CHAPTER I: Introduction to

Entrepreneurship and Small Business

Entrepreneurship: Concepts & Definitions
Entrepreneurship is the symbol of business strength and
achievement.
Entrepreneurs are the founders of today's business
success; their sense of opportunity, their drive to
innovate and their capacity for accomplishment have
become the standard by which free enterprise is
measured.
Entrepreneurs will continue to become critical
contributor to the economic growth through their
innovation, research and development effectiveness,
job creation, competitiveness, productivity, and
formation of new industry.
 Entrepreneurship: Concepts…..

Researchers (e.g Morris, 1998) argue that a clear

definition showing the boundaries of
entrepreneurship is not yet settled.

As a result, the term has been used to define a wide

range of activities such as; creating, founding,
adapting and managing a venture (Hoy and Vesper,
1994; Hisrich et al, .2005).
And it has emerged as an important force in global
economic growth.
 Entrepreneurship: Concepts…..

But, as an academic discipline it is still considered

relatively new (Mcstay, 2008), although its origin
can be traced back to the seventeenth century,
when economist Richard Cantillon coined the
term, ‘entrepreneur’ (Cantillon, 1755).

The literal definition of this French term is ‘to

undertake’ or ‘go between’ referring to the
position an individual assumed when pursuing
an opportunity (Mcstay, 2008).
 Entrepreneurship: Concepts…..
According to Hisrich et al., (2005), a go-between are
persons who act in between and took on the associated
risk but did not necessarily provide the capita.

Davidson (2003) opine that the entrepreneurship

literature has been crowded with a variety of different
definitions and contexts.

And entrepreneurship is considered as a multi-faceted

phenomenon borrowing from several academic
disciplines (Low and MacMillan, 1988).
 Entrepreneurship: Concepts…..
Joseph Schumpeter (1928) is considered as one of the
creators of the concept of entrepreneurship.
Schumpeter associated the concept of
entrepreneurship with innovation (Filion, 1998)
and posited that the essence of entrepreneurship lies
in the perception and exploitation of new
opportunities in the realm of business,
and it always has to do with bringing about a different
use of national resources in that they are withdrawn
from their traditional employ and subjected to
new combinations.
 Entrepreneurship: Concepts…..
Stevenson and Jarillo (1990) indicated that after
Schumpeter’s clarification of innovation most
economists and other non-economists have
accepted the connection of entrepreneurship with
innovation.

However, Entrepreneurship as a field of study began to

emerge in the 1970s.

Birch did various studies in 1979 and 1987 which

revealed that the economic impact of
entrepreneurship was not only attributed to business
formation, but also to the growth of new businesses.
 Entrepreneurship: Concepts…..
Filion (1998), states that during the 1980s the
field of entrepreneurship exploded and spilled
over into most of the soft sciences and
management sciences.

The transition was marked by two events - the

publication of the first-ever encyclopaedia
containing the state of the art in the field
(Vesper et al.,1982), and the first major annual
conference (the Babson conference) dedicated
to research in the new field.
 Entrepreneurship: Concepts…..
Morris (2008) characterised the entrepreneurial field as having
seven perspectives that are quite representative of the
evolution of the field, whilst also emphasising the apparent
importance of creation of the field. These perspectives are:

 The creation of wealth,

 The creation of enterprise,
 The creation of innovation,
 The creation of change,
 The creation of employment,
 The creation of value and
 The creation of growth
(Morris, et al., 2008).
 Entrepreneurship: Concepts…..
Covin and Slevin (1991) indicated that the
overriding reason for the increased interest in
entrepreneurship is the widespread belief that
entrepreneurial activity stimulates general
economic development as well as the
economic performance of individual
businesses.
Entrepreneurship is the key element for gaining
competitive advantage and consequently
greater financial rewards.
 Entrepreneurship: Concepts…..
The concept of entrepreneurship varies from country to
country as well as from period to period and the level of
economic development thoughts and perceptions; a concise
and universally accepted definition has not yet emerged.

Example:
 In the earliest period: An entrepreneur was viewed as a go-
between, who attempt to establish trade routes and signed
contracts with many persons (forerunners of today's venture
capitalist) to sell goods.
While the capitalist was a passive risk bearer, the merchant
adventure took the active role in trading, bearing all the
physical and emotional risks.
 Entrepreneurship: Concepts…..
 In the Middle Ages: The term entrepreneur used to
describe a person managing large production projects.
In this case, the person would not take any risks but would
merely manage the project using the resource provided.
In the 18th century, The Irishman named Richard Cantillon,
who was living in France, credited to being the first to
use the term entrepreneur in the business context.
He viewed the entrepreneur as a risk taker, seeing the
merchants, farmers, crafts men, and other sole
proprietors buy products at certain price –therefore,
operating at a risk condition.
 Entrepreneurship: Concepts…..
Karl Vesper: has researched entrepreneurship and explained
that its nature is a matter of individual perception.
• To an economist: an entrepreneur is one who brings
resources; labor, materials, and other assets in to
combination that makes their value greater than before.
• To a psychologist: such a person is typically driven by
behavioral forces like need to obtain, to experiment, to
accomplish something, or perhaps to escape authority of
others.
• To capitalist philosophers: an entrepreneur is the one
who creates wealth for others as well, who finds better
ways to utilize resources and reduce waste and who
creates job that others are glad to get.
 Entrepreneurship: Concepts…..
Fundamentally, entrepreneurship is a human creative act,
involved building a team of people with complementary skills
and talents. And there have been hundreds of definitions in
dozens of books. Such definitions include, an entrepreneur is:
• A decision maker whose entire role arises out of his alertness
to hitherto unnoticed opportunities (kirzner-1973).
• Who uses available resources in novel ways (Schumpteter-
1934).
• Are action oriented, highly motivated individuals who take
risk to achieve goals.
• Are people who have the ability to see and evaluate business
opportunities, the ability to gather resources to take
advantage of them; and the ability to initiate action to insure
success?
• Is someone who always searches for change, responds to it,
 Entrepreneurship: Concepts…..

The concept entrepreneurship has wide rages of

meanings.
On one extreme, an entrepreneur is a person of
very high aptitude who pioneers change,
possessing characteristics found in only a very
small fraction of population.
On the other extreme of definition, any one who
wants to work for is considered an
entrepreneur.
 Entrepreneurship: Concepts…..

In almost all of the recent definitions, there is an

agreement that we are talking about a kind of
behavior that includes:

• Initiative taking
• The organizing and reorganizing of
social/economic mechanisms to turn
resources to practical account, and
• The acceptance of risk or failure, etc.
 Entrepreneurship: Concepts…..

Robert Hisrich (1985), defined entrepreneurship in a

relatively comprehensive way as:

“ a process of creating some thing different with value

by devoting the necessary time, and effort assuming
the accompanying financial, psychological, and social
risks, and receiving the resulting rewards of
monetary and personal satisfaction.”
 Entrepreneurship: Concepts…..
Characteristics of Successful Entrepreneurs
A common stereotype of the entrepreneur emphasizes such
characteristics as a high need for achievement, willingness
to take moderate risk, and strong self-confidence. Go
through the following listed characteristics and compare
them with what you have identified.
A) Need for Achievement:
David C.Mclelland, a Harvard psychologist, discovered a
positive correlation between the need for achievement and
entrepreneurial activity. According to McClelland, those who
become entrepreneurs have, on the average, a higher need
for achievement than do members of the general
population. Entrepreneurs are driven by a need to achieve
more and more.
 Entrepreneurship: Concepts…..
B) Willingness to take risk:
The risks that the entrepreneur takes in starting and or
operating their own business are varied. By investing their
own money, they assume a financial risk. If they leave
secured jobs, they risk their careers.
The stress and time required in starting and running a business
may place their families at risk. In addition, entrepreneurs
who identify closely with particular business venture assume
psychic risk as they face the possibility of business failure.
David C. McClelland discovered in his studies that individuals
with a high need for achievement also have moderate risk
taking propensities. Often enough entrepreneurs are
calculated risk takers. They enjoy the excitement of a
challenge
 Entrepreneurship: Concepts…..
C) Self-Confidence:
Studies show that successful entrepreneurs tend to be confident
individuals who see the problem in launching a new venture but
believe in their own ability to overcome these problems.
Some studies of entrepreneurs have measured the extent to which
they are confident of their own abilities. According to J.B.Rotter,
those who believe that their success depends upon their own
efforts have an internal locus of control. In contrast, those who
feel that their lives are controlled largely by luck or chance or
fate have an external locus of control.
External locus of control believing that ones life is controlled more
by luck or chance than ones own efforts. Based on research to
date, it appears that entrepreneurs have a higher internal locus
of control than is true of the population in general.
 Entrepreneurship: Concepts…..
D) Innovation and creativity:
Innovative activity is a hallmark of entrepreneurship. The
entrepreneurial manager is constantly looking for innovations,
not by waiting for a flash of inspirations, but through an
organized and continuous search for new ideas.
Entrepreneurship is not so much an art that either you have, or you
do not, but rather a practice, which you constantly follow or you
choose to ignore. It thus can be developed and learned; its core
activity is innovation and a continuous, purposeful search for
new ideas, and their practical applications.
Doing things differently is part of entrepreneur's nature. It is how
they create a market opportunity and differentiate themselves
from the multitude. Innovation can be based upon many factors
from marketing to technology.
 Entrepreneurship: Concepts…..
E). Total commitment:
Hard work, energy, and single mindedness are all
essential elements in the entrepreneurial profile.
F). Effective time management:
Entrepreneurs are well aware that time is
something that cannot be saved if every single
minute is not used worthy enough. Establishing
goals, determining deadlines, allocating time for
each and every important activity are personality
traits entrepreneurs are identified with.
 Entrepreneurship: Concepts…..
G). An Ability of leadership:
Successful entrepreneurs are successful leaders, whether
they lead few employees or hundreds or thousands. By
the very nature of their of their work , entrepreneurs are
leaders because they must seek opportunities ; initiate
business enterprises; gather the physical, financial and
human resources to carry out heir enterprise; set goals foe
themselves and for others, and direct and guide others to
accomplish goals.
To be aware of better ways to accomplish tasks is to be an
effective leader. You are likely to be successful leader if
you believe in continuous growth, improved efficiency and
the continued success of your organization.
 Entrepreneurship: Concepts…..
H). An ability of decision making:
Successful entrepreneurs are creative decision makers.
Looking matters from different angles, gathering relevant
information for decision making and consistency are
crucial in entrepreneurial decision making.

I). Desire for Independency:

They wish for autonomy believing that independency of
action is the only sure way to get what they need.
Note that whilst entrepreneurs may share some of these
characteristics, no one single trait can be said to be secret
of entrepreneurial success.
 The 10 PECS
PERSONAL
ENTERPRENEURIAL
COMPETENCIES

07/25/2025 25
1. Opportunity seeking and initiative

2. Goal setting

3. Systematic planning and monitoring

4. Information seeking

5. Risk taking

6. Persistence and Commitment

7. Quality

8. Efficiency

9. Persuasion and networking

10. Independence and self-confidence
07/25/2025 26
 Opportunity seeking and
initiative

- Does things before asked or forced by

events- proactive
- Seizes opportunities to start a new
business, obtain finance, equipment,
land, work space or assistance etc.
- Takes action to extend the business
into new areas, products or services
(Continuously moves into new fron-
tiers)

27
07/25/2025 27
 THINK Entrepreneurially!
• What matters
most is who
owns the cup!

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 Attitude
• “Attitude determines altitude.” “Attitude
is everything.” (Watch the iceberg and
Rebirth of the Eagle)

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WHAT ENTREPRENEURS
SEE
OBJECTIVES
 FIRST STEPS
 OPPORTUNITIES

WHAT OTHERS SEE

 CHAOS OR CONFUSION
 VICIOUS CIRCLES
 PROBLEMS
30
07/25/2025 30
 Exercises- Opportunity Seeking
. . .
. . .
. . .
Connect the nine dots without uplifting your pen-
cil
“Creativity emerges from the elimination of all un-
necessary assumptions.”
31
07/25/2025 31
NINE DOTS

07/25/2025 32
 - Deliberately calculates risks
and evaluates alternatives

- Takes action to reduce risks

and control outcomes

- Faces challenges and mod-

erate risks

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33
 - Finds ways to do things
better ,faster and cheaper

- Acts to do things that meet or ex-

ceed standards of excellence

- Develops ways / procedures that

ensure the required quality
34
07/25/2025 34
 - Takes action in the face of a signifi
cant
obstacle
- Acts repeatedly or switches to al-
ternative strategies to meet a chal-
lenge or overcome an obstacle.
- Takes insistent actions or switches
between alternatives to attain goal
- Takes personal responsibility and
demonstrate proactive stance
- Story of persistent people like
Tomas Edison
35
07/25/2025 35
 - Makes a personal sacrifice
or go to an extra mile to
complete a job (honors his/
her word)
- Does ‘low level’ jobs to get a
job done
- Strives to keep customers
satisfied and places long
term goodwill over short
term gain
36
07/25/2025 36
 - Seeks information from clients, suppliers, competitors
and other sources

- Does research on how to provide a product or service

- Seeks the advice of experts

37
07/25/2025 37
 - Sets personally meaningful and
challenging goals/objectives

- Articulates clear and specific

long range goals

- Sets SMART short term objec-

tives

38
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 - Plans by breaking large tasks into
small steps with deadline

- Evaluates performance, receive

feedbacks and change accordingly

- Keeps neat financial records and

utilizes them for business deci-
sions

39
07/25/2025 39
 - Uses deliberate strategies to influ-
ence or persuade others

- Uses key people to accomplish ob-

jectives

- Acts to develop and maintain busi-

ness contacts
40
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 - Looks for freedom and autonomy
from control of others/ curtailing rules

- Sticks with own judgment

- Expresses confidence to accomplish

‘difficult tasks’

41
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 Intrapreneurship: Concepts
The term corporate entrepreneurship has been
explained as intrapreneurship (Pinchot, 1985),
corporate venturing(MacMillan, 1986; Vesper,
1990) as well as corporate entrepreneurship
(Guth and Ginsberg 1990; Hornsby et al.,
1993).

In many instances, the terms intrapreneurship

and intrapreneur are used to refer to the
process and the individuals respectively.
 Intrapreneurship: Concepts
And, Pinchot (1985) coined the terms intrapreneurship
and intrapreneur to refer to the process and the
person respectively. Accordingly, he stated an
intraprener as any of the “dreamers who do”.
Elaborating this he explained that intrapreneurs are
those who take hands-on responsibility for creating
innovation of any kind within an organization.

Comparatively he described the entrepreneur as

someone who fills the role of an intrapreneur
outside the organization
 Intrapreneurship: Concepts

As far as terminology is concerned, there are several

terms such as intrapreneuring; corporate
entrepreneurship; internal corporate
entrepreneurship; corporate venturing; internal
corporate entrepreneurship; strategic renewal;
internal entrepreneurship and venturing (Sharma
and Chrisman, 1999: Pinchot, 1985; Antoncic &
Hisrich, 2004).
 Intrapreneurship: Concepts
Antoncic & Hisrich (2001) considered corporate
entrepreneurship as a spirit of entrepreneurship
within the existing business.

Developing on this tone Antoncic and Hisrich (2001),

define the term corporate entrepreneurship as a
process that goes on within a founded firm, regardless
of its size, and leads not only to new business ventures
but also to other innovative activities and orientations
such as development of new products, services,
technologies, managerial techniques, strategies, and
competitive postures.
 Intrapreneurship: Concepts
Pinchot (1985) defines “intrapreneurship” as
entrepreneurship inside the organisation where
individuals will champion new ideas from development to
complete profitable reality.

Hence it can be understood that corporate entrepreneurship

is just entrepreneurship inside an existing company.

Similarly, Morris, et al. (2008), describe the term as

“entrepreneurial behaviour inside established mid-sized
and large businesses”.
 Intrapreneurship: Concepts

“……. is a process through which individuals in an

established business pursue entrepreneurial
opportunities to innovate, without regard for the
level and nature of currently available resources..”
Ireland et al (2006).
 Intrapreneurship: Concepts
Dimensions of corporate Entrepreneurship

Corporate entrepreneurshipis characterised by certain

components, and these components have been
broadly described as the dimensions of corporate
entrepreneurship by different scholars.

For example Tasika M. Davis (2006), revised the

literature on the area of corporate
entrepreneurship and compiled the following
dimensions:
T a b le : T h e d im e n sio n s o f c o r p o r a te e n tr e p r e n e u r s h ip

D im e n s io n (s ) C o n tr ib u tin g A u th o r /s

In n o v a tio n A c tiv itie s Z a h ra , N e u b a u m , a n d H u se (2 0 0 0 )

V e n tu rin g A c tiv itie s G u th a n d G in s b e rg (1 9 9 0 )
O rg a n iz a tio n a l R e n e w a l

D e v e lo p m e n t o f N e w id e a s H o rn s b y , K u ra tk o , a n d Z a h ra (2 0 0 2 )
Im p le m e n ta tio n o f N e w Id e a s

P ro c e s s o f O rg a n iz a tio n a l R e n e w a l S a th e (1 9 8 9 )

N e w S tra te g ic D ire c tio n V e sp e r(1 9 8 4 )

In itia tiv e fro m B e lo w
A u to n o m o u s B u s in e s s C re a tio n

R is k ta k in g G u th a n d G in s b e rg (1 9 9 0 )
In n o v a tio n C o v in a n d S le v in (1 9 8 9 , 1 9 9 1 )
P ro a c tiv e n e s s Z a h ra (1 9 9 1 )

P ro d u c t in n o v a tio n M ille r (1 9 8 3 ) P
P ro a c tiv e n e s s
R is k ta k in g

C re a tio n K u ra tk o , Ire la n d , a n d H o rn s b y (2 0 0 1 )
R enew al
In n o v a tio n

E n tre p re n e u rs h ip tu rn e d in w a rd T h o rn b e rry (2 0 0 1 )
C o rp o ra te V e n tu rin g , In tra p re n e u rin g
O rg a n iz a tio n a l tra n s fo rm a tio n
In d u stry R u le -b re a k in g

S o u r c e : T a s sik a M . D a v is (2 0 0 6 ).
 Intrapreneurship: Concepts
These dimensions generally fall under the eight broad
components as outlined by Antoncic and Hisrich (2003),
namely:

(1) new venture creation;

(2) new businesses creation;
(3) product/service innovativeness;
(4) process innovativeness;
(5) self-renewal;
(6) risk taking;
(7) proactiveness; and
(8) competitive aggressiveness.
 Small and Micro enterprises: The Vital
Components of the Economy
Micro and small businesses
Either in the developed or under developed, countries, it is
presumed that small and micro business play a very
important role in one’s economy.
Micro and small businesses complement day to day life in
many aspects.
They create job opportunities, provide goods and services
of need and wants, advocate and introduce technologies
to the public use with many other detailed purposes to
the society, the country, and the world at large.
Therefore it is very important to know about micro and
small businesses.
 Small and Micro enterprises………
Definition:
In classifying and defining a business organization,
the following questions can be raised:
• What yardsticks are applied to determine business
size?
• Is independent ownership a critical factor?
• Is either sales volume or number of employees a
logical guide in describing smallness?
• Can a business be described accurately as small in
both manufacturing and retailing sector etc.?
 Small and Micro enterprises………

The ministry of trade and industry of the FDRE

provides the following definitions
– Micro enterprises: are business enterprises found in
all sectors of Ethiopian economy with a paid-up capital
(fixed assets) of not more than 500,000.
– Small enterprises are business enterprises with a paid
up capital of more than 500,000 but not more than
birr 2,000,000.
The above definitions are given in accordance with
the provisions of the FEDERAL SMALL and MICRO
ENTERPRISES AGENCY.
 Small and Micro enterprises………
Micro and small enterprises are establishments staffed with
10 persons using power driven machinery.
The following criteria are used to classify businesses
– Size criteria
• No. of employees
• Sales volume
• Capital
• Asset size
• Insurance in force
• Volume of deposits
– Economic /control criteria
• Market share
• Independence
• Personalized management
 Small and Micro enterprises………
To provide a clearer image of the SMES, the following
general criteria in defining small business are
suggested:
• Financing of the business is supplied by one individual
or a small group. Only in a rare case would the business
have more than 15-20 owners.
• Except for its marketing function, the firm’s operation is
geographically localized.
• Compared to the biggest firms in the industry, the
business is small.
• The number of employees in the business is usually
fewer than 100.
 Small and Micro enterprises………
Though the definition of small, micro and medium
enterprises with respect to size criteria varies from
country to country the generally acceptable divisions
are:-
• Up to 19 workers–micro or very small enterprises
• 20-100 workers – small enterprises
• 101-500 workers – medium enterprises

Micro and small business are those that employ

relatively less amount of capital, labor, land as well as
entrepreneurial resources than that of the big
industries.
 Small and Micro enterprises………
Motives of establishing a small business:
The desire for individuals to own and operate their own
small business is growing. For individuals pursuing a
career in business ownership, numerous benefits can
be attained personally as well as professionally. There
are several advantages sought of small businesses,
some common are:-
• Independence: - The freedom to do things in one’s
own way outsets the responsibilities associated with
the independence.
• Financial opportunities:- Many small business owners
make more money running their own company than
they would be working for some one else.
 Small and Micro enterprises………
• Community service: - Sometimes individuals with an
entrepreneurial ability may come across some needs and wants
of the community and they may think that they can provide it
with an exchange of value. This community serving motive may
provide an advantage.
• Job security: - when one owns a business job security is ensured.
• Family employment: - small businesses most of the time do have
vacant jobs at least for families and relatives. The perpetuation
of the business is actually dependent on extended family
employment.
• Challenge: - a challenge is most of the time a good motive for
success. And only the toughest entrepreneurs come to be
successful in the ever-challenging environment of the business
world. A success advantage is exploited from the motive to
challenge. Challenge gives psychological satisfaction.
 Small and Micro enterprises………
– Contributions of small and micro business.
Small and micro firms have greater contribution to a nation’s economic
welfare. They produce a substantial portion of our total goods and
services. Other than supplementing big businesses, SMEs have a number
of purposes: Some are:-

• Provide new Jobs: - Because the formation, market entry as well as

operation of SMEs is relatively easy in the time, they produce the “lion’s
share of new jobs, some times adding jobs while large corporations are
“downsizing and laying off employees.
• Introducing Innovation:- A record shows that many scientific break
through originated with independent inventors and SMEs.
• Producing Goods and Services efficiently:-As there are some areas in
which large businesses are effective and efficient enough in production,
there are some areas in which small businesses are very convenient in
performing activities, This advantage of small business can easily fill the
gap in efficiency of large businesses.
 Small and Micro enterprises………
• Stimulating Economic Competition: - When producers consist of
only a few big businesses, the customer will be at their control
they can set high prices, withhold technological developments
exclude new competitors or other wise abuse their position of
power. If competition is to have a “cutting edge” there is need for
SMEs.
• Aiding Big Business:- SMEs may provide numerous functions to
big businesses two of them are:
– Distribution function:- Whole sales and retail establishments, many of
them perform a valuable economic service by linking customers and
produces of those products.
– Supply function:- SMEs act as suppliers and subcontractors of large
firms. In addition to supplying services, directly to large corporations,
small firms provide services to customers of big business eg. Repair
appliances, installation etc… therefore large firms form a “partnership”
and “strategic alliance with small firm.
 Small and Micro enterprises………
– Economic, social and political aspects of small business enterprise

Small businesses (enterprises) have to play a vital role in Ethiopian

economy. They need a strong support on socio-economic and
political grounds.

• Socialistic idea
Our goal is to establish a socialistic pattern of society. The main
objectives are equitable distribution of wealth and
decentralization of economic power. The benefits of industrial
growth should be shared by as many people as possible and
should improve thee general standard of living. Proliferation of
small enterprises will go a long way in achieving these
objectives.
 Small and Micro enterprises………
• Less capital and more labor
We have vast manpower but inadequate capital which has resulted in
increasing unemployment. Planners have realized the necessity of
encouraging small industries because they require less capital but
generate more employment. The small scale sector has the capacity
to generate a much higher degree of employment than the large
scale sector. The small industries will stand in good position because
they are less capital intense and more employment oriented.

• Removing regional imbalances

There is continuous shifting of people from rural to urban which causes
over-crowding in cities with slum conditions due to lack of social and
medical amenities which require heavy investments. This problem
can be solved by inducing people to set up small industries in rural
areas. The prolific setting up of agro-based industries will go a long
way in creating a balance in the economy.
 Small and Micro enterprises………
• Creating self- employment opportunities
Self employment can be generated in adequate avenues by
setting up small industries with the help and expertise
provided by the government and other agencies. Bank and
several industrial corporations have arranged special training
programs for young entrepreneurs who can easily set up their
own units with package assistance from the government.

• Ancillary function
Many small-scale industrial units supply parts and accessories to
bigger industries. This ancillary function involves specialization
in specific areas and results in greater profitability. The
government has relaxed the ceiling of investment in plant and
machinery for ancillary unit.
 Small and Micro enterprises………

• Export promotion
Small-scale industries are opening up fresh avenues in the
export market. Realizing the importance of small-scale
sector in the economy, the Ethiopian government has
adopted several measures to speed up the growth for small
industries.

• Supply of critical raw materials

The government has also liberalized the import policy to
ensure regular supply of raw materials to small industrial
units, and devised a more efficient and consistent system of
distribution of critical raw material.
 Small and Micro enterprises………
Problems in Ethiopian small business
Small-scale industries have not been able to contribute
substantially as needed to the economic development
particularly because of financial, production and marketing
problems. These problems are still major handicaps to
development.
Lack of adequate finance and credit has always been a major
problem of Ethiopian small business. Small scale units do not
have easy access to the capital market because they mostly
are organized on proprietary partnership basis and are of very
small size.
They do not have access to industrial sources of finance partly
because of their size and partly because of the fact that their
surpluses which can be utilized to repay loans are negligible
 Small and Micro enterprises………
Because of their size and partly because of their
limited profit, they search funds for investment
purposes. Consequently, they approach money-
lenders who charge high rate of interest. Hence
small enterprises continue to be financially weak.

Small scale enterprises find it difficult to get raw

materials of good quality and at cheaper rates
in the field of production. Very often they do not
get raw material in time.
 Small and Micro enterprises………
As a result, these enterprises fail to produce goods in
requisite quantities and of good quality at a low cost.
Furthermore, the techniques of production, which these
enterprises have adopted, are usually outdated.
Because of their poor financial position they are not
able to buy new equipment, consequently their
productivity suffers.

Many small business enterprises are suffering with the

problem of marketing their products. It is only by
overcoming all these constraints that small
entrepreneurs can hope to make their enterprises
successful.
 U !
K YO
HA N
T