ጅማ ዩኒቨርሲቲ www.ju.edu.et
1. Entrepreneurship and free enterprises
2. Small Businesses
3. Business planning
4. Product and Service concept
5. Marketing and New Venture
6. Organizing and Financing the New
7. Managing Growth and Transaction
Chapter 1: Entrepreneurship and
□Entrepreneur/ship, just like management, has no single
An entrepreneur is a person who is action oriented, highly
motivated, takes risks to achieve goals
An entrepreneur is a person who establishes his own
business with the intention of making profits
An entrepreneur is a person who only provides capital
without taking active part in the leading role in an enterprise.
An entrepreneur is a one who innovates, raise money,
assemble input, choose managers and set the organization
□To sum up in the light of the developments, there are four
key elements of entrepreneurs. These are:
Vision (identifying emerging opportunities)
Innovation (creating new business or new ways of doing
Risk bearing (taking risk and facing uncertainty)
Organizing (collection and coordination of the necessary
□Entrepreneurship, like an entrepreneur, has no single
□Entrepreneur is a person while entrepreneurship is a
□Entrepreneurship is aprocess under taken by an
entrepreneur to create incremental value and wealth by
discovering investment opportunities, organizing
enterprises, undertaking risks andeconomic uncertainty
and there by contributing to economic growth
□During the ancient period the word entrepreneur was used to refer
to a person managing large commercial projects through the
resources provided to him.
□In the 17th Century a person who has signed a contractual
agreement with the government to provide stipulated products or
to perform service was considered as entrepreneur.
□In the 18th Century the first theory of entrepreneur has been
developed by Richard Cantillon. He said that an entrepreneur is a
risk taker. If we consider the merchant, farmers and /or the
professionals they all operate at risk. For example, the merchants
buy products at a known price and sell it at unknown price and this
shows that they are operating at risk.
□The other development during the 18th Century is the
differentiation of the entrepreneurial role from capital
providing role. The later role is the base for today’s venture
□In the late 19th and early 20th Century an entrepreneur was
viewed from economic perspectives. The entrepreneur
organizes and operates an enterprise for personal gain.
□In the middle of the 20th and early 21thCentury the notion of
an entrepreneur as an inventor was established.
Role of entrepreneurs within
□Capital formulations: - Entrepreneurs mobilize the idle
saving of the public through the issue of industrial
□Improvement in per capita income
□Generation of employment
□Improvement of the living standard
□Balances regional development
□Innovation: the commercial application of invention
Entrepreneurs, Invention and innovation
Areas of Innovation
□New Production Techniques
□New Way of Delivering the Product or Service to the
□New Operating Practices
□New Means of Informing the Customer about the Product
□New Means of Managing Relationship within the
□New Ways of Managing Relationships between
Chapter Two : Small Businesses
□Small business is a business which is independently owned
and operated, not dominated in its field of operation and
meets certain standard of number of employee and
□In general there are two approaches to define a small
business; measures of the size and economic/ control
□Some of the criteria’s to measure the size are
Number of employees: - for example in Ethiopian case it is
Less than 30 employees (6-30).
Investment paid up capital: - for Ethiopia it is 100,001-
1,500,000 (industry), and 50,001-500,000 birr (service).
Volume of sales, production and deposits are also used to
measure the size of business
If there is ambiguity in the definition between the usage of
man power and capital, it is recommended to use the total
paid up capital as a measurement criteria.
□Market share: has no significant influence on the price of
national quantities of goods sold to any significant level.
□Independence: independence means that an owner has
control of the business himself.
□Personalized management: It implies that the owner
actively participates in all aspects of the management of
the business and in major decision making process.
□Technology: small business is generally labor intensive
□Geographical area of operation: the area of operation of
a small business is often local
Economic, social and political aspects of
small business enterprises in Ethiopia
□Socialistic idea (the equality argument )
□Less capital and more labor
□Removing regional imbalances (the decentralization
□Creating self-employment opportunities
□Supply of critical raw materials
Small business failure factors
□Poor financial control
□Lack of adequate capital
□Over investment in fixed asset
□Failure to plan current as well as future operation
□Failure to adopt proper inventory control system
□Improper Attitude (The entrepreneur may not respect time,
employees and may have lazy lifestyle and dictatorial style of work)
□Inadequate marketing plan
□Incorrect market identification
□Poor distribution channel
□Weak marketing communication or promotion
How to avoid the pitfalls/difficulties of
a small business
□Know your business in depth:
□Have a Good Relation with Stake Holders
□Prepare business plan
□Managing financial resources
□Understanding financial statement
□Learn to manage people effectively
□Keep in tune with yourself
□Take up short professional courses in management
□Be sensitive to your customers
Setting up a small business
□The first and for most step in starting a small business is to
find out a suitable business idea and give a practical shape to
□To think of a goal for the business in the long run rather than
to look for the immediate tomorrow is called Basic Business
□The basic business idea is to meet the broadest needs of the
customers and has a long life perhaps from 5-50 years.
□The basic business idea facilitates choice of product under an
□The product line consists of different families of products.
□The product range on the other hand includes different
sizes of the product within the product line.
□In order to establish a business venture with an
entrepreneurial system an entrepreneur needs to take the
1. Search for business idea
2. Process the idea
3. Select the best idea
What a project an
entrepreneur should have?
□The project an entrepreneur chooses should be based on
□Quantifiable and Non-Quantifiable projects
□Sectorial projects :-under this the following projects can
Industry and mining
Social service sector
Transport and communication
Factor intensity oriented classification (labor vs capital
Causation oriented classification
Magnitude oriented classification
□Financial institution classification
Characteristics of small scale
□Limited scale of operation
□Local area of operation
Chapter Three: Business planning
□A business plan is a written document prepared by the
individual entrepreneur or partners that describes the
goals and objectives of the business along with steps
necessary to achieve those goals.
□Business plan is also defined as a written summary of the
entrepreneur’s proposed venture, its operational and
financial details, its marketing opportunities & strategy,
and its manager’s skills and abilities.
□At star-up of new business
□Buyout stage/business purchase
□Ongoing review stage
When business plans are produced
Who is going to prepare business plans
□Managers: - Clarifying ideas and finding strength,
weakness, opportunity & threats.
□Owners:- Assessing feasibility & viability of business,
setting objective & budgets:
□Lenders: - Evaluate risk us. Benefits, appraise quality of
Why business plans
Scope of Business plan
□Business plan includes information on the following aspects:
Economic/Market aspects: Economic justification like market
size, market growth, market share.
Technical aspects: Details on technology needed, equipment
and match their sources
Financial aspects: Total investment, cost of capital, ROI,
source of capital, enterprise contribution
Production aspects: product, its design, standard of quality,
usage, production aspect like production process, schedule,
Managerial aspects: Qualification & experience, commitment
Formats of a business plan
□Description of the firm’s product
□Officers’ owners’ Resumes
□Plan of operation
Common Mistakes in Business
□One- person commitment
□Too- action Oriented
□No Performance Standard
□Poor progress Control
Chapter Five: Marketing and
New Venture Development
□Marketing Research: is the systematic gathering,
recording and analyzing of data about problems related to
the marketing of goods and services.
□It is the function which links the consumer [customer] and
public to the marketer through information-information
used to identify and define marketing opportunities and
problems; generate, define, and evaluate marketing
actions; monitor marketing performance; and improve
understanding of marketing as a process.
Characteristics of a marketing research
□Marketing research should be systematic
□Marketing research is a process
□Data may be available from difference sources
□Marketing research may be applied to any aspect of
marketing that requires information to aid decision
□Research findings and their implementation must be
communicated to the appropriate decision matter.
In conducting marketing research, scientific methods should
be followed. The scientific method requires objectivity,
accuracy, and thoroughness.
The Scope of Marketing Research
The Marketing Research Process
□Examination of primary & secondary data
□Analysis of data
□Implementation of findings
□Marketing intelligence is the systematic collection and
analysis of publicly available information about
competitors and developments in the marketplace.
□Techniques range from quizzing the company’s own
employees and benchmarking competitors’ products to
researching internet, lurking around industry tradeshows,
and even routing through rivals’ trash bins.
□Competitive analysis is a widely used approach for
developing strategies in many industries.
□According to Porter, the nature of competitiveness in a
given industry can be viewed as a composite of five forces:
1. Rivalry among competing firms
2. Potential entry of new competitors
3. Potential development of substitute products
4. Bargaining power of suppliers
5. Bargaining power of consumers
□Marketing strategy refers to the marketing logic by which
the company hopes to create customer value and achieve
□Companies know that they cannot profitably serve all
consumers in a given market.
□Thus, each company must divide up the total market,
choose the best segment, and design strategies for
profitably serving chosen segments. This process involves
market segmentation, target marketing, differentiation
(actually differentiating the market offering to create
superior customer value), and positioning.
□In search of growth, a firm has four options:
1. Market Penetration: the firm can stay with its base
product or service, and its existing market
2. Product Development: the firm can develop related or
new products for its existing market.
3. Market Development: the firm can develop related or
new markets for its existing products.
4. Entry in to new Market: the firm might try to move into
related or new markets with related or new products.
□International marketing is important because of the
economic theory of comparative advantage.
□This theory states that each country has natural
advantages over others in the production of certain goods,
and therefore specialization and the trading of surpluses
will benefit everybody.
Reasons for Internationalization
□Small or saturated domestic markets
□Economies of scale
Chapter 6: Organizing and Financing
the New Venture
When establishing an entrepreneurial team people should
□Those who share the same values and vision for the
□Those who have complementary skills
□Those who have integrity
□Those who can manage the risks of a small business
The following are common errors in team building
□Not considering experience and qualification of each
□Putting together a team whose members have different
□Using only insiders in the board of directors
□Using family members as attorney and accountant
□Giving the management team all stock in lieu of salary
Sources of Finance
Debt financing (short term)
□Trade credit (Open-book credit & Promissory
□Loans (Secured Loans & Unsecured Loans)
Debt as Long-term financing
Sources of Finance
□Stock (Preferred & Common stock)
□Sale of assets
Venture capitalists may be investment bankers
when they invest capital, make loans, and give
management advice intended to assist the
company to achieve significant growth.
Many companies financed by venture capitalists
convert from closely held corporations to public
corporations during the course of their growth.
□In USA Small Business Administration loans are
available to smaller businesses.
Chapter 7: Managing Growth and
Preparing for the Launch of the Venture
□Hiring New Employees
□Creating Awareness of the New Venture
Managing Early Growth of Venture
□Motivating and leading the team
□Managing Cash Flow
□Managing Costs and Profits
New Venture Expansion Strategies
□Mergers & acquisitions