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ENTREPRENEURSHIP DEVELOPMENT
Lecture Notes
(Source: Osuagwu, L. (2OO6, Small Business & Entrepreneurship Management, Lagos: Grey
Resources Lid, 2nd edj.
I. FUNDAMENTALS OF BUSINESS MANAGEMENT.
Management, like any other sphere of knowledge, has many definitions. It may be defined as the
art and science of getting things done through others. It involves the efficient and effective use of
human and non-human resources. It is a process that involves the guidance or directionof a group
of people towards organizational goals. It may be conceived as the reasonable combination of the
work of organizational members (or the reasonable combination of the different activities of a
person) using all available resources in order to achieve set goals and objectives.
Different perspectives/approaches have been used to explain management. These
perspectives/approaches include:
(1) The functional management approach
(2) The Behavioural science approach
(3) The human relations approach
(4) The quantitative approach
(5) The systems approach
(6) The contingency approach, and
(7) Scientific manageiient approach.
The scientific management approach, for example, posits that:
- Management must be scientific (instead of rule-of-thumb).
- Harmonious organization is obtained by assigning each set of operation to the appropriate
person so that division of labour leading to efficiency and effectiveness can be achieved..
- Co-operation by labour and management can be achieved.
- Specialization of workers can be achieved by increasing efficiency.
- Striving for entrepreneurship can be achieved through proprietorship.
Management, therefore, can be seen as the efficient and effective use of resources to achieve
predetermined objectives and goals. It is the systematic, subjective and objective combination of
human and non-human resources under a dynamic business environment, with planned
objectives properly directed and controlled for desired output. It is the process of allocating
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firm’s resources by planning, organizing, directing, and controlling for the purpose of producing
desired outputs. It is a problem-solving process of achieving organizational goals through the
efficient and effective use of scare resources in a dynamic business environment. How one views
management depends on the knowledge one has of management, and the person’s professional
and cultural background. Management is the activities and physical resources in the attainment
of predetermined goals and objectives.
Decision—Making Process
Irrespective of the approach a decision maker decides to follow, there are certain steps that
business managers should take in the course of actually making business management decisions.
The steps to be taken into consideration include:
(1) Define the business problem,
(2) Establish the business goals and objectives,
(3) Generate alternative solutions to the business problem,
(4) Select an optimum alternatives solution,
(5) Implement the relevant business decisions
(6) Evaluate the effects of the decisions taken.
Managers are employed to make decisions. Decisions are concerned with planning, and other
managerial functions relating to the resources and activities of their business organizations.
Certain factors affect the efficiency and effectiveness of business management decisions, and
these include environmental factors, strategic actions, and resources, among others.
Generally, environmental factors that may affect managerial decision in business organizations
include:
- Technology
- Competition
- Government regulation
- Economy
- Legal issues
- Political issues
- Cultural issues
- Industry structure, among others.
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Corporate strategies, which may be used for efficient and effective business management
decisions, include:
- Market penetration
- Market development
- Product development
- Backward integration
- Forward integration
- Concentric diversification
- Horizontal diversification
- Conglomerate diversification
- Retrenchment strategy
- Divestiture strategy
- Harvest strategy
- Liquidation strategy
- Mergers
- Acquisitions
- Joint ventures
- Turn around strategy
- Combination strategy
- TQM strategies
- Marketing strategies
- Production/operations strategy
- Financial strategy
- Personnel strategy, among others.
Corporate performance measures that may be used to evaluate business management decisions
include:
- Market share
- Sales volume
- Marketing cost
- Return on investment
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- Gross earnings
- Total assets
- Profit before tax
- Current ratio
- CAMEL measures
- Productivity of company resources
- Employee satisfaction
- Customer/client satisfaction
- Corporate social responsibility objectives
- Earnings per share
- Dividends per share, among others
Some Basic Business Management Concepts
It has already been stated that management is the efficient and effective utilization of resources.
Most of the principles of management, if not all, are important in the management of all
business-enterprises, though in varying degrees and emphases. Some of these management
principles include:
Theory X— which states that people are ready to work with little or no force at all.
Theory V—This states that people are reluctant to work unless when force is applied.
Theory Z— This states- that both the subordinates and the manager work as a team.
Managerial Efficiency and Effectiveness: Efficiency has to do with optimum utilization of
resources (i.e. not wasting resources), while effectiveness deals with the achieving of set
objectives. Therefore, a business enterprise can be efficient without being effective, -
Total Quality Management (TQM,): This is a concept in management, which says that every
individual and division in an organization should emphasize the satisfaction of customers and
clients. It is the managerial philosophy, technology or belief which emphasizes customer/client
satisfaction by every individual in the organization irrespective of title or function. It is the
efficient and effective use of resources to achieve the major objective of buyer/customer/client
satisfaction by all sections and people of the organization via improved products, processes, and
people. Some of the aspects of total quality management (TQM) are:
Relationship marketing: This is personalized marketing, direct marketing, or one-on-one
marketing, with the aim of establishing long-lasting relationship with the customer/client.
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Value analysis: This deals with the removing or reducing of unnecessary components/additions
in a product or service without impairing value. –
Bench marketing: This is concerned with the studying of the product, people, and processes of
other rival companies in other to do better than them, or at worst do as much as they are doing.
Business process re-engineering: This is concerned with changing old ways of carrying out
managerial activities.
Peter’s principle: This managerial principle states that an organization grows to a level or
situation where managerial activities of high importance are manned or handled by people of
substantial incompetence.
lnjellitis: This is a managerial situation where an incompetent manager Would not like to work
with a competent subordinate for the fear of losing his/her job to the subordinate.
Contingency management: It relates to the exercise of alternative courses of action. In
management context, the term contingency has become a synonym for situational management.
Budget: A type of plan that specifies anticipated results in numerical terms and serves as a
control device for feedback, evaluation, and follow-up.
Forecasting: A method of predicting future business conditions For the purpose of establishing
goals and budgets.
Policy: A general guide to thinking and action. Organizational strategy should be a function of
policy, environment, etc.
Procedure: A guide to action that concerns he chronological steps entailed in attaining some
objectives, such as allowing a person to return faulty product.
Rule: An inflexible guide to action, such as a “No smoking”.
Objectives: are some things management is attempting to achieve. They may be conceptualized
according to different levels. Objectives are said to exist at different levels to suggest that some
distinctions exist in terms of (a) how broadly or specifically the objective is stated; (b) The time
flame over which the objective is being viewed, and (c) how important the objective is to the
organization, among other considerations.
Strategy: To modern business management, strategy has come to mean the type of top-level
planning decision that stipulates the long—term relationship between an organisation and its
environment. Strategic planning is the longest-term plan. Intermediate and short-term plans are
derived from a firm’s overall long-term objectives, strategy, or mission. Strategy is a course of
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action for achieving stated goals or objectives, while being sensitive to environmental factors.
Programme: Programmed management decisions are those that are repetitive and routine.
Managers tend to develop fixed procedures for handling programmed decisions. Typical
examples include hiring decisions in a personnel office, billing decisions in a hospital, etc.
Span of Control: i.e. the number of people reporting to a manager. When the span of control is
narrow, relatively few people report directly to the manager. When the span of control is wide,
many individuals report directly to the same manager. Span of control is sometimes known as
‘span of management’ or span of responsibility. It refers to the number of subordinates who can
be effectively supervised by one manager, supervisor, or anybody in position of authority,
Mathematically, it has been proved that as the number of subordinates supervised increases, the
number of relationships between them and their supervisor also increases i.e.,
R = n(2 n + n – 1)
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Where R = number of relationships,
n = number of subordinates.
Unity of Command: This principle means that there should be only one managerial/executive
source giving directions to a subordinate or department. This means that only one manager
should be in the position of command, and no staff should be required to accept orders from
more than one manager or supervisor neither should any department, section, or division be
subjected to more than the command of one manager.
In summary, therefore, management can be broadly defined as the efficient and effective use of
both human and non-human resources which involve the process of planning, organizing
directing controlling for the purpose of producing desired outputs. Management is a process
because all organizational managers, irrespective of their skills or type of business, engage in
certain interrelated activities or functions. These activities or functions include the following
planning, innovating, organizing, communicating, controlling, motivating and representing.
Types of management decisions in business organizations include:
• Strategic decisions: These are decisions which set the principal goals and objective of tire
organization with consideration of impacting environment. They are long term decisions.
• Operating Decisions: These are short term decisions that define issues as outputs, pricing,
inventory level and others.
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Administrative Decisions: They are concerned with defining the organizational structure by
establishing lines of authority and communication as desired.
• Tactical Decision: Routine and usually contain few and relate to the efficient use of
organizational resources.
• Personal Decision: Decision made by a manager as an individual and cannot be delegated to
subordinates.
• Basic Decisions: Such as location of industry.
• Routine Decisions: Business decisions that are routines and repetitive
• Unprogrammed Decisions; Decisions that are taken following a course of action.
The various managerial skills for efficient arid effective management include:
Technical Skill: Knowledge of work with tools / techniques
Human Skill: Ability to work with people
Conceptual Skill: Ability to recognize significant
Design Skill: Skill of good design and practical solution to problem.
Kinds of Managerial Authority include:
Formal line authority
Staff authority
Functional authority
it is important to mention that the element of management at every level includes delegation of
authority, staff responsibility and accountability in business.
We have attempted to discuss some of the basic management concepts and principles, which
would assist a manager or decision-maker, whether in large or small business organizations, to
make efficient and effective business management decisions. Expectedly, a book of this nature
should serve as an introduction to small business and entrepreneurship management; expose
readers to extant theories and perspectives in the field of small business and entrepreneurship
management; provide the skills, knowledge and abilities to start arid manage a business venture
efficiently and effectively; and awaken and stimulate the entrepreneurial spirit in readers of the
book. The remaining chapters in this book would examine cognate dimensions of small business
and entrepreneurship management as they relate to some, if not all, of these issues.
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2. INTRODUCTION TO ENTREPRENEURSHIP
Business is defined as organized efforts by individuals or companies to engage in the provision
of goods, services or ideas to relevant market of interest in exchange for rewards or money. The
importance of small business enterprises has persuaded and increased government intervention in
order to encourage the establishment, survival, and growth of various types of SBEs in many
countries of the world.
The common types of business enterprises include:
Sole Proprietorship; General Partnership; Limited Partnership; Corporations; and Limited
Liability Companies.
1. Sole Proprietorship: It is a form of business enterprise that is owned and managed by one
person who bears the risk and makes decision individually.
The advantage include: ease of formation, simplicity of formation, sole claim on profits, tax
advantage, etc. Its disadvantages are: unlimited liability, lack of continuity, Jack of management
specialization, difficulty, of raising adequate human and non-human resources among others. -
2. Partnership: Business enterprise consisting of two or more people pulling resources together
to run a business. There are three types of partnership, and these include:
a. General partnership: It is the most easy to form type of partnership. Its characteristics include
personal liability, equal control and management, equal authority (except it is limited by the
Partnership agreement), sharing of profits and losses, unlimited number of owners, fiduciary
relationship, limited life span, non- transfer of interest except by general agreement, tax on
partners.
b. Limited Partnership: Consists of one more general partners who take business decisions and or
more limited partners who are passive investors or Participants,
c. Limited Liability Partnership: A type of partnership with a liability shield/protection for
partners.
3 Corporation: It is a type enterprise with legal protection. It comprises of shareholders, board
of directors and
officers who run the business affairs.
4. Limited liability Company: It is a type of business enterprise that combines some features of
partnership and
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corporations. It requires a legal process to form.
What is Entrepreneurship?
The choice of definitions in management science disciplines (including entrepreneurship) is a
debatable issue However, a clearly stated set of definitions in any discipline is necessary for
scientific understanding, description, explanation, and prediction. In addition, clearly stated and
agreed-upon definitions in any discipline assist researchers and theorists to build upon each
other’s works, and help practitioners and decision-makers to decide whether research findings
are relevant and applicable to their decision situations.
An exhaustive treatment of’ the field of entrepreneurship seems to be a difficult task because
entrepreneurship has foundations in many socio-psychological disciplines, and draws
substantially from all the organic business functions. However, there are some foundation
concepts and constructs that define die field of entrepreneurship; their consistent definition,
treatment and application are likely to reduce confusion and inter-study inconsistencies of
research findings.
The earliest reference to the term “entrepreneurship” has been traced to Richard Cantillon’s
(1734) work. To Richard Cantillon, entrepreneurship meant self-employment with certain
returns. Generally, the core of entrepreneurship (both individual and corporate forms of
entrepreneurship) is the pursuit of business opportunity.
Entrepreneurship is the process of assembling resources to create and build an independent
enterprise encompassing creativity, risk-taking and innovation. Entrepreneurship focuses on
opportunity-seeking and is, therefore, relevant/related to the marketing discipline, and marketing
has direct relevance to many entrepreneurship definitional factors.
Entrepreneurship may be seen as an elusive concept. There are many views of what is meant by
the term entrepreneurship, some of which focus upon business development aspects, while others
focus upon entrepreneurial behaviour which may be linked to activities of those in the non-
commercial sectors as well as commercial sectors. For example, entrepreneurship is often
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considered synonymous with ‘new firms’ and/or existing ‘small, micro and medium-sized
enterprises’ (SMMEs), and/or owner-managers or in some cases ‘dynamic’ or fast growing new
firms. Also, entrepreneurship can be seen as:
1. having specific functions in the economy, particularly in innovation and resource allocation
with entrepreneurs seen for example as innovators.
2. Or as a form of behaviour concerned with the systematic grasping of business opportunities;
3. Or as a set of personal characteristics, cognitive styles, attributes or motivations (such as risk
taking or being a ‘great leader’) of entrepreneurs.
Entrepreneurship may be defined in terms of three components:
a. Innovativeness (i.e., introducing new goods, services or technologies, and developing new
markets).
b. Proactiveness (i.e., seeking new ways of bringing entrepreneurial concept to fruition).
c. Constructive risk-taking (i.e., making reasonable decisions when faced with environmental
uncertainties; systematically mitigating risk factors).
Therefore, weak entrepreneurial companies are characterized by a high aversion to risk, and low
levels of proactiveness and innovation. Such companies do not practice good market orientation.
Generally, market orientation is most effective when a company maintains a moderate (not high)
level of entrepreneurship.
As stated above, the first person to coin the word ‘entrepreneurship’ in the 18th century was
Richard Cantillon and he defined entrepreneurship as a business activity concerned with bearing
the risk of purchasing at a certain price and selling at an uncertain price. An entrepreneur,
amongst other things, is that person who creates a business enterprise, establishes it, and nurses it
to survival and success. Therefore, men and women can become entrepreneurs for many reasons.
Well-performing entrepreneurs are also reasonable risk-takers, self-confident, hard-working,
goal-setters, accountable, and innovative. However, these entrepreneurial traits defy clear-cut
separation because each of these entrepreneurial traits shades into another trait.
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Entrepreneurship is linked to the processes of creating a business concern. Entrepreneurship is an
essential variable in any nation’s economic growth and development, and as a result has been
substantially documented in such disciplines as psychology, sociology, economic, business and
political science literature, among others. Entrepreneurship can, also, be conceived as a process,
which involves the efforts of an individual in identifying viable opportunities in a business
environment and obtaining and managing the resources needed to exploit those opportunities.
Therefore, any managerial action by a small or large business entrepreneur geared towards
having and maintaining a balance between these opportunities and the relevant environmental
issues will assist in the growth and development of an enterprise.
There has been no consensus in defining entrepreneurship and innovation in extant literature.
Some studies have dealt with entrepreneurship and innovation by investigating the personality
and psychology of entrepreneurs and innovators, while others have talked of the nature of
entrepreneurship and innovation in organizations. Entrepreneurship may be conceived to involve
capturing of ideas, converting the ideas into goods and services, and then building a business
venture to take the goods and services to the relevant market that need and want the goods and
services. Entrepreneurship represents organizational behaviour. The key elements of
entrepreneurship include risk taking, proactivity, and innovation. However, these three elements
are not sufficient to ensure organizational success or efficiency and effectiveness. An efficient
and effective firm not only engages in entrepreneurial managerial behaviour, but also has the
appropriate culture and organizational structure to support such entrepreneurial behaviour.
Therefore, entrepreneurship may be seen as organizational behaviour that is related to change
and innovation, Entrepreneurship can exist within or outside formal organizations.
Corporate entrepreneurship (intrapreneurship) takes place in organizations, and goes on within
organizations, regardless of their size. Intrapreneurship emphasizes such issues as individual
intrapreneur, the formation of new corporate ventures, arid the characteristics of entrepreneurial
organizations. Entrepreneurs are distinct from small business owners. Small business owners are
mainly concerned with securing an income to meet their immediate needs. They do not usually
engage in innovation. Entrepreneurs, on the other hand, have higher achievement motivation and
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risk-taking, and are inclined to innovation and change. This means; therefore, that
entrepreneurship and innovation are closely related and complementary. The words a person uses
to describe entrepreneurship usually influence that person’s ability to think about and investigate
the phenomenon of entrepreneurship.
The Entrepreneurship Process
Entrepreneurship is the process of creating value by pulling together a unique package of human
and non-human resources to exploit business opportunities. The entrepreneurship process is
anchored on innovation and renovation which leads to a disjointed and non-linear triggering of
events. Business venture implementation and success/growth (or failure) then follow,
The entrepreneurial process consists of:
a. Deciding to become a business entrepreneur.
b. Developing successful business plan/business model.
c. Moving from a business idea to an entrepreneurial firm or company.
d. Managing and growing the entrepreneurial business firm or company.
Many factors influence the entrepreneurship process. Perhaps, the decision about whether to start
a business is best considered in the light of an understanding of the entrepreneurial process. The
entrepreneurial process has four distinct phases: (1) identify and evaluate the business
opportunity, (2) develop the business plan, (3) determine the resources required, and (4) manage
the resulting business enterprise created. While these phases proceed progressively, none is dealt
with in isolation or is totally competed lefore work begins on other factors in a sequential phase.
For example, to successfully identity and evaluate a business opportunity (phase I), an
entrepreneur must have in mind the type of business desired (phase 4). Therefore, the
entrepreneurial process involves more than just problem solving in a typical management
position. An entrepreneur must, in addition, find, evaluate, and develop a business opportunity
by overcoming the strong forces that resist the creation of something new.
Entrepreneurship Development Courses in Institutions of Higher Learning
In recent times, entrepreneurship education has been developing rapidly steadily, but unevenly,
in many countries of the world. However, few future entrepreneurs (students), while in college or
university, realize that they will pursue entrepreneurship as their major life goal after graduation
from colleges or universities. Even among the few students that do, relatively few individuals
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will start a business immediately after graduation, and even fewer will prepare for a new venture
creation by working in a particular position or industry. This mandates that entrepreneurs
continually supplement their education through books, trade journals, seminars, or taking courses
in other areas of specialization. Generally, skills that need to be acquired through seminars or
courses include creativity, management in the organic business functions, environmental
assessment and opportunity identification, venture evaluation, and business-deal making and
negotiations, among others.
Entrepreneurship education is a fast growing area in many colleges and universities. While many
universities offer at least one course in entrepreneurship at the graduate or undergraduate level,
few of them actually have a major or minor concentration iii entrepreneurship studies. Although,
courses in entrepreneurship vary by university/college, there is a great deal of commonality,
particularly in [lie initial one or two courses in this field of study. These courses tend to reflect
the overall objectives for a course in entrepreneurship. Course objectives in entrepreneurship
tend to emphasize skill identification and assessment; understanding of entrepreneurial decision
making and the entrepreneurial process; understanding of the characteristics of entrepreneurs and
their role in economic development on a domestic and on an international basis; assessing
business opportunities and coming up with an idea for a new venture (feasibility studies); writing
and presenting a full-scale business plan; knowing how to obtain human and non—human
resources; managing and growing the enterprise; and understanding the role of entrepreneurship
within an existing organization (i.e., intrapreneurship).
Some of the criteria for evaluating entrepreneurship education programmes include:
1. Number of courses offered.
2 Relevant publications by lecturers.
3. Impacts of entrepreneurship on communities.
4. Business venture creation by students and young graduates.
5. Innovations emanating from entrepreneurship programmes.
Objectives of Entrepreneurship Courses in Institutions of Higher Learning
A course in entrepreneurship at whatever level (in a university, polytechnic or college) should
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have the following major objectives to the relevant participants/audience:
• Understand the role of new and smaller firms iii the economy.
• Understand the relative strengths and weakness of different types of enterprises.
• Know the general characteristics of an entrepreneurial process.
• Assess the participant’s (student or up-coming entrepreneur) own entrepreneurial skills.
• Understand the entrepreneurial process and the product planning and development
process.
• Know alternative methods for identifying and evaluating business opportunities and the
factors that support and inhibit creativity in business operations.
• Develop an ability to manage (form, organize, and work in) interdisciplinary teams;
• Know the general correlates of success and failure in business innovation and new
venture creation.
• Know the generic entry strategies for new business venture creation.
• Understand the aspects of creating and presenting a new business venture plan.
• Know how to identify, evaluate, and obtain relevant human and non-human resources.
• Know the essentials of:
- Marketing planning
- Financial planning
- Operations planning
- Organization planning
- Venture launch planning
- Human resource planning, etc.
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• Know how to manage and grow a new business venture for survival, efficiency and
effectiveness.
• Know the managerial challenges and demands of a new venture launch
• Understand the role of entrepreneurship in existing organizations (i.e., intrapreneurship).
Entrepreneurship’s Characteristics
Relevant extant literature has documented many explanations regarding the differences between
persons who undertake the activities necessary for the pursuit and exploitation of business
opportunities (i.e., entrepreneurs) and non-entrepreneurs. These differences maybe as a result of:
1. Variations in the beliefs individuals hold about the efficacy of perceived available resources.
2. The resources at one’s disposal.
3. Expectations about the value of these resources.
4. Considerations of one’s opportunity costs.
5. Previous experiences.
6. Optimism.
7. Action-orientation:
8. Tolerance for ambiguity.
9. Need for achievement, among others.
3. SMALL BUSINESS & ENTREPRENEURSHIP
History has it that small business entrepreneurship originated in Eastern Mediterranean. Nigeria
has become increasingly important in the world economy because of its abundant human and
non-human resources. It is important to state that Nigeria has put many measures in place to
encourage and promote participation in small business arid entrepreneurship over the years.
These are through the provisions of various loan schemes and credit
E.g. National Economic Reconstruction Food, Nigeria Export Promotion Council, National
Directorate of employment, Industrial Development Centre among others.
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The managerial roles of entrepreneurs in small business enterprises include:
1. Arrangement of work to be carried out in the organization
2. Provision of capitals through loans, savings or both
3. Carries out the managerial functions and also ensuring that the goods and services are
produced and marketed accordingly
4. Policy/decision on location of business and mode of production of product.
Small business entrepreneurship is relevant to today’s employment, production, innovation,
exploitation of business opportunity, value-added to business concerns to as well as efficient and
effective utilisation of resources and running of business by individuals for optimal generation of
industrial weight and minimization of economic, technological, social and political ills to ensure
a reduced government expenditure, improved standard of living of Nigerians, creation of
balanced budget, growth arid development of Nigerian economy not minding the presence of
multi-national and other large firms in Nigeria as a result of hard work and dedication to the task
to be carried out in small business organization, and the relevant business environment. The
features of small business enterprises include independent ownership and management, relatively
small in size, reliance’s for internal sources of finance more labour-intensive, encourage dynamic
competition, productive avenue for talent and energies, individual fulfillment of potentials, low
levels of investments, low turn-over, few employees and managers, less legal requirements and
easy evasion of tax.
In addition to a good business idea and a good business plan, there must also be a good
entrepreneur. Although the “ideal” entrepreneur cannot be profiled, there are certain trends and
norms for a potential entrepreneur. In some respects, entrepreneurial traits such as responsibility,
tenacity, and the ability to handle ambiguity are more important business success than the goo or
service being offered.
The entrepreneurial process involves the steps of finding, evaluating, and developing
opportunities for creating a new business venture. Each step is important to the eventual success
of the new business venture, and each step in the entrepreneurial process is closely related to
other steps. For example, before the opportunity identification stage can result in a meaningful
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search, the potential business entrepreneur must have a general idea about the type of company
desired. However, the resulting selection criteria employed cannot be too inflexible, otherwise a
valuable business idea may be excluded.
There are both Formal and informal mechanisms for identifying business opportunities. While
formal mechanisms are generally found within a more established company (i.e.,
intrapreneurship), most entrepreneurs use informal sources for their ideas, such as being sensitive
to the complaints and chance comments of friends and associates.
Once the business opportunity is identified, the evaluation process begins. Basic to the screening
process is the understanding of the factors that are responsible for the availability of the business
opportunity (such as technology, market changes, competition, or changes in government
regulations). From this base, the market size and time dimension associated with the business
idea can be estimated. It is important that the business idea lit the personal skills and goals of the
entrepreneur, us well as that the entrepreneur thrive a strong desire to see the opportunity brought
to fruition, survival and growth to the process of evaluating a business opportunity, the required
human anti non-human resources should be clearly defined and obtained at the lowest possible
cost.
Managing a new business venture differs in many ways from managing an existing business
operation, particularly along the five key dimensions of: strategic orientation, commitment to
business opportunity, commitment of relevant human and non-human resources, control of
resources, and management structure. The entrepreneurial business venture presents the manager
with a different set of circumstances than what the corporate manager typically faces. As a result,
a distinctly different set of skills needs to be developed, either through entrepreneurial
experience or education.
Just as there is no distinct entrepreneurial personality profile, there is to specific entrepreneurial
career path. Education, personality, childhood family life, employment history, adult
development history, adult non-work history, current work situation, current perspective, and
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current family situation affect the avenue through which an individual approaches
entrepreneurship in business.
The education of potential business entrepreneurs is a difficult task, complicated due to the
absence of any clear career patterns. Many potential business entrepreneurs are not educated in
business or engineering schools; many do not know that they are going to be business
entrepreneurs in the future. Generally, the goal of an entrepreneurial education curriculum should
be to provide a program addressing entrepreneurship at different levels, and which may include
personal assessment of the business entrepreneur, business idea generation, business opportunity
assessment, developing a business plan, and the business skills needed at various stages in the
life of an entrepreneurial business venture.
The starting point for any successful new business venture is the basic good or service to be
offered. This idea can be either generated internally or externally through various techniques.
The possible sources of new ideas range from the comments of consumers/clients to changes in
government regulations and policies. Monitoring the comments of acquaintances, evaluating the
new products offered by competitors, becoming familiar with the ideas contained in previously
granted patents, and becoming actively involved in research and development are also techniques
for coming up with a good product idea. In addition, there are specific techniques business
entrepreneurs can use to generate ideas. For example, a better understanding of the
consumer’s/client’s true opinions can be gained from using a focus group. Another consumer-
oriented/client-oriented approach is problem inventory analysis, through which
consumers/clients associate particular problems/faults with specific products and then develop a
new product that does not contain the identified faults.
Brainstorming, a technique useful in both idea generation and problem-solving, stimulates
creativity by allowing a small group of people to work together in an open, non-structured
environment. Other techniques useful in enhancing the creative process are checklists of related
questions, free association, idea notebooks, and the “bigdream” approach. Some techniques are
very structured while others are designed to be more free-form. Each business entrepreneur
should know the techniques best suited to him or her and what other techniques are available if
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one approach does not work.
Once the idea or group of ideas is generated, the product planning and developing process
begins. If a large number of potential ideas have been, uncovered, they must be screened or
evaluated to determine their appropriateness for further development. Ideas showing the most
potential are then moved through the concept stage, the product development stage, the test
marketing stage, and finally into commercialization. The business entrepreneur should constantly
evaluate the idea throughout this process.
A business is considered to be a small business enterprise if it possesses the following features:
- Few members or employees.
- Low amount of investment and business turnover.
- Small size within the industries,
- Mangers are also owners.
- Employees are not greater than 50 and financial capital outlay is not more than N150, 000
in the case of Nigeria.
4. ENVIRONMENT FOR ENTREPRENEURSHIP DEVELOPMENT
A small business organization is a product of its environment, and it exists to satisfy sonic needs
and wants in the environment, whether the organization is a profit, government, church, charity
or civic organization. Therefore, the business environment provides the reason for the life of a
small business organization. As business environments become more complex and dynamic,
small business enterprises must become more entrepreneurial in order to identify new business
opportunities for sustained efficiency and effectiveness.
Environment has been seen as the totality of the factors that affect, influence, or determine the
operations and/or performance of a business. The environment determines what is possible for
the organization to achieve. The environment provides the lifeblood for the organization by
providing a market for its product and services and by serving as a source of resources.
To be successful, therefore, an organization must interact with its environment because it
supplies the organization with inputs (in the form of resources, information, etc) that are
necessary for its products and services. Every organization exists within an extensive and
complex environmental network. An organization’s environment refers to all groups, norms and
conditions with which an organization must deal with. It includes such things as the political,
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cultural, economic, religious, educational and other relevant factors that affect an organization
and which are in turn affected by it. The environment of an organization can be seen as the total
set of outside forces surrounding and colouring the behaviour of the organization, its members,
and parts.
Generally there are three major business environments, which a small business organization must
face, and challenge in order to succeed in a business endeavour. These small business
environments are the micro-environment, the intermediate environment and the macro-
environment. The micro-environment is the organization itself. It comprises various internal
systems and operations that the organization uses to produce the product and services available
and necessary to satisfy the many needs mid wants of clients, customers and groups in the macro
environment. The intermediate business environment is the environment that connects the
organization to the macro environment. It comprises various systems such as suppliers, insurance
companies, bankers and distributors that link the organization to its macro environment. A small
business organization’s macro environment is the total environment in which the organization
exists. It comprises systems and factors that are outside the organization. These major business
environments affect the organization in one way or the other.
Enabling Environment For Entrepreneurship Development In Nigeria
Industrial infrastructure or enabling environment is one of the many environments within which
small business organizations operate. The elements of the enabling environment include
electricity, transportation, communication, water supply, financial infrastructure and educational
infrastructure among others. These elements of the enabling environment are salient factors to be
considered in the operation and management of small business enterprises in Nigeria.
The efficiency and effectiveness of the infrastructural system in any economy, including Nigeria,
affect the overall level of the investment, industrial competitiveness, and the pace of
participation in small and medium enterprises, among others. In Nigeria, like in other developing
economies, these elements that constitute the enabling environment for small business
management are in most cases being provided by government. In his period of structural
adjustment in Nigeria, when private sector participation in business activities, including small
business enterprises, is being emphasized, it is imperative, therefore, to examine the adequacy, or
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otherwise, of these elements of the enabling environment or industrial infrastructure.
A business environment can be seen as a total set of internal and external forces or factors that
affect, influence or determine the performance of business organization, its members and unit.
the micro business environment are internal factors that affect the level of performance and
achievement of a small business organization. The major sub-systems are goal and work system
power and authority system and human factor system which if strategically combined leads to
efficient and effective use of resources in small business organization. Intermediate business
environment are linking factors or systems which span the boundaries or create the relationship
that exist between the organization and the external environment.
The micro business environment is the environment within which a small business organization
works and for the organization to survive there must be a successful interaction with its
microenvironment. Therefore, an organization is left with the choice of adapting or quitting the
environment, otherwise it will eventually die. This environment is broadly classified into
economic, technological, socio- cultural, political and legal, competitive and international
systems and can be referred to as general environment.
A business environment can also be viewed to be composed of the following:
1. The Remote Business Environment: it influences the operation of the organization without it
exerting any meaningful influence on the environment; for example, ecological factors.
2. The Business Industry Environment: It deals with competitive structure of relevant industry of
business operations e.g. Monopoly, oligopoly, monopolistic competition.
3. Operating Environment System of Business: It represents the level at which the individual
small business company has the greater influence on the business and the business requires
quicker response.
Industrial infrastructures (such as electricity, transportation, etc) affects the operation of a
business organization and an efficient and effective industrial infrastructure will go a long way in
enhancing or encouraging participation in, and management of small business enterprise in
Nigeria.
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5. FEASIBILITY STUDY& ENTREPRENEURSHIP DEVELOPMENT
Feasibility study is a process which examines the factors surrounding the production, marketing,
staffing and financing of a small business venture. It is often associated with new or expanding
small business operations and identified those actions that if taken or followed will help assure
the success or continued success or continued success of new or existing business ventures.
The major features of a feasibility study include the product or service, the market size of the
product/ services, the management team, the production or operations process and plan, the
marketing plan, manpower requirements, estimated capital expenditure estimated working
capital, cash budget, projected balance sheet and profitability analysis and evaluation of project.
The following steps are associated with feasibility study:
Section 1: Product / Service Analysis: This section of the feasibility study deals with the type of
product/service the small business enterprises plans to go into,
Section 2: Market Analysis: The profitability prospects of any products/services are largely
determined by the market factors such as the extent of the market, intensity pattern, and nature of
competition, among others.
Section a: Personnel Analysis: This focuses on the structure of the organization of the project
and the capability and morals of its management and staff which is viewed under organizational
structure, management, technical partner participation, local stall training need, personnel and
associated cost and office equipment and cost.
Section 4: Production and technologies Analysis: the technical aspect of the operations of the
proposed project is considered under: Description of the printing press, machinery, factory and
other buildings, engineering department equipment and support facilities.
Section 5: Financial Analysis: The financial implications of the proposed project expected
operating cost and revenue.
Section 6: Project Implementation Strategy: This is concerned with the estimated times of
completion as well as the activities to be performed in the course of the project.
Section 7: Conclusion: it states the advantages, drawbacks, and probabilities or likelihood of
implementing the proposed project.
6. PLANNING FOR ENTREPRENEURSHIP DEVELOPMENT
The development of a coherent and implementable business plan is beneficial to companies, and
this development should involve a strategic process. Planning is, generally, essential for any type
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of business, whether big or small. A business venture cannot go far in terms of survival and
growth without a solid business plan, which is a document that meaningfully describes an
entrepreneur’s business direction. Investors or venture capitalists usually want to look at an
entrepreneur’s business plan before considering about investing their money in the business
strategy.
One of the most salient steps in the establishment of any new business enterprise is the design of
a business plan. A business plan performs the following managerial functions in a small business
enterprise functions:
I, It can assist the entrepreneur crystallize and direct his business ideas,
2. - It can help the entrepreneur set goals and objectives, including the associated criteria to
measure performance,
3. It can act as a means to attract any forrn of funding needed for the business
4. It can convince venture capitalist and other investors that the entrepreneur has
isolated some beneficial growth business opportunities in all dimensions.
A business plan is a document that meaningfully describes an entrpreneur’s business direction.
That it shows the purpose, philosophy, plan of action, expected challenges and the route of future
success, growth and development. An enterprise without a plan has no future in terms of
survival and growth in the economy.
The difference between a successful and unsuccessful company is the level of adequacy,
relevance and soundness of their business plan. Business plan must be flexible and revised as
relevant environmental conditions facing the company change and as more accurate data and
information become available. A business plan serves as a planning tool for growth, a document
to convey relevant information and index to measure and monitor performance over time, among
others.
A business plan contains cover page, table of contents, executive summary, company
description, the production or service, marketing, the market, management, ownership structure,
environmental assumptions, financial statements and projections, and appendixes. Product life
cycle and new product life cycle and new product development process assist in the development
of a business plan for new and existing business organization.
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7. FINANCING ENTREPRENEURSHIP DEVELOPMENT
Finance is one of the factors to be considered in business and lack of adequate finance can lead
to the failure of a business, Every business is concerned about financing policies and strategies
for efficient and effective business management decisions.
Sourcing of finance is necessary for operating expenses, establishing a business expansion,
upgrading equipment, purchasing capital items, building up inventory, entering a new
geographical market among other money must come from somewhere outside the enterprise; that
is by borrowing using cash flow statements.
Small business financing options include personal funds, informal sources, equity
financing/venture capital, banks and non-bank leaders, credit cards, commercial credit,
customers financing, receivable financing factoring, leasing, public offering.
Short and long terms financing in small business has to do with various types of loan which
include:
(i) Short term financing, e.g. working / operating capital
(ii) Intermediate term financing e.g. loan for furniture and fittings
(iii) Long term financing e.g. business purchases.
A good business plan is one of the most valuable tools a small business has when seeking outside
financing for example from a bank. Lenders tend to look at character, cash flow, collateral,
capital and other relevant conditions. For the purpose of the loan-finance, a business plan must
be composed of: business identification, business description, management description,
marketing, loan information, other information, executive summary and credit history
After choosing the type of loan and potential lender / bankers, it needs to get the following
documents prepared:
- The balance sheet and income statement
- To determine the healthiness of a small business, ratios with the aid ofa balance sheet and
income statement can be prepared in comparison with other business in the same industry and
industry average.
8. BASIC ACCOUNTING FOR ENTREPRENEURSHIP DEVELOPMENT
Basic accounting system is important for relevant decision — making in small business and
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entrepreneurship - management as long as it is of good standard and help in reaching the
objective of the business as well as achieving it.
Any methods used to determine when and how to report income and expenses in a small business
enterprises must entail recording, reporting and summarizing of financial data for relevant
business management decisions; The business enterprise can use cash method or and accurate
method of accounting. In keeping accounting records and books, small business must ensure to
keep the following documents.
The Income Statement is calculated by adding all revenues front a business and then subtracting
all the costs and expenses of operating the business. A business’ income statement is composed
of some of the following: Gross revenue, return and allowances, cost of goods sold, general and
administrative expenses among others.
The balance sheet shows the financial condition of a business that is, what it owns and what it
owes in the course of business transaction. This is prepared periodically.
- Asset is long-termed and is composed of current fixed and other assets.
- Liability is the enterprise’s debt, and is made up of account payable and accrued wages.
- Owner’s equity shows the business’s net worth.
- The Cash Flows Statement shows what happens to an enterprise’s cash over a specific period of
time and is divided.
- Profit Margin measures the standing health and operation of a small business’s-activities.
- Budget helps a small business to communicate, organize and monitor its activities.
9. LEGAL ISSUES IN ENTREPRENEURSHIP DEVELOPMENT
Many legal issues facing business activities can be categorized into the broad areas of contract
tort, property, agency, commercial, or bankruptcy law. These broad areas of law cover
many business activities. A small business enterprise, including being personally liable for
violating those laws can have disastrous consequences on the operations of a small business
enterprise, including being personally liable for violating those laws, in addition to the small
business enterprise being liable. The legal issues relating to the establishment of a small business
enterprise are complex, and many variables affect the business decision of an entrepreneur, and
these may spur him to seek for legal security.
Laws define the rights of individuals and institutions including the relevnt relationship that exist
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between business enterprises and their stakeholders. Laws, also, define a business enterprise’s
duties and responsibilities, its relevant participants and publics of interest. Laws are binding and
enforceable on all involved directly or indirectly with the operations of a business enterprise.
It is nearly impossible to list every law that may be applicable to the formation and operation of a
small business enterprise in all countries of the world. However, any law meant for the
activities/operations of companies must functionally make a trade-off concerning the conflicting
interests of the relevant parties involved in company incorporation, which may include
shareholders, other creditors, directors, company staff:, the government, and the general public,
among others. It means, therefore, that any company law, decree, or act should endeavour to
formulate and enforce the rights, duties, and liabilities of the relevant stakeholders as listed
above.
Generally, a small business entrepreneur should be aware of some categories of laws relevant to
his business operations, and these include:
- Business formation laws.
- Consumer protection laws: Various laws protect consumers from fraudulent acts, misleading
advertisements, anti-defective products, among others.
- Contract laws.
- Employment hiring laws.
- Environmental laws and regulations: Various laws and regulations deal with issues like
emissions, asbestos, hazardous waste, the discharge of water, and other items that affect the
environment, among others.
- Intellectual property laws.
- License and property laws.
- Securities laws, which deal with how to comply with these laws when selling stock or other
securities.
- Tax laws.
- Zoning laws: Local laws/regulations may limit the use of particular property and may regulate
parking, waste disposal, signage-post, business that can be conducted, among others.
An entrepreneurial business enterprise should keep good record in order to comply with various
laws and to operate business activities properly and legally. These include keeping accounting
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and book-keeping records, contracts, corporate records, correspondence records and others.
An enterprise or a sole proprietorship type cannot escape liabilities except if it is a corporation or
a limited liability type of business which can reduce the possibility of these liabilities through
adequate capitalization, insurance, proper signatures, no mingling and withholding which is
achieved if these are properly noted.
A small business enterprise should avoid giving personal guarantees to creditors to avoid
exposure of personal assets for repayment of obligation, and negotiation is advised to be made on
issues of bigger deposits, limited term of guarantee and limited guarantee.
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