University of Mines and Technology-

Tarkwa
 Lecture One: Entrepreneurship and small
1
business
OUTLINE
 The Evolution of Entrepreneur and Entrepreneurship
 Definitions of Entrepreneurship and Entrepreneur
 Types of Entrepreneurs
 Reasons Why People Become Entrepreneurs
 Definition of Personality
 Characteristics of Entrepreneur
 Functions of an Entrepreneur
 Types of Entrepreneur
 The entrepreneur’s Role in Business
 Intrapreneurship and Intrapreneur
 Entrepreneurship and the Environment
 Advantages and Disadvantages of Entrepreneurship
 The Role of Small Business in Economic Development
 Evolution of Entrepreneur and Entrepreneurship
2

 The word ‘entrepreneur’ is derived from the French word ‘entreprendre’ which means ‘to undertake’.

 EARLY PERIOD: The earliest notion of an entrepreneur as an intermediary dates back to Marco Polo.
He sought to establish trade routes to the Far East and would enter into contracts with venture
capitalists to sell his goods. The venture capitalist assumed the risk, while the merchant adventurer
managed the trading. After successfully selling the goods and completing his trips, the profits were
shared by the capitalist and the merchant.

 MIDDLE AGES: The term entrepreneur referred to a person who was managing large projects. He did
not take any risk but managed the projects using the resources provided. These projects were often
commissioned by wealthy individuals, noble families or even the church.
• An example is the cleric who was in charge of great architectural works such as castles, public
buildings, and cathedrals.

 17th CENTURY: In the 17th century, an entrepreneur was defined as an individual who engaged in
contractual agreements with governments to provide specified services or goods. In these agreement,
the entrepreneur assumed the responsibility of bearing any financial risks associated with their
ventures, thereby either reaping profits or bearing losses.
 Evolution of Entrepreneur and Entrepreneurship
cont’d 3

 18th CENTURY: In the 18th century, Richard Cantillon, a notable French economist, is credited with applying the
term "entrepreneur" to business and is often regarded as its founder. Cantillon's definition of an entrepreneur
emphasized the core aspect of uncertainty in their activities.
• According to Cantillon, an entrepreneur is an individual who purchases factor services, such as labor and capital, at
certain prices with the intention of selling the resulting goods or services at uncertain prices in the future. The key
distinction in Cantillon's definition lies in the element of risk and uncertainty associated with entrepreneurial
endeavors.
• By emphasizing the uncertain nature of entrepreneurial activities, Cantillon's definition highlighted the unique role of
entrepreneurs as risk-takers and opportunity-seekers.
 19th CENTURY: During the 19th century, the roles of entrepreneurs and managers were not clearly distinguished,
as they were primarily perceived from an economic perspective. An entrepreneur was seen as an individual who
willingly assumed risks and utilized their own initiative and skills to establish and operate a business venture. They
were responsible for planning, organizing, and leading their enterprise, taking on the primary decision-making and
strategic responsibilities.
 Evolution of Entrepreneur and Entrepreneurship cont’d 4

 20th CENTURY: In the early 20th century, there was a shift in the perception of entrepreneurs, particularly influenced by the work
of economist David Dewing. During this period, Dewing equated the role of the entrepreneur with that of a business promoter.
According to Dewing's perspective, a promoter was an individual who played a crucial role in taking innovative ideas and
transforming them into viable and profitable businesses.
• However, Joseph Schumpeter provided a different perspective, describing an entrepreneur as an innovator who pioneers
untested technologies and introduces new products or methods to the market.
• This expanded view of the entrepreneur in the early 20th century highlights the importance of their ability to transform ideas into
profitable ventures, emphasizing their role as innovators, organizers, and promoters of business opportunities.
 21st CENTURY: This era is characterised by globalisation and digital age. With the advent of the internet and digital
technologies, barriers to entry have significantly decreased, enabling individuals from around the world to embark on
entrepreneurial journeys.
• E-commerce, social media, and digital marketing have emerged as critical tools for modern entrepreneurs, revolutionizing the
way businesses operate and reach their target audience.
• Modern entrepreneurs are often seen as visionaries who identify and exploit new opportunities. Prominent examples of such
modern entrepreneurs include Elon Musk, known for his ventures like Tesla and SpaceX, Jeff Bezos, the founder of Amazon, and
Mark Zuckerberg, who co-founded Facebook.
 Definition of Entrepreneur and Entrepreneurship 5
The term entrepreneur is used in various ways and various views. These views are broadly classified into three
groups, namely risk bearer, organizer and innovator.

 Entrepreneur as Risk Bearer: According to Richard Cantillon, the entrepreneur as a risk bearer is an agent who
buys factors of production at certain prices in order to combine them into a product with the of selling it at uncertain
prices in the future.
• This viewpoint emphasizes the entrepreneur's role in taking on the uncertainties and risks associated with investing
in and operating a business.

 Entrepreneur as an Organizer: The entrepreneur as an organizer, as described by Jean-Baptiste Say, is someone

who brings together land, labor, and capital from different sources to produce a marketable product.
• By selling the product, the entrepreneur pays rent for the use of land, wages to laborers, and interest on capital,
with the remaining amount being their profit.
• This perspective highlights the entrepreneur's role in coordinating and organizing various resources to create value.

 Entrepreneur as an Innovator: Joseph A. Schumpeter introduced the concept of the entrepreneur as an innovator.
According to Schumpeter, entrepreneurs play a crucial role in driving economic development through dynamic
changes and innovations.

 Hence, an entrepreneur can be defined as a person who tries to create something new, organizes production,
undertakes risks, and handles economic uncertainty associated with running the business enterprise.
 Definition of Entrepreneur and Entrepreneurship cont’d 6

The term "entrepreneur" can be viewed from two distinct perspectives: that of an economist and that of a
psychologist.

From an economist's perspective, an entrepreneur is someone who combines resources, labor, materials,
and other assets in ways that increase their collective value. This individual is also an agent of change,
introducing innovations and new methods that drive economic progress.

From a psychologist's perspective, an entrepreneur is driven by intrinsic motivations, such as the need to
achieve, experiment, accomplish goals, or perhaps to escape the authority and constraints imposed by
others. This drive propels them to undertake the challenges and uncertainties associated with
entrepreneurial ventures.

 Entrepreneurship
Entrepreneurship is the practice of starting new organizations or revitalizing mature organizations,
particularly new businesses generally in response to identified opportunities.

In general, entrepreneur refers to the person and entrepreneurship defines the process.
 Reasons why people become entrepreneurs 7

People become entrepreneurs and start their firms for various reasons, but three primary motivations often
stand out:

 Being one’s own boss (Independence and Autonomy): Many people are driven by a strong desire to be
their own boss, make their own decisions, and control their professional lives. Thisanalysis
General dominance sense of freedom and
self-reliance can be gratifying and serve as a source of motivation for many individuals.

 To pursue their ideas (passion). Many individuals have a strong desire to work in fields they are
genuinely passionate about, and starting their firm gives them the chance to align their work with their
interests. TSLS was employed to resolve endogeneity issue
associated with the link between DFI, FL and DL
 Financial rewards. Entrepreneurship offers the potential for financial success and wealth creation. By
running their own firms, entrepreneurs have the opportunity to create value, generate profits, and build
personal wealth.
Instrumental variable quintile regression
 Entrepreneurial Personality 8

 Personality is defined as the characteristics of an individual that cause consistent patterns in that individual’s
behaviour over time.

 Personality is discussed in terms of traits.

 A trait is a characteristic, usually expressed as a dimension on which a person can be measured

 Personality trait therefore, refers to relatively enduring characteristics inside the individual that are likely to
predispose that individual of particular beliefs, attitudes and behaviour.

Characteristics of Entrepreneur
In order to be successful, an entrepreneur should have the following qualities:
 Opportunity-seeking
 Risk Taking
 Planning
 Goal Setting
 Persuasion
 Persevering
 Problem-solving
 Self-confidence
 Functions of an entrepreneur 9

 Idea Generation: Idea generation involves the entrepreneur's ability to come up with innovative and creative
business concepts. This process may involve brainstorming, market research, trend analysis, and personal
experiences to spark innovative ideas for potential business ventures.
 Determination of Business Objectives: Once the entrepreneur has generated an idea, they need to establish clear
and specific business objectives. These objectives define the direction and purpose of the venture.
 Raising of Funds: All the activities of the business depend upon the finance and hence fund raising is an important
function of an Entrepreneur
• An Entrepreneur can raise funds from internal sources as well as external sources.
• He should also have complete knowledge of government-sponsored schemes like MASLOC, Youstart, NEIP in
which he can get government assistance in the form of seed capital, fixed and working capital for his business.
 Recruitment of Manpower: Entrepreneurs are responsible for identifying the required skills, competencies, and
experiences needed for their business and recruiting suitable personnel.
• This function involves selecting and hiring individuals who align with the company's values and can contribute to
achieving its objectives.
 Functions and types of entrepreneurs 10

 Implementation of the Project: Once the necessary resources, including funds and manpower, are in place,
entrepreneurs must execute their business plans effectively.
• This function involves taking concrete steps to transform ideas into reality.
• Successful implementation requires strong leadership, effective decision-making, and the ability to adapt to
changing circumstances.
Types of Entrepreneurs
Today various types of Entrepreneurs are found engaged in different types of activities, not only in industrial activities
but also in agriculture and commercial activities. Entrepreneurs are classified in a number of ways as discussed below.
A. According to the Type of Business
o Business entrepreneur: discovers an idea to start a business and then builds a business to give birth to his idea.
o Industrial entrepreneur: undertakes manufacturing activities.
o Corporate entrepreneur: also known as an intrapreneur is an employee within a larger organization who identifies
opportunities for innovation and growth within the company and takes initiative to develop new products, services,
or processes.
o Trading Entrepreneur: engages in buying and selling of goods.
o Agricultural entrepreneur: Also known as agripreneur involved in agricultural activities such as raising and marketing
of crops, fertilizers, and other inputs of agriculture
 Types of entrepreneurs 11

B. According to the use of technology

o Technical entrepreneurs: They are extremely task-oriented. They are of craftsman type. They develop new and
improved quality goods because of their craftsmanship.

o Non-technical entrepreneurs: They lack specialized technical skills but possess other valuable qualities or
expertise that contribute to their entrepreneurial success. Thus, they are not concerned with the technical aspects
of the product. They develop marketing techniques and distribution strategies to promote their business.

o Professional entrepreneurs: they leverage their expertise gained from a specific profession to start and grow a
business. This type of entrepreneur often comes from fields such as law, medicine, accounting, or consulting

C. According to Motivation
o Pure entrepreneurs: Driven by innovation and a strong entrepreneurial spirit, they create and grow businesses
from their vision and innate qualities

o Induced entrepreneurs: Start businesses due to external influences or incentives, such as government support or
market conditions.

o Motivated entrepreneurs: Driven by specific motivations like personal achievement, financial gain, or solving a
specific problem.
o Spontaneous entrepreneurs: Act on sudden inspiration or opportunity, often without extensive planning, relying on
their intuition and adaptability
 Types of entrepreneurs 12

D. Classification by Clarence H. Danhof

Clarence H. Danhof's classification of entrepreneurs is a widely recognized framework that categorizes entrepreneurs
based on their roles, behaviors, and attitudes toward innovation and risk. Danhof identified four distinct types of
entrepreneurs:
o Innovative entrepreneurs: They are characterized by their ability to innovate and bring new ideas, products, or
processes to the market
o Adoptive/imitative entrepreneurs: they adapt and improve upon existing innovations.
o Fabian entrepreneurs: Exhibit caution and hesitation towards new changes.
o Drone entrepreneurs: Resist changes and prefer to stick to their traditional methods of business operations.

E. According to Entrepreneurial Activity

Based on entrepreneurial activity, entrepreneurs are classified as:
o Novice Entrepreneur: A novice entrepreneur is someone who is new to entrepreneurship and typically starting
their first business venture.
o Serial Entrepreneur: A serial entrepreneur is an individual who continuously comes up with new ideas and starts
multiple businesses over time.
o Portfolio Entrepreneur: Also known as parallel entrepreneur manages several businesses simultaneously, rather
than starting one business, selling it, and then moving on to the next. These entrepreneurs diversify their risk by
investing in and running multiple businesses at the same time.
F. Classification Based on the Scale of Enterprise
o Small Scale
o Large scale
 Distinction between Entrepreneur and Manager 13

 Entrepreneurs are creators and innovators who start and own businesses, take significant risks, and focus on growth
and strategic direction. Managers on the other hand are responsible for the operational execution of a business,
focusing on efficiency, stability, and performance within an established framework.

 The Entrepreneur’s Role in Business

 The entrepreneur combines economic factors such as capital, material, labour, and resources to create or add value
to a product or service for consumers.
 Entrepreneurs enhance economic efficiency by providing competitive pressures on established players in a market.
 The entrepreneur accepts uncertainty by taking risks and managing risk situations.
 Entrepreneurs maximize investors’ returns and thereby emphasizing the importance of firm’s stakeholders.
 Entrepreneur processing market information by analyzing and synthesizing them in order to exploit the opportunity
identified on the market.
 Entrepreneurship and the Environment 13

The level of entrepreneurial activity in any economy is determined by a number of environmental factors. These factors
are:
 The Economic Environment
 The economic environment covers factors such as population, interest rates and inflation that influence business activities. For
example, as the number of people in an economy grows, the population’s carrying capacity for new organizations is increased.
Consequently there are more opportunities for new ventures.
 Monetary policies also affect interest rates and exchange rates. If interest rates are high it means it is expensive to borrow money,
this increases cost of production.
 In addition, the general state of the economy also affects prices of resources and demand for goods and services. If the economy
is in a recession demand for goods and services are low because people do not have the money to buy things.

 Technological Environment
 The rate of technological development in an economy is another dimension of the environment which affects business operations.
 Technological development and infrastructure also influence communication, transportation and production processes.
 It affects the quality of raw materials, employee productivity, consumer needs and tastes.
 Entrepreneurship and the Environment cont’d 13

 Political Environment
 The political climate in any country affects entrepreneurship.
 If the government is unstable or corrupt entrepreneurship will be discouraged because business owners cannot be certain whether
they will be allowed to access any rewards they accumulate from their efforts and whether they can obtain returns that are
commensurate to the risks they take.
 Entrepreneurs prefer free market economies with democratic governments and freedom of choice. Such environments ensure
efficient allocation of resources and create opportunities.

 Legal Environment
 The ease and cost of forming a business entity, such as a corporation, limited liability company (LLC), or partnership, can
significantly impact entrepreneurial activity. Favorable incorporation laws can encourage more startups.
 Efficient and fair dispute resolution mechanisms, such as courts and arbitration, are essential for resolving business conflicts
without excessive time and cost.
 In general, the legal system minimizes distortions to the free market system and encourages entrepreneurs to respond to
opportunities.
 A poor legal system breeds corruption, distorts operation of the free market and prevents efficient allocation of resources.
 Entrepreneurship and the Environment cont’d 13

 Socio-cultural Environment
 Cultural values and norms shape consumer preferences and behaviors, influencing the types of products and services that are in
demand. Entrepreneurs must understand these cultural nuances to tailor their offerings effectively.
 Religious beliefs and practices can influence business operations, including the types of businesses that are considered acceptable
and the ethical standards they must adhere to.
 Social support systems and networks such as friends, family, and business support groups promote entrepreneurship.

 Competitive Environments: Refers to the level of competition in the industry in which the firm operates. It also comprises
a number of components.
 The first is the intensity of competition within the industry.
 Competition may be monopolistic (no competitors) or perfect (all industry participants compete directly against each other).
 In most cases businesses are able to differentiate their products from those of their competitors and are therefore able to enjoy
some degree of monopoly. In other words most industries have monopolistic competition.

 The second component of the competitive environment is the ease with which firms can enter the industry.
 Prospective businesses may be deterred from joining the industry where there are significant entry barriers such as large capital
requirements, requirements of specific skills and knowledge, patented products, regulatory policies and economies scale.
 Entrepreneurship and the Environment cont’d 13

 The availability of substitute products is the third component of the competitive environment.
 If there are close substitutes to a product this will limit the price a firm can charge for the products.
 Consumers will switch to the new product if the price is low enough to enable them to recoup the cost of
switching.
 This means if there a close substitutes profit margins are likely to be low in the industry.
 Advantages and Disadvantages of Entrepreneurship 13

 Advantages
 Develop new markets
 Discover new sources of materials
 Mobilize capital resources
 Introduce new technologies, new industries and new products.
 Create employment.

 Disadvantages
 Work schedule
 Long hours of work
 Complete responsibility
 Discouragement
 The role of small business in economic development 13

• Small businesses enable individuals to develop entrepreneurial and managerial skills that are needed as a
foundation for local investment and sustained industrialization.
• The indigenous technology employed by these businesses is more likely to use local raw materials and equipment,
thereby saving foreign exchange which might otherwise be spent on imports.
• In Ghana, small businesses are major sources of employment, income, and personal development for the rural and
urban poor and for women due to their labour-intensive methods of operation.
• Largely resource-based, small businesses in Ghana contribute to forward and backward linkages between
agriculture and industry on the one hand and between different sub-sectors of industry on the other.
• Small businesses contribute to government revenue through taxes.
• Small firms encourage rural-urban linkages in that some of the raw materials and finished goods they produce are
consumed by the rural and urban sectors and vice versa.
• Small businesses make more efficient use of scarce factors of production than large-scale businesses because they
are usually labour intensive, with only small capital investments.
THANK YOU
 Lecture 2: STARTING OR BUYING A SMALL BUSINESS 13

 Reasons for starting up a new business

The reasons for entrepreneurs starting up new business are a lot. A research by Birley and Westhead
(1994) reported seven components of new venture motivation:
 The need for approval,
 The need for independence,
 The need for personal development,
 Welfare (philanthropic) considerations,
 Perception of wealth,
 Tax reduction and indirect benefits, and
 Following role models.

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 Advantages and Disadvantages of starting your own small business
14

 Advantages
• Creation of the owners.
• Control of the owners.
• Satisfaction of the owners.
• Clean Sheet.
• Help from various agencies
• Match between founder and enterprise.
• Less funds required.

 Disadvantages
• Unproven idea.
• High failure rate.
• No market share or good will.
• Hard, lonely work.
• Barriers to entry.
• No track record.
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• Difficult to finance.
 Finding a Sound Idea for a Business
15
 As revealed in the stories of majority of entrepreneurs across the globe, there are a number of sources of ideas
available. Some of the more useful sources, as summarized by Hisrich and Peters (1991), are highlighted as below
o Consumers
o Existing Companies
o Distribution Channel
o Government Agencies
o Research and Development

 Methods for Generating Ideas

There are several methods that the entrepreneur can use to help generate and test ideas, including;

 Focus groups
• Involve gathering a small group of individuals who represent the target market or customer segment to discuss a product, service, or concept in detail
• The discussion is usually guided by a moderator who prompts the group with questions to elicit in-depth responses and interactions.
• The participants share their thoughts, preferences, and experiences related to the product or service being considered.
• Focus groups help entrepreneurs understand consumer perceptions, attitudes, and reactions to a potential idea.
• By analyzing the group's responses, entrepreneurs can refine their ideas and align them with customer expectations.

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 Methods for Generating Ideas cont’d
15

 Brainstorming:
• Brainstorming is a creative thinking process where a group of people comes together to generate a wide range of ideas and
solutions.
• Participants are encouraged to think freely and suggest any idea that comes to mind, no matter how unconventional or outlandish it
may seem.
• The goal is to create an open environment that fosters creativity and collaboration, allowing participants to build on each other's
ideas.
• After generating a list of ideas, the group can then evaluate and refine them to identify the most promising options.

 Problem inventory analysis:

• Involves systematically identifying and analyzing existing problems or unmet needs in a particular market or industry.
• The entrepreneur conducts research, surveys, or interviews to understand the challenges faced by customers or businesses within
the target market.
• By compiling a comprehensive inventory of problems, the entrepreneur can identify patterns, trends, and recurring issues.

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 NEW BUSINESS ASSESSMENT 16

As ideas develop into new-venture start-ups, the real challenge is for those firms to survive and grow. To achieve this,
there is the need for the entrepreneur to have a clear understanding of the critical factors for selecting ventures; the
reasons for venture failure, and an effective evaluation process for new ventures.

Critical Factors for New-Venture Development

A number of critical factors is important for new-venture assessment. One way to identify and evaluate them is with a checklist, a
general questionnaire approach.

 The Phases of a New Venture

A new venture goes through three phases: pre-start –up, start-up, and post start-up.
 The prestart-up phase begins with an idea for the venture and ends when the doors are opened for the business.
 The start-up phase begins with the initiation of sales activity and the delivery of products and services and ends when the business is firmly
established and beyond short-term threats to survival.
 The post start-up phase lasts until the venture is terminated or the surviving organizational entity is no longer controlled by an entrepreneur.

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 Critical Factors of Pre-Start Up and Start-Up Phases
17

The pre-start–up and the start-up phases are the critical segment for the entrepreneur and, therefore, are the major
focus in this section. Five factors are critical during these two phases:
 The relative uniqueness of the venture,
 The relative investment size at start-up,
 The expected growth of sales and /or profits as the venture moves through its start-up phase
 The availability of products during the pre-start-up and start-up phases, and
 The availability of customers during the pre-start-up and start – up phases.

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 Reasons For New Venture Failure
18

Three main causes for new venture failure are:

 Product/market problems
 Financial difficulties
 Managerial problems.

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 OPPORTUNITIES FOR BUYING EXISTING BUSINESS 18

 Options for Small Business Buyers

Some of the options available to the entrepreneur to become involved in the existing business include the following:
 Outright purchase: A prospective entrepreneur might choose to purchase an existing business wholly, as a means
of market entry. An on-going small business owner could also decide to expand by buying another small firm.
 Buy-in: A buyer might not wish to buy an on-going business entirely. Instead, they might buy into an existing firm
and become a new partner, or shareholder, with those that already exist. This is more commonplace in professional
practices such as doctors, solicitors, and accountants. These are often large partnerships where the partnership
agreement does allow for the recruitment of another partner into the practice, should some members leave.
 Buy-out:Commonly refer to the purchase of a business, or a significant part of it, by its current management.
Although buy-outs could occur from small firms and franchises as well as forced sale by the parent company, large
firms are often the sellers.
 Buy-in Management buy-out:The Buy-in Management Buy-out (BIMBO) is a variation of the management buy-
out concept. BIMBO combines outside and inside management in the purchase of a firm. It is the belief that the risk
of buying into a firm from the outside could be minimized if the existing management of the firm are also involved.
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 IMPORTANCE OF BUYING EXISTING BUSINESS 19

 Advantages of Buying an Existing Business

Some of the possible advantages include the following:
• Overcomes barriers to market entry
• Buying immediate turnover and income
• Buying market share
• Existing assets of property equipment and staff
• Goodwill with existing customers
• Existing track record
 Disadvantages of Buying an Existing Business
• Potential ill will
• Buying possible liabilities with assets
• Employees inherited with the business may not be suitable.
• Risk in intangible assets
• The location may have become unsatisfactory

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 FRANCHISING 19

 Meaning of Franchising
• Franchising is a business agreement in which a company (the franchisor) grants others (the franchisees) the right
and license (the franchise) to sell a product or service and possibly to use the business system developed by the
company.
• It is a system of distribution in which a series of individually owned businesses operate as if they were a part of a
large chain.
• In most instances, the franchisee is granted an exclusive right to distribute the franchisor’s goods/services in a
specific geographical area.

 Types of Franchising
Basically, there are three types of franchising: trade name franchising, product distribution franchising, and pure franchising.
 Trade name franchising
 Here, the franchisee buys the right to become identified with the franchisor’s trade name without distributing particular products
exclusively under the franchisor’s name.
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 FRANCHISING cont’d 20

 Product distribution franchising

 With product distribution franchising, the franchisee is licenced to sell specific products under the manufacturer’s
(franchisor’s) brand name and trademark via a selective, limited distribution network.
 This type of franchising is also referred to as dealerships.

 Pure (or comprehensive or Business format) franchising

 In pure franchising, the franchisee is provided with a comprehensive system to operate the business.
 This includes not only the use of the trade name and products but also the entire business operation system,
marketing strategy, and ongoing support.
 Pure franchising is common among fast-food restaurants, car rental agencies, business service firms, lodging
establishments, etc.

11
 Advantages and Disadvantages for Franchisees 21

 Advantages for Franchisees

• Product acceptance
• Management training and support
• Capital requirements
• Knowledge of the market
• Standardized quality goods/services
 Disadvantages to Franchisees
• Franchise fees and profit sharing
• Lack of independence
• Limited product line
• Less freedom
• Unsatisfactory training programmes

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 Advantages and Disadvantages for Franchisors 22

 Advantages for Franchisors

• Expansion risk
• Availability of motivated franchisees
• Cost advantages
 Disadvantages to Franchisors
• Lack of quality franchisees
• Risk of failure
• Increasing pressure of franchisees

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 Guidelines for a Successful Franchising Strategy 23

 The success of the franchising strategy generally depends on two basic elements: the commitment from both the
franchisor and the franchisee, and an effective plan and support system.
 Starting a Franchise: What Franchisors Should Look For
To start a franchise, potential franchisors should assess three essential issues (Ibrahim and Ellis, 1992) outlined below:
• The window of opportunity and the business concept
• Transferability of the business concept to different areas
• Adequate resources including financial management resources

 Selecting a Franchise: What Franchisees Should Look For

• Objectives and lifestyle
• Time span of the opportunity
• The soundness of the business concept
• Proven track record and support system including financial, trading and development support as well as local and
national advertising campaign.
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 THE FRANCHISE AGREEMENT 24

 The franchise agreement is a legally binding contract between the franchisor and the franchisee that outlines the
terms and conditions of the franchise relationship.
 The franchise agreement contains all of the specific requirements and obligations of the franchise.
 Obligation and relationship of both the franchisor and the franchisee must be clearly defined.
 The potential franchisee should give particular attention to different provisions that may restrict their freedom of
choice or freedom to sell the franchise and/ or buy-back clauses.

15
THANK YOU
 Lecture 3: BUSINESS ORGANISATION/BUSINESS UNIT
 OUTLINE
 Definition of business organization
 Identify the sources of funds available to business organisation or firms.
 Identify the forms/types of business organisation.
 Advantages and disadvantages of the various types of business organisation.

1
 Definition of Business Organization

 A business organisation is any firm established for the purpose of carrying out some kind of economic activities such
as production and distribution of goods and services.
 A business organisation may be owned and controlled by the private individuals and hence referred to as private
enterprise or may be owned and controlled by the state/ government and hence referred to as public enterprise.

 Sources of Funds Available to Business Organisation/Firms

o Personal savings.
o Borrowing from friends and close relations.
o Borrowing from the bank and other institutions.
o Ploughing back profits.
o Hire purchase.
o Issuing of shares.
o Issuing of debentures/bonds.
o Sale of assets.
2
 Forms/Types of Business Organisation
 Sole Proprietorship.
 Partnership.
 Joint Stock Company.
 Co-operative Society.
 Public Corporation
 Joint Venture.

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 SOLE PROPRIETORSHIP
 A sole proprietorship is a form of business organisation in which one person owns, controls the affairs of the
business, and assume the responsibility of bearing any risk of production.
 It is the oldest, simplest, and most common form of business organisiation.
 There is no legal distinction between the business and the owner

 Features/Characteristics
• The business is usually owned by one person.
• It is simple and easy to form because it does not require completion of any document.
• Capital is contributed by one person/sole proprietor either from personal savings, loans from banks, friends, or
relatives.
• Decision is taken by the owner alone without consulting anybody so quick decision is taken.
• The business has unlimited liability.
• The business has no separate legal entity.

4
 Advantages and Disadvantages of Sole Proprietorship
 Advantages
 Ease of formation.
 Complete control
 Privacy
 Enjoys profits
 Direct relationship/contact with customers.

 Disadvantages
 Limited access to capital
 Unlimited liability.
 Lack of continuity.
 Limited management skills
 Stress and workload

5
 PARTNERSHIP
 The partnership is a form of business organisation where two or more individuals, known as partners come together
to carry out a business venture with the goal of earning/making profit.
 A partnership requires at least two partners.
 The maximum number of partners is usually regulated by law, often up to 20 in many countries, except for professional partnerships
like those in law or accounting, which may have different rules.
 A partnership is often governed by a partnership agreement called Partnership Deed.
• It outlines the terms and conditions of the partnership, including the rights, responsibilities, and profit sharing agreements among
the partners

 Types of Partnership
 General partnership
 Limited partnership

6
 Features of Partnership

o A partnership is jointly owned by two or more individuals who contribute their resources, skills, and expertise to the
business.
o Decision is taken by all members who own the business.
o Capital is contributed by partners
o Control and management are in the hands of all the partners except in the case of a limited partnership.
o The liability of each member is unlimited except limited partnerships.
o Profits are shared among the partners based on the agreed-upon profit-sharing ratio outlined in the partnership
agreement.
o Continuity and Succession: A partnership does not have perpetual succession.

7
 Types/Kinds of Partners

 Active or Working or General Partner: Actively participates in the day-to-day operations and management of the
partnership.
 Dormant or Sleeping Partner: Invests in the business but does not participate in its daily operations.
 Nominal or Holding Out: Does not have an actual interest in the partnership but allows their name to be used as a
partner.
 Limited Partner: Invests in the partnership but has limited liability and does not manage the business.

8
 Advantages and Disadvantages of Partnership

 Advantages
 Larger amount of capital is raised.
 Effective decision-making.
 Better management and greater efficiency.
 Longer continuity of the business.
 Sharing of risk among members.
 Enjoyment of economies of scale.
 Disadvantages
 Unlimited liability.
 Delay in decision making.
 Disagreement among partners may collapse the business.
 Lack of continuity.
 Limited capital.

9
 JOINT STOCK COMPANY/LIMITED LIABILITY COMPANY

 A type of business entity that is owned by shareholders who hold shares of the company’s stock
 It is also known as a Corporation
 Types
 Public Joint Stock Company ( Public Limited Liability Company)
• Shares are traded publicly on stock exchanges and are subject to regulatory requirements for public disclosure
• Has a large and diverse group of shareholders
• Shareholders' liability is limited to the amount they invested in the company.
• A minimum of seven members with no maximum
• Managed by a board of directors elected by the shareholders

 Private Joint Stock Company (Private Limited Liability Company)

• Shares are not traded publicly on stock exchanges
• Restrictions on the transfer of shares and the number of shareholders
• Shareholders' liability is limited to the amount they invested in the company.
• Can be formed by a minimum of two members and a maximum of fifty members.
• Managed by a board of directors appointed by the shareholders 10
 Features of Joint Stock Company

 Limited liability
 Transferability of shares: Shares of a joint stock company can be bought and sold on stock exchanges, providing
liquidity and flexibility for investors
 Continuity
 It is managed by Board of Directors elected by the shareholders
 It has large capital outlay because it could easily issue shares and debentures to increase its capital.
 Day to day decision-making process of the business is in the hands of Board of Directors
 It has a separate legal entity.

11
 Advantages and Disadvantages of Limited Liability Company

 Advantages
o Enjoyment of limited liability.
o Continuity of business is assured.
o Accessibility to large capital which enhance growth.
o Ownership is separated from control.
o Enjoyment of economies of scale.
o Enjoyment of a legal entity.
o Transfers of shares.

 Disadvantages
o Difficult to form.
o Limited control of the business by owners.
o Exploitation of shareholders.
o Delay in decision making.
o Possibility of conflict of interest.
o No business secrecy 12
 COOPERATIVE SOCIETY

 A cooperative society is a form of business organisation established by people with a common interest who pool their resources for
mutual benefit.
 It is formed mainly by consumers, traders, farmers, workers, and craftsmen to satisfy their common needs and interest.
 Types of Cooperative Society
 Producer Co-operative Society
 Consumers Co-operative society
 Marketing Co-operative Society
 Credit and Thrift Co-operative Society
 Features
• Membership is open to everyone who fulfils certain conditions stipulated by the society.
• It is formed by a minimum of two persons but no maximum number of persons
• Decisions in a cooperative society are made democratically, with each member having one vote, regardless of their shareholding
• Members contribute capital to the cooperative, and the return on this capital is usually limited
• The liability of members is limited to the extent of their capital contribution.
• The primary motive is to provide service to members rather than to maximize profit
• It is a separate legal entity 13
 Advantages and Disadvantages of Cooperative Society
 Advantages
o It provides members with opportunities for training in various activities.
o The activities of a cooperative society help to raise the standard of living of its members by making goods available to them at
affordable prices.
o It helps to keep prices of goods low since it can sell to members at lower prices because its profits are not taxed.
o Members can obtain loans for productive purposes at lower rates of interest.
o Habit of saving is encouraged by thrift and credit societies.
o It is democratic in nature since members have equal voting rights.
o Members’ liability is limited to their capital contribution, protecting personal assets.

 Disadvantages
o Problem of securing efficient management to run the organisation.
o Decision-making can be slow due to the democratic process and the need for consensus.
o Potential for conflicts among members with differing interests and priorities.
o Raising capital can be challenging as it depends largely on member contributions.
o Difficulty in recovering loans.
14
o Embezzlement of funds.
 PUBLIC CORPORATIONS/STATE ENTERPRISES

 Public Corporation is a large-scale business enterprise established by an Acts of Parliament, owned and controlled by the
government to provide essential services to better the lives of the citizens.
 Public corporation is also called Statutory Corporation, State Owned Enterprise, and Public Enterprise.
 Examples of public corporations in Ghana are Ghana Railway Corporation, Ghana Broadcasting Corporation, Ghana National
Petroleum Corporation, Volta River Authority, Ghana Grid Company Limited (GRIDCo), etc.

 Features
• It is owned by the state or the general public.
• It is formed through the Act of Parliament but in the case of a military government, it is formed through a decree.
• The management of a public corporation is in the hands board of directors whose chairman and members are appointed by the
minister in charge of the particular ministry.
• Capital needed to finance the organisation is provided by the government from the consolidated funds through taxation and loans
from both internal and external sources.
• The main motive of a public corporation is to provide welfare services to the general public.
• Public corporations are accountable to the government and, by extension, to the public.
15
 Reasons for the Establishment of Public Corporations

 To provide essential goods and services at reasonable prices.

 To develop and maintain critical infrastructure that supports economic growth, such as ports, railways, and highways.
 By participating in key sectors, public corporations can prevent monopolies and promote competitive markets,
ensuring fair pricing and preventing exploitation by private entities
 To create employment opportunities.
 Due to huge initial capital requirements.
 Government gets involved in business in order to raise revenue.
 To provide certain products and services for security reasons.
 Undertake long-term investment projects that may not yield immediate returns but are essential for sustained
economic growth and development

16
 Problems Facing Public Corporations/Why SOEs Fail in Their Operation

 Financial Problem/Inadequate Funding.

 Frequent Government/Political Interference.
 Appointment of unqualified personnel or inefficient management.
 Unpatriotic attitude of the workers.
 Poor remuneration / Poor working conditions.
 Inadequate supply of resources.
 Embezzlement and corruption.

17
 Advantages and Disadvantages of Public Corporations

 Advantages
o Public corporations often provide essential services that may not be profitable but are crucial for the public welfare,
such as water supply, healthcare, and public transportation.
o They often have access to government support, which can provide stability and enable long-term investments in
infrastructure and services.
o They can create employment opportunities and contribute to economic stability
o The government can regulate prices to ensure that essential services remain affordable for all citizens.
o They help control and eliminate excessive private monopoly.

 Disadvantages
o Risk is borne by the innocent taxpayer what has not taken part in the poor running of the organisation.
o Inefficient and inadequate supervision leading to wastage of resources.
o Management exploits and embezzles state funds.
o Political interference especially politicians whose party is in power.
18
 Solutions to the Problem of SOEs

o Provision of measures to attract top-class managerial personnel to effect adequate supervision.

o Ensuring better attitude of workers through the provision of incentives to motivate them.
o Employment of managerial staff should be based on merit and not on political affiliation.
o Provision of adequate funding or financial resources.
o Corrupt practices such as embezzlement or pilfering of government property should be checked.

19
 JOINT VENTURE

 A joint venture is a business that is jointly owned by two or more independent firms who continue in their original
business but pool their resources in another line of business.
 In other words, it is any business in which a private investor and government are in partnership.

 Features
• Each party contributes assets, capital, expertise, or technology to the joint venture.
• It is usually formed when there is a need for foreign expertise which is lacking in recipient country.
• It is usually created by an Act of Parliament/ a decree by the host country.

20
 Advantages and Disadvantages Joint Venture

 Advantages
• It paves way for sufficient capital resources.
• It leads to creation of jobs for labour in the host country.
• It enhances government revenue through taxation.
• It gives firms access to the needed markets.
• It gives firms access to new and improved technology

 Disadvantages
• Increased balance of payments through repatriation of capital and profits by the foreign partners.
• It may result in incomplete projects when the foreign partners abandon the project for some reason such change of government.
• It may result in lopsided development of the host country since they tend to favour specific sectors of the economy.

21
THANK YOU
Lecture 4: THE BUSINESS PLAN
 OUTLINE
 The meaning of the Business Plan
 Information Needs for the Business Plan
 Writing the Business Plan
 Writing the Business Plan II
 Writing the Business Plan III
 Using and Implementing the Business Plan

1
 The Meaning of the Business Plan

 The business plan is a written outline of the entrepreneur’s proposed venture, its operational
and financial details, its marketing opportunities and strategy, and its manager’s skills and
abilities (Zimmerer and Scarborough, 1994).
 It describes the direction the firm is going in, what its goals are; where it wants to be, and how
it is going to get there.
 Thus, the business plan answers the questions, Where am I now? Where am I going? How will I
get there?

2
 When to Plan

As Stokes points out, business plans can be triggered by various events and reasons, such as the
following:
 Start-Up
 Business purchase
 Ongoing review
 Major decisions

3
 The Importance of the Business Plan
 It helps determine the viability of the venture in a designated market.
 It provides guidance to the entrepreneur in organizing his or her planning activities.
 It serves as an important tool in helping to obtain financing.

4
 INFORMATION NEEDS FOR THE BUSINESS PLAN
 Feasibility Study of the Business Concept
 The entrepreneur, before preparing the plan, should do a quick feasibility study of the business concept to make
out if there are any possible barriers to success.
 The information gathered should focus on production, marketing and finance.
 The goals and objectives of the venture should be clearly defined before the feasibility study is embarked upon.
 Market Information Needs
 Define the market
 Know the size of the market
 Define who your customers are
 What are these proposed customers currently buying or using to address a particular problem

5
 INFORMATION NEEDS FOR THE BUSINESS PLAN cont’d
 Operations Information Needs
The entrepreneur might need operation information on the following:
 Location
 Manufacturing operations
 Raw Materials
 Equipment
 Labour skills
 Space
 Overhead
 Financial Information Needs
The three conventional areas of financial information that are required to determine the feasibility of the business are:
1. Expected sales and expense figures for at least the first three years,
2. Cash flow figures for the first three years, and
3. Current balance sheet figures and projected balance sheets for the three years
6
 WRITING THE BUSINESS PLAN
 Who Should Write the Business Plan?
o The entrepreneur should prepare the business plan.
o However, the entrepreneur may consult with a number of other sources in the preparation.
 The Format of the Business Plan
o The precise format of the business plan will depend on the particular business and the intended audience of the plan.

7
 Outline of a Business Plan
 Introductory page
• Name and address of business
• Name(s) and address(es) of principals
• Nature of business
• Statement of confidentiality of report
 Executive Summary
• Although it appears first, it is often written last to capture the essence of the entire plan.
• It should be engaging and provide a quick understanding of your business.
• It is about 2-3 pages in length and must be very concise and brief
 Industry Analysis
• Future outlook and trends
• Analysis of competitors
• Market segmentation
• Industry forecasts
8
 Outline of a Business Plan Cont’d.
 Description of Venture
• Product(s)
• Service(s)
• Size of business
• Office equipment and personnel
• Background of entrepreneurs

 Production Plan
• Manufacturing process (amount subcontracted)
• Physical plant
• Machinery and equipment
• Names of suppliers of raw materials

 Marketing Plan
• Pricing
• Distribution
• Promotion
• Product forecasts
• Controls

9
 Outline of a Business Plan Cont’d.
 Organizational Plan
• Form of ownership
• Identification of partners or principal shareholders
• Authority of principals
• Management-team background
• Roles and responsibilities of members of organization
 Assessment of Risk
• Evaluate weakness of business
• New technologies
• Contingency plans
 Financial Plan
• Pro forma income statement
• Cash flow projections
• Pro forma balance sheet
• Break-even analysis
• Sources and applications of funds
 Appendix (contains backup material)
• Letters
• Market research data
• Leases or contracts
• Price list from suppliers
10
 WRITING THE BUSINESS PLAN II
o This session discusses the second segment of writing the business plan.
o It focuses mainly on the details of the various components of the business plan.
o This involves: introductory page, executive summary, industry analysis and description of venture.
 Introductory Page
• The introductory page is the title or cover page.
• It provides a concise summary of the content of he business plan.
• This page should contain the following:
 The name and address of the company.
 The name of the entrepreneur(s) and a telephone number.
 A paragraph describing the company and the nature of the business.
 The amount of financing needed.
 A statement of the confidentiality of the report. This is for security purposes and is important for the entrepreneur.

11
 WRITING THE BUSINESS PLAN II Cont’d.
 Executive Summary
• The executive summary of the business plan should be written by the entrepreneur after the total plan is prepared.
• About two pages in length, it should be concise and should summarize all of the relevant points of the proposed venture.
• That is, it explains the nature of the venture, financing needed, market potential, and support as to why it will succeed.
 Industry Analysis
• It discuses the industry outlook, which should include future trends and accomplishment of past objectives, and insight on new
product developments in the industry.
• This section also should include an analysis of each major competitor in the industry, with appropriate strengths and
weaknesses described, indicating particularly how they might affect the new venture’s potential success in the market.
 Some key questions that should be considered by the entrepreneur;
 What are total industry sales over the past five years?
 What is anticipated growth in this industry?
 How many new firms have entered this industry in the past three years?
 What new products have been recently introduced in the industry ?
12
 WRITING THE BUSINESS PLAN II Cont’d.
 Some key questions that should be considered by the entrepreneur;
 Who are the nearest competitors?
 How will your business operation be better than this?
 Are each of your major competitors’ sales growing ,declining , or steady?
 What are the strengths and weaknesses of each of your competitors?
 What is the profile of your customers?
 How does your customer profile differ from that of your competition?
 Description of Venture
• It deals with a detailed description of the new venture.
• It begin with a statement of the venture’s general business goals and a definition of immediate objectives.
• Together, it specifies what the business plans to achieve, how, when, and who will do it.
• Other key elements in this section are the location and size of the business, the personnel and office equipment that will be
required, the background of the entrepreneur(s), and the history of the business.

13
 WRITING THE BUSINESS PLAN II Cont’d.
 A summary of some of the important questions that need to be answered by the entrepreneur when preparing this section
(Description of Venture);
 What are your product (s) and /or service(s)
 Describe the product(s) and/ or service(s), including patent, copyright, or trademark status.
 Where will the business be located?
 Is your building new? Old? In need of renovations? (If renovations needed, state costs etc.?)
 Is the building leased or owned? (state the terms.)
 Why is this building and location right for your business?
 What additional skills or personnel will be needed to operate the business?
 What office equipment will be needed?
 Will equipment be purchased or leased?
 What is your business background?
 What management experience do you have?
 Describe personal data such as education, age, special abilities, and interests?
 What are your reasons for going into business?
 Why will you be successful in this venture?
 What development work has been completed to date?

14
 WRITING THE BUSINESS PLAN III

 This session discusses the third segment of writing the business plan.
 It focuses mainly on the details of the remaining components of the business plan.
 This involves: production plan, marketing plan, organizational plan, assessment of risk, financial plan and appendix.
 Production Plan
o A production plan for the new venture should be included in the business plan.
o This should describe the complete process of production (or manufacturing).
o If the manufacturing is to be undertaken in whole or in part by the entrepreneur, he or she will need to describe the physical
plant layout; the machinery and equipment needed to perform the manufacturing operations; raw materials and suppliers’
names, addresses, and terms; costs of manufacturing; and any future capital equipment needs.
o If the venture is a retail store or service and not a manufacturing operation, this section would be titled “merchandising plan “
and the purchasing of merchandise, inventory control system, and storage needs should be described.

15
 WRITING THE BUSINESS PLAN III

 Production Plan
 A summary of the key questions for this section of the business plan are as follows;
• Will you be responsible for all or part of the manufacturing operation?
• If some manufacturing is subcontracted, who will be the subcontractor(s)? (Give names and addresses)
• Why were these subcontractors selected?
• What are the costs of the subcontracted manufacturing? (Include copies of any written contracts.)
• What will be the layout of the production process? (Illustrate steps if possible.)
• What equipment will be needed for manufacturing?
• What raw materials will be needed for manufacturing?
• Who are the suppliers of new materials and appropriate costs?
• What are the costs of manufacturing the project?
• What are the future capital equipment needs of the venture?

16
 WRITING THE BUSINESS PLAN III Cont’d.

 Production Plan
 If a Retail Operation or Service
• From whom will merchandise be purchased
• How will the inventory control system operate?
• What are storage needs of the venture and how will they be promoted?
 Marketing Plan
• This section of the business plan describes how the product(s) or service(s) will be distributed, priced, and promoted.
• Definite forecasts for product(s) or service(s) should be indicated in order to project profitability of the venture.
 Organizational Plan
• This section of the business plan should describe the form of ownership of the business.
• If the business is a partnership, the terms of the partnership should be included .
• Also, a description of the form, shares, and inclusion of the résumés of the business officers and key directors of the company.
It is also helpful for the entrepreneur to provide an organizational chart identifying the business’s key positions and the
personnel occupying them. 17
 WRITING THE BUSINESS PLAN III Cont’d.

 Organizational Plan
 Some of the key questions the entrepreneur should answer in preparing this section of the business plan are;
 What is the form of ownership of the organization?
 If a partnership, who are the partners and what are the terms of agreement?
 If incorporated, who are the principal shareholders and how much stock do they own?
 What type and how many shares of voting or nonvoting stock have been issued?
 Who are members of the board of directors? (Give names, addresses, and résumés)
 Who has cheque-signing authority or control?
 Who is each member of the management team and what is his or her background?
 What are the roles and responsibilities of each member of the management team?
 What are the salaries, bonuses, or other forms of payment for each member of the management team?

18
 WRITING THE BUSINESS PLAN III Cont’d.
 Assessment of Risk
• Key risks for a new venture might result from competitors’ reaction; weaknesses in the marketing; production, or
management team; and new advances in technology that might render the new product obsolete.
• It is also important for the entrepreneur to provide contingency plans and strategies should any of the above risk
factors occur.
 Financial Plan
• The financial plan is one of the most important sections of the business plan.
• It determines the potential investment commitment needed for the new venture business and indicates whether
the business plan is economically feasible.
• Three financial areas should be included in this section.
 First, the entrepreneur should prepare the projected income statement, indicating the forecasted sales and the
appropriate expenses, for at least the first three years, with the first year’s projections provided monthly.
 Secondly, the entrepreneur should carefully prepare the projected cash flow figures for three years, with the first
year’s projections provided monthly.
 Finally, the projected balance sheet is also provided in this section of the business plan. This shows the financial
condition of the business at a specific time.
 Appendix
• This section of the business plan normally contains any additional information that is not necessary in the
document.
19
 USING AND IMPLEMENTING THE BUSINESS PLAN
 The Importance of Business Plan
Planning is an important part of any business operation.
It is important to realize that without good planning the employees will not understand the company’s goals and how
they are expected to perform in their jobs.
In addition, the entrepreneur can enhance effective business plan implementation by developing a schedule to
measure progress and institute contingency plans.
 Measuring Plan Progress
Measuring the progress of a business plan is essential to ensure that the goals and objectives outlined in the plan are
being met.
It involves evaluating performance, identifying areas for improvement, and making necessary adjustments to stay on
track.
 Description of Control Elements
o Control elements refer to the systems and processes used to monitor and regulate various aspects of an
organization to ensure that goals and objectives are being met.
o A brief description of each of these control elements is given below (Hisrich and Peters, 1996):
• Inventory control
• Production control
• Quality control
• Sales control
20
• Disbursements
 USING AND IMPLEMENTING THE BUSINESS PLAN Cont’d.
 Updating the Plan
• The most effective business plan can become out of date if conditions change.
• Environmental factors such as the economy, customers, new technology, or competition and internal factors such as the loss or
addition of key employees can all change the direction of the business plan.
• Thus, it is important to be sensitive to changes in the company, industry, and market.
• If these changes are likely to affect the business plan, the entrepreneur should determine what revisions are needed.
 Why Some Business Plans Fail
Generally, a poorly prepared business plan can be blamed on one or more of the following factors (Hisrich and Peters, 1996):
 Goals set by the entrepreneur are unreasonable.
 Goals are not measurable.
 The entrepreneur has not made a total commitment to the business or to the family.
 The entrepreneur has no experience in the planned business.
 The entrepreneur has no sense of potential threats or weaknesses to the business.
 No customer need was established for the purposed product or service.
21
THANK YOU
LECTURE 5: MANAGING RESOURCES
 OUTLINE
 Nature and Types of Resources
 Operating Resources
 Informational Resources
 Human Resource
 Technological Resources
 Local Resource Mobilization

1
 MEANING AND NATURE OF FIRM RESOURCES

 Resource is anything thought of as a strength or weakness of a given firm

 Resources are inputs used to produce goods and services
 A resource is anything that the entrepreneur and his or her supporters can use to pursue the
venture
 A resource is anything or quality that is useful
 A firm’s resources are those tangible and intangible assets that are tied semi-permanently to
the firm.
 Included are intangible resources such as innovation, idea generation, human resources,
quality of product or service, brand names, technology, skills, as well as tangible resources
which cover equipment, building, location.
2
 Characteristics of Resources
 All resources share the following characteristics:
o They are consumed
o They can only be used once
o They are in demand and are competed for
o They have a value – a price tag
o Markets exist for them

3
 Strategic and Non-Strategic Resources
 Strategic Resources - these are the resources that create competitive advantage and are
essential for a company's success in the market. These resources are typically rare, valuable,
difficult to imitate, and non-substitutable
 Non-strategic resources - these are usually termed as ‘common’ resources because they are
necessary for carrying out the firm’s usual activities but provide no specific advantage. These
resources may be necessary for day-to-day operations but do not differentiate a company from
its competitors or drive sustainable growth. e.g ordinary desk and chairs and office furniture.

4
 Attributes of a Strategic Resource
 Valuable - Resources are valuable because they exploit some environmental opportunity.
• They are valuable when they help the organization implement its strategy effectively and efficiently.
• This means that a valuable resource exploits opportunities or minimizes threats in the firm’s environment.

 Rare - Rare strategic resources are those that are not easily available or possessed by competitors.
• They are unique or scarce within the industry or market.
• When a company owns rare resources, it gains a competitive advantage because competitors cannot easily replicate or acquire
them.

 Imperfectly Imitable Resources - Resources are imperfectly imitable when competitors cannot merely copy them.
• When resources are hard to imitate, they provide sustainable competitive advantage and protect a company from being
overtaken by competitors.

 Non-substitutable - A resource is non-substitutable when there are no viable alternatives or replacements that provide
the same benefits or value
• These resources are irreplaceable and crucial for maintaining a company's competitive advantage. 5
 Types of Resources
There are various types of resources available to a firm. These are financial, physical, human, technological and organisational
resources.
 Financial Resources
 Financial resources represent money assets and financial stocks.
 Financial resources are generally the firm’s borrowing capacity, the ability to raise new equity, and the amount of internal fund
generation.
 Physical Resources
 Physical resources are the tangible property the firm uses in production and administration. This includes the firm’s plant and
equipment, its location, and the amenities available at that location.
 Human Resources
 Human resources cover the knowledge, training, and experience of the entrepreneur and his or her team of employees and
managers.
 It includes the judgment, insight, creativity, vision, and intelligence of the individual members of an organization.
6
 Types of Resources Cont’d.
 Technological Resources
 Technological resources are embodied in a process, system, software, or physical transformation that enables organizations to
operate efficiently, innovate, and stay competitive.
 These may include labs, research and development facilities, and testing and quality control technologies.

 Organizational Resources
 Organizational resources refer to the structures, processes, and culture that define how an organization operates
and makes decisions.

 Information Resources
 Information resources include data, knowledge, and intellectual property that an organization uses to make informed decisions
and create value.

7
 OPERATING RESOURCES
Meaning and Nature of Operating Resources
Operating resources are those things actually used by the people who run the venture.
Thus, they are the essential assets and materials used by an organization to conduct its day-to-day operations and
produce goods or services.
Examples include premises, motor vehicles, production machinery, raw materials, storage facilities and office
equipment.

 Fundamental Considerations in Choosing and Improving Facilities

In choosing and improving facilities some factors need to be considered:
• Size of building
• Construction and External Appearance
• Signs
• Internal Appearance

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 The Purchasing Process
 Procuring materials is a key management function for any type of business.
 Expert systems have recently been developed for the purchasing function. These systems can:
• analyse a problem (e.g. economic ordering levels)
• explain a process (e.g. documentation)
• make a choice (e.g. from a selection of suppliers)
 Steps in the Purchasing Process
The general pattern for handling purchase orders is as follows:
o A department initiates a request for goods or services and sends it to the purchasing department.
o Purchasing staff verifies that the specifications are complete and selects potential sources. The purchasing department must
identify suppliers who have the capacity of supplying the desired goods. If no lists of suppliers are currently on file, new ones
must be sought.
o Purchasing staff follow good business practices in determining the best offer for required materials or services.
o When an order is awarded, it is faxed or mailed.
o The invoice with the purchase order number noted on the invoice is sent to the Accounts Payable Department before a
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payment can be made.
 BUSINESS INFORMATIONAL RESOURCES
 Meaning of Business Information
 The concept of information is closely related to notions of constraint, communication, control, data, form, instruction,
knowledge, meaning, mental stimulus, pattern, perception, and representation.
 Business information is therefore, the knowledge of specific events or situations that has been gathered or received by
communication, intelligence or news about business.
 Types of Business Information
Business information is usually categorized in one of two ways.
 First, there are locations of information, with the most common distinction being between whether the information source is
located within the firm or externally to it.
 Second, information can be categorized according to purpose. This is the most common classification, as companies which set
out to gather information usually do so for some particular purpose.

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 Types of Business Information

 Market Information
 Competitor Information
 Macroeconomic and geopolitical Information
 Supplier Information
 External financial Information
 Information on regulations and taxation
 Production information
 Human Resources Information
 Internal financial information

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 Sources of Business Information
 Information sources can either be; primary, gathered as a result of research or analysis instigated by the firm, or secondary,
gathered from existing sources.
 In addition, information sources can be either internal or external to the firm.
 Secondary sources of information are:
o Public, available to any researcher;
o Proprietary, owned by a particular company or institution
o Subscription,
 Other sources of business information include:
o Government agencies
o Libraries
o Trade associations
o Private research and information companies
o Journals and newspapers
o Business information services
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o Online databases
 Importance of Business Information

Information reduces risk

Business information enables firms to overcome some of the barriers to ineffective
communication
It brings about understanding

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 HUMAN RESOURCE

 Human resource (HR) is a term used to describe the combination of traditionally administrative
personnel functions with performance management, employee relations, and resource
planning.
 Human resource management is the strategic and coherent approach to the management of an
organisation's most valued assets. That is, people working in the firm who individually and
collectively contribute to the achievement of the objectives of the business.
 It deals with activities such as the planning of human resources, job analysis, recruitment,
selection and induction. Other human resource management issues include compensation and
fringe benefits, personnel appraisal, training and development, equity and work place health
and safety.
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 Steps in Human Resource Management (HRM)
Human Resource Management (HRM) is a comprehensive process that involves managing an organization’s
workforce to maximize employee performance and achieve organizational goals
The steps involve in the HRM process include the following;

Human Resource Planning

 Human resource planning involves identifying the current and future human resource needs of the organization to
ensure that it has the right number of people, with the right skills, in the right places, at the right times
 Human Resource planning has four basic aspects.
 Planning for future needs by deciding how many people and type of skills the organisation will need
 Planning for future balance by comparing the number of needed employees to the number of present employees
who can be expected to stay with the organisation
 Planning for recruiting or laying off employees
 Planning for the development of employees, to ensure that the organisation has a study supply of experience and
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capable personnel.
 Steps in HRM Cont’d.

Recruitment
 This is concerned with developing a pool of job candidates in line with the human resource
plan.
 Thus, this step involves attracting, screening, and selecting qualified candidates for open
positions within the organization.
 Candidates are usually located through;
• Newspaper
• Professional journal advertisements
• Employment agencies
• Word of mouth
• Visits to college and university campuses. 16
 Steps in HRM Cont’d.

Selection
 This involves using application forms, resumes, interviews, employment and skills tests, and reference checks to
evaluate and screen job candidates for the managers who will ultimately select and hire a candidate.
 There are some basic steps in an organisation’s selection process:
o Complete job application form
o Initial screening interview
o Testing
o Background investigation
o In-depth selection interview
o Physical examination
o Job offer

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 Steps in HRM Cont’d.

Socialization
 This is designed to help the selected individuals fit smoothly into the organisation. Newcomers
are introduced to their colleagues, acquainted with responsibilities, and informed about the
organisation’s goals, policies, and expectations regarding employee behavior.
 Typically, socialization conveys three types of information;
• General information about the daily work routine
• A review of the organisation’s history, purpose, operations and products or services, as well as
how the employees job contribute to the organisations needs.
• A detailed presentation of the organisation’s policies, work rules and employee benefits.

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 Steps in HRM Cont’d.

Training and development

 Training and development aims to increase employee’s ability to contribute to organisational
effectiveness. Training is designed to improve skills in the present job and facilitate employee
promotion.
 Managers can use four procedures to determine the training needs of individuals in the
organization;
• Performance appraisal
• Analysis of job requirement
• Organisation analysis
• Survey of human resource
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 Steps in HRM Cont’d.
Performance Appraisal
 This compares an individual’s job performance to standards or objectives developed for the individual’s position.
 Low performance may prompt corrective action, such as additional training, a demotion, or separation, while high
performance may merit a bonus or promotion.
 Although an employee’s immediate supervisor will perform the appraisal, the HRM department is responsible for
working with upper management to establish the policies that guide all performance appraisals.
 There are a number of other pitfalls that mangers must avoid.
i. Shifting standards
ii. Bias
iii. Different rater patterns
iv. The halo effect – to rate subordinates high or low on all performance measures based on one of their
characteristics.
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 Steps in HRM Cont’d.

Promotions, Transfers, Demotions, and Separations

 These reflect an employee’s value to the organisation.
 High performers may be promoted or transferred to help them develop their skills, while low
performers may be demoted, transferred to less important positions, or even separated.

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 The Four C’s Model For Evaluating Human Resources

To evaluate the effectiveness of the HRM Process within an organisation, Harvard researchers
have proposed a four C’s model for human resources outcomes:
• Competence
• Commitment
• Congruence
• Cost-effectiveness

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 TECHNOLOGICAL RESOURCES

Meaning of Technological Resources

 Technology is the branch of knowledge that deals with industrial arts, applied science, and engineering and a process, an
invention, or a method.
 A technological resource is therefore anything thought of as a strength or weakness of a given firm in the areas of pure
invention and process innovation.

Types of Technological Resources

Technological resources are generally classified into seven categories. These are discussed below.
o People
o Information
o Knowledge
o Time
o Tools and Machines
o Materials
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o Money
 Importance of Technological resources

Technology resources serve as a tool to help run a business.

Technological resources also enable a firm to sustain its competitive advantage.
With increases in competition on the global markets, information and communications
technology has surpassed its traditional role (word processing), and now plays a more central
role in small businesses.

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 RESOURCE MOBILIZATION
Assessing Local Resources
 Every local setting has resources that entrepreneurs can use to improve their businesses.
 Before entrepreneurs can benefit from these local resources, however, they need to take some
preparatory steps.
• Identify and prioritize resource needs.
• Conduct a local resource assessment
• Develop simple profiles of potential sources of support
• Match appropriate resources with your organization needs

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 Mobilizing Resources
 In mobilizing resources, firms need to consider the following;
 Think beyond money
 Get people to connect with the work being done
 Be cost-effective
 Build local skills
 Keep records
 Stay in line with your mission
 Diversify sources of support

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 Developing Strategies for Mobilizing Local Resources
Before a firm begins to mobilize resources, it should ensure that it has the staff needed to plan,
implement, monitor, and evaluate this effort.
If it does not, the organization may need to train current staff, hire additional staff, or find
partner organizations whose areas of expertise complement its own.

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 Resource utilization
Advantages for controlling resources include:
Less capital
Flexibility
Low sunk cost
Reduced risk

However it must be noted that if strategic resources are never owned and controlled then no:
• Competitive advantage can be obtained
• No rents can be collected and if rents are raised it will create a cost push squeeze to the
entrepreneur.
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THANK YOU