- 1 Who is this Programme For?
- 2 1. Introduction
- 3 3. What Is Business Management?
- 4 4. What is meant by Entrepreneurship?
- 5 So You want to be an Entrepreneur?
- 6 Self Assessment
- 7 Web Resources
- 8 5. What are the different Business types
- 9 Reflection
- 10 Reflection
- 11 Reflection
- 12 Reflection
- 13 Reflection
- 14 Summary
- 14.1 Unit 2: Planning for the Business
- 14.2 1. Introduction
- 14.3 2. Learning Objectives
- 14.4 3. Legal requirements for your type of business
- 14.5 Government Regulations and your Businesss
- 14.6 Legal Structure
- 14.7 Naming the Business
- 14.8 4. Opportunities in Your Environment
- 15 Web Resources
- 16 Reflection
- 17 Preknowledge
- 17.1 8. Funding for the Enterprise
- 17.2 Tradional sources of Venture capital:
- 17.3 9. The Business Plan
- 17.4 Why is it important?
- 17.5 Elements of a Business Plan:
- 17.6 Parts of the Business Plan:
- 18 Web Resources
- 19 Summary
Who is this Programme For?
The contents of the Entrepreneurship/Managing your Business have been written for:
- anyone who would wish to start their own business
- anyone who is already owning a business, but would like to learn more about the different aspects such as marketing, customer care, financial aspects etc..
- any pre-university learner or mature learner who would like to get a formal introduction to Entrepreneurship and Business Management.
While preparing the contents for the programme we took special measures to ensure that the target audience would be able to relate to the different ideas introduced and kept the language as simple as possible. The activities that have been integrated throughout the units will enable you to gradually and systematically gather information and the right 'ingredients' to be able to write up your business plan. The following diagram gives you an overview of the 8 chapters that this module consists of and how the activities have been designed to ultimately enable you to develop your business plan.
Upon completion of this programme, you will be able to:
- Understand the concepts of business and entrepreneurship.
- Compare the potential of different business ideas
- Know the basic legal requirements for launching a small business.
- Perform SWOT analyses and applying them to your competitors, your own business and even yourself
- Analyse the environment for designing the marketing mix and marketing strategies
- Develop good book-keeping practices
- Acquire appropriate resources for your business needs
- Anticipate and relate to your customers needs more accurately
- Develop sharp skills to compile your business plan to your advantage
Unit 1: Starting up a Business
- What is Business Managment?
- What is meant by Entrepreneurship?
- Who is an Entrepreneur?
- What is an Enterprise?
- What are the different business types?
- How is a business idea developed?
- What Factors Influence the Business?
- Cultural Factors
- Economic Factors
- Political Factors
- Environmental Factors
- The importance of a business in a country
Welcome to the first Unit of the Business Management course. You have made a wise decision to embark on this programme of study, and we are certain that the ideas will help you start up your own business.
Any aspiring business person has to come to terms with basic concepts associated with a business. Throughout this course, we intend to discuss concepts like 'entrepreneurship', 'the entrepreneur', 'an enterprise', 'the business idea', and factors that influence your intention to start up a business. For a given country, the factors could be cultural, economic, political, or environmental.
As you interact with the ideas introduced, you will be conversant with the different skills related to Business Management. This is so because, for any business venture to succeed, business management skills have to be properly applied. This will be related to your understanding, as a newcomer to the business world or even if you already are a business manager, of the categories of businesses available namely, product-oriented and service-oriented businesses.
Entrepreneurs are found not only in the business, but also in the social, political, education and even in the existing business ventures as employees. They are called Social entrepreneurs, political entrepreneurs or the intrapreneurs, who develop new fields within the existing enterprises. Intrapreneurs perform all the functions of the entrepreneurs, minus the riskbearing and rewards of the new stream. they are an asset to the entreprise, in which they are employed. If you are an employee, you may practice intrapreneurship instead of entrepreneurship.
3. What Is Business Management?
A. How do we define Business Management?
There are several definitions for Business Management. The definitions vary depending on the perspective of the person giving the definition.
First, let us look at these definitions for business:
- Business is defined as an organization operated with the objective of making a profit from the sale of goods or services.
- An enterprise, commercial entity, or firm in either the private or public sector, concerned with providing products (goods or services) to satisfy customer requirements.
If we look closely at these definitions we will see that there are certain words which appear in both.
Now, look at these definitions for management:
- Management(from Old French ménagement "the directing", from Latin manu agere "to lead by the hand") characterises the process of leading and directing all or part of an organisation, often a business, through the deployment and manipulation of resources (human, financial, material, intellectual or intangible).
- Mary Parker Follett (1868 - 1933) defined management as "the art of getting things done through people."
- One can also think of management functionally, as the action of measuring a quantity on a regular basis and of adjusting some initial plan, and as the actions taken to reach one's intended goal. This applies even in situations where planning does not take place. From this perspective, there are five management functions: planning, organising, leading, co-ordinating and controlling.
In some cases though, these definitions, while useful, are far too narrow. The phrase "management is what managers do" is also prevalent, conveying the difficulty with which management is defined, the shifting nature of definitions, and the connection of managerial practices with the existence of a managerial cadre or class.
You can see that there is no single definition for Business Management.
For this course we may define Business Management as the process of planning, organising, leading, co-ordinating and controlling resources to produce goods and services to satisfy customer needs.
B. Why do we need to define Business Management?
The structure and demands of business management are constantly changing. As a result, it is important that we determine what it means to us at a particular point and time. Once, we have decided on a definition; that definition should:
- ... provide the business owner with areas of focus for his/her business.
- ... indicate the perspectives(areas of focus) of the writer(s)you may choose to as your "guide".
- ... allow you to compare the different perspectives to that of your own.
- It may also help you to clarify your own thoughts on which perspective you should take.
4. What is meant by Entrepreneurship?
Entrepreneurship is what the entrepreneurs do! And they are present in any field - not only making profits, but also working in the not for profit NGOs, in the field of education, social reforms economic development, polity of the locality, state,country or even the world polity.The entrepreneurs working in the social spheres are called social entrepreneurs and those, who are working in the corporate sector as employees, but do something usually done by entrepreneurs, are called the Intrapreneurs. Now, what do the entrepreneurs do? why do we need them?
The accumulation of factors of production per se – be they knowledge, physical or human capital – cannot alone explain economic development. They are necessary inputs in production, but they are not in themselves sufficient for economic growth to occur.
Human creativity and productive entrepreneurship are needed to combine these inputs in profitable ways, and hence an institutional environment that encourages free entrepreneurship becomes the ultimate determinant of economic growth.
Thus, the entrepreneur and entrepreneurship should take center stage in any effort to explain long-term economic development. The Economic theory, however did not lay proper attention to the entrepreneur and to the entrepreneurship.
A. Define the term Entrepreneurship?
There has been a great deal of attention paid to the subject of entrepreneurship over the past few years, stemming primarily from the discovery by economic analysts that small firms contribute considerably to economic growth and vitality.
Entrepreneurship, can be defined as, the practice of starting new organizations, particularly new businesses generally in response to identified opportunities.
Generally, the new organisations started by Entrepreneurs are Small Businesses.That is why, sometimes small and medium enterprises are reffered to as the seedbed of entrepreneurship.
Some experts distinguish between an entrepreneur and a business person. Difference is the innovation in the business activities. Innovation is not the R&D stuff or inventions in the normal sense, but it involves commercial application of an idea. It is not difficult to learn.
B. How do we define Small Business?
A small business is "one that is independently owned and operated and which is not dominant in its field of operation."
Small Businesses are defined using size standards. Different countries have different standards which are used to determine the size of a business. These standards include:
- Number of Employees
- Amount of money used to start – Start up investment
- Rate of turnover - average annual receipts of the business
- St. Vincent & the Grenadines: A small business is one that employs ten persons or less and has an initial investment of Twenty five ($EC25,000.00)or less.
- Belize: A small retail business is one which has annual sales receipts under $ 2 million.
- European Union: A Small Business has less than 50 employees and a turnover of less than 10 million Euro. The EU also defines a medium sized enterprise as one which employs less than 250 people and has a turnover of of less than 50 million Euros and a micro enterprise as one with less than 10 employees and a turnover of less than 2 million Euro
Typical examples of small businesses include: small shops, hairdressers, tradesmen, solicitors, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing etc.
Have you been thinking of your business idea?
So You want to be an Entrepreneur?
Running a business is not every bodies cup of tea. In order to succeed, you need many skills, to understand this, You must conduct a 'SWOT anylasis' i.e.evaluate your streangths, weaknesses, opportunities available and the threats.You may also conduct a test of following four things:
4.1 Who is an Entrepreneur?
Now a days, entrepreneur is defined in a much wider sence, but to start with, we may consider this definition: An Entrepreneur is a person who owns and operates a business enterprise. He/she takes all the risks involved in the operation of this enterprise. Later on we will see that entrepreneurs do a lot more things and are found in almost every sphere of life, in education, in social development, politics and of cource in business.
Entrepreneurs are innovative; and as a result, are always able to see possibilities which would not be normally seen by ordinary persons. They have a strong desire to succeed; and so, it is often quite common for entrepreneurs to fail at several initial enterprises before finally making it big. Also, entrepreneurs have the capacity to work long hours, ensuring that their business ideas are fully developed rather than, take holidays and time off from their businesses.
The table below gives some qualities that help people to better understand themselves. Try the activity.
Characteristics of an Entrepreneur
- Most importantly, it is a mind game, the thought process of high impact entrepreneurs is different from the businessman. It is innovative and looks at the things with a different perspective as compared to others.
- The Entrepreneurs are known be calculated risk takers, and are not gamblers.
- The entrepreneur has an enthusiastic vision, the driving force of an entreprise.
- The entrepreneur's vision is usually supported by an interlocked collection of specific ideas not available to the marketplace.
- The overall blueprint to realize the vision is clear, however details may be incomplete, flexible, and evolving.
- The entrepreneur promotes the vision with enthusiastic passion.
- With persistence and determination, the entrepreneur develops strategies to change the vision into reality.
- The entrepreneur takes the initial responsibility to cause a vision to become a success.
- Entrepreneurs take prudent risks. They assess costs, market/customer needs and persuade others to join and help.
- An entrepreneur is usually a positive thinker and a decision maker.
4.2 What is an Enterprise?
Almost any business or organisation can be called an enterprise, possibly led by an entrepreneur. Entreprise can have any organisational structure - porpritorship, corporate or other types.
A commercial enterprise is any activity which provides customers with a product (goods/services) with a view to making a profit.
5. What are the different Business types
There are two different types of business:
- Sole trader
A sole trader is the simplest form of business organization. You can start the business on your own using your own money. However, to get recognized and to be able to do business legally, you will need to register your business at the registrar of companies or any government body. All the income earned through the business is yours but you may have to pay for income tax.
The legal constraint for the sole trader however, is that you have "unlimited liability", that is, it means that you are the only person responsible for your debts. In case of bankruptcy, you will be liable and therefore your creditors may claim all your private property.
- It is relatively cheap and easy to start.
- All the profit is yours.
- You are your own boss.
- You do all the work.
- You have NO limited liability
- All the risk is yours
- What about sickness and holidays?
- Do you have all the skills to launch a business on your own?
A partnership is, in essence, a sole trader but having the ownership shared between partners. A partnership should have a partnership agreement (a legal document) drawn up to show the rights and responsibilities of all the partners. There may also be 'sleeping partners' (explain sleeping partners) who own a share of the business but are not involved in the day-to-day running of the business. A partnership also has unlimited liability. Partnerships are common in the professions such as accountancy and law.
In terms of legal structure, the partnership can be incorporated into a firm. There are two main categories of firms:
- a. Private limited company
- b. Public limited company
Private limited companyA private limited company is one where the liability is limited, that is, the liability is limited to the value of the shares issued . This means that any debts are debts of the company and not of the owners.
A limited company has to be registered legally, and the legal document must include a Memorandum and Articles of Association. There need only be one director and they have to prepare annual accounts and submit them to government body responsible for the registration of companies.
Private limited companies can range significantly in size. They may consist of a small family based business or they could be large multi-national companies.
- You have limited liability
- Easier to raise larger sums of capital
- More flexible than Public Limited Companies
- Opportunities for bringing in more skills
- You can only sell shares privately
- Not very flexible if expansion becomes possible
- More legal formalities than sole traders
Explain each of these advantages & disadvantages
Public limited company
Like a private limited company, a public limited company has shares, but the key difference is that these shares can be bought by anyone freely on a stock exchange. Ownership is therefore open to anyone who wants to buy shares. Public Limited Companies have legal requirements in that they have to produce annual reports and accounts and file them with the government body acting as registrar of companies. There are various other requirements including: • You must have at least two directors. • You have a fully qualified Company Secretary. (Explain...)
- You have limited liability.
- It is easier to have access to finance.
- More funds are available for investment HOW??
- Goodwill: Public awareness gives status EXPLAIN
- You have to publish results.
- Others, e.g. auditors have to look at your books. (to check for transparency)
- Greater need to conform to legal procedures.
- Owners might lose control. (HOW? depending on % of shares owned)
6. How is a business idea developed?
New opportunities occur from changes in industry, social, or economic environments. New ventures arise in the following ways:
A. External Causes
- Changes in industry stimulated by advancing technology and new knowledge spur new products and services ; A good example of this are the changes in the ICT - tele-communication etc, and the IT - the computer, internet and the e-learning technologies.
- Accidental discovery ; Sometimes a person stumbles upon an idea instead of deliberately trying to invent a new product, as was the case of the Post-It product of the 3M company.
- Changing perceptions ; There are times when the social environment is an element of new venture creation. For example, the emphasis on health activities in the 1980's created full-service health clubs.
- Economic changes ; often involve opportunities that arise out of the necessity such as the energy crises leading to new ideas
B. Voluntary Self-Employment
1. Prior work experience is the most common origin of new ventures:
a) Frequently a person, perceiving ways to modify a product or improve a service will start a new venture from the knowledge acquired from a former workplace;
b) A person can also obtain the right to manufacture a product based on a patent;
c) An individual observing scant competition afforded to a particular business can go out and duplicate that same business, as long as there is a market.
2. Follow family traditions especially if they have been serving the needs of that community for so long.
3. Being your own boss can give self satisfaction and can also achieve leadership and recognition.
1. A love of horses or animals can lead someone to an opportunity of running a riding school or a animal farm.
D. Advantages of starting your own business
1. The entrepreneur can select his/her own location, employees, and avoid any undesirable precedents set by a previous owner.
2. A start up business can start fresh without having to follow old practices.
7. What factors influence the business?
Now that you have looked at some of the key concepts, and discussed the reasons for getting into business, you should examine factors that influence your type of business. There are many factors, some of them positive and others negative. We shall select a few, then as you read further, we expect you to come out with some of your own.Kotler and Armstrong (2004) have come up with several factors, and we discuss some of these below. How exactly do the factors impact on business? Let’s examine each one in turn.
The culture of a country refers to customary practices and beliefs that people uphold. Jarvis (2002) has observed that culture is made up of institutions and other forces that affect society's basic values, perceptions, preferences, and behaviours. The entrepreneur should remember that people grow up in a particular society that shapes their basic beliefs.
Culture affects the way consumers think and use certain products. As an example, in some cultures, it is not proper for women to deal with the public e.g. selling goods or wares. This is a crucial factor for business purposes. Firstly, should the mother of a family identify a business idea that is likely to bring income to the family, she will not be able to operate the business because of cultural constraints. Secondly, should she, nevertheless, go ahead and start a business, that might lead to conflicts in the family, and in turn that might cause the family to break up.
The economy of a country refers to activities in which people are employed to generate revenue.Two economic factors reflect a country's attractiveness for business. Firstly, its industrial structure shapes its product and services needs, income levels and employment levels. Secondly, in a subsistence economy the vast majority of people engage in simple agriculture. They consume most of their output and barter the rest for simple goods and services. In such a situation, there are few market opportunities for a business.
For example the economy of Botswana is based on diamonds and beef industry. The economy of Mauritius depends on tourism and agricultural production, specifically sugar production. How would the economy of your country affect your business? Let us imagine that you had set up a retail shop at a settlement where employees depend on diamond mining for their wages and salaries. Suppose the mine closes down because diamonds have been depleted or there is a slump in the industry. How does that impact on your business? To begin with, workers will be retrenched and can no longer have money to spend. Secondly, they might migrate to new places where they are offered jobs. This means you end up without customers, hence no income from the business. You will be left with goods that no one wants because your market has been affected. Eventually, you have to close shop.
Your response should show that you understand the meaning of economic factors, then cite typical examples from your country to illustrate the impact of economic factors on business.
So, what do you think are political factors? Nations differ in their political and legal approaches. Such factors should be taken into account when deciding whether to set up a business. Government bureaucracy is an example. This refers to the way a particular government facilitates or constrains business. If, as an example, only citizens are allowed to operate certain types of business, that means non-citizens will find it difficult to start up businesses even though they have the capital to do so.
Political instability is another factor. A country is said to be politically unstable if there is violence or when there is no rule of law. Unstable political situations discourage business. As an investor, you may not feel safe to set up a business where there is no assurance of security.
Bureaucracy and political instability will vary from one country to another. In some cases there might be no instability. However, your response ought to demonstrate an understanding of these two concepts, relative to setting up business ventures in the context you are familiar with.
It can also be noted that for a given country, well-conceived regulations can encourage entrepreneurship, and ensure fair business practices. Thus, governments develop public policies to guide business practices. This is done through a wide range of laws and regulations.
The government of Botswana, for example, encourages investment by foreigners and non-citizens. However, the law prescribes that certain businesses be confined to citizens only. In other instances, the law allows non-citizens to enter into joint ventures with locals. The idea is to ensure that business interests of citizens are protected from unfair competition.
The environment of a business can be both physical and political. In business terms, the physical environment refers to the place where your business is situated.Location will determine the success or failure of the business. If you were to locate the enterprise, say a hotel, in a place where there are bad roads, it is most likely that customers will not be able to reach you. So, in that case,the environmental factor would be a major constraint for setting up the enterprise.
Natural resources are an important environmental factor. These are needed as inputs by entrepreneurs.Business persons should, therefore, be aware of trends in the natural environment. While this may not apply to your country, just read this explanation closely.
In many countries, shortages of raw materials can affect setting up businesses. Air pollution chokes many of the world's cities, while water shortages are already a big problem in many parts of the world.
Fuel is yet another environmental factor that impacts on business. Most countries in Southern Africa (e.g. Botswana, Zimbabwe, Zambia, Malawi, to name a few) have the greater percentage of their populations living in rural areas. Entrepreneurs who set up businesses in rural areas have to contend with serious transport problems. This is because prices for petrol and diesel continue to escalate. In turn, the prices of commodities inevitably go up, and these have to be passed on to rural consumers, who are largely poor and can ill afford the high prices.
Kotler, P. and Armstrong, G. 2004. Principles of Marketing. Upper Saddle River, New Jersey: Prentice Hall.
Jarvis, S. "Red, White, and Blues". Marketing News. May 27, 2002, pp 1-9
8. The Importance of Business in a Country
Some of the current issues under consideration at the moment include " the problem of unemployment". As you can understand, the importance of getting work for all citizens, has become a priority concern for any government. If this can be achieved, then the problem we mentioned above will be resolved, and at the same time, the problem of "poverty" may be eliminated, and more and more revenue will be available for the Finanace department of one's country to distribute where it is most needed. So, it is through business that economic, financial and infrastructural development can possibly happen.
Educating the worker
A certain amount of business kowledge, skills and attitude are required by the worker in order for him/her to perform duties in the work place. This can be done through formal or informal education/training. The value of education to a worker can be monitored through improved productivity in the workforce. Of course the classification of unskilled labour may not necessary need education/training. But statistics proved that by providing some form of training, productivity can be improved .
Business relationship with Government
Businesses provide employment for the workers. The workers contribute to the government in a form of income tax. The business is also liable to pay tax (company tax) to the goverment. Businesses are also used by the government as a collecting agent for some other form of taxations. Which means, the more prosperous the business the better off the government. Some concessions are usually granted by govrernment for businesses in a form of subsidies.
Unit 2: Planning for the Business
- Learning Objectives
- Legal requirements for your type of business
- Opportunities in your environments
- Competition (SWOT Analysis)
- Supply and Demand
- The Market
- Funding for the enterprise
- The Business plan
You are now into the second unit of your Business ManagementCourse. We are sure that, you found the first unit very interesting to follow. You may have also found some areas challenging and required a bit more effort. Nevertheless, you have managed to complete unit one and you are now moving on to Unit two. Excellent!
In Unit Two, we will work more closely with you and your business idea. This is the planning stage. Here, you will be guided on specific requirements for your type of business.
You will also begin to develop your Business Plan.
2. Learning Objectives
At the end of this unit you should be able to:
- discuss the rules and regulations to be followed in setting up a business,
- understand the required procedures for naming a business
- understand issues regarding trade marks service marks
- assess the opportunities for starting up your business
- identify competitors in your field of business
- analyse the business environment using the SWOT analysis
- determine the supply and demand of your product
- establish your target market
- determine the financial needs of your enterprise
- determine the initial capital requirement of your enterprise
- determine the short and the long term capital needs of your enterprise
- justify the need for a business plan
- Outline the steps involved in preparation of a business plan
- Discuss the elements of a business plan
3. Legal requirements for your type of business
This section aims at informing you of the laws, rules and practices that apply when starting a business in your community. These may include, for example:
requirements for registering a business
local laws that govern businesses
the tax code for small businesses
professional codes of conduct relevant to specific occupations, etc.
The authorities may offer certain facilities and incentives to entrepreneurs starting a
new business. These may take the form of:
grants to set up a small business
recognition in the community, etc.
Government Regulations and your Businesss
The owner of a small business/enterprise must deal with government rules, regulations and laws. Taking the time to research the applicable regulations is as important as knowing your market.
Bear in mind that regulations vary by industry. If you're in the food service business, for example, you will have to deal with the health department. You must carefully investigate the regulations that affect your industry. Being out of compliance could leave you unprotected legally, lead to expensive penalties, and jeopardize your business.
Licenses - There are many types of licenses, however, they may not all be applicable to your type of business.
- Traders licence gives individuals permission to operate business in specific areas and permit trading in specific types of business.
- Certificate of Occupancy/Permission from the Planning Division in your country/area of operation must be sought if you intend to put up a building/stall or if you intend to change the use of an existing buildingor stall.
- Liquor Licence must be had if your buisness will be involved in the sale of alchoholic beverages.
- VAT registration(where applicable) is a requirement by law. You must determine if this will apply to your business.
- Tax requirements - In many countries, small businesses/enterprises sole proprietor and partnerships are exempt form direct taxes. However, the business owners become liable. Most companies/corporations are required to pay company taxes. In some countries, the company/corportation may tax-exempt for a specified period of time.
You must constult with your tax department to get specific information as it relates to your specific type of business.
To ensure survival, the small business person/entrepreneur must choose a legal structure that best suits the needs of the business.
There are three major forms of legal structures. These are sole proprietorship, the partnership and corporation. Each of these has its own advantages and disadvantages. Let us look at each form of business ownership.
The sole proprietorship generally is very easy to start. It requires the least amount of licences.
The partnership requires some discussion with the partners and your attorney. A Partnership Deed/Agreement must be drawn up and you may need some assistance from someone who is not to be involved in the business. Your business attornery, or advisor, or counsellor at the business centre all of these can offer assistance in the development of you Agreement.
The company/corporation requires a bit more in terms of time, planning and formal legal requirements. In some countries to start a company/corporation you were required to prepare Articles of Association and Memorandum of Associations. These documents require some assistance in the preparation. Here, your attornery, advisor or counsellor at a business centre can offer assistance. These documents must be submitted to the Registrar of Companies/Business in the country before you can begin operations. When these documents are approved you will be issused a Certificate of Incorporation. This gives you permission to begin operations.
However, in recent times many countries have removed these requirements. Only basic information on the business need to be supplied. You must check with your attorney and the Registrar of Companies/Business in your country to determine what the specific requirements are for you area of business.
Naming the Business
If you intend to trade using a name other than your own; in other words if you intend to create a name for your business you must seek permission to use that name and also to ensure that no other busiess has registered that name before you can put up that name on your building.
In starting a company, these checks are done before your business is registered. It is built into the registration process.
Protecting Your Idea
If applicable to your business, you may want to apply for trademarks, patents and copyright.
Trademarks: Trademarks are names or symbols used in trade that is subject to regulation by state government. Trademarks and service marks may be registered for a specified term.
Patent: A set of exclusive rights granted by a state to a person (the patentee, usually the inventor) for a fixed period of time in exchange for the regulated, public disclosure of certain details of a device, method, process or composition of matter (substance) (known as an invention) which is new, inventive, and useful or industrially applicable.
Copyright: A set of exclusive rights regulating the use of a particular expression of an idea or information. At its most general, it is literally "the right to copy" an original creation. In most cases, these rights are of limited duration. The symbol for copyright is ©, and in some jurisdictions may alternately be written (c). http://en.wikipedia.org/wiki/Copyright
4. Opportunities in Your Environment
In order to identify opportunities for business startups in your environment/community you must consider the economy of your country and ask yourself a few questions. First you may ask what is economy?
Economy maybe defined as the state of the country or region in terms of the production and consumption of goods and services, and the availability of money.
- What is/are the main activity/ies of the people in your area?
- Have these activities changed in recent times?
- Is there a product/service that is lacking?
- Do you think people could/would pay for this product/service if it was provided?
- Are you able to provide this product/service?
- Could you ask some others to join with you to provide this product/service?
You may also sit with your friends and/or relatives and discuss the idea of starting a business. Your share your ideas and hear their ideas. This is called Brainstorming.
5. Competition (SWOT Analysis)
Competition may be defined as a business relation in which two or more parties compete to gain customers.
Goods and services will be bought from those who, in the view of buyers, provide ‘the most for the money'and/or from those who offer greater buying convenience. Hence, competition tend to drive the entrepreneurs to find ways and means of ensuring that the customers make their goods and services their first choice.
Therefore, all business persons must consider competition when deciding to start a business regardless of the size of business. Special efforts must be made in assessing existing competition; as well as, planning to deal with competition which may come after the business has started.
As an entrepreneur, you must define competition correctly; select the appropriate competitors to analyze; plan how you will deal with new competitors and explain your competitive advantages. This information will be important when developing the competition section of your business plan.
In identifying competitors, entrepreneurs often find themselves in a difficult position. On one hand, they want to show that they are unique (even under the investors' broad definition) and list no or few competitors. However, this has a negative connotation. If no or few businesses are in a market space, it implies that there may not be a large enough customer need to support the new business' products and/or services.
After identifying your competitors, your business plan must describe them. In doing so, the plan must also objectively analyze each competitor's strengths and weaknesses and the key drivers of competitive differentiation in the marketplace.
In analysing your competitors'strengths and weaknesses you will begin to use a rather common tool used by many business persons. It is called a SWOT Analysis.
What is SWOT Analysis?
SWOT analysis is a tool for auditing a business and its environment. It is the first stage of planning and helps marketers and new entrepreneurs to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats.
- S - Strengths
- W - Weaknesses
- O - Opportunities
- T - Threats
Strengths and weaknesses are internal factors. Opportunities and threats are external factors. For example:
A strength could be:
- Specialist marketing expertise
- New, innovative products or services
- Location of business
- Any other aspect of their businesses that add value to their products or services
A weakness could be:
- Lack of marketing expertise
- Undifferentiated products or services (i.e. in relation to your business)
- Location of their businesses
- Poor quality goods or services
- Damaged reputations
In SWOT, opportunities and threats are external factors. For example:
An opportunity could be:
- A developing market such as the Internet
- Mergers, joint ventures or strategic alliances
- Moving into new market segments that offer improved profits
- A new international market
- A market vacated by an ineffective competitor
A threat could be:
- A new competitor in your home market
- Price wars among competitors
- A competitor has a new, innovative product or service
- Competitors have superior access to channels of distribution
- Taxation (such as VAT)is introduced on your product or service
You can apply the SWOT analysis to your business or your competitors businesses as you try to assess the position of anyof these organisations.
Now try to do a SWOT on one of your competitors.
Follow these steps: My SWOT Analysis of...
6. Supply and Demand
Supply is the quantity that producers are willing to sell at a given price. For example, the potato grower may be willing to sell one hundred lbs of potatoes if the price is $0.75 per lb and substantially more if the market price is $0.90 per lb.
The main factors which determine supply are:
- the market price of the product
- the cost of producing it
Market price is the current or existing price that suppliers are asking and customers are paying for a product.
You must determine the current/market price of the product you intend to supply. To do this you must investigate the market. You may use the telephone directory/internet or visit suppliers in your area to determine how many other persons/companies are supplying the product you intend to supply.
- Are they supplying enough to meet the needs of the market?
- Are there always shortages?
- What part of the market is usually left without?
- What are their prices?
Later, when you calculate the cost at which you can produce your product, you will be able to determine if you can better the price of the other suppliers - your competitors. In other words, can you supply your product at a competitive price in the required quantities?
You Can ... Then this may be your niche - your target market!
Demand is the quantity of a good that consumers are not only willing to purchase but also have the capacity to buy at the given price per unit. For example, a consumer may be willing to purchase 2 lb of potatoes if the price is $0.75 per lb. However, the same consumer may be willing to purchase only 1 lb if the price is $1.00 per lb.
- Is there a demand for your product?
- Are the customers willing to buy your product?
- How much are they willing to pay for your product:
- More than your competitiors?
- The same as your competitors?
- Less than your competitors?
You will learn to calculate prices in Unit 4
7. The Market
After establishing the type of competition you are likely to face in your business, as well as the supply and demand for the product or service you are going to offer, it is essential to focus on the market.When you complete this section, you will be able to define 'market' and explain the link between your chosen market and the plans you have for the venture.The following areas will be discussed:
- What is a market?
- Market segments
- Market positioning.
A practical knowledge about your market will enable you to draw up a good business plan. That, in turn, will make you stand a good chance of getting business funding from finance institutions.
What is the meaning of a market?
The concepts of buying and selling lead to the concept of a market. Basically, a 'market' is the set of actual buyers of a product or service.The buyers share a particular need or want that can be satisfied through exchange relationships.What do you understand by 'needs' and 'wants'? Let's examine them briefly.
Human needs are states of felt deprivation. They include physical needs for food, clothing, warmth, and safety; as well as social needs for belonging and affection.Wants, on the other hand, are the form human needs take as they are shaped by culture and individual personality e.g.the rich people will go for expensive cars to match their status.The size of the market depends on the number of people who exhibit the need, have resources to engage in exchange, and are willing to exchange these resources for what they want.
Originally, the term 'market' stood for the place where buyers and sellers met to exchange their goods, such as a village square. Economists use the term 'market' to refer to a collection of buyers and sellers who transact in a particular product class as in the cattle or grain market. Marketers, however, see the sellers as constituting an industry, and the buyers constituting the market(Kotler and Armstrong, 2004).
Marketers are keenly interested in markets. Each nation's economy and the whole world economy consist of complex, interacting sets of markets that are linked through exchange processes. To reflect on the foregoing, work on this activity.
When you are planning your business, it is important to establish your target market or market segment. The idea of a market segment arises from the fact that it is not possible to supply your product to everyone in the community.Segmentation simply means dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviours who might require separate products.
Let's suppose you want to start a business for selling clothing items.How do you establish your segment? To begin with, you should take into account who you want to sell to. A number of questions come to mind, for example:What age group am I going to concentrate on? If you want to concentrate on adults, you still ask yourself: Am I going to sell to adult men or women? If you decide to sell to women, what age range are you going to concentrate on (20-35 years; 35-50 years; 50-60 years, etc.)? Once you decide on your segment, you still have to decide whether you want to specialise in formal clothing or casual. Once you finalise your decision, you can then consider that you have a market segment in place, so your planning will take into account what the type of clothing you are going to supply involves. Why is it important to have a target market?
By going after segments instead of the whole market, entrepreneurs have a much better chance to deliver value to customers, and to receive maximum rewards for close attention to consumer needs. Within a given market segment and customer size, you can easily establish the buying power, motivations for buying, and peak periods for the business.What other benefits do you think accrue from segmentation?
When you arrange for your product to occupy a clear and distinctive place relative to competitors for the same product, we refer to this as market positioning. It is an important aspect of planning for business, and you can position your product on the basis of:more- for- more, the same- for- less, less- for- much less, and more- for- less. These positioning strategies are explained briefly below, and as you read them, try and figure out which would work for you best.
"More-for-more" positioning involves providing the most upscale product or service, and charging a higher price to cover the higher costs.Not only does this positioning offer high quality, it also offers prestige to the buyer.
"The same for less" positioning offers the same quality but for a lower price.Some businesses develop imitative but lower-priced brands in an effort to lure customers from the market leader.
"The less-for-much less" positioning offers cheap products that cost less. This is because a market always exists for products that offer less and, therefore, cost less. Few people need, want, or can afford the very best in everyhting they buy.
"The more-for-less" positioning is the concept of offering better products at a much lower price. However, research has shown that offering more usually costs more, making it difficult to deliver on the"for-less promise".
8. Funding for the Enterprise
Some questions you may need to ask yourself about funding; that is the amount of money required to start your business will have to be:
- How much capital/funds will I need?
- What type of capital/funding will I need?
- Where can I get these funds?
Study the list below and try to determine which of these will best help in providing the funds you need to start.
Tradional sources of Venture capital:
===Seed Financing:=== Refers to a small amount of personal funds - this include money saved from other forms of income. This is often referred to as ownership capital/owners equity.
===Relatives and Friends:=== Relatives and friends may agree to give or lend you money to start your business venture. However, this form of funding usually generate trouble as the business progress. Often, persons recall their funds at times when the buisness is least able to return those funds or they may demand a greater or additional involvement in the venture which was not a part of your plan.
===Partnerships:=== There should be a written Agreement between the partners listing duties, responsibilities, amount of capital one has to contribute and also the proportion of profit sharing. This will help if differences shold arise regarding who should do what and who should get what out of the business.
===Commercial Banks and Other Financial Institutions:=== A main souce of finances, not only to business entreprenuer, but also to the community at large for what ever purpose intented. Loans are offered at different rates of interest. You must ascertain your interest rate and repayment schedule. Here, a comfortable payment scheduld must be worked out. The entrepreneur must decide the repayment intervals and how much he/she will be able to pay at each interval. That is how often will you be able to make a payment on your loan and how much. EG. will you pay weekly, monthly, quarterly?
===Sale of Capital Stock:=== Stocks, or owership shares, issued in exchange for funds needed to operate the business. An entrepreneur may opt to sell shares on the open market. These shares wil then be purchases by interested parties/persons. In this way, the entrepreneur gets the needed capital. The parties/persons buying the shares become shareholders and must be assured of some returns on the money they have put into that business venture.
===Venture Capital=== Refers to funds that are invested in new or higher risk enterprises, by outside investors. Venture Capital investments usually are high risk investments, however, they offer the potential of very high returns. The new entrepreneur seeking venture capital investors have he option of seeking the support of others who have had the experience of using venture capital. This person does not only have the experience in acquiring/finding venture capital; but, can also provide the new entrepreneur with support and direction concerning starting up.
===Corporate Partnership:=== A form of venture businesses, larger companies can keep up with fast-pased developments, a technique referred to as windowing in on recent entreneurial developments.
- Heightened credibility with customers and bankers;
- Expert msnagerial assistance;
- Continuing source of financing;
- small burden of risk.
- Loss of substantial equity;
- Investors make most of the decisions;
- Risk of takeover.
Government Sponsored Agencies:
- Small business Administration loans;
- Special Government Programmes;
- Small Business Investment Company loans;
- State and Regional Development Companies.
===Trade Credit:=== Credit extended by Suppliers.
===Equipment Loans and Leases:=== Equipment can be bought on an installment basis. A 25% to 35% down payment is required with a loan period of 3 to 5 years.
Advantages of leasing equipment are:
- Flexibility with equipment needs and payment schedules;
- Smaller capital requirements;
- the leasing company offers maintenence service for equipment;
- Leasing offers a way to beat the obsolence problem.
- Absence of depreciation as a non-cash outlay;
- Higher total cost comared to purchasing the equipment.
9. The Business Plan
This plan contains the written describtion of the enterprise, its objectives and the steps necessary to achieve them. It is necessary for new and established ventures.
Why is it important?
- It is the road map;
- It shows the ultimate destination and how to get there;
- It allows for unexpected detours and unforseen problems;
- It shows how to change the route and still drive ahead safely.
Elements of a Business Plan:
- A thourough explanation of the product or service that the business will provide;
- Why this product/service will satisfy customer needs;
- Why this business will be successful;
- The potential revenue, expenses and profits;
- The possible expansion of the business in the future.
Parts of the Business Plan:
- Type of business you intend to conduct;
- The legal form of business: sole proprietorship,a partnership and a corporation;
- Business hours;
- Seasonability of the business;
2. Strategy Formulation:
- What are you doing;
- Where would you want to be;
- How you would be getting there.
Strategy: the managerial game plan for directing and running the business.
Systematic recording of the enterprice's income and expenditures, assets, liabilities and owern's equity, in order to determine its's financial performance and financial position.
- Balance Sheet: It shows at a point in time the firm's position with regards to assets, liabilities and net worth, or owners equities;
- Income Statement (Statement of Financial Performance): It shows over a specific time period all the revenues and expenses which result in the profit or loss from those transactions and cash flow statements;
- Cash Flow Statements: Show the inflow of dollar from receipts into the business, and the outflow in the form of expenditures made by the business;
- Capital Equipment list: A statement that includes the details of operating equipment of a an enterprice and its corresponding dollar value.
Involves those business activities, which relate directly to determining the target msrket (to whom you will sell) and delivering goods or services to those markets.
- Target Market: the percentage of the total market to whom the enterprice plans to sell its product or services.
- Sucess will depend upon how, for example the product will be priced and how the business deals with the competition.
- Price and product differentiation from the competition play and important role in the firm's profitability.
The location of the business may be the key to its sucess.
- Location: the physical site and the geographic area of the enterprice's facilities.
- Layout: the arrangement of fixtures, equipment and machinery in the business. It varies according to the type of business the enterprice is operating.
6. Production/Operation functions:
- The system from transforming inputs into outputs, and also
- Concern with producing or making he output in the most efficient manner at the lowest cost.
- Involves the Recruting, Selection, Evaluation and Training of the individuals who are employed by and necessary for the functioning of the enterprice.
Human Resourse Management: the modern term used to refer to all functions pertaining to personnel.
- The process of obtaining the necessary money to operate the business. Money is the lifeblood of the enterprice.
- Those methods used to ensure that the business achieves its objectives;
- The following statements should be included:
- Sources of applications of cash: This statement shows the sources as well as the applications of cash within the enterprice;
- Application and expected effect of loan or investment: If the new or existing business has applied for a loan or has sought outside investment, there should be a complete disclosure in the business plan of how that apital will be utilised.
- breakeven analysis: is the volume of sales sufficient to cover all fixed and variable costs. It is the point where revenues equal costs.
- Internal Controls: There are certain controls required the systems - inventories, accounts receivable, risk management and crime.
- Financial ratios:or those percentage relationships in the firm such as current ratio, quick ratios, working capital ratio and the firm's performance to industry averages.
10. Executive Summary:
- A brief synopsis of all the elements in the business plan and can only be written last, once all the plan's elements are known. It is however, presented as the first part of the plan.
Unit 3: The Marketing Plan
- Learning Objectives
- The nature of the Market plan
- Characteristics of a Market Plan
- Steps in preparing the Market plan
- Defining the business situation
- Defining Target Market/Opportunities and Threats
- Considering the Strength and Weaknesses
- Establish Goals and Objectives
- Defining Marketing Strategy and Action Programmes
- Coordination of the Planning Process
- Designing Responsibility for Implementation
- Budgeting the Marketing Strategy
- Implementing the Marketing Plan
- Monitoring Process and Marketing Actions
Some of basic terms that needs to be understood when we are looking at the Market for our products/services include demand - this is when a person or a group of persons show a need for our product/service. If they show a willingness to pay for it, then they become our customers. The number of customers in the community represent the market for a product/service. The business people who provide similar product/service are known as competitors.
In this Unit, we are going to look at the nature of the marketing plan. We will look at the three questions that a marketing plan seeks to answer. Questions such as, where have we been; where do we want to go and how are we going to get there?
We will then look at the characteristics of a marketing plan, and finally, we will spend the rest of the unit focussing on the steps involved in preparing a marketing plan.
2. Learning Objectives
- Discuss the nature of the Marketing plan;
- Describe some characteristics of the Market Plan;
- Outline the steps involved in developing the Market plan.
The Nature of the Marketing Plan
A sound marketing plan is the key to the success of our business. It should include:
- our market research;
- our location;
- the customer group we are targeting,
- our competition;
- the product or service we are selling;
- advertising and
A marketing plan should be done before we start our business and annually once the business has started. It should focus on decisions related to the marketing variables which may affect our products, price, place and promotion, as mentioned above. It should be noted that in developing a marketing plan, a lot of market research has to be conducted. This is basically to get informaion that will assist us in the development of our marketing plan. This information can be generated from both secondary and primary sources.
A marketing plan should focus on decisions related to the marketing mix variables which are:
- place and
In addition to conducting a marketing research, it is also important for an enterprise to do an environmental analysis. This will basically be geared to providing information to the entrepreneur on what is happening in the market. Environmental analysis entails looking at the:
- legal issues,
- competition and
- availability of raw materials.
It is also important to study the internal environmental factors. These include:
- financial resources;
- the management team;
- suppliers and
- the company's mission statement.
The main idea behind the development of a marketing plan is to answer the following questions:
- Where have we been? This includes finding out historical information about the market place, the firm's strengths, weakenesses, opportunities and threats.
- Where do we want to go? This involves setting marketing goals and objectives for the short term.
- How do we get there? This question calls for decisions on specific marketing strategies that will be implemented in achieving the enterprice's goals.
Having looked at the nature of a marketing plan, let us look briefly at the characteristics of a marketing plan.
Characteristics of a Marketing Plan
The characteristics of a Marketing Plan should be to:
- Provide a strategy to accomplish the mission statement of the enterprice;
- Be based on facts and valid assumptions;
- Provide for the use of existing resources;
- Describe how an organisation is going to implement the plan;
- Provide for continuity;
- Be simple and short;
- Be flexible;
- Specify a performance criterion that can be monitored and controlled.
The Marketing Plan
First you must set your marketing objectives. These must be:
- be clear;
- be measurable; and
- have a stated time frame for achievement.
Examples of marketing objectives could be:
- To generate sales of $800.00 during the first year.
- To encourage 100 new persons to try the product in the first six months.
Your marketing strategy section of your plan outlines your game plan to achieve your marketing objectives. It is, essentially, the heart of the marketing plan. The marketing strategy section should include information about the four p's:
- Product - your product(s)and services
- Price - what you'll charge customers for products and services
- Promotion - how you will promote or create awareness of your product in the marketplace
- Place (distribution) - how you will bring your product(s) together with your customers.
Steps in preparing the Marketing Plan
There are ten steps involved in preparing a marketing plan. We said the steps are:
- Defining the business situation;
- Defining the target market/oppportunities and threats;
- Considering strengths and weaknesses;
- Establishing goals and objectives;
- Defining marketing strategy and action pogrammes;
- Co-ordinating of the planning process;
- Designing responsibiity for implementation;
- Budgeting the marketing plan;
- Implementing the Marketing Strategy;
- Monitoring process or marketing actions.
Let us look at each of these steps in this section.
- Beneficiaries of Financial Inforrmation
- What is stock?
- Accounting Records OR Book-Keeping on your PC
- Cash Flow Projection
- Qualities of a Good Salesperson
- Customers' Instincts and Habits OR Retail Psycology
- Different Customer Types
- What Motivates Cusomers to buy?
- Persuading the Customer
- Identifing Staff for your Business
- Sources of Prospective Staff
- Staff training and Development
- Workplace Environment
- Team Building
- Staff Turnover
- ConclusionUnit 8: Business communication