigeria, few judges in the country have knowledge about this area
of law. The libraries of most courts in Nigeria are grossly inadequate too.

To effectively protect creative works generated by the entertainment industry, the

government must address the widely held belief that intellectual property protection is a
Western concept irrelevant in Africa. Debate about whether and to what extent Nigerian
artists and musicians deserve copyright protection must be divorced from the broader
debate about the merits and demerits of global strengthening of IP rights. The
government must also seriously address the numerous factors that undermine effective
enforcement of laws in the country including corruption, lack of coordination among the
responsible agencies, lack of accountability, and lack of resources. However, for
enforcement to make sense and be effective, the underlying law must be appropriate,
balanced, understood by the general public, and a product of broad-based debate and
participation.

Nigeria can be a better a place only and only if the authorities concerned could take
responsibility as to effectively enforce the already existing laws. When this is done, the
country will be a safe haven for people who have been endowed with high intellect to
display their wisdom in moving the country forward.

3.3 Strategies for Protection of Intellectual Property (original ideas,

concepts, products etc.)
Once you have identified your intellectual property you should develop strategies to
protect your rights so that you don't put your business at risk. Imagine if your competition
discovered your secret and started replicating it, or you told someone your idea and then
discovered too late that you had lost the legal right to make it exclusively yours. The key
is not to talk about your idea or make your IP public knowledge before you've had a
chance to protect it. Intellectual property (IP) can be bought, owned, sold, licensed out
or bequeathed in much the same way as a building or a block of land. IP can be so
valuable that many businesses list it among their assets on their balance sheet.

It's important to develop effective strategies to protect you IP within your business, not
only to protect valuable assets but also to safeguard the products, processes and creative
inputs from which the profits of the business emanate.

Step 1: Register your IP

The first step of any protection strategy is to register your IP.

There are seven types of IP protection available to you: patents; trademarks; plant
breeders’ rights; registered designs; copyright; circuit layout rights; and
confidentiality/trade secrets.

Different IP rights vary in the protection they provide and in many cases more than one
type may be necessary to fully protect your creation. You can patent your IP through a
patent attorney and/or an intellectual property lawyer, either of whom will take your
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current model and appropriately describe it in minute detail to distinguish it from any
other similar products.

Step 2: Act to keep it secret and demonstrate ownership

The second step in a protection strategy is to take the necessary actions to keep your
idea a secret and demonstrate your ownership of the idea. Consider some of the following
steps to protect your idea:

Keep your idea a secret

Contact only those people who can assist you with planning your product development.
Before you discuss your idea with anyone make sure you have a signed confidentiality
agreement or a non-disclosure agreement in place, which describes the object/idea along
with details about yourself and the person to whom you will disclose these details. The
agreement must be signed in your presence and preferably witnessed - and more
importantly - it must be dated to establish the time, date and place of disclosure.

Demonstrate that the idea is yours

Write down in detail what your idea is; what it does and how it works. Draw a detailed
picture of the object or take a photograph of the prototype. Make copies and put the
original documents in a sealed, self addressed envelope and mail the envelope by
registered mail. When you receive the envelope DO NOT open it. Put it in a safe place.
This establishes evidence of the time date and place of original thought.

Make sure you're not infringing anyone else's IP

Search the IP Nigerian website to find out if there are products of the same type and
application as yours. This will save you time and money in your application for IP
protection. Many types of protection aren't available if your idea is similar to one that is
already covered by a patent, trade mark or the like.

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4.0 Module 4: Technological Entrepreneurship

4.1 The interface between Technology Development and Entrepreneurship

The word technology is not a new one. In fact, the root of the word means to shift or to
change, and was used originally in relation to changing nature. As Bacon, Locke, and
Descartes recognized, this idea of man changing nature, rather than being controlled by
it was essential to the emergence of the autonomous self, and eventually to the very
notion of the entrepreneur. Thus, technology and entrepreneurship are tightly related.

Today we think of technology as being about electronics (computers, software, web

applications, etc.), but that smart entrepreneurs still view technology—in whatever
form—as a means to an end, and not an end of itself.

Jim Collins, in his book, Good to Great, sums this up when he says, “Technology is an
accelerator.” Embedded in this simple statement is a lot of wisdom. First, while Collins
confirms that technology is indeed an accelerator, he doesn’t qualify the statement in
terms of exactly where or what technology is accelerating. In other words, technology
can accelerate both good and bad ideas, and it can accelerate these ideas towards
success or failure. Think of technology as some sort of widget that sits in between ideas
and the future. Whether entrepreneurs put good ideas (that is, ideas that are strategic
and aligned with their core principles) or bad ideas (random acts of improvement) into
the technological accelerator will determine whether or not you speed towards success
or failure.

Successful entrepreneurs—those who have a clear concept of what they are trying to
accomplish—leverage technology in order to help them achieve their goals more quickly.
In order to ascertain which technology will align with their goals, entrepreneurs must
have a very open and inquisitive bias towards technology.

What entrepreneurs do not do is bury their heads in the sand. If you desire to become
an entrepreneur, and you’re one of those people that says things like, “I don’t do e-mail,”
or “I can’t even program my VCR,” then you must stop. Technology today is not what it
was even sum years ago. With the advances made in programming and user interface
(UI) design, today’s technology is very, very user friendly. The fact of the matter is, if it’s
not user friendly it would not stay around too long, because a competitor will come along
and make it user friendly.

Today, we cannot think of any company where technology (either in the form of an
Internet presence or just general communication) is not crucial, entrepreneurs must have
the knowledge and the ability to use technology. This mean that an entrepreneur must
understand the language and the trends of technology.

To use an analogy, think of the musician who, while not an engineer, is fluent with the
tools of the recording studio. She can easily and effectively communicate with the
engineer and producer in order to get the sound she hears in her head on to the tape (or
hard drive). It’s the same thing with technology .As an entrepreneur you will need to

29
make manifest your vision in any number of ways, being able to efficiently convey your
goals to those who will help you realize them is really the only way to go.

Throughout, it is essential that you make sure that whatever technology you embrace
has a deep and direct connection to your overall business plan.

4.2 Technological Environment and Business

Technology can be defined as the method or technique for converting inputs to outputs
in accomplishing a specific task. Thus, the terms 'method' and 'technique' refer not only
to the knowledge but also to the skills and the means for accomplishing a task.
Technological innovation, then, refers to the increase in knowledge, the improvement in
skills, or the discovery of a new or improved means that extends people's ability to
achieve a given task.

High technology has become like a force of nature. It transforms the economy,
schools, consumer habits, the very character of modern life. Investors pour money
into it; parents urge their children to study it; communities vie to attract its
factories; decorators adopt it as a style; politicians push it as a panacea.
(Source : Science Digest Magazine)
Technology can be classified in several ways. For example, blueprints, machinery,
equipment and other capital goods are sometimes referred to as hard technology while
soft technology includes management know-how, finance, marketing and administrative
techniques. When a relatively primitive technology is used in the production process, the
technology is usually referred to as labour-intensive. A highly advanced technology, on
the other hand, is generally termed capital-intensive.

Changes in the technological environment have had some of the most dramatic effects
on business. A company may be thoroughly committed to a particular type of technology,
and may have made major investments in equipment and training only to see a new,
more innovative and cost-effective technology emerge.

Indeed, the managing director of multinational organisation manufacturing heavy

machinery once said that the hardest part of his job had nothing to do with unions, pay
or products, but with whether or not to spend money on the latest technologically
improved equipment.

Computer technology has had an enormous impact on education and health care, to
name but two areas affected. The advancements in medical technology, for example,
have contributed to longevity in many societies. In addition, the introduction of robots in
many factories has reduced the need for labour, and the use of VCR's and microcomputers
has become commonplace in many homes and businesses.

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Unfortunately, there is a negative side to technological progress. The introduction of
nuclear weapons, for example, has made the destruction of the human race a frightening
possibility. In addition, factories using modern technologies have polluted both air and
water and contributed to various environmental and health-related problems.

Technology is a critical factor in economic development. Because of the advances of

international communication, the increasing economic interdependence of nations, and
the serious scarcity of vital natural resources, the transfer of technology has become an
important preoccupation of both industrialised and developing countries. For many
industrialised countries, the changes in the technological environment over the last 30
years have been immense particularly in such areas as chemicals, drugs, and electronics.
It is vital that organisations stay abreast of these changes - not only because this will
allow them to incorporate new and innovative designs into their products, but also
because it will give them a firmer base from which to anticipate and counteract
competition from other organisations.

When the Gillette company developed a superior stainless steel razor blade, it feared that
such a superior product might mean fewer replacements and sales. Thus, the company
decided not to market it. Instead, Gillette sold the technology to Wilkinson, a British
garden tool manufacturer, thinking that Wilkinson would use the technology only in the
production of garden tools. When Wilkinson Sword Blades were introduced and sold
quickly, Gillette understood the magnitude of its mistake.

The transfer of technology is essential for attaining a high level of industrial capability
and competitiveness. Multinational corporations are playing an increasingly important role
in technology transfer because they invest abroad to expand production, marketing and
research activities. There is also a growing consciousness amongst governments of the
need to increase technology transfer to the developing countries to help stabilise their
economic and social conditions.

In spite of the many differences in social, political, cultural, geographic and economic
conditions, there are some common characteristics in the technological environments of
developing countries. The most common technology transfer from industrialised to
developing countries has been in agriculture and health care. As a result of improved
health care systems, infant mortality rates have been cut while the incidence of once
common diseases such as malaria and typhoid has been reduced in Latin America, south-
east Asia and Africa (although the incidents of the AIDS virus has increased alarmingly).
Similarly, agricultural technology has increased agricultural productivity in Brazil, India
and elsewhere. However, in most developing countries, technology has made little impact
on the productive systems, income distribution and living conditions of the majority of
the population.

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5.0 Module 5: Management of Innovation

5.1 Innovation and Entrepreneurship

An innovation is gainful modification to the product or process. An existing product can
be made better by adding more features modifying design to make it safer or more users
friendly. Or the method may be modified to produce it in more cost effective way.
Sometimes the raw materials are substituted to bring down the cost. All these are
examples of innovation. In short Innovation is achieved by Value Analysis/Value
Engineering. It’s never easy to compete against old players in any walk of life. New
entrant faces considerable odds in the beginning and only this battle. Innovation is the
best ally of an entrepreneur in this battle. It helps him to gain competitive advantage in
his business either due to cost advantage or due to differentiation of product. Innovations
in marketing and distribution help him gain the market share quickly.

Innovation is needed by the entrepreneur for following reasons –

1. To face competition.
2. To stand out in the clutter.
3. To survive recession
4. To solve certain problems.

Installing Attitude for innovation

1. Encourage creative conflict
2. Big ideas from small teams
3. Learning happens from the desk
4. Understand the product users
5. Live in the future
6. Failure sometime produces innovation
7. Joint prototyping to brain storming for fast track innovation

Different Sources of Innovation –

1. Unexpected occurrences
2. Process needs
3. Incongruities
4. Industry & market changes

5.2 Entry Strategies for New Ventures

It is easy to be captivated by the promise of entrepreneurship and the lure of becoming
one’s own boss. It can be difficult, however, for a prospective entrepreneur to determine
what product or service to provide. Many factors need to be considered, including: an
idea’s market potential, the competition, financial resources, and one’s skills and
interests. Then it is important to ask: Why would a consumer choose to buy goods or
services from this new firm?

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One important factor is the uniqueness of the idea. By making a venture stand out from
its competitors, uniqueness can help facilitate the entry of a new product or service into
the market.

It is best to avoid an entry strategy based on low cost alone. New ventures tend to be
small. Large firms usually have the advantage of lowering costs by producing large
quantities.

Successful entrepreneurs often distinguish their ventures through differentiation, niche

specification, and innovation.

 Differentiation is an attempt to separate the new company’s product or service

from that of its competitors. When differentiation is successful, the new product
or service is relatively less sensitive to price fluctuations because customers value
the quality that makes the product unique.

A product can be functionally similar to its competitors’ product but have features
that improve its operation, for example. It may be smaller, lighter, easier to use
or install, etc. In 1982, Compaq Computer began competing with Apple and IBM.
Its first product was a single-unit personal computer with a handle. The concept
of a portable computer was new and extremely successful.

 Niche specification is an attempt to provide aproduct or service that fulfills the

needs of a specific subset of consumers. By focusing on a fairly narrow market
sector, a new venture may satisfy customer needs better than larger competitors
can.

Changes in population characteristics may create opportunities to serve niche

markets. One growing market segment in developed countries comprises people
over 65 years old. Other niches include groups defined by interests or lifestyle,
such as fitness enthusiasts, adventure-travel buffs, and working parents. In fact,
some entrepreneurs specialize in making “homemade” dinners for working parents
to heat and serve.

 Innovation is perhaps the defining characteristic of entrepreneurship. Visionary

business expert Peter F. Drucker explained innovation as “change that creates a
new dimension of performance.” There are two main types of product innovation.
Pioneering or radical innovation embodies a technological breakthrough or new-
to-the-world product. Incremental innovations are modifications of existing
products.

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 But innovation occurs in all aspects of businesses, from manufacturing processes
to pricing policy. Tom Monaghan’s decision in the late 1960s to create Domino’s
Pizza based on home delivery and Jeff Bezos’ decision in 1995 to launch
Amazon.com as a totally online bookstore are examples of innovative distribution
strategies that revolutionized the marketplace.

Entrepreneurs in less-developed countries often innovate by imitating and adapting

products created in developed countries. Drucker called this process “creative imitation.”
Creative imitation takes place whenever the imitators understand how an innovation can
be applied, used, or sold in their particular market better than the original creators do.

Innovation, differentiation, and/or market specification are effective strategies to help a

new venture to attract customers and start making sales.

6.0 Module 6: Women Entrepreneurship

6.1 The Concept of Women Entrepreneurship

A female entrepreneur is a woman who has created a business in which she has the
majority shareholding and who takes active interest in decision-making, risk-taking and
day-to-day management. The contribution of women entrepreneurs to economic activity
and employment has increased over time. Women entrepreneurs and their businesses
are a rapidly growing segment of the business population. Women entrepreneurs are
prominent not only in industries where they were traditionally active, but also in less
traditional sectors (e.g. manufacturing, construction, and transportation). Women
entrepreneurs have created a variety of new ventures and contributed to the
development of a range of services and products.

Research has shown that the percentage of female entrepreneurs worldwide still remains
low in relation to that of male entrepreneurs and to the percentage of women in the
population. The creative and entrepreneurial potential of women is a latent source of
economic growth and is a veritable weapon for the creation of new jobs and should be
encouraged.

Research has shown as well that women face a number of difficulties in establishing and
maintaining businesses. Although most of these difficulties are common to both genders,
in many cases they tend to be more significant for female entrepreneurs. This is due to
factors such as a poor business environment, the choice of business types and sectors,
information gaps, lack of contacts and access to networking, gender discrimination and
stereotypes, weak and inflexible supply of childcare facilities, difficulties in reconciling

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business and family obligations, as well as differences in the way women and men
approach entrepreneurship.

Increasing the rate of new business creation by women is essential to stimulate

innovation and employment in our economies.

Measures Promoting Female Entrepreneurship

Specific actions or measures promoting female entrepreneurship have already been

established in several countries. These include support measures in the following seven
areas; captured as FINANCE: (1) Funding, (2) Information, (3) Networking, (4) Advice
and consultancy mentoring, (5) New Techniques and training, (6) Commencement
support, and (7) Encouragement and mentoring.

Other measures include:

1. Supporting women on their way to self-employment according to their specific

demands and to enable experience exchange and business contacts.

2. Creating optimal conditions for women to do a successful entrepreneurial

job; women who want to create a business should be coached and supported in
the relevant fields.

3. Representing the interests of female entrepreneurs and influence the policy of

the government through this co-operation of female entrepreneurs.

4. Enabling women with different personal background to achieve self-employment

and to support self-employed women (high relevance to labour market policy).

5. Strengthening the economic potential of women and to support female

entrepreneurship by offering an optimal infrastructure for start-ups.

6. Strengthening the personality of the female entrepreneurs, to procure

the entrepreneurial know-how and to help women to manage their problems and
difficulties as entrepreneurs.

7. Fostering equality on the labour market and to increase the employment

rate and the start-up rate of female entrepreneurs.

8. Building an optimal environment for female entrepreneurs by

providing them with various professional services that range from advice,
lobbying, funding to contacts and enterprise presentations.

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9. Increasing the knowledge on female entrepreneurship in order to open up the
business creation process to all by providing necessary resources.

10. Obtaining statistical information (e.g. number of enterprises, turnover, and sectors
of activity) on enterprises run by women in order to gain more knowledge on
female entrepreneurship.

Good practices for Women Entrepreneurship

The following measures are suggested:

1. Measures should be designed for both, groups and individuals.

2. Measures supporting enterprise start-ups should focus on sectors that can

provide women with an adequate income.

3. Measures increasing the self-confidence of women and the belief in their own
abilities as entrepreneurs are important.

4. Not only women, but also girls should be targeted at by support measures in order
to encourage them to become entrepreneurs.

5. The facilitation of access to credit should be a key element in business support.

Recommendations with Respect to Women Entrepreneurs

On the basis of research findings, the following recommendations have been reported in
encouraging women entrepreneurship:

1. Seek to raise awareness of women's issues by mainstream support agencies.

 Promoting the message to business support providers that raising female

participation rates is an important part of a strategy for raising the level of
entrepreneurship in society.
 Support should be given to organizations that wish to improve their understanding
of the needs of women entrepreneurs, through activities such as exchange visits,
training programmes and seminars.
 Ensuring that all literature and other material produced regarding enterprise issues
recognizes the fact that women are a substantial and growing component of the
entrepreneur community. This should pay particular attention to the language
used in promotional material aimed at people interested in starting a business.
 Providing continuing support for nation-wide information and lobbying bodies.

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  Supporting the development of a website for women entrepreneurs, providing
information about specific support that is available, a data base of businesses
interested in co-operation, and a discussion forum to exchange views
and information between women entrepreneurs.
 Stressing the need for mainstream business support organizations to continually
review their provision to ensure that it both reflects women's
experiences and does not deter women from seeking support for business start-
up.
 Take steps to ensure that organizations providing advisory services to
businesses become more aware of the special needs of women
entrepreneurs.

2. Take steps to increase the availability of finance.

 Strong and effective lobbying of financial institutions to counter actual, perceived

or unintended discrimination against women entrepreneurs.
 Should reduce the need for financial support aimed specifically at women
entrepreneurs. The alleged practice of some banks in requesting a partner's
countersignature on a loan application is an example of one possible target for this
action.
 Offering targeted financial support aimed at female entrepreneurs, as part of a
strategy for raising the overall level of entrepreneurship. Support for local
schemes, such as credit unions and mutual guarantee schemes involving women
entrepreneurs, would be valuable. Micro-credit programmes are beneficial not just
for the cash they offer, but also for the peer support and mentoring arrangements.

3. Continue selective support for female specific programmes.

 Female specific training and support is not required in all areas of business. It is
most applicable at the start-up stage and with reference to particular
areas such as motivation, confidence skills and capitalization issues. Once
women are 'in the system', they can participate in more mainstream provision.
 Female specific training is particularly important in learning new
skills, such as technology.
 Priority support for mentor programmes for women entrepreneurs (particularly
those wanting to develop their businesses), using successful women
entrepreneurs as mentors where possible.

4. Take active steps to encourage equal opportunities monitoring by general business

support organizations.

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  A demonstration of effective monitoring of equal opportunity of access should be
a condition of any support offered by the Commission to mainstream business
support organizations and other agencies. This would help to ensure equitable
practice and also protect these organizations against inaccurate accusations.

 Role of Orientation and Women Entrepreneurial Aspirations

 Contributions of Women to National Socio-economic and Human Development
 Barriers to Women Entrepreneurial Practice.

7.0 Module 7: Social Entrepreneurship

7.1 The Concept of Social Entrepreneurship

Social entrepreneurship at its essence is a process by which individuals “build or transform
institutions to advance solutions to social problems”. Social entrepreneurs are the idea
champions: people who advance change, working within, between and beyond
established organizations. The social entrepreneur also helps others discover their own
power to change by helping them envision a new possibility and recognize how it can be
broken down into doable steps that build momentum for change.

Qualities of a Social Entrepreneur

Social entrepreneurship is a process – involving a long-term commitment and continual

set-backs. For this reason, social entrepreneurs share certain qualities, including the
ability to overcome apathy, habit, incomprehension, and disbelief while facing heated
resistance; the ability to shift behavior, mobilize political will, and continually improve
their ideas; the ability to listen, recruit and persuade; among those they work with, they
encourage a sense of accountability, and a sense of ownership for the change. Social
entrepreneurs are also comfortable with uncertainty and have a high need for autonomy.
Since social entrepreneurs will face adversity along the way, another important quality is
the capacity to derive joy and celebrate small successes. Successful social
entrepreneurship involves well established behaviors which can be acquired. While some
people appear to be born with more entrepreneurial inclination than others, most people
can learn to behave like entrepreneurs.

Historical Perspective on Social Entrepreneurship

Social entrepreneurship has always existed, though it has not been recognized as such.
Historical figures such as St. Francis or Gandhi advanced important social changes
through work that is analogous to what social entrepreneurs today are doing. Social
entrepreneurship as a movement developed in response to major global forces that have
shifted the patterns of life around the world, creating more opportunities for people to
cause change. America experienced many of these changes over a century ago: the
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emergence of the private sector, rapid developments in industry, urbanization, and the
rise of new wealth up to the early 1900s created new social problems, and Americans
responded with programs and organizations to address these needs. Examples include
Hull House, Boy Scouts and the Salvation Army.

Social entrepreneurship today is a response by the global citizenry to changes that have
happened, and are happening, on a global scale. Large-scale changes over the past half-
century, such as the collapse of authoritarian and communist regimes, resulted in
newfound freedoms for many across the globe. These freedoms have led to greater
wealth, longer life spans and better communications around the world, but they have
also created new problems. For example, mass rural-to-urban migration has in some
countries resulted in mega towns that are violent and unhealthy; or, people who have
been involuntarily dispersed by change struggle to pick up their lives again and suffer in
poverty.

Social Movements

At the same time, however, hundreds of movements and millions of organizations aimed
at addressing these myriad problems have also emerged, and social entrepreneurship as
a movement has grown. The pace of change continues to accelerate, and as it does, the
pace of adaptive systems must keep up. Solutions must be decentralized and integrated
and deployed in real time. Social entrepreneurship is the intersection of the worlds
complex problems, the recognition that new kinds of organizations and models are
required to address those problems, and the historic changes that have dramatically
increased the capacity of individuals and modest-size groups to address those problems.

Pioneering Social Entrepreneurs

Two highly successful examples of pioneering organizations in the field are Grameen Bank
and the Bangladesh Rural Advancement Committee (BRAC). Both organizations
originated amidst disaster in Bangladesh: a cyclone and a civil war ravaged the country.
Muhammad Yunus and Fazle H. Abed created and operated the Grameen Bank and BRAC,
respectively, on the belief that their results would be stronger if they broke from the
pattern of paternalistic aid and followed a new method based on trial and error and an
emphasis on results. Yunus and Abed hired locals instead of foreigners, with hired staff
through a competitive application process instead of doling out jobs to family and friends,
they refused to sanction bribery, they focused on efficiency and results, they
experimented continuously, and they viewed failures as opportunities. These tactics were
a departure from the traditional methods of aid distribution and management. The
Grameen Bank and BRAC also benefited from the long-term involvement of Yunus and
Abed and tens of thousands of local staff members, whereas traditional donors often only
stayed on projects for a few of years before rotating out of country. Both organizations
saw results that were a world apart from anything the field of international development
had yet seen. They proved that it was possible to mitigate poverty on a massive scale
and helped shift the global development paradigm.

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Differences and Similarities with Other Sectors

How do social entrepreneurial ventures compare to change agents in other sectors? While
social and business entrepreneurs are similar in their skills and temperaments, they differ
markedly in their primary objectives. For business entrepreneurs, the objective is usually
to maximize profits or build a lasting, respected entity. For social entrepreneurs, the
objective is to maximize some form of social impact, usually by addressing an urgent
need that is being mishandled, over-looked, or ignored by other institutions.

Social entrepreneurship also differs markedly from government in many ways. Unlike
governments, who work from the top down, social entrepreneurs address problems from
the bottom up. The social entrepreneurs’ efforts often begin with an interaction with a
problem on the ground level, which leads to a question that eventually grows into an
organization through trial and error. Governments often implement ideas before testing
and adapting them as they go, and they often lack the nuanced understanding of ground-
level details that is the key to success in social entrepreneurship. Additionally,
governments are bound by protocol, rules and procedures; social entrepreneurs have far
more flexibility. A social entrepreneur has the luxury of trying seemingly crazy ideas and
getting rid of ideas that do not work, whereas a government gets bogged down in hashing
out the details prior to implementation without the chance to learn from mistakes.

Similarly, social entrepreneurs can stay working on a problem until they solve it.
Governments are under pressure for quick, tangible results. Government, however,
benefits from its access to a wide array of resources and recognized legitimacy. To
address social problems at the proper scale, we must combine the creativity and agility
of social entrepreneurs with the resources and legitimacy of governments.

Social Activism

Activism is similar to social entrepreneurship, but can best be understood as a subset of

social entrepreneurship. Activism is a tool that many social entrepreneurs use to further
their cause. Activism typically works from the outside, attempting to influence the decision
makers in government or large institutions. Social entrepreneurship utilizes outside- and
inside-directed tactics, often working directly with institutions to enact change. Social
entrepreneurs also often seek to create new institutions rather than change old ones.
Activism is important because it helps elicit empathy by making injustice and suffering
palpable. Social entrepreneurs can further their cause by utilizing techniques of activism
for this purpose.

Social Entrepreneurs and Citizen Democracies

The work of social entrepreneurs strengthens established and emerging democracies.

Democracy, like social entrepreneurship, is an iterative process. Citizens of democracies
and social entrepreneurs build and continually adapt institutions designed to meet
society’s needs. In pre-democratic contexts, social entrepreneurs help citizens realize
their ability to shape change, which reinforces their power as citizens. Democracies

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flourish when large numbers of citizens acquire the capacity to shape civic life. Social
entrepreneurship is a process by which citizens organize to do just that. As the field social
entrepreneurship continues to expand, it may help redefine the concept of citizenship,
creating a world of citizens who are actively involved in creating and shaping their
countries institutions.

Financing Social Ventures

Social entrepreneurs finance social organizations from a variety of sources. They often
start with people close to them – family, friends, classmates and professional contacts.
Social entrepreneurs also turn to corporations, public foundations, social venture
competitions, impact investors and Web-based intermediaries. The Obama campaign
proved that this approach can be highly effective. Fellowships and prize programs
directed specifically at social entrepreneurs are another source of funding. Though the
organizations are not numerous they comprise the current key pipelines of support and
recognition.

Achieving Social and Financial Objectives

Social entrepreneurs are increasingly seeing strong results through complementary

nonprofit, business, and hybrid enterprises. The term “blended value” refers to the
commingling of social and financial objectives, and an increasing number of organizations
are working in this gray area, using a combination of business methods and philanthropy.
Social enterprise, a combination of business and philanthropy, is a promising strategy
because it allows a social organization to benefit from the strategies of traditional business
entrepreneurs. These developments bring challenges. As the line between sectors blurs,
a new form of financing will be necessary. Blended value or impact investors, investors
who cross the lines between philanthropy, business and the public sector, will be
increasingly important.

Cultivating Talent

Another challenge social entrepreneurs’ face is attracting talent. Social entrepreneurs

must recruit talent without the ability to offer compensation that is comparable to
business. Instead, social organizations rely on attracting people by promising meaningful
work. The social sector also lacks a structured system to nurture talent; when combined
with financial inhibitors, this makes retaining talent difficult. More people have chosen
social organizations over other opportunities following the economic downturn, probably
because comparable salaries in the private sector have dropped. Social entrepreneurs in
the near future will have to determine the tipping point in compensation in order to
redirect talent from other sectors.

Nurturing Innovations in Education

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Fostering innovation will also require changes in education. The idea that everyone can
be a change maker should be integrated starting in grade school so that children can
become comfortable with the ideas and skills necessary to effect change early on. From
childhood, it is important to nurture students‘ willingness to try out new ideas. When
children are encouraged to test out their own ideas in a safe and non-judgmental
environment, they learn to value their own ideas, and valuing one’s own ideas is crucial
for a social entrepreneur. Schools should also encourage students to ask questions and
take initiative. This is important because social entrepreneurs are action researchers,
learning through experimentation. Additionally, schools could create programs that help
children develop empathy. Emotional learning is just as important as cognitive learning,
though schools focus almost entirely on the latter. Schools that have utilized emotional
learning programs have shown that it is possible to teach children to develop empathy;
developing empathy will help children understand how they fit into the larger world,
helping them to understand others better and to build teams. Another option that targets
the more practical skills of social entrepreneurs is to create programs that would expose
students to problems and then help guide them through the process of constructing a
solution. Finally, schools could do more to celebrate youth-initiated social problem
solving. While youth-led social entrepreneurship is growing, it is mostly outside of the
school system.

Universities Role in Moving the Field Forward

Universities also play an important role. Universities legitimize new field and careers, and
thus have the potential to grow social entrepreneurship as a field. The first course in
social entrepreneurship was initiated by Greg Dees in 1994 at Harvard University.
Research in social entrepreneurship education by Debbi Brock and Ashokas Global
Academy for Social Entrepreneurship documented over 350 professors in 35 countries
teaching courses in social entrepreneurship. Other initiatives include fellowship programs
at schools such as Harvard and New York University, social enterprise courses and social
venture planning competitions at many leading business schools, and partnerships
between universities and social organizations that allow students to interact with social
entrepreneurs. One example is the Reynolds Program in Social Entrepreneurship at New
York University. It is the first university-wide interdisciplinary fellowship program in the
field, and is open to graduate and undergraduate students from every school and every
discipline. Interdisciplinary programs are essential due to the interdisciplinary nature of
social problems.

Partnerships and Support Organizations

The relationship between governments and social entrepreneurs can and should be
changed in order to maximize efficiency and social impact. Social entrepreneurs and
governments have suffered from a mutual lack of trust and respect. They face different
pressures, have different needs and operate in different ways, and the tensions, lack of
respect and weak relationships, have impeded necessary collaboration. Governments
often utilize the pilot and scale method when inter-acting with social entrepreneurs. This

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entails identifying a promising innovation in the social sector and then supplanting the
organization and taking the idea to scale within the government. However, for the same
reason that governments do not launch and run businesses, governments should not try
to run social enterprises when there are others in society who are better suited to the
task. Growing a social enterprise takes as much or more entrepreneurialism as starting it
does, and governments do not have a competitive advantage in this area.

Supporting and Collaborating with Governments to Serve the Social Sector

Where governments do have a competitive advantage is in determining priorities,

ensuring fairness, and fashioning a framework of incentives and oversights. Governments
should shift from the model of running programs and providing after-the-fact payments
for services to a model of investing and overseeing long-term investment in social
entrepreneurial organizations. Governments should think like a gardener rather than a
builder – identifying promising seeds and rich soil (the social entrepreneurs and
environments ripe for change), and fostering growth (through long-term investment).
This does not mean abolishing government programs; rather, it means shifting toward
harnessing the power of social entrepreneurs to achieve policy goals, as government does
with business entrepreneurs. Governments will also need to overhaul the network of
constraints holding social entrepreneurs back. Examples include: making it easier for
citizens to receive tax benefits for contributions to social entrepreneurs; creating cross-
sector fellowships to bring social entrepreneurs into government and place policy staffers
in social organizations; and introducing innovation funds within all government agencies
to encourage the development of a social capital market. One example of social
entrepreneurs working effectively with government is America Forward. This coalition of
more than 80 social entrepreneurs created a set of policy ideas that led the Obama
administration to create the White House Office on Social Innovation and Civic
Participation and to support an innovation fund, for which Congress appropriated $50
million in seed capital. The new office works to identify and scale high-performing social
organizations, forge partnerships with business and philanthropy and support national
service and other forms of citizen engagement. The fund is designed to leverage private
investment to expand ―ideas that work. ―Intrapraneurs within the administration can
build on these ideas and foster a policy environment more alert to the potential of social
entrepreneurs.

Relationships with Private Sector

With regard to business, a great deal of innovation in the coming years will result from
the intersection of the social and business sectors. Businesses are realizing they can
benefit by working from and learning from social entrepreneurs for a variety of reasons.
1) Businesses realize that social organizations know how to operate in underdeveloped
markets (internationally and domestically) – how to identify opportunities, develop
products, manage staff, etc., in unfamiliar contexts. As businesses expand into the
developing world and other underserved markets, organizations can learn from social

43
entrepreneurs ‘experience. 2) Businesses are under increasing pressure by customers,
employees and investors to be socially conscious. Businesses that are familiar with the
landscape of social entrepreneurship will be better poised to succeed than competitors
who are not aware of these social changes. 3) By partnering with social entrepreneurs, a
business can target the Bottom of the Pyramid, the four billion people living on less than
$2 per day, without having to establish new channels of business from scratch. The
business in this situation will also benefit from the social entrepreneur’s expertise in the
field. As with governments, the benefits of combining are complimentarily. 4) Social
entrepreneurs are reshaping the nature of corporate social responsibility. Social
entrepreneurs are increasingly working directly with top executives instead of going
through the corporate social responsibility or marketing departments. Corporate social
responsibility is thus becoming a core management function as opposed to a component
of PR. 5) Social entrepreneurs are influencing the regulatory and investment
environments, holding businesses more accountable to their social and environmental
performance. Oversight tools, such as Social Accountability Internationals SA8000, which
certifies that companies maintain decent working conditions, will accelerate the growth
of social enterprise.

The Role of Philanthropists in Fostering Social Entrepreneurship

We can reshape philanthropy’s approach to more effectively foster social entrepreneurs.

Philanthropists have the ability to make long-term investments, assume greater risk and
support less popular ideas than businesses or governments. Philanthropy in the coming
years will be particularly important: researchers estimate that inheritances will amount to
tens of trillions of dollars in the coming decades. In the past, philanthropic investments
were treated as charity and chosen in an often-capricious manner. The standard approach
was to provide modest one-year grants restricted to specific use. The past decade has
seen an important shift, characterized by increased involvement by the donor with the
organization on the receiving end and a method of financing similar to that of venture
capital. On a high level, philanthropy has shifted from palliative to curative. This shift has
involved searching for innovative ideas, targeting high performance social entrepreneurs,
providing longer term capital along with managerial assistance and rigorously tracking
results. Also, many donors have adopted a venture capital approach, providing multiyear
grants that are combined with direct engagement on the part of the donor, whether
through management consulting, lobbying support, business plan development, or similar
work. Joel L. Fleishman argues that “venture philanthropy” and social entrepreneurship
will dominate philanthropy in the twenty-first century. The limitations to the venture
capital model for social entrepreneurs are that it is not designed to support an enterprise
forever. Options for long-term support are governments, generating revenue through
social enterprise, or patient capital funds.

There are five proposed ways by which philanthropy could redeploy resources to harness
social entrepreneurs more effectively.

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1. Help social entrepreneurs engage more successfully with businesses and governments:
Philanthropists are in a position to create a neutral space for generating ideas and to
catalyze necessary exchanges between social entrepreneurs and policy makers and
between social entrepreneurs and the business sector.

2. Fund structural supports for social entrepreneurs: Philanthropies have influence with
universities and the education system generally that they could use to encourage
education and research on social entrepreneurs. They could provide tuition support to
attract students to study in the field. Philanthropic foundations could support the creation
of new media platforms to encourage the sharing and exchange of knowledge.
Foundations could also support programs for training baby boomers in social
entrepreneurship to encourage this group to become change makers in their “encore
careers.” Finally, philanthropy could support the growth of advisory services that allow
social investors to make well-informed investment decisions.

3. Stick with things that work and communicate clearly: Philanthropies should be clear
when providing their reasons for ending a relationship with a recipient organization, and
organizations should continue to do what they have been successful at.

4. Let more organizations die: More organizations open, but few close. This means that
funding is continually spread thinner and thinner. Foundations could ensure that failure
or mediocrity lead to reductions or withdrawal of funding.

5. Help social entrepreneurs work together: The field of philanthropy could encourage
social entrepreneurs to join together in firms, where they share expertise, test ideas,
launch ventures and provide consulting advice to larger clients. This creates a lower risk,
more effective, and more supportive environment.

The Role of the Media

Journalism will play a key role in helping society become more innovative. The structure
of news media is changing as traditional media sources have to adapt to a changing
society, but the content of media has not kept up. News media drastically underreports
stories of social innovation in favour of stories of conflict. Social entrepreneurs can help
change this by legitimizing a category of news focused on solutions. The media has a
vital role in making the work of social entrepreneurs visible, illustrating what the leaders
in the industry are doing, just as the media already does with business and government.

Individuals Role in Supporting Social Entrepreneurship

The most valuable step an individual can take to prepare him/herself to participate in the
field of social entrepreneurship is to deepen his or her self-knowledge. In order to be
successful and make an impact, an individual must first understand what he/she cares
about and has always cared about, what his/her strengths and weaknesses are, what
his/her value set it, what environments he/she works best in, and what his/her
motivations are. Without knowing these things about oneself, one may inadvertently add
to the already ample store of negative leadership in the world. It is not necessary to study

45
social entrepreneurship, but it is necessary to understand the workings of the system you
want to change and the history of the problem with which you are concerned. This
involves what may be a lengthy process of investigation and brainstorming. Most of all,
you need to be prepared to listen and to face challenges.

8.0 Module 8: Business Opportunity Evaluation

8.1 Sources of Business Opportunities in Nigeria

A business is a concept, which could be contemplated anywhere. It takes someone with
business insight to visualize the need to develop the concept into ideas, reduce them to
business plan and nurtured to assume resemblances of economic activities supported
with resources. At the simplest level, a business assessment plan is sometimes referred
to as a feasibility study. It must be noted however, that a clear line of difference exists
between a business plan and a concept. A concept broadly speaking, involves more than
a plan, it is a general belief, an abstraction or a principle. For instance, it is a concept
that every location in Nigeria has a business opportunity. This may not be the same as
actually drawing up a plan to run a particular line of business. To this extent, a concept
differs from a plan but suffice to say that both are in context the same.

A business plan is very important in any business proposal irrespective of the nature of
business. Generally, however, below is the form most business plans or feasibility reports
take:-

Feasibility report

Feasibility is a document that generally outlines the potency of a planned project

commencing with a preamble; which states general information or company profile, the
project itself, sponsorship and whether arrangements exist for technical assistance. Other
information includes:

• Marketability and demand analysis.

• Technical feasibility in terms of skilled and adequate manpower, machinery, raw
materials, equipment, etc.
• Production requirements, forecast production limit, factory layout.
• Financing plans, including loan, lease or hire purchase arrangement.
• Financial evaluation by way of investment appraisal methods.
• Financial projections and cash-flow, budget estimates for the duration of the
project or for at least 12 months ahead.
• Environmental impact assessment.
• Details of the project implementation.

1. Sources of business information

The major source of business information is one's mindset or subconscious mind. A

prominent pastor in Abuja once postulated that he never taught any follower how to pray

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because he knew that individual experiences would. This is, indeed, a pertinent lesson
for aspiring entrepreneurs. Most people who have succeeded in business today did so for
compelling reasons ranging from failure to gain a white collar job to not being satisfied
with the one offered. Those who understand the business world do seek white collar job
to raise capital in order to be on their own. In searching for such, they become dissatisfied
with each succeeding job and keep moving, thereby, taking advantage of higher perks to
accumulate their capital. Such persons are often referred to as high flyers.

Elueni (2000) postulated that wealth can be acquired through one's physical strength,
sustained for a while through conceptual strength and made permanent through
investment: in assets. In his opinion, ownership interest through shares is the most
permanent and reliable form of assets, provided that: such companies truly have
perpetual solvency.

Akingbola (2008) classifies players in the economy as salary earners, self-employed

professionals and investors and further notes that investors control the economy, they
have government ears and sympathy, they work less but have everything in their favour.

2. Environmental scanning

Environmental scanning involves a process of studying one's locality in order to gain

insight with a view to identifying inherent opportunities. Each environment has its
peculiarity permeated by challenges beneath which lay golden opportunities. An
exploration of the environment would unravel tranches of the inherent gold. However,
the process of unearthing this is quite onerous and challenging requiring the virtues of
patience, perseverance, creativity and courage to access the hidden gold, while threats,
fear and weaknesses constitute artificial barriers constraining the process. No wonder,
management specialists advocate that entrepreneurs should overcome challenges by
maximizing their strengths in order to counterbalance their weaknesses and threats.
Akingbola (ante) states that getting rich is not taught in school rather, it is learnt why
doing it on the streets, which he calls the University of Life. He lists the alumni of such
university as Bill Gates (Microsoft), Ted Turner (CNN), Richard Branson (Virgin Air),
Thomas Edison (Electric bulb), etc.

The Nigerian economy is full of opportunities as well as threats. The main threats are in
the region of policy inconsistency, poor infrastructure, near absence of the rule of law,
among others. However, her population; diverse culture and vast expanse of land are
immeasurable opportunities that tend to outweigh the threats. This probably explains
why in spite of the threats, businesses always thrive in Nigeria making it the second best
opportune country on the continent after South Africa probably.

3. Interaction with people of similar ideas or experiences

This is a prelude to formation of a partnership based on mutual business interest. It is

most common among people who suffer a common fate or undertake similar training.
Such business synchronization more often than not yields synergic effect.

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4. Extensive travels around the locality or beyond

Travelling, they say, is part of education and perhaps, experience as well. Both are wealth
in a sense that they can each be translated into business ideas to earn some money. Our
Ibo brothers from the eastern part of Nigeria are a good example here. The business
ideas they import from different parts of the world has made them quite prosperous.

5. Seminars by business communities, government agencies or

professional associations

Seminars are useful for business opportunities in that speakers at such occasions are
carefully selected. They are usually people with proven knowledge on topics assigned to
them. They are sometimes, government officials who are responsible for policy
formulation. Their presence goes a long way in clarifying otherwise, thorny policy issues
or proves an opportunity for them to avail the audience of some privileged information
on government's strategic focus. The major drawback here is that the cost of attendance
at such seminars is often quite exorbitant. A probable way round this is for the
entrepreneur to ask after the papers, at post-event as they are likely cheaper.

6. Enquiries at specialized Government Agencies

The Small and medium enterprise development agency of Nigeria (SMEDAN), the Nigerian
export processing commission (NEPC), the Nigerian import and export bank (NEXIM), the
Nigerian export processing zone (EPZ), among others have desks for public enquiries.
CBN for instance, has an extensive agricultural department known as development
finance, which offices exist in virtually all the branches of the Bank. The department offers
agricultural credit guarantee schemes, currently up to a limit of N 1 million for an
individual or N 10 million for corporate farmers. The loans are sourced from conventional
banks but guaranteed by the CBN. Interest cost on such loans can be drawn back to the
extent of 40% after the applicant has fully repaid the underlying facility. The scheme is
known as interest draw back (IDA), which was introduced by the CBN in 2003 with a
capital base of about N2 billion. Such information could only be available if sought after
at the relevant sources.

7. Examination of projects/dissertations of graduates of higher

Institutions

This is one of the most original sources of business ideas. Business students are privileged
to select topics in areas of familiarity for their projects. It is expected that the knowledge
gained in such sector would serve as incentive to further stimulate interest and actions.
A good project should therefore have a background information on the industry being
considered. Business students, especially at the MBA level, who aspire to become astute
entrepreneurs should plan their projects in a manner that would serve as precursor to
business plans or feasibility reports. Fortunately, students' projects are available at
libraries of polytechnics and universities.

48
We can recall the experience of Mr. Wale Adenuga, a famous television producer.
Adenuga read Business Administration at the University of Lagos where he busied himself
as the chief cartoonist of the campus publication between 1971 and 1974. On graduation,
he started publishing Ikebe Super and Super Story magazine in 1976 and later added
Binta magazine to the list of his publications. As time went on, public interest swapped
to electronic media and Wale was responsive enough to move with time by changing
from print media to television production. His Papa Ajasco attracted so much public
appeal followed by Super Story.

It is desirable to state here that what informed Wale's brilliant career is the knowledge
he had acquired as a hobby at the undergraduate studies in business administration.

8. Browsing internet with a view to studying experiences of other

countries

Internet cafes exist to provide information on a wide array of issues including business
activities. Some may be too advanced and outside the scope of our environment.
However, most can be stream-lined to suit the immediate needs of our environment.

9. Tapping intelligence report from existing businesses

This can be done through the engagement of an employee of small scale businesses in a
discussion bothering on the business policy of their respective companies.

10. Taking advantage of improved infrastructure

In the modern global village, access to business opportunities is no longer an exclusive

right of the local authorities. The effect of globalization can as well create business
opportunities.

An instance of this is seen in the case of Gboko, a traditional capital town of the Tivs,
Benue state. Gboko is one of the three major towns in Benue State with little or no Federal
government presence. It is however, the traditional seat of Tiv Native Authority and also,
a great market for agricultural produce, therefore a host town to a number of cottage
industries. It is privileged to have a giant cement factory, which became comatose in the
late 90s. Prior to this, residents of the town had depended solely on the resources of the
factory while solvent. However, its subsequent distress rendered the town economically
castrated despite claims of dividend of democracy by unconscionable politicians.

Interestingly, at the height of desperation, the Federal government liberalized the global
system of mobile telecommunication (GSM) service and its expansion to the town was
embraced by youths, especially ladies who could not compete in Okada business (hire).
Today, the GSM has gainfully employed over ten per cent of the youths while contributing
about five per cent of the township income. This was followed closely by the
establishment of three institutions of higher learning i.e. a polytechnic, college of
education and a university, which have collectively created opportunities in terms of
increased demand for hostel accommodation, business centres cum secretarial services,

49
tailoring and banking services. Meanwhile, the cement factory has been revived through
privatization. The new demand accentuated by the spate of private institutions of higher
learning, GSM revolution occasioned by privatization philosophy and banking service
expansion are alien to any deliberate government efforts to provide jobs. On the contrary,
globalization led to improved environment without government's direct intervention. In
other words, these are externalities of globalization that could trigger entrepreneurial
activities.

11. Taking courses at higher schools to acquire more or relevant skills

Education is a powerful spring that spins one's life. Higher education means higher stakes
in life, all things being equal. When I was developing a hostel accommodation at Fidei
Polytechnic, Gboko, I met a bread baker who was rounding up his national diploma
programme (ND) in marketing at the institution. In the ensuing discussion, he impressed
on me that his training had afforded him an opportunity to generate increased sales
through courteous handling of his customers. This is an intrinsic benefit of a higher
education. Bankers in Gboko have had cause to make testimonies that they had witnessed
Okada drivers with over N50,000.00 in their savings account. These bankers probably
forget that these drivers are graduates of at least, NDs or NCEs and they know better
why they are in the Okada business.

12. Taking advantage of government policies

Generally speaking, policies are general principles that guide top management in decision
making. In the corporate world, they are set by the board. Policies aim at creating
conducive environment for the attainment of set objectives.

In governance, polices aim at achieving macro-economic objectives such as stable

exchange rate, balance of payment equilibrium, acceptable level of unemployment, price
stability, among others. In other to achieve this, government employs a combination of
fiscal and monetary measures some of which can spin opportunities for entrepreneurs.
For instance, the ban on frozen foods has encouraged both chicken and aquatic farming
in recent times. Similarly, local rice has taken the centre stage following the ban on rice
importation and Nigerian farmers are working on the imperative of inward sourcing, not
to mention the effect of the ban on fruit juice, which triggered stiff competition between
Dangote Group and Coca Cola to customers' delight.

13. Reliance one's honesty

Honesty is now a rare attribute in our society and whoever possesses it stands out to be
appreciated. Several capitalists amongst us have one form of job offer or the other but
they would rather not trade-off such with treachery. It is evident that domestic
employments like housekeeping, garden attendance and driving have all vanished from
the hitherto gainful job opportunities due to dearth of integrity.

Therefore, where an individual possesses this rare quality, such person should
demonstrate it in a manner that would attract patronage. The best way to demonstrate

50
honesty is by rendering one's self available for agency activities to earn some commission.
Agency activities may start from the renewal of vehicle licenses, project supervision, rent
collection, house decoration, land registration, business registration or assets
procurement. Once the first deliverable is right then demands for such services begin to
trickle in.

14. Investment clubbing

Investment club is the coming together by people of like minds to pool resources and
take advantage of the investment opportunities. It has become necessary to form these
clubs due to the continued shifting of the goal post by stockbrokers in terms of initial
amount required to open clients' investment accounts. For instance, First Trustee Limited
at a point required N2.5 million to open a client's trading account, which was well beyond
an average investor. Considering that First Trustee Ltd is an experienced corporate
investor, a member of the larger First Bank family with a sister company like First
Registrars Ltd that controls over 40% of quoted companies in Nigeria, one is not in doubt
as to how beneficial First Trustee Ltd could be to potential investors. It is sensible
therefore, if a group of five could to pool resources together and meet the threshold.

15. Engagement in hobbies

A hobby is a past time endeavour. Typically, hobbies can be developed into a lucrative
business venture. Hobbies may be classified into games, collections, outdoor recreation,
performing arts or creative hobbies (cooking, gardening etc.). Indeed, the supreme court
of Thailand has had to sack the country's prime minister on charges of engagement in a
television cooking programme as a hobby (CNN, September 12, 2008). In Nigeria, with
the growing need to add spices to occasions, a good number of eloquent employees have
developed habit in the hobby of being masters of ceremonies (MC) where they earn
reasonably well. A colleague, a London trained economist, has had to resign her
appointment as a senior manager in a bank to continue with her wedding cooking which,
until then was just a hobby. A lot of married women tend to run kiosks in front of their
residences as hobbies to evade idleness. Some professionals engage in part-time teaching
as a hobby and the list can go on.

Regulators in case of need

The following are regulators in some of the sectors where prospective entrepreneurs may
wish to raise capital:

• Money market: Central Bank of Nigeria, Nigeria Deposit Insurance Corporation,

Chartered Institute of Bankers of Nigeria, Money Market Association of Nigeria.
• Insurance market: National Insurance Commission (NAICOM), Nigeria
Insurance Association (NIA).
• Capital Market: Securities and Exchange Commission, Nigerian Stock Exchange
(NSE), Abuja Commodity and Securities Exchange (AC&SE), Chartered
Institute of Stockbrokers (CIB).

51
• Pension fund market: Pension Commission (Pencom).
• Debts market: Debt Management Office

Unfortunately, there exists no commercial code to regulate other financial investments

that fail to come under the purview of the above stated agencies. Accordingly, EFCC has
become a ready agency to mediate in dispute arising from these transactions. The Federal
Government should urgently task Bureau of Public Enterprises SMEDAN and NACCIMA to
come up with acceptable commercial code to define and enforce good business ethics
and practices as is done in the developed world.

8.2 Entrepreneurial ideas and Opportunities

The process of opportunity recognition is critical to entrepreneurship. The
fundamental activity of entrepreneurship is new venture creation. A major step in
any entrepreneurial venture creation process is the recognition of the
opportunity by the entrepreneur.

Opportunity recognition connotes perceiving a possibility for new profit potential through:

a) the founding and formation of a new venture, or

b) the significant improvement of an existing venture.

From this broad definition, opportunity recognition can be conceived of as an activity that
can occur both prior to firm formation and after formation of the firm through into the
life. How do entrepreneurs identify opportunities?

An idea for an entrepreneurial business does not necessarily equate to an opportunity

although it is always at the heart of an opportunity. Entrepreneurship is a market driven
process, other factors must exist to support the new product idea for it to become an
opportunity as potential customers must want the product. Hence, we can think of the
"idea" as a stepping stone that leads to an opportunity. Opportunity recognition is
therefore a process.

Timmons' (1994) proposed a model of successful venture creation based on the three
crucial driving forces of entrepreneurship:

(1) the founders (entrepreneurs),

(2) the resources needed to form the firm, and

(3) the recognition of the opportunity.

52
Surrounding the process are such things as risk, chaos, information asymmetries,
resource scarcity, uncertainty, paradoxes, and confusion, all of which complicate the
process. Only when all three components converge and fit can entrepreneurship occur
successfully. The challenge for the entrepreneur is to manipulate and influence the
surrounding factors to improve the chances for success of a venture. As Timmons (1994)
notes, the process of recognizing and seizing an opportunity often relies on the right
timing. Thus, according to Timmons (1990), the business idea is central to opportunity.
However, only when the business environment and the skills and backgrounds of
individual entrepreneurs fit together appropriately with the features of an opportunity can
it reach its full potential.

Reasons for Starting a Business

An observation that is fundamental to entrepreneurship scholarship suggests that some

individuals are more likely to identify and exploit opportunities than are others. A variety
of explanations for presumed differences between entrepreneurs and others have been
offered and debated.

These differences are due to:

a) variations in the beliefs individuals hold about the efficacy of perceived

available resources;
b) the resources at one's disposal;
c) expectations about the value of these resources;
d) consideration of one's opportunity costs;
e) prior experience;
f) optimism;
g) action-orientation; and
h) a wide variety of personal dispositions, such as tolerance for ambiguity or need for
achievement.
The pursuit of entrepreneurial activity reflects a series of choices that entrepreneurs make
as they engage in the process of starting a business. Ascertaining the reasons
entrepreneurs offer for why they choose to engage in business start-up is likely to provide
insights into differences in persistence in entrepreneurial activity, the kinds of
entrepreneurial activities undertaken, and success (or failure) at starting a business.

New businesses are not created by accident. There are sufficient impediments to
successful business start-up to suggest that the process involves actions that are clearly
intentional. When obstacles arise in connection with any of these activities, entrepreneurs
must find ways to overcome them in order to ensure what Heider (1958) called
"equifinality" of the outcome. Therefore, in theoretical terms, new venture creation is an
53
intentional act that involves repeated attempts to exercise control over the process, in
order to achieve the desired outcome.

The causes of behaviour have traditionally distinguished between those factors internal
to the person and factors that are located in the external environment. The more an
event appears to have been the product of an internal cause, the more the individual can
be held accountable for the event. In Heider's work, attribution theory has also
distinguished between temporary, transient causes and causes presumed to remain
essentially unchanged over a longer time period. The former are referred to as variable
causes; the latter are stable causes. For Heider (1958), intentionality was the "central
feature" of personal causality, the one element needed to distinguish between events
brought about by people and events brought about by forces of nature.

In a study of entrepreneurs from 11 different countries, Scheinberg and MacMillan (1988)

pilot-tested a set of 38 possible reasons for going into business. Subsequent factor
analyses of these statements eventually led to 23 possible reasons that were tested in
detail by Birley and Westhead (1994). In order, the top six reasons were:

(a) to have freedom in work

(b) to take advantage of an opportunity

(c) to control one's own time

(d) "it made sense at that time in my life,

(e) to provide security for one's family, and

(f) to have greater flexibility for personal life.

With the possible exception of (d), these explanations all sound quite intentional and
presume that the entrepreneur can exert control over the outcome. Factor analysis of the
23 reasons produced seven factors that the authors labelled:

(a) need for approval

(b) need for independence

(c) need for personal development

(d) welfare considerations (in the contributing-to-the-community sense)

(e) perceived instrumentality of wealth

(f) tax reduction, and

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(g) following role models.

As was the case with the top six individual reasons, these factors have the distinct flavour
of intending to pursue achievable (i.e., controllable) goals. Other reasons given for why
start a business were identification of a market need, autonomy and independence, a
desire to make more money, a desire to use knowledge and experience, the enjoyment
of self-employment, and a desire to show that it could be done.

Applying the framework of expectancy theory to the choice to undertake the behaviours
required for new venture creation leads to the prediction that such actions are most likely
when individuals believe that (1) they are able successfully to perform venture-organizing
behaviours, (2) successful venture-organizing behaviours will lead to predictable
outcomes (such as a business start-up) and (3) a successful start-up will result in other
outcomes of a positive value (such as wealth creation, increased personal status, or
greater independence).

Both individual factors "endogenous factors" and situational variables "exogenous

factors" will enter into the person's expectancy judgments, instrumentality judgments,
and assessments of values. Probability judgments may be affected by perceptions of one's
own skills and abilities, generalizations from past experiences (especially other
entrepreneurial experiences), the perceived difficulty of the task, or the amount of effort
required. Instrumentality judgments may be affected by perceptions of the environmental
and situational constraints, such as the availability of capital, network contacts, and
potential market demand for the product or service. In a fashion comparable to ours, the
open-ended responses could be coded to account for nascent entrepreneur's perceptions
of ability, the likelihood of success, and the value of the outcomes of new business
creation.

Opportunities and Potential Entrepreneurs

Individuals become entrepreneurs for a wide variety of reasons. All of them, however,
may be summarized by saying that each potential entrepreneur, when making that
choice, believes that the utility received from undertaking an entrepreneurial venture
exceeds the utility received from any alternative income-producing activity.

Imagine a world where each individual is faced with a profit opportunity. Some individuals
will see it, some will not. Of those who see it, some will act upon it, others will not.
Individuals that seize the opportunity become entrepreneurs, all others do not. Thus,
each individual chooses between becoming or not becoming an entrepreneur.

55
Alternatively, we could assume that it is possible to divide all income-producing activities
into two groups: one group including all activities that require entrepreneurial effort and
a second group including all activities that do not require such an effort. In either case,
and for any given entrepreneurship rate, because there are only two possible choices,
each individual's choice of activity is determined by the difference between the subjective
return to becoming an entrepreneur and the subjective expected return to doing
something else. We call such a difference the subjective relative return to
entrepreneurship.

Subjective relative returns to entrepreneurship describe an individual's decision to

become an entrepreneur as a function of three simultaneous elements:

1) the subjective initial endowment, which is personal;

2) the institutional and economic circumstances of the economy, which are

objective and community specific; and

3) the existing level of entrepreneurial activity in that community as perceived

and evaluated by the individual.

The initial endowment summarizes all subjective personal characteristics and, among
other things, includes the individual's family background, education, and personal history.
The institutional and economic variables summarize the objective socioeconomic
circumstances within which the individual operates. They include, but are not limited to,
property rights, taxes, inflation rate, possibility of alternative employment, etc.

Finally, the choice of an individual with respect to entrepreneurship is influenced by the

existing level of entrepreneurial activity. In traditional explanations of entrepreneurship,
differences in entrepreneurship rates across communities are explained through
differences in economic and institutional conditions. As a result, these explanations
cannot account for the high variance in entrepreneurship rates when similar economic
and institutional characteristics exist. Our idea is that, like most human decisions, the
choice to become an entrepreneur is formed and revised within the set of information
available to the individual. The key assumption is that different agents have different
information, thus different perceptions about the risk and cost of becoming an
entrepreneur. In particular, perceptions about likelihood and ease of success are
influenced by the social circle of the individual and. therefore, influenced by the existing
rate of entrepreneurial activity itself.

56
Thus, entrepreneurship creates more entrepreneurship and the aggregate level of
entrepreneurial activity is uncertain and heavily influenced by cultural traits. This means
that significant differences among entrepreneurship rates of different groups may exist
in spite of relatively modest differences among their economic and institutional
characteristics. To summarize, for each individual, the relative return to entrepreneurship
is a function of the set of personal characteristics that determine the initial subjective
endowment, objective socioeconomic circumstances, and of the entrepreneurship rate
itself. In particular, the higher the entrepreneurship rate, the stronger is the incentive to
become an entrepreneur rather than to pursue any other activity, independent of initial
personal characteristics.

If the entrepreneurship rate influences the choices of new individuals, then

entrepreneurship is a self-reinforcing phenomenon. As a result, the process of its
development throughout a community is not predictable. Thus, depending on the nature
and strength of certain social traits, a community may or may not develop a high level of
entrepreneurial activity.

8.3 Elements of Venture Creation

Some key factors may lead to an increase in a person's desire and decision to start a
business. Examples of such factors include a person's perception of desirability and
feasibility of starting a business or the person's propensity and intention to found a
business and his or her sense-making about the environmental forces.

Four elements in venture creation have been identified:

1. a profitable business opportunity

2. technical know-how of the entrepreneur

3. business know-how of the entrepreneur, and

4. entrepreneurial initiative.

Thus, some literature suggests that for an entrepreneur to start a business, he or she
should perceive that a profitable opportunity exists, should feel confident that he or she
possesses necessary skills to go into business, and should take an initiative for starting a
business. Three key elements of a venture creation process can be conceptualized from
Vesper's submissions, as opportunity, propensity and ability to enterprise.

Entrepreneurial Opportunity
57
Opportunity refers to the extent to which possibilities for new ventures exist and the
extent to which entrepreneurs have the leeway to influence their odds for success through
their own actions. Entrepreneurial opportunities tend to be higher in economies that are
deregulated, where market mechanisms operate freely, and where entrepreneurs have
to face very few barriers to entry. Thus, government policies and procedures affect the
business opportunity. The opportunity will influence an entrepreneur's propensity to
enterprise and ability to enterprise.

Entrepreneurial Propensity

A stream of research on entrepreneurship emphasizes the psychological and behavioural

characteristics of entrepreneurs. The most common of these are the high need for
achievement, capacity to innovate, internal locus of control, propensity for taking risks,
and other key entrepreneurial characteristics.

People that have an urge for excellence, willingness to take moderate risk, and desire to
be independent are very likely to become entrepreneurs. A study conducted in various
countries found ten behavioural characteristics of successful entrepreneurs. These
characteristics are opportunity seeking and initiative, persistence, risk taking, demand for
quality and efficiency, commitment to work, goal setting, information seeking, systematic
planning and monitoring, persuasion and networking, and independence and self-
confidence.

The literature on personal entrepreneurial competencies argues that people with certain
behavioural characteristics are able to perceive the opportunities available in the
environment, seize such opportunities, and then turn such opportunities into profitable
ventures. Yet, a personality or behavioural profile is not a sufficient condition for people
to go into business. An individual with high propensity to start a business is more likely
to go into business when he or she sees several business opportunities in the
environment. Furthermore, the propensity to enterprise will be enhanced when an
individual feels confident in his or her ability to enterprise.

Entrepreneurial Ability

Entrepreneurial ability refers to the sum of technical and business capabilities required to
start and manage a business. While "technical capability" refers to the technical skills,
"business capability" refers to the knowledge and skills in various functional aspects of
business such as business planning, product development, marketing, personnel
management, general management, accounting, finance, etc. Furthermore, as
entrepreneurs face resistance from customers, investors, and several other stakeholders,
they require some political and strategic planning skills in order to succeed in their

58
endeavours. Without having the ability to enterprise, entrepreneurs may not be able to
seize the opportunities available to them and successfully go through various start-up
activities or manage the on-going business. Individuals with the necessary ability to
enterprise, when combined with enhanced propensity to enterprise, will increase their
chances of going into business. And, once they are in business, they are most likely to
be the winners.

A crucial requirement in the process of new venture creation is a match between the
opportunity, the propensity to enterprise, and the ability to enterprise. While the
opportunity may enhance one's propensity to enterprise, persons with high propensity to
enterprise will perhaps be able to identify the opportunities in the environment. Similarly,
ability to enterprise may depend upon the nature of available opportunities. Some people
may have high engineering skills but the opportunity for the use of such skills may be
low. Persons with a high ability to enterprise may also be more able to locate opportunities
than those with lower ability to enterprise. The likelihood to enterprise increases with an
increase in the propensity and ability to enterprise and a match with available
opportunities. Thus, a high level of opportunity, propensity to enterprise, and ability to
enterprise will positively correlate with an individual's likelihood to enterprise.

There is a relationship between opportunity, propensity to enterprise, and ability to

enterprise. The process of developing competent entrepreneurs and increasing their
likelihood to enterprise consists of developing plentiful business opportunities in the
environment, enhancing people's propensity to enterprise, and developing their capability
to enterprise. Competent entrepreneurs will be able to take advantage of most
opportunities and respond to the needs of the environments.

A key role of the entrepreneurial environment is to help entrepreneurs develop both

propensity to enterprise and ability to enterprise. Persons with low propensity to
enterprise lack the necessary motivation and mind-set required to start a business,
whereas persons with low ability to enterprise lack the skills needed to manage the start-
up and subsequent processes of business operation.

The foregoing discussion suggests that the importance of each dimension of the
environmental factors varies depending upon the availability of opportunities for business
start-up and the overall level of propensity and ability of people to start an enterprise.
Each aspect of environmental condition is related to a specific aspect of the core elements
of new venture creation. Generally, the availability of opportunities is a primary element
for enhancing the propensity and ability to enterprise and consequently the likelihood to
enterprise. The dimension of the environment that directly relates to the opportunity is
macroeconomic policies and procedures. The better the legal and institutional framework

59
for efficient functioning of the markets and the fewer the barriers that constrain people
to pursue business opportunities, the greater the likelihood of business start-up.

The dimension of the environment that relates to the propensity to enterprise is

socioeconomic factors. The greater the importance placed by the society on
entrepreneurial values and behaviours, the larger the proportion of experienced
entrepreneurs and role models, and the higher the societal recognition of entrepreneurial
performance, the more likely that the propensity to enterprise is high.

The dimension of the environment that relates to the likelihood to enterprise is the level
of entrepreneurial and business skills. The greater the availability of technical and
business-related training, the greater the ability of the potential entrepreneurs to start
and manage a business. Thus, if people have a high propensity to enterprise but a low
ability to enterprise, environmental interventions will need to develop the entrepreneurial
and business skills of these people. Conversely, if people have high ability to enterprise
but a low propensity to enterprise, environmental interventions needs to be oriented
towards making the socioeconomic conditions conducive for entrepreneurship.

As argued earlier, a person with high propensity to enterprise may enter into business;
yet the person is likely to fail either at the start-up stage or afterwards if he or she lacks
the ability to enterprise. Conversely, a person with high ability to enterprise but low
propensity to enterprise lacks adequate motivation to venture into business. Successful
entrepreneurship thus requires high levels of propensity and ability to enterprise.

The financial and non-financial assistance appear important only if the overall likelihood
to enterprise is high. Previous studies have shown that tax and other incentives were
important when people had higher motivation to go into business.

These elements of venture creation have important implications for public policy and for
the design and implementation of programmes to develop entrepreneurship. Generally,
the primary role of the government and other agencies is to increase opportunities, to
develop the motivation of potential entrepreneurs to go into business, and to enhance
potential entrepreneurs' ability to start a business. Government agencies that develop
entrepreneurial environments may be efficient in their work if they address the specific
elements of our model. The following points summarize the guidelines for formulating
public policy:

1. Governments can contribute to entrepreneurship by adopting policies and

procedures that provide a broader scope of opportunities to entrepreneurs.
Examples of possible interventions are the provision of laws and regulations to
protect entrepreneurial innovation such as patents and copyrights, liberal

60
 economic policy to let people freely exercise their entrepreneurial talents,
and minimum rules and regulations for entrepreneurs to follow so that the costs
of doing business can be minimized.

2. Governments whose countries have low propensity to enterprise but high ability
to enterprise could design policies and programs aimed at improving the
socioeconomic dimension of the environment. Short-term interventions could
include such programs as the best-entrepreneur-of-the-year award, provisions of
trade fairs, and similar activities that reward entrepreneurial activities and increase
overall societal awareness toward entrepreneurship. A possible long-term policy
approach is to introduce entrepreneurial values and thinking in the educational
system.

3. Governments whose countries have a low level of ability to enterprise but high
level of propensity to enterprise could try to develop policies and programs that
enhance the entrepreneurial and business skills of the potential entrepreneurs.
Examples of useful interventions are technical and vocational training, and short-
term entrepreneurship development courses and workshops aimed at enhancing
specific business skills.

4. Some caution is needed in offering broad-based financial assistance to potential

entrepreneurs in countries where propensity and ability to enterprise are low. If
the propensity and ability to enterprise are low, policies and programs should
also be directed to developing the propensity and ability to enterprise. This
is because despite the financial assistance, people with low propensity and ability
to enterprise may not venture into business or, even if they did, they may not be
able to manage the enterprise. The greater the likelihood to enterprise, the greater
the role of financial and non-financial assistance in creating new ventures.

Overall, the arguments above suggest that before developing specific policies and
programmes, governments could focus on analysis of the extent of the opportunity,
propensity to enterprise, and ability to enterprise, could identify weak areas, and then
formulate policies and programs to strengthen the weaker areas.

The arguments developed in this chapter suggest that similar relationships may exist
between environmental factors and performance of an individual entrepreneur, and that
a match between specific requirements of the entrepreneurs and environmental forces
would lead to greater likelihood of business start-up and success.

A major contribution of this chapter is that entrepreneurship can flourish if potential

entrepreneurs find opportunities in the environment, if environmental conditions motivate

61
entrepreneurs to take advantage of these opportunities, and if environmental conditions
enhance entrepreneurs' ability to start and manage a business. We have shown how the
framework of entrepreneurial environments and the model developed in this paper
provide a basis for studying entrepreneurial environments, for developing richer theories
in entrepreneurship, and for formulating public policy.

Finally, as Van de Yen (1993) argued, "the study of entrepreneurship is deficient if it

focuses exclusively on the characteristics and behaviours of individual entrepreneurs, on
the one hand, and if it treats the social, economic, and political factors influencing
entrepreneurship as external demographic statistics, on the other hand.

AHMADU BELLO UNIVERSITY (ABU), ZARIA, NIGERIA

CURRICULUM ON BUSINESS CREATION AND GROWTH

GENS 301: BUSINESS CREATION AND GROWTH

MODULE 1: CONCEPT OF BUSINESS AND NEW VALUE CREATION

1. Business Planning Process
Introduction/Definition of Concepts
A business is an activity or entity, normally engaged in the provision of products and or services,
for commercial gain, extending to non-Commercial organizations that may or may not be profit
oriented. This is irrespective of the size and autonomy. While, a plan is a statement of calculated
intention to organize effort and resource to achieve an outcome. This may or may not be in written
form, but essentially comprising explanations, justifications and relevant numerical and
financial statistical data.

Business plan therefore could be referred to as the activities and aims of any entity, individual,
group or organization with the purpose of converting efforts to results. It is a formal statement of
a set of business goals, the reasons why they are believed attainable, and the plan for reaching
those goals. It may also contain background information about the organization or team attempting
to reach those goals.

62
When the existing business is to assume a major change or when planning a new venture, a 3 to 5
year business plan is required, since investors will look for their returns within that
timeframe. Invariably, the business plan simply serves as the detailed map of the venture that will
guarantee a steady start up, a steady but gradual growth and vitality of the business.

The process of determining all the goals, strategies and projected actions that you intend taking
to promote and ensure the survival and progress of your business within a given time frame
is referred to as business planning process. This characteristically has two key aspects, one
focused on making profits and the other focused on dealing with risks that might negatively impact
the business. Business plan serves as a blueprint to guide the organization’s policies and strategies
which are continually modified as conditions change and new opportunities or threats appear.
If this is prepared for external audience like lenders and prospective investors; it has to
include details of the past, the present, and a forecasted performance of the business. Typically,
this also contains pro-forma balance sheet, income and cash flow statements to show how the
required fund shall positively affect the financial position of the business.

Business Planning Process:

There are five required steps to create a new business plan. It is a detailed process here referred to
as business planning process. These steps are:
Research: Business planning process starts with a detailed research into the industry, its
customers, competitors, and costs of the business.

Strategize: A good major source of strategizing is to watch the current practices in that business
environment to have a foundation to build the necessary competitive distinctiveness.

Calculate: It is essential to calculate and have a rough draft of the financial implications
in terms of the expected expenditure and revenues to ascertain a possible profitability at
the end of the day.

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Draft: The fourth step of a business planning process is to begin to draft and flesh up the
background work made in the decided strategy and the financial calculations for the actual business
plan detailed content.

Revisitation and Proof-reading to finalize: The fifth step is to revisit the entire business plan details
and reconsider any ambiguity or inappropriate wordings and ideas featuring in the plan.

Typical Structure for a Business Plan for a Start up Venture

There is no fixed content for a business plan. Rather the content and format of the business plan is
determined by the goals and audience of that enterprise. Some entrepreneurs simply see a
business plan representing all aspects of business planning process that include only the vision
and strategy with sub-plans to cover marketing, finance, operations, human resources as well
as a legal plan when required. To some others, it has to be more detailed than that. It has to
typically include an introduction/overview, a short description of the business idea and
opportunity, what makes it different, who will be involved in the business, how you will provide
your product or service, your marketing and sales strategy and financial situations and forecasts
for the expected profitability. Consequently, it is essential to know that the structure of business
plans varies. However, a typical structure for a business plan for a start up venture will contain the
following:
Executive Summary: This is the general overview of the entire business. It is a summary of the
business idea, the mission statement, a sketchy report of where your business fits in the
market place and why it will succeed. Questions that have to be answered here include:

What is the business?

What is the market?
What is the potential for the business?
What are the forecast profit figures?
What are the Funding requirements?
What are the prospects for investors and lender?

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Business Description: This is a detailed description of the business, with an in-depth explanation
of the product or service being planned for the market and its benefits to those who will buy or use
it.

Business Environment Analysis: This should explain the detailed strategy and tactics to
be employed for bringing the product or service to the market. Strategy is the broad approach to
the achievement of objectives while tactics refer to the details of the strategy. This includes the
business name, the image and how they will be protected.

• Determines how to get to the market?

• Summarizes how to fulfil the entrepreneur’s objectives.
• The detail will be contained in programmes and budgets.
• the pricing structure to be established.
• the estimated sales projections.

Market Analysis: This should thoroughly describe the customers, your competitors, the need for
your product or service, and the health and vitality of the market place. This cannot be guess work.
It must be based on a careful and reliable research. Other key questions it must answer are:
• What is the size and growth rate of the market?
• How is the market segmented?
• What is special about the product or service?
• What are the competitive advantages?
• What is the marketing strategy?

Marketing Plan: The marketing has to be adequately planned for and must include the:

• Market research
• Segmentation and targeting
• Detailed outline of the product or service
• Unique selling points
• Chosen pricing strategy

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• Promotional plans
• Distribution strategy
• Customer service strategy

Operations Plan: Operations plan include the production process which must be explicitly
explained. The process of bringing your product or service to the market, office space, production
schedules, inventories, suppliers, supplies, official licenses, and insurance, meeting and existing
business regulations must all be thoroughly discussed. The following may also be included
depending on the type of business.

• Physical location
• Facilities
• Equipment
• Scale & location of operations
• Capacity - potential and effective
• ICT strategy
• Engineering and design support
• Materials required
• Inventory levels and stock control plans
• Purchasing arrangements
• Sources of supply of key resources
• Quality control plans
• Staffing requirements

Management and Organization: This explains the organizational structure of the enterprise
whether it will be sole proprietorship, partnership, Limited Liability Corporation, or other
status and those to be involved. Others are:
• Details of senior management
• Corporate governance
• Staffing requirements
• Key personnel

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• Recruitment and selection
• Training
• Rewards (financial & non-financial)
• Labour relations
• Employment and related costs

Financial Plan: This offers the idea about the finances to be involved. The available amount, the
required amount and how and where you will secure the difference. It should also be able to give
the investment appraisal – payback and discounted cash flow as well as break even analysis. Other
expectations from the plan are:

• Details of capital required and uses

• The plan must include details of the external finance required. This will be equal to the
finance required, less the finance raised internally from existing owners and from
operations
• The plan will outline how it is proposed to raise the finance
• Sources of finance: Short, medium and long term; Debt vs. equity
• Evaluation criteria for performance review
• Ratio analysis: net profit margin, Gross profit margin, return on capital employed,
liquidity and solvency analysis

Effective business planning has to begin with an honest and realistic appraisal of the
current position of the business.

Reasons for a Business Plan: Planning about your business is a necessary process to undertake
before, during and after start up. A business plan serves as:

Road Map/Guide For The Business: It is not everyone that starts a business with a plan
but it is better to have one to guide one. It guides the entrepreneur through the various phases
of his business. Note that it is not a static document that you write once and put away. It should be

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simply taken as a guide or checklist of questions that constantly need to be attended to at every
stage of gestation, growth, maturity and decline of the business.

Assurance of potentiality: The headings in a business plan will reassure all that the venture will
work. The plan helps to clarify the entrepreneurs thinking and demonstrates his commitment to
carry on as planned. It also identifies where he/she intends to get to and how to get there. This will
also convince them that the tools, talent and team to make your plan work are already available.

Define a Business: It helps to identify the business, its objectives/goals and programmes that must
be achieved.

Serves as Résumé for the Business: This happens when there is the need for communications to
attract more investments, loans and profit potentials of the business. Regular Business Review and
Course Corrections: The business plan is your regular reference to ensure you stay focused on its
objectives. It will need to be constantly reviewed as the business develops.

Review Current Progress against the Initial Forecast: The progress of the business shall easily be
feasible against the earlier forecasts. This makes any review or necessary adjustments to get it back
on track possible.

Support for a Loan Application or Raise Equity Funding: Whenever a business is seeking fund
from a bankers, venture capitalist or investor, a comprehensive business plan that is clear,
focused, realistic and contains sound business reasoning shall be a necessary requirement to show
that it is worthy of financial support.

Defines Agreements Between Partners: It helps to define agreements, shares, etc between
partners, shareholders and other stakeholders in the business.

Proper Allocation of Resources: It helps to allocate resources properly, handle unforeseen

complications and thereby assist in making adequate business decisions.

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Sets a Value on a Business for Sale or other Legal Purposes: Whenever the business is
placed on sale, it helps to set a value for it. This is also required at most times for legal purposes.

Start Up Decision - What Motivates People to Begin New Businesses

A. Introduction/Definition of Concepts It is worthy of note to consider what motivates people

to begin new businesses particularly when one reflects on what it takes to start a new one
in the Nigerian environment. It should be understood that new businesses are not created by
accident, but clearly intentional. Entrepreneurs are driven by challenges which they pursue and
overpower. These challenges in Nigeria include the fears of funding, hardworking, complete
failure and universal delayed profit in the stabilizing years.

Factors that Motivate People to Begin New Businesses

Joblessness
Financial Ambition
Desire to Control the Economy
Desire to pursue a business idea
Advantage of an opportunity in the market
Inherited Family Business
Desire to be their own boss
Replicating a Business Idea found in another Environment
Frustration with low Pay
Preference for a Smaller Company Environment
Lack of opportunity in previous employer
The desire "to make things improve the world"
Invite to begin someone else's business
Maintain own ethical values which their employer did not share
Desire to be involved in operations
Exposure to Some Available Fund
Spirit of returning to the society
Life after Retirement
Favourable Government Policies and Procedures

Opportunity Search and Identification

Introduction/definition of concepts
Opportunity is a perceived means of generating incomes that previously have not been exploited
and are not currently being exploited by others. Opportunity identification can, in turn, be defined

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as the cognitive process or processes through which individuals conclude that they have identified
an opportunity. It is essentially a situation in which new goods, raw materials, markets and
organizational strategies can be introduced through the formation of new means, ends or means-
ends relationships.

BUSINESS OPPORTUNITY IDENTIFICATION PROCESS

Most entrepreneurs searching for new business ideas fundamentally consider three central issues.
The main one is the potential economic value. He first considers if the venture has the capacity to
generate profit. The second is the newness of such a venture. He / She will prefer products, services
or technology that does not previously exist in that environment. The third is the perceived
desirability whether their product has the moral or legal acceptability in that environment.

The Stages of Opportunity Identification process.

Opportunity identification is the collection of three main factors, which are the entrepreneur’s
background, the business influence and the general business environment. Opportunity
identification has five stages that lead to ‘recognition’. The five stages are discussed in
relationship with the process of opportunity identification. These stages are:
a. Preparation
b. Incubation
c. Insight
d. Evaluation
e. Elaboration

Types of Opportunity
The main purpose of any type of opportunity is to strategize to achieve appropriate search. In other
words, appropriate searching strategies are a function of the type of opportunity. Business search
opportunities could be classified into three types, these are the:
i. recognized type
ii. discovered type
iii. created/enacted type

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Each of this type of opportunity is associated with a certain level of uncertainty. These are low
uncertainty for recognition opportunity, moderate uncertainty for discovery opportunity and
ultimate uncertainty for created/enacted opportunity.

Recognition Type: Entrepreneurial alertness attitude enables recognition because the

entrepreneur will be very sensitive and alert to information available in his/her environment.
Recognition type is characterized by several other factors such as the background of the
entrepreneur, the influence of the business and its general environment. This type of opportunity
has to do with the exploitation of the existing markets where both sources of supply and demand
that exist are recognized and brought together. Opportunity recognition occurs under condition of
near certainty. This low uncertainty or near certainty opportunity in recognition type is referred to
as analysis inducing.
Discovered Type: In this type of opportunity, when only the demand exists, but supply does not,
and vice versa, then the non-existent side has to be discovered. This type of opportunity has to do
with the exploration of existing and latent markets. For the discovered type opportunities to occur,
a purposeful search is necessary. The entrepreneurs of the discovery type narrowed their
search to areas where they had specific prior knowledge and they basically do not rely on
alertness. An example is demand exists for ‘Published texts in entrepreneur education in
Nigeria’ while the supply has to be discovered. Another example is the existence of supply
for ‘application of computers in Nigerian rural schools,’ demand has to be discovered. As earlier
mentioned, with opportunity discovery the uncertainty level is moderate. With this moderate
uncertainty task, the discovery opportunity is known as quasi-rationality inducing.
Creation/Enactment Type: This type of opportunity is based on the principle of enactment
where the entrepreneur creates new means and new ends by using effectual reasoning. This
reasoning includes three types of means. The entrepreneur themselves, prior knowledge and
experience, whom they know especially in the social, religious and professional sector. In this
type of opportunity, the supply and demand will not apparently exist; one or both of them have to
be created. This demands that several economic inventions like marketing, financing and others
have to be created for the opportunity to exist.

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This opportunity exploits principally the creation of new markets. Creation or enactment
opportunity is associated with true or ultimate uncertainty. This high uncertainty task in
opportunity creation can be recognized as intuition-inducing.
Factors that Influence Business Opportunity Identification

There are five factors that influence identification of opportunities. These are:
a. Entrepreneurial Alertness
b. Prior Knowledge
c. Discovery versus Purposeful Search
d. Networking versus Solo Entrepreneur
e. Creativity
f. Entrepreneurial Alertness Factor

This is a predisposition to observe and be responsive to information about objects, incidents, and
patterns of behaviour in the environment, with special sensitivity to maker and user problems,
unmet needs and interests, and novel combinations of resources. This is usually preceded by a
position of enthusiastic awareness of information. Entrepreneurs constantly search about for
opportunities that have been overlooked before then but unfortunately not all that have
entrepreneurial alertness become successful entrepreneurs. Opportunity identification is only an
indispensable stage of a process in initiating a new successful business.

Prior Knowledge Factor

People tend to discover opportunities from the information that is related to the information
they already know. Prior knowledge and experience are the primary source of searching for
opportunities. Entrepreneurs narrowed their search to areas where they had specific prior
knowledge. Prior knowledge triggers identification of the value of new information.

Discovery versus Purposeful Search Factor

Some entrepreneurs absolutely believe that opportunity identification has to be through a
purposeful search for opportunities while others believe that opportunity is something that had
been readily available and overlooked but now discovered accidentally.

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Networking versus Solo Entrepreneurship Factor
Entrepreneurs’ network is vital in opportunity identification. The main contribution of network to
identifying potential venture opportunities is from information gathered from social exchange of
ideas. People with widespread networks discover more pungent opportunities than those
businessmen who do not have social networks. There are three categories of opportunity
recognition attitudes from social networks. These are the solo, the network and the informal
categories. The solo entrepreneur category has a very creative, opportunistic and distinctive
alertness attitude. They develop business ideas on their own with the belief that new opportunities
which is claimed to be theirs alone, come naturally. Network entrepreneurs obtain their ideas from
their social networks. Entrepreneurs with informal attitudes get their ideas when relaxed.

Creativity Factor
Most successful entrepreneurs identify opportunities that others do not see due to the special
creativity attribute they possess. These creative attributes has a lot to do in business decision
making and therefore very significant in opportunity- identification process. Hence creative
entrepreneurship is described as the accomplishment of original useful ideas to start a new
business to product and service delivery level.

Opportunities from SWOT Analysis

Some opportunities are sometimes identified while the entrepreneur is having his or her self
assessment in terms of strength, weakness, opportunities and threats universally referred to as
SWOT. SWOT Analysis is a useful self-appraisal system for your strengths and weaknesses that
help establish your business or develop your business by exploiting your abilities, talents and
opportunities. It is frequently used to understand, underline and identify the opportunities open to
you and the threats you are likely to encounter. SWOT Analysis could also be that initial self
appraisal of the ability of the business opportunity to start and survive.

To use SWOT Analysis, one should understand that Strengths and weaknesses are internal to your
organization while opportunities and threats generally relate to external factors. Hence SWOT
analysis is often described as internal/external analysis.

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Strengths:
Your strengths should be perceived from both an internal position, and from the judgment
of the customers and others in the market. You should also be realistic and a list of your
company's characteristics of the business or project team that give it an advantage over others
should help. In the study of your strengths, consider them with your competitors in mind. The
situation where your competitors manufacture good products, but of less quality packaging
to yours; your own strength will be quality packaging. However, quality product remains a
necessity and therefore a weakness and a threat to your own product. Such strengths could be
economical, availability of adequate funding, abundant raw materials, etc.
Weaknesses:
Your weaknesses are your limitations that characteristically place you or the team at a disadvantage
when compared with others. You are aware of your own weaknesses than any other. It is a time
to be truthful to yourself by asking yourself some unpleasant questions and answers about
your weaknesses. Like your strength, this should also be considered from an internal and external
pedestal. Such weaknesses in Business SWOT Analysis (BSA) are poor funding, unconducive
location, inadequate infrastructure, outdated and poor equipment, poor staffing, while
poor comportment, restlessness, drunkenness, low education, irresponsible
attitudes, unwarranted socializing, reckless financial management, lack of skill
and general ineptitude are mostly the weaknesses in Personal SWOT Analysis (PSA).
Constant survey of the market and your competitors’ progress should be done to inform you of
your weakness.

Opportunities
Opportunities are external chances for accomplishing the goals and objectives of the venture.
These objectives may be to improve productions and achieve better profits in the market or to start
up a new business from emergence to survival. In considering opportunities, it is best to search
your strengths for possible business or development opportunities. Another tactic is to search
your weaknesses for possible reduction of your weaknesses to identify and explore
opportunities from them. Such opportunities may open up from associations, connections and

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affiliations in ones religious, political group, family especially inheritance and an acquired
experience by the entrepreneur.

Threats:
This refers to external factors usually outside the control of person or persons in the market
environment that could impede the business or the entrepreneur from achieving the expected
goals and objectives. These external factors include unpleasant environment, new
government regulations, technological upgrades in the industry, Government support for local
production of cassava – a major drug component and the ban on imported drugs.

Legal Issues at Start Up

A. Introduction/Definition Of Concepts
Starting a business venture can be a difficult task involving many important decisions, but it is
highly exciting that the business idea is taking shape with every decision ready for takeoff. The
right legal structure that will suit ones particular type of business or circumstances and ambitions
should be considered. This will reduce unknown legal issues and thereby save money and negative
images. In conclusion, Start-up must make provisions for legal expenses right from the onset to
avoid significant legal problems later.

LEGAL FORMALITIES FOR BUSINESS START UP

Legal issues at start up involves dealing with setting up the business entity, business name and
trademark registrations, labour and employment issues, intellectual property and vendor
contracts among others. Four major legal issues that should be attended to are:

Address legal restrictions/Limits:

There are some Legal restrictions by the Federal and State Governments which have
regulations for the establishment of businesses in Nigeria. Business operation permits and licenses
are obtained for the establishment of businesses, business name permit, their premises, their
operations, their materials and even the quality of their products. You have to fill and file
certain forms with the Corporate Affairs Commission (CAC); the autonomous body responsible
for regulating the formation and management of companies in Nigeria. Besides the

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Corporate Affairs Commission (CAC), some common Government agencies involved in business
start up are Standard Organization of Nigeria (SON), Nigerian Copyright Council, National
Agency for Food and Drug Control (NAFDAC) etc.

Choose a Business Entity Type

There are several corporate structures in the Nigerian business registration system which includes
sole proprietorships, partnerships, Limited Liability Corporation and Corporations. The business
structure one chooses depends on some number of factors. These consist of the number of business
partners to be accommodated in the business, the number of employees, the amount of personal
liability for business debts one can afford and how one would like to be taxed among several
others. It is best to contact an experienced business lawyer. Each of these types of business entity
has its strengths and weaknesses. Some of them are:

Sole Proprietorship:
A sole proprietorship lets the entrepreneur/proprietor/business owner to have full control over the
business. It is therefore easy and cheap to start and run. For sole proprietorships and partnerships,
the core strength is that income is only taxed once – as personal income. The weaknesses
are that there is no protection for liability in a sole proprietorship while there is limited ability to
raise capital. There is lack of continuity or transferability whenever the proprietor has problem
with the venture.
Partnership:
Partnerships have few formal requirements making them inexpensive to run in comparison to
corporations. In this business entity, not only is there no protection for the corporation, but also
the one partner could be liable for the unscrupulous acts of another. It has tax advantages while
management flexibility is high. It is also easy and cheap to start. There is also no limit of liability
for partners. Just like sole proprietorship, there is Lack of continuity/ or transferability while
the ability to raise capital is unlimited.
Limited Liability Corporation:
Limited Liability Corporations are created and controlled by an operating agreement
which is a complex contract. Like corporation, limited liability company entity reduces personal

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liabilities. It has some tax advantages as well as continuity or transferability. It has greater ability
to raise capital while its management flexibility is higher.
Corporations:
Corporation is the most common business entity that offers protection for its shareholders.
Its disadvantage is that income may be taxed twice, in the corporate and at individual levels.
Corporation has an advantage of having a clearly define structure where shareholders who
own the corporation, appoint officers to run the corporation and directors that oversee the
officers.

It has restricted liability continuity and transferability as well as greater ability to raise capital. Its
other weaknesses include more limited tax advantages that require additional filing, more
formalities while more expenses are required. It has a very marginal tax management flexibility.

Protect Intellectual property

However, there are several aspects of intellectual property that a start-up needs to put in proper
place. People often misconstrue the entire intellectual property for patents only. Patent is just the
main type of Intellectual Property for the protection of invention. Others aspects are trademarks
for the protection of logo while copyright for the protection of artistic, dramatic and literary works.
Shareholder's Agreement is another aspect of Intellectual property required to regulate the
relationship of shareholder in a company that has them. Company trademarks also include trade
names and trade dress like its colours. Companies need to register all their Intellectual Property
Rights from start up to protect their intellectual property marks and prevent litigations on
plagiarism at later stages.
Generating and Registering a Business/company name:
Finding a befitting business name could be an interesting aspect of legal issues at start up. It is
however required by the Government that this name is registered. Such a registration is to
guarantees that no other business can exploit that your trade name.

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It is essential to keep these characteristics of a business name at hand while choosing a
new one:
• It should be easily and proudly expressible.
• It should be easy to comprehend and spell.
• It has to be creative and imaginative. (Sound well)
• avoid common or generic names.
• It must clearly advertise your business ideas and represent all you do so that your
production line will not be limited.
• It should be distinctive and concise and without ambiguous words. consider the
generated name in an alphabetical list such as the yellow pages.

Checking the Company name and trademark

When your business name is submitted to the Corporate Affairs Commission (CAC),
the body will help you check if the proposed company name or trade mark is not already in
existence or similar to one earlier registered. This will be checked on their computer which has the
search facility (database) with the full list of registered businesses in Nigeria. Detailed checking
at the CAC is to confirm the registration of your intellectual property which no other
business in Nigeria can ever use again. It becomes the business link and marketing strategies
with your customers.

Develop Basic Legal Documents

After the registration of the business name and trademarks, the business can now develop its basic
legal documents and common forms needed. Purchase and services agreement that have to be
signed should be prepared for the customer. Apparently, the business has to employ staff to assist
run it. Employment legislation should be abided with by ensuring that employees receive their
terms and conditions of service document, not too long upon assumption of duty. Company
policies and procedure in respect of staff health, safety and general welfare should be documented,
and be handed over to them on employment. There should be a general employment manual while
agreement forms should also be prepared. Business companies are required to file an annual
return with the Corporate Affairs Commission (CAC). This may include the company account
depending on the type of entity and the annual turnover.

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Feasibility Analysis of New Ventures and New Venture Financing
Introduction/definition of concepts
Feasibility analysis is a comprehensive research study required by the entrepreneur or his agent to
determine the practicability, profitability and viability of the business idea. Before jumping into a
start up business, expanding an existing one or even acquiring an existing one, it is very necessary
to analyze the feasibility of that business. For whatever purpose, the main task of feasibility
analysis is to express the model of the business and its marketability; check its prospect for
financial profitability and success; and convey the managing group’s capability to implement
and accomplish the business objectives. The main concern and tool of feasibility analysis are the
necessary expenditure and the profit to be accomplished. This means it is all about finance.

Reasons for Feasibility Analysis

Feasibility analysis is all about questioning your concept, ascertaining which components are in
place to make it realistic to easily execute and recognizing the biggest obstacles you're likely to
face.

Feasibility analysis mainly assists to:

Appraise the business marketplace for the new business idea; assess if the Managing team have
the personality generally known with successful business persons. In this wise, an ingenious
suitable feasibility analysis will supply the historical setting of the business, describe the products
and services, the account/financial profile/data, information on its operations as well as
management, marketing research and strategy, including legal necessities.

HOW TO WRITE A FEASIBILITY ANALYSIS REPORT

A feasibility analysis report for a start up business can be a simple or complex exercise, depending
on the type of business. The best approach is to first determine what the entrepreneur requires it
for and what interests him/her. However, in writing a business feasibility report the write up should
be creatively kept simple, clear and concise, straight to the facts and figures, evidences laden and
stylishly assertive.

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Template and Structure for a Feasibility Analysis Report
a. Proposing Entrepreneurs’ Profile:
b. Team Members Names:
c. e-mail addresses:
d. GSM Telephone Members:
e. Positions of Team members in the Business:
f. Postal and Residential Addresses:
g. Educational Qualifications:

Business Name: This indicates the type of registration, whether a sole proprietorship,
partnership, corporation or limited liability venture. Please note that a public limited liability
company carries the “Plc” after the name or the “Ltd” when proposed as a private limited company.
Business Location Headquarters and Branches: A good description of the possible headquarters
location of the company, its branches and facilities including offices and manufacturing
plant. The report needs to specify the required size of the location, its adequacy and the costs to be
involved in acquiring, constructing or renovating buildings and required utilities that will
suit their operations. The proposed location should have adequate access to infrastructure and
services like highways, railway, airport and other utilities in relation to customers.
Background History of the Business: This refers to the business overview and should
briefly describe the proposed business. It should be specifically spelt out how it shall be organized
and a proposed aspiration of the venture to be a small company forever or to be developed
into an international standard later.
Business Objective: It describes the main concept and the essence of the business. The main
objectives usually put forward by most entrepreneurs are the generation of income, provision of
jobs for the youth, improving the economic status of the business location and setting new
standards or products in the business environment.
Required Technical skills: This section assesses the technical and professional readiness of
the business. A business can only be considered technically and operationally feasible if it has
the necessary expertise, infrastructure and capital to develop, install, operate and maintain
the proposed venture, and be able to deliver the proposed goods or services at a profit.

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Proposed financial Contributions (Capitalization): A start up business requires a lot of fund to
provide sufficient access to resources. Most businesses die prematurely for the primary reason
of under-capitalization. Financial provisions from all proposed sources of funding the business
must be ensured to keep the business running from start up until it starts to make profits and
breakeven.
Management and its Strategy: This section should spell out the organizational structure
appropriate for the business and decide whether management would run the business by direct
labour, contract, consultancy, etc.
Sources of finance at Start up: The report is supposed to give details of capital fund required and
to enumerate the various sources of raising capital to sustain the business for the first one year. It
should identify the short, medium and long term sources of funding.
Production and operational requirements: Operations must define the production and other
operational processes necessary to deliver the products and services from pre-production
level to the market environment. These include manufacturing, consulting, logistics, after-sales
service, travel and transportations, printing, etc. This section delineates how to run the business
and deliver the products and services to the market.
Market Potential Assessment and Strategy: This is essentially all about distribution and sales
strategy. Product or service businesses are considered feasible based only on evidences that
it has sufficient market demand. This means that it must have enough customers to purchase a
sufficient quantity of products or services in the target location and provide the strong potential
that the product or service will return pleasant profit figures.

The report has to decide the distribution channel whether the marketing strategy ought to
adopt the cash-and-carry, direct sales, credit sales, wholesale outlet, commission agents or
middlemen structure or the combination of the arrangements.
Financial Assessments and Projections: The main essence of the financial assessment and
projections is to determine whether the business is financially feasible or not. This is a vital
aspect of the entire feasibility report. This financial appraisal also entails the payback and
discounted cash flow as well as break even analysis. It offers the expected expenses and incomes
of the business including the sales and advertising projections as well as how long it will take the
business to break even. It should also be able to predict the total start-up costs required to

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begin operations right through the cost of land and buildings, plants and equipment,
legal costs, accounting costs, day-to-day running costs, wages, rent, utilities, interest payments on
debts, etc. All these will eventually be weighed against the business’s projected revenue on weekly,
monthly, and or annual/bi-annual basis to determine the projected profit or loss of the business.
Growth and the break-even period: A business must have a lifecycle. The start up stage is always
the planning and takes off period. All resources are put into it to ensure its birth and survival in the
market. The feasibility report should be able to predict the timing of the various growth stages
especially the break even, peak period in the life cycle of the product and the revenue dropping
period. An average feasible start up business ought not to aim longer than 18 months to break
even, depending on its type.
Re-investment Policy: The feasibility report would need to find out the current status of the
business, examine the up to date developmental programme of the business and be able to
predict how the business should be in the future.
Risk analysis: Risks especially the financial one is a major consideration for any business. The
feasibility analysis ought to envisage and prepare for risks which sometimes could be major. These
major risks could be in the organization, competitive, regulatory, etc sectors associated with the
business. It must also be able to calculate how to alleviate such possible risks. Some entrepreneurs
insure their entire system including staff and equipment.

Conclusions and Recommendations: When it has been decided to establish a business entity the
business feasibility analysis must after all consideration conclude whether the business is viable,
promising and gainful. This is to guide the entrepreneurs to go ahead with it or start
thinking of another business. Feasibility analysis must also show when is the best time for the
business to start for a rapid generation of income, its maturity time, its decline and possible
natural death time.

Other Feasibility Considerations

They assess certain specifics when there is a challenge in a particular identified section
of the business. These depend on the section but they are:
i. Economic feasibility

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Economic analysis commonly known as cost-benefit analysis is the most frequent
approach for evaluating the effectiveness of a business by determining the benefits
and savings expected from it after comparing them with costs. It is crucial to
objectively weigh the cost against the benefits before going ahead with the start up.
The benefits must outweigh the costs, if it is viable.
ii. Legal feasibility
This is to investigate and ensure that the proposed business conforms with all legal
prerequisites. All registrations are already done with the various Government and
professional bodies. They all depend on the type of business.
iii. Operational feasibility
Operational feasibility assesses how competently the proposed business gets to the
bottom of challenges and exploits all the opportunities earlier noted during capacity
description. It also checks how the business complies with the necessities
established in the requirements analysis part of the business development .
iv. Schedule feasibility
Schedule feasibility is a appraisal to determine how suitable the business take off
timetable is. It considers the available technical skills, how realistic the business
deadlines are, how compulsory and considered necessary are those time limits.
Some businesses may require certain time span to develop and mature, to be
viable. For example a few months time limit for a Cocoa plantation business is
unrealistic when it is obvious that it will require some years to start yielding. It
however becomes a highly rewarding at pay off subsequently.
v. Resource feasibility
Resource feasibility entails examining and determining the availability of the type and
amount of required resources for the business start up. Such resources include the time/period
available, its dependencies, its interferences with other operations, etc
Financial feasibility: In a start up business, the financial feasibility tests the financial viability
of the proposed business based on the total estimated cost of the business, financing format
like the intended capital configuration, debt equity ratio and promoter's share
of total cost, existing investment by the promoter in other businesses and the expected
cost–benefit analysis

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New Venture Financing Start up businesses are usually much easier to finance and source fund for
than established businesses because they have the potential to grow rapidly with limited resources
of fund, land and labour. Funding such start up businesses provide the opportunity for providing a
progressing chain of financing. This fund sources leads from one link to the other at a particular
time from gestation stage to maturity. See the diagram on page. These funding sources are arranged
below in progressively required.
Founders, Friends & Family or Bootstrapping Phase
Business Angels
Venture Capital (VC)
Initial Public Offering (IPO)
Founders, Friends and Family
The most simple and familiar method used to raise capital funds for a start up business is
through you as founders, family and friends often referred to as the “3Fs”. It is a group that could
be interested in investing in your ideas due to your time-honored personal relationship with them.
Despite the possible substantial danger inherent in such with mixing personal relationships with
business, they are not likely to be interested in the details of your idea as other business financiers.
A similar means of self-funding a business by limiting or avoiding outside investment or running
a business venture on a shoestring financial plan is bootstrapping. This is a means of funding a
small scale business with highly creative attainment and exploit of all available resources without
elicit borrowing money from any bank or other finance houses. It strictly rely greatly on internally
generated earnings, credit cards, second mortgages, and customer advances and other few
sources. It provides the main strategy of positioning an operating venture to seek equity
capital from external investors later.

Angel Financing
Some individuals who invest their money in business ventures for high financial profits better than
what they can get from banks and other investments are Angels doing angel financing. They are
majorly motivated to offer this second round financing by the profit in it usually calculated in
percentages. The business of angel investing is becoming very lucrative in Nigeria not just for
businesses but to other people in financial stress. For start-ups, angels are usually ready to grant

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the required finances before incomes and administrative supports. Some of them are well known
while others are not, but they are mostly professionals who have made their money in their
businesses. These include engineers, lawyers, medical doctors, company executives, public
servants, academicians, entrepreneurs, etc. They sometimes willingly take the risk to have a slice
in your business that could hopefully become big in future. Affiliated and non-affiliated are the
two types of angels known. An affiliated angel has some sort of contact with you and or your
business but not necessarily related to you. With this familiarity, it is advisable to approach the
affiliated angel since he will be interested in your affairs. However, a non-affiliated angel has no
association with either you or your business. They are both more accommodating than banks and
other financial sources to tap the ingenuity of start-up businesses. They play very contributive roles
in finance, knowledge and other supports.

Venture Capital Financing

Some investors are interested in financing early stage and more risk-oriented ventures by
offering seed funding to early-stage businesses with high potential growth ventures for high
profit generation. Known as venture investors, they are often not interested in innovations and
high-tech developments and to be the first investor for start up businesses.

Initial Public Offering (IPO) or mergers & acquisitions (M&A) Initial public offering (IPO) or
merger and acquisitions (M&A) or the stock market is the first sale of stock by a small or large
scale company to the public to raise expansion capitals and become a publicly traded enterprise. It
allows a company to source for capitals from a wide pool of investors for growth and debt
repayment. This first fund from the shares goes directly to the Company while further trade of
shares on the stock market has to pass between investors. A company selling common shares is
never required to repay the capital to investors. This financing source was first employed by the
Dutch East Indian Company to issue stocks and bonds in an initial public offering. A company
proposing this funding source will through the assistance of an investment bank as underwriters
help to correctly assess their shares price.

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MODULE: 2 THEORIES OF GROWTH: AN OVERVIEW
Entrepreneurship is recognized as the engine of economic growth and poverty reduction
worldwide. 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.
Thus, managers and owners are expected to design and implement effective strategies to ensure
the survival and growth of businesses.

Concept of Business Growth

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 opportunities

In explaining the pattern of business growth, many theories rely on “The life-cycle approach. This
approach posits that just as humans pass through stages of physiological and psychological
development from infancy to adulthood, businesses also evolve in predictable ways and
encounter similar problems in their growth” (Bhidé, 2000). It is proposed that businesses pass
though infancy, growth, maturity and then decline or even close shop. The question is why do
some businesses survive and grow while others do not.

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Reason for Business growth
Conventionally, people ascribe businesses success or failures to fate/chance or certain
environmental conditions including family background. Even though one could not entirely rule
out the influence of changes in the environmental factors, the entrepreneur's positive attitude,
discipline, skills, competences, resilience and experience are real factors determining the
transition of an enterprise from start up to a fully grown or diversifies venture.

The question often asked is what motivates people commit to starting and growing their
businesses. Usually, entrepreneurs tend to make critical investments, take acceptable risks and
learn consistently because of their desire to make money and enjoy all the rights and privileges
that come along with wealth. Other reasons include improved social status and well being, greater
opportunity for philanthropy and community services, and gaining control over their own destiny.
Employees attribute increase in income/ benefits and advancement with businesses that grow.
Thus, it is in the best interest of business owners and other stakeholders in the society for
businesses to grow and flourish because growth tends to create social and economic value for all.

Any increase in the activities of small enterprises will lead to corresponding increase in
employment. As employments are created, the increase productivity raises the level of wealth
creation in a given economic environment. This is why the productiveness of an economy is
related to increasing income and improving standards of living. Businesses combine human and
material resources to create value. So, as activities of enterprises increase due to increase in
labour productivity and efficient use of resources, all things being equal lead to high wages
for individual worker, more profit for the company and rise in GDP for the nation. When
productivity is higher, cost of production tends to be lower. With lower cost of production, citizens
obtain products cheaper and these, in turn, increase living standards.

Types of Business Growth

There are two main types of business growth:
1. Internal Growth and
2. External Growth

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1. Internal growth: Internal growth is typically a steady process of expansion from within the
firm. The owner(s) of the business contribute more capital, or plough back profits into the
business to acquire new assets, employ more staff, build additional plant or deploy new
technology. The main advantage of this approach is that the business is able to leverage its assets
and experience over time. The main disadvantage is that it takes time, and rivals may be
expanding and gaining competitive advantage as well. NASCO Nigeria plc used this approach by
expanding into the production of detergents and carpets. Thus, through hard work and careful
planning owners can grow their businesses successfully.

2. External Growth: External growth can be carried out by seeking external finance, or by merger
and acquisition. These approaches tend to rely on bringing external resources into the business in
order to fund expansion. In this case, there is the possibility of changes in the ownership structure
of the firm.

Strategies for Growth

Business organizations must grow in order to remain relevant and competitive. A firm is required
to constantly search for and make use of knowledge of its changing market in order to identify and
exploit growth opportunities. Businesses tend to grow in order to deliver their products or services
better than competitors. But, the capacity of the firm to deliver resides in the range and quality
products or services offered to the customers, the skills and the service offered by the staff,
technical knowledge/ technology and customer/supplier relationships.

Therefore, entrepreneurs are expected to create an environment that will fit the growth agenda of
the firm. This entails continues assessment of structures, policies, procedures, systems, activities,
decisions making, coordination, and communication networks. All of these factors are vital to
achieving optimum growth. When a firm is better organized, there are a number of alternative
path for growth. They include:

1. Expanding Product Line or Service Offerings: A firm may increase its products offerings
by serving the existing market or discovering an entirely new market. This requires market

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research and intelligence to enable the firm gauge the acceptability of the new products to the
target market.
2. Opening new branches/division: In order to expand to new market, entrepreneurs make efforts
to set up branches in other locations. Opening new branches or divisions allows firms to
expand to new locations, other local governments or states with new or existing products
depending on market requirements. The key to creating and successfully operating in a
new location is to ensure that a demand already exists or the company is capable of stimulating
demand in the new target market.
3. Exporting: Today, markets, customer taste, competition and knowledge are global.
Regardless of the business one undertakes there are numerous opportunities for growth in the
international market. Unlike broadening domestically, expanding globally is likely to leverage
and re-enforce a company’s unique position and identity.
4. Innovation: Innovation is the greatest source of sustained growth. Innovation signifies
continuous change in the way a firm serves its customers or conducts its business. To be successful,
there is the need for a shift towards modernization and employing global good practices for
managing ventures. Sticking to traditional methods of operations whether in farms, shops or
factories no longer work. Entrepreneurs are required to drive change process that will create
unique value by tapping into the creative talents of members of the organization.
5. Creating and Maintaining Online Presence: Today’s world is divided not by ideology but by
technology. When a firm employs modern information and communication technology it gains an
edge over its competitors (Marco and Levien, 2004; Mitra, 2012). Instead of a firm setting up
branches physically within and outside national borders, it can reach global market using internet.
To be successful, a firm is expected to create and promote a website that is user friendly.
6. Franchising and Licensing: Franchising and licensing are used by companies that have
successful products or services in order to expand to other markets more efficiently. Franchising
is a growth strategy where a firm allows another firm or firms to use its successful business model.
When a business reaches certain level of maturity, it can franchise its product offerings. In this
case, a firm enters into a contractual relationship with other firms known as franchisees to conduct
business under the franchisor's trade name for a fee.

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Licensing however, is a contractual arrangement where a firm known as a licensor allows another
firm called licensee to use its brand name, patent, or other proprietary right, in exchange for a fee
or royalty. License agreement provides both firms to expand and drive mutual benefits. The
licensor benefits from the knowledge, technology, skills, assets and other competencies of the
licensee. It also allows the Licensor to enter foreign markets by using local firms. This
arrangement is popularly used by manufacturing firms such as pharmaceutical companies,
clothing, toys, technology based firms etc.

7. Merger and Acquisition: Formally the term “merger” applies to the consolidation of two or more
companies about equal in size. Acquisition involves a larger firm taking over smaller ones. The
two terms are however used interchangeably. Companies merge with or buy other companies to
expand or consolidate their operations. In many cases companies engaged in merger or acquisition
in order to get access to real estate or other facilities; to get access to brand, trademarks, patents or
technology and sometimes to get competent employees. But the most common reason is to acquire
customers (Selden and Colvin, 2003). The business could expand to other markets or produce more
products by merging with one or more firms that produces similar or different products.
8. Competition: In the global corporate scene, companies cannot afford to ignore the need to
collaborate with other companies or competitors to create new value. This is not to undermine
competition, but to allow firms to compete at one level and collaborate in another level with the
aim of taking advantage of new market, or developing new products which they could
otherwise not achieve independently. Also, firms collaborate to take advantage of foreign markets.
This form of alliance facilitates learning, access to modern technological advances and reduced
transition time. The computer and photographic film industry are good examples of how an active
alliance could help companies add superior value.

Challenges of Business Growth in Nigeria

It is well understood that Small Scale Enterprises (SMEs) are the most effective means of
generating employment and fostering growth. Typically, SMEs adapt with greater ease under
changing business conditions because of flexibility and low capital involved. In spite of their
resilience, small businesses encounter numerous challenges which limit their ability to grow.

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The problems of many of ventures in Nigeria remains lack of expansion, low technology and skills;
and limited capital. In fact, significant numbers of youth that have low skills are either unemployed
or are engaged in street hawking and road side petty trades because the ventures that are expected
to absorb them do not frequently grow. Thus, there is the need to carefully address the binding
constraints to growth of businesses in order to regenerate the economy. Some of the key challenges
are as follows:
1. Lack of coherent economic empowerment policy: There is yet to be a comprehensive long term
agenda for youth development which would draw momentum from reliable data bank for skilled
and unskilled; employed and unemployed youth in the country. There is almost total absence
of coordination among various agencies concern with employment generation in the country.
2. Technical constraints: Although there are few vocational and other skills acquisition centers
in the country, their number and competencies are inadequate to improve the technical capacity of
many Nigerians. Also, the technical skills provided are skewed towards low technology and low
skill trades.
3. Deteriorating economic condition: Due to weak economic policies that engender high inflation,
high interest and exchange rates couple with the smuggling of foreign cheap products into the
country, many people consider it extremely risky to invest in agri-business and manufacturing.
4. Lack of productive culture: People are accustomed to being dependent on parents, relative,
friends and government. Without social re-orientation, it will be difficult to free the enormous
talent and energies of people to think and act their way to financial independence.
5. Weak Investment climate:
 Low Access to finance: Even with the introduction of Micro Finance Banks and the
consolidation of the banking sector, a large number of businesses in Nigeria do not have
access to finance.
 Access to Business Development Services: Entrepreneurs require services such as tax
planning and accounting, business plans, advice on marketing, production, IT systems,
legal services etc. However, due to lack of access to finance and technical skills, many do
not appreciate the relevance of the services and some cannot afford the services. Hence,
they remain small.

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  Low Access to infrastructure: Nigerian businesses grapple with inadequate power, water,
sanitation, security, rails and roads networks. This tends to increase the cost of doing
business which drains resources required for expansion.
 Low Access to Investments: many companies that operate outside the extractive sectors
find it difficult to attract foreign investment and foreign lending. The Federal Ministry of
Commerce and Nigerian Investment Promotion Council have a unique role to play in this
regard.

Even though the list of challenges is not exhaustive, it is pertinent to begin to consciously foster
an environment that encourages entrepreneurs to invest in new technology and new activities
which is critical to the economic growth of the country.
Critical Success Factors for Growing Businesses
In an effort to create enduring and growing ventures, entrepreneurs require the following if they
are to succeed.
1. Clarity: The greater clarity an entrepreneur has regarding values, vision, mission, purpose and
goals, the greater the probability that his/her venture will grow and succeed.
2. Competence: Even when goals are clearly defined, there is the need for an entrepreneur to
constantly learn new skills and acquire experiences to permit making informed decisions.
3. Reputation: The most valuable asset a firm can develop is its reputation. Reputation is how the
business is known by its customers. Building reputation around quality, reliability, and service is
critical to the survival and growth of businesses.
4. Resilience: There are numerous challenges confronting businesses especially at the initial stage.
The ability to identify and remove obstacles with focus and speed is critical.
5. Creativity: Successful businesses are innovative. The ability to think differently, faster and to
figure out new and easier ways to produce and deliver products and services are very crucial to
growth.
6. Concentration: Entrepreneur’s ability to avoid distractions and focus on what he/she does best
is one of the secret for success. Many people are unable to focus their energy, resources and time
to what they are good at.
7. Courage: This entails audacity to explore and venture into the unknown with no guarantee of
success.

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7. Learning from failure and moving on: The ability to learn from the failure and venture out on
the next exhibition makes entrepreneurs different from the “rest of the pack”.
8. Financial Discipline: There are instances where entrepreneurs get carried away by short term
financial successes. They tend to acquire assets and liabilities that contribute little or nothing to
the business. This is one of common reasons why businesses stagnate and die eventually.
9. Investment in people: Businesses that grow consistently develop the capacity of managers and
employees. Also, they tend to appreciate and reward the creative talents and efforts of their
employees.

MODULE 3: SOURCES OF FUNDS

Finance has long been considered by Small and Medium Enterprises (SMEs) operators as an
important issue. Obtaining financial resources assistance and when they are needed can be more
difficult for small scale entrepreneurial ventures than for established organizations. The critical
issue is to ensure that sufficient cash is available for current operations and growth of the
business. The owner must also ensure that money is available to settle current liabilities when
due; these may include inventory, rent, telephone bills, office supplies etc. Other reasons for
sourcing business finance include the following:

i. upgrading facilities to comply with stricter environmental regulations

ii. financing production in cases where there is significant lag between when costs
are incurred and when payments are received;
iii. purchasing of new equipment or facilities;

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 iv. purchasing of business vehicles; and
v. building up inventory in advance of a busy season.

Irrespective of the reason(s) for which funds are required, it is the sole responsibility of the
business owner to ensure that funding is obtained at the right time, at the right cost and from the
right source. Before raising the required funds, the business owner must estimate the actual funds
needed in order to avoid encountering unnecessary high cost of capital or excess capital.

SOURCES OF FUNDS FOR NEW AND ENTREPRENEURIAL VENTURES

There are several sources of finance for both new and old entrepreneurial ventures. These sources
are:
(i) Personal Savings
(ii) Borrowing from Friends and Relations
(iii) Trade Credit
(iv) Accrual Accounts
(v) Retained Earnings
(vi) Equity Financing
(vii) Bank Loans
(viii) Project Financing
(ix) Venture Capital
(x) Debt Financing
(xi) Commercial Draft
(xii) Banker’s Acceptance
(xiii) Bills Discounting
(xiv) Commercial Paper
(xv) Inventory Financing
(xvi) Bank Overdraft
(xvii) Loans from Corporative Societies
(xviii) Hire Purchase
(xix) Leasing

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(xx) Factoring
(xxi) Microfinance Bank
(xxii) Public Offerings
(xxiii) Small Business Investment Organizations

(i) Personal Savings

Personal savings is the most common source of financing for small business enterprises. It has to
do with the personal money which the entrepreneur has been able to set aside for an intended
business venture. This includes cash and any personal assets convertible into cash or to business
use, for example, cash from family/friends which is an informal form of financing falls into this
category. This may also be from past savings, trust accounts or some other form of personal equity
of the business owner. This is the least expensive method of financing and also the easiest as the
decision to lend is made by the same persons wishing to borrow the fund.

(ii) Borrowing from Friends and Relations

Funds can be raised for entrepreneurial ventures through borrowing from friends and relations.
The amount to be raised through this source however, depends on the financial capabilities of the
friends and relations and the relationship that exists between the business owner and his friends or
relations. The repayment period and the interest payable are a function of the terms of
borrowing which are usually determined by the lender.

(iii) Trade Credit

Trade credit as a source of fund occurs when a buyer makes an arrangement with the seller to buy
goods on credit and pay later. However, this arrangement depends on the customer’s good
reputation and it often requires a pre-arrangement between the buyer and the seller. Trade credit
is one of the most widely used short term sources of funds and the term normally falls within the
range of thirty to ninety days which can still be extended after the expiration period, depending on
the relationship between the parties involved.

(iv) Accrual Accounts

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Accrual accounts can also be called account payable. It represents the continually occurring
current liability of a particular business. These include wages, interest, taxes and other expenses
that are payable in arrears. They are due but yet to be paid. Their repayment period is usually
within a period of one year.

(v) Retained Earnings

Funds can also be obtained through undistributed profits. A business owner may decide to
reinvest part of his or her profit back to business for efficient operations of the business. This is
also called plough-back profit and it shows the naira value of ownership rights that result from the
business retention of its past income. In business, retained earnings are usually considered as an
additional fund for financing the future growth of the business. Retained earnings are helpful as a
last resort in business finance. The inability of the business owners in meeting up with the stringent
conditions of the financial institutions usually makes the business owner come to fall back to their
business reserves for funds raising.

(vi) Equity Financing

Equity finance is a form of business finance in which funds borrowed to operate a business venture
are not taken as loan but converted to equity (stake in ownership) which now makes the lender a
part owner of the business venture, risk and profit are shared together. The amount of
equity finance in a particular business may be substantial subject to factors such as the nature of
the business, the total amount of capital required and the interest of the investor. The advantage
of equity financing is that its infusion of capital does not have to be repaid like a loan.

(vii) Bank Loan

A small business entrepreneur can approach bank for a loan. This is a common practice among
established small business enterprises with good reputation doing business with a particular
bank. The bank interest rate depends on the type of loan involved whether is fixed or variable.
Bank loan can be given either on short term or long term basis. Short term bank loan usually
covers between one month and less than one year, while long term bank loan covers a period that
is more than year one. The relationship of the borrower with the bank matters a lot. The reason
for this is that banks are more likely to give loans to business owners they know very well and

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whom they have their business and personal records. The amount of money that banks are
willing to give per time depends on the nature of business, the size of business, the repayment
period and the creditworthiness of the business owner.

(viii) Project Financing

Project financing is the funding of a particular project by a financial institution. This can be a
source of funds only when the proceeds from the project are sufficient to repay the capital sum
usually known as the principal which is the amount of money borrowed for the execution of the
project with interest accrued. The project will be used as the security for such loan and the advance
is self–liquidating. In this case, the borrower‘s financial standing or position is less important
because the institution must ascertain the value of the project and ensure that the value is high
enough to settle the amount of money borrowed by the contractor.

(ix) Venture Capital

Venture capital is the money invested by individuals or venture capital firms in small and high risk
business enterprises. Venture capitalists are investors that invest in other people’s businesses for
the sole aim of profit. They receive equity participation i.e. the equity ownership right of some
proportion in the business enterprises they have invested their money in. They participate
substantially in the management of the enterprises in which they have invested, holding board
positions and working in close liaison with the enterprise’s management team. The venture capital
industry may consist of:
(a) wealthy individuals
(b) foreign investors
(c) private investment funds
(d) pension funds or
(e) major corporations.

(x) Debt Financing

These are funds that the business owner borrows and must repay with interest. Borrowed capital
maintains ownership of the business (unlike equity financing, which dilutes ownership) but is
carried as a liability on Balance Sheet. In general, small businesses are required to pay more

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interest than large businesses because of perceived higher risks, that is, few percent above prime
rate. Entrepreneurs seeking debt capital can have access to a range of credit options varying in
Complexity, availability and flexibility, both from commercial and government sponsored
lenders.

(xi) Commercial Draft

Commercial draft is a short term financing source credit. It is an unconditional order in writing
made by one party. The drawer addressed to a second party, the drawee ordering the drawee to pay
a specified sum of money to a third party called the payee. Commercial draft may be a sight or
time draft. The type depends on the negotiation terms.

(xii) Banker’s Acceptance

This is credit facility that involves a bank and its customer. It is a time draft payable at a stipulated
date. It is an arrangement between the businessmen who produce goods for sale. The businessman
customer then draws the acceptance credit paper requiring his banker to accept the responsibility
of settling the bills pending when the goods will be sold. By placing its acceptance on the bill
(acceptance credit) the bank has accepted a contingent liability as well as giving an indication that
it will honour the bill upon presentation at maturity in case the customer defaults. A discount house
usually evaluates the creditworthiness and reputation of the accepting bank. The maturity date is
usually less than six months and it is mainly used in international trade.

(xii) Bills Discounting

Bills discounting is a source of finance where the supplier of goods (creditor) writes a bill of
exchange for the customer for acceptance. Immediate cash may be obtained by the supplier for his
goods after the goods have been dispatched to the customer by discounting the bill with the bank
or discount house after the bill has been accepted by the debtor (customer). Other aspects of bill
discounting involves Government securities such as Treasury Bills and certificates which can be
surrendered before their maturity dates to banks or discount houses for purchase. The amount paid
to the bill owner is less than face value.

(xiii) Commercial Paper

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This is an instrument of the money market (commercial Bank) that is usually used by many
organisations to raise short- term funds. Under this source of funds, an issuing house issues it on
behalf of a company. The issuing house only finds investors to buy the commercial paper, the
investors deal directly with the company issuing the note. The issuing house does not even
guarantee the note. The issuing house charges commission for the service through a coupon rate
which is usually stated on the commercial paper. The maturity date of a commercial paper ranges
between 90 and 180 days and it is usually written out to contain details such as the date of issue,
the maturity date, the amount per coupon, etc. The coupon rate and the issuing house commission
make up the cost of commercial paper.

(xiv) Bank Overdraft

Another financial facility is an overdraft facility, which banks give to its business clients. Bank
overdraft is an overdrawn bank current account and a short-term financial facility which is
renegotiated every year depending on the performance of the business. Bank overdraft is usually
covered by personal guarantee of SME owners and carries a higher interest rate than a normal loan.
Often this interest rate is higher than profit margin percentages, which makes it a very short-term
loan for covering cash flow problems rather than to finance acquisitions or buy stocks. Before
banks grant overdraft, the following factors are considered:
(i) The purpose for which the fund is required;
(ii) The character of the entrepreneur;
(iii) The management and financial position of the business;
(iv) The capacity of the business and
(v) Collateral security (this depends on the amount of money involved).
(xv) Inventory Financing: Inventory financing is the use of inventory or stocks as collateral
security for borrowing of fund.

(xvi) Borrowing from Cooperative Societies

A cooperative society is an association established by group of individuals who pooled their
resources together to engage in a business transaction for profit making but mainly for the
benefit of members. Depending on the financial capability of the cooperative society, it can provide
funds for its members to start business or finance their business transactions. The amount

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that can be raised from cooperative society is subject to the financial commitment of the members,
the repayment period is not usually beyond two years since the fund is provided on short-term
sources of finance. The interest charged is also considerable low compared with
Commercial bank interest rates.

(xvii) Hire Purchase

Hire purchase is used when purchasing assets such as plant, equipment, machinery and vehicles.
An initial deposit may be required followed by a series of installment payment with an attached
interest. The interest rate is usually controlled by the prevailing bank rate (e.g. 4 percent above
bank lending rate when regulated by government). Under hire purchase, agreement periods can
range between 1 to 3 years depending on life span of the asset. Hire purchase is quick and easy to
arrange, the security for agreement being the asset itself. Upon the payment of the initial deposit,
the customer enjoys immediate use of the asset. The asset legally belongs to the owner of the asset
and if the buyer defaults, the owner of the assets automatically repossesses his or her asset.

(xviii) Leasing
A lease is an agreement whereby the owner-manager (lessee) undertakes to make regular
monthly payments to the financial institution (lessor) in return for the use of equipment
belonging legally to the latter. The leasing instrument is used by SMEs to finance equipment
(including vehicles) acquisitions. Operating leases function in such a way that the leasing
company retains ownership and risks associated with the equipment (although insurance is
mandatory). The lessor is therefore both the financier and the legal owner of the equipment. In
lease financing, the following points are important and worth noting by any entrepreneur that
wants to enter into lease agreement.
(i) Ownership of the asset does not rest with the business until the asset is sold at
residual value at end of contract.
(ii) Capital allowances may be claimed by leasing institution but not by the business.
(iii) Lease payments are tax deductible that is, passed as expenses in Profit and Loss.
(iv) Leasing does not normally affect borrowing capacity unless financial legislation
requires balance sheets to reflect leasing finance.
(v) Period of repayment matches expected life of asset.

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 (vi) Immediate use of asset.

(xix) Factoring
Factoring is a financing source that allows a business owner to raise fund based on the value of his
or her invoices yet to be paid. Under factoring arrangement, an entrepreneur can outsource their
sales ledger operations and maximize the use of sophisticated credit rating systems for their
funding. Factoring arrangement can be with or without recourse. It is with recourse if the factor
company collects the amount due from other means upon the default of the debtor and without
recourse, if the factor company bears the consequence upon default of the debtor.

(xx) Microfinance Banks

The establishment of microfinance banks is meant to expand the financial infrastructure of the
country so as to meet the financial requirements of the Micro, Small and Medium Enterprises
(MSMEs).

(xxi) Public Offerings

Public offering is a financing option that is only available to companies that are well established.
Businesses with sustainable growth potentials in the course of expanding their businesses might
decide to use public offerings by ‘going public’ to raise required funds for their business
operations. Public offering usually starts with selling of equity holding to the public and this is
called initial public offering (IPO) in which stock is registered with the Securities and Exchange
Commission (SEC). This is usually offered to the public through a registered Brokerage firm or
an investment Banker and this gives the organization the opportunity to trade its shares in the floor
of the stock exchange market. Public offerings usually result in long term sources of funds which
include the following:
(a) ordinary shares
(b) preference shares
(c) debentures

(xxii) Small Business Investment Organizations. These can be government owned or private
owned with debts being government guaranteed. Small business investment organizations can be

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regular or specialized, for example, giving loans only to agro-business or manufacturing firms,
business research, product research and development, business start-ups and
minority/vulnerable groups. Unlike traditional venture capital companies, they use private funds
or government funds to provide both for debt and equity financing to small businesses. Examples
of institutions under this category are – Small and Medium Industries Equity Investment Scheme
(SMIEIS), Central Bank of Nigeria (CBN, National Economic Reconstruction Fund (NERFUND),
National Bank for Commerce and Industry (NBCI), Small Scale Industries Credit Scheme
(SSICS).

INTERNAL AND EXTERNAL SOURCES OF FUNDS

Internal financing is the term for a firm using its profits as a source of capital for new
investment, rather than distributing them to firm's owners or other investors and obtaining capital
elsewhere while external financing consists of new money from outside of the firm brought in for
investment. External financing is generally thought to be more expensive than internal financing,
because the firm often has to pay a transaction cost to obtain it. Internal financing is generally
thought to be less expensive for the firm than external financing because the firm does not have to
incur transaction costs to obtain it, nor does it have to pay the taxes associated with paying
dividends.

Advantages and Disadvantages of internal financing

Advantages of internal sources of finance include the following:

i. capital is immediately available;
ii there is no interest payable on such fund;
iii. there is no control procedures regarding the credit worthiness of the owners; and
iv there is no third party’s influence.

Disadvantages of internally sourced funds

i. It is somehow expensive.
ii. It does not easily increase capital.

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iii. It is not as flexible as external financing.
iv. It is not tax-deductible.
v. It is limited in volume because it is subject to the capability of the owner(s) to raise fund
internally.

FORMAL AND INFORMAL SOURCES OF FUNDS

Formal sources of funds represent those institutions that are registered with appropriate
authorities to transact the business of finance with entrepreneurs. Examples of formal sources of
funds include loans from commercial banks, insurance company etc. Formal financial services are
usually provided by financial institutions that are controlled by the government and subject to
banking regulations and supervision. On the other hand, informal sources of funds are provided
outside the structure of government regulations and supervision. Examples of informal sources of
funds include those groups or individuals that are involved in loan disbursement with little or no
formal regulations e.g. Esusu, thrift savings scheme, cooperative society etc.

Advantages of formal sources of finance

(i) Provides proper guidelines and documentation for loans.
(ii) Business advisory support from the banks that is lending.
(iii) Helps the entrepreneur to stay focused on the business because of interest rates.

Advantages of informal sources of finance

(i) It helps entrepreneurs to have easy access to funding.
(ii) Less documentation is involved in loan process.
(iii) Entrepreneurs do not stand the risk of loss of assets or business to the institution.

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MODULE 4: MARKETING FOR BOTH SMALL AND LARGE BUSINESSES

Marketing is a specialist activity that influences the success of any organization whether small or
large. In very pedestrian language, marketing can be conceptualized as a process that enables
people obtain their needs or wants from organizations that have developed products or services
that will help satisfy these needs or wants of people. These products or services are offered to
people who are at liberty to exchange them for something of value. The implication of this
definition is that successful marketing rests on the premise that proper need assessment has to be
carried out to determine what the market desires or is lacking. Then, a product is conceived and
designed to fill that gap and priced appropriately and communicated to the market and
made available with minimum inconvenience for the customer. The language in marketing is
deliberately general. For instance, purchasers are referred to as customers, though a service
organization such as a firm of accountants will call them clients; telecommunication company will
call them subscribers; a school will call them students; a hospital will call them patients and a hotel
will call them guests. Similarly, a product may well be a service but the word product is often used
to refer to both.

Small Business Marketing: Marketing forms the cornerstone for the initiation, growth and
subsequent profitability of a small business. Without marketing and a marketing strategy, a
business cannot survive and prosper. For the entrepreneur or small business owner, marketing is a

104
matter of determining demand, matching a product or service with customer needs, and promoting
those attributes in the marketplace to produce sales and make profit in the process.

Differences between Small Business Marketing and Large Business Marketing

a) Budget Constraints: Small business is operating on a lean budget particularly as it relates to
marketing plan. The huge organizations sometimes called corporate titans, have astronomical
budgets to cover their promotions. In essence, they have the wherewithal to send out effective
messages which are often sent to a mass audience. In the case of the small business operator, they
are better able to send out personalized messages and distribute in a manner that guarantees a better
chance of reaching their audience.
b) Staffing: When you peruse through the organogram of a big corporation like Globacom Nigeria
Limited, you will find the Commercial Director Marketing at the helm of affairs. He has six
Divisional Directors with six Business Development Managers assisting them. Then there are 48
Global Business Directors across the country and well over 50 Area Managers across the 36 states
in the country. In addition to these, you will find several professionals that bother on other aspects
that bother on the customer. In contrast, small businesses combine marketing with the leadership
role. The organization chart of a small business puts responsibility for marketing in the top box,
where the business owner manages the process as a hands-on task. In essence, you will not have
the luxury of professionals as in the Globacom example.

c) Differences in Creativity: Large companies like Cadbury Nigeria Plc. routinely require millions
of Naira to produce advertorials with the single purpose of establishing brand awareness and
market orientation. Small businesses adopt a significantly different method. They strive to
establish brand awareness just like Cadbury does, but their advertisements have to fulfill two tasks.
One, the expenditure has to provide direct and measurable marketing action. Two, each action has
to stir adequate buying activity to compensate the expenditure involve in producing and running
the advertisement in the first place.

d) Differences on Strategy: In large companies like Nigerian Bottling Company Plc.

documents of business plans are numerous and probably found on bookshelves in the company. In
the case of small businesses, the term marketing plan may sound amazing. Interestingly, a
marketing work plan is quite simple and fairly manageable. If you spend a bit of your time to

105
design your annual marketing plan, then implementation of this plan becomes really easy. Note
that without a proper marketing plan, you will spend the year racing around to deal with
competitive actions, media opportunities and market conditions that may or may not match your
present business expectations.

e) Customer Interaction: Small businesses have the capacity to interact directly with their
customers, get to know them on a personal level, and learn exactly what their needs are. More
often than not, large organizations do not have this luxury. As entrepreneur, you may
occasionally envy the huge budget and staffing of large organizations, but being small
has its own unique advantages. Imagine the complexity of Cadbury Nigeria Plc. trying to
understand and know its numerous customers. Meanwhile, you are able to meet with your
customers personally perhaps on a daily basis at virtually no extra cost to you. Since the significant
point of marketing is to establish and sustain customer loyalty, it stands to reason that nothing is
more adaptable, more resilient and more flexible than the small business.

MARKETING MIX IN NEW VENTURES

Marketing mix is the unique blend of the elements of marketing that will apply to the business.
These elements are: product or service itself; the location of the business; the distribution methods
adopted by the business; the price at which the products will be sold; the advertising and promotion
alternatives available to the business; and how the product will be sold as well as the level of
customer service to be provided. These elements are often summarized and commonly referred
to as the 4Ps - product, price, promotion and place. The understanding of these elements and
flair with which they are mixed is fundamental. In essence, creativity and imagination must be
brought to bear. If this is done well, it will put the organization ahead of the competition.

Product: This is anything offered that is capable of satisfying a particular need or want.
Products in the context of marketing discourse are tangible and when you pay for them you hold
onto something that you can see, touch and feel. It is important for entrepreneurs to understand
people never buy products but buy benefits. The term product is used to cover both tangibles and
intangibles (services). Product decisions require looking at the following areas: product mix;
product features and product support.

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a) Product mix: This covers the range of products offered for sale by the organization. In essence,
an organization could have one or more product lines. To determine the product mix, it is important
that small business owners engage in marketing research by way of need assessment to determine
what people lack or what is currently not being delivered. It also entails knowing what kind of
stock to have, what kind of customers you will want to serve, what do they like to buy and how
they want to buy.
b) Product features: It is important for the entrepreneur to remember that customer perception
will determine success rather than what he sees in his product. Product features include colour,
packaging, labels, quality, options, style design, brand names, freshness, consistency, sizes,
durability, ingredients and product image among others. For services issues that bother on
promptness, efficiency, expertise, reliability, guarantees, house-call, specialization, and pick
up delivery among others are very fundamental.

c) Product support: For a business, a sale may be an end result but for the customer it is just the
beginning because he may have challenges with the product from time to time or the service he is
seeking may be too complicated for him to understand. For these reasons, he will require help by
way of support from the bearing in mind that support will to a large extent determine repeat
patronage. Examples of support services include; pre-sale advices, installation, reliable delivery,
prompt follow up, availability of spare parts and after-sales service.

Place: In marketing, a business must have the right product, at the appropriate time and price, and
in the right place. In this context, place refers to two aspects; location and distribution. Location
as a component of marketing mix is critical to some and almost irrelevant to others.
For example it is critical to a retailer but not necessarily to a “pure water company”. The cardinal
rule for many business owners is to locate the business where the market is.

It is important to know what kinds of persons are likely to be the customers for the goods / services
on offer. This is not to say that other factors are not important. For a manufacturing concern, access
to raw materials is key as well as the availability of skilled labour. Distribution has to do with the
channels used to resolve the question of how the products reach the customers - the place where
the purchase will be made.

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Rarely do organizations deal directly with the final user of their products – consumer. Very often
they have to rely on marketing intermediaries (wholesalers and retailers) who join together
to transport and store goods in their path from producers to consumers. The small business owner
must recognize that there is a constantly changing market and the distribution system
represents an investment and is an asset to the business.

Promotion: This encompasses everything to do with the way an organization communicates

persuasively with people to influence them towards making a purchase. Marketers use many
different tools to promote their products and services. Promotion is sometimes seen as the most
important part of marketing; certainly it is the most visible, with elements of it –
advertisements, posters and so on – all around. It should be known that even the producer of the
best product or service will do no business if no one knows it exists. Similarly promoting a bad
product is certainly the fastest way to kill it. The combination of promotional tools an organization
uses is called its promotional mix.

a) Advertising: This is a non personal communication through various media by organizations

and individuals who are in some way identified in the advertising message. The medium
of advertising include; television, radio, handbills, billboards (electronic and non-electronic),
newspapers, magazines, music and internet. The best medium is a function of the product being
advertised and the target customers to be reached. Advertising is carried out with the following
objectives in mind: informing potential customers of a new offering; increasing the frequency of
purchase; increasing the use of a product; increasing the quantity purchased; increasing
frequency of replacement; presenting a promotional programme; bringing a family of products
together; and making the organization’s range of offerings known. In summary, advertising can
help promote a business but it is important to be aware that it has its limitations. Some small
business owners believe that if their business is failing they can advertise their way out the
problem. Sadly, this is not the case because advertising cannot force people to buy unneeded
goods and services. If the business is in the wrong market advertising will not be able to help.
Furthermore, it cannot improve an inferior product. If the product is not adequate or does not fit
the overall marketing mix, advertising cannot compensate.

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b) Personal selling: This is face-to-face presentation and promotion of products and services. It
also involves the search for new prospects and follow-up service after the sale. Effective selling is
not simply a matter of persuading others to buy. In fact it is more accurately described as helping
others to satisfy their wants and needs. The major strength of personal selling over advertising
is that it provides a two way communication where the prospect can ask questions and
seek clarification where necessary as against advertising which is strictly one way. For large
businesses this medium is very expensive because their customers are spread all over as against
the small business operator who usually has direct access to his customers and sees them often.

c) Public relations: This is defined as the function that evaluates public attitudes, changes policies
and procedures in response to the public’s requests, and executes a programme of action and
information to earn a public understanding and acceptance. In essence, a good public relations
(PR) programme has three steps.

(1) Listen to the public through marketing research.

(2) Change policies and procedures to accommodate the concerns and aspirations of the public.
(3) Inform people that you are being responsive to their needs.

d) Publicity: This is talking arm of PR. It is one of the major functions of almost all organizations.
Publicity is any information about an individual, product or organization that is distributed to the
public through the media and that is not paid for, or controlled by the seller. In essence, it can be
viewed as a form of free advertising.
e) Sales promotion: Sales promotions (SP) are used to help promote the sale of the product
or service. They are generally put into place for short time periods to achieve customer attention
and sales. SP is considered very effective because it creates instant demand booster and leverages
on the weakness of the average customer – greed – which makes him buy certain products that he
may ordinarily not want to buy at the time or may not buy that much quantity. SP campaigns could
be used in the following scenarios;
(1) To move products or services that has slowed down probably created by loss of buyer interest
or change of buying season.
(2) To win back customers who have moved to competitors for reasons such as price, delivery of
product, pedestrian packaging among others.

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(3) To launch new products. This allows the customers to experience the new product or service.

In essence, it encourages new product trials and brand switching. SP could be deployed in different
ways but some of the very prominent ones include:

 Offering a special price reduction for a given period;

 selling two items for the price of one;
 adding a product on or in another product without charging for the added on product;
 giving out free samples;
 sponsoring a game or a contest and organizing raffle draws for those that qualify based on
volume of purchases made over a period of time.
Note that the list is endless and only needs some marketing imagination and flair to make
a successful promotion.

Price: The phrase that goes mostly with cheap is poor quality, yet everyone wants a bargain. In
many ways way can think of price in terms of value. People are willing to pay a price that is
commensurate with the value to them of a product or service. When you focus on making
improvements in these areas, you will be increasing the value of your offerings to customers, and
that will allow you to charge a price that you and your customers will consider reasonable. In
consumer psychology, the tendency is to see high price as connoting high quality and low price as
connoting low quality. This may not necessarily be true in all cases but it always tends to influence
our judgement during purchase decisions. It should be noted that the term price could be used
differently depending on the sector and the context. For example, all these refer to the amount you
pay in exchange for the value received.

 Guest Lecturer - Honorarium

 Apartment - Rent
 Doctor - Consultation Fee
 Highway - Toll
 Import / Export - Duty
 PHCN / GSM - Tariff
 Insurance - Premium
 Association - Dues
 Bank - Interest
 School - Tuition

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Factors Affecting Price
Competition in the market and marketing strategies: In free market economies, the level of
competition in the market place has a great influence on prices charged. The pricing structure
should reflect the competitive strategy the business has adopted. For example, to be a cost leader,
low prices will be the marketing tool to use to gain market share. Alternatively, if the strategy is
differentiation then the business owner must develop an “exclusive” image and be able to charge
more for the product or service. If the marketing strategy is penetration then the business will
consider a drop in price to induce new customers to purchase the product offered.
Demand for your product: Generally the demand for most products varies with price. Usually at
high prices customers purchase less, where at low prices customers purchase more. Some
products or services are price insensitive, i.e. the price can be increased without having much effect
on demand. For other products if the price in increased it can have a huge gap on demand. These
products are said to be price sensitive.
Introducing a new product: The launching of a product that is novel in the market can be an
opportunity for a business to charge a premium without a backlash from the market. This enables
recovery of some of the costs that are associated with the introduction of the new product or
service. After the introduction it may be possible for the business to maintain a high price until a
competitor counters with something similar and the price may then need to be adjusted to ensure
a reasonable share of sales.

INTERNATIONAL MARKETING
International marketing is the process of planning and conducting transactions across national
borders to create exchanges that satisfy the objectives of individuals and organizations.
International marketing has forms ranging from export-import trade to licensing, joint ventures,
wholly owned subsidiaries, management contracting among others. International marketing very
much retains the basic tenets of ‘satisfaction” and “exchange”. Standardization Vs. Adaptation
This addresses the concern of whether companies should have identical products in all
countries or develop products to satisfy local tastes and desires. In the discourse of
International marketing, standardization is sometimes used interchangeably with globalization i.e.
treating entire market as a single one for both production and marketing reasons.

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Modes of Market Entry
There are three broad strategies for foreign market entry and each one involves its own level of
commitment, risk and degree of profit. These are Exporting, Joint Venturing and Direct
Investment.

Exporting: This is the process of sending items, services or persons from one country to another
in return for goods, money or services. This involves occasional and active exporting of goods and
services. Occasional exporting is a passive level of investment where the company exports
surpluses from time to time and sells goods to resident buyers representing foreign countries. On
the other hand, active exporting takes place when the company makes a commitment to
expand exports to a particular market. However, in either of the two cases, the company produces
all of its goods in the home country and may or may not modify them before exporting.

Joint Venturing
Joint venturing is the second method of entering a foreign market by teaming up with foreign
nationals to set up production and marketing facilities. Joint venturing differs from exporting in
that a partnership is formed that leads to some production facilities abroad, and it differs from
direct investment in that an association is formed with someone in the country. A joint venture is
the association of two or more people to carry out a particular business or contract.

A joint venture can be formed in four ways:

Licensing: - This represents a simple way for a manufacturer to become involved in international
marketing. The licensor enters an agreement with a licensee in the foreign market, offering the
right to use manufacturing process, trademarks, patent, trade secret or other item of value for a fee
or royalty. The licensor improves his market coverage at a little risk, while the licensee gains
production expertise or a well-known product or name without having to start from scratch.
Example franchising – KFC in Nigeria.

Contract Manufacturing: This involves a contract with local manufacturers to produce the
products, which the seller sells. It has the drawback of less control over the manufacturing process
and the loss of potential profits on manufacturing. On the other hand, it offers the company a

112
chance to start faster, with less risk and with the opportunities to form a partnership or buy
out the local manufacturer at a later date.
Management Contracting: Here a foreign firm is invited to help run a venture on behalf of a
domestic firm. In this arrangement, the domestic firm usually provides the capital while the foreign
counterpart provides the know-how. This is considered on the strength that the foreign firm is
synonymous with exceptional skills in that particular line of business. They are normally
paid a fee and may be allowed to buy some shares over a specified time frame. Example of
management contracting – Hilton and hotel management.

Joint Ownership Ventures: In joint ownership ventures foreign investors join with local
investors to create a local business in which they share joint ownership and control. The foreign
investor may buy an interest in a local company, or a local company may buy an interest in an
existing operation of a foreign company, or the two parties may form a new business venture. This
may be necessitated due to political consideration or economic constraints or to satisfy a pre-
condition for entry.

Direct Investment
The third strategy that could be employed in order to operate in a foreign market is through direct
investment. In this the firm may invest in foreign-based assembly or manufacturing facilities by
either building a new plant or buying substantial shares in an already existing plant, or completely
buying over an existing plant. The following benefits are derivable to the foreign investor:
1. The firm may secure cost economies in the form of cheaper labour or raw materials,
government investment incentives, freight savings, and tax concession, etc.
2. The firm will also gain a better image in the host country because it creates job
opportunities to the local nationals.
3. The firm can develop a deeper relationship with the government, customers, local
suppliers, and distributors, enabling it to adapt its products to the local market.
4. The firm retains full control over the investment and therefore, can develop
manufacturing and marketing policies that serve its long-term international
objectives.
However, it exposes a firm’s large investment to risk, such risks as devaluation of currency and
worsening markets.

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MODULE 4: MARKETING FOR BOTH SMALL AND LARGE BUSINESSES

Marketing is a specialist activity that influences the success of any organization whether small or
large. In very pedestrian language, marketing can be conceptualized as a process that enables
people obtain their needs or wants from organizations that have developed products or services
that will help satisfy these needs or wants of people. These products or services are offered to
people who are at liberty to exchange them for something of value. The implication of this
definition is that successful marketing rests on the premise that proper need assessment has to be
carried out to determine what the market desires or is lacking. Then, a product is conceived and
designed to fill that gap and priced appropriately and communicated to the market and
made available with minimum inconvenience for the customer. The language in marketing is
deliberately general. For instance, purchasers are referred to as customers, though a service
organization such as a firm of accountants will call them clients; telecommunication company will
call them subscribers; a school will call them students; a hospital will call them patients and a hotel
will call them guests. Similarly, a product may well be a service but the word product is often used
to refer to both.

Small Business Marketing: Marketing forms the cornerstone for the initiation, growth and
subsequent profitability of a small business. Without marketing and a marketing strategy, a
business cannot survive and prosper. For the entrepreneur or small business owner, marketing is a
matter of determining demand, matching a product or service with customer needs, and promoting
those attributes in the marketplace to produce sales and make profit in the process.

Differences between Small Business Marketing and Large Business Marketing

a) Budget Constraints: Small business is operating on a lean budget particularly as it relates to
marketing plan. The huge organizations sometimes called corporate titans, have astronomical
budgets to cover their promotions. In essence, they have the wherewithal to send out effective
messages which are often sent to a mass audience. In the case of the small business operator, they
are better able to send out personalized messages and distribute in a manner that guarantees a better
chance of reaching their audience.

114
b) Staffing: When you peruse through the organogram of a big corporation like Globacom Nigeria
Limited, you will find the Commercial Director Marketing at the helm of affairs. He has six
Divisional Directors with six Business Development Managers assisting them. Then there are 48
Global Business Directors across the country and well over 50 Area Managers across the 36 states
in the country. In addition to these, you will find several professionals that bother on other aspects
that bother on the customer. In contrast, small businesses combine marketing with the leadership
role. The organization chart of a small business puts responsibility for marketing in the top box,
where the business owner manages the process as a hands-on task. In essence, you will not have
the luxury of professionals as in the Globacom example.

c) Differences in Creativity: Large companies like Cadbury Nigeria Plc. routinely require millions
of Naira to produce advertorials with the single purpose of establishing brand awareness and
market orientation. Small businesses adopt a significantly different method. They strive to
establish brand awareness just like Cadbury does, but their advertisements have to fulfill two tasks.
One, the expenditure has to provide direct and measurable marketing action. Two, each action has
to stir adequate buying activity to compensate the expenditure involve in producing and running
the advertisement in the first place.

d) Differences on Strategy: In large companies like Nigerian Bottling Company Plc.

documents of business plans are numerous and probably found on bookshelves in the company. In
the case of small businesses, the term marketing plan may sound amazing. Interestingly, a
marketing work plan is quite simple and fairly manageable. If you spend a bit of your time to
design your annual marketing plan, then implementation of this plan becomes really easy. Note
that without a proper marketing plan, you will spend the year racing around to deal with
competitive actions, media opportunities and market conditions that may or may not match your
present business expectations.

e) Customer Interaction: Small businesses have the capacity to interact directly with their
customers, get to know them on a personal level, and learn exactly what their needs are. More
often than not, large organizations do not have this luxury. As entrepreneur, you may
occasionally envy the huge budget and staffing of large organizations, but being small
has its own unique advantages. Imagine the complexity of Cadbury Nigeria Plc. trying to

115
understand and know its numerous customers. Meanwhile, you are able to meet with your
customers personally perhaps on a daily basis at virtually no extra cost to you. Since the significant
point of marketing is to establish and sustain customer loyalty, it stands to reason that nothing is
more adaptable, more resilient and more flexible than the small business.

MARKETING MIX IN NEW VENTURES

Marketing mix is the unique blend of the elements of marketing that will apply to the business.
These elements are: product or service itself; the location of the business; the distribution methods
adopted by the business; the price at which the products will be sold; the advertising and promotion
alternatives available to the business; and how the product will be sold as well as the level of
customer service to be provided. These elements are often summarized and commonly referred
to as the 4Ps - product, price, promotion and place. The understanding of these elements and
flair with which they are mixed is fundamental. In essence, creativity and imagination must be
brought to bear. If this is done well, it will put the organization ahead of the competition.

Product: This is anything offered that is capable of satisfying a particular need or want.
Products in the context of marketing discourse are tangible and when you pay for them you hold
onto something that you can see, touch and feel. It is important for entrepreneurs to understand
people never buy products but buy benefits. The term product is used to cover both tangibles and
intangibles (services). Product decisions require looking at the following areas: product mix;
product features and product support.

a) Product mix: This covers the range of products offered for sale by the organization. In essence,
an organization could have one or more product lines. To determine the product mix, it is important
that small business owners engage in marketing research by way of need assessment to determine
what people lack or what is currently not being delivered. It also entails knowing what kind of
stock to have, what kind of customers you will want to serve, what do they like to buy and how
they want to buy.
b) Product features: It is important for the entrepreneur to remember that customer perception
will determine success rather than what he sees in his product. Product features include colour,
packaging, labels, quality, options, style design, brand names, freshness, consistency, sizes,
durability, ingredients and product image among others. For services issues that bother on

116
promptness, efficiency, expertise, reliability, guarantees, house-call, specialization, and pick
up delivery among others are very fundamental.

c) Product support: For a business, a sale may be an end result but for the customer it is just the
beginning because he may have challenges with the product from time to time or the service he is
seeking may be too complicated for him to understand. For these reasons, he will require help by
way of support from the bearing in mind that support will to a large extent determine repeat
patronage. Examples of support services include; pre-sale advices, installation, reliable delivery,
prompt follow up, availability of spare parts and after-sales service.

Place: In marketing, a business must have the right product, at the appropriate time and price, and
in the right place. In this context, place refers to two aspects; location and distribution. Location
as a component of marketing mix is critical to some and almost irrelevant to others.
For example it is critical to a retailer but not necessarily to a “pure water company”. The cardinal
rule for many business owners is to locate the business where the market is.

It is important to know what kinds of persons are likely to be the customers for the goods / services
on offer. This is not to say that other factors are not important. For a manufacturing concern, access
to raw materials is key as well as the availability of skilled labour. Distribution has to do with the
channels used to resolve the question of how the products reach the customers - the place where
the purchase will be made.

Rarely do organizations deal directly with the final user of their products – consumer. Very often
they have to rely on marketing intermediaries (wholesalers and retailers) who join together
to transport and store goods in their path from producers to consumers. The small business owner
must recognize that there is a constantly changing market and the distribution system
represents an investment and is an asset to the business.

Promotion: This encompasses everything to do with the way an organization communicates

persuasively with people to influence them towards making a purchase. Marketers use many
different tools to promote their products and services. Promotion is sometimes seen as the most
important part of marketing; certainly it is the most visible, with elements of it –
advertisements, posters and so on – all around. It should be known that even the producer of the

117
best product or service will do no business if no one knows it exists. Similarly promoting a bad
product is certainly the fastest way to kill it. The combination of promotional tools an organization
uses is called its promotional mix.

a) Advertising: This is a non personal communication through various media by organizations

and individuals who are in some way identified in the advertising message. The medium
of advertising include; television, radio, handbills, billboards (electronic and non-electronic),
newspapers, magazines, music and internet. The best medium is a function of the product being
advertised and the target customers to be reached. Advertising is carried out with the following
objectives in mind: informing potential customers of a new offering; increasing the frequency of
purchase; increasing the use of a product; increasing the quantity purchased; increasing
frequency of replacement; presenting a promotional programme; bringing a family of products
together; and making the organization’s range of offerings known. In summary, advertising can
help promote a business but it is important to be aware that it has its limitations. Some small
business owners believe that if their business is failing they can advertise their way out the
problem. Sadly, this is not the case because advertising cannot force people to buy unneeded
goods and services. If the business is in the wrong market advertising will not be able to help.
Furthermore, it cannot improve an inferior product. If the product is not adequate or does not fit
the overall marketing mix, advertising cannot compensate.

b) Personal selling: This is face-to-face presentation and promotion of products and services. It
also involves the search for new prospects and follow-up service after the sale. Effective selling is
not simply a matter of persuading others to buy. In fact it is more accurately described as helping
others to satisfy their wants and needs. The major strength of personal selling over advertising
is that it provides a two way communication where the prospect can ask questions and
seek clarification where necessary as against advertising which is strictly one way. For large
businesses this medium is very expensive because their customers are spread all over as against
the small business operator who usually has direct access to his customers and sees them often.

c) Public relations: This is defined as the function that evaluates public attitudes, changes policies
and procedures in response to the public’s requests, and executes a programme of action and

118
information to earn a public understanding and acceptance. In essence, a good public relations
(PR) programme has three steps.

(1) Listen to the public through marketing research.

(2) Change policies and procedures to accommodate the concerns and aspirations of the public.
(3) Inform people that you are being responsive to their needs.

d) Publicity: This is talking arm of PR. It is one of the major functions of almost all organizations.
Publicity is any information about an individual, product or organization that is distributed to the
public through the media and that is not paid for, or controlled by the seller. In essence, it can be
viewed as a form of free advertising.
e) Sales promotion: Sales promotions (SP) are used to help promote the sale of the product
or service. They are generally put into place for short time periods to achieve customer attention
and sales. SP is considered very effective because it creates instant demand booster and leverages
on the weakness of the average customer – greed – which makes him buy certain products that he
may ordinarily not want to buy at the time or may not buy that much quantity. SP campaigns could
be used in the following scenarios;
(1) To move products or services that has slowed down probably created by loss of buyer interest
or change of buying season.
(2) To win back customers who have moved to competitors for reasons such as price, delivery of
product, pedestrian packaging among others.
(3) To launch new products. This allows the customers to experience the new product or service.

In essence, it encourages new product trials and brand switching. SP could be deployed in different
ways but some of the very prominent ones include:

 Offering a special price reduction for a given period;

 selling two items for the price of one;
 adding a product on or in another product without charging for the added on product;
 giving out free samples;
 sponsoring a game or a contest and organizing raffle draws for those that qualify based on
volume of purchases made over a period of time.

119
 Note that the list is endless and only needs some marketing imagination and flair to make
a successful promotion.

Price: The phrase that goes mostly with cheap is poor quality, yet everyone wants a bargain. In
many ways way can think of price in terms of value. People are willing to pay a price that is
commensurate with the value to them of a product or service. When you focus on making
improvements in these areas, you will be increasing the value of your offerings to customers, and
that will allow you to charge a price that you and your customers will consider reasonable. In
consumer psychology, the tendency is to see high price as connoting high quality and low price as
connoting low quality. This may not necessarily be true in all cases but it always tends to influence
our judgement during purchase decisions. It should be noted that the term price could be used
differently depending on the sector and the context. For example, all these refer to the amount you
pay in exchange for the value received.

 Guest Lecturer - Honorarium

 Apartment - Rent
 Doctor - Consultation Fee
 Highway - Toll
 Import / Export - Duty
 PHCN / GSM - Tariff
 Insurance - Premium
 Association - Dues
 Bank - Interest
 School - Tuition

Factors Affecting Price

Competition in the market and marketing strategies: In free market economies, the level of
competition in the market place has a great influence on prices charged. The pricing structure
should reflect the competitive strategy the business has adopted. For example, to be a cost leader,
low prices will be the marketing tool to use to gain market share. Alternatively, if the strategy is
differentiation then the business owner must develop an “exclusive” image and be able to charge
more for the product or service. If the marketing strategy is penetration then the business will
consider a drop in price to induce new customers to purchase the product offered.

120
Demand for your product: Generally the demand for most products varies with price. Usually at
high prices customers purchase less, where at low prices customers purchase more. Some
products or services are price insensitive, i.e. the price can be increased without having much effect
on demand. For other products if the price in increased it can have a huge gap on demand. These
products are said to be price sensitive.
Introducing a new product: The launching of a product that is novel in the market can be an
opportunity for a business to charge a premium without a backlash from the market. This enables
recovery of some of the costs that are associated with the introduction of the new product or
service. After the introduction it may be possible for the business to maintain a high price until a
competitor counters with something similar and the price may then need to be adjusted to ensure
a reasonable share of sales.

INTERNATIONAL MARKETING
International marketing is the process of planning and conducting transactions across national
borders to create exchanges that satisfy the objectives of individuals and organizations.
International marketing has forms ranging from export-import trade to licensing, joint ventures,
wholly owned subsidiaries, management contracting among others. International marketing very
much retains the basic tenets of ‘satisfaction” and “exchange”. Standardization Vs. Adaptation
This addresses the concern of whether companies should have identical products in all
countries or develop products to satisfy local tastes and desires. In the discourse of
International marketing, standardization is sometimes used interchangeably with globalization i.e.
treating entire market as a single one for both production and marketing reasons.

Modes of Market Entry

There are three broad strategies for foreign market entry and each one involves its own level of
commitment, risk and degree of profit. These are Exporting, Joint Venturing and Direct
Investment.

Exporting: This is the process of sending items, services or persons from one country to another
in return for goods, money or services. This involves occasional and active exporting of goods and
services. Occasional exporting is a passive level of investment where the company exports
surpluses from time to time and sells goods to resident buyers representing foreign countries. On

121
the other hand, active exporting takes place when the company makes a commitment to
expand exports to a particular market. However, in either of the two cases, the company produces
all of its goods in the home country and may or may not modify them before exporting.

Joint Venturing
Joint venturing is the second method of entering a foreign market by teaming up with foreign
nationals to set up production and marketing facilities. Joint venturing differs from exporting in
that a partnership is formed that leads to some production facilities abroad, and it differs from
direct investment in that an association is formed with someone in the country. A joint venture is
the association of two or more people to carry out a particular business or contract.

A joint venture can be formed in four ways:

Licensing: - This represents a simple way for a manufacturer to become involved in international
marketing. The licensor enters an agreement with a licensee in the foreign market, offering the
right to use manufacturing process, trademarks, patent, trade secret or other item of value for a fee
or royalty. The licensor improves his market coverage at a little risk, while the licensee gains
production expertise or a well-known product or name without having to start from scratch.
Example franchising – KFC in Nigeria.

Contract Manufacturing: This involves a contract with local manufacturers to produce the
products, which the seller sells. It has the drawback of less control over the manufacturing process
and the loss of potential profits on manufacturing. On the other hand, it offers the company a
chance to start faster, with less risk and with the opportunities to form a partnership or buy
out the local manufacturer at a later date.
Management Contracting: Here a foreign firm is invited to help run a venture on behalf of a
domestic firm. In this arrangement, the domestic firm usually provides the capital while the foreign
counterpart provides the know-how. This is considered on the strength that the foreign firm is
synonymous with exceptional skills in that particular line of business. They are normally
paid a fee and may be allowed to buy some shares over a specified time frame. Example of
management contracting – Hilton and hotel management.

122
Joint Ownership Ventures: In joint ownership ventures foreign investors join with local
investors to create a local business in which they share joint ownership and control. The foreign
investor may buy an interest in a local company, or a local company may buy an interest in an
existing operation of a foreign company, or the two parties may form a new business venture. This
may be necessitated due to political consideration or economic constraints or to satisfy a pre-
condition for entry.

Direct Investment
The third strategy that could be employed in order to operate in a foreign market is through direct
investment. In this the firm may invest in foreign-based assembly or manufacturing facilities by
either building a new plant or buying substantial shares in an already existing plant, or completely
buying over an existing plant. The following benefits are derivable to the foreign investor:
1. The firm may secure cost economies in the form of cheaper labour or raw materials,
government investment incentives, freight savings, and tax concession, etc.
2. The firm will also gain a better image in the host country because it creates job
opportunities to the local nationals.
3. The firm can develop a deeper relationship with the government, customers, local
suppliers, and distributors, enabling it to adapt its products to the local market.
4. The firm retains full control over the investment and therefore, can develop
manufacturing and marketing policies that serve its long-term international
objectives.
However, it exposes a firm’s large investment to risk, such risks as devaluation of currency and
worsening markets.

MODULE 4: MARKETING FOR BOTH SMALL AND LARGE BUSINESSES

Marketing is a specialist activity that influences the success of any organization whether small or
large. In very pedestrian language, marketing can be conceptualized as a process that enables
people obtain their needs or wants from organizations that have developed products or services
that will help satisfy these needs or wants of people. These products or services are offered to
people who are at liberty to exchange them for something of value. The implication of this

123
definition is that successful marketing rests on the premise that proper need assessment has to be
carried out to determine what the market desires or is lacking. Then, a product is conceived and
designed to fill that gap and priced appropriately and communicated to the market and
made available with minimum inconvenience for the customer. The language in marketing is
deliberately general. For instance, purchasers are referred to as customers, though a service
organization such as a firm of accountants will call them clients; telecommunication company will
call them subscribers; a school will call them students; a hospital will call them patients and a hotel
will call them guests. Similarly, a product may well be a service but the word product is often used
to refer to both.

Small Business Marketing: Marketing forms the cornerstone for the initiation, growth and
subsequent profitability of a small business. Without marketing and a marketing strategy, a
business cannot survive and prosper. For the entrepreneur or small business owner, marketing is a
matter of determining demand, matching a product or service with customer needs, and promoting
those attributes in the marketplace to produce sales and make profit in the process.

Differences between Small Business Marketing and Large Business Marketing

a) Budget Constraints: Small business is operating on a lean budget particularly as it relates to
marketing plan. The huge organizations sometimes called corporate titans, have astronomical
budgets to cover their promotions. In essence, they have the wherewithal to send out effective
messages which are often sent to a mass audience. In the case of the small business operator, they
are better able to send out personalized messages and distribute in a manner that guarantees a better
chance of reaching their audience.
b) Staffing: When you peruse through the organogram of a big corporation like Globacom Nigeria
Limited, you will find the Commercial Director Marketing at the helm of affairs. He has six
Divisional Directors with six Business Development Managers assisting them. Then there are 48
Global Business Directors across the country and well over 50 Area Managers across the 36 states
in the country. In addition to these, you will find several professionals that bother on other aspects
that bother on the customer. In contrast, small businesses combine marketing with the leadership
role. The organization chart of a small business puts responsibility for marketing in the top box,
where the business owner manages the process as a hands-on task. In essence, you will not have
the luxury of professionals as in the Globacom example.

124
c) Differences in Creativity: Large companies like Cadbury Nigeria Plc. routinely require millions
of Naira to produce advertorials with the single purpose of establishing brand awareness and
market orientation. Small businesses adopt a significantly different method. They strive to
establish brand awareness just like Cadbury does, but their advertisements have to fulfill two tasks.
One, the expenditure has to provide direct and measurable marketing action. Two, each action has
to stir adequate buying activity to compensate the expenditure involve in producing and running
the advertisement in the first place.

d) Differences on Strategy: In large companies like Nigerian Bottling Company Plc.

documents of business plans are numerous and probably found on bookshelves in the company. In
the case of small businesses, the term marketing plan may sound amazing. Interestingly, a
marketing work plan is quite simple and fairly manageable. If you spend a bit of your time to
design your annual marketing plan, then implementation of this plan becomes really easy. Note
that without a proper marketing plan, you will spend the year racing around to deal with
competitive actions, media opportunities and market conditions that may or may not match your
present business expectations.

e) Customer Interaction: Small businesses have the capacity to interact directly with their
customers, get to know them on a personal level, and learn exactly what their needs are. More
often than not, large organizations do not have this luxury. As entrepreneur, you may
occasionally envy the huge budget and staffing of large organizations, but being small
has its own unique advantages. Imagine the complexity of Cadbury Nigeria Plc. trying to
understand and know its numerous customers. Meanwhile, you are able to meet with your
customers personally perhaps on a daily basis at virtually no extra cost to you. Since the significant
point of marketing is to establish and sustain customer loyalty, it stands to reason that nothing is
more adaptable, more resilient and more flexible than the small business.

MARKETING MIX IN NEW VENTURES

Marketing mix is the unique blend of the elements of marketing that will apply to the business.
These elements are: product or service itself; the location of the business; the distribution methods
adopted by the business; the price at which the products will be sold; the advertising and promotion

125
alternatives available to the business; and how the product will be sold as well as the level of
customer service to be provided. These elements are often summarized and commonly referred
to as the 4Ps - product, price, promotion and place. The understanding of these elements and
flair with which they are mixed is fundamental. In essence, creativity and imagination must be
brought to bear. If this is done well, it will put the organization ahead of the competition.

Product: This is anything offered that is capable of satisfying a particular need or want.
Products in the context of marketing discourse are tangible and when you pay for them you hold
onto something that you can see, touch and feel. It is important for entrepreneurs to understand
people never buy products but buy benefits. The term product is used to cover both tangibles and
intangibles (services). Product decisions require looking at the following areas: product mix;
product features and product support.

a) Product mix: This covers the range of products offered for sale by the organization. In essence,
an organization could have one or more product lines. To determine the product mix, it is important
that small business owners engage in marketing research by way of need assessment to determine
what people lack or what is currently not being delivered. It also entails knowing what kind of
stock to have, what kind of customers you will want to serve, what do they like to buy and how
they want to buy.
b) Product features: It is important for the entrepreneur to remember that customer perception
will determine success rather than what he sees in his product. Product features include colour,
packaging, labels, quality, options, style design, brand names, freshness, consistency, sizes,
durability, ingredients and product image among others. For services issues that bother on
promptness, efficiency, expertise, reliability, guarantees, house-call, specialization, and pick
up delivery among others are very fundamental.

c) Product support: For a business, a sale may be an end result but for the customer it is just the
beginning because he may have challenges with the product from time to time or the service he is
seeking may be too complicated for him to understand. For these reasons, he will require help by
way of support from the bearing in mind that support will to a large extent determine repeat
patronage. Examples of support services include; pre-sale advices, installation, reliable delivery,
prompt follow up, availability of spare parts and after-sales service.

126
Place: In marketing, a business must have the right product, at the appropriate time and price, and
in the right place. In this context, place refers to two aspects; location and distribution. Location
as a component of marketing mix is critical to some and almost irrelevant to others.
For example it is critical to a retailer but not necessarily to a “pure water company”. The cardinal
rule for many business owners is to locate the business where the market is.

It is important to know what kinds of persons are likely to be the customers for the goods / services
on offer. This is not to say that other factors are not important. For a manufacturing concern, access
to raw materials is key as well as the availability of skilled labour. Distribution has to do with the
channels used to resolve the question of how the products reach the customers - the place where
the purchase will be made.

Rarely do organizations deal directly with the final user of their products – consumer. Very often
they have to rely on marketing intermediaries (wholesalers and retailers) who join together
to transport and store goods in their path from producers to consumers. The small business owner
must recognize that there is a constantly changing market and the distribution system
represents an investment and is an asset to the business.

Promotion: This encompasses everything to do with the way an organization communicates

persuasively with people to influence them towards making a purchase. Marketers use many
different tools to promote their products and services. Promotion is sometimes seen as the most
important part of marketing; certainly it is the most visible, with elements of it –
advertisements, posters and so on – all around. It should be known that even the producer of the
best product or service will do no business if no one knows it exists. Similarly promoting a bad
product is certainly the fastest way to kill it. The combination of promotional tools an organization
uses is called its promotional mix.

a) Advertising: This is a non personal communication through various media by organizations

and individuals who are in some way identified in the advertising message. The medium
of advertising include; television, radio, handbills, billboards (electronic and non-electronic),
newspapers, magazines, music and internet. The best medium is a function of the product being
advertised and the target customers to be reached. Advertising is carried out with the following

127
objectives in mind: informing potential customers of a new offering; increasing the frequency of
purchase; increasing the use of a product; increasing the quantity purchased; increasing
frequency of replacement; presenting a promotional programme; bringing a family of products
together; and making the organization’s range of offerings known. In summary, advertising can
help promote a business but it is important to be aware that it has its limitations. Some small
business owners believe that if their business is failing they can advertise their way out the
problem. Sadly, this is not the case because advertising cannot force people to buy unneeded
goods and services. If the business is in the wrong market advertising will not be able to help.
Furthermore, it cannot improve an inferior product. If the product is not adequate or does not fit
the overall marketing mix, advertising cannot compensate.

b) Personal selling: This is face-to-face presentation and promotion of products and services. It
also involves the search for new prospects and follow-up service after the sale. Effective selling is
not simply a matter of persuading others to buy. In fact it is more accurately described as helping
others to satisfy their wants and needs. The major strength of personal selling over advertising
is that it provides a two way communication where the prospect can ask questions and
seek clarification where necessary as against advertising which is strictly one way. For large
businesses this medium is very expensive because their customers are spread all over as against
the small business operator who usually has direct access to his customers and sees them often.

c) Public relations: This is defined as the function that evaluates public attitudes, changes policies
and procedures in response to the public’s requests, and executes a programme of action and
information to earn a public understanding and acceptance. In essence, a good public relations
(PR) programme has three steps.

(1) Listen to the public through marketing research.

(2) Change policies and procedures to accommodate the concerns and aspirations of the public.
(3) Inform people that you are being responsive to their needs.

d) Publicity: This is talking arm of PR. It is one of the major functions of almost all organizations.
Publicity is any information about an individual, product or organization that is distributed to the

128
public through the media and that is not paid for, or controlled by the seller. In essence, it can be
viewed as a form of free advertising.
e) Sales promotion: Sales promotions (SP) are used to help promote the sale of the product
or service. They are generally put into place for short time periods to achieve customer attention
and sales. SP is considered very effective because it creates instant demand booster and leverages
on the weakness of the average customer – greed – which makes him buy certain products that he
may ordinarily not want to buy at the time or may not buy that much quantity. SP campaigns could
be used in the following scenarios;
(1) To move products or services that has slowed down probably created by loss of buyer interest
or change of buying season.
(2) To win back customers who have moved to competitors for reasons such as price, delivery of
product, pedestrian packaging among others.
(3) To launch new products. This allows the customers to experience the new product or service.

In essence, it encourages new product trials and brand switching. SP could be deployed in different
ways but some of the very prominent ones include:

 Offering a special price reduction for a given period;

 selling two items for the price of one;
 adding a product on or in another product without charging for the added on product;
 giving out free samples;
 sponsoring a game or a contest and organizing raffle draws for those that qualify based on
volume of purchases made over a period of time.
Note that the list is endless and only needs some marketing imagination and flair to make
a successful promotion.

Price: The phrase that goes mostly with cheap is poor quality, yet everyone wants a bargain. In
many ways way can think of price in terms of value. People are willing to pay a price that is
commensurate with the value to them of a product or service. When you focus on making
improvements in these areas, you will be increasing the value of your offerings to customers, and
that will allow you to charge a price that you and your customers will consider reasonable. In
consumer psychology, the tendency is to see high price as connoting high quality and low price as

129
connoting low quality. This may not necessarily be true in all cases but it always tends to influence
our judgement during purchase decisions. It should be noted that the term price could be used
differently depending on the sector and the context. For example, all these refer to the amount you
pay in exchange for the value received.

 Guest Lecturer - Honorarium

 Apartment - Rent
 Doctor - Consultation Fee
 Highway - Toll
 Import / Export - Duty
 PHCN / GSM - Tariff
 Insurance - Premium
 Association - Dues
 Bank - Interest
 School - Tuition

Factors Affecting Price

Competition in the market and marketing strategies: In free market economies, the level of
competition in the market place has a great influence on prices charged. The pricing structure
should reflect the competitive strategy the business has adopted. For example, to be a cost leader,
low prices will be the marketing tool to use to gain market share. Alternatively, if the strategy is
differentiation then the business owner must develop an “exclusive” image and be able to charge
more for the product or service. If the marketing strategy is penetration then the business will
consider a drop in price to induce new customers to purchase the product offered.
Demand for your product: Generally the demand for most products varies with price. Usually at
high prices customers purchase less, where at low prices customers purchase more. Some
products or services are price insensitive, i.e. the price can be increased without having much effect
on demand. For other products if the price in increased it can have a huge gap on demand. These
products are said to be price sensitive.
Introducing a new product: The launching of a product that is novel in the market can be an
opportunity for a business to charge a premium without a backlash from the market. This enables
recovery of some of the costs that are associated with the introduction of the new product or

130
service. After the introduction it may be possible for the business to maintain a high price until a
competitor counters with something similar and the price may then need to be adjusted to ensure
a reasonable share of sales.

INTERNATIONAL MARKETING
International marketing is the process of planning and conducting transactions across national
borders to create exchanges that satisfy the objectives of individuals and organizations.
International marketing has forms ranging from export-import trade to licensing, joint ventures,
wholly owned subsidiaries, management contracting among others. International marketing very
much retains the basic tenets of ‘satisfaction” and “exchange”. Standardization Vs. Adaptation
This addresses the concern of whether companies should have identical products in all
countries or develop products to satisfy local tastes and desires. In the discourse of
International marketing, standardization is sometimes used interchangeably with globalization i.e.
treating entire market as a single one for both production and marketing reasons.

Modes of Market Entry

There are three broad strategies for foreign market entry and each one involves its own level of
commitment, risk and degree of profit. These are Exporting, Joint Venturing and Direct
Investment.

Exporting: This is the process of sending items, services or persons from one country to another
in return for goods, money or services. This involves occasional and active exporting of goods and
services. Occasional exporting is a passive level of investment where the company exports
surpluses from time to time and sells goods to resident buyers representing foreign countries. On
the other hand, active exporting takes place when the company makes a commitment to
expand exports to a particular market. However, in either of the two cases, the company produces
all of its goods in the home country and may or may not modify them before exporting.

Joint Venturing
Joint venturing is the second method of entering a foreign market by teaming up with foreign
nationals to set up production and marketing facilities. Joint venturing differs from exporting in
that a partnership is formed that leads to some production facilities abroad, and it differs from

131
direct investment in that an association is formed with someone in the country. A joint venture is
the association of two or more people to carry out a particular business or contract.

A joint venture can be formed in four ways:

Licensing: - This represents a simple way for a manufacturer to become involved in international
marketing. The licensor enters an agreement with a licensee in the foreign market, offering the
right to use manufacturing process, trademarks, patent, trade secret or other item of value for a fee
or royalty. The licensor improves his market coverage at a little risk, while the licensee gains
production expertise or a well-known product or name without having to start from scratch.
Example franchising – KFC in Nigeria.

Contract Manufacturing: This involves a contract with local manufacturers to produce the
products, which the seller sells. It has the drawback of less control over the manufacturing process
and the loss of potential profits on manufacturing. On the other hand, it offers the company a
chance to start faster, with less risk and with the opportunities to form a partnership or buy
out the local manufacturer at a later date.
Management Contracting: Here a foreign firm is invited to help run a venture on behalf of a
domestic firm. In this arrangement, the domestic firm usually provides the capital while the foreign
counterpart provides the know-how. This is considered on the strength that the foreign firm is
synonymous with exceptional skills in that particular line of business. They are normally
paid a fee and may be allowed to buy some shares over a specified time frame. Example of
management contracting – Hilton and hotel management.

Joint Ownership Ventures: In joint ownership ventures foreign investors join with local
investors to create a local business in which they share joint ownership and control. The foreign
investor may buy an interest in a local company, or a local company may buy an interest in an
existing operation of a foreign company, or the two parties may form a new business venture. This
may be necessitated due to political consideration or economic constraints or to satisfy a pre-
condition for entry.

Direct Investment

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The third strategy that could be employed in order to operate in a foreign market is through direct
investment. In this the firm may invest in foreign-based assembly or manufacturing facilities by
either building a new plant or buying substantial shares in an already existing plant, or completely
buying over an existing plant. The following benefits are derivable to the foreign investor:
1. The firm may secure cost economies in the form of cheaper labour or raw materials,
government investment incentives, freight savings, and tax concession, etc.
2. The firm will also gain a better image in the host country because it creates job
opportunities to the local nationals.
3. The firm can develop a deeper relationship with the government, customers, local
suppliers, and distributors, enabling it to adapt its products to the local market.
4. The firm retains full control over the investment and therefore, can develop
manufacturing and marketing policies that serve its long-term international
objectives.
However, it exposes a firm’s large investment to risk, such risks as devaluation of currency and
worsening markets.

MODULE 7: MANAGING TRANSITION: FROM START UP TO GROWTH

In business, change is the way things will be different, and transition is how you move people
through the stages to make change work. Efforts at leading change, however, can be serious, if not
outright disastrous, unless the entrepreneurs manage transition. Yet managing transition well is
often the most neglected part of a change initiative (Stevens, 2008). The steps involved are
identifying the needs, setting up the transition team, laying out the plan, getting inputs from
stakeholders, finalising the plan, clearing the path and marking the progress of the transition
by milestones.

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TRANSITION IN BUSINESS AND PHASES OF BUSINESS GROWTH

The Phases of Business Growth

Most people agree that organizations have a life cycle; that, like people, businesses pass through
some identifiable stages.

Phase one: Start up/infancy (growth through creativity)

An overview for this phase is that the entrepreneurs who founded the firm are busy creating
products and opening up markets. There aren't many staff, so informal communication works fine,
and rewards for long hours are probably through profit share or stock options.

Major functions of a Start-up Entrepreneur:

1. Mentoring and Being Mentored

2. Teaching everything he knows to his employees that will make the business to grow
3. Setting business targets

To transit from start up to growth, the entrepreneur must:

i. be flexible- for instance, flexible to try different marketing strategy;

ii. ask for advice from smart people;
iii. make sales his top priority; and
iv. discover their optimum selling strategy- this might be a combination of media, pricing
and quality.

Basic challenges of Start-up phase: Completing a sound business plan; pitching the business
plan with confidence to people who can help; finding the first customers; having a team that work
together well; delays in processing intellectual property protection claims; managing cash flow
effectively; finding the funding required for your business start-up costs; insufficient cash; creating
a business not a job; gaining marketplace acceptance and support – from your family, friends and
customers.
Phase two: Fast growth/childhood (growth through direction)

An overview for this phase is that growth continues in an environment of more formal
communications, budgets and focus on separate activities like marketing and production. Incentive
schemes replace stock as a financial reward. The fast growth/childhood phase of business is
characterized by an increase in employee size and income. The main task should be on aggressive

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proliferation of new products or goods and services. The manager/entrepreneur is to focus on how
to double the business revenue.

How to manage fast growth/childhood and double business revenue:

1. Create new adaptations of products/services that customers already know and love
2. Work hard
3. Work with smart people
4. Find a productive way to engage your employees so that you become a group that
reproduces great products/services
5. Increase the speed in the delivery of goods and services

Formula for Creative Brainstorming:

1. Have a team of 3-8 persons
2. Have a limited amount of time (1-3 hours)
3. Have an agenda/goals and objectives
4. Let everyone contribute
5. Have strict rules- such as time limit for each contribution, no specific criticism, be
positive
6. Encourage a culture of creativity in solving problems

Basic challenges for fast growth/childhood phase: Having the discipline to maintain a narrow
strategic focus; transitioning from owner to leader; confronting future growth; managing cash
flow effectively; founder conflicts on roles and tasks; sticking to product schedules; building and
growing a customer base; having the right business leadership skills; and getting overwhelmed by
growth.

Phase three: Adolescent (growth through delegation)

This is characterized by more employees and revenue. The focus of the Entrepreneur is fostering
growth through delegation.

Functions of the Entrepreneur:

1. Create an organizational chart or a corporate structure for the organization

2. Spend more time with the marketing manager and less time with others like 80% to 20%
3. Explain business objectives to the corporate managers, draft a report format and meet
with each one every week
Basic challenges for Adolescent phase are: Evolving from being a manager of employees to a
manager of managers; insufficient cash; keeping communications open; managing customers’
expectations; delay in milestones delivery and running out of funds.

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Phase four: Maturity (growth through coordination and monitoring)

An overview for this phase is that growth continues with the previously isolated business units re-
organized into product groups or service practices. Investment finance is allocated centrally and
managed according to Return on Investment (ROI) and not just profits. Incentives are shared
through company-wide profit share schemes aligned to corporate goals. It is characterized by large
number of employees.

Roles of an Entrepreneur:

1. Employee- contribute positively

2. Manager- develop procedures to get work done, supervision etc.
3. Business builder- articulate values, philosophy and vision, supervision
4. Wealth builder- determines what the company is worth and what to do to increase its
worth.

Basic challenges for Maturity phase: choosing right kind of investors; managing
customers’ expectations and bureaucracy- team conflict.

Phase 5: Growth through collaboration

The formal controls are replaced by professional good sense as staff group and re-group flexibly
in teams to deliver projects in a matrix structure supported by sophisticated information systems
and team-based financial rewards. Further growth can only come by developing
partnerships with complementary organizations.

Phase 6: Growth through extra-organizational solutions

Greiner's sixth phase suggests that growth may continue through merger, outsourcing, networks
and other solutions involving other companies. Growth rates will vary between and even within
phases. The duration of each phase depends almost totally on the rate of growth of the market in
which the organization operates.

Managing Transition from Start up to Growth: The STARS Model

Business owners must make necessary changes from time to time and know how to manage
transition effectively. The number one reason why most businesses (small and large) are failing
today is that they do not recognize the need for a transition nor did they manage the transition
effectively. Some business leaders, who know that there is a need to manage transition, do not

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know where to get started and how to make the changes that will ultimately lead to sustainable
business success. Where to start is to acknowledge that all business ventures must have a start–up.

The STARS Model

The STARS model (Watkins 2003, 2009) provides a perspective on business evolution and
development that identifies the most common business transition:
• Startup
• Turnaround
• Accelerating growth
• Realignment
• Sustaining success.

The ability to navigate successfully in each situation is crucial to the success of individual
businesses.

Start-up stage: When starting a business, your focus should be on generating cash, gathering
skilled labour for your business, product and marketing development, securing adequate
inventory, and acquiring production technology. The challenges are in designing new production
systems and business structures, selecting business strategies, recruiting, and building teams, all
with limited resources. These are some of the most important aspects to be effectively managed
during the start- up phase:

• Have good vision, get your vision right, get your strategies right and get your action
plans right.
• Assemble a talented business team.
• Gather sufficient capital and operating cash.
• Work to remove problems in your production system.

Turnaround stage: A turnaround is critical when there is a need to save a failing business. It is
similar to radical surgery to save the life of the business. The focus should be on business
restructuring and obtaining external advice as needed.

Thus, what you need is to re-evaluate your business plan and make the necessary changes to the
strategies, markets, products, or technologies that are not working. More importantly, you need to:

• Learn and understand what went wrong in the business and communicate it to your
employees
• Remove any non-core business activities
• Make faster and bolder moves

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• Clean house at the top
• Secure early wins
• Create supporting alliances

Managing and accelerating growth: There are times when entrepreneurs have to deal with the
challenges and opportunities of increasing demand. Your focus should be on managing
the pressures of scaling up production by ensuring the resources required, improving the existing
systems, and creating new business structures.

Modify your business model for quicker response to market needs as follows:
• Organize to learn what is working
• Improve production systems
• Design new business structures as a way to ensure financing for expansion
• Implement new technologies
• Integrate new employees
• Establish priorities and focus on a few vital goals
• Build team leadership.

Sustaining growth/success: Some businesses reach their desired level of growth/success but
struggle to sustain it. The focus should be on business- model innovation – developing a
persistent competitive advantage through continuous improvement of the business model. An
emphasis on innovative new products and plant quality has also helped companies to sustain their
successes.

In order to sustain growth/ success, you also need to:

• Focus on your most productive areas for innovation
• Provide sustained benefits for all stakeholders
• Expand business-model innovation
• Pursue higher potential business-model improvements
• The entrepreneur should put in place: marketing plan and marketing strategies;
a financial planning; a production plan; and a business plan.

Transition Managers and the Transition Management Process: Transition managers are in a
unique position to facilitate the Transition Management Process, working simultaneously with new
business development project teams, divisional interfaces and senior management. The steps to
guide this process include:

• Setting/managing expectations among the interfaces including senior management

and the project team;
• Encouraging open discussions about the challenges of transition;

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• Establishing the strategic context for managing innovations;
• Identifying transition stages and issues;
• Building the transition management plan; and
• Facilitating business transition process.
Pitfalls in Managing Transitions from Start up to Growth: Success in business is never
automatic. Starting a business is always risky, and the chance of success is slim. Regardless of the
industry, failure is the result of either the lack of management skills or lack of proper capitalization
or both. The common causes of failure in business transitions include:

• Choosing a business that isn't very profitable

• Inadequate cash reserves
• Failure to clearly define and understand your market, your customers, and your
customers' buying habits
• Failure to price your product or service correctly
• Failure to adequately anticipate cash flow
• Failure to anticipate or react to competition, technology, or other changes in
the marketplace
• Overgeneralization
• Over reliance on a few key customers
• Putting up with inadequate management
• Lack of experience of managers
• Poor cash flow management
• Absence of performance monitoring
• Over borrowing and poor debtor management
• Lack of financial skills and planning
• Failure to innovate
• Poor inventory management
• Poor communications throughout the organization
• Competition
• Poor location and low sales
• Over investments in fixed assets
• Personal use of business funds and
• Unexpected growth (Mason, 2012).

DECISION MAKING IN BUSINESS TRANSITION

A decision is a choice made from at least two alternatives while decision- making involves the
selection of one alternative from two or more possible alternatives, based upon some criteria.
Decisions can either be programmed or non-programmed. However, to make an effective decision,
a manager should create a constructive environment, generate good alternatives, explore these

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alternatives, choose the best alternative, check the decision, communicate the decision, and take
necessary actions.

Definition of Decision Making: Decision-making is the process of identifying and selecting a

course of action to solve a specific problem.

Simple decisions usually need a simple decision-making process. But difficult decisions
typically involve issues like these:
• Uncertainty - Many facts may not be known.
• Complexity - You have to consider many interrelated factors.
• High-risk consequences - The impact of the decision may be significant.
• Alternatives - Each has its own set of uncertainties and consequences.
• Interpersonal issues - It can be difficult to predict how other people will react.

The Characteristics of Decision-Making

• Decision-making permeates all management.
• It is essential to the operation of the management process in any form of
organizational setting.
• It involves judgment.
• It includes risk and uncertainty, since it deals with future values.

The basic process of rational decision-making involves diagnosing and defining the problem,
gathering and analysing the facts relevant to the problem, developing and evaluating
alternative solutions to the problem, seeking the most satisfactory alternative, and converting this
alternative into action.

Conditions under which Managers make Decisions

In general, managers make decisions under three possible conditions, namely: certainty, risk and
uncertainty. Each of these conditions is briefly discussed below.

BUSINESS CONTROL

What is business control? This is the process of measuring and correcting the activities of
subordinates to ensure that plans are completed and goals are achieved. Control is
implemented by comparing actual results to planned results and correcting any significant
differences. Managers control their organization by continually monitoring the use and
performance of resources especially money and people.

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Controlling can be defined as the task of ensuring that the firm’s objectives are being
achieved. It entails establishing standards, comparing performance against these standards and
correcting deviations. Standards are set during the planning process. Standards form part of the
objectives of the company. Standards are therefore set as at the time the objectives are set. The
control process can therefore be said to start with the formulation of objectives.

Different types of control include the following:

1. Financial control
2. Inventory control
3. Quality control
4. Credit control
Controlling Techniques
A variety of tools and techniques have been used over the years to help managers in
controlling their operations. Three of such tools are:
1. Budgeting
2. Break-even analysis
3. Financial analysis

The business control process involves several activities:

• establishing performance standards;
• reporting or monitoring performance;
• comparing performance against standards;
• identifying unsatisfactory performance; and
• pursuing appropriate action to correct significant deviations in performance.

PERSONAL DISCIPLINE IN BUSINESS TRANSITION

Self-discipline will ensure that your thoughts are translated to actions during the most
difficult times in business. It involves deciding what you want, writing it down, setting a deadline,
organising the lists of things to do to achieve your goal by sequence and priority, taking steps daily
in the direction of the goal

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