REASONS WHICH COULD LEAD ONE TO START BUSINESS IN A COMMUNITY
Recognition
Self-satisfaction
Get profit
Unemployment
Self motivation
Retrenchment
IN ECONOMICS WE HAVE 4 FACTORS OF PRODUCTION
Land
Labour
Capital
Entrepreneurship
P = f ( land, labour, capital, entrepreneurship)
Entrepreneurship is one of the factor of production which involve creativity and inovation in either modifying existing business or starting a new business in a different way as compared to competitors. This will help exploiting business opportunities.
Economics, for example, focus on the entrepreneurs ability to act as change agents, such that mobilize resources, adopting technologies opening markets and exploiting opportunities.
The abilities asssociated with innoration in the technology and management aimed at doing new thing or old things in new way with new combination of resorces socialogists and anthropologist.
Concentrate in the way Entrepreneurial antivities influenced by group pressure ethnic characteristics or commercial value.
SUMMERY
It’s therefore summarized that for economy over the previously existing one or.
Produces or introduce the fame product or service in new markets through alertness in the process risk taking regarded as important.
Market Competitions
Product – out put goods or services
Market is the place where goods and service supplied to obtain profit or value.
Product being the component of the market scenery we look on the product features
Texture
Colour
Product packege
Ingredient
Quality
service we look what kind of target group we plan to sell or provide our product. what cultural they have, what kind of product are we going to offer to our customer. On customer we have to look .
Behaviour
In come
Group
Culture
As an enterpreneur what point are you going to consider marketing is a process of which involve interaction of either exchange of good /services at the right time right place right price and the right products.
Cost baged prising
Penetration Prising
Market prising
Premeum prising.
Competitors baged Prising
Skin Price
Promotional Prising
Cost based prising eg:when you made 10liters of juice the total cost is 15000/= so you will sell each liter for 2000/=
This come after preparation of goods depend to time you consume.
Penetration prising is the prising set by a marketer of supplyer to sell certain goods and services below competitors price.
Premeum Prising higher price above the market price charged to aproduct and in come of the consumer
Competitors based prising
It can be higher product or low pruduct depending on the market situation
Skim Price
To attract people to buy more product example when a customer buy one product and get one for free a buyer given additional after purchaging
Promotional Prising
These are situational prices set to win competition in the market.
Basecally it is price reduction doing low market season or doing holy days eg;X-mas promotion for the aim of increasing sales volume.
ROLE WHICH ENTERPRENUER PLAY IN ENTERPRISE
Promoters
Partners
Shareholders
Directors
Organizers
Initiator of idea
Risk takers
Planner
Controller
Co-ordinators
PROMOTERS
Enterpreneurs are promoters because they can scan/ survey the environment, I dentify the opportunities and implement the business ideas/projects
PARTNERS
Involved in the participation of other persons in a business project because of the following
Degree of success or failure factor involved
Complexity of a business idea that may require more than one person to run
Making use of the influence, experience and capacity of others
Consolidating friendship through joint business association
SHAREHOLDERS
Potential enterpreneurs would participate as shareholders under the following circumstances:
When the enterprise requires too much Investment e.g. When the foreigner want to invest in our country they must involve local people as shareholders.
When they do not want to commit their full time in the enterprise.
By spreading their investment portfolio to reduce risks
When they do not have the capacity to manage such an enterprise
DIRECTORS
Enterpreneurs participate as director by contributing ideas to advance the enterprises objectives.
They make financial decision within an enterprise.
ORGANIZERS
For an enterpreneur to effectively control monitor operation and facilitate communication with wokers, It is advisable to have an orgainzation structure for his/her enterprise. Types of possible organization structures can be formal or informal such as:-
Where various members of a family are assigned various positions
Where various employed assistants have been assigned administrative positions in the running of the small business
INITIATING IDEAS
Enterpreneurs come up with new ideas. This is an important area for an enterpreneur as it determines his rate of expansion in business e.g, new designs and use of products
TAKING RISKS
Enterpreneur take risks in business eg, Starting businesses which have the chance of success or failure- Resigning from secure jobs to start business is also risk taking
PLANNING
Enterpreneur should be aware of the importance of planning and limitation of planning in the interprise.
CONTROLLING:
Enterpreneurs are leader rather than followers
-They make final decisions and control all aspect of business operations
COORDINATING:
The enterpreneurs must coordinate all factors of productions in the business. Eg.
Financial, labour, and land.
TYPES OF ENTERPRENEURS.
Before beginning a business, thre is a need to I dentify the type of enterpreneur you might choose to be.
Each type should help the country to grow.
SELF EMPLOYED:
Is the type of enterpreneur where by individual perform all the work and keep all profit.
-This includes everything from family run stores, agents repair persons,accoutant, to phisicians and lawyers.
-It can be full time because no one else involved
( Refer to the advantage of the self employed)
OPPORTUNISTIC ENTERPRENEURS:
Those who start a business and expand as fast as possible in order to be able to hire other employees.
Most the time these additional employees have needed expertise that the owner does not have.
INVENTORS:-
Those with particular inventive abilities who design a better product and then creat companies to develop, produce and sell the item. High Technology companies of this type are a new trend.
PATTERN MULTIPLIERS:
Those who look for an aidea someone else has already created and then create their own business based on following another model.
ECONOMY OF SCALE EXPLOITERS:
Those who benefit from a large volume of sales by offering discount prices and operating with very low overhead.
ACQUIRERS:-
Those who take over a business started by another and use their own ideas to make it successfull. This often happens when there is financial problem in the current operation. Fresh management ideas may save the business
BUY –SELL ARTISTS
Those who buy a company for the purpose of improving it before sellingf it for a profit.
SPECULATORS
Those who purchase a commodity and resell it for a profit. Real estate art, antiques and crops are typical speculator items
INTERNAL ENTERPRENEURS [INTRAPRENEUR]
Those who creat new ideas and make them into a successful project within an existing business.
TOPIC 4
SMALL ENTERPRISES
MEANING OF SMALL BUSINESS
Elements that constitute the meaning
Independent Management
Owner supplied capital
Mainly local area of operation
Relatively small size within industry
A business is small if the owner has direct communication with the operating managers.
Individually owned and operated business.
A business employing not more than 50 people
SMALL BUSINESS STATISTICS AND OBSERVATION
Up to 95% of all businesses in most countries are small businesses
Over 40% of most nation’s business employees are employed in small businesses.
Approximately 75% of new jobs are generated by the small business sector.
Approximately 40% of the total business volume in many countries is done by small firms.
50% of all small enterprises fail in the first 2years.
60% of the money used to initiate small business is generated from the private sources such as saving and borrowing from friends.
Poor management is the biggest of failure in small business
Chances of any new business surviving more than 5 years is one to four
Small business is the natural home of enterpreneurship in almost all countries
Questions 1
Small enterprises have a role to play in all countries and in all sectors of economy.
CHARACTERISTICS OF SMALL BUSINESS.
Few management levels between the top and bottom of the business (low bureacracy)
Owner makes most decisions
Open communication in personal level.
Difficult to obtain funds, especially for expansion.
Financial matter is a continous problem.
Employees do a variety of tasks.
Low employees turnover
Planning is primary short- term
Indequate quantative data
Family ownership.
Few employees
Tied to local community
STRENGTHS AND WEAKNESS OF SMALL ENTERPRISES
WEAKNESS
Financial limitations
Man power problems
High direct costs
To many eggs
Lack of acceptance
STRENGTHS
Personal touch
Greater motivation
Greater flexibility
Less bureaucracy
Unobstrasive
[1]. Qualities that are often associated with successful enterpreneurship
Have the necessary technical knowledge of the business sector.
Have the right business skills
Have the ability to manage and develop relationship already established.
Have the ability to lead the business.
He/she can take over the vision.
He/she can offer a new perspective
[2]. Characteristics of enterpreneurs or general enterprising tendencies (GET)
a). Innovation ( New way of doing things
- A good idea of setting a business and developing good products/ services that appeals to customer.
b). Achievement oriented.
-Higher desire to do well in his/her business.
c). Pro-active
-Not only reacting but anticipate future needs and changes.
d). Risk taker .
-Venturing/taking/ starting a business with a lot of uncertainty.
e). Creative.
Transformation a dream into reality.
f). Passion
-Strong emotion with what one believes and perseverance which results into business success
g). Growth seeking.
-He/ she seek for the growth of enterprise always.
3) Main characteristic for successfully enterpreneurs
a) Moderate risk taking
-They normally calculate their chances for success, They prefer moderate and challenging risks where moderate returns are attainable.
b) Exhibit drive and energy
-Successful enterpreneurs can work for a long hours .they spend long and productive hours at work.
c) Have self confidence.
-They believe in themself and their abilities to achievethe goals they set.
d)Believe in long term commitment
-They have long term commitment to their business venture.
e) Are money oriented.
- They view money as a means to an end. It is a measure of their development and success.
f) Have a problem –solving attitude.
-They strive to overcome hurdles and solve problems.
g) Deal positively with problems and failure
- They regard failure as opportunity to learn and avoid similar problems in the future.
h) Seem and use feedback.
-They seek out and use feedback to learn their mistakes and set back to improve performance
I) Take initiative.
-They are self motivated and pro active acting on situations rather than waiting to be acted up on.
j) Seek personal responsibility
- They seek situations in which they are personally responsible for success or failure
k) Desire independence and individuality.
-They want to be their own boss, to do their own things in their own way and teir own pace.
l) Are innovative and creative.
-They seek new ideas about products and processes and new ways to solve problems.
m) Get a long well with others
-Have interest in people.
n) Compete against themselves
MAIN TYPES OF RISKS LIKELY TO BE FACED BY PEOPLE WHO BECOME ENTERPRENEURS:
Financial risk
By starting a business an individual always carries some risk of failure and puts personal capital invested in business or other invested resources at stake. These resources will be lost if the business /venture fails.
Career risk
Enterpreneur ask themselves if the whether they will be able to find a job or go back to their old job if their venture should fail.
Family and social risk.
Enterpreneurs who are married and especially those with children, expose their families to the risk of an incomplete family experience and the possibility permanent emotional scars, besides , old friends may vanish because of missed get together.
Psychic risk.
The greatest risk may be the well being of the enterpreneur. Money can be replaced a new house can be build, spouse children and friends can usually adapt. However enterpreneur who suffer financial catastrophes may be unable to bounce back.
Economic security risk.
The entails missing advantage of salarried employment has numerouse benefits including
Future security through retirement benefits
Pension scheme
Earning regular and stable income
Paid vacation
Medica and insurance benefits
Opportunities for promotion
COMMON PITFALLS BY ENTERPRENEURS IN SELECTING NEW VENTURE
-The most important pitfalls commonly encountered in the process o selecting a new venture /business are follow:-
Lack of objective evaluation
Many enterpreneurs lack objectivity in evaluating a product/service idea.
They need to subject the idea to rigorous study and investigation
Lack of real insight into the market
They need to project the life cycle of the new product and the timing of its introduction.
Inadquate understanding of technical requirements
Failure to anticipate the technical difficulties in developing or producing a product can sink a new venture.
Poor financial understanding
Some enterpreneurs underestimate the funds required to carry the project to completion.
Lack of venture uniqueness.
A new venture should be unique.
Uniqueness is the special CV and design concepts that draw the customer to the venture. It should provide performance or services superior to competitor
Ignorance of legal issues.
Business is subject to many legal requirement. Legal issues overlooked including
Work place safe for employees
Providing products/services that are reliable and safe.
Protecting ones inventions and product through patents, Trademarks and copy right.
MAJOR CAUSES OF FAILURE FOR NEW BUSINESS:-
Product/ market problem.
-Poor timing – a pre-mature entry into the market place.
- product design problems.
-Inappropriate distribution strategy.
-Unclear business definition.
Managerial problems
-Hiring and promotions based on nepotism rather than qualification.
-Poor relations with parent companies and venture capitalists.
- Incompetent support proffessionals. Eg Attorneys. Who are unable to read contracts.
Financial difficulties
-Initial – under capitalization
-Inadequate working capital
-Assuming debt too early
Human resource problems
High owner ego
Interpersonal problems –subsquent firing
Employee related conflicts
Control factor – poor monitoring and control of resources
HOW DO I FIND A GOOD BUSINESS IDEA
Personal skills and experience
Over half of the ideas for successfull business come from work place experience.
The back ground of the enterpreneurs play a crucial role in the decision to good into business as well as the type of venture created.
Your skills and experience are probably your most important resource not only in generating ideas but also in capitalizing on them.
Mass media
The mass media is a great source of information, ideas and often opportunity. Newspapers, magazines, television, and now the Internet are all example of mass media.
Exhibitions
-Is to attend exhibitions and trade fairs.
- These are usually advertised on the radio or news papers. By visiting such events regularly, you will not only discover new products and services but also meet sales representatives, manufacturers, wholesalers distributors and franchisers.
-These are often excellent sources of business ideas, information and help in getting started.
Survey .
Survey may be conducted informaly by taking to people – usually using a questionnaire or through interviews and or by observation.
You may start talking to your family and and friends to find out what they think is needed or wanted
Beside talking to people you could also get information by observation.
Complaints
Complaints and frustrations on the part of customers have led to many a new product and services.
-You can have a good ideas from some complaints about the abscence of a certain product.
Brainstorming
-Brainstorming is a technique for creative problem- solving as well as for generating ideas. The objective to come up with as many ideas as possible.
Each ideas leads to one or more additional ideas, resulting in a good number.
Don’t critisize or judge ideas of others :-
Ideas that seem to be wild or crazy are welcome
Combine and improve upon ideas of others
All ideas should be recorded
HOW DO I ORGANIZE AN ENTERPRISE
Know your competitors:
ANALYSING COMPETITION:
-Competition must be expected by new venture,but having too much competition is an unnecessary risk. It would be better to select another venture.
-You must know your competitors as well and customers.
-Know how your competitors operates
Steps should be taken to know your competitors
Step 1. Identify your competitors
Direct competitors
List each by name, address and type of business.
Indirect competitors
List the name, address and type of business of each firm
Steps 2. Analyse recent start-up and recent failures
List competitive business that have started within the past years
List competitive business that have gone out of business within the past years.
Analyse the reasons for the start up and their failures
Steps 3. Analyse existing business
Estimate the sale and profits of each of your competitors.
Rate your competitors in terms of price, quality of product or service, facilities, advertising, promotion and sales
What price do they charge?
How much do they advertise?
What extra service do they offer?
Is their location expensive, moderate or cheap?
Are their employees well trained?
Are their employees well paid?
Steps 4. Compare proposed operation against the competition.
Indicate the advantage your product and /or services will have in terms of price, perfomance, quality, durability and visibility
Explain why your method of operating will be successfull.
Explain the market for the business.
2: Minimizing problems of starting a business
Personal qualification
Finances
Customer
Business operators
Using outside assistance
Keeping records.
Reasons to why the small enterprises fail to secure loans from commercial banks.
Lack of collateral
Small business has no tangible assets to secure
Inability to afford high interest charges on loan
The cost of borrowingis generally high.
High administrative cost for banking system.
Funds disbursed to micro-enterprises are often difficult and costly to administrative.
Low skills to apply for the loans.
Small enterprises are generally less trained in processing credible loan applications or preparing acceptable business plan.
Low skills and experience to manage profitable business
There is high failure rate in small and new ventures. Many failure to utilize the loan for productive, profitable purposes and be able to repay the loans.
ROLE OF SMALL BUSINESS TO THE ECONOMY OF THIS COUNTRY
Employment creation
Establishment of new business creates jobs in the business formed
The more enterprising people are the more the chances of investing in new ventures and creating jobs.
Economic growth.
New business creat weath which is eventually distributed to all member in various forms.
Standard of living
Enterpreneurship enables a country to produce quality products and services which are sold at reasonable price consumption of high quality goods at low prices improves the consumers standard of living.
Distribution outlets for big business (Investment opportunity)
Large business rely on small business (wholesale) and retail outlets to distribute product and services to consumer.
Tax base (Revenue to government)
New businesses become tax payers, thus returning the revenue to the government .
Technological development.
Enterpreneurs develop new products from new Ideas. Every business strive for profitability but competitors dictates that great stride be made in technology.
Condition for enterpreneurship success in Tanzania
-The success of an enterprneur in starting a managing a profitable business does not depend on the characteristics of an enterpreneur alone but rests on number of other environmental factors.
Financial base.
Banks and government need to be involved in financing new business ventures at reasonable rates.
Education and training.
-Enterpreneurs need to have basic education and sufficient experience in the business fields they undertake
-Lack of management skills is often identified as one of the major causes of business failures
Availability of infrastructure.
-An enterpreneur stands better chances of success where efficient transport facilities, good telecommunication systems and distribution networks are well provided.
Favourable laws and regulations
Rigid laws and business regulations may be a cause of discouraging enterpreneurial activities. Regulation should be regulated.
Trade regulations
Strong trade regulation, tarrifs should be regulated.
Taxes.
Heavy taxes levied on business establishment reduce profitability.
-Taxes should generally reduced especially for new business to creat incentive
Research
Society encouragement and support
Specific ways in which an enterpreneurs can cope with stress.
Networking:
-One way to relieve the loneliness of running a business is to share experiences by networking with other business owners
Getting away from it all:
Should go for the holidays . (short breaks may be also good)
Finding satisfaction outside the company
Communicating with surbordinates
Delegation.
BUSINESS PLAN:
Defn: a business plan is a written document that describe the objective of the proposed business venture and the steps necessary to achieve those objectives.
-It describes all the relevant external and internal elements involved in starting a new venture.
-It is a game plan showing where you are going, where you are, and how to get there.
b) The importance of business plan to the enterpreneur
It describes the path for a enterpreneur to follow through periods of growth
It enables investors,bankers and other creditors to understand and appreciate the enterpreneurial for successful business.
Saves us sales documents to raise fund.
Helps the enterpreneur to minimize risk of failure and avoid problems
Help enterpreneurs to develop his/her managerial skills
