CENTRE FOR ENTREPRENEURSHIP DEVELOPMENT

UNIVERSITY OF BENIN

Course code: CED 300

Session: 2019/2020

UNIT 1: DEFINITION AND IMPORTANCE OF ENTREPRENEURSHIP

Definition of Entrepreneurship

Economists have never had a consistent definition of "entrepreneur" or "entrepreneurship" (the

word "entrepreneur" comes from the French verb entreprendre, meaning "to undertake"). Though
the concept of an entrepreneur existed and was known for centuries, the classical and
neoclassical economists left entrepreneurs out of their formal models. They assumed that perfect
information would be known to fully rational actors, leaving no room for risk-taking or
discovery. It wasn't until the middle of the 20th century that economists seriously attempted to
incorporate entrepreneurship into their models. Three thinkers were central to the inclusion of
entrepreneurs in economic models: Joseph Schumpeter, Frank Knight, and Israel Kirzner.

 Schumpeter suggested that entrepreneurs not just companies were responsible for the
creation of new things in the search of profit.
 Knight focused on entrepreneurs as the bearers of uncertainty and believed they were
responsible for risk premiums in financial markets.
 Kirzner thought of entrepreneurship as a process that led to the discovery

Thus, an entrepreneur is an individual who creates a new business, bearing most of the risks and
enjoying most of the rewards. The entrepreneur is commonly seen as an innovator, a source of
new ideas, goods, services, and business/or procedures. Entrepreneurs play a key role in any
economy, using the skills and initiative necessary to anticipate needs and bring good new ideas
to market. While, entrepreneurship is defined as the active process of creating incremental
wealth and innovating things of value that have a bearing on the welfare of an entrepreneur and
the society at large. The more modern entrepreneurship definition is also about transforming the
world by solving big problems, bringing about social change or creating an innovative product
that challenges the status quo of how we live our lives on a daily basis.

Given the multifaceted nature of the entrepreneurship, definition offered depends on the
disciplinary approach been adopted. Thus, entrepreneurship can best be defined as a
multidisciplinary concept. Hence, Ogundele (2007) posits that the concept of entrepreneurship
means different things to different persons and with varying degrees of conceptual perspectives.
Over time, some authors and scholars have identified entrepreneurship in terms of the function of
risk taking, provision of factors of production and economic transformation by entrepreneurs
(Schumpeter, 1951; Durowoju, 2014) and others see it as the introduction of innovation into the
marketplace (Drucker, 1985; Audretsch, 1995). However, a number of distinctions from different
perspectives in terms of definitions of entrepreneurship have been identified.

 Economic Approach to Entrepreneurship: one of the key economic viewpoints to

entrepreneurship can be seen as the process of entrepreneurial activity in reducing
unemployment situation in a society. That is, as new business enterprises are created,
employment of individuals is encouraged, and unemployment is reduced considerably. In
other words, if the tendency to establish business enterprises is low; the extent to which
the people are unemployed in the society would be very high, vice-versa. From the
foregoing, Schumpeter (1951) describes entrepreneurship from economic context as the
undertaking of new ideas and new combinations (innovations), mechanism for change
and economic development. The economist view of entrepreneurship according to
Hamilton and Harper (1994) is the process of profit making. Hence, profit making is the
sole motivation for the entrepreneur. They emphasize that the sociologist and
psychologist views of culture and trait are flatly ignored by the economists.

 Sociological Approach to Entrepreneurship: Ikeije & Onuba, 2015 opined that group
characteristics such as beliefs, ethnicity, competition, social networks and values, among
others, as they affect enterprise creation in the society are issues that sociological
approach to entrepreneurship is interested in explaining. Thus, Thornton (1999) defines
entrepreneurship as the establishment of new firms, which are premised on the process of
socio-economic context-dependent. Austin et al (2003) argue that the sociological
viewpoint to entrepreneurial development is a framework for nurturing and improving on
innovation within the setting of the countless number of social problems that are faced by
the people in the society. In other words, it encourages entrepreneurs to focus more
attention on the innovative arrangements that will resolve social problems, rather than
just the economic viability of the business enterprise. Thus, sociological approach looks
at what societal social problems are that the entrepreneurs seek to solve by establishing
business enterprises.

 Psychological Approach to Entrepreneurship: Psychological approach to

entrepreneurship is concerned with the personality traits of the entrepreneur in line with
entrepreneurial developments in the society. These traits include risk taking ability,
personal enthusiasm to succeed, goal achievement, target orientation, among others. The
behavior of the entrepreneur is a reflection of the kind of person he/she is in terms of
his/her willingness to place his/her future ambition and financial security on the line and
take a risk in the name of an idea, spending much time, as well as, capital on an uncertain
business enterprise (Idam, 2014). Therefore, Oteh (2009) affirms that entrepreneurship is
a process by which an individual driven by the desire to achieve a specific goal embarks
on the establishment of a firm. These specific goals could be to experiment on a business
or perhaps to escape the authority of others. In other words, psychological orientation to
business enterprise places emphasis on personal traits, motives, and incentives on
entrepreneurs, which is the strong need for achievement and career commitment.

 Management Approach to Entrepreneurship: The management viewpoint to

entrepreneurship entails the introduction of innovation, a change, or a new order in the
 way things are done by the entrepreneur. Entrepreneurship is a concerted and a planned
search for change conducted after a systematic study of opportunities in the environment.
Schumpeter (1951) defines entrepreneurship as a process of risk-taking innovation that is
required for speedy economic development, through the process of “creative destruction”,
by which outdated technologies and ideas are substituted with new ones. The basic
ingredient in Schumpeter’s definition of entrepreneurship is ‘value creation’ by the
entrepreneur, which has the ability of bringing change in the form of economic
development of the society. The success of any business venture depends upon the
entrepreneur’s knowledge, hard work, optimism, foresight, and ability to manage the
business enterprise. Some of these qualities of entrepreneurs are acquired through
training, education, and experience. From the foregoing, it is very imperative to
emphasize that the entrepreneur has certain personality qualities which can influence his
behavior (psychologists’ perspective). He is being influenced by the environment
(sociologists’ perspective). Also, the entrepreneur is visibly influenced by government
development programmes and economic opportunities (economists perspective), and he
is concerned with the introduction of a change, through innovation (management view).

Definition and Importance of Entrepreneurship

1. Creation of Employment- Entrepreneurship generates employment. It provides an entry-

level job, required for gaining experience and training for unskilled workers.
2. Innovation- It is the hub of innovation that provides new product ventures, market,
technology and quality of goods, etc., and increases the standard of living of people.
3. Impact on Society and Community Development- A society becomes greater if the
employment base is large and diversified. It brings about changes in society and promotes
facilities like higher expenditure on education, better sanitation, fewer slums, a higher
level of homeownership. Therefore, entrepreneurship assists the organisation towards a
more stable and high quality of community life.
4. Increase Standard of Living- Entrepreneurship helps to improve the standard of living of
a person by increasing the income. The standard of living means, increase in the
consumption of various goods and services by a household for a particular period.
5. Supports research and development- New products and services need to be researched
and tested before launching in the market. Therefore, an entrepreneur also dispenses
finance for research and development with research institutions and universities. This
promotes research, general construction, and development in the economy.

KEY TAKEAWAYS

 A person who undertakes the risk of starting a new business venture is called an
entrepreneur.
 An entrepreneur creates a firm, which aggregates capital and labor in order to produce
goods or services for profit.
 Entrepreneurship is an important driver of economic growth and innovation.
  Entrepreneurship is high-risk, but also can be high-reward as it serves to generate
economic wealth, growth, and innovation.

UNIT 2: FORMS OF BUSINESS OWNERSHIP

A business is an organization that uses economic resources or inputs to provide goods or services
to customers in exchange for money or other goods and services. It could be a profit or nonprofit
seeking enterprise established for the purpose of creating goods and services that meet the needs
of mankind. In a capitalist economy, entrepreneurs are the active players in business. One major
decision that confronts an entrepreneur is the form of ownership his/her business venture would
take. The form a business takes can make tremendous difference on the long-run for an
entrepreneur. Although an entrepreneur may change the form of ownership later, this
change can be expensive, time consuming, and complicated. Good understanding of
characteristics of various forms of ownership and their impacts on an entrepreneur business and
personal circumstances are vital in making a choice. There is no single best form of business
ownership. Each form has its own unique set of advantages and disadvantages. Before you can
decide how you want to structure your business, you will need to know what your options are.
Here are a brief rundown on the most common ways to organize a business which is known as
forms of business ownership.

 Sole proprietorship
 Partnership
 Limited liability company (LLC)
 Co-operative Society
Sole Proprietorships

A sole proprietorship also known one person business is firm owned by one person, usually the
individual who has day-to-day responsibility for running the business. Sole proprietors own all
the assets of the business and the profits generated by it. They also assume complete
responsibility for any of its liabilities or debts. In the eyes of the law and the public, you are one
in the same with the business. This means the owner of the business reports business income and
losses on his or her personal tax return and is personally liable for any business related
obligations, such as debts or court judgments.

Advantages of a Sole Proprietorship

 Easiest and least expensive form of ownership to organize.

 Sole proprietors are in complete control, and within the parameters of the law, may make
decisions as they see fit.
 Sole proprietors receive all income generated by the business to keep or reinvest.
 Profits from the business flow-through directly to the owner’s personal tax return.
 The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship

  Sole proprietors have unlimited liability and are legally responsible for all debts against
the business. Their business and personal assets are at risk.
 May be at a disadvantage in raising funds and are often limited to using funds from
personal savings or consumer loans.
 May have a hard time attracting high-caliber employees, or those that are motivated by
the opportunity to own a part of the business.
 Some employee benefits such as owner’s medical insurance premiums are not directly
deductible from business income (only partially deductible as an adjustment to income).

Partnerships

A partnership is a business form created automatically when two or more persons not more than
twenty (20) engage in a business enterprise for profit. In the partnership, the business’ assets,
liabilities and profits are shared according to the established partnership agreement or deed. it is
best to have a written or documented partnership agreement.
Features of Partnership
The main features of a partnership include:

 Ownership: It is requires between 2-20 persons to enter into a partnership.

 Liability: The liability is unlimited except for limited partnership.
 Sources of Capital or Finance: The partners contribute or jointly raise funds for the
business. They could equally obtain bank loan, and plough back profit.
 Legal Entity: The business has no separate legal entity.
 Procedure to shut down: The partners must agree following stipulated terms of
agreement (where such exist) before capital can be withdrawn or the business shut down.
Types of Partnership
The following are the types of partnership.
i. General or Ordinary Partnership: The partners are actively part of the business
management; risk, profit and loss. Responsibilities, power, liabilities, profit, risks and
losses are evenly distributed among the partners.
ii. Limited Partnership: Stake in terms or liability, profit or loss is based on the financial
contribution of partners in the business. Partners do not take equal part in the
management of the business. However, it must have at least a general partner (major
partner) who bears the risk and takes active part in the business activities.
iii. Master Limited Partnership (MLP): This is a newer form of partnership which
looks much like a corporation in that it acts like a corporation and is traded on the stock
exchanges like a corporation but it is taxed like a partnership and thus avoids the
corporate income tax.
iv. Limited Liability Partnership (LLP): LLP partners risk losing their personal assets to
only their own acts and omissions of people under their supervision. This newer
type of partnership was created to limit the disadvantage of unlimited liability.
Kinds of Partners
Individuals who enter into partnership are categorized into the following.
i. General/Active Partner: This is the partner(s) who take active part in the formation,
financing and management of the business. They are assigned portfolios and receive
salaries and/or engage in profit share depending of the terms of agreement.
ii. Dormant/Sleeping Partner: A passive partner enters into partnership by providing just
money (cash or assets). He is absent from the routine operation of the business. He is
only entitled to profit sharing and losses based on the agreed sharing formula.
iii. Nominal/Passive Partner: This is an individual who is involved in the partnership on
the basis of his experience, wealth or pedigree. He usually contributes nothing to the
business financially or actively but allows his name to be used in the partnership or who
gives the public the impression that he is a partner. He is more like a mentor to the
business owner(s) and may not share in the profit of the business.
iv. Silent Partners: A silent partner is an individual who is known to the public as a partner
but who does not take active part in the management of the firm.
v. Secret Partner: A secret partner is that who is active in the affairs of the business but not
known to the public as a partner.
Advantages of a Partnership

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

developing the partnership agreement.
 With more than one owner, the ability to raise funds may be increased.
 The profits from the business flow directly through to the partners’ personal tax returns.
 Prospective employees may be attracted to the business if given the incentive to become a
partner.
 The business usually will benefit from partners who have complementary skills.

Disadvantages of a Partnership

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

Cooperative Society
Co-operative society is form of business ownership that entails a collective ownership of a
production, storage, transportation or marketing organization. This form of business ownership
involves a situation whereby people will co-operate with one another as an association and share
the wealth more evenly. Cooperative is a word derived from two Latin words meaning –
“Working together”.
The ultimate goal of a co-operative is mutual benefit. This, by implication, means that if there is
any benefit or problem accruing to the society, such benefit or problem belongs to all the
members. The persons making up the group are called members. Cooperatives may be
incorporated or unincorporated.
Characteristics of Co-operative Society
The characteristics of co-operative society as a form of business ownership include:

 Voluntary Association: Membership is by choice. Individual with common economic

objectives form and join the society. They can leave the society at will.
 Open Membership: The membership is open to all those having a common economic
interest. Any person can become a member irrespective of his/her religion, nationality,
sex, among others.
 Membership Composition: A minimum of 10 members are required to form a
cooperative society.
 Legal Entity: It is a corporate body; it can sue and be sued. It is required by law to be
registered under the Co-operative Societies Act. The society enjoys perpetual succession,
it has its own common seal, it can enter into agreements with others, it can sue others in a
court of law, it can own properties in its name.
 Capital: The capital of the cooperative society is contributed by its members. It could
also get loan from government and apex cooperative institutions.
 Democratic Set Up: The cooperative societies are managed in a democratic manner. It
usually has an elected management committee which is open to every member. Every
member has equal voting right (one-man, one-vote) irrespective of the number of shares
held by any member. It is the general body of the society which lays down the broad
framework within which the managing committee functions.
 Service Motive: The primary objective of all cooperative societies is to provide services
to its members.
 Return on Capital Investment: The members get return on their capital investment in
the form of dividend.
 Distribution of Surplus: After giving a limited dividend to the members of the society,
the surplus profit is distributed in the form of bonus, keeping aside a certain percentage as
reserve and for general welfare of the society.
Types of Cooperative Society
The categorization of cooperative societies is on the basis of their nature of activities. These
include the following.
1. Consumers’ Cooperative Societies: These societies are formed to protect the interest of
consumers by making available consumer goods of high quality at reasonable price.
2. Producer’s Cooperative Societies: These societies are formed to protect the interest of
small producers and artisans by making available items of their need for production, like
raw materials, tools and equipment, among others.
3. Marketing Cooperative Societies: They are usually set up to solve the problem of
marketing the products. Small producers come together to form marketing cooperative
societies.
 4. Housing Cooperative Societies: They are formed to curb the challenges associated with
owning decent residential houses by members. They are formed generally in urban areas.
5. Farming Cooperative Societies: These societies are formed by the small farmers to get
the benefit of large-scale farming.
6. Credit Cooperative Societies: These societies are started by persons who are in need of
credit. They accept deposits from the members and grant them loans at reasonable
interest rate.
Advantages of Co-operative Society
i. Easy to Establish: It is relatively cheap and involves little legal formalities to establish
once the minimum membership is gotten.
ii. Limited Liability: The liabilities of the members are limited to the shares brought into
the organization.
iii. Open Membership: The membership is open to all persons with similar interest. They
are free to join and leave the society at will.
iv. State Assistance: It enjoys support from government such as loans and tax relief.
v. Continuity: Its existence is not determined by any individual. The demise,
incapacitation, or resignation of any of its members may not lead to its end.
vi. Democratic Management: It operates on the democratic principles of one ma, one vote.
Every member has the opportunity to be part of the management committee.
Disadvantages of Co-operative Society
i. Limited Capital: The capital base of cooperative society is largely determined by the
wealth (contributions) of its members.
ii. Lack of Managerial Expertise: Since it relays on its members as management, the
quality of expertise of its members determine the management expertise. This could
negatively affect the prospects of the business.
iii. Less Motivation: Members individual efforts do not attract rewards. Every member earn
dividend based on shares. This could discourage members from giving their best.
iv. Lack of Interest: Often time, the interest of members in cooperative societies cannot be
sustained beyond the initial period. Selfishness, favoritism and the likes often discourage
participation of members.
v. Dependence on Government: The activities of cooperative societies pass through
serious government scrutiny. This control could negatively affect its operation and
existence.
Limited Liability Company
A limited liability company or corporation is a registered legal entity established by several
individuals by shares. It is a fusion of persons with a common agreement to pool their
resources/capital together to own a business venture. It could also be described as an association
of investors who buy or own shares (shareholders) in a company for the purpose of carrying on a
business. Thus, it is equally referred to as a joint stock company. A company operates as a
separate entity, independent of its members; it offers liability protection to its owners for
company debts and liabilities. A joint stock company could be a private limited company or a
public limited company. There are two types of limited liability companies:
1. Public Limited Liability Company: It is formed by a minimum seven persons and no
maximum number. Ownership is by shares; people are free to come in and free to sell-off
their shared. A public limited company shares can be bought by anyone freely on a stock
exchange.
Features of a Public Limited Liability Company

 Membership: It has a minimum of seven members and no maximum, but article

of association could specify maximum.
 Issuance of Shares: Its shares can be sold to the public.
 Transferability of Shares: Shares can be transferred at the pleasure of the
shareholders without the consent of other shareholders.
 Quotation as Public Companies: It is a quoted company, listed on the floor of
the stock exchange.
 Publication of Accounts: It is a legal requirement for its audited account to be
published and a copy also sent to the registrar of companies annually.
 Limited Liability: Each shareholder possess limited liability
Advantages of Public Limited Liability Company
The following are the advantages of a Public Limited Liability Company.
i. Legal Entity: It is a corporate body; it can sue and be sued.
ii. Limited Liability: The liabilities of the owners are limited to the shares brought
into the organization.
iii. Ease of Raising Additional Capital: The large numbers of
investors/shareholders makes it easy to raise fund from their contributors. It could
also sell its shares or bonds.
iv. Expansion is Unlimited: With a large pool of capital, its ability to expand is
unlimited.
v. Continuity: The exit of large number of its members due to mass demise,
incapacitation, or resignation may not lead to its end. The company is not
threatened because it still has a vast number of persons as capable replacements.
vi. Adaptability: It is adaptable to small medium and large scale companies
according to the fund available to the firm.
vii. Capital Transfer: Transfer of capital can be done at will.
viii. Vast Expertise: The fact that it is made up of many members as shareholders,
members of board, managers and other portfolios, with diverse experience and
knowledge, the running of the company will experience seamless operations.
ix. Share Holders Interest is Safeguarded: Because there is no secrecy, the
shareholders have nothing to fear.
x. No Managerial Responsibility: It is not compulsory for a shareholder to be a
part of the management. This implies that others are managing the business for
you.
xi. Employees May become Co-owners: Employee will become owner either by
deliberate action of the management of the companies or by buying shares.
 xii. Democratic Management: The Company is run democratically; election of
board of directors is by vote. In meeting, if no quorum is formed there will not be
a meeting
Disadvantages of the Public Limited Liability Company
The following are the disadvantages of a Public Limited Liability Company.
i. Double Taxation: Most corporations are faced with double taxation. In Nigeria,
federal, state and local government charge companies different taxes.
ii. Complex to Establish: Methods of establishment and finance needed for
such kind of business is high and it require a large capital outlay which may
scare out a lot of investors.
iii. No Privacy: Company and allied matter decree expect this type of company to
publish its account annually, making it public affairs.
iv. Non-Flexibility: It is hard to switch business because the papers for
registration state what they are to do. If you change condition, it means you are to
form another company entirely. Special performance must be sought from
government to transact business outside the location in which you were
registered.
v. Cooperation is Non Existence: Most companies have problems of
misunderstanding between both managers and managers or with workers, which
is possibly due to its large nature.
vi. Owners are separate from Managers: This could give room for laxity and sharp
practices on the part of the managers as they have no stake.
vii. Delay in policy and decision making: No decision can be made without a quorum.
This could affect smooth operations especially in emergency situations.
viii. Suppression of individual initiatives: There is little room for individual
innovativeness; everything must be subject to approval.

2. Private Limited Liability Company: This Company at beginning comprises two people
and a maximum of fifty, including its employees. It is a company where the liability is
limited to the value of the shares issued.
Features of a Private Limited Liability Company

 Membership: A minimum of 2 and a maximum of 50 persons.

 Issuance of Shares: Its shares cannot be sold to the public.
 Transferability of Shares: This is only possible with the consent of other
shareholders.
 Quotation: It is not quoted or listed on the floor of the stock exchange.
 Publication of Accounts: Publication of annual account is not required. But a
copy of audited account must be sent to the registrar of companies annually.
 Limited Liability: Every shareholder possesses limited liability.
Advantages of a Private Limited Liability Company
 The following are the advantages of a Private Limited Liability Company.
i. Limited Liability: Liability is limited to the amount of money
contributed into the business. In case of liquidation, your personal properties
are not touched.
ii. Privacy: It is not compulsory to publish its account yearly. This helps to
protect the company’s secret.
iii. Continuity: The number of persons involves helps to ensure continuity in the
event of death or incapacitation of some of its members.
iv. More Capital: It has more pool of capital and equally very credit worthy form
banks and other financial sectors.
v. Legal Entity: The Company is a legal entity as such it can sue and be sued.
Disadvantages of a Private Company
The following are the disadvantages of a Private Limited Liability Company.
i. Taxes: Most of these companies pay corporate tax compare to a sole trader or
partnership that pays personal income tax. Sometimes, it could be a huge
burden that could affect the company.
ii. Share: It is unfortunate that the companies share are not publicly subscribed,
even in the exchange of shares, all member must be notify. A new member
may be rejected.
iii.No Presence in the Money Market: The shares of private limited
companies are not quoted on the floor of the stock exchange; hence they
cannot be transferred without the consent of other share holders
Cooperative Society

Co-operative society is a form of business ownership that entails a collective ownership of a

business for the purpose of marking profit. This form of business ownership involves a situation
whereby people will co-operate with one another as an association and share the wealth more
evenly. The ultimate goal of a co-operative is mutual benefit. This, by implication, means that if
there is any benefit or problem accruing to the society, such benefit or problem belongs to all the
members. The persons making up the group are called members or cooperators. Cooperatives
may be incorporated or unincorporated.
Characteristics of Co-operative Society
The characteristics of co-operative society as a form of business ownership include:

 Voluntary Association: Membership is by choice. Individual with common economic

objectives form and join the society. They can leave the society at will.
 Open Membership: The membership is open to all those having a common economic
interest. Any person can become a member irrespective of his/her religion, nationality,
sex, among others.
 Membership Composition: A minimum of 10 members are required to form a
cooperative society.
  Legal Entity: It is a corporate body; it can sue and be sued. It is required by law to be
registered under the Co-operative Societies Act. The society enjoys perpetual succession,
it has its own common seal, it can enter into agreements with others, it can sue others in a
court of law, it can own properties in its name.
 Capital: The capital of the cooperative society is contributed by its members. It could
also get loan from government and apex cooperative institutions.
 Democratic Set Up: The cooperative societies are managed in a democratic manner. It
usually has an elected management committee which is open to every member. Every
member has equal voting right (one-man, one-vote) irrespective of the number of shares
held by any member. It is the general body of the society which lays down the broad
framework within which the managing committee functions.
 Service Motive: The primary objective of all cooperative societies is to provide services
to its members.
 Return on Capital Investment: The members get return on their capital investment in
the form of dividend.
 Distribution of Surplus: After giving a limited dividend to the members of the society,
the surplus profit is distributed in the form of bonus, keeping aside a certain percentage as
reserve and for general welfare of the society.
Types of Cooperative Society
The categorization of cooperative societies is on the basis of their nature of activities. These
include the following.
7. Consumers’ Cooperative Societies: These societies are formed to protect the interest of
consumers by making available consumer goods of high quality at reasonable price.
8. Producer’s Cooperative Societies: These societies are formed to protect the interest of
small producers and artisans by making available items of their need for production, like
raw materials, tools and equipment, among others.
9. Marketing Cooperative Societies: They are usually set up to solve the problem of
marketing the products. Small producers come together to form marketing cooperative
societies.
10. Housing Cooperative Societies: They are formed to curb the challenges associated with
owning decent residential houses by members. They are formed generally in urban areas.
11. Farming Cooperative Societies: These societies are formed by the small farmers to get
the benefit of large-scale farming.
12. Credit Cooperative Societies: These societies are started by persons who are in need of
credit. They accept deposits from the members and grant them loans at reasonable
interest rate.
Advantages of Co-operative Society
vii. Easy to Establish: It is relatively cheap and involves little legal formalities to establish
once the minimum membership is gotten.
viii. Limited Liability: The liabilities of the members are limited to the shares brought into
the organization.
 ix. Open Membership: The membership is open to all persons with similar interest. They
are free to join and leave the society at will.
x. State Assistance: It enjoys support from government such as loans and tax relief.
xi. Continuity: Its existence is not determined by any individual. The demise,
incapacitation, or resignation of any of its members may not lead to its end.
xii. Democratic Management: It operates on the democratic principles of one ma, one vote.
Every member has the opportunity to be part of the management committee.
Disadvantages of Co-operative Society
vi. Limited Capital: The capital base of cooperative society is largely determined by the
wealth (contributions) of its members.
vii. Lack of Managerial Expertise: Since it relays on its members as management, the
quality of expertise of its members determine the management expertise. This could
negatively affect the prospects of the business.
viii. Less Motivation: Members individual efforts do not attract rewards. Every member earn
dividend based on shares. This could discourage members from giving their best.
ix. Lack of Interest: Often time, the interest of members in cooperative societies cannot be
sustained beyond the initial period. Selfishness, favoritism and the likes often discourage
participation of members.
x. Dependence on Government: The activities of cooperative societies pass through
serious government scrutiny. This control could negatively affect its operation and
existence.
UNIT 3: LOCATION AND BUSINESS SITE SELECTION
Location is the mantra of the every business. But finding the exact right location for a business is
often a case of easier said than done. What a good location is depends on the nature of the
enterprise and its target market. Choosing a business location is perhaps the most important
decision a small business owner or startup will make, so it requires precise planning and
research, according to the Small Business Administration website, which calls for looking at
demographics, assessing your supply chain, scoping the competition, staying on budget,
understanding state laws and taxes. The following are five tips to consider in the search for a
business location:

1. Consider the surrounding community: When hunting for a business site, entrepreneurs should
consider whether a given community is actively seeking new companies. Contact the local
economic development agency to learn about possible incentives, which could include financial
support for tenant improvements, municipal programs giving preference to area businesses or
local tax and planning department waivers. Economic development consultant Justin Erickson
advised entrepreneurs to lock down incentives prior to signing a lease or making a commitment
as “communities sometimes do not follow through with promised incentives once a company has
signed a lease or bought a building.”

2. Beware of problem locations: Some locations are great. Others are miserable. Consider the
revolving restaurant site, a spot that's home to a new restaurant every six months: Each new
owner believes that he or she has the secret sauce to make the site work only to call it quits after
a short stretch. The fact is, not all locations are the same. Regardless of the product, service or
business plan, some locations are simply bad for business. “If you find yourself trying to decide
between a better location at a higher rent versus a lesser location for a lower rent my advice is go
for the better location,” said commercial lease consultant Dale Willerton. “When I’m consulting
to tenants and doing site selection my job isn’t to find the cheapest location -- it’s to select a site
that will help the tenant maximize sales.”

3. Identify target customers: Entrepreneurs must carefully consider their target clients when
developing a business plan. Then they should seek locations abundant with this type and ensure
that these areas can provide employees with the needed skills. “Estimate the market size and the
customers’ purchasing power in the primary area,” Morato said. “Driving or walking time to the
location should be studied. Also, examine the vehicular and traffic flow and take note of physical
barriers and traffic limitations or detours."

4. Pay a fair price: The ideal location will rarely be one with the lowest price tag. Entrepreneurs
should be realistic and ready to pay for a good site. An ideal location will contribute toward the
enterprise's success. A poor one will result in rapid closure. Good locations are not cheap. A
business plan should include a realistic projection of the costs involved. “It may cost us more to
do business here, and there are definitely some handicaps to doing business here, but there is a
tremendous upside to being near your customers,” said Paul Beach, an executive who runs a
company that makes lithium-ion batteries in California.

5. Know the competition: Very rarely will a business be the only game in town. Entrepreneurs
must assess the competition and be certain there's enough business to go around. If a given
community is already saturated with similar businesses, consider a new location. Those
determined to compete in a tight market must offer a product or service sufficiently game
changing to draw enough business to make the operation viable. “Identifying the competition in
a market helps determine if your business idea is feasible,” according to the Iowa State
University website. “A competitive assessment also directs how a product/service should be
positioned.” This analysis will determine if the company can gain a competitive edge by offering
something the existing competition doesn't.

UNIT 4: CONCEPT OF FEASIBILITY STUDY

As the name implies, a feasibility analysis is used to determine the viability of an idea, such as
ensuring a project is legally and technically feasible as well as economically justifiable. It tells us
whether a project is worth the investment. In some cases, a project may not be doable. There can
be many reasons for this, including requiring too many resources, which not only prevents those
resources from performing other tasks but also may cost more than an organization would earn
back by taking on a project that isn’t profitable. A feasibility study is part of the initial design
stage of any project or plan. It is conducted in order to objectively uncover the strengths and
weaknesses of a proposed project or an existing business. A well-designed study should offer a
historical background of the business or project, such as a description of the product or service,
accounting statements, details of operations and management, marketing research and policies,
financial data, legal requirements, and tax obligations. It can help to identify and assess the
opportunities and threats present in the natural environment, the resources required for the
project, and the prospects for success. It is conducted in order to find answers to the following
questions: Does the company possess the required resources and technology? , Will the company
receive a sufficiently high return on its investment? Generally, such studies precede technical
development and project implementation.

Types of Feasibility Study

A feasibility analysis evaluates the project’s potential for success; therefore, perceived
objectivity is an essential factor in the credibility of the study for potential investors, funding and
lending institutions. There are five types of feasibility study described below.

1. Technical Feasibility: This assessment focuses on the technical resources available to the
organization. It helps organizations determine whether the technical resources meet
capacity and whether the technical team is capable of converting the ideas into working
systems. Technical feasibility also involves the evaluation of the hardware, software, and
other technical requirements of the proposed system.
2. Economic Feasibility: This assessment typically involves a cost/ benefits analysis of the
project, helping organizations determine the viability, cost, and benefits associated with a
project before financial resources are allocated. It also serves as an independent project
assessment and enhances project credibility, helping decision-makers determine the
positive economic benefits to the organization that the proposed project will provide.
3. Legal Feasibility: This assessment investigates whether any aspect of the proposed
project conflicts with legal requirements like zoning laws, data protection acts or social
media laws. Let’s say an organization wants to construct a new office building in a
specific location. A feasibility study might reveal the organization’s ideal location isn’t
zoned for that type of business. That organization has just saved considerable time and
effort by learning that their project was not feasible right from the beginning.
4. Operational Feasibility: This assessment involves undertaking a study to analyze and
determine whether and how well the organization’s needs can be met by completing the
project. Operational feasibility studies also examine how a project plan satisfies the
requirements identified in the requirements analysis phase of system development.
5. Scheduling Feasibility: This assessment is the most important for project success, after
all, a project will fail if not completed on time. In scheduling feasibility, an organization
estimates how much time the project will take to complete.

Steps in a Feasibility Study

Conducting a feasibility study involves the following steps:

1. Conduct preliminary analyses.

2. Prepare a projected income statement. What are the possible revenues that the project can
generate?
3. Conduct a market survey. Does the project create a good or service that is in demand in
the market? What price are consumers willing to pay for the good or service?
4. Plan the organizational structure of the new project. What are the staffing requirements?
How many workers are needed? What other resources are needed?
5. Prepare an opening day balance of projected expenses and revenue
6. Review and analyze the points of vulnerability that are internal to the project and that can
be controlled or eliminated.
7. Decide whether to go on with the plan/project.

Contents of a Feasibility Report

A feasibility report should include the following sections:

 Executive Summary
 Description of the Product/Service
 Technology Considerations
 Product/ Service Marketplace
 Identification of the Specific Market
 Marketing Strategy
 Organizational Structure
 Schedule
 Financial Projections

UNIT 5: ANALYSIS OF BUSINESS OPPORTUNITY

Opportunity analysis is the process of identifying and exploring revenue enhancement or expense
reduction situations to better position the organization to realize increased profitability,
efficiencies, market potential or other desirable objectives. Opportunity analysis is a vital process
for the growth of an organization and needs to be performed frequently. The evaluation of
business requires financial, product and human resource analysis. Review the potential and the
pitfalls inherent in the business to make an informed decision and increase your chances of
success.

Steps to Evaluating Business Opportunities

Self-Analysis: According to the Arkansas Small Business Development Center, most small
businesses fail because of poor management and the owner’s inability to manage resources.
Before you even start researching the feasibility of your idea and the market you plan on
entering, evaluate your own talents, desires and goals. Consider your willingness to take risks as
well as the amount of time and energy you’ll need to make the business a success. Review your
financial, personnel and marketing skills as well to ensure you have the necessary background to
make a success of your new venture.

Financial Components: After learning about the investment required to purchase the existing
business or franchise or the start-up costs you’ll need initially, evaluate your own resources. Part
of a financial assessment includes the amount you have in personal savings to add to the initial
investment. Banks typically require entrepreneurs to come up with a portion of the investment to
show good faith and willingness to take a risk with the lender. Assess the financing available
through the seller, investors and lenders when evaluating your chances of succeeding.

Market Research: To thoroughly understand what you’re getting into, perform an extensive
market research project to determine the feasibility of your business. In addition to gleaning
statistics of trends and current customer buying patterns, you need to know who your customers
are, where they are located and what kind of competition exists in your area. Consider market
research your first steps in opportunity analysis that help you understand exactly how you will
sell products or services to a specific market.

Risk Assessment: A complete evaluation of a business opportunity includes a risk assessment.

An honest appraisal of the potential risks inherent in your new business can help you prepare for
possible problems and decide whether the risks are worth the investment. Details you need to
consider in the risk assessment process include factors that could negatively affect your business,
such as the general state of the economy, weather events and your competition's competitiveness.
Internal considerations should include your own health, the level of credit available to you and
the number and type of employees you’ll need to hire to run the business efficiently.

Support: Finally, evaluate the amount of support you expect to receive from your family and the
community. You’ll most likely spend an inordinate amount of time in the initial stages of
opening your new business, which could affect your family relationships. Opportunity evaluation
requires professional and personal considerations. Outside hobbies and commitments may need
to be curtailed for some time. Attitudes and cultural preferences in your community can impact
your ability to grow and sustain your business. Evaluate your standing on all these fronts to
ensure you’ve got the necessary support to be successful.

UNIT 6: GOVERNMENT POLICY ON FINANCING SMALL AND MEDIUM

SCALE ENTERPRISES

Every business operates within an economic environment and is therefore susceptible to the
changes that take place in the economic policies overtime. This makes it highly important for
businesses to be informed on various ways these policies affect their sales, profitability and
overall objectives. A policy can be defined as a plan of action agreed and chosen by a group of
people, organization, or political party. In business, policies can be categorized as internal or
external. The internal policies guide and spell out how business activities are run. The internal
policies, also known as business policies, are set by the owners and management of a business,
and determine their scope of operations (Oviatt & McDougall, 2005). But these business policies
are dependent and often influenced by the overall government policies within the economy in
which entrepreneurs operate. Policy is a law, regulation, procedure, administrative action,
incentive or voluntary practices of institutions or government. The government policies
therefore, are external policies which are not within the direct control of the entrepreneurs within
the economy.

In Nigeria, structures and programmes such as the Small and Medium Enterprises Development
Agency (SMEDAN), N-Power programme, Government Enterprise and Empowerment
Programme (GEEP) and the You-win programme were designed to promote entrepreneurial
activities by facilitating access to funds and other resources needed for SMEs (Oliyide, 2012;
Today.ng, 2018). All these policies and much more are targeted towards promoting
entrepreneurship. The Federal Government has at different times set up agencies to help the
development of SMEs in Nigeria. As laudable as they are different obstacles varying from bad
policy formulation to poor implementation has been the bane of these bodies. No doubt legally
registered business enjoy the benefit of legal entity and access to credits, nonetheless, several
MSMEs in Nigeria have their businesses unregistered. Also, despite government efforts to
increase participation through reduced cost and the ability to register under a day, several
businesses lie outside the formal registered; hence depicting the ease of business start-ups in
Nigeria. Once a business is registered in Nigeria, it is expected to pay tax. But due to the most
SMEs lying outside the formal sector and the poor tax system many entrepreneurs find it easy to
evade (Makinde, 2005; Kiabel & Nwokah, 2009; Otusanya, 2010; Abiola & Asiweh, 2012;
Adebisi & Gbegi, 2013). The various government efforts in promoting SMEs is as follows:

People’s Bank of Nigeria: was designed to provide credit facilities to small-scale enterprises
which find it difficult to approach the formal financial institutions and are discourage from the
informal ones due to high cost of borrowing. The bank is a formal financial institution, some of
those attribute that have facilitated their operations are; low transactions costs, prompt
disbursement of loans, minimal paperwork, no collateral, etc

Bank of Industry: was set up to provide long terms loan for the industry sector. The bank is to
assist in the startup, expansion and development of small, medium and large scale enterprises.

Small and Medium Enterprises Development Agency of Nigeria: was established by the
SMEDANACT 2003 to promote the development of micro, small and medium enterprises, it’s a
one stop shop for SMEs development. The body provides services on entrepreneurial skills and
as well as vocational training that will ensure smooth take off, steady development and actual
survival of SMEs in Nigeria.
The SMEEIS Scheme: The Banker's Committee is a body constituted by representatives of
banks in Nigeria. The scheme was approved at its 246th meeting on December 21, 1999.
According to the body, this was a response to President Obasanjo's concern and policy measures
for the promotion of small and medium industries (SMI) as a vehicle for rapid industrialization,
sustainable economic development, poverty alleviation and employment generation. The scheme
requires all banks in Nigeria to set aside 10% of their profit before tax (PBT) for equity
investment in small and medium scale industries. SMEEIS is the current sector driven economic
policy thrust of government involving banks. It is an equity financing initiated by the Federal
Government aimed at formalizing SMEs source of financing. The scheme commenced on June
19th 2001. The scheme was set up to solve the problem of funding for SMEs operators which
consequently led to introduction of venture capital into the Nigeria financial industry.

UNIT 7: LAW OF CONTRACT

Law of contract is an agreement between private parties creating mutual obligations enforceable
by law. The basic elements required for the agreement to be a legally enforceable contract are:
mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and
legality. The law of contract is concerned about the legal enforceability of promises. In that
context, a contract may be described as an agreement that the law (the Courts) will enforce. This
notion of enforceability is central to contract law. If you break (breach) the contract, the other
party has several legal remedies. Firstly, he can sue you for damages for breach of contract. Also,
he can ask the court to order you to perform the contract. If you break (breach) the contract, the
other party has several legal remedies.

The law of contract is about the enforcement of promises. Not all promises are enforced by
courts. To enforce a set of promises, or an agreement, courts look for the presence of certain
elements. When these elements are present a court will find that the agreement is a contract. • To
say that we have a contract means that the parties have voluntarily assumed liabilities with
regard to each other. The process of agreement begins with an offer. For a contract to be formed,
this offer must be unconditionally accepted.

Types of Contract

There are several types of contracts. The most common types under English law ar:

Contracts of record: Contracts of record are judgments of courts of law and other recognized
tribunals. Example : if during litigation, the contesting parties agree to a settlement of the case
and the judge records that settlement in writing, such settlement is called a contract of record and
is binding on both parties.

Contracts under seal: A contract under seal is also called a deed or a specialty contract. This is
a contract which is in writing and signed by both parties and is formally executed by the affixing
of a seal. Example : Conveyances relating to property – If you buy or sell a land, a notary must
notarially execute the contract with two witnesses. In Sri Lanka a seal is not used like in
England.

Simple contracts: Simple Contracts Simple contracts are the most common type of contract.
Most business contracts are simple contracts. A simple contract may be in writing or be made
verbally or by conduct. No formalities are required for simple contracts except where required by
legislation. The legal rules relating to contracts discussed below apply to simple contracts.

Elements of a Contract

The complaining party must prove four elements to show that a contract existed:

1. Offer - One of the parties made a promise to do or refrain from doing some specified
action in the future.
2. Consideration - Something of value was promised in exchange for the specified action or
nonaction. This can take the form of a significant expenditure of money or effort, a
promise to perform some service, an agreement not to do something, or reliance on the
promise. Consideration is the value that induces the parties to enter into the contract. The
existence of consideration distinguishes a contract from a gift. A gift is a voluntary and
gratuitous transfer of property from one person to another, without something of value
promised in return. Failure to follow through on a promise to make a gift is not
enforceable as a breach of contract because there is no consideration for the promise.
3. Acceptance - The offer was accepted unambiguously. Acceptance may be expressed
through words, deeds or performance as called for in the contract. Generally, the
acceptance must mirror the terms of the offer. If not, the acceptance is viewed as a
rejection and counteroffer. If the contract involves a sale of goods (i.e. items that are
movable) between merchants, then the acceptance does not have to mirror the terms of
the offer for a valid contract to exist, unless: (a) the terms of the acceptance significantly
alter the original contract; or (b) the offeror objects within a reasonable time.
4. Mutuality - The contracting parties had “a meeting of the minds” regarding the
agreement. This means the parties understood and agreed to the basic substance and
terms of the contract. When the complaining party provides proof that all of these
elements occurred, that party meets its burden of making a prima facie case that a
contract existed. For a defending party to challenge the existence of the contract, that
party must provide evidence undermining one or more elements.

UNIT 8: TAXATION POLICIES

A tax is a compulsory payment of money paid to the government by individuals or organizations

as the government covers its expenses on various public functions and its interference in
political, economic and social life without direct return of benefit to be derived by the taxpayer.
Taxation is a system by which a government levies or imposes charges on citizens and corporate
entities to finance its expenses such as defense, welfare like education, health care,
infrastructure, among others. The National Tax Policy (2012) noted that taxation is basically the
process of collecting taxes within a particular location. It can also be defined as the enforced
proportional contributions from persons and property, levied by the State by virtue of its
sovereignty for the support of government and for all public needs. To create a system of
taxation, a country must make decision regarding the distribution of the tax burden; that is, Who
will pay taxes and bear the burden? How much they will pay? And how the taxes collected will
be spent? This is the core of the Nigeria tax policy.

Basic concepts in Taxation

Tax Base: The tax base is the amount to which a tax rate is applied. It is the total of taxable
income, taxable assets, and the assessed value of property within the government tax jurisdiction.
It can also be defined as the total amount of assets or income that can be taxed by a taxing
authority, usually by the government which can be income or property. For example, the
assessed value is the tax base for property taxes and taxable income is the tax base for income
tax.
Tax Rate: A tax rate is the percentage at which an individual or corporation is taxed. It is the
percentage of the tax base that must be paid in taxes. It is necessary to know the tax base and the
tax rate when calculating most taxes. Example, if the tax base equals N100 and the tax rate is
6%, then the tax will be (100 × 0.06) = N6.
Average Tax Rate: The average tax rate is the ratio of the total amount of taxes paid (T) to the
total tax base (TB) expressed as a percentage.
T
100
Average Tax Rate = TB

For example, if a household has a total income of N100,000 and pays taxes of N5,000, the
household’s average tax rate is 5%.

5000
100  5%
100000

Marginal Tax Rate: The marginal tax rate can be defined as the tax rate that applies to the last
(or next) unit of the tax base; it is in effect, the tax percentage on the highest Naira earned. It is
the incremental tax paid on incremental income or the rate on the last Naira of income earned. It
is the part of a progressive tax system which applies different tax rates to different levels of
income. As income rises, it is taxed at a higher rate (according to the bracket it falls in). For
example, if an increase in income would push someone’s income into the next tax bracket, the
increase would be subject to two tax rates; it would be taxed at your current marginal tax rate
until it reaches the top end of the person’s current bracket, and any amount that exceeds the
current bracket would be taxed at the next highest rate.

Table 1: Illustration of marginal tax rate calculation

Tax Bracket (N) 0 – 20,000 20,000- 40,000 40,000 – 60,000 60,000 – 80,000

Tax Rate (%) 0 10 20 30

From the Table 1, assuming Clement’s income is N50,000 per year, implying that his marginal
tax rate is 20%. Clement gets N15,000 increase in income bringing his total income to N65,000
per year. The first N10,000 of his increased income would be taxed 20% because it is within his
current bracket, but the next N5,000 would be taxed at 30% because it falls within the next
bracket. In this situation, his increased income would be subject to:

 10, 000  0.20  2,000    5,000  0.30  1,500   3,500 in taxes.

Effective Tax Rate: The effective tax rate is the average tax rate paid by an individual or a
corporation. The effective tax rate for individuals is the average rate at which their earned
income; such as salaries, and unearned income; such as stock dividends, are taxed. The effective
tax rate for a corporation is the average rate at which its pre-tax profits are taxed, while the
statutory tax rate is the legal percentage established by law.
Tax Holiday: A tax holiday is a government incentive program that offers a tax reduction or
elimination to businesses. It is a temporary period during which the government removes certain
taxes, usually sales tax on certain items in order to encourage the consumption or purchase of
these items. Tax holidays are often used to in developing countries to help stimulate foreign
investment.
Types of Tax
Personal Income Tax (Individual income tax): Personal income tax also called
individual income tax is a tax on a person’s income e.g. wages, salaries, and other earnings from
one’s occupation or jobs. Other income that could be taxed is profits from real estate or other
investments whose value has increased over time. It is a statutory obligation imposed by the
government on the incomes of individuals, communities and families, trustees or executors of
any settlement. In Nigeria, PIT is guided by the Personal Income Tax Act Cap P8 LFN 2004 (as
amended).
Corporate income tax: A corporate income tax is also called corporation tax or company tax. It
is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous
legal entities. Many countries impose such taxes at the national level and a similar tax may be
imposed at state or local levels. In Nigeria, the Company Income Tax rate is 30% for large a
company, that is, companies with gross turnover greater than N100m, assessed on a preceding
year basis. It is a tax charged on profits for the accounting year ending in the year preceding
assessment.
Payroll tax: Whereas an income tax is levied on all sources of income, a payroll tax applies only
to wages and salaries. They are taxes imposed on employers or employees, and are usually
calculated as a percentage of the salaries that employers pay their staff. Payroll taxes generally
fall into two categories: deductions from an employee's salaries, and taxes paid by the employer
based on the employee's wages. For most people, payroll taxes are the second-largest tax they
must pay each year, after individual income taxes. In developed economies, payroll taxes are the
main sources of funding for various social insurance programs, such as those that provide
benefits to the poor, elderly, unemployed, and disabled. Here, Income tax rates range from 7% to
24%. Social security: Social security contributions in Nigeria cover benefits for retirement,
disability, sickness and maternity. Employees contribute a minimum of 8% of their salary, while
employers must contribute around 10% to the various benefit schemes.

Consumption tax: A consumption tax is a tax levied on sales of goods or services. Consumption

tax in Nigeria is VAT which is at 7.5% of goods and service consumed except for those goods
and services specifically exempted from the tax. VAT is administered by the federal government
of Nigeria. However some state governments in Nigeria also administer a form of consumption
tax on specific goods and services. For instance the Lagos State Government in Nigeria charges a
5% consumption tax on hotels, restaurants and other relaxation spots.
Property tax: In principle, a property tax is a tax on an individual’s wealth; that is, the value of
all of the person’s assets, both financial (such as stocks and bonds) and real (such as houses, cars,
and artwork). In practice, property taxes are usually more limited.
Classification of Taxes
The classification ranges from taxes that may be proportional, progressive, regressive and
degressive.

Proportional tax: A proportional tax takes the same percentage of income from all people. No
matter the size of income, the same rate or same proportion (%) is charged. For example, it is a
proportional tax when all taxpayers have to pay to say 1% of their income. It means that
everyone experiences the same tax rate, whether low, middle, or high-income.
Progressive tax: A progressive tax takes a higher percentage of income as income rises; that is
the rich people not only pay a larger amount of money than poor people but a larger fraction of
their incomes. The term progressive refers to the way the tax rate progresses from low to high
with the principle that ‘the higher the income; the higher the rate’. In a progressive tax, the rich
pays higher taxes than the poor and the tax is based on the taxpayer's income or wealth.
Regressive tax: A regressive tax takes a smaller percentage of income as income rises; that is,
poor people pay a larger fraction of their incomes in taxes than rich people. It is the opposite of
the progressive tax. Under this system of taxation, the tax rate diminishes as the taxable amount
increases. That is, there is an inverse relationship between the tax rate and taxable income.
Degressive Tax: A tax is called degressive when the higher incomes do not make a due
sacrifice, or when the burden imposed on them is relatively less, that is, the tax may be
progressive up to a certain limit beyond which a uniform rate is changed. This means that there
will be a lower relative sacrifice on the larger incomes than on the smaller incomes.
UNIT 9: MEANING AND MANDATES OF SOME AGENCIES FOR
ENTREPRENEURSHIP DEVELOPMENT IN NIGERIA
The following are some organizations and agencies (statutory and non-statutory) that have been
set up to enhance the performance and subsequent development of entrepreneurship in Nigeria.
Statutory Organizations/Agencies for Entrepreneurship Development
In the context of this chapter, statutory organizations/agencies are set up by the government with
the sole mandate for entrepreneurship development. These organizations or agencies are often
established by an act or law for specific mandates in the area of entrepreneurship development in
the country. Some of these statutory organizations/agencies in Nigeria are discussed in this
chapter.
Small and Medium Enterprises Agencies of Nigeria (SMEDAN)
This agency was established by the SMEDAN Act of 2003 to promote the development of the
Micro, Small and Medium Enterprises Development (MSMED) sector of the Nigeria economy.
Its mission is to facilitate the access of micro, small and medium entrepreneurs/investors to all
the resources required for their development. This is a “One stop shop” for micro small and
medium enterprises development. Its mission is to facilitate the access of micro, small and
medium entrepreneurs/investors to all the resources required for their development. It compiles;
reviews and updates all existing economic policies, regulations, incentives and legislation
affecting MSME operation within the state. Other institution established was the Industrial
Development Centers (IDCs) which is to provide extension service to SMEs in such areas as
project appraisal for loan application, training of entrepreneurs, managerial assistance, product
development as well as other extension services. These industrial associations provide increased
support for entrepreneurial development in the forms of training, logistics and funding for their
members. Emerging entrepreneurs are therefore encouraged to join any of these associations in
order to access the numerous benefits they provide.
The major mandate of SMEDAN as contained in the enabling Act can be summarized as
follows:
i. Stimulating, monitoring and coordinating the development of the MSMEs sub-sector;
ii. Initiating and articulating policy ideas for small and medium enterprises growth and
development;
iii. Promoting and facilitating development programmes, instruments and support services to
accelerate the development and modernization of MSME operations;
iv. Serving as vanguard for rural industrialization, poverty reduction, job creation and
enhanced livelihoods;
v. Linking MSMEs to internal and external sources of finance, appropriate technology,
technical skills as well as to large enterprises;
vi. Intermediating between MSMEs and Government (SMEDAN is the voice of the
MSMEs);
vii. Working in contact with other institutions in both public and private sector to create a
good enabling environment of business in general, and MSME activities in particular.
National Directorate of Employment (NDE)
The National Directorate of Employment (NDE) was established in November 1986. It fully
began operations in January 1987. The National Directorate of Employment (NDE) was
established to give training opportunities to the unemployed, especially the youth, by providing
guidance, finance and other support services, to help them create jobs for themselves and others.
Nearly two million people have benefited from the NDE programmes. The NDE Charter is to
ensure that NDE is committed to employment generation, poverty reduction, wealth creation and
attitudinal change to enable Nigerian Youths to be self-employed as well as contribute to the
economic growth and development of the Nation.
The NDE mission is derived from its mandate as follows, to:
i. design and implement programmes to combat mass unemployment;
ii. articulate policies aimed at developing work programmes with labour intensive
potentials;
iii. obtain and maintain data bank of unemployment and vacancies in the country with a view
of linking job seekers with vacancies; and
iv. implement any other policies as may be laid down from time to time by the board
established under sections of its enabling Act.
The NDE Vision is to:
1. Job for all. To create pool of artisans and entrepreneurs among the unemployed through
2. Skills acquisition of youths who will promote economic development of the nation.
Industrial Development Centres (IDC)
The first Industrial Development Centers (IDC) was established in Owerri in 1965 by the former
Eastern Nigeria government, Ministry of Trade and Industry. It was taken over in 1970 by the
Federal government including the one in Zaria, Northern Nigeria, which was established in 1969.
IDCs are established in more states of the federation namely Maiduguri, Abeokuta, Sokoto,
Benin City, Uyo, Bauchi, Akure, Port Harcourt, Ilorin, Kano, Osogbo and Ikorodu. The mission
of IDC is to provide extension service to SMEs in such areas as project appraisal for loan
application, training of entrepreneurs, managerial assistance, product development as well as
other extension services.
The IDCs in pursuance of its mandate of coordinating and monitoring all investment activities
facilitate investments by maintenance of liaison between investors and Ministries, Government
departments and agencies, institutional lenders and other authorities concerned with investments;
provision and dissemination of up-to-date information on incentives available to investors; and
assisting incoming and existing investors by providing support services including assistance to
procure authorities and permits required for the establishment and operation of enterprises. The
emergence of the Industrial Development Centres was as a result of the Nigerian government’s
yearning to strengthen small and medium enterprises (SMEs) in the country. Through IDC,
entrepreneurs are expected to learn about new production techniques, new types of machinery
and their usage, how to develop a feasibility plan as well as establishing small scale businesses
for self-sufficiency and self-reliance.
Industrial Training Fund (ITF)
Established in 1971, the Industrial Training Fund has operated consistently and painstakingly
within the context of its enabling laws Decree 47 of 1971 as Amended in the 2011 ITF ACT. The
objective for which the Fund was established has been pursued vigorously and efficaciously.
Over the years, the ITF has not only raised training consciousness in the economy, but has also
helped in generating a corps of skilled indigenous manpower which has been manning and
managing various sectors of the national economy.
The Vision Statement of ITF is to be the foremost Skills Training Development Organization in
Nigeria and one of the best in the world, while the mission Statement is to set and regulate
standards and offer direct training intervention in industrial and commercial skills training and
development, using a corps of highly competent professional staff, modern techniques and
technology.
The main thrust of ITF programmes and services is to stimulate human performance, improve
productivity, and induce value-added production in industry and commerce. Through its Students
Industrial Work Experience Scheme (SIWES) and Vocational and Apprentice Training
Programmes (VATP), the Fund also builds capacity for graduates and youth self-employment, in
the context of Small Scale Industrialization, in the economy.
Over the years, pursuant to its statutory responsibility, the ITF has expanded its structures,
developed training programmes, reviewed its strategies, operations and services in order to meet
the expanding, and changing demands for skilled manpower in the economy. Beginning as a
Parastatal “B” in 1971, headed by a Director, the ITF became a Parastatal “A” in 1981, with a
Director-General as the Chief Executive under the aegis of the Ministry of Industry. The Fund
has a 13 member Governing Council and operates with 10 departments and 4 units at the
headquarters, 38 area offices, 4 skills training centres, and a centre for industrial training
excellence. As part of its responsibilities, the ITF provides direct training, vocational and
apprentice training, research and consultancy service, reimbursement of up to 50% levy paid by
employers of labour registered with it, and administers the SIWES. It also provides human
resource development information and training technology service to industry and commerce to
enhance their manpower capacity and in-house training delivery effort.
Bank of Industry (BOI)
The Bank of Industry Limited (BOI) is Nigeria’s oldest, largest and most successful development
financing institution. Although the bank’s authorized share capital was initially set at N50 billion
in the wake of NIDB’s reconstruction into BOI in 2001 out of the Nigerian Industrial
Development Bank (NIDB) Limited, which was incorporated in 1964. It has been increased to
250 billion in order to put the bank in a better position to address the nation’s rising economic
profile in line with its mandate. The bank took off in 1964 with an authorized share capital of
two million (GBP). The International Finance Corporation which produced its pioneer Chief
Executive held 75% of its equity along with a number of domestic and foreign private investors.
The mandate of BOI is to provide financial assistance for the establishment of large, medium and
small projects as well as the expansion, diversification and modernisation of existing enterprises;
and rehabilitation of existing ones. The vision of BOI is to be Africa’s leading development
finance institution operating under global best practices. It mission is to transform Nigeria’s
industrial sector by providing financial and business support services to enterprises. Following a
successful institutional, operational and financial restructuring programme embarked upon in
2002, the bank has transformed into an efficient, focused and profitable institution that is well
placed to effectively carry out its primary mandate of providing long term financing to the
industrial sector of the Nigerian economy.
Corporate Affairs Commission (CAC)
The Corporate Affairs Commission (CAC) was established under the Companies and Allied
Matters Decree No. 1 of 1990.The Commission has statutory responsibility for registration of
companies, business names and Incorporated Trustees. Undergo Name searches and Company
Incorporation. The vision of CAC is to be a world-class company’s registry providing excellent
registration and regulatory services.
The functions of the Commission as set out in section 7 of the Companies and Allied Matters Act
includes the following to:
i. registers Business Names, and Incorporated Trustees as well as provides a wide range of
ancillary services
ii. administer the Act, including the regulation and supervision of the formation,
incorporation, management and winding up of companies
iii. establish and maintain companies registry and offices in all the states of the Federation
suitably and adequately equipped to discharge its functions under the Act or any law in
respect of which it is charged with responsibility
 iv. arrange and conduct an investigation into the affairs of any company where the interests
of the shareholders and the public so demand
v. undertake such other activities as are necessary or expedient for giving full effect to the
provisions of the Act.
National Agency for Food and Drug Administration and Control (NAFDAC)
The National Agency for Food and Drug Administration and Control (NAFDAC) was
established by Decree No. 15 of 1993 as amended by Decree No. 19 of 1999. Its mandate is to
regulate and control the manufacture, importation, exportation, distribution, advertisement, sale
and use of Food, Drugs, Cosmetics, Medical Devices, Packaged Water, Chemicals and
Detergents (collectively known as regulated products). The agency was officially established in
October 1992. The NAFDAC’s organization consists of the Director General’s Office and
fourteen (14) directorates overseeing the functions of the agency.
The Agency has the following functions, that is, to:
a. regulate and control the importation, exportation, manufacture, advertisement,
distribution, sale and use of food, drugs, cosmetics, medical devices, bottled water and
chemicals;
b. conduct appropriate tests and ensure compliance with standard specifications designated
and approved by the council for the effective control of the quality of food, drugs,
cosmetics, medical devices, bottled water and chemicals and their raw materials as well
as their production processes in factories and other establishments;
c. undertake appropriate investigations into the production premises and raw materials for
food, drugs, cosmetics, medical devices, bottled water and chemicals and establish
relevant quality assurance systems, including certificates of the production sites and of
the regulated products;
d. undertake the inspection of imported food, drugs, cosmetics, medical devices, bottled
water and chemicals and establish relevant quality assurance systems, including
certification of the production sites and of the regulated products;
e. compile standard specifications and guidelines for the production, importation,
exportation, sale and distribution of food, drug, cosmetics, medical devices, bottled water
and chemicals;
f. undertake the registration of food, drugs, cosmetics, medical devices, bottled water and
chemicals;
g. issue quality certification of food, drugs, cosmetics, medical devices, bottled water and
chemicals intended for export;
h. establish and maintain relevant laboratories or other institutions in strategic areas of
Nigeria as may be necessary for the performance of its functions under this Act;
i. pronounce on the quality and safety of food, drugs, cosmetics, medical devices, bottled
water and chemicals after appropriate analysis;
j. grant authorisation for the import and export of narcotic drugs and psychotropic
substances as well as other controlled substances;
k. advise Federal, State and local governments, the private sector and other interested bodies
regarding the quality, safety, and regulatory provisions on food, drugs, cosmetics,
medical devices, bottled water and chemicals;
 l. undertake and co-ordinate research programmes on the storage, adulteration, distribution
and rational use of food, drugs, cosmetics, medical devices, bottled water and chemicals;
m. issue guidelines on, approve and monitor the advertisement of food, drugs, cosmetics,
medical devices, bottled water and chemicals;
n. compile and publish relevant data resulting from the performance of the functions of the
Agency under this Act or from other sources;
o. sponsor such national and international conferences as it may consider appropriate; and
p. liaise with relevant establishments within and outside Nigeria in pursuance of the
functions of the Agency.
Standards Organization of Nigeria (SON)
The Standard Organisation of Nigeria (SON) is the sole statutory body that is vested with the
responsibility of standardizing and regulating the quality of all products in Nigeria. SON was
established by the Act No.56 of 1971. SON’s mandate includes the preparation of Standards
related to products, measurements, materials, processes and services, amongst others; their
promotion at national, regional and international levels; the certification of products; assistance
in the production of quality goods and services; improvement of measurement accuracy and the
circulation of information related to standards.
The statutory functions of the Standards Organization of Nigeria by section 3, subsections (1) of
1971 Act No. 56 are as follows, to:
a. organize test and do everything necessary to ensure compliance with standards
designated and approved by the Council;
b. undertake investigations as necessary into the quality of facilities, materials and products
in Nigeria, and establish a quality assurance system including certification of factories,
products and laboratories;
c. ensure reference standards for calibration and verification of measures and measuring
instrument;
d. compile an inventory of products requiring standardization;
e. compile Nigeria Industrial Standards;
f. foster interest in the recommendation and maintenance of acceptable standards by
industry and the general public;
g. develop a method for testing of materials, supplies and equipment including items
purchased for use of departments Government of the Federation or State and Private
establishment;
h. register and regulate standard marks and specification;
i. undertake preparation and distribution of standard samples;
j. establish and maintain such number of Laboratories or other institutions as may be
necessary for the performance of its functions under this Act;
k. compile and publish general scientific or other data resulting from the performance of its
function under this Act, o from other sources when such data are of importance to
scientific or manufacturing interest or to the general public and are not available
l. advise departments of the government of the Federation or state on specific problems
relating to standards;
m. sponsor such national and International conferences as it may consider appropriate;
 n. co-ordinate all activities relative to its functions throughout Nigeria and to co-operate
with corresponding national or international organizations in such fields of activity as it
considers necessary with a view to securing uniformity in standards specifications and
o. undertake any other activity likely to assist in the performance of the functions imposed
on it under this Act; and
p. undertake such research as may be necessary for the performance of its functions under
this Act. And for that purpose, it shall have the power to make use of research facilities,
whether public or private upon such terms and conditions as may be agreed upon between
the organization and the institution concerned.
Non-Statutory Organizations/Agencies for Entrepreneurship Development
The non-statutory organizations/agencies for entrepreneurship development are set up by the
government as private or non-governmental organizations/agencies for the enhancement of
entrepreneurship. These NGOs help in providing capital; mentorship and probably creating
avenues whereby local entrepreneurs get to display their innovations to a global audience.
Hence, without further ado, some of these non-statutory organizations/agencies are discussed in
this chapter.
National Association of Small and Medium Enterprises (NASME)
NASME is a Nigerian private sector association, which brings together Small and Medium Scale
enterprises across the country. It was registered in 1996 as a Business Membership Organization
(BMO) to coordinate and foster the promotion of Micro, Small and Medium Enterprises
(MSMEs) in Nigeria. It is devoted to networking, capacity building; policy advocacy and
promotion of the performance of its member firms and operators. It works consistently to
improve the welfare of its members.
Nigerian Association of Small Scale Industrialists (NASSI)
This association was established in 1978 to cater for the needs of the small scale business
industrialist through the provision of socio-political and economic support for the members.
NASSI organizes workshops, conferences, exhibitions, trade-fairs, study tours and also provides
advisory services to the members. It also provides information on sources of raw materials,
market situations, plants and equipment and the required manufacturing standard. NASSI grants
micro credit facilities to members and sometimes stands as sureties for bonafide small and
medium enterprise (SME) in their relationship with development finance institutions. The
association links up its members with various opportunities both at home and abroad as well as
serving as the mouthpiece of members against unfavourable public policies.
Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture
(NACCIMA)
NACCIMA was founded in 1960 as a voluntary association of manufacturers, merchants, mines,
farmers, financers, industrialists, trade groups who network together for the principal objectives
of promoting, protecting and improving business environment for micro and macro benefits. The
body provides a network of national and international business contacts and opportunities. It also
promotes, protects and develops all matters affecting commerce, industry, mines and agriculture
and other form of private economic activities by all lawful means. NACCIMA promotes, support
and oppose legislative and other measures affecting commerce, industry, mines and agriculture
in Nigeria as well as contributing to the overall economic stability, orderly expansion and social,
political and economic development of Nigeria.
Manufacturers’ Association of Nigeria (MAN)
The Manufacturers Association of Nigeria (MAN) was established in May, 1971 as a company
limited by guarantee to perform important roles on behalf of its members as well as the
development of the country. The Manufacturers’ Association of Nigeria performs so many
functions. The body encourages a high standard of quality for members’ products through the
collection and circulation of useful information as well as the provision of advice. Secondly, it
encourages the patronage of Nigerian made products by Nigerians and by consumers in foreign
countries. Thirdly, it develops and promotes the contribution of manufacturers to the national
economy through government. Furthermore, it provides the manufacturers in the country with
information on industrial, labour, social, legal, training and technical matters.
Traditional Micro-Finance Institutions
Before the emergence of formal microfinance institutions, informal microfinance activities
flourished all over the country. Informal microfinance credit is provided by traditional business
support groups that work together for the mutual benefits of their members. The informal
microfinance arrangements operate under different names: ‘esusu’ among the Yorubas of
Western Nigeria, ‘osusu’ for the Benins of Midwest, ‘etoto’ for the Igbos in the East and ‘adashi’
in the North for the Hausas. The key features of these informal schemes are savings and credit
components, informality of operations and higher interest rates.
Micro Finance Institutions (MFI)/Micro Finance Banks (MFB)
These are set up to meet the credit needs of the rural and urban poor, artisans, farmers, petty
traders, vehicle mechanics, etc. Central bank of Nigeria gave a directive to all erstwhile
Community Banks were converted to MFI in December 2006 through recapitalization to meet
the new guidelines for setting up of MFI. In Nigeria, there are many MFI or MFB providing easy
and cheap micro-credits to small business owners in Nigeria.
Small and Medium Industries Equity Investment (SMIEIS)
The Bankers’ Committee took a decision that 10 per cent of the funds accruing to the Small and
Medium Industries Equity Investment (SMIEIS) would be channeled to micro enterprises
through registered microfinance institutions. Under the SMIEIS arrangement, banks in Nigeria
agreed to set aside 10 per cent of their pre-tax profit annually for equity investment in small and
medium industries. In December, 1999, the Small and Medium Industries Equity Investment
Scheme (SMIEIS) was initiated, conceived and designed by the Bankers’ Committee at its 246th
meeting. The scheme has not been very successful because it has a lot of conditionality attached
to access, hence the utilization rate of the accumulated fund in only 3 per cent.
Foundations and Grant-Making Organizations
These are private or non-governmental organizations/agencies registered by law such as CAC to
assist voluntarily specific aspect of entrepreneurship development. The objective of foundations
and grant-making organizations is to provide participants- entrepreneurs- with some essential
needs (like skill, networking, capital and mentorship) that will enable them develop their
businesses. Such organizations include the following.
1. Tony Elumelu Foundation: The Tony Elumelu Foundation (TEF) was founded in 2010
by Tony O. Elumelu, an entrepreneur, investor and philanthropist who is passionate about
Africa’s economic development. The objective of the foundation is to empower women
and men across our continent, catalysing economic growth, driving poverty eradication
and ensuring job creation. They believe the private sector’s role is critical for Africa’s
development and that the private sector must create both social and economic wealth. The
foundation’s mission is implemented through programmes, research, communities,
advocacy and convening, including the annual TEF Forum, the largest gathering of
entrepreneurs in Africa, and TEFConnect, Africa’s digital hub for entrepreneurs. The
Foundation leverages its strong relationships in the public, private and development
sectors to drive its mission of creating prosperity for all.
2. LEAP Africa: The LEAP (Leadership, Effective, Accountability & Professionalism)
initiative was founded by Ndidi Okonkwo Nwuneli in 2002. The body aims to help build
entrepreneurs with good leadership qualities and also empower them with the skill
needed to drive business sustainability. LEAP Africa is in partnership with JP Morgan,
Sahara group, Microsoft, Lafarge, Coca-Cola Foundation, Citi Foundation, Aspen
Institute just to mention a few.
3. Center for Enterprise Development and Action Research (CEDAR): The idea of the
Centre was developed in 1995 out of the field experiences of the founder, Olusade Taiwo,
(a female development researcher). This was further validated during a Stakeholders’
Brainstorming Seminar in September 1996, when the views of different stakeholders
were sought and the Centre was formally launched. CEDAR was later registered with the
Corporate Affairs Commission in Nigeria as an organisation Limited by Guarantee in
2003.This NGO is located in Ibadan and it is in partnership with the University of Ibadan
Distance Learning Centre and the Center for Development Enterprises (CDE) in
Belgium. The vision of the center is to empower people irrespective of their social status
to make informed decisions that can enable them to effectively combat unemployment
and poverty as well as influence related policy at different levels of the society. It has
been set up to help aspiring entrepreneurs achieve their goal(s) by ensuring that they have
access to information on market intelligence; skill acquisition and also micro-credit.
4. FATE Foundation: The FATE foundation was founded in 2000 by Mr. Fola Adeola
(former managing director of Guaranty Trust Bank) to harness the strong entrepreneurial
culture of Nigerians by providing the business incubation, growth and accelerator support
required to fully explore their innovative potential. Its goal is to enable aspiring and
emerging Nigerian entrepreneurs start, grow and scale their businesses while also
facilitating the development of an enabling business environment and thriving
ecosystem.The foundation (through its two major programmes- Aspiring Entrepreneurs
Programme and Emerging Entrepreneurs Programme) trains prospects on the skills
needed to grow and nurture ideas into burgeoning business. FATE Foundation is in
partnership with KPMG, Microsoft, Mainone, Ford Foundation, and Bank of Industry
and recently joined the Youth Business International Network.
Additionally, the Federal Government is also in collaboration with some international bodies to
promote small and medium scale industries, just as they do in other sectors, their functions cover
funding, research and development etc. These bodies include:
1. World Bank: Founded in 1944, the International Bank for Reconstruction and
Development—soon called the World Bank—has expanded to a closely associated group
of five development institutions. Originally, its loans helped rebuild countries devastated
by World War II. In time, the focus shifted from reconstruction to development, with a
heavy emphasis on infrastructure such as dams, electrical grids, irrigation systems, and
roads. With the founding of the International Finance Corporation in 1956, the institution
was able to lend to private companies and financial institutions in developing countries.
And the founding of the International Development Association in 1960 put greater
emphasis on the poorest countries, part of a steady shift toward the eradication of poverty
becoming the Bank Group’s primary goal. The subsequent launch of the International
Centre for Settlement of Investment Disputes and the Multilateral Investment Guarantee
Agency further rounded out the Bank Group’s ability to connect global financial
resources to the needs of developing countries. Today the Bank Group’s work touches
nearly every sector that is important to fighting poverty, supporting economic growth,
and ensuring sustainable gains in the quality of people’s lives in developing countries.
2. United Nations Industrial Organization (UNIDO): UNIDO is the specialized agency
of the United Nations founded in November, 1966 to promote industrial development for
poverty reduction, inclusive globalization and environmental sustainability. In the face of
a rapidly changing global economic landscape and increasing inequalities, a strategy for
sustained growth must ensure a form of industrialization that makes opportunities
accessible to all people and broadly distributes income and non-income gains across
society. The inability of countries to fully integrate solutions to social issues into targeted
industrial and economic policies undermines the developmental potential of industry,
thus widening income inequality gaps. Thus, UNIDO concentrates its efforts on the
development of agro-industries, increasing the participation of women and youth in
productive activities, and human security in post-crisis situations. The mission of the
United Nations Industrial Development Organization (UNIDO), as described in the Lima
Declaration adopted at the fifteenth session of the UNIDO General Conference in 2013,
is to promote and accelerate inclusive and sustainable industrial development (ISID) in
Member States. The relevance of ISID as an integrated approach to all three pillars of
sustainable development is recognized by the 2030 Agenda for Sustainable Development
and the related Sustainable Development Goals (SDGs), which will frame United Nations
and country efforts towards sustainable development in the next fifteen years. UNIDO’s
mandate is fully recognized in SDG-9, which calls to “Build resilient infrastructure,
promote inclusive and sustainable industrialization and foster innovation”. The relevance
of ISID, however, applies in greater or lesser extent to all SDGs.
3. African Development Bank (ADB): The Agreement establishing the African
Development Bank was adopted and opened for signature at the Khartoum, Sudan,
conference on August 4, 1963. This agreement entered into force on September 10, 1964.
The Bank began effective operations on July 1, 1966. Its major role is to contribute to the
economic and social progress of its regional member countries - individually and
collectively. Under Article 8 of the Agreement establishing the ADB, the Bank is
authorized to establish or be entrusted with administering and managing special funds
 which are consistent with its purposes and functions. In line with this provision, the
African Development Fund (ADF) was established with non-African states in 1972 and
the Nigeria Trust Fund (NTF) with the Nigeria Government in 1976. Other special and
trust funds include: Arab Oil Fund; Special Emergency Assistance Fund for Drought and
Famine in Africa; and Special Relief Fund. The mission and strategy of ADB Group is to
spur sustainable economic development and social progress in its regional member
countries (RMCs), thus contributing to poverty reduction.
UNIT 10: ETHICAL ISSUE IN BUSINESS
Having examined the nature and concept of business in other units, it is also imperative to elicit
an understanding of ethical and unethical behaviours and practices in business enterprises by
business managers and owners. This will create awareness on the essence of ethical standards
and moral duties of the business enterprise. It is in this wise that a clarification of the term, ethics
is foremost. Philosophically, the question of ethics stems from the theories values and morals.
Where the word value, reflects the importance, worth, desirability and the respect something gets
in return. Specifically, too there are social values which pertain to moral beliefs and principles
that are accepted by the majority to ensure the continuity of a society (Ergil, 1984). This is
against the background that values serve as guide for culturally appropriate behaviours, where
the individual value can help in the formation of ethical standards. Generally, Greek philosophy
has brought a new understanding of man, by focusing on the value of the individual, while
recognising the conflict created between the individual needs to a group and the need to be
recognised as an individual with specific characteristics. This also explains that ethical
behaviours are not mere abstract terms, but are truly conceptualized by real-life experiences in
the interaction between and amongst human beings (as moral persons) who are expected to abide
by moral codes of conduct and act morally right as against wrong.

One of such Greek philosopher who made popular the essence and meaning of ethics is
Aristotle. His conception of ethics lies in good action that is geared towards improving
individual lives, and the general concern for human well-being. Aristotle’s view follows the
ethical philosophy of Socrates and Plato, which states that virtue is crucial to a well-lived life.

Morals: refer to human behaviour, where morality is the practical activity; ethics describe the
theoretical, systematic and rational reflection upon the human behaviour. In essence, values are
linked to beliefs and attitudes and in turn, guide human behaviour (Rennie, 2007). This makes
morals, values and ethics crucial to social life; and ethics, beyond the law. They are standard of
behaviour even though not required by law; it is expected of a good citizen of a nation. Thus,
ethics define for individuals, what is morally right or wrong. Most times philosophers are
disinclined to spin a fine distinction between ‘ethics’ and ‘morality’, thus, the two terms are used
as synonyms. Between ethics and morality, the focus is on universal values and standards of
conduct that is required of every rational being in society.

Development of the Concept of Business Ethics

Abrams (1954) pointed that, business ethics can be both a normative and a descriptive discipline,
while Velentzas and Broni (2010) are of the view that as a corporate practice and a career
specialization, the field of business is primarily normative. According to Laczniak and Murphy
(2000), a normative decision in an organizational culture relates to what can be that is, what a
business organization ought to consider in evaluating and improving their ethical conduct. It is
also in this context that Broni (2010) has described business ethics as a form of applied ethics
and moral or ethical problems that arise in a business environment. Generally, in the opinion of
Bennet (2003) and Boylan (1995) and in a broad sense, ethics in business is simply the
application of everyday moral or ethical norms to business. One underlying fact about business is
that it has an end goal of making profit. But many businesses have earned a bad reputation just
by being in business. The reason for this is not farfetched. According to Solomon (1983) to some
people, the one main good of business is to make money, which could be called capitalism in its
purest form (Antoniou, 2008). But in the argument of Maitland (1994) making money in itself is
not wrong, it is the manner in which some businesses conduct themselves that brings up the
question of ethical behaviour. Put differently, ethics refers to the moral principles that govern the
action of an individual or group. It means a set of principles constituting a code of behaviour
which defines what is good (to be done) or bad and wrong (and thus, to be avoided) (Koslowski
and Shionoya, 1994).

In effect, business ethics is the study of morality and standards of business conduct. (Hodgetls
and Luthans, 2003) Following the same trend, Boatright (1998) suggests that business ethics
perceived to be right and moral by individuals within an enterprise will take into account the
welfare of those affected by business decisions and behaviours. In a sustainable business, the
expectation is that the employees at every level should be committed to the ethical standards of
the business, while the business manager in turn should be committed to the ethical standards of
the business.

Ethical Issues and Dilemmas in Business

As previously mentioned, ethical standards and values stem from the business organisations and
the society in which these business firms operate. It should also be noted that ethical standards
are not static, but dynamic patterns of human conduct and as such could vary from society to
society. Akers (1989) summed some common unethical issues in the Western world to include
back-stabbing through price wars, stealing of corporate plans and litigation arising from violation
of patent rights. While in the African context, unethical issues face greater challenges, especially
as these arise from the culture of the people. Jaja (1995) noted that the cultural elements and
practice in Africa sometimes put African managers in situations that make them exhibit nepotism
and ethnicity in employment placement rather than meritocracy which is the ideal. Again, the
concept of ‘African time’ has found its way into serious business meeting thereby disregarding
commitment to time and appointment. Other practices include leadership cults, complacency,
bribery, fraud and paying of kickback. In contrast to bribery, the Unites States law forbids
companies from paying bribes either domestically or overseas. (Jennings, 2000).
 In a general analysis of unethical business practices prevalent in Africa, Ludlum and
Pichop (2008) have identified the following:

i. Corruption and bribery which has eaten deep into the fabric of business practice in Africa
has been described as the practice of paying money or providing benefits to someone in
business or government so as to obtain an inappropriate market, workplace or economic
advantage. In the assertion of Unruh and Arreola (2009) bribery and corruption is so
institutionalized in a number of African nations as the only effective way of doing business.
ii. Another unethical practices typical of the African business sector are piracy and
counterfeiting. Counterfeiting as the name suggest is not genuine and usually forged.
Oftentimes, counterfeiting has to do with unauthorized production, sales of exact copies of
genuine goods, and even trademarks. On the other hand, piracy has to do with a violation of
intellectual property (patents, copyrights and trademarks), reproduction of films and other
forms of recordings without permission specifically as it concerns ethics of intellectual
property, knowledge and skills even in some developed nations, knowledge and skills are
valuable but not easily “ownable” as objects. (Norman, 1999). Piracy also refers to illegal
duplication of books, computer programmes and video tapes. When goods and products are
duplicated, the original firm whose products are being duplicated lose royalty and revenue.
There is also a high possibility of defective and sub-standard materials, thus making the
products lose the original genuine products. These fake products are sometimes injurious.

Resolving Ethical Issues in Business

As an entrepreneur, there are many ethical issues that can arise in the operative business. An
understanding of these various ethical issues is crucial to managing these situations.

i. Human resource management- ethical issues in this context relate to hiring management
and dismissal of workers. It is important that organisations should develop codes of conduct
internally. This should serve as guide for managers when confronted with ethical situations and
moral conflicts. Furthermore, it is imperative that such codes of conduct are supplemented by
internal systems such as reward and information systems, promotion criteria, hiring practical,
recognition systems, the culture of the organisation and communication system. All of these
must evolve from the organisation’s values and ethical conduct. It must apply to all members in
the organisation, such as; all must be committed to it.

In drawing up a code of conduct, even though it is developed internally, a number of codes

and principles must have emerged globally, so as to give a wider view of what ethical
responsibilities entail. For instance, what eventually evolves as code of conduct should include
the United Nation’s Global Compact ten principles in the areas of human rights, labour, the
environment and anti-corruption (Velentzas, Broni 2010c; 121-123). Others should include codes
developed by other multi-national businesses or multisector alliances. All of these will help to
develop a comprehensive code of conduct to deal with managerial decision making, reward
systems and the management of communication to ensure genuine ethical practices.

Still of importance is that job advertisements for companies or organisations should be

detailed. An ethical approach to the recruitment process requires that the job advertisements
should clearly state the nature of the position, any question regarding salary, job tasks, hours,
time frames and expectations of the applicant. When these are clarified, and the applicants
respond honestly and thoroughly as possible, the applicants and organisations are duly informed
and protected from unrealistic expectations about the nature of the job.

ii. Rights and duties are crucial to working conditions. Once these are properly captured in
code of conducts and enshrined in a company’s Law and other authoritative documents such as
treaties and international declarations, a worker immediately knows the extent of his demands.
Ordinarily, rights are justifiable claims and entitlements and can be viewed as the positive things
that people are allowed to do, but they also come in the form of duties and obligations that go
along with the rights. For instance, employees are granted certain rights such as conducive
working conditions, minimum wage, but these have corresponding duties to ensure that these
conditions are met. Importantly too, these rights should be based on laws and regulations, as well
as on moral grounds, written into international laws and treaties such as the UN Declaration of
Human Rights and the Natural Environment. It is this regard that Cavanagh (2005) emphasized
that one ethical question every organisation should ask is whether decisions made or taken
respect the rights and duties of the individuals involved.
iii. Adequate and appropriate use of business resources aid facilities can pose a number of
ethical problems. Some businesses offer privileges to their employees as a gesture of goodwill.
Employees should also avoid using their business connections to gain appropriate personal
advantage.

UNIT 11: CORPORATE SOCIAL RESPONSIBILITY IN BUSINESS

Introduction
Corporate Social Responsibility (CSR) appears new in developing economies like
Nigeria and other sub-sahara Africa countries. The practice of CSR by religious society,
entrepreneurs and corporate business organizations however dates back to 17th and 18th
centuries (Amaechi, Ogbechie & Amao, 2006). The business idea of the earliest practitioners
was not for profit maximization but to add value to the society. CSR responsibilities by these
foremost business organizations were voluntary arising from the social and environmental needs.
The environment in which business outfits operate in order to attain their goals is very crucial.
This is because the environment to a great extent influences the success of business
organizations. Environment, relatively implies the geographical boundary e.g Ekosodin
community, Edo State, Lagos State, Niger-Delta region, North East region etc. It could mean
socio-political climate and even government policies regulating the activities of the people
including businesses. The cost of living, the physical location of business premises and the
security of lives and property within the areas where businesses are located are all aggregates of
a business environment. To this end, both the environment and the entrepreneurs or
organizations should benefit from each other mutually (Oseyemon, 2018). Prior to the
independence era, Nigeria economic main-stay was agricultural products. But since the
discovery of crude oil in commercial quantity with attendant consequences on the Niger-Delta
region (pollution of human and aquatic lives) the demand for CSR became a phenomenon.
Nevertheless, it must be understood that CSR is not limited to companies and industries but a
responsibility of any organization including government and its agencies, small and medium
scale enterprises (SMEs), educational organizations etc. Every organization therefore has
economic, legal, ethical and philanthropic responsibility to stakeholders and the environment in
which such organization exists in diverse ways for a lasting goal attainment.
Concept of Corporate Social Responsibility (CSR)
CSR can be viewed from two perspectives. First, it means that organizations/corporations have
the responsibility to make money and the responsibility to interact ethically with the surrounding
community. Secondly, CSR conceals corporations or business organizations to have the
responsibility to make profit or create wealth while playing the role of welfare services to their
immediate communities/environment. Corporate social responsibility is the charitable and
stewardship responsibility of organizations to their host communities (Oseyemon, 2018). This
implies that when entrepreneurs and organizations assist the unemployed and less privileged in
the society, they are playing the role of charity. On the other hand, when successful
entrepreneurs or wealthy individuals in the society see themselves as holding in trust the wealth
and the resources of the society, it behold on them to give account of their wealth by giving back
to the society. This may be regarded as charitable principle of CSR. The concept of CSR
therefore, suggests that every organization whether private business or public organizations such
as educational institutions, ministries agencies, national and multinational companies are
expected to have moral or philanthropic consciousness in their primary responsibilities to earn a
fair return for the use of the society resources (Obi-Omovoh, 2017). CSR is also perceived as a
social contract between business organization and a community, whereby the community permits
business to operate within its jurisdiction to obtain jobs for residents and revenue through
taxation (Hurst, 2004).
Theories of Corporate Social Responsibility
The following are theories to understand CSR:
1. The Stakeholders theory: The thrust of the theory is that firms or business
organizations should as a responsibility create value for all stakeholders, not just
shareholders. Edward Freeman (1984) describes CSR as a business ethics that
addresses morals and values in managing an organization. The theory asserts that
those whose lives are touched by a corporation or a business organization hold a right
and obligation to participate in directing it. The stakeholders of an organization are
therefore the mirror image of corporate social responsibility.
Examples of stakeholders include:
i. Company or business owners, (private individuals or shareholders)
ii. Employees in a business organization or corporate organization
iii. Customers or potential customers, clients, students, parents or guardians in case of
educational institution.
 iv. Creditors, suppliers or potential suppliers to a company
v. Government and government entities involved in regulation and taxation
vi. Everyone living in the town who may be affected by contamination from
workplace operation
vii. Staff (teachers), union members, alumnus for schools and colleges.
viii. Political groups
ix. The media
The theory emphasizes that business organization has a responsibility to consider the
interest as well as the needs of all stakeholders, not just the monetary interest of the
owners of the firm or business organization. To achieve this there should be a
harmonious relationship between the business outfit and those who have stake in it.
2. Corporate Social Performance theory: The origin of this theory was traced to
Howard R. Bowen (1953) who posits that social responsibility of businessmen refers
to their obligation to pursue policies, to make decisions, or to follow those lines of
action which are desirable in terms of objectives and value to the society. The theory
harps on corporate responsiveness which is basically the adaptation of corporate
behaviour to social needs and demand, even acting in a proactive manner (Mele,
2006).
The theory charges entrepreneurs to adhere to business principles, standard of
performance in law according to the existing public policy process. Since managers
or entrepreneurs are humans they are expected to be ethical (rational), exercise
discretion within every aspect of corporate social responsibility which they have
influence in in order to promote socially responsible outcomes. To achieve corporate
responsibility and responsiveness to the community, business organization must
perform the following four obligations.
i. Economic responsibility: This responsibility is very vital. One of the primary
aim of a business enterprise is to make profit or else it is doomed to fold up.
Non-profit organizations like public institutions get their profit from their own
activities as well as donations, support, grants or aids. Goals attainment of
some organizations could be a form of profit. Educational institution is an
example.
ii. Legal responsibility: It is the responsibility of a responsible organization to
accept rules and regulations as social good. Businessmen and women should
make good faith and efforts to obey the laws of the land and guiding rules that
established their organizations for mutual benefits. This obligation calls for a
proactive duty of an entrepreneur. An entrepreneur should anticipate some
responsibilities before they are demanded by stakeholders in the court of law.
iii. Ethical responsibility: This is a moral duty of a business owner or CEO of an
organization to do what is right even when not required by the letter or spirit
of the law e.g maintaining good sanitation of your business environment,
giving of donations or assistance to the vulnerable in the society during
critical periods like natural disaster or pandemic situation. Business managers
must not wait until profits are declared before such obligation is carried out
but it should be done from the perspective of welfare services owed to the
people in the environment.
 iv. Philanthropic responsibility: This is a contribution made by a corporate
organization to the society even when it is not a mandate of the organization.
For instance, if Omega Restaurant and Bar decided to donate face masks and
food items to people in correctional homes in Benin City, such a gesture is
philanthropic obligations. It is a public act of generosity which requires
business organizations like everyone in the society to support but the general
welfare should be determined by the needs of the surrounding community
(Amaechi et al., 2006). It is however advisable that business owners or
corporate organization fulfil these responsibilities in descending order to their
host communities.
3. Triple bottom line theory: This is a theory that expects companies, business owners
and managers to focus on social and environmental matters just as they do on profit.
In other words, the theory seeks to regulate corporation level of commitment to
corporate social responsibility and its impact on the environment over a period of
time (Berry-Johnson, 2020). The triple bottom line means that the cardinal roles of a
business is profit making, peoples’ welfare and meeting the environmental needs. It
connotes that a company or a business organization should not only be concerned
about profit making but also show concern to the people and the environment in
which they operate. These three elements can be used to measure the performance of
a business in terms of growth and social responsibility. Also, the company must
continue striving towards ensuring economic, social and environmental sustainability.
4. Corporate citizenship theory: The term ‘corporate citizenship’ was introduced into
the business and society relationship in 1980s. As reported by Attman and Vidarer-
Cohen (2000); Windsor (2001). The theory was actually canvassed by 34 CEOs at the
World Economic Forum in New York in 2002. The theory simply states that a
business organization or a firm is not socially responsible, if it merely complies with
minimum requirement of the law but its commitment to ‘good neighbourliness’
meaning being a good citizen. Good neighbourliness means a business outfit not
doing things that spoil the neighbourhood or environment like pollution, oil spillage,
and erosion. It also entails the concern of business to actively participate in solving
social problems such as insecurity, unemployment, transportation, and other social
infrastructural decay. The incessant protests by members of communities where
multinational companies operate against environmental neglect and lack of welfare
has globalize the agitation for corporate citizenship of good neighbourhoodliness by
business organizations. Example is the agitation by the Niger-Delta people against
multinational oil companies in the region. The theory emphasizes that businesses are
part of the society and should participate in social life, respecting universal human
rights and contributing in different ways to the social wellbeing both in local and
global arena (Mele, 2006).

How to build a socially responsible business

A business entity is socially responsible if it is not only committed to profit making but
having a sense of responsibility and obligation to the welfare and needs of its stakeholders. Such
a business should also make a lasting footprint in its environment. However, for a business
organization to be socially responsible, it requires cost in time, money, and other resources.
Nevertheless, to build a socially responsible business, the following guides are essential.
a. Set aside a little fraction of your sales/profit to the cause of CSR.
b. Always endeavour to donate or help members of your business community till you
have enough resources to extend your CSR to the wider community.
c. When initiating CSR, endeavour to involve your employees in decision making
process. When an employer of labour contributes to a cause employees believe in, it
increases the success of such organization including area of CSR.
d. Let your consumers or clients be aware that you are socially responsible. This can be
achieved by offering discounts at specific time. Let them enjoy some benefits from
your business organization.
e. Dedicate little percentage of your profit to charity for the needy in your environment
in the name of your business or organization.
Benefits of Corporate Social Responsibility
The benefits of CSR implementation by business organizations include:
i. Improved financial performance on the long run.
ii. Increased ability to attract, motivate and retain employees.
iii. Enhanced business reputation.
iv. Access to capital for growth.
v. Better brand recognition.
vi. Increased sales and customers loyalty.
vii. Positive media attention or improve public image.
viii. Greater employee employment or retention.
ix. High employees productivity.
x. Corporate involvement in community education and employment.
Challenges against Corporate Social Responsibility
The following are the challenges or issues against CSR practice as identified by Sexty
(2011)
i. Profit maximization is the primary reason of business enterprise and to embark on
any other responsibility besides this is to sabotage the market mechanism and a
distortion of the allocation of scarce resources.
ii. Business organizations or corporations ought to be responsible to their critical
stakeholders and shareholders not to the public or operate in the social domain. When
they do, such business managers could be questioned by the shareholder on their
source of authority or legitimacy in their involvement in social matters.
iii. Corporate social responsibility ought to be a social policy within the jurisdiction of
the government not business organizations.
iv. Most businesses lack training and technical skills necessary to implement social
programmes.
v. Business involvement in social responsibilities increase the organization cost and its
social cost. This could lead to business failure.
 vi. Business organization cannot be held accountable for their action in the area of social
responsibility unlike other institutions like government.
vii. Customers sometimes bear the brunt of business involvement in CSR by way of
increase in prices of products/services.
UNIT 12: BRANDING, PACKAGING AND NETWORKING IN BUSINESS
Meaning and Scope of Branding
Branding is defined as the way or process by which different companies or firms differentiate
their product offerings from that of competitors. In branding of such product offerings, it is done
or created by developing a unique name, packaging and design (Chernatony, 1991). Branding
involves creating mental structures and helping consumers organize their knowledge about
products and services in a way that clarifies their decision making and in the process provide
value to the firm. Branding in the view of Jobber (1995) affects perception because it has been
opined that in a blind product test, consumers normally fail to distinguish between brands in each
product category. Branding helps to ease purchase decision.

Brand: Kotler and Armstrong (2008) defined a brand as a name, term, sign, symbol or design or
a combination of all these intended to identify the goods or services of one seller or group of
sellers to differentiate them from those of competitors. A brand name constitutes that aspect of a
brand that can be mentioned or voiced, for example, Close up, Pepsodent, 7up, Coca Cola, Omo,
Sunlight, Zip, Evap etc.

Brand Mark: represents the part of a brand that gives recognition to the brand but cannot be
uttered or voiced as a word. That is the symbols, designs or distinctive coloring, special pack
used to identify a product.

Brand equity: the value of a brand based on the extent to which it has high brand loyalty, name
awareness, perceived quality, strong brand associations and other assets such as patents,
trademarks and channel relationships.

Brand extension: using a successful brand name to launch a new or modified product in a new
category.

Brand image: the set of beliefs that consumers hold about a particular brand.
(Kotler & Keller, 2006)

Brand inflation: refers to a situation where we have many brands and instead of leading to
transparency, it leads to confusion in the market. For example, we have many brands of beer and
juice, and buyers may be confused because of such proliferation of brands. This situation is often
met with a lot of criticism because it leads to waste of resources and cost growth.

Trademark: that part of a brand that is given legal recognition to a product. It offers legal
protection to the seller who has exclusive right to use the brand name and prevents its use by
competitors.
Patent: Protective right given to an investor to exclude others from making, selling or using the
invention for a period of time.
Types of Brand
The following types of brands have been identified by Ezirim, Udo, Nwoka and Worha (2004);
manufacturer brand, own-label brand and generic brand.

Manufacturer brand: Manufacturer brands are created by producers and bear their chosen
brand name. It makes it possible to easily identify producers with their products at sales points.
Marketing of such brand lies in the hands of the producer. For example sunlight washing
powder, bar soap and lux soap. The value of the brand lies in the hands of the producer who can
gain distribution and customer loyalty by building such a brand.

Own-label brand: They are also called distributor brands. They are owned and created by
distributors. It is common among supermarkets/large retail outlets and forms a strong
competitive weapon for them. They are attractive to customers due their low price. Large retail
outlets normally adopt this and often have restricted right to distribute the products and thus
control pricing and promotion.

Generic brand: These are products that are usually unbranded and contain just the name of the
product. It is often low priced and left to compete with other brands among buyers that are price
conscious. They are normally not advertised because identification is difficult.

Other types of brands as recognized by Young (2019) are product, service, organisation, person,
event, geographical and miscellaneous (global, generic, luxury and cult) brands.

Advantages of branding
i. Makes products identification as it relates to a particular seller easy
ii. Brings about increase in the transparency of goods and services
iii. It serves as a guarantee in dealing with the offering of fake products to the market. It
therefore serves to develop and offer good quality products to the market.
iv. It promotes and ease the advertising process
v. A brand and trade name offers legal protection to the owner of a brand against
imitation/copying and adulteration of a good or service by competitors
Disadvantages of branding
i. High cost of branding can bring about price inflation
ii. It can lead to waste of resources by appealing to prestige and other intangible values
iii. The possibility of brand inflation can lead to market ambiguity and confusion on the part
of customers.

How to Create a Brand

i. Quality: quality is very important in building a successful brand. First and foremost a
product/service must achieve the basic functional requirement expected of it. For
example making of teapots whose handles break off at one touch. It has been reported
statistically that higher quality brands achieve greater market share and make better
profits than their inferior rivals (Buzzelli & Gale, 1987).
ii. Positioning: this involves a careful choice of target market one wants to play in with clear
and specific advantages. Positioning can be achieved through a combination of service,
 design, guarantees, packaging, delivery, brand name and image. For example, swatch and
its marketing of its product to younger age groups based on fashion, design and colour.
iii. Repositioning: as markets evolve with changes and opportunities it presents, brands may
need to reposition to take advantage of the changes and opportunities. For instance,
lucozade drink repositioned from just being a drink given to children who are ill to one
mothers could drink to gain energy as well as athletes.
iv. Long-term perspective: brand building is something that is long term. Management must
be ready to make the necessary investment to see this process through. So for instance,
building a loyal customer base, communicating brand values and generating awareness
(advertisement) takes many years.
v. Internal marketing: Internal marketing is a key feature in building successful brands. This
concept was defined by Aburoub, Hersh and Aladwan, (2011) as the realistic use of
marketing philosophies on people who serve customers. It is also seen as a way of
treating internal customers who are employees as external customers and creating
strategies that will fit human needs and job products (Cahill, 1996). It is the ability to be
able to attract, develop, motivate and keep qualified employees so as to be able to achieve
set organizational goals. It is the training and communication with internal staff. It is very
common with the service industry.
vi. Credibility/Being first: studies by Urban, Carter and Mucha (1986) and Lambkin (1992)
show that pioneer brands are more likely to be successful than follower brands. A clearer
position is created in the minds of target customers before competition by virtue of being
first. It also offers the opportunity of building customer and distributor loyalty. For
example Coca Cola have maintained brand leadership for almost a century. To be
successful and retain market share is not just being first but requires some concerted
efforts at maintaining marketing efforts to stay on top and withstand competitors as they
set in.
vii. Well blended Communication: customer perception is important in brand positioning as it
is based on it. To create the needed response in the minds of the target market, a lot needs
to be put into consideration and properly followed up on as it pertains to advertising,
selling and promotional activities.
Role of Brands
Brands play an important role to manufacturers and consumers alike. Some of the identified roles
of brands according to Kotler and Keller (2006) are;

From the manufacturers or sellers perspective, brands play the following role
a. Brands also help firms simplify product handling or tracing.
b. It helps firms to organize inventory and accounting records.
c. It helps to offer legal protection for unique features or aspects of the product.
d. Brands can signal a certain level of quality so that satisfied buyers can easily choose the
product again.
e. Branding which brings about brand loyalty can offer predictability and security of
demand for a firm and creates barrier to entry that make it difficult for other firms to
enter the market.
f. Branding can be used as a means to create competitive advantage arising from lasting
impressions created in the minds of users
 g. Strong brands can result in better earnings and profit performance for firms which in turn
create greater value for shareholders.

From the consumer perspective a brand’s role can be classified thus;

a. It helps in the identification of the source or maker of a product.
b. It helps in simplifying decision making and in risk reduction.
c. It allows consumers to assign responsibility to a particular manufacturer or distributor.
d. It enables consumers to be able to be able to evaluate identical products differently
depending on how they are branded.
e. Consumers are able to isolate brands that satisfy their need and the ones that do not.
f. It makes decision on which product or service to use easy based on identified brands.

BRAND EQUITY
Brand equity refers to the added value given to products and services. Such values may be shown
in how consumers think, feel and act with respect to the brand as well as the prices, market share
and profitability that the brand commands for the firm. Brand equity has psychological and
financial value which it adds to a firm and is an important intangible asset to the organisation.
The customer perspective is one of the perspectives used to study brand equity and it opines that
the power of a brand lies in what the customer has seen, read, heard, learned, thought and felt
about the brand over time. This perspective notes that the power of the brand lies in the minds of
existing or potential customers and what they have experienced directly and indirectly about the
brand.

Building Brand Equity

Brand equity is built by the creation of the right brand knowledge structures with the right
customers. From the marketing management perspective, we have three main sets of brand
equity drivers;
i. The initial choices for the brand elements or identities making up the brand (e.g. brand
names, logos, symbols, slogans, packages and signage).
ii. The product and service and all accompanying marketing activities and supporting
marketing programs. E.g. Joe Boxer made its name selling colourful underwear with its
signature yellow smiley face.
iii. Other associations indirectly transferred to the brand by linking it to some other entity
e.g. a person, place or thing.
Brand Equity Models

Brand Asset Valuator: this model gives a comparative measure of the brand equity of
thousands of brands across hundreds of diverse classes. Under this model, there are four pillars
of brand equity which are differentiation, relevance, esteem and knowledge. Differentiation is
used to measure the degree to which a brand is seen to be different from others. While relevance
is used to gauge the span of the brand’s appeal, esteem is used to determine how well a brand is
considered and valued. Finally, knowledge determines how familiar and intimate a consumer is
with the brand. Differentiation and Relevance pillars rather than just reflecting on the past of a
brand, determine a brand’s strength and its future value. Esteem and Knowledge on the other
hand reflect on the past on a brand as it gives a report of the past performance and create brand
stature. A power grid developed from these four pillars is used to explain the stages in the cycle
of brand development. It consists of brand strength (Differentiation and Relevance on the
vertical axis) and brand stature (Esteem and Knowledge on the horizontal axis). A new brand just
after it is introduced into the market show low levels on all four pillars. A new brand that is
strong tends to show higher level of Differentiation than Relevance while still low on Esteem
and Knowledge. A brand that is a leader in the market show high levels on all four pillars. Lastly
a brand that is declining shows high knowledge-indicating past performance relative to a lower
level of Esteem and even lower levels of Differentiation than Relevance.

Aaker model: this model explains that there are five categories of brand assets and liabilities
associated to a brand that either add or subtract from the value provided by a product or service
to a firm or its customers. These categories of brand assets are; brand loyalty, brand awareness,
perceived quality, brand associations and other proprietary assets such as patents, trademarks and
channel relationships. The model also identified brand identity as an important concept for
building brand equity. Brand identity is the unique set of brand associations depicting what the
brand stands for and promises to the customers. It consists of 12 dimensions grouped around 4
perspectives: brand-as-product (product scope, product attributes, quality/value uses, users,
country of origin), brand-as-organisation (organisational attributes, local versus global), brand-
as-person (brand personality, brand-customer relationships) and brand-as-symbol (visual
imagery/metaphors and brand heritage).
Brandz model: this model explains that brand building involves a number of chronological steps
where each step is dependent upon effectively achieving the earlier step. The objectives at each
step in ascending order are;
 Presence- do I know about it?
 Relevance- does it offer me something?
 Performance- can it deliver?
 Advantage- does it offer something better than others?
 Bonding – nothing else beats it.
At the topmost level of the pyramid, i.e. the bonding level research shows that bonded customers
have stronger relationship with the brand and spend more on the brand than those at the lower
levels. While most consumers are found at the lower levels, the challenge for a marketer is to
develop activities and promotional programs to move consumers up the pyramid.
Brand Resonance: this model like the brandz model explains that brand building involves a
number of chronological steps also in an ascending order. These steps are;(i) ensuring
identification of the brand with customers and an association of the brand in customers mind
with a specific product class or customer need, (ii) firmly establishing the totality of brand
meaning in the minds of customers by strategically linking a host of tangible and intangible
brand associations, (iii) eliciting proper customer responses in terms of brand related judgment
and feelings and (iv) converting brand response to create an intense active loyalty relationship
between customers and the brand. The model demonstrates that performing the four steps
involves establishing six brand building blocks with customers. The pyramid explains the duality
of a brand whether rational route or emotional route. The pyramid consists of brand salience
(how often and how easily a brand is evoked under various or purchase situations), brand
performance (how the product or service meets customers functional need), brand imagery (deals
with the extrinsic properties of the product or service and the ways in which a brand attempts to
meet consumers psychological or social needs), brand judgments (focus on consumers personal
opinions and evaluation), brand feelings (customers emotional responses and reactions with
respect to the brand) and brand resonance (refers to the relationship that customers have with the
brand and the extent to which customers are in sync with the brand).
Measuring Brand Equity
Brand equity can be measured with two basic approaches- direct and indirect approaches. A
direct approach assesses the actual impact of brand knowledge on consumer response to different
aspects of marketing. It looks at how the sources and outcomes change overtime.

The indirect approach assesses potential sources of brand equity by identifying and tracking
consumer brand knowledge structures. It helps to fully understand the sources of brand equity
and how the sources impact outcomes of interest. The two methods are complementary and can
be used side by side.
Brand Audits- Indirect approach
A brand audit is a consumer- focused exercise that involves a series of procedures to assess the
health of the brand, uncover its sources of brand equity and suggest ways to improve and
leverage its equity. It helps marketers to better understand their brands and can be used to set
strategic direction for the brand.

In conducting brand audits, possible questions to look at are; are the current sources of brand
equity satisfactory? Do certain brand associations need to be strengthened? Does the brand lack
uniqueness? What brand opportunities exist and what potential challenges exist for brand equity.
With results from the analysis gotten from asking the questions above, the marketer can develop
a marketing program to maximise long-term brand equity.

Brand audits can be conducted whenever there is an important shift in strategic direction. A
regular conduct of brand audit allows the marketer to keep a close tab on their brands and help
them manage them more proactively. Brand audits aid marketing plans and have implication for
strategic direction and brand performance. It involves two steps which are; brand inventory and
brand exploratory.
Brand inventory; helps to provide a current, comprehensive profile of how all the products and
services sold by a company are marketed and branded. Brand inventory helps to proffer what
consumer perceptions are based on.
Brand exploratory; conducted to help understand what consumers think and feel about the
brand and its corresponding product category to identify sources of brand equity.
Brand Tracking- Direct approach
Brand tracking is used to collect information from consumers on a regular basis over time. It
employs quantitative measures to provide marketers with up to date information on how their
brands and programmes are performing based on a number of key dimensions. It helps to proffer
understanding on where, how much and in what ways brand value is being created.
Brand Valuation
It is the job of estimating the total financial value of the brand and it is different from brand
equity. Some companies like Nestle base the growth of their companies on acquiring and
building rich brand portfolios. The value of the brand trademark is valued to be worth more than
the physical building and lands.

Managing Brand Equity

It is necessary to manage a brand to keep the required customers responses to ones product or
services. Effective brand management entails a long term view of marketing decisions. This is so
because customers continued response to a product or services depends on their continued
knowledge about it and what they remember about the brand. Ways to manage a brand are
discussed herein;
i. Brand Reinforcement
For a brands value not to depreciate it must be properly managed. Companies like Coca Cola
are still brand leaders because over the years, they have constantly strived to improve on their
products, services and marketing. Reinforcement requires innovation and relevance;
marketers must introduce new products and conduct new marketing activities that truly
satisfy their target markets. Failure to reinforce brands can lead to its exit from the market or
a fall from its leadership position.
ii. Brand Revitalisation
Changes in consumer tastes and preferences, the advent of new competitors, new technology
or new development in the business environment can have great impact on the fortunes or
survival of a brand. Reversing the failed fortunes of a brand would require it returns to its
roots and restore lost sources of its brand equity or create new sources of brand equity. The
changes experienced by such comeback brands are more revolutionary than evolutionary. To
be able to revitalise a brand, one must be able to understand what sources of brand equity to
begin with, find out if positive associations are losing their strength or uniqueness, if negative
associations have been linked to the brand, then decisions as to whether to retain same
positioning or create new ones, would be made.
iii. Brand Crisis
In managing brands, marketing managers ought to assume that some form of brand crisis
would occur at some point in time. Carefully thought out and well planned/managed crisis
programme is very necessary for brand management. It is important that customers see this
response as both swift and sincere. It is easier for a firm who has a strong corporate image
with respect to credibility and trust worthiness to be able to weather the storm arising from
brand crisis. Swift response to crisis would help protect the image of a company because if it
takes too long to respond to a crisis situation, customers can have a negative impression and
might switch to an alternative brand arising from unfavourable media coverage and word of
mouth.

Branding Strategy
It is a long term plan for the development of a successful brand in order to achieve specific goals.
This reflects the number and nature of common and distinctive brand elements applied to
different products sold by a firm. It involves deciding the nature of new and existing brand
elements to be applied to new and existing products. Brand strategy is how, what, where, when
and to whom you plan on communicating and delivering on your brand messages. When a new
brand is introduced, firm can take any of the following decisions; it can develop new brand
elements for the new product; it can apply some of its existing brand elements; it can use a
combination of new and existing brand elements. In branding a product the first decision a firm
can make is to decide whether to create a brand name for the product. And in deciding this, it can
choose from any of the following brand names which one to use. Individual names, blanket
family names, separate family names for all products or corporate name combined with
individual product names.

Individual brand names; used where each product is branded separately. The reputation of a
company is not tied to a product and thus when a new product line fails (quality) the company
image is not hurt. The publicity of the enterprise is not related to the publicity of the product
(Kotler & Keller, 2012). With this strategy according to Crane (2010, 130), it shall be likely to
avoid or reduce channel conflicts with the products with different names placed at different sale
points. With this strategy a firm can also achieve success with the new products and produce a
new product class with a name mirroring the basic interest (Aaker, 2004).

Blanket family names; adopted by a company wherein it uses its existing brand name to brand
new products. Used by Heinz and it has the following advantages-development cost is less
because no need to search for a new name for the new products also reduce advertising cost.
Also it can lead to high volume of sales if the brand name is strong.
Separate family names for all products; adopted where a company produces quite different
products and would not be favourable to use a blanket family name.
Corporate name combined with individual product names; in this type of branding, the
company name is used to legitimize a product while the individual name gives it its individual
identity. An organisation with corporate brand strategy can group and manage all presentations
under a single canopy, for example Harvard, Virgin, Toshiba, GE (Aaker, 2004) and Dangote in
Nigeria. With this strategy a firm does not need to make an intensive expenditure for conducting
a research (product development cost shall be less) for the name to create a new brand or for an
advertisement to make the brand name known and accepted. Under this strategy any increase in
the prestige would bring about increase in sales of the new product (Kotler & Keller, 2012)
likewise a strategic mistake by the company in any of its product has the risk of affecting the
image of other products and that of the company (Pitta & Katsanis, 1995).

Brand extensions; also known as sub brand is another major type of branding strategy that can
be used when a firm uses its established brand to introduce a new product. It is normally done by
leveraging a new product under a strong brand name. E.g. Nokia and Samsung. Brand extensions
can bring about product success and positive feedback benefits. One major disadvantage of this
strategy is brand dilution as consumers might not be able to associate a brand with a specific
product and can lead to a situation where they think less of the brand.
Also part of the brand strategy is where you advertise your brand, the distribution channels you
use, what you communicate visually and verbally.

PACKAGING
Packaging is the activities involved in the planning, making and producing of a container or
wrapper for a product, normally a physical product (Oseyomon, 2013). Kotler and Keller (2006)
define packaging as all the activities of designing and producing the container for a product.
Packaging is used to create convenience and as a promotional tool, it can have up to three levels
material; primary (main pack for the product), secondary (the carton) and tertiary (the shopping
package). Packaging is important in product marketing which aside its primary function of
protecting a product, helps to attract customers and serves to distinguish a company’s product
from those of other companies. It is the silent salesman used to get the attention of consumers. It
is the development of a container and graphic design for a product (Pride & Ferell, 2006). The
old adage says that you should not judge a book by its cover, but in product marketing the way a
product is packaged can make or break a sale.

Factors promoting the use of packaging as a marketing tool

1. Self Service: most items are sold on self-service basis given that about 53% of purchases
are made on impulse (Kotler and Keller 2006). Arising from this an effective package
must therefore perform the task of selling the product by attracting attention, describing
the product features, creating consumer confidence and making an overall impression.
2. Consumer affluence: consumer affluence makes them willing to pay for the convenience,
appearance, dependability and prestige of better packages.
3. Company and brand image: packaging contributes to instant recognition of the company
or its brand by consumers.
4. Innovation opportunity: innovative packaging can be beneficial to consumers as well as
bring about profits to producers.

Objectives of packaging
i. It helps in brand identification.
ii. Convey descriptive and persuasive information i.e. communicate benefits.
iii. Facilitate product transportation, protection and marketing.
iv. Assist at home storage, protection against damage, spoilage and pilferage.
v. Aid product consumption and convenience in handling a product.
vi. Helps in cost effectiveness and sustainability.

Developing an effective packaging

To satisfy the needs of consumers and achieve the overall marketing objective of a brand,
packaging must be properly done. The right packaging must be chosen- size, colour, shape,
material, text and graphics. All these elements must be perfectly harmonized with consideration
on the pricing, advertising and other parts of the marketing program. To ensure packaging is
effective it must be tested via the following; engineering test to ensure the package stands up to
normal conditions, visual tests to make sure the scripts are legible and colours are properly
blended, dealer test to ensure that the dealers find the packaging easy to handle and attractive and
finally consumer test to ensure that the consumer is favourably disposed to the product. Firms
should also put environmental concerns into consideration when developing packages with
respect to degradable and non degradable factors as packaging transcends just designs.
Packaging also requires proper funding and good plan as materials chosen can have an impact on
brands.

Types of Packaging
Packaging ensures the protection of the products that are meant to be distributed in the market
for the purpose of sale, storage, and use. Protecting goods is very important and packaging is
meant to protect them during transportation and storage. Packaging as earlier postulated can be
primary, secondary or tertiary. There are different types of packaging materials that can be used
to package products after they have been produced. El-Sayed (2019) highlighted some of the
common types which are; Plastics: these are organic polymeric materials that can be molded into
the desired shape; Metals (steel, tin, aluminium), Metal is strong, opaque, ideal packaging
material for pressurized containers and Aluminium and stainless steel are the metals of choice for
both primary and secondary packaging;Glass: Glass jars and bottles are very popular for
packaging foods and they protect food from moisture, pests, and micro organism; Wood: mostly
used for pallets and crates (heavy duty products). Some lidded or hinged boxes are produced e.g.
cigars, gifts, tea, cheese. High value spirits use wood and a few caps incorporate wood; Bamboo:
is emerging as a packaging material; Cardboard and papers: these are paper based materials that
are light weight yet strong. There are different types of packaging solutions and materials with
each type of good, selected for form, function or even marketing purposes (El-Sayed, 2019).

Paper and Carton Packaging Paper and carton packaging is used for different types of goods
(food, electronics, toys, shoes, kitchenware and even other packaging materials). Paper and
carton packaging companies produce wrapping paper, inflated paper, sheets, boxes, tubes,
pallets, interlayers, corners, edges and custom protective systems (depending on the dimension
and shape of the packed good, the carton is cut and modeled to fix and protect the product).
Film Packaging There are multiple types of films used in the packaging industry, most
commonly polyethylene (PE), polypropylene (PP), polyolefin and polyvinyl chloride (PVC)
films. The films usually come on a roll and are used to wrap goods, cover goods, protect boxes
and make other packaging products (such as bags, tubes, bubble wrap and sheets). Films can be
used for lamination, printed or perforated.
Foam Packaging Foam used for packaging can be produced on a roll or in sheets of different
thicknesses. The foam is used to wrap goods or make bags (usually laminated with high-density
PE), corners, edges and custom systems. The corners and edges are used to protect flat glass,
furniture and sharp edges.
Textile Packaging There are some goods that are best protected by textiles. For example, there
are custom-made textile insertions used in the automotive industry to protect car parts during
transportation. The textile insert is put on a metal frame that fits into a metal container. There is
also textile material used for box covers.
Plastic Boxes and Containers Multiple types of plastic boxes and containers are used in all
industries. For example, in the food industry there are plastic containers for goods like ketchup,
yogurt, milk and juices. Plastic boxes are mainly used for transporting goods and are reusable.

Factors to Consider when Packaging a Product

There are certain factors to put into consideration when packaging a product and according to
Agbonifoh, Ogwo, Nnolim and Nkamnebe (2007), the following are some of such factors;
i. The ability of the product to be easily damaged
ii. The dangers or hazards to which the product would be exposed to
iii. The advertisement role the package is meant to play
iv. The duration during which the product is supposed to be in the package and still be in a
good condition when eventually in use.
v. Product convenience for customers use and easy purchase and pricing.
Features of packaging
a. Attracts the attention of the customer/consumer and arrests their interest.
b. It helps to suggest the nature of the product and impacts the brand name
c. It serves to have a special quality, character and appearance that is easy to recognize
d. It should help to facilitate purchase decision
e. Packaging should depict cultural values
f. It informs consumer about product’s properties and serves to differentiate a brand from
that of competitors.

Networking in Business
According to Wolff and Moser (2009, 196) networking is defined as “behaviors that are aimed
at building, maintaining, and using informal relationships that possess the (potential) benefit of
facilitating work related activities of individual by voluntarily granting access to resources and
maximizing common advantages”. Networking as defined by Gould and Penley (1984) is the
building up of a system or network of contacts or links within and/or outside the business and
giving important career information and support for the individual. Networking in the view of
Gibson, Hardy III, and Buckley (2014), is a form of goal-directed behavior, both within and
outside of an organization, centered on creating, cultivating, and utilizing interpersonal
relationships.

Value Networks
Value networks refer to a system of partnerships and alliance that a firm creates to source,
augment and deliver its offerings (Kotler & Keller, 2006). A value network includes a firm’s
suppliers and its supplier’s suppliers and its immediate customers and their end customers. The
value network includes valued relations with others such as academia (researchers) and
government agencies. To succeed and deliver superior service/value to its customers, a company
needs to coordinate these parties.

Entrepreneurial Networks
Entrepreneurial networks are structured systems of connections with relatives, suppliers,
customers, external consultants, other agents, potential partners and other entrepreneurs
(Donckels & Lambrecht, 1997). To achieve success and position effectively in the market,
entrepreneurial firms need to have effective business relationships with identified stakeholders.
As important as it is to have a good network to achieve success in any entrepreneurial venture,
having this good network is not just enough. Entrepreneurs must be proficient in managing these
networks and build strong independent relationships alongside using of efficient use of resources
to achieve set goals (Gartner, 1990).
Business Attitudes Proposed For Entrepreneurial Business Networks
Entrepreneurial networks explore business opportunities cooperatively and employ a
redistribution of resources and profits on a reciprocal basis, acting as a community or a
collaborative formation. Overall, four business attitudes are proposed for entrepreneurial
business networks:
 1. survival and security attitude where relationships provide for living for the family and for
the owner;
2. business-intrinsic attitudes where relationships provide satisfaction with the ownership
and with the running of the business;
3. intrinsic-creative attitude where the business gives pride in creativity;
4. achievement oriented attitude where the business satisfies the need to seek new
challenges.
UNIT 13: THE USE OF SOCIAL MEDIA IN BUSINESS

Social Media in Business

Social media use by businesses includes a range of applications. Although social media accessed
via desktop computers offer a variety of opportunities for companies in a wide range of business
sectors, mobile social media, which users can access when they are "on the go" via tablet
computers or smartphones, benefit companies because of the location and time sensitive
awareness of their users. Social media can help business owners to engage customers and find
out what people are saying about their business. Social media can also be used for advertising,
promotional giveaways and mobile applications. Social media can help business to attract
customers, get customer feedback and build customer loyalty.
Benefits of Social Media for Business

Social media can help you engage with your customers and find out what people are saying
about your business. You can also use social media for advertising, promotional giveaways and
mobile applications. Social media can help your business to:

 attract customers, get customer feedback and build customer loyalty

 increase your market reach, including international markets
 do market research and reduce marketing costs
 increase revenue by building customer networks and advertising
 develop your brand
 exchange ideas to improve the way you do business
 recruit skilled staff for example through job networking sites like LinkedIn
 increase traffic to your website and improve its search engine ranking
 keep an eye on your competitors

Disadvantages of Social Media

Social media may not be suited to every business. If you are unprepared and launch your social
media presence without planning, you could waste valuable time and money. You should be
aware that:

 if you don’t have a clear marketing or social media strategy, the benefits may be reduced
 you may need additional resources to manage your online presence
 social media is immediate and needs daily monitoring
  if you don't actively manage your social media presence, you may not see any real
benefits
 you may get unwanted or inappropriate behaviour on your site, including bullying and
harassment
 online exposure could attract risks such as negative feedback, information leaks or
hacking
 false or misleading claims made on your social media (by your business or a customer)
can be subject to consumer law. You could be fined if a customer fan posts misleading or
deceptive information, particularly about competitor products or services

Social Media Strategy in Business

Having a social media strategy and preparing social media policy and procedures carefully
beforehand can help manage risk associated with social media. Not all social media platforms
will be right for all businesses. A social media strategy describes how your business will use
social media to achieve its communications aims. It also outlines the social platforms and tools
you’ll use to achieve this.

Consider saving save time and effort by using social media tools that customer’s use. Below is a
brief guide to help understand some of the options available.

Social networking sites: Social networking sites allow you to create your own profile or page,
network with others and share information (including promotions, images and video). Creating a
business profile can help you to attract followers, get new customers and develop your brand.
Examples of social networking sites include Facebook, Pinterest and Instagram.

Job networking sites: Job networking sites can be used to build a professional business profile
and connect with networks of skilled people for recruitment and development. An example
is LinkedIn.

Blogs: Blogs are online journals of thoughts, observations, promotions, links, images and videos.
Blogs are typically public. They allow readers to comment on posts and interact with you. You
can host them in-house or through a blogging platform that provides the software and website
hosting. Some examples of free blogging tools include Blogger and WordPress

Micro: Micro-blogs are used to send short messages to a network of followers. They can be
useful if your business has a lot of information to share. Examples include Twitter and Tumblr.

Video sharing sites: Video sharing sites let you upload and share your videos. Users can then
comment on and share your videos with others. Examples include YouTube and Vimeo.

Podcasts and vodcasts: Podcasts are audio files with blog-style or lecture-style content.
Vodcasts are podcasts in video format. They are usually available either for: download onto a
computer or portable device (so it can be played offline) streamed live
Social-news communities: Social-news communities are websites where members share
interesting news or links to others in the community. Social-news websites are not intended for
selling your products and services. Examples include Digg, StumbleUpon and Reddit.

Private social network services: Private social network services allow you to share information
in your private network. This is useful for businesses that want to develop a secure organisation-
only network to share knowledge. An example is Yammer.

Location-based services: Location-based services helps you connect and interact with other
people and businesses in your area. Foursquare is an example that also enables you to
recommend or rate businesses in that area.

UNIT 14: ADVERTISEMENT STRATEGIES IN BUSINESS

Advertising is a marketing tactic involving paying for space to promote a product, service, or
cause. The actual promotional messages are called advertisements, or ads for short. The goal of
advertising is to reach people most likely to be willing to pay for a company’s products or
services and entice them to buy. The purpose of advertising is to:

 Make customers aware of your product or service;

 Convince customers that your company's product or service is right for their needs;
 Create a desire for your product or service;
 Enhance the image of your company;
 Announce new products or services;
 Reinforce salespeople's messages;
 Make customers take the next step (ask for more information, request a sample, place an
order, and so on); and
 Draw customers to your business.

Basic Strategies in Advertising

Advertising includes paid messages within a company's promotional mix. Since you pay for the
time or space for an ad placement, you typically have greater control over the development and
delivery of the message. Several key strategies contribute to an effective ad campaign and
advertisement design and delivery.

 Segmentation Strategy: Companies with a broad target audience typically segment or

break down the marketplace to groups of customers with similar traits or interests. The
idea is to concentrate your message on a specific type of customer that brings a great
return on investment. Common approaches to segmentation include demographics,
lifestyles, usage patterns and geography. Once you identify discrete segments, you select
one to target for a given ad campaign.
  Message Strategy: Your message strategy includes a creative strategy, specific message
objective and techniques to achieve it. Companies use variety of creative approaches in
advertising, including humor, drama, attention-getting visuals, upbeat jingles and catch
slogans. Promoting brand recall is a common message objective. Jingles, slogans and
rhyming are common techniques to achieve recall. Fear and anxiety-inducing messages
rely on these human emotions to persuade customers to buy. Presenting the social
importance of a brand, making people laugh, playing on sensuality and transforming
thoughts and behaviors are other common techniques used in messages.
 Positioning Strategy: A company's positioning refers to its unique value proposition for
a particular target market. Thus, your positioning strategy begins with a statement
identifying what you offer and to whom. A company with a brand new, patented
technology device might position itself as the leading provider of technology ABC to
teens and young adults. With this position in mind, the company would focus its
advertising on establishing this position through consistent messaging. In a more
competitive marketplace, you also need to know what competitors offer to ensure your
messages emphasize differentiation and superior benefits.
 Media Strategy: Your media strategy includes developing a media mix and
consideration of several placement factors. First, you must decide in which medium or
media you wish to place your ads. A small business is often limited to a few local ad
opportunities because of budget limitations. To maximize the value of your ad, you need
to know the potential target market reach, the number of possible impressions for your ad
and the costs to generate those impressions. Local newspaper, direct mail and radio
commonly offer the most affordable way for small businesses to get their messages out.

Activities

UNIT 15: ACCOUNTABILITY AND RECORD KEEPING

As the business owner, you are accountable for understanding your record keeping obligations. If

you use a registered agent to manage your records, you still retain primary accountability. Thus,
the unit will focus on:

 Accountability and delegation of duties

 What is a business Record
 Standards of good record keeping
 Management of electronic records

Update still on please