Entrepreneurship

Development and Training

Author
Dr. Marus Eton
Department of Business, Faculty of Arts and Social Science, Kabale
University, Kabale, Uganda

Publication Month and Year: November 2019

Pages: 121
E-BOOK ISBN: 978-81-943354-1-2

Academic Publications
C-11, 169, Sector-3, Rohini, Delhi
Website: www.publishbookonline.com
Email: [email protected]
Phone: +91-9999744933
 Entrepreneurship Development and Training

Author
Dr. Marus Eton (PhD)

Dr. Eton Marus (PhD) comes with vast working experience

in academia. He is a dynamic, self-motivated professional with
multi-disciplinary academic background with professional
proficiency in the areas of Finance and Accounts, Business,
Monitoring and Evaluation. He is a Lecturer at Kabale
University in the department of Business. He has Doctorate in
Business Administration with specialty in (Finance). He has
additional qualifications in areas of Financial Management,
Monitoring and Evaluation, Accounting, and marketing. He is
an accomplished scholar and researcher. He has made a number
of publications in peer reviewed journals. He has presented
papers in international Conferences and renowned consultant in
business and research. He has wide experience in lecturing at
higher institution of learning. The Author lives in Uganda.

[email protected]. [email protected]
256772880149/256701304416
 Entrepreneurship Development and Training

Course Description
The Entrepreneurship course is a dynamic course designed to inspire
and engage learners in the fundamental aspects of an entrepreneurial mindset
and the unlimited opportunities it can provide. This course will empower
learners through entrepreneurial thinking and immerse them in
entrepreneurial experiences that will enable them to be creative and
innovative. Furthermore, the course will expose learners on the application
of entrepreneurship skills. Thus, creating and managing viable enterprises.
Course objective
To equip students with innovative and creative skills in the business
environment.
Learning outcomes
By the end of this course, a student should be able to
i) Develop critical thinking skills that will enable them to identify and
evaluate entrepreneurial opportunities, manage risks and learn from
the results.
ii) Analyze the process that enables entrepreneurs with limited
resources to transform a simple idea into a sustainable success.
iii) Establish goals, identify resources and determine the steps required
to start and manage a business.
iv) Demonstrate and interact with local entrepreneurs and business
owners within their own communities.
v) Develop a business plan for starting up a business
Detailed Course outline
1. Introduction 10hours
 Introduction to entrepreneurship
 The concept of entrepreneurship
 The entrepreneur and entrepreneurial characteristics
 Entrepreneurial success
2. Environmental analysis 15hours
 Introduction to environmental analysis
 Internal environmental analysis
 External environmental analysis
 Challenges in industrial analysis
3. Creativity and innovation 10hours
 Purposeful innovation
 Sources of innovative opportunity
 The bright idea
 Principles of innovation
4. Starting a business 10hours
 Feasibility study
 Business plan
 Implementation follow up
 Control of the business project
 Contents

S. No. Chapters Page No.

1. Entrepreneurship Development and Training 01-25
2. Types/Classification of Entrepreneurs 26-39
3. The Entrepreneurial Process 40-51
4. Small Business in Uganda 52-60
5. Creativity and Innovation 61-74
6. Environmental Analysis 75-85
7. Feasibility Study 86-95
8. Introduction to A Business Plan 96-115
9. Entrepreneurship Development 116-121
 Chapter - 1
Entrepreneurship Development and Training

Introduction
An entrepreneur refers to the person or persons who undertake the task
and risk of organizing other factors of production (land labor and capital).
He is the coordinator or mobilizer, a risk taker, innovator and decision
maker.
The entrepreneur therefore organizes natural resources and capital goods
for production to take place. This is done in anticipation of demand and
supply.
Entrepreneurship is a process of creating something different with value
by devoting the necessary time and effort or entrepreneurship is the process
of creating incremental wealth.
Characteristics of Entrepreneurs
i) They are risk bearers that are; they risk their capital against
uncertainties in business.
ii) They are enterprising that is; have the courage and willingness to do
new things.
iii) They are creative and innovative that is; they bring about new ideas
and things.
iv) They are decision makers i.e. they are good and quick at deciding.
v) They are mobilizes that is are able to bring together the resources
(land, labor and capital) for production.
vi) Good planning i.e. should be good at determining in advance what,
when, where, and how to produce something.
vii) Patient, this is the ability to persevere and be diligent i.e. to endure
all kinds of business problem.
viii) Restless. they don’t rest unless their dreams come true
ix) Independence that is they are free from control, support or influence
of others.

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 x) Have the need for achievement
xi) They are ambitious.
xii) They always want to win.
Problems Faced by Entrepreneurs
 Taxation by the government.
 Government intervention by nationalizing and fixing prices.
 There is political pressure.
 Competition for the market.
 Lack of infrastructure for easy distribution of goods and services.
 Fluctuating demand and supply situations which in turn affect
planning of what, when, where and how to produce.
 Insufficient profits.
 High inflationary tendencies.
 Insufficient financial services and loan funds are low.
Importance of Entrepreneurship
i) It leads to employment opportunities both for the entrepreneur and
those who help him
ii) It contributes a lot to government revenue in form of taxes.
iii) Entrepreneurship utilizes those resources that would otherwise be
redundant.
iv) It helps to maintain constant flow of goods and services.
v) Provision of a variety of commodities to consumers raises their
standards of living
vi) The excess profits generated by entrepreneurs is used to finance
social services e.g. sport
vii) It helps in the development of infrastructure e.g. Bridges, roads.
viii) It may lead to the inflow of skills and the development oflocal skills
ix) It also helps to increases the export potential of a country.
x) It increases domestic investments through competition and inflow
of foreign capital

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The Process of Entrepreneurship
There are four Stages in the Entrepreneurship Process. They Include
i) Some Changes in The Real World
A change in the real world may bring a lead to produce something new,
this change is spotted through conscious acting of scanning the environment
for example change in weather conditions from humid to dry weather may
lead to the production of drought resistant crops in the areas where
Agriculture is rain fed.
ii) Idea Generation
At this stage a new idea over something comes from what is happening
in the real world, from the above for example the idea of producing drought
resistant crops may have come from understanding of a real change in the
weather conditions.
iii) Opportunity Identification
This involves conscious knowledge of the gap within the environment
that really needs to be filled. It starts with an assessment of new ideas with
possible opportunities associated to it.
iv) Viability and Feasibility
Opportunity identification also goes hand in hand with viability and
feasibility tests. At this stage an identified opportunity is to be tested on the
grounds whether it can be profitably exploited using the available resources
during a particular time period
Actual Operation of the Identified Opportunity

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Entrepreneurship Development
Introduction
Entrepreneur refers to someone who undertakes to organize, control,
manage and take risks/ profits of the organization.
Entrepreneurship refers to the process of creating and building a vision
of creating and building a vision from practically nothing, fundamentally it is
a human art.
1. Psychological Profile
Is the way an entrepreneur thinks, perceives or visualizes himself and
his environment and how this influences his behaviors? Behavior here entails
feelings, attitudes and opinions.
Many writers have tried to explain entrepreneurship in different but
mutually connected way. So different theories of entrepreneurship exist and
there have been different definitions of entrepreneurship but most of them
add something to other definitions.
Hisrich and Peters (1995) defined entrepreneurship as a process of
creating something different with value by devoting necessary time and
effort, assuming the accompanying financial, psychological and social risk,
and receiving the resulting rewards of monetary and personal satisfaction.
Another writer RonStandt (1984, 28) improved the above definition by
defining the entrepreneurship as a process of creating incremental wealth. He
said that the wealth is created by an individual (entrepreneur) who assumes
the major risk in terms of equity, time and career commitment or provides
value for some products or service may not be new or infused b the
entrepreneur by receiving and allocating the necessary skills and resources
A consistent universal theory of entrepreneurship does not exist but in
general the theory consists of several different approaches including
sociological, psychological, anthropological and economical approaches.
Timmons (1999) defines entrepreneurship as a way of thinking,
reasoning and acting that is opportunity obsessed, holistic in approach and
leadership balanced
Gupter and Sprihivan(1995) defines entrepreneurship to involve
combining factors of production to initiate changes and to that it is a
discontinuous phenomenon.
Donald and Richard (1989) defines entrepreneur as a process of

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innovation and new venture creation through four major dimension-
individuals, organization, environment and process and aided by
collaborativenetworks in the government, education and entrepreneurship.
The essence of entrepreneurship is the urge to match the continuous
changes in the environment with regard to the way an organization operates
and to the product innovation and improvement.Thus, the central
entrepreneurship role is constant desire to create something new such as;
new insights into the market, new corporate value, new manufacturing
processes, new product and service or new ways of managing all
entrepreneurial activity revolves around the birth and operation of new ideas.
The primary concern of entrepreneurship is desire to constantly adjust
with in the volatile business environment. As the economy undergoes
changes, newer and better methods of dealing with such changes are sought
and researched: a new organization, new insight into the market, new
corporate values, new manufacturing processes, new product or services,
new ways of managing.
Entrepreneurship process therefore through information synthesis,
observes such changes especially those signaling opportunities and makes
considerable judgment of the likely gains out of it. The entrepreneur thus
becomes innovative only if he discovers the ways which improves the
efficiency in the use of resources thereby improving production, productivity
and quality of a product or service required by the community.
Entrepreneurship is not a natural gift or talent peculiar only to some few
individuals. Under normal circumstances, it is believed that everybody can
upgrade his / her entrepreneurial skills through spontaneous and conscious
activity of training, experience, education and social structures such as
family; peers and religion. These factors interact with desire to create
something new and different from the common and general understanding of
a particular phenomenon.
Psychological Perspective of Entrepreneurship
In this study, several psychological theories have been analyzed above;
these theories bring out personality characteristics that are closely related to
those of entrepreneurs. These include: -
1. The Needs and Achievement Theory: Development by
McClelland emphasizes three for Achievement, need for utilizations
and Need for power. It pays attention to personal traits, motive and
incentives of on individual and concludes that entrepreneurs have a
strong head for achievement (McClelland writer 1971).

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 2. From Douglas McGregor’s theory x and theory y, we can learn that
people who believe in theory y have strong self-drive and can work
comfortably alone. This is common characteristics of entrepreneurs.
3. From within the hierarchy of needs of has lows theory that within
them there is that level where the individual seeks esteem and self-
actualization. This can be likened to the entrepreneurs need for
recognition and applause.
4. The Hygiene theory developed by Hertzberg, indicate that the
motivating factors of an individual involve achievement,
recognition and advancement.
5. The Expectancy theory on the other hand, talks of behavior as being
determined by a combination of forces in the individual and the
environment.
6. A similar focus is found in locus of control theories that conclude
that an entrepreneur will probably have strong internal locus of
control (Low and Mac Millan 1988).
This means that an entrepreneur believes in his or her capabilities to
commerce and complete theories and events through his or her own actors.
However, prior research has suggested that individual involvement in
entrepreneurial activity cannot be predicted by a simple set of characteristics
(Sandbarg and Hofer 1987), But the above theories give us a clean indication
that entrepreneurship characteristics are a subset of the personality
characteristics of an individual as brought out clearlyby the psychologists. In
view of the above, the study will summaries the characteristics into those
most commonly identified with entrepreneurship. These will include among
others.
 Achievement motivation.
 Affiliation needs.
 Loans of control.
 Risk taking propensity.
 Tolerance for ambiguity.
Researchers have said that there is no characteristic predisposition or set
of traits of the individual entrepreneur level of analysis that consistently
“predicts” entrepreneurial activities the study skill aims at establishing a
close link between entrepreneurship and human psychology. To achieve this,
we shall analyze each of the above traits in detail.

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Achievement Motivation
The root of the achievement motive lines with the Weberian concept of
the protestant work ethic.
McClelland (1961) proposed that the need for achievement was a
psychological motive derived from particular types of familiar socialization
intervening between ideological values the entrepreneurial behaviors.
Achievement motivation can be defined as behaviors towards
competition with a standard of excellence (McClelland 1953). People who
have high levels of achievement motivation tend to set challenging goals and
try to achieve these goals. These people value feedback and increase it to
assess their accomplishments Achievement motivation is accepted as
important characteristics of the individual and influences work behavior to a
great extent
Certain characteristics of individuals with high achievement need may
lead to different levels of entrepreneurship styles. For organization
McClelland and Koestler (1992) suggested that people with high levels of
achievement motivation will be future anointed and will take tasks seriously
if they believe that current tasks will influence future goals.
Besides, achievement motivation refers to a desire to outperform other
people, people with achievement motivation find satisfaction in companying
themselves to others and is motivated by this comparison.
Affiliation Need
Affiliation need refers to a desire to be close to other people in order to
feel re assured that the self is acceptable (McClelland, 1953). In his research
or the theory of psychological motivators McClelland found out that
entrepreneurs are also driven by the need to stay in harmony with their
environment, being of service, a problem swore and to make beneficial
contribution to the welfare of their immediate society.
Locus of Control
Locus of control refers to the perceived control over the events in one’s
life (Rotter,(1996) people with internal locus of control what happens in their
lives on the other hand, people with external locus of control tend to believe
that most of the events in their lives result from being lucky, being at the
right place at the right time, and the behaviors of powerful individuals
people’s beliefs in personal control over their lives influence their perception
of important events their attitude towards life, and their work behaviors.

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 Locus of control may be related to pro – activeness. When individuals
believe that they can make a difference in their lives by performing certain
actions, they may be more willing to think about the future and act
proactively; research indicates that people with higher degrees of internal
locus of control tend to monitor the environment to obtain information.
Internal locus of control may also be related to risk taking orientation
research shows that internals tend to estimate probability of failure as lower
and decide in favor of risky options.
There is also reason to expect a positive relationship between the locus
of control, innovativeness and competitive aggressiveness, to the extent that
individuals feel that being compressively aggressive or being innovative are
ways of exerting control over the environment we can expect a positive
relationship between these variables.
Risk – Taking Propensity
This is defined as the “perceived probability of receiving rewards
associated with the success of a situation that is required by the individual
before he will subject himself to the consequences associated with failure,
the alternative situation providing less reward as well as less several
consequences that the proposed situation “risk taking is defined as a trait that
distinguishes entrepreneurs from non-entrepreneurs.
Risk taking propensity of the entrepreneur is expected to be related to
the risk-taking level of the entrepreneurial firm. When entrepreneurs have
the ability to influence the actions of the organization with their personal
decisions, their personal characteristics may be reflected in the actions of the
organized as a result the organizing be more risk taking the propensity may
positively influence innovativeness especially product innovativeness,
product innovativeness requires a certain degree of tolerance for taking risks,
because innovativeness benefit it’s from a willingness to take risks and
tolerate failures the risk – taking propensity of the entrepreneurs will
positively influence innovative attempts of employees and as a result the
organization may adopt an innovative orientation to face the competition.
Tolerance for Ambiguity
This refers to a tendency to perceive ambiguous situations in a more
neutral way people who have low levels of tolerance for ambiguity tend to
find unstructured and uncertain situations uncomfortable and want to avoid
these situations. A certain level of tolerance for ambiguity may influence
organization success positively because organization events are uncertain

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and UN structured most of the time and organization success requires the
willingness and ability to cope with uncertainty. Tolerance for ambiguity
may be related to certain entrepreneurial styles. Tolerance for ambiguity
found to be related to personal creativity (Terano 1990) and the ability to
produce more ideas during brain storming. These findings suggested that
creativity and innovative less requires a certain level of tolerance for
ambiguity. The ability to tolerate ambiguous situations may also be
positively related to the risk – taking style of the organization.
Tolerance for ambiguity may also be positively related to pro –
activeness.
This requires a desire to think about the future and take actions to
answer future situations and threats proactive organization need to think
beyond.
Conventional ways of operating and question the strong quos as a result pro
activeness requires the capability to handle the unknown, people who are
able to tolerate ambiguity may lead their organization to become more
proactive.
2. Sociological Aspect of Entrepreneurship
Sociological theory tries to explain entrepreneurship as a process
whereby the individual’s sociological background is one of the decisive push
factors that can influence such an individual to become innovative and
creative in a particular field of activity and thus become an entrepreneur.
Entrepreneurship is seen as a response to inferior social conditions, people
become creative (entrepreneurial) in the areas where they are socially
deprived or seen to have the possibility of being disadvantaged. It is said that
if people are disadvantaged they will become entrepreneurs and spear head
the drive for economic change.
The entrepreneurial skills are highly affected by sociological
environment which distinguishes different opportunities that one may be
able to exploit. That is to say, entrepreneurship can be affected by a number
of factors which surround a particular society they include:
i) Child Family Environment
The family environment of the entrepreneur includes birth orders,
parents’ occupation and social status, and relationship. It has been found that
being a first born or an only child is postulated to result in the child receiving
special attention and thereby more self-confidence. In terms of occupation of
the entrepreneur’s parents, there is strong evidence that entrepreneurs tend to

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be self-employed, or entrepreneurial fathers. Having a father who is self-
employed provides a strong inspiration for the entrepreneur. The overall
parental relationship regardless of whether they are entrepreneurs is perhaps
the most important aspect of the child hood family environment in
establishing the desirability of entrepreneurial activity for the individual.
Parents of entrepreneurs need to be supportive and encourage independence,
achievement and responsibility.
The family network influences the ability to mobilize resources
necessary for the business or enterprise. The capital can be mobilized
through inheritance patterns, family loans and cheap loans and cheap labor in
the family. Most successful businessmen belong to groups with internal
relationship and trust.
ii) Family Background
The family background has great influence on the growth and
development of entrepreneurship. The nature of activities that a particular
family undertakes determines the type of entrepreneurship that will be
adopted by the growing entrepreneurs. For example, if the family deals with
hand crafts there is a greater possibility of developing entrepreneurs in such
a field.
iii) Religion
In the sociological aspect of entrepreneurship, it has been found out that
religion plays a major role towards entrepreneurship. For example, some
religious communities in India i.e. Parseers, Marwarsand Sindlees are seen
to have an affinity for industrial activities. Religion exercises a strong
influence on attitudes towards material gains relatively to efforts.
iv) Environment
A complex and varying combinations of financial, institutional, cultural
and personal factors determines the nature and the degree of entrepreneurial
activity at any time. The personal background of the entrepreneur are
determined mainly by the environment in which they are born and brought
up and work.
A multiple of environmental factors determine the entrepreneurial spirit
among people. The entrepreneur in turn creates an impact on the
environment. Thus the interaction between the entrepreneur and his
environment is an ongoing process. At any one given point of time, the
entrepreneur delivers meaning from the environment prevailing at that time
and tries to adopt and or change the environment to suit their needs.

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 The environment especially the external is dynamic and it keeps
changing and affects different organizations to a varying extent. For
example, government policies, political excessive red tape, ideological and
social conflicts, rising costs of input etc. Therefore, entrepreneurship is
environmentally determined and the most important tool for entrepreneurial
growth is the presence of a favorable business environment.
v) Race
There is no link between race and entrepreneurship. Entrepreneurs have
sprung from all region of the world without any bias to any particular region
(race). Evidence however exist which shows entrepreneurship in Africa is a
reality. For instance, African entrepreneurs raise start – up and operating
capital from community resources such as rotating credit systems involving
social groups.
vi) Time and Age
The time and age of entry into entrepreneurship are important factors to
most entrepreneurs. In terms of chorological age, most entrepreneurs initiate
their entrepreneurial careers between the ages of 22 and 55 (Hisrich and
Peters 1995). They also said although a career can be initiated before or after
these years, it is not as likely because an entrepreneur requires experience,
financial support, or high energy level in order to successfully launch and
manage a new venture. According to the study carried out in India, it was
found that two thirds of the entrepreneurs entered into entrepreneurship
before the age of 25 years. People from mercantile communities entered into
entrepreneurship comparatively at younger age due to their early orientation
and guidance by their parents. The important thing to note here is that a
person can join entrepreneurship at any age provided he/she has ability and
interest of becoming an entrepreneur.
vii) Culture
Hofstadter (1991) defines culture as the collective programming of the
mind which distinguishes the members of the group or category of people
from another. The mental programming referred to above consists of shared
values, beliefs and norms. These mental contracts influence how people
socialize their particular culture, and the way they perceive events. They also
help to determine what behaviors are considered appropriate or inappropriate
in various social situations.

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Hofstede Identified from Value-Oriented Dimensions of Culture that
may be used to Describe Cultural Groups. They Include
 Power Distance
This is the general measure of the degree of interpersonal influence that
those who hold power in a social structure can exert over those who lack
power. According to Hofstede, it is the difference between the extents to
which
Superiors in a social hierarchy can determine the behaviors of a
subordinate compared to the extent that the subordinate can determine the
behavior of the superior.
In high power distance societies, inequality between social groups is
expected as part of “natural’ order. Consequently, there tends to be large
social and economic gaps between those who have power and those who do
not. In addition, movement between high and low power groups is restricted
creating a tendency towards distinct social classes with little exchange
between the groups.
In contrast low power distances societies attempt to minimize inequality
between classes, emphasizing the ideal of equal rights for all members of the
society even if it is not perfectly achieved. Social mobility is relatively easy
in low power distance societies and a large middle class is usually present to
bridge the gap between more or less privileged groups.
In high power distance cultures because of the social inequality
characterizing high power distance regions, access to educational systems
and economic resources may be restricted to the privileged class.Moreover,
members of the lower classes may not be accepted into entrepreneurial roles,
or lf they assure such roles, their activities may be devalued or considered
illegitimate.
 Uncertainty Avoidance
The level of anxiety experienced by members of cultured due to
ambiguous events may vary as a function of the society’s values and beliefs.
Uncertainty evidence is a measure that indicates a group’s level of anxiety
regarding future event. It evaluates the degree of tolerance of a culture of the
ambiguity that is internet in a continuously unfolding future.
Societies attempt to manage uncertainty through rules, technologies,
laws and initials in order to protect members from anxiety. These devices
standardize the behaviors of society members and make the outcome of
social processes more predictable.

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 Individualism
This is the measure that indicates the degree to which individual identity
and self-concept are linked to collective groups of the society. In
individualistic societies, personal values and goals are prime determinants of
behaviors and self-identity.
Of all Hofstede’s value dimensions, the one most directly associated
with Weston ideals of entrepreneurship is individualism. In the Weston
model, the activities of the entrepreneur are quite essentially individualistic.
 Masculinity
Hofstedes final cultural direction is masculinity. Despite its name, this
construct does not measure specific differences between male and female,
rather it refers to learned styles of behavior that have been (stereotypically)
applied tomales and females.
The masculinity measure evaluates the general tendency to act either
assertively (Masculine) or in a nurturing manner (feminine) In high
masculinity societies, individuals tend to set high performancestandards and
act forcefully to achieve these standards. In societies with a low masculinity,
nurturance issues are prominent.
Its relation to entrepreneurship would seem to be through the
assertiveness and high need for achievement characteristics of “masculine”
culture. In masculine societies and material success achieved through
successful entrepreneurial ventures is valued and entrepreneurs who attain
such success are recognized and esteemed. Conversely in relatively feminine
cultures, achievements motivation, at least in the material sense, is relatively
weak and success is defined in terms of pleasant human relationships.
viii) Migration
Research has it that some entrepreneurs are / were migrants having
come from different places with in the state from outside limited knowledge
of the language or culture of the majority or discrimination against the
immigrants led to difficulties in securing jobs in existing firms. A viable
alternative in this inhospitable work environment is striking out ofone’s own.
Therefore the explanation forimmigrants high rate of business creation is a
combination of their social costiveness and difficultiesincluding exploitation
they encounter in the broader labor market one such explanation associated
with the early work of Ivan light among others, argued that the more
hardship and frustration in migration experienced in the main stream
economy, the more likely they were to seekemploymentand develop stronger

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economic and social bonds with in their ownethnic community. These in turn
complete in the broader market by providing them with information
networks services of credit, a loyal consumerbecause for their goods, and
steady supplyof co- ethnic laborers.
It should be noted however, that among immigrants, the traits of risk
taking and ambition are like
ix) Occupational background
It is widely held, but untested consensus that past experience is a better
predictor of decision, performance, and behavior than education (Bird 1993).
Thus, the most powerful way of learning is through ones occupation that is
direct experience of the subject matter. It is therefore, assured that one might
learn that entrepreneurship is desirable feasible and profitable from the
concrete experience of working in one own or other persons firms.
Occupational background or previous work experiences are described
etc formative and may encourage entrepreneurial behavior. The skills gained
through formative experience may be managerial, financial attitudinal or a
combination of these, and may build business competence, high lighting
opportunities for the individual
Small businesses have been suggested as incubators for future
entrepreneur, although they may be viewed as formative, it can also be
viewed as a reactive experience due to the fact that the organization
environment may be unstable and job prospects are limited as are rewards.
x) Gender
Gender is one of the sociological angles from which the theory of
entrepreneurship can be viewed Depending on the social, political, cultural
economic and historical as well as religious settings of the gender the theory
of the entrepreneur changes. In India the caste structure was such that social
mobility was estimated and this people born in a specific caste confirmed
themselves to particular look at women in this case study it was found that
women were in the lower caste particularly demised access to education
acquisition of skills other than those that would confide them to motherhood
and house care and as such the majority of them contented themselves with
the role of child upbringing and housekeeping. Not with standing this they
were economically marginalized and psychologically biased towards
initiation of business or in visionary ventures. As a result few of them ever
ventured into entrepreneurial activates. They therefore did not from their
perspective have the impetus to become innovators. Some religions societies

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like the Parsees, Marwari and Sindlees on the other hand in India had an
affinity for industrial activity and as result some of the women from such
societies tended to have an affinity for industrial occupation and
entrepreneurship in the same field.
Dominance of certain ethnical groups / sexes in entrepreneurship is
global phenomenon. The protestant ethics in the west, the samurais in Japan,
the trending classes in U.S.A and the family business concerns in France
from those we can clearly observe putting into consideration, family
background, the type of industry that could be started, the type of ownership
and the average annual, monthly income of the family all played down
heavily on the ideas of what an entrepreneur was from a gender perspective.
xi) The Handicapped
The handicapped in India also formed asset of their own in India.(these
of course transcended in all cases, education background, religious affiliation
and physical capacity. the handicapped formed quite a number in the Indian
community mainly due to the then high prevalence of polio and poor
working conditions. From their perspective they were already
psychologically and physically impaired as a result very few of them even
dreamt let alone really achieved the status of entrepreneur. They tended to
regard themselves as a less privileged caste of their own and did not very
much venture into entrepreneurship or become entrepreneurs not
withstanding that society as a whole already viewedthemnegatively all in all
m, the perspective of the entrepreneur was such that considering the social
economic and political settings of their surroundings, the handicapped did
not (generally) a result few of them ventured into entrepreneurships it
therefore acted (handicraft as a sort of barrier to expression but not complete
inability.
xii) Education
The early entrepreneurship theorists advocated that entrepreneurship
cannot be taught or learned in schools, they believed that entrepreneurship
has been recognized that one must be born with. Currently entrepreneurship
has been recognized as a discipline that can be used to help an entrepreneur
to acquire important traits which he might not possess.
Formal education; helps an entrepreneur to develop entrepreneurial
skills like resourcefulness. However, the lack of higher education is not an
obstacle or limiting factor. The study conducted in India reveals that
majority of entrepreneurs lacked higher education. Most of these were young
persons with higher education seemed to prefer white color jobs in the

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government. However engineers, technicians and other professionals are
however coming forward as entrepreneurs.
The level of education that the society possesses may contribute
substantially to the kind of entrepreneur that will grow in such a society.
Education helps the entrepreneur to know what is going on in other parts of
the world and can enable him / her to improve in all aspects of his or her
activities. Therefore, education is important factor that can influence
development of entrepreneurial skills or creativity.
xiii) Schools and Institutions
Schools and institutions form an integral and fundamental grouping in
society. As seen above the level of education is one of the key factors that
influence entrepreneurial participation in a society. Much as the individuals
in these schools/institutions in India were all in away affected by their
individual historical background which includes size of family, type of
family and economic status of family. According to Hadimahis study,
Zamidar family helped to gain access to political power and exhibited higher
levels of entrepreneurship.
We also observe that family status of the individual greatly influenced
social and physical mobility of a person. These institutions however were
also affected by religion, which exercises a strong influence on the attitude
towards material gain relatively to efforts. Max Weber propounded the
theory that the ‘protestant ethic’ among Christians fastened the right attitude
for entrepreneurial skills like resourcefulness however the lack higher
education is not a limiting factor. Since education and technical knowhow is
primarily acquired in schools/ institutions and we know that education is the
best means of developing man’s resourcefulness which encompasses
different decisions of entrepreneurship
It is important on this wrote to reveal the studies of AsdlokKuhar who
found that many of the very successful entrepreneurs were graduates and
post graduates particularly in engineering and other technical discipline and
also that Kamma and Brahim entrepreneur were relatively more educated
than others. This may be expected that higher levels of education may enable
the entrepreneurs to exercise their entrepreneurial talent more efficiency and
effectively. Therefore, it can be said that people from schools (institutions
are helped to acquire / discover themselves potential as entrepreneur. This is
focus, the elite perceived themselves as highly potential entrepreneurs had
high option of becoming as identifying them as one, hence explaining why
the greater majority of entrepreneurs are institutional outputs.

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3. Economic Theory of Entrepreneurship
This one looks at an entrepreneur as an innovator who is capable of
identifying opportunities, exploiting them and turning into Marketable ideas.
He adds value in the form of time, money, skills and accepts the rises of
competitive markets with regard to implementation of ideas or exploitations
of opportunities and eventually the community benefits from his effort.
Schumpeter (1934) defines entrepreneurship “essentially a creative
activity consisting of doing such things as are generally hot done in the
ordinary course of business.
Timmons (1999) defines entrepreneurship “as a way of thinking,
reasoning and acting that is opportunity obsessed holistic in approach and
leadership to exist, an activity ought to produce something different,
something specific, that changes and upgrades field from resources.
According to Hertzberg (1998) the entrepreneur’s business has two main
purposes. The first is to create the next satisfied customer “string to fulfill
some need, either real or perceived. The second purpose is to “out with
navels by (beating) the opportunities not yet taken and therefore to make the
largest profit possible. He creates satisfied customers by developing needs.
The entrepreneur is also important in that he improves an existing good
or service through innovations or develops a new one. This is an economic
action that can also create a need for a commodity by investing or marketing
it in a new way. An entrepreneur must also be constantly aware of what
people are looking for and also be aware of potential uses of client goods and
services when an entrepreneur is successful, he will make profit.
Schumpeter’s Theory of the Entrepreneur
He said the development of entrepreneurship was a Factor of Production
(F.O.P). He sees the entrepreneur as having a decision-making role and his
/her main function is to be viewed in a wide perspective and induces the
introduction of a new methods of production; opening of new market and
creation of new types of individual organization.
Schumpeter looks at entrepreneurship as the avenue through which
technological change comes. The resultant technological change comes. The
resultant technological change in essence means a form of economic
development. Scamper argues that as the economy develops progress will
eventually come to be “mechanized”.
Another salient aspect of the Schumpeterian view is that it emphasizes
the idea of the entrepreneur as a sow ice of disequilibrium in the economy

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Schumpeter argued that equilibrium and optimization, is the horn of a
healthy economy and the central reality for economic theory and economic
practice.
Also, Schumpeter initially sees innovation and hence economic growth
and development as being the province of bold individual entrepreneurs.
The Entrepreneur and Technological Change
Basic innovations are more or less exogenous to the economic system in
that their supply is perhaps influenced by market demand in some way, but
their genesis lies outside the existing market structure accordingly
Schumpeter argues that the entrepreneur seizes upon these basic inventions
and transforms them into economic innovations. In this aspect we may see
the entrepreneur as playing a key role in technological change in industry.
Micro economic theory points out that resource owners and producers
invest their talents and other resources in production with an aim of reaping
returns, similarly Schumpeter late that the successful innovator reaps level
short term profit which are soon bid away by imitators.
Schumpeter’s theory however portrays the bold entrepreneur as one who
does not let off because of the said imitators come into play there is always
new knowledge with in the entrepreneurs’ sphere. Indeed, the job of the
entrepreneur is precisely to introduce new knowledge.
The Obsolescence of the Entrepreneur
The obsolescence of the entrepreneur becomes clear when we look at
telemeters’ elaboration on the nature of large corporations and its role in his
theory Schumpeter believed that economic history influences economic
theory. Perhaps because of the changes he saw in contemporary economics
(rapid industry and increased expenditure on research and development in
large cops) Schumpeter argued that the entrepreneur role was gradually
being assimilated by the corp. He saw the inventive activities as singly under
the control of large firms and this reinforces their competitive position.
There is a historical trend in Schumpeter is idea that the entrepreneur will
eventually become “less important” or obsolete” and large firms would
occupy a more prime position.
This social function (entrepreneurship) is already losing importance and
is bound to lose it at an increasing rate in the future even if the economic
process itself of which entrepreneurship was the prime mover went on
unabated.

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The Entrepreneur and Disequilibrium
Schumpeter argues that in a world of limited knowledge,
entrepreneurship is necessarily an unpredictable and extra rational activity.
This argument leans towards a liberal social order continently, the
Schumpeterian view asserts that the capitalist process aided by
entrepreneurship) progressively raises the standards of life of the razzes.
Economics aim at bringing those things that once were for the elite to the
reaches of common individuals. And this Schumpeter says can only be done
through the success of risk takers (supported by entrepreneurs) similarly, the
rate of general economic progress will depend on the ability of individuals to
commend resources and direct them in unconventional and surprising
directions.
Yet, it’s the same process of innovations, Schumpeter argues, that thrice
dynamic disequilibrium, basically inventions are more or less exogenous to
the economic system. Entrepreneur base upon opportunities and strive to be
pioneers in production of new products. Those who are successful reap large
short-term profit. This as we noted earlier encourages competitors into the
market in the form of imitators. Similar, great innovations lead to the
elimination of jobs and firms. Schumpeter called this “creative Destruction”
the effects of entrepreneurship not only create progress, jobs, firms, and
improved standards of living, but also put some jobs, firms and products out
of business.
Schumpeter therefore argues that innovation leads to disequilibrium and
alternation of the existing market structure but as time goes on, the situation
eventually settles down to wait for the next wave of innovation. The result is
a punctuated pattern of economic development that is perceived as a series of
business cycles.
Israel Kirzners View of Entrepreneurship
Israel Kirzners procedure is based on an analogy, or a parallel between
what he calls the entrepreneurial element in individual decision making and
entrepreneurship in the market interaction. He isolates the entrepreneurial
element by contrast in routine optimizing behavior with what he claims we
can know about time individual action by means of a close inspection.
To Kirzner, close inspection reveals that individuals spontaneously
discover means of satisfying their wants. For example, an individual light
follow a sub conscious vision that is either vision or impression) and as a
result experience an unexpected gain he calls such spontaneous discovery –
the entrepreneurial element.

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 Kirzner further identifies what he regards as a crucial kind of action in a
market economy that is arbitrage (this is the purchase and sale of same or
equivalent securities in order to profit from piece discrepancies). Kirzner
associates entrepreneurship in the market economy primarily with this
action. He further argues that as the entrepreneurial element in individual
decision making leads to a more efficient personal allocation of resources or
co-ordination of the individual’s plans, so also does entrepreneurship in the
market economy that arbitrage leads to economic coordination or the more
efficient allocation of resources in the economy.
The Discussion Will Focus on The Following
1) Entrepreneurial Element in Individual Decision Making
The attracting point for understanding Kirzners definition of
entrepreneurship is the isolated actor. This isolated learning is linked to
entrepreneurial characteristics which (sporadically) a rise from people in
their various isolated environments.
a) Spontaneous Learning
Kirzners idea of entrepreneurship is based on what he calls bounteous
learning. This he said is not planned learning. Thus, it is sub conscious
subconscious learning is synonymous with the transformation of a
previously recognized entrepreneurial vision into recognized contributor to
satisfaction, when Kirznerls says that an individual belief. Lay constitute an
entrepreneurial vision he was hot reforming to a conscious belief. He would
in essence bet that his belief was correct. His action would therefore be
indelibility choice.
b) Alertness
Kirzner calls the state of mind that enables spontaneous learning to
occur as alertness. According to kirznersjust as leaving is spontaneous, so
also is alertness. This state of mind cannot be produced as improved upon;
it’s part of human nature. Individuals may differ in their alertness.
c) Transformation of Spontaneous Learning into Conscious
Knowledge
After an entrepreneur has recognized his vision (or hunch), it’s longer
subconscious. According to Kirzner it becomes a factor of production. The
individual how takes it into account in his decision making. This when
individual recognizes that following previously subconscious vision is a
means of increasing his satisfaction, he simultaneously discovers that he
possesses a factor of production This entrepreneurship is a discovering
process although a subconscious one.

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d) Motivation for Subconscious Learning
In spite of the fact that spontaneous learning is a subconscious process,
Kirzner says that it’s encouraged by the possibility of gain. He says, lf we
know anything atall about theprocess of spontaneousdiscovery of
information, it’s thatthis processis some low altogether more rapid when the
relevant informationwill be of benefit to the potential discoverer.
2) The pure entrepreneur and the entrepreneur economy
According to Kirzner a pure entrepreneur is decisions maker whose
entire role arises out of his alertness to hitter to unnoticed opportunities. This
activity of these pure entrepreneurs can then explain how prices and input
and output quantities and qualities charges.
3) Alertness and Arbitrage
For Kirzner, the first characteristics of an entrepreneur is alertness the
crucial question (in the task of the theory of the market) concerns the nature
of the forces that bring about changes in the buying, selling, producing and
consuming decisions that make up the market. This force Kirzner says
consists of learning from mistakes for example the help to explain how
yesterday market experience can accounts for change on plans that might
generate alterations in prices in outputs or in the uses of inputs hence the fact
that men learn their experience in the market.
The learning which Kirzner has in mind is subconscious, and the
changes are hot consciously chosen Kirzner is hot referring here to market
participants who, each motivated by his personally protected gain from trade,
He is referring to a subconscious process. The expectation that traders have
of other’s plans change subconsciously. Traders are subconsciously alert to
changes.
In short, the pure entrepreneur first subconsciously discovers what he
regards as an opportunity to earn money by buying and selling (or by buying
F.O producing a good and selling it) then he fiancés his venture by burning
money from a capitalist, the entrepreneur uses the funds for his
entrepreneurial venture, and then he pays back the capitalist, including
interest and keeps the pure entrepreneur profit” A good descriptive label for
the behavior performed by the pure entrepreneur is arbitrage. Thus the
defining characteristics of entrepreneurship in the market economy are
arbitrage.
a) Differences among Individuals
Individuals in market differ in their alertness. For example, if two

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individuals buy and sell of the basis of sub conscious visions, the first may
be more correct, in the eyes of the superior insight, than the second. The
money earned by the first win corresponding be grater similarly if two
individuals buy and sell on the basis of some subconscious vision one may
come to subconsciously realize that the vision, in gain while the other
remainsinward of his vision contribution to his earnings. Leaving has
therefore accrued in the first instance only.
b) Learning as discovery and transformation
Learning in the market according to Kirzner, consists of a
transformation of a non-means into a means at least to the individual who
experience it. If an individual subconsciously learns that his perilous
subconscious vision enabled him to gain in a market. Later he experiences a
similar choice situation. At the later time, his knowledge, not his vision
would enable him to make a correct choice. At the time that the vision is
discoursed, it gets transformed into F.O.P knowledge. This alertness,
subconscious learning, and entrepreneurship are discovery processes.”
c) Encouragement of subconscious learning in a market
Subconscious learning in the market can be encouraged in two ways
according to Kirzner.
It can be encouraged by others advertising if the advertiser profits his
message to the potential consumer, or with conic illustration or a compared
by a certain piece of music surely this is because the advertiser knows hot
merely how to lower the cost to the consumer of learning his message but
how to encourage spontaneous learning by the closure with no deliberate
search for all”
Subconscious learning can be encouraged by institutional arrangement;
institutional arrangement determines the gains that are available to different
individuals when they subconsciously learn, because subconsciously
learning in some individuals is superior to that in other, it’s important that
those who are superior receive higher gains.
4) Entrepreneurship as Equilibrating
From a Logical Definitional Standpoint, Kirzner’s Notion of
Entrepreneurship as Equilibrating Combines Three Ideas
 The first is the subconscious learning is equilibrating to the isolated
actor.
 That subconscious learning about arbitrage opportunity is
equilibrating in markets.

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  The subconscious learning would lead to a general equilibrium of
there were no changes in the non-entrepreneurial determinants of
DD and SS.
He states that, it’s only entrepreneurship which might eventually lead to
equilibrium (Kirzner 1999).
a) Subconscious learning is equilibrium:The tendency of purposeful
human beings to become aware of available opportunities (by
means subconscious learning tends, with greater or lesser rapidity,
to eliminate misallocation error. From Kirzners view point,
misallocation of resources means wrong decisions and these would
lead to disequilibrium.
b) The subconscious learning about arbitrage opportunities is
equilibrating in the market in the market economy, what Kirzner
calls the “entrepreneurial element in individual decision making
“impacts through arbitrage. Like the isolated individual, the
arbitrageur behaves according to subconscious vision. he a observes
price and follows his subconscious vision to arrange an exchange a
cow dollar value and a buyer who attaches a higher dollarvalue
given that his visionis correct, the result is entrepreneurial or market
“profit”
c) Subconscious Learning Win Lead to General Equilibrium:
Kirzner says that just as there is a tendency for arbitrage to lead to
equilibrium in a particular market there is also a tendency for it to
lead to an optimum general equal or equity in all markets. An equal
state is one in which to further learning resisting from following
subconscious vision is possible all the Knowledge of wants abilities
and knowledge that the economists assumes to be element from the
stand point of supervisor insight has been acquired by the various
individuals.
Cassion’s theory of Entrepreneurship
Like Schumpeter and Kirznercasson is another author who tried to
advance the economic theory of entrepreneurship Casson (1982) specifically
defines an entrepreneur as someone who specializes in taking judgmental
decision about the coordination of scarce resources after identifying new
opportunities the entrepreneurs persona comparative advantage lies in
processing information which requires considerable judgment. This is
because the information collected is sometimes conflicting and often
incomplete.

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 In one of his essays on entrepreneurship Casson says the not effective
way to synthesize the lights of transactions of the firm is to build the theory
of the firm around the personality of the entrepreneur. The theories that
neglect the entrepreneurial dimension in explaining the behavior of the firm
can only after a partial explanation...
He continues that an entrepreneurial theory of the firm can encompass
all the major issues regarding the nature of the firm like the boundaries of the
firm the formation, the internal organization of the firm, the growth and
diversification of the firm and the role of the entrepreneur which he argues to
be the most fundamental.
Caisson’s theory from Economic Perspective Considered Four
Categories
i) Innovation
As the economy undergoes some economic changes, newer and better
methods of dealing with such changes are initiated by the entrepreneur. This
is because he is the one who can observe such opportunities through
information synthesis and makes considerable judgment of this information
to make a gain out of it.
ii) Uncertainty
Successful entrepreneurs must be optimistic and self-confident in order
to compete for resources (Rss) from rival entrepreneurs and to like with risk
but their judgment may turn out to be wrong the uncertain judgment. To
obtain widest possible synthesis of the latest information, they cultivate
networks of social contacts that feed them the information they require for
making judgment decisions
Caisson emphasizes here that information (knowledge) is very important
he argues that all other things being equal; it’s the optimistic and self-
confident entrepreneur who will prevail- whereby he takes a more favorable
view of the economic environment than others,and is therefore prepared to
pay more for, the Rss for which they are competing. In this way are
competing. In this way the entrepreneur believes to have better knowledge
than the others and outcome of his judgment becomes less certain.
iii) Entrepreneurial Businesses
The trend here is that as changes occur in the economy entrepreneur’s
getter as much information as possible. Then competition impacts on the
entire market situation resulting in improvement inform of new business,
normally one phase of entrepreneurship triggers off subsequent phases, for

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example which includes new firm formations; partnership formations;
diversification; inter firm joint ventures; merger; and growth through
learning such improvement automatically lead to economic growth.
iv) Equilibrium
If an economy is in equilibrium there are unexploited gains to be made
An entrepreneur is someone who notice some of the opportunities for
profitable trade and exploits them returning to the original equilibrium
position can either be achievement through increasing or decreasing price, or
through increasing or decreasing qualities entrepreneurs normally anticipate
such changes and plan in advance how to exploit them and gain out of them
entrepreneurs therefore move the economy to equilibrium.
Caisson attempts to identify a shared element between Schumpeter is
Kirzners and his theory by introducing the concept of entrepreneurial
judgment. The attempt to identify a shared element suggests that caissons
theory has generality and may be applied to all kinds of entrepreneurship. In
Caisson’s view, the concept of entrepreneurial judgment is of paramount
importance which is based on individuals their perceptions and the
information that they have available or choose to acquire.
Central to this concept is the recognition that different individuals will
make different outhouse because information is necessarily impotent and
costly to acquire in cognizance of this, Casson recounts that the
entrepreneurial theory of the firm suggests that a market economy driver by
practical judgment through a proper synthesis and coordination of
information mainly around the personality of the entrepreneur, is likely to
prove the most successful

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 Chapter - 2
Types/Classification of Entrepreneurs

Literature on entrepreneurship is paying greater attention to the diversity of

entrepreneurs. Certain characteristics of the firms and the entrepreneurs who
own them can be more easily and clearly understood if we group and classify
certain types of entrepreneurs differently. The following are some of the
distinctions that can be used to classify entrepreneurs.
Motivation to Engage in Entrepreneurial Activity
Push (Forced): Push entrepreneurs are those whose dissatisfaction with
their current position for reasons unrelated to their entrepreneurial
characteristics, pushes them to start a venture.
Pull Entrepreneurs: Are those who are lured by their new venture idea
and initiate venture activity because of the attractiveness of the business idea
and its personal implications.
“Push” and ‘pull’ Entrepreneurs: Are combinations of the above two.
They are normally more motivated and thus outperform other types of
entrepreneurs. However, “push” entrepreneurs were found to be more
successful than ‘pull’ entrepreneurs. They are more determined and
persistent because they normally have nothing to fall back to.
Levels of Creativity and Innovation
Innovative Entrepreneur: Assemble a large variety of information and
combine a range of factors experimentally to produce new possibilities in
terms of markets, techniques, or products. Countries with a very
underdeveloped industrial base hardly produce this type of entrepreneur,
because of lack of the necessary infrastructure.
Imitative (Adoptive) Entrepreneurs: They imitate and adopt the
technology and techniques innovated by others. They are particularly
important in underdeveloped countries although not highly regarded in more
developed economies. However, imitative entrepreneurs also need to be
creative in order to modify innovations to suit their special conditions.
Opportunistic Entrepreneurs: They constantly look for and exploit

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serial opportunities because of their wide skills and knowledge accumulated
from a wider educational background, experience or exposure. They start by
exploiting small opportunities seeking and exploiting a series of, often
varied, opportunities as they grow. They ambition involve building large
organizations and are not afraid of borrowing to achieve this growth. They
usually find it easy to delegate and hire competence.
Visionary Entrepreneurs: They have almost similar characteristics to
the opportunistic Entrepreneurs however, while “opportunistic”
entrepreneurs pursue, serial business opportunities, the “Visionary”
entrepreneurs, concentrate on the unwavering pursuit of a single, powerful
opportunity. In Practice, this fixation may represent a false opportunity’ that
is ahead of its time or falls to consider significant obstacles to
implementation.
Craftsman entrepreneurs: They own the businesses in which they
operate, but tend to restrict their business to their individual skills and
experiences usually accumulated from limited education and exposure. They
have minimal growth ambitions, keeping their enterprises small as a means
of maintaining control. Control is normally autocratic, with little delegation
and strong paternalistic attitudes towards their workers. They avoid risk and
the use of loan money. Normally, they are not marketing oriented preferring
to build very strong with their existing customer.
Drone Entrepreneurs: At some instant in their business, craftsman
entrepreneurs are so comfortable with their achievements that they decide
not to tamper with what they consider a winning formula. Those
entrepreneurs that will not change under any circumstances are referred to as
drone entrepreneurs. Slowly but surely, this entrepreneur will be forced to
close.
Fabian Entrepreneurs: Are also reluctant to change, but are sometimes
forced by circumstances to change. They respond very slowly to changes in
the market, and this affects their growth and competitiveness. However, by
following a proven path, these entrepreneurs are protected from the
uncertainty of new innovations; they are therefore likely to survive for a long
time. They however grow very slowly or do not grow at all because they fail
to exploit new innovations that are normally more profitable.
Solo Entrepreneurs: At the level of organization these are
entrepreneurs who developed their business ideas on their own. The solo
entrepreneur is limited to his means and capabilities.
Network Entrepreneurs: These are entrepreneurs who get their ideas

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from the social networks, and develop them suing the networks are found.
These network entrepreneurs can draw from the means and capabilities
within the network to supplement his individual means and capabilities. The
network entrepreneur is therefore more likely to grow better and faster.
Coprenuers: Are entrepreneurial couples that work together as co-
owners of an enterprise. Although some scholars consider business co-
ownership a recipe for divorce, some researchers have described it as an
exciting proposition that involves nurturing and growing, a business with
someone you love – much like raising a child. It is important, however, to
first build a successful relationship before launching the enterprise.
Individual and Institutional entrepreneurs – Most start-up firms are
dominated by entrepreneurs acting individually, or coming together
individually. However, as the business grows and becomes more complex, it
becomes imperative to develop the entrepreneurial skills through a corporate
body.
Part Time Entrepreneurs: Starting business on a part time basis is a
popular gateway to Entrepreneurship that allows one to get the best of both
worlds by getting the benefits of Entrepreneurship and the security of a
regular salary. It also allows part timers to hedge against the risks of a
venture flop, and tests the waters before making the final commitment. Part
time entrepreneurs are normally suited for young enterprises because as
enterprises grow, they tend to take up more time until the entrepreneur
decides to become full time.
Corporate cast off and dropouts: Are produced by retrenched and
retiring employees and have become an important source of entrepreneurial
activity. Armed with adequate experience, severance packages, knowledge
of the industry, and a network of connections; these former employees will
normally have better start up options and a higher chance of entrepreneurial
success.
Under Further Study of Entrepreneurship, Entrepreneurs Have Also
Been Classified According to
 Male or female entrepreneurs.
 Rural or urban entrepreneurs.
 Small and large-scale entrepreneurs.
 First, second and third generation entrepreneurs.

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Importance of Entrepreneurs
1. They bring technology intensive, often risky, innovations to the
commercial market – and in the process, even help to develop
whole new industries. Entrepreneurs are driving a revolution that is
transforming and renewing economies worldwide. While in Uganda
we still depend on the same commercial products introduced almost
a century ago for our economic growth, the USA gets more than
half of its economic growth from industries that barely existed a
decade ago.
2. Entrepreneurship through innovation is the heart of economic
progress. It is the very basis of any nation’s economy and
wellbeing.
3. Entrepreneurs are the source of innovation, which is believed to be,
the heart of economic progress. Innovation is the very basis of any
nation and community’s economic progress.
4. Entrepreneurship is the catalyst that enables a country to compete
more favorably in the global market place. It enables nations to
compete in the global market place as respectable stakeholders and
not beggars at the mercy of others.
5. Entrepreneurial innovation raises the prospects for more productive
and satisfying lives by supplying new effective tools and methods,
and solutions to problems and inconveniences. Entrepreneurship is
the essence of free enterprise because the birth of new businesses
gives a market economy its vitality.
6. New ideas alter the fabric of society and keep the world fresh and
moving forward. New and emerging businesses creates a very large
proportion of innovation products and services that transform the
way we work and live, such as personal computers, software, the
Internet, and drugs.
7. Entrepreneurs are creators of jobs. It is a fact that entrepreneurship
and employment go hand in hand. As new products and services are
introduced, more staff will be required to produce, sell, and deliver
them.
8. An important aspect of entrepreneurship is social entrepreneurship.
In this case, the objective is not make profits per se, but to achieve
social good through the similar process of identifying opportunities,
exercising creativity, and building new structures. It is no accident

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 that business entrepreneurs are also well equipped to play a role to
champion social causes.
9. Entrepreneurs, in an effort to market and promote their enterprises
support churches, schools, and communities, produce goods, feed a
hungry world, and keep their homes and families, while they invest
in the future to build a better community.
10. Entrepreneurial success comes when they can anticipate and deliver
what the consumers want and it in a way that satisfies them.
Entrepreneurs understand that making money begins with giving.
Entrepreneurship works best and creates the greatest wealth and
human progress for all when it aims at satisfying customers.
11. Entrepreneurs turn worthless waste, weeds, rocks and other
undesirable into coveted riches. Oil was worthless until
entrepreneurs with ideas and the freedom and faith to take risks
managed to locate it, extract it, and put it to work for humanity.
12. Governments balance their budgets by stimulating new wealth,
wealth from investment attributed to entrepreneurs.
13. Entrepreneurs are and have always been leaders in communities and
nations.
14. Entrepreneurs help to keep industries relevant by creating the
necessary timely innovation. They help the industry to evolve
slowly, maintaining stability and measured change at the same time.
They help to maintain the industry at “the edge of chaos,” where the
components of a system never quite look into place, and yet never
quite dissolve into turbulence either.
Benefits of Entrepreneurship
Research shows that people who seek a career in entrepreneurship work
harder and take higher risks than people employed in the regular salaried
jobs. However, more and more people are joining entrepreneurship, and
more still are starting too serious consider it’s a viable and interesting career
option. This is mainly because of the following reasons:
An Opportunity to Gain Control Over One’s Destiny:
entrepreneurship provides n entrepreneur the opportunity to achieve what
they consider to be important. Entrepreneurs are noted or wanting to always
be in full control of their lives, and entrepreneurship enables them to achieve
the full control they desire.
An Opportunity to Make a Difference: Entrepreneurship enable

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participating individuals to makes a difference in any a matter that is of
importance to the individual.
An Opportunity to Reach Ones Full Potential: Working for or under
other people will normally create barriers to one’s development in terms of
rules, policies, precedence and acceptable procedures. Entrepreneurship is an
instrument that allows entrepreneurs to challenge all their skills, abilities and
endurance without any external limitations.
An Opportunity to Make Lots of Money: Although money may not be
the primary motivator of entrepreneurs, it is still recognized as an important
motivation. Owning their own businesses give entrepreneurs the opportunity
the opportunity to earn salaries, dividends and profits; making so much cash
in the process.
An Opportunity to Contribute to Society and to be recognized for it
– An entrepreneur is always associated with his or her businesses, its
products and its services. In an effort to generate profits, they contribute to
the development of society and in the process become recognized for their
efforts.
An Opportunity to enjoy one’s Work: Entrepreneurship is about
doing what one enjoys.
Barriers to Entrepreneurship
Barriers to entrepreneurship are factors that hinder the development of
entrepreneurship. They hinder people from acquiring the practicing
entrepreneurial skills, but also prevent practicing entrepreneurs form
achieving the full benefits that entrepreneurship has to offer. Many of these
barriers are mainly perceptual obstacles, rather than any concrete, objective
obstructions in the way of making the entrepreneurial decision. Barriers can
arise from the social, economic and political environment with which the
individual interacts. They can also be caused by the adverse conditions
within the organization with which the individual works. However, most
barriers are a direct result of an individual’s failures and weaknesses.
Barriers or Threats at the Individual Level
Individual Weaknesses: This poses the biggest threat to
entrepreneurship in Uganda. Such barriers are ignored, as focus is normally
on the environmental factors. Since one can easily act to remedy these
weaknesses they usually form the main focus of entrepreneurship training
programs. Barriers at the individual level would include:
Poor Entrepreneurial Skills: Most entrepreneurs and potential

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entrepreneurs are short on entrepreneurial skills. They are risk adverse, lack
creativity, innovation, endurance, flexibility, and other entrepreneurial
characteristics. This means that many people will start business that are
images of existing businesses resulting in very intense competition in very
narrow fields that provide little returns for the investors. Entrepreneurial
characteristics can help businesses people to look for and exploit new
opportunities.
Lack of Business and Technical Skill: Business skills in marketing,
accounting, management, etc… are required by all practicing entrepreneurs
to effectively manage their entrepreneurial ventures. Many ventures also
require specialized technical know how to set up, operate and manage. Lack
of such skills many times limits the capacity of entrepreneurs to effectively
exploit the full potential of their ventures. Moreover, owing to the high rate
the illiteracy, many enterprising individuals even lack the capacity to
appreciate and acquire these skills.
Low mobility and Exposure: Mobility and exposure normally offers
the biggest revelation for new ideas that shape creativity and innovations that
shape entrepreneurship. However, Ugandans generally do not travel widely,
do not read widely and do not explore, ask or investigate. As a result, even
highly educated people remain largely narrow minded. This limits the
creativeness and innovativeness of Uganda’s potential and practicing
entrepreneurs.
Lack of Role Models in Entrepreneurship: Uganda is seriously short
of role models in the field of entrepreneurship, which limits the number of
people who willingly aspire for a career in entrepreneurship. Many people
have a very low opinion of struggling entrepreneurial upstarts, while they
consider the few successful entrepreneurs to be super lucky individuals who
can only be admired but not be emulated. As a result, very few people are
attracted to entrepreneurship as a career of choice. Most are forced into
entrepreneurship as a last resort, without enough interest and commitment.
Inspiration is a key characteristic of entrepreneurship. New entrepreneurs
need to be inspired entrepreneurs that they admire.
Lack of Business Ethics: Many entrepreneurs have failed, or been
compromised, because of unethical behavior. Unpaid loans, unpaid or highly
exploited employees, unpaid suppliers, substandard goods, tax evasion,
corruption, smuggling etc. characterize many business ventures in Uganda
today. While such tendencies may sometimes result in a quick profit, many
times these ills come back to haunt the entrepreneur, many times crippling
them completely.

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 Complacency (Lack of Motivation): Because of lack of role models
and limited exposure, entrepreneurs in Uganda tend to be satisfied with
relatively small and modest achievements. They tend to have little
motivation for higher or extraordinary achievement. The tendency to
prematurely celebrate success limits the growth of many entrepreneurial
ventures.
Lack of Continuity: Very few firms in Uganda are known to survive
the death of their founders. Very few entrepreneurs have the opportunity to
pass on their enterprises to new generations and watch from the side as the
enterprises continue to prosper. Moreover, many firms are known to change
business or diversify very fast before gaining he required experience. Lack
of continuity affects the learning cycle of the firm and the entrepreneur and
therefore the long-term competitiveness of the enterprise.
Career Dependency: Ugandans especially the educated have long been
dependent on their careers to provide for their livelihoods. Entrepreneurship
has for long been regarded as a last resort effort mainly reserved for the
under-educated. Although this mindset is rapidly changing, its effect is still a
big barrier to entrepreneurship in Uganda.
Uncertainty of Income: In most cases the initial stages of the
entrepreneurial career are filled with uncertainty, and many entrepreneurs
will not have enough money even for their basic survival. There is no regular
income, and many entrepreneurs are forced to draw from their savings. This
is the most trying stage of any entrepreneur.
Risk of Losing the Entire Investment: Business failure is a reality that
threatens entrepreneurs at all level, but most especially the new enterprises.
Business failure will result not only in the loss of a job, but also the entire
investment and sometimes the entire livelihood. This threat becomes even
greater for entrepreneurs who mortgage all their savings and assets to
finance their enterprises.
Long Hours of Hard and Challenging Work: Without adequate
support structures and resources, entrepreneurs have no option but to engage
their own mental and physical energies to move their investments especially
during the early stages. Hard work and long hours is therefore a reality of
many an entrepreneurship career.
High levels of Stress: The pressure of hard-long hours of work and the
uncertainties associated with entrepreneurship result in highly stressful life
styles for entrepreneurs. Most entrepreneurs put significant investments in
their enterprises, have no steady incomes, have mortgaged everything to

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finance their businesses, and the line between their success and their failure
is every thin; causing enormous anxiety and stresses to the entrepreneur.
High Levels of Responsibility: Entrepreneurship brings the thrills of
being the boss, but also the responsibility for decisions that not only affect
the entrepreneurs and their families, but also the livelihood of employees,
suppliers and other stakeholders who somehow depend on the firm for their
own survival.
Barriers Arising from The Environment: The environment also
presents numerous barriers to practicing and prospective entrepreneurs in
Uganda. Some of these barriers are discussed below:
The Political-Legal Environment: Political Instability has dogged
different regions of Uganda for the past 40 years. This state of affairs has
robbed Uganda of many entrepreneurs, and many more entrepreneurs have
lost lifetime savings and business assets, while others have been forced by
Instability to close. This affects continuity and experienced and resource
accumulation are essential in today’s competitive environment.
Business Administrative Procedures: In many cases, the business
environment is dominated by complex and burdensome regulations,
favoritism, corruption, and weak enforcement mechanisms. As a result,
businesses are forced into the informal economy, countries are unable to
attract investment, and participation of the private sector in the decision-
making process is limited. As a result, businesses are forced into the
informal sector, and the country is unable to attract investment, and the
participation sector in decision making is limited.
Government Economic Policy: The formulation and delivery of
business policy is based on a narrow conception of conventional big
businesses and a consequent lack of specific attention to the circumstances
and needs of entrepreneurs. Moreover, the bulk of government’s monetary
and fiscal policies are aimed at appeasing the donor agencies and multilateral
financial Institutions, many times at the expense of business in general and
entrepreneurs in particulars.
Insensitive Government Institutions and Departments:
Entrepreneurs blame government Institutions and departments for having
little qualification and a minimal appreciation and understanding of the
importance of business and business formation among entrepreneurs. This
limits entrepreneurs’ access to these Institutions as support mechanisms or
potential clients. Arbitrary Interpretation of the regulations b officials has
cost many entrepreneurs much time and money.

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 Excessive, Complex, and Arbitrary Taxation: The tax system in
Uganda is complicated, voluminous, confusing, changes rapidly and in most
cases beyond the comprehensive of the entrepreneur. The tax administration
is arbitrary and many times misunderstood, resulting in Adhoc tax
administrative solutions which foster rampant corruption. Very high taxes
also serve to discourage potential entrepreneurs.
Economic Environment
Lack of access of Finance: Banking System and Practices in Uganda
impose impossible demands on entrepreneurs. Banks have little incentive to
extend credit. The term of credit are unreasonable, requiring difficult
collateral and guarantees to secure the loan. Borrowers default on their loans,
resulting in high interest rates which are a very heavy burden to could be
entrepreneurs. Additional burdens include unreasonable demands, for audits,
inspections, and documentation; and the incompetence and insensitivity of
most banking staff.
Low Purchasing Power: Low incomes and a high rate of
unemployment limit the purchasing power of a relatively small Ugandan
population. This makes it hard for businesses in general and entrepreneurs in
particular to acquire the necessary economies of scale.
Poor Infrastructure: Uganda is still plagued with a very poor physical
and social infrastructure in terms of roads, electricity, water, bridges, schools
and hospitals. These hinder business development in many parts of the
country, and act as barriers to entrepreneurship.
Economic Instability: Due to over reliance on donor assistance,
borrowing, the import bill that far outweighs the export earnings, and over
reliance on imports, the Ugandan economy is very fragile and easily
destabilized by any small shocks in the international environment.
Social Barriers to Entrepreneurship
The Social Environment May Also have Certain Aspects that act as
Hindrances to Entrepreneurship. Such Hindrances Include the
Following
 Lack of adequate social support groups to support entrepreneurs and
innovators who are out to challenge the status quo.
 Many socio-cultural settings get stuck in the traditional ways and
norms – they are not willing to change these norms. This situation
discourages people from trying anything new and acts as a barrier to
creativity innovation and entrepreneurship.

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  In many of our communities, there is a stigma attached to failure.
People look down upon failed attempts, preferring those that do not
tray at all. This works to discourage experimentation and
entrepreneurship.
Barriers Arising from the Employing Firm
There are also issues internal to the organizations that serve to block
entrepreneurial tendencies within the firms. When entrepreneurship within
the firms is obstructed, it has a negative impact on the general level of
entrepreneurship within the community. Barriers within the firms include:
 Too much bureaucracy.
 Inadequate communication and consulting within the organization.
 Slow decision making resulting from bureaucracy and lack of
effective communication are familiar to many who work in large
organization.
 Strong and rigid punishments for those who make mistakes and
those who divert from the accepted norms create an aversion to risk
and failure. People become too timid to make bold decisions and
stand out from the crowd. Employees fear that they will be blamed
if things go wrong and that it is better to keep their heads down.
 Lack of resources.
 Poor and inequitable reward for entrepreneurial effort tends to kill
the enterprising spirit.
Solutions to Barriers of Entrepreneurship
To achieve successful Entrepreneurship Development, three elements
stand out, namely; the individual, The Environment, and the firm.
The Individual
The MAIR model suggests four factors that have to come together in
order to create an entrepreneur. These are Motivation, Ability, Ideas and
Resources. These factors form the acronym MAIR by which the model is
known as:
Motivation: Refers to the force that influences an individual to opt and
take up Entrepreneurship as a career. These may be PULL and PUSH
factors. Individuals react differently to these stimuli, therefore are motivated
by different factors. Recognizing and rewarding innovation is a key
motivating factor.

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 Ideas: Ideas are starting point for any entrepreneurial venture, however
not all ideas will be viable or marketable. The ideas of interest to ED are the
ones that are both viable and marketable. The challenge of ED is to support
and encourage innovations through actively exposing people to new ways,
products, methods and information.
Ability: For nay enterprise to survive, it requires a constant supply of
relevant skills from both the owners and the employs. Although some of
skills are naturally endowed to certain individuals, the majority are acquired
through training, observation, experience, experimentation. Individuals need
entrepreneurial and business skills as well as technical skills relevant to the
industry to start and grow enterprises. The challenge of ED is to propagate
these skills widely and effectively in order to support entrepreneurship.
Resources: Any enterprise will require resources to survive and thrive.
While some resources are naturally endowed to an individual, a firm or a
nation (community), the majority of resources must be sourced, and
entrepreneurs will need to have the ability to acquire resources. The
challenge of ED is to enable the individual to obtain the necessary resources
to operationalize their ideas and to create easy and affordable means access
to resources.
The Environment
Entrepreneurship and ED will be successful only where there is a
conducive environment for them to flourish. The following environment
factors are critical to the growth of entrepreneurship: Economic
environment, challenging circumstances, external rewards for
entrepreneurship, training facilitates, external leadership and learning
opportunities.
The Economic Climate: In general, an environment that is ideal for
business growth is conducive to entrepreneurship. Four areas are particularly
pertinent.
Government Economic Policy (Monetary, Fiscal & Regulatory):
Expansionary monetary policy is more conducive to entrepreneurship
development than contractionary: Fiscal policy is more to government
revenue and expenditure and the expansionary fiscal policy is more
conducive to ED. Situations where government leaves the forces of demand
and supply to control the distribution of resources allows Entrepreneurship to
flourish, since it has more rewards for the innovations.
Infrastructure should be well developed and maintained to ease

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communication. But also, government institutional policies and practices
should open up their services to entrepreneurs.
The financial systems including banks and non-bank intermediaries,
securities markets, and financial instruments like treasury bills, bills of
exchange, credit cards, cheques etc. must exist and operate efficiency to aid
business transaction.
Legal Framework: should not be too stringent to inhibit
Entrepreneurship, but should be clear and effective enough to provide
adequate protection to entrepreneur against fraud.
Challenging Circumstances: Challenging circumstances tend to bring
out latent creativity in people, and lack of challenge breeds complacency.
Competition for jobs and resources are good examples of challenging
circumstances. ED involves giving room for creativity and innovation and
eliminating the fear of making mistakes as a way tackling these challenging
situations.
External Rewards for Entrepreneurship: How the society recognizes
and rewards entrepreneurs is important for Entrepreneurship development.
Entrepreneurs should be the first beneficiaries of their innovations.
Situations where pirates and copycats take the profits from other people’s
innovations are not good for Entrepreneurship Development. Benefits should
not only come inform of profits, but recognitions in form of awards, role
modeling, special considerations etc.
Training Facilitates and Learning Opportunities: Availability and
quality of training facilitates and Entrepreneurship Development programs
and supply of role models for the young generations to emulate. Stimulate
the teaching entrepreneurship within educational institutions to enable
students read patterns and trends so as to envision the future the future, and
integrate knowledge acquired in responding to society needs.
External Leadership: Business leaders, political and cultural leaders,
and technological leadership can play a big role in Entrepreneurship
Development. Business leaders can encourage an environment that allows
generation and growth of new ideas. Political leaders can set policies that
support the development of Entrepreneurship, but can also participate
directly by setting up business, mobilizing and supporting people into
entrepreneurship, and generating new ideas and passing them to the public.
Entrepreneur support groups could be developed.

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The Firm
Internal and External Interrelationships have a Strong Influence on
Entrepreneurship. These Will Include Factors Such as
Organizational Culture: These are acceptable norms and behaviors
within the organization. If these permit new idea generation and
implementation, then the culture is supportive of ED. This requires
flexibility in operations and openness to change. It should support
experimentation and tolerate some degree of failure as a natural consequence
of innovation.
Organizational Structure: Define the reporting relationships and
interdepartmental communication. If the structure allows a smooth flow of
ideas and permits even lower level technical staff to exercise their creativity.
To support ED, the organization needs to open up channels of
communication, encourage frank exchange of ideas and freedom of
interaction at all levels.
Leadership: A strong leadership is required to direct change, which is
the driver of innovation. Leadership should actively participate and support
constructive change.
Reward structure: Organizations should be able to recognize
innovation and reward it appropriately. This requires formulating means of
measuring entrepreneurial effort so that reward is dispensed in a fair and
equitable manner. Reward can be in form of recognition, material, or
promotion.

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 Chapter - 3
The Entrepreneurial Process

The entrepreneurial process involves all the functions, activities and action
associated with perceiving opportunities and creating organizations to pursue
them.
The process of starting a new venture is embodied in the entrepreneurial
process, which involves more than just problem solving in a typical
management position. An entrepreneur must find, evaluate, and develop an
opportunity by overcoming the forces that resist the creation of something
new. The process has five distinct phases.
i) Identification of opportunity – idea generation.
ii) Evaluation of the opportunity.
iii) Development of the business plan.
iv) Determination of the required resource, and
v) Management of the resulting enterprise.
Although these phases proceed progressively, no one stage is dealt with
in isolation or is totally completed before work on other phases occurs.
1) Identify the Opportunity
A person gets an idea for a new business either through a deliberate
search or a chance encounter. Where do would be entrepreneurs get their
ideas? More often than not it is through their present line of employment or
experience.
Ideas, Inventions & Innovations
Everybody has ideas; ideas are relatively easier to come by compared to
inventions. It takes knowledge, time, money and effort to refine and idea into
a workable invention. Turning an invention into an innovation-a new product
launched into, and accepted by the market place – takes even more effort and
a little luck. Inventors are individuals who conceive a new product, process
or services. Typical inventors have neither the interest nor the resources to
commercialize their inventions. Innovators are people seek to commercialize
inventions.

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 Innovation may be defined as a complex series of activities, beginning
with an idea and followed by a succession of interwoven steps – research
and development, financing, marketing and production. Innovation is only
completed when the market accepts a product, process or service.
Entrepreneurship is identified with innovation. Innovation does not
always mean inventing something physical (technological innovation), but
could involve redefining the way something is done (social
innovation).Innovation is the specific instrument or entrepreneurship. It is
the act that gives resources the capacity to create wealth. Innovation creates
resources. There are no resources until entrepreneurs find a use for it through
innovation.
Drucker (1986) Looks at Seven Major Sources of Innovation That
Include
1. The Unexpected Success, Failure or Unexpected Event: Keeping
track of what is going on in the firm, the industry, the economy and
the environment. Monitor these activities as they have a high
indicator of change that has occurred or is waiting to happen many
people ignore. Failure normally frowned upon without examining
the root cause of failure that could highlight new opportunity.
2. Incongruities are Discrepancies or Dissonances Between “what
is” and “what was expected”: Incongruities are a sign of change
that has occurred, and therefore a sign of opportunity.
3. Process Needs: Necessity is the mother of invention. Once a need
is felt the innovator identifies what is need, and how it can be
produced. This involves understanding the problem, accumulating
knowledge of how it can be produced. This involves understanding
the problem, accumulating knowledge of how to satisfy the need,
and fitting the solution within people’s expectations.
4. Industry and Market Structure: Many times last a long time, and
are sometimes considered part of the order of nature destined to
endure forever. In reality however, these structures are quite fluid
and can be dismantled-sometimes with little effort. When such a
change occurs, everyone in the industry has to act, giving an
opportunity for innovation. Industry and market change are likely to
change if the industry grows very fast, convergence of technologies
or development of new technologies. Outsiders usually see the
opportunities while insiders see them as threats.

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 5. Demographics: Define changes in population size, age structure,
composition, employment, educational status and income. The
consequence of these changes can be predicted and are o good
driver of innovation. However, it is common for established firms
to ignore these changes if they do not conform to their expectations
giving an opportunity to innovators.
6. Change in Perceptions: The way people perceive situations is
constantly changing. Understanding these perceptions will help
people innovate (health and fitness, healthy foods, security).A
change in perception does not necessarily change facts; it changes
the meaning of already existing facts. Timing is a critical factor in
innovations based on perceptions because perception changes very
fast and some of them are fads that disappear within a short time.
7. New knowledge: Knowledge based innovation is the most
publicized and recognized innovations. The knowledge may not
necessarily be scientific or technical. It can be social. It is
characterized by a long-time frame, large casualty rate,
unpredictability, and the big challenges it poses to the entrepreneur.
These innovations are normally a convergence of several different
kinds of knowledge from a variety of disciplines.
2) Evaluating the Opportunity – Feasibility Study
Whether the opportunity is identified by using input from consumers,
business associates, channel members, or technical people, each opportunity
must be carefully screened and evaluated. This evaluation of the opportunity
is perhaps the most critical element of the entrepreneurial process, as it
allows the entrepreneur to assess whether the specific product or service has
the returns needed compared to the resources required.
This evaluation process involves looking at the length of the
opportunity, its real and perceived value, its risks and returns, its fit with the
personal skills and goals of the entrepreneurs and its uniqueness or
differential advantage in its competitive environment.
The market size and the length of the window of opportunity are the
primary basis for determining the risks and rewards. These risks reflect the
market, competition, technology and amount of capital involved.
The amount of capital needed provides the basis for the return and
rewards.
The methodology for evaluating risks and rewards frequently indicates

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that an opportunity offers neither a financial nor a personal reward
commensurate with the risks involved.
Finally; the opportunity must fit the personal skills and goals of the
entrepreneur. It is particularly important that the entrepreneur be able to put
forth the necessary time and effort required to make the venture succeed.
Opportunity analysis, or what is frequently called a feasibility study, is
one method for evaluating opportunity. It is not a business plan
A feasibility study includes the following; a description of the product
or service, an assessment of the opportunity, an assessment of the
entrepreneur and the team, specifications of all the activities and resources
needed to translate the opportunity into a viable business venture, and the
source of capital to finance the initial venture as well as its growth.
3) Developing a Business Plan
A good business plan must be developed in order to exploit the defined
opportunity. This is a very time-consuming phase of the entrepreneurial
process. A good business plan is essential to developing the opportunity and
determining the resources required, obtaining those resources and
successfully managing the resulting venture.
4) Determine the Resources Required
The resources needed for addressing the opportunity must also be
determined. This process starts with an appraisal of the entrepreneur’s
present resources. Any resources that are critical need to be differentiated
from those that are just helpful. Care must be taken not to underestimate the
amount of variety of resources needed. The downside risks associated with
insufficient or inappropriate resources should also be assessed.
5) Manage the Enterprise
After resources are acquired, the entrepreneur must use them to
implement the business plan. The operational problems of the growing
enterprise must also be examined. This involves implementing a
management style and structure as well as determining the key variables for
success.
A control system must be established, so that any problem areas can be
quickly identified and resolved. Some entrepreneurs have difficulty
managing and growing the ventures they created.

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Intrapreneurship
Definitions
Entrepreneurship is the practice of embarking on a new business or
reviving an existing business by pooling together a bunch of resources, in
order to exploit new found opportunities.
Intrapreneurship is the practice of entrepreneurship by employees
within an organization.
In 1992, The American Heritage Dictionary acknowledged the popular
use of a new word, intrapreneur, to mean "A person within a large
corporation who takes direct responsibility for turning an idea into a
profitable finished product through assertive risk-taking and innovation".
Intrapreneurs are employees who work within a business in an
entrepreneurial capacity, creating innovative new products and processes for
the organization. Intrapreneurship is often associated with larger companies
that have taken notice of the rise in entrepreneurial activity in recent years;
these firms endeavor to create an environment wherein creative employees
can pursue new ways of doing things and new product ideas within the
context of the corporation. But smaller firms can instill a commitment to
intrapreneurship within its work force as well.
Difference between an Entrepreneur and an Intrapreneur
An entrepreneur takes substantial risk in being the owner and operator
of a business with expectations of financial profit and other rewards that the
business may generate.
On the contrary, an intrapreneur is an individual employed by an
organization for remuneration, which is based on the financial success of the
unit he is responsible for.
Intrapreneurs share the same traits as entrepreneurs such as conviction,
zeal and insight.
As the intrapreneur continues to expresses his ideas vigorously, it will
reveal the gap between the philosophy of the organization and the employee.
If the organization supports him in pursuing his ideas, he succeeds. If not, he
is likely to leave the organization and set up his own business.
Features of Intrapreneurship
Intrapreneurship involves innovation, the ability to take risk and
creativity. An Intrepreneur will be able to look at things in novel ways. He

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will have the capacity to take calculated risk and to accept failure as a
learning point. Central to ‘intrapreneurship’ is the concept of empowering
yourself as an employee. This can entail different things depending on the
specific goals and aspirations of the individual. It may include:
 Negotiating flexible hours with your employer; instead of ‘clocking
in’ and ‘clocking off’ from the office at set times, you instead
commit to completing specific tasks within a given time period. The
hours during which you complete the tasks are left up to you.
 Working from home for a portion, or even all of the week.
 Assisting on tasks or projects that you have a strong interest in but
that fall outside of your prescribed duties and job description.
 Initiating projects, products or services on behalf of the company to
bring in additional revenue. This might also entail you receiving a
commission.
 Getting your employer to pay for or subsidize your study of subjects
that complement the business.
An intrapreneur thinks like an entrepreneur looking out for
opportunities, which profit the organization. Intrapreneurship is a novel way
of making organizations more profitable where imaginative employees
entertain entrepreneurial thoughts. It is in the interest of an organization to
encourage intrapreneurs. Intrapreneurship is a significant method for
companies to reinvent themselves and improve performance.
Another important factor that led to the choice between entrepreneurship
and intrapreneurship was age. The study found that people who launched
their own companies were in their 30s and 40s. People from older and
younger age groups were risk averse or felt they have no opportunities,
which makes them the ideal candidates if an organization is on the lookout
for employees with new ideas that can be pursued.
Entrepreneurship appeals to people who possess natural traits that find
startups arousing their interest. Intrapreneurs appear to be those who
generally would not like to get entangled in startups but are tempted to do so
for a number of reasons. Managers would do well to take employees who do
not appear entrepreneurial but can turn out to be good intrapreneurial
choices.

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Types of Intrapreneurship
Different Organizations Approach Intrapreneurship in Different Ways.
Below are some of the Common Approaches
Administrative Intrapreneurship: The company forms an
administrative arm (normally called the research and development – R &D
Team) to spearhead and encourage greater creativity and innovation.
Opportunistic Intrapreneurship: The Company opens up its structures
to allow individuals to pursue opportunities both internal and external to the
organization, with the company using its resources to exploit the new
innovations it finds attractive.
Acquisitive Intrapreneurship: The organization looks out for other
firms and entrepreneurial start-ups that have developed, tested and perfected
new innovations that could be beneficial to their operations. They then
acquire the innovative firms or their innovations through mergers, takeovers,
joint ventures, licensing agreements, buy outs etc...
Imitative Intrapreneurship: Firms copy and take advantage of other
firms’ innovations, and employ their corporate muscle and superior
resources to control the market for the new product or service.
Incubative Intrapreneurship: The Company creates new terms as
semi-autonomous new venture development units, provides them with seed
capital and allows them independent action to develop an idea from
inception to commercialization. The company can then reintegrate the
innovation into its mainstream operations once market viability has been
proven.
Organizational Characteristics That Encourage Intrapreneurship
The single most important factor in establishing an "intrapreneur-
friendly" organization is by making sure that employees are placed in an
innovative working environment. Rigid and conservative organizational
structures often have a stifling effect on intrapreneurial efforts. Conservative
firms are capable of operating at a high level of efficiency and profitability,
but they generally do not provide an environment that is conducive to
intrapreneurial activity and organizations that do not encourage creativity
and leadership often alienate talented employees. Erik Rule and Donald
Irwin stated in Journal of Business Strategy, companies do establish a culture
of innovation through:
1. Formation of intrapreneurial teams and task forces;

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 2. Recruitment of new staff with new ideas;
3. Application of strategic plans that focus on achieving innovation;
and
4. Establishment of internal research and development programs are
likely to see tangible results.
Other keys to instilling an intrepreneurial environment in business
organizations include the following:
Support from Ownership and top Management –This support should
not simply consist of passive approval of innovative ways of thinking.
Ideally, it should also take the form of active support, such as can be seen in
mentoring relationships. Indeed, the small business owner's own
entrepreneurial experiences can be valuable to his firm's intrapreneurial
employees if he makes himself available to them.
Recognition that the style of Intrapreneurialism that is encouraged
needs to be Compatible with Business Operations and the
Organization's Overall Culture: Make sure that communication systems
within the company are strong so that intrapreneurs who have new ideas for
products or processes can be heard.
Intelligent Allocation of Resources to Pursue Intrapreneurial Ideas
Reward intrapreneurs – All in all, intrapreneurs tend to be creative,
dedicated, and talented in a variety of areas. They are thus of significant
value even to companies that do not feature particularly innovative
environments. Their importance is heightened, then, to firms that do rely on
intrapreneurial initiatives for growth. Since they are such important
resources, they should be rewarded accordingly (both in financial and
emotional terms).
Allow intrapreneurs to follow through – Intrapreneurs who think of a
new approach or process deserve to be allowed to maintain their
involvement on the project, rather than have it be handed off to some other
person or task force.
The Intrapreneur
The intrapreneurial employees, they are advised to be courageous,
moderate risk takers, frugal, flexible, and creative about their pathway. Their
task is to put together a team of enthusiastic volunteers, build a network of
sponsors, and ask for advice before asking for resources.

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Intrapreneurship Provides 10 Commandments for Employees to
Become Intrapreneurs
i) Do any job needed to make your project work regardless of your
job description.
ii) Share credit wisely.
iii) Remember, it is easier to ask for forgiveness than permission.
iv) Come to work each day willing to be fired.
v) Ask for advice before asking for resources.
vi) Follow your intuition about people; build a team of the best.
vii) Build a quiet coalition for your idea; early publicity triggers the
corporate immune system.
viii) Never bet on a race unless you are running in it.
ix) Be true to your goals, but realistic about ways to achieve them.
x) Honor your sponsors.
The Intrapreneural Organization
Intrapreneurs have been credited with increasing the speed and cost-
effectiveness of technology transfer from research and development to the
marketplace. While intrapreneurs are sometimes considered inventors,
inventors come up with new products.
Intrapreneurs come up with new processes that get that product to
market. Part of the reason they are considered similar to inventors is that
they are creative and are risk-takers in the sense that they are stepping out of
their traditional role within the business.
However, their risk-taking behavior is personal. In terms of the business,
they actually work towards minimizing the risk through the innovative
approaches they use to more efficient and effective product production and
sales.
Some Methods That Have Been Used by Businesses to Foster
Intrapreneurship are
 Users of internal services are allowed to make their own choice of
which internal vendor they wish to use.
 Intrapreneurial employees are granted something akin to ownership
rights in the internal intraprises they create.
 Companywide involvement is encouraged by insisting on truth and
honesty in marketing and marketplace feedback.

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  Intrapreneurial teams are treated as a profit center rather than a cost
center (i.e., they are responsible for their own bottom line). One
way some companies handle this is for the team to have their own
internal bank account.
 Team members are allowed a variety of options in jobs, in
innovation efforts, alliances, and exchanges.
 Employees are encouraged to develop through training programs.
 Internal enterprises have official standing in the organization.
 A system of contractual agreements between internal enterprises is
defined and supported by the organization.
 A system for settling disputes between internal enterprises and
between employees and enterprises is part of the intrapreneurship
plan.
Importance of Intrapreneurship Nowadays
Organizations are finding it harder and harder to survive by merely
competing. They are, therefore, increasingly looking towards their
Intrapreneurs totakethem beyond competition to create new businesses in
new markets.
As competition intensifies the need for creative thinking increases. It is
no longer enough to do the same thing better or longer enough to be efficient
and solve problems. Nowadays business has to keep up with changes and
that requires creativity.
Develop success from failures: Discouragement and failure are two of
the surest stepping stones to success. No other element can do so much for a
man if he is willing to study them and make capital out of them.
According to Gary Hamel, Innovation Will be the Critical Element in
creating Wealth in the Future. Successful Intrapreneurship can Lead to
 Promotions.
 Greater remuneration (pay Raises, bonuses and/or Incentives).
 Improved confidence & status within the company.
 New career inside the company.
 New career outside the company as a consultant or advisor.
Causes behind Retardation of Intrapreneurship
The Primary Factors Retarding Intrapreneurship are
 The costs of failure too high and the rewards of success are too low.

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  Intrapreneurs need to be given the space in which to fail, since
failure is an unavoidable aspect of the Intrapreneurial process. This
is not to say that organizations should simply condone failure, but
rather that organizations need to begin to measure and attribute
failure to either Intrapreneur fault, or circumstances beyond the
Intrapreneurs control - and punish and reward accordingly.
 Similarly, the rewards for success are usually inadequate - few
organizations provide rewards for Intrapreneurs that even closely
approximate the rewards available to the Entrepreneurial
counterparts. Most incentivisation systems need to be upgraded
accordingly. A lot of companies talk about intrapreneurship and ask
people to take risks, but if those people succeed they get nothing
more than a small bonus, and if they fail they get fired. You can't
create wealth unless you are willing to share it
 Inertia caused by established systems that no-one is willing to
change. Most Organizations are governed by implicit and explicit
systems, and in many cases peopleare reluctant to change them.
Intrapreneurs are met with; this is the way we’ve always done it
around here.
 Hierarchy. Organizational hierarchies are what create the need to
ask for permission. The deeper the hierarchy, that harder it is to get
permission for anything new. Hierarchies also tend to create narrow
career paths and myopic thinking, further stifling creativity and
innovation. People lower down in the hierarchy have a tendency to
become dis-empowered through having to ask permission,
eventually developing the "victim mentality" that causes reactivity.
What then can Organizations do to Encourage Intrapreneurship?
Organizations, therefore, need to find ways to measure and reward
Intrapreneurship - both in terms of its frequency, and the rigour with which it
is pursued. Organizational processes and structures are required to foster
Intrapreneurship, just as they are for any other aspect of the organization.
Getting Started as an Intrapreneur
The First Step in Breaking out of Your Career Shackles is making the
Mental Commitment. Success Begins in the Mind. The Following Tips
will help you move forward as an ‘Intrapreneur’
 Learn as much as you can about your company, how it operates,
what market it serves and how it makes profit.

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 Research the business sector in which your organization competes.
What are the new market trends? Who are your main competitors?
Where is the industry headed?
 Assess your strengths and weaknesses. Are you currently in the
right position/job in respect of those qualities?
 If you could change your job structure (responsibilities, tasks, time
schedule, department etc.), what would you change? How might
this change benefit the company? How would these changes benefit
you?
 What are your personal and career ambitions? How can you use the
company as a platform for achieving those ambitions while adding
value to the company?
 Write out a detailed plan for how you might add additional value to
your company.
 Whom would you approach in the company to put forward your
plan?
 Given the current climate within the company, when would be the
best time to put your plan forward?
 Take the bold step into becoming an ‘intrapeneur’. It will take
courage, discipline and commitment – but, in time, you will scale
new heights within your career.

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 Chapter - 4
Small Business in Uganda

Various studies have depicted that Uganda is not short of craftsmen

entrepreneurs that can start and manage small businesses. In fact Uganda has
a very high small business ownership per capita compared to other countries
in the region. However, we are seriously short of ventures as described
above.
The term small business connotes a different meaning depending on the
environment and circumstances under which it is sought. However, we are
seriously short of visionary and opportunistic entrepreneurs that can start and
grow entrepreneurs under which it is sought. However, small businesses can
be clearly distinguished from medium and large businesses by considering
one or combination of factors such as:
 A small number of employees
 A small sale volume or turnover
 A small size of assets in comparison with the largest competitors in
its industry.
 A small market share i.e. the area of operation is primarily local,
although the market is not necessarily local.
 A small degree of formalization
 A large owner’s equity as capital is supplied and ownership is held
by an individual or a few individuals.
Note: The impact of these factors is a subject and qualitative judgment
depending on the industry in which the firm operates state of growth of the
economy, the people involved and the purpose for which the definition is
sought.
The 1998 policy paper defines small business in Uganda as employing
less than 50 people and an annual turnover of less than $300,000. However,
small business is some kind of business that has been done before i.e.
something that has been done before by another business owner somewhere
else.

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Small Business Start-Up in Uganda
There is no satisfactory, universal and quantitative definition of a small
business as of now. However, some researchers have tried to define it as
follows:
According to the Bolton Report (1971), a Small Business
 Is a business with small market share?
 It is administered by its owners in a personalized manner.
 It does not take any instructions from outsiders.
The American Committee for Economic Development (1972) defines a
Small Business as
 A business with small market share.
 Capital is supplied by individual owners.
 Workers and owners are in one community.
According to Bannock (1985) and Foley & Green (1989) small
businesses act as “motivation.” Most big businesses benefit by absorbing
ideas and products developed by small businesses. In case of business
failure, small business loses less than a large one.
Finally, one needs fewer resources to start a small business than those
required for big businesses. Small businesses create employment at grass
roots and contribute a lot to the country economy.
Importance of Small Business Sector
i) The small business provides a productive outlet for the energies of
the large enterprises and independent people who great pace by
economic independence.
ii) Small businesses provide the means of entry into the business
sector. This can be for existing, new, or entrepreneurial talents
which will grow to challenge large businesses.
iii) A small business is the traditional breeding ground for new
industries. It is the major source of innovation.
iv) Small businesses provide competition to large and well established
businesses.
v) Small businesses provide some check on monopoly profits and on
the inefficiency which monopoly breeds.

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 vi) Many small businesses act as specialist suppliers of parts and
components to large businesses.
vii) Small businesses add to the variety of products and services. This is
because they exceed in a limited or specialized area which large
businesses can hardly achieve.
viii) Because of their small nature, small businesses are normally an
important source of innovation.
ix) Small businesses are traditional breeding ground for large
industries.
Entering into Entrepreneurship as a Necessity or as an Opportunity
Most people will be driven into entrepreneurship either as a necessary or
as an opportunity. Those who start due to necessity will be driven by “push”
factors, such as retrenchment, unfavorable conditions at the present
employment, redundancy, government policies, etc. they enter into
entrepreneurship as their last resort because they do not have any other
alternative. This is every common with “corporate cast offs and drop out.”
On the other hand, there might be an opportunity that has yet been
identified and exploited. A fore sighted entrepreneur would take such an
advantage to exploit such an opportunity. Such a person would be
encouraged by “pull” factors to join entrepreneurship as an opportunity.
Some of the “pull factors are need for achievement, need for independence,
desire to start something new, need for autonomy, etc. (Dawhurst & Burns,
1993).
Development Taxonomy
According to Halliday, (1987), Taxonomy is the classification of the
means by which the formation of an event or species takes place. In the case
of business development taxonomy, the events from which information can
be classified for a business to take place make the following.
 Markets.
 Industrial base.
 Labor markets.
 Environment.
 Location.
 Selection.
 Premises selection.

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  Business support structure.
 Culture.
 Photocopying or duplicating culture.
 Availability of raw materials.
 Water and power supplies.
 Transport for workers, raw materials and finished products.
 Political climate.
 Government policies.
 Competitive advantage.
 Religion beliefs.
Proposal Evaluation
New business proposals are difficult to judge and evaluate. Many
businesses fail in their early stages (Mason, 1989). There are certain key
factors to be address during the process of the business startups. Some of
them are:
i) The Mair Model
This is a Mnemonic Standing for
M - Motivation and commitment
A - Abilities and ideas
I - Idea in relation to the market needs
R- Resources
When the above factors are present, any business will succeed if it has a
business plan.
The Start Up Model

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Motivation
Motivation is very varied. The need for independence may be as
important as any need for money. Family background and support can be
crucial. Sometimes there are “push” factors such as redundancy or
frustration in the existing career. There might also be “pull: factors (need for
independence or the invention of a new idea. Starting a business is a difficult
process and the necessary drive and commitment are a prerequisite.
Abilities
Abilities, skills and experience also vary considerably. They need to be
related to the idea. There are probably three areas of skills which are: craft or
technical skills; managerial skills and interpersonal or behavior skills. Very
often an individual will not have all three in particular, technical ability may
not be matched by management skills most especially those relating to the
market.
Idea
The key any start-up is to relate the business idea to the need in the
market. Often people into business because the can make or supply
something. Only if there is a clear customer need, backed by effective
demand, at an appropriate scale, can there be a viable business.
Secondly, it is crucial to understand the nature of the need being met:
The single most important question for a start-up is “exactly what business
are you in? This will indicate if they really understand the market needs.
Resources
Resources include physical items, such as premises, plant and furniture.
They also include human resources such as employees of different levels.
Resources also include finance which often perceived as the main need
although; this may not in fact be a key problem.

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The Plan
Having the success in the ingredients is not in itself sufficient. A
business plan must have a coherent plan which links all the elements
together and which charts its future progress s that it can be monitored.
1) Swot Analysis
This is an individual assessment of someone before starting any
business.
S - Strength
W - Weaknesses
O - Opportunities
T - Threats
Both strength and weaknesses are internal factors. They can, therefore,
be tamed, controlled or adjusted. Opportunities and threats are external
factors and are beyond one’s control. However, one should be able to take
safeguards against them.
2) Business Start-Up Options
There are Several Types of Businesses that one Could Easily Start up.
The Common ones are
 Starting from scratch.
 Purchasing an existing business.
 Purchasing a failed business.
 Purchase of franchise.
 Establishing an agency.
 Setting up a workers’ cooperative.
The Role and Importance of Small Business in Uganda Economy
Encourage Innovation and Flexibility: Smaller enterprises are sources
of new ideas, materials, processes and services that large firms may be
unable to provide. Small businesses usually devote themselves to developing
and marketing innovative products and services. This has forced small firms
to be flexible to readily face the changing market conditions and adapt
quickly to changing demands within their field and capacity.
Maintenance of close Relationships with Customer and the
community: Small and local businesses usually have a more intimate

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knowledge of their communities and thus take close interest in them. They
are able to understand their customers properly: they are in close touch with
the customers, suppliers and communities/stakeholders.
Keep large firm Competitive: Through introduction of new products
and services. Small business help checks the development of monopolies.
They encourage competition in large organizations through innovations and
creativities.
Job Creation: As small businesses are created and grow, they will
require staff to produce, sell and deliver their products or services thus
creating jobs, they use less advanced technology that uses more labor per
unit of capital.
Human Resource Development: Small businesses facilitate the
mobilization of the human resource, which could not have been absorbed in
agriculture or large scale enterprises, for productive activities. They employ
people with little or no skills and help to develop them into a pool of skilled
or semi-skilled workers that contribute to economic development.
Poverty Alleviation and Improved Quality of Life: Small businesses
are an important source of income for the lowest income household,
providing unsophisticated jobs and affordable entry point into business. This
helps to fight poverty. Moreover in their drive provide better, cheaper and
faster products and services in wider geographical areas, they thus provide
relevant products and services to population in all corners of the nation,
giving greater choice and a better quality of life.
Resource Mobilization: With a poor savings culture in Uganda, small
businesses are an important a venue for mobilizing and utilizing investment
capital that could not have been mobilized by formal financial institutions.
This is because the source of funds is normal self, close friends and relatives.
Entrepreneurial Development: They provide a productive outlet for
energies and talents of enterprising individuals, providing an affordable entry
point into business. This allows entrepreneurs not only to exploit and test
their entrepreneurial skills but also develop them as they put them into
practice.
Strengthen Economic Linkage: This is because small businesses
operate in socially, economically and geographically diverse sectors of the
economy, helping to create and strengthen forward and backward linkage
that result in improve efficiency. Large firms depend on small businesses to
distribute their products and supply raw materials used in the manufacture of

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these products. Small businesses cannot venture. They engage in a very wide
variety of activities reaching and servicing more people in the process.
International Competitiveness: With the reduction in trade barrier and
restrictions in the cross-border movements, small businesses provide the
opportunity for a diversified and more effective access to the international
markets. They are flexible and can respond early to change in the
international environment.
Economic Growth: Small businesses stimulate the creation of new
wealth by investing in a small but steady and predictable manner. Their
incomes are taxed to generate government revenue and products and services
contribute to GDP growth.

Problems Facing the Small Business Sector in Uganda

The Following are Problems Facing Small Business Sector in Uganda
 Inadequate financing.
 Inadequate management.
 Burdensome government regulations and paper work.
 Lack of technical training and advisory services on small business
management.
 Inadequate information on business opportunities, available
services, new technologies, taxes/subsidies rules and regulations.
 Poor physical infrastructure.
 Limited research and development among others.
Small Business and Entrepreneurial Venture
Small business by definition includes entrepreneurial ventures because
most new ventures start small. However, small businesses are distinguished
from entrepreneurial ventures by the nature of the firm and aspirations/goals
of the owners.
Distinctions can be drawn from the Following
Potential for Growth: Entrepreneurial venture has a strong vision for
growth and strong potential for growth. This potential for growth results
from the fact that it is characterized by innovative strategic
practices/products which may lead to creation of new markets and industry
while for small businesses growth is always small business because a small
business operate within a given market.

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 Strategic Objectives The entrepreneur sets up very specific strategic
objectives drafted to achieve the high potential for growth that includes
commitment to constructive changes and achievement of unusual results
arising from applications of new but many times risky innovations. The
principal objectives are profitability and growth while small business
objective are not as clear as demanding. Such objectives are mainly personal
rather than making profits. Many of them set up objectives but may lack
information due to lack of research.
The Level of risk Involved: The level of risk involved in an
entrepreneurial venture is high compared to small businesses. This is
because they are in most cases involved in many risk innovations.
Note: Many small businesses may/will posses some of the characteristic
of entrepreneurial venture at certain stages of their development especially
when starting. However, if they do not pursue growth through constructive
change and innovation they are not considered to be entrepreneurial.

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 Chapter - 5
Creativity and Innovation

Creativity
Robert Hirsch, defined creativity as the process of creating something
different by devoting the necessary time and effort. This is accompanied by
financial, psychological and social risks
Proctor (1995) considers creativity to the phenomenon of a working new
thoughts rearing old learning and examining assumption to formulate new
theories or create awareness.
Creativity is therefore the generation of ideas that results in improved
efficiency and effectiveness of a system. although there are varying
definitions of creativity there is creative thinking which is the inner feeling
and can be improved upon.
Creativity is the powerful competitive weapon in the knowledge of
business.
It’s an important source of competitive strength for all the organization
concerned with growth and change.
Kerka (1999) organizes that creativity is a complex of that traits skills
and capacities including the ability to work automatically thinking openness
to experience and tolerate for ambiguity
The Process of Creativity
Creativity is a process which is influenced by many external factors
such as the business environment, social forces and individual attributes.
One of the earliest models of the creative process is attributed to Graham
Walles. In 1926 Graham identified four stages of the creative process as
preparation, incubation, insight and evaluation.

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The Stages are Frustrated Below

1) Preparation
This refers to the base of experience and knowledge that precedes the
creative ideals. such preparation is typically a conscious effort base on one’s
Interest and curiosity abort a given area of knowledge or activity.it includes
perception of idea and development of interest. During this phase one
becomes immersed and develops sensitivity to the issues and problems in a
field of interest
2) Incubation
This refers to that part of the opportunity recognitions process in which
an individual is contemplating an idea or a specific problem. it’s the part of
the process that occurs when a person is thinking about a problem as
considering an idea. Discussions of the incubation phase often make
reference to a specific problem that someone is trying to solve.
3) Insight
This is also called the illumination stage. Whereas incubation refers to
an ongoing process; insight refers to a moment of recognition. It’s the point
at which the whole answer or core solution springs into awareness suddenly
and spontaneously. The experience, however is not necessarily one that
pushes the process forward, but instead may feed back to the incubation and
preparation stages for further consideration.it should be noted that creativity
is not a linear process.one may move back and forth though the various stage
of consciousness as the process continues.
4) Evaluation
Not all ideas are good business opportunity and what seems to be a good
entrepreneurial idea may not be a real or legal business opportunity. Thus
evaluation is the phase in the creativity process when insights are analyzed
for them viability. This stage is also referred to as the verification or
confirmation stage since it involves deeper analysis into whether a concept is

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workable, whether the creator has the skills necessary to accomplish it, and
whether it’s truly profitable enough to undertake.
In this phase of the process ideas are put to test via various forms of
investigation such as preliminary market testing, financial viability analysis
and or feedback from business associates and others in one’s social network.
The results of this analysis feed back to the incubation and preparation phase
for more consideration.
It is this aspect of creativity that may be the most challenging because it
requires the creative person to be truly honest about the prospects of his new
insight. This is the phase that tests on entrepreneur’s commitment and
willingness to commit to a business start. At the same time neglecting the
analysis may also lead to failure.
Other Creativity Models
A number of models have been developed after the pioneer contribution
made by Graham Walles. Hills (1996), reports that the notion of elaboration
was added to Graham’s model to high light the importance of educing a
creative idea. Elaboration is the stage in which the creative insight is
actualized that is put into a formal form that is ready for final presentation
several authors have argued that elaboration is generally the most difficult
and time concerning part of the creativity process.
In the case of the entrepreneurial business opportunity elaboration
represents the process of business planning. Assuring that a business idea has
survived the evaluation stage and is still regarded as viable, this is the stage
when many details are worked out. In that process, as small problems
become apparent, the details of elaboration will also feed back to earlier
stages of the creative process of elaboration is where the skilled entrepreneur
engages in planning activities to reduce uncertainty.
Implementation is largely noted to be outside the creative thinking
process but it’s hot enough just to have creative thoughts, ideas has no value
until we put in the work to implement them. Very new idea that is put in
practice changes the world we live in.
Innovation
Innovation is a process of developing an idea into a new product or
service that adds value, creates market and increases customer satisfaction.it
is a means by which is an entrepreneur create new wealth. Innovation creates
a resource. It finally rests up on recognizing an opportunity that exploits a
market innovation applies to all levels of technology and therefore does not
have to be technician (Timmons 1994).

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 Innovation is any practice perceived to be new by the relevant unit in
production.
Innovation is a temporary sequence of activities that occur in developing
and implementing new ideas.
Innovation is a complex activity which proceeds from conceptualization
of a new idea to generation of a new solution and actual radiation of
economic or social values.
Drucker (1985), defined innovation as: ‘the act that endows resources
with a new capacity to create wealth’. It also refers to purposeful and
organized search for changes and exploiting opportunities arising from such
changes for either economic or social change. Drucker argues that innovation
should be a systematic, organized and purposeful activity and that innovation
as well as entrepreneurship is discipline with simple rules.
As quoted by Drucker, Say defined innovation as changing the yield of
resources of changing the value of satisfaction obtained from resources by
the consumer.
Balunya (1997), defined innovation as the act o introducing something
new in this case can be anything ranging from products, organization
structures, etc.
Kao (1989) argued that for something to qualify as an innovation it must
be new, useful and able to solve an existing problem and be understandable.
Why Innovation?
Innovation is vital because the word is dynamic. A lot of things keep
changing both within and outside an organization some change are natural
and spontaneous. These changes could be demographics, perception,
industry and market structures including competition because of the
environment dynamism with in which people and organization operate its
necessary for the latter to be innovative to cope up with the changes and to
ensure survival in business.
Secondly because entrepreneurs aim at being at the top and reap profit
of their work, they have to keep advancing in ways of low things are done
and create something new or different that adds value. An entrepreneur aims
at being on top in business to out compete others, to achieve this he has to be
innovative.

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The Innovation Process
Timmons (1999) suggested the following steps in the innovation
process: Identifying an idea, developing the idea into a thorough opportunity,
evaluation and finally implementation. Timmons argues that the innovation
process has a number of problems that must be overcome if the innovation
process is to be successful. There is need to determine careful and thorough
evaluation whether an idea is an opportunity or not.
According to Balunywa (1997) the process of innovation begins with
the perception of a new idea and ends when the idea has been effectively
implemented and becomes part of organization operational activities. The
process involves exploiting and managing changing values. Even though
above definitions limit innovation to a process. It may be noted that
innovation can also be an event.
The process of innovation, according to Balunywa begins with
perception of a new idea, conceptualizing the idea by thinking about it and
refining it. The next stage is the development stage where for big
organization experience are undertaken and finally the implementation stage
where the innovation is operationalized. The stages of innovation are
illustrated below:
Innovation Process

1) Perception
At the first stage the entrepreneur perceives on idea, on opportunity or
need for innovation. At this stage the idea is a mere feeling. The
entrepreneur thinks about the idea and may necessitate going through the
creativity process.

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2) Conceptualization
Usually at the perception stage the idea is still vague. Therefore it’s of
the conceptualization stage when the idea is refined, thought about and made
more explicit. This is a stage for providing answers to such question like
how will the product or service be produced? Who are the users? How is the
organization to be structured?
3) Development Stage
This is the stage when full conditions for the innovation are how defined
and experiments undertaken to see if the product or service or product will
work.
At time the idea may be taken back to the drawing board to allow
gathering of more information. At this stage a strategy to implement the
innovation is evolved if it works.
4) Operation stage
This is the implementation stage decision are taken on investment, the
production team marketing mix decision and the structure to implement the
innovation. For small entrepreneurs, the development stage is combined with
the operation stage.
Types of Innovation
Timmons (1994) Summarizes Innovations into Three broad Categories
i) Incremental Innovation
This is the most common and features the introduction of a product
involving some level of newness and some value creation an example is the
introduction of Mobile telephone facilities
ii) Substantial Innovation
This is where there is a significant degree of product newness and
important value creation for the customer for example introduction of carried
soft drinks, carried beer changing of the packaging design of castle breweries
products.
iii) Transformational Innovation
This is the least common and involves radical new products that create
substantial value creation from the customer, for instance World Wide Web
(www)
Moving from incremental to trains formational types of innovation, the

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degree of product newness and value delivered to customer’s increases and
so does the potential to earn high profits. Concurrently, the degree of
business risk can also rise as one move up the innovation ladder.
Factors Leading to Innovations in Organizations
1) Customers are more Sophisticated and Expect More
Customers today tend to be more segmented demeaning. They are
looking for products that are better designed to meet their individual needs
customers expect high quality and better price products for instance a TV set
cars. In respects the customer is the driving force to innovation.
2) Customers have more choice
As the number of suppliers to the end market is generally rising
customer loyalty to particular suppliers is disappearing education are the
beauty product. There are several company loyalty to brand win be guided
be the satisfaction derived from consuming a particular product.
3) Ideas Make up More of the Value Chain
In today’s production process, physical inputs are being Asigly
substituted by intellectual input. Wealth creation is increasingly about
capturing and applying new ideas to create new products that exploit
identified opportunities.
4) Shorter Product Life Cycles
Before the test two decades, most motor vehicle manufacturing
companies were developing vehicles with an estimated life span of more
than 10years.Today, this has drastically reduced. With tastes and technology
rapidly changing and good ideas being quickly and superseded, there is
continual pressure to devise new and better products at a faster rate, for
instance the use of fiber car body instead of steal.
5) Target Market Strategy
Most firms and organization in the current business word have focused
targeted markets for their products. To be able to enter, survive and win the
market, often new or better product package is required to win against
entrenched competition.
Innovation in Business Enterprizes
1) Openness to New Ideas from all Possible Sources
Demanding customers in the most demanding markets can be an
excellent source of ideas for innovative products for instance in the banking

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industry in Kenya, Barclays Bank continuously send questionnaires to their
clients about their new of the services provided by the bank (suggestion
box).
2) Constantly Engage with Customers and Markets
Working and interacting continuously with customers, understanding
and interpreting their needs, living with the customers rather than studying
them from a distance will increase the potential to innovate.
3) Use Vigorous idea Screening Process
A good idea is not necessarily a viable opportunity. Before spending
time and resources in developing a product or service, carefully evaluate the
idea and see if it’s viable opportunity. The idea should fit the competencies
of the business /entrepreneur and should keep the firm a dire future
objective.
4) Continuous Seeking of Information
The innovation process requires information about markets and their
sizes, customer profile, distribution channels, costs regulatory compliance
the size and strength of competitors among others. Government universities
and research agencies can be very rich sources of timely information to keep
enterprises screen ideas and plan for the development and blanch of the
products.
5) Minimize and Manage Risk
Risk is the likelihood that the actual outcome will deviate from the
expected outcome. The degree of risk is a measure of the less than perfect
state of information that is available regarding the forces in favor and the
forces against the project. Acquiring all the relevant information that is
feasible minimizes risk.
6) Gather Skilled People to Build a Competent Team
Successful innovation requires teams of skilled and dedicated people.
Entrepreneurs need to recruit the best and bright people for their team. There
is need for strong consideration on how to reward the team members.
7) Provide a Strong Sense of Direction
Leaders in innovative enterprises know their firms and what they want
to be.
They have a strong outward focus, are confident and interested in ideas
and change. From their thorough understanding of their opportunities, the

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product they are developing and the market are seeking to capture, they
inspire and build confidence in their team.
Sources of Innnovation In Business Enterprises
1) The Unexpected Occurrence
This is a system of fundamental change in behavior, expectation of a
great number of customers, which requires relegation understanding
analysis, support and exploitation to the value and yield. It’s the diversion
from the normal business trend happening in an organization. It/s the urge
for change from the ordinary way of doing things.
In many organizations, the management fails to exploit such
opportunities because they believe that anything which has lasted for a fair
amount of time must be normal and go on forever. Anything that contradicts
it is considered unhealthy. Unexpected success is challenge to management‘s
judgments.
Unexpected success is not just an opportunity or innovation but
demands innovation. It forces organization to ask: what basic challenges are
how opportunities for the organization.
2) Unexpected Failure
Failures like success cannot be rejected and rarely go unnoticed. Many
failures arise out of mistakes, negligence, greed, stupidity thoughtless band
wagon –climbing or incompetence whether in design or expectation. It may
arise out of assumptions on which a product or service, its design or its
marketing strategy were based or may no longer fit reality. For instance,
changes in perception or value to a particular product to customers, changes
in income in which customers demand something quite different. Any
change like this is an opportunity for innovation.
Unexpected failure demands that the organization go out, look around
and listen. It calls for more study and more analysis most importantly it
should be considered as a symptom of innovative opportunity and be taken
seriously.
3) Unexpected Outside Event
These are events that come from outside the organization or enterprise
and significantly affect the operation of the organization. Unexpected outside
e3vent, may be above all an opportunity to apply already existing expertise
to a new application that does not change the nature of the “business” the
organization is in. It may be an extension rather than diversification.

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1. Incongruity
An incongruity is a discrepancy or disagreement between what is and
what ought to be or between what is and what everybody assumes it to be.
It’s a symptom of an opportunity to innovate (Drucker 1985).
An incongruity is a symptom of change either changes that has already
occurred or changes that can be made to happen. These are changes within
an organization, a market or a process. It’s this visible to people with in or
chose to the organization, market or process. There are four types of
incongruity that occurs in business organization or industry.
i) Incongruous Economic Realities
Economically, if the demand for a product or service from a particular
organization is growing steadily its economic performance should improve
thus increasing profitability. A lack of profitability and good results in such
an industry brings about incongruity between economic rarities.
ii) Incongruity between Reality of an Industry and the Assumption
About it
Situations may occur in an industry or service where people
misconceive reality. They will concentrate their efforts on the area where
results do exist. This is incongruity between reality and behavior. This
incongruity offers opportunity for successful innovation to whoever can
perceive and exploit it.
iii) Incongruity between Perceived and Actual Customer Values and
Expectations
Producers and suppliers at times misconceive what it is the customer
actually buys. They assume that what represents” value” 6to the producer is
the same to the consumer. Variations in expectations and values occur. The
reaction of the typical producer and supplier is then to complain that
customers are irrational or unwilling to pay for quality. Whenever such a
complaint isheard, there is reason to assume that the values and expectations
the producers holds to be real are incongruous with the actual values and
expectations of customers and clients. Then there is reason to for an
opportunity for innovation that is highly specific, and carries a good chance
for success.
iv) Incongruity within the Rhythm or Logic or Process
This is an internal incongruity with in a process rhythm or logic that
upset the customer. Customers are aware of it. It occurs where customers

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feel uncomfortable with the product or service so that the product or service
can be redesigned to remove the discomfort. He users or customers talks
about it,but what lacks however is somebody willing to listen somebody to
take seriously the customers concerns, so that the product orservice can
satisfy the customers.
2. Process Need
This is an innovation that perfects an already existing process,
replacement of weak links, redesigning old existing process around newly
available knowledge. The missing link forms the process need for innovation
with in an industry, business or service sometimes everybody within the
organization, an industry always knows that the need exists. Yet usually no
one does anything about it. However when the innovation appears
immediately accepted as “obvious” and soon becomes standard.
An example of the process need innovation is the mobile phone services
in Uganda. The telephone service in Uganda was introduced long time ago,
but the mobile services were not available. To perfect the communication
system there was a Need in the telephone industry that could allow
communication to take place anywhere. Celtel, MTN, Warid Mango saw this
as an n innovative opportunity and introduced mobile phones in Uganda.
3. Industry and Market Structure
This is a form of innovation that occurs from changes in the market
structures within the economy. In reality market and market structures can
remain stable for many years and can ensure that the market leaders and their
trailers establish sound foundation in the market. However a slight
disturbance of these structures can cause the collapse or disintegration of the
market or industry. Such a disturbance can be a source of innovative
opportunity within the industry or 9organisation.An example of innovation
from changes in industry and market structure is the Auto mobile industry.
On a local scene after the re-introduction of the EAS, in the newspaper
industry the East African newspaper has been trying to cover and report
news in E. Africa. Many bus companies like Gateway, Akamba, etc. have
come in to exploit the opportunity in the transport industry with in the
region.
4. Demographic Factors
These are innovative opportunities that occur within the organization or
industry as a result of changes in demographic factors. These may be
changes in population, its size, age structure, composition, employment,

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education, and income. Demographic factors are the most reliable. This is
because demographic changes are known. For instance the number of
students in Uganda expected to join p.1 by the year 2009 are already born or
those to join s.1 by the same year can be estimated. As a result those who
analyze demographic changes can exploit them and reap great rewards.
An example is the education sector in many developing countries
including Kenya, Uganda and Tanzania. Due to the increasing population as
per the projections, there is an increasing number of private institutions for
learning as the demand for education facilities outstrips the supply in public
institutions. As a result the education sector has been vibrant and innovative
individuals and organization are exploiting the opportunity. The demand for
accommodation has led to the construction of private hostels around the
college. These are innovations as a result of demographic changes.
5. Changes in Perception
Perception refers to attitude towards a situation or the way organization
individuals perceive or look at a situation. Changes in perception does not
change facts but changes the learning hence different consequences.
Drucker (1985) demonstrates this concept using two phases, the glass
is” half full”
And the glass is “half empty”. The two phases are mathematically the
same but interpreted differently due to perception. The interpretation will
depend on the mood rather than facts. Innovative opportunities occurs if the
general perception changes from seeing the glass as half full to seeing it as
half empty.
An example is the cinema industry. With the increasing number of video
tapes in the market there has been a sharp decline in people attending cinema
shows in cinema halls. These have been an increase in video show rooms.
There has also been an expansion of TV, video deck, DVD market. This is
innovation as a result of change in perception and tastes.
6. New Knowledge
This is innovation within an organization as a result of new knowledge
in production or service provision. According to Drucker knowledge-based
innovation is the “super star” of entrepreneurship. It gets publicity and
lowly. It’s what people mean when they talk of innovation.
7. The Bright Idea
Innovations based on a bright idea probably out number all other

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categories taken together. A very large population of the new businesses that
are described in the books of entrepreneurs and entrepreneurship are built
around” bright ideas”, e.g. the ball point pen, beer cars etc. Also, what is
called research in many businesses aims at finding and exploiting bright
ideas? Yet bright ideas are the most risky and least successful source of
innovative opportunities. The casualty rate is high.
Also no one knows which ideas for an innovation based on a bright idea
have a chance to succeed and which ones are likely to fail. Why did the zip
find acceptable and practically displace buttons, even though it tends to jam?
(After all a jammed zip or a dress, jacket, or appear of trousers can be quite
embarrassing.
Principles of Innovation
These are o number of “Dos” – Things that have to be done. There are
also a few “don’ts” –Things that should not be done and these are conditions.
a) The Do’s
Purposeful, systematic innovation begins with the analysis of the
opportunities. It begins with thinking about the sources of innovative
opportunities. In different areas, different sources will have different
importance at different times.
Innovation is both conceptual and perceptual. The most important issue
about innovation is therefore to go out, to ask and to listen. Successful
innovators use both the right side and the left side of their brains. They work
out analytically what the innovation has to be to satisfy an opportunity. Then
they go out and look at the customers, the users, to see what their
expectations, their values, their needs are. One can perceive that this or that
approach will not fit in with the expectations or the habits of the people who
have to use it.
An innovation to be effective has to be simple and it has to be focused.
It should do only one thing, otherwise, it confuses. If it’s not simple it
doesn’t work. Everything new runs into trouble, if complicated it cannot be
repaired or fixed. Indeed a greatest praise on innovation can relieve is for
people to say: This is obvious. Why didn’t I think of it? Innovation should be
focused on a specific need that it satisfies on a specific end result that it
produces.
Effective innovation starts small. They try to doone specific thing.
Innovations should better be capable of being started small, requiring at first
little money, few people and only a small and limited market. Otherwise

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there is not enough time o make the adjustments and changes that era almost
always needed for an innovation to succeed.
A successful innovation aims at leadership. It does not aim necessarily
at bellowing eventually a “big business, in fact no one can foretell whether a
given innovation will end up as a big business or a modest achievement.
b) The Don’ts
Try not to be clever. Innovations have to be handled by ordinary human
beings, if they to attain any size and importance at all, anything too clever,
whether in design or expectation is almost bound to fail?
Don’t diversify, don’t splitter, don’t try to do too many things at once.
Innovations that stray from a core are likely to fail. They remain ideas and
do not become innovations. An innovation needs the concentrated energy of
a unified effort behind it.
Do not innovate for the future, innovate for the present. An innovation
may have long –range impact, it may not its full maturity until 20 years later
they invention of computer and its uses.
c) Conditions
Innovation is work. It requires knowledge. There are clearly people who
are more talented than others. Also innovators rarely work in more than one
area.
To succeed, innovators must build on their strengths. Successful
innovators look at opportunities overt a wide range. But then they ask which
of these opportunities fits me, fits this company, packets to work what we (or
1) are good at and have shown capacity for in performance?
Innovation is an effect in the economy and society, a change in the
behavior of customers, farmer’s etc. It’s also a change in a process that is
how people work and produce something. Innovation therefore always has to
be close to the market, focused on the market, indeed market driven.

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 Chapter - 6
Environmental Analysis

Many different forces inside and outside an organization influence a

manager’s performance. So he management functions of planning,
organizing and controlling often are must be accomplished under constantly
changing conditions. A manager must deal with the environments.
The organization‘s internal environment, which usually can be
controlled and the often unpredictable and uncontrollable conditions of the
outside world, the extend environment.
The Organization
Organizations vary in purpose and in technical needs e.g. schools,
hospital, bank, telephone companies, civil groups and restaurants are all with
differing goals and needs. But they and any other organization have other
extent in common.
The basic theory can help managers simplify and deal with the complex
interactions of internal and external environments. An organization can be
viewed as simply one element in a numbers of elements that depend on each
other. The organization takes Resource (I/P) from the larger system (the
external environment). Processes these resourceswithin its internal
environment and reforms them to the outsidein changed form (o/p). The
figure
Below Displays the Fundamental Elements of the Organization as a
System
The Organisation Environment as a System

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 Every organization interacts with a larger system by taking resource and
providing o/p.
11p, human and non-human Resource. Human l1p comes from the
people who work in the firm. they contribute their time and energy to the
organization in exchange for wages and other tangibles and in tangibles
rewards, non-human Resource consist of raw materials and information.
These are transformed or used in contribution with human resource to
provide other resources.
A steel mill employs people and blasts furnaces, plus other tools and
machines, to transform ironore into steel, rubber, plastic, fabrics and in
combination with people, tools, and equipment makes auto mobiles.
A university uses resources to teach students, do research, and to
provide information to society though the education process. The l/p are
student, faculty and money, A hospital‘s l/p are staff, supplies and patients.
The patients are processed through the application of medical knowledge and
treatment. The o/p is patients restored to a level of health consistent with the
severity of the disease.
It’s the manager who must coordinate the activities of the entries system
(organization) or one of the many sub systems (department) within the
organization. For the manager, the systems concept emphasizes that;
i) The ultimate survival of the organization depends upon its ability to
adopt to the demands of the environment, and
ii) In heating these demands, the total i/p process o/p cycle must be the
focus of managerial attention.
The Internal Environment
The environment inside the organization in which a manager must
function is called the internal environment. It includes discussions of the
settings where managers work, the day to day activities that utilize much of
their time and some generalized skills necessary to cope with the internal
environment. It includes the following;
Three Management Levels
Most organization functions have at least three distinct but overlapping
levels, each requiring a different managerial focus and reemphasis. They
include:
i) The operations level.

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 ii) The managerial level, end
iii) The strategic level.
These can be Illustrated Below

Environment internal and

external

Strategic Level

Management Level

Operations Level

1) The Operations Level

Every organization whether it prod less a physical plot as a service, has
an operations function, in any organization therefore there is the operations
level that focuses on performing effectively, whatever (it is that) the
organization produces or does in the case of a physical product; there is the
flow of material and the supervision of the operations. Colleges must be sure
the students are properly processed, registered, scheduled, and taught and
their materials are maintained. Banks must see that the cheques are
processed and financial transactions recorded accurately and quickly.
As the figure above shows an operations function is at the core of every
organization. The managerial task here is to develop the best allocation of
resources that will produce the desired o/p.
2) The Managerial Level
As an organization increases in size, someone must coordinate the
activities at the operations level as well as deciding which products or
services to produce. These problems are the focus of the managerial level. A
dissatisfied student complains to the Dean of College. A sales manager
mediates disagreement between customers and sales people. At this level, the
managerial task is really too fold;
i) Managing the operations function
ii) Selling as a link between those who produce the product or service
and those who use the o/p.

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 In other words, for the operations level to do its work, a manager must
make sure it has the correct materials and also must see that the o/p gets sold
as used.
Managers and the Level of Management

The primarily focus of manager’s activities depend on their level in the

organization.
3) The Strategic Level
Every organization operates in a broad social environment. As a part of
the environment, an organization also is responsible to the environment. The
strategic level must make sure the managerial level operates within the
bounds of society. Since the ultimate source of authority in any organization
must provide goods and services to society in away approved by society.
Thus the strategic level determines the long range objectives and direction
for the organization that is how the organization will interacts with its
environment. The organization also may seek to influence its environment
though lobbying efforts, advertising effort or education. Programs aimed at
members of society.
Types of Managers and Levels of Management
Understanding the three levels of management can be helpful in
determining the primarily focus of manager’s activities at different levels in
an organization. For example asset of terms widely used in organization
includes top management, middle management and first level management.
In this case the top management corresponds to the strategic level,
middle management. Corresponds to the managerial level, and first level
management corresponds to the operating level.
NB: Refer to diagram behind.
While the terms top, middle, and first level management may not always

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correspond exactly to the three levels outlined above, they provide an
understanding of managers do at each level. The term manager covers all
three levels, from the chief, executive officer to the first level supervisor. All
are managers but the focus of their activities varies.
The actual terms used to identify managers at various organization
levels differ from organization to organization and business, education and
government.
Generally speaking, the activities of supervisors, chairpersons and
program managers are similar despite the different terms used to identify
them. A chairperson of a department in college could be expected to spend
most of the time dealing with the faulty as individuals. Similarly, manager’s
presidents and cabinet secretaries spend much of their time being concerned
about the work that their organization is doing in terms of the expectations of
owners, customers and tax payers.
The Skill of Managers
Certain general skills are needed for effective managerial performance
regardless of the level of the manager in the hierarchy of the organization.
however, the mix of skills will differ depending on the level of the manager
in the organization there are three basic skills;
i) Technical Skill: Is the ability to use the tools procedures or
techniques of a specialized field. Accountants, engineers, nurses,
physicians’ musicians each have specific technical skills in their
fields of specialization; managers must possess sufficient technical
skills to accomplish the jobs for which they are responsible.
ii) Human Skills: Is the ability to work with and understand people.
Which manage people effective, managers must participate
effectively with others.
iii) Conceptual Skill: Is the ability to comprehend all activities and
interests of the organization. This skill involves understanding how
the organization functions as a whole and how the parts depend
upon or relate to one another.
While all three of these skills are essential for effective managerial
performance, their relative importance to a specific manager depends on his
or her level in the organization. Technical skills is critical at the lower levels
of management but becomes less so as one moves up through the
management tanks. A production foreman and a nursing supervisor will need
more technical skills than the president of the company or hospital

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administrator, because they deal with day to day problems in manufacturing
and nursing.
On the other hand, the importance of conceptual skills increase as one
rises in the management.
The higher one is in the hierarchy, the more involved one becomes in
longer term decisions that can influence many parts of the organization or
the entire organization. Thus, conceptual skills are most critical for top
managers.
While human skills is critical at every level in management, it probably
is most important at the lowest level. The greatest number of manager
subordinate interaction are likely to occur at this level.
The Role of Managers
Recently it has been determined that managers perform 10 different but
closely related roles. The figure below shows that 10 roles can be separated
into three different groupings; interpersonal roles, information roles and
decisional roles.
The Overlapping Roles of Managers

1) Interpersonal Roles
These roles focus on interpersonal relationship. The three roles of figure
heads, leader, and liaison result from formal authority. By assuming them;
the manager is able to move into the informational roles that in turn lead
directly to the decisional roles.

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 All managerial jobs require some duties that are symbolic or ceremonial
in nature.
The manager’s leadership role involves directing and coordinating the
activities of the subordinates. This may involve staffing (hiring, training,
promoting, dismissing) and motivation.
The Liaison role gets mangers involved in interpersonal relationship
outside of their area of command.
2) Information Roles
This set of roles establishes the manager as the central focus for
receiving and sending non-routine information. Through the three
interpersonal roles discussed above, the manager builds a network of
contacts.
The monitor role involves examining the environment in order to gather
information about changes, opportunities, and problems that may affect the
unit the formal and informal contacts developed in the liaison role are often
useful here.
3) Decisional Roles
While developing interpersonal relationships and activities are not ends
in themselves as the basis relationship to the process of decision making. In
fact, some people believe that these decisional allocated, and negotiators are
manager’s most important duties
The purpose of the entrepreneur role is to bring about changes for the
better in the unit. The effective first line supervisor is looking continually for
new ideas or new methods to improve the unit’s performance, the effective
college clean constantly plans change that win result in higher quality
education. The effective marketing manager always tries to seek for new
product ideas.
In the disturbance handles role, managers make decisions or take
corrective action in response to pressure that is beyond their control because
there are disturbances, he decisions usually must be made quickly, which
means that this role will take priority over other roles, the immediate goals is
to bring about stability, when an emergency room supervisor responds
quickly to a local disaster, a plant supervisor reacts to astrike, or a first line
manager responds to a breakdown in a key piece of equipment, each is
dealing with disturbances in the environment. These responses must be quick
and must result in a return to stability.

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 The resource allocate role places a manager in the position of deciding
who will get what resources Including money, people, time and equipment.
Therefore are level enough relationship to go around; the manager must
allocate the scare Rss towards numerous possible ends. Resource allocation,
therefore, is one of the most critical of the manager’s decisional roles. A first
line supervisor must decide whether an overtime schedule should be
established or whether part time workers should be hired. The president of
the United States must decide whether to allocate more to defense and less to
social programs, or Vice versa.
In the negotiator role, managers must bargain with other units and
individuals to obtain advantages for their own units. The negotiations may be
over work, performance, objectives, RSS, or anything influencing the unit. A
sales manager may negotiate with the production department over a special
order for a large customer a first line supervisor may negotiate for new type
winters, a top manager may negotiate with a labor union representatives.
Management Levels and Management Roles.
A manager’s level in the organization influences which managerial roles
are emphasized. Obviously, top managers spend much more time in the
figure lead role than first line supervisors do.
The liaison role of top and middle managers involves individuals and
groups outside the organization while the liaison role at the first line level is
outside the unit but inside the organization.
Top manager monitor the environment for changes that can influence
the entire organization middle managers monitor the environment for
changes likely to influence the particular function that they manage
(marketing). And the first line supervisor is concerned about what will
influence his or her unit. However, while both the amount of time in the
various roles and the each role may differ, all managers perform
interpersonal informational and decisional roles.
The External Environment
No organization is self-sufficient, whether profit or nonprofit, each
organization provides something to the outside environment and in from
depends on the environment for survival. The numerous components of the
external environment can be classified into two categories
Direct influence on the performance of the organization and Indirect
action components, which influence the climate in which the organization
operates and may (under some conditions) become direct – action
components.

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Direct Action Components of the External Environment
The major direct – action components of a managerial external
environment are the organization clients that it must satisfy, it is competitors,
and the organization and individuals that simply Rss the figure below
illustrate the direct action component

The performance of the organization is influenced by the above factors,

i) Clients
A business organizations customer is clinical, and managers constantly
must be aware of the present needs and emerging needs of clients. This may
involve altering present products or services, developing new ones, or even
entering new business.
ii) Competitors
The actions of competitors that directly impact on managers are of two
basic types
a) Intra type
This occurs between institutions engaged in the same basic activity for
example competition between banks for customers
b) Intertype
This rises between different types of organization for example hospitals
compete with health maintenance organization for patients.
iii) Suppliers
Every organization enquires inputs from environment in the, of raw

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materials services, equipment, labor and funds. They use these inputs to
produce output. This organization depend on those who supply resources.
The availability of resources determines the organizations capacity to
respond to threats and opportunities presented to it Depending on the type of
organization, some suppliers will be more critical – and others for example a
hospital Leeds funds and qualified staff.
Indirect Action Component of The External Environment
These can affect Managers in at Least two Ways
a) The outside organization can have a direct influence on an
organization or an indirect influence through a direct influence
througha direct-action component for example a consumers
groupmaylobby for certain cases like equal credit opportunities on
product safely.
b) Certain indirect action components organization influences the
climate in which the organization functions for example the
economy may expand or decline requiring response from
management.
Some of the Most Important Components of the Indirect Action
Components Include
Technology
Changes in technology can influence the destiny of the organization.
Technology may be a constraint when opportunities exist but the necessary
equipment is not present. However technological innovation can create
opportunities for entirely new industries for example the effect of ATM on
banking.
Economic
Economic changes pose both opportunities and problems for managers.
It has an effect on the demand for a company product as service. It also
facilities the establishment of new enterprises. A major show down in the
economic growth can bring failure to some organization changes include
halation refers, productivity savings unemployment refers, productivity
savings unemployed refers etc.
Therefore managers must constantly monitor changes in economic
changes in order to minimize threats and capitalize on opportunities.
Political and Legal Factors
Nutritious laws and Authority characterize the political and legal

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environment faced by most managers. This indirect component may act as
both a constant and opportunity for example the vocational Education Act
provides opportunities for certain types of education while acting as a
constraint for others.
Cultural and Social Factors
Change appears to be a constant element in our social system, all the
people are part of the cultural and social order that affects their behavior,
traditions, customs and beliefs influence all the people and organization
managers must identify the changing cultural social conditions that win
influence their organization yet many organizations have not considered the
impact of such conditions or have under estimated their impact.
International
For many organizations this indirect action component presents great
challenges it provides managers with both opportunities and threats for those
managers who depend on foreign resources the international factors could be
a problem. For some managers or organization win provide foreign
competition.
In markets for other organization it will provide opportunities to sell
their plots in new markets. When a business firm decides to leave its national
broader and do business in other countries it becomes a multinational
company with the decision to become a multinational company the
international component takes an increasingly important and complying role.
The organization becomes subject to the nature of different cultures,
economic and political system

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 Chapter - 7
Feasibility Study

This is an in-depth investigation aimed at determining how perfectible and

how desirable a specified project or process or system is. The investigation
aims at analyzing all the critical elements in various aspects in the
production of a given product or service.
The study eventually Results into A Project Feasibility Study Report,
Which Ways among Others Provide Answers to The Following
Whether or loot the project under study can be done and if so based on
pre-stated project objectives.
The most practical, beneficial and describe way to carry out the project.
Understanding of Feasibility Studies Which Include the Following
 Feasibility studies in their practice applications incorporate viability
studies.
 The position that feasibility studies occupies in the overall cantered
of the project cycle
 The distinction between a feasibility study and a project report.
Feasibility Vs Viability Tests
The Feasibility Study/Test Refers to A Preliminary Inventory of the
Following
 The entrepreneurship ability.
 Resource requirement.
 Resource availability.
The aim of this preliminary test is to reach a decision as to whether the
idea under test has promise as lot
In the day to day use of the term however, a feasibility study includes
both tests of feasibility and viability. An idea is feasible if it’s within the
entrepreneurships ability to transform it into an enterprise.
Its viable if the enterprise can achieve the pre – set objectives the

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profitable in case of a business enterprise or beneficial in the case of social
or community projects.
The Project Cycle
Complete Imploration of the Project Involves Several Stages Which
Include the Following
 Project identification that is the development of new ideas.
 Project preparation lie laying down the parameters and
characteristics of the project
 Project appraisal that is tests of feasibility and viability.
 Negotiation.
 Implementation.
 Post implementation evaluation.
The feasibility study proper is stage 3 in the cycle. However the
feasibility study report will also include aspects of stages 1-5
Pre – And Post Investment Report
A feasibility is or pre – investment decision is made it examines a
proposed project in terms of its areas.
Objectives, technical feasibility social impact, etc note that it’s different
from a detailed project report or a business plan in commercial terms
There are also post investment decision activities. These are project
work plans which include the following; detailed specifications and designs,
engineering drawing, site investigation, process designs, and tire schedules
for implementation.
The above two (post and pre) report type should also be destination from
a post – project evaluation report. This as they have suggests is a post –
implementation activity whose purpose is to evaluate the attainment of the
project objectives pre- investment decision includes the following:
Since the feasibility study report is the basis of a major investment
decision, the study light to be very broad but critical covering all the relevant
ground and taking advantage of the previous experience if any in related
fields.
The study should include adscription of the project objectives and
principle characteristics if it’s to be used as a bench more for
implementation, monitoring and evaluation of the project.

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 Similarly the report should include a rundown of the main assumption
upon which predictions of performance are based. It also includes elements
of risks and uncertainty associated with the implementation of the project.
The report, a part from giving suggested courses of a firm, it should also
point out alternatives considered and make a case for the suggested choices
Quiz often it will be necessary to make a adjustments to some of the
parameters in order to attain reliable solutions of it may become necessary to
compromise on the type of technology to be employed, sources of inputs, the
production programs in order to enlace the viability of the project.
Not all the project will pass the feasibility / viability tastes, where the
tastes indicate that the project is not possible the report should stage so
giving logical explanations for this position.
The emerging trend for conducting as a whole studies and project
implementation as a whole is one that involves a section of stakeholders and
particularly the end users
Good feasibility studies are based on more listening, piloting,
demonstrating and main streaming.
Stakeholders in A Feasibility Study
Because feasibility studies solve a variety of stake holders, they include
a range of conflicting interests, each interested party will always went to bias
assumptions and expectations within them own ends at the forefronts of a
prospective investor may prepare a document based on extremely realistic
interests.
However, once the investor is satisfied that the project has got prospects
of success, its expected performance, he will also be prepared to get a loan
because of the supporting documents.
The Range of Potential Stakeholders win varies with the Uniqueness of
each Project but they include the Following
 The investor.
 The financial.
 Supplies and contractors.
 Consultants.
 Government (firm the social economic angle).
 Aid agencies.
 Community.

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Contents of a Feasibility Study
As already noted the feasibility study is a very important step in the
project analysis cycle. The decision to threat depends mainly on the
recommendations of the study. This calls for thoroughness in the exercise.
The resulting report must contain answers to all aspects of the project to
minimize as much as possible risks and uncertainty which is associated with
new investment. The study must cover technical, final and marketing,
management, organizational, social – economic, environmental and any
other aspects that may affect the success or failure of the project.
Since feasibility studies are relevant to virtually all areas of activities, be
it in manufacturing, agriculture, import and export trade, community
development projects, it’s not redistrict to propose a standard format that a
feasibility study report ought to follow.
The relative important of different dimensions of analysis win every
with the type of project of which analyzing commercial project commercial
project, financial ability will be of paramount consideration for community
projects, social benefits will be more considered than profitability, if its
Agriculture the emphasis and content will include such considerations like
soil texture, diseases control, wealth cycles, these may not be relevant to be
manufacturing project
Other Services of Variation Include
 The size of the project.
 The costs involved.
 The nature of the production process.
 The expressed requirements of the stake holders sponsoring the
study.
Contents of a Feasibility Study
1. Executive Summary
 It’s written last but appears first in the report.
 It’s extremely important since many busy executives do not read the
entire report.
 It also includes an outline of the principle objectives, characteristics
of the project, Major assumptions, total cost of the project and
expected sources of finance and the study’s major conclusions and
recommendations.

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2. Project Background
 History of the background.
 History of the project.
 The importance/justification of the project.
3. The Project
 Project description and detailed features of the proposed product or
services.
 Brief details of cost estimates and the proposed sources of
financing.
 Details of the executing firm/company and managerial expenses.
4. Market Analysis
 Demand patterns that is collect and future trends, effective demand,
etc.
 Expected market share.
 Price projections.
 Other marketing variables like distribution, promotion etc.
 Competition that is their capacity, strength, and weaknesses future
entry and exit.
 Competitive advantage. This is an analysis of the company /
industries own strengths and weaknesses.
5. Technical Feasibility
 Location of the firm/business
 Utilities and infrastructural facilities that is their availability,
adequateness and reliability.
 Machinery, furniture and equipment, brief specifications,
availability in Local or export markets, schedule of supplies and
costs.
 Buildings that is specifications, layout and cost motor vehicles that
is specifications, cost and source.
 Raw material requirement that is the type quality and quality,
availability, sow ices and cost
 Production process. This includes plant and lay out

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  Production capacity and expected capacity utilization overtime.
6. Organization and Management
 Top, middle and lower cadre personnel i.e. the skill and hours of
each required, their availability and cost.
 Specialist skills consultants if required i.e. the hours required and
the cost.
 Organizational structure.
 Reward structure.
7. Financial Viability
 The project cost that is capital expenditure and working capital.
 Details of financing that are the cost and structure.
 Estimate of the perfect results that are production and sales
schedule, perfected over a period of time.
 Calculation of profitability, liquidity and payback period.
8. Economic Viability Analysis
 Use of discounted cash flow, computation of the NPV and IRR.
 The break even analysis.
 Economic valuation of resources.
 Social economic benefits.
 Economic rate of return.
 Environmental impact analysis.
 The nature and type of disposal.
 The effect of such disposals.
9. Outstanding Issues if Any
Conclusion and recommendations including a proposed implementation
schedule (when)
Annex.
Uses of Feasibility Study
 Providing the information necessary to make the investment
decision.
 Supporting application for financing.

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  Serving as a reference document for project implementation
monitoring and evaluation.
 Solving as a support document for license applications, tax
exemptions etc.
The Preliminary Consideration
Before embarking on the preparation of a feasibility study, it’s necessary
to put into proper perspective the project, project cycle and the feasibility
study report.
The Following Are Some of The Areas That Should Be Considered
 The starting point.
 What is the starting point of the project?
 Is it new, replication, an extension or a reliabilities / reconstruction?
A New project: Starts from scratch which may be an advantage in the
sense that there are no previous experiences and the investor has a free hand
to be innovative. The disadvantage is that with such projects the risk and
uncertainty is high.
Replicated Project: They have the advantage of previous experience
and they normally follow a previous success story.
Extension Project: These also follow a success story and there are
fewer areas of risk and uncertainty since they are also expending in size they
will enjoy economies of scale and the viability is easy to establish.
Reliability/Reconstruction Projects: They are based on the assumption
that the existing activity has failed in one way as the other: Reforms may
include among others:
 Project mismanagement.
 Effects of civil disturbance or war.
 Natural catastrophes or general economic decline.
2. Sectorial Differences
Different sectors of the economy: - Agric agro – industry,
manufacturing industry infrastructure, commerce, social /community
projects, etc. will call for different consideration issues and emphasis and
different skills and experience for an effective team.
Differences will also arise between project in the public sector, private
sector, joint venture projects, projects arising from foreign investment (FDI)

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and projects quitted by NGO’s and CBO’s. The spectrum of question that
needs answers will be different.
3. Scale of the Project
The preparation of e feasibility study is part of transaction cost. This
being the case, investment in the feasibility study should be in line with the
scale of the project. Just as it would be indivisible to commission a multi –
disciplinary project it would be equally have to settle for a brief over view
report as a basisfor making the decision to invest in a major project.
There is therefore a need to establish a match between the complexity
and thoroughness of a feasibility study and complexity and level of
investment expected.
Should the project prove viable economists will use the concept of
margin at cost to establish this match for example.
1) Oil Seed Processing Project or a Venture Capital Company.
 Private sector projects.
 Key issues will probably be technical feasibility and financially
viability.
 Ownership, investment risk and management will probably be
vested in the same individual.
2) Copper/Cobalt Exaltation as Oil Pipeline Extension.
 Large investment.
 Probably public sector participation.
 Key issues will extend to economic viability, social benefits and
environmental concerns.
 Rural electrification, safe drinking water, rural communication
facilities.
Other Areas of Distinction
Projects that is purely domestic in characteristics Vs projects with
international inputs.
Different concepts of size base on different measures – level of
investment, of employees, sale, turn over etc.

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While Preparing Feasibility Studies the Following Should Be Born in
Mind
 The order in which work is undertaken in feasibility study
preparation does not at ways strictly follow the order of the table of
contents as listed in the previous section.
 Some modifications way needs to be done even after the investment
decision has been taken later decision.
 In the project cycle may necessitate changes in options previously
prefixed.

Ordinarily B should follow A. however having decided on the product,

technology alternatives may offer an alternatives option which necessities
residing the characteristics of the product or service. Similarly location, C,
may have all desired qualities and may have the professed option. However
with the changes created by the AB interaction the scale of operations may
change hence necessitating a change in location.
Another area that may result in re – orienting previous decisions is the
stage of negotiation and contracting results of negotiations especially with
financiers, suppliers and contractors may affect the viability of the project,
yet these must be carried out after the feasibility study has been completed.
Negotiations by their very nature involve compromises and shifting of
positions making it unavoidable to alter positions previously regarded as
superiors.

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 One possible escape route is far the feasibility study to work within
ranges within which negotiations and contracts should limit themselves
The need to review of previous positions often results in impasse
especially when decision makers have different professional backgrounds
and/or different perspectives of the projects objectives. Some professionals
are conservative and will be revenant shift from them profiled position, both
financial and economic analyses are key issue in feasibility study
preparation.
There is no outright answer; one must refers to the basis objectives of
the project financial analysis reflects the interests of the investor that is the
analysis examines the financial outcomes of the project. On the hand
economic cost/benefit analysis takes the macro perspective and examines
The alternative uses of the resources to be invested (opportunity cost),
and benefits from the project to the society and economy as a whole and
employment, contribution to G.D.P evaluation of poverty, reduction of
income, inequality of forex, economic linkages created, etc.
If the investment decision is being made by individuals then financial
results will prevail and if the project is intended to benefit the society, then
economic analysis will be given more weight.

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 Chapter - 8
Introduction to A Business Plan

Start-Up of a Business
If you are planning to start a business the most important thing to do is
to know your behaviors and competences that is you can answer this
question “WHO AM I?” When you know who you are then the choice of
business is made easy. You only start businesses that in line with your
behaviors and competences. Many people cannot explain who they are in
terms of their behaviors. They are more comfortable telling you about their
achievements and behaviors of their neighbors. Moreover, successful
entrepreneurs know very well who they are and can describe their behaviors
in concrete terms. They know their strengths and weaknesses. It is important
to take advantage of the valuable/useful personal characteristics. Take
advantage of the weakness by looking at them as opportunities and not
threats (SWOT Analysis).
What are your Strengths?
When you are patient or have a good smile, you can do very well in a
customer service-oriented business
What are your Weaknesses?
When you are rude or short tempered, and then you are better off
avoiding customer service-oriented businesses. When you decide to have one
then it is better to employ a person who is customer service oriented to cover
up your weakness.
Generating Ideas
The environment that we live in is full of opportunities that can be
translated into business ideas but many are never recognized and tapped.
Business ideas are usually picked from existing problems, unmet needs or
underutilized resources. It is important to scan the environment and spot the
opportunities that do exist and develop ideas to match it. Businesses that are
not open to new ideas usually die in their first two years of operation. The
need to change with the changing business environment is supreme.

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 Identifying business opportunities is not enough but a person with the
right characteristics to match the business opportunity is very important, that
is “A good person with a second class idea is better than a good idea with a
second class person.” That is the need to know your strengths and
weaknesses as discussed earlier in order to know what to do.
Creativity
Creativity is typically used to refer to the act of producing new ideas,
approaches or actions, while innovation is the process of both generating and
applying such creative ideas in some specific context.
Definitions of Creativity Are Typically Descriptive of Activity That
Results in
 Producing or bringing about something partly or wholly new;
 Investing an existing object with new properties or characteristics;
 Imagining new possibilities that were not conceived of before and;
 Seeing or performing something in a manner different from what
was thought possible or normal previously.
For example, Amabile et al.., (1996) suggest that while innovation
"begins with creative ideas,"
"...creativity by individuals and teams is a starting point for innovation;
the first is a necessary but not sufficient condition for the second”.
Creativity is a key to the development of both new and existing
businesses, especially for those who want to grow towards a profitable
business. Those people who are creative will be base what they come up
with on their resources and experiences.
Skills, Talents and Knowledge
Skills and talents are resources that one has and so they should be
exploited in starting and running a business. It is important to identify these
skills and talents that you have.
Another ways of identifying business ideas is by analyzing key
components like
Your Skills/Talents/Knowledge (skills mean Business)
Using your skills you can provide a service or make things (a product),
but think if the product or service will be used by another business or people
and ask yourself the following questions;

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 Which people/businesses will consume this service or product?
What services or products to offer?
A skill
This is defined as the great ability or expertise that comes from training
and practice. It mainly involves the use of hands or body. A skill is
something which someone is good at doing. For example: those good at
plaiting hair can set up hair saloons or those who are grafting skills can set
up a horticulture nursery.
A Talent
This defined as a superior, apparently natural ability in the arts or
sciences or in the learning or doing of anything. It is usually a natural
inclination for a particular work. For example a strongman can do good work
as a bouncer. If you can sing then you can become a musician and even start
your own Music band
Knowledge
This defines as expertise acquired by a person through experience or
education; the theoretical or practical understanding of a subject, and what is
known in a particular field or in total; facts and information. For example, a
doctor may set up a medical clinic or a trainer who shares information as a
business. If you know how to write a business plan, you can start a
consultancy firm specializing in writing business plans
 What skills do you have?
 What talents do you have?
 What knowledge do you know?
Problems (Problems Mean Opportunities)
When there is a problem usually one can solve it by creating a business,
for example traffic jams in Kampala lead to the introduction of boda-bodas
because they can move easily in the small spaces left by cars in the traffic
jam.
Qn. List of some common problems faced in the community and possible
solutions. (You can have more than two solutions for a single problem).
Problems /Possible Solutions/Opportunities
Resources (Things Can Make Money)
One can use the resources he/she has to develop a business idea. You

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can ask yourself the following questions about the resources that you do
have;
 Can other people use it differently?
 Can I package it differently?
 Can it be used as a substitute for?
 Can it be used to provide a service?
 Can it be used by altering the size, shape, and color?
 Can it be recycled or reused?
 Can it be used by combining with other things?
 Can its bits or parts be used?
Examples
Many people have land or by products of their business or old clothes in
their homes that they can use to start other businesses. Off cuts from
sweaters can be used as stuffing’s for cushions and pillows.
Needs (People want Things)
People Want Things all the Time. You Can get them (things) by
Producing Products or Offering a Service. That is
 People or interest group has needs that are not fulfilled.
 People want things/services but do not exist.
 Have seen things/services but can’t find it.
 The existing thing/services are out of date or style.
 The existing products are not easy to use.
 Quality may not good enough.
 What is existing may be too expensive.
Therefore, we should always be on a look out for business ideas and in
doing so we could involve our families, peers or workmates. The outcome
will always be ideas for a service or product business that you can think of.
These ideas can be a valuable basis for identifying new business
opportunities, and new and better ways of solving problems in existing
enterprises.
At the end of it all, ask yourself the Following Questions, Using your
Business Idea
 Does this idea match my strength?

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  Does this idea help me to meet my personal objectives?
 Which skills/talents/knowledge am I employing in this business
idea?
 Is there an under/not utilized resource that I am using to produce a
product?
 Which resources do I need to realize the business idea?
 What gap am I filling? Is it a need or problem?
 Are there people out there who will buy your product or pay for
your service?
The Entrepreneur
In starting and managing a business the entrepreneur is at the centre
stage. He/she can steer the business to success or failure.
The entrepreneur is the person who organizes runs and is responsible for
running a business, a person who has possession over a new enterprise or
venture and assumes full accountability for the inherent risks and the
outcome. Entrepreneur applies to someone who creates value by offering a
product or service. Entrepreneurs often have strong beliefs about a market
opportunity and organize their resources effectively to accomplish an
outcome that changes existing interactions.
Some observers see them as being willing to accept a high level of
personal, professional or financial risk to pursue that opportunity, but the
emerging evidence indicates they are more passionate experts than gamblers.
Being an Entrepreneur
Independence
Do not need to follow the orders of others. The customer is the boss, but
they decide themselves on how to act.
Pleasure – Happiness
If they manage to create a business in the area of hobby, interest or
knowledge, it is much more fun!
Economical Benefits
If the entrepreneur is successful, he will benefit personally. Can’t be
sacked! Most of the richest people in the world are entrepreneurs
Self Esteem
If you manage to be successful, you feel much better!

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Bankruptcy
Many small businesses become bankrupt and then you risk not only
losing your own money, but also others.
Difficulties
Entrepreneurs will face very high obstacles with pressure on friends and
family
Being Alone
When the entrepreneur is the only responsible actor behind the business
it can be very lonely.
Financial Insecurity
Variations in income – Based on the business, sometimes no money to
pay salaries.
Long Hours – Hard Work
In the beginning (or always) the entrepreneur will have to work long
hours to make ends meet.
The Entrepreneurial Process
 First an idea to fulfill a need.
 The idea is worked on.
 Idea converts into an business idea.
 The business idea is the ground for the venture.
 Then we need to plan ourselves to start the company – what to we
need to do?
 This plan is: the making of a business splan.
 The business plan touches upon almost everything considering the
business.
 Be realistic...
 What personal talent, skill, knowledge and experience is needed?
 Do I know where my strengths and weaknesses are – which will
affect my venture?
 Do you realize what sacrifications are needed and are you ready to
make these sacrifications?
 Why do we start companies?

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  To do something which is more fun?
 Use our talent, skills, expertise?
 Be independent?
 We want to grow ourselves and widen the horizon?
 We are idealistist? (make a better world)
 Of need?
 To make money?
Four Elements needed to get your Business Started
Boundary
 Creating a place for your business – in location and in people's
minds.
Resources
 The money, product, knowledge etc. that make up the business.
Intention
 The desire to start a business.
Exchange
 Moving resources/products/services in exchange for money.
The Next Step
Nowto Focus on these Aspects with the Business Plan
The business plan is our tool – model to get the best results
Life Expectancy of Firms
50%- within 2 yrs from the start
65%- within 5 yrs from the start
90%- within 10 yrs from the start
A Business Plan
A Business Plan is like a road map that helps individuals gain financial
and other support for their enterprise or project. A business plan also enables
Businessmen to handle the opportunities and obstacles they will inevitably
encounter as they move forward with their dream.
The Business Plan is a report that describes the firms abiltiy to sell
enough of the product/service so that the firm will show growth and profits.
Meet Joseph Mayanja, a young entrepreneur. He has a great idea for a

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new technology that he thinks will revolutionize the consumer goods
industry. To get the business off the ground, he knows he will need
investment capital.
Now meet Joyce Namusoke. She runs a successful business but wants to
apply for a loan so she can expand her enterprise.
Finally meet Antony Kirigwajjo, he has an idea for a new product line
and wants to get approval and funding from the firms Directors team to
develop the line.
Every Business- whether it’s a start-up company, an expansion of an
existing firm –a spin off from the parent company, or even a project within
an established organization-needs a business plan to navigate successfully
through its own unique competitive environment.
Preparing a business plan is time consuming process, as a well-
developed plan has numerous sections and comprehensive information. To
prepare a business plan for your own business or project, you will need to
think carefully about a number of key issues –such as who your customers
and competitors will be, how much money you will need to invest in the
business and what kind of payoff you have in mind.(to name just a few).
But all of this work is very worthwhile. Armed with a well-prepared
plan you stand a much better chance of obtaining the investment shillings
and other forms of support you will need to make your business succeed.
In summary; the purpose of the business plan preparation is to gather all
the information necessary to make a decision on whether or not to go into a
particular business or to expand an existing business.
A second purpose is to provide you with enough information to decide
how best to operate the business. Later in the strategy formulation phase, you
will decide how the business will be run (who will manage the business,
what prices will be charged, how much advertising will be used, etc). The
strategies that you decide upon in the second phase will, to a great extent, be
based upon the information that you gather and analyze it in this first phase.
The third purpose is to compile information which, although of little
concern to you, helps readers of your business plan better understand your
business. If, for instance, you intend to use your business plan to get a bank
loan, you may want to include a brief history of your business, a description
of your products and services, etc.
A business Plan Is Important Because
 It guides the owner in running the business.

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  It is a way of selling yourself and your business to possible partners.
 It shows that the business owner is organized and knows his or her
business.
 It provides information about the business and the market one is to
operate in.
A well-prepared business plan will increase your chances, of obtaining
financial assistance from financial institutions e.g. banks.
Contents of a Business Plan
1. Description of Business
This section of the Business Plan provides background and the
information on how your business was started and how it is presently doing
or, if a proposed business, how and when you plan to start it. The business
description delivers this content in a straightforward and informative
manner, but with an upbeat and inspiration tone. The purpose of the business
description is to objectively explain and justify your business idea in a
positive and enthusiastic manner.
What goes into the business descriptions?
Include Information about the Business, Such as
 What the history of the concept or the business is (is it on the
drawing board, at the start-up stage, ready to expand?)
 What markets the business will serve.
 What kind of business it is (manufacture, retailer, service business).
 What the product or service is.
 Why people will use it (what problem will the product or service
solve for customers?)
 What the financial status is.
You May Decide To Also Include the Following Information
 Who will manage the business (be sure to emphasize the skills and
experience of the management team, as readers familiar with the
industry will be most interested in the quality of the people on the
team).
 What the structure of the business is (partnership, corporation,
franchise).
 Where the business will be located.

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  Where will you locate your business?
The Location of your Business is a Very Important Decision. The Wrong
Location Could Jeopardize the Success of your Business. Points to
Consider are
 Do you need to be located close to customers, or are you able to
service your clients remotely via the telephone or over the Internet?
 Do you need to be located close to suppliers? I.e. consider the
delivery costs for raw materials and supplies.
What Features Must your Premises Have? i.e.
 Consider size, street frontage, show rooms, parking, loading bays,
and special facilities.
 Do you intend to lease or purchase your premises?
 Do you plan to operate your business from home?
A variety of factors will influence your selection of location and
premises. Ensure you make a wise decision, keeping in mind the costs and
inconvenience of relocating.
Tip: Be enthusiastic in your business description; this is the section in
which you present the value of your concept-why you believe the business
will be a resounding process.
Tip: In drafting the business description, balance your enthusiasm for
the venture with a measured acknowledgement of risks and costs involved.
1.1 Introduction
This is your first and perhaps easiest task in writing a Business Plan. In
this element of your Business Plan you are to introduce your company to the
reader and explain the purpose of your business plan. It should be used to
briefly familiarize the reader with who you are, what the goals of your
business are, and when these goals will be accomplished. If you are
presenting your plan to a banker, you may state how much you intend to
borrow, and what you intend to do with the funds.
The presentation of your plan is almost as important as its content,
particularly if you are going to present it to a bank. Even if it will never be
seen by anyone other than yourself, you should make it as neat and orderly
as possible, both as an exercise in good planning in it, and in order to make
easier to use.

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1.2 Business Vision
The best vision statements for result areas describe outcomes that are
five to ten years away, although some look even further out.
In general, you should base your vision statements on the best possible
outcome. In fact, you might want to envision something even better than
what you consider to be the best possible outcome. Remember that the
purpose of the vision statement is to inspire, energize, motivate, and
stimulate your creativity, not to serve as a measuring stick for success; that is
the job of your objectives and goals.
The quality of your vision determines the creativity, quality and
originality of your ideas and solutions. A powerful vision statement should
stretch expectations and aspirations helping you jump out of your comfort
zone.
Remember that the purpose of the vision statement is not to serve as a
"real" target that you are going to measure against to determine if you have
succeeded or failed. You should use your goals and objectives to do that.
Instead, the purpose of the vision statement is to open your eyes to what is
possible.
Describe your vision statement in present tense as if you were reporting
what you actually see, hear, think and feel after your ideal outcome was
realized.
Your vision statement should describe how you will feel when the
outcome is realized. Including an emotional payoff in your vision statement
infuses it with passion and will make it even more compelling, inspiring, and
energizing.
Examples of Vision Statements
"To be a leading entity to provide training, knowledge and consulting
services all over the world in the fields of self-development and human
resources development for individuals and business societies."
"Victor Valley High School is dedicated to providing the highest quality
educational program with the cornerstones of value learning, self-worth
among students and staff, quality performance among students and staff, and
transition for students to a productive and responsible participation in society
at large."
1.3 Business Mission
A paragraph that describes the firm’s goals and competitive advantage

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20-50 words, Keep it simple, clear and brief. The best mission statements
tend to be 3 to 5 sentences long. The mission statement should touch upon
what you want the company to focus on.
A mission Statement Summarises
 Company goals.
 Company added value.
 Company target markets.
A mission statement is unique to a company and it describes what a
company does.
Examples of Mission Statements
"To create a profitable restaurant with an exciting atmosphere, great
food, and excellent service where people truly enjoy coming to eat. To
provide a safe, healthy, and rewarding workplace for our employees."
"Growing from strength to strength, XYZ is dedicated to improving the
quality of life, making it better, safer and easier." -- Submitted by Shaniz
"To provide high quality products that combine performance with value
pricing, while establishing a successful relationship with our customers and
our suppliers”
1.4 Business Goals
From the beginning the business owner should work to create clearly
defined goals for his or her business plan. A goal is something that we want
to achieve. Goals ought to be
These goals begin at the top of the business and work their way down.
Some are longer than three years and others are shorter than one year.
Categorize the goals into long-term (More than 3 years), medium term
(between 1 to 3 years) and short time (less than one year). However,
categorization of the goals will also depend on the type of business.
Businesses are formed to achieve something. For a business to remain in
operation, it must have a goal. Goals are results to be achieved. Goals are
also called objectives or ends. You may need to gather more information
when setting them.
There are Questions You Need to Ask When Establishing Business
Goals
 What do I have to do to get where I want to be in 2 (5) years?

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  What are the necessary means for doing this?
 Who could help me in that?
 What obstacles will I possibly face, and how can I overcome them?
 Where do we want to go in terms of products, customers, profits,
return on investment?
 What changes do we have to make in each section of the business to
get us there?
It will also help you to think seriously about what you can do to reach
your objective of having a
Successful Business. Consider the Following Points That Relate to you
 Individual problems which interfere with the way to success - they
should be reduced!
 External obstacles that hinder your plans - they should be
overcome!
 Find some small and practical things that you can do over the
coming days to help you to reach your goals!
 Think about help you could get from other people (what, from
whom?).
 Try to divide your bigger goals into several smaller objectives.
Establish an order and priorities:
 What has to be done first to achieve the next goal?
 What would come next, and so on?
 When doing this you should think of a realistic time-frame, such as
the next six months. If you want, you may enlarge this period of
time.
All Objectives Should be Smart i.e. Specific, Measurable, Achievable,
Realistic, and Timed as Explained Below
Specific: Be precise about what you are going to achieve
Measurable: Quantify your objectives
Achievable: Are you attempting too much?
Realistic: Do you have the resource to make the objective happen (men,
money, Machines, materials, and minutes?)
Timed: State when you will achieve the objective (within a month? By
March 2012?)

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Example of Goals
 Start the business worth UGX 1,000,0000/= by November 2008
 Finish construction of the poultry house which can house 200 birds
by August 2008
 Stock 200 birds (layers) by November 2008
 Reduce production costs by 500,000 every year.
Importance of Goals in business
Goals focus the efforts of individuals in the business.
For Example
 “You cannot hit a target you can’t see!”
 “If you do not know where you are going, you will never know
when you get there.”
 Goals help in planning. We plan to achieve something.
 Goals encourage people to work
 Goals assist in watching and checking performance of workers and
the entire business
Questions That You Need to Answer after Writing down Your Goals
 Are the goals which you have put to your introduction clear and
unambiguous to you and to the outside reader?
 Do you understand them clearly?
 Will you be able to say when you have achieved them or are they
are vague and indeterminate?
 Do you know by when you aim to achieve them?
1.5 Important Contents
For an Existing Business, the Following Information Should Be Spelt
Out
 Name of Business
 Legal name and trade name, if any.
 Date and place of Registration or Incorporation, If any
 Date actual operations began or planned to begin.
Brief History
Discuss the type of business, the major events in the past operations and
discuss the results, mentioning sales history when pertinent.

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Legal Form of Organization
The Entrepreneur Has to Make a Choice When It Comes to Deciding
the Type of Business Organization, Which Includes the Following
 Sole proprietorship.
 Partnership.
 Private limited liability Company (by shares or guarantee).
 Franchise.
a) Sole Proprietorship
By definition, a single proprietorship is a business owned and operated
by one person. The owner and the business are synonymous in the eyes of
the law. All the assets in the firm are owned by the proprietor, subject only
to the liabilities incurred in its establishment and operation. The proprietor is
solely responsible for its debts, incurs and losses, assumes all its risks,
provides all its capital, and provides its total management. The only
requirement for its establishment is that the owner obtains any licenses
required in the city, town or local council.
Advantages of Sole Proprietorship
i) Simplicity of the organization.
ii) Owner’s freedom to make decisions.
iii) Owner’s enjoyment of all the profits.
iv) Minimum legal restrictions.
v) Ease of discontinuance.
vi) Tax advantages.
Disadvantages of Sole Proprietorship
i) Owner’s possible lack of ability and experience.
ii) Limited opportunity for employees.
iii) Difficulty in raising capital.
iv) Limited life of the firm.
v) Unlimited liability of proprietor.
Typical traders include tradesmen such as plumbers, electricians,
television repair people etc. Nowadays lots of people are setting up their own
businesses by creating small web-based companies working from home.

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b) Partnership
A partnership is usually defined as an association of two or more
persons to carry on as co-owners of a business for profit. Partnerships are
based upon a partnership agreement. The partnership agreement should
always be reduced to writing, even though this is not a legal requirement. It
should cover all areas of possible disagreement among the partners. It should
define authority and the rights and duties of each partner, and the limits to
such authority. It should include an agreement on how profits and losses are
to be divided.
Advantages of the Partnership
i) Ease of the organization.
ii) Combined talents, judgment and skills.
iii) Larger capital available to the firm.
iv) Maximization of the personal interest in the firm.
v) Definite legal status of the firm.
vi) Tax advantages.
Disadvantages of the Partnership
i) Unlimited liability.
ii) Limited life.
iii) Divided authority.
iv) Danger of disagreement.
Partnerships are typically found in professional services such as
accountants, solicitors, doctors, dentists etc. where the partners can share
expertise and skills. They can also share the workload; organizing work rotas
to allow for time off and holidays. Partners also pool their capital.
c) Private Company
A private company has a minimum number of two (2) shareholders
required and it limits the number of its members to 50 (employees are not
part of this number). Companies are owned by shareholders that each
contributes a stock of money into a central pool. This pool of capital is then
used to provide a core sum of finance, which is then added to by borrowing
and other forms of finance. Directors run the company on behalf of
shareholders who receive a share of the profits as dividends. Examples
include MTN, Airtel, Rwenzori beverages (makes of mineral water) among
others.

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Advantages of a Private Company
i) Limited liability to shareholders.
ii) Perpetual life (If all the shareholders died the business would go on
as a legal entity).
iii) Ease of transferring ownership.
iv) Ease of expansion.
v) Applicability to all sizes of firms.
Disadvantages of a Private Company
i) Government regulations.
ii) Expense of organization.
iii) Pay corporate tax (this is higher).
1.6 Product Description
The product description is the detailed description of the product/service
that you intend to market. It offers a thorough and straightforward
description of the products or services the business will provide to
customers. For example, include product characteristics such as
functionality, design, styles, and colors.
The product/service description should be complete enough to with a
clear idea of your products/services, if the product is unusual or not easily
described, include a picture or a drawing which will highlight the offerings
special features and unique points of differentiation. If a range of products or
services are being offered, highlight the principal one or two and list the rest
of the range here and/or put the full product/service range in an appendix. As
much as possible, describe the product or service from the customer's
perspective.
The description should tell what makes your company's product or
service different or unique in the marketplace. More detail on this will be
provided in the competitor analysis section, but a brief highlighting of
product distinctions and key selling attributes this will help one to
understand the product or service better.
After describing the product or service, state what benefits the customer
will receive from purchasing the product or service (e.g., what problem is
being solved). This will most likely further explain the value proposition
statement defined earlier.
Under the product description stress your USP - be sure to emphasize
your USP - Unique Selling Proposition. Your USP is the proprietary

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information that sets your product or service apart from your competition. If
you are using your business plan to solicit funds, this is what your financiers
will want to see. If it is an internal document, your USP will be critical to
your sales and marketing strategies. Without a USP, your product or service
will appear drab and there will be no compelling reason for people to buy it.
What would some USPs be? For a food product, it could be a
proprietary recipe (like Nalongo’s steamed food in Katwe) or a special way
the food is served (like the Mongolian food).
Tips
Focus on your success factors. In other words, think about how you are
going to make money. Why will your products or services be successful in
the marketplace? There are many numbers of reasons you can use - it's a
well-organized business, we use state-of-the-art equipment, our location is
exceptional, the market is ready for our product, it’s a great product at a fair
price, etc.
If you are selling a product, you may want to include full specifications.
If available, include a quality photograph as well.
One of your challenges will be to keep the "unique" in your USP
Example of a Product Description
Pap Café provides its customers, whether at its facility on Parliament
Avenue or one of the Mobile Cafes, the ability to custom order a coffee
beverage that will be blended to their exact specifications. Each of Pap’s
Baristas (a person who has acquired some level of expertise in the
preparation of espresso-based coffee drinks) will be trained in the fine art of
brewing, blending, and serving the highest quality hot and cold beverages,
with exceptional attention to detail.
Besides coffees, Pap Café will offer teas, domestic and Italian sodas,
frozen coffee beverages, seasonal specialty drinks, cakes, pastries and other
baked goods. Through the website and certain locations, Pap Café will
market premium items such as coffee mugs, T-shirts and sweatshirts, ball
caps, and more.
Format/Contents of A Business Plan
Executive Summary
 Purpose of the Plan.
 Finance Required for Starting Up the Business.

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  Brief Description of the Business.
 Nature of Business.
 Background of the Business.
The Company and Industry Overview
 Introduction.
 Vision.
 Mission Statement.
 Purpose of the Business.
 Core Values.
 Corporate Goals.
 Enterprise Objectives.
 Short Term Objectives.
 Medium Term Objectives.
 Long Term Objectives.
Product or Service
Product Feature
 Use of Service or Product.
 Product Benefits.
 Uniqueness of Product or Service.
 Development Stage.
 Skills and Technologies Required In the Business.
Marketing Plan
 Marketing Strategy.
 Product.
 Promotion.
 Pricing Strategy.
 Place/Distribution
 Market and Industry Analysis.
 Situation Analysis.
 SWOT Analysis.
 PEST Analysis.
 Competitive Analysis.

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  Competitors Strengths and Weaknesses.
 Market Size and Growth
 Market Share Estimate
 Special Market Characteristics
Operational Plan
 The Operations Process.
 Building and Equipment.
 Location of the Business.
 Facilities.
Management Plan
 Human Resource Strategy.
 Recruitment.
 Selection.
 Management Performance.
 Reward and Compensation.
 Owners/Directors/Managers.
 Skills, Experience and Qualification.
 Amount Expected to Be Paid to Each Worker.
 Training Policy
Financial Plan
 Finance Required to Start-up the Business.
 Financial Planning.
 Financing.
 Projected Sources of Expenses.
 Income Statement Projections.
 Balance Sheet Projections.
 Ratio Analysis.
 Cash Flow Projections.
 Monitoring Standards.
 Control Measures.
Appendices
 Charts

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 Chapter - 9
Entrepreneurship Development

Entrepreneurship Development is a deliberate Endeavour in human resource

development, which is usually undertaken by the state or a community with
the major aims of: Developing competence among participants to start,
manager and develop enterprises and developing greater understanding of
entrepreneurship, as a means of providing an enabling environment for
entrepreneurship, as a means of providing an enabling environment for
entrepreneurs to thrive.
The Need for Entrepreneurship Development
Over the past few decades, entrepreneurship, has gained amazing
popularity not only in Uganda but also in the wider world. This is as a result
of the significant changes in the workplace and the social and political
environments that are funning the growth of entrepreneurship worldwide.
These factors include:
Technological advancements that have compressed technological
processes and enabled many things to be made/and services to be delivered
at a fraction of the original cost.
Entrepreneurial Education: Since the 1980s, the countries that have
invested in teaching entrepreneurship have harvested a rich crop of high
caliber entrepreneurs.
Downsizing – as big corporation reengineer their operations and
retrench unwanted staff, they have ended up releasing a number of qualified
and well-connected individual who have joined the entrepreneurial class.
Downsizing has also removed the myth of lifelong employment and
awakened people to the promise of entrepreneurship “Sometimes as a
fallback position. Downsizing has also made corporations to outsource non
core activities providing opportunities for entrepreneurs.
More sophisticated customers demanding higher quality and more
personalized goods and services have opened up interesting and profitable
for entrepreneurs to tap.

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 Easier access to information, through vast communication networks like
the ‘worldwide web’, have enabled entrepreneurs to access a large number of
potential suppliers and customers quickly and at minimal cost.
Liberalization and globalization has enabled small entrepreneur firms to
access international markets without the threat of protectionism and other
trade barriers.
A shift to shift to service sector: As economies shift to the service sector
that requires personalized attention, smaller companies are able to create
profitable niches to compete with larger established firms.
Threats of Entrepreneurship/Barriers
Entrepreneurship, as a career, also possess many serious challenges,
which anyone hoping to take up a career in entrepreneurship should be aware
of in order to plan for them. The challenges include:
Uncertainty of Income: In most cases the initial stages of the
entrepreneurial career are filled with uncertainty, and many entrepreneurs
will not have enough money even for their basic survival. There is no regular
income, and many entrepreneurs are forced to draw from their savings. This
is the most trying stage of any entrepreneur.
Risk of Losing the Entire Investment: Business failure is a reality that
threatens entrepreneurs at all level, but most especially the new enterprises.
Business failure will result not only in the loss of a job, but also the entire
investment and sometimes the entire livelihood. This threat becomes even
greater for entrepreneurs who mortgage all their savings and assets to
finance their enterprises.
Long Hours of Hard and Challenging Work: Without adequate
support structures and resources, entrepreneurs have no option but to engage
their own mental and physical energies to move their investments especially
during the early stages. Hard work and long hours is therefore a reality of
many an entrepreneurship career.
High Levels of Stress: The pressure of hard-long hours of work and the
uncertainties associated with entrepreneurship result in highly stressful life
styles for entrepreneurs. Most entrepreneurs put significant investments in
their enterprises, have no steady incomes, have mortgaged everything to
finance their businesses, and the line between their success and their failure
is every thin; causing enormous anxiety and stresses to the entrepreneur.
High Levels of Responsibility: Entrepreneurship brings the thrills of
being the boss, but also the responsibility for decisions that not only affect

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the entrepreneurs and their families, but also the livelihood of employees,
suppliers and other stakeholders who somehow depend on the firm for their
own survival.
The process of Entrepreneurship Development
Entrepreneurship Development presupposes that although certain
characteristics are inborn, the bulk of entrepreneurial characteristics can be
developed through:
Acquired Factors: Individual personal effort through formal education,
work experiences, acquired technical skills and exposure.
Societal Influences: (or sociological factors) including imitating role
models, peer influence, cultural and religious beliefs and norms.
The Entrepreneurial Process
The process of starting a new venture is embodied in the entrepreneurial
process, which involves more than just problem solving in a typical
management position. An entrepreneur must find, evaluate, and develop an
opportunity by overcoming the forces that resist the creation of something
new. The process has four distinct phases: (1) identification and evaluation
of the opportunity, (2) development of the business plan, (3) determination
of the required resources, and (4) management of the resulting enterprise.
Although these phases proceed progressively, no one stage is dealt with in
isolation or is totally completed before work on other phases occurs.
For example, to successfully identify and evaluate an opportunity (phase
1), an entrepreneur must have in mind the type of business desired (phase 4).
Identify and Evaluate the Opportunity
Opportunity identification and evaluation is a very difficult task. Most
good business opportunities do not suddenly appear, but rather result from an
entrepreneur’s alertness to possibilities, or in some case, the establishment of
mechanisms that identify potential opportunities. For example, one
entrepreneur asks at every cocktail party whether anyone is using a product
that does not adequately fulfill its intended purpose. This person is
constantly looking for a need and an opportunity to create a better product.
Another entrepreneur always monitors the play habits and toys of her nieces
and nephews. This is her way of looking for any unique toy product niche
for a new venture.
Although most entrepreneurs do not have formal mechanisms or
identifying business opportunities, some sources are often fruitful:

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consumers and business associates, members of the distribution system and
technical people. Often, consumers are the best source of ideas for a new
venture. How many times have you heard someone comment, “If only there
was a product? That would…” This comment can result in the creation of
new business. One entrepreneur’s evaluation of why so many business
executives were complaining about the lack of good technical writing and
word-processing services resulted in the creation of her own business
venture to fill this need. Her technical writing service grew to 10 employees
in two years.
Due to their close contact with the end user, channel members in the
distribution system also see product needs. One entrepreneur started a
college bookstore after haring all the students complain about the high cost
of books and the lack of service provided by the only bookstore on campus.
Many other entrepreneurs have identified business opportunities through a
discussion with a retailer, wholesaler, or manufacturer’s representative.
Finally, technically oriented individuals often conceptualize business
opportunities when working on other projects. One entrepreneur’s business
resulted from seeing the application of a plastic resin compound in
developing and manufacturing a new type of pallet while developing the
resin application in another totally unrelated area—casket moldings.
Whether the opportunity is identified by using input from consumers,
business associates, channel members, or technical people, each opportunity
must be carefully screened and evaluated. This evaluation of the opportunity
is perhaps the most critical element of the entrepreneurial process, as it
allows the entrepreneur to assess whether the specific product or service has
the returns needed compared to the resources required. This evaluation
process involves looking at the length of the opportunity, its real and
perceived value, its risks and returns, its fit with the personal skills and goals
of the entrepreneur, and its uniqueness or differential advantage in its
competitive environment.
The market size and the length of the window of opportunity are the
primary basis for determining the risks and rewards. These risks reflect the
market, competition, technology, and amount of capital involved. The
amount of capital needed provides the basis for the return and rewards. The
methodology for evaluating risks and rewards frequently indicates that an
opportunity offers neither a financial nor a personal reward commensurate
with the risks involved. One company that delivered bark mulch to
residential and commercial users for decoration around the base of trees and
shrubs added loam and shells to its product line. These products were sold to

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the same customer base using the same distribution (delivery) system.
Follow-on products are important for a company expanding or
diversifying in a particular channel. A distribution channel member such as
Kmart, Service Merchandise, or Target prefers to do business with multi-
product, rather than single-product, firms.
Finally, the opportunity must fit the personal skills and goals of the
entrepreneur. It is particularly important that the entrepreneur be able to put
forth the necessary time and effort required to make the venture succeed.
Although many entrepreneurs feel that the desire can be developed along the
venture, typically it does not materialize. An entrepreneur must believe in
the opportunity so much that he or she will make the necessary sacrifices to
develop the opportunity and manage the resulting organization.
Opportunity analysis, or what is frequently called an opportunity
assessment plan, is one method for evaluating an opportunity. It is not a
business plan. Compared to a business plan, it should be shorter; focus on
the opportunity, not the entire venture; and provide the basis for making the
decision of whether or not to act on the opportunity.
An opportunity assessment plan includes the following: a description of
the product or service, an assessment of the opportunity, an assessment of
the entrepreneur and the team, specifications of all the activities and
resources needed to translate the opportunity into a viable business venture
and the source of capital to finance the initial venture as well as its growth.
The assessment of the opportunity requires answering the following
questions:
 What market need does it fill?
 What personal observations have you experienced or recorded with
regard to that market need?
 What social condition underlies this market need?
 What market research data can be marshaled to describe this market
need?
 What patents might be available to fulfill this need?
 What competition exists in this market?
 How would you describe the behavior of this competition?
 What does the international market look like?
 What does the international competition look like?

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  Where is the money to be made in this activity?
Developing a Business Plan
A good business plan must be developed in order to exploit the defined
opportunity. This is a very time-consuming phase of the entrepreneurial
process. An entrepreneur usually has not prepared a business plan before and
does not have the resources available to do a good job. A good business plan
is essential to developing the opportunity and determining the resources
required, obtaining those resources, and successfully managing the resulting
venture.
Determine the Resources Required
The resources needed for addressing the opportunity must also be
determined. This process starts with an appraisal of the entrepreneur’s
present resources. Any resources that are in critical need to be differentiated
from those that are just helpful. Care must be taken not to underestimate the
amount of variety of resources needed. The downside risks associated with
insufficient or inappropriate resources should also be assessed.
Acquiring the needed resources, in a timely manner while giving up as
little control as possible is the next step in the entrepreneurial process. An
entrepreneur should strive to maintain as large an ownership position as
possible, particularly in the start-up stage. As the business develops, more
funds will probably be needed to finance the growth of the venture, requiring
more ownership to be relinquished. Alternative suppliers of these resources,
along with their needs and desires need to be identified. By understanding
resource supplier needs, the entrepreneur can structure a deal that enables the
recourses to be acquired at the lowest possible cost and the least loss of
control.
Manage the Enterprise
After resources are acquired, the entrepreneur must use them to
implement the business plan.
The operational problems of the growing enterprise must also be
examined. This involves implementing a management style and structure, as
well as determining the key variables for success. A control system must be
established, so that any problem areas can be quickly identified and resolved.
Some entrepreneurs have difficulty managing and growing the venture they
created.

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