1.0 Introduction
This lesson is intended to help in understanding the terms in entrepreneurship and their relationship and be aware of the potential careers in self-employment. It entails the various factors to be considered in becoming self-employed.
The lesson will also seek to understand characteristics that underlie the success of an entrepreneur.
1.2.1 Entrepreneur
This is a person who is able to identify business opportunities and obtain the necessary resources to initiate a successful business activity.
1.2.2 Entrepreneurship
This is the act or process of identifying business opportunities and gathering the
necessary resources to initiate a successful business activity.
Entrepreneurship: becoming enterprising from within an organization.
1.2.3 Self-employment.
This is being in business by oneself.
1.2.4 Small Business
Is one that is independently owned and operated and not dominant in its operation
1.3 Classification of entrepreneurs.
They can be classified into 2 types.
1.3.1 Craft entrepreneurs
This is a person who exploits and utilizes personal skills without expanding the business. They are also called skill-based entrepreneurs.
1.3.2 Opportunistic entrepreneurs
This type of entrepreneur is more of a coordinator who is interested in having the business grow and expand delegating responsibility to others, increasing the number of employees working in the business. They are also called environment Based entrepreneurs.
1.4 Self-employment Vs paid employment
Factors to be considered in becoming self-employed include;
(i) Opportunity cost considering the advantages and disadvantages of going into small scale enterprise and employment.
(ii) Types of businesses Looking into possible types of businesses within the various classifications.
(iii) Market.Places situations where there are sellers who have products and services to sell and buyers who have the capacity and willingness to purchase.
(iv) Government policies. Policies affecting small enterprises such as location, taxation, pricing, licensing, loans e.t.c.
(v) Location. These are the factors to be considered when deciding where to
locate a business, for example, the community profile, communication,
roads, water, buildings, sources of raw materials, competition e.t.c.
(vi) Resources. These include labour, raw materials, source of finance and
equipment
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- /► 1.4.1 Advantages And Disadvantages Of Self-Employment And Paid Employment.
(i) Advantages of self-employment.
a) Personal satisfaction This means doing what you want with your life. It enables one to spend each working day in a job you enjoy. For example, if you like hair dressing and beauty care, you will start your own salon, hence, personal satisfaction when a customer is pleased by your service.
b) Independence.
Independence is freedom from control of others. You are able to use your knowledge, skills and abilities as you deem fit. You have freedom of action as you can make decisions without approval of someone else.
c) Profit The profit left after the owner enjoys all the other expenses. It enables one to control his/her own income and increase the income which is not often the case when you work for someone else.
d) Job security. Job security enables assurance of continued employment and income. Self employed persons cannot be laid off, retrenched, fired or forced to retire at a certain age.
e) Status Self-employed persons receive attention and recognition through customer contact and public exposure hence enjoy status above others. They also enjoy pride in ownership, enjoy seeing their names on buildings, vehicles, stationery and in advertisement, e.g. kuguru food processors. Community service identifies and provides needs, desires and wants of the community. Family employment provides a place of employment. Challenge – they look for challenging businesses.
(ii) Disadvantages of self-employment
a) Loss of invested capital There is high possibility of losing your invested capital i.e. money used in starting the enterprise, hence, the problem in repaying banks, suppliers, and other persons.
b) Uncertainty. There is high possibility of uncertainty or low income even in a well-established business.
c) Long hours Many self-employed persons work fourteen or more hours a day, six or seven days a week. The owner is often the first to arrive in the business in the morning and the last to leave at night. Customers dictate the hours but not the desire of the owner.
d) Routine chores Running your own business may involve routine jobs you do not like to do.
(iii) Advantages Of Paid Employment.
Specific/ fixed responsibilities
Steady income
Fringe benefits
Fixed hours of work
More certain future
Set span of control
Minimal risk
Disadvantages of paid employment
Strict following of orders
Set income
Limited responsibility
Difficult in implementing ideas
Dependency on employer
1.5 Characteristics of a successful entrepreneur
1. Desire to achieve
An entrepreneur would always like to excel, to succeed in competition with others as well as accomplish something.
2. Action Oriented
This is exhibited by their motivation to take action when and where
necessary.
3. Problem solver
They have the ability to solve problems and make decisions which involves striving with determination. They have high drive and ability to constantly struggle to accomplish solutions for business success.
4. Risk taker
They take moderately calculated risks, they enjoy the excitement of challenges, they do not gamble etc.
5. Initiative
They have the ability to generate new ideas and implement them ahead of the others to be able to create a competitive edge.
6. Independence
They like doing things their own way. Their own business fulfils their need for independence. They like to be their own boss.
7. Positiveness
The entrepreneur approaches tasks with the hope of success and not with fear of failure. They are optimistic persons.
8. Self -confidence
An entrepreneur is confidence of achieving realistic and challenging goals, coupled with a sense of effectiveness, will ultimately contribute to the success of the venture.
1.6 Reasons for Business Failure
(a) Neglect – which may result from bad habits, poor health, marital difficulties, complacency or laziness.
(b) Fraud – This may be a problem in which workers are involved or owner at least fail to guide against.
(c) Disaster – Entrepreneur sometimes fail to insure against disaster by not having insurance or protection of some kind against fire or burglary.
(d) Lack of experience – This is whereby the owners of a small business lack technical knowledge in their particular businesses. This however, tends to be just part of the problem.
(e) Incompetence – Some people do not have the personal skills or technical knowledge necessary to run a business. These people could employ other people as managers.
(f) Lack of customers – Part of an entrepreneur’s job is to find and keep customers. Customers avoid certain businesses for a variety of reasons; i.e. Poor services, indifferent attitude of employees, failure of business to settle arguments and lower prices offered elsewhere.
(g) Selling on credit – Lack of clear-cut credit policy and method of collection.
Unreasonable expenses – Expenses not kept to absolute minimum levels.
(i) Excessive fixed assets – Too much money is kept or tied up in buildings, land and equipment.
(j) Stock-trouble – Overstocking or buying slow moving goods can be costly.
(k) Location – Poorly located businesses away from customers are not accessible.
(l) Personal characteristics – example immaturity, unbalanced personality and unaggresive people may interfere with the effective performance of a going concern.
(m) Others
(i) Lack of tax knowledge, poor marketing research.
(ii) Inadequate records, legal problems.
(iii) Lack of product development, diversification.
(iv) Nepotism example family business.
(vi) Poor administrative co-ordination, one-person management with person business.
1.7 THE FAMILY BUSINESS
These are emphasized in term of issues like: -
(a) Commitment – They belong to the business because it is theirs.
(b) Contribute money – From the members of the family.
(c) Culture – Family culture is put into business culture, a family business generally goes beyond three to four generations.
(d) Focus on the long run – It is seen as a business which will benefit the members.
Disadvantages
(a) Many times members clash with one another and spreads into the business.
(a) The business tends to interfere with family matters.
(b) Family business ends with rivalry between siblings.
(c) Parents assume that their children should also join and continue with the same.
(d) Family (children) wrecks the business since they get priorities than others.
(e) It brings stress to members example wife and some siblings.
(f) When a dormant father dies, it likely to fail.
(g) In laws also tend to lend hard problem beginnings.
Succession problems i.e. Standing into borders of the father or mother or transfer of leadership is hard.
Last modified: Tuesday, 16 February 2010, 09:48 AM
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(ii) What are the characteristics of an entrepreneur?
(iii) Distinguish between self-employment and paid employment.
(iv) What are the reasons for business failure?
(v) Outline the advantages and disadvantages of self-employment and
paid employment.
(vi) Site some illustrations of small businesses in the manufacturing,
merchandising and service sectors in Kenyan economy.
(vii) Most businesses in the economy are small business. Is this an
accurate statement? Support your answer.
(viii) What are the advantages and disadvantages of a family business?
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1. Identify four basic types of business that you can initiate on an entrepreneur.
2. You are required to prepare a chart identifying the advantages and disadvantages of self-employment and paid employment.
3. Mr. Juma is a very successful entrepreneur in a small town of Muhura Bay. What are some of the characteristics expected of him?
Due date: / Tuesday, 23 February 2010, 09:55 AM
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Definition of Key Words
1. Entrepreneur -A person who identifies a business and takes advantage of that opportunity.
2. Entrepreneurship -The process of identifying the same and becoming a successful business man
3. Self-employment - Being in a business by ones self
4. Family Business - A business owned by a family
5. Unpaid employment - Is where one is employed, instructed and paid by the business management.
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UCU 104_1
ENTREPRENEURIAL OPPORTUNITIES
2.O Introduction
A business idea is a pre requisite for a person venturing into business. It is the potential entrepreneurial understanding of self, market, product or service. This can help generate ideas or best ideas into a business opportunity. It covers identification task, selection and exploration of attractive business opportunity.
At the end students are expected to a) - be able to identify potential business ideas that match their interests, training and experience.b) Be able to recognize and evaluate an appropriate business opportunity.
2.2 What is a business idea?
A business idea is an entrepreneur's understanding of his own self, product or service and the customer. Business ideas might come from the following sources;
2.2.1 Services Needed By Others Like;
(a) Entertainment
(b) Marketing the products of others
(c) Repair services
(d) New inventions
(e) Extension of hobbies
(f) Home business e.t.c.
2.2.2 Classification Of Business Ideas.
(a) Food and recreation
Horticulture Dairy farming Cinemas Discos
(b) Construction
Buildings Road making Quarrying
(c) Manufacturing
Posho-milling Tailoring e.t.c.
(d) Repair and maintenance
Auto garages Metal workshops e.t.c.
2.3 Sources of Business Ideas
No single method could be called the right or best way. The common sources of new enterprise ideas are;
2.3.1 Newspapers
One way of searching for new enterprise ideas is through newspapers. When reading pay attention to classified advertising sections, which consist of massages grouped under different headings like 'help wanted', 'cars for sale', 'commercial opportunities' or 'personal services'.
2.3.2. Magazine articles
Entrepreneurs should stay informed by reading magazines regularly. Look for articles describing new types of businesses for example, high demand for solar water heaters goes up when more homes are acquiring piped water.
2.3.3 Hobbies
These are the activities that one pursues for pleasure and relaxation. A business related to one's hobby will enable him or herself to spend more time doing what he or she enjoys most.
E.g. one who likes driving can start a taxi business.
2.3.4 Shows and exhibitions
One way to find ideas for new enterprises is to attend shows and exhibitions sponsored by manufacturers and distribution, check their leaflets and brochures. Here one can gain or discover a business idea that matcher his/her interests and ability.
2.3.5 Surveys
This is by finding out what consumers need and want i.e. through informal or formal surveys.
(a) Informal surveys.
(b) Formal surveys.
(i) personal contacts i.e. talking to the family, friends, neighbour e.t.c. Asking
them what new business they think are needed, what they don’t get locally,
what business they can start e.t.a. by answering such questions one gets a
business idea.
(ii) Observation when one observes directly any business activity in a
community, he may be able to identify which one is not available e.g. when
it appears that there a number of bicylelists in the area and there is no
bicycle repair in a town.
(i) Questionnaires i.e. list of questions is prepared and then asked at interviews. It provides weaknesses or shortcomings in what existing enterprises provide.
(ii) Interviews - the more people you interview, the better are your chances of identifying the shortcomings of existing businesses.
2.3.6 Brainstorming
This is a technique used to solve a problem by generating as much ideas as possible. It can be used in a group or by oneself. It generates reliable information about favorable businesses to be started.
2.3.7 Vocational Training and experience
A business idea can be developed from one area of training. For example;
(a) A teacher who starts a private school.
(b) A mechanic starts a jua kali workshop
(c) Experience gained as an employee of a furniture company generates an idea for starting a carpentry workshop.
2.4 Evaluating A Business Opportunity
2.4.1 Meaning
business opportunity is an attractive business idea which an entrepreneur accepts as a basis for an investment decision.
2.4.2 Pre- Feasibility Study.
Once the entrepreneurial response begins, it becomes important to increase the
entrepreuneral interest. This can be achieved by the identification of opportunities and
then confirmed by the pre-feasibility study. The prime objectives of such a study are
to determine whether; The investment opportunity is promising enough to make a firm decision. The project is viable from the marketing manufacturing and other points of view. Analysis in terms of whether any aspect of the project is critical or crucial enough to call
for in-depth analysis.
2.4.3. Feasibility Study
Having established the viability of a business opportunity it is necessary to acquire comprehensive technical economic and commercial data for the final investment decision. In most cases an entrepreneur has to explore the suitability of the opportunity to his own specific skills and expectations, e.g. an engineering workshop project, identified as a business opportunity, calls for details of specific market survey at the pre- feasibility stage, technical skills and investment capabilities of an entrepreneur have to be assessed before a final decision about the investment is taken.
2.4.4 Characteristics Of A Good Business Opportunity
(a) Demand - there should be a favorable market scope for the product or service.
(b) Attractive returns on investment - if the returns on investment are attractive then the business opportunity can be pursued further.
(c) Availability if raw materials - business opportunity is said to be viable where the raw materials required to produce the products are available.
(d) Technical requirements - some businesses require technical or managerial skills.
2.4.5 Identification Process For Business Opportunities.
The following factors may help in identifying and assessing business opportunities at the local level.
(a) Environment - these are the basic features of a local area and the resources
available e.g. population occupation patterns, socio economic level e.t.c.
(b) Current business scene - this is the present pattern of trading and business
activities in the area e.g what does the local population require.
(c) The target group - when the target group is viewed from its expectations,
strengths and weaknesses, then one can draw the right conclusions on a
specific opportunity for a specific target group.
(d) Matching skills with opportunities many entrepreneurs open a business
with which they are familiar.
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Key Words
1. Business idea - An entrepreneur's understanding of his own self, product or service.
2. Exhibitions - Where entrepreneurs gather business ideas.
3. Brainstoning - Technique of solving a problem by generating ideas from people.
4. Business opportunity -An attractive business opportunity which is acceptable by an entrepreneur
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TYPES OF BUSINESS CONCERNS $ THEIR LEGAL ASPECTS
3.0 Introduction
The lesson pertains different forms of business enterprises operated in developing countries like Kenya.
It entails all their legal aspects that entrepreneur need to be familiar with when starting and operating a business.
3.1 Objectives
At the end of the lesson, students should be able to:
To conceptualize different forms of business concerns.
To know advantages $ disadvantages of each.
The students will be able to know how legal structures of business organizations affect the business right. Recognize the legal aspects of operating a business enterprise.
3.2 Legal Forms Of Business Organization