INTRODUCTION

Society is a social and economic context in which people establish or acquire business
relationship. The social and economic context has so developed that no man can live as an
island alone, i.e. no man can supply all his human needs and wants personally. Society
generally exists in a dynamic environment that daily develops new needs and wants.
Entrepreneurship is a very important link for societies to generate economic growth and
ensure economic and socio-economic development. Hence nation’s competitive advantage
is determined by entrepreneurship activities. This implies that a large pool of entrepreneurs
is required to benefit a society by increasing jobs, incomes, and better services.

In Namibia as in many other developing countries there is a large shortage of

entrepreneurs. This partly explains the reason for poor economic activities and the low
living standards of the majority of the people. Generally Namibians are not enlightened or
educated to operate as entrepreneurs, but are rather trained and developed to enter the labor
market as employees. When graduates join the business, social and economic
institutions as employees, they simply take up all existing job, reducing job opportunities
rather then creating job opportunities. This trend has continued despite the high levels of
unemployment among the economically active population.

However many people that have endeavored to become entrepreneurs, have been motivated
by their failure to get employment in the formal sector of the economy. Their
entrepreneurial activities are rarely initiated with the primary aim of benefiting the society
in which they live. Instead most entrepreneurs tend to be people who recognize business
opportunities for personal gains. It’s therefore clear that they became entrepreneurs to
survive financially. This could have contributed to the high levels entrepreneurship
failures, and the belief among many people that it is better to become an employee rather
than an entrepreneur.

A Definition of Entrepreneurship

According to the English Dictionary, the term entrepreneur is defined as “one who
organizes, manages and assumes the risk of a new business enterprise’. This definition
gives a limitation of entrepreneurship as a short term activity of a single act or a limited
number of acts of starting up businesses. However it is rather a long term commitment to
business promotion and development.

Today entrepreneurs are considered to be the heroes of free enterprise since motivation and
creativity have helped many to build large enterprises from small business.
Entrepreneurship is a long term process which according to Timmons involves:

 Creating and building something of value from practically nothing. It is basically a

human creative act which involves finding personal energy of initiating and building an
enterprise or organization rather describing me.
 It requires a vision and the passion, commitment, and motivation to transmit this vision
to other stakeholders.
 It also requires willingness to take calculated risk, both financially and personally.

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 It involves building a team of people with complementary skills and talents.
 It involves sensing an opportunity where others see chaos, contradictions and confusion
and finding, marshalling and controlling resources to pursue the opportunity.
 It involves making sure the venture does not go out of money when it needs money
most.

The definition of Entrepreneurship is as diverse as the different functions of the

Entrepreneur. A largely held view of the term is that an Entrepreneur is the person who
brings about a change and possesses characteristics to implement ideas to benefit the
society as a whole. Only a few people are talented enough to manage this change. Apart
from this definition, a simple explanation of the term Entrepreneurship is that it is the
person who wants to work for himself.

The Austrian economist Schumpeter defines Entrepreneurship as an event that

introduces a new product, a new product method, new markets or a new form of
organization. According to Schumpeter, in a perfect scenario, these actions will help
generate wealth by creating a demand in the market from a newly introduced innovation.
Thus, a true Entrepreneur is one who combines the input factors in such a manner that will
generate a greater output. This greater output from the various input factors will result in
creating wealth for the society.

Throughout the theoretical history of entrepreneurship, scholars from multiple disciplines

in the social sciences have grappled with a diverse set of interpretations and definitions to
conceptualize this abstract idea. Over time, "some writers have identified
entrepreneurship with the function of uncertainty-bearing, others with the
coordination of productive resources, others with the introduction of innovation, and
still others with the provision of capital" (Hoselitz, 1952). Even though certain themes
continually resurface throughout the history of entrepreneurship theory, presently there is
no single definition of entrepreneurship that is accepted by all economists or that is
applicable in every economy.

Entrepreneurship can be thus defined as the act of initiating, building and expanding an
enterprise or organization, building an entrepreneurial team and gathering other
resources to exploit an opportunity in the market place for long term gains. The main
objectives of entrepreneurship are growth, expansion and long-term financial gains. Small
businesses that only aim at survival of its owners cannot be seen as an entrepreneurial
venture. Though growth is inevitable for entrepreneurship, it is a long term objective that
may not be achieved overnight.

Definitions of entrepreneurship
The debate over entrepreneurship is universal. It is spoken of, written about and
discussed frequently – both in academia and in the public press. Regardless of
where the debate occurs, entrepreneurship has been identified as being vitally
important to the wellbeing of any economy, and its potential to contribute to the
creation of employment and the alleviation of poverty has been well documented.

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“Entrepreneur” is a French word with its origin dating back to the 1700s, and since
then has evolved to mean someone who “undertakes a venture”. Jean-Baptiste
Say, a French economist of the 1800s, stated that:
“…an entrepreneur shifts economic resources out of an area of low productivity
into an area of higher productivity and greater yield.”
In a more modern context, the Oxford
Dictionary describes an entrepreneur as: “…one, who organises, manages and
assumes the risk of a business enterprise.”
However, the Oxford Dictionary definition remains somewhat limited as individuals
with an entrepreneurial mindset are associated not only with business ventures,
but are also found within welfare, social, adventure and sporting ventures.
Entrepreneurs are also found in government, universities and other similar
institutions. There are numerous contemporary definitions, many of which evolved
during the latter half of the 20th century and were well summarised by
Hitt, Ireland, Camp and Sexton in 2002.
Schumpeter (1934) Entrepreneurship is seen as new combinations, including the
doing of new things that are already being done in a new way. New combinations
include:
1. Introduction of new goods
2. New method of production
3. Opening of new markets
4. New source of supply
5. New organisations
Kirzner (1973) Entrepreneurship is the ability to perceive new opportunities. This
recognition and seizing of the opportunity will tend to “correct” the market and
bring it back to equilibrium.
Drucker (1985) Entrepreneurship is the act of innovation that involves endowing
existing resources with new wealth capacity.
Stevenson, Roberts & Grousbeck (1985)
Entrepreneurship is the pursuit of an opportunity without concern for current
resources or capabilities.

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Rumelt (1987) Entrepreneurship is the creation of new business: new business
meaning that they do not exactly duplicate existing business but have some
element of novelty.
Low & MacMillan (1988) Entrepreneurship is the creation of new enterprise.
Gartner (1988) Entrepreneurship is the creation of organisations: the process by
which new organisations come into existence.
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TRACKING ENTREPRENEURSHIP IN SOUTH AFRICA: A GEM PERSPECTIVE
Timmons (1997) Entrepreneurship is a way of thinking, reasoning and acting that
is opportunity obsessed, holistic in approach, and leadership balanced.
Venkataraman (1997) Entrepreneurship research seeks to understand how
opportunities to bring into existence future goods and services are discovered,
created, and exploited, by whom and with what consequences.
Morris (1998) Entrepreneurship is the process through which individuals and
teams
create value by bringing together unique packages of resource inputs to exploit
opportunities in the environment. It can occur in any organisational context and
can result in a variety of possible outcomes, including new ventures, products,
services, processes, markets, and technologies.
Sharma & Chrisman (1999) Entrepreneurship encompasses acts of organisational
creation, renewal, or innovation that occur within or outside an existing
organisation.
A true modern day entrepreneur, Sir Richard Branson, eloquently sums up much of
what has been said about entrepreneurs when he states that:
“...entrepreneurs have been the driving force for growth in countries around the
world.
Their ability to see opportunities, to see order amongst chaos where others see
only issues, problems and disorganisation, has helped transform communities and
economies.”

Types of Entrepreneurships Projects

According to Schumpeter, there are five basic types of entrepreneurship projects.

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 1. The introduction of a new good in the market is the first of these. By new
product, it means something that has been invented and has never been available in
the market. In simple terms, whenever a new invention is made, it is seen as an act
of entrepreneurship.

2. The second is the introduction of the new method of production. As we know it

is the production of goods that forms the pillar of the economy. By new method, it
is assumed that the method that is effective and efficient and is able to improve on
an existing production method.

3. The third type of entrepreneurship is the opening of a new market. Whenever,

such resources are provided that enables the population to benefit, whether it is an
economic, education or any other benefit, it establishes a new opportunity that is
known as a new market for using that particular resource.

4. The fourth factor is the conquest of a new source of supply. Economist believes
that a new supply source allows the industry to increase its productivity. This new
source can be in many forms including the discovery of a natural resource (oil, steel
etc) or attracting a labor force that hasn’t been exposed to that industry.

5. The last but not least is the carrying out the new organization of industry that
will increase human welfare.

Although, all of the five types of entrepreneurship are important but according to
Schumpeter, the most influential is the introduction of the new product in the market
(invention) that will directly increase the human welfare. The remaining four factors
indirectly affect the human welfare by reducing the cost. Therefore, in order for the
remaining four factors to contribute, it is important that the first factor be present and it can
only be done with the invention of a new product.

RESOURCE FOR ENTREPRENEURSHIP

Every business venture will need resources to implement or carry out the outlined plan or
program. Success is achieved through efficient and effective utilization of all necessary
resources that are available. What are these basic entrepreneurial resources? For the
entrepreneur, resource needs can be divided into three broad categories.

A. Physical Resources.

In the case of a service or retail venture, these resources refer to the required site, building,
office or shop equipment and layout, as well as to vehicles. When for manufacturing a
product, these will also include factory equipment, factory layout, tools and raw materials.

B. Human Resources

The human resource is the most important resource for starting up and running an
entrepreneurial venture. Though the entrepreneur may start business as a sole trader, he

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will need the support of many other people to succeed in his endeavors. The people
directly involved in a small business can be the greatest asset. They are optimally managed
and involved or can be the greatest liability they are incorrectly managed. The following
people are important asset for the entrepreneurial team.

I. The co-founder: These are business shareholders that are either partners or
investors. They normally earn dividends on their investment. It’s therefore
essential that their numbers of shares or percentage of ownership that each co-
founder has should be clearly defined.

II. The management team: Entrepreneurs aspiring to establishing a reputable

business will require a management team. The team will be responsible for
specialized function within the business. The management team can also include
the co-founders of the business who will be involved in the decision making process
and the operation of the new venture.

III. Employees: with the increasing needs employment and business growth is usually
measured in terms of number of employees. Through most new ventures start with
very few employees, the number of employees grows as the business grows. By
choosing the right people to the new venture, their contribution to the enterprise
will not only expands his or her own skills and abilities, but could also gain
competition advantage in the market place.

IV. Consultants: Small business may not be able to employee on full time some
essential specialized skills. Consultants provide essential skills for proper business
management in Accounting, finance, Human resources, auditing legal matters.

C. Financial Resources

Money is often identified as one of the most critical ingredient for starting a new business.
Entrepreneur capacity to raise money is usually a result of being able to develop a good
business plan with all other necessary resources put in place. Financial help always follows
identification of the right people pursuing an opportunity based on their proven ability to
manage it with success.

Financial resources can include one or more of the following:

 Start up capital from personal investment.

 Investment by shareholders or co-founder
 Long – or short term loan.
 Trade credit from supplier
 Start up grants from business development

The Entrepreneur’s Risks

An entrepreneur is someone who starts a new business in the face of risk and uncertainty
for the purpose of achieving profit and growth. He or she achieves this by identifying

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opportunities and assembling the necessary resources to capitalize on them. With high
possibilities of failure, entrepreneurs are risk avoiders and not risk takers. They are willing
to take risks, but carefully and thoroughly, and will do everything possible to avoid failure.

The following four critical risk areas in respect of the entrepreneur are identified by risks.

- Financial risk
- Career risks
- Family and social risk
- Emotional risks

The Characteristics of an Entrepreneur

Researchers have invested a great deal of time and effort to paint clear pictures of
entrepreneurial personality. Although several characteristics entrepreneurs tend to exhibit
have been identified, none have isolated a set of traits, require for success. What are some
of these characteristics?

1. Desire of responsibilities: Entrepreneur feels a sense of personal responsibility for the

ventures they start. They feel unruly, legally, financially and mentally accountable for
the venture.

2. Preference of Moderate risk: Entrepreneurs are not wild risk takers but instead
calculating risk takers. Through their goals may appear high or even impossible to
others entrepreneur see and believe them to be realistic and attainable. They usually
spot opportunities in areas that reflect their knowledge, background and experience,
which increases their probability of success?

3. Confidence in their ability to succeed: Entrepreneurs are typically optimistic about

their chances of success and their optimism is based on reality. They have a desire and
achieve to liquor problems and establish successful ventures. This may explain why
some of the most successful entrepreneurs have failed in business often more then once
before finally succeeding.

4. Higher level of energy: Entrepreneurs are more energetic than the average person.
This energy is a critical factor given the great task required to launch anew company.
Long hours and hard work are a rule rather than the exception.

5. Future Orientation: Entrepreneurs see potential where most people see only problems
or nothing at all. They look a head and are less concerned with what was done
yesterday than with what might be tomorrow. There are more interested in spotting and
capitalizing on business opportunities.

6. Good organizers since the availability of finances depends on having all other factors
in place, it is clear that most entrepreneurs are very good at bringing together all the
components necessary for a venture. Effectively combining people and jobs enables
entrepreneurs to transform their vision into reality.

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7. Value achievement over money: Achievement seems to be entrepreneur’s primary
motivating force and money is simply a symbol of achievement. Even where there is
no immediate financial gains, entrepreneurs will be contract to work very hard as long
as they perceive progress in their endeavors.

ENTERPRENEURSHIP, MANAGEMENT AND INTRAPRENEURSHIP

Although entrepreneurs are associated with the management of a small business, there is a
difference between entrepreneurs and small business management.

 Entrepreneurs by definition: conceive of a business idea, gather necessary

resources, organizes the business and operates a private business. Generally they
are risk takers who are strongly motivated to achieve their dreams including profits.

 Management on the other side is move concerned with organizing and running all
kinds of organization is not concerned with conceiving or owing a private personal
business. Managers are therefore high level employees tasked with the
responsibility of running a business venture profitably.

 Entrepreneurship is however not only limited to small and medium sized businesses
but entrepreneurship, is also an element of larger organizations and business
managers. This realization has necessitated the emergency of a new definition of
entrepreneurship to carter for the new scenario. Generally entrepreneurship is an
approach to general management that begins with identifying opportunities and
ends with exploiting the opportunities.

Therefore if entrepreneurship is all about recognizing business opportunity and exporting

them, ownership of a business ceases to be a major factor. Business managers can also be
classified as entrepreneurs. Terms such as intrapreneurship and corporate
entrepreneurship have emerged to explain entrepreneurship that occurs within a corporate
organization.

CHARACTERISTICS OF CORPORATE ENTREPRENEURS

The corporate entrepreneur is regarded as a person who:

 Is motivated by independence and creativity, but could also cope with the
corporate environment, with its reward and promotion systems.

 Can delegate tasks, but prefers to be more directly involved in the project.

 Takes calculated risk

 Perceives mistakes and failure as something the corporation does not tolerate
and therefore keeps risky project in the background until the success of such
projects are guaranteed.
 Follows a dream and is able to convince others to follow it

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  Serves himself, the clients and his/her sponsor.

CHARACTERISTICS OF THE CORPORATE MANAGERS

 is motivated by promotion and other corporate rewards

 delegates tasks and is mainly involved in the supervision task

 is afraid of risks

 tries to avoid mistakes and failures

 follows the guidance of top managements

 serves other people

To be effective the entrepreneur or corporate entrepreneur must presses the skills of both
the entrepreneur and the corporate manager. An entrepreneur can hence be defined as a
person in an existing corporation who examines potential new market opportunities,
obtains resources to meet attractive opportunities and initiates production and sales.
Entrepreneurs are people capable of starting a new business centre within the existing
company.

IMPLEMENTATION OF INTRAPRENEURSHIP

A firm that is willing to pursue opportunities initiates actions, rather than react to the
actions of others, and emphases new and innovative products and services can be described
as an entrepreneurial organization. It is achieved in organization willing to exposed
himself/herself to situation with uncertain outcome, enjoys new and exciting activities,
does not tire easily and is skilful at persuading others to achieve a particular goal.

Apart from the position characteristics of the entrepreneur, such as enthusiasm, creativity,
perseverance and a strong desire to succeed, the following negative characteristics of an
entrepreneur has been identified:

 an inability to work with others

 an inability to delegate
 an unwillingness to communicate freely, and
 obstinacy

It is perhaps these more negative characteristics that differentiate intrapreneurs from

corporate managers. Intrapreneurs who develop a new product as his/her own creation can
not distance himself from it. In fact he/she has trouble handing it over to another person or
even bringing it under the normal control of the organization system. To the intrapreneur,

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the success of a product or project can have bonuses, but a failure can bring an end to
his/her career. The intrapreneur is therefore not the most supportive person for other ideas
in the organization.

LEVEL OF INTRAPRENEURSHI IN ORANISATION

Intrapreneurship manifesto itself in various ways in organization MacMilan and George

identifies the following levels.

 Level 1: Improving / changing current product and services.

 Level 2 : New products and services to be sold to current markets.

 Level 3: Existing products and services that can be sold to new markets

 Level 4: New products or services that do not exist today but could be
developed to replace current products and services in known markets.

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 ENTREPRENEURSHIP AND SOCIETY

A largely held view of the term is that an Entrepreneur is the person who brings about a
change and possesses characteristics to implement ideas to benefit the society as a
whole. Entrepreneurship helps the society as well as the entrepreneur, him or herself. The
benefits of an entrepreneurship may be divided into three distinct categories that include
the benefits to the nation, benefit to the society and the benefit to the individual.

A. Economic or National Benefits

1. An effective entrepreneurship venture fosters the production of wealth for a nation.

When many of the entrepreneurship produce an output greater than the input, the
economy of the nation is directly bolstered.

2. Another advantage to the nation is the creation of jobs for its people. Such a job
creation utilizes the human resources of that particular country and helps the natural
talent materialize.

3. With the new inventions and development in the new technology a nation can use its
resources more effectively.

4. Since, a majority of the entrepreneurship projects are private; it provides an

environment of competitiveness which further increases the quality of the products in
the national markets.

5. By privatizing the local economy, entrepreneurship ventures help attract eager foreign
firms who are otherwise reluctant to do business with the government subsidized
economy.

6. The income level of the average person and the standard of living of a society increase
with every successful entrepreneurship project that is undertaken.

7. There is an increase in the employment level on the regional scale. It is also noticeable
that an entrepreneurship helps develop other entrepreneur businesses because of the
extra incentives that it can provide to a new entrepreneur in the shape of capital,
knowledge and technology.

B. Societal Benefits

1. Entrepreneurship helps the societies to fulfill its basic needs in the world that calls
for the survival of the fittest?

2. Entrepreneurs lead by example in assisting the society and therefore boost the moral
of the public.

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 C. Personal Benefits

1. An entrepreneur helps himself while creating opportunities for others. It is a fact

that by doing so an entrepreneur fulfills his creative urge.
2. Each successful project carried out by the entrepreneur leads to self satisfaction.

3. The greatest satisfaction is derived from the fact that the individual is his own boss
and therefore can use its creativity without any fear of repercussion.

4. The quality of every good entrepreneur project is the profit and the fame that such a
career provides.

5. Infect, entrepreneurs always enjoy respect and high status in their communities.

The Economic Responsibilities of Entrepreneurs

Ever since the French economist Richard Cantillon tried to define the entrepreneurship,
there has been a debate on the exact role and functions of an entrepreneur. Apart from the
differences in defining the term, all of the economist from Adam Smith, David Ricardo to
the modern economist like Mill and Marshall agree that entrepreneurship plays an
important role in developing the economy by generating wealth.

1. Early economist agreed that among the four factors of production, (land, labor,
capital and organization) organization is the factor that is the coordinating
factor that brings together the other three factors and the entrepreneurship is
the element that powers and strengthens the organization. These economists
approved that the entrepreneur has a vast understanding of the workings of the
industry in which he determines to undertake the venture.

2. A few modern economists believe that entrepreneurship is itself the fourth factor of
production that is the most important in driving a successful economy. These
experts are of the view that entrepreneur are defined by their risk taking abilities.
According to them the entrepreneur ventures are carried out where there is a gap in
the development of a product. The entrepreneurs work to fill the gap by
introducing something that increases the effectiveness of the already existing
product.

3. Still, many recent theories of entrepreneurship stress that it is not only the inherent
and risk taking abilities of a person that can define an entrepreneur but also the
ability to predict where the opportunity for growth exist. By grasping these
favorable opportunities, an entrepreneur works to create a new product by
using innovation.

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 4. The new entrepreneurs are able to track the deficiencies in the demand and
supply of the market and provide a new improved product, for which there
will be a demand. It is true that a great amount of entrepreneurship projects in the
developing countries can be attributed to inventing a new product, very few of the
entrepreneurs can innovate a new product in less developed countries due to limited
resources. Therefore, in the third world countries the definition of the entrepreneur
can be modified to include those people who try to improve on the existing
technology which is already present in the developing countries.

The Social Responsibilities of Entrepreneurs.

Social responsibility is described by Griffin as the obligation of an organization to protect

and enhance the societal contest in which it functions. This means that the entrepreneur has
an obligation towards the community in which the venture operates. The areas in which the
entrepreneur could choose to exercise his or her social responsibility are the environment,
customers, employee, investors and the general social welfare of his community.

1. Environment: The natural environment is one critical area of social responsibility

and includes issues such as pollution of water, air, and any natural resources, waste
disposal and dealing with hazardous waste and products. There has been a world
wide outcry against the production and disposal of hazardous materials and
products. Legislation has been developed to regulate all activities that would have a
negative effect on the natural environment.

2. Customers: Entrepreneurs could adopt an attitude of social responsibility towards

there customers. In adopting such a stance, the entrepreneur should know that there
are four basic customer rights:

 The right to safe products and services

 The right to be informed about all relevant aspects of products and services,
 The right to heard in the event of a complaint; and
 The right to choose what they buy.

The entrepreneur should be aware that one way in which to address this social
responsibility is in training his/her employees in customer relations and providing
after sales services for all products and services rendered. If a customer complains
about a product or service, the employees dealing with that customer should adopt
the attitude that the customer must always be handled with respect and in a friendly
manner.

3. Employees: The social responsibility in dealing with employees should not only
include the employees themselves, but also their immediate families. Their
immediate families should partake some of the benefits, such as education and
training, medical aid and social activities. Treating employees fairly, respecting
their dignity towards having a satisfied workforce.

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 4. Investors: These could be the co-owners or other persons who have provided
financial backing to the entrepreneur. Maintaining a proper accounting system,
providing information on the financial situation of the venture and reinvesting any
profits, would address this responsibility. Actions such as insider trading, illegal
stock manipulation, cover-ups, accepting inappropriate gifts and with holding
financial information could have a detrimental effects on investor relationship.

5. The general social welfare of a community: Entrepreneurs can get involved in

education and health sponsorships, contribution to charity and other related
associations. Sometimes entrepreneurs could also be involved in actions aimed at
correcting some of the political and social wrongs that exists.

3.2.2 SMMEs contribution to GDP

In Africa particularly, the development of small, medium and micro sized firm has
often been regarded as a “missing link” in development strategies of African
countries, as several import-substitution policies have favoured large corporations
at the expense of SMMEs. Several arguments have been given for putting SMMEs
at the centre of development strategies. The main reason lies on the simple
observation that they constitute the largest portion of employment in developing
countries (especially the micro-enterprise segment, although is not defined /or
given attention in policy formulation). SMMEs constitute over 90 per cent of
business operations and contribute towards over 50 per cent of the nation’s total
employment opportunities and Gross Domestic Product (GDP).

The distributions of SMME in some regions of Africa are as follows:

Burkina Faso:
30 per cent of Gross National Product (GNP) is generated by Micro, Small (craft)
Enterprises that employs about 900,000 people (or 18% of the labour force).

Nigeria:
With a GDP of over $40 billion, Nigeria has the second largest economy in Africa.
In 2002 and 2001, the GDP of Nigeria was $43.4 billion and $42.5, respectively.
According to estimates from the World Bank, SMMEs comprise of 87 per cent of all
firms operating in Nigeria. Around 75 per cent of the poor depend on a farm or
non-farm SMME for their livelihoods. Around 80 per cent (Approximately 6.7

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million) of the SMMEs and small business account for 15 per cent of the total
(about 1.3 million) and medium enterprise account for 5 per cent of the total
(around 420,000).

Mozambique:
In Mozambique, agriculture, livestock and fisheries sector have a share of 33 per
cent of the GNP with 80 per cent of the labour force employed in these sectors.
The services sector has the largest share of the GNP at 44 per cent and employs
15 per cent of the officially registered total labour force; the industry sector
contributes towards 23 per cent of the GNP and employs 5 percent of the labour
force. Around 50 percent of Micro Enterprises carry out their business from private
homes and do not have formal business education.

Ghana:
The SMME sector in Ghana supports around 30 per cent of the workforce and
contributes to 6 per cent of the GDP.
Around 70 per cent of enterprises are Micro and Small Enterprises (MSEs). It is
estimated that nearly 40 per cent of Ghana’s National Income (GNI) is contributed
by micro to informal activities.
South Africa:
In South Africa the SMME sector contribution to the growth of the economy is
evident from the statistics below:
 SMMEs represent 97.5% of the total number of business firms in South
Africa,
 Contribute 34.8% of the country`s GDP,
 Employ 55% of the country`s labour force and
 Contributes 42% of total remuneration (Mutezo, 2005:32).

According to Rwigema and Venter (2004:393), it is estimated that the SMME

sector contribute approximately 40% of South Africa`s GDP and accounts for some
3.5 million jobs. The sector is estimate to have between 500 000 and 700 000
businesses.

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 In Namibia, though, SMEs have contributed approximately 12 percent to the
Gross Domestic Product (GDP) and have employed about 20 percent of the work
force during 2004, (Arnold, Grossmann, Mwatotele, Stork and Tobias (2005). The
Namibian government has recognised the important role of the SME sector, as
reflected in its 1997 SME Policy that states “government’s firm commitment to
transform the sector, as a priority, from its current state of deprivation and
underdevelopment into a lead sector of the economy” (Ministry of Trade and
Industry 1997:1). Accordingly, the policy defined ambitious targets in terms of SME
development: the SME sector was expected to create 35,000 new jobs, increase
incomes in the SME sector by 10%, diversify production activities into higher value-
added activities and manufacturing, reduce the regulatory burdens and to increase
the overall contribution of the SME sector to the country’s GDP to 15% by 2005.

It is difficult to argue in favour of SMMEs importance in Namibia due to lack of

availability of statistics to substantiate one argument for. As such, researches are
needed to do proper observations that will lead to factual argument. It is widely
agreed that entrepreneurs have a positive impact on the economy. They create
employment, contribute to economic growth, and produce and commercialize
innovations. In doing so, they influence the growth of cities and regions. It is hoped
that this section raises some important issues for further debate and investigation.
The next section will provides the constraints that SMMEs face and interventions
programmes that are used to militate against the constraints in general and
Namibia efforts in particular.

ENTREPRENUERSHIP AND BUSINESS ENVIRONMENT

The state of the society and the government are interdependent on the many entrepreneur
projects being undertaken around the world. The role of each entrepreneurship projects
differs widely on a global scale due to the disparities in the local business environment.

 In developing countries, the process of privatization has helped to eliminate

restrictions on the kind of opportunities that exist in the market.

 In socialist countries, governments have historically helped entrepreneurs who

have shown keen interest in optimizing the plans of the government.

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  On the other side, less developed counties have rarely provided the entrepreneur a
thriving atmosphere.

The major hurdles that the new entrepreneurs face are the availability of resources to carry
out such a business.

 The most important is the allocation of funds that comes in the form of money to
research and development.

 Another largely ignored factor is the availability of knowledgeable partners who

can run a successful entrepreneurship after its initial stage. This is so because there
is a great tendency for the entrepreneur to move from one project to another. The
lack of knowledge on part of the management can halt the development process, if
adequate training is not provided.

 Historically, women owned businesses have not been successful even in the
developing countries due to the lack of government support. It remains the most
significant problem in mainly the theoretical and male dominated societies.

Managing the Entrepreneurship Industry

Governments can help improvise the entrepreneurial spirit by not only removing the
hurdles described above but by creating an industrial atmosphere that is favorable to the
structural change. If the resources are allocated from the losers to gainers by purchasing the
sales of assets, the entry and exist of the firms and rise and fall of the industries, the
governments can effectively allocate resources to the successful entrepreneurs.

Experts agree that the most effective method of managing the entrepreneurship industry is
to foster the start-ups. Among other techniques, this can be achieved by:

 Minimizing the paper work and formalities for the new starter.
 A single identification number should be issued to every new entrepreneurial
project to track down each case.
 The authorization process should not take long and the case decisions should be
made by a fixed date.
 Tax treatment of the new subsidiaries and the policies on induction of new
employees should be simplified.

Entrepreneurship and Economic Development

Leibenstein maintains that there are two simultaneous steps in the process of economic
development for LDCs: economic growth and market transformation.

 In order for a country to increase its per capita income, it must have a "shift from less
productive to more productive techniques per worker" (Leibenstein, 1995). This shift
is the process of market transformation, and it can be manifested in the creation of

17
 new goods, new skills, and new markets. Entrepreneurship is the driving force behind
both growth and transformation.

 Without entrepreneurs there would be no new innovation or creative imitation in the

marketplace; hence, the transformation to new production methods and goods in the
country would not take place.

 As entrepreneurs transform the market, not only do they provide new goods and
services to the domestic market, they also provide a new source of employment to the
economy (Praag, 1995).

As a result, entrepreneurship is a necessary ingredient in the process of economic

development; it both serves as the catalyst for market transformation and provides new
opportunities for economic growth, employment, and increased per capita income.

Although entrepreneurship can directly affect the rate of an economy's transformation and
development, few countries have actively pursued entrepreneurship encouragement
programs. Additionally, many LDCs have focused more on encouraging entrepreneurship
in the form of multi-national corporations (MNCs) rather than domestic and indigenous
entrepreneurship. MNCs can certainly increase a country's income, provide market
innovations, and serve as the catalyst for market transformations; thus, MNCs can be used
as a source of entrepreneurship-led development. However, Saeed suggests that it is
preferred for governments to promote domestic and indigenous entrepreneurship because
domestic entrepreneurs are more aware of the market gaps that need to be filled
domestically (Saeed, 1998). Thus, instead of producing goods that might not be consumed
within the country, domestic market forces encourage domestic entrepreneurs to create
innovations and creative imitations that fulfill a real market deficiency domestically.
Hence, MNCs can be used for entrepreneurship-led development, but domestic
entrepreneurship is thought to be more effective.

The Supply of Entrepreneurship

The supply of entrepreneurship is affected by many factors, not all of which can easily be
controlled or changed. Nonetheless, policymakers can implement certain policies in order
to encourage entrepreneurship. Based on the above characteristics of entrepreneurs and the
factors that affect the supply entrepreneurship, the following policy prescriptions may serve
as a general guide for implementing policies that foster economic development through
increased levels of entrepreneurship (the recommendations are in no particular order):

1. Increase the market incentives for entrepreneurs: As stated earlier, one of the
primary determinants of the supply of entrepreneurship is the willingness of an
individual to become an entrepreneur. Willingness is largely determined by the
anticipated economic benefits that will accrue to an entrepreneur if his enterprise is
profitable. In many countries market regulations limit the incentives that could
encourage would-be entrepreneurs to start their own enterprises. For example, price
ceilings that are set below market equilibrium lower the amount of revenue that an
entrepreneur could earn in a certain industry. If the anticipated economics benefits

18
 are lower than the opportunity cost, than the would-be entrepreneur will not start his
own enterprise. Thus, in many countries policies should be implemented to increase
and improve the incentives for entrepreneurs. Additional policy possibilities include
tax incentives for entrepreneurs.

2. Improve the availability of credit and capital: The second major determinant of
the supply of entrepreneurship is opportunity. In order for an individual to start his
own enterprise, it is necessary for him to have the credit or capital to finance the
initial start-up costs. One of the primary problems facing would-be entrepreneurs in
LDCs is a lack of such capital. Without initial capital, many entrepreneurs do not
have the funds to start enterprises of their own. Governments could attempt to
correct for this problem by encouraging the development of venture capital
companies and by implementing micro-credit programs. The specific type of capital
programs that are implemented would need to be crafted specifically for each
country, depending on where the country is along its course of development. In the
poorest of LDCs, the focus would most likely be on micro-credit programs, like the
Grameen Bank in Bangladesh. However, in countries with higher levels of human
capital, entrepreneurial firms would derive greater use from venture capital.
3. Develop entrepreneurship encouragement programs: By passing legislation that
is friendly towards entrepreneurs, countries can make it more culturally acceptable
and less risky to be an entrepreneur. Additionally, entrepreneurship encouragement
programs, like the Technopreneurship 21 Initiative in Singapore5, can assist
entrepreneurs in finding capital, setting up a business plan, and complying with the
various business and tax regulations.
4. Initiate entrepreneurship educational programs: New education initiatives
should be created to teach entrepreneurship. By equipping more people with the
skills to become entrepreneurs, a country can effectively increase its supply of
competent entrepreneurs. Economists disagree as to whether entrepreneurial skills
can be taught or whether they are intrinsic. Nonetheless, there have been successful
results from such educational programs. One example of such a policy is the
Malaysian Entrepreneurship Development Centers in the rural, indigenous areas of
Malaysia. These centers teach the indigenous people entrepreneurial skills and
assist aspiring entrepreneurs with the development of their business plans.
5. Reform market regulations to facilitate entry into the market: Countries can
increase their supply of entrepreneurship by improving the ease of entry into the
formal sector. Many LDCs use licenses and permits to regulate who can participate
in the formal sector. Although these policies may earn government revenue or
protect state-owned enterprises, they effectively make the markets inefficient (by
limiting competition) and prevent would-be entrepreneurs from starting their
enterprises. By reforming their market-entry laws, some countries will be able to
increase their supplies of entrepreneurs. As an example, Nigeria's abolition of its
marketing boards provided new opening for a large number of small entrepreneurs
to enter the market with creative imitations.
6. Increase entrepreneurial opportunities available to women and young persons:
As Saeed suggests, many women and young persons are excluded from the formal
sector in LDCs because of cultural values or legal restrictions. By preventing these
groups from participating in the formal market, these countries are essentially
limiting the size of their pool of would-be entrepreneurs. By eliminating
discriminatory employment and licensing policies, countries could create an influx

19
 of possible entrepreneurs. Unfortunately, such polices may not be culturally popular
in some countries (Saeed, 1998).

All of the above recommendations are general policy suggestions that governments can
pursue. The specific policies that a country implements, must however be made with full
regard to the specific circumstances that the country faces. For example, in a country where
the majority of entrepreneurship takes the form of small family-owned enterprises, there is
initially little need for venture capitalists; instead it would be more appropriate for this
country to implement micro-credit programs to assist potential entrepreneurs. Thus, the
policies that an LDC implements to increase its supply of entrepreneurship must be crafted
individually for the country's specific case and stage of development. Additionally, like
most development policies, many of the above recommendations require government
expenditure. However, since entrepreneurship is necessary for economic development,
expenditure on encouragement policies is as justified as much as expenditure on any other
development policy.

STARTING A NEW BUSINESS

Starting a business requires you to complete a number of steps and make some key
decisions. Though part of your overall plan, you’ll need to select a location, decide on a
business structure, and obtain the necessary licenses and permits. In addition, determining
which financing options will meet your short-term needs and long-term goals is crucial.
Within this section, we’ll provide information on these topics along with guidance on
buying an existing business, copyright and trademark issues, and getting support from an
outside expert.

Never think you can do it alone! One of the best ways to insulate yourself against business
failure is to find and work with a mentor, someone with business experience who can guide
and assist you i.e. Small Business Development Centers - Link to organizations to help
your small business grow and prosper.

RECOGNIZING BUSINESS OPPORTUNITIES

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An entrepreneur can be described as someone who starts a new business in the face of risk
and uncertainty for the purpose of achieving profit and growth. Starting a new business
entails coming up with new ideas of offering services or producing products. Some
common questions to consider are; where do ideas come from? How do people come up
with great ideas? Is creativity something you are born with or it can be learnt. Definitely
creativity can be learnt. What is creativity? Creativity is the activity that results in
innovation, which is finding new ways of doing things. In a global market place that is
highly competitive, it’s important that entrepreneurs find new and exciting products and
services. It is through creativity that business opportunities are recognized.

1. Thinking Creatively About Opportunity

Creativity requires one to be aware of your surrounding. Fortunately there are many ways
to activate your creativity

o Thinking outside of the square. This requires looking at ordinary items in a new
way. Find a simple item and figure out how many new products or uses you can
find out of it is an excellent stimulus to creativity.

o Go from the usual to the unusual. Find new ways of solving problems or
challenges different from the common methods used. Instead of using gas energy
you can think of using solar energy for lighting.

o Work with unrelated items. Pick items randomly and try to come up with a new
product from the items chosen. This forces you to look at things in a new way.

Creative Sources of Ideas

Ideas can come to you from anywhere and sometimes in un expected moments. Research
has found that some of the greatest ideas have come to people when they ‘‘re brushing their
teeth, driving, or sleeping. Here are some of idea source:

o Start people watching. Find places in your community where you’ll be able to
observe people. In a hotel lobby or a shopping mall, you can learn a lot about what
people want and need. That’s how Mary Naylor learned that people who work in
office buildings wanted the same kind of concierge service offered in hotels. She
offered a Capitol Concierge to do just that. Her business handles special service
such as arranging for theater tickets or making dinner reservations.

o Watch for demographic changes. Demographics are the characteristic of human

population and population segment, especially when used to identify consumer
markets. Demographic changes occur on a continuing basis. Such changes in the
number of births or deaths, age distribution, levels of education, occupations, and
geographic concentration can affect your business. The studies shown that people
under the age of 35 start about 47 percent of all new businesses. Those young
business owners have unique needs that Jennifer Kushell recognized. She
established The international Directory of young Entrepreneurs on the internets.

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 o Become an insatiable reader. Most successful entrepreneurs stay on top of what is
going on in business and the world by reading newspapers, magazines, and books.
Don’t read just in your area of interest. Sometimes reading about an unrelated field
will spark an idea that you can apply to your field. For example, observing the spiny
burr in nature was the inspiration for Velcro, the unique fastening tape found on
outdoor equipment and clothing.

2. Consider Your Own Experiences.

Self-employment options within your own experience are the easiest to identify and are
excellent sources of opportunity. Look for opportunities in your hobbies and in your
work.

o Hobbies. Many hobbies can be turned into successful ventures. Developing web
sites, restoring cars, playing a sport, making music –these are just a few pastimes
that have potential. Try to evaluate your own favorite pastime in terms of its
business potential. What equipment, supplies, or special arrangements does your
hobby require? What kinds of problems or inconveniences do you face? Are there
any changes on the horizon that might affect your pastimes? Answers to this
question can lead to a business.

o Work. If you work after school you have another source of idea for business
opportunities. Look at it for another perspective. Ask yourself: Is there room in the
market for a similar business, possibly in a different niche? Are there any gaps in
the company‘s net work of suppliers? Is the company or its customers in need of
services that aren’t being provided?

3. Consult Outside Sources.

Look at people, places, things in the business community for business ideas, but don’t lose
sight of your goal. Constantly ask your self, “What self –employment opportunity does this
present to some one with my interests?”

 Trade magazines. Trade magazines are periodicals published for specific types
of business or industries. For example, press time Online is a monthly magazine
covering the news -paper industry. Progressive grocer covers the supermarket
industry. A cleaner is a trade publication and product guide for industrial
cleaning contractors. Trade magazine often contain articles, ads, and ideals on
new products, services, or business concepts. You may be able to obtain copies
from businesspeople, vocational instructor, or the internet.

 Specialty magazines. Specialty magazines target people with special interests

in sports, camping, fashion, and a variety of other areas. They can also provide
ideas for new business ventures. Articles in such specialty magazines can help
identify interests and needs of potential consumers.

 Newspapers. Newspapers provide an ongoing source of ideas for business.

Many have business sections which, like other business publications, report on
trends innovations.
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   Once the decision is made to start a business, often the next decision is either to buy an
existing business or start a new venture from scratch. There are advantages and
disadvantages to both options.

1. BUYING A BUSINESS

There are many advantages in buying a business, but equally many disadvantages.  If you
thoroughly check the operations of the business and ensure the purchase agreement
contains safeguard clauses, many of the disadvantages can be minimized.

 With an existing business there will always be surprises.  You may never know the real
reason why the business is up for sale, but you can reduce the potential for surprises by
insisting on working in the business for a time prior to sale to see how staff and clients
really view the business.

 Advantages of Buying a Business.

If you buy a business you start with:

A. an existing customer base and existing contracts;

B. existing suppliers;
C. existing staff and management;
D. existing plant, equipment, stock and material;
E. knowledge of the business from the current owner;
F. premises that are set up;
G. goodwill associated with the name and location of the business;
H. financiers lending more readily to an existing business with a trading record.

Disadvantages of Buying a Business

The disadvantages of buying an existing business can include:

A. Customers may link the goodwill to the previous owner and leave when a new
operator takes over the business.
B. Staffing problems:
 Some staff may leave when the new owner takes over.
 Some staff may be unsuitable for the job they are doing.
 Some staff may resent the change to a new owner.
C. You may inherit staff entitlements, such as impending long-service leave payments.
D. Plant and equipment may be obsolete or faulty.
E. The business may have no real intellectual property that is transferable.
F. The business may have a bad image which is difficult to change.
G. The cost of acquiring goodwill may be too high.

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 H. BUYING A FRANCHISE

An important step in the small business startup process is deciding whether or not to go
into business at all. Each year, thousands of potential entrepreneurs are faced with this
difficult decision; because of the risk and work involved in starting a new business, many
new entrepreneurs choose franchising as an alternative to starting a new, independent
business from scratch.

If you are concerned about the risk involved in a new independent business venture, then
franchising may be the best business option for you. But remember that hard work,
dedication, and sacrifice are essential to the success of any business venture, including
franchising.

What is Franchising?

Franchising refers to the methods of practicing and using another person's business
philosophy. The franchisor grants the independent operator the right to distribute its
products, techniques, and trademarks for a percentage of gross monthly sales and a royalty
fee. Various tangibles and intangibles such as national or international advertising, training,
and other support services are commonly made available by the franchisor. Agreements
typically last from five to thirty years, with premature cancellations or terminations of most
contracts bearing serious consequences for franchisees.

The franchise governs the method of conducting business between the two parties.
Generally, a franchisee sells goods or services supplied by the franchiser or that meet the
franchiser's quality standards.

Franchising is based on mutual trust between the franchiser and franchisee. The franchiser
provides the business expertise (marketing plans, management guidance, financing
assistance, site location, training, etc.) that otherwise would not be available to the
franchisee. The franchisee brings the entrepreneurial spirit and drive necessary to make the
franchise a success.

There are primarily two forms of franchising:

 Product/trade name franchising and
 Business format franchising.

In the simplest form, a franchiser owns the right to the name or trademark and sells that
right to a franchisee. This is known as product/trade name franchising. The more complex
form, business format franchising, involves a broader ongoing relationship between the two
parties. Business format franchises often provide a full range of services, including site
selection, training, product supply, marketing plans, and even assistance in obtaining
financing.

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ADVANTAGES

For franchisors

 Expansion: After the brand and formula are carefully designed and properly
executed, franchisors are able to sell franchises and expand rapidly across countries
and continents using the capital and resources of their franchisees, and can earn
profits commensurate with their contribution to those societies while greatly
reducing the risk and expense that would be inherent in conventional chain
operations

 Legal considerations: The franchisor is relieved of many of the mundane duties

necessary to start a new outlet, such as obtaining the necessary licenses and permits.
For this reason, hotel and restaurant chains that sell alcohol often have no viable
option but to franchise if they wish to expand to another state or province.

 Liability insurance: The franchisor is relieved of the obligation to carry liability

insurance on the independently owned franchise units that produce the gross sales
of the franchised system because this is the obligation and responsibility of the
franchisees under the franchise agreement. As long as the franchisor's operational
manuals are efficient and followed by the franchisees, the franchisors are generally
almost always protected from any liability for any incident that occurs on the
property of the franchisee.

 Sell franchises: Franchisors can sell franchises without making any representations
as to success or failure of the units in the written franchise disclosure documents
and in the written franchise agreements. Therefore, franchisors are generally
protected from lawsuits from their franchisees who fail because of the non-
negotiable contracts that require franchisees to acknowledge, in effect, that they are
buying the franchise knowing that there is risk, and that they have not been
promised success or profits by the franchisor.

 Operational considerations: Franchisees are said to have a greater incentive than

direct employees to operate their businesses successfully because they have a direct
stake in the start up of the branded business and the tangible assets that wear the
brand name. The need of franchisors to closely scrutinize the day to day operations
of franchisees (compared to directly-owned outlets) is greatly reduced.

 Maximize profits: Franchisors can maximize their profits on the gross sales of the
franchisees and avoid the operational expenses for the physical units that wear their
brand names. Franchisors can minimize their risk and thus increase their profits
because their franchisees bear the expense of operating the units and the expense of
being employers, in compliance with existing city, state, and federal laws.

For franchisees

 Employment: Opening a franchise is An easy way of "owning a business"

25
  Quick start: As practiced in retailing, franchising offers franchisees the advantage
of starting up a new business quickly based on a proven trademark and formula of
doing business, as opposed to having to build a new business and brand from
scratch (often in the face of aggressive competition from franchise operators). A
well run franchise would offer a turnkey business: from site selection to lease
negotiation, training, mentoring and ongoing support as well as statutory
requirements and troubleshooting.

 Expansion: With the help of the expertise provided by the franchisors, the
franchisees may be able to take their franchised businesses to a level which they
wouldn't have been able to without the expert guidance of their franchisors.

 Training: Franchisors often offer franchisees significant training, which is not

available for free to individuals starting their own business. Although training is not
free for franchisees, it is sometimes supported through the traditional franchise fee
that the franchisor collects and tailored to the business that is being started. When
training fees and travel expenses, etc. are required beyond the initial franchise fee,
these fees are deductible as part of the startup expenses of the business.

DISADVANTAGES

For Franchisors

 Limited pool of viable franchisees: In any city or region there may be only a
limited pool of prospects that have both the financial resources and the desire to
purchase and start up a franchised business, as compared to the pool of individuals
who can be hired and trained to competently manage directly-owned businesses, as
paid employees. However, in periods of recession where traditional good jobs are in
short supply, this disadvantage disappears because those who can't find good jobs
are willing to invest money in a franchise as a means of self-employment.

 Control: Successful franchising necessitates a much more careful vetting process

when evaluating the limited number of potential franchisees than would be required
in the hiring of direct employees who may have experience in the concept sector.
An incompetent manager of a directly-owned outlet can easily be replaced, while,
regardless of the local laws and agreements in place, removing an incompetent
franchisee who owns the tangible assets of the business is much more difficult.
Incompetent franchisees can easily damage the public's goodwill towards the
franchisor's brand by providing inferior goods and services. If a franchisee is cited
for legal violations, (s)he will probably face the legal consequences alone but the
franchisor's reputation could still be damaged.

For franchisees

 No guarantee: usually, there is a guarantee of financial success for the franchisee

made by the franchisor in the written disclosure circular and the actual franchise
agreement. While the estimated startup costs of the franchise are an implied
"earnings claim" some businesses do fail, including franchised outlets.

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 Unfortunately, the unit financial performance statistics are not required to be
disclosed to new buyers of franchises under Federal Regulatory Policy, the FTC
Rule, and this omission makes it impossible for new buyers of franchises to assess
the odds of success and failure of their investment in the franchise in terms of
profitability and failure as experienced on a unit basis of the franchise system.

 Control: For franchisees, the main disadvantage of franchising is a loss of control.

While they gain the use of a system, trademarks, assistance, training, marketing, the
franchisee is required to follow the system and get approval for changes from the
franchisor. For these reasons, franchisees and entrepreneurs are very different. In
other words, he is "renting or leasing" the opportunity, and not "buying a business
for the purpose of true ownership." Additionally, "A franchise purchase consists of
both intrinsic value and time value. A franchise is a wasting asset due to the finite
term: the franchisor is only obliged to renew the franchise if it chooses to contract
for that obligation."

 Price: Starting and operating a franchise business carries expenses. In choosing to

adopt the standards set by the franchisor, the franchisee often has no further choice
as to signage, shop fitting, uniforms etc. The franchisee may not be allowed to
source less expensive alternatives. Added to that is the franchise fee and ongoing
royalties and advertising contributions. The contract may also bind the franchisee to
such alterations as demanded by the franchisor from time to time.

 Conflicts: The franchisor/franchisee relationship can easily cause conflict if either

side is incompetent (or acting in bad faith). An incompetent franchisor can destroy
its franchisees by failing to promote the brand properly or by squeezing them too
aggressively for profits. Franchise agreements are unilateral contracts or contracts
of adhesion wherein the contract terms generally are advantageous to the franchisor
when there is conflict in the relationship.

TYPES OF BUSINESS FORM

If the initial market research suggests the idea is a good one, then the entrepreneur must
consider the practicalities of setting up the business. There are three main types of business
form:

SOLE PROPRIETORSHIPS

A sole Proprietorships or trader is simple to set up because there is no complicated

paperwork. The vast majority of small business starts out as sole proprietorships. The
owner of a sole trader enterprise, such as plumbers, window cleaners and professional
writers has complete control of the business. These firms are owned by one person, usually
the individual who has day-to-day responsibility for running the business. However, there
is nothing to prevent a sole trader taking on employees and many do. The sole trader takes
all the profits (after tax) but is liable for all debts the business incurs. This means that if the

27
business makes a substantial loss, the sole trader may be forced to sell personal assets such
as their house to cover the business debts. In worst cases, sole traders may face bankruptcy.

Advantages of a Sole Proprietorship

1. Easiest and least expensive form of ownership to organize.

2. Sole proprietors are in complete control, within the law, to make all decisions.
3. Sole proprietors receive all income generated by the business to keep or
reinvest.
4. Profits from the business flow-through directly to the owner's personal tax
return.
5. The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship

1. Unlimited liability and are legally responsible for all debts against the business.
2. Their business and personal assets are 100% at risk.
3. Have almost be ability to raise investment funds.
4. Are limited to using funds from personal savings or consumer loans.
5. Have a hard time attracting high-caliber employees, or those that are motivated
by the opportunity to own a part of the business.
6. Employee benefits such as owner's medical insurance premiums are not directly
deductible from business income (partially deductible as an adjustment to
income).

1. PARTNERSHIPS

In a Partnership, two or more people share ownership of a single business. Partnerships

are a common form of business for many enterprises offering professional services,
such as doctors’ surgeries, accountancy practices and design businesses. Partners can
bring more capital and a wider range of skills, work and ideas to the business. Like
proprietorships, the law does not distinguish between the business and its owners and
therefore most partnerships also have full liability for any business debts. The Partners
should have a legal agreement that sets forth how decisions will be made, profits will
be shared, disputes will be resolved, how future partners will be admitted to the
partnership, how partners can be bought out, or what steps will be taken to dissolve the
partnership when needed. Yes, its hard to think about a "break-up" when the business is
just getting started, but many partnerships split up at crisis times and unless there is a
defined process, there will be even greater problems. They also must decide up front
how much time and capital each will contribute, etc.

Advantages of a Partnership

1. Partnerships are relatively easy to establish; however time should be invested in

developing the partnership agreement.
2. With more than one owner, the ability to raise funds may be increased.

28
 3. The profits from the business flow directly through to the partners' personal
taxes.
4. Prospective employees may be attracted to the business if given the incentive to
become a partner.

Disadvantages of a Partnership

1. Partners are jointly and individually liable for the actions of the other partners.
2. Profits must be shared with others.
3. Since decisions are shared, disagreements can occur.
4. Some employee benefits are not deductible from business income on tax
returns.
5. The partnership have a limited life; it may end upon a partner withdrawal or
death.

Types of Partnerships that should be considered:

 General Partnership: Partners divide responsibility for management and liability,

as well as the shares of profit or loss according to their internal agreement. Equal
shares are assumed unless there is a written agreement that states differently.

 Limited Partnership and Partnership with limited liability: "Limited" means

that most of the partners have limited liability (to the extent of their investment) as
well as limited input regarding management decisions, which generally encourages
investors for short term projects, or for investing in capital assets. This form of
ownership is not often used for operating retail or service businesses. Forming a
limited partnership is more complex and formal than that of a general partnership.

 Joint Venture: Acts like a general partnership, but is clearly for a limited period of
time or a single project. If the partners in a joint venture repeat the activity, they
will be recognized as an ongoing partnership and will have to file as such, and
distribute accumulated partnership assets upon dissolution of the entity.

3. Corporations

A corporation, chartered by the state in which it is headquartered, is considered by law to

be a unique "entity", separate and apart from those who own it. A corporation can be taxed;
it can be sued; it can enter into contractual agreements. The owners of a corporation are its
shareholders. The shareholders elect a board of directors to oversee the major policies and
decisions. The corporation has a life of its own and does not dissolve when ownership
changes.

Advantages of a Corporation

1. Shareholders have limited liability for the corporation's debts or judgments against
the corporations.

29
 2. Generally, shareholders can only be held accountable for their investment in stock
of the company. (Note however, that officers can be held personally liable for their
actions, such as the failure to withhold and pay employment taxes.)
3. Corporations can raise additional funds through the sale of stock.
4. A corporation may deduct the cost of benefits it provides to officers and employees.
5. Can elect S corporation status if certain requirements are met. This election enables
company to be taxed similar to a partnership.

Disadvantages of a Corporation

1. The process of incorporation requires more time and money than other forms of
organization.
2. Corporations are monitored by federal, state and some local agencies, and as a
result may have more paperwork to comply with regulations.
3. Incorporating may result in higher overall taxes. Dividends paid to shareholders are
not deductible form business income, thus this income can be taxed twice.

Subchapter S Corporations

A tax election only; this election enables the shareholder to treat the earnings and profits as
distributions, and have them pass thru directly to their personal tax return. The catch here is
that the shareholder, if working for the company, and if there is a profit, must pay herself
wages, and it must meet standards of "reasonable compensation". This can vary by
geographical region as well as occupation, but the basic rule is to pay yourself what you
would have to pay someone to do your job, as long as there is enough profit. If you do not
do this, the IRS can reclassify all of the earnings and profit as wages, and you will be liable
for all of the payroll taxes on the total amount.

4. Limited Liability Company (LLC)

A limited company is a legal entity. This means, for example, that if a company owes
someone money, the creditor can take the company to court. Because of its legal status, it is
more complicated and more expensive to set up a limited company. Any new (or small)
business choosing this form of structure will become a private limited company. The
entrepreneur setting up a new company is likely to retain a large shareholding but may
offer shares to some investors in return for capital. However, unlike the public limited
companies (PLCs) listed on the stock market, these shares cannot be sold to the general
public.

A limited company is owned by its shareholders, who are entitled to a share of any profits
and a say in the running of the business. The main advantage of this type of business
ownership is that it offers shareholders limited liability. Shareholders are not responsible
for the full amount of any debt incurred by the business. The liability of each shareholder is
limited to the amount of capital they have invested in the business. This is why this form of
business is attractive to many entrepreneurs. The LLC is a relatively new type of hybrid
business structure that is now permissible in most states. It is designed to provide the
limited liability features of a corporation and the tax efficiencies and operational flexibility
of a partnership.

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The owners are members, and the duration of the LLC is usually determined when the
organization papers are filed. The time limit can be continued if desired by a vote of the
members at the time of expiration. LLC's must not have more than two of the four
characteristics that define corporations: Limited liability to the extent of assets; continuity
of life; centralization of management; and free transferability of ownership interests.

THE BUSINESS PLAN

Strategic Planning
Too many people think strategic planning is something meant only for big businesses, but it
is equally applicable to small businesses. Strategic planning is matching the strengths of
your business to available opportunities. To do this effectively, you need to collect, screen,
and analyze information about the business environment. You also need to have a clear
understanding of your business - its strengths and weaknesses - and develop a clear
mission, goals, and objectives. Acquiring this understanding often involves more work than
expected. You must realistically assess the business you are convinced you know well.

In addition, strategic planning has become more important to business managers because
technology and competition have made the business environment less stable and less
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predictable. If you are to survive and prosper, you should take the time to identify the
niches in which you are most likely to succeed, and to identify the resource demanded.

A business plan is a document that describes a new business. It explains to lender and
investors why the new business deserves financial support.

The Use of the Business Plan.

Many people think that business plans are for banker’s benefits and not the entrepreneurs.
This feeling reflects the typical entrepreneur’s preference for action over paper work.
However entrepreneurs need business plans for many reasons, including financing. A
business plan is a tool with three basic purposes: communication, management, and
planning.

1. Communication Tool: As a communication tool,

 it is used to attract investment capital, secure loans. A business plan is important

because bankers and other financing sources require it.

 Convince workers to hire on, and assist in attracting strategic business partners.

 The development of a comprehensive business plan shows whether or not a

business has the potential to make a profit. It requires a realistic look at almost
every phase of business and allows you to show that you have worked out all
the problems and decided on potential alternatives before actually launching
your business.

The prospective lenders and investor will need to know especially what you plan to do
and how you to do it. This enables them estimate your potential for repayment of any
loan or investment.

2. Management Tool: As a management tool, a business plan

 Enables you to organize and analyze critical data.

 Helps to ensure that all aspects of your business operation are covered making it
easier for one to remember all the essential details.

 Helps you track, monitor, and evaluate your progress. The business plan is a
living document that you will modify as you gain knowledge and experience.

 By using your business plan to establish timelines and milestones, you can gage
your progress and compare your projections to actual accomplishments.

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 3. Planning Tool As a planning tool,

 The business plan guides you through the various phases of your business.

 A thoughtful plan will help identify roadblocks and obstacles so that you can
avoid them and establish alternatives.

 Many business owners share their business plans with their employees to foster
a broader understanding of where the business is going.

The Parts of the Business Plan

Formulating a business plan involves a great deal of research. Information is drawn from
many different sources for different purposes. Without proper organization the details can
be over whelming. Hence learning the parts is a good first step.

There is no correct format for a business plan. They can be long, complex, and detailed or
short and simple. Its important to anticipate who will be reading your business plan and
add the appropriate pieces of specific details essential to them. Among all the different
types of business plans, there are some common features essential to every business plan.

4. Executive’s summary: This is a brief recommit of all the key points contained in a
business plan. Hence lenders and investors, mostly rely on the executive summary
to help them decide whether it’s worthy reading through the whole document. To
save time, the executive summary should not be longer than two papers. It should
however including the most important information from each section of the plan.

5. Product/service Plan: This section presents the product or service you are
offering. Ti is very important that this section highlights the unique features of the
products or services and any Spin offs or additional products or services to be later
when the business is more established.

6. Management team Plan: The section highlights the qualifications of the

management team and of any partners you will have. An analysis must be made on
the expertise you are missing and how it will be resolves. The section will also
describe the advisory board that will help you get started.

7. Industry/Market analysis: The section presents your finding from the research on
the Industry and Market. It gives an analysis of your customers, competitors and
Industry it could also contain information about the perspective location’s
geographic, economic and demographic data.

8. Operational plan: The operation plan examines all the process that takes place in
the business so that the product or service is produced and delivered to the
customers. If you are manufacturing a product, you will want to discuss the status
of your product development. How much time and money will it take to get the

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 product ready to market? You may also have to explain the distribution of your
product/services.

9. Organizational Plan: The section looks at the people aspect of the business. IT
discusses the management philosophy, the legal form of the company, key
management personnel, and key employment policies.

10. Marketing Plan: A marketing plan focuses on how a company makes its
customers aware of its products or services. It includes such features as the market
riche or segment that is being served, the pricing policy. The company image the
marketing tactic’s used to reach the customers, a media plan and a marketing
budget.
11. Financial Plan: The financial plan presents the forecasts for the future of the
business it also explains the assumptions make when calculation your forecast
figures. The information is usually presented in a form of financial statements. The
section shows whether the plan will be financially health.

12. Growth Plan: The section looks at how the business will expand in the future.
Investors and lenders like now the future growth penitential of the business over its
life.

LEGAL ISSUES FACING START-UPS

PROTECTING YOUR IDEAS

Hundreds of thousands of inventors and innovators file each year for protection under U.S.
patent, trademark and copyright laws. However, it can be hard to decide which of the three
vehicles is most appropriate for the protection of a particular invention. Although a single
product or service may require a patent, a trademark, and a copyright, each category
protects a distinct aspect of a creative work or expression.

Patents, copyrights and trademarks, as well as know-how or trade secrets, are often
collectively referred to as intellectual property. Many firms have such property without
even being aware of it or of the need to take measures to protect it.

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People who may not be interested in protecting their own rights must still take precautions
to avoid infringing on the rights of others. This calls for more than the avoidance of
copying. Some copying is unavoidable; but one can easily infringe on the rights of others
without deliberately imitating specific features of goods or services.

Suppose you have a marketable idea for a product or service. You know you need help to
put the idea into effect, but you don’t want someone to steal you idea. What can you do?
Depending on your product, you have several options.

What are you trying to protect?

The group of laws that effects how ideas are protected is called intellectual property law.
Before you can learn how intellectual property laws can help you protect your ideas you
need to define what it is you’re trying to protect. If you want to protect an invention of
some type, that falls under patent law. Protecting a logo for your business is a trademark
issues. If you write music, software, or books, your protections come under the heading of
copyright law. And if you create recipes for food, you will deal with trade secrets.

Patents

A patent is a grant to an inventor that gives him or her exclusive right to produce and sell
an invention. It lasts for a period of 21 years from the dates of application. The invention
must qualify under of the Patent and Trademark Office (PTO). To protect your invention,
you should make disclosure document with the patent and Trademark Office. This
statement costs $25 to process. In the application, the firm shows that you are the inventor
of your product and describe detail. Within two years you must file an application with
PTO.

Trade Secrets

A trade secret is any piece of information used by a business that isn't known to the general
public, including formulas, business plans, designs and procedures. State and federal laws
protect trade secrets when other areas of intellectual property law don't offer adequate
protection. An example is the formula for Coca-Cola, which remains a secret despite being
over 100 years old. This formula cannot be patented because it is considered a recipe, but it
can be protected under trade secret laws.

Trade secret law does not provide absolute protection. While the law prohibits competitors
from stealing business secrets, they may be figured out by using reverse engineering.
Secrets discovered via reverse engineering and then made public lose their protection

Copyright

A copyright is a form of legal protection for "original works of authorship." Screenplays,

music, employee handbooks and commercial brochures are examples of work that is
eligible for copyright protection, giving owners the exclusive right to reproduce, distribute,
publicly perform and display their work. Legal protection is extended as soon as the work
is created. Registration provides the owner with establishing public awareness of its use.

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Trademarks

For businesses, trademarks are one of the most valuable forms of intellectual property. A
trademark is any word, combination of words, or symbol attached to a product or service. It
is the chief means of identification for a product or service, which when marketed,
becomes a brand. Trademarks are followed by the registered trademarks symbol ®. For
example a rainbow-colored with a bite taken out of its is the trademark of Apple Computer.
It is recognized worldwide. Similarly, a design or symbol that describes a services
business is called a service mark. The stylized M on a McDonald’s sign is an example of a
service mark.

Because success for most businesses depends on how recognizable their brand becomes,
taking the steps to protect trademarks from imitators is critical.

Intellectual Property

Intellectual property is often worth more to a business than its tangible assets. Consisting of
business strategies, images, concepts and ideas, lawful protection of intellectual property
predates the U.S. Constitution. Now protected by patents, trademarks, copyrights and trade
secrets, businesses must take the appropriate steps to ensure that their intellectual property
is kept safe from competing businesses, defecting partners and even employees. Intellectual
property law covers a very broad spectrum of legal issues involving contracts, patents,
trademarks, copyrights and more. The level of expertise of lawyers specializing in these
areas can vary from generalists in the field to experts in sub-specialties that may range from
information technology ("IT") to entertainment law. Patents

LAWS AFFECTING STARTING UP YOUR BUSINESS.

Certain legal requirements are fundamental to your ability to do business. If you cannot
meet the requirements, you cannot even start up your company. There are three categories
of laws you should be aware of before you start your business

1. Permits

Before you can officially open the doors of your business you must get a business
permit from your local government. This permit allows you to do business in your
community. It will most likely have to be renewed annually. You will be required
to pay periodic fees throughout the life of your business. The size of the fee is
usually based on how much the business earns.

2. Licenses

Certain professions require you to show that you have the necessary education and
training to do the job. For Example, doctors, nurses, barbers, accountants, and

36
 counselors all need special licenses protect consumers from unskilled or unqualified
business operators. Licensing requirements vary from one state or locality to
another.

Be sure you have the necessary licenses before you start your business. Check with
your local government or your state department of licensing and regulation for
information.

3. Contracts

A contract is a binding legal agreement between two or more persons or parties. As

an entrepreneur, you will sign contracts to start and run your business. Some
contracts will be with vendor or landlords, other with clients, and still others with
government agencies.

Most people fulfill the requirements of the contracts they sign. However, when one
of the parties fails to meet his or her obligations, the other party may be entitled to
monetary damages. The right to these damages is usually determined by the court.
This is why it is important to draw up a legally binding contract that clearly states
the intentions of all the parties. To be a valid legal contract, a document must
contain certain elements.

 Agreement. Agreement occurs when one party to a contract makes an offer or

promises to do something and the other party accepts. For example, suppose a
vendor offers to sell your business a fax machine. There is no agreement until
you have either sent the vendor a purchase order or a check signifying that you
accept the offer. If you change any of the terms of the vendor’s offer, you have
created what is called a counteroffer. This is a new offer now requires the
acceptance of the vendor to form a new contract.

 Consideration. Consideration is what is exchanged for the promise. The

money you pay to the vendor for the fax machine is valuable consideration and
causes the contract to be binding.

 Capacity. Capacity means that you are legally able to enter into a binding
agreement. By law, minors, intoxicated persons, and insane persons cannot
enter into valid contracts if they do sign such a contract, the agreement can be
considered void. This mans that the contract never existed.

 Legality. The final contract element is legality. For a contract to be valid, it

must be legal. In other words, it cannot have any provisions that are illegal or
would result in illegal activities.

4. Choosing a Location

 Before you start your business, you need to decide where to locate it.
Considerations are on the type of business, need for foot traffic and location
of competition factors. The law also affects where you place the business.
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  Zoning Laws and Building Codes. If you build a new facility or locate
you business in an existing building, you will need to conform to local
zoning laws. Cities typically designate particular areas, for certain uses.
Zones are usually specified as residential, commercial, industrial, or public.
For example, you cannot locate a tire manufacturing plant in the middle of a
residential neighborhood.

 Zoning laws also address environmental issues. They may restrict such
things as the disposal of toxic waste, noise and air pollution, and
incompatible building styles. For example, a residential neighborhood
might permit office buildings, but only those that are low-rise and fit with
the residential architecture. Zoning laws may also define the type and style
of signs that business can use and the appearance of the buildings.

 In addition to restrictions on use and appearance, you need to check the laws
that relate to the actual construction of your facility. These are called
building codes set standards for construction or modification of buildings.
These standard include such things as the strength of concrete, the amount
of insulation, and other structural requirements. Local governments employ
inspectors to verify that building code requirements are met at each stage of
construction.

FINANCING THE START-UP

To finance a new business, entrepreneurs must know where to look. Some sources, such as
banks and finance companies, are obvious. Others, like investment companies, may be less
familiar. Your business plan should state your preference for sources of new capital.
There are two types of financing for new capital: equity and debt sources.

Equity Sources

Equity sources trade cash for some portion of ownership, or equity of a business. For
example, an investor might give you a certain amount of money if you give him or her a 10
percent interest in your company. Equity funding is sometimes called risk capital. This is
because and individual who invests in a business puts his or her money at risk. If the
business is successful, the investor makes a profit. However, if the business fails, he or she
can lose it all.
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There are many forms of equity financing:

 Personal savings. The number- one source of start-up capital for new business is the
entrepreneur’s own personal saving. The U.S. Department of Commerce reports that
67 percent of all new business was started without borrowing any money. When a
business does borrow money, the entrepreneur should chip in more than half the start-
up capital. By doing so, he or she keeps control of the business.

 Friends and family. Entrepreneurs often borrow money from friends and relatives.
However, you have to consider whether the relationships can survive if the business
fails and the investment is lost.

 Private investors. Private investors are nonprofessional financing sources. Sometimes

they are called angels because of the help they give new business. They often become
involved in start-up financing of one or two new local business a year. Angels usually
prefer to keep a low profile and are not easy to locate. The most common way to find
them is through networking in your community. Also, some nonprofit organizations
have established networks of angles. Be very careful about choosing private investors.
Put the terms in writing and have an attorney check it.

 Partners. By finding a partner with compatible goals, you can share the costs of a
business. If you have complementary skills, you can divide the responsibilities as well.
Your business can also from a strategic alliance with another business. That occurs
when two companies each have special skills that the other needs. When entering a
partnership with another company, be sure to put the agreement in writing and have it
reviewed by an attorney.

 Venture capitals. Venture capitals are individuals or firms that invest capital
professionally. They make investments to make money. As a results, they expect a
large portion of the business and look for high growth potential. Because venture
capitalist are so expensive and demanding, they are not good sources of start-up capital
for most small business. However, venture capitalists are a good source of money for
established business that seeks funding for growth.

 State sponsored venture capital funds. Some states use fund to start businesses and
create jobs. Because they are not as focused on making a profit, they are like support as
small business. Check with economic development corporation for locating such funds.

Debt Sources.

Sources of debt capital are far than sources of equity capital financing, and entrepreneur
borrows has to repay it with interest. When entrepreneur raises capital by borrowing retains
full ownership of the ever, the loan must be carried as a the business balance sheet.

 Banks. Banks were once the primary source of operation capital, or the money that
business uses to support operations in the short term. With a line of credit agrees to
lead a business a certain amount of money certain interest rate. The company can then

39
 borrow that credit line as its needs dictate and pay back the a regular basis. Today,
banks are very conservative it lending practices. They are not inclined to lend to
unless they are well established.

After your business is up and running however, make some types of financing
available. For example be able to borrow money using your business assets for the
loan. If you don’t pay back the loan, the pledged assets. What kinds of assets can you
use as security? One possibility is your inventory.

 Trade credit. Trade credit is a source of short-term which you get credit from within
your industry or suppose you purchase goods from a supplier on 30 credit, interest free.
This means that you would your money for at least an extra 30 days. If you promptly,
they could provide you with the money pay you bill.

 Commercial finance companies. Commercial finance companies provide a more

expensive alternative to commercial banks. Finance companies are less conservative
than banks and they typically take more risks. They also charge more some form of
security is usually required for a loan. Typically, the security is the entrepreneur’s
home. However, finance companies may also accept receivables and inventory.

 Small Business Administration (SBA). If the SBA approves your request for a loan, it
will use a commercial bank to process and release the money. It will also guarantee
repayment of up to 90 percent of the loan should your business fail. If your business
fails, the SBA assures the bank that it can only lose the portion of the loan that is not
guaranteed. The SBA also leads public funds to qualified veterans and persons with
handicaps.

 Small Business Investment Companies (SIBCs). These companies are licensed by

the SBA to provide equity and debt financing to young businesses. They invest about
twice as often in start-up ventures as do venture capitalists. Each SBIC is privately
owned, and their requirements vary.

CHOOSING A LOCATION and starting a business from scratch

Every business has to be located somewhere. A sole trader who works as a window cleaner
may operate from home, where as a multinational car company will have factories, offices
and outlets in many countries. For both businesses however, where to locate may be the
most important decision they make and can determine their success. It is a very expensive
decision to reverse.

Factors affecting location

There are many factors that determine where a business will locate:

 Cost of site
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  Availability of labour
 Proximity to raw materials
 Proximity to market
 Infrastructure
 Government incentives

Cost of site

The amount, type and cost of land are all important factors in choosing a location. The cost
of land will vary greatly across regions and countries. For example the cost of a site in
Windhoek will be significantly higher than a similar site in Otjiwarongo. Also the kind of
land may be important (e.g. avoiding areas of possible mining subsidence)

The ability to expand and to build new premises may be important. This would require the
support of the local authorities for planning permission.

Availability of Labour

The availability of workers, their skill level and wage rate they need to be paid is crucial in
deciding the where to locate. Some businesses may need skilled labour whereas others
require a large supply of lower-cost, unskilled labour.

Where labour skills are in short supply (e.g. in some high-tech industries) it often happens
that similar businesses locate themselves close to each other. They might also be close to
colleges and other training organisations that provide the main source of newly trained
employees.

Businesses that require large numbers of unskilled workers might prefer to be located in
areas of low labour costs. These are also often areas of high unemployment – where
recruitment may be easier than in areas where there are labour shortages. Many multi-
national companies that require large amounts of unskilled labour, such as Nike to make
trainers, have located factories in SE Asia where the wage rate is very low and there are
many available workers.

Proximity to raw materials

Businesses that use substantial quantities of raw materials may find it cheaper to locate
near to the source of those inputs as this will reduce transport costs. Such businesses are
often called “bulk-reducing” as the weight or size of the finished product is less than the
combined raw materials that went into making it. Good examples include:

 Steel-producers

 Sawmills

 Sugar factories

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  Oil refineries

Proximity to Market

By contrast, businesses that assemble components (“bulk-increasing”) often choose to

locate closer to where the customer markets are. This is because the cost of transporting the
bulkier or heavier finished product is greater than the cost of transporting the raw materials
or components. Good examples include:

 Breweries

 Car repairs

 Bakeries

In some cases moving the final product is not possible, such as for services like restaurants
and high street shops. In these cases the businesses will locate at the market itself.

Infrastructure

Infrastructure covers the modes of transport for people, materials and information.
Businesses need to ensure there is adequate infrastructure provision or costs can rise, such
as extra transport costs. It is the government that is largely responsible for providing and
maintaining local infrastructure.
The key infrastructure considerations are:

 Road/rail/sea and air links. The most appropriate mode will depend on the type of
business and product, but road is used by over 80% of business.

 Communications network. For example is there mobile phone coverage and

suitable telephone lines (e.g. availability of broadband internet access).

 Access to basic facilities such as water and electricity (and enough power).

Government Incentives

Government policy also influences business location. Governments often offer incentives
to start new businesses, or relocate existing ones, in areas that need economic development
(“regeneration”). This has led to certain areas being called enterprise zones or assisted
areas where firms are offered grants or low interest loans if they locate into these
economically depressed regions.

Another example is “Regional Development Agencies” which were first set up by the
current government in 1999. Their aim is to:

 Encourage economic development and regeneration

 Promote business efficiency, investment and competitiveness

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  Promote employment
 Provide training to the labour force to assist in growing employment

Both the UK Government and the European Commission offer financial support to
businesses willing to move to areas of high unemployment. Businesses are also encouraged
to redevelop “Brownfield” sites (e.g. old farms, inner city wasteland) rather than build on “
Greenfield” land on the outskirts of cities.

1. The supply of entrepreneurship is affected by many factors. Discuss some of the

policies that developing countries could implement to increase its supply of
entrepreneurship?

2. The entrepreneur has an obligation towards the community in which the venture
operates. Explain the areas in which the entrepreneur could choose to exercise his
or her social and economic responsibility of his community?

3. Briefly explain the differences and similarities between the Entrepreneurship,

management and intrapreneurship.

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4. Entrepreneurs play very important roles towards the economic development of the
country. Discuss the various ways entrepreneurs contribute towards economic
development.

5. The three major ways of recognizing business opportunities in your community is

creative thinking, personal experiences and consulting outside sources. Discuss?

6. Discuss the various options available for entrepreneurs to protect their marketable
ideas for a product or services.

7. To finance a new business, entrepreneurs must know where to look. There are two
major sources for financing new capital, equity and debt sources. Explain the
options available for start up capital under the two major sources?

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